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Policy & Politics

Independent directors and their role: A discussion

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Who is an Independent Director?

An Independent Director (“ID”) is a director other than a managing director or a whole-time director or a nominee director, who, in the opinion of the board, is a person of integrity and possesses relevant expertise and experience, not being a promoter of such company of its affiliates, not being a relative of promoters or directors of the company or its affiliates, is an independent director. Such individual cannot have any pecuniary relationship with that company, its promoters, senior management or affiliate companies, during the past two years or the current year. Moreover, the independent director cannot be related to promoters or the senior management and should not have been an executive with the company, partner or executive director of the auditors, lawyers, consultants of the company in preceding three years. It has been witnessed that IDs are rarely chosen based on qualification and/ or experience of the candidate, but mostly through close associates or nomination basis.

 A Databank of Independent Directors

Recently, on October 22nd, 2019, the Ministry of Corporate Affairs (“Ministry”) brought about the Companies (Appointment and Qualification of Director) Fifth Amendment Rules, 2019, Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019 and Companies (Accounts) Amendment Rules, 2019 (“Rules”) under the Companies Act, 2013 (“Act”). The Rules came into force on December 1, 2019, with exception to Rule 2 and 5 of Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019. The objective of these Rules is to create a databank of people who are currently serving as ID or plan to serve as ID and, are eligible to be appointed as ID in a company. Such databank will be available on the website of Indian Institute of Corporate Affairs. It must be noted that government has now identified as an institute to make Section 150 of the Act relevant. Further to their registration in the databank, such present and prospective IDs will have to pass an online proficiency self-assessment test which will be conducted by the Institute and such test will examine their capability to act as an ID on the board of company.

Qualification of IDs

In order to qualify for the online proficiency selfassessment test, such IDs must secure atleast 60%, within 12 months from the date of registration in the databank maintained by the Indian Institute of Corporate Affairs. There is no restriction on the number of attempts an individual may take to pass the online proficiency self-assessment test. The only exceptions to the online proficiency selfassessment test are given to individuals who hold minimum experience of ten years as a director or key managerial personnel in a listed public company or in an unlisted public company having a paid-up capital share capital of Rs. 10 crores or more. For the purpose of calculation of the period of 10 (ten) years, any period during which an individual was acting as director or key managerial personnel in two or more than two entities at the same time shall only be counted once. As per Companies (Appointment and Qualification of Director) Fifth Amendment Rules, 2019, every ID is now required to provide a declaration that their respective names are appearing on the database of IICA when they declare their independency as per Section 149(7) of the Act.

What Questions must an ID ask before joining a company’s board

An individual must be very careful before deciding to join a company’s board as an ID, especially without any due diligence. An ID must ask several questions to the management of the company before joining its board along with independent due diligence. Due diligence is a process by which an individual gathers important business information about a target. In this case, the target will be the company a person wishes to join as an ID. Some of the key issues which must be taken care of include – financial position of the company, operational capabilities of the company and most importantly any probable risk which may lead to company engaging in illegal or fraudulent activity. As a part of due diligence exercise, company’s indemnification process and director’s liability insurance must be reviewed in the event any obligation falls on director when there is a litigation against the company. Company’s charter documents and public filings and press releases which are available in the public domain must also be reviewed along with byelaws to get a clear picture of obligations which ID may have to follow. Such scope and qualifications of such documents/policies must be reviewed by a legal professional along with identification of red-flags in the due diligence process so that any gap can be identified on time. A prospective director must carry out his own due diligence process in order to gather maximum information about the Board, their processes and commitments. Additionally, any possible conflict of interest to the company and other board members must be checked because ACT identifies certain eligibility criteria which must be met by an ID. It is also important to know the company’s policy on mitigating risks in case company faces an allegation or has a possible risk of running into a litigation.

Does an ID owe a duty of care & disclosure?

