Postgraduate Course

Contents:

Lesson 1- Transfer of Property Act, 1882

Lesson 2- The Societies Registration Act, 1860

Lesson 3-The Indian Trusts (Amendment) Act, 2016

Lesson 4- Intellectual Property Rights: Patents and Copyrights

Lesson 5- Intellectual Property Laws: Geographical indications and Designs Act

Lesson 6- Trademark Protection and Passing off

Lesson 7- The Competition Act, 2002

Lesson 8- Advertisement and Unfair Trade Practices

Lesson 9- The Consumer Protection Act, 1986

Lesson 10- The Right to Information Act, 2005

Lesson 11- Laws related to prevention and control of air pollution and water pollution

Lesson 12- The Environment Protection Act, 1986 and National Green Tribunal

Edited by:

K.B. Gupta

SCHOOL OF OPEN LEARNING

(Campus of Open Learning)

University Of Delhi

5, Cavalry Lane, Delhi - 110007

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LESSON 1

TRANSFER OF PROPERTY ACT, 1882

1 STRUCTURE

1.1 Background

1.2 Definitions

1.3 Immovable and Movable Property

1.4 Transferable Property Section 6

1.5 Transfer of property for the Benefit an Unborn Child (Section 13)

1.6 Rule Against Perpetuities (Section 14)

1.7 Doctrine of Lis Pendens or Lite Pendente (Sec 52)

1.8 Sale of Immovable Property (Section 54)

1.9 Mortgage (Section 58)

1.10 Charge (Section 100)

1.11 Lease ( Section 105)

1.12 Actionable Claim (Section 3)

1.13 Exchange (Section 118)

1.14 Gift (Section 122)

1.15 Self-Assessment Questions

1.1 BACKGROUND

The transfer of Property Act came in to existence on 1st July, 1882. The two major objectives

behind the Act were to regulate the transfer of property between living persons and secondly,

to complete the code of contract for immovable property.

The Act is not exhaustive. It does not cover each and every aspect of Transfer of property.

Broadly, two types of property transfers take place:

1. Transfer of property by operation of law. For example- Inheritance, by will,

insolvency etc.

2. Transfer of Property by voluntary transfer by the acts of parties for example: Sale,

gift, mortgage, lease etc.

The first type of transfers is not governed by the Said Act, while the seconds type of transfers

are covered by the Transfer of Property Act, 1882. The Contract Act, 1872 governs the

transfer of different types of properties (Movable and immovable). But later on, the transfer

of Property Act, 1882 was enacted to deal with immovable Property and The Sale of Goods

Act, 1932 to regulate the sale of movable Property.

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1.2 DEFINITIONS

"Immovable property" does not include standing timber, growing crops or grass;

"Attested", in relation to an instrument, means and shall be deemed always to have meant

attested by two or more witnesses each of whom has seen the executants sign or affix his

mark to the instrument, or has seen some other person sign the instrument in the presence and

by the direction of the executants, or has received from the executants a personal

acknowledgement of his signature or mark, or of the signature of such other person, and each

of whom has signed the instrument in the presence of the executants; but it shall not be

necessary that more than one of such witnesses shall have been present at the same time, and

no particular form of attestation shall be necessary;

"Registered" means registered in any part of the territories to which this Act extends under

the law for the time being in force regulating the registration of documents;

"Attached to the earth" means-

a) rooted in the earth, as in the case of trees and shrubs;

b) imbedded in the earth, as in the case of walls or buildings; or

c) attached to what is so embedded for the permanent beneficial enjoyment of that to

which it is attached;

"Actionable claim" means a claim to any debt, other than a debt secured by mortgage of

immovable property or by hypothecation or pledge of movable property, or to any beneficial

interest in movable property not in the possession, either actual or constructive, of the

claimant, which the civil courts recognise as affording grounds for relief, whether such debt

or beneficial interest be existent, accruing, conditional or contingent;

―Transfer of property" means an act by which a living person conveys property, in present

or in future, to one or more other living persons, or to himself and one or more other living

persons; and "to transfer property" is to perform such act.

―Living person‖ includes a company or association or body of individuals, whether

incorporated or not, but nothing herein contained shall affect any law for the time being in

force relating to transfer of property to or by companies, associations or bodies of individuals.

Transfer of Property

According to the Act, 'transfer of property' means an act by which a person

conveys property to one or more persons, or himself and one or more other

persons.

The person may include an individual, company or association or body of

individuals, and any kind of property may be transferred includes transfer of

Immovable Property.

Thus, the Act provides for the transfer of both, movable and immovable property.

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1.3 IMMOVABLE AND MOVABLE PROPERTY

Immovable property

Transfer of Property Act, 1882 does not define the term Immovable Property.

However, Section 3 only states the Immovable Property does not include standing

timber, growing crops and grass.

According to the General Clauses Act, 1897, Immovable Property includes Land,

benefit to arise out of land, things attached to the earth, or permanent fastened to

anything attached to the earth.

Thus, by combining the aforesaid two definitions, we can say that the immovable

property includes Land, benefit to arise out of land, things attached to the earth, etc.,

but does not include standing timber, growing crops and grass.

Examples of immovable property

Right to collect rents of immovable property;

A right of way- A right-of-way is a right to make a way over a piece of land, usually

to and from another piece of land. A right of way is a type of easement granted or

reserved over the land for transportation purposes; this can be for a highway,

public footpath, rail transport, canal, as well as electrical transmission lines, oil and

gas pipelines. A right-of-way can be used to build a bike trail. A right-of-way is

reserved for the purposes of maintenance or expansion of existing services with the

right-of-way. In the case of an easement, it may revert to its original owners if the

facility is abandoned.

The equity of redemption- The equity of redemption refers to the right of a mortgagor

in law to redeem his or her property once the liability secured by the mortgage has

been discharged.

The interest of mortgage;

Right to collect Lac from the tree;

A right to fisheries;

Right to receive future rents and profits of land;

Reversion in property leased;

A factory.

Movable Property

The word "movable property" is intended to include corporeal property of every

description, except land and things attached to the earth or permanently fastened to

anything, which is attached to the earth.

Examples of Moveable Property

A right to worship;

A copyright;

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The interest of a partner in a partnership firm;

A right to get maintenance;

A right to obtain the specific performance of an agreement to sell;

Government promissory notes; and

Machinery that is not permanently attached to the earth and can be shifted from one

Place to another.

Standing timber, growing crops and grass.

1.4 TRANSFERABLE PROPERTY (SECTION 6)

Section 6 provides that in general every kind of property can be transferred from one person

to another. However following are the exceptions:

The chance of an heir-apparent succeeding to an estate, the chance of a relation

obtaining a legacy on the death of a kinsman, or any other mere possibility of a like

nature, cannot be transferred. Or also known as Spes Succession.

A mere right of re-entry for breach of a condition subsequent cannot be transferred to

anyone except the owner of the property affected thereby.

An easement cannot be transferred apart from the dominant heritage.

An interest in property restricted in its enjoyment to the owner personally cannot be

transferred by him.

A right to future maintenance, in whatsoever manner arising, secured or determined,

cannot be transferred.

A mere right to sue cannot be transferred.

A public office cannot be transferred, nor can the salary of a public officer, whether

before or after it has become payable.

Stipends allowed to military, naval, air-force and civil pensioners of the government

and political pensions cannot be transferred.

No transfer can be made:

o insofar as it is opposed to the nature of the interest affected thereby, or

o for an unlawful object or consideration within the meaning of section 23 of the

Indian Contract Act, 1872 (9 of 1872), or

o To a person legally disqualified to be transferee.

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1.5 TRANSFER OF PROPERTY FOR THE BENEFIT AN UNBORN CHILD

(SECTION 13): (Gupta, 2015)

"Where, on a transfer of property, an interest therein is created for the benefit of a person not

in existence at the date of the transfer, subject to a prior interest created by the same

transfer, the interest created for the benefit of such person shall not take effect, unless it

extends to the whole of the remaining interest of the transferor in the property."

Section13 gives effect to the general rule that a transfer can be affected only between living

persons. There cannot be direct transfer to a person who is not in existence or is unborn. This

is the reason why Section 13 uses the expression transfer ‗for the benefit of‘ and not ‗transfer to‘ unborn person.

Unborn Child

―A person not in existence has a specific reference to one who may be born in the future but does not have current existence‖. Even though a child in the womb is literally not a person in

existence, but has been treated so under both Hindu Law and English Law.

A child in the mother‘s womb is considered to be competent transferee. Therefore, the property can be transferred to a child in mother‘s womb because the child exists at that time but not to an unborn person who does not even exist in mother‘s womb. Every transfer of

property involves transfer of interest.

For transfer of property for the benefit of unborn person two conditions are required to be

fulfilled:

1) Prior life interest must be created in favor of a person in existence at the date of

transfer, and

2) Absolute interest must be transferred in favor of unborn person.

Pre-Requisites for a Valid Transfer of Property to an Unborn Person

Section 13 provides a mechanism for a specific mechanism for transferring property validly

for the benefit of unborn persons. The procedure as follows:

1) The person intending to transfer the property for the benefit of an unborn person

should first create a life estate in favor of a living person and after it, an absolute

estate in favor of the unborn person.

2) Till the person, in whose favor a life interest is created is alive, he would hold the

possession of the property, enjoy its usufruct i.e. enjoyment the property.

3) During his lifetime if the person, (who on the day of creation of the life estate was

unborn) is born, the title of the property would immediately vest in him, but he will get

the possession of the property only on the death of the life holder.

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Creation of a Prior Life Interest

As far as the creation of a prior interest is concerned, first, the property is given for life to a

living person. It is not necessary that life interest should be created in favor of only one living

person. The transfer is competent to create successive life interests in favor of several living

persons at the same time.

For instance, ‗A‘ transfer property to ‗B‘ for life and after him, to ‗C‘, and then to ‗D‘ again

for their lives and then absolutely to B‘s unborn child UB.

A ———————————B (life interest)

———————————-C (life interest)

———————————-D (life interest)

——————————-UB (Absolute interest)

Figure 1: Creation of a Prior Life Interest

On B‘s death, the possession would be taken by C and on C‘s death, by D. On D‘s death, the possession would go to B‘s child, who should have come in existence by this time. If he is

not there, the property would revert back to A, if he is alive, else to his heirs.

No Life Interest for an Unborn Person

As far as the unborn is concerned, no life interest can be created for the benefit of an unborn

person. Section 13, specifically prohibits that, by the use of the expression, ‗the interest created for the benefit of such person‘ shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property. It means that the transfer must convey

to the unborn person, whatever interest he had in the property, without retaining anything

with him. Thus, no limited estate can be conferred for the benefit of the unborn person. If

limited interest in the property is settled for him, the same would be void.

For instance, A creates a life estate in favor of his friends B, and a life estate for the benefit of

B‘s unborn first child UB1 and then absolutely to B‘s second child UB2.

A ———————– B (Life interest)

———————– UB1 (Life interest)

———————– UB2 (Absolute interest)

Figure 2: No Life Interest for an Unborn Person

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The second figure is of limited interest in the property for the benefit of an unborn person and

would therefore be void and incapable of taking effect in law. After the death of B, here, the

property would revert back to A or his heirs as the case may be, as even though the transfer

for the benefit of UB2 appears to be proper, as it is dependent on a void transfer that cannot

take effect in law; a transfer subsequent to, or dependent on a void transfer can also not take

effect.

Thus, where a father gave a life interest in his properties to his son and then to his unborn

child absolutely, it was held that the settlement was valid. But where the interest in favor of

the unborn child was a life interest the settlement would be void, and a subsequent interest

would also fail. Similarly, where there is possibility of the interest in favor of the unborn

child being defeated either by a contingency or by a clause of defeasance, it would not be a

bequest of the whole interest, and would be therefore be void.

In the example cited above, in figure (ii), suppose UB1 dies before B and UB2 is alive when

the life estate in favor of B comes to an end. Even then, the transfer of the benefit of UB2 will

not take effect as the validity of the transfer has to be assessed from the language of the

document and not with respect to probable or actual events that may take place in future. It is

the substance of the transfer that will determine whether it is permissible under the law or not

and not how the situation may emerge in future.

Girish Dutt Vs Data Din, A made a gift of her property to B for her life and then to her sons

absolute. B had no child on the date of execution of the gift. The deed further provided that in

case ‗B‘ only had daughters, then the property would go to such daughters but only for their

life. In case ‗B‘ had no child then after the death of ‗B‘, the property was to go absolutely to

‗X‘.

The deed on paper provided a life estate in favor of B‘s unborn daughters: which is contrary

to the rule of Section 13. However, B died without any child, and X claimed the property

under the gift deed. The court held that where a transfer in favor of a person or his benefit is

void under Section13, any transfer contained in the same deed and intended to take effect or

upon failure of such prior transfer is also void. In determining whether the transfer is in

violation of Section 13, regard has to be made with respect to the contents of the deed and not

what happened actually. Here as the transfer stipulated in the contract that was void, the

transfer in favor of X also became void. Hence, X‘s claim was defeated.

Case Laws

Sopher’s case

In the case of Sopher vs Administrator General of Bengal a testator directed that his property

was to be divided after the death of his wife into as many parts as there shall be children of

his, living at his death or who shall have pre-deceased leaving issue living at his death. The

income of each share was to be paid to each child for life and thereafter to the grand-children

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until they attained the age of 18, when alone the grand-children were to be absolutely entitled

to the property. The bequest to the grand-children was held to be void by Privy Council as it

was hit by Section.113 of the Indian Succession Act which corresponds to Section.13 of

Transfer of property Act. Their Lordships of the Privy Council observed that: ― If under a bequest in the circumstances mentioned in Section.113, there was a possibility of the interest

given to the beneficiary being defeated either by a contingency or by a clause of a

defeasance, the beneficiary under the later bequest did not receive the interest bequeathed in

the same unfettered form as that in which the testator held it and that the bequest to him did

not therefore, comprise the whole of the remaining interest of testator in the thing

bequeathed.

Ardeshir’s Case

In Ardeshir Vs Duda Bhoy‟s case D was a settler who made a settlement. According to the

terms of settlement, D was to get during life; one-third each was to go to his sons A and R.

After D‘s death, the trust property was to be divided into two equal parts. The net income of each property was to be given to A and R for life and after their death to the son‘s of each absolutely. If A and R were each to pre-deceased D without male issue, the trust was to

determine and the trust property were to the settler absolutely. The settler then took power to

revoke or vary the settlement in whole or in part of his own benefit. It was held that R‘s son who was not born either at the date of settlement or his death did not take any vested interest

and the gift to him was invalid. A‘s son who was alive at these dates did not also take a vested interest.

Figure 3: Mechanism for Transferring a Property Validly to an Unborn Person

Original owner

First create a life estate in favour of a living person.

Thereafter an absolute estate in

favour of the unborn person.

Life Estate

Person with life estate will hold the possession of property as

long as he is alive

Enjoy the property usufruct.

Absolute Interest

When the person in whose favour absolute estate is vested

is born , title of the property would immediately vest in his

name.

Possession of the property will not be transferred only on

the death of life holder.

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Absolute Interest Vs. Life Interest

Absolute Interest in favour of unborn child Life Interest in favour of unborn child

Figure 4: Absolute Interest Vs. Life Interest

1.6 RULE AGAINST PERPETUITIES (SECTION 14) (Sethi, 2018)

Rule against perpetuity has been dealt under Section 14 of Transfer of Property Act, 1882.

Perpetuity simply means ―indefinite Period‖, so this rule is against a transfer which makes a property inalienable for an indefinite period.

How Perpetuity May Arise?

Perpetuity may arise in two ways –

1) By taking away from transferee his power of alienation (such a condition has been

made void under Section 10 of the Act)

2) by creating future remote interest (which has been prohibited under Section 14 of the

Transfer of Property Act)

Rule against perpetuity is the rule against such creation of future remote interest or we can

say is a rule against remoteness of vesting (interest). Remoteness here means ―The state of being unlikely to occur‖.

It is important to ensure free and active circulation of property both for trade and commerce

as well as for the betterment of the property. There are people who want to retain their

property in their own families from generations to generations. This will be a loss to the

A

B(life interest)

C(life interest)

D(life interest)

UB(Absolute

interest)

A

B(life interest)

UB1(life interest)

UB2(life interest)

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society because it will be deprived of any benefit arising out of that property. Free and

frequent circulation is important and the policy of the law is to prevent the creation of such

perpetuity.

Thus, the object of section 14 is to see that the property is not tied- up and to prevent creation

of perpetuity.

What Does The Law Says?

The rule against perpetuity as dealt under section 14 makes such a transfer (of property)

inoperable where condition is laid down for vesting of interest after the life of the last

preceding interest holder/s and beyond the minority of the ultimate beneficiary.

Breakdown of the Section

The language of this section can simply be broken down into the following manner

1) ―No transfer of Property can operate to create an interest which is to take effect after.

2) The lifetime of one or more persons living at the date of such transfer( i.e. lifetime of

the last prior interest holder/s) and

3) The minority of some person who shall be in existence at the expiration of that period

and to whom, if he attains full age, the interest created is to belong.‖( i.e. minority of the ultimate beneficiary who must have been in existence at the death of the last prior

interest holder/s)

4) So clearly section 14 provides that in a transfer of property, vesting of interest cannot

be postponed beyond the life of the last prior interest holder and the minority of the

ultimate beneficiary.

Essential Ingredients of the Section

The following ingredients must be present to attract the provisions of section. 14 –

Figure 5: Conditions to be satisfied to attract Section 14

There must be transfer of property

The transfer should be to create an interest in favour of an unborn person

After lifetime of living persons and during the minority of unborn person

The unborn person must be in existence at the expiry of the interest of the living persons

The vesting of the interest in favour of the ultimate beneficiary may be postponed only up to the life or lives of living persons plus the minority of th eultimate beneficiary but not beyond that.

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If all the above ingredients are present then the vesting of the interest in favour of the

ultimate beneficiary may be postponed only up to the life or lives of living persons plus the

minority of the ultimate beneficiary but not beyond that.

Minority

Minority in India terminates at the age of 18 years or when the minor is under supervision of

Court at the age of 21 years. But in Saundara Rajan v. Natarajan ,A.I.R 1925 P.C. 244, the

Privy Council held that since at the date of the transfer it is not known whether or not a

guardian would be appointed by Court for the minor in future, for purposes of section 14 the

normal period of minority would be 18 years. So, the vesting can be postponed only up to the

life of the prior interest holder and the minority i.e. 18 years of the ultimate beneficiary.

Period of Gestation

The maximum limit fixed for postponing the vesting of interest is the life or lives of the prior

interest holder/s plus the minority of the ultimate beneficiary. But when a child is in his

mother‘s womb at the time of the expiration of the interest of the prior interest holder and since for the purposes of being a transferee a child in the mother‘s womb is a competent

person, the latest period up to which the vesting may be postponed would be the life of the

prior interest holder/s plus the period of gestation ( i.e. the period during which a child

remains in womb after being conceived which is normally about 9 months or 280 days) plus

minority of the ultimate beneficiary. The period of gestation shall not be counted in addition

to minority if the ultimate beneficiary is already a born person.

Example, if ‗A‘ (prior interest holder) dies then the ultimate beneficiary i.e. ‗X‘ must already

be in the existence at that time either in the mother‘s womb or as a born child. If ‗X‘ is in

mother‘s womb, say of 6 months then the maximum period up to which vesting of period

may be postponed would be life of ‗A‘ plus six months ( period of gestation) plus 18 years (

minority of ‗X‘)

Maximum Possible Remoteness of Vesting

In India, the maximum permissible possible remoteness of vesting is –

Life of the preceding interest Period of gestation of ultimate beneficiary (only when the child

is not born) minority of the ultimate beneficiary

How It Differs From English Law?

Under English Law, vesting of interest may be postponed up to life or lives of last person

plus a period of 21 years irrespective of the age of minority of ultimate beneficiary and a

transfer shall not be void even if vesting has been postponed beyond 21 years but it shall take

effect as if the age of 21 had been substituted for the specified in the instrument, which may

be any fixed period longer than 21 years.

In India, section 14 provides that vesting can be postponed up to life or lives of the last

person plus the minority of the ultimate beneficiary. Minority in India terminates at the age of

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18 years. After the existing life or lives, vesting cannot be postponed in India beyond 18

years in any circumstance.

Exceptions to Section 14

The provisions of section 14 shall not apply in the following cases –

Figure 6: Exceptions to Section 14

1) Transfer for public benefit - Where property is transferred for the benefit of the

people in general, then it is not void under this rule. For e.g. for the advancement of

knowledge, religion, health, commerce or anything beneficial to mankind.

2) Covenants of Redemption - This rule does not offend the covenants of redemption in

mortgage.

3) Personal Agreements - Agreements that do not create any interest in the property are

not affected by this rule. This rule applies only to transfers where there is a transfer of

interest.

4) Pre-emption - In this there is an option of purchasing a land and there‘s no question of any kind of interest in the property, so this rule does not apply.

5) Perpetual Lease - It is not applicable to the contracts of perpetual renewal of leases.

6) Mortgages - because there is no creation of future interest.

Therefore section 14 provides a rule against perpetuity i.e. a rule against remoteness of

vesting, in absence of which the society shall definitely suffer a loss because of the stagnation

of the properties. It would cause great hardship in the easy enforcement of law which shall be

detrimental to trade, commerce, intercourse and may also result into the destruction of the

property itself.

Exceptions to the Section 14

Transfer for public

benefit

Covenants of redemption

Personal Agreements

Mortgages

Perpetual Lease

Pre-Emption

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So this rule against perpetuity ensures free and active circulation of property both for the

betterment of the property as well as for the betterment of the society at large.

1.7 DOCTRINE OF LIS PENDENS OR LITE PENDENTE (SEC 52)

The expression Lis Pendens means a pending Litigation.

―Lis‖ means an action or a suit, ―Pendens‖ means continuing or pending.

This Doctrine of Lis pendens (Pending Litigations) is embodied in section 52 of the Transfer

of Property Act .The doctrine of lis pendens is expressed in the maxim „ut lite pendente nihil innovateur‟ which means nothing new should be introduced during the pendency of a suit. In

other words, Doctrine of Lis Pendens may be defined as the jurisdiction, power or control

that courts have, during pendency of an action over the property involved therein.‖

Section 52: During the pendency in any court having authority [within the limits of India

excluding the State of Jammu and Kashmir] Government or established beyond such limits]

by the Central Government of any suit or proceedings which is not collusive and in which

any right to immovable property is directly and specifically in question, the property cannot

be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the

rights of any other party thereto under any decree or order which may be made therein,

except under the authority of the court and on such terms as it may impose.

Explanation : For the purposes of this section, the pendency of a suit or proceeding shall be

deemed to commence from the date of the presentation of the plaint or the institution of the

proceeding in a court of competent jurisdiction, and to continue until the suit or proceeding

has been disposed of by a final decree or order and complete satisfaction or discharge of such

decree or order has been obtained, or has become unobtainable by reason of the expiration of

any period of limitation prescribed for the execution thereof by any law for the time being in

force. Doctrine of lis pendens provides that where a suit or proceeding is pending in any court

between two persons with respect to any immovable property, the property cannot be

transferred or otherwise dealt with by any party, except under the authority of the court. If

any party transfers or otherwise deals with that property, the transferee will be bound by the

result of the suit or proceeding, whether or not he had notice of the suit or proceeding.

Example

There is a dispute between A and B with regard to ownership of property X. A file a

suit against B in the court of Law. A may either win or lose the suit. If he wins, he

gets the property. If he loses, B gets the property. Now suppose during the pendency

of the suit, A, professing to be the owner of the property, sells it to C. If the suit ends

in A‘s favour, no difficulty arises. If it ends in B‘s favour, C cannot retain the property. C is bound by the decree of the court and must return the property to B. He

cannot even take a plea that he had no notice of the pending litigation.

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Arguments behind the Doctrine

There are two schools of thought behind the Doctrine:

a) One school of thought says that a pending litigation should be known to all and if a

party enters into an agreement with respect to such property then, it is considered as

―bad faith‖ and therefore, bound by the judgement made. b) The second school of thought says that this Doctrine is necessary to prevent the

transfer of subject matter of litigation during a pending suit. It is more of a necessity

as a matter of public policy i.e to prevent multiplicity of suits one after another

making it practically impossible for the actual owner to avail his rights.

Effect of the Doctrine

The effect of the doctrine is that in case of transfer of property or any dealing by a party to a

suit during its pendency is not ipso facto void. section 52 creates only a right to be enforced

to avoid a transfer made pendent lite, because such transfers are not void but voidable and

that too at the option of the affected party to the proceeding, pending which the transfer is

affected. Thus, the effect of the rule of lis pendens is not to invalidate or avoid transfer, but to

make it subject to the result of the litigation. Following example will clear the effect:

M sues N in respect of a house in N‘s possession. During the pendency of the suit N sells the house to P.M‘s suit is dismissed. The transfer to P holds good. Thus, here,

the purchaser (P) is bound by the result of the litigation.

X sues Z in respect of a house in Z‘s possession. During the pendency of the suit Z sells it to Y. X‘s suit is decreed. The transfer to Y is voidable and X‘s right to take the

property is not affected.

Essential Aspects of the Doctrine

1) Pendency of a suit or proceeding.

2) Pendency of suit or proceeding in the competent court.

3) The suit or proceeding should be bonafide i.e. non-collusive.

4) A right to immovable property must directly be the subject matter of the suit or

proceeding.

5) The property in dispute should be transferred or otherwise dealt with by any party to

the suit or proceeding.

6) The transfer should affect the rights of the third party.

Leading Case Laws: Govind Pillai Gopala Pillai Vs Aiyyappan Krishnan (AIR 1957

Ker. 10)

Facts, issues and judgement: In this case, a dispute with respect to the rights over a property

was presented in court. However, the plaint was returned after a preliminary finding that the

court, where it was presented, did not have the necessary pecuniary jurisdiction to try it.

Before, it could be filed in the proper court, the person who had its possession, executed a gift

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of the same in favour of his wife and son. The issue before the court was whether the gift

deed would be lit by the rule of lis pendens.

Where a suit was incorrectly presented in a wrong court and before its presentation in the

proper court, the property is transferred; the doctrine of lis pendens would not apply.

Means of Transfer of property for moveable or immovable

Figure 7: Means of Transfer

1.8 SALE OF IMMOVABLE PROPERTY (Section 54)

For a sale of an immovable property, for example, a building, there will be a contract

between the parties requiring the seller to transfer the ownership in the building for a price in

cash. The contract will provide the terms of the sale, including the time of passing of the

ownership, delivery of the property and payment by the buyer. In the performance of the

contract, when the seller transfers the ownership in the property, the sale is done. At some

point of time, the seller will give possession of the property to the buyer. A sale of

immovable property is done through a registered instrument.

The definition of ‗sale of immovable property‘ in section 54 reads:

"Sale" defined- "Sale" is a transfer of ownership in exchange for a price paid or promised or

part-paid and part-promised.

Sale how made: Such transfer, in the case of tangible immovable property of the value of one

hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be

made only by a registered instrument. …

Five

Means of

Transfer

Sale

Gift

Mortgage Lease

Exchange

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Delivery of tangible immovable property takes place when the seller places the buyer, or

such person as he directs, in possession of the property.

Contract for sale: A contract for the sale of immovable property is a contract that a sale of

such property shall take place on terms settled between the parties.

It does not, of itself, create any interest in or charge on such property.

Rights and Duties of Buyer and Seller

Some of the significant rights and obligations are:

The seller has to disclose to the buyer any ‗material defect‘ in the property or the title of the seller, which the seller is aware of, to the buyer. The defect in the property can

be flooding, water-logging or encumbrances.

The seller has to give all the land documents to the buyer for the buyer to inspect.

The seller is bound to answer all the questions put by the buyer. The two provisions

are intended to ensure that the buyer satisfies himself of the title of the seller to sell

the property.

Section 55(1)(d) casts a duty on the seller that once the buyer has paid the due sum, it

is his duty to take the necessary steps to effect the transfer of ownership in the

property.

After the ownership has transferred to the buyer, the seller has to give possession of

the property when asked for by the buyer. In the case of land or building, possession

will be by giving physical control of the property.

It is implied in every sale contract that the seller has the right to sell the property.

Where the buyer has paid the whole purchase money, the seller has to deliver all the

documents of title relating to the property.

1.9 MORTGAGE (SECTION 58)

Mortgage is a transfer of an interest in an immovable property to a creditor as a security for

payment of the debt. The person transferring the property is called the mortgagor and the one

receiving the interest, the mortgagee. Section 58 defines six kinds of mortgages. The rights

and liabilities of the parties would be different in each of them.

Simple mortgage: In a simple mortgage, the mortgagor does not give the possession

of the property. Under the contract, the mortgagor personally undertakes to pay the

debt and on default, the creditor has the right to have the property sold and recover the

debt. The mortgagee gets possession of the property and the right to sell it through a

court order.

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Mortgage by conditional sale: In this mortgage, the mortgagor makes a conditional

sale of the property to the creditor. The condition of the sale is that on default in

payment by the mortgagor, on a certain date, the sale will become absolute. There is

no sale when the agreement is made. It ripens into a sale, by the very terms of the

contract, when the mortgagor defaults in paying the due sum. The absolute sale is

enforced by what is called foreclosure.

English Mortgage: In an English mortgage, the mortgagor transfers the property

absolutely to the creditor, but subject to the term that he will re-transfer the property

on payment of the debt on a certain date. (combination of simple mortgage and

mortgage by conditional sale)

Usufructuary mortgage: In a usufructuary mortgage, the mortgagor delivers

possession of the property to the creditor, with the right to receive rent or profit from

the property. This is in lieu of the interest on the credit and/or repayment of the

mortgage-money. The property is returned when the amount due is personally paid or

is discharged by rents and profit received.

Equitable Mortgage/Mortgage by deposit of title-deeds is where the title document

to a property is delivered to the creditor to create a security over the loan. All

provisions related to simple mortgage shall apply to this kind of mortgage.

An Anomalous mortgage is a mortgage, but it is not covered by any of the above

specific forms of mortgage. This mortgage is the combination of two or more other

kinds of mortgages. The remedy to the mortgagee may be by way of sale or by way of

foreclosure, depending on the terms of the Deed.

Mortgage when to be by assurance

Where the principal money secured is one hundred rupees or upwards, a mortgage

other than a mortgage by deposit of title deeds can be affected only by a registered

instrument signed by the mortgagor and attested by at least two witnesses. Where the

principal money secured is less than one hundred rupees, a mortgage may be affected

either by a registered instrument signed and attested as aforesaid or (except in the case

of a simple mortgage) by delivery of the property.

Some Major Rights

Section 60 provides the right of the mortgagor to redeem the property. The substance

of this section is that once the payment of money has become due, the mortgagor has

a right to pay and receive from the mortgagee, all the title documents and possession

of the property. The right, however, is not available if the parties have extinguished it

or a decree of the court has extinguished it.

The corresponding right of the mortgagee is the right to sell the property. This is

called foreclosure. Section 67 gives the right to the mortgagees to obtain a decree

from the court for foreclosure if the money has remained unpaid. When the mortgagor

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does not pay the money in time, the mortgagee does not become the owner of the

property. He has to apply to a court for a decree. While a right to redeem cannot be

ousted by the contract, the right of foreclosure can be ousted by the contracting parties

1.10 CHARGE (SECTION 100) (ICSI, 2018)

A charge is a right created by any person including a company referred to as ―the borrower‖ on its assets and properties, present and future, in favour of a financial institution or a bank,

referred to as ―the lender‖, which has agreed to extend financial assistance.

Section 2(16) of the Companies Act, 2014 defines charges so as to mean an interest or lien

created on the property or assets of a company or any of its undertakings or both as security

and includes a mortgage. The following are the essential features of the charge which are as

under:

1. There should be two parties to the transaction, the creator of the charge and the charge

holder.

2. The subject-matter of charge, which may be current or future assets and other

properties of the borrower.

3. The intention of the borrower to offer one or more of its specific assets or properties

as security for repayment of the borrowed money together with payment of interest at

the agreed rate should be manifested by an agreement entered into by him in favour of

the lender, written or otherwise.

A charge may be fixed or floating depending upon its nature. ―Charge‖ as defined in Transfer of Property Act, 1882 According to Section 100 of the Transfer of Property Act, 1882, where

an immovable property of one person is by act of parties or operation of law made security

for the payment of money to another and the transaction does not amount to a mortgage, the

latter person is said to have a charge on the property, and all the provisions which apply to a

simple mortgage shall, so far as may be, apply to such charge.

Charge and Mortgage Distinguished

There is a clear distinction between a mortgage and a charge, the former being a transfer of

an interest in immoveable property as a security for the loan whereas the latter is not a

transfer, though it is nonetheless a security for the payment of an amount. A mortgage deed

includes every instrument whereby for the purpose of securing money advanced, or to be

advanced, by way of loan, or an existing or future debt, one person transfers, or creates in

favour of another, a right over a specified property

Need for Creating a Charge on Company’s Assets

Almost all the large and small companies depend upon share capital and borrowed capital for

financing their projects. Borrowed capital may consist of funds raised by issuing debentures,

which may be secured or unsecured, or by obtaining financial assistance from financial

institution or banks. The financial institutions/banks do not lend their monies unless they are

sure that their funds are safe and they would be repaid as per agreed repayment schedule

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along with payment of interest. In order to secure their loans they resort to creating right in

the assets and properties of the borrowing companies, which is known as a charge on assets.

This is done by executing loan agreements, hypothecation agreements, mortgage deeds and

other similar documents, which the borrowing company is required to execute in favour of

the lending institutions/ banks etc.

As a matter of convenience and practice, as and when more funds are required by companies,

they approach the same institutions/banks or certain new institutions/ banks and offer same

assets as security for fresh loans. However, when the same assets are charged for a second

and subsequent time, a very important question arises as to priority in respect of the charges

in favour of different institutions. This situation is managed by securing consent of the earlier

lending institutions to the creation of second and subsequent charges on the same assets. With

their consent, the charges of all the lending institutions, ranks pari passu, i.e. on the same

footing. However, the earlier lending institution may not give its consent to the creation of

second charge on the ground that the realizable value of the asset charged in its favour is not

adequate to cover its loan and as such it cannot share its right of charge with the lending

institutions which seek second and subsequent charges. The real question which alerts the

lending institutions is how to ensure that the assets being offered as security for their

proposed loans are not already encumbered.

Duty to Register Charge

Primarily, under section 77 of the Companies Act, 2013 every company creating a charge

shall register the particulars of charge signed by the company and its charge – holder together

with the instruments creating. Important points in the Act relating to charge creation:

Any charge created within or outside India-

on property or assets or any of the company‘s undertakings-

Whether tangible or otherwise, situated in or outside India

Shall be registered.

Hence all types of charges are required under the Act to be registered whether created within

or outside India.

Time Limit for Registration of a Charge

A charge created by a company is required to be registered with the Registrar within thirty

days of its creation in such form and on payment of such fees as may be prescribed.

According to Companies (Registration of Charges) Rules, 2014 e-forms prescribed for the

purpose of creating or modifying the charge is Form No.CHG-1 (for other than Debentures)

or Form No.CHG-9 (for debentures including rectification).

Condonation of delay by Registrar: The Registrar may on an application by the company

allow registration of charge within three hundred days of creation or modification of charge

on payment of additional fee. The Registrar may, on being satisfied that the company had

sufficient cause for not filing the particulars and instrument of charge, if any, within a period

of thirty days of the date of creation of the charge, allow the registration of the same after

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thirty days but within a period of three hundred days of the date of such creation of charge or

modification of charge on payment of additional fee. The application for delay shall be made

in Form No.CHG-10 and supported by a declaration from the company signed by its

secretary or director that such belated filing shall not adversely affect rights of any other

intervening creditors of the company.

Condonation of delay by the Central Government: If company fails to register the charge

even within this period of three hundred days, it may seek extension of time in accordance

with Section 87 from the Central Government. The same has been discussed later in this

chapter.

Application for registration of charge by the charge-holder According to Section 78 where a

company fails to register the charge within the period specified above, the person in whose

favour the charge is created may apply to the Registrar for registration of the charge along

with the instrument created for the charge in Form No.CHG-1 or Form No.CHG-9, as the

case may be, duly signed along with fee. The registrar may, on such application, give notice

to the company about such application. The company may either itself register the charge or

shows sufficient cause why such charge should not be registered. On failure on part of the

company, the Registrar may allow registration of such charge within fourteen days after

giving notice to the company shall allow such registration.

Where registration is affected on application of the person in whose favour the charge is

created, that person shall be entitled to recover from the company, the amount of any fee or

additional fees paid by him to the Registrar for the purpose of registration of charge.

1.11 LEASE (SECTION 105) (Net Lawman, 2018)

Section 105 defines the term Lease, it is a transaction whereby one person (i.e., lessor)

transfers the right to enjoy in an immovable property to another person (i.e., lessee) either for

a certain time or in perpetuity, in return of a consideration.

In India the party who takes the property for his use and occupation for prescribed time

executes a lease deed. Property can be defined as something tangible or intangible to which

its owner has legal title. Lease therefore can be of a movable or an immovable property.

Lease is specie of transfer of immovable property under the Transfer of Property Act 1882.

A lease is transfer of an interest in an immovable property which is the subject of the lease

and that interest is the right to occupy and use the property for which the lease is given for

period and on such terms and conditions as agreed between the parties. The transferor of

property is called the lessor and the person to whom it is transferred is referred as a lessee,

and the consideration so rendered is called rent.

The essentials ingredients of a lease agreement are:

Parties to the agreement;

The identification of the property subject matter of the arrangement;

Term of lease,

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Rent,

Date of commencement and expiry.

Procedure of Forming a Lease Agreement:

Lease of immovable property for one year, or term exceeding one year, can only be made by

registered instrument. All other leases may be made by unregistered instruments or oral

agreements.

Where there is no contract or local law governing the execution of a lease deed then lease of

immovable property for agricultural or manufacturing purpose shall be deemed to be on

yearly basis and terminable on the part of either lessor to lessee by giving 6 month notice. On

the other hand a lease of immovable property for any other purpose shall be for monthly

basis, terminable by either lessor or lessee by giving 15 day notice.

In the absence of a lease agreement in writing or the existing agreement is silent on the rights

and liabilities of lessor or lessee then section 108 of the Transfer of Property Act sets down

the guidelines to be followed for a working relationship in a lease arrangement. Once the

lessor transfers the property leased to the lessee, the lessee in the absence of contract to the

contrary shall possess all the rights and will also be subject to all the liabilities of the lessor as

he is the owner of it. For computing the time for a lease of immovable property, if time is

expressly mentioned then the lease of immovable property will commence from that

particular day and where no time is mentioned the lease begin from the day when it was

entered into.

Where the time is limited and the lease can be terminated before the expiration, but the lease

deed omits to mention at whose option it is terminable. In such a case the lessee will have the

option to determine the lease.

The Right of Possession:

A lease of an immovable property can be determined through 8 modes and it is only by one

of these methods that the lease stands determined and the lessor gets back right of possession

of the property;

By efflux of time limited thereby;

Where the interest of the lessor terminates on happening of an event;

The interest of the lessor terminates on, or his power to dispose of the same extends to

the happening of any event;

In case the interest of lessor and lessee becomes vested;

Express surrender before the term is over;

Implied surrender;

Forfeiture; When the lessee renounces his character

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The Prerequisites of the Agreement:

Holding over comes into play when even after the determination of lease the lessee remains

in possession of the property and the lessor or his legal representatives accept the rent and

assent to the continuing possession by the lessee. In such a case the lease stands renewed year

after year or month after month according to the purpose for which the property is leased.

Where lease of immovable property has been determined by forfeiture for non-payment of

rent and the lessor files a suit to evict the lessee. If the lessee at the hearing of the suit pays to

the lessor rent in arrear with interest, full cost of suit or provides sufficient security within 15

days, the court may pass an order to relieve the lessee from forfeiture and allow him to hold

on to the property.

Lease and License:

Lease and license are two different aspects of transferring property and to ascertain whether

the transaction is a lease or license it has to be ascertained whether parties had intended to

create a lease or a license; if the document creates an interest in the property, it can be

referred as lease and if it permits a person to use a property and the legal possession remains

with the owner or the original lessee it is called a license.

The Stamp Duty Act 1899:

The Stamp Duty Act 1899 enumerates the value of stamp duty payable on different lease

documents. A lease agreement can be stamped as an ordinary agreement under article 5 of the

Indian stamp act and corresponding provision of the state stamp duty act. If an agreement of

lease amounts to a demise it is required to be stamped under article 35 of the Indian stamp act

which also includes a sub-lease or an agreement to let and sublet. Under article 35, duty

charged is on the average annual rent which is multiplied by the number of years according to

the length of the lease period.

Therefore, while entering into a lease, lessor and lessee have to act according to the

provisions mentioned under Transfer of Property Act, registration, amount payable on

account of stamp duty and other terms and conditions so mentioned in the lease deed.

1.12 EXCHANGE (SECTION 118) (Singh, 2017)

Section 118 of the said Act defines ―Exchange‖ as ―When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being

money only, the transaction is called an exchange.‖

All the formalities associated with ―transfer by sale‖ have to be complied with, for transfer of ownership rights in exchange for another property. If the value of the property is Rs.100/- or

more than a conveyance deed is required to be executed and that must be registered with the

office of Registrar / Sub-registrar. Further section 119 of the said act provides relief to a party

who suffers in ―transfer by exchange‖ due to defect in the title of the transferor. A person

with the defective title is liable to return the original property of the other person and is also

liable for the losses incurred due to such exchange.

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Each party, to such transfer by exchange, enjoys the rights and is subject to liabilities of a

seller, pertaining to the thing which he gives and enjoys the rights and is subject to liabilities

of a buyer, pertaining to the thing which he takes. This provision is there in section 120 of the

said act (Transfer of Property Act, 1882) for protection of both the parties involved in the

process of transfer of ownership rights in immovable property by the exchange.

Difference between ―exchange of movable property‖ and ―exchange of immovable

property‖

The former is known as ―barter‖ and is subject to the Indian Contract Act, 1872, whereas the

latter is known as ―exchange‖ and is subject to the ―Transfer of Property Act, 1882.‖

Section 118 provides that an exchange can be made only in the manner provided for the

transfer of such property by sale.

Since a sale of immovable property can only be affected by a registered conveyance, an

exchange of tangible, immovable property of the value of ₹ 100 and more must be made by

the registered instrument. In the case of immovable property, an exchange is, usually, made

by mutual conveyances. However, it is not necessary that there should be two separate deeds.

A party receives a thing in exchange. However, he is deprived of such thing due to the

defective title of the other party. What are the remedies available to the deprived party?

In case a party, receiving a thing in exchange, is deprived of such thing due to a defective title

of the other party to the exchange transaction, such deprived party can avail of the remedy

that is stated in section 119 of the Act. The deprived party in such a case is entitled to get

back the thing that has been given to the other party during the transaction, provided it still

lies in the possession of the other party.

However, if any contrary expression appears, the party is not entitled to such remedy.

Difference between Exchange and sale:

The difference between a sale and an exchange is that in a sale the price is paid in money

while in an exchange it is paid in another property by way of barter. The sale is always for a

price, which means money or the current coin of the realm while no price is paid in an

exchange; there is only a transfer of one specific property for another. And although payment

of price may be made in addition to the transfer of property, by way of equality of exchange,

such payment does not make the exchange lose its character as such.

1.13 GIFT (SECTION 122) (Dmello, 2017)

Section 122 of the Transfer of Property Act defines ―gift‖ as follows:

‖Gift‖ – The transfer of certain existing moveable or immoveable property made voluntarily

and without consideration by one person called the ‗donor‘, to another person called the ‗donee‘ and accepted by or on behalf of the donee.

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The gift must be accepted during the life time of the donor and the donor should be capable

of giving. However, if the donee dies before the acceptance, the gift becomes void.

Who Can Make A Gift Deed?

Essentials of a valid gift deed:

1. There must be a transfer of ownership.

2. The subject matter of gift must be certain whether existing movable or immovable

property.

3. The transfer must be voluntarily done.

4. It must be done without consideration.

5. There must be acceptance by or on behalf of the donee, and such acceptance must be

made during the lifetime of the donor and while he is capable of giving.

There are two parties to the gift: donor and donee.

The donor must be a person competent to transfer; whereas the donee may be any person.

The gift can be made to any one, to an incompetent person or even to a juridical person.

Gratuitous transfer is the essence of a gift transfer.

Registration of Gift Deed:

According to Section 123, a gift of immoveable property must be made by a registered

instrument signed by or on behalf of the donor and attested by at least two witnesses.

Where a gift in favour of someone is registered but it is not accepted by the donee, the gift is

incomplete. Suppose, a document is executed by the donor making a gift of immoveable

property and the deeds are delivered to the donee, and the donee accepts the gift but the

document is not registered? The Courts held the gift as valid in the eyes of law.

While registration is a necessary formality for the enforcement of a gift of immoveable

property, it does not suspend the gift until registration actually takes place. The donee in such

a case can ask the donor to complete the gift by registration. Thus, the most essential thing

for the validity of a gift is its acceptance. If the gift is accepted but not registered it is a valid

gift.

Case law: The Privy Council in Kalyan Sundram vs. Kumarappa, A.I.R. 1925 P.C. 42,

decided that after acceptance of the deed of gift and before registration, the donor cannot

revoke the gift. The gift which is accepted by the donee, will take effect from the date of the

execution of the document by the donor, even though it is registered at a later date.

Revocation of Gift Deed:

If the deed of gift is executed but never communicated to the intended donee and remains in

the possession of the donor undelivered, it cannot be compulsory registered at the instance of

the donee. The reason is that the donee did not accept the gift, the donor can at any time

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before such acceptance revoke the gift. But once a gift is accepted by the donee, the donor

cannot revoke it.

A gift may, however, be revoked if it is brought about by a fraud or misrepresentation or

undue influence. The other essential characteristic of a gift is that it cannot be revoked at the

will and pleasure of the grantor.

A revocable gift is one which may be revoked by the donor at any time. Its revocation would

depend upon the mere will or pleasure of the donor. Such a gift is void. But on the other

hand, if the condition is one which does not depend on the will or pleasure of the donor, the

gift can be revoked on the happening of such condition.

Illustration:

(a) A gives a field to B, reserving to himself, with B‘s assent, the rights to take back the field in case B and his descendants die before A, B dies without descendants during A‘s lifetime. A may take back the field.

(b) A gives a lakh of rupees to B, reserving to himself with B‘s assent the right to take back at

leisure ₹10,000 out of one lakh. The gift holds goods as to ₹ 90,000 but is void as to ₹10,000

which continues to belong to A.

A gift which comes into existence on the fulfillment of a condition, that is to say, a gift which

is subject to a condition precedent is also valid. A condition precedent, as already explained

in this study dealing with vested interest and contingent interest, is one which must be

fulfilled before the transfer takes effect. But the condition attached to the gift should not be

illegal or immoral. For instance, a gift to A on condition that he murders B is not valid.

‗Gifts‘ comprising both of existing property and future property is void as to the latter. For example, A makes a gift of his house and also makes a gift of the additions that he is likely to

make in future. Here the gift of the house is valid but the gift of the additions that are yet to

be made is invalid.

Onerous Gift:

Lastly reference may also be made to what is known as an onerous gift. It may be that several

things are transferred as gifts by single transaction. Whereas some of them are really

beneficial the others convey burdensome obligations. The result is that the benefit which it

confers is more than counter balanced by the burden it places.

For instance, A makes gifts of shares in the companies X and Y. X is prosperous but heavy

calls are expected in respect of shares in Y company. The gifts are onerous. The rule as laid

down in Section 127 is that the donee takes nothing by the gift unless he accepts it fully.

Where the gift is in the form of two or more independent transfers to the same person of

several things, the donee is at liberty to accept one of them and refuse the other.

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The rules pertaining to gifts in the Transfer of Property Act do not apply to the gifts by

Mohammedans. A gift made by a Mohammedan, its validity has to be judged according to

Muslim law and not according to the Transfer of Property Act.

1.14 ACTIONABLE CLAIM (SECTION 3) (Harbansh, 2011)

―Actionable claim" means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial

interest in movable property not in the possession, either actual or constructive, of the

claimant, which the civil courts recognise as affording grounds for relief, whether such debt

or beneficial interest be existent, accruing, conditional or contingent;

Simply stated, an actionable claim means a claim to any unsecured debt or a claim to any

beneficial interest in movable property, not in the possession of the claimant. The debt or

beneficial interest may exist, accruing, conditional or contingent.

Example: A borrows ₹5000/- from B at 12 % p.a. interest on 1st April, 2006 and promises to

pay back the amount with interest on 1st July, 2006. Till 1st July, 2006, the debt is an accruing

debt and is an actionable claim.

It may be noted that a person can have actionable claim, even without consideration. Further,

such persons claim will not be affected by claim of a subsequent transferee with

consideration.

The term actionable claim is that every kind of claim in a movable property which would be

enforced through the courts. But such a wide meaning created confusion.

For example, under this meaning all debts whether secured or unsecured were actionable

claims whereas a debt secured by mortgage of immovable property is, strictly speaking, an

‗interest in land‘. Similarly, under this meaning any claim of money whether the amount was fixed amount or uncertain, was an actionable claim. Because of such confusions there used to

be conflicting decisions and the law was neither clear nor uniform.

Actionable claim is a claim to any debt, other than a debt secured by mortgage of immovable

property or by hypothecation or pledge of moveable property, or to any beneficial interest in

moveable property not in possession either actual or constructive, of the claimant, which the

civil courts recognize as affording grounds of relief whether such debt or beneficial interest

be existent, accruing or conditional or contingent.

As per Section 3 of the Transfer of Property Act, 1882, Actionable Claim is a claim to any

debt, other than a debt secured by mortgage of immovable property or by hypothecation or

pledge of moveable property, or to any beneficial interest in moveable property not in

possession either actual or constructive, of the claimant, which the civil courts recognize as

affording grounds of relief whether such debt or beneficial interest be existent, accruing or

conditional or contingent‖.

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―A person is said to have notice‖ of a fact when he actually knows that fact, or when, but for

willful abstention from an enquiry or search which he ought to have made, or gross

negligence, he would have known it.

Explanation I: Where any transaction relating to immovable property is required by law to be

and has been effected by a registered instrument, any person acquiring such property or any

part of, or share or interest in, such property shall be deemed to have notice of such

instrument as from the date of registration or, where the property is not all situated in one

sub-district, or where the registered instrument has been registered under sub-section (2) of

section 30 of the Indian Registration Act, 1908 (16 of 1908), from the earliest date on which

any memorandum of such registered instrument has been filed by any Sub-Registrar within

whose sub-district any part of the property which is being acquired, or of the property

wherein a share or interest is being acquired, is situated:

Provided that-

(1) The instrument has been registered and its registration completed in the manner

prescribed by the Indian Registration Act, 1908 (16 of 1908), and the rules made

there under,

(2) The instrument of memorandum has been duly entered or filed, as the case may be, in

books kept under section 51 of that Act, and

(3) The particulars regarding the transaction to which the instrument relates have been

correctly entered in the indexes kept under section 554 of that Act.

Explanation II: Any person acquiring any immovable property or any share or interest in any

such property shall be deemed to have notice of the title, if any, of any person who is for the

time being in actual possession thereof.

Explanation III: A person shall be deemed to have had notice of any fact if his agent acquires

notice thereof whilst acting on his behalf in the course of business to which that fact is

material:

Provided that, if an agent fraudulently conceal the facts, the principal shall not be charged

with notice thereof as against any person who was a party to or otherwise cognizant of the

fraud.

Actionable claim means a claim to any debt other than a debt secured under a mortgage or

hypothecation or pledge on any immovable or moveable property, possession of which is

given to person or institution which gave the loan.

