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Law firms and the Covid-19 pandemic: Lessons and notes

A major impact of the lockdown and Covid-19 has been, one that most shy away from admitting, the cash flow crunch.

Ajay Bhargava

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The novel coronavirus has resulted in people being locked down in their homes. Notwithstanding the widespread health concerns attached with Covid-19, it has been able to instil, in the minds of people, fear. The world is panicking at a rate faster than the spread of the virus. These unprecedented times have not only brought the world closer, more rapidly than the modern means of communication and technology, but have also unified the world, in a way not seen or heard of before, in its fight against the novel virus.

The virus has not discriminated, and its impact has been felt by one and all, businesses and individual alike, across the globe–mentally, emotionally, physically and financially. There is no right or wrong way of dealing with the present situation and each entity is doing its level best to manage the circumstances for its own preservation and those it is responsible for. When it comes to a law firm, clients and resources are quintessential. The wellbeing of a law firm’s clients and its resources is paramount and in dealing with the impacts of Covid-19, the wellness of the clients and resources is central.

In order to understand the means adopted by a law firm to survive, and ultimately, thrive from the present situation, one needs to understand and acknowledge the impact of the novel virus on the legal industry. A major impact of the lockdown and Covid-19 has been, one that most shy away from admitting or at least explicitly acknowledging, the cash flow crunch. Cash flow may not necessarily be a direct consequence of the pandemic but, in most cases, a subsequent one.

For a lawyer, and on a larger scale, a law firm, apart from issuing advisory and opinions to clients for the various activities undertaken by the client, there is also involvement in the dispute resolution process of the disputes that have arisen out of the transactions undertaken by the clients. Dispute resolution has been on a backfoot with the courts only taking up matters being urgent in nature, which most often than not do not include matters involving disputes between parties at a personal/ commercial level.

Moreover, with businesses shut due to the lockdown and only bare minimum and essential activities being allowed by the governments, the opinions sought by the clients have also declined. Resultantly, the incoming work has been restricted leading to lower revenue generation and along with outstanding invoices. Another major impact for the industry has been the morale level of the individuals. A law firm is only as good as its representatives.

In other words, if the overall morale of those responsible for running the various dayto-day affairs of the firm is not high, the natural consequence of the same would be lower morale of the firm. Therefore, tackling with the affected morale of the members has been a key challenge for law firms. Yet another challenge