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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

Making it happen: Arpan’s journey to respond to child sexual abuse

Anil Swarup

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This was 2017. As Secretary, School Education, Government of India, I was sitting on the last bench of a class-room, along with students of class 5, in a school in Mumbai. I was extremely impressed and least embarrassed at what was being taught primarily because of the manner in which a sensitive subject of child sexual abuse was being discussed so effortlessly with the children. With me was Pooja Taparia, the founder-CEO of Arpan, an NGO that was originally set up in 2003 to improve the lives of the underprivileged.

The journey to deal with Child Sexual Abuse (CSA) started in June 2006 after Pooja Taparia was influenced by a play ‘30 Days in September’ on this subject. It gave her a new vision and direction for Arpan. When she embarked on this journey, she saw a world that was seemingly silent and quiet to the sexual abuse of children. There was a tremendous social and cultural taboo on conversation around sexuality and awareness about CSA was non-existent. Sexual abuse of children was often hidden and under-reported and there was a limited acceptance of its prevalence and negative consequences. A broad variety of societal, cultural, individual and family-related normative frameworks restricted initiating the required conversations. Amidst this silence, the idea was to ignite the movement to prevent CSA as it was felt strongly that CSA needed to be prevented because of its high prevalence and negative impact. This was only possible if the tribe grew and each one played her part in child protection and took the pledge to create ‘A World Free of Child Sexual Abuse’.

To initiate the work on CSA, the need was to demystify it, create awareness that the phenomenon exists and it exists in our families and homes. The second step was to develop a scientifically researched prevention model that can address a multifaceted problem like CSA in the Indian context. Arpan developed the Personal Safety Education (PSE) programme which is a school-based comprehensive and holistic intervention model to respond to CSA by helping children identify and seek help in an unsafe situation so that they can participate in their own safety and strengthening their safety net. Since then, Arpan has implemented the PSE programme with 133,000 children and 104,000 parents and teachers, non-teaching staff across 218 schools, 6 institutions and 23 communities in 3 districts of Maharashtra. From its inception, Arpan believed that prevention investment must include greater provision for scientifically rigorous, large-scale outcome evaluation studies. External evaluation of the PSE programme by International Market Research Bureau (2014) revealed that out of the 8% of children reported to have faced an unsafe situation, 90% were able to seek immediate help. A Case Study (2017) also revealed that all who faced sexual abuse experience were able to stop the abuse and seek help. Based on an evaluation of the ideal gap period for implementation of PSE (2018), Knowledge retention ranged from 92% to 69%.

The third step has been to put in concentrated effort to mainstream PSE starting in early childhood and to sustain it during subsequent years. Towards this, public-private partnership has been pivotal as without the strategic deployment of government machinery, it would not have been possible to successfully achieve a safe childhood for all children. Arpan has trained 189,000 individuals and professionals through public-private partnership as well as partnership with large school chains and NGOs. Of these 139,000 professionals (govt. and non-govt. teachers, social workers and mental health professionals) were trained to replicate prevention and intervention models of Child Sexual Abuse. These professionals have reached out to over 1.13 million children and adults all over the country. This model of replication has been able to deliver impact – ~80% of children taught by the training participants remember 75% of the key concepts.

Arpan worked closely with various Government Ministries and Departments both at the central and state levels to integrate PSE within their curriculum and training. It has been part of a Life Skills think-tank initiated by the Ministry of Education (MoE) and working closely with an extremely committed set of officers like Saroj Yadav at National Council of Educational Research and Training (NCERT) and at Central Board of Secondary Education (CBSE) to ensure that the curriculum on Health and Wellness of school-going adolescents under the aegis of the school health programme of Ayushman Bharat incorporate messages of Personal Safety. This curriculum will take PSE to twenty-five crore children and fifteen lakh schools across India. Arpan has been able to integrate Personal Safety in Maharashtra SCERT school safety and security module as well which will also be transacted to all school-going children in Maharashtra.

Initiatives have been taken to integrate PSE in a number of states like Bihar, Delhi (where an energetic young officer, Ira Singhal along with Neelam Kumari and Advisor in the Education Department of the State, Shailendra Sharma provided all support and guidance) and Maharashtra (where the Education Commissioner, Vishal Solanki took the lead). Training of Master Teacher trainers and Teachers across these states has already started. On implementation, the programme will reach 30 million children through 700,000 teachers. As a part of the Nationwide Safe Neighbourhood campaign, initiated by the Ministry of Women & Child Development Department (WCD), Arpan has conducted trainings with regional officers from Childline who are in turn conducting trainings with all teachers across the country under the Nishtha programme.

Arpan also partners with the Ministry of Health & Family Welfare (where Dr. Zoya Ali Rizvi has been proactive and supportive) for trainings of Adolescent Health Counselors and Medical Officers across the country.

Work also commenced with Chandrapur District Administration, Akola District Administration, Kolhapur Zilla Parishad (under able guidance of a committed IAS officer, Aman Mittal, CEO), Kolhapur Municipal Corporation, Thane Municipal Corporation and slowly moving towards creating these as Sexual Abuse Free Districts of Maharashtra

Realizing the potential of an interactive e-Learning platform as an easy and efficient learning tool to transcend geographical boundaries and scale PSE programme, a responsive website www.arpanelearn.com was launched in 2019. 78,000 children and 2800 adults have taken the digital courses of PSE. With the support and guidance of Dr. Amarendra Behera and Dr. Abhay Kumar at the Central Institute of Education Technology (CIET), Arpan’s digital courses are also being showcased on Doordarshan’s Swayamprabha channels. This digital journey that Arpan initiated is proving to be useful during COVID time.