An Actionable Claim is a plain unsecured debt which can be claimed by a person against

another person and which can be enforced in civil courts according to law. The right to

benefit of a contract falls within the definition of Actionable Claim. An Actionable Claim is

transferable and inheritable and it is deemed to be a property in the hands of the person who

has the claim. Actionable claim, a claim to a debt, whether existent, accruing, contingent or

conditional (the latter two types being future debt), are capable of being transferred in

present. It is recommended that this position be clarified by virtue of an amendment to the

28

Transfer of Property Act. Simply stated, an actionable claim means a claim to any unsecured

debt or a claim to any beneficial interest in movable property, not in the possession of the

claimant. The debt or beneficial interest may exist, accruing, conditional or contingent.

For example, A borrows ₹ 5000/- from B at 12% per annum interest on 1st April, 2006 and

promises to pay back the amount with interest on 1st July, 2006. Till 1st July, 2006, the debt

is an accruing debt and is an actionable claim.

It may be noted that a person can have an actionable claim, even without consideration.

Further such person‘s claim will not be affected by claim of a subsequent transferee with consideration.

Conditions of Actionable Claim

Two conditions of actionable claim is that—

(1)Unsecured Money Debt: A debt is an obligation to pay a liquidated or definite sum of

money. Such debt may be: (1) existent, (2) conditional, (3) contingent. If it is now due and

owing it is existent. If it is a present debt but payable in the future it is accruing. A debt which

will be due only if a condition be fulfilled or if a certain specified thing happens is a

conditional debt. Contingent debts are debt which are payable on a certain contingency, e.g.,

an amount due under a policy of insurance.

Types of Debts

Existent Debt: Where a debt or sum of money has already become due and is payable

(enforceable) at present, the debt is existent. For example, claim of arrears of maintenance

allowance or the claim of arrears of salary is existent debt because a definition sum of money

has already become due in the past and now it is payable.

Accruing Debt: Where a debt or sum of money is at present due but it is payable not now but

on a future date, the debt is accruing. Accruing debt is due at present but becomes payable

only on a future date. For example if A promises to pay ₹ 100 to B as maintenance allowance

on fifth of every month, the claim for salary to fall due in the next month is an accruing debt

and such an actionable claim.

Conditional or Contingent Debt: Where the claim for a sum of money exists but the

payment depends upon the fulfillment of any condition, the debt is condition. If A promises

to give ₹1000 to B provided he marries within one year, than B‘s claim for ₹1000 is

conditional because it is subject to a condition to be fulfilled by him in future.

Similarly, where the claim of money is subject to some uncertain future event which may or

may not happen, the claim is contingent, For example, where A promises to give ₹1000 to B

provided B‘s first child is a son, the claim of B for ₹1000 is contingent claim (debt).

Debts secured by a mortgage of immovable property or by a pledge of movable property are

excluded from the definition of actionable claim. Actionable claim therefore under the

section means a claim to unsecured debt. A claim for damages, i.e. for an unascertained sum

29

of money or a claim for mesne profits* does not come within the definition of actionable

claim.

Illustrations

a) A owes ₹ 1000 to B. B‘s claim is an actionable claim. b) A borrows ₹ 1000 from B and mortgages his house to him. The mortgage debt is not

actionable claim.

c) A contracted to buy goods from B. On the due date, a fails to take delivery and B sells

the goods in the open market at a loss ₹ 10000. B has a right to claim the damages

from A but this claim is not an actionable claim.

(2) Claim to Beneficial Interest not in Possession of the Claimant Right of a person to take

the possession of a movable property from the possession of the another, is the actionable

claim of that person provided claimant has beneficial interest(i.e. right of possession) in that

property. Following condition are necessary for an actionable claim:

a) The claim is in some movable property.

b) The movable property is in possession of another person.

c) The beneficial inters or the right of the possession of the claimant is recognized by the

court.

A person can claim possession of a movable property of which he has right to possess but it is

not in his possession. If a property is already in his actual or constructive possession there is

no question of claiming its possession, Therefore, if a movable property is proved to be in

actual or constructive possession of the claimant, there is no actionable claim. Moreover, the

claimant must also have right of possession i. e. the law recognizes that he has beneficial

interest in that movable property. If he has no legal right of possession, the claim is not

actionable claim.

Beneficial interest of movable property: A claim to any beneficial interest in movable

property, not in possession of the claimant, is included in the present definition. Thus, a right

to claim the benefit of a contract for the purchase of goods is a beneficial interest in movable

property.

Illustration

1. A agrees to sell to B bales of cotton deliverable on a future day. B has a beneficial

interest in the goods and it is an actionable claim.

2. A has sold fifty bags of wheat to B. The bags of wheat are in the warehouse of A. B‘s right to take possession of the bags of wheat from the warehouse of A is his (B‘s) Actionable claim.

3. A has fifty bags of wheat in his warehouse. A has not sold these bags to B or the

contract of sale is not valid. B has not beneficial interest in those bags of wheat. Claim

of B, if made by him, is not his actionable claim.

30

Transfer of Actionable Claim: Beneficial interest in movable property is intangible

movable property. Therefore, actionable claim is regarded as property.

Some instance of actionable claim:

a) The right to claim benefit of the contract for the purchase of goods.

b) A claim to money under an insurance policy.

c) A share in partnership.

d) A claim for arrears of rent.

e) A claim for return of earnest money.

f) Right to get back the purchase-money when the sale is set aside.

g) Muslim women claim for her unpaid dower.

h) Right to get the proceeds of a business.

Instances of claims which are not actionable claim:

a) A debt is an actionable claim, but a debt which has passed into a decree is not an

actionable claim.

b) The right to recover damages for breach of contract.

c) A claim to mesne profits*.

d) A copyright.

e) Where a decree provides for a future decree, this future decree is also not actionable

claim.

* Mesne profits -The profits of an estate received by a tenant in wrongful possession and

recoverable by the landlord.

1.15 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

a) A sale of land can happen only through a registration of a sale agreement.

b) A seller of a building is under no obligation to disclose a defect in his property.

c) A sale of a flat requires the contract to be in writing, but not registration of the

document.

d) A co-owner can sell his share only with the consent of all other owners.

e) In a mortgage, there is a debt, but there need not be a debt in the case of a charge.

f) The Transfer of Property Act covers gift of immovable property.

g) The Transfer of Property Act does not cover transfer through inheritance.

h) A co-owner can sell his share but not give possession to the buyer till the property

is divided among the co-owners.

i) The Transfer of Property Act covers both immovable and movable property.

j) A security of immovable property for the payment of money, which does not

qualify to be a mortgage, is called a charge.

31

2. Long Answer Questions

Q1. Define the aim and objective of Transfer of Property Act, 1882. Discuss the

provisions relating to mortgage, charge, gift and actionable claim as per the Transfer

of Property Act, 1882.

Q2. Discuss the properties that cannot be transferred as per the Transfer of Property

Act, 1882 also explain the provision of Right to Perpetuity, along with the exemptions

with examples and relevant case law.

Q3. Write a short note:

i) Moveable and Immovable property under Transfer of Property Act, 1882. ii) Transferable Property(Section 6 of Transfer of Property Act, 1882) iii) Actionable Claim

SUGGESTED READINGS

1) Gupta, S. (2015, February 15). Academike: Articles on legal issues. Retrieved May

30, 2018, https://www.lawctopus.com/academike/transfer-property-unborn/#_ftn21

2) Sethi, T. (2018). Rule against Perpetuity. Retrieved May 30, 2018, from

http://www.legalservicesindia.com/article/2477/Rule-Against-Perpetuity.html

3) Dmello, A. (2017, October 17). Kanoon. nearlaw.com. Retrieved May 31, 2018, from

http://kanoon.nearlaw.com/2017/10/18/gift-deed-property-act/

4) Gupta, S. (2015, February 15). Academike: Articles on legal issues. Retrieved May

30, 2018, https://www.lawctopus.com/academike/transfer-property-unborn/#_ftn21

5) Harbansh, A. (2011). Actionable Claim. International Journal Of Business Policy And

Economics, 4(2), 409-415.

6) ICSI. (2018). Charge. Retrieved from www.icsi.edu:

https://www.icsi.edu/Docs/Webmodules/Publications/Lesson%2015.pdf

7) Net Lawman. (2018). Transfer of Property Act, 1882. Retrieved from

www.netlawman.co.in: https://www.netlawman.co.in/ia/lease-understanding-concepts

8) Sir Dinshaw Fardunji Mulla, revised by Dr. Poonam Pradhan Saxena, Mulla's The

Transfer of Property Act 2.

9) Row, Sanjiva. revised by Justice K. Shanmukham & Shrinivas Gupta, Transfer of

Property Act (with Model Forms of Sale Deed, Agreement to Sell, Mortgage, Lease

Deed, Gift Deed, Partition Deed, Assignment of Actionable Claim etc.) (in 2 Vols)

10) Bare Act on The transfer of Property Act, 1882

32

LESSON 2

THE SOCIETIES REGISTRATION ACT, 1860

2 STRUCTURE

2.1 Introduction

2.2 Societies Formed by Memorandum of Association and Registration

2.3 Memorandum of Association

2.4 Registration and Fees

2.5 Annual List of Managing Body to be Filed

2.6 Property of Society how vested

2.7 Suits by and against Societies

2.8 Suits Not to Abate:

2.9 Enforcement of Judgment Against Society:

2.10 Recovery of Penalty Accruing Under Bye-Law

2.11 Members Liable to be Sued as Strangers:

2.12 Societies Enabled to Alter, Extend Or Abridge their Purposes

2.13 Provision for Dissolution of Societies and Adjustment of their Affairs

2.14 Upon a Dissolution No Member to Receive Profit

2.15 Member Defined

2.16 Governing Body Defined

2.17 Registration of Societies Formed before Act

2.18 Such Societies to File Memorandum, etc. With Registrar Of Joint-Stock Companies

2.19 Inspection Of Documents

2.20 To What Societies Act Applies

2.21 Model Memorandum of Association

2.22 Model Rules and Regulations

2.23 Instructions for Registration

2.24 Self-Assessment Questions

2.1 INTRODUCTION

An Act for the registration of literary, scientific and charitable societies Whereas it is

expedient the provision should be made for improving the legal condition or societies

established for the promotion of literature, science, or the fine arts, or for the diffusion of

useful knowledge, the diffusion of political education, or for charitable purposes;

Points to be kept in mind while forming a society:-

i. The Emblems Act, 1950 prohibits the use of any name, emblems, official seal etc. as

specified in the Act without previous permission of competent authority. It also

prohibits the use of the name of national heroes and other names etc. mentioned in the

33

Act. The Societies intending to seek registration are advised to consult this Act also

before proposing the name etc. for registration.

ii. If the proposed name is identical with that by which any other society has been

registered or resembles such name which is likely to deceive the public or the member

of society, such name may be avoided. Names of all the registered Societies have

been put on the website of Industries Department to enable the public and prospective

applicants to check the availability of names.

2.2 SOCIETIES FORMED BY MEMORANDUM OF ASSOCIATION AND

REGISTRATION

Any seven or more persons associated for any literary, scientific, or charitable purpose, or for

any such purpose as is described in section 20 of this Act, may, by subscribing their names to

a memorandum of association, and filing the same with Registrar of Joint-stock Companies

form themselves into a society under this Act.

2.3 MEMORANDUM OF ASSOCIATION

The memorandum of association shall contain the following things, that is to say,-

The name of the society;

The object of the society;

The names, addresses, and occupations of the governors, council, directors, committee, or

other governing body to whom, by the rules of the society, the management of its affairs is

entrusted.

A copy of the rules and regulations of the society, certified to be a correct copy by not less

than three of the members of the governing body, shall be filed with the memorandum of

association.

2.4 REGISTRATION AND FEES

Upon such memorandum and certified copy being filed, the Registrar shall certify under his

hand that the society is registered under this Act. There shall be paid to the Registrar for

every such registration a fee of fifty rupees, or such smaller fees as the State Government

may from time to time, direct; and all fees so paid shall be accounted for to the State

Government.

2.5 ANNUAL LIST OF MANAGING BODY TO BE FILED

Once in every year, on or before the fourteenth day succeeding the day on which, according

to the rules of the society, the annual general meeting of the societies is held, or, if it rules do

not provide for an annual general meeting, in the months of January, list shall be filed with

the Registrar of Joint Stock Companies, of the names, addresses and occupations of the

34

governors, council, director, committee, or other governing body then entrusted with the

management of the affairs of the society.

2.6 PROPERTY OF SOCIETY HOW VESTED

The property, movable and immovable belonging to a society registered under this Act, if not

vested in trustees, shall be deemed to be vested, for the time being, in the governing body of

such society, and in all proceedings civil and criminal, may be described as the property of

the governing body of such society for their proper title.

2.7 SUITS BY AND AGAINST SOCIETIES

Every society registered under this Act may sue or be sued in the name of President,

Chairman, or Principal Secretary, or trustees, as shall be determined by the rules and

regulations of the society and, in default of such determination, in the name of such person as

shall be appointed by the governing body for the occasion:

Provided that it shall be competent for any person having a claim, or demand against the

society, to sue the President or Chairman, or Principal Secretary or the trustees thereof, if on

application the governing body some other officer or person be not nominated to be the

defendant.

2.8 SUITS NOT TO ABATE

No suit or proceeding in any Civil Court shall abate or discontinue by reason of the person,

by or against whom such suit or proceedings shall have been brought or continued, dying or

ceasing to fill the character in the name whereof he shall have sued or been sued, but the

same suit proceedings shall be continued in the name of or against the successor of such

person.

2.9 ENFORCEMENT OF JUDGMENT AGAINST SOCIETY

If a judgment shall be recovered against the person or officer named on behalf of the society,

such judgment shall not be put in force against the property, movable or immovable, or

against the body of such person or officer, but against the property of the society.

The application for execution shall set forth the judgement, the fact of the party against whom

it shall have been recovered having sued or having been sued, as the case may be, on behalf

of the society only, and shall require to have the judgement enforced against the property of

the society.

2.10 RECOVERY OF PENALTY ACCRUING UNDER BYE-LAW

Whenever by any bye-law duly made in accordance with the rules and regulations of the

society, or, if the rules do not provide for the making of byelaws, by any bye-laws made at a

general meeting of the members of the society convened for the purpose (for the making of

which the concurrent votes of three-fifths of the members present at such meeting shall be

35

necessary), any pecuniary penalty is imposed for the breach of any rule or bye-law of the

society, such penalty, when accrued, may be recovered in any court having jurisdiction where

the defendant shall reside, or the society shall be situate, as the governing body thereof shall

deem expedient.

2.11 MEMBERS LIABLE TO BE SUED AS STRANGERS

Any member who may be in arrear of a subscription which according to the rules of the

society he is bound to pay, or who shall possess himself of or detain any property of the

society in a manner or for a time contrary to such rules, or shall injure or destroy any property

of the society, may be sued for such arrear or for the damage accruing from such detention,

injury, or destruction of the property in subject to the same prosecution, and, if convicted,

shall be liable to be punished in like manner, as any person not a member would be subject

and liable to in respect of the like offence.

2.12 SOCIETIES ENABLED TO ALTER, EXTEND OR ABRIDGE THEIR

PURPOSES

Whenever it shall appear to the governing body of any society registered under this Act,

which has been established for any particular purpose or purposes, that it is advisable to alter,

extend, or abridge such purpose to or for other purposes within the meaning of this Act, or to

amalgamate such society either wholly or partially with any other society, such governing

body may submit the proposition to the members of the society in a written or printed report,

and may convene a special meeting for the consideration thereof according to the regulations

of the society; but no such proposition shall be carried into effect unless such report shall

have been delivered or sent by post to every member of the society ten days previous to the

special meeting convened by the governing body for the consideration thereof, nor unless

such proposition shall have been agreed to by the votes of three-fifths of the members

delivered in person or by proxy, and confirmed by the votes of three-fifths of the members

present at a second special meeting convened by the governing body at an interval of one

months after the former meeting.

2.13 PROVISION FOR DISSOLUTION OF SOCIETIES AND ADJUSTMENT OF

THEIR AFFAIRS

Any number not less than three-fifths of the members of any society may determine that it

shall be dissolved, and thereupon it shall be dissolved forthwith, or at the time then agreed

upon, and all necessary steps shall be taken for the disposal and settlement of the property of

the society, its claims and liabilities according to the rules of the said society applicable

thereto, if any, and if not, then as the governing body shall find expedient, provided that, in

the event of any dispute arising among the said governing body or the members of the

society, the adjustment of its affairs shall be referred to the principal court of original civil

jurisdiction of the district in which the chief building of the society is situate; and the court

shall make such order in the matter as it shall deem requisite.

36

Assent required: Provided that no societies shall be dissolved unless three-fifths of the

members shall have expressed a wish for dissolution by their votes delivered in person, or by

proxy, at a general meeting convened for the purpose:

Government consent: Provided that whenever any Government is a member of, or a

contributor to, or otherwise interested in any society registered under this Act, such society

shall not be dissolved without the consent of the Government of the State or registration.

2.14 UPON A DISSOLUTION NO MEMBER TO RECEIVE PROFIT

If upon the dissolution of any society registered under this Act there shall remain, after the

satisfaction of all its debts and liabilities, any property whatsoever, the same shall not be paid

to or distributed among the members of the said society or any of them, but shall be given to

some other society, to be determined by the votes of not less than three-fifths of the members

present personally or by proxy at the time of the dissolution, or in default thereof, by such

court as aforesaid:

Clause not to apply to Joint-stock Companies: Provided, however, that this clause shall not

apply to any society which has been founded or established by the contributions of share-

holders in the nature of a Joint-stock Company.

2.15 MEMBER DEFINED

For the purposes of this Act a member of a society shall be a person who, having been

admitted therein according to the rules and regulations thereof, shall have paid a subscription,

or shall have signed the roll or list of members thereof, and shall not have resigned in

accordance with such rules and regulations;

Disqualified members: But in all proceedings under this Act no person shall be entitled to

vote or be counted as a member whose subscription at the time shall have been in arrears for

a period exceeding three months.

2.16 GOVERNING BODY DEFINED

The governing body of the society shall be the governors, council, directors, committee,

trustees, or other body to whom by the rules and regulations of the society the management of

its affairs are entrusted.

2.17 REGISTRATION OF SOCIETIES FORMED BEFORE ACT

Any company or society established for a literary, scientific or charitable purpose, and

registered under Act 43 of 1850 , or any such society established and constituted previously

to the passing of this Act but not registered under the said Act 43 of 1850 may at any time

hereafter be registered as a society under this Act.

Assent required: Subject to the provision that no such company or society shall be registered

under this Act unless an Assent to its being so registered has been given by three-fifths of the

37

members present personally, or by proxy, at some general meeting convened for that purpose

by the governing body. In the case of a company or society registered under this Act 43 of

1850, the directors shall be deemed to be such governing body.

In the case of a society not so registered, if no such body shall have been constituted on the

establishment of the society, it shall be competent for the members thereof, upon due notice,

to create for itself a governing body to act for the society thenceforth.

2.18 SUCH SOCIETIES TO FILE MEMORANDUM, ETC. WITH REGISTRAR OF

JOINT-STOCK COMPANIES

In order to any such society as is mentioned in the last proceeding section obtaining registry

under this Act, it shall be sufficient that the governing body file with the Registrar of Joint-

stock Companies. A memorandum showing the name of the society, the objects of the

society, and the names, addresses and occupations of the governing body, together with a

copy of the rules and regulations of the society certified as provided in section 2, and a copy

of the report of the proceedings of the general meeting at which the registration was resolved

on.

2.19 INSPECTION OF DOCUMENTS

Any person may inspect all documents filed with the Registrar under this Act on payment of

a fee of one rupee for each inspection; and any person may require a copy or extract of any

document or any part of any document, to be certified by the registrar, on payment of two

annas for every hundred words of such copy or extract; and such certified copy shall be prima

facie evidence of the matters therein contained in all legal proceedings whatever.

2.20 TO WHAT SOCIETIES ACT APPLIES

The following societies may be registered under this Act:-

Charitable societies, the military orphan funds or societies established at the several

presidencies of India, societies established for the promotion of science, literature, or the fine

arts for instruction, the diffusion of useful knowledge, 1 [the diffusion of political education],

the foundation or maintenance of libraries or reading-rooms for general use among the

members or open to the public or public museums and galleries of paintings and other works

of art, collections of natural history, mechanical and philosophical inventions, instruments, or

designs.

38

2.21 MODEL - MEMORANDUM OF ASSOCIATION

The memorandum of association may be prepared according to the model memorandum of

association given below:-

MEMORANDUM OF ASSOCIATION

1. Name of the Society: The name of the Society shall be-------------------------------------------

2. Registered Office: The office of the Society shall remain in the National Capital Territory

of Delhi and at present is at the following address:-

-------------------------------------------------------------------------------------------------------------

3. Aim and Object: The aim and objects for which the Society is established are as under:-

(a) --------------------------------------------------------------------------------------------------------

(b) --------------------------------------------------------------------------------------------------------

(c) --------------------------------------------------------------------------------------------------------

(d) --------------------------------------------------------------------------------------------------------

and so on……

NOTE: Please add this clause in the memorandum after completing the objects.

All the income, earning, moveable, immovable properties of the societies shall be solely

utilized and applied towards the promotion of its aim and objects only set forth in the

memorandum of association and no profit thereof shall be paid or transferred directly or

indirectly by way of dividends, bonus, profits or in any manner whatsoever to the present and

past member of the society or to any person claiming through any or more of the present or

past member.

No member of society shall have any personal claim on any moveable or immovable

properties of the society or make any profit, whatsoever by virtue of his membership.

4. GOVERNING BODY : The names, addresses, occupations and designations of the

members of the governing body to whom the management of the society is entrusted as

required under the section 2 of Societies Registration Act, 1860 as applicable to the National

Capital Territory of Delhi area are as follows:-

Sl.no. Name (in Capital letters) Address Occupation Designation in

the Society

1.

2.

3.

4.

5.

6.

7.

39

5. DESIROUS PERSONS: We, the undersigned are desirous of forming a society namely

____________________________________________________ Under Societies

Registration Act, 1860 as applicable to the National Capital Territory of Delhi in the

pursuance of the memorandum of association of the society:-

Sl.no. Name & Address Occupation Signature

1.

2.

3.

4.

5.

6.

7.

sd/- sd/- sd/-

President Secretary Treasurer

NOTE: The memorandum should close after clause 5 given in the above model form.

6. All the signatures of the desirous persons / subscribers given in the clause 5 of the

memorandum must be witnessed by an Oath Commissioner, Notary Public (Notarial stamps

affixed), Gazetted Officer/Advocate or Magistrate 1st Class with their official rubber stamps

and complete in all respect.

7. The names of the persons mentioned in the clause 4 (Governing Body) of the model of the

memorandum must necessarily be included under clause 5 i.e. in the list of desirous persons /

subscribers to the memorandum. This is to say that member of the Governing Body cannot be

outside the list of the desirous persons / subscribers to the memorandum.

8. For carrying out the aims and objects given by the memorandum and for internal

management of the society, rules and regulation may be made by the society.

9. The rules and regulations of the society should be filed along with the memorandum of

association with registering authority i.e. Registrar of Societies for the purpose of registration

of the society.

10. If the rules and regulations of the society are inconsistent with provision of the Societies

Registration Act, 1860 they are invalid and mere filing with registering authority for the

purpose of registration of society cannot make them valid.

40

2.22 MODEL - RULES & REGULATIONS

1. Rules and Regulations of the Society may be prepared according to the model rules

and regulation given below:-

a. Name of the Society

b. Membership defined

c. Admission and qualification for Membership

d. Subscription of the membership

e. Appeal and re-admission of membership

f. Right and privileges of membership

2. General Body

a. General body defined

b. Power and duties / functions of the general bodies.

c. Notice of meeting and periodicity of meetings

3. Managing / Governing Body/Executive Committee

a. Managing/Governing Body/Executive Committee defined

b. Minimum and maximum strength including office bearers

c. Composition

d. Election and its mode

e. Term of the office of the Governing Body

f. Powers and suits of the office bearers

g. Quorum and notice of the meeting

h. Filling up of casual vacancies

4. Sub-Committee, if any, formation, Composition, duties and functions

5. Source of income and utilization of funds

6. Audit of Accounts

7. Operation of the Bank Account

8. Annual List of Managing / Governing Body to be filed

9. As required Under Section 4 of the Societies Registration Act, the list of Managing /

Governing Body shall be filed once in every year with the Registrar of Societies,

Delhi.

41

10. Suits by and against Societies

Every society registered under this Act may sue or be sued in the name of the

president, chairman, or principal secretary, or trustees, as shall be determined by the

rules and regulations of the society and, in default of such determination, in the name

of such person as shall be appointed by the governing body for the occasion. Provided

that it shall be competent for any person having a claim or demand against the society,

to sue the president or chairman, or principal secretary or the trustees thereof, if on

application to the governing body some other officer or person be not nominated to be

the defendant. A registered society is not a corporation but is like a Joint Stock

Company or a Club.

Any amendment in the memorandum of association of rules will be carried out in

accordance with procedure laid down under section 12 and 12-A of the Society

Registration Act, 1860

11. Dissolution and Adjustment of Affairs

If the Society need to be dissolved it shall be dissolved as per provision laid down

under section 13 and 14 of the Societies Registration Act, 1860 as applicable to Union

Territory of Delhi shall apply to this Society.

12. Application of the Act

All the provision under all the section of the Societies Registration Act, 1860 as

applicable to the Union Territory of Delhi shall apply to this Society.

13. Essential Certificate

Certified that this is the correct version of the rules and regulations of the Society

sd/- sd/- sd/-

President Secretary Treasurer

42

2.23 INSTRUCTIONS FOR REGISTRATION

1. Types of Societies Registered under Societies Registration Act, 1860

CODE NO. CATEGORY

01 WELFARE SOCIETY

02 SOCIAL WELFARE

03 NATURAL ENVIRONEMNT & POLLUTION CONTROL

04 LITERACY SOCIETIES

05 SCIENCE/HEALTH / RESEARCH

06 RESIDENTS WELFARE SOCIETIES

07 GAMES / SPORTS

08 FINE ARTS

09 CULTURAL

10 EDUCATIONAL SOCIETIES

11 MEDICAL & HOSPITAL

12 RELIGIOUS

13 CHARITABLE

14 MISC.

2. The two documents for registration viz. Memorandum of Association and Rules and

Regulations should separately be typed neatly with separate page marking. Good

quality durable paper should be used for typing as the documents are for the

permanent records.

3. At least 4 cm margin must be on the left side and 2.5 cm from right side of each sheet

on the thick paper while typing on double space lining and type on one side only.

4. The aims and objects given under Clause 3 of the memorandum should not to be

repeated in the Rules and Regulations likewise, the activities of the programme of

working direction towards attainment of the aims and objects of the Society should

not figure in Memorandum.

5. Specific language given in the Guidelines for the particular clauses may be adopted

while preparing the document.

6. In case management of or reference to a particular existing places of worship like

Mandir, Gurudwara, Masjid, Church or Budh Vihar etc. is involved sufficient

documentary proof is required that the Society is legally competent for the same.

7. Affidavit on ₹ 10/- (Rupees ten only) Non-Judicial stamp paper from the President or

Secretary of the Society should be furnished regarding the relationship between the

subscribers (desirous persons) to the Memorandum are given under clause 5 of the

Memorandum and also an affidavit that the name of society will be changed if the

said name already found registered in our records. This affidavit must be attested by

Oath Commissioner. Notary Public with National Stamp affixed thereon or Magistrate

1st Class. Documentary proof in the shape of Sale Deed / General Power of Attorney/

43

Water bill and an allotment letter in the case of Government Quarter in respect of

premises shown as registered office of the Society under Clause 2 of the

memorandum should also be furnished along with No Objection Certificate from the

owner of the premises on ₹ 10/- (Rupees ten only) Non-judicial Stamp affixed

thereon. Specimen of affidavits is enclosed.

8. ₹ 50/- (Rupees fifty only) as the registration fee shall be demanded when formalities

are complete and the Registrar of the Societies has approved the grant of registration.

9. Driving License/Passport / Election Card or any other identity proof required in

respect of all desirous persons.

10. Societies which propose to operate across India should have one member each from at

least seven states of the Union of India.

11. Signature of minimum three office bearers is required on each & every page of the

Memorandum of Association and rules and regulations of the Society.

AFFIDAVIT No. 1

I, ---------------------------------------------s/o-------------------------------------------Resident of ----

---------------------------------------------------------------------------do hereby solemnly affirm and

declare as under:-

(1) That I am the President / Secretary of the Society named

________________________________________________________________.

(2) That the desirous persons of the Society are not related to each other by way of blood

relation or otherwise.

(3) That the name of proposed Society is not identical or reassembles to any other registered /

non-registered Society in our locality as per my knowledge.

(4) That if name of this Society is found attracting the provision of Emblems Act of 1950 and

/ or identical and resembles closely to any other Society which is already registered under

Societies Registration Act of 1860 in the N.C.T. of Delhi and other law of land applicable to

them then registration granted shall be deemed to have been withdrawn if the Society fail to

change the name within the given time do so Registrar of Societies, Delhi.

DEPONENT

VERIFICATION:

Verified at Delhi, on this the ----------- day of ---------------200---- that the contents of the

above affidavit are true and correct to the best of my knowledge and belief and nothing has

been concealed therefrom.

DEPONENT

44

AFFIDAVIT No. 2

(SPECIMEN OF N.O.C)

I, ---------------------------------------------s/o-------------------------------------------Resident of ----

---------------------------------------------------------------------------do hereby solemnly affirm and

declare as under:-

(1) That I am the legal owner / General Power of Attorney holder / allottee and in possession

of property bearing No.--------------------------------------------------------------------------------

(2) That I shall have ‗No Objection if the registered office of the Society named-----------------

------------------------------------------------------------ shall be situated at my above said

premises.

DEPONENT

VERIFICATION:

Verified at Delhi, on this the ----------- day of ---------------200---- that the contents of the

above affidavit are true and correct to the best of my knowledge and belief and nothing has

been concealed therefrom.

DEPONENT

2.24 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

a) The Emblems Act, 1950 prohibits the use of any name, emblems, official seal etc. as

specified in the Act without previous permission of competent authority.

b) Any company or society established for a literary, scientific or charitable purpose, and

registered under Act 43 of 1850.

c) Any person may inspect all documents filed with the Registrar under this Act on

payment of a fee of one rupee for each inspection.

d) The provisions regarding maximum number of members in a partnership are given in

Societies Registration Act.

e) Any seven or more persons associated for any scientific, literary or charitable

purposes can apply for Registration of a society.

45

f) No limit of maximum number of members is prescribed in the Act.

g) Major contents of MOA are Name, address and aim and objective.

h) The document for registration needs to be certified by at least three members of the

governing body.

2. Long Answer Questions

Q1. Discuss the objective of the Societies Registration Act, 1860. Also discuss the

procedure for registration and dissolution of societies under Societies Act, 1860.

Q2. Seven college friends united after a long time and decided to create an alumni

association to instill the feeling of brotherhood among themselves and also to help the

college in conducting seminars, conferences and placements. Draft the Memorandum

of Association and explain the procedures of registration and dissolution as per the

Societies Registration Act, 1860.

SUGGESTED READINGS

1) Bare Act on Societies Registration Act, 1860

2) www.mca.gov.in/

3) http://www.delhi.gov.in

46

LESSON 3

THE INDIAN TRUSTS (AMENDMENT) ACT, 2016

3 STRUCTURE

3.1 Introduction

3.2 definitions

3.3 Purpose or Object of Trust (Section 4)

3.4 Trust of immoveable property (Section 5)

3.5 Creation of trust (Section 6)

3.6 Who may create trusts (Section 7)

3.7 Subject of trust (Section 8)

3.8 Who may be beneficiary (Section 9)

3.9 Who may be trustee (Section 10)

3.10 Duties of Trustee

3.11 Rights and Powers of Trustees

3.12 Disabilities of Trustees

3.13 Rights and Liabilities of the Beneficiary

3.14 Discharge of trustee (Section 71)

3.15 Trust how extinguished (Section 77)-

3.16 Revocation of trust (Section 78)

3.17 Self-Assessment Questions

3.1 INTRODUCTION

The Indian Trust Act, 1882 came into force on 13th January, 1882, which was amended to

form The Indian Trusts (Amendment) Act, 2016 on the 26th July, 2016.

3.2 DEFINITIONS

―Trust‖- A "trust" is an obligation annexed to the ownership of property, and arising out of a

confidence reposed in and accepted by the owner, or declared and accepted by him, for the

benefit of another, or of another and the owner.

"Author of the trust"-the person who reposes or declares the confidence is called the

"author of the trust":

―Trustee‖- the person who accepts the confidence is called the "trustee":

―Beneficiary‖- the person for whose benefit the confidence is accepted is called the

"beneficiary":

―Trust Property‖- the subject-matter of the trust is called "trust-property" or "trust-money":

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The "beneficial interest" or "interest" of the beneficiary is his right against the trustee as

owner of the trust-property; and the instrument, if any, by which the trust is declared, is

called the "instrument of trust".

"Breach of Trust"- a breach of any duty imposed on a trustee, as such, by any law for the

time being in force, is called a "breach of trust".

3.3 PURPOSE OR OBJECT OF TRUST (SECTION 4)

Section 4 of the Indian Trust (Amendment) Act, 2016 provides that a trust can be created for

any lawful purpose. The purpose of a trust is lawful unless it is:

a) forbidden by law, or

b) Is of such a nature that, if permitted, it would defeat the provisions of any law, or

c) Is fraudulent, or

d) Involves or implies injury to the person or property of another, or

e) The Court regards it as immoral or opposed to public policy.

Every trust of which the purpose is unlawful is void. And where a trust is created for two

purposes, of which one is lawful and the other unlawful and the two purposes cannot be

separated, the whole trust is void.

Illustrations

a) A conveys property to B in trust to apply the profits to the nurture of female

foundlings to be trained up as prostitutes. The trust is void.

b) A bequeaths property to B in trust to employ it in carrying on a smuggling business,

and out of the profits thereof to support A's children. The trust is void.

c) A, while in insolvent circumstances, transfers property to in trust for A during his life,

and after his death for B. A is declared an insolvent. The trust for A is invalid as

against his creditors.

3.4 TRUST OF IMMOVEABLE PROPERTY (SECTION 5)

No trust in relation to immoveable property is valid unless declared by a non-testamentary

instrument in writing signed by the author of the trust or the trustee and registered, or by the

will of the author of the trust or of the trustee.

Trust of moveable property.-No trust in relation to moveable property is valid unless declared

as aforesaid, or unless the ownership of the property is transferred to the trustee. These rules

do not apply where they would operate so as to effectuate a fraud.

3.5 CREATION OF TRUST (SECTION 6)

Subject to the provisions of section 5, a trust is created when the author of the trust indicates

with reasonable certainty by any words or acts:

a) An intention on his part to create thereby a trust,

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b) The purpose of the trust,

c) The beneficiary, and

d) The trust-property, and (unless the trust is declared by will or the author of the trust is

himself to be the trustee) transfers the trust-property to the trustee.

Figure 1: Creation of Trust

Illustrations

a) A bequeaths certain property to B, "having the fullest confidence that he will dispose

of it for the benefit of" C. This creates a trust so far as regards A and C.

b) A bequeaths certain property to B "hoping he will continue it in the family". This does

not create a trust, as the beneficiary is not indicated with reasonable certainty.

c) A bequeaths certain property to B, requesting him to distribute it among such

members of C's family as B should think most deserving. This does not create a trust,

for the beneficiaries are not indicated with reasonable certainty.

d) A bequeaths certain property to B, desiring him to divide the bulk of it among C's

children. This does not create a trust, for the trust-property is not indicated with

sufficient certainty.

e) A bequeaths a shop and stock-in-trade to B, on condition that he pays A's debts and

legacy to C. This is a condition, not a trust for A's creditors and C.

3.6 WHO MAY CREATE TRUSTS (SECTION 7)

A trust may be created:

a) By every person competent to contract, and,

b) With the permission of a principal Civil Court of original jurisdiction, by or on behalf

of a minor;

Creation of Trust

Intention

Purpose

Trust Property

Beneficiary

49

But subject in each case to the law for the time being in force as to the circumstances and

extent in and to which the author of the trust may dispose of the trust-property.

3.7 SUBJECT OF TRUST (SECTION 8)

The subject-matter of a trust must be property transferable to the beneficiary. It must not be

merely a beneficial interest under a subsisting trust.

3.8 WHO MAY BE BENEFICIARY (SECTION 9)

Disclaimer by beneficiary.-Every person capable of holding property may be a beneficiary. A

proposed beneficiary may renounce his interest under the trust by disclaimer addressed to the

trustee, or by setting up, with notice of the trust, a claim inconsistent therewith.

3.9 WHO MAY BE TRUSTEE (SECTION 10)

Every person capable of holding property may be a trustee; but, where the trust involves the

exercise of discretion, he cannot execute it unless he is competent to contract.

Illustrations

a) A bequeaths certain property to B and C, his executors, as trustees for D. B and C

prove A's will. This is in itself an acceptance of the trust, and B and C hold the

property in trust for D.

b) A transfers certain property to B in trust to sell it and to pay out of the proceeds A's

debts. B accepts the trust and sells the property. So far as regards B, a trust of the

proceeds is created for A's creditors.

3.10 DUTIES OF TRUSTEE

Figure 2: Duties of Trustees

Trustee to execute trust

Trustee to inform himself of state of trust-property

Trustee to protect title to trust-property

Trustee not to set up title adverse to beneficiary

Care required from trustee

Conversion of perishable property

Trustee to be impartial

Investment of trust-money

Accounts and information.

Trustee to prevent waste

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1) Trustee to execute trust.-The trustee is bound to fulfil the purpose of the trust, and to

obey the directions of the author of the trust given at the time of its creation, except as

modified by the consent of all the beneficiaries being competent to contract. For

Example: Rajesh, a trustee, is simply authorized to sell certain land by public auction.

He cannot sell the land by private contract.

2) Trustee to inform himself of state of trust-property-A trustee is bound to acquaint

himself, as soon as possible, with the nature and circumstances of the trust-property;

to obtain, where necessary, a transfer of the trust-property to himself; and (subject to

the provisions of the instrument of trust) to get in trust-moneys invested on

insufficient or hazardous security.

Example: The trust-property is money in the hands of one of two co-trustees. No

discretionary power is given by the instrument of trust. The other co-trustee must not

allow the former to retain the money for a longer period than the circumstances of the

case required.

3) Trustee to protect title to trust-property-A trustee is bound to maintain and defend

all such suits, and (subject to the provisions of the instrument of trust) to take such

other steps as, regard being had to the nature and amount or value of the trust

property, may be reasonably requisite for the preservation of the trust-property and

the assertion or protection of the title thereto.

4) Trustee not to set up title adverse to beneficiary.-The trustee must not for himself

or another set up or aid any title to the trust-property adverse to the interest of the

beneficiary.

5) Care required from trustee.-A trustee is bound to deal with the trust-property as

carefully as a man of ordinary prudence would deal with such property if it were his

own; and, in the absence of a contract to the contrary, a trustee so dealing is not

responsible for the loss, destruction or deterioration of the trust-property.

Example: Vidya, a trustee directed to sell the trust-property by auction, sells the same,

but does not advertise the sale and otherwise fails in reasonable diligence in inviting

competition. A is bound to make good the loss caused thereby to the beneficiary.

6) Conversion of perishable property.-Where the trust is created for the benefit of

several persons in succession, and the trust property is of a wasting nature or a future

or reversionary interest, the trustee is bound, unless an intention to the contrary may

be inferred from the instrument of trust, to convert the property of a in to property

permanent and immediately profitable character.

Example: Sunil bequeaths to Karan all his property in trust for Vinod during his life,

and on his death for Ram, and on Ram's death for Mohan. Sunil's property consists of

three leasehold houses, and there is nothing in Sunil's will to show that he intended

the houses to be enjoyed in specie. Karan should sell the houses, and invest the

proceeds in accordance with section 20 as per The Indian Trust (Amendment) Act,

2016.

7) Trustee to be impartial.-Where there are more beneficiaries than one, the trustee is

bound to be impartial, and must not execute the trust for the advantage of one at the

expense of another. Where the trustee has a discretionary power, nothing in this

51

section shall be deemed to authorize the Court to control the exercise reasonably and

in good faith of such discretion.

Example: Abhishek, a trustee for Bhavya, Chetan and Dharna, is empowered to

choose between several specified modes of investing the trust-property. Abhishek in

good faith chooses one of these modes. The Court will not interfere, although the

result of the choice may be to vary the relative rights of Bhavya, Chetan and Dharna.

8) Trustee to prevent waste.-Where the trust is created for the benefit of several

persons in succession and one of them is in possession of the trust-property, if he

commits, or threatens to commit, any act which is destructive or permanently

injurious thereto, the trustee is bound to take measures to prevent such act.

9) Accounts and information.-A trustee is bound

a. To keep clear and accurate accounts of the trust-property, and

b. At all reasonable times, at the request of the beneficiary, to furnish him with

full and accurate information as to the amount and state of the trust-property.

10) Investment of trust-money.-Where the trust-property consists of money and cannot

be applied immediately or at an early date to the purposes of the trust, the trustee is

bound (subject to any direction contained in the instrument of trust) to invest the

money on the following securities, and on no others.

3.11 RIGHTS AND POWERS OF TRUSTEES

Following are the rights and powers of Trustees:

1) Right to title-deed.-A trustee is entitled to have in his possession the instrument of

trust and all the documents of title (if any) relating solely to the trust-property.

2) Right to reimbursement of expenses.-Every trustee may reimburse himself, or pay

or discharge out of the trust-property, all expenses properly incurred in or about the

execution of the trust, or the realization, preservation, or benefit of the trust-property,

or the protection or support of the beneficiary.

3) Right to indemnity from gainer by breach of trust.-A person other than a trustee

who has gained an advantage from a breach of trust must indemnify the trustee to the

extent of the amount actually received by such person under the breach; and where he

is a beneficiary the trustee has a charge on his interest for such amount. Nothing in

this section shall be deemed to entitle a trustee to be indemnified who has, in

committing the breach of trust, been guilty of fraud.

4) Right to apply to Court for opinion in management of trust property.- Any

trustee may, without instituting a suit, apply by petition to a principal Civil Court of

original jurisdiction for its opinion, advice or direction on any present questions

respecting the management or administration of the trust-property other than

questions of detail, difficulty or importance, not proper in the opinion of the Court for

summary disposal.

5) Right to settlement of accounts.-When the duties of a trustee, as such, are

completed, he is entitled to have the accounts of his administration of the trust-

property examined and settled; and, where nothing is due to the beneficiary under the

trust, to an acknowledgment in writing to that effect.

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6) General authority of trustee.-In addition to the powers expressly conferred by this

Act and by the instrument of trust, and subject to the restrictions, if any, contained in

such instrument, and to the provisions of section 17, a trustee may do all acts which

are reasonable and proper for the realization, protection or benefit of the trust-

property, and for the protection or support of a beneficiary who is not competent to

contract.

7) Power to sell in lots, and either by public auction or private contract.-Where the

trustee is empowered to sell any trust property, he may sell the same subject to prior

charges or not, and either together or in lots, by public auction or private contract, and

either at one time or at several times, unless the instrument of trust otherwise directs.

8) Power to sell under special conditions. Power to buy-in and re-sell.-The trustee

making any such sale may insert such reasonable stipulations either as to title or

evidence of title, or otherwise, in any conditions of sale or contract for sale, as he

thinks fit; and may also buy-in the property or any part thereof at any sale by auction,

and rescind or vary any contract for sale, and re-sell the property so bought in, or as to

which the contract is so rescinded, without being responsible to the beneficiary for

any loss occasioned thereby.

9) Power to convey.-For the purpose of completing any such sale, the trustee shall have

power to convey or otherwise dispose of the property sold in such manner as may be

necessary.

10) Power to vary investments.-A trustee may, at his discretion, call in any trust-

property invested in any security and invest the same on any of the securities

mentioned or referred to in section 20, and from time to time vary any such

investments for others of the same nature : Provided that, where there is a person

competent to contract and entitled at the time to receive the income of the trust-

property for his life, or for any greater estate, no such change of investment shall be

made without his consent in writing.

11) Power to apply property of minors, etc., for their maintenance, etc.-Where any

property is held by a trustee in trust for a minor, such trustee may, at his discretion,

pay to the guardians (if any) of such minor, or otherwise apply for or towards his

maintenance or education or advancement in life, or the reasonable expenses of his

religious worship, marriage or funeral, the whole or any part of the income to which

he may be entitled in respect of such property ; and such trustee shall accumulate all

the residue of such income by way of compound interest by investing the same and

the resulting income thereof from time to time in any of the securities mentioned or

referred to in section 20, for the benefit of the person who shall ultimately become

entitled to the property from which such accumulations have arisen.

12) Power to give receipts.-Any trustees or trustee may give a receipt in writing for any

money, securities or other moveable property payable, transferable or deliverable to

them or him by reason, or in the exercise, of any trust or power; and, in the absence of

fraud, such receipt shall discharge the person paying, transferring or delivering the

same therefrom, and from seeing to the application thereof, or being accountable for

any loss or misapplication thereof.

53

13) Power to compound- Two or more trustees acting together may, if and as they think

fit,--

a. accept any composition or any security for any debt or for any property

claimed ;

b. allow any time for payment of any debt ;

c. compromise, compound, abandon, submit to arbitration or otherwise settle any

debt, account, claim or thing whatever relating to the trust ; and,

d. for any of those purposes, enter into, give, execute and do such agreements,

instruments of composition or arrangement, releases and other things as to

them seem expedient, without being responsible for any loss occasioned by

any act or thing so done by them in good faith.

14) Power to several trustees of whom one disclaims or dies.-When an authority to deal

with the trust-property is given to several trustees and one of them disclaims or dies,

the authority may be exercised by the continuing trustees, unless from the terms of the

instrument of trust it is apparent that the authority is to be exercised by a number in

excess of the number of the remaining trustees.

15) Suspension of trustee's powers by decree.-Where a decree has been made in a suit

for the execution of a trust, the trustee must not exercise any of his powers except in

conformity with such decree, or with the sanction of the Court by which the decree

has been made, or, where an appeal against the decree is pending, of the Appellate

Court.

3.12 DISABILITIES OF TRUSTEES

1) Trustee cannot renounce after acceptance.-A trustee who has accepted the trust

cannot afterwards renounce it except

a. with the permission of a principal Civil Court of original jurisdiction, or

b. if the beneficiary is competent to contract, with his consent, or

c. By virtue of a special power in the instrument of trust.

2) Trustee cannot delegate.-A trustee cannot delegate his office or any of his duties

either to a co-trustee or to a stranger, unless

a. The instrument of trust so provides, or

b. The delegation is in the regular course of business, or

c. The delegation is necessary, or

d. The beneficiary, being competent to contract, consents to the delegation.

Explanation.--The appointment of an attorney or proxy to do an act merely ministerial

and involving no independent discretion is not a delegation within the meaning of this

section.

3) Co-trustees cannot act singly.-When there are more trustees than one, all must join

in the execution of the trust, except where the instrument of trust otherwise provides.

4) Control of discretionary power.-Where a discretionary power conferred on a trustee

is not exercised reasonably and in good faith, such power may be controlled by a

principal Civil Court of original jurisdiction.

54

5) Trustee may not charge for services.-In the absence of express directions to the

contrary contained in the instrument of trust or of a contract to the contrary entered

into with the beneficiary or the Court at the time of accepting the trust, a trustee has

no right to remuneration for his trouble, skill and loss of time in executing the trust.

Nothing in this section applies to any Official Trustee, Administrator General, Public

Curator, or person holding a certificate of administration.

6) Trustee may not use trust-property for his own profit.-A trustee may not use or

deal with the trust-property for his own profit or for any other purpose unconnected

with the trust.

7) Trustee for sale or his agent may not buy.-No trustee whose duty it is to sell trust-

property, and no agent employed by such trustee for the purpose of the sale, may,

directly or indirectly, buy the same or any interest therein, on his own account or as

agent for a third person.

8) Trustee may not buy beneficiary's interest without permission.-No trustee, and no

person who has recently ceased to be a trustee, may, without the permission of a

principal Civil Court of original jurisdiction, buy or become mortgagee or lessee of

the trust- property or any part thereof ; and such permission shall not be given unless

the proposed purchase, mortgage or lease is manifestly for the advantage of the

beneficiary.

Trustee for purchase.-And no trustee whose duty it is to buy or to obtain a mortgage

or lease of particular property for the beneficiary may buy it, or any part thereof, or

obtain a mortgage or lease of it, or any part thereof, for himself.

9) Co-trustees may not lend to one of themselves.-A trustee or co-trustee whose duty

it is to invest trust-money on mortgage or personal security must not invest it on a

mortgage by, or on the personal security of, him or one of his co-trustees.

3.13 RIGHTS AND LIABILITIES OF THE BENEFICIARY

1) Rights to rents and profits-The beneficiary has, subject to the provisions of the

instrument of trust, a right to the rents and profits of the trust-property.

2) Right to specific execution-The beneficiary is entitled to have the intention of the

author of the trust specifically executed to the extent of the beneficiary's interest ;

3) Right to transfer of possession- Right to transfer of possession.-and, where there is

only one beneficiary and he is competent to contract, or where there are several

beneficiaries and they are competent to contract and all of one mind, he or they may

require the trustee to transfer the trust-property to him or them, or to such person as

he or they may direct. When property has been transferred or bequeathed for the

benefit of a married woman, so that she shall not have power to deprive herself of her

beneficial interest, nothing in the second clause of this section applies to such

property during her marriage.

Illustrations

a) Certain Government securities are given to trustees upon trust to accumulate the

interest until A attains the age of 24, and then to transfer the gross amount to him.

55

A on attaining majority may, as the person exclusively interested in the trust-

property, require the trustees to transfer it immediately to him.

b) Mohan bequeaths ₹ 10,000 to trustees upon trust to purchase an annuity for

Rohan, who has attained his majority and is otherwise competent to contract.

Rohan may claim the ₹ 10,000.

c) Ajay transfers certain property to Bhuvan and directs him to sell or invest it for

the benefit of Chetan, who is competent to contract. Chetan may elect to take the

property in its original character.

4) Right to inspect and take copies of instrument of trust, accounts, etc.-The

beneficiary has a right, as against the trustee and all persons claiming under him with

notice of the trust, to inspect and take copies of the instrument of trust, the documents

of title relating solely to the trust-property, the accounts of the trust property and the

vouchers (if any) by which they are supported, and the cases submitted and opinions

taken by the trustee for his guidance in the discharge of his duty.

5) Right to transfer beneficial interest.-The beneficiary, if competent to contract, may

transfer his interest, but subject to the law for the time being in force as to the

circumstances and extent in and to which he may dispose of such interest: Provided

that when property is transferred or bequeathed for the benefit of a married woman,

so that she shall not have power to deprive herself of her beneficial interest, nothing

in this section shall authorize her to transfer such interest during her marriage.

6) Right to sue for execution of trust.-Where no trustees are appointed or all the

trustees die, disclaim, or are discharged, or where for any other reason the execution

of a trust by the trustee is or becomes impracticable, the beneficiary may institute a

suit for the execution of the trust, and the trust shall, so far as may be possible, be

executed by the Court until the appointment of a trustee or new trustee.

7) Right to proper trustees.-The beneficiary has a right (subject to the provisions of the

instrument of trust) that the trust property shall be properly protected and held and

administered by proper persons and by a proper number of such persons.

Explanation I.--The following are not proper persons within the meaning of this

section:--

A person domiciled abroad: an alien enemy: a person having an interest inconsistent

with that of the beneficiary: a person in insolvent circumstances; and, unless the

personal law of the beneficiary allows otherwise, a married woman and a minor.

Explanation II.--When the administration of the trust involves the receipt and custody

of money, the number of trustees should be two at least.

8) Right to compel to any act of duty.-The beneficiary has a right that his trustee shall

be compelled to perform any particular act of his duty as such, and restrained from

committing any contemplated or probable breach of trust.