 In all matters affecting company, directors and their fiduciary duties to the company include honesty and good faith as well as the duty of care, duty of loyalty and a duty of disclosure. The duty of care requires the director to perform their duty with the same standard of care that a prudent person would use in order to further the best interest of the company and also exercise good faith, as per the facts and circumstances of that particular company. The duty of loyalty requires that there should be no conflict between duty owed to the company and self-interest of a director. The duty of disclosure requires the director to provide complete and materially accurate information to the company. In such case, the role of ID becomes even more important as he or she has to satisfy himself that such obligations on directors are stringently followed to the maximum extent. A director’s responsibilities and obligations in the event of a potential transaction depends on the facts and circumstances of such transaction. From an economic angle, if a transaction is not that material or only marginally material to the company, the level of involvement and scrutiny facing the board of directors may get lowered down and only the basic business judgment rule will apply in such a case. For instance, where a company’s growth strategy is based on acquisition-based model, the ID should ideally set out the strategy and parameters for potential target acquisitions but leave the completion of the acquisition and transaction largely with the executives and officers.

The law focuses on the process, steps and considerations made by the ID, as opposed to the actual final decision. More expansive that the due diligence process is, the better it becomes for both the company and its stakeholders, and it also provides the protection to the directors in the face of scrutiny or investigation by any authority. Courts will consider facts and evidences like appearance at Board meetings, the number and frequency of such meetings, knowledge of the director on subject matter, time spent in taking decisions, suggestions taken from third-party experts like lawyers, requests for information from the management and requests for and review of documents and contracts by the Board and external experts. In the performance of their obligations and fiduciary responsibilities, an ID may, and should, seek the advice and counsel of third parties, such as attorneys, investment bankers, and valuation experts. Moreover, it is generally a best practice to obtain a third-party expert fairness opinion in any transaction undertaken by the company. Furthermore, most of these experts like corporate lawyers will prepare an opinion in form of due diligence report for such transactions. In addition to added protection to the ID, the fairness opinion is often relied upon by charted accountants and auditors in concluding or certifying the valuations in a merger and acquisition transaction, especially in a case where a related party is involved in the transaction.

Is corporate social responsibility also an ID obligation?

Big companies which fall under certain thresholds are additionally responsible for addressing some of the social issues and some of these issues may also concern economic development, environment and issues impacting public at large. Accordingly, companies must involve themselves in understanding such issues by involving stakeholders and taking their views on corporate social responsibility (“CSR”) issues. CSR is defined under Section 135 of the Act which prescribes involvement of ID in CSR committee. The role of ID in such decisions will enable board and management to make informed decisions and may enhance the business intelligence. Further, better decisions which reduces any business risk, build brand value and help in gaining long term shareholder value will benefit company. A CSR action may work for company in return as it shows responsibility of a business and its contribution to the society. A key part of ID’s responsibility is to ensure that an effective and structured corporate governance has been put in place and followed upon. Such corporate governance structure must also ensure that reasonable financial and growth targets are set, and such targets are achieved along with risk identification and management are carried out parallelly. IDs are responsible for taking into account interests of shareholders, customers, employees, creditors and general public. Due to the position an ID holds, it must also keep Board advised to regular basis, of any interest that could potentially conflict with CSR and in case there is a conflict, as a best practice, such ID or any director possibly in conflict must not receive any relevant documents of that meeting including minutes of meetings and must abstain himself from any discussion in that regard. IDs have an additional role to play as per Section 178(1) of the Act in which they shall be a part of Nomination and Remuneration Committee consisting of three or more non-executive director out of which not less than onehalf shall be IDs.

 Suggestions and Conclusion

Considering the important role of an ID for a better Corporate Governance, the amendment in the rules by the legislature is indeed a welcome move by the Legislature to conduct a screening test to filter out the non-deserving candidature for the position of becoming ID’s and to develop a stout mechanism to handover some of the important decision making of the Company in the hands of more experienced and worthy ones in order to cater to better Corporate Governance.

 However, the author feels that with respect to the qualifications and eligibility criteria to become an ID, amongst all other exemptions, certain additional exemptions may be granted to Professionals like Corporate lawyers, Company Secretary, Chartered Accountant to become ID’s with relevant years of experience in handling corporate governance. Additionally, there may be restrictions with respect to the number of attempts to clear the self assessment test in order to pave in some robust mechanism for the purposes to minimize chances of various governance misadventures by letting the more capable and deserving ones leading from the front on the important decision making.