Arpan plans to build collaboration with 10-15 states and integrate Personal Safety in the curriculum over the next 5 years. Simultaneously, digital technologies will be leveraged to scale reach and teach personal safety to every child in the country. This will have a cascading effect to reach millions of children and adults and help the country take a step towards world free of Child Sexual Abuse.

Arpan, under inspired leadership of Pooja Taparia, with an amazing team comprising committed persons like Aditi Ray, made it happen in a domain that was considered to be kept at a safe distance and not even discussed on account of perceived embarrassment. This wonderful team brought this out in public discourse and sought to remedy the malaise. They have succeeded on account of their commitment, dedication, meticulous planning and immaculate execution.

Anil Swarup has served as the head of the Project Monitoring Group, which is currently under the Prime Minister’s Offic. He has also served as Secretary, Ministry of Coal and Secretary, Ministry of School Education.

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Policy & Politics

Horrendous atrocities being committed on women and girls in Afghanistan

When America suddenly decided to withdraw its troops, the ground slipped under the feet of the women of Afghanistan. Who will stop the Taliban now?

Vijay Darda

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A short video clip uploaded by an international news channel has shaken me to the core. In that video, a fourteen-fifteen-year-old girl is seen screaming and shrieking. Her parents are begging for mercy but Taliban terrorists are forcibly taking away the girl from the family.

The girl will now be turned over to some Taliban terrorist to quench his lust. If that monster is killed someday in the war, then the child will be given to another monster! This is the fate of that girl!

And that girl is not the only unlucky one. This is the fate of lakhs of girls like her in Afghanistan. In the areas which the Taliban has occupied so far, they have started barbarity in the name of Sharia. It has decreed that a list of unmarried girls above the age of fifteen years and widows should be prepared. It is evident that all these girls and women will be used for quenching the lust of terrorists.

Although the leadership of the Taliban based in Qatar is ruling out such incidents, the Taliban terrorists who are bloodying Afghan soil are kidnapping girls every day. In those areas, even the media is not working now so that the whole truth could come out. But the pictures and news that are coming out after filtering fill the mind with pain.

When the Taliban captured the whole of Afghanistan in 1996, it was women who had to bear the brunt of their brutality. The education of the girls had stopped. You must recall how an attempt was made on Malala because she was secretly spreading her voice to the world in favour of the education of the children. So will the girls be imprisoned in homes again? When asked, Suhail Shaheen, Taliban spokesman in Qatar, said that women will have freedom of education and work but under Sharia law they will also have to wear hijab. Let us remind you that during the Taliban regime from 1996 to 2001, it became notorious for their misogyny and violence against women. The women who did not wear the hijab or even those, whose fingers were visible, were also lashed publicly. A woman could not step out of the house without a male member of her household accompanying her. The actions of the Taliban are showing that the old dark days and dreadful nights are about to return.

When American troops landed on Afghanistan’s soil in 2001 and the Taliban started shrinking, there was a ray of light in the lies of the women there. The girls started going to school. Cruelty to women decreased. Women started going out for work. A lot has changed in Afghanistan in the last 20 years. But when America suddenly decided to withdraw its troops from Afghanistan, the ground slipped under the feet of the women of Afghanistan. Who will stop the Taliban now?

However, the rural women there have an inborn conditioning to discrimination because no woman’s name is even taken outside the house. Even on the doctor’s prescription slip it is written ‘daughter of so and so’ or ‘wife of so and so’. Her name is neither on her birth certificate nor on her death certificate. This irony is a part of their life. But the condition in urban areas was getting better. The arrival of the Taliban has raised a fog of fear and suspicion. The problem is that in Afghanistan there is no one to raise the voice of women and anyway, Taliban does not listen to anyone’s voice.

Interestingly, this time some brave Afghan women have come forward to raise their voice against the Taliban. In Afghanistan’s urban areas such as Kabul, Faryab, Herat, Jowzjan and Ghowr, hundreds of Afghan women took to the streets carrying Kalashnikov rifles and Afghan flags. They are trying to show to the world that they do not approve of Taliban rule. That is why they are with the National Army in the war against the Taliban and the barbaric terrorists should also understand that women are not lumps of meat for their lust. They too an fight the war and are ready for the war. It is possible that the Afghan army will also train and equip such brave women. However, in cities it may be possible to join and fight alongside the National Army, but what will happen in rural areas?

The painful and bitter reality of the present time is that the Afghan army has also left the rural areas defenceless. The Afghan National Army is focusing all attention on the security of the country’s

capital Kabul and various provincial cities. The Taliban took advantage of this vacuum immediately and took over the rural areas. Right now it is difficult to say how much of the country is with the Taliban and how much is with the army. But wherever there is Taliban, the life of women has become worse than hell. The number of women in Afghanistan’s population of 3.80 crore is about 1.8 crore. Today, after two decades of tasting freedom, Afghan women and girls are again scared of a repeat of that dark era of confinement as the Taliban advances and the world remains a mute spectator!