Illustrations

56

a) A contract‘s with B to pay him monthly ₹ 100 for the benefit of C. B writes and

signs a letter declaring that he will hold in trust for C the money so to be paid. A

fails to pay the money in accordance with his contract. C may compel B on a

proper indemnity to allow C to sue on the contract in B's name.

b) A is trustee of certain land, with a power to sell the same and pay the proceeds to

B and C equally. A is about to make an improvident sale of the land. B may sue

on behalf of himself and C for an injunction to restrain A from making the sale.

9) Wrongful purchase by trustee.-Where a trustee has wrongfully bought trust-

property, the beneficiary has a right to have the property declared subject to the trust

or retransferred by the trustee, if it remains in his hands unsold, or, if it has been

bought from him by any person with notice of the trust, by such person. But in such

case the beneficiary must repay the purchase-money paid by the trustee, with interest,

and such other expenses (if any) as he has properly incurred in the preservation of the

property; and the trustee or purchaser must:

a) account for the net profit of the property,

b) be charged with an occupation-rent, if he has been in actual possession of the

property, and allow the beneficiary to deduct a proportionate part of the purchase-

money if the property has been deteriorated by the acts or omissions of the trustee

or purchaser.

10) Following trust property--into the hands of third persons; into that into which it

has been converted.-Where trust-property comes into the hands of a third person

inconsistently with the trust, the beneficiary may require him to admit formally, or

may institute a suit for a declaration, that the property is comprised in the trust.

Where the trustee has disposed of trust-property and the money or other property

which he has received therefore can be traced in his hands, or the hands of his legal

representative or legatee, the beneficiary has, in respect thereof, rights as nearly as

may be the same as his rights in respect of the original trust-property.

Illustrations

a) A, a trustee for B of ₹ 10,000, wrongfully invests the ₹ 10,000 in the purchase of

certain land. B is entitled to the land.

b) A, a trustee, wrongfully purchases land in his own name, partly with his own

money, partly with money subject to a trust for B.

c) B is entitled to a charge on the land for the amount of the trust money so

misemployed.

11) Saving of rights of certain transferees.-Nothing in section 63 entitles the

beneficiary to any right in respect of property in the hands of—

a) A transferee in good faith for consideration without having notice of the trust,

either when the purchase money was paid, or when the conveyance was executed,

or

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b) A transferee for consideration from such a transferee. A judgement-creditor of the

trustee attaching and purchasing trust-property is not a transferee for

consideration within the meaning of this section.

12) Acquisition by trustee of trust-property wrongfully converted.-Where a trustee

wrongfully sells or otherwise transfer‘s trust-property and afterwards himself

becomes the owner of the property, the property again becomes subject to the trust,

notwithstanding any want of notice on the part of intervening transferees in good faith

for consideration.

13) Right in case of blended property.-Where the trustee wrongfully mingles the trust-

property with his own, the beneficiary is entitled to a charge on the whole fund for the

amount due to him.

14) Wrongful employment by partner-trustee of trust-property for partnership

purposes.-If a partner, being a trustee, wrongfully employs trust-property in the

business or on the account of the partnership, no other partner is liable therefor in his

personal capacity to the beneficiaries unless he had notice of the breach of trust. The

partners having such notice are jointly and severally liable for the breach of trust

person to whom a debt or charge is transferred.

Illustrations: ‗A‘ and ‗B‘ are partners. A dies, having bequeathed all his property to

‗B‘ in trust for ‗Z‘, and appointed B his sole executor. ‗B‘, instead of winding up the

affairs of the partnership, retains all the assets in the business. ‗Z‘ may compel him,

as partner, to account for so much of the profits as are derived from A's share of the

capital. ‗B‘ is also answerable to ‗Z‘ for the improper employment of A's assets.

15) Liability of beneficiary joining in breach of trust.-Where one of several

beneficiaries—

a. joins in committing breach of trust, or

b. knowingly obtains any advantage therefrom, without the consent of the other

beneficiaries, or

c. becomes aware of a breach of trust committed or intended to be committed,

and either actually conceals it, or does not within a reasonable time take

proper steps to protect the interests of the other beneficiaries, or

d. has deceived the trustee and thereby induced him to commit a breach of trust,

the other beneficiaries are entitled to have all his beneficial interest

impounded as against him and all who claim under him (otherwise than as

transferees for consideration without notice of the breach) until the loss

caused by the breach has been compensated.

16) Rights and liabilities of beneficiary's transferee.-Every person to whom a

beneficiary transfers his interest has the rights, and is subject to the liabilities, of the

beneficiary in respect of such interest at the date of the transfer.

3.14 DISCHARGE OF TRUSTEE

The trustee may be discharged from his office only as follows (Section 71)-:--

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a) by the extinction of the trust;

b) by the completion of his duties under the trust;

c) by such means as may be prescribed by the instrument of trust;

d) by appointment under this Act of a new trustee in his place;

e) by consent of himself and the beneficiary, or, where there are more beneficiaries than

one, all the beneficiaries being competent to contract, or

f) by the Court to which a petition for his discharge is presented under this Act.

3.15 TRUST HOW EXTINGUISHED (SECTION 77)-

A trust is extinguished—

a) when its purpose is completely fulfilled; or

b) when its purpose becomes unlawful; or

c) when the fulfilment of its purpose becomes impossible by destruction of the trust-

property or otherwise; or

d) When the trust, being revocable, is expressly revoked.

3.16 REVOCATION OF TRUST (SECTION 78)

A trust created by will, may be revoked at the pleasure of the testator.

A trust otherwise created can be revoked only—

a) where all the beneficiaries are competent to contract--by their consent;

b) where the trust has been declared by a non-testamentary instrument or by word of

mouth--in exercise of a power of revocation expressly reserved to the author of the

trust; or

c) Where the trust is for the payment of the debts of the author of the trust, and has not

been communicated to the creditors--at the pleasure of the author of the trust.

Illustration: A conveys property to B in trust to sell the same and pay out of the proceeds

the claims of A's creditors. A reserves no power of revocation. If no communication has

been made to the creditors, A may revoke the trust. But if the creditors are parties to the

arrangement, the trust cannot be revoked without their consent.

3.17 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

a) The Indian Trust Act, 1882 came into force on 13th January, 1882, which was

amended to form The Indian Trusts (Amendment) Act, 2016 on the 26th July,

2016.

b) Section 4 of the Indian Trust (Amendment) Act, 2016 provides that a trust can be

created for any lawful purpose.

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c) Every trust of which the purpose is unlawful is void.

d) No trust in relation to immoveable property is valid unless declared by a non-

testamentary instrument in writing signed by the author of the trust or the trustee

and registered, or by the will of the author of the trust or of the trustee.

e) A trust may be created by every person competent to contract, and, With the

permission of a principal Civil Court of original jurisdiction, by or on behalf of a

minor;

f) Every person capable of holding property may be a beneficiary.

g) Every person capable of holding property may be a trustee; but, where the trust

involves the exercise of discretion, he cannot execute it unless he is competent to

contract.

h) A trustee may, at his discretion, call in any trust-property invested in any security

and invest the same on any of the securities mentioned or referred to in section 20

i) A trustee who has accepted the trust cannot afterwards renounce

j) A trustee cannot delegate his office or any of his duties either to a co-trustee or to

a stranger

Long Answer Questions

Q1. Discuss the aim and objective of the Indian Trust Act, 1882. Also discuss the disabilities of trustees under the Indian Trust Act, 1882.

Q2. Define trust. Discuss the provisions regarding creation of Trust. Also discuss the

rights and liabilities of trustees under the Indian Trust Act, 1882.

SUGGESTED READINGS

1) Bare Act of the Indian Trust (Amendment) Act, 2016

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LESSON 4

INTELLECTUAL PROPERTY RIGHTS: PATENTS AND

COPYRIGHTS

4 STRUCTURE

4.1 Intellectual Property Laws in India

4.2 Subject Matter of Intellectual Property

4.3 Intellectual Property Laws: Aim and Objectives

4.4 Classification of Intellectual Property Rights

4.5 Patents: procedure for application

4.6 What is not patentable in India?

4.7 Patent monopoly and doctrine of exhaustion

4.8 Compulsory Licensing

4.9 Copyright

4.10 What can be protected using Copyright?

4.11 Copyright Protection

4.12 Copyright Registration Process and Procedures

4.13 Application for Registration of Copyright

4.14 Correction and rectification of entries in the Register of Copyrights

4.15 Copyright Infringement

4.16 The Copyright Board

4.17 Self-Assessment Questions

4.1 INTELLECTUAL PROPERTY LAWS IN INDIA

Intellectual property (IP) is a legal concept which refers to the creation of mind that has a

commercial value. Intellectual property issues are gaining importance since globalization of

the economy. Many products that used to be traded as low-technology goods or commodities

now contain a higher proportion of invention and design in their value. Films, music

recordings, books, computer software, on-line services, clothing, food, plants, biotechnology

products, and many others are bought and sold because of the information, creativity, and

identity they contain—not usually because of the plastic, metal, cloth, paper, or other material

used to make them. The importance of intellectual property in India is well established at all

levels—statutory, administrative, and judicial. The issue of intellectual property rights was

brought on an international platform of negotiation by World Trade Organization (WTO)

through its agreement (trade rule) on Trade Related Aspects of Intellectual Property Rights

(TRIPs). TRIPs, which has established a new global regime of intellectual property, protects

seven types of intellectual properties—copyrights and related rights, trademarks,

geographical indicators, industrial designs, patents, layout designs of integrated circuits, and

undisclosed information. It lays down universal standards for protection and enforcement of

intellectual property rights in member countries which are required to promote effective and

adequate protection of intellectual property rights with a view to reducing distortions and

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impediments to international trade. The obligations under TRIPs Agreement relate to

provision of minimum standard of protection within the member countries_ legal systems and

practices. India has already amended its patent law in 2005 to comply with the agreement on

TRIPs. (Kumar, 2014)

With the liberalization of the Indian economy, it is increasingly believed that adequate

protection of intellectual property is a necessary element in encouraging foreign investment.

Moreover, in other newly liberalized and rapidly expanding markets, like China,

counterfeiting and piracy of branded goods is an issue in India. The types of counterfeit

goods run the gamut from software, electronics, and clothing to pharmaceuticals and

cosmetics. While counterfeits clearly do harm to brand equity, some may also pose a risk to

consumers, such as counterfeit pharmaceuticals. Intellectual property laws—the Trademarks

Act of 1999 and the Copyright Act of 1957—empower authorities to take action to prevent

infringement, including counterfeit goods. (Kumar, 2014)

4.2 SUBJECT MATTER OF INTELLECTUAL PROPERTY (Kumar, 2014)

IP is the creation of human intellect. It encompasses ideas, knowledge, invention, innovation,

creativity, and research, all being the product of human mind and is similar to any property,

whether movable or immovable, wherein the proprietor or the owner may exclusively use his

property at will and has the right to prevent others from using it but with his permission. The

rights relating to intellectual property are known as Intellectual Property Rights.

IP is divided into two broad categories:

Industrial property, which includes inventions (patents), trademarks, industrial

designs, and geographic indications of source; and

Copyright, which includes literary and artistic works such as novels, poems, plays,

films, musical works, and artistic works such as drawings, paintings, photographs, and

sculptures, and architectural designs. Rights related to copyright include those of

performing artists in their performances, producers of phonograms in their recordings,

and those of broadcasters in their radio and television programs.

The innovations and creative expressions of indigenous and local communities are also IP,

yet because they are _traditional_ they may not be fully protected by existing IP systems.

Access to, and equitable benefit-sharing in, genetic resources also raise IP questions.

4.3 INTELLECTUAL PROPERTY LAWS: AIM AND OBJECTIVES (Kumar, 2014)

Most of the IP laws (with the exception of trademarks law) aim to promote progress. By

exchanging limited exclusive rights for disclosure of inventions and creative works, society

and the patentee/copyright owner mutually benefit, and an incentive is created for inventors

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and authors to create and disclose their work. Keeping in view the above aim, IP laws for

time being in force seek to achieve the following objectives.

Figure 1: Intellectual Property Laws: Aim and Objective

Financial incentive

These exclusive rights allow owners of intellectual property to benefit from the

property they have created, providing a financial incentive for the creation of an

investment in intellectual property, and in case of patents, pay associated research and

development costs. Some commentators, such as David Levine and Michele Boldrin,

dispute this justification.

Economic growth

The World Intellectual Property Organization (WIPO) treaty and several related

international agreements are premised on the notion that the protection of intellectual

property rights is essential to maintaining economic growth. The WIPO Intellectual

Property Handbook gives two reasons for intellectual property laws. One is to give

statutory expression to the moral and economic rights of creators in their creations

and the rights of the public in access to those creations. The second is to promote, as a

deliberate act of government policy, creativity and the dissemination and application

of its results and to encourage fair trading which would contribute to economic and

social development. The Anti-Counterfeiting Trade Agreement (ACTA) states that

‗effective enforcement of intellectual property rights is critical to sustaining economic

growth across all industries and globally. Economists estimate that two-thirds of the

value of large businesses in the US can be traced to intangible assets. IP-intensive

industries‘ are estimated to generate 72 percent more value added (price minus

material cost) per employee than ‗non-IP-intensive industries‘. A joint research project of the WIPO and the United Nations University measuring the impact of IP

Financial incentive

Economic Growth

Protection of moral and material interests

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systems on six Asian countries found ‗a positive correlation between the

strengthening of the IP system and subsequent economic growth.‘

Protection of moral and material interests

Article 27 of the Universal Declaration of Human Rights clearly states that everyone

as the right to the protection of the moral and material interests resulting from any

scientific, literary, or artistic production of which he is the author. Although the

relationship between intellectual property and human rights is a complex one, there

are moral arguments for intellectual property.

The arguments that justify intellectual property fall into three major categories.

Personality theorists believe that intellectual property is an extension of an individual.

Utilitarian believe that intellectual property stimulates social progress and pushes

people to further innovation. Lockean‘s argue that intellectual property is justified based on deservedness and hard work.

Various moral justifications for private property can be used to argue in favour of the

morality of intellectual property, such as the following:

Natural Rights/Justice Argument: This argument is based on Locke‘s idea that a person has a natural right over the labour and/or products which are

produced by his/her body. Appropriating these products is viewed as unjust.

Although Locke had never explicitly stated that natural right applied to

products of the mind, it is possible to apply his argument to intellectual

property rights, in which it would be unjust for people to misuse another‘s ideas.

Utilitarian-Pragmatic Argument: According to this rationale, a society that

protects private property is more effective and prosperous than societies that

do not. Innovation and invention in the 19th century America has been said to

be attributed to the development of the patent system. By providing innovators

with _durable and tangible return on their investment of time, labor, and other

resources_, intellectual property rights seek to maximize social utility. The

presumption is that they promote public welfare by encouraging the ‗creation,

production, and distribution of intellectual works‘.

Utilitarian Argument: Utilitarian‘s argue that without intellectual property, there would be a lack of incentive to produce new ideas. Systems of protection

such as intellectual property optimize social utility.

Personality Argument: This argument is based on a quote from Hegel,

‗Every man has the right to turn his will upon a thing or make the thing an object of his will, that is to say, to set aside the mere thing and recreate it as

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his own‘. European intellectual property law is shaped by this notion that ideas

are an ‗extension of oneself and of one‘s personality‘. Personality theorists argue that by being a creator of something, one is inherently at risk and

vulnerable for having their ideas and designs stolen and/or altered. Intellectual

property protects these moral claims that have to do with personality.

4.4 CLASSIFICATION OF INTELLECTUAL PROPERTY RIGHTS (Kumar, 2014)

In order to develop a proper understanding, all the IPRs can be classified under the following

two broad areas:

1. One area can be characterized as the protection of distinctive signs, in particular,

trademarks (which distinguish the goods or services of one undertaking from those of

other undertakings) and geographical indications (which identify a good as originating

in a place where a given characteristic of the good is essentially attributable to its

geographical origin).

2. Other types of industrial property are protected primarily to stimulate innovation,

design, and creation of technology. This category includes inventions (protected by

patents), industrial designs, and trade secrets, which are of value.

Figure 2: Classification of Intellectual Property

Accordingly, common types of intellectual property rights include the following:

Patents

Copyright

Industrial design rights

Trademarks

Trade dress

And in some jurisdictions, trade secrets

Industrial property

Patents, trademarks, industrial designs, and geographic indications of source; and

Copyright

Literary and artistic works such as novels, poems, plays, films, musical works, and artistic works such as drawings, paintings, photographs, and sculptures, and architectural designs.

65

Figure 3: Intellectual Property Laws

4.5 PATENTS: PROCEDURE FOR APPLICATION (Kumar, 2014)

Patents form the heart of intellectual property. The word ‗patent‘ has originated from the Latin word patere, which means ‗to lay open‘, i.e., to make available for public inspection. In modern usage, a patent grants an inventor or their assignee exclusive or say monopoly right

to make, use, sell, and import an invention for a limited period of time, in exchange for the

public disclosure of the invention. An invention in this behalf is a new, useful, and non-

obvious solution to a specific technological problem, which may be a product or a process.

Some other types of intellectual property rights are also called patents in some jurisdictions:

industrial design rights are called design patents in the US, plant breeders_ rights are

sometimes called plant patents, and utility models are sometimes called petty patents or

innovation patents.

A patent is an exclusionary right as it provides its inventor with the right to exclude others

from making, using, selling, offering for sale, or importing the patented invention for the term

of the patent, which is usually 20 years from the filing date. Like any other property right, it

may be sold, licensed, mortgaged, assigned or transferred, given away, or simply abandoned.

Procedure for grant of a patent in India, the Patents Act, 1970, deals with the patenting of

inventions. An invention relating to a product or a process that is new, non-obvious, i.e.,

inventive, and has industrial application can be patented in India provided it does not fall into

the category of non-patentable under the (Indian) Patents Act. A patent application can be

filed with the office of Controller of Patents, which is headquartered in Kolkata with sittings

at Delhi, Chennai, and Mumbai, either alone or jointly, by true and first inventor or his

assignee. The application is referred by the Controller to the Examiner upon a formal request

Copyrights And Related Rights

Trademarks

Geographical Indicators

Industrial Designs

Patents

Layout Designs of Integrated Circuits

Trade Secrets

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by the Applicant to check whether the invention is non-obvious and useful and also if the

invention has already been claimed by some other person. After the First Examination Report

is issued, the Applicant is given an opportunity by the patent office to meet the objections

raised in the report. The Applicant has to comply with the requirements within 12 months

from the issuance of the First Examination Report. If the requirements of the first

examination report are not complied with within the stipulated time, then the application is

treated to have been abandoned by the applicant. After the removal of objections and

compliance of requirements, the Controller publishes the application in the official gazette to

give an opportunity to public to register their pre-grant opposition under Section 25(1),

against the grant of patent, if any. After successful removal of objections, if any, a patent is

granted and notified in the Patent Office Journal. Now the patent holder (patentee) is free to

use, sell, assign, or license his right in patent. However, a post-grant opposition under Section

25(2) can be filed by any person interested within 12 months from the date of publication of

grant.

Figure 4: Procedure for Application

4.6 WHAT IS NOT PATENTABLE IN INDIA?

By merely fulfilling the basic patentability requirements, i.e., the invention should be novel,

inventive, and capable of industrial application, one cannot get patent for all the inventions in

India even though they meet all the above criteria. In broad-spectrum, inventions which are

contrary to public order or morality or likely to cause serious intolerance to human, animal,

or plant life or health or to the environment are categorically prohibited under the (Indian)

Patents Act. Sections (3) and (4) of the Act have extensive list of areas which are not

patentable in India. A recap of such areas is given below:

Application filed -office of Controller of Patents-HQ in

Kolkata with sittings at Delhi, Chennai, and Mumbai

Referred by the Controller to the

Examiner

First Examination Report is issued

Applicant –opportunity-office to meet the objections

raised in the report-12 months.

not complied -abandoned by the

applicant

Official gazette to give an opportunity to public-Sec 25(1)

Grant Patent-Patent Office

Journal

A post-grant opposition -

Section 25(2) -12 months from

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i. An invention which is frivolous or which claims anything obvious or contrary to the

well-established natural law. An invention, the primary or intended use of which

would be contrary to law or morality or injurious to public health.

ii. A discovery, scientific theory, or mathematical method.

iii. A mere discovery of any new property or new use for a known substance or of the

mere use of a known process, machine, or apparatus unless such known process

results in a new product or employs at least one new reactant.

iv. A substance obtained by a mere admixture resulting only in the aggregation of the

properties of the components thereof or a process for producing such substance.

v. A mere arrangement or re-arrangement or duplication of a known device each

functioning independently of the other in its own way.

vi. A method or process of testing applicable during the process of manufacture for

rendering the machine, apparatus, or other equipment more efficient for the

improvement or restoration of the existing machine, apparatus, or other equipment or

for the improvement or control of manufacturer.

vii. A method of agriculture or horticulture.

viii. A method or process for the medicinal, surgical, curative, prophylactic, or other

treatment of human beings or any process for a similar treatment of animals or plants

to render them free of disease or to increase their economic value or that of their

products.

ix. An invention relating to atomic energy falling under the Atomic Energy Act, 1962.

4.7 PATENT MONOPOLY AND DOCTRINE OF EXHAUSTION

A patent is granted for an invention that is new, inventive, and is capable of industrial

applications. The patent holder is able to exploit and control the use of patented matter since

a patent gives its owner the right to exclude third party, not having his consent, from making,

using, offering for sale, selling, or importing the patented invention during the term of the

patent. The underlying principle behind providing these exclusive rights is to ‗promote the progress of science and useful arts‘ by providing inventors the incentive to invest in researching and developing innovative technology. However, as a measure of natural law of

justice doctrine of exhaustion operates which dictates that the patent owner‘s exclusive rights be limited in scope. Accordingly, upon receiving compensation, patentee‘s voluntary introduction of a patented good into commerce without restriction prevents him from

exercising his right to exclude others from using or reselling that good.

The doctrine was first recognized by the United States Supreme Court in 1873 in Adams vs.

Burke. In that case, the patentee authorized a licensee to make, use, and sell patented coffin

lids only within a ten-mile radius in Boston. A customer of the licensee bought the coffin lids

within the ten-mile radius, but later resold the lids outside the ten-mile radius. The patentee

sued the customer, but the Supreme Court found no infringement. In 2008 also, the United

States Supreme Court issued its unanimous decision in Quanta Computer, Inc. vs. LG

Electronics, Inc. and held, the patent law cannot be used to control the subsequent use or

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disposition of a product ‗that substantially embodies a patent ‗once the product has been sold with authority of the patent owner.‘ The authorized sale of an article that substantially

embodies a patent exhausts the patent holder‘s rights and prevents the patent holder from

invoking the patent law to control post sale use of the article‘.

Incremental innovation, generic drugs, and patent protection Courts in India are empowered

to disallow patent guard to a patent holder in the interest of masses if the patent holder fails to

fulfill the stipulated measure or tends to exploit the patent. Very recently, the Supreme Court

(of India) upheld the Intellectual Property Appellate Boards (IPAB) decision to deny patent

protection to Novartis, the Swiss multinational pharmaceutical company in respect of its anti-

blood cancer drug, branded as Glivec, saying it is an example of ‗incremental innovation‘ under Section 3(d) of the Indian Patents Act and thus not liable for protection. The court

clearly said that the company failed to satisfy the criteria stipulated in the Act such as

research data clarifying the increased ‗therapeutic efficacy‘ of the innovation. The ruling ends

Novartis attempts to secure a patent for the drug and strikes a balance between patents and

affordability. Patients would have otherwise been forced to pay ₹ 1.20 lakh for a month‘s dosage if the court case had gone in favour of Novartis. Generic variants of Glivec,

comparable in dosage, strength, and intended use, offered by Cipla Ltd., an Indian

Pharmaceutical Major, cost just ₹ 8,000 per month. Novartis_ earlier challenge to the

constitutionality and TRIPs compatibility of Indian patent law was rebuffed by the Madras

High Court in 2007 and no appeal was pursued. The judgment on Glivec is a blow for a

patent regime with a higher threshold of inventiveness. Just prior to this, Roche Ltd., a Swiss

Global healthcare company, was stripped off its patent for Peginterferon, a powerful antiviral

drug treatment for chronic hepatitis B and C in February, 2013, by IPAB, good eight years

after it was granted. Previously, the multinational patentee (Roche) had been denied

injunction by Delhi High Court on the ground that it sold a more expensive drug than the

infringing generic manufacturer. The rulings on Glivec and Peginterferon marked a crucial

conclusion to a saga that has been several decades in the making. Here it is pertinent to

mention that IPAB is authorized to hear and adjudicate upon appeals from most of the

decisions, orders, or directions made by the Patent Controller as well as all pending appeals

from the Indian High Courts under the Patents Act. The IPAB has its headquarters at Chennai

and has sittings at Mumbai, Delhi, Kolkata, and Ahmadabad. The Indian patent law, which

albeit has come under severe criticism (owing to above Supreme Court ruling) from the US

and UK based Pharma MNCs, has become a mode of sorts for developing and

underdeveloped countries who are trying to frame stringent norms that would keep bad

patents at bay. Taking a cue from India, the Philippines adopted a law similar to Section 3(d)

[of Indian Patents Act, 1970]—that denies patents on incremental innovations and was

pivotal in the Novartis judgment while formulating its patent law. Uganda, which will

introduce its patent bill in 2016, has partially adopted India‘s Section 3(d) in it. Moreover, IP

Australia, a government-appointed body that looks into the issue of patent laws in Australia,

released a draft report last week that raised concerns against the indiscriminate grant of

patents to minor innovations; it further called for an independent body to vet new approvals.

Similarly, several South Asian countries have amended their patent laws to include

compulsory license provisions to allow the entry of generic drugs in case of an emergency,

69

unusual circumstances, or public interest. For example, in October 2012, Indonesia issued

compulsory licenses on seven HIV/AIDS drugs and a hepatitis B medicine manufactured by

Merck & Co, GSK, Bristol-Myers Squibb, Abbott, and Gilead.

4.8 COMPULSORY LICENSING (Chander & Choudhary, 2013)

Compulsory licenses are authorizations given to a third-party by the Government to make,

use or sell a particular product or use a particular process which has been patented, without

the need of the permission of the patent owner. The provisions regarding compulsory licenses

are given in the Indian Patents Act, 1970 and in the TRIPS (Trade-Related Aspects of

Intellectual Property Rights) Agreement at the International level. Although this works

against the patent holder, generally compulsory licenses are only considered in certain cases

of national emergency, and health crisis. There are certain pre-requisite conditions which

need to be fulfilled if the Government wants to grant a compulsory license in favor of

someone.

Under Indian Patents Act, 1970 the provisions of ‗compulsory license‘ are specifically given under Chapter XVI, and the conditions which need to be fulfilled are given is Sections 84-92

of the said Act.

As per Section 84, at any time after the expiration of three years from the date of the grant of

a patent, any person interested may make an application to the Controller for grant of

compulsory license on patent on any of the following grounds, namely:—

a) That the reasonable requirements of the public with respect to the patented invention

have not been satisfied, or

b) That the patented invention is not available to the public at a reasonably affordable

price, or

c) That the patented invention is not worked in the territory of India.

As per Section 84, any person who is interested or already the holder of the license under the

Patent can make a request to the Controller for grant of compulsory license on expiry of the

three years, when the above conditions are fulfilled.

However compulsory licenses may also be granted, when –

Section 92 A- For exports, under exceptional circumstances.

Section 92A- In case of national emergency, extreme urgency of public non-

commercial use by notification of the Central Government

Section 92 A (1) – To a country which has insufficient or no manufacturing power in

the pharmaceutical sector to address public health.

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Global Perspective on Compulsory Licensing

This phenomenon of compulsory licensing is a hugely debated issue. Many developing

countries are giving importance to the compulsory licensing because of the unavailability and

un-affordability of the medicines, and they are continuously granting more and more

compulsory licenses. The developed countries of Europe, USA are opposing this view as it

would make innovation difficult for the pharmaceutical companies

India’s first case of granting compulsory license

India‘s first case of granting compulsory license was granted by the Patent office in 2012 to an Indian Company called Natco Pharma for the generic production of Bayer Corporation‘s Nexavar. All the 3 conditions of Section 84 was fulfilled that the reasonable requirements of

the public were not fulfilled, and that it was not available at an affordable price and that the

patented invention was not worked around in India.

This medicine is used for treating Liver and Kidney Cancer, and one month‘s worth of dosage costs around ₹ 2.8 Lakh. Natco Pharma offered to sell it around for ₹ 9000 making

this potentially lifesaving drug easily accessible to all parts of the society and not just the rich

people. The Government took this decision for the general public benefit. However, it was

heavily criticized by the Pharmaceutical Companies as they felt the license should not have

been given.

However, Natco Pharma is paying the royalties to Bayer at a rate of 6% of all sales on a

quarterly basis in accordance with the guidelines set by the United Nations Development

Programme (UNDP)

In January 2013, the Health Ministry of India recommended three anti-cancer drugs

trastuzumab, ixabepilone, and dasatinib for compulsory licenses. This will allow the

Government to sell these drugs at a significantly lower price and will also allow the people

who cannot afford the drugs originally, access to these drugs.

Impacts of Compulsory Licensing

The areas which will be impacted by compulsory license are as follows:-

(i) Innovation – In Underdeveloped countries, the innovation of pharmaceutical

companies will be less as they will be dependent on generic drugs. They will

prefer getting the compulsory license to a generic drug rather than funding the

Research & Development separately, which is often a very costly thing.

Moreover, research-based pharmaceutical companies will not launch patent

module in the developing countries as there is always the risk of losing the patent,

and losing money in research.

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(ii) Competition & Cost- Compulsory licensing will increase the number of

companies producing generic medicines. Hence the supply will go up, and the cost

will come down. This will also force the innovator countries to introduce

differential pricing of their patent module so that they can stand on the market.

(iii) Patients- Patients will get medicines at a significantly cheaper rate. Also, the big

pharmaceutical companies often introduce plans like free access to medicine to

protect their patents in the developing countries.

4.9 COPYRIGHT (Kumar, 2014)

A copyright gives the creator of an original work exclusive right to it, usually for a limited

time. The rights of authors of literary and artistic works (such as books and other writings,

musical compositions, paintings, sculpture, computer programs, and films) are protected by

copyright. In addition, protection is granted to related or neighboring rights like the rights of

performers (e.g., actors, singers, and musicians), producers of phonograms (sound

recordings), and broadcasting organizations. Copyright may apply to a wide range of

creative, intellectual, or artistic forms, or works. Copyright does not cover ideas and

information themselves, only the form or manner in which they are expressed.

India‘s copyright law, laid down in the Indian Copyright Act, 1957, as amended by Copyright

(Amendment) Act, 1999, fully reflects the Berne Convention on copyrights, to which India is

a party. Additionally, India is party to the Geneva Convention for the Protection of Producers

of Phonograms and to the Universal Copyright Convention. India is also an active member of

WIPO, Geneva, and UNESCO.

The copyright law has been amended periodically to keep pace with changing requirements.

The recent amendment to the copyright law, which came into force in May 1995, has ushered

in comprehensive changes and brought the copyright law in line with the developments in

satellite broadcasting, computer software, and digital technology. The amended law has made

provisions for the first time to protect performer‘s rights as envisaged in the Rome

Convention.

Several measures have been adopted to strengthen and streamline the enforcement of

copyrights. These include the setting up of a Copyright Enforcement Advisory Council,

training programs for enforcement officers, and setting up special policy cells to deal with

cases relating to infringement of copyrights.

4.10 WHAT CAN BE PROTECTED USING COPYRIGHT? (World Intellecutual

Property Organization, 2018)

Exhaustive lists of works covered by copyright are usually not to be found in legislation.

Nonetheless, broadly speaking, works commonly protected by copyright throughout the

world include: literary works such as novels, poems, plays, reference works, newspaper

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articles; computer programs, databases; films, musical compositions, and choreography;

artistic works such as paintings, drawings, photographs, and sculpture; architecture; and

advertisements, maps, and technical drawings.

Copyright protection extends only to expressions and not to ideas, procedures and methods of

operation or mathematical concepts as such. Copyright may or may not be available for a

number of objects such as titles, slogans, or logos, depending on whether they contain

sufficient authorship.

What rights does copyright give me? What are my rights as author of copyright? (World

Intellecutual Property Organization, 2018)

There are two types of rights under copyright:

Economic rights, which allow the rights owner to derive financial reward from the use

of his works by others; and

Moral rights, which protect the non-economic interests of the author.

Most copyright laws state that the rights owner has the economic right to authorize or prevent

certain uses in relation to a work or, in some cases, to receive remuneration for the use of his

work (such as through collective management). The economic rights owner of a work can

prohibit or authorize:

• Its reproduction in various forms, such as printed publication or sound recording;

• Its public performance, such as in a play or musical work;

• Its recording, for example, in the form of compact discs or dvds;

• Its broadcasting, by radio, cable or satellite;

• Its translation into other languages; and

• Its adaptation, such as a novel into a film screenplay.

Examples of widely recognized moral rights include the right to claim authorship of a work

and the right to oppose changes to a work that could harm the creator's reputation.

A copyright arises under the Act, if:

• The work is first published in India.

• The work is first published outside India, but the author is a citizen of India.

• In case of unpublished work, the author is, at the date of making the work, a citizen of

India or domiciled in India.

• In case of an architectural work of art, the work is located in India.

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4.11 COPYRIGHT PROTECTION

• Copyright protection is available only for a limited number of years.

• In the case of literary, dramatic, musical or artistic work (other than a photograph),

when published during the lifetime of the author, copyright subsists first during the

lifetime of the author. In addition, it subsists for the next sixty years from the death of

the author.

• In the case of joint authors, the sixty years period is to be counted after the death of

the author who dies last.

• In the case of literary, dramatic, musical or artistic work (other than a photograph)

which is anonymous or pseudonymous, copyright is for sixty years from the date of

publication.

• The copyright for a photograph and films is for a period of sixty years from the year

of its publication.

4.12 COPYRIGHT REGISTRATION PROCESS AND PROCEDURE (India Filings,

2018)

Copyright is a right given by the law to creators of literary, dramatic, musical and artistic

works and producers of cinematograph films and sound recordings. In fact, it is a bundle of

rights including, inter alia, rights of reproduction, communication to the public, adaptation

and translation of the work. There could be slight variations in the composition of the rights

depending on the work. Copyright ensures certain minimum safeguards of the rights of

authors over their creations, thereby protecting and rewarding creativity. Creativity being the

keystone of progress, no civilized society can afford to ignore the basic requirement of

encouraging the same. Economic and social development of a society is dependent on

creativity. The protection provided by copyright to the efforts of writers, artists, designers,

dramatists, musicians, architects and producers of sound recordings, cinematograph films and

computer software, creates an atmosphere conducive to creativity, which induces them to

create more and motivates others to create.

Copyright Registration Procedure (India Filings, 2018)

The procedure for registration is as follows:

1. Application for registration is to be made on as prescribed in the first schedule to the

Rules;

2. Separate applications should be made for registration of each work;

3. Each application should be accompanied by the requisite fee prescribed in the second

schedule to the Rules ; and

4. The applications should be signed by the applicant or the advocate in whose favour a

Vakalatnama or Power of Attorney has been executed. The Power of Attorney signed

by the party and accepted by the advocate should also be enclosed.

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Time for Processing Application (India Filings, 2018)

After you file your application and receive diary number you have to wait for a mandatory

period of 30 days so that no objection is filed in the Copyright office against your claim that

particular work is created by you.

Figure 5: Copyright Registration Process Flowchart

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Scope and Extent of Copyright Registration (India Filings, 2018)

Both published and unpublished works can be registered. Copyright in works published

before 21st January, 1958, i.e., before the Copyright Act, 1957 came in force, can also be

registered, provided the works still enjoy copyright. Three copies of published work may be

sent along with the application.

If the work to be registered is unpublished, a copy of the manuscript has to be sent along with

the application for affixing the stamp of the Copyright Office in proof of the work having

been registered. In case two copies of the manuscript are sent, one copy of the same duly

stamped will be returned, while the other will be retained, as far as possible, in the Copyright

Office for record and will be kept confidential. It would also be open to the applicant to send

only extracts from the unpublished work instead of the whole manuscript and ask for the

return of the extracts after being stamped with the seal of the Copyright Office. When a work

has been registered as unpublished and subsequently it is published, the applicant may apply

for changes in particulars entered in the Register of Copyright in Form V with prescribed fee.

All kinds of literary and artistic works can be copyrighted; you can also file a copyright

application for your website or other computer program. Computer Software or programme

can be registered as a ‗literary work‘. As per Section 2 (o) of the Copyright Act, 1957 ―literary work‖ includes computer programs, tables and compilations, including computer

databases. ‗Source Code‘ has also to be supplied along with the application for registration of copyright for software products. Copyright protection prevents undue proliferation of private

products or works, and ensures the individual owner retains significant rights over his

creation.

Register of Copyrights (Copyright_Rules_2013, 2013)

1) The Register of Copyrights shall be kept in physical and electronic form in six parts,

namely :—

Part I - Literary works other than computer programmes, tables and

compilations including computer data bases and dramatic works.

Part II - Musical works

Part III - Artistic works

Part IV - Cinematograph films

Part V - Sound recordings

Part VI - Computer programmes, tables and compilations including computer

data bases.

2) The Register of Copyrights shall contain the particulars specified in Form-XIII.

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4.13 APPLICATION FOR REGISTRATION OF COPYRIGHT

(COPYRIGHT_RULES_2013, 2013)

1) Every application for registration of copyright shall be made in Form-XIV and every

application for registration of changes in the particulars of copyright entered in the

Register of Copyright shall be made in Form-XV.

2) Every such application shall be in respect of one work only, and shall be accompanied

by the fee specified in the Second Schedule in this behalf.

3) Every application should be signed only by the applicant, who may be an author or

owner of right. If the application is submitted by the owner of copyright, it shall be

enclosed with an original copy of no objection certificate issued by the author in his

favour.

4) Every application for registration of an unpublished work shall be accompanied by

two copies of the work.

5) Every application for registration of a computer programme shall be accompanied by

the source and object code.

6) Every application for registration in respect of an artistic work which is used or is

capable of being used [in relation to any goods or services], such application shall

include a statement to that effect and shall be accompanied by a certificate from the

Registrar of Trade Marks referred to in section 3 of the Trade Marks Act, 1999, to the

effect that no trade mark identical with or deceptively similar to such artistic work has

been registered under that Act in the name of, or that no application has been made

under that Act for such registration by, any person other than the applicant.

7) Every application for registration in respect of an artistic work which is capable of

being registered as a design under the Designs Act, 2000, such application shall be

accompanied by a statement in the form of an affidavit containing the following,

namely:-

a) It has not been registered under the Designs Act, 2000; and

b) It has not been applied to an article through industrial process and reproduced

more than fifty times.

8) Every such application can be filed in the Copyright Office by person or by post or by

online filing facility as provided on the website of the Copyright Office.

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9) The person applying for registration shall give notice of his application to every

person who claims or has any interest in the subject-matter of the copyright or

disputes the rights of the applicant to it.

10) If no objection to such registration is received by the Registrar of Copyrights within

thirty days of the receipt of the application, the Registrar of Copyrights shall, if

satisfied about the correctness of the particulars given in the application, enter such

particulars in the Register of Copyrights.

11) If the Registrar of Copyrights receives any objections for such registration within the

time specified in 2[sub-rule (10)], or, if he or she is not satisfied about the correctness

of the particulars given in the application, he or she may, after holding such inquiry as

he or she deems fit, enter such particulars of the work in the Register of Copyrights as

he or she considers necessary.

12) The Registrar of Copyrights shall give an opportunity of hearing before rejecting the

any application filed for registration of any work.

13) The process of registration is deemed to be completed only when a copy of the

entries made in the Register of Copyrights is signed and issued by Registrar of

Copyrights or by Deputy Registrar of Copyrights, to whom such authority is

delegated.

14) The Registrar of Copyrights shall, as soon as may be, send, wherever practicable, a

copy of the entries made in the Register of Copyrights to the parties concerned.

4.14 CORRECTION AND RECTIFICATION OF ENTRIES IN THE REGISTER OF

COPYRIGHTS (COPYRIGHT_RULES_2013, 2013)

1) The Registrar of Copyrights may, either suo motu or on application of any interested

person, amend, or alter the Register of Copyrights for the entries specified in section

49, after giving, wherever practicable, to the person affected by such amendment or

alteration, an opportunity to show cause against such amendment or alteration, and

communicate to such person the amendment or alteration so made.

2) The Registrar of Copyrights shall rectify the entries made in the Register of

Copyrights after an order is being passed by the Board on an application made by the

Registrar of Copyrights in this behalf under section 50.

Indexes (Copyright_Rules_2013, 2013)

1) There shall be kept at the Copyright Office the following indexes both in physical

and electronic form for each part of the Register of Copyrights, namely:—

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a. A general Author Index;

b. A general Title Index;

c. An Author Index of works in each language; and

d. A Title Index of works in each language.

2) Every Index shall be arranged alphabetically in the form of cards.

Exemptions from Copyright Violations

1) The Act exempts several activities from the obligations of copyright violation in the

interest of the larger social good.

2) Example: with respect to literary work

a. A fair dealing with the literary, dramatic, musical or artistic work for the

purpose of private use, research, criticism or review.

b. Making up to three copies of a book for a public library, if such book is not

available for sale in India.

4.15 COPYRIGHT INFRINGEMENT

The Act provides for civil as well as criminal liability. The Act brings several other persons

in its fold, in addition to the person copying or reproducing a work.

A person, knowing that a copyright is being infringed upon, permits, for profit, the use of a

place for communication of the copyrighted work to the public, also violates the Act. Thus,

the owner of a hall who lets out his place for the viewing of a CD that is pirated, knowing the

CD to be pirated, also infringes the Act. Any person who commercially deals in, by selling,

hiring or importing, any work which is an infringement of a copyright, is also a violator of

the law. Thus, all persons selling pirated video or music CDs get covered by the law.

Case: R.G. Anand vs. Delux Films

Anand wrote a play entitled ‗Hum Hindustani‘ in 1953. A film maker, Mohan Sehgal, got interested in making a film based on the play. He heard the play from Anand, in his office.

Anand did not receive any further communication from Mohan Sehgal. Thereafter, Mohan

Sehgal announced the production of a film titled, ‗New Delhi‘. Anand saw the picture and felt that the film was entirely based on his play. He felt that Sehgal had dishonestly imitated

the play in the film and violated his copyright. He, therefore, moved the court and the case

finally came before the Supreme Court.

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Judgement by SUPREME COURT

• The Supreme Court noted that for it to be a violation of the copyright, the person

should not only have adopted the idea, but also the manner, arrangement, situation

and scene, with minor changes or superficial additions or embellishment.

• Where the same idea is being developed in a different manner, it is manifest that the

source being common, similarities are bound to occur. In such a case, the courts

should determine whether or not the similarities are on fundamental or substantial

aspects of the mode of expression adopted in the copyrighted work. If the defendant‘s work is nothing but a literal imitation of the copyrighted work, with some variations

here and there, it would amount to a violation of the copyright. In other words, in

order to be actionable, the copy must be a substantial and material one, which

would at once lead to the conclusion that the defendant is guilty of an act of piracy.

• The Court found that there had been no copyright violation in the case.

Case: Nagoti Venkataramana vs State of Andhra Pradesh

This case dealt with the liability of the persons dealing in pirated videos. In the shop of

Nagoti, Video City, several video cassettes of Telugu, English and Hindi movies were found.

The shop gave these tapes for hire, to customers. The police prosecuted him under Section 52

A(2), which was added in 1984.

It reads:

No person shall publish a video film in respect of any work unless the following particulars

are displayed in the video film when exhibited, and on the video cassette or other container

thereof, namely,—

a. If such work is a cinematograph film required to be certified for exhibition under

the provisions of the Cinematograph Act, 1952 (37 of 1952), a copy of the

certificate granted by the Board of Film Certification under Section 5A of that

Act, in respect of such work;

b. The name and address of the person who has made the video film and a

declaration by him that he has obtained the necessary license or consent from the

owner of the copyright in such work, for making such video film; and

c. The name and address of the owner of the copyright in such work.

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4.16 THE COPYRIGHT BOARD (COPYRIGHT_RULES_2013, 2013)

Terms and conditions of the office of the Chairman or members of the Board:

1) The Chairman and other members of the Board shall be appointed for such period not

exceeding five years as the Central Government may in each case deems fit:

Provided that the Chairman and the other member shall hold office as such after he

has attained,—

a. In the case of Chairman, the age of sixty-five years; and

b. In the case of any other Member, the age of sixty-two years.

2) (i) A person shall not be qualified for appointment as Chairman unless he –

a. is or has been a judge of a high court; or

b. is qualified for appointment as a judge of a high court;

(ii) A person shall not be qualified for appointment as member unless he-

a. is or has been a member of the indian legal service and has held a post in

grade i of that service for at least three years; or

b. has, for at least ten years, held a judicial office; or

c. is or has been a member of a tribunal or civil service not below the rank of a

joint secretary to government of india with three years‘ experience in the field of copyright; or

d. has, for at least ten years, been an advocate of a proven specialized experience

in copyright law;

(iii) The Chairman and other Members shall be appointed by the Central Government;

and

(iv) No person shall be appointed as Chairman except after consultation with the

Chief Justice of India

3) The Chairman and other members of the Board shall, on the expiry of the period of

their appointment, be eligible for re-appointment.

4) The Chairman or any other member of the Board may resign his office by giving three

months‘ notice in writing to the Central Government: Provided that the Chairman or any other member shall, unless he is permitted by the

Central Government to relinquish his office sooner, continue to hold office until the

expiry.

5) The Chairman or any other member shall not be removed from his office except by an

order made by the Central Government on the ground of proved misbehavior or

incapacity after an inquiry made by a Judge of the Supreme Court in which the

Chairman or the other member had been informed of the charges against him and

given a reasonable opportunity of being heard in respect of those charges.

4.17 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

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a) A patent is granted for 20 years.

b) A process of doing agriculture cannot be patented.

c) A patent holder can use the patent but not sell it.

d) For getting a patent, the invention should be non-obvious and useful.

e) Computer software can be copyrighted.

f) Surgical processes or other processes for treating human being cannot be patented.

g) A copyright develops in the author when he receives the certificate of registration

from the Registrar of Copyrights.

h) When a singer sings a film song for a film, the copyright vests in the singer.

i) On broadcasting a program, the broadcaster loses the copyright in the work.

j) A patent is granted for scientific discoveries.

2. Long Answer Questions

Q1. Describe the aim and objectives of intellectual property laws for the time being in

force. Also elaborate the statement ‗the rights conferred under copyright are distinct in certain aspects from other intellectual property rights.

Q2. Elaborate on the Indian patents Act. What is not patentable in India? Describe the

procedure for grant of Patents in India?

SUGGESTED READINGS

1) Copyright_Rules_2013. (2013). Retrieved from copyright.gov.in:

http://copyright.gov.in/Copyright_Rules_2013/chapter_ii.html

2) Chander, H., & Choudhary, V. a. (2013). Current Scenario of Patent Act: Compulsory

Licensing. Indian Journal of Pharmaceutical Education and Research, 26-30.

3) Furtado, R. (2016, September 26). What Is The Concept Of „Compulsory License‟ Under The Patents Act, 1970? Retrieved May 2018, 2018, from i pleaders:

https://blog.ipleaders.in/concept-compulsory-license-patents-act-1970/

4) India Filings. (2018). India Filings. Retrieved May 31, 2018, from www.indiafilings.com:

https://www.indiafilings.com/learn/copyright-registration-process-procedure/

5) Kumar, R. (2014). Legal Aspects of Business. Delhi: Cengage Learning India Pvt.Ltd.

6) World Intellecutual Property Organization. (2018). WIPO. Retrieved May 31, 2018, from

www.wipo.int: http://www.wipo.int/copyright/en/

7) Albuquerque, D. (2016). Legal Aspects of Business Text, Jurisprudence and Cases. New

Delhi: Oxford University Press.

8) Pathak, A. (2014). Legal Aspects of Business. New Delhi: Mc Graw Hill Education.

9) http://www.ipindia.nic.in/

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LESSON 5

INTELLECTUAL PROPERTY LAWS: GEOGRAPHICAL

INDICATIONS AND DESIGNS ACT

5 STRUCTURE

5.1 The Geographical Indications of Goods (Registration and Protection) Act, 1999 Act

5.1.1 Definitions

5.1.2 The Register and Conditions for Registration

5.1.3 Application for Registration

5.1.4 Withdrawal of Acceptance

5.1.5 Duration, Renewal, Removal and Restoration of Registration

5.1.6 Infringement of Registered Geographical Indications

5.1.7 Appeals to the Appellate Board

5.2 The Design Act, 2000

5.2.1 Definitions

5.2.2 Registration of designs

5.2.3 Prohibition of registration of certain designs

5.2.4 Application registration of designs

5.2.5 Certificate of registration

5.2.6 Inspection of registered designs

5.2.7 Cancellation of registration

5.3 Self-Assessment Questions

5.1 THE GEOGRAPHICAL INDICATIONS OF GOODS (REGISTRATION AND

PROTECTION) ACT, 1999 ACT

The Geographical Indications of Goods (Registration and Protection) Act, 1999 Act of

Parliament received the assent of the President on the 30th December, 1999. It extends to the

whole of India. It shall come into force on such date as the Central Government may, by

notification in the Official Gazette, appoint, and different dates may be appointed for

different provisions of this Act, and any reference in any such provision to the

commencement of this Act shall be construed as a reference to the coming into force of that

provision.

5.1.1 Definitions

―Appellate Board‖ means the Appellate Board established under Section 83 of the Trade Marks Act, 1999

―Authorised user‖ means the authorised user of a geographical indication registered under

Section 17;

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―Deceptively similar‖ A geographical indication shall be deemed to be deceptively similar to another geographical indication if it so nearly resembles that other geographical indication as

to be likely to deceive or cause confusion;

―Geographical indication‖, in relation to goods, means an indication which identifies such goods as agricultural goods, natural goods or manufactured goods as originating, or

manufactured in the territory of a country, or a region or locality in that territory, where a

given quality, reputation or other characteristic of such goods is essentially attributable to its

geographical origin and in case where such goods are manufactured goods one of the

activities of either the production or of processing or preparation of the goods concerned

takes place in such territory, region or locality, as the case may be.

Explanation:—For the purposes of this clause, any name which is not the name of a country,

region or locality of that country shall also be considered as the geographical indication if it

relates to a specific geographical area and is used upon or in relation to particular goods

originating from that country, region or locality, as the case may be;

―Goods‖ means any agricultural, natural or manufactured goods or any goods of handicraft or

of industry and includes food stuff;

―Indication‖ includes any name, geographical or figurative representation or any combination of them conveying or suggesting the geographical origin of goods to which it

applies;

―Name‖ includes any abbreviation of a name;

―Package‖ includes any case, box, container, covering, folder, receptacle, vessel, casket, bottle, wrapper, label, band, ticket, reel, frame, capsule, cap, lid, stopper and cork;

―Prescribed‖ means prescribed by rules made under this Act;

―Producer‖, in relation to goods, means any person who:—

if such goods are agricultural goods, produces the goods and includes the person who

processes or packages such goods;

if such goods are natural goods, exploits the goods;

if such goods are handicraft or industrial goods, makes or manufactures the goods,

and includes any person who trades or deals in such production, exploitation, making

or manufacturing, as the case may be, of the goods ;

―Register‖ means the Register of Geographical Indications referred to in section 6;

―Registered‖ (with its grammatical variations) means registered under this Act;

―Registered proprietor‖, in relation to a geographical indication, means any association of

persons or of producers or any organisation for the time being entered in the register as

proprietor of the geographical indication;

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―Registrar‖ means the Registrar of Geographical Indications referred to in Section 3;

―Tribunal‖ means the Registrar or, as the case may be, the Appellate Board before which the

proceeding concerned is pending.