Ambika Pratiyush Swain is a Managing Associate at L&L Partners Law Offices (Formerly Luthra and Luthra Law Offices) and Siddhant Grover is a mentee at L&L Partners.

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Policy & Politics

Partnerships, technology and behaviour change key for agriculture growth, said Union Agriculture Minister

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Partnerships, technology and behaviour change key for agriculture growth, said Union Agriculture Minister

India has the potential to become “aatmnirbhar” in agriculture and also meet the food requirement of the world, said Narendra Singh Tomar, Union Minister of Agriculture & Farmers Welfare.
Speaking during the session, Food for All: From Farm to Fork, during the 3rd edition of LEADS 2022—— a global thought leadership initiative of the industry chamber FICCI, the minister said the country is steadfastly moving ahead in the direction. However, everyone must work together for the goal. “We would like to collaborate. I use this opportunity to invite the international community to join hands with us for the benefit of coming generations,” he said.
He noted that country’s agri exports had crossed the milestone of ₹4 lakh crores. “We are working to increase it further,” he said.
Minister Tomar said that the government is constantly working to make the country “aatmnirbhar”. As a result, Indian agriculture recorded a robust growth of 3.9% despite the pandemic. In addition, the minister reiterated that the government aims to make Indian agriculture internationally competitive by aiding the small farmers in the country. He alluded to several government programmes to reduce farming-related challenges. “Due to increase in investment in basic infrastructures like irrigation system, storage, warehousing, and cold storage, the Indian agriculture is expected to record robust growth in the coming years,” he added.
On occasion, H.E. Mr Damien O’Connor, Hon’ble Minister for Trade & Export Growth; Agriculture; Biosecurity; Land Information & Rural Communities, New Zealand, alluded to the challenge emanating from climate change. “agricultural emissions from livestock are a real challenge for New Zealand and food systems around the world. It contributes 35% to the global greenhouse gas emissions and 48% to New Zealand’s emission profile.”
He also alluded to Global Research Alliance and encouraged Indian parliamentarians “to look at investigating partnering up with a Global Research Alliance” to gather global technologies “in a way that is not seeking to maximise commercial benefit but to maximise the climate change benefit from this collaboration.”
Sanjiv Mehta, President, FICCI and CEO & Managing Director, Hindustan Unilever Limited (HUL), said achieving food and nutrition security is a multifaceted challenge. “Food systems can play a big role in protecting food security and nutrition if careful attention is paid to targeting the poor, reducing inequalities, including gender inequality and incorporating nutrition goals and actions were relevant.”
Dr Anish Shah, Vice President, FICCI and Managing Director and CEO, Mahindra & Mahindra, said the world will have 10 billion people by 2050. “Today, we do not have enough food to provide for everyone, so we have to do a number of things to feed everyone.” He pointed to three themes that can help address the challenge. The first is partnerships to reduce carbon footprint and improve productivity. Second, adopting technology to transform agriculture and thirdly, inducing behaviour change.
Sunny Verghese, Co-Founder and Group CEO, Olam International, said, the biggest priority is to help decarbonise.

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Policy & Politics

Digital Agriculture Mission to digitalise the farmer: Manoj Ahuja, Secretary, Agriculture

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Digital Agriculture Mission to digitalise the farmer: Manoj Ahuja, Secretary, Agriculture