I feel like crying at the plight of these women..!

The author is the chairman, Editorial Board of Lokmat Media and former member of Rajya Sabha.

In Afghanistan, the terror outfit Taliban is committing horrendous atrocities on girls and women. It had been doing the same in the earlier regime too. But this time it is introducing sweeping restrictions on women in areas controlled by it. In defiance, women in many cities have picked up Kalashnikov rifles to defend their motherland against the Taliban.

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Policy & Politics

The good, the bad and the googly: The curious case of the Air India data breach

SITA is a multinational information technology company based in Geneva, Switzerland, which has been furnishing IT & Telecommunication services to the air travel industry since 2016. SITA released a statement intimating the airlines it has partnered with, in March, 2021, that it has been affected by a cybersecurity attack to its system due to which customer-data has been leaked.

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The Good, the Bad and the Googly: The Curious Case of the Air India Data Breach

An indispensable virtue for humankind – personal data and privacy, unfortunately, wanders for sale in the dark web; with a substantial increase in data leaks over the recent years having become a central cause of concern for all and sundry. The equilibrium of data protection & technological advancement is in a disarray, attributable to the significant rise in the misuse of users’ information and the wildfire-like upsurge of incidents of data breach which have no plausible explanation to them.

All things considered, in light of the rampant instances of data breach doing rounds in the news, the issue of the Air India- Data Breach has posed an out-of-ordinary question of paramount consequence – legally, can a mechanism for monetary compensation exist for instances of data- infringement?

WHAT REALLY TRANSPIRED IN THE AIR INDIA DATA BREACH?

SITA is a multinational information technology company based in Geneva, Switzerland which has been furnishing IT & Telecommunication services to the air travel industry since 2016. SITA released a statement intimating the airlines it has partnered with, in March, 2021, that it has been affected by a cybersecurity attack to its system due to which customer-data has been leaked. Some of the notable airline companies which were compromised included behemoths like Lufthansa, British Airways, Finnair, and American Airlines, who individually issued statements to inform their customers of the breach in March itself. SITA, however declined to make a comment on the incident to the larger public and merely stated that it, “acted swiftly and initiated targeted containment measures. The matter remains under continued investigation by SITA with the support of leading external experts in cyber-security.”

Interestingly, a few months later in May, 2021, Air India (“AI”) released a statement revealing that it was one of the compromised airline companies due to the cybersecurity attack on the SITA Passenger Service System (“SITA PSS”), and that there was a data-breach wherein personal data of its customers for the period of 26thAugust 2011 to 20th February 2021 was infringed upon. The cybersecurity attack lasted for 22 days, affecting the personal data of 4.5 million passengers, wherein the data breached included their name, passport information, frequent flyer details, and credit card information – but did not affect passwords including CVV/ CVC info. The lax inaction of Air India is questionable, looking at the magnitude of the attack and the impact on data privacy & security concerns. Dubious also was the defence put forth – AI shielded itself by claiming they made an announcement regarding the attack on their website on 19th March, 2021, but it seems like their announcement did not reach the doorstep of the consumers, leaving them confused, enraged, and with an impending feeling of vulnerability.

WITH EVERY ACTION, THERE IS A CONSEQUENT REACTION: THE CLAIM AGAINST THE BREACH

Ensuing the delayed appraisal of the attack, the AI management was sent a notice, by one of the aggreived customers (a journalist from Delhi), seeking damages of Rs 30 lakhs. In the notice, the airline has been accused of “knowingly, intentionally and deliberately leaking the personal data and for breach of sensitive information” of its customers. A reference was made in the notice to the famous case of K.S Puttaswamy v/s Union of India, in which the right to privacy was held to be a fundamental right under Article 21, subject to reasonable restrictions. As per the unanimous understanding of the nine-judge bench in the Puttaswamy judgement, the right to privacy includes one’s autonomy over his/her personal decisions, bodily integrity, and very importantly – a right to protection of one’s personal information.

The notice as sent to AI expressly mentions that as a corollary of the cyberattack, there has been a loss of autonomy over personal data and hence the journalist contends that she has been subject to hardship because of the violation of her right to privacy and her right to be forgotten – which is an extension of the rights recognised by the Apex Court in its Puttaswamy judgement.

Upon a careful perusal of the judicial acumen behind the Puttaswamy judgment, one can analyze that the interpretation given by the Honourable judges to the right to privacy is wide in its scope, which leads to a range of claims arising as a direct consequence of breach of privacy can be admissible; thus, the demarcation of the extent of application of this judgment has to be determined on a case to case basis, depending on the facts and other associated factors. Nonetheless, the number of data breaches occurring in neoteric times, in light of the KS Puttaswamy judgement, indicate a pivotal focal point: the urgent and dire need for the introduction of a data protection law in India.

FACT VS FICTION: CAN COMPENSATION INDEED BE SOUGHT, OR IS IT MERE WISHFUL THINKING?

In the not-so-distant past, we have witnessed a lot many data breaches that have emanated in India – we have had the personal data of over 29 million job seekers which found its way to the dark web, and the expose of the sensitive data of over 7 million CSC-BHIM users last year, and the (in)famous Domino’s India data breach which affected over 180 million of its customers, to cite a few examples among many such instances which have come to light, and the plethora of instances which have not.