Words and expressions used and not defined in this Act but defined in the Trade Marks Act,

1999 shall have the meanings respectively assigned to them in that Act. In this Act, unless the

context otherwise requires, any reference:—

To the use of a geographical indication shall be construed as a reference to the use of

a printed or other visual representation of the geographical indication;

To the use a geographical indication in relation to goods shall be construed as a

reference

To the use of the geographical indication upon, or in any physical or in any other

relation whatsoever, to such goods;

To a registered geographical indication shall be construed as including a reference to

a geographical indication registered in the register;

To the Registrar shall be construed as including a reference to any officer when

discharging the functions of the Registrar in pursuance of sub-section (2) of section 3;

To the Geographical Indications Registry shall be construed as including a reference

to any office of the Geographical Indications Registry.

5.1.2 The Register and Conditions for Registration

Registrar of Geographical Indications:

1) The Controller-General of Patents, Designs and Trade Marks appointed under sub-section

(1) of section 3 of the Trade Marks Act, 1999, shall be the Registrar of Geographical

Indications.

2) The Central Government may appoint such officers with such designations as it thinks fit

for the purpose of discharging, under the superintendence and direction of the Registrar,

such functions of the Registrar under this Act, as he may from time to time authorise

them to discharge.

Power of Registrar to Withdraw or Transfer Cases etc.

Without prejudice to the generality of the provisions of sub-section (2) of section 3, the

Registrar may, by order in writing and for reasons to be recorded therein, withdraw any

matter pending before an officer appointed under the said sub-section (2) and deal with such

matter himself either de novo or from the stage it was so withdrawn or transfer the same to

another officer so appointed who may, subject to special directions in the order of transfer,

proceed with the matter either de novo or from the stage it was so transferred.

Geographical Indications Registry and Offices

1) For the purpose of this Act, there shall be established a Registry which shall be known as

the Geographical Indications Registry.

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2) The head office of the Geographical Indications Registry shall be at such place as the

Central Government may, by notification in the Official Gazette, specify, an for the

purpose of facilitating the registrations of geographical indications, there may be

established at such places as the Central Government may think fit branch offices of the

Geographical Indications Registry.

3) The Central Government may, by notification in the Official Gazette, define the territorial

limits within which an office of the Geographical Indications Registry may exercise its

functions.

4) There shall be a seal of the Geographical Indications Registry.

Register of Geographical Indications

1) For the purposes of this Act, a record called the Register of geographical indications shall

be kept at the head office of the Geographical Indications Registry, wherein shall be

entered all registered geographical indications with the names, addresses and descriptions

of the proprietors, the names, addresses and descriptions of authorised users and such

other matters relating to registered geographical indications as may be prescribed and

such registers may be maintained wholly or partly on computer.

2) Notwithstanding anything contained in sub-section (I), it shall be lawful for the Registrar

to keep the records wholly or partly in computer floppies or diskettes or in any other

electronic form, subject to such safeguards as may be prescribed.

3) Where such register is maintained wholly or partly in computer floppies or diskettes or in

any other electronic form under sub-section (2), any reference in this Act to any entry in

the register shall be construed as the reference to the entry as maintained on computer

floppies or diskettes or in any other electronic form, as the case may be.

4) No notice of any trust, express or implied or constructive, shall be entered in the register

and no such notice shall be receivable by the Registrar.

5) Subject to the superintendence and direction of the Central Government, the register shall

be kept under the control and management of the Registrar.

6) There shall be kept at each branch office of the Geographical Indications Registry a copy

of the register and such other documents mentioned in section 78 as the Central

Government may, by notification in the Official Gazette, direct.

Part A and Part B of the Register

1) The register referred to in section 6 shall be divided into two Parts called respectively Part

A and Part B.

2) The particulars relating to the registration of the geographical indications shall be

incorporated and form part of Part A of the register in the prescribed manner.

3) The particulars relating to the registration of the authorised users shall be incorporated

and form part of Part B of the register in the prescribed manner.

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Registration to be in Respect of Particular Goods and Area

1) A geographical indication may be registered in respect of any or all of the goods,

comprised in such class of goods as may be classified by the Registrar and in respect of a

definite territory of a country, or a region or locality in that territory, as the case may be.

2) The Registrar shall classify the goods under sub-section (1), as far as may be, in

accordance with the International classification of goods for the purposes of registration

of geographical indications.

3) The Registrar may publish in the prescribed manner an alphabetical index of

classification of goods referred to in sub-section (2).

4) Any question arising as to the class within which any goods fall or in the definite area as

referred to in sub-section (1) in respect of which the geographical indication is to be

registered or where any goods are not specified in the alphabetical index of goods

published under sub-section (3) shall be determined by the Registrar whose decision in

the matter shall be final.

Prohibition of Registration of Certain Geographical Indications

A geographical indication prohibits registration:

a) The use of which would be likely to deceive or cause confusion; or

b) The use of which would be contrary to any law for the time being in force; or

c) Which comprises or contains scandalous or obscene matter; or

d) Which comprise or contains any matter likely to hurt the religious susceptibilities of

any class or section of the citizens of India; or

e) Which would otherwise be disentitled to protection in a court; or

f) Which are determined to be generic names or indications of goods and are, therefore,

not or ceased to be protected in their country of origin, or which have fallen into

disuse in that country; or

g) Which although literally true as to the territory, region or locality in which the goods

originate, but falsely represent to the persons that the goods originate in another

territory, region or locality, as the case may be, Shall not be registered as a

geographical indication.

Explanation 1: For the purposes of this section, "generic names or indications", in relation to

goods, means the name of a goods which, although relates to the place or the region where

the goods was originally produced or manufactured, has lost its original meaning and has

become the common name of such goods and serves as a designation for or indication of the

kind, nature, type or other property or characteristic of the goods.

Explanation 2: In determining whether the name has become generic, account shall be taken

of all factors including the existing situation in the region or place in which the name

originates and the area of consumption of the goods.

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Registration of Homonymous Geographical Indications

Subject to the provisions of Section 7, a homonymous geographical indication may be

registered under this Act, if the Registrar is satisfied, after considering the practical conditions

under which the homonymous indication in question shall be differentiated from other

homonymous indications and the need to ensure equitable treatment of the producers of the

goods concerned, that the consumers of such goods shall not be confused or misled in

consequence of such registration.

5.1.3 Application for Registration

1) Any association of persons or producers or any organization or authority established by or

under any law for the time being in force representing the interest of the producers of the

concerned goods, who are desirous of registering a geographical indication in relation to

such goods shall apply in writing to the Registrar in such form and in such manner and

accompanied by such fees as may be prescribed for the registration of the geographical

indication.

2) The application under sub-section (1) shall contain-

a. A statement as to how the geographical indication serves to designate the goods as

originating from the concerned territory of the country or region or locality in the

country, as the case may be, in respect of specific quality, reputation or other

characteristics of which are due exclusively or essentially to the geographical

environment, with its inherent natural and human factors, and the production,

processing or preparation of which takes place in such territory, region or locality,

as the case may be;

b. The class of goods to which the geographical indication shall apply;

c. The geographical map of the territory of the country or region or locality in the

country in which the goods originate or are being manufactured;

d. The particulars regarding the appearance of the geographical indication as to

whether it is comprised of the words or figurative elements or both;

e. A statement containing such particulars of the producers of the concerned goods,

if any, proposed to be initially registered with the registration of the geographical

indication as may be prescribed; and

f. Such other particulars as may be prescribed.

3) A single application may be made for registration of a geographical indication for

different classes of goods and fee payable therefore shall be in respect of each such class

of goods.

4) Every application under sub-section (1) shall be filed in the office of the Geographical

Indications Registry within whose territorial limits, the territory of the country or the

region or locality in the country to which the geographical indication relates is situated:

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Provided that where such territory, region or locality, as the case may be, is not situated in

India, the application shall be filed in the office of the Geographical Indications Registry

within whose territorial limits the place mentioned in the address for services in India as

disclosed in the application, is situated.

5) Every application under sub-section (1) shall be examined by the Registrar in such

manner as may be prescribed.

6) Subject to the provisions of this Act, the Registrar may refuse the application or may

accept it absolutely or subject to such amendments, modification, conditions or

limitations, if any, as he thinks fit.

7) In the case of refusal or conditional acceptance of application, the Registrar shall record

in writing the grounds for such refusal or conditional acceptance and the materials used

by him in arriving at his decision.

5.1.4 Withdrawal of Acceptance

Where, after the acceptance of an application for registration of a geographical indication but

before its registration, the Registrar is satisfied,

(a) that the application has been accepted in error, or

(b) that in the circumstances of the case the geographical indication should not be registered

or should be registered subject to conditions or limitations or to conditions additional to

or different from the conditions or limitations subject to which the application has been

accepted,

The Registrar may, after hearing the applicant if he so desires, withdraw the acceptance and

proceed as if the application had not been accepted.

Advertisement of Application

1) When an application for registration of a geographical indication has been accepted,

whether absolutely or subject to conditions or limitations, the Registrar shall, as soon as

may be after acceptance, cause the application as accepted together with the conditions or

limitations, if any, subject to which it has been accepted, to be advertised in such manner

as may be prescribed.

2) Where after advertisement of an application-

(a) an error in the application has been corrected; or

(b) the application has been permitted to be amended under section 15,

The Registrar may, in his discretion cause the application to be advertised again or instead

of causing the application to be advertised again, notify in the prescribed manner, the

correction made in the application.

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Opposition to Registration

1) Any person may, within three months from the date of advertisement or re

advertisement of an application for registration or within such further period, not

exceeding one month, in the aggregate, as the Registrar, on application made to him

in such manner and on payment of such fee as may be prescribed allows, give notice

in writing in the prescribed manner to the Registrar, of opposition to the registration.

2) The Registrar shall serve a copy of the notice on the applicant for registration and,

within two months from the receipt by the applicant of such copy of the notice of

opposition, the applicant shall send to the Registrar in the prescribed manner a

counter-statement of the grounds on which he relies for his application, and if he does

not do so, he shall be deemed to have abandoned his application.

3) If the applicant sends such counter-statement, the Registrar shall serve a copy thereof

on the person giving notice of opposition.

4) Any evidence upon which the opponent and the applicant may rely shall be submitted

in such manner and within such time as may be prescribed to the Registrar, and the

Registrar shall give an opportunity to them to be heard, if they so desire.

5) The Registrar shall, after hearing the parties, if so required, and considering the

evidence, decide whether and subject to what conditions or limitations, if any, the

registration is to be permitted, and may take into account a ground of objection

whether relied upon by the opponent or not.

6) Where a person giving notice of opposition or an applicant sending a counter

statement after receipt of a copy of such notice neither resides nor carries on business

in India, the Registrar may require him to give security for the costs of proceeding

before him, and in default of such security being duly given, may treat the opposition

or application, as the case may be, as abandoned.

7) The Registrar may, on request, permit correction of any error in, or any amendment

of, a notice of opposition or a counter-statement on such terms as he thinks just.

Correction and Amendment

The Registrar may, on such terms, as he thinks just, at any time, whether before or after

acceptance of an application for registration under section 11, permit the correction of any

error or in connection with the application or permit an amendment of the application.

Provided that if an amendment is made to a single application referred to in sub-section

(3) of Section 11 involving division of such application into two or more applications, the

date of making of the initial application shall be deemed to be the date of making of the

divided applications so divided.

Registration of a Geographical Indication

1) Subject to the provisions of section 12, when an application for registration of a

geographical indication has been accepted and either-

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a. the application has not been opposed and the time for notice of opposition has

expired; or

b. The applicant has been opposed and the opposition has been decided in favour

of the applicant.

2) The Registrar shall, unless the Central Government otherwise directs, register the said

geographical indication and the authorized users, if any, mentioned in the application

and the geographical indication and that authorized users when registered shall be

registered as of the date of the making of the said application and that date shall,

subject to the provisions of section 84, be deemed to be the date of registration.

3) On the registration of a geographical indication, the Registrar shall issue each to the

applicant and the authorized users, if registered with the geographical indication, a

certificate in such form as may be prescribed of the registration thereof, sealed with

the seal of the Geographical Indications Registry.

4) Where registration of a geographical indication is not completed within twelve

months from the date of the application by reason of default on the part of the

applicant, the Registrar may, after giving notice to the applicant in the prescribed

manner, treat the application as abandoned unless it is completed within the time

specified in that behalf in the notice.

5) The Registrar may amend the register or a certificate of registration for the purpose of

correcting a clerical error or an obvious mistake.

Application for Registration as Authorized User

1) Any person claiming to be the producer of the goods in respect of which a

geographical indication has been registered under section 16 may apply in writing to

the Registrar in the prescribed manner for registering him as an authorized user of

such geographical indication.

2) The application under sub-section (1) shall be accompanied by a statement and such

documents of facts as may be prescribed and required by the Registrar to determine as

to whether such person is the producer of the goods referred to in that sub-section and

such fee as may be prescribed.

3) The provisions of this Chapter relating to-

(a) The filing and examination of the application;

(b) The refusal and acceptance of registration;

(c) Withdrawal of acceptance of application;

(d) Advertisement of application;

(e) Opposition to registration;

(f) Correction or error in an amendment of the application; and

(g) Registration.

shall apply in respect of the application and registration of authorized users referred to

in sub-section (1) in the same manner as they apply for the application for registration

and registration of the geographical indication.

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5.1.5 Duration, Renewal, Removal and Restoration of Registration

1) The registration of a geographical indication shall be for a period of ten years, but

may be renewed from time to time in accordance with the provisions of this section.

2) The registration of an authorized user shall be for a period of ten years or for the

period till the date on which the registration of the geographical indication in respect

of which the authorized user is registered expires, whichever is earlier.

3) The Registrar shall, on application made in the prescribed manner, by the registered

proprietor or by the authorized user and within the prescribed period and subject to

the payment of the prescribed fee, renew the registration of the geographical

indication or authorized user, as the case may be, for a period of ten years from the

date of expiration of the original registration or of the last renewal of registration, as

the case may be (which date is in this section referred to as the expiration of the last

registration).

4) At the prescribed time before the expiration of the last registration of a geographical

indication or the authorized user, as the case may be, the Registrar shall send notice in

the prescribed manner to the registered proprietor or the authorized user, as the case

may be, of the date of expiration and the conditions as to payment of fees and

otherwise upon which a renewal of registration may be obtained, and, if at the

expiration of time prescribed in that behalf those conditions have not been duly

complied with, the Registrar may remove the geographical indication or the

authorized user, as the case may be, from the register;

5) Provided that the Registrar shall not remove the geographical indication or the

authorized user, as the case may be, from the register, if an application is made in the

prescribed form and the prescribed fee and surcharge is paid within six months from

the expiration of the last registration of the geographical indication or the authorized

user, as the case may be, and shall renew the registration of geographical indication or

the authorized user, as the case may be, for a period of ten years under sub-section

(3).

6) Where a geographical indication or authorized user, as the case may be, has been

removed from the register for non-payment of the prescribed fee, the Registrar shall,

after six months and within one year from the expiration of the last registration of the

geographical indication or the authorized user, as the case may be, on receipt of an

application in the prescribed form and on payment of the prescribed fee, if satisfied

that it is just so to do, restore the geographical indication or the authorized user, as the

case may be, to the register and renew registration of the geographical indication or

authorized user, as the case may be, either generally or subject to such condition or

limitation as he thinks fit to impose, for a period of ten years from the expiration of

the last registration

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5.1.6 Infringement of Registered Geographical Indications

1) A registered geographical indication is infringed by a person who, not being an

authorized user thereof,-

a) Uses such geographical indication by any means in the designations or

presentation of goods that indicates or suggests that such goods originate in a

geographical area other than the true place of origin of such goods in a manner

which misleads the persons as to the geographical origin of such goods; or

b) Uses any geographical indication in such manner which constitutes an act of

unfair competition including passing off in respect of registered geographical

indication.

Explanation 1:-For the purposes of this clause, "act of unfair competition" means any

act of competition contrary to honest practices in industrial or commercial matters.

Explanation 2:-For the removal of doubts, it is hereby clarified that the following acts

shall be deemed to be acts of unfair competition, namely:-

i. All acts of such a nature as to create confusion by any means whatsoever with

the establishment, the goods or the industrial or commercial activities, of a

competitor;

ii. false allegations in the course of trade of such a nature as to discredit the

establishment, the goods or the industrial or commercial activities, of a

competitor;

iii. geographical indications, the use of which in the course of trade is liable to

mislead the persons as to the nature, the manufacturing process, the

characteristics, the suitability for their purpose, or the quantity, of the goods;

Uses another geographical indication to the goods which, although literally true as to

the territory, region or locality in which the goods originate, falsely represents to the

persons that the goods originate in the territory, region or locality in respect of which

such registered geographical indication relates.

2) The Central Government may, if it thinks necessary so to do for providing additional

protection to certain goods or classes of goods under sub-section (3), by notification

in the Official Gazette, specify such goods or class or classes of goods, for the

purposes of such protection.

3) Any person who is not an authorized user of a geographical indication registered

under this Act in respect of the goods or any class or classes of goods notified under

sub-section (2), uses any other geographical indication to such goods or class or

classes of goods not originating in the place indicated by such other geographical

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indication or uses such other geographical indication to such goods or class or classes

of goods even indicating the true origin of such goods or uses such other geographical

indication to such goods or class or classes of goods in translation of the true place of

origin or accompanied by expression such as "kind", "style", "imitation", or the like

expression, shall infringe such registered geographical indication.

4) Notwithstanding anything contained in this section, where the goods in respect of

which a geographical indication has been registered are lawfully acquired by a person

other than the authorized user of such geographical indication, further dealings in

those goods by such person including processing or packaging, shall not constitute an

infringement of such geographical indication, except where the condition of goods is

impaired after they have been put in the market

5.1.7 Appeals to the Appellate Board

(1) Any person aggrieved by an order or decision of the Registrar under this Act, or the rules

made there under, may prefer an appeal to the Appellate Board within three months from

the date on which the order or decision sought to be appealed against is communicated to

such person preferring the appeal.

(2) No appeal shall be admitted if it is preferred after the expiry of the period specified under

sub-section (1):

Provided that an appeal may be admitted after the expiry of the period specified therefore,

if the appellant satisfies the Appellate Board that he had sufficient cause for not preferring

the appeal within the specified period.

(3) An appeal to the Appellate Board shall be in the prescribed form and shall be verified in

the prescribed manner and shall be accompanied by a copy of the order or decision

appealed against and such fees as may be prescribed.

5.2 THE DESIGN ACT, 2000

This Act may be called the Design Act, 2000. It extends to the whole of India. It shall come

into force on such date as the Central Government may, by notification, appoint and different

dates may be appointed for different provisions of this Act and any reference in any such

provision to the commencement of this Act shall be construed as a reference to the coming

into force of that provision. In the Act, unless there is anything repugnant in the subject or

context.

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5.2.1 Definitions

―Article‖ means any article of manufacture and any substance, artificial, or partly artificial

and partly natural and includes any part of an article capable of being made and sold

separately;

―Controller‖ means the Controller-General of Patents, Designs and Trade Marks referred to

in Section 3;

―Copyright‖ means the exclusive right to apply a design to any article in any class in which

the design is registered;

―Design‖ means only the features of shape, configuration, pattern, ornament or composition

of lines or colours applied to any article whether in two dimensional or three dimensional or

in both forms, by any industrial process or means, whether manual, mechanical or chemical,

separate or combined, which in the finished article appeal to and are judged solely by the eye;

but does not include any mode or principle of construction or anything which is in substance

a mere mechanical device, and does not include any trade mark as defined in clause (v) of

sub-section (1) of section 2 of the Trade and Merchandise Marks Act, 1958 or property mark

as defined in section 479 of the Indian Penal Code or any artistic work as defined in clause

(c) of section 2 of the Copyright Act, 1957 (e) ―High Court‖ shall have the same meaning as

assigned to it in clause (i) of sub-section (I) of section 2 of the Patents Act, 1970;

―Legal representative‖ means a person who in law represents the estate of a deceased

person;

―Original‖, in relation to a design, means originating from the author of such design and

includes the cases which though old in themselves yet are new in their application;

―Patent Office‖ means the patent office referred to in section 74 of the Patents Act, 1970.

―Prescribed‖ means prescribed by rules under this Act; and

―Proprietor of a new or original design‖,-

i. Where the author of the design, for good consideration, executes the work for some

other person, means the person for whom the design is so executed;

ii. Where any person acquires the design or the right to apply the design to any article,

either exclusively of any other person or otherwise, means, in the respect and to the

extent in and to which the design or right has been so acquired, the person by whom

the design or right is so acquired; and

iii. In any other case, means the author of the design; and where the property in or the

right to apply, the design has devolved from the original proprietor upon any other

person, includes that other person.

5.2.2 Registration of Designs

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1) The Controller General of Patents, Designs and Trade Marks appointed under sub-

section (1) of section 4 of the Trade and Merchandise Marks Act, 1958 shall be the

Controller of Designs for the purposes of this Act.

2) For the purposes of this Act, the Central Government may appoint as many examiners

and other officers and with such designations, as it thinks fit.

3) Subject to the provisions of this Act, the officers appointed under sub-section (2) shall

discharge under the superintendence and directions of the Controller such functions of

the Controller under this Act as he may, from time to time by general or special order

in writing, authorise them to discharge.

4) Without prejudice to the generality of the provisions of sub-section (3), the Controller

may by order in writing and for reasons to be recorded therein, withdraw any matter

pending before an officer appointed under sub-section (2) and deal with such mater

himself either de novo or from the stage it was so withdrawn or transfer the same to

another officer appointed under sub-section (2) who may, subject to special directions

in the order of transfer, proceed with the matter either de novo or from the stage it was

so transferred.

5.2.3 Prohibition of Registration of Certain Designs

Design which:

a. is not new or original; or

b. has been disclosed to the public anywhere in india or in any other country by

publication in tangible form or by use or in any other way prior to the filing

date, or where applicable, the priority date of the application for registration;

or

c. is not significantly distinguishable from known designs or combination of

known designs; or

d. comprises or contains scandalous or obscene matter shall not be registered.

5.2.4 Application Registration of Designs

(1) The Controller may, on the application of any person claiming to be the proprietor of

any new or original design not previously published in any country and which is not

contrary to public order or morality, register the design under this Act.

(2) Provided that the Controller shall before such registration refer the application for

examination, by an examiner appointed under sub-section (2) of section 3, as to

whether such design is capable of being registered under this Act and the rules made

there under and consider the report of the examiner on such reference.

(3) Every application under Sub-Section (1) shall be in the prescribed form and shall be

filed in the Patent Office in the prescribed manner and shall be accompanied by the

prescribed fee.

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(4) A design may be registered in not more than one class, and, in case of doubt as to the

class in which a design ought to be registered; the Controller may decide the question.

(5) The Controller may, if he thinks fit, refuse to register any design presented to him for

registration; but any person, person aggrieved by any such refusal may appeal to the

High Court.

(6) An application which, owing to any default or neglect on the part of the applicant, has

not been completed so as to enable registration to be effected within the prescribed

time shall be deemed to be abandoned.

(7) A design when registered shall be registered as of the date of the application for

registration.

Registration in respect of particular article

(1) A design may be registered in respect of any or all of the articles comprised in a

prescribed class of articles.

(2) Any question arising as to the class within which any article falls shall be determined

by the Controller whose decision in the matter shall be final.

(3) Where a design has been registered in respect of any article comprised in a class of

article, the application of the proprietor of the design to register it in respect of some

one or more other articles comprised in that class of articles shall not be refused, nor

shall the registration thereof invalidated.

(a) on the ground of the design not being a new or original design, by reason only that

it was so previously registered; or

(b) on the ground of the design having been previously published in India or in any

other country, by reason only that it has been applied to article in respect of which it

was previously registered:

Provided that such subsequent registration shall not extend the period of copyright in

the design beyond that arising from previous registration.

(4) Where any person makes an application for the registration of a design in respect of

any article and either-

(a) That design has been previously registered by another person in respect of some

other article; or

(b) the design to which the application relates consists of a design previously

registered by another person in respect of the same or some other article with

modifications or variations not sufficient to alter the character or substantially to

affect the identity thereof, then, if at any time while the application is pending the

applicant becomes the registered proprietor of the design previously registered, the

foregoing provisions of the section shall apply as if at the time of making the

application the applicant had been the registered proprietor of that design.

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Publication of particulars of registered Design

The Controller shall, as soon as may be after the registration of a design, cause

publication of the prescribed particulars of the design to be published in such manner

as may be prescribed and thereafter the design shall be open to public inspection.

5.2.5 Certificate of Registration

1) The Controller shall grant a certificate of registration to the proprietor of the design

when registered Certificate of registration.

2) The Controller may, in case of loss of the original certificate, or in any other case in

which he deems it expedient, furnish one or more copies of the certificate.

Register of designs

(1) There shall be kept at the Patent Office a book called the register of designs, wherein

shall be entered the names and addresses of proprietors of registered designs,

notifications of assignments and of transmissions of registered designs, and such other

matter as may be prescribed and such register may be maintained wholly or partly on

computer, floppies or diskettes, subject to such safeguards as may be prescribed.

(2) Where the register is maintained wholly or partly on computer floppies and diskettes

under sub-section (1), any reference in this Act to any entry in the register shall be

construed as the reference to entry so maintained on computer, floppies or diskettes.

(3) The register of designs existing at the commencement of this Act shall be

incorporated with and form part of the register of designs under this Act.

(4) The register of designs shall be prima facie evidence of any matter by this Act

directed or authorized to be entered therein.

Copyright on Registered Design

(1) When a design is registered, the registered proprietor of the design shall, subject to the

provisions of this Act, have copyright in the design during ten years from the date of

registration.

(2) If, before the expiration of the said ten years, application for the extension of the

period of copyright is made to the Controller in the prescribed manner, the Controller

shall, on payment of the prescribed fee, extend the period of copy-right for a second

period of five years from the expiration of the original period of ten years.

5.2.6 Inspection of Registered Designs

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(1) During the existence of copyright in a design, any person on furnishing such

information as may enable the Controller to identify the design and on payment of the

prescribed fee may inspect the design in the prescribed manner.

(2) Any person may, on application to the Controller and on payment of such fee as may

be prescribed, obtain a certified copy of any registered design.

Existence of copyright

On the request of any person furnishing such information as to as may enable the

Controller to identify the design, and on payment of the prescribed fee, the Controller

shall inform such person whether the registration still exists in respect of the design,

and, if so, in respect of what classes of articles, and shall state the date of registration,

and the name and address of the registered proprietor.

5.2.7 Cancellation of Registration

1) Any person interested may present a petition for the cancellation of the registration of

a design at any time after the registration of the design, to the Controller on any of the

following grounds, namely:-

a) that the design has been previously registered in India; or

b) that it has been published in India or in any other country prior to the date of

registration; or

c) that the design is not a new or original design; or

d) that the design is not registrable under this Act; or

e) it is not a design as defined under clause (d) of section 2.

2) An appeal shall lie from any order of the Controller under this section to the High

Court, and the Controller may at any time refer any such petition to the High Court,

and the High Court shall decide any petition so referred.

5.3 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

1. A design must be put in the public domain to claim registration over the design.

2. A design should be capable of application to the industrial process.

3. A design is registered for 20 years and can be renewed for 5 years at a time.

4. Geographical indication registration is available only for agricultural produce.

5. Geographical indication registration is available for manufactured goods.

6. An individual per cannot apply for Geographical indication registration.

7. Geographical indication registration is first given for 20 years.

8. Any association of persons or producers can apply for registering a Geographical

indication in to goods.

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9. On registration of Geographical indication, producers of the area apply for registration

as the users of the Indication.

10. Unauthorised use of a registered indication as coming from the region is an offence,

attracting fine.

2. Long Answer Questions

Q1. Write a note on Design Act, 2000.

Q2. A sports accessories manufacturing company discovered that the foot on which a

cricket fast bowler lands, moves significantly within the shoe. This knocks the big toe,

straining the toe, ankle and the foot. The company developed a pair of shoes where the

front portion of the shoe, near the big toe, had a hole. The idea was that on impact, the toe

would have the space to move out and not get knocked. Thus designing pair of shoes give

rise to intellectual property? If yes, under which law can the company seek protection

from others coming up with similar shoes?

SUGGESTED READINGS

1) Bare Act of Design Act, 2000

2) Bare Act of Geographical Indications of Goods (Registration and Protection) Act, 1999

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LESSON 6

TRADEMARK PROTECTION AND PASSING OFF

6 STRUCTURE

6.1 The Trade Mark Act, 1999

6.2 Infringement of trademarks in India

6.3 Passing off of Trademark in India

6.4 Remedies against Infringement and Passing off of a Trademark in India:

6.5 Trade Dress

6.6 Self-Assessment Questions

6.1 TRADE MARK ACT, 1999 (Legal Service India )

A Trade Mark is a visual symbol in the form of a word , a device ,or a label applied to articles

of commerce with a view to indicate to the purchasing public that is a good manufactured or

otherwise dealt in by a particular person as distinguished from similar goods dealt or

manufacture by other persons.

There are few important functions of trademark (Gadhre, 2018):

A trademark can be used for identifying and distinguishing a particular seller‘s goods from others. Trademark also shows the origin of the goods i.e. a customer can identify the

manufacturer and also assume about the quality of goods that all goods bearing the particular

trademark are of a particular quality desired by the customers. Trademarks are widely used

for the advertisement purposes also which helps to customers in associating any good with

the quality, reputation and goodwill of any company. So it is very important for any

organization to take precautions while allowing any one to use its trademark because the

name and reputation of the company is directly associated with the trademark.

There has been various new concepts have emerged in relation to trademark due to the

technological revolution in the communication, media and other areas and due to the

increased knowledge and perception of individuals, business enterprises are showing more

interest in registering non-conventional marks such as colour marks, shape marks, smell

marks, sound marks, advertisement slogans, trade dress etc. to capture the market.

How it can cause damage to a Company (Gadhre, 2018):

If any organization is using the registered trademark of another company without permission,

that means it is not only committing a crime but also causing damage to the business of the

company and damaging the brand name of that company. The organization might be using

others trademark to use its market reputation and market stake to enhance its own business

without extra efforts. But such companies are not using the exact trademark of other company

but they generally go for use of similar marks and here the problem came in to existence.

These activities mainly fall under two heads Infringement and Passing Off.

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6.2 INFRINGEMENT & PASSING OFF OF TRADEMARKS IN INDIA (Rana, 2018)

Infringement of a Trademark in India:

Trademark is said to be infringed when a registered trademark is used by a person who is

neither the registered proprietor nor the licensee of the said trademark in relation to the goods

or services for which it is registered.

Trademark infringement in India means violation of the exclusive rights granted to the

registered proprietor under the Trade Marks Act, 1999 to use the same in relation to the

goods or services in respect of which the trade mark is registered. Section 29 and Section 30

of the Trade Marks Act, 1999 lay down the provisions for protection of a registered

trademark in case the same is infringed upon by a person not being a registered proprietor or

licensee.

What amounts to Infringement of a Trademark in India?

Infringement of a Trademark in India means violation of the exclusive rights granted to the

registered proprietor under the Trade Marks Act, 1999 to use the same in relation to the

goods or services in respect of which the trade mark is registered. Section 29 and Section 30

of the Trade Marks Act, 1999 lay down the provisions for protection of a registered

trademark in case the same is infringed upon by a person not being a registered proprietor or

licensee.

Section 29 of the Trade Marks Act, 1999 provides that a registered trademark is infringed

when a person not being a registered proprietor or licensee, uses in course of trade;

1) Identity with Registered Mark and Similarity of Goods / Services: A Mark which

is identical to the registered trademark and there is similarity of the goods or services

covered by the trade mark in a manner causing confusion to the general public; or

2) Similarity with Registered Mark and Identity of Goods / Services: A Mark which

is similar to the registered trade mark and there is an identity or similarity of the

goods or services covered by the trade mark in a manner causing confusion to the

general public; or

3) Identity with Registered Mark and Identity of Goods / Services – Presumption of

Confusion: A Mark which is identical to the registered trademark and there is

similarity of the goods or services covered by the trade mark. It is pertinent to note

that in such cases the Courts will presume that such use will cause confusion on part

of public; or

4) Identity with Registered Mark having Reputation: A Mark which is identical or

similar to the registered trademark having reputation in India, even if such mark is

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used in relation to goods or services which are not similar to those for which the

trademark is registered?

5) Similarity of Trade Name with Registered Trade Mark: A trade name or part of

trade name and such concern is dealing in the goods or services in respect of which

the trade mark is registered.

6) Application of Registered Mark on Labelling or Packaging etc. with knowledge

that such application is without Authorisation: Applies registered trademark to

material intended to be used for labelling, packaging, business paper or advertisement

provided such person when he applied the mark knew or had reasons to believe that

the application of the mark was not duly authorised by the Registered User or

Licensee thereof.

7) Use of Registered Trademark in Advertising, when such use takes unfair

advantage, is detrimental or against the reputation of registered Trademark

An advertising using a registered trademark and such advertising;

1. Takes unfair advantage of and is contrary to honest practices in industrial or

commercial matters; or

2. Is detrimental to its distinctive character; or

3. Is against the reputation of the trade mark.

What does not amounts to Infringement of a Trademark in India?

Section 30 of the Trade Marks Act, 1999 provides limits on effect of registered trademark

and also enumerates certain acts which do not constitute infringement. These acts are also

used as defence in suits for infringement of trademarks and an infringer may escape his

liability if his use of the registered trademarks falls within the ambit of the section. Section 30

of the Trade Marks Act, 1999 provides that there is no infringement of registered trademark;

1. Use of Mark to indicate the kind, quality, quantity etc.

When the infringing mark is used in relation to goods or services, covered by the

registered trademark, to indicate the kind, quality, quantity etc. of the goods or rendering

of services. For example in a case before the Delhi High Court proprietor of the mark

―RICH‘S WHIP TOPPING‖ registered in Class 30 for non-dairy topping, icing, filling

and generally for other goods in that Class instituted a trademark infringement

proceedings and passing off action against the user of the mark ―BELLS WHIP TOPPING‖. The Delhi High Court in this case held that as the word ―WHIP TOPPING‖ is indicative of quality of goods sold under and its use cannot be considered as

infringement of registered trade mark ―RICH‘S WHIP TOPPING‖ unless it is established that the mark ―WHIP TOPPING‖ has acquired secondary meaning.

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2. Use of Mark, which is outside the scope of Registration

When the registered trademark is registered subject to conditions or limitations and the

trademark is used in a manner, which outside the scope of registration. For instance; a

trademark such as ―ABC Garden Market‖ may be registered with the condition that the registered proprietor will not have the exclusive right to use the words ―Garden‖ and/or ―Market‖. In such case use of the words ―Garden‖ and/or ―Market‖ by person will not amount to infringement of the registered trademark.

3. Implied Consent for Use

Where a person uses the mark in relation to goods or services for which the registered

owner had once applied the mark and had not subsequently removed it or impliedly

consented to its use;

4. Use of Registered Trademark in relation to parts and accessories etc.

A trade mark registered for any goods may be used in relation to parts and accessories to

other goods or services and such use is reasonably necessary and its effect is not likely to

deceive as to the origin;

5. Use of two Registered Trademarks identical or similar to each other

The use of registered trade mark being one of two or more registered trademarks, which

are identical or similar in exercise of the right to the use of that registered trade mark.

6.3 PASSING OFF OF TRADEMARK IN INDIA

Passing off action arises when an unregistered trademark is used by a person who is not the

proprietor of the said trademark in relation to the goods or services of the trademark owner.

Passing off in India is a tort actionable under common law and mainly used to protect the

goodwill attached with the unregistered trademarks. It is founded on the basic tenet of law

that one should not benefit from the labour of another. Section 27 of the Trade Marks Act,

1999 provides that no infringement action will lie in respect of an unregistered trade mark but

recognizes the common law rights of the trade mark owner to take action against any person

for passing off their goods/services as the goods of another person or as services provided by

another person.

What amounts to Passing off in India?

Passing off of a Trademark in India is a tort actionable under common law and mainly used

to protect the goodwill attached with the unregistered trademarks. It is founded on the basic

tenet of law that one should not benefit from the labour of another. Section 27 of the Trade

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Marks Act, 1999 provides that no infringement action will lie in respect of an unregistered

trade mark but recognizes the common law rights of the trade mark owner to take action

against any person for passing off their goods/services as the goods of another person or as

services provided by another person. It has been settled in catena of authorities that essential

characteristics of a passing off action are as follows:

1. Misrepresentation;

2. Made by a person in the course of trade mark;

3. To prospective customers of his or ultimate consumers of goods or services supplied

by him;

4. Which is calculated to injure the business or goodwill of another trade;

5. Which causes actual damage to a business or goodwill of the trade by whom, the

action is brought.

In a typical suit for Passing off, the Courts generally frame following issue / questions for

consideration and determination:-

1. Whether the Plaintiff is prior user of the mark in point of time.

2. Whether the goods of the Plaintiff have acquired distinctiveness with any name or

mark and are associated in the minds of the general public as those of Plaintiff.

3. Whether there is a misrepresentation by the Defendant with regard to his goods and

such misrepresentation is likely to lead to confusion in the minds of the people as a

result whereof they may treat the goods of the Defendant as those of the Plaintiff.

The Courts generally consider the following factors in order to determine and adjudicate

aforesaid issues;

1. The nature of mark i.e. whether the marks are word marks or label marks or

composite marks, i.e. both words and labels works.

2. The degree of resemblances between the marks, phonetically similar and hence

similar in idea.

3. The nature of the goods in respect of which they are used as trade-marks.

4. The similarity in the nature, character and performance of the goods of the rival mark.

5. The class of purchasers who are likely to buy the goods bearing the marks they

require, on their education and intelligence and a decree of care they are likely to

exercise in purchasing and/or using the goods.

6. The mode of purchasing the goods or placing orders for the goods.

7. Any other surrounding circumstances which may be relevant in the extent of

dissimilarity between the competing marks.

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Difference between infringement & passing off of trademarks in India

The difference between Infringement and Passing Off of a trademark are given below:

Infringement Passing off

Statutory remedy

Common Law remedy

Registration of trademark is required. Registration of trademark is not a pre-

requisite.

Plaintiff is only required to establish that

infringing mark is deceptively similar to the

registered mark in respect of similar goods /

services and no further proof is required

afterwards as there is presumption of confusion.

Plaintiff is not only required to establish

deceptive similarity of two contesting

mark but also require to prove deception or

confusion among public and likelihood of

injury to the plaintiff's goodwill.

Prosecution under Criminal remedies is easier.

Prosecution under Criminal remedies is

relatively harder.

Benefit of instituting the suit under Section 134

of the Trade Marks Act, 1999 is available

wherein the registered proprietor or registered

user of the trademark can institute the suit

where they actually and voluntarily resides or

carries on business or personally work for gain.

Such benefit is not available and the

regular rules of jurisdiction provided under

Section 20 of Civil Procedure Code, 1908

apply i.e. Passing off action has to be filed

where the Defendant resides or carried on

business or cause of actions has arisen.

An action for Infringement for registered trademark or tort of Passing off for both registered

as well as unregistered trademark are essentially two ways of achieving the same objective

i.e. protection of goodwill attached with a mark. In India a combined action for infringement

and passing off is permissible. However, both are technically two different concepts and the

difference between the two is highlighted above.

Jurisdiction while filing suit for Infringement or Passing off in India:

How to decide where to file a suit for infringement or passing should be filed in India?

One of the most important practical benefit given under Section 134 of the Trade Marks Act,

1999 is that a suit for infringement can also be instituted before a District Court / High Court

(enjoying Ordinary Original Civil jurisdiction such as High Court of Delhi, Bombay, Calcutta

or Madras), within the local limits of whose jurisdiction, at the time of the institution of the

suit, the person instituting the suit, actually and voluntarily resides or carries on business or

personally work for gain. The person includes the registered proprietor and the registered

user.

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On the other hand the suit for passing off can only be instituted before a District Court, within

the local limits of whose jurisdiction;

1. The Defendant is residing, working for gain or carrying on its business; or

2. Cause of action has arisen

6.4 REMEDIES AGAINST INFRINGEMENT AND PASSING OFF OF A

TRADEMARK IN INDIA

Both Civil and Criminal remedies are available in the Infringement or Passing off action.

Under Section 135 of the Trade Marks Act, 1999, the court grant relief in any suits for

infringement or for passing off for injunction; either damages or an account of profits

together with or without an order for delivery up of the infringing labels and marks for

destruction or erasure. Criminal Prosecution of infringers of trademark is also provided under

Trade Marks Act, 1999. Criminal Prosecution of person infringing an un-registered mark is

also available under various provisions of Indian Penal Code, 1860. However, it pertinent to

note that the Criminal Prosecution of an infringer under Trade Marks Act, 1999 is much

easier and effective then Criminal Prosecution of a person‘s infringing an un registered mark

under relevant provisions of Indian Penal Code, 1908.

Cases of Infringement (Legal Service India, 2018)

No one can use the trademark which is deceptively similar to the trademark of other

company. As in the case of Glaxo Smith Kline Pharmaceuticals Ltd. v. Unitech

Pharmaceuticals Pvt. Ltd. the plaintiff claimed that defendants are selling products under the

trademark FEXIM that is deceptively similar to the plaintiff‘s mark PHEXIN, which is used for pharmaceutical preparations. The defendants are selling anti-biotic tablets with the

trademark `FEXIM' with the packing material deceptively similarly to that of the plaintiff,

whereby intending to not only to infringe the trademark but also to pass off the goods as that

of the plaintiff as the two marks are also phonetically similar. The Court restrained the

defendant from using the trademark `FEXIM' or any trademark deceptively similar to the

trademark of the plaintiff `PHEXIN', any label/packaging material deceptively similar and

containing the same pattern as that of the plaintiff.

If a party using the deceptively similar name only for a single shop and not spreading its

business by use of that particular name then also that party could be stopped from using the

trade name of other company. This is given in M/s Bikanervala v. M/s Aggarwal Bikanerwala

where the respondent was running a sweet shop in with the name of AGGARWAL

BIKANERVALA and the plaintiff was using the name BIKANERVALA from 1981 and also

got registered it in the year 1992. Hence they applied for permanent injunction over the use of

the name AGGARWAL BIKANERWALA for the sweet shop by the defendant. Court held

in favour of the plaintiff and stopped defendant from manufacturing, selling, offering for sale,

advertising, directly or indirectly dealing in food articles for human consumption under the

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impugned trade mark/trade name/infringing artistic label 'AGGARWAL BIKANER WALA'

or from using any trade mark/trade name/infringing artistic work containing the name/mark

'BIKANER WALA/BIKANERVALA' or any other name/mark/artistic work which is

identical or deceptively similar to the plaintiff's trademark 'BIKANERVALA'.

If the trademark is not registered by any party but one party started using it before the other

then first one would have the legal authority on that particular mark. In Dhariwal Industries

Ltd. & Anr Vs M.S.S. Food Products where appellants were using the brand name

MALIKCHAND for their product and the respondents were using the name MANIKCHAND

which is similar to the previous one and both parties have not registered their trademarks.

Court held in this matter that even though plaintiff have not registered their trademark they

are using it from long time back and hence court granted perpetual injunction against the

respondents.

Even if a company is not doing business in country, but it is a well-known company or well-

known goods, then also it would be entitled to get authority over its trademark. As given in

case of N.R. Dongare v. Whirlpool Corp. Ltd. where the defendants have failed to renew their

trademark ‗WHIRLPOOL‘ and in the meantime the plaintiffs have got registration of the same. In this case court said that though there was no sale in India, the reputation of the

plaintiff company was travelling trans-border to India as well through commercial publicity

made in magazines which are available in or brought in India.

The ―WHIRLPOOL‖ has acquired reputation and goodwill in this country and the same has become associated in the minds of the public. Even advertisement of trade mark without

existence of goods in the mark is also to be considered as use of the trade mark. The

magazines which contain the advertisement do have a circulation in the higher and upper

middle income strata of Indian society. Therefore, the plaintiff acquired trans-border

reputation in respect of the trade mark ―WHIRLPOOL‖ and has a right to protect the invasion thereof.

Cases of Passing off (Legal Service India, 2018)

Even if the goods are not same or similar to each other, then also no one can use the

registered trademark of a company for any kind of goods which may result in the harm to the

business and reputation of the company which is the owner of the trademark.

In Honda Motors Co. Ltd. v. Mr. Charanjit Singh and Ors defendant Company was using the

trade name HONDA for ‗Pressure Cookers‘ which they are manufacturing in India and even when their application for registration of this trademark had been rejected by the registrar

they continued using it and again applied for registration and hence plaintiff has brought this

plaint. Plaintiff is the well-known company having presence all over the world in the field of

Motor Cars, Motorcycles, Generators and other electronic appliances. They are doing

business in India in association with the Siddharth Shriram Group with the name Honda Siel

Cars India Ltd. Plaintiff has established that his business or goods has acquired the reputation

and his trade name has become distinctive of his goods and the purchasing public at large

associates the plaintiff's name with them. The use of trademark HONDA by respondents is

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creating deception or confusion in the minds of the public at large and such confusion is

causing damage or injury to the business, reputation, goodwill and fair name of the plaintiff.

Hence court has restricted the defendants from using the trademark HONDA in respect of

pressure cookers or any goods or any other trade mark/marks, which are identical with and

deceptively similar to the trade mark HONDA of the plaintiff and to do anything which

amounts to passing off to the goods of the plaintiff.

In the case of Smithkline Beecham v. V.R. Bumtaria the plaintiff applied for permanent

injunction to restrain the defendant from infringing the trademark, passing off, damages,

delivery etc. of its registered trademark ARIFLO, used in respect of the pharmaceutical

preparations. Defendants were using the similar name ACIFLO for their product of the same

drug in India. Plaintiffs were not doing business in India for the particular product and argued

that since their advertisements are been published in medical journals hence they have a

trans-border reputation and defendants should be stopped to use the similar trademark which

creating deception in customers.

Court said that mere publication of an advertisement in a journal cannot establish a trans-

border reputation. Such reputation if any is confined to a particular class of people, i.e., the

person subscribing to the said specialized journals and the same can‘t be said to be extended to the general consumers. Thus any adverse effect on the firm in such a case can‘t be amounted to the offence of ―passing off‖.

Though the dispute resulted in compromise where the defendant agreed and accepted the

plaintiffs‘ exclusive right on the use of mark i.e. ARIFLO in India and abroad and further agreed to not to manufacture pharmaceutical preparations under the mark ACIFLO or any

other mark identical or similar to ARIFLO.

6.5 TRADE DRESS (Legal Service India, 2018)

The literal meaning of Trade Dress is - the overall image of a product used in its marketing or

sales that is composed of the non-functional elements of its design, packaging, or labelling

(as colours, package shape, or symbols). That means there is a specific way of writing any

product name, its unique background and other remarkable signs. The concept of trade dress

has much importance in a country like India where one third of the population is still

illiterate. Trade dress helps the illiterate people who cannot read the trademark on the product

as well as the manufacturers to reach the people easily.

Delhi H.C. had dealt with this concept in a detailed manner in the case of Colgate Palmolive

Company and Anr. v. Anchor Health and Beauty Care Pvt. Ltd.[7] where the plaintiffs have

filed the case for the ‗passing off‘ of trademark and the dispute was on the colour scheme and combination of colours in a significant manner. Colgate Company was the plaintiff and

questioning the use of a mark on dental product which is the combination of ‗red‘ and ‗white‘ in proportion of 1/3:2/3 respectively and the way of writing the name of product was also in

dispute. Plaintiffs were using the mark of particular fashion from 1951 and the respondents

started using it in 1996. Plaintiffs have filed the application to stop the respondents from

using the particular mark.

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The plaintiffs showed to the court that the look of trade dress of the two articles, one

manufactured by the plaintiff and another by the defendant from the point of view of not only

unwary, illiterate customer/servants of the household but semi-literate also as the trademarks

"Colgate" and "Anchor" are written in English language cannot be distinguished by ordinary

customer. There is every likelihood of confusion as to the source on account of the similarity

of substantial portion of the container having particular colour combination and also shape of

the container. Such an action on the part of infringing party also has an element of unfair

competition.

Court said in this matter that may be, no party can have monopoly over a particular colour but

if there is substantial reproduction of the colour combination in the similar order either on the

container or packing which over a period has been imprinted upon the minds of customers it

certainly is liable to cause not only confusion but also dilution of distinctiveness of colour

combination. Colour combination, get up, lay out and size of container is sort of trade dress

which involves overall image of the product's features. There is a wide protection against

imitation or deceptive similarities of trade dress as trade dress is the soul for identification of

the goods as to its source and origin and as such is liable to cause confusion in the minds of

unwary customers particularly those who have been using the product over a long period.

If a product having distinctive colour combination, style, shape and texture has been in the

market for decades it got attached with the reputation and goodwill of the company which

could be earned at huge cost.

In the present dispute if an illiterate servant or village folk goes to the shop with the

instruction to bring Colgate Tooth Power having a container of particular shop with trade

dress of colour combination of Red and White in 1/3 and 2/3 proportion he will not be in

position to distinguish if he is handed over "Anchor" Tooth Powder contained in a container

having the identical trade dress and colour combination of "Red and White‖ in that order and proportion. Confusion is much large as to source and origin as the difference in name will not

make any difference to such a customer and the goods of the defendant can easily be passed

off as goods of the plaintiff.

Court said that significance of trade dress and colour combination is so immense that in some

cases even single colour has been taken to be a trademark to be protected from passing off

action. Except where the colour cannot be protected as the blue colour is for the Ink and red

colour is for the lipstick or similar cases. Court said that it is been established that the

defendants are using the trade dress of plaintiffs for their containers and hence Court had

allowed the application of plaintiffs and restrained defendants from using the colour

combination of red and white in the disputed order on the container/packaging of its goods.

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6.6 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

1. A trademark can be a word or a sign.

2. Laudatory words are the best trademarks.

3. Trademark registration is available for marks associated only with goods and not

services.

4. Putting a trademark in public domain disqualifies it from trademark registration.

5. A trademark protection is given for 10 years at a time.

6. A well-known trademark is given protection, even if it is not registered in India.

7. A reputed trademark gets protection across classes.

8. Trademark right becomes available only when the certificate of registration is given.

9. The most appropriate trademark is one which describes the goods or services.

10. Trademark registration is done for different classes for goods & services.

2. Long Answer Questions

Q1. If a manufacturer started selling mineral water with the trade name ‗Amul‘, would it

be case of trademark infringement?

Q2. Maruti is a well-known trade name in the class of automobiles. A tissue paper

manufacturing company introduces tissue boxes under the trade name, Maruti. Could this

constitute infringement of the right of the owners of the trade name Maruti? What could

be the remedies available to prevent the use of the trade name by the tissue paper

manufacturer?

SUGGESTED READINGS

1) Albuquerque, D. (2016). Legal Aspects of Business Text, Jurisprudence and Cases. New

Delhi: Oxford University Press.

2) Gadhre, A. (n.d.). Trade Mark Infringement and passing Off. Retrieved May 31, 2018, from

Legal Service India: http://www.legalserviceindia.com/article/l226-Trademark-Infringement-

&-Passing-Off.html

3) Legal Service India . (n.d.). Trade mark Law in India. Retrieved May 31, 2018, from Legal

Service India:http://www.legalserviceindia.com/trademarks-

copyrights/trade%20markmainpage.htm

4) Pathak, A. (2014). Legal Aspects of Business. New Delhi: Mc Graw Hill Education.

5) Rana, S. (n.d.). http://www.ssrana.in. Retrieved May 31, 2018, from http://www.ssrana.in:

http://www.ssrana.in/Intellectual%20Property/Infringement/Infringement-and-Passing-Off-

of-Trademark.aspx

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LESSON 7

THE COMPETITION ACT, 2002

7 STRUCTURE

7.1 Introduction

7.2 Aim and Objective

7.3 Comparison of MRTP Act and Competition Act

7.4 Definitions

7.5 Administrative mechanism

7.6 Agreement among Enterprises

7.7 Prohibition of Agreements Anti-Competitive Agreements

7.8 Adverse Effect on Competition with reference to the Relevant Market

7.9 Abuse of Dominance

7.10 Prohibits Abuse by Enterprises in Dominant Positions (Section 4)

7.11 Regulation of combinations

7.12 Competition Commission of India

7.13 Penalties

7.14 Self-Assessment Questions

7.1 INTRODUCTION (Economics Discussion, 2018)

In 1999, Government of India appointed a committee on ―Competition Policy and Law‖ under the Chairmanship of Sri S.V.S. Raghvan. In the year 2000, this committee submitted its

report. Accordingly, the competition Act, 2002 was framed and passed on the basis of

recommendation of this committee.