Contextual and correct information to anybody associated with agriculture has the potential to unlock a lot of value, said Manoj Ahuja, Secretary, Union Ministry of Agriculture & Farmers Welfare, at the Release Ceremony of the FICCI compendium on “Enhancing Farmers’ Income”.
In this regard, Ahuja alluded to the Digital Agriculture Mission, which essentially tries to digitalise the farmer in terms of identity, linking up the farmers’ land and geo-referencing it, and crops grown. “These are some of the basic things we are trying to put in the agristack,” he said. “We have made some headway; hopefully, next year, we should show substantial results,” he added.
Ahuja said, “I’m seeing the benefits information contextualised to the various partners in the agricultural ecosystem can bring”.
On occasion, Samuel Praveen Kumar, Joint Secretary, Union Ministry of Agriculture & Farmers Welfare, spoke on backstopping agriculture startups that are coming up with innovative technologies and solutions to enhance farm incomes. In this regard, Mr Kumar alluded to the three C’s— convergence, capacity building, and collectives like (FPOs and cooperatives) as the vital elements.
Elaborating on convergence, Kumar said, “if the government can package the schemes in such a manner that you give more benefits, in a unified manner to the businesses or startups, I think they will be able to sustain their business.” Similarly, on capacity building, he noted, “when we talk about capacity building for farmers or extension workers, it’s not like that. It is for everybody in the ecosystem.” Mr Kumar also alluded to developing climate-resistant crops, reducing carbon footprints using technology, and developing infrastructure.
Elaborating on the compendium, TR Kesavan, Chairman, FICCI National Agriculture Committee & Group President, TAFE, noted the need to document the best practices and give them to people so that “people can touch, feel, do and understand the practices.” He added, “small and marginal farmers are going to be one of the greatest strengths of the country. Some of the case studies in the compendium tell how they are changing.”
The FICCI compendium of guidelines presents select case studies, and successful projects and interventions rolled out by various organisations in achieving higher crop connectivity, resource use efficiency, cropping intensity and diversification towards high-value agriculture.

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Policy & Politics

Supreme Court: An Order Is In Given Factual Circumstances; Judgement Lays Down Principles Of Law

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Supreme Court

The Supreme Court in the case Akil Valibhai Piplodwala observed and has issued a notice on a petition filed by a man seeking a direction that he should not be deported to Pakistan until his claim to be an Indian citizen is decided as per Section 9(2) of the Citizenship Act, 1955.
The bench comprising of Justice Surya Kant and the Justice J. B. Pardiwala observed and has also issued status quo in the matter. Thus, the notice on the plea has been issued to the District Superintendent of Police (Godhra), State of Gujarat and the Ministry of Home Affairs, Union of India.
According to the plea, the was born at Godhra, Gujarat in 1962 and had completed his education in India. The petitioner moved to Pakistan in 1976 but in 1983 he returned to India and got married at Godhra to an Indian woman on 2nd March 1984 and had three children from the wedlock. Thus, the petitioner again went away and finally returned to India in 1991 after obtaining all the requisite permits including a residential permit and continued to reside in India with his family.
However, out of fear of getting deported, the petitioner moved a regular civil suit before the Court of Civil Judge praying to declare him a citizen of India under Section5(1)(C) of the Indian Citizenship Act, 1955 since he was married to an Indian citizen. It is also prayed by him to restrict authorities from deporting him till his application under Section 9(2) of the Act is decided by the Union of India. In 1999, it was held by the Civil Judge that the Court did not have jurisdiction to decide the citizenship of the Petitioner. However, the decree was allowed by the Civil Judge partly to direct that he should not be deported back until his application under the Citizenship Act is decided.
Further, after the period of 4 years, the Union of India preferred a delayed appeal under Section 96 of CrPC against the order of the Civil Judge before the Principal District Judge. On 12.07.2022, the District Judge set aside the decree passed by the Civil Judge.
The petitioner being aggrieved by the order of the District Judge, moved the High Court of Gujarat. On 02.08.2022, the High Court dismissed his appeal holding that no substantial question of law arose.
Senior Advocate IH Sayed, appearing for the petitioner submitted that the High Court disregarded the fact that the Petitioner has been rendered vulnerable to deportation and if he is not protected till his application is adjudicated upon it would be violation of the procedure established by the principle of law.
The present petition was filed through Advocate Taruna Singh Gohil.

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Policy & Politics

Delhi HC Asks Centre: What Is The Procedure For Undertrial Foreign Nationals’ Visa Renewal?