In light of such breaches and in the absence of a specific data protection law, limited safeguards are guaranteed by the existing legal regime. Section 43A of the Information Technology Act, 2000 (“IT Act”) specifies that the body corporate, which holds, handles or deals with the sensitive data or information of a similar nature of a particular person, and under whose oversight a data or information breach has taken place (i.e., concerning our discussion, Air India), would be held negligent and liable to compensate such aggreived person. The victim of a data breach can thereby approach the Adjudicating Authority established under the IT Act seeking redressal – with the only catch being that the victim will have to show that he/she has sustained a monetary loss of INR Five Crores or less.

To add on, the umbrella protection of Section 43A comes with one particular condition which can be misused by body corporates, which we find in the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (“2011 Rules”) – whereby, Rule 8 says that the body corporate is absolved of liability to a large extent if it has complied with reasonable security practices, standards, and procedures as specified by the 2011 Rules. Thus, when Rule 8 of the 2011 Rules is read with Section 43A of the IT Act, the threshold of the onus on the body corporate is consequentially lowered – and the single pit-stop defence of a body corporate having adhered to “reasonable security practices and procedures” could let it off the hook hassle-free.

This showcases that as per the current legal regime governing data breach-compensation in India, no aggrieved customer/consumer/user can seek compensation ‘ipso facto’ – even if a particular body corporate concedes to a data breach on its end.

However, this raises a crucially pertinent question – should the corporate under whose aegis the data breach took place be vindicated merely because it adhered to set standards of security as per the IT Act and the 2011 Rules?

An answer in affirmative to the immediate question is troublesome on two grounds – One, the standard of care & reasonability established in the years 2000 and 2011 are far outdated when viewed in contrast with the degree & magnitude of data and information breach that we witness in 2021 and thus, accountability goes for a toss since the body corporate has to merely prove that it has adhered to a yardstick of standard of care, which is archaic & obsolete to its very core, for it to go scot-free; and two, the ambiguity and vagueness in the definitional aspects of the IT Act and its aligned Rules, along with the dearth of an efficacious checks-and-balances mechanism, makes space for expansive legal incertitude. In turn, all of this would provide for a potential leeway wherein the interests of corporations supersede the interests of customers/users/consumers – thereby defeating the very purpose which brought to existence the IT Act, and subsequently, its allied Rules.

CONCLUDING REMARKS

The quandary remains – when one is left to fend for themselves, can the doors of justice be knocked to claim reparation for a data breach? This question needs to be addressed taking into consideration the Personal Data Protection Bill, which is still pending on the floor of the Parliament and thus doesn’t have the accord of being considered a law, yet.

However, not all hope is lost as the legislative machinery is keeping up with the digitisation trends and bringing accountability to data collecting corporates – we now have E-commerce companies brought under the Consumer jurisprudence and the BIS framework for data privacy assurance.

Although, India doesn’t have a piece of legislation that addresses the issue of compensation or redressal of consumers in cases of a data breach so far – nevertheless, this makes the Air India data-breach case of a high consequence since the Court’s ruling will pave the way for corporate accountability, especially in cases of data breach.

The quandary remains – when one is left to fend for themselves, can the doors of justice be knocked to claim reparation for a data breach? This question needs to be addressed taking into consideration the Personal Data Protection Bill, which is still pending on the floor of the Parliament and thus doesn’t have the accord of being considered a law, yet.

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Policy & Politics

An analysis of the New Labour Code and its impact

The effectiveness of the New Labour Code—which were supposed to see the light of the day this year but deferred by a year due to Covid-19 pandemic—will be tested in due times when the same will be implemented.

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INTRODUCTION

Labour, enumerated as entry 24 & 25, falls under the Concurrent List of the Constitution of India. Therefore, both Parliament and state legislatures are competent to enact laws regulating labour. The Union Government stated that there are more than 100 state and 40 central laws regulating various aspects of labour such as resolution of industrial disputes, working conditions, social security and wages, etc. Pursuant to the recommendations of the Second National Commission on Labour, which submitted its report in June, 2002, the union legislature passed The Occupational Safety, Health and Working Conditions Code, 2020 (hereinafter as the ‘Code’). It was re-introduced in Lok Sabha by the Union Minister of Labour and Employment, Mr. Santosh Kumar Gangwar, on September 19, 2020, with the new changes which lead to the withdrawal of the Occupational Safety, Health and Working Conditions Code, 2019 (hereinafter as ‘OSH Code, 2019’). As the OSH Code, 2019 was referred to the Department related Parliamentary Standing Committee on Labour, which suggested substantial number modifications to the code and also in the light of Covid-19 pandemic, the Union Government also proposed certain changes to the OSH Code, 2019. The Code consolidates 13 existing Acts regulating health, safety, and working conditions, which include the Factories Act, 1948; the Mines Act, 1952; and the Contract Labour (Regulation and Abolition) Act, 1970. The OSH Code intends to amalgamate, simplify, consolidate and rationalise more than 600 provisions of the 13 laws mentioned in a single code consisting of around 143 provisions.