This Act was enforced on 13th January 2003. Later on, the government made some

amendments through passing of competition (Amendment) Bill, 2007. This Act covers whole

of India except Jammu and Kashmir. This Act smoothly replaced the MRTP Act.

Under the new laws, hardly 100 of the 6,000 big industries would come under the purview of

the Act. An industry having assets of ₹ 1,000 Crore or more or having a annual turnover of ₹

3,000 Crore or more would attract the provisions of the new law, i.e., Competition Law or

Antitrust Law.

The Act provides for the constitution of Competition Commission of India (CCI) which is a

corporate body with quasi-judicial powers. The order of this Commission can be challenged

only in the Supreme Court. The Commission shall be headed by a Chairman and there would

not be more than 10 members of the Commission to be appointed by the Government of

India. After its formation, the CCI has taken over MRTP commission (MRTPC). Accordingly

MRTPC was dissolved and all pending cases of MRTPC were either disposed within a year

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or shifted to CCI. The pending unfair Trade Practice (UTPs) cases have been shifted to

concerned consumer courts formed under consumer protection Act. 1986.

7.2 AIM AND OBJECTIVE

An Act to provide, keeping in view of the economic development of the country, for the

establishment of a Commission to prevent practices having adverse effect on competition, to

promote and sustain competition in markets, to protect the interests of consumers and to

ensure freedom of trade carried on by other participants in markets, in India, and for matters

connected therewith or incidental thereto. (CCI , 2018). The competition Act 2002 was

formulated with following objectives (Economics Discussion, 2018)

1. To promote healthy competition in the market.

2. To prevent those practices which are having adverse effect on competition

3. To protect the interests of concerns in a suitable manner.

4. To ensure freedom of trade in Indian markets.

5. To prevent abuses of dominant position in the market actively.

6. Regulating the operation and activities of combinations (acquisitions, mergers and

amalgamation).

7. Creating awareness and imparting training about the competition Act.

Key takeaways:

Establishment of a Commission to prevent adverse effect on competition.

Promotion and sustenance competition in the market

Protection of consumer‘s interest. Freedom of Trade

7.3 COMPARISON OF MRTP ACT AND COMPETITION ACT

MRTP Act, 1969 Competition Act,2002

Pre-reforms: rigid and reactive Post Reforms: Simple and

Transparent

No administrative and financial autonomy

for the commission

Competition Commission is

Autonomous

Offences are implicit and undefined Offences are well defined

No power to inquire into foreign cartels Regulation is in place

Table 1: Comparison of MRTP Act and Competition Act

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7.4 DEFINITIONS

Acquisition: ―acquisition‖ means, directly or indirectly, acquiring or agreeing to acquire—

i. shares, voting rights or assets of any enterprise; or

ii. control over management or control over assets of any enterprise;

Agreement: ―agreement‖ includes any arrangement or understanding or action in concert,—

i. whether or not, such arrangement, understanding or action is formal or in writing; or

ii. whether or not such arrangement, understanding or action is intended to be

enforceable by legal proceedings;

Appellate Tribunal: Appellate Tribunal‖ means the National Company Law Appellate Tribunal referred to in sub-section (1) of section 53A;]

Cartel: ―cartel‖ includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the

production, distribution, sale or price of, or, trade in goods or provision of services;

Chairperson: ―Chairperson‖ means the Chairperson of the Commission appointed under

sub-section (1) of section 9;

Commission: ―Commission‖ means the Competition Commission of India established under

sub-section (1) of section 7;

Consumer: ―consumer‖ means any person who—

i. buys any goods for a consideration which has been paid or promised or partly paid

and partly promised, or under any system of deferred payment and includes any user

of such goods other than the person who buys such goods for consideration paid or

promised or partly paid or partly promised, or under any system of deferred payment

when such use is made with the approval of such person, whether such purchase of

goods is for resale or for any commercial purpose or for personal use;

ii. hires or avails of any services for a consideration which has been paid or promised or

partly paid and partly promised, or under any system of deferred payment and

includes any beneficiary of such services other than the person who hires or avails of

the services for consideration paid or promised, or partly paid and partly promised, or

under any system of deferred payment, when such services are availed of with the

approval of the first-mentioned person whether such hiring or availing of services is

for any commercial purpose or for personal use;

Director General: ―Director General‖ means the Director General appointed under

sub- section (1) of section 16 and includes any Additional, Joint, Deputy or Assistant

Directors General appointed under that section;

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Director General: ―enterprise‖ means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply,

distribution, acquisition or control of articles or goods, or the provision of services, of any

kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with

shares, debentures or other securities of any other body corporate, either directly or through

one or more of its units or divisions or subsidiaries, whether such unit or division or

subsidiary is located at the same place where the enterprise is located or at a different place or

at different places, but does not include any activity of the Government relatable to the

sovereign functions of the Government including all activities carried on by the departments

of the Central Government dealing with atomic energy, currency, defence and space.

Goods: ―goods‖ means goods as defined in the Sale of Goods Act, 1930 (8 of 1930) and

includes—

a) products manufactured, processed or mined;

b) debentures, stocks and shares after allotment;

c) in relation to goods supplied, distributed or controlled in India, goods imported into

India;

Person: ―person‖ includes—

i. An individual;

ii. A Hindu undivided family;

iii. A company;

iv. A firm;

v. an association of persons or a body of individuals, whether incorporated or not, in

India or outside India;

vi. any corporation established by or under any Central, State or Provincial Act or a

Government company as defined in section 617 of the Companies Act, 1956 (1 of

1956);

vii. Anybody corporate incorporated by or under the laws of a country outside India;

viii. a co-operative society registered under any law relating to co-operative societies;

ix. a local authority;

x. Every artificial juridical person, not falling within any of the preceding sub-

clauses;

―Public financial institution‖ means a public financial institution specified under section 4A of the Companies Act, 1956 (1 of 1956) and includes a State Financial, Industrial or

Investment Corporation

―Regulations‖ means the regulations made by the Commission under section 62;

―Relevant market‖ means the market which may be determined by the commission with

reference to the relevant product market or the relevant geographic market or with reference

to both the markets;

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―Relevant geographic market‖ means a market comprising the area in which the conditions

of competition for supply of goods or provision of services or demand of goods or services

are distinctly homogenous and can be distinguished from the conditions prevailing in the

neighbouring areas;

―Relevant product market‖ means a market comprising all those products or services which

are regarded as interchangeable or substitutable by the consumer, by reason of characteristics

of the products or services, their prices and intended use;

―Service‖ means service of any description which is made available to potential users and

includes the provision of services in connection with business of any industrial or commercial

matters such as banking, communication, education, financing, insurance, chit funds, real

estate, transport, storage, material treatment, processing, supply of electrical or other energy,

boarding, lodging, entertainment, amusement, construction, repair, conveying of news or

information and advertising;

―Statutory authority‖ means any authority, board, corporation, council, institute, university

or any other body corporate, established by or under any Central, State or Provincial Act for

the purposes of regulating production or supply of goods or provision of any services or

markets therefore or any matter connected therewith or incidental thereto;

―Trade‖ means any trade, business, industry, profession or occupation relating to the

production, supply, distribution, storage or control of goods and includes the provision of any

services;

Competition Act, 2002- Competition laws recognise three broad activities that could result

in limiting competition in a market.

i. Existing enterprises can enter into agreements among themselves that are aimed at

limiting competition in the market.

ii. An enterprise that is dominant in a market segment can abuse its dominant position

by limiting competition.

iii. A merger of two or more companies can lead to the formation of monopolies and

thus, give rise to the possibility of an abuse of the monopoly position to reduce

competition.

7.5 ADMINISTRATIVE MECHANISM

The Act constitutes a Competition Commission consisting of up to 6 members. The

Commission is charged with the duty to ‗eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure

freedom of trade carried on by other participants, in markets in India.‘ The Commission performs judicial functions under the Act.

Procedure:

The Act creates the office of the Director General.

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Director General‘s office, assisted by other officers, is the executive body which deals

out the incidences of anti-competition actions and takes them to the Commission for

adjudication.

The procedure to be followed by the commission in anti-preventive agreements and

abuse by dominant enterprises is common.

Under Sec 19, the commission makes an inquiry into an alleged anti competition

agreement under Sec 3 or an abuse of dominant position under Sec 4.

Incidence can be brought to the notice by:

The Commission

Any person(informant), consumer association or trade association

The central government, State Government or a statutory authority.

Figure 1: Procedure

7.6 AGREEMENT AMONG ENTERPRISES

Firms are free to enter into agreements with each other. Every agreement binds one party and

imposes restrictions on the other. Without these mutual restrictions, no exchange would be

possible. Some agreements, however, have the potential of restricting or distorting

competition in a segment of the economy. Such agreements can be in writing, oral, informal

or even an arrangement. Agreements can be of two kinds, horizontal and vertical.

Horizontal agreements are between two or more enterprises, in the same market, which are

at the same stage of the production chain.

For example, an agreement between two airlines operating in domestic routes would be a

horizontal agreement.

Commission directs the DG to investigate.

DG submit the report within a specified time period

Issue notice

Consideration of objections and suggestions

Pass order

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Some kinds of horizontal agreements are taken to be inherently anti-competition.

Purchase or sale price

Production or investments

Collusive tenders

Territory, type or size.

Vertical agreements are agreements between enterprises that are at different stages or levels

of the production chain.

For example, an agreement between a manufacturer and a distributor:

Tie in arrangements

Exclusive supply agreements etc

Vertical agreements can also strengthen the capability of the production chain and thus, foster

competition. For example, a manufacturer may insist that a distributor deals only with him.

7.7 PROHIBITION OF AGREEMENTS ANTI-COMPETITIVE AGREEMENTS

Section 3 prohibits anti-competitive agreements among enterprises. An abridged version of

the section is as follows:

1) No enterprise or association of enterprises or person or association of persons shall

enter into any agreement in respect of production, supply, distribution, storage,

acquisition or control of goods or provision of services, which causes or is likely to

cause an appreciable adverse effect on competition within India.

2) Any agreement entered into in contravention of the provisions contained in Sub-

section (1) shall be void.

3) Any agreement entered into between enterprises or associations of enterprises or

persons or associations of persons or between any person and enterprise or practice

carried on, or decision taken by, any association of enterprises or association of

persons, including cartels, engaged in identical or similar trade of goods or provision

of services, which—

a) directly or indirectly determines purchase or sale prices;

b) limits or controls production, supply, markets, technical development, investment

or provision of services;

c) shares the market or source of production or provision of services by way of

allocation of geographical area of market, or type of goods or services, or number

of customers in the market or any other similar way;

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d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed

to have an appreciable adverse effect on competition:

Provided that nothing contained in this sub-section shall apply to any agreement entered into

by way of joint ventures if such agreement increases efficiency in production, supply,

distribution, storage, acquisition or control of goods or provision of services.

4) Any agreement amongst enterprises or persons at different stages or levels of the

production chain in different markets, in respect of production, supply, distribution,

storage, sale or price of, or trade in goods or provision of services, including a—

a) tie-in arrangement;

b) exclusive supply agreement;

c) exclusive distribution agreement;

d) refusal to deal;

e) resale price maintenance,

shall be an agreement in contravention of Sub-section (1) if such agreement causes or is

likely to cause an appreciable adverse effect on competition in India. ...

7.8 ADVERSE EFFECT ON COMPETITION WITH REFERENCE TO THE

RELEVANT MARKET

Section 19(5) provides the factors to be taken into account while determining the relevant

market. A relevant market can be determined on the basis of the ‗relevant geographic market'‘ and the ‗relevant product market‘. Section 19(5) states:

For determining whether a market constitutes a "relevant market" for the purposes of this

Act, the Commission shall have due regard to the "relevant geographic market'' and "relevant

product market". The Commission shall, while determining the "relevant geographic market",

have due regard to all or any of the following factors, namely:—

a) regulatory trade barriers;

b) local specification requirements;

c) national procurement policies;

d) adequate distribution facilities;

e) transport costs;

f) language;

g) consumer preferences;

h) Need for secure or regular supplies or rapid after-sales services.

The Commission shall, while determining the "relevant product market", have due regard to

all or any of the following factors, namely:—

a) physical characteristics or end-use of goods;

b) price of goods or service;

c) consumer preferences;

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d) exclusion of in-house production;

e) existence of specialized producers;

f) Classification of industrial products.

Factors to be considered while deciding whether an agreement would have an

appreciable adverse effect on competition

Section 19(3) has provided the factors that are to be taken into account while deciding

whether an agreement would have an appreciable adverse effect on competition. It reads:

The Commission shall, while determining whether an agreement has an appreciable adverse

effect on competition under section 3, have due regard to all or any of the following factors,

namely:—

a) creation of barriers to new entrants in the market;

b) driving existing competitors out of the market;

c) foreclosure of competition by hindering entry into the market;

d) accrual of benefits to consumers;

e) improvements in production or distribution of goods or provision of services;

f) Promotion of technical, scientific and economic development by means of production

or distribution of goods or provision of services.

7.9 ABUSE OF DOMINANCE

A firm can acquire a dominant position in a relevant market and act independently of the

competition and the competitors.

Being a dominant organisation per se, is not bad or objectionable. What is objectionable is

the abuse of the position of dominance.

Higher prices and restrict quality of products

Barriers for competitors

Predatory price

7.10 PROHIBITS ABUSE BY ENTERPRISES IN DOMINANT POSITIONS

(SECTION 4)

(1) No enterprise or group shall abuse its dominant position.

(2) There shall be an abuse of dominant position under sub-section (1), if an enterprise or a

group —-

(a) Directly or indirectly, imposes unfair or discriminatory—

(i) Condition in purchase or sale of goods or service; or

(ii) Price in purchase or sale (including predatory price) of goods or service.

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Explanation— For the purposes of this clause, the unfair or discriminatory condition in

purchase or sale of goods or service referred to in sub-clause (i) and unfair or discriminatory

price in purchase or sale of goods (including predatory price) or service referred to in sub-

clause (ii) shall not include such discriminatory condition or price which may be adopted to

meet the competition; or

(b) Limits or restricts—

(i) Production of goods or provision of services or market therefore; or

(ii) Technical or scientific development relating to goods or services to the prejudice

of consumers; or

(c) Indulges in practice or practices resulting in denial of market access in any manner; or

(d) Makes conclusion of contracts subject to acceptance by other parties of supplementary

obligations which, by their nature or according to commercial usage, have no connection with

the subject of such contracts; or

(e) Uses its dominant position in one relevant market to enter into, or protect, another

relevant market.

Explanation—for the purposes of this section, the expression—

(a) "Dominant position" means a position of strength, enjoyed by an enterprise, in the

relevant market, in India, which enables it to—

(i) Operate independently of competitive forces prevailing in the relevant market; or

(ii) Affect its competitors or consumers or the relevant market in its favour.

(b) "predatory price" means the sale of goods or provision of services, at a. price which is

below the cost, as may be determined by regulations, of production of the goods or provision

of services, with a view to reduce competition or eliminate the competitors.

(c)―Group‖ shall have the same meaning as assigned to it in clause (b) of the Explanation to section 5.

―Group‖ means two or more enterprises which, directly or indirectly, are in a position to —

(i) Exercise twenty-six per cent or more of the voting rights in the other enterprise; or

(ii) Appoint more than fifty per cent of the members of the board of directors in the

other enterprise; or

(iii) Control the management or affairs of the other enterprise;

Factors that the commission should take into account in deciding whether the enterprise

enjoys a dominant position [Section 19 (4)]

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The Commission shall, while inquiring whether an enterprise enjoys a dominant position or

not under section 4, have due regard to all or any of the following factors, namely:—

a) market share of the enterprise;

b) size and resources of the enterprise;

c) size and importance of the competitors;

d) economic power of the enterprise including commercial advantages over competitors;

e) vertical integration of the enterprises or sale or service network of such enterprises;

f) dependence of consumers on the enterprise;

g) monopoly or dominant position whether acquired as a result of any statute or by virtue

of being a Government company or a public sector undertaking or otherwise;

h) entry barriers including barriers such as regulatory barriers, financial risk, high capital

cost of entry, marketing entry barriers, technical entry barriers, economies of scale,

high cost of substitutable goods or service for consumers;

i) countervailing buying power;

j) market structure and size of market;

k) social obligations and social costs;

l) relative advantage, by way of the contribution to the economic development, by the

enterprise enjoying a dominant position having or likely to have an appreciable

adverse effect on competition;

m) any other factor which the Commission may consider relevant for the inquiry

7.11 REGULATION OF COMBINATIONS

The acquisition of one or more enterprises by one or more persons or merger or

amalgamation of enterprises shall be a combination of such enterprises and persons or

enterprises, if—

A. any acquisition where—

i. the parties to the acquisition, being the acquirer and the enterprise, whose control,

shares, voting rights or assets have been acquired or are being acquired jointly

have,—

a) either, in India, the assets of the value of more than rupees on thousand Crore

or turnover more than rupees three thousand Crore; or

b) in India or outside India, in aggregate, the assets of the value of more than five

hundred million US dollars, including at least rupees five hundred Crore in

India, or turnover more than fifteen hundred million US dollars, including at

least rupees fifteen hundred Crore in India; or

ii. the group, to which the enterprise whose control, shares, assets or voting rights

have been acquired or are being acquired, would belong after the acquisition,

jointly have or would jointly have,—

a) either in India, the assets of the value of more than rupees four thousand Crore

or turnover more than rupees twelve thousand crores; or

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b) in India or outside India, in aggregate, the assets of the value of more than two

billion US dollars, including at least rupees five hundred Crore in India, or

turnover more than six billion US dollars, including at least rupees fifteen

hundred Crore in India; or

B. acquiring of control by a person over an enterprise when such person has already direct or

indirect control over another enterprise engaged in production, distribution or trading of a

similar or identical or substitutable goods or provision of a similar or identical or

substitutable service, if—

i. the enterprise over which control has been acquired along with the enterprise over

which the acquirer already has direct or indirect control jointly have,—

a) either in India, the assets of the value of more than rupees one thousand Crore

or turnover more than rupees three thousand Crore; or

b) in India or outside India, in aggregate, the assets of the value of more than five

hundred million US dollars, including at least rupees five hundred Crore in

India, or turnover more than fifteen hundred million US dollars, including at

least rupees fifteen hundred Crore in India; or

ii. the group, to which enterprise whose control has been acquired, or is being

acquired, would belong after the acquisition, jointly have or would jointly have,—

a) either in India, the assets of the value of more than rupees four thou sand

Crore or turnover more than rupees twelve thousand Crore or

b) in India or outside India, in aggregate, the assets of the value of more than two

billion US dollars, including at least rupees five hundred Crore in India, or

turnover more than six billion US dollars, including at least rupees fifteen

hundred Crore in India; or]

C. any merger or amalgamation in which—

i. the enterprise remaining after merger or the enterprise created as a result of the

amalgamation, as the case may be, have,—

a) either in India, the assets of the value of more than rupees one thou sand Crore

or turnover more than rupees three thousand Crore; or

b) in India or outside India, in aggregate, the assets of the value of more than five

hundred million US dollars, including at least rupees five hundred Crore in

India, or turnover more than fifteen hundred million US dollars, including at

least rupees fifteen hundred Crore in India; or

D. the group, to which the enterprise remaining after the merger or the enterprise created as a

result of the amalgamation, would belong after the merger or the amalgamation, as the

case may be, have or would have,—

a. either in India, the assets of the value of more than rupees four-thou sand Crore

or turnover more than rupees twelve thousand Crore; or

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b. in India or outside India, in aggregate, the assets of the value of more than two

billion US dollars, including at least rupees five hundred Crore in India, or

turnover more than six billion US dollars, including at least rupees Fifteen

Hundred Crore in India

Explanation— for the purposes of this section,—

a) ―control‖ includes controlling the affairs or management by—

i. one or more enterprises, either jointly or singly, over another enterprise or

group;

ii. one or more groups, either jointly or singly, over another group or enterprise;

b) ―group‖ means two or more enterprises which, directly or indirectly, are in a position to —

i. exercise twenty-six per cent or more of the voting rights in the other

enterprise; or

ii. appoint more than fifty per cent of the members of the board of directors in

the other enterprise; or

iii. control the management or affairs of the other enterprise;

c) the value of assets shall be determined by taking the book value of the assets as

shown, in the audited books of account of the enterprise, in the financial year

immediately preceding the financial year in which the date of proposed merger falls,

as reduced by any depreciation, and the value of assets shall include the brand value,

value of goodwill, or value of copyright, patent, permitted use, collective mark,

registered proprietor, registered trade mark, registered user, homonymous

geographical indication, geographical indications, design or layout- design or similar

other commercial rights, if any, referred to in sub-section (5) of section 3.

Regulation of combinations (Section 6)

(1) No person or enterprise shall enter into a combination which causes or is likely to cause

an appreciable adverse effect on competition within the relevant market in India and such a

combination shall be void.

(2) Subject to the provisions contained in sub-section (1), any person or enterprise, who or

which proposes to enter into a combination, 13 [shall] give notice to the Commission, in the

form as may be specified, and the fee which may be determined, by regulations, disclosing

the details of the proposed combination, within14 [thirty days] of—

(a) approval of the proposal relating to merger or amalgamation, referred to in clause

(c) of section 5, by the board of directors of the enterprises concerned with such

merger or amalgamation, as the case may be;

(b) Execution of any agreement or other document for acquisition referred to in clause

(a) of section 5 or acquiring of control referred to in clause (b) of that section.

15[(2A)No combination shall come into effect until two hundred and ten days have

passed from the day on which the notice has been given to the Commission under

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sub-section(2) or the Commission has passed orders under section 31, whichever is

earlier.]

(3) The Commission shall, after receipt of notice under sub-section (2), deal with such notice

in accordance with the provisions contained in sections 29, 30 and 31.

(4) The provisions of this section shall not apply to share subscription or financing facility or

any acquisition, by a public financial institution, foreign institutional investor, bank or

venture capital fund, pursuant to any covenant of a loan agreement or investment agreement.

(5) The public financial institution, foreign institutional investor, bank or venture capital

fund, referred to in sub-section (4), shall, within seven days from the date of the acquisition,

file, in the form as may be specified by regulations, with the Commission the details of the

acquisition including the details of control, the circumstances for exercise of such control and

the consequences of default arising out of such loan agreement or investment agreement, as

the case may be.

Explanation—for the purposes of this section, the expression—

(a) ―Foreign institutional investor‖ has the same meaning as assigned to it in clause (a) of the Explanation to section 115AD of the Income-tax Act, 1961(43 of 1961);

(b) ―Venture capital fund‖ has the same meaning as assigned to it in clause (b) of the Explanation to clause (23 FB) of section 10 of the Income-tax Act, 1961(43 of 1961);

7.12 COMPETITION COMMISSION OF INDIA

Establishment of Commission

(1) With effect from such date as the Central Government may, by notification, appoint, there

shall be established, for the purposes of this Act, a Commission to be called the ―Competition Commission of India‖.

(2) The Commission shall be a body corporate by the name aforesaid having perpetual

succession and a common seal with power, subject to the provisions of this Act, to acquire,

hold and dispose of property, both movable and immovable, and to contract and shall, by the

said name, sue or be sued.

(3) The head office of the Commission shall be at such place as the Government may decide

from time to time.

(4) The Commission may establish offices at other places in India.

Composition of Commission

(1) The Commission shall consist of a Chairperson and not less than two and not more than

six other Members to be appointed by the Central Government.

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(2) The Chairperson and every other Member shall be a person of ability, integrity and

standing and who has special knowledge of, and such professional experience of not less than

fifteen years in, international trade, economics, business, commerce, law, finance,

accountancy, management, industry, public affairs or competition matters, including

competition law and policy, which in the opinion of the Central Government, may be useful

to the Commission.

(3) The Chairperson and other Members shall be whole-time Members.]

Selection Committee for Chairperson and Members of Commission

(1) The Chairperson and other Members of the Commission shall be appointed by the

Central Government from a panel of names recommended by a Selection Committee

consisting of –

a. The Chief Justice of India or his nominee - Chairperson

b. The Secretary in the Ministry of Corporate Affairs - Member

c. The Secretary in the Ministry of Law and Justice - Member

d. Two experts of repute who have special knowledge of, and professional

experience in international trade, economics, business, commerce, law,

finance, accountancy, management, industry, public affairs or competition

matters including competition law and policy

(2) the term of the Selection Committee and the manner of selection of panel of names shall

be such as may be prescribed.]

Term of office of Chairperson and other Members

1) The Chairperson and every other Member shall hold office as such for a term of five

years from the date on which he enters upon his office and shall be eligible for re-

appointment:

2) Provided that the Chairperson or other Members shall not hold office as such after he

has attained the age of sixty-five years

3) A vacancy caused by the resignation or removal of the Chairperson or any other

Member under section 11 or by death or otherwise shall be filled by fresh

appointment in accordance with the provisions of sections 9.

4) The Chairperson and every other Member shall, before entering upon his office, make

and subscribe to an oath of office and of secrecy in such form, manner and before

such authority, as may be prescribed.

5) In the event of the occurrence of a vacancy in the office of the Chairperson by reason

of his death, resignation or otherwise, the senior- most Member shall act as the

Chairperson, until the date on which a new Chairperson, appointed in accordance with

the provisions of this Act to fill such vacancy, enters upon his office.

6) When the Chairperson is unable to discharge his functions owing to absence, illness

or any other cause, the senior-most Member shall discharge the functions of the

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Chairperson until the date on which the Chairperson resumes the charge of his

functions.

Administrative powers of Chairperson

The Chairperson shall have the powers of general superintendence, direction and control in

respect of all administrative matters of the Commission:

Provided that the Chairperson may delegate such of his powers relating to administrative

matters of the Commission, as he may think fit, to any other Member or officer of the

Commission.‖

Salary and allowances and other terms and conditions of service of Chairperson and other

Members

1) The salary, and the other terms and conditions of service, of the Chairperson and

other Members, including travelling expenses, house rent allowance and conveyance

facilities, sumptuary allowance and medical facilities shall be such as may be

prescribed.

2) The salary, allowances and other terms and conditions of service of the Chairperson

or a Member shall not be varied to his disadvantage after appointment. Vacancy, etc.

not to invalidate proceedings of Commission

No act or proceeding of the Commission shall be invalid merely by reason of—

a. any vacancy in, or any defect in the constitution of, the Commission; or

b. any defect in the appointment of a person acting as a Chairperson or as a Member or

c. any irregularity in the procedure of the Commission not affecting the merits of the

case.

Duties, Powers and Functions of Commission

Duties of Commission

Subject to the provisions of this Act, it shall be the duty of the Commission to eliminate

practices having adverse effect on competition, promote and sustain competition, protect the

interests of consumers and ensure freedom of trade carried on by other participants, in

markets in India:

Provided that the Commission may, for the purpose of discharging its duties or performing its

functions under this Act, enter into any memorandum or arrangement with the prior approval

of the Central Government, with any agency of any foreign country.

Inquiry into certain agreements and dominant position of enterprise

(1) The Commission may inquire into any alleged contravention of the provisions contained

in subsection (1) of section 3 or sub-section (1) of section 4 either on its own motion or on—

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(a) receipt of any information, in such manner and accompanied by such fee as may

be determined by regulations, from any person, consumer or their association or trade

association; or

(b) a reference made to it by the Central Government or a State Government or a

statutory authority.

(2) Without prejudice to the provisions contained in sub-section (1), the powers and

functions of the Commission shall include the powers and functions specified in sub-sections

(3) to (7).

(3) The Commission shall, while determining whether an agreement has an appreciable

adverse effect on competition under section 3, have due regard to all or any of the following

factors, namely:—

a. creation of barriers to new entrants in the market;

b. driving existing competitors out of the market;

c. foreclosure of competition by hindering entry into the market;

d. accrual of benefits to consumers;

e. improvements in production or distribution of goods or provision of services; or

f. promotion of technical, scientific and economic development by means of production

or distribution of goods or provision of services.

(4) The Commission shall, while inquiring whether an enterprise enjoys a dominant position

or not under section 4, have due regard to all or any of the following factors, namely:—

a) market share of the enterprise;

b) size and resources of the enterprise;

c) size and importance of the competitors;

d) economic power of the enterprise including commercial advantages over competitors;

e) vertical integration of the enterprises or sale or service network of such enterprises;

f) dependence of consumers on the enterprise;

g) monopoly or dominant position whether acquired as a result of any statute or by virtue

of being a Government company or a public sector undertaking or otherwise;

h) entry barriers including barriers such as regulatory barriers, financial risk, high capital

cost of entry, marketing entry barriers, technical entry barriers, economies of scale,

high cost of substitutable goods or service for consumers;

i) countervailing buying power;

j) market structure and size of market;

k) social obligations and social costs;

l) relative advantage, by way of the contribution to the economic development, by the

enterprise enjoying a dominant position having or likely to have an appreciable

adverse effect on competition;

m) any other factor which the Commission may consider relevant for the inquiry.

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(5) For determining whether a market constitutes a ―relevant market‖ for the purposes of this Act, the Commission shall have due regard to the ―relevant geographic market‘‘ and ―relevant product market‖.

(6) The Commission shall, while determining the ―relevant geographic market‖, have due regard to all or any of the following factors, namely:—

a) regulatory trade barriers;

b) local specification requirements;

c) national procurement policies;

d) adequate distribution facilities;

e) transport costs;

f) language;

g) consumer preferences;

h) need for secure or regular supplies or rapid after-sales services.

(7) The Commission shall, while determining the ―relevant product market‖, have due regard to all or any of the following factors, namely:—

a) physical characteristics or end-use of goods;

b) price of goods or service

c) consumer preferences;

d) exclusion of in-house production;

e) existence of specialised producers;

f) classification of industrial products

7.13 PENALTIES

Contravention of orders of Commission

1) The Commission may cause an inquiry to be made into compliance of its orders or

directions made in exercise of its powers under the Act.

2) If any person, without reasonable clause, fails to comply with the orders or directions

of the Commission issued under sections 27, 28, 31, 32, 33, 42A and 43A of the Act,

he shall be punishable with fine which may extend to rupees one lakh for each day

during which such non-compliance occurs, subject to a maximum of rupees ten Crore,

as the Commission may determine.

3) If any person does not comply with the orders or directions issued, or fails to pay the

fine imposed under sub-section (2), he shall, without prejudice to any proceeding

under section 39, be punishable with imprisonment for a term which may extend to

three years, or with fine which may extend to rupees twenty-five Crore, or with both,

as the Chief Metropolitan Magistrate, Delhi may deem fit:

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Provided that the Chief Metropolitan Magistrate, Delhi shall not take cognizance of

any offence under this section save on a complaint filed by the Commission or any of

its officers authorized by it.

Compensation in case of contravention of orders of Commission

Without prejudice to the provisions of this Act, any person may make an application to the

Appellate Tribunal for an order for the recovery of compensation from any enterprise for any

loss or damage shown to have been suffered, by such person as a result of the said enterprise

violating directions issued by the Commission or contravening, without any reasonable

ground, any decision or order of the Commission issued under sections27, 28, 31, 32 and 33

or any condition or restriction subject to which any approval, sanction, direction or

exemption in relation to any matter has been accorded, given, made or granted under this Act

or delaying in carrying out such orders or directions of the Commission.

Penalty for failure to comply with directions of Commission and Director General

If any person fails to comply, without reasonable cause, with a direction given by—

a) the Commission under sub-sections (2) and (4) of section 36; or

b) the Director General while exercising powers referred to in sub-section (2)of section

41,such person shall be punishable with fine which may extend to rupees one lakh for

each day during which such failure continues subject to a maximum of rupees one

Crore, as may be determined by the Commission.

Power to impose penalty for non-furnishing of information on combinations

If any person or enterprise who fails to give notice to the Commission under sub- section(2)

of section 6, the Commission shall impose on such person or enterprise a penalty which may

extend to one per cent, of the total turnover or the assets, whichever is higher, of such a

combination.

Penalty for making false statement or omission to furnish material information

If any person, being a party to a combination,—

a. makes a statement which is false in any material particular, or knowing it to be false;

or

b. Omits to state any material particular knowing it to be material, such person shall be

liable to a penalty which shall not be less than rupees fifty lakh but which may extend

to rupees one Crore, as may be determined by the Commission.

Penalty for offences in relation to furnishing of information

(1) Without prejudice to the provisions of section 44, if a person, who furnishes or is

required to furnish under this Act any particulars, documents or any information,—

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a) makes any statement or furnishes any document which he knows or has reason to

believe to be false in any material particular; or

b) omits to state any material fact knowing it to be material; or

c) Wilfully alters, suppresses or destroys any document which is required to be furnished

as aforesaid, such person shall be punishable with fine which may extend to rupees

one Crore as may be determined by the Commission.

(2) Without prejudice to the provisions of sub-section (1), the Commission may also pass

such other order as it deems fit.

Power to impose lesser penalty

The Commission may, if it is satisfied that any producer, seller, distributor, trader or service

provider included in any cartel, which is alleged to have violated section 3, has made a full

and true disclosure in respect of the alleged violations and such disclosure is vital, impose

upon such producer, seller, distributor, trader or service provider a lesser penalty as it may

deem fit, than leviable under this Act or the rules or the regulations:

Provided that lesser penalty shall not be imposed by the Commission in cases where the

report of investigation directed under section 26 has been received before making of such

disclosure.

Provided further that lesser penalty shall be imposed by the Commission only in respect of a

producer, seller, distributor, trader or service provider included in the cartel, who has made

the full, true and vital disclosures under this section.

7.4 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

1. A merger of large enterprises has to be approved by the competition commission.

2. Being a dominant enterprise is anti- competitive.

3. Any contract which limits a party from freely competing in the economy is void.

4. An enterprise is dominant if it has more than 75% market share.

5. Vertical agreements are necessarily anti-competition.

6. Only a contracting party can file a complaint before the Competition Commission.

7. Agreements among enterprises that are anti- Competition are void.

8. Horizontal agreements are necessarily anti- Competition.

9. An enterprise is dominant if it can operate independently of its competitors.

10. Harsh terms set by a stronger party to a contract, is abuse of dominant position.

2. Long Answer Questions

Q1. Elaborate on the following provisions of the Competition Act, 2002:

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i. Prohibition of anti-competitive agreement

ii. Prohibition of abuse of dominant position

iii. Regulation of combinations

Q2. Discuss the establishment, composition, appointment and terms of the Chair-person

and other members of Competition Commission of India.

Q3. Discuss the procedure for enquiry under Section 19 of the Competition Act, 2002.

Q4. Describe the power of the Competition Commission concerning the division of an

enterprise enjoying dominant position.

Q5. Express the penalty which can be imposed upon a person by the Competition

Commission for

i. Contravention of the orders of the Commission;

ii. Failure to comply with the directions of Commission and Director General and

iii. Making false statements, or omission to furnish material information.

SUGGESTED READINGS

1) Albuquerque, D. (2016). Legal Aspects of Business Text, Jurisprudence and Cases.

New Delhi: Oxford University Press.

2) Bare Act of Competition Commission Act, 2002

3) www.cci.gov.in

4) www.economicsdiscussion.net/essays/essay-on-the-competition-act-2002/19158

5) www.cci.gov.in/sites/default/files/whats_newdocument/The%20Competition%20Act

%2C%202002%20No.%2012%20of%202003.pdf

6) Pathak, A. (2014). Legal Aspects of Business. New Delhi: Mc Graw Hill Education.

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LESSON 8

ADVERTISEMENT AND UNFAIR TRADE PRACTICES

8 STRUCTURE

8.1 Advertising: A fundamental Right

8.2 Constitutional Framework 8.3 Unfair Trade Practice

8.4 Laws Imposing Restrictions on Advertising

8.5 Commercial Advertisement

8.6 Curtailment of the Advertisements

8.7 Advertisement and Freedom of Speech

8.8 Misleading & Surrogate Advertising

8.9 Advertising Regulation in India

8.10 Self-Assessment Questions

8.1 ADVERTISING: A FUNDAMENTAL RIGHT (Sayam, 2016)

The Supreme Court of India has held that advertisements, regarded as commercial speech,

form part of the fundamental right to freedom of speech and expression recognized under

Article 19(1)(a) of the Constitution of India. As advertising is one of the elements of the right

to information, it facilitates the dissemination of information about sellers and their products.

With respect to advertising, the Ministry of Information and Broadcasting is the wing of the

Government of India which broadly deals with content regulation in television and radio. In

2008, it set up the Electronic Media Monitoring Centre with a view to monitor content on

television and report violation of its Programme and Advertising Code.

At present, the Advertising Standards Council of India (ASCI) is the foremost body for the

regulation of advertisements in India. It promotes self-regulation in advertising, ensuring the

protection of the interests of consumers. One of the most important features of this body is its

Consumer Complaints Council (CCC).

Legislations such as the Consumer Protection Act, 1986, the Indecent Representation of

Women (Prohibition) Act, 1986, the Food Safety and Standards Act, 2006, the Drugs and

Cosmetics Act, 1940 and many others relating to the content and ethics of advertisements

have been enacted. The author is of the opinion that the current quality of the average

advertisement whether in print, on television, radio or other electronic media, is not up to the

mark and this in turn makes us question the regulatory framework that the said bodies and

legislations provide. This framework needs to be examined at length to gauge its impact.

However, in order to understand advertising in India, it is pertinent to first identify where the

groundwork for such advertisements lies.

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8.2 CONSTITUTIONAL FRAMEWORK

In Tata Press Limited v. Mahanagar Telephone Nigam Limited, the Apex Court has given

recognition to advertisements under Article 19(1) (a) of the Constitution in the following

manner:

“Advertising which is no more than a commercial transaction is nonetheless dissemination of

information regarding the product advertised. Public at large is benefitted by the information

made available through the advertisement. In a democratic economy free flow of commercial

information is indispensable. There cannot be honest and economical marketing by the public

at large without being educated by the information disseminated through advertisements. The

economic system in a democracy would be handicapped without there being freedom of

„commercial speech‟.”

The Constitution itself lays down in Article 19(2) the restrictions which can be imposed on

the fundamental right guaranteed under Article 19(1) (a) of the Constitution. The

―commercial speech‖ which is deceptive, unfair, misleading and untruthful would be hit by

Article 19(2) of the Constitution and can be regulated or prohibited by the State.

The Apex Court in Hamdard Dawakhana v. Union of India dealt with advertising of

prohibited drugs and commodities. The Court came to the conclusion that the sale of

prohibited drugs was not in the interest of the general public and as such could not be

―speech‖ within the meaning of freedom of speech and expression under Article 19(1) (a) of the Constitution. The Court further held that an advertisement is no doubt a form of speech

but its true character is reflected by the object for the promotion of which it is employed.

The Hamdard Dawakhana case was considered by the Supreme Court in Indian Express

Newspapers (Bombay) Private Limited & Others v. Union of India & Others. The combined

reading of both cases led the Court in the Tata Press case to conclude that ―commercial speech‖ cannot be denied the protection of Article 19(1) (a) of the Constitution merely because the same is issued by businessmen.

Advertising is considered to be the cornerstone of our economic system. Low prices for

consumers are dependent upon mass production, mass production is dependent upon volume

sales, and volume sales are dependent upon advertising. Apart from the lifeline of the free

economy in a democratic country, advertising can be viewed as the life blood of free media,

paying most of the costs and thus making the media widely available. The newspaper

industry obtains sixty to eighty per cent of its revenue from advertising. Advertising pays a

large portion of the costs of supplying the public with newspaper. For a democratic press the

advertising ―subsidy‖ is crucial. Without advertising, the resources available for expenditure on the ―news‖ would decline, which may lead to an erosion of quality and quantity. The cost

of the ―news‖ to the public would increase, thereby restricting its ―democratic‖ availability.

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Further, the Apex Court has laid down that, ―A restraint on the number of pages, a restraint on circulation and a restraint on advertisements would affect the fundamental rights under

Article 19(1) (a) on the aspects of propagation, publication and circulation.‖

The Constitution, being the law of the land, interpreted as seen above, provides the basic

foundation to understanding advertisements and their accountability. Where, to advertise is a

fundamental right under Article 19(1)(a), advertising in an obnoxious, irresponsible and

misleading manner may be reasonably restrained under Article 19(2).

8.3 UNFAIR TRADE PRACTICE

Definition of Unfair Trade Practice under Consumer Protection Act, 1986

Section 2(1) (r) of Consumer Protection Act, 1986 also defines the term ‗unfair trade practice‘. It reads:

"unfair trade practice" means a trade practice which, for the purpose of promoting the sale,

use or supply of any goods or for the provision of any service, adopts any unfair method or

unfair or deceptive practice including any of the following practices, namely;—

(1) The practice of making any statement, whether orally or in writing or by visible

representation which,—

i. falsely represents that the goods are of a particular standard, quality, quantity,

grade, composition, style or model;

ii. falsely represents that the services are of a particular standard, quality or

grade;

iii. falsely represents any re-built, second-hand, reno­vated, reconditioned or old

goods as new goods;

iv. represents that the goods or services have sponsor­ship, approval,

performance, characteristics, accesso­ries, uses or benefits which such goods

or services do not have;

v. represents that the seller or the supplier has a spon­sorship or approval or

affiliation which such seller or supplier does not have;

vi. makes a false or misleading representation concern­ing the need for, or the

usefulness of, any goods or services;

vii. gives to the public any warranty or guarantee of the performance, efficacy or

length of life of a product or of any goods that is not based on an adequate or

proper test thereof;

viii. Provided that where a defence is raised to the effect that such warranty or

guarantee is based on adequate or proper test, the burden of proof of such

defence shall lie on the person raising such defence;

ix. makes to the public a representation in a form that purports to be—

(a) a warranty or guarantee of a product or of any goods or services; or

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(b) a promise to replace, maintain or repair an article or any part thereof or to

repeat or continue a service until it has achieved a specified result, if such

purported warranty or guarantee or prom­ise is materially misleading or if

there is no reasonable prospect that such warranty, guaran­tee or promise will

be carried out;

x. materially misleads the public concerning the price at which a product or like

products or goods or services, have been or are, ordinarily sold or provided,

and, for this purpose, a representation as to price shall be deemed to refer to

the price at which the product or goods or services has or have been sold by

sellers or provided by suppliers generally in the relevant market unless it is

clearly specified to be the price at which the product has been sold or services

have been provided by the person by whom or on whose behalf the

representation is made;

xi. Gives false or misleading facts disparaging the goods, services or trade of

another person.

Explanation - For the purposes of clause (1), a statement that is—

(a) Expressed on an article offered or displayed for sale, or on its wrapper or

container; or

(b) expressed on anything attached to, inserted in, or accompanying, an article offered

or displayed for sale, or on anything on which the article is mounted for display or

sale; or

(c) contained in or on anything that is sold, sent, delivered, transmit­ted or in any

other manner whatsoever made available to a member of the public, shall be deemed

to be a statement made to the public by, and only by, the person who had caused the

statement to be so expressed, made or contained;

(2) permits the publication of any advertisement whether in any news­paper or otherwise, for

the sale or supply at a bargain price, of goods or services that are not intended to be offered

for sale or supply at the bargain price, or for a period that is, and in quantities that are,

reasonable, having regard to the nature of the market in which the business is carried on, the

nature and size of business, and the nature of the advertisement.

Explanation —For the purpose of clause (2), "bargaining price" means—

(a) A price that is stated in any advertisement to be a bargain price, by reference to an

ordinary price or otherwise, or

(b) A price that a person who reads, hears or sees the advertisement, would reasonably

understand to be a bargain price having regard to the prices at which the product

advertised or like products are ordinarily sold;

(3) permits—

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(a) the offering of gifts, prizes or other items with the intention of not providing them

as offered or creating impression that something is being given or offered free of

charge when it is fully or partly covered by the amount charged in the transaction as a

whole;

(b) the conduct of any contest, lottery, game of chance or skill, for the purpose of

promoting, directly or indirectly, the sale, use or supply of any product or any

business interest;

(3A) withholding from the participants of any scheme offering gifts, prizes or other

items free of charge, on its closure the information about final results of the scheme.

Explanation — For the purposes of this sub-clause, the participants of a scheme shall

be deemed to have been informed of the final results of the scheme where such results

are within a reasonable time, published, prominently in the same newspapers in which

the scheme was originally advertised;

(4) permits the sale or supply of goods intended to be used, or are of a kind likely to be used,

by consumers, knowing or having reason to believe that the goods do not comply with the

standards prescribed by competent authority relating to performance, composition, contents,

design, constructions, fin­ishing or packaging as are necessary to prevent or reduce the risk of

injury to the person using the goods;

(5) permits the hoarding or destruction of goods, or refuses to sell the goods or to make them

available for sale or to provide any service, if such hoarding or destruction or refusal raises or

tends to raise or is intended to raise, the cost of those or other similar goods or services.

(6) Manufacture of spurious goods or offering such goods for sale or adopts deceptive

practices in the provision of services.

8.4 LAWS IMPOSING RESTRICTIONS ON ADVERTISING (Tripti, 2018)

Following are the laws imposing restrictions on advertisements in India:

1. Consumer Protection Act- This statute provides for the establishment of a Central

Consumer Protection Council with the object of promotion and protection of the

rights of the consumer, including protection against unfair trade practices. The Act

also empowers the District Forum to take measures to discontinue the unfair trade

practices. The Forum also has the power to issue corrective advertisements to

neutralize the effect of a misleading advertisement. India does have other legislations

that regulate unfair trade practices, in addition to the Consumer Protection Act.

2. The Monopolies and Restrictive Trade Practice act, 1969: It had been the most

effective Act in the eighties and nineties to regulate undesirable advertising. In the

year 1984, the government brought, through an amendment, "unfair trade practices"

under the purview of the MRTP Commission and the Office of the Director General

(Investigation and Registration). However, this Act is being replaced by the

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Competition Act, 2002 but the cases pending under the MRTP Commission are still

being heard. Moreover, a Competition Commission has been set up under the

Competition Act to deal with monopolies and restrictive trade practices. The

complaints pertaining to unfair trade practices are still being handled by the MRTP

Commission or the consumer courts. The MRTP Act has been very effective in

hauling a number of advertisers to stop advertisements which are prejudicial to

consumer interest through its 'cease and desist orders'.

3. Information Technology Act, 2000 (IT Act) -The IT Act makes the publication and

transmission in electronic form of material which is lascivious or appeals to the

prurient interest or it its effect is such as to tend to deprave and corrupt persons who

are likely, having regard to all relevant circumstances, to read, see or hear the matter

contained or embodied in it, punishable with imprisonment and fine. The IT Act

applies to any offence committed by any person outside India, if it involves a

computer, computer system or computer network located in India. The offences under

the IT Act are punishable with imprisonment and/or fine.

4. Indian Penal Code, 1860 (IPC) -The IPC makes it a punishable offence to advertise

any obscene publication or its distribution, sale, hire or circulation. It is also an

offence under IPC to publish advertisements relating to any lottery which is not a state

lottery or which is not authorized by the State Government. The IPC prohibits the

sale, distribution, public exhibition or circulation of any obscene book, pamphlet,

paper, drawing, painting, representation, figure or any other obscene object.

5. The Cigarettes and other Tobacco Products (Prohibition of Advertisement and

Regulation of Trade and Commerce, Production, Supply and Distribution) Act,

2003 (CTPA) - The CTPA prohibits advertisement of cigarettes and other tobacco

products which, directly or indirectly, suggest or promote the use or consumption of

cigarettes or any other tobacco products, by any person who is either engaged in the

production, supply or distribution of such products or by a person having control over

a medium who causes such advertisements to be advertised through that medium or

by a person who takes part in such advertisement.

6. The Drugs and Magic Remedies (Objectionable Advertisements) Act - This

statute prohibits advertisements of drugs for certain purposes and of treatment of

certain diseases and disorders. It also prohibits misleading advertisements relating to

drugs and advertisements of magical remedies for the treatment of certain diseases

and disorders. Under this Act, ―advertisement‖ includes any notice, circular, label, wrapper or other document and any announcement made orally or by means of

producing or transmitting light, sound or smoke.

7. The Emblems and Names (Prevention of Improper Use) Act, 1950- This statute

prohibits the use, for professional or commercial purposes, of select emblems and

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names of national or international significance. An advertiser who makes commercial

use of such emblems and names would be liable under this statute.

8. SEBI (Mutual Funds Regulation), 1996: SEBI Guidelines for Advertisements by

Mutual Funds - the Guidelines list out detailed requirements for advertisements by

Mutual Funds. The guidelines apply to all forms of advertisements, communications,

released in any form and through any media including websites. It defines an

―advertisement‖ as any material published or designed to be published on which a mutual fund has no control over the audience and which is broadly distributed.

9. The Prenatal Diagnostic Techniques (Regulation and Prevention of Misuse) Act,

1994: This statute prohibits advertisements relating to predetermination of sex.

10. The Transplantation of Human Organs Act, 1994: This statute makes it a

punishable offence to issue advertisements inviting persons to supply, for payment a

human organ.

8.5 COMMERCIAL ADVERTISEMENT (Tripti, 2018)

Hamdard Dawakhana (WAKF) LalKuan, Delhi vs. Union of India, [SCR 1960 (2) 671] -

The Court in this case dealt with advertising of prohibited drugs and commodities. The Court

was principally dealing with the right to advertise prohibited drugs, to prevent self-

medication and self-treatment. It is in no doubt true that some of the observations referred to

above go beyond the needs of the case and tend to affect the right to publish all commercial

advertisements. A Constitution Bench of this Court held that an advertisement is no doubt a

form of speech but its true character is reflected by the object for the promotion of which it is

employed. It assumes the attributes and elements of the activity under Article 19(1) which it

seeks to aid by bringing it to the notice of the public.

When it takes the form of a commercial advertisement which has an element of trade or

commerce it no longer falls within the concept of freedom of speech for the object is not

propagation of ideas social, political or economic or furtherance of literature or human

thought; but as in the present case the commendation of the efficacy, value and importance in

treatment of particular diseases by certain drugs and medicines. In such a case, advertisement

is a part of business and it was being used for the purpose of furthering the business of the

petitioners and had no relationship with what may be called the essential concept of the

freedom of speech. It cannot be said that the right to publish and distribute commercial

advertisements advertising an individual's personal business is a part of freedom of speech

guaranteed by the Constitution.

The Court came to the conclusion that the sale of prohibited drugs was not in the interest of

the general public and as such "could not be a speech" within the meaning of freedom of

speech and expression under Article 19(1) (a) of the Constitution. The Court further held in

the said case that an advertisement is no doubt a form of speech but its true character is

reflected by the object for the promotion of which it is employed.

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Hamdard Dawakhana's case was considered by this Court in Indian Express Newspapers

(Bombay) Private Ltd. & Ors etc. vs. Union of India, 1985(2) SCR 287 – herein, the

Parliament of India enacted a statute that was aimed at controlling advertisements of drugs in

some specified cases [Drugs and Magic Remedies (Objectionable Advertisements) Act

(1954)]. Purpose of the act was to prevent ‗objectionable‘ and' unethical‘ advertisements in order to discourage self-medication and self-treatment. The constitutionality of this Act was

challenged by the plaintiff on the grounds that it restricted his right to freedom of speech and

expression unfairly, in contravention of Arts19(1)(a) and Art 19(2) and also that it violated

his rights to carry on business because the restrictions were allegedly in contravention of Art

19(1)(g) .

The Judgment: The Bench that decided the case acknowledge that advertisement was no

doubt a form of speech but that ―its true character is detected by the object for the promotion

of which it is employed. The judgment acknowledged that advertisements acquire some, but

not all, elements of speech or expression intended for protection by Art 19(1)(a) by bringing

to the notice of the public‖.