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Delhi HC Asks Centre: What Is The Procedure For Undertrial Foreign Nationals’ Visa Renewal?

The Delhi High Court in the case Uchenne v. State observed and has directed the Centre to place on record the necessary steps and procedures required to be followed by foreign nationals, who are in the jail as undertrials, for renewal of their visas.
The bench comprising of Justice Jasmeet Singh observed while dealing with a plea filed by a foreign national seeking bail in an NDPS case, said there are many foreign nationals lodged in the national capital’s prisons, whose visa applications have not been processed.
The court stated that he i.e., the Central Govt Counsel shall also place on record necessary steps and procedures so that foreign nationals who are in jail as undertrial know the procedure for renewal of their visas. The Uchenne, accused had moved the High Court last year wherein seeking regular bail in an FIR registered under Section 21 of the Narcotic Drugs and Psychotropic Substances Act, 1985. Thus, after the completion of investigation, charge-sheet was filed under Section 21 of the NDPS Act as well as Section 14 of the Foreigners Act.
It was observed that Section 21 of the NDPS Act states punishment for contravention in relation to manufactured drugs and preparation, Section 14 of Foreigners Act provides various penalties under the statute, in case of violation of any of the provisions.
The Additional Public Prosecutor on March 30, told the court that before proceeding with the bail matter, accused’s visa needs to be re-validated. The Advocate J.S. Kushwaha appearing for the foreign national submitted before the Court that although his passport was renewed, he is required to be taken to the Foreign Regional Registration Office (FRRO) for visa renewal on April 29.
Accordingly, it has been directed by the court to Uchenne to complete all procedural formalities and ordered that he be taken to the FRRO in accordance with law and established procedures.
On August 2, over three months, Uchenne’s counsel apprised the Court that despite earlier orders, his visa was neither renewed nor any reasons were given regarding the delay or rejection. Also, the court was informed that Uchenne had applied for visa on January 28, in 2019.
However, during the recent hearing on September 19, it was sought by the Centre’s counsel seeking further time to get instructions in writing from FRRO before the next date of hearing.
Accordingly, the court listed the matter for hearing next on October 10.

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Policy & Politics

“Indian Pharma aspires to reach 400 billion dollars by 2047,” MoS of Chemical and Fertilizer

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“Indian Pharma aspires to reach 400 billion dollars by 2047,” MoS of Chemical and Fertilizer

To commemorate the 100 years of independence, the Central government has begun working on a vision plan for a ‘future-ready India’. In this context Confederation of Indian Industry (CII) organised the 4th Life Sciences Conclave with the theme “Roadmap for Indian Life Sciences @ 2047”. A white paper released by CII on the Way Forward for lifesciences. To achieve the biggest milestones in the lifesciences and Pharmaceutical sectors over the next 25 years, India needs to focus on four strategies; Innovation & Commercialisation, Sustainable Production, Internationalisation and create a Business Environment and develop the lifesciences infrastructure and regulatory frameworks for ease of doing business.
Speaking at the virtual platform, Bhagwanth Khuba, MoS Chemical & Fertiliser and Ministry of New and Renewable energy, said in his message“ The Indian pharmaceuticals market has characteristics that make it unique. . India plays an important role in manufacturing various critical, high‐ quality and low‐cost medicines for Indian and global markets. The industry has contributed immensely not just to Indian but to global healthcare outcomes. The sector forms a major component of the country’s foreign trade as well, with attractive avenues and opportunities for investors. The outbreak of the COVID-19 brought out the risk of disruption of supply chain of critical bulk drugs for the Indian pharmaceutical sector, highlighting the need for India to attain a sufficient degree of self-reliance in bulk drugs. In this regard the Department of Pharmaceuticals prepared two schemes for promoting domestic manufacturing of critical KSMs/ Drug Intermediates and APIs by attracting investments in the sector to ensure their sustainable domestic supply and thereby reduce India’s import dependence on other countries for critical KSMs/Drug Intermediates and APIs.”
S Aparna, Secretary, Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers said, “ Showed three important routes to bring mainstream of lifesciences research that are biosimilars and RNA vaccines, stem cell and gene therapy and ability to bring natural products.