EXTENT

The Code emphasizes on health, safety and welfare of the workers employed in various sectors such as industry, trade, business, manufacturing, factory, motor transport undertaking, building and other construction works, newspaper establishments, audio-video production, plantation, mine and dock-work and service sectors. It also aims to provide a broader legislative framework, thereby, enabling the workmen to secure just and humane working conditions and, enables the government at both the union and the state level to make rules and regulations in consonance with the emerging technologies and developments in the industrial sector.

IMPLICATIONS OR CHANGES IN THE LABOUR JURISPRUDENCE

The Code aims at reducing the burden of the employers as it replaces multiple registrations under various enactments to a single common registration, one licence and one return, ultimately creating a centrally consolidated database which will be helpful under ease of doing business policies of the Governments. The Code places an obligation on employers to conduct free annual health check-ups for their employees, to ensure the disposal of hazardous and toxic waste including e-waste, to issue an appointment letter to every employee on their appointment in the establishment.

CONSTITUTION OF ADVISORY BOARDS AT BOTH NATIONAL & STATE LEVEL

The Code states that the Central Government shall constitute a National Occupational Safety and Health Advisory Board which will discharge the functions conferred on it by or under the Code and to advise to the Central Government on the matters relating to standards, rules and regulation to be framed under the Code. The State Government shall constitute a similar type of board to be called the State Occupational Safety and Health Advisory Board which will advise on the matters arising out of the administration of the Code as may be referred to it by the State Government.

CONSTITUTION OF SAFETY COMMITTEES

The appropriate government may require a constitution of safety committees in certain establishments, and for a certain class of workers, consisting of representatives of the employer and the workers, however, the number of employer representatives shall not exceed the employee representatives. The function of these committees will be to act as a liaison between employers and employees. In any establishment which is a factory employing 500 workers or more, or a factory engaged in hazardous work employing 250 workmen or more, or a building or construction work employing 250 workers or more, or a mine where more than 100 workmen are employed in ordinary course; the employer will appoint safety officers according to the qualifications prescribed by the appropriate government.

In another welcome step towards providing some semblance of social security to the unorganised sector workers, the new Code provides for the establishment of a Social Security Fund. Any establishment having 100 workers shall have a canteen facility and that should be provided by the employer. For the appointment of welfare officers under the Code, the minimum number of workmen in any establishment is 250.

CONDITIONS OF EMPLOYMENT

Workers cannot be subjected to work for more than 6 days in a week, one day off every week and will be entitled to one day off for every 20 days of work. Workers or Employees are entitled to receive wages for the work done overtime at the rate of twice the normal wage rate as per the scheme of the Code. Under the Code provisions have been made for the employment of female employees by the employer for working beyond 7 pm till 6 am (basically night shifts) with their consent and conditions relating to safety, holiday, working hours. Furthermore, the women workers are entitled to be employed in all establishments for any kind of work including hazardous ones subject to the conditions that the appropriate government may require the employer to provide adequate safeguards prior to their employment in hazardous or dangerous operations. The Code provides that the wages to the audio-visual workers, shall be disbursed electronically and this will ensure transparency, thereby helping in keeping and maintenance of the records as well.

FALLACIES IN THE NEW CODE

As the Code consolidates the provisions of the 13 legislations related to the subject but at the same time it is unable to simplify them or be all inclusive while dealing with the matters dealt by those laws. These include provisions on registration, duties of employers, and filing of returns. It also includes additional provisions which are applicable to the specific types of workers such as contract labour, inter-state migrant workers, audio-visual workers, or those in mines, beedi & cigar workers, construction workers, factories, and plantations.

Major Safety Issues sidelined & some sectors left out

For example, the Code requires that any person suffering from deafness or giddiness may not be employed in construction activity which involves a risk of accident. The question to be posed here is why such a general safety requirement is not provided for all workers or why the legislature ignored such an important aspect. Similarly, the Code provides for registration of employment contracts for audio-visual workers, raising the question of why there is a special treatment for this category. Furthermore, the disputes related to the contracts of audio-visual workers will be resolved by the dispute resolution mechanisms devised by the appropriate government, if still the dispute remains unresolved the parties may invoke the jurisdiction of the Industrial Tribunal established by the appropriate government under the Industrial Disputes Act, 1947.

The Code under section 2(1)(zx)(a)(i) contains health and safety provisions for workers in plantations measuring at least five hectares. In its report on the OSH Code, 2019 the Department related Parliamentary Standing Committee on Labour noted an assurance of the Union Ministry of Labour and Employment, that workers in plantations measuring less than five hectares would be covered in the Code on Social Security, 2020. However, the definition of a ‘plantation’ in the OSH Code, 2019 retained the five-hectare threshold. This recommendation has not been incorporated in the Code.

NO PROPER FORUMS FOR APPEAL

The Code bars the civil courts from hearing any matters under the code. In some matters where persons are aggrieved by the orders of authorities such as, Inspector-cum-facilitator in the case of factories, or by the revocation of a license for contractors, the Code under section 119 (6) provides for an administrative appellate authority to be notified by the appropriate government. However, it does not provide a proper judicial mechanism for hearing disputes under the code but provides a quasi-judicial one to be notified by the appropriate government as opposed to the earlier regime, for example the functions and constitution of a labour court were clearly laid down under Industrial Disputes Act, 1947. It can be argued that the bar on civil courts from hearing matters under the code, deny aggrieved persons an opportunity to challenge certain issues such as relating to the contractual terms in case of contract labour before a civil court of competent jurisdiction, as such matters may be governed by the terms of contract falling under Indian Contract Act, 1872. The only judicial remedy available to a person aggrieved is to file a writ petition before the relevant High Court, as the High Court is vested with power of superintendence over the courts and tribunals functioning under its territorial jurisdiction.