The activity or product or service that it seeks to publicize [the right to disseminate and

receive information that Art 19(1)(a) recognizes in certain cases]. But the judgment goes onto

to state that the content and intent of the advertisement is extremely important when deciding

whether it deserves protection under Arts 19(1)(a) and 19(2).When it (advertisement) takes

the form of a commercial advertisement which has an element of trade and commerce, it no

longer falls within the concept of freedom of speech, for the object is not propagation of

ideas, social political or economic, or furtherance of literature or human thought, but the

commendation of the efficacy , value and importance of certain goods.

This statement forms the crux of the judgment and encapsulates the legal position occupied

by commercial speech when it comes to protection under Art 19(1)(a). The judgment iterated

that advertisements prohibited by the impugned Act relate to trade and commerce and not the

propagation of ideas and that advertising of prohibited drugs and commodities of which the

sale is not in the interest of the general public cannot be speech within the meaning of Art

19(1)(a).

The observations in Hamdard Dawakhana's case to the effect that advertising by itself would

not come within Article 19(1) (a) of the Constitution, were explained by this Court in Indian

Express Newspapers‘ case in the following words: The main plank of that decision was that

the type of advertisement dealt with, did not carry with it the protection of Article 19(1) (a).

The court finally opined that all commercial advertisements cannot be denied the protection

of Article 19(1) (a) of the Constitution merely because they are issued by businessmen."

The combined reading of Hamdard Dawakhana's case and the Indian Express Newspapers‘ case leads us to the conclusion that "commercial speech" cannot be denied the protection of

Article 19(1) (a) of the Constitution merely because the same are issued by businessmen.

Advertising is considered to be the cornerstone of our economic system. Low prices for

consumers are dependent upon mass production, mass production is dependent upon volume

140

sales, and volume sales are dependent upon advertising. Apart from the lifeline of the free

economy in a democratic country, advertising can be viewed as the life blood of free media,

paying most of the costs and thus making the media widely available. Without advertising,

the resources available for expenditure on the "news" would decline, which may lead to an

erosion of quality and quantity. The cost of the "news" to the public would increase, thereby

restricting its "democratic" availability.

In the case of Secretary, Ministry of Information and Broadcasting v. Cricket Association of

Bengal reported in (1995) 5 SCC 161 Supreme Could held that commercial advertisement no

doubt is a form of speech but its true character is reflected by the object for promotion of

which it is employed, Only when an advertisement is concerned with the expression or

prorogation of ideas that it can be said to be related to freedom of expression and speech. The

object and purpose for which advertisement is published is the determining factor. When

propagation of ideas and thoughts is inconsequential, but the real purpose and object is

promotion of sales of goods and services and personal benefit without any social purpose,

commercial advertisement cannot have the same decree of constitutional protection as in case

of social or political speeches.

The Supreme Court further observed that commercial advertisements helps dissemination of

information regarding the product and the public also benefits by the information which is

available and honest and economic marketing is protected under Article 19(1)(a). It was

observed that said freedom is both for the speaker as well as the recipient of the speech, but

an advertisement for a life-saving drug may be more important and leads greater public

interest than an advertisement for pure trade consideration.

Mahesh Bhatt and anr v. Union Of India, 147 (2008) DLT 561was another landmark

judgement – herein, the Writ Petitions challenged the legality and validity of some of the

provisions of the Cigarette and Other Tobacco Products (Prohibition of Advertisement and

Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 under

which "advertisement‖ was defined to include any visible representation by way of notice,

circular, label, wrapper or other document and also includes any announcement made orally

or by any means of producing or transmitting light, sound, smoke or gas.

The court had observed advertisements means to make an announcement and inform public

and disseminate information through media and other means, to draw the attention of the

public/individual concerned to some information. It was held that advertisements of tobacco

products cannot per-se be regarded as immoral. Consumption of tobacco or smoking is

unhealthy but is not immoral. The term 'decency' is more expansive in its scope. Commercial

advertisements are entitled to limited protection under Article 19(1)(a) of the Constitution if

they are in public interest. Commercial advertisements of tobacco products are not

expressions protected under Article 19(1)(a) of the Constitution. Commercial advertisements

will include indirect or surrogate advertisements which promote and encourage use of

tobacco products. However, commercial advertisements are different and distinct from news.

The purpose and object behind news is to disseminate information, thoughts and ideas. Pre-

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dominant nature and character of the article, picture, etc, will determine whether it is a

commercial advertisement or a news item/picture.

8.6 CURTAILMENT OF THE ADVERTISEMENTS (Tripti, 2018)

A Constitution Bench held in Sakal Papers (p) Ltd. and others. Vs. Union of India, AIR

1962 SC 305 - considered the constitutional validity of the Newspaper (Price and Page) Act,

1956. The said Act empowered the Government to regulate the prices of newspaper in

relation to their pages and sizes and to regulate allocation of space for advertisement matter.

This Court held that the Act placed restraints on the freedom of press to circulate. This Court

further held that the curtailment of the advertisements would bring down the circulation of

the newspaper and as such would be hit by Article 19(1) (a) of the Constitution of India.

It was argued before this Court that the publication of advertisements was a trading activity.

The diminution of advertisement revenue could not be regarded as an infringement of the

right under Article 19(1) (a). It was further argued before this Court that devoting large

volume of space to advertisements could not be the lawful exercise of the right of freedom to

speech and expression or the right of dissemination of news and views. It was also contended

that instead of raising the price of the newspaper the object could be achieved by reducing the

advertisements. The Supreme Court ruled that it is not open to the State to curtail the freedom

of the press for promoting the general welfare of a section or a group of people unless its

action can be justified by a law strictly falling under clause 2 of Article 19. Freedom of the

Press cannot be curtailed on such omnibus grounds as in the interest of the general public as

in the case of the freedom to carry on trade, business or profession. The restriction must be

reasonable. In other words, it must not be excessive or disproportionate. The procedure and

the manner of imposition of the restriction also must be just, fair and reasonable.

In Bennett Coleman & Co. & Ors. v. Union of India, 1973 2 SCR 757it was held that the

law which lays excessive and prohibitive burden which would restrict the circulation of a

newspaper will not be saved by Article 19 (2). If the area of advertisements is restricted, price

of paper goes up. If the price goes up circulation will go down. The High Court did not accept

the contention that a newspaper has a constitutional right to obtain advertisements from the

government. It, however, held that the government cannot exercise this power or privilege to

favour one set of newspapers or to show its displeasure against another section of the press. It

should not use the power over such large funds in its hands to muzzle the press, or as a

weapon to punish newspapers which criticise its policies and actions. It has to use the funds

in a reasonable manner consistently with the object of the advertisement viz. to educate and

inform the public about the activities of the government.

8.7 ADVERTISEMENT AND FREEDOM OF SPEECH (Tripti, 2018)

It was later held in the landmark case of Tata Press Limited Vs Mahanagar Telephone-

Nigam, 1995 AIR 2438 that it cannot be said that every advertisement is a matter dealing

with freedom of speech nor can it be said that it is an expression of ideas. In every case one

has to see the nature of the advertisement and what activity falling under Art. 19(1) it seeks to

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further. The advertisements in the instant case relate to commerce or trade and not to

propagating of ideas; and advertising of prohibited drugs or commodities of which the sale is

not in the interest of the general public cannot be speech within the meaning of freedom of

speech and would not fall within Art. 19(1)(a). The main purpose and true intent and aim,

object and scope of the Act is to prevent self- medication or self-treatment and for that

purpose advertisements commending certain drugs and medicines have been prohibited.

The Supreme Court of India gave out one of the most progressive pieces of judicial

interpretation: the right to commercial freedom of speech and expression. Of far reaching

consequence to media and business, wholly synonymous with the spirit of liberalization ―this great constitutional advance was made on simple and relatively boring facts‖.

In a nutshell it means that, for the first time in India, advertising is protected as a form of free

speech.

The judgment results from a dispute between Tata Press and MTNL whose monopoly on

printing telephone directories under the Indian Telegraph Act, was successfully challenged by

Tata‘s Yellow Pages.

It was contended that it is the public‘s right to receive information by way of advertising implicit in the concept of ―free speech and expression‖ guaranteed under Article 19(1)A of the Constitution. In taking a holistic approach to the issue, Justice Kuldip Singh described the

free flow of commercial information as ―the cornerstone of our economic system. Low prices for consumers are dependent on mass production (which) is dependent on volume sales

(which) is dependent on advertising.‖

To safeguard free enterprise, the heart of liberalisation, advertising is vital to both

manufacturer and consumer. In fact, Justice Singh goes further in supporting the right of the

consumer, ‗the recipient of commercial speech‘, with a striking example: ―An advertisement giving information regarding a life-saving drug may be of much more importance to the

general public than to the advertiser who may be having purely a trade consideration Article

19(1) (a) not only guarantees freedom of speech and expression, it also protects the rights of

Individuals to listen, read and receive the said speech.‖

The judgement is also interpreted ―as a resounding victory for the media,‖ because it dwells at length on the role of ―advertising as the life blood of a free media...the newspaper industry

obtains 60 to 80 per cent of its revenue from advertising. For a democratic press the

advertising ‗subsidy‘ is crucial. Without advertising,‘ the resources available for expenditure on ‗news‘ would decline, which may lead to the erosion of quality and quantity. The cost of

‗news‘ to the public would increase, thereby restricting its ‗democratic‘ availability.‖ ―Cutting off advertising is like cutting off the lifeblood of a newspaper and state authorities which have indulged in this form of coercion in the past have been pulled up by the court.‖ The absolute right of a newspaper to receive advertising ―as commercial free speech‖ is an issue which bears further legislative review in the light of the new law.

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Freedom of speech goes to the heart of the natural right of an organised freedom-loving

society to "impart and acquire information about that common interest". If any limitation is

placed which results in the society being deprived of such right then no doubt it would fall

within the guaranteed freedom under Art. 19(1)(a). But if all it does is that it deprives a trader

from commending his wares it would not fall within that term.

8.8 MISLEADING & SURROGATE ADVERTISING (Tripti, 2018)

The Consumer Protection Act, the advertising Code, the Censor Board and the working group

on Misleading Advertisements set up by the Consumer Affairs, Food and Public Distribution

Department, Government of India, have all dealt with the issue of misleading advertisements.

The preferred solution is to ask the advertiser to issue a corrective advertisement to neutralize

the effect of misleading advertisements. In India, due to severe restrictions on advertising

certain products like alcohol, tobacco products, medicines and baby food, a whole genre of

misleading / surrogate advertising has emerged. In such advertising, a brand is endorsed

using a product different from the actual product being promoted.

Like in the matter of United Breweries Limited v. Mumbai Grahak Panchayat, the matter of

debate included the advertisements of Bagpiper Soda. This advertisement was held to be a

surrogate advertisement for Bagpiper whiskey.

The National Consumer Disputes Redressal Commission, New Delhi, held that the word

―soda‖ was used in an inconspicuous manner, while the word ―Bagpiper‖ was boldly stated, with the baseline ―India‘s largest, World‘s No. 3‖. Advertisements can be direct and also

indirect whereby surrogate or product placement, use or trade name display, techniques are

adopted but with the object and purpose of drawing attention to the object of publicity. In the

present day context, direct and indirect advertisements are employed to attract attention and

interest, make the product known and justify it's consumption and use. Supply of free

medicines to doctors by pharmaceutical companies has been held to be publicity and

advertisement.

8.9 ADVERTISING REGULATION IN INDIA (Tripti, 2018)

The Government of India has not set up a regulatory body in India to regulate advertisements.

Depending on the nature of the grievances, the power to regulate advertisements may be

exercised by a vast variety of authorities, including the courts, Central and State

Governments, tribunals or the police authorities. In addition to these authorities is the Press

Council of India Act, 1978 which is also empowered to regulate press advertisements. The

Council is guided by its ―Norms of Journalistic Conduct‖. in the regulation of advertisements. The Press Council has the power to hold an inquiry into a complaint against a newspaper and

if it finds that the newspaper has violated the standards prescribed by the council, it may

warn, admonish or censure the newspaper, the editor or journalist as the case may be.

India however, does have a self-regulatory body dealing with both online and other forms of

advertising. The Advertising Standards Council of India (ASCI) monitors certain standards

and fairness in the domain of advertising. It was established in India in 1985. It is a self-

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regulatory voluntary organization whose role and function of the ASCI is to deal with

complaints received from consumers and industry against advertisements which are

considered as false, misleading, indecent, illegal, leading to unsafe practices or unfair to

competition and in contravention to the advertising code laid down by the ASCI. While

safeguarding consumer interests, ASCI also monitor and guide the commercial

communications of practitioners in advertising. The aim of advertisement is to promote sales

of products or service by affecting a purchasing decision. Although the benefits of advertising

are numerous it is one aspect of marketing that is subjected to a severe criticisms. And now

there is a new medium for advertisers to explore, the Internet!

While there may be no specific legislations governing online advertising in India, ASCI does

recognize online advertising. ASCI‘s Code of advertising and existing statutes provides necessary guidance and arsenal to combat errant advertisers. Finally, guidance may be sought

by simplify reading the Terms and Conditions of the website; the advertiser wants to

advertise on. This exercise will avoid any negative repercussions following release of an

online advertisement.

8.10 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

1. Comparing products in an advertisement is an unfair trade practice.

2. Giving a false warranty is an unfair trade practice.

3. Showing down others products, even if on the basis of facts, is an unfair trade

practice.

4. A consumer association can take a case of unfair trade practice in a consumer

forum.

5. Advertising a ‗sale‘ without actually giving discount is a false bargain and an unfair trade practice.

6. Any false representation is an unfair trade practice.

7. An advertisement is to be judged by the meaning it conveys.

8. Comparing products in an advertisement, on the basis of facts, is not an unfair

trade practice.

9. A person must be using the product to endorse it in an advertisement. Failing this,

it is an unfair trade practice.

10. A trader cannot access a consumer forum to seek remedy against a rival trader as

he is not a consumer within the CPA.

2. Long Answer Questions

Q1. ―Advertising a false warranty is also an unfair trade practice.‖ Explain the

statement in the light of unfair trade practices.

Q2. ―Advertising is a fundamental right‖. Elaborate.

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Q3. Vansh came across an advertisement on the television where a computer being

wrongly described, with highly exaggerated features. Can he move a consumer forum

as a consumer under the Consumer Protection Act, claiming that the advertisement

was an unfair trade practice?

Q4. Elaborate the laws imposing restrictions on advertisements in India.

SUGGESTED READINGS

1) Pathak, A. (2014). Legal Aspects of Business. New Delhi: Mc Graw Hill Education.

2) Sayam, N. (2016, April 28). Advertisements as ―Commercial Speech‖. Speaking

Threads. Retrieved from https://speakingthreads.org/2016/04/28/advertisements-as-

commercial-speech/

3) Tripti. (2018). Advertisement and Freedom of Speech and Expression. Retrieved from

Legal Service India: http://www.legalservicesindia.com/article/1317/Advertisement-

and-Freedom-of-Speech-and-Expression.html

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LESSON 9

THE CONSUMER PROTECTION ACT, 1986

9 STRUCTURE

9.1 Background

9.2 Definitions

9.3 Rights of the Consumer

9.4 Consumer Disputes Redressal System: Advisory Bodies

9.5 Consumer Disputes Redressal System: Adjudicative Bodies

9.6 How to file the complaint

9.7 Where to file a complaint

9.8 Appeal

9.9 Penalties

9.10 Self-Assessment Questions

9.1 BACKGROUND

The General Assembly of United Nations on 19th April 1985 adopted a set of guidelines for

the protection of consumers and authorized the Secretary General to persuade member

countries to make policies and enact laws accordingly. The guidelines were as follows

(Albuquerque, 2016):

1. Physical safety

2. Protection and promotion of consumer economic interests

3. Standards for safety and quality of consumer goods and services

4. Measures enabling consumers to obtain redressal

5. Measures relating to specific areas (food, water and pharmaceuticals)

6. Consumer education and information programme

In the Thirty-seventh Year of the Republic of India, the country promptly enacted the

Consumer Protection Act, 1986 to provide a simpler and quicker access for redressal of

consumer grievances. The act came into existence to provide better protection of the interests

of consumers and for that purpose to make provision for the establishment of consumer

councils and other authorities for the settlement of consumer‘s disputes and for matters

connected therewith.

The Act was passed in December, 1986, and came into force in April, 1987. On 24th

December it was declared as the ‗National Consumer Day‘ by Government of India and the then President of India gave his assent to the enactment of this Act. The Act was amended in

1991, 1993, and 2002 (w.e.f. 15.03.2003). The world observes 15th March as the ‗World Consumer Rights Day‘.

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Some key highlights

This Consumer Protection Act applies to the whole of India except the State of

Jammu and Kashmir and covers all goods and services (unless specifically exempted

by the Central Government ) purchased by the consumers and to all sectors — private,

public and cooperative.

The Act secures the rights of a consumer against unfair trade practices by traders and

manufacturers.

This Act provides means through which consumers can file their complaints across

consumer forums with special powers, and relevant punishment can be taken against

erring suppliers. This also helps in deciding appropriate compensation which may be

awarded to the consumer for the hardships they have undergone.

In order to provide relief to both parties and to avoid long litigation, The Consumer

forum sets up a formal process called ‗'informal adjudication' where forum officials

mediate between the two parties and urge compromise.

An advocate is not mandatory to file a complaint and pursue the Consumer Protection

Act.

The provisions of the Act are compensatory in nature and consumers are not required

to deposit huge court fees. The law encourages consumers to approach courts, as it

follows simple procedures thus helping in quicker redressal of grievances.

Products used for commercial purposes are not covered under this law as court

provides redressal for goods and services purchased for personal use only.

The Act envisages three-tier quasi-judicial machinery at the national, state and the

district level.

9.2 DEFINITIONS

Section 2(d) "consumer" means any person who, -

(i) buys any goods for a consideration which has been paid or promised or partly paid

and partly promised, or under any system of deferred payment and includes any user

of such goods other than the person who buys such goods for consideration paid or

promised or partly paid or partly promised, or under any system of deferred payment

when such use is made with the approval of such person, but does not include a

person who obtains such goods for resale or for any commercial purpose; or

(ii) hires or avails of any services for a consideration which has been paid or promised

or partly paid and partly promised, or under any system of deferred payment and

includes any beneficiary of such services other than the person who hires or avails of

the services for consideration paid or promised, or partly paid and partly promised, or

under any system of deferred payment, when such services are availed of with the

approval of the first mentioned person but does not include a person who avails of

such services for any commercial purpose;

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Explanation- For the purpose of this clause, ―commercial purpose‖ does not include use by a person of goods bought and used by him and services availed by him exclusively for the

purpose of earning his livelihood by means of self-employment.

Cases and illustrations to understand the definition of a consumer

Case A: Manoj bought a mobile from an electronics shop for his personal use. The mobile

phone was defective. Is Manoj a consumer?

Manoj, is a consumer under Section 2(d)(i) as he bought goods for consideration.

Case B: Radha on a vacation hired a cab from her home to railway station. The cab broke

down as was not in a proper condition. Due to which Radha missed the train. Is she a

consumer?

Radha is a consumer under Section 2(d)(ii) as she has availed a service for a consideration.

Case C: Vansh bought an iron for use by his family. While his daughter, Myra was ironing

the clothes, it sparked and hurt her. Is Vansh a consumer? Is Myra a consumer?

Vansh is a consumer under Section 2(d)(i) as he bought goods for consideration. However,

Myra is also a consumer as the definition of „consumer‟ includes „any user than the person who buys such goods for consideration … when such use is made with the approval of the

person‟.

Case D: Sunil runs a cyber café. He bought a computer form an electronic shop for using it in

his café. The computer was defective. Is Sunil a consumer?

The rider at the end of section 2(d)(i)states „but does not include a person who obtains such goods for resale or for any commercial purpose.‟ Thus, Sunil is not a consumer as he has bought the computer for commercial purpose.

Case E: Mayank bought an ipad for his personal use. The payment was to start the following

month and was to be made in nine monthly instalments. The phone was defective. Is Mayank

a consumer?

Mayank is a consumer as the price is to be paid under „a system of deferred payment‟.

Goods: Every kind of moveable property other than actionable claims and money; it includes

stocks and shares, growing crops, grass, and things attached to or forming part of land which

are agreed to be severed before sale or under the contract of sale (Sec. 2, 7 Sale of Goods act,

1930)

Spurious goods and services: Such goods and services are claimed to be a genuine but are

actually not so

Services: Any description that is made available to potential users and includes, but not

limited to, the provision of facilities in connection with banking, financing insurance,

transport, processing, supply of electrical or other energy, board or lodging or both, housing

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construction, entertainment, amusement or the purveying of news or other information, but

does not include the rendering of any service free of charge or under a contract of personal

service.

"Complaint" means any allegation in writing made by a complain­ant that—

an unfair trade practice or a restrictive trade practice has been adopted by any trader

or service provider;

the goods bought by him or agreed to be bought by him; suffer from one or more

defects;

the services hired or availed of or agreed to be hired or availed of by him suffer from

deficiency in any respect;

"Complainant" means—

a consumer; or

any voluntary consumer association registered under the Companies Act, 1956 (1of

1956)or under any other law for the time being in force; or

the Central Government or any State Government,

one or more consumers, where there are numerous consum­ers having the same

interest;

in case of death of a consumer, his legal heir or representative; who or which makes a

complaint;

―restrictive trade practice‖ means a trade practice which tends to bring about manipulation

of price or conditions of delivery or to affect flow of supplies in the market relating to goods

or services in such a manner as to impose on the consumers unjustified costs or restrictions

and shall include—

(a) Delay beyond the period agreed to by a trader in supply of such goods or in providing the

services which has led or is likely to lead to rise in the price;

(b) any trade practice which requires a consumer to buy, hire or avail of any goods or, as the

case may be, services as condition precedent to buying, hiring or availing of other goods or

services;

"unfair trade practice" means a trade practice which, for the purpose of promoting the sale,

use or supply of any goods or for the provision of any service, adopts any unfair method or

unfair or deceptive practice including any of the following practices, namely;—

The practice of making any statement, whether orally or in writing or by visible

representation which,—

i. falsely represents that the goods are of a particular standard, quality, quantity, grade,

composition, style or model;

ii. falsely represents that the services are of a particular standard, quality or grade;

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iii. falsely represents any re-built, second-hand, reno­vated, reconditioned or old goods as

new goods;

iv. represents that the goods or services have sponsor­ship, approval, performance,

characteristics, accesso­ries, uses or benefits which such goods or services do not

have;

v. represents that the seller or the supplier has a spon­sorship or approval or affiliation

which such seller or supplier does not have;

vi. makes a false or misleading representation concern­ing the need for, or the usefulness

of, any goods or services;

vii. gives to the public any warranty or guarantee of the performance, efficacy or length of

life of a product or of any goods that is not based on an adequate or proper test

thereof; Provided that where a defence is raised to the effect that such warranty or

guarantee is based on adequate or proper test, the burden of proof of such defence

shall lie on the person raising such defence;

viii. makes to the public a representation in a form that purports to be—

ix. a warranty or guarantee of a product or of any goods or services; or

x. a promise to replace, maintain or repair an article or any part thereof or to repeat or

continue a service until it has achieved a specified result, if such purported warranty

or guarantee or prom­ise is materially misleading or if there is no reasonable prospect

that such warranty, guaran­tee or promise will be carried out;

xi. materially misleads the public concerning the price at which a product or like

products or goods or services, have been or are, ordinarily sold or provided, and, for

this purpose, a representation as to price shall be deemed to refer to the price at which

the product or goods or services has or have been sold by sellers or provided by

suppliers generally in the relevant market unless it is clearly specified to be the price

at which the product has been sold or services have been provided by the person by

whom or on whose behalf the representation is made;

xii. Gives false or misleading facts disparaging the goods, services or trade of another

person.

Defect: means any fault, imperfection or shortcoming in the quality, quantity, potency, purity

or standard which is required to be maintained by or under any law for the time being in force

under any contract, express or implied or as is claimed by the trader in any manner

whatsoever in relation to any goods;

Deficiency: means any fault, imperfection, shortcoming or inade­quacy in the quality, nature

and manner of performance which is required to be maintained by or under any law for the

time being in force or has been undertaken to be performed by a person in pursuance of a

contract or otherwise in relation to any service

Person: Person includes an individual or any of the following:

(i) A firm whether registered or not;

(ii) A Hindu undivided family;

(iii) A co-operative society;

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(iv) Every other association of persons whether registered under the Societies

Registration Act, 1860 (21 of 1860) or not;

Dispute: "consumer dispute" means a dispute where the person against whom a complaint

has been made, denies or disputes the allega­tions contained in the complaint.

9.3 RIGHTS OF THE CONSUMER (Consumer rights, 2018)

In general, the consumer rights in India are listed below:

The right to be protected from all kind of hazardous goods and services

The right to be fully informed about the performance and quality of all goods and

services

The right to free choice of goods and services

The right to be heard in all decision-making processes related to consumer interests

The right to seek redressal, whenever consumer rights have been infringed

The right to complete consumer education

Following are the detailed rights:

i. Right to Safety

According to the Consumer Protection Act 1986, the consumer right is referred to as ‗right to be protected against marketing of goods and services which are hazardous to life and

property‘. It is applicable to specific areas like healthcare, pharmaceuticals and food processing, this right is spread across the domain having a serious effect on the health of the

consumers or their well-being viz. Automobiles, Housing, Domestic Appliances, Travel etc.

When there is violation of the right then there occur medical malpractice lawsuits in the

country. It is estimated every year that thousands or millions of citizens of India are killed or

seriously injured by immoral practices by doctors, hospitals, pharmacies and the automobile

industry. Still the government of India, known for its callousness, does not succeed in

acknowledging this fact or making a feeble effort for maintaining statistics of the mishaps.

The Government of India needs to have world class product testing facilities to test drugs,

food, cars or any other consumable product that can prove to be a menace to life. It does not

happen coincidently that Tata Nano is sold in India for half of what it costs in a country

which is industrially developed, this is a classic case of requirement of a cheap product that

outweighs the need for safety of family and self. The developed countries like the United

States have stalwart agencies which oversee the protection of consumer products, the Food

and Drug Administration (FDA) for food and drugs, the National Highway Traffic Safety

Administration (NHTSA) for automobiles and the Consumer Product Safety Commission

(CPSC) for various other consumer products etc. This right needs each product which can

potentially be a danger to our lives to be marketed after adequate and complete verification as

well as validation. India is 50 years away, for empowering this right adequately and

completely.

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ii. Right to Information

The right to information is defined as ‗the right to be informed about the quality, quantity, potency, purity, standard and price of goods or services, as the case may be so as to protect

the consumer against unfair trade practices‘ in the Consumer Protection Act of 1986. In the market place of India, consumers get information by two ways namely advertising and word

of mouth however these sources are considered to be unreliable but still this word of mouth is

quite common here. Because of this, the Indian consumers hardly have precise and complete

information for assessing the true value, safety, suitability, reliability of any product. Usually

the hidden costs can be found, lack of suitability, quality problems and safety hazards only

after the purchase of the product. There is another right claimed by Indian government on

paper, this right must ideally make sure that all consumable products have been labelled in a

standard manner containing the cost, quantity, the ingredients and instructions given to use

the product safely. It is unfortunate that even the medicines in the country do not follow a

standardized labelling convention. There should be establishment of unit price publishing

standards for consumer market where costs are revealed in standard units like per kg or litre.

The consumers, ought to be informed in an exact yet accurate manner for the cost involve

during time of availing a loan. For providing benefit to the society through this right,

advertisers must be held against the standards of products in the advertisements. The

pharmaceuticals require to disclose potential side effects related to their drugs and

manufacturers ought to be required to publish reports from independent product testing

laboratories for the purpose of comparing the quality of their products from competitive

products.

There is a website: Consumerdaddy.com, for the purpose of empowering the consumers with

right to information. Without help of these types of websites it is difficult to spread awareness

among the consumers of India. The right to information gives the power to the consumers to

have an easy access to information which is necessary for the consumer.

iii. Right to Choose

The definition of Right to Choose as per the Consumer Protection Act 1986 is ‗the right to be assured, wherever possible, to have access to a variety of goods and services at competitive

prices‘. For regulating the market place, there is just one factor required and that is

competition. The existence of cartels, oligopolies and monopolies prove to be

counterproductive to consumerism. The natural resources, liquor industry,

telecommunications, airlines etc all are being controlled by a mafia to some or the other

extent. Since the Indian consumers come from a socialistic background, the tolerating of

monopolistic market is found in their blood. It is seldom seen that people want to switch the

power company, in the times when they have a blackout at home. It is interesting to know

that even micro markets like fish vendors in some cities are known to collude and discourage

the consumers‘ bargaining power. No matter what size or form, or span, but collusion of

various companies which sell a similar kind of product is unethical or say less legal. It can be

estimated that India has to stride for about 20 more years for empowering its citizens fully in

this regard.

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iv. Right to Be Heard

As stated in the Consumer Protection Act 1986, ‗the right to be heard and to be assured that

consumer‘s interests will receive due consideration at appropriate forums‘ is the definition of the right to be heard. This right helps to empower the consumers of India for putting forward

their complaints and concerns fearlessly and raising their voice against products or even

companies and ensure that their issues are taken into consideration as well as handled

expeditiously. However, till date the Indian Government has not formed even one outlet for

hearing the consumers or their issues to be sorted out. There are a number of websites

striving to do this. The major objective of Consumer is to ensure that their voices are heard

by the corporate world. There is a website, Consumerdaddy.com, where consumers can

upload their criticisms as well as file complaints. Every criticism filed gradually lessens the

overall score of the product which is being criticized therefore each complaint is

independently checked by an investigator who belonged to Consumerdaddy.com website.

This website provides the consumers the benefit of doubt always, so their voice is considered

over that of the company. It is believed at consumerdaddy.com, that consumer is always

right, and that he is the king. In case a consumer makes an allegation regarding the product,

the onus goes to the dealer, or supplying company or manufacturer to disprove that allegation

is not true. To be precise, the consumer is heard, and the load of proof goes to the company.

Various attempts are made by the government for empowering the citizens with this right,

and it is believed that about 10-15 years more are required for the accomplishment of this

goal.

v. Right to Redressal

The right to seek redressal against unfair trade practices or restrictive trade practices or

unscrupulous exploitation of consumers‘ is referred to as the right to redressal according to the Consumer Protection Act 1986.

The government of India has been bit more successful with regard to this right. The

Consumer courts like District Consumer Disputes Redressal Forums at district level, State

Consumer Disputes Redressal Commissions and National Consumer Disputes Redressal

Commissions have been incorporated with the help of the consumer protection act. These

consumer grievance redressal agencies have fiduciary as well as geographical jurisdictions

which address consumer cases between businesses and consumers. About 20 lakh Consumer

cases are heard in the district consumer forum, and around one Crore can be heard in the state

consumer court while more than one Crore cases are heard at national consumer court. It has

been found that if one becomes guardian of consumer protection or consumer rights in the

country these courts today are found to be ineffective because of bureaucratic sabotages,

clogged cases, callousness of government and decadent infrastructure. Only some of the

district forums have appointed officials for time being and majority of them are non-

functional because of funding and infrastructure constraints. There are around 20-30 million

open cases in India which remain unsolved and would take around 320 years to wind up.

Having such type of compromised legal system the consumer cases form just civil litigations

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and are carried forward to the bottom of the priority list. It is estimated that India is 10 years

away in effectively ensuring the right to redressal to every consumer of India.

vi. Right to Consumer Education

The right of every Indian citizen to have education on matters regarding consumer protection

as well as about her/his right is regarded as the last right provided by the Consumer

Protection Act 1986. The right makes sure that the consumers in the country have

informational programs and materials which are easily accessible and would enable them to

make purchasing decisions which are better than before. Consumer education might refer to

formal education through college and school curriculums as well as consumer awareness

campaigns being run by non-governmental and governmental agencies both. Consumer

NGOs, having little endorsement from the government of India, basically undertake the task

of ensuring the consumer right throughout the country. India is found to be 20 years away

from giving this right that gives power to the common consumer.

CONSUMER DISPUTES REDRESSAL SYSTEM:

Figure 1: Consumer Disputes Redressal System

9.4 ADVISORY BODIES

Consumer Protection Councils:

A. The District Consumer Protection Council: It shall consist of the following

members, namely:-

a) the Collector of the district (by whatever name called), as its Chairman; and

b) Such number of other official and non-official members as may be prescribed

by the State Government.

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The District Council shall meet at least twice in an year.

The procedure will be set by SG

B. The State Consumer Protection Council: It shall consist of the following members,

namely:

a) The Minister in-charge of consumer affairs in the State Government as its

Chairman;

b) Such number of other official or non-official members as may be prescribed

by the State Government.

The State Council shall meet at least twice in a year.

The procedure will be prescribed by the State Government

C. The Central Consumer Protection Council: It shall consist of the following

members, namely:

a) the Minister in charge of Consumer Affairs in the CG as its Chairman, and

b) Such number of other official or non-official members as may be prescribed.

The Council shall meet at least once a year.

9.5 ADJUDICATIVE BODIES

Consumer Disputes Redressal Agencies (Economic Discussions, 2018):

Figure 2: Three-Tier Consumer Disputes Redressal System

Under the Consumer Protection Act 1986 three-tier consumer disputes redressal system at the

District, State and National levels has been set up.

Thus the Act provides for establishing the following consumer redressal agencies:

National Commission

Abo e ₹ Crore

State Commission

Abo e ₹ Lakh and belo ₹ Crore

District Forum

Upto ₹ Lakh

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1. District Consumer Forum in each district of a state set up by the State Government.

2. State Consumer Commission in each state set up by each State.

3. National Consumer Commission set up by the Central Government.

The District Consumer Forum:

According to Consumer Protection Act 1986 each District Consumer Forum set up in each

district of a State shall consist of a person who is or has been or is qualified to be a district

judge. This person will work as president of the district consumer forum.

Two eminent members who have adequate knowledge and experience and have the ability in

dealing with problems concerning law, commerce, economics, accountancy, industry, public

affairs or administration and one of whom shall be a lady member, especially who is a social

worker.

District Forum has the jurisdiction:

A District Forum has the jurisdiction to deal with the complaints where the value of good or

service and the compensation claimed, if any, does not exceed ₹ 20 lakh (as per amendment

in the Act in 2002). A complaint by consumers will be filed in a District Forum in case when

the opposite party or each of the opposite party if there are more than one resides or carries

on business within the district concerned at the time of filing the complaint or any one of the

party (if there are more than one) residing or carrying on business in the district at the time of

the filing of the complaint if the district forum grants permission for this.

The State Consumer Commission:

1) A person who is or has been a judge of a high court appointed by the State

Government,

2) Two other members of high standing and eminence who have adequate knowledge or

experience concerning the problems relating to law, commerce, economics, industry,

public administration etc. one of whom shall be a woman.

State Consumer Commission has the jurisdiction:

The State Consumer Commission as per the amendment of the Act in 2002 shall have the

jurisdiction to entertain complaints where the value of goods or services and compensation

claimed if any exceeds ₹ 20 lakh but is not more than ₹ 1 Crore.

The State Consumer Commission will also entertain appeals against the orders of District

Forums within the State. Besides, the State Consumer Commissions have been authorized to

call for the records and give appropriate orders in case of any consumer dispute pending

before the District Forum within the State or has been decided by it if the State Commission

finds that a District Forum has exercised a power not vested in it by the Act or has failed to

exercise a power or jurisdiction vested in it or acted illegally in exercise of its powers.

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The National Consumer Commission

A person who is or has been a judge of the Supreme Court and is appointed by the Central

Government in consultation with Chief Justice of India. He will also work as president of the

national commission,

1) Four other members of eminence having good knowledge or experience and ability to

deal with the problems relating to commerce, economics, law, industry, public affairs

or administration and one of whom shall be a woman.

National Consumer Commission has the jurisdiction:

1) To entertain complaints where the value of goods or services and compensation

claimed if any is, according to Amendment Act 2002, one Crore or more;

2) National Commission is authorized to hear appeals against the order of any State

Consumer Commission;

3) The Central Commission has the right to call for the records from the State

Commissions.

It is important to note that all forums, commissions appointed under the Consumer Protection

Act are in substantial matters not different from the ordinary civil courts. They are quasi-

judicial tribunals created to render speedy justice

9.6 HOW TO FILE A COMPLAINT (indiainfoline, 2018):

Complaint is to be filed within two years of buying the product or using the service.

Complaint needs to be in writing. Letters should be sent by registered post, hand-

delivered, by email or fax. Don't forget to take an acknowledgment.

The complaint should mention the name and address of the person who is

complaining and against whom the complaint is being filed. Copies of relevant

documents must be enclosed.

The consumer must mention details of the problem and the demand on the company

for redressal. This could be replacement of the product, removal of the defect, refund

of money, or compensation for expenses incurred and for physical/mental torture.

Please ensure that the claims are reasonable.

You should preserve all bills, receipts and proof of correspondence related to the case.

Avoid using voice mail or telephone because such interactions are normally difficult

to prove.

The complaint can be in any Indian language, but it is better to use English.

There is no compulsion to hire a lawyer. Main cost consists of correspondence and

travelling to the consumer forum for the hearing

Maintain a complete record of the emails and documents sent by you.

9.7 WHERE TO FILE A COMPLAINT (indiainfoline, 2018):

District Forum, having territorial jurisdiction, if the claim is up to ₹ 20 lakh.

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State Commission, having territorial jurisdiction, if the claim exceeds ₹ 20 lakh, but

not ₹ 1 Crore.

National Commission, if the claim exceeds ₹ 1 Crore.

‗Claim‘ includes the value of goods/services and compensation.

9.8 APPEAL (indiainfoline, 2018)

Appeal is a legal instrumentality whereby a person not satisfied with the findings of a court

has an option to go to a higher court to present his case and seek justice. In the context of

consumer forums:

An appeal can be made with the state commission against the order of the district

forum within 30 days of the order which is extendable for further 15 days. (Section

15)

An appeal can be made with the National Commission against the order of the state

commission within 30 days of the order or within such time as the National

Commission allows. (Section 19)

An appeal can be made with the Supreme Court against the order of the National

Commission within 30 days of the order or within such time as the Supreme Court

allows. (Section 23)

9.9 PENALTIES (indiainfoline, 2018)

The consumer courts (district court, state commission and National Commission) are given

vast powers to enforce their orders. If a defaulter does not appear in court despite notices and

reminders, the court may decide the matter in his absence. The forum can sentence the

defaulter to a maximum of three years' imprisonment and impose a fine of ₹ 10,000. Forums can issue warrants to produce defaulters in court. They can use the police and revenue

departments to enforce orders.

The rights of consumer‘s needs to be protected since they avail services given by the service

providers based on trust and faith and thus it‘s a necessity to keep a check on the service

providers for the sake of service recipient.

The Consumer Protection Act is quite a comprehensive legislation (Economic

Discussions, 2018)

Under the Consumer Protection Act not only manufacturers and suppliers of goods but also

of such services as insurance providers, medical treatment, lending and recovery of bank

loans also come within the purview of the Act. A few such important cases are worth

explaining.

Consumer Protection Act and Medical Practitioners:

The applicability of Consumer Protection Act to medical practitioners is a highly complicated

issue and the case relating to it went even up to the Supreme Court of India. In defence of

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medical practitioners it was argued that their services are excluded category being services

under ―Control of Personal Services‖. Supreme Court rejected these arguments and brought medical practitioners, hospitals and nursing homes where services are rendered for valuable

consideration under the purview of Consumer Protection Act.

Doctors and hospitals committing medical negligence have therefore become liable and

damages for medical negligence can be claimed from them. Though this has created fear and

concern among medical practitioners and private hospitals but this will help in preventing

medical negligence on the part of doctors and hospitals.

It has been widely reported in the media about medical negligence, for example, of operating

a wrong eye, removing a kidney of a person without his consent, leaving screw, scissors and

a towel in the abdomen of a patient, giving a wrong injection leading to the death of a patient.

For all these acts of negligence compensation can be claimed from doctors and hospitals and

also penalties can be imposed on them.

In an important case Supreme Court held that a medical practitioner may be liable, if there

was negligence in respect of diagnosis and/or treatment given to a patient provided it can be

demonstrated that the negligent act was not based on reasonable and responsible information

as to the kind and quality of treatment.

Insurance Companies and Consumer Protection Act:

One of the important categories where Consumer Protection Act has been usefully applied is

the claims against insurance companies. Many insurance companies (including public sector

insurance companies) often deny medical claims to the insurers on one pretext or the other.

Generally insurance companies deny claims for damages to the insurers that they did not

disclose the pre-existing disease they were suffering from at the time of getting insured. In

many cases consumer commissions have rejected the arguments of insurance companies and

have awarded damages to the insurers and require insurance companies to fulfill their

contractual obligations.

In a recent case of accident claim the United India Insurance Company denied to pay the

damages on a car which met with an accident on the ground that it was being plied without

the ‗fitness certificate‘ as required under the Motor Vehicles Act. In this case in Nov. 2007, National Consumer

Commission held that the insurance companies, if the terms of the policy were not breached,

cannot refuse to entertain claims on the pretext that the insured violated some other laws or

conditions ―as the insurance is a matter of contract between the two parties.‖

Recovery of Bank Loans and Consumer Protection Act:

The wide applicability of Consumer Protection Act can be understood from the recent

judgment of the State Consumer Commission of Delhi which slapped a fine of ₹ 55 lakh on

ICICI Bank for trying to recover a vehicle loan by hiring musclemen. The goons of recovery

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agent of the bank, forcibly dragged out a youth from his car, beat him up with iron rods and

left him bleeding and drove away with the vehicle. Justice J.D. Kapoor, president of the

commission, said, ―We hold ICICI Bank guilty of the grossest kind of deficiency in service and unfair trade practice for breach of terms of contract of hire-purchase/loan agreement by

seizing the vehicle illegally.‖

Some relevant case laws:

Chetanprakash vs. MET Institute of computer Science

Facts: Prakash, appeared for his final year BSc exams, however prior to the declaration of his

results, he sought admission to MET Institute, towards pursuing his Masters in Computer

Science. However, the institute laid a condition, that in order to pursue the MCS course, a

student has to clear his final year exams. Prakash, however, went ahead and deposited his

fees towards the MCS course before the declaration of his result. On declaration of his result,

Prakash failed his exams. On failing his exams, he went to withdraw his admission from the

MCS course and requested for a refund, to which the institute does not responded. Finally, he

sends a legal notice to the institute, and registered a complaint with the consumer forum.

Judgement: The Court gives a judgement directing the institute, to pay the complainant,

Chetan Prakash, ₹ 32,000 as compensation for harassment, along with the course fee of ₹

62,200.

Dharamdas Pritiani Vs HDFC Ergo General Insurance Company Ltd

Facts: Complainant - Dharamdas Pritiani - Advised by the doctors to undergo treatment for

heart ailment in 2008-09. He underwent a rare treatment called Enhanced External Counter

Pulsation (EECP). The treatment was completed in 45 sittings, costing ₹118,000. HDFC Ergo

rejected the complainant‘s claim saying the treatment was experimental and not recognized by the insurer. The insurance company also claimed that a policy holder must be hospitalized

for at least 24 hours for reimbursement. The complainant claimed that the treatment was

recognized by the United States and 40 hospitals in India. The forum said the documents

furnished by Pritiani support his claim and the treatment did not require any hospitalization,

thus he must be reimbursed ₹118,000.

Judgement: Consumer redressal forum of India‘s directed HDFC Ergo General Insurance

Company Ltd to pay ₹ 118,000 towards compensation for refusing a policy holder‘s claim along with an additional compensation of ₹ 5,000 for mental agony.

Krishan Kumar Bajaj Vs PepsiCo

Facts: Krishan Bajaj, a resident of Ahmadabad purchased pack of ―Lay‘s (Tangy Twist Potato Chips) on 28 June 2010 and sensed it was bit underweight. He wrote twice to the

manufacturer. The first letter got no response however his second letter got him a gift hamper

as his compensation, which he duly refused. Bajaj then approached CERS, who wrote to

PepsiCo many a times but company refused to accept their fault and gave several

unsatisfactory clarifications. Later on, CERS took the issue to the Consumers Dispute

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Redressal Forum, which also gave a favourable ruling. The company asked for the bill of

purchase which Bajaj could not produce.

Judgement: The Court overruled the argument of Bajaj for not having a valid bill but CERS

requested the court to direct PepsiCo to stop such unfair trade practices & to further deposit ₹

200000 in the Consumer Welfare Fund, ₹ 2,75,250 as punitive damages and also to give ₹

75,000 as costs of litigation.

9.10 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

1. ‗X‘ was gifted a book by ‗Y‘. ‗X‘ is the consumer within the CPA in relation to ‗Y‘. 2. ‗M‘ bought a mobile phone but the price was to be paid two weeks later. ‗M‘ cannot

be a consumer as the price has not been paid.

3. A non-government organisation was providing free education. The beneficiaries are

not consumers as they have not paid for the service.

4. A company is a consumer if it is I consuming the goods in the course of its

commercial activities.

5. Product replacement is one of the remedies awarded by the consumer forums.

6. ‗A‘ bought a washing machine. His wife is not a consumer under the CPA. 7. A consumer forum can award damages only if the other party has been negligent.

8. A consumer can approach a consumer forum only at the place of the registered office

of the seller.

9. A person, who is using goods himself, for his livelihood, is also a consumer.

10. A consumer association can also approach a consumer forum.

2. Long Answer Questions:

Q1. Discuss the role and objective of District, State and Central Protection councils under

the Consumer Protection Act, 1986. Also cite two relevant cases laws.

Q2. Explain the composition and jurisdiction of consumer disputes redressal agencies

under Consumer Protection Act.

Q3. Raj, after finishing his studies, decides to become a management consultant. He

chose the format of a company for running his business. He formed a company, raj

Consultants Private Limited. He is a Director of the company and also the sole employee.

The company bought a laptop. As Raj was the sole employee, he was exclusively using

the laptop. The laptop turned out to be defective and not of merchantable quality. Can Raj

seek remedy against the seller of the computer from a consumer forum? Also in the light

of above case, discuss the definition of Consumer as per the Consumer Protection Act,

1986.

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Q4. A shop keeper sold you some biscuits, claiming that those were pure. Later a

laboratory test showed that those were adulterated. What precautions should you have

taken before buying and what remedies are available to you as per CPA, 1986.

Q5. Describe the salient features of the Consumer Protection Act, 1986. Enumerate also

the objectives of the Act.

Q6. Who is a consumer? Discuss the rights of consumer.

SUGGESTED READINGS

1) Albuquerque, D. (2016). Legal Aspects of Business Text, Jurisprudence and Cases.

New Delhi: Oxford University Press.

2) axd. (2010, Jan). www.du.ac.in. Retrieved from du.

3) Consumer rights. (2018, May). Retrieved from www.jagograhakjago.com:

http://www.jagograhakjago.com/consumer-rights/

4) Economic Discussions. (2018, May). Retrieved from Highlights on the Consumer

Protection Act, 1986: http://www.economicsdiscussion.net/acts/consumer-protection-

act-1986/highlights-on-the-consumer-protection-act-1986/11053

5) indiainfoline. (2018, May). Retrieved from www.indiainfoline.com:

https://www.indiainfoline.com/article/research-articles/know-the-basics-of-consumer-

protection-act-45308802_1.html

6) Pathak, A. (2014). Legal Aspects of Business. New Delhi: Mc Graw Hill Education.

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LESSON 10

THE RIGHT TO INFORMATION ACT, 2005

10 STRUCTURE

10.1 Introduction

10.2 Definition

10.3 Obligations of public authorities

10.4 Designation of Central/State Public Information Officers

10.5 Request for obtaining information

10.6 Exemption from disclosure of information (Section 8)

10.7 Grounds for rejection to access in certain cases (Section 9)

10.8 Severability (Section 10)

10.9 Third party information (Section 11)

10.10 Constitution of Central Information Commission

10.11 Constitution of State Information Commission

10.12 Powers of Information Commission

10.13 Enforcement and Penalty

10.14 Appellate Authority

10.14.1First Appeal

10.14.2Second Appeal

10.15 Relevant Case Laws

10.16 Self-Assessment Questions

10.1 INTRODUCTION

The Right to Information Act, 2005 gives the rights to citizens to obtain information from the

government and government controlled organisations. In democracy the government is

accountable to the people. The people can make the government accountable to them only if

they have adequate information on its functioning and that of its organisation. The objectives

of the Act, thus, are tied to the principles of democracy, accountability and governance.

The preamble to the Act provides that:

―An Act to provide for setting out the practical regime of right to information for citizens to

secure access to information under the control of public authorities, in order to promote

transparency and accountability in the working of every public authority, the constitution of a

Central Information Commission and State Information Commissions and for matters

connected therewith or incidental thereto‖

It would not be possible for the government to function effectively and efficiently if it were to

make all information public. The Act does not create an unlimited right to information. It

strikes a balance between the right to information of an individual and the public interest in

withholding the information. The important themes in relation to the Act are: who has the

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right to information; the organisations against which the right can be enforced; what

constitutes ‗information‘ the nature of information which can be refused; and the mechanism for seeking remedy if information is denied. (Pathak, 2014)

10.2 DEFINITION

Some of the important definitions given in the RTI Act are given below:

Appropriate Government: "appropriate Government" means in relation to a public authority

which is established, constituted, owned, controlled or substantially financed by funds

provided directly or indirectly

i. by the Central Government or the Union territory administration, the Central

Government;

ii. by the State Government, the State Government;

Central Information Commission: "Central Information Commission" means the Central

Information Commission constituted under sub- section (/) of section 12;

Central Public Information Officer: "Central Public Information Officer" means the

Central Public Information Officer designated under subsection (I) and includes a Central

Assistant Public Information Officer designated as such under sub-section (2) of section 5;

Chief Information Commissioner: "Chief Information Commissioner" and "Information

Commissioner" mean the Chief Information Commissioner and Information Commissioner

appointed under sub-section (3) of section 12;

Competent Authority: "competent authority" means-

i. The Speaker in the case of the House of the People or the Legislative Assembly of a

State or a Union territory having such Assembly and the Chairman in the case of the

Council of States or Legislative Council of a State;

ii. The Chief Justice of India in the case of the Supreme Court;

iii. The Chief Justice of the High Court in the case of a High Court;

iv. The President or the Governor, as the case may be, in the case of other authorities

established or constituted by or under the Constitution;

v. The administrator appointed under article 239 of the Constitution;

Information: "information" means any material in any form, including records, documents,

memos, e-mails, opinions, advices, press releases, circulars, orders, logbooks, contracts,

reports, papers, samples, models, data material held in any electronic form and information

relating to any private body which can be accessed by a public authority under any other law

for the time being in force;

Prescribed: "prescribed" means prescribed by rules made under this Act by the appropriate

Government or the competent authority, as the case may be;

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Public authority: "public authority" means any authority or body or institution of self-

government established or constituted—

i. by or under the Constitution;

ii. by any other law made by Parliament;

iii. by any other law made by State Legislature;

iv. by notification issued or order made by the appropriate Government, and includes

any—

a) body owned, controlled or substantially financed;

b) non-Government organisation substantially financed, directly or indirectly by

funds provided by the appropriate Government;

Record: "record" includes—

i. Any document, manuscript and file;

ii. Any microfilm, microfiche and facsimile copy of a document;

iii. Any reproduction of image or images embodied in such microfilm (whether enlarged

or not); and

iv. Any other material produced by a computer or any other device;

Right to information: ―right to information" means the right to information accessible under

this Act which is held by or under the control of any public authority and includes the right to

i. Inspection of work, documents, records;

ii. Taking notes, extracts or certified copies of documents or records;

iii. Taking certified samples of material;

iv. Obtaining information in the form of diskettes, floppies, tapes, video cassettes or in

any other electronic mode or through printouts where such information is stored in a

computer or in any other device;

State Information Commission: "State Information Commission" means the State

Information Commission constituted under sub-section (/) of section 15;

State Chief Information Commissioner: "State Chief Information Commissioner" and

"State Information Commissioner mean the State Chief Information Commissioner and he

State Information Commissioner appointed unc1d$ sub-section 15; (3) of section

State Public Information Officer: "State Public Information Officer" means the State Public

Information Officer designated under subsection (/) and includes a State Assistant Public

Information Officer designated as such under sub-section (2) of section 5;

Third party: ―third party'' means a person other than the citizen making a request for information and includes a public authority.