Inclusion, Innovation and Integration are the key words
Dr V.K Saraswat, Member, NITI, Aayog said, that the emerging important areas are genome sequencing, DNA splicing, CRISPR CRAS are the fastest growing domains. With development of nano robotics, transgenic free varieties of GM food will be common entity in future. Agriculture scientists will develop edible vaccines. Precision agriculture, genome engineering will help in innovative technology. Early intervention and better prognosis of diseases will drive the lifesciences sector. Another field emerging is tissue engineering in generating artificial organs. India needs to secure rich biological wealth. Lifesciences is an important part of healthcare and projected to touch 150 billion dollar by 2025. Some of the initiatives have taken place in the last decade has broadened the scope. Investment is key. Private equity firms are going to bolster new areas. Sustaining position in novel vaccine, reducing morbidity and mortality. Ethical policy development and venture technologies are important areas
Vivek Kamath, Co-Chairman CII National Committee on Pharmaceuticals & Managing Director Abbott India Ltd, said, “ Healthcare is one of the priority sectors for 2047. Government through various policies and schemes are encouraging of an efficient lifesciences sector. The covid affected the healthcare sector but gave opportunity for the industry to transform. One key word that came up during the pandemic was ‘collaboration’ that helped in combatting the pandemic. Collaboration can become a burning desire
Satish Reddy, Chairman, Dr Reddy’s Laboratories, mentioned, “ We are in the 75th year of independence and the theme of the conclave resonates very well with what the industry has to achieve. All around the globe 20% of generic medicines are made in India. Aspiration is to reach 400 billion dollars by 2047. One area where we are aspiring to be demonstrating capability is in innovation. Need to disrupt existing ways. There is immense opportunity in expanding the entire lifesciences biosimilars innovation. Success eludes us. We have the ability for new drug discovery as well as achieve discovery of newer molecules. For this adequate funding and investments are required as well as tax rebates for R&D. Also there is a need for industry academia collaboration for translational research.
Dr Renu Swarup said “Moving to the next 25 years we need to leverage on the opportunities we have built for ourselves but cannot be based on an incremental increase of what we have done. We have to keep up with the pace of technology. Collaborations are the key to success and there need to be convergence in research.”
At the platform CII and Cadila Pharma launch joint national campaign for rabies-free India by 2030. As a part of the campaign to make India rabies-free by 2030, several activities for awareness and prevention of rabies will be undertaken at the national and state level under the aegis of the government of India.
By 2047 we will see the beginning of a demographic, epidemiological and environmental shifts so we should be ready with Lifecourse immunisation.- UNICEF.

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Nation

Top opposition leaders gather at INLD rally to challenge ‘Delhi Sultanate’

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Sharad Pawar, the head of the NCP, Nitish Kumar, the chief minister of Bihar, Sitaram Yechury, and Sukhbir Singh Badal, the leader of the Shiromani Akali Dal, were among the prominent opposition figures that attended the INLD’s large gathering on Sunday in Fatehabad, Haryana.

JDU leader KC Tyagi addressed the crowd and claimed that the Bihar CM has come from Patna to challenge the Delhi Sultanate at a time when eight former Congress CMs had switched to the BJP. He claimed that Kumar has no fear of the ED, the income tax, or any other organisations.

To commemorate the birth anniversary of Devi Lal, the founder of the INLD and a former deputy prime minister, a rally is being conducted.

Tejashwi Yadav, the deputy chief minister of Bihar and the head of the RJD, as well as Arvind Sawant of the Shiv Sena, also showed up at the gathering to demonstrate the unity of the opposition.

The coming together of so many regional satraps is seen as part of efforts to forge opposition unity. Kumar and RJD president Lalu Prasad are likely to meet Congress president Sonia Gandhi after the rally to take the process forward.

Veteran socialist leader Tyagi had already declared that the gathering would be historic because it would unite like-minded forces against the BJP in the run-up to the 2024 Lok Sabha elections.

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