WEAKENING OF THE INSPECTION SYSTEM

The Code weakens the inspection system in numerous ways. To make matters adverse, the code is silent on the powers of inspectors envisaged by ILO Conventions ratified by India, the provisions such as free entry at any time and without prior notice and as frequently as possible to secure effective application of laws by the establishments of Labour Inspection Convention, 1947 are diluted by the passing of the Code.

EXCESSIVE DELEGATION OF POWERS & REGRESSIVE APPROACH TOWARDS DEFINING KEY TERMS

Under the Constitution, the legislature is the law making organ and the executive is responsible for their implementation. It is often observed that the legislature enacts a law on a specific entry/subject within its domain covering the general principles and policies, and further, delegates detailed rule-making to the government thereby, allowing expediency and flexibility. However, time and again the courts have reiterated that certain essential functions and powers should not be delegated to the government which include, framing the legislative policy on a particular subject matter to determine the principles of the law. Also, it is the general principle that any rule made as a delegated legislation should also remain within the scope of the parent legislation. The Code in section 127, also gives the appropriate government the power to exempt any establishment for a period to be specified in the notification providing exemption. Further, it also enables the state governments to exempt any new factory from any or a group of provisions of the Code in the interest of creating more economic activity and employment. Therefore, the appropriate government has wide discretion in providing exemptions under the Code. Every factory generates employment, and public interest could be interpreted broadly. Also the exemptions could cover a wide range of provisions including those related to hours of work, safety standards, retrenchment process, collective bargaining rights, contract labour. The low numeric thresholds with respect to the number of workers would create adverse incentives for establishment sizes to remain small, in order to avoid complying with labour regulation and therefore the real intention of the legislature will remain unfulfilled as the laws will not be applicable to them. It is worth noting that the Factories Act, 1948 only permitted exemptions from its provisions during the cases of public emergency, and such exemptions were limited to three months. The Code under its scheme also envisages similar provision but however, the life of such exemptions is that of one year at a time. But the drawback here is the regressive approach of the legislature when it defines the phrase ‘Public Emergency’, in explanation to section 128 of the Code, as a state of a grave exigency, whereby, the security of the union or any part of territory is threatened due to war, or external aggression, or internal disturbance. Implications of this could be that in near future the government may invoke the internal disturbance condition to suspend the application of the code and this will be a severe blow to the rights of the workers across India.

Also, this situation could be done for indefinite time as the maximum life for a notification issued after invoking this provision is one year, but this would be circumvented by re-issuing the notifications.

CONCLUSION

The (in)effectiveness of the Code and the rules made thereunder, will be tested in due times when the same will be implemented. These reforms were to see the light of the day this year but due to another deadly wave of the Covid-19 pandemic, the Union has deferred the same by another year. Also passing of these new laws is nothing short of packing the old & aged wine, into some new bottles and displaying them, so that it may attract some new customers to the tavern.

The Code under section 2(1)(zx)(a)(i) contains health and safety provisions for workers in plantations measuring at least five hectares. In its report on the OSH Code, 2019 the Department related Parliamentary Standing Committee on Labour noted an assurance of the Union Ministry of Labour and Employment, that workers in plantations measuring less than five hectares would be covered in the Code on Social Security, 2020. However, the definition of a ‘plantation’ in the OSH Code, 2019 retained the five-hectare threshold. This recommendation has not been incorporated in the Code.

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Policy & Politics

An analysis on gig and platform workers: Code on social security

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The introduction of the social security code in India is an important step towards reformation of workplaces. Social security is commonly viewed as a sort of monetary assistance provided by the government to persons who are either inadequately employed or can’t be employed. In India, the term “social security” has a completely different connotation. Our social security system in India is made up of various labour laws that our state and central governments have enacted over several years. These govern salaries and benefits for workers, as well as safe working conditions and regulate labour and industrial relations.

The Code on Social Security, 2020, amalgamates eight previously existing labour laws of centre. These are the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; Payment of Gratuity Act, 1972; Employees’ Compensation Act, 1923; Maternity Benefit Act, 1961; Employees’ State Insurance Act, 1948; Workers Cess Act, 1996; Cine Workers Welfare Fund Act, 1981; Building and Other Construction and Unorganised Workers’ Social Security Act, 2008.

This Code isn’t just a collection of previous laws consolidated into one. It has expanded the coverage, made benefits available to all workers in the organised and unorganised sectors, incorporated notions of giving maximum benefits with minimal governance, and demonstrates consistency in approach. The Code aims to bring uniformity to the provision of social security benefits to employees, which were previously divided into different acts with varying applicability and coverage. The Code also attempts to give social security to a large group of workers by recognising and covering workers in the unorganised sector. Under this code, draft rules have been published by the Government.