10.3 OBLIGATIONS OF PUBLIC AUTHORITIES

(1) Every public authority under the Act has been entrusted with the duty to-

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(A) maintain all its records duly catalogued and indexed in a manner and the form which

facilitates the right to information under this Act and ensure that all records that are

appropriate to be computerised are, within a reasonable time and subject to

availability of resources, computerised and connected through a network all over the

country on different systems so that access to such records is facilitated;

(B) publish within one hundred and twenty days (120 days) from the enactment of this

Act,—

i. the particulars of its organisation, functions and duties;

ii. the powers and duties of its officers and employees;

iii. the procedure followed in the decision making process, including channels of

supervision and accountability;

iv. the norms set by it for the discharge of its functions;

v. the rules, regulations, instructions, manuals and records, held by it or under its

control or used by its employees for discharging its functions;

vi. a statement of the categories of documents that are held by it or under its

control;

vii. the particulars of any arrangement that exists for consultation with, or

representation by, the members of the public in relation to the formulation of

its policy or implementation thereof;

viii. a statement of the boards, councils, committees and other bodies consisting of

two or more persons constituted as its part or for the purpose of its advice, and

as to whether meetings of those boards; councils, committees and other bodies

are open to the public, or the minutes of such meetings are accessible for

public;

ix. a directory of its officers and employees;

x. the monthly remuneration received by each of its officers and employees,

including the system of compensation as provided in its regulations;

xi. the budget allocated to each of its agency, indicating the particulars of all

plans, proposed expenditures and reports on disbursements made;

xii. the manner of execution of subsidy programmes, including the amounts

allocated and the details of beneficiaries of such programmes;

xiii. particulars of recipients of concessions, permits or authorisations granted by

it;

xiv. details in respect of the information, available to or held by it, reduced in an

electronic form;

xv. the particulars of facilities available to citizens for obtaining information,

including the working hours of a library or reading room, if maintained for

public use;

xvi. the names, designations and other particulars of the Public Information

Officers;

xvii. such other information as may be prescribed; and thereafter update these

publications every year;

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2) It shall be a constant endeavour of every public authority to take steps in accordance with

the requirements of clause (b) of sub-section (1) to provide as much information suo motu

to the public at regular intervals through various means of communications, including

internet, so that the public have minimum resort to the use of this Act to obtain

information.

3) For the purposes of sub-section (/), Information shall be disseminated widely and in such

form and manner which is easily accessible to the public.

4) All materials shall be disseminated taking into consideration the cost effectiveness, local

language and the most effective method of communication in that local area and the

information should be easily accessible to the extent possible in electronic format with the

Central Public Information Officer or State Public Information Officer. As the case may

be, available free or at such cost of the medium or the print cost price as may be

prescribed.

Explanation.-For the purposes of sub-sections (3) and (4), "disseminated" means making

known or communicated the information to the public through notice boards, newspapers,

public announcements, media broadcasts, the internet or any other means, including

inspection of offices of any public authority.

10.4 DESIGNATION OF CENTRAL/STATE PUBLIC INFORMATION OFFICERS

(1) Every public authority shall, within one hundred days (100 days) of the enactment of

this Act, designate as many officers as the Central Public Information Officers or

State Public Information Officers, as the case may be, in all administrative units or

offices under it as may be necessary to provide information to persons requesting for

the information under this Act.

(2) Every public authority shall designate an officer, within one hundred days of the

enactment of this Act, at each sub-divisional level or other sub-district level as a

Central Assistant Public Information Officer or a State Assistant Public Information

Officer, as the case may be, to receive the applications for information or appeals

under this Act for forwarding the same forthwith to the Central Public Information

Officer or the State Public Information Officer or senior officer specified under

section 19(1) or the Central Information Commission or the State Information

Commission.

However, where an application for information or appeal is given to a Central

Assistant Public Information Officer or a State Assistant Public Information Officer,

as the case may be, a period of five days shall be added in computing the period for

response specified under section 7(1).

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(3) Every Central Public Information Officer or State Public Information Officer, as the

case may be, shall deal with requests from persons seeking information and render

reasonable assistance to the persons seeking such information.

(4) The Central Public Information Officer or State Public Information Officer, as the

case may be, may seek the assistance of any other officer as he or she considers it

necessary for the proper discharge of his or her duties.

(5) Any officer, whose assistance has been sought under sub-section (4), shall render all

assistance to the Central Public Information Officer or State Public Information

Officer, as the case may be, seeking his or her assistance and for the purposes of any

contravention of the provisions of this Act, such other officer shall be treated as a

Central Public Information Officer or State Public Information Officer, as the case

may be.

10.5 REQUESTS FOR OBTAINING INFORMATION

1) A person, who desires to obtain any information under this Act, shall make a

request in writing or through electronic means in English or Hindi or in the

official language of the area in which the application is being made,

accompanying such fee as may be prescribed, to—

a. the CPIO or SPIO, as the case may be, of the concerned public authority;

b. the CAPIO or State Assistant Public Information Officer, as the case may be,

specifying the particulars of the information sought by him or her:

Provided that where such request cannot be made in writing, the Central Public

Information Officer or State Public Information Officer, as the case may be, shall

render all reasonable assistance to the person making the request orally to reduce

the same in writing.

2) An applicant making request for information shall not be required to give any

reason for requesting the information or any other personal details except those

that may be necessary for contacting him.

Transfer of application

1) Where an application is made to a public authority requesting for an

information,—

i. which is held by another public authority; or

ii. the subject matter of which is more closely connected with the

functions of another public authority,

The public authority, to which such application is made, shall transfer the

application or such part of it as may be appropriate to that other public authority

and inform the applicant immediately about such transfer:

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2) Provided that the transfer of an application pursuant to this sub-section shall be

made as soon as practicable but in no case later than five days from the date of

receipt of the application.

Disposal of request

1) Subject to the proviso to sub-section (2) of section 5 or the proviso to sub-section

(3) of section 6, the Central Public Information Officer or State Public

Information Officer, as the case may be, on receipt of a request under section 6

shall, as expeditiously as possible, and in any case within thirty days of the receipt

of the request. either provide the information on payment of such fee as may be

prescribed or reject the request for any of the reasons specified in sections 8 and 9:

Provided that where the information sought for concerns the life or liberty of a

person, the same shall be provided within forty-eight hours of the receipt of the

request.

2) If the Central Public Information Officer or State Public Information Officer, as

the case may be, fails to give decision on the request for information within the

period specified under sub-section (/), the Central Public Information Officer or

State Public Information Officer, as the case may be, shall be deemed to have

refused the request.

3) Where a decision is taken to provide the information on payment of any further

fee representing the cost of providing the information, the Central Public

Information Officer or State Public Information Officer, as the case may be, shall

send an intimation to the person making the request, giving—

a. the details of further fees representing the cost of providing the

information as determined by him, together with the calculations made to

arrive at the amount in accordance with fee prescribed under sub-section

(/),requesting him to deposit that fees, and the period intervening between

the despatch of the said intimation and payment of fees shall be excluded

for the purpose of calculating the period of thirty days referred to in that

subsection;

b. information concerning his or her right with respect to review the decision

as to the amount of fees charged or the form of access provided, including

the particulars of the appellate authority, time limit, process and any other

forms.

4) Where access to the record or a part thereof is required to be provided under this

Act and the person to whom access is to be provided is sensorily disabled, the

Central Public Information Officer or State Public Information Officer, as the case

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may be, shall provide assistance to enable access to the information, including

providing such assistance as may be appropriate for the inspection.

5) Where access to information is to be provided in the printed or in any electronic

format, the applicant shall, subject to the provisions of sub-section (6), pay such

fee as may be prescribed: Provided that the fee prescribed under sub-section ( /) of

section 6 and sub-sections (/) and (5) of section 7 shall be reasonable and no such

fee shall be charged from the persons who are of below poverty line as may be

determined by the appropriate Government.

6) Notwithstanding anything contained in sub-section (5), the person making request

for the information shall be provided the information free of charge where a

public authority fails to comply with the time limits specified in subsection(1).

7) Before taking any decision under sub-section (/), the Central Public Information

Officer or State Public Information Officer, as the case may be, shall take into

consideration the representation made by a third party under section 1.

8) Where a request has been rejected under sub-section (/), the Central Public

Information Officer or State Public Information Officer, as the case may be, shall

communicate to the person making the request,—(i) the reasons for such rejection;

a. The period within which an appeal against such rejection may be

preferred; and the particulars of the appellate authority.

9) Information shall ordinarily be provided in the form in which it is sought unless it

would disproportionately divert the resources of the public authority or would be

detrimental to the safety or preservation of the record in question.

10.6 EXEMPTION FROM DISCLOSURE OF INFORMATION (SECTION 8):

Following are the exemptions under RTI Act, 2005:

1) Notwithstanding anything contained in this Act, there shall be no obligation to give any

citizen,—

a) information, disclosure of which would prejudicially affect the sovereignty and

integrity of India, the security, strategic, scientific or economic interests of the State,

relation with foreign State or lead to incitement of an offence;

b) information which has been expressly forbidden to be published by any court of law

or tribunal or the disclosure of which may constitute contempt of court;

c) information, the disclosure of which would cause a breach of privilege of Parliament

or the State Legislature;

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d) information including commercial confidence, trade secrets or intellectual property,

the disclosure of which would harm the competitive position of a third party, unless

the competent authority is satisfied that larger public interest warrants the disclosure

of such information;

e) information available to a person in his fiduciary relationship, unless the competent

authority is satisfied that the larger public interest warrants the disclosure of such

information;

f) information received in confidence from foreign Government;

g) information, the disclosure of which would endanger the life or physical safety of any

person or identify the source of information or assistance given in confidence for law

enforcement or security purposes;

h) information which would impede the process of investigation or apprehension or

prosecution of offenders;

i) cabinet papers including records of deliberations of the Council of Ministers,

Secretaries and other officers

j) information which relates to personal information the disclosure of which has no

relationship to any public activity or interest, or which would cause unwarranted

invasion of the privacy of the individual unless the Central Public Information Officer

or the State Public Information Officer or the appellate authority, as the case may be,

is satisfied that the larger public interest justifies the disclosure of such information.

2) Notwithstanding anything in the Official Secrets Act, 1923 (19 of 1923) nor any of the

exemptions permissible in accordance with sub-section (/), a public authority may allow

access to information, if public interest in disclosure outweighs the harm to the protected

interests.

3) Subject to the provisions of clauses (a), (c) and (i) of sub-section (I), any information

relating to any occurrence, event or matter which has taken place, occurred or happened

twenty years before the date on which any request is made under section 6 shall be

provided to any person making a request under that section.

10.7 GROUNDS FOR REJECTION TO ACCESS IN CERTAIN CASES (SECTION 9)

Without prejudice to the provisions of section 8, a Central Public Information Officer or a

State Public Information Officer, as the case may be, may reject a request for information

where such a request for providing access would involve an infringement of copyright

subsisting in a person other than the State.

10.8 SEVERABILITY (SECTION 10)

1) Where a request for access to information is rejected on the ground that it is in relation to

information which is exempt from disclosure, then, notwithstanding anything contained in

this Act, access may be provided to that part of the record which does not contain any

information which is exempt from disclosure under this Act and which can reasonably be

severed from any part that contains exempt information.

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2) Where access is granted to a part of the record under sub-section (I), the Central Public

Information Officer or State Public Information Officer, as the case may be, shall give a

notice to the applicant, informing—

a) that only part of the record requested, after severance of the record containing

information which is exempt from disclosure, is being provided;

b) the reasons for the decision, including any findings on any material question of fact,

referring to the material on which those findings were based;

c) the name and designation of the person giving the decision;

d) details of the fees calculated by him or her and the amount of fee which the applicant

is required to deposit

e) His or her rights with respect to review of the decision regarding non-disclosure of

part of the information, the amount of fee charged or the form of access provided,

including the particulars of the senior officer specified under sub-section (/) of section

19 or the Central Information Commission or the State Information Commission. as

the case may be, time limit, process and any other form of access.

10.9 THIRD PARTY INFORMATION (SECTION 11)

1) Where a Central Public Information Officer or a State Public Information Officer,

as the case may be, intends to disclose any information or record, or part thereof

on a request made under this Act, which relates to or has been supplied by a third

party and has been treated as confidential by that third party, the Central Public

Information Officer or State Public Information Officer, as the case may be, shall,

within five days from the receipt of the request, give a written notice to such third

party of the request and of the fact that the Central Public Information Officer or

State Public Information Officer, as the case may be, intends to disclose the

information or record, or part thereof, and invite the third party to make a

submission in writing or orally, regarding whether the information should be

disclosed, and such submission of the third party shall be kept in view while

taking a decision about disclosure of information:

Provided that except in the case of trade or commercial secrets protected by law,

disclosure may be allowed if the public interest in disclosure outweighs in

importance any possible harm or injury to the interests of such third party.

2) Where a notice is served by the Central Public Information Officer or State Public

Information Officer, as the case may be, under sub-section (/) to a third party in

respect of any information or record or part thereof, the third party shall, within

ten days from the date of receipt of such notice, be given the opportunity to make

representation against the proposed disclosure.

3) Notwithstanding anything contained in section 7, the Central Public Information

Officer or State Public Information Officer, as the case may be, shall, within forty

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days after receipt of the request under section b, if the third party has been given

an opportunity to make representation under sub-section (2), make a decision as to

whether or not to disclose the information or record or part thereof and give in

writing the notice of his decision to the third

4) A notice given under sub-section (3) shall include a statement that the third party

to whom the notice is given is entitled to prefer an appeal under section 19 against

the decision.

10.10 CONSTITUTION OF CENTRAL INFORMATION COMMISSION

1) The Central Government shall, by notification in the Official Gazette constitute a

body to be known as the Central Information Commission to exercise the powers

conferred on, and to perform the functions assigned to, it under this Act.

2) The Central Information Commission shall consist of—

a. the Chief Information Commissioner; and

b. Such number of Central Information Commissioners, not exceeding ten, as

may be deemed necessary.

3) The Chief Information Commissioner and Information Commissioners shall be

appointed by the President on the recommendation of a committee consisting of—

a. the Prime Minister, who shall be the Chairperson of the committee;

b. the Leader of Opposition in the Lok Sabha; and

c. Union Cabinet Minister to be nominated by the Prime Minister.

Explanation.—For the purposes of removal of doubts, it is hereby declared

that where the Leader of Opposition in the House of the People has not been

recognised as such, the Leader of the single largest group in opposition of the

Government in the House of the People shall be deemed to be the Leader of

Opposition.

4) The general superintendence, direction and management of the affairs of the

Central Information Commission shall vest in the Chief Information

Commissioner who shall be assisted by the Information Commissioners and may

exercise all such powers and do all such acts and things which may be exercised

or done by the Central Information Commission autonomously without being

subjected to directions by any other authority under this Act.

5) The Chief Information Commissioner and information Commissioners shall be

persons of eminence in public life with wide knowledge and experience in law,

science and technology, social service, management, journalism, mass media or

administration and governance.

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6) The Chief Information Commissioner or an Information Commissioner shall not

be a Member of Parliament or Member of the Legislature of any State or Union

territory, as the case may be, or hold any other office of profit or connected with

any political party or carrying on any business or pursuing any profession.

7) The headquarters of the Central Intimation Commission shall be at Delhi and the

Central Information Commission may, with the previous approval of the Central

Government, establish offices at other places in India.

Term of office and conditions of service

1) The Chief Information Commissioner shall hold office for a term of five years from

the date on which he enters upon his office and shall not be eligible for

reappointment, provided that no Chief Information Commissioner shall hold office as

such after he has attained the age of sixty-

2) Every Information Commissioner shall hold office for a term of five years from the

date on which he enters upon his office or till he attains the age of sixty-five years,

whichever is earlier, and shall not be eligible for reappointment as such Information

Commissioner:

• Provided that every Information Commissioner shall, on vacating his office

under this sub-section be eligible for appointment as the Chief Information

Commissioner in the manner specified in sub-section (3) of section 12:

• Provided further that where the Information Commissioner is appointed as the

Chief Information Commissioner, his term of office shall not be more than

five years in aggregate as the Information Commissioner and the Chief

Information Commissioner.

3) The Chief Information Commissioner or an Information Commissioner shall before

he enters upon his office make and subscribe before the President or some other

person appointed by him in that behalf, an oath or affirmation according to the form

set out for the purpose in the First Schedule.

4) The Chief Information Commissioner or an Information Commissioner may, at any

time, by writing under his hand addressed to the President, resign from his office:

• Provided that the Chief Information Commissioner or an Information

Commissioner may be removed in the manner specified under section 14.

5) The salaries and allowances payable to and other terms and conditions of service of

a. The Chief Information Commissioner shall be the same as that of the Chief

Election Commissioner;

b. An Information Commissioner shall be the same as that of an Election

Commissioner:

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• Provided that if the Chief Information Commissioner or an Information

Commissioner, at the time of his appointment is, in receipt of a pension,

other than a disability or wound pension, in respect of any previous service

under the Government of India or under the Government of a State, his

salary in respect of the service as the Chief Information Commissioner or

an Information Commissioner shall be reduced by the amount of that

pension including any portion of pension which was commuted and

pension equivalent of other forms of retirement benefits excluding pension

equivalent of retirement gratuity:

• Provided further that if the Chief Information Commissioner or an

Information Commissioner if, at the time of his appointment is, in receipt

of retirement benefits in respect of any previous service rendered in a

Corporation established by or under any Central Act or State Act or a

Government company owned or controlled by the Central Government or

the State Government, his salary in respect of the service as the Chief

Information Commissioner or an Information Commissioner shall be

reduced by the amount of pension equivalent to the retirement benefits:

• Provided also that the salaries, allowances and other conditions of service

of the Chief Information Commissioner and the Information

Commissioners shall not be varied to their disadvantage after their

appointment.

6) The Central Government shall provide the Chief Information Commissioner and the

information Commissioners with such officers and employees as may be necessary

for the efficient performance of their functions under this Act, and the salaries and

allowances payable to and the terms and conditions of service of the officers and other

employees appointed for the purpose of this Act shall be such as may be prescribed.

10.11 CONSTITUTION OF STATE INFORMATION COMMISSION—

1) Every State Government shall, by notification in the Official Gazette, constitute a

body to be known as the (name of the State) Information Commission to exercise the

powers conferred on, and to perform the functions assigned to, it under this Act.

2) The State Information Commission shall consist of—

a. The State Chief Information Commissioner, and

b. Such number of State Information Commissioners, not exceeding ten, as may

be deemed necessary.

3) The State Chief Information Commissioner and the State Information Commissioners

shall be appointed by the Governor on the recommendation of a committee consisting

of—

a. The Chief Minister, who shall be the Chairperson of the committee;

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b. The Leader of Opposition in the Legislative Assembly; and (M) a Cabinet

Minister to be nominated by the Chief Minister.

Explanation.—For the purposes of removal of doubts, it is hereby declared that

where the Leader of Opposition in the Legislative Assembly has not been

recognised as such, the Leader of the single largest group in opposition of the

Government in the Legislative Assembly shall be deemed to be the Leader of

Opposition.

4) The general superintendence, direction and management of the affairs of the State

Information Commission shall vest in the State Chief Information Commissioner who

shall be assisted by the State Information Commissioners and may exercise all such

powers and do all such acts and things which may be exercised or done by the State

Information Commission autonomously without being subjected to directions by any

other authority under this Act.

5) The State Chief Information Commissioner and the State Information Commissioners

shall be persons of eminence in public life with wide knowledge and experience in

law, science and technology, social service, management, journalism, mass media or

administration and governance.

6) The State Chief Information Commissioner or a State Information Commissioner

shall not be a Member of Parliament or Member of the Legislature of any State or

Union territory, as the case may be, or hold any other office of profit or connected

with any political party or carrying on any business or pursuing any profession.

7) The headquarters of the State Information Commission shall be at such place in the

State as the State Government may, by notification in the Official Gazette, specify

and the State Information Commission may, with the previous approval of the State

Government, establish offices at other places in the State.

Term of office and conditions of service

1) The State Chief Information Commissioner shall hold office for a term of five years

from the date on which he enters upon his office and shall not be eligible for

reappointment:

• Provided that no State Chief Information Commissioner shall hold office as

such after he has attained the age of sixty-five years.

2) Every State Information Commissioner shall hold office for a term of five years from

the date on which he enters upon his office or till he attains the age of sixty-five years,

whichever is earlier, and shall not be eligible for reappointment as such State

Information Commissioner:

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• Provided that every State Information Commissioner shall, on vacating his

office under this sub-section, be eligible for appointment as the State Chief

Information Commissioner in the manner specified in sub-section (3) of

section 15:

• Provided further that where the State Information Commissioner is appointed

as the State Chief Information Commissioner, his term of office shall not be

more than five years in aggregate as the State Information Commissioner and

the State Chief Information Commissioner.

3) The State Chief Information Commissioner or a State Information Commissioner,

shall before he enters upon his office make and subscribe before the Governor or

some other person appointed by him in that behalf, an oath or affirmation according to

the form set out for the purpose in the First Schedule.

4) The State Chief Information Commissioner or a State Information Commissioner

may, at any time, by writing under his hand addressed to the Governor, resign from

his office:

• Provided that the State Chief Information Commissioner or a State

Information Commissioner may be removed in the manner specified under

section 17.

5) The salaries and allowances payable to and other terms and conditions of service of

a. the State Chief Information Commissioner shall be the same as that of an

Election Commissioner;

b. the State Information Commissioner shall be the same as that of the Chief

Secretary to the State Government:

o Provided that if the State Chief Information Commissioner or a State

Information Commissioner, at the time of his appointment is, in receipt

of a pension, other than a disability or wound pension, in respect of

any previous service under the Government of India or under the

Government of a State, his salary in respect of the service as the State

Chief Information Commissioner or a State Information Commissioner

shall be reduced by the amount of that pension including any portion of

pension which was commuted and pension equivalent of other forms of

retirement benefits excluding pension equivalent of retirement gratuity:

o Provided further that where the State Chief Information Commissioner

or a State Information Commissioner if, at the time of his appointment

is, in receipt of retirement benefits in respect of any previous service

rendered in a Corporation established by or under any Central Act or

State Act or a Government company owned or controlled by the

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Central Government or the State Government, his salary in respect of

the service as the State Chief Information Commissioner or the State

Information Commissioner shall be reduced by the amount of pension

equivalent to the retirement benefits:

o Provided also that the salaries, allowances and other conditions of

service of the State Chief Information Commissioner and the State

Information Commissioners shall not be varied to their disadvantage

after their appointment.

6) The State Government shall provide the State Chief Information Commissioner and

the State Information Commissioners with such officers and employees as may be

necessary for the efficient performance of their functions under this Act, and the

salaries and allowances payable to and the terms and conditions of service of the

officers and other employees appointed for the purpose of this Act shall be such as

may be prescribed.

10.12 POWERS OF INFORMATION COMMISSION

The CIC/SIC has a duty to receive complaints from any person-

Who has not been able to submit an information request because a PIO has not been

appointed;

Who has been refused information that was requested;

Who has received no response to his/her information request within the specified time

limits;

Who thinks the fees charged are unreasonable;

Who thinks information given is incomplete or false or misleading; and

Any other matter relating to obtaining information under this law.

If the Commission feels satisfied an enquiry may be initiated and while initiating an

enquiry the Commission has same powers as vested in a Civil Court.

The Central Information Commission or the State Information Commission during the

inquiry of any compliant under this Act may examine any record which is under the

control of the public authority, and no such record may be withheld from it on any

grounds.

10.13 ENFORCEMENT AND PENALTY

The Act requires every ‗public authority‘ to designate an officer as the Public

Information Officer (PIO).

A citizen can make an application to the PIO.

The Central Information Commission and State Information Commissions, created

under the Act, facilitate the implementation of the Act.

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Every PIO is liable for a fine of ₹ 250 per day, upto a maximum of ₹ 25,000, for any of the following breaches:

o Not receiving an application.

o Delaying the furnishing of the requested information without reasonable

cause.

o Malafide refusal to furnish information.

o Knowingly furnishing incorrect, incomplete or misleading information.

o Destroying requested information.

The CIC/SIC also has the power to recommend disciplinary action for violation of the

law against the PIO.

10.14 APPELLATE AUTHORITY

Any person who does not receive a decision within the specified time or is aggrieved by a

decision of the PIO may file an appeal under the Act.

10.14.1 First Appeal

First appeal shall be filed to the officer senior in rank to the PIO in the concerned Public

Authority within 30 days, from the expiry of the prescribed time limit for providing the

information or from the receipt of the decision. However, the Appellate Authority may

entertain the appeal even after the expiry of the aforesaid 30 days, if it is satisfied that the

Appellant has been prevented by sufficient cause from filing the appeal within the prescribed

period of 30 days.

First Appeal shall be disposed of within 30 days from the date of its receipt or within such

extended period not exceeding a total of forty five days from the date of filing thereof, for

reasons to be recorded in writing.

10.14.2 Second Appeal

Second appeal shall be filled to the CIO or SIC, as the case may be, within 90 days of the

date on which the decision was given or should have been made by the First Appellate

Authority. However, the Appellate Authority may entertain the appeal even after the expiry

of the aforesaid 90 days, if it is satisfied that the Appellant has been prevented by sufficient

cause from filing the appeal within the prescribed period of 90 days.

10.15 RELEVANT CASE LAWS

Cases related to public authority

Case 1: S. S. Angadi Vs State Chief Information Commissioner, Bangalore

A body can be constituted by registering it as a company, society or co-operative,

under the respective Acts. The Acts control and regulate the body. This, however,

does not mean that the body is created by the government. The regulation by the

Act also does not amount to control. For it to be a ‗public authority‘ the

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government should be controlling the management of the body. The case explores

this point in relation to a society registered under the Karnataka Societies

Registration Act.

The High Court noted that: It is not in dispute that (the Society) is not created by

‗any other law made by the State Legislature‘. It is also not in dispute that it is not a body owned or controlled or substantially financed by the Government. It is also

not a non-Government organisation substantially financed directly or indirectly by

funds provided by the appropriate Government. It is no doubt true that any society

in Karnataka established by few or many individuals is required to be registered

under the Karnataka Societies Act. It is also not in dispute that a society registered

under the Karnataka Societies Registration Act, is also required to file its annual

accounts and the elections are to be held from time to time in accordance with the

bye-laws.

The provisions of the Societies Registration Act, 1960, applicable to all societies,

are under the control of the Government only to regulate its activities and to see

that it shall not misuse the funds of its members. Therefore, such Association

cannot be treated as a Public Authority as defined under Right to Information Act,

as contended by the petitioner.

Case 2: Principal, M.D. SDG College Vs State Information Commission, Haryana

Sanatan Dharam Sabha is a registered society. The society runs M. D. Sanatan

Dharam Girls College, Ambala City. The college is affiliated to Kurukshetra

University and is covered by the Haryana Affiliated Colleges (Security of Service)

Rules, 2006. The society receives a 95% aid from the State of Haryana, to

disburse the salaries and to meet the expenses of its employees. Some information

was sought by a teacher of the college under the Right to Information Act. The

management of the college claimed that the college had not been established or

constituted by or under the Constitution or any other law made by the Parliament

or state legislature. Further any institution, authority or body not established or

constituted by funds provided by the government, could not be subjected to the

Act.

The High Court ruled as follows:

… the definition of ‗public authority‘ comprises in the first category, those authorities, bodies or institutions of self-government which are established

or constituted by or under the Constitution or by the law made by the Parliament

or the state legislature or by the notification issued or orders made by the

appropriate government. In the second part, ‗public authority‘ has been defined to include anybody owned, controlled or substantially financed or non-government

organisation substantially financed directly or indirectly by the funds provided by

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the appropriate government. There is no controversy that the petitioner has been

receiving 95% aid from the State of Haryana to disburse the salary and to meet the

expenses of its employees. Therefore, it is covered by the expression used in

Section 2(h)(d)(ii) of the Act, namely ‗non-government organisation substantially

financed directly or indirectly by the funds provided by the appropriate

Government.‘ The use of expression ‗includes‘ in Clause (d) of Section 2(h) of the

Act clearly indicates that the definition is illustrative and not exhaustive.

According to the well-known principles of judicial interpretation where the word

‗defined‘ is declared to include certain other things, the definition is to be taken as prima facie extensive.

Case 3: DAV College T. And M. Society Vs Director of Public Instruction

DAV College was initially given a grant to the extent of 95%, for building its

infrastructure, by the Union Territory, Chandigarh. Subsequently, the grant-in-aid

was reduced to 45%. The college contended that it was not a public authority

within the Right to Information Act. Thus, it need not furnish the requested

information.

The Punjab and Haryana High Court ruled that:

……….The definition of the expression ‗public authority‘ itself shows that ‗public authority‘ would include any organisation / body, owned, controlled or substantially financed directly or indirectly by funds provided by the government

or even the nongovernment organisation which is substantially financed. The

petitioner has claimed that they are getting only 45% grant-in-aid after admitting

that initially, the grant-in-aid paid to them was to the extent of 95%. If on account

of a policy of the Government, the grant-in-aid to the extent of 95%, which was

given initially, allowing the petitioner to build up its own infrastructure, and

reducing the grant-in-aid later would not result into an argument that no

substantial grant-in-aid is received and therefore, it could not be regarded as

‗public authority‘. Therefore, we do not find any substance in the stance taken by the petitioner that it is not a ‗public authority‘.

Cases Related To Refusal of Information

Case 1: Pritam Rooj Vs University Of Calcutta

A student applied under the Right to Information Act, for a copy of his evaluated

answer script. The university had a mechanism where a student could apply for re-

evaluation, but not for giving a copy of the evaluated answer-sheet. The

University denied the information. In appeal before the Commission, it

apprehended that the furnishing of the information would disclose the identity of

the examiners. Also, that it would open the floodgates for every student to demand

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a copy of his answer sheet. The University also argued that as the answer script

was created by the student himself, it was not ‗information‘.

The High Court ruled in favour of the student. It noted:

…The Act begins with a citizen‘s right to obtain information and ends with the information being made available to him or his request being justly rejected on

the grounds recognised by the Act; what happens before and what may be the

consequence of the information being made available or rightfully denied is a

matter beyond the operation of the Act. The University‘s first challenge … answer-script is not information at all cannot be accepted. In the stricter sense, if

such answer-script answers to the description of information, whether such

information is of the examinee‘s creation, counts for little. In the broader

perspective, if a document submitted takes on any marking it becomes a new

document.

The University‘s offer of making the marks allotted to each individual question available to all candidates is fair and laudable, but not if it comes with the rider

that the answer-scripts should then be exempted from being divulged. … the answered paper with or without an examiner‘s etchings thereon is not information exempted under any of the limbs of Section 8. the University‘s eagerness here to not divulge the identity of its examiners there is a desirable and worthy motive - to

ensure impartiality in the process. But a procedure may be evolved such that the

identity of the examiner is not apparent on the face of the evaluated answer-

script……

Case 2: Celsa Pinto Vs Goa State Information Commission

An applicant sought information from the Goa Public Service Commission, in

relation to the appointment of a new curator on the retirement of the earlier one.

The applicant asked why the post was filled through direct recruitment and not

promotion. The second associated question was why a particular person was not

considered for promotion to the post The Public Information Officer‘s reply to the question was: ‗I don‘t know.‘

The applicant came before the Goa Information Commission in appeal. The Goa

Information Commission upheld the allegation of the applicant that the Public

Information Officer was guilty of furnishing incomplete, misleading and false

information and imposed a penalty of ₹ 5,000. This was to be deducted from the

salary of the PIO.

The PIO moved the High Court against the decision of the Goa State

Commission. The High Court ruled:

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… the Act confers on the citizen the right to information. Information has been defined by Section 2(f) as follows.

…The definition cannot include within its fold, answers to the question ‗why‘, which would be the same thing as asking the reason for a justification for a particular thing. The Public Information Authorities cannot expect to

communicate to the citizen the reason why a certain thing was done or not done in

the sense of a justification because the citizen makes a requisition about

information. Justifications are matter within the domain of the adjudicating

authorities and cannot properly be classified as information.

Cases Related To Rights of Third Party

Case 1: Surupsingh Hrya Naik Vs State Of Maharashtra

The Supreme Court imposed a punishment of one month imprisonment of an

MLA of the Legislative Assembly of the State of Maharashtra. The MLA, on his

surrender to the police, was shifted to Sir J.J. Hospital, Mumbai on account of

suspected heart problems as well as low sugar and blood pressure. The person

underwent medical treatment at the hospital for 21 days. He spent the remaining

tenure of the imprisonment in jail. A citizen applied to the hospital for details of

the medical records of the convict. The citizen set out in the application that it was

in public interest to know why a convict was allowed to stay in the air conditioned

comfort of the hospital and thus, escape the punishment imposed on him. The

information was denied on the grounds that it was exempted under Section 8.

The High Court ruled:

…By its very constitution and the plenary powers which the Legislature enjoys, such information cannot be denied to Parliament or State Legislature by

any public authority. As the preamble notes, the Act is to provide for setting out a

practical regime of right to information for citizens, to secure access to

information under the control of public authorities as also to promote transparency

and accountability in the working of every public authority. These objects of the

legislature are to make our society more open and public authorities more

accountable. Normally, therefore, all such information must be made readily

available to a citizen subject to the right of privacy and that information having no

relationship to any public authority or entity. The test always in such matter is

between the private rights of a citizen and the right of third person to be informed.

The third person need not give any reason for his information. Considering that,

we must hold that the object of the Act leans in favour of making available the

records in the custody or control of the public authorities.

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10.17 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

a) A citizen seeking information can make a verbal request under RTI.

b) RTI Act does not put an end to verbal request and information can be given

informally on such request.

c) Application for information can be only on a prescribed format.

d) RTI Act provides uniform standard format for applying for information

throughout the country.

e) The PIO has power to verify the intention of the applicant in seeking information.

f) The applicant is not required to give reasons for seeking information under the

Act.

g) The size and content of proactive disclosure reduces proportionately with the

number of applications seeking information.

h) If the same information is sought by a large number of people, then it may be

made available to only one person.

i) There is a limit on the number of kinds of information sought in one single

application.

j) If a citizen asks, 20 kinds of information, the PIO can negotiate with the citizen.

2. Long Answer Questions

Q1. Discuss the aim and objective of RTI Act, 2005.Outline the powers vested in the

Central Information Commission or State Information Commission as regards

receiving and inquiring into the complaint from any person under the RTI Act, 2005.

Q2. Discuss the obligations of public authorities as regards maintaining records and

publishing information.

Q3.Explain the types of information which can be denied to any citizen by a public

authority notwithstanding anything contained in the RTI Act, 2005. Cite two case

laws.

Q4. Describe the decision related powers of the chief Information Commission and

the state Information Commission.

SUGGESTED READINGS

1) Albuquerque, D. (2016). Legal Aspects of Business Text, Jurisprudence and Cases. New

Delhi: Oxford University Press.

2) Pathak, A. (2014). Legal Aspects of Business. New Delhi: Mc Graw Hill Education.

3) Bare Act on RTI Act, 2005 available at http://rti.gov.in/rti-act.pdf

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LESSON 11

LAWS RELATED TO PREVENTION AND CONTROL OF AIR

POLLUTION AND WATER POLLUTION

11 STRUCTURE

11.1 Sustainable development

11.2 Biodiversity

11.3 Carbon credit

11.4 National Environment Policy 2006

11.5 Law relating to prevention and control of air pollution and water pollution

11.6 Self-Assessment Questions

11.1 SUSTAINABLE DEVELOPMENT (Dan Cristian Durana, 2015)

Meaning and Scope

The term sustainable development has been coined by the world commission on environment

and development (WCED), popularly known as Brundtland Commission in its report ―Our Common Future‖. The report defines the term ―Sustainable Development‖ in the following words:

Sustainable development is development that meets the needs of the present without

compromising the ability of future generations to meet their own needs. It contains within it

two key concepts:

the concept of 'needs', in particular the essential needs of the world's poor, to which

overriding priority should be given; and

The idea of limitations imposed by the state of technology and social organization on

the environment's ability to meet present and future needs.

The importance of sustainable development

The role of sustainable development of society has been noted since 1992 the Earth Summit

in Rio de Janeiro and reiterated at the World Summit Sustainable Development in

Johannesburg in 2002 (Baron et al., 2001). Without environmental protection cannot ensure

sustainable development. Sustainable development includes environmental protection, while

environmental conditions sustainable development. The European Union requires a new

approach to global environmental problems linked to environmental effects and pressure of

all socio-economic consequences. Realizing the need for continued economic and social

development, it is imperative to protect and improve the state of the environment represents

the only possibility to create and maintain the welfare of both the present generation and

those to come; this balance was the factor that can and should ensure the development of

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society as a whole (Glasbergen, 2000). This is the key issue of sustainable development. In

the last century, economic and technical progress has led to the neglect and deterioration of

natural resources systems. The global economy, however, is now structured and non-

renewable resources with a strong impact on the environment, exceeding the capacity of

different ecosystems. Examples are: the decimation of forest areas, reducing the area of

farmland per person, reduction of drinking water, global warming, melting glaciers and

extinction of animal and plant species. Environmental issues and how man / human

communities affect ecosystem concerns have been part of human society from the beginning

(Popescu, 2001). It is believed today that many prehistoric societies have developed rules and

taboos regarding the use of certain common resources so as to protect or ensure their rational

exploitation. The natural resources and ecosystems supporting everyday life were represented

in many traditions and rituals of communities living in close contact with nature. In this

context, sustainable development is of fundamental importance because:

The use of renewable resources does not exceed their rate of regeneration with

emphasis on preservation of natural resources. In this eco-centric approach, natural

resources are assigned an intrinsic value, independently of their usefulness to human

beings. It is a romantic vision that sees nature as an antidote to industrialized society.

The use of renewable resources cannot exceed the replacement rate. In this case the

emphasis is on conservation of natural resources. This approach is deeply

anthropocentric - nature has value to the extent that sustains life and human activity is

prevalent even today.

The release of harmful substances shall not exceed the capacity of natural systems to

absorb and compensate. In this case the general welfare of the ecosystem should be

the first priority, and human aspirations and needs to be resized and re-evaluated by

the fact that they are not a priority, but a small element among many other items.

Components of sustainable development

Economic component: Economic development desired to produce a maximum flow of

income in terms of rational use, resource efficiency, particularly scarce resources. As a

manifestation of macroeconomic dynamics, economic development requires a set of

quantitative transformations, structure and quality, both in economic and in scientific

research and manufacturing technologies in organizational structures and mechanisms of

economic functioning in thinking and people's behaviour (Becker, 2001).In this approach, the

main concern is related to how countries develop their economies. It is shown that rapid

economic growth with obtaining maximum benefits, especially for developing countries,

creates a heavy burden on the ability of the planet to support. From the perspective of

sustainable development, economic growth should be such that negative environmental

impact is limited. The concept of sustainable development represents a paradigm shift in this

area - sustainability is not just about pivita environmental protection but is discussed in the

context of connection with other areas, especially those involving economic activity (Krajnc

& Glavic, 2005). Therefore, development must be conceived as a process multidimensional,

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involving major changes in social structures, attitudes popular and national institutions,

aiming at accelerating economic growth, reducing inequality and poverty eradication. On the

one hand, the economic dimension aims to ensure a balanced and sustainable economic

environment by producing goods and services continuously to maintain manageable levels of

government and external debt and avoid extreme sectoral imbalances affecting agriculture

and production industrial, and in order to achieve needed training a competitive industry,

diversification of industrial production and attracting investment. On the other hand, the

economic dimension of the strategy is strangled by other countries that fail to recover from

the economic crisis, putting its future difficulty. Moreover, the common objectives, they must

reach a certain level joint and above this impediment can change the results (Stefanescu et al.,

2009). These issues need to be resolved in a manner that inspires even if the problems are

difficult, however, to have full exhalation solutions. Instruments that lead to economic

purpose is achieved education, scientific and intellectual potential that is available, the target

technology and natural resources, thereby triggering role in economic activity, which in turn

helps in achieving the ultimate goal of the strategy.

Ecological component: Environment development can be defined as the ability to hold

whiles the three basic functions of the environment: the power function of resources, waste

receptor function and the direct utility (Wardle & Giller, 1996). By its complexity, ecological

component of sustainable development captures not only the actual economic development in

relation to the environment, but the entire development. Ecological development is closely

correlated growth and interrelation with environmental laws, the ecological balance. Wheeler

(2004) says that currently witnessing a transition from an economic perspective toward an

environmental perspective. This dimension is oriented towards satisfying specific practical

requirements, and long, proposing harmony and complexity, excluding unilateral orientation

to a branch or another of the industry. In other words, in an area environmental development

is the capacity to grow and to bring the environment and its peculiarities, while ensuring the

protection and renewal of natural resources and environmental heritage. Environmental

protection is considering physical and biological system stability, developing their capacity to

adapt to change and less conservation status considered ideal (Bran, 1991). Assuming a

complex structure, diversified term eco-development is characterized by greater capacity

according to the requirements of a stage and some major goals. It requires caution in

ecologically; stimulates the development of knowledge based on consumption, but

subordinate planning 810 Dan Cristian Duran et al. / Procedia Economics and Finance 26 (

2015 ) 806 – 811 opportunities; expected a harmonious development, cautious, in full

agreement with the possibilities at a time and in a particular place. Thus, economic growth

should not affect the environment in order to talk about sustainable development.

International organizations have proposed environmental policy, but there are a lot of people

who do not like the actions targeting the environment, on the issue as a political

commonplace. As said above ecological development is an objective of developing countries

that stretches over a long period. 3.3. Human component assuming that viable alternatives

have been identified to maintain ecological balance and authorities everywhere so converting

raw materials purchasing in material goods to be made in accordance with the requirements

for efficiency and optimality, quality of life and labour standards is the prerequisite fulfilment

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and satisfaction professional, social or otherwise. Human sustainability has regard to social

interactions, relationships, behavioural patterns and values of humanity (Dempsey et al.,

2011).

Human component: aimed at socio-cultural stability, achieve fairness both at the same time

a generation is concerned maintaining cultural diversity "world village", as the prevention or

cure of "social ills" of alienation, lack of job satisfaction (continue under a narrowing of

specialization on the basis of "knowing more and more about less and less" that difficult for

the worker to perceive the finished product and understand the usefulness of his work), the

relativism of values, the end of history, uncertainties about the nearer future or more distant

"disease" postmodern age specific. Realizing the need for further social development

(without harming the environment) is imperative to protect and improve the state of the

environment represents the only possibility to create and maintain the welfare of both the

present generation and those to come, this balance was the factor that can and should ensure

development company whole. Minica and France (2008) synthesize the human aspect of

sustainable development worldwide involves the following objectives:

Promotion of education, training and public support for the environment

Protecting and promoting human health (focused on access to medical facilities,

especially in rural areas, control of infectious diseases, risks pollution and ecological

risk).

Fight against poverty (through access of the poor to sustainable livelihoods,

promoting human development and integrated policy investment in human capital).

Demographic threatening sustainable development (focusing on population growth,

especially in developing countries).

11.2 BIODIVERSITY (Millennium Ecosystem Assessment, 2005)

Biodiversity is the variability among living organisms from all sources, including terrestrial,

marine, and other aquatic ecosystems and the ecological complexes of which they are part;

this includes diversity within species, between species, and of ecosystems. Biodiversity forms

the foundation of the vast array of ecosystem services that critically contribute to human

well-being. Biodiversity is important in human-managed as well as natural ecosystems.

Decisions humans make that influence biodiversity affect the well-being of themselves and

others.

Biodiversity is defined as ―the variability among living organisms from all sources including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of

which they are part; this includes diversity within species, between species and of

ecosystems.‖ The importance of this definition is that it draws attention to the many dimensions of biodiversity. It explicitly recognizes that every biota can be characterized by

its taxonomic, ecological, and genetic diversity and that the way these dimensions of

diversity vary over space and time is a key feature of biodiversity. Thus only a

multidimensional assessment of biodiversity can provide insights into the relationship

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between changes in biodiversity and changes in ecosystem functioning and ecosystem

services (CF2).

Biodiversity includes all ecosystems—managed or unmanaged. Sometimes biodiversity is

presumed to be a relevant feature of only unmanaged ecosystems, such as wild lands, nature

preserves, or national parks. This is incorrect. Managed systems—be it plantations, farms,

croplands, aquaculture sites, rangelands, or even urban parks and urban ecosystems—have

their own biodiversity. Given that cultivated systems alone now account for more than 24%

of Earth‘s terrestrial surface, it is critical that any decision concerning biodiversity or ecosystem services address the maintenance of biodiversity in these largely anthropogenic

systems.

Measuring Biodiversity: Species Richness and Indicators

In spite of many tools and data sources, biodiversity remains difficult to quantify precisely.

But precise answers are seldom needed to devise an effective understanding of where

biodiversity is, how it is changing over space and time, the drivers responsible for such

change, the consequences of such change for ecosystem services and human well-being, and

the response options available. Ideally, to assess the conditions and trends of biodiversity

either globally or sub-globally, it is necessary to measure the abundance of all organisms over

space and time, using taxonomy (such as the number of species), functional traits (for

example, the ecological type such as nitrogen-fixing plants like legumes versus non-nitrogen-

fixing plants), and the interactions among species that affect their dynamics and function

(predation, parasitism, compe­tition, and facilitation such as pollination, for instance, and

how strongly such interactions affect ecosystems). Even more important would be to estimate

turnover of biodiversity, not just point estimates in space or time. Currently, it is not possible

to do this with much accuracy because the data are lacking. Even for the taxonomic

component of biodiversity, where information is the best, considerable uncertainty remains

about the true extent and changes in taxonomic diversity (C4).

There are many measures of biodiversity; species richness (the number of species in a given

area) represents a single but important metric that is valuable as the common currency of the

diversity of life—but it must be integrated with other metrics to fully capture biodiversity.

Because the multidimensionality of biodiversity poses formidable challenges to its

measurement, a variety of surrogate or proxy measures are often used. These include the

species richness of specific taxa, the number of distinct plant functional types (such as

grasses, forbs, bushes, or trees), or the diversity of distinct gene sequences in a sample of

microbial DNA taken from the soil. Species- or other taxon-based measures of biodiversity,

however, rarely capture key attributes such as variability, function, quantity, and

distribution—all of which provide insight into the roles of biodiversity. (See Box 1.2)

Ecological indicators are scientific constructs that use quantitative data to measure aspects of

biodiversity, ecosystem condition, services, or drivers of change, but no single ecological

indicator captures all the dimensions of biodiversity (C2.2.4). (See Box 1.3) Ecological

indicators form a critical component of monitoring, assessment, and decision-making and are

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designed to communicate information quickly and easily to policy-makers. In a similar

manner, economic indicators such as GDP are highly influential and well understood by

decision-makers. Some environmental indicators, such as global mean temperature and

atmospheric CO2 concentrations, are becoming widely accepted as measures of

anthropogenic effects on global climate. Ecological indicators are founded on much the same

principles and therefore carry with them similar pros and cons

11.3 CARBON CREDIT (Conserve Energy Future, 2018)

A carbon credit is a generic term for any tradable certificate or permit representing the right

to emit one tonne of carbon dioxide or the mass of another greenhouse gas with a carbon

dioxide equivalent to one tonne of carbon dioxide. Following is the brief summary of what

carbon credits are:

Permission – Permission is granted to a country, company or organization to produce

a certain number of emissions which can be traded in, if not used.

License to trade – Another explanation says that a certificate is issued giving the

prospective emitter the right to produce up to one ton of CO2 or its equivalent.

Another common term – Another widely used term refers to a carbon offset as a

financial tool to reduce (not increase) carbon emissions by storing carbons for future

or later use.

In a nutshell, carbon credit (often called carbon offset) is a credit for greenhouse emissions

reduced or removed from the atmosphere from an emission reduction project, which can be

used, by governments, industry or private individuals to compensate for the emissions they

are generating.

Features of Carbon Credits

When this ingenious concept was first discussed and the phrase coined, stakeholders saw

mainly inherent benefits in on the one hand, sustaining life as we know it today, and on the

other, rescuing the environment and cutting down on carbon emissions. But like the practice

of using the dreaded credit card, the plan hasn‘t worked up to now. In the meantime, this list highlights some of the main features of carbon credits, if correctly put into practice.

Individual benefits – Domestic users can also gain by trading in carbon credits while

helping them adopt a more concerted and disciplined approach to reducing their

carbon footprints.

Buying greenhouse gasses – According to most sources, the purchase of carbon

credits remains a lucrative enterprise. Each carbon credit that is purchased is

channelled to a company which is specifically tasked to bring down emissions or

provide more sustainable and environmentally-friendly alternatives to these emitters.

Business and job opportunities – Trading in carbon credits using the capitalist

principle, if applied fairly, allows private investors to generate profits from their

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purchases and diversify them towards the creation of environmentally-sustainable

businesses which either emits very low or no carbons. And as new businesses are

started up, more employment opportunities arise.

Things you need to know about the Kyoto Protocol

Essentially, this is where it all began. The very idea of trading in carbon credits was signed

and sealed at this gathering of nations some years ago. That nations have reneged on the

agreements they signed is not a moot point and is a matter of public record. Here we highlight

some of the characteristics of the Kyoto Protocol.

UNFCCC – The Kyoto Protocol saw the formation of the United Nations Framework

Convention on Climate Change.

Cap-and-trade – At this gathering a system was devised to impose national caps on

greenhouses of developed nations that ratified the Kyoto Protocol. They were aligned

as Annex B countries.

AAU’s – Each of these countries were given an allotment and corresponding number

of emissions allowances known as Assigned Amount Units.

Trading targets – Participating countries were required to reduce their emissions to

well below nineteen-ninety levels and below five percent by 2012. They could also

reduce their emissions by trading in emissions allowances with countries that already

had surplus allowances. They could meet their targets by buying carbon credits.

Two flexible mechanisms – Overall costs of reducing emissions were kept minimal.

Increasing cost-effectiveness, the Kyoto Protocol also founded two ‗flexible mechanisms‘ known as the Clean Development Mechanism and the Joint Implementation.

How Does Carbon Credits Work?

Carbon credits are typically measured in tonnes of CO2-equivalents (or CO2e) and are

bought and sold through number of international brokers, online retailers and trading

platforms. Businesses that find it hard to comply with the carbon emissions, purchase carbon

credits to offset their emissions by making finance readily available to renewable energy

projects, forest protection and reforestation projects around the world. These renewable

energy and energy efficiency projects replace fossil fuel and industrial processes. This all

helps businesses in mitigating their emissions and comply with the global standards.

Offsetting one tonne of carbon means there will be one less tonne of carbon dioxide in the

atmosphere than there would otherwise have been. For e.g.: when solar energy companies sell

carbon offsets, this helps them as these projects become more viable. The buyers of the

offsets benefit as they can use these offsets to mitigate their greenhouse gas emissions. Many

types of activities can generate carbon offsets. Projects which sell carbon credits include

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wind, solar, geothermal, biomass projects which replace fossil fuel powered plants, low cost

household device projects that can eliminate need for extra energy, methane capture from

landfill gas and agriculture, different a forestation projects, forest protection from illegal

logging, destruction of heat trapping greenhouse gases from the atmosphere and many more.

The mitigating mechanisms

We have already pointed out the credit conundrum and professed that carbon credit

agreements have not worked to plan. This section deals with another term; carbon offsets. It

is similar to the principle of applying carbon credits but is primarily designed to help reverse

damage already done. Here we highlight some of the features and functions of using carbon

offsets.

Investments – Those who can, invest in projects which are specifically designed to

reduce or prevent carbon dioxide or greenhouse gasses.

Damage control – One description given to carbon offsets was that it is a form of

damage control in which guilty parties can make reparations for previously excessive

emissions and basically through the purchase of carbon offsets, turn a blind eye while

harmful gasses are controlled or reduced elsewhere.

The vintage year – This peculiar analogy synonymous with the harvesting of grapes

basically highlights the year in which the reduction of carbon emissions actually

occurs.

The source project – It remains a precarious form of technology because there is

always the chance that it may fail. What happens is this; the technologies that are

devised to offset carbons use biomass and methane. But industrial energy efficiencies

are encouraged during this ‗source‘ process and renewal energy is used.

Certification – Checks and balances are put into place via certifications to ensure that

carbon offsetting procedures and methodologies are properly authenticated and

registered.

Which Carbon Credit Method Works Best – Mandatory or Voluntary?

Finally, while protocols and regulations are in place, voluntary alternatives towards making

concerted efforts to reduce carbon emissions are also available. A question worth asking at

this point is; which method works better and if so, are there results to substantiate this. We

end this article on carbon credits by listing key historical features and assigned mandates. We

begin with mandatory carbon credits. You can go through these brief lists and begin to draw

your own conclusions.

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Mandatory Carbon Credits

The Kyoto Protocol was the precursor to mandatory carbon credits. Here we highlight some

of the main outcomes from that historic conference and those that followed it.

Cap-and-trade systems – Under a cap-and-trade program, a limit (or ―cap‖) on certain types of emissions or pollution is set, and companies are permitted to sell (or

―trade‖) the unused portion of their limits to other companies that are struggling to comply.

CDM – The Clean Development Mechanism only enforces countries to partially meet

Kyoto targets through the financing of carbon reduction vehicles in mainly

developing countries.

JI – Tradable units from Joint Implementation initiatives are known as Emissions

Reductions Units. This system has a long-term target in mind.

EU-ETS – The European Union Emissions Trading Scheme is a body of countries

that have all been given an overall cap to work from as a single body. The original EU

member states of this body were nick-named the ‗bubble‘.

Voluntary Carbon Credits

Finally, let us briefly feature the voluntary alternative. Best known by its acronym, VERS,

Voluntary Emission Reductions, reminiscent of bartering, are a carbon offset traded

voluntarily for carbon credits. Reductions, when they take place, are monitored, in turn, by a

voluntary certification process. Voluntary carbon credit enables companies and businesses to

purchase carbon credits on a voluntary basis to satisfy Corporate Social Responsibility

objectives

This overview has explained what carbon credits are, how it works and how it mitigates

carbon emissions. It linked this explanation to its origins, also suggesting that the process of

trading in carbon credits is subject to neglect and/or abuse and the agreements in place could

be broken.

Government policy regarding environment

The Ministry of Environment & Forests is the nodal agency in the administrative structure of

the Central Government, for the planning, promotion, co-ordination and overseeing the

implementation of environmental and forestry programmes. The Ministry is also the Nodal

agency in the country for the United Nations Environment Programme (UNEP). The

principal activities undertaken by Ministry of Environment & Forests, consist of conservation

& survey of flora, fauna, forests and Wildlife, prevention & control of pollution, afforestation

& regeneration of degraded areas and protection of environment, in the frame work of

legislations. Following are some of the days dedicated to environment nationally and

internationally:

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The World Environment Day (on 5 June),

The Earth Day (on 22 April), and

The World Water Day (on 22 March), every year, to demonstrate their concern for

clean air, clean water, and sustainable energy resources.

11.4 NATIONAL ENVIRONMENT POLICY 2006 (Ministry of Environment and Forest,

Governement of India, 2006)

A diverse developing society such as ours provides numerous challenges in the economic,

social, political, cultural, and environmental arenas. All of these coalesce in the dominant

imperative of alleviation of mass poverty, reckoned in the multiple dimensions of livelihood

security, health care, education, empowerment of the disadvantaged, and elimination of

gender disparities.

The present national policies for environmental management are contained in the National

Forest Policy, 1988 National Conservation Strategy and Policy Statement on Environment

and Development, 1992 Policy Statement on Abatement of Pollution,1992 National

Agriculture Policy, 2000 National Population Policy, 2000 National Water Policy, 2002 have

also contributed towards environmental management. All of these policies have recognized

the need for sustainable development in their specific contexts and formulated necessary

strategies to give effect to such recognition. The National Environment Policy seeks to extend

the coverage, and fill in gaps that still exist, in light of present knowledge and accumulated

experience. It does not displace, but builds on the earlier policies.

The principal Objectives of this policy are enumerated below.

These Objectives relate to current perceptions of key environmental challenges. They may,

accordingly, evolve over time:

i. Conservation of Critical Environmental Resources: To protect and conserve

critical ecological systems and resources, and invaluable natural and man-made

heritage, which are essential for life support, livelihoods, economic growth, and a

broad conception of human well-being.

ii. Intra-generational Equity: Livelihood Security for the Poor: To ensure equitable

access to environmental resources and quality for all sections of society, and in

particular, to ensure that poor communities, which are most dependent on

environmental resources for their livelihoods, are assured secure access to these

resources.

iii. Inter-generational Equity: To ensure judicious use of environmental resources to

meet the needs and aspirations of the present and future generations.

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iv. Integration of Environmental Concerns in Economic and Social Development:

To integrate environmental concerns into policies, plans, programmes, and projects

for economic and social development.

v. Efficiency in Environmental Resource Use: To ensure efficient use of

environmental resources in the sense of reduction in their use per unit of economic

output, to minimize adverse environmental impacts.

vi. Environmental Governance: To apply the principles of good governance

(transparency, rationality, accountability, reduction in time and costs, participation,

and regulatory independence) to the management and regulation of use of

environmental resources.

vii. Enhancement of Resources for Environmental Conservation: To ensure higher

resource flows, comprising finance, technology, management skills, traditional

knowledge, and social capital, for environmental conservation through mutually

beneficial multi stakeholder partnerships between local communities, public agencies,

the academic and research community, investors, and multilateral and bilateral

development partners.

Environment Vs Environmental Law

‗Environment includes water, air, and land and the inter-relationship which exists

among and between

Water, air, land, human beings, other living creatures, plants, micro-organisms, and

property. Whereas

environmental law is a complex body of statutes, common law, treaties, conventions,

regulations, and

policies which, broadly, operate to regulate the interaction of humanity and the natural

environment for the

Purpose of reducing the adverse impact of human activities.

This can be divided into the following two major subjects:

1) Pollution control and remediation;

2) Resource conservation and management.

Following is a list of the environmental legislations that arose in part due to ineffective

solution of environmental problems and issues at common law:

General

Forest and wildlife

Water

Air

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General

The Environment (Protection) Act (EPA), 1986

The Environment (Protection) Act (EPA) was enacted in 1986. It extends to the whole

of India, including the State of Jammu and Kashmir.

EPA is said to be an umbrella legislation passed to provide a framework for the

Central Government towards the coordination of activities of various Central and

State agencies under previous legislations, such as Water Act, Air Act, etc.

The Act seeks to provide for the protection and improvement of the environment that

includes water, air, land, human being, other living creatures, plants, micro-

organisms, and properties and for matters connected there with.

It empowers the Central Government to initiate measures to protect and improve

environmental quality, control, and reduce pollution from all sources, and prohibit or

restrict the setting and/or operation of any industrial facility on environmental

grounds. The Act was amended in 1991.(The Act shall be discussed in detail in next

lesson)

The Hazardous Wastes (management and handling) Rules, 1989

The Hazardous Wastes (Management and Handling) Rules aim to control the

generation, collection, treatment, import, storage, and handling of hazardous waste.

Accordingly, before hazardous waste is delivered at the hazardous waste site, the

occupier or operator of a facility shall ensure that the hazardous waste is packaged in

a manner suitable for storage and transport and the labeling and packaging shall be

easily visible and be able to withstand physical conditions and climate factors.

Moreover, packaging, labeling, and transport of hazardous wastes shall be in

accordance with the provisions of the rules issued by the Central Government under

the Motor Vehicles Act, 1988, and other guidelines issued from time to time.

The Manufacture, Storage, and Import of Hazardous Chemical Rules, 1989

The Manufacture, Storage, and Import of Hazardous Chemical Rules framed under

the Environment (Protection) Act, 1986, by the Government of India apply to

workplaces in which hazardous chemicals are manufactured or stored.

These rules define the terms used in this context, and set up an authority to inspect,

once a year, the industrial activity connected with hazardous chemicals and isolated

storage facilities.

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The Manufacture, Use, Import, Export, and Storage of Hazardous Micro-

organisms/Genetically Engineered Organisms, or Cells Rules, 1989

The Manufacture, Use, Import, Export, and Storage of Hazardous Micro-

organisms/Genetically Engineered Organisms or Cells Rules were framed by the

Central Government in the exercise of the powers conferred by Sections 6, 8, and 25

of the Environment (Protection) Act, 1986.

These rules were introduced with a view to protect the environment, nature, and

health in connection with the application of gene technology and microorganisms.

The Public Liability Insurance Act, 1991

With the growth of hazardous industries, risks from accidents, processes, and

operations, not only to the persons employed in such undertakings but also to the

public who may be in vicinity, have increased. The people who are affected by

accidents in the hazardous installations are, very often, economically weaker sections

and suffer great hardships because of delayed relief and compensation. While the

workers and employees of hazardous installations are protected under separate laws,

members of the public are not assured of any relief except through long legal process.

To ameliorate the sufferings of members of the public due to accidents which take

place in hazardous installations it was found essential to provide for mandatory Public

Liability Insurance.

To achieve this objective, the Public Liability Insurance Bill was introduced in the

Parliament. The Public Liability Insurance Act, 1991, is in consonance with the spirit

of principle of the Rio Declaration, in as much as it aims at providing for public

liability insurance for the purpose of providing immediate relief to the persons

affected by accident occurring while handling any hazardous substance or matters

connected therewith or incidental thereto.

The National Environmental Tribunal Act, 1995

In 1995, the Central Government established the National Environment Tribunal

(through the National Environment Tribunal Act, 1995) to provide for strict liability

for damage arising out of accidents caused from the handling of hazardous

substances.

This Act aims to award compensation for damages to persons, property, and the

environment arising from any activity involving hazardous substances.

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The National Environment Appellate Authority Act, 1997

The National Environment Appellate Authority Act has been created to hear appeals

with respect to restrictions of areas in which classes of industries, etc., are carried out

or prescribed subject to certain safeguards under the EPA.

The Biomedical Waste (management and handling) Rules, 1998

The Biomedical Waste (Management and Handling) Rules is a legal binding on the

healthcare institutions to streamline the process of proper handling of hospital waste

such as segregation, disposal, collection, and treatment.

With a view to control the indiscriminate disposal of hospital waste/biomedical waste,

MoEF has issued a notification on Biomedical Waste Management under the

Environment (Protection) Act. Govt. of NCT of Delhi in its notification dated 6th

July, 1999, has authorized Delhi Pollution Control Committee (DPCC) for the

purpose of granting authorization for collection, reception, storage, treatment, and

disposal of biomedical waste to implement the Biomedical Waste Management Rules,

1998.

These rules will apply to hospitals, nursing homes, veterinary hospitals, animal

houses, pathological labs, and blood banks, generating hospital wastes except such

occupier of clinics, dispensaries, pathological labs, blood banks providing

treatment/service to less than one thousand patients per month.

The Environment (siting for industrial projects) Rules, 1999

The Environment (Siting for Industrial Projects) Rules, 1999, framed by the Central

Government in exercise of the powers conferred by the Environment (Protection) Act

lay down detailed provisions relating to areas to be avoided for siting of industries,

precautionary measures to be taken for site selecting, and also the aspects of

environmental protection which should have been incorporated during the

implementation of the industrial development projects.

The Municipal Solid Wastes (management and handling) Rules, 2000

The Municipal Solid Wastes (Management and Handling) Rules, 2000, apply to every

municipal authority responsible for the collection, segregation, storage, transportation,

processing, and disposal of municipal solid wastes which consists of household waste,

construction and demolition debris, sanitation residue, and waste from streets.

This garbage is generated mainly from residential and commercial complexes. Under

these rules, it is obligatory on the part of all the municipal authorities to arrange for

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collection, segregation, transportation, and suitable disposal of municipal wastes of

the municipal towns/cities.

The Ozone Depleting Substances (regulation and control) Rules, 2000

The Ozone Depleting Substances (Regulation and Control) Rules have been laid

down for the regulation of production and consumption of ozone depleting

substances.

India signed the Montreal Protocol along with its London Amendment in 1992 and

also ratified the Copenhagen, Montreal, and Beijing Amendments in 2003 mindful of

the precautionary measures needed for the protection of the ozone layer, otherwise its

modifications would result into the amount of solar ultraviolet radiation having

biological effect that reaches the earth surface and potential consequences for human

health, for organisms, ecosystems, and material.

Government of India as a party to the protocol continues its action, measures, and

adoption of necessary regulations with the sole objective of protection of ozone layer.

The Batteries (Management and Handling) Rules, 2001

The Batteries (Management and Handling) Rules, 2001, shall apply to every

manufacturer, importer, re-conditioner, assembler, dealer, auctioneer, consumer, and

bulk consumer involved in the manufacture, processing, sale, purchase, and use of

batteries or components so as to regulate and ensure the environmentally safe disposal

of used batteries.

The Noise Pollution (Regulation and Control, Amendment) Rules, 2002

The Noise Pollution (Regulation and Control) (Amendment) Rules lay down such

terms and conditions as are necessary to reduce noise pollution and permit use of loud

speakers or public address systems during night hours (between 10:00 pm to 12:00

midnight) on or during any cultural or religious festive occasion.

These rules apply to diesel generator (DG) sets as well. Accordingly, the maximum

permissible sound pressure level for new DG sets with rated capacity up to 1000

KVA, manufactured on or after 1st July, 2003, shall be 75 decibel at 1 meter from the

enclosure surface. Moreover, towards the compliance of these rules, the DG sets

should be provided with integral acoustic enclosure at the manufacturing stage itself.

The Biological Diversity Act, 2002

The Biological Diversity Act, 2002, is an act to provide for the conservation of

biological diversity, sustainable use of its components, and fair and equitable sharing

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of the benefits arising out of the use of biological resources and knowledge associated

with it.

Forest and Wildlife Protection Legislations

Forest and wildlife protection legislations have been briefly introduced below.

Indian Forest Act 1927 and Amendment 1984

Indian Forest Act 1927 and Amendment 1984 are one of the many surviving colonial

statutes. This Act was enacted by the Indian Parliament in view of rapid deforestation

and the resulting environmental degradation.

It was enacted to ―consolidate the law related to forest, the transit of forest produce,

and the duty chargeable against timber and other forest produce‖. It defines what a forest offence is, what are the acts prohibited inside a reserved forest, and what are the

penalties that can be imposed on the violation of the provisions of the Act? It also

defines the procedure to be followed for declaring an area to be a reserved forest, a

protected forest, or a village forest.

Wildlife Protection Act 1972, Rules 1973, and Amendment 1991

Wildlife Protection Act 1972, Rules 1973, and Amendment 1991 provide for the

protection of birds and animals and for all matters that are connected to it whether it

be their habitat or the waterhole or the forests that sustain them.

The Act empowers the Central and State governments to declare any area a wildlife

sanctuary, national park, or closed area.

There is a blanket ban on carrying out any industrial activity inside these protected

areas. It provides for authorities to administer and to implement the Act; regulate the

hunting of wild animals; protect specified plants, sanctuaries, national parks, and

closed areas; restrict trade or commerce in wild animals or animal articles; and

miscellaneous matters.

The Act prohibits hunting of animals except with permission of authorized officer

when an animal has become dangerous to human life or property or is disabled or

diseased beyond recovery.

Forest (conservation) Act 1980 and Rules 1981

Forest (Conservation) Act 1980 and Rules 1981 were enacted by the Parliament to

check further deforestation and conserve forests and to provide for matters connected

therewith or ancillary or incidental thereto.

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It strictly restricts and regulates the de-reservation of forests or use of forest land for

non-forest purposes without the prior approval of Central Government.

The Act also lays down the pre-requisites for the diversion of forest land for non-

forest purposes.

The Easement Act, 1882

An easement is a right which the owner or occupier of certain land possesses, as such,

for the beneficial enjoyment of that land, to do and continue to do something, or to

prevent and continue to prevent something being done, in or upon or in respect of

certain other land not his own.

Accordingly, the Easement Act allows private rights to use a resource that is

groundwater by viewing it as an attachment to the land.

It also states that all surface water belongs to the state and is a state property.

The Indian Fisheries Act, 1897

Fishing in India is a major industry in its coastal states, employing over 14 million

people. India is a major exporter of fish in the world. In 2010, the country exported

over 700,000 metric tons of fish to some 90 countries generating revenue of over $1.9

billion.

Marine and freshwater catch fishing combined with aquaculture fish farming is a

rapidly growing industry in India.

In 2010, India was the sixth largest producer of marine and freshwater capture

fisheries, and the second largest aquaculture farmed fish producer in the world.

To protect and promote this benevolent industry, several key laws and regulations are

relevant at the central level.

These include the British-era Indian Fisheries Act (1897), which penalizes the killing

of fish by poisoning water and by using dynamite or other explosive substance in any

way whether coastal or inland.

The Inland Stream Vessel Act, 1917

The Inland Stream Vessel Act, 1917, provides a mandatory rule of the fresh water for

the use of the passengers.

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The River Boards Act, 1956

The River Boards Act, 1956, enables the states to enroll the Central Government in

setting up an Advisory River Board to resolve issues in inter-state cooperation.

The Act provides for the establishment of River Boards for the regulation and

development of inter-State rivers and river valleys.

The Water (Prevention and Control of Pollution) Act, 1974

The Water (Prevention and Control of Pollution) Act, 1974, establishes an

institutional structure for preventing and abating water pollution. It establishes

standards for water quality and effluent.

Polluting industries must seek permission to discharge waste into effluent bodies.

The CPCB (Central Pollution Control Board) was constituted under this Act.

Air Pollution Protection Legislations

A brief account of major air pollution protection legislations is given below.

The Factories Act, 1948

The Factories Act, 1948, was the first to express concern for the working environment

of the workers.

It is an Act to consolidate and amend the law regulating labour in factories. While

ensuring the safety and health of the workers, the Act contributes to environmental

protection.

The Act contains a comprehensive list of 29 categories of industries involving

hazardous processes, which are defined as a process or activity where unless special

care is taken, raw materials used therein or the intermediate or the finished products,

by-products, wastes or effluents would:

i. Cause material impairment to the health of the persons engaged

ii. Result in the pollution of the general environment

The amendment of 1987 has sharpened its environmental focus and expanded its

application to hazardous processes. The amendment requires the following

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compulsory disclosure of information by the occupier of every factory involving a

hazardous process:

i. The occupier of every factory involving a hazardous process shall disclose in

the manner prescribed all information regarding dangers, including health

hazards and the measures to overcome such hazards arising from the exposure

to or handling of the materials or substances in the manufacture,

transportation, storage, and other processes to the workers employed in the

factory, the Chief Inspector, the local authority within whose jurisdiction the

factory is situated, and the general public in the vicinity.

ii. The occupier shall, at the time of registering the factory involving a hazardous

process, lay down a detailed policy with respect to the health and safety of the

workers employed therein and intimate such policy to the Chief Inspector and

the local authority and, thereafter, at such intervals as may be prescribed,

inform the Chief Inspector and the local authority of any change made in the

said policy.

iii. The information furnished under subsection (1) shall include accurate

information as to the quantity, specifications, and other characteristics of

wastes and the manner of their disposal.

iv. Every occupier shall, with the approval of the Chief Inspector, draw up an

onsite emergency plan and detailed disaster control measures for his factory

and make known to the workers employed therein and to the general public

living in the vicinity of the factory the safety measures required to be taken in

the event of an accident taking place.

v. Every occupier of a factory shall

a. if such a factory is engaged in a hazardous process on the

commencement of the Factories (Amendment) Act, 1987, within a

period of 30 days of such commencement; and

b. if such factory proposes to engage in a hazardous process at any time

after such commencement, within a period of 30 days before the

commencement of such process, inform the Chief Inspector of the

nature and details of the process in such form and in such manner as

may be prescribed.

vi. Where any occupier of a factory contravenes the provisions of subsection (5),

the license issued under Section 6 to such factory shall, notwithstanding any

penalty to which the occupier or factory shall be subjected to under the

provisions of this Act, be liable for cancellation.

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vii. The occupier of a factory involving a hazardous process shall, with the

previous approval of the Chief Inspector, lay down measures for the handling,

usage, transportation, and storage of hazardous substances inside the factory

premises and the disposal of such substances outside the factory premises and

publicize them in the manner prescribed among the workers and the general

public living in the vicinity.

The Air (Prevention and Control of Pollution) Act, 1981

The Air (Prevention and Control of Pollution) Act, 1981, provides for the control and

abatement of air pollution. It entrusts the power of enforcing this act to the CPCB.

The Act is very innovative in its approach. It empowers the State board to lay down

the standards for emission of air pollutants into the atmosphere from industrial plants,

automobiles, or from any other source having in view the standards laid down by the

Central board.

If an industry is already in operation, it should have applied for consent to the board

within a period of three months from the date the area is declared as air pollution

control area under Section 19 of the Act.

The salient features of the Act are as follows:

i. The Central board is to advise the Central Government on matters of air

pollution, specify desirable air quality standards, coordinate activities of the

State boards, train persons engaged in air pollution control, discriminate

information and data relating to the Air Act, etc. The State boards are

empowered with similar powers within their respective states.

ii. The Act empowers the State board to establish laboratories and appoint

Government analysts for analyzing samples of air or emission for the purpose

of implementing the Act.

iii. The Act also empowers the State Government to declare any area within the

state as an air pollution control area after consulting the State boards. In such

areas, the Act prohibits operation of any industrial plant without prior

permission from the Government; besides, the Act also prohibits the use of

certain fuels, materials, or appliances that may cause air pollution in the air

pollution control area.

iv. The Act empowers boards to issue direction including closure, prohibition, or

regulation of any industry, operation, or process and for stopping and control

of water or power supply and other sources.

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The Atomic Energy Act, 1982

The Atomic Energy Act, 1982, deals with the radioactive waste. The Act provides for

the development, control, and use of atomic energy for the welfare of the people of

India and for other peaceful purposes and for the matters connected therewith.

The purpose of the Atomic Energy Act (AEA) is to assure the proper management of

source, special nuclear material, and byproduct material.

The AEA and the statutes that amended it delegate the control of nuclear energy

primarily to the Department of Energy (DOE), the Nuclear Regulatory Commission

(NRC), and the Environmental Protection Agency (EPA).

DOE authority extends to the following:

i. Source material

a. Uranium, thorium, or any other material that is determined by the NRC

pursuant to the provisions of Section 61 of the AEA to be a source

material; or

b. Ores containing one or more of the foregoing materials, in such

concentration as the NRC may by regulation determine from time to time.

ii. Special nuclear material

a. Plutonium, uranium enriched in the isotope 233 or the isotope 235, and

any other material that the NRC, pursuant to the provisions of Section 51

of the AEA, determines to be special nuclear material, but does not include

source material; or

b. Any material artificially enriched by any of the foregoing, but does not

include source material.

iii. Byproduct material

a. Any radioactive material (except special nuclear material) yielded in or

made radioactive by exposure to radiation incident to the process of

producing or utilizing special nuclear material, and

b. The tailings or wastes produced by the extraction or concentration of

uranium or thorium from any ore processed primarily for its source

material content.

The Air (Prevention and Control of Pollution) Amendment Act, 1987

The Air (Prevention and Control of Pollution) Amendment Act, 1987, empowers the Central

and State Pollution Control Boards (SPCBs) to meet with grave emergencies of air pollution.

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11.6 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

a) The World Environmental day is celebrated on 5th June.

b) The first of the major environmental protection act to be promulgated in India was

Water Act.

c) The Forest (Conservation) Act was enacted in the year 1986.

d) The Forest (Conservation) Act extends to the whole of India except Jammu and

Kashmir.

e) Penalty for conservation of the provisions of the Forest Act is under Section 3A.

f) The Wildlife (Protection) Act was enacted in the year 1986.

g) The Water (Prevention and Control of Pollution) Act was enacted in the year

1974.

h) Wildlife Protection Act 1972, Rules 1973, and Amendment 1991 provide for the

protection of birds and animals.

i) The Atomic Energy Act, 1982, deals with the radioactive waste.

j) The Factories Act, 1948 contains a comprehensive list of 29 categories of

industries involving hazardous processes.

2. Long Answer Questions

Q1. Write short notes on the following:

i. The National Green Tribunal

ii. Water Pollution Protection Legislations

Q2. Discuss the objectives and significance of environment legislations in force.

Q3. Describe environmental laws that exclusively deal with air and water.

Q4. Describe the legislations in force that seek to provide protection to wildlife and

forests.

SUGGESTED READINGS

1) Conserve Energy Future. (2018). Conserve Energy Future. Retrieved May 31, 2018, from

www.conserve-energy-future.com: https://www.conserve-energy-future.com/carbon-

credits.php

2) Dan Cristian Durana, L. M. (2015). The components of sustainable development - a possible

approach. Procedia Economics and Finance, 26, 806-811.

3) Millennium Ecosystem Assessment. (2005). Ecosystems and Human Well-Being:Biodiversity

Synthesis. Washington, DC: World Resources Institute.

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4) Ministry of Environment and Forest, Governement of India. (2006). National Environment

Policy 2006. Ministry of Environment and Forest, Governement of India.

5) http://www.moef.gov.in

6) http://envfor.nic.in

7) http://iced.cag.gov.in/?page_id=256

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LESSON 12

THE ENVIRONMENT PROTECTION ACT, 1986 AND

NATIONAL GREEN TRIBUNAL

12 STRUCTURE

12.1 The Environment Protection Act,1986

12.1.1 Introduction

12.1.2 Premises of the Act

12.1.3 Objectives, scope and Applicability

12.1.4 Definitions

12.1.5 Measures for Prevention, Control, and Abatement of Environmental

Pollution

12.1.6 Power of Central Government to take measures to protect and improve

environment (Section 3)

12.1.7 Rules to regulate environmental pollution (Section 6)

12.1.8 Powers of entry and inspection (Section 10)

12.1.9 Offences and Penalty

12.2 The National Green Tribunal

12.2.1 Background

12.2.2 Structure

12.2.3 Powers

12.2.4 Procedure for filing an Application or Appeal

12.2.5 Principles of Justice adopted by NGT

12.2.6 Review and Appeal

12.3 Self-Assessment Questions

12.1 THE ENVIRONMENT PROTECTION ACT, 1986

The Environment (Protection) Act was enacted in the year 1986. It was enacted with the main

objective to provide the protection and improvement of environment and for matters

connected therewith.

12.1.1 Introduction

The Act is one of the most comprehensive legislations with pretext to protection and

improvement of environment. The Constitution of India also provides for the protection of

the environment. Article 48A of the Constitution specifies that the State shall endeavor to

protect and improve the environment and to safeguard the forests and wildlife of the country.

Article 51 A further provides that every citizen shall protect the environment. (Legal Bites :

Law and Beyond, 2016)

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12.1.2 Premises of the Act (Legal Bites : Law and Beyond, 2016)

It is now generally accepted that environment is threatened by a wide variety of human

activities ranging from the instinctive drive to reproduce its kind to the restless urge of

improving the standards of living, development of technological solutions to this end, the vast

amount of waste, both natural and chemical, that these advances produce. Paradoxically, this

urge to grow and develop, which was initially uncontrolled is now widely perceived to be

threatening as it results in the depletion of both living and non-living natural resources and

life support systems. The air, water, land, living creatures as well as the environment in

general is becoming polluted at an alarming rate that needs to be controlled and curbed as

soon as possible.

The 1986 Act was enacted in this spirit. From time to time various legislations have been

enacted in India for this purpose. However, all legislations prior to the 1986 Act have been

specific relating to precise aspects of environmental pollution. However, the 1986 Act was a

general legislation enacted under Article 253 (Legislation for giving effect to international

agreements.—Notwithstanding anything in the foregoing provisions of this Chapter,

Parliament has power to make any law for the whole or any part of the territory of India for

implementing any treaty, agreement or convention with any other country or countries or any

decision made at any international conference, association or other body) of the Constitution,

pursuant to the international obligations of India. India was a signatory to the Stockholm

Conference of 1972 where the world community had resolved to protect and enhance the

environment.

The United Nations conference on human environment, held in Stockholm in June 1972,

proclaimed that ―Man is both creator and molder of his environment, which gives him

physical sustenance and affords him the opportunity for intellectual, moral, social and

spiritual growth. In the long and tortuous evolution of the human race on this planet a stage

has reached when through the rapid acceleration of science and technology man has acquired

the power to transform his environment in countless ways and on unprecedented scale. Both

aspects of man‘s environment, the natural and manmade are essential to his well-being and to

the enjoyment of basic human rights even the right to life itself‖.

While several legislations such as The Water (Prevention and Control of Pollution) Act, 1974

and The Air (Prevention and Control of Pollution) Act, 1981 were enacted after the

Conference, the need for a general legislation had become increasingly evident. The EPA was

enacted so as to overcome this deficiency.

12.1.3 Objectives, Scope and Applicability (Legal Bites : Law and Beyond, 2016)

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As mentioned earlier, the main objective of the Act was to provide the protection and

improvement of environment and for matters connected therewith. Other objectives of

implementation of the EPA are:

To implement the decisions made at the UN Conference on Human Environment held

at Stockholm in June, 1972.

To enact a general law on the areas of environmental protection which were left

uncovered by existing laws. The existing laws were more specific in nature and

concentrated on a more specific type of pollution and specific categories of hazardous

substances rather than on general problems that chiefly caused major environmental

hazards.

To co-ordinate activities of the various regulatory agencies under the existing laws

To provide for the creation of an authority or authorities for environmental protection

To provide a deterrent punishment to those who endanger human environment, safety

and health

Scope and Applicability

The Environment (Protection) Act is applicable to whole of India including Jammu &

Kashmir. It came into force on November 19, 1986.

12.1.4 Definitions

In this Act, unless the context otherwise requires,--

"Environment" includes water, air and land and the inter- relationship which exists

among and between water, air and land, and human beings, other living creatures, plants,

micro-organism and property;

"Environmental pollutant" means any solid, liquid or gaseous substance present in such

concentration as may be, or tend to be, injurious to environment;

"Environmental pollution" means the presence in the environment of any environmental

pollutant;

"Handling", in relation to any substance, means the manufacture, processing, treatment,

package, storage, transportation, use, collection, destruction, conversion, offering for sale,

transfer or the like of such substance;

"Hazardous substance" means any substance or preparation which, by reason of its

chemical or chemical properties or handling, is liable to cause harm to human beings,

other living creatures, plant, micro-organism, property or the environment;

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"Occupier", in relation to any factory or premises, means a person who has, control over

the affairs of the factory or the premises and includes in relation to any substance, the

person in possession of the substance;

"Prescribed" means prescribed by rules made under this Act.

12.1.5 Measures for Prevention, Control, and Abatement of Environmental Pollution

1. Persons carrying on industry operation, etc., not to allow emission or discharge

of environmental pollutants in excess of the standards

No person carrying on any industry, operation or process shall discharge or emit or

permit to be discharged or emitted any environmental pollutants in excess of such

standards as may be prescribed.

2. Persons handling hazardous substances to comply with procedural safeguards

No person shall handle or cause to be handled any hazardous substance except in

accordance with such procedure and after complying with such safeguards as may be

prescribed.

3. Furnishing of information to authorities and agencies in certain cases

a. Where the discharge of any environmental pollutant in excess of the prescribed

standards occurs or is apprehended to occur due to any accident or other

unforeseen act or event, the person responsible for such discharge and the person

in charge of the place at which such discharge occurs or is apprehended to occur

shall be bound to prevent or mitigate the environmental pollution caused as a

result of such discharge and shall also forthwith—

i. intimate the fact of such occurrence or apprehension of such occurrence;

and

ii. Be bound, if called upon, to render all assistance, to such authorities or

agencies as may be prescribed.

b. On receipt of information with respect to the fact or apprehension on any

occurrence of the nature referred to in sub-section (1), whether through intimation

under that sub-section or otherwise, the authorities or agencies referred to in sub-

section (1) shall, as early as practicable, cause such remedial measures to be taken

as necessary to prevent or mitigate the environmental pollution.

c. The expenses, if any, incurred by any authority or agency with respect to the

remedial measures referred to in sub-section (2), together with interest (at such

reasonable rate as the Government may, by order, fix) from the date when a

demand for the expenses is made until it is paid, may be recovered by such

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authority or agency from the person concerned as arrears of land revenue or of

public demand.

12.1.6 Power of Central Government to take measures to Protect and Improve

Environment (Section 3)

Subject to the provisions of this Act, the Central Government shall have the power to take all

such measures as it deems necessary or expedient for the purpose of protecting and

improving the quality of the environment and preventing controlling and abating

environmental pollution.

1) In particular, and without prejudice to the generality of the provisions of sub-section

(1), such measures may include measures with respect to all or any of the following

matters, namely:--

i. co-ordination of actions by the State Governments, officers and other authorities--

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

b) under any other law for the time being in force which is relatable to the

objects of this Act;

ii. planning and execution of a nation-wide programme for the prevention, control

and abatement of environmental pollution;

iii. laying down standards for the quality of environment in its various aspects;

iv. laying down standards for emission or discharge of environmental pollutants from

various sources whatsoever:

v. Provided that different standards for emission or discharge may be laid down

under this clause from different sources having regard to the quality or

composition of the emission or discharge of environmental pollutants from such

sources;

vi. restriction of areas in which any industries, operations or processes or class of

industries, operations or processes shall not be carried out or shall be carried out

subject to certain safeguards;

vii. laying down procedures and safeguards for the prevention of accidents which may

cause environmental pollution and remedial measures for such accidents;

viii. laying down procedures and safeguards for the handling of hazardous substances;

ix. examination of such manufacturing processes, materials and substances as are

likely to cause environmental pollution;

x. carrying out and sponsoring investigations and research relating to problems of

environmental pollution;

xi. inspection of any premises, plant, equipment, machinery, manufacturing or other

processes, materials or substances and giving, by order, of such directions to such

authorities, officers or persons as it may consider necessary to take steps for the

prevention, control and abatement of environmental pollution;

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xii. establishment or recognition of environmental laboratories and institutes to carry

out the functions entrusted to such environmental laboratories and institutes under

this Act;

xiii. collection and dissemination of information in respect of matters relating to

environmental pollution;

xiv. preparation of manuals, codes or guides relating to the prevention, control and

abatement of environmental pollution;

xv. Such other matters as the Central Government deems necessary or expedient for

the purpose of securing the effective implementation of the provisions of this Act.

2) The Central Government may, if it considers it necessary or expedient so to do for the

purpose of this Act, by order, published in the Official Gazette, constitute an authority

or authorities by such name or names as may be specified in the order for the purpose

of exercising and performing such of the powers and functions (including the power

to issue directions under section 5) of the Central Government under this Act and for

taking measures with respect to such of the matters referred to in sub-section (2) as

may be mentioned in the order and subject to the supervision and control of the

Central Government and the provisions of such order, such authority or authorities

may exercise and powers or perform the functions or take the measures so mentioned

in the order as if such authority or authorities had been empowered by this Act to

exercise those powers or perform those functions or take such measures.

Appointment of officers and their powers and functions

1) Without prejudice to the provisions of sub-section (3) of section 3, the Central

Government may appoint officers with such designation as it thinks fit for the

purposes of this Act and may entrust to them such of the powers and functions under

this Act as it may deem fit.

2) The officers appointed under sub-section (1) shall be subject to the general control

and direction of the Central Government or, if so directed by that Government, also of

the authority or authorities, if any, constituted under sub- section (3) of section 3 or of

any other authority or officer.

Power to give directions (Section 5)

Notwithstanding anything contained in any other law but subject to the provisions of this

Act, the Central Government may, in the exercise of its powers and performance of its

functions under this Act, issue directions in writing to any person, officer or any authority

and such person, officer or authority shall be bound to comply with such directions.3

Explanation--For the avoidance of doubts, it is hereby declared that the power to issue

directions under this section includes the power to direct--

a) the closure, prohibition or regulation of any industry, operation or process; or

b) Stoppage or regulation of the supply of electricity or water or any other service.

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12.1.7 RULES TO REGULATE ENVIRONMENTAL POLLUTION (SECTION 6)

1) The Central Government may, by notification in the Official Gazette, make rules in

respect of all or any of the matters referred to in section 3.

2) In particular, and without prejudice to the generality of the foregoing power, such

rules may provide for all or any of the following matters, namely:--

a) the standards of quality of air, water or soil for various areas and purposes;

b) the maximum allowable limits of concentration of various environmental

pollutants (including noise) for different areas;

c) the procedures and safeguards for the handling of hazardous substances;

d) the prohibition and restrictions on the handling of hazardous substances in

different areas;

e) the prohibition and restriction on the location of industries and the carrying on

process and operations in different areas;

f) The procedures and safeguards for the prevention of accidents which may cause

environmental pollution and for providing for remedial measures for such

accidents.

12.1.8 POWERS OF ENTRY AND INSPECTION (SECTION 10)

1) Subject to the provisions of this section, any person empowered by the Central

Government in this behalf shall have a right to enter, at all reasonable times with such

assistance as he considers necessary, anyplace--

a) for the purpose of performing any of the functions of the Central Government

entrusted to him;

b) for the purpose of determining whether and if so in what manner, any such

functions are to be performed or whether any provisions of this Act or the rules

made there under or any notice, order, direction or authorisation served, made,

given or granted under this Act is being or has been complied with;

c) for the purpose of examining and testing any equipment, industrial plant, record,

register, document or any other material object or for conducting a search of any

building in which he has reason to believe that an offence under this Act or the

rules made there under has been or is being or is about to be committed and for

seizing any such equipment, industrial plant, record, register, document or other

material object if he has reason to believe that it may furnish evidence of the

commission of an offence punishable under this Act or the rules made there under

or that such seizure is necessary to prevent or mitigate environmental pollution.

2) Every person carrying on any industry, operation or process of handling any

hazardous substance shall be bound to render all assistance to the person empowered

by the Central Government under sub-section (1) for carrying out the functions under

that sub-section and if he fails to do so without any reasonable cause or excuse, he

shall be guilty of an offence under this Act.

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3) If any person wilfully delays or obstructs any persons empowered by the Central

Government under sub-section (1) in the performance of his functions, he shall be

guilty of an offence under this Act.

4) The provisions of the Code of Criminal Procedure, 1973, or, in relation to the State of

Jammu and Kashmir, or an area in which that Code is not in force, the provisions of

any corresponding law in force in that State or area shall, so far as may be, apply to

any search or seizures under this section as they apply to any search or seizure made

under the authority of a warrant issued under section 94 of the said Code or as the

case may be, under the corresponding provision of the said law.

Power to take sample and analyse the same (Section 11):

1) The Central Government or any officer empowered by it in this behalf shall have

power to take, for the purpose of analysis, samples of air, water, soil or other

substance from any factory, premises or other place in such manner as may be

prescribed.

2) The result of any analysis of a sample taken under sub-section (1) shall not be

admissible in evidence in any legal proceeding unless the provisions of sub-sections

(3) and (4) are complied with.

3) Subject to the provisions of sub-section (4), the person taking the sample under sub-

section (1) shall—

a) serve on the occupier or his agent or person in charge of the place, a notice, then

and there, in such form as may be prescribed, of his intention to have it so

analysed;

b) in the presence of the occupier of his agent or person, collect a sample for

analysis;

c) cause the sample to be placed in a container or containers which shall be marked

and sealed and shall also be signed both by the person taking the sample and the

occupier or his agent or person;

d) Send without delay, the container or the containers to the laboratory established or

recognised by the Central Government under section 12.

4) When a sample is taken for analysis under sub-section (1) and the person taking the

sample serves on the occupier or his agent or person, a notice under clause (a) of sub-

section (3), then,--

a) in a case where the occupier, his agent or person wilfully absents himself, the

person taking the sample shall collect the sample for analysis to be placed in a

container or containers which shall be marked and sealed and shall also be signed

by the person taking the sample, and

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b) in a case where the occupier or his agent or person present at the time of taking

the sample refuses to sign the marked and sealed container or containers of the

sample as required under clause (c) of sub-section (3), the marked and sealed

container or containers shall be signed by the person taking the samples, and the

container or containers shall be sent without delay by the person taking the sample

for analysis to the laboratory established or recognised under section 12 and such

person shall inform the Government Analyst appointed or recognised under

section 12 in writing, about the wilful absence of the occupier or his agent or

person, or, as the case may be, his refusal to sign the container or containers.

Environmental laboratories

The Central Government may, by notification in the Official Gazette,--

a) Establish one or more environmental laboratories;

b) Recognise one or more laboratories or institutes as environmental laboratories to carry

out the functions entrusted to an environmental laboratory under this Act.

c) Make rules specifying-

i. The functions of the environmental laboratory;

ii. The procedure for the submission to the said laboratory of samples of air,

water, soil or other substance for analysis or tests, the form of the laboratory

report thereon and the fees payable for such report;

iii. Such other matters as may be necessary or expedient to enable that laboratory

to carry out its functions.

Environment Audit (Seth, 2012)

Rule 14 of the Environment Protection Rules, 1986 provides for the submission of

environmental audit report. Accordingly, every person carrying on an industry, operations, or

process requiring consent under Section 25 of the Water(Prevention and Control of

Pollution)Act or Section 21 of the Air (Prevention and Control of Pollution) Act or both or

authorization under the Hazardous Waste (Management and Handling) Rules, 1989 is

required to submit an environmental Audit report in Form V, prescribed under the said rules,

for every financial year ending on 31st march every year on or before the 15th may, to the

concerned state pollution Control Board.

Environment impact assessment notification (EIAN) (Seth, 2012)

Central Government has issued EIAN in 1994 for Environment impact assessment of

development projects. Under this Notification, 29 highly polluted industries have been

identified, where clearance from Central Government is required for setting up or expanding

the unit. An ‗Impact Assessment Agency‘ will assess the project report and the environmental impact of that project.

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Projects like nuclear power, highways, cements, etc. require Central Government only if the

investment is more than Rs.50crores. However in projects like pesticides, mining, distilleries,

etc., Central Government clearance is always required irrespective of the amount of

investment.

Clearance of projects from Environmental angle (Seth, 2012)

The requirements and procedure for seeking Environmental clearance of projects are as

follows:

1) Any person, who desires to undertake any project in any part of India or the expansion

or modernisation of any existing projects listed in Schedule I to the Environment

Protection Act, 1986 shall submit an application in the form prescribed under

Schedule II to the Act, to the Secretary, Ministry of Environment and Forests, New

Delhi.

2) The application shall be accompanied by a detailed project report, which shall, inter-

alia, include an Environment Impact Statement and an Environment Management

Plan.

3) The summary feasibility report submitted with the application shall be evaluated and

assessed by the Impact Assessment Agency. The Impact Assessment Agency will

prepare a set of recommendations based on technical assessment of documents and

data.

4) If no comments are received from the Impact Assessment Agency, the Project would

be deemed to have been approved.

12.1.9 Offences and Penalty

Penalty for contravention of the provisions of the act and the rules, orders and

directions

1. Whoever fails to comply with or contravenes any of the provisions of this Act, or the

rules made or orders or directions issued there under, shall, in respect of each such

failure or contravention, be punishable with imprisonment for a term which may

extend to five years with fine which may extend to one lakh rupees, or with both, and

in case the failure or contravention continues, with additional fine which may extend

to five thousand rupees for every day during which such failure or contravention

continues after the conviction for the first such failure or contravention.

2. If the failure or contravention referred to in sub-section (1) continues beyond a period

of one year after the date of conviction, the offender shall be punishable with

imprisonment for a term which may extend to seven years.

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Offences by companies

1. Where any offence under this Act has been committed by a company, every person

who, at the time the offence was committed, was directly in charge of, and was

responsible to, the company for the conduct of the business of the company, as well as

the company, shall be deemed to be guilty of the offence and shall be liable to be

proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable

to any punishment provided in this Act, if he proves that the offence was committed

without his knowledge or that he exercised all due diligence to prevent the

commission of such offence.

2. Notwithstanding anything contained in sub-section (1), where an offence under this

Act has been committed by a company and it is proved that the offence has been

committed with the consent or connivance of, or is attributable to any neglect on the

part of, any director, manager, secretary or other officer of the company, such

director, manager, secretary or other officer shall also deemed to be guilty of that

offence and shall be liable to be proceeded against and punished accordingly.

Explanation--For the purpose of this section,--

i. "Company" means anybody corporate and includes a firm or other association of

individuals;

ii. "Director", in relation to a firm, means a partner in the firm.

Offences by government departments

1. Where an offence under this Act has been committed by any Department of

Government, the Head of the Department shall be deemed to be guilty of the offence

and shall be liable to be proceeded against and punished accordingly.

a. Provided that nothing contained in this section shall render such Head of the

Department liable to any punishment if he proves that the offence was

committed without his knowledge or that he exercise all due diligence to

prevent the commission of such offence.

2. Notwithstanding anything contained in sub-section (1), where an offence under this

Act has been committed by a Department of Government and it is proved that the

offence has been committed with the consent or connivance of, or is attributable to

any neglect on the part of, any officer, other than the Head of the Department, such

officer shall also be deemed to be guilty of that offence and shall be liable to be

proceeded against and punished accordingly.

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12.2 THE NATIONAL GREEN TRIBUNAL (Conservation India, 2011)

12.2.1 Background

Most conservationists would have heard of the National Green Tribunal (NGT), and some

may have already filed applications before it. This short primer explains how, when and

where to approach the NGT, and looks at the fundamental difference between courts and

tribunals, and the structure and jurisdiction of the NGT.

The NGT was established on October 18, 2010 under the National Green Tribunal Act 2010,

passed by the Central Government. The stated objective of the Central Government was to

provide a specialized forum for effective and speedy disposal of cases pertaining to

environment protection, conservation of forests and for seeking compensation for damages

caused to people or property due to violation of environmental laws or conditions specified

while granting permissions.

12.2.2 Structure

Following the enactment of the said law, the Principal Bench of the NGT has been

established in the National Capital – New Delhi, with regional benches in Pune (Western

Zone Bench), Bhopal (Central Zone Bench), Chennai (Southern Bench) and Kolkata (Eastern

Bench). Each Bench has a specified geographical jurisdiction covering several States in a

region. There is also a mechanism for circuit benches. For example, the Southern Zone

bench, which is based in Chennai, can decide to have sittings in other places like Bangalore

or Hyderabad. Click here for a copy of the notification specifying jurisdiction of each bench.

Provided below is a link to all NGT zonal benches, addresses & contact details.

The Chairperson of the NGT is a retired Judge of the Supreme Court, Head Quartered in

Delhi. Other Judicial members are retired Judges of High Courts. Each bench of the NGT

will comprise of at least one Judicial Member and one Expert Member. Expert members

should have a professional qualification and a minimum of 15 year experience in the field of

environment/forest conservation and related subjects.

12.2.3 Powers

The NGT has the power to hear all civil cases relating to environmental issues and questions

that are linked to the implementation of laws listed in Schedule I of the NGT Act. These

include the following:

1) The Water (Prevention and Control of Pollution) Act, 1974;

2) The Water (Prevention and Control of Pollution) Cess Act, 1977;

3) The Forest (Conservation) Act, 1980;

4) The Air (Prevention and Control of Pollution) Act, 1981;

5) The Environment (Protection) Act, 1986;

6) The Public Liability Insurance Act, 1991;

7) The Biological Diversity Act, 2002.

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This means that any violations pertaining only to these laws, or any order / decision taken by

the Government under these laws can be challenged before the NGT. Importantly, the NGT

has not been vested with powers to hear any matter relating to the Wildlife (Protection) Act,

1972, the Indian Forest Act, 1927 and various laws enacted by States relating to forests, tree

preservation etc. Therefore, specific and substantial issues related to these laws cannot be

raised before the NGT. You will have to approach the State High Court or the Supreme Court

through a Writ Petition (PIL) or file an Original Suit before an appropriate Civil Judge of the

taluk where the project that you intend to challenge is located.

12.2.4 Procedure for Filing an Application or Appeal

The NGT follows a very simple procedure to file an application seeking compensation for

environmental damage or an appeal against an order or decision of the Government. The

official language of the NGT is English. Click here for the prescribed template for filing an

Application/Appeal before the NGT.

For every application / appeal where no claim for compensation is involved, a fee of ₹ 1000/-

is to be paid. In case where compensation is being claimed, the fee will be one percent of the

amount of compensation subject to a minimum of ₹ 1000/-.

A claim for Compensation can be made for:

1. Relief/compensation to the victims of pollution and other environmental damage

including accidents involving hazardous substances;

2. Restitution of property damaged;

3. Restitution of the environment for such areas as determined by the NGT.

No application for grant of any compensation or relief or restitution of property or

environment shall be entertained unless it is made within a period of five years from the date

on which the cause for such compensation or relief first arose

12.2.5 Principles of Justice Adopted by NGT

The NGT is not bound by the procedure laid down under the Code of Civil Procedure, 1908,

but shall be guided by principles of natural justice. Further, NGT is also not bound by the

rules of evidence as enshrined in the Indian Evidence Act, 1872. Thus, it will be relatively

easier (as opposed to approaching a court) for conservation groups to present facts and issues

before the NGT, including pointing out technical flaws in a project, or proposing alternatives

that could minimize environmental damage but which have not been considered.

While passing Orders/decisions/awards, the NGT will apply the principles of sustainable

development, the precautionary principle and the polluter pays principles.

However, it must be noted that if the NGT holds that a claim is false, it can impose costs

including lost benefits due to any interim injunction.

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12.2.6 Review and Appeal

Under Rule 22 of the NGT Rules, there is a provision for seeking a Review of a decision or

Order of the NGT. If this fails, an NGT Order can be challenged before the Supreme Court

within ninety days.

12.3 SELF ASSESSMENT QUESTIONS

1. True and false Questions:

Indicate whether the following statements are true or false:

a) The provisions of environmental protection in the constitution were made under

Article 21-B.

b) The Environmental (Protection) Act was enacted in the year 1986.

c) The Biological Diversity Act came in to force in 2002.

d) The key regulatory authorities are the Ministry of Environment, Forest and

Climate Change.

e) The main objective of the Act was to provide the protection and improvement of

environment and for matters connected therewith

f) The Power of Central Government to take measures to protect and improve

environment is covered under Section 3.

g) The Central Government may, by notification in the Official Gazette, make rules

in respect of all or any of the matters referred to in section 3.

h) The Central Government or any officer empowered by it in this behalf shall have

power to take, for the purpose of analysis, samples of air, water, soil or other

substance from any factory, premises or other place in such manner as may be

prescribed as per section 11.

i) Central Government has issued EIAN in 1994 for Environment impact assessment

of development projects.

j) The NGT was established on October 18, 2010 under the National Green Tribunal

Act 2010, passed by the Central Government.

2. Long Answer Questions

Q1.Enumerate the general environmental regulations in force in India and discuss

their subject-matter.

Q2. 'EPA is an umbrella legislation passed to provide a framework for central

government towards coordination of activities of various Central and State agencies

under previous laws.' Comment.

Q3. Explain the National Green Tribunal detailing the powers, rules, procedure of

appeal etc.

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Q4. Discuss the constitution and jurisdiction of National Green Tribunal to deal with

the cases relating to environment.

SUGGESTED READINGS

1) Albuquerque, D. (2016). Legal Aspects of Business Text, Jurisprudence and Cases. New

Delhi: Oxford University Press.

2) Conservation India. (2011, May 2). Retrieved May 31, 2018, from

http://www.conservationindia.org: http://www.conservationindia.org/resources/ngt

3) Legal Bites : Law and Beyond. (2016, September 25). Retrieved May 31, 2018, from

www.legalbites.in: https://www.legalbites.in/environmental-protection-act1986/

4) Pathak, A. (2014). Legal Aspects of Business. New Delhi: Mc Graw Hill Education.

5) Seth, T. (2012). Legal Aspects of Business. In T. Seth, Legal Aspects of Business. Pearson.

6) Website of Ministry of Environment, Forest and Climate Change (MoEFCC)-

http://envfor.nic.in/