The law also broadens the scope to include fixed-term contract workers, who will now be entitled for gratuities, whereas previously only permanent employees were covered. As per the Code, an employee is entitled to gratuity if they are terminated from their job after a continual service tenure of at least five years, which is the same as earlier. The events that would lead to gratuity are as follows: retirement, resignation, death or permanent disability as a result of an accident or illness, or termination of a contract under a fixed-term employment contract, or on the occurrence of any event notified by the Centre. In the eventuality of an employee’s death, the gratuity would be payable to the employee’s nominee or legal heir. As a result of the inclusion of the term “expiration of fixed-term employment”, now fixed-term contract employees too will be entitled for gratuity.

Under the new laws, these workers will be covered by social security benefits such as income services and health insurance. Several new terms have been developed, such as gig workers, platform workers, and fixed-term employees, which previously were not acknowledged by any labour laws. Gig workers and platform workers, who are part of the unorganised workforce, were not legally recognized by the Government for many years. Since these workers were not paid on a salary basis, they were deprived of many benefits such as Health Insurance, Provident Fund, etc. The new regulations provide gig workers a shared identity.

Definition of “Gig Worker”In India, the phrase “gig worker” is a relatively recent notion. Generally, a gig worker is someone who works hourly or does part-time jobs in various fields, ranging from catering events to developing software, and many more. The job is generally temporary and performed within a set timeframe under an unusual employment arrangement. The term “gig worker” is defined in the Code as, “a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationships”. The legal identification of gig workers was urgently needed because the concept covers a large group of contract employees. Even a part-time professor can be covered in the gig economy. Contingent employees, freelancers, and independent contractors are just a few examples of prevalent names. The gig economy finds its origin and is mostly popular among youths in western countries. This model enables students to start working at a young age and get expertise in their chosen fields. The perks involved with such employment would inspire individuals in India to pursue these jobs and avail benefits that arise out of it.

Definition of “Platform Worker” In general, a platform worker is someone who works for an enterprise that offers specific services to clients, customers, individuals or organisations through an online platform. Uber, Ola, Zomato, etc. are some of its examples. According to the Code, a platform worker is, “a person engaged in or undertaking platform work”. In order to have a fuller insight, the definition of platform worker must be read in conjunction with the definition of platform work, which specifies what platform work is. It is defined as, “a work arrangement outside of a traditional employer employee relationship in which organisations or individuals use an online platform to access other organisations or individuals to solve specific problems or to provide specific services or any such other activities which may be notified by the Central Government, in exchange for payment.’’

WHAT’S THERE FOR GIG AND PLATFORM WORKERS IN CODE?

The Central Government has proposed to generalize benefits such as health and maternity benefits, as well as life and disability insurance. The state government is responsible for providing benefits to workers such as provident fund, skill upgradation, and accommodation. Nirmala Sitharaman, the Finance Minister of the nation, has also stated that all sorts of workers would now be subject to minimum wage regulations and that the Employees State Insurance Corporation, or ESIC, will apply to the government. The Centre also has no information about how many gig workers at present are now employed in India; however, some independent estimates put the figure at above 130 million. To reap the benefits of these planned incentives, the government has planned to create an online platform for all qualified unorganised workers in the country by June 2021. It’s mandatory for all the gig and platform workers to register on this portal. In order to be eligible, the worker must be over the age of 16 and under the age of 60. Also, they have worked for at least 90 days in the past 12 years. The worker would be required to submit a self-declaration, either online or offline, as well as additional documents, including the Aadhar Card. The Central Government could also choose five members for the unorganised sector to the National Social Security Board, which will frame policies and regulations for gig and platform workers. Furthermore, the Code requires aggregators, or employers in the case of gig workers, to donate a set proportion of their revenue to a social security fund for the unorganised sector’s welfare.

Amidst this pandemic gig economy has been a major help to the country. When we all were staying at our homes due to the fear of getting infected by the virus, various workers of online platforms like Zomato, Swiggy, etc, were providing services ranging from delivering food to delivering medicines.

India is now seeing a booming phenomenon where a lot of start ups are coming up and their business model rests on such kind of an arrangement where they are engaging these people on an independent contract basis meaning thereby, that there is no employer employee relationship with them and so they are not suppose to comply with all the labour laws that exist in the country because all of them focus on an employee so one concern is that if a recognition is given to these gig workers then even the business model of these organisations might collapse because they are engaging these people in thousands of numbers.

Second concern is related to these workers who have constantly been asking for certain minimum benefits for themselves. A couple of years back certain organisations of these workers came forward and filed a PIL in Delhi High Court asking for setting up of a committee that can examine whether they can be treated as an employee, whether they can get the benefits under labour laws but there was no headway on that front. So, its very tricky balance to meet. So, government has tried to do that by not saying that these are employees on one hand and on the other hand giving them atleast social security benefits meaning thereby providing life benfit, health benefit, benefit in relation to accidents. So, the government plans to formulate a scheme under the code on social security which will provide atleast these benefits to gig workers, platform workers there has been an attempt to balance both the interests.

CONCLUDING REMARKS

We are witnessing the rise in the trend of people using online platforms like Zomato, Uber etc. on a day-to-day basis and with the increase in the services provided by the online platforms there will be increase in number of people working for these platforms. So it becomes of utmost importance to formulate a robust scheme to safeguard the welfare of the people working for the online platforms.

Although, the government has recognized the workers working for online platforms by introducing the definition in the Code on Social Security but only the introduction of the concept is not enough there are many things needed to be done. First concern is that since that there is only one code that defines the concept of gig workers. Now, when we look at both the definitions of gig workers and platform workers one can interpret that Platform worker seems to be a narrower concept falling within the wider concept of gig worker. Now, this problem paired with the lack of definition in the other codes leads to confusion with regards to what gig workers can avail in terms of protections and minimum wages, etc. The lack of clarity in the definition also leads to large ambiguity allowing the platforms to decide who is a gig worker and a platform worker.

Secondly, the Judiciary should also give certain recommendations for the welfare of Gig Workers as till date we lack on judicial front when it comes to take steps for gig workers. On 19th February, the Supreme Court of the United Kingdom in Uber BV & Ors. v. Aslam & Ors. ruled that Uber drivers should be treated as employees rather than independent contractors, making them liable for all employment-related benefits such as minimum wage, annual leave, and insurance. No such issues with regards to gig workers have been dealt by Judiciary in India. In 2018 the Delhi High Court in the case Delhi Commercial Driver Union v. Union of India was posed with the question that whether these workers can be conferred with the status of worker but before this question could be answered the matter was eventually withdrawn, thereby pushing out employment status of gig workers in India to a later date. So, there is a need for proper guidance on the issue by the Judiciary so that a proper policy could be framed by which the interest of the workers and online platforms can be balanced.

The Central government has proposed to generalise benefits such as health and maternity benefits, as well as life and disability insurance. The state government is responsible for providing benefits to workers such as provident fund, skill upgradation, and accommodation. Nirmala Sitharaman, the Finance Minister, has also stated that all sorts of workers would now be subject to minimum wage regulations and that the Employees State Insurance Corporation, or ESIC, will apply to the government. The Centre also has no information about how many gig workers at present are now employed in India; however, some independent estimates put the figure at above 130 million. To reap the benefits of these planned incentives, the government has planned to create an online platform for all qualified unorganised workers in the country by June 2021. It’s mandatory for all the gig and platform workers to register on this portal. In order to be eligible, the worker must be over the age of 16 and under the age of 60.

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Policy & Politics

SURROGACY BILL AND REPRODUCTIVE RIGHTS: AN ANALYSIS

Atulendra Rathour

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To regulate surrogacy in India, the Surrogacy (Regulation) Bill, 2019 was introduced and was passed in Lok Sabha but was later sent to Select Committee. The Select Committee made some changes and introduced a draft of the Surrogacy (Regulation) Bill, 2020. Union Cabinet approved it on 26th February 2020. The bill is yet to be introduced in the Lower house in the upcoming session due to a pandemic its introduction is delayed.

The new bill allows any woman to surrogate willingly as the earlier bill only allowed close relatives to be surrogates. The clause defining infertility has also been removed to make access to surrogacy easier. This new proposed Bill is a better version of the previous 2019 Bill. Many of the loopholes related to the previous bill has been covered but still, it relies on a Need-based approach instead of emphasizing a Rights-based approach. The bill prohibits Commercial Surrogacy and promotes Altruistic Surrogacy. The bill aims to prevent further exploitation of surrogates and children born out of surrogacy. Even then, some clauses of the bill are contradictory with Women’s autonomy and their reproductive rights.

By completely prohibiting Commercial Surrogacy, also affects the bodily autonomy of women. The ethical (Altruistic) Surrogacy expects a woman to undergo the complete period of pregnancy that too without any compensatory benefit. Just in the name of compassion, love, and affection. Surrogacy is not a one-day issue to be taken so lightly rather it involves several Physical and Mental ups and downs. Banning commercial Surrogacy is also a strong move towards constraining the income of Surrogates as the $400 million – a year industry will come into its foot. This bill will further motivate surrogates not to go for surrogacy which will lead to the disappearance of surrogacy and will affect couples’ rights to avail child.

The bill also fails to pass the test of the “Golden Triangle” laid down by Apex Court in Minerva Mills Ltd. & Ors v. Union of India & Ors. The test checks the constitutionality of the laws based on Equality, liberty, and freedom of rights. The right to make reproductive choices forms a part of Article 21 of the Indian Constitution. Apex Court in Suchitra Shrivastava v. Chandigarh Administration said, “There is no doubt that a woman’s right to make a reproductive choice is also a dimension of personal liberty as understood under article 21 of the Constitution of India”. Similar contention of Supreme Court was given in the case of Devika Biswas v. Union of India. In another landmark Judgment of KS Puttaswamy, nine judges bench of Supreme Court held that Personal and bodily autonomy forms a part of the Right to Privacy under Article 21 of the Indian Constitution. High Court of Andhra Pradesh in B.K. Parthasarthi v. Government of Andhra Pradesh held that State’s interference in one’s procreation is a direct interference in one’s privacy. Right to livelihood also forms a part of Article 21 and banning commercial surrogacy will also violate this right as a large number are run their livelihood by becoming a surrogate of others.

Conclusively, it is said that the bill is an attempt to tackle the exploitation of surrogates on the other hand it is a clear violation of Women’s bodily autonomy and reproductive choices. The bill fails to overcome the patriarchal and traditional notion of society.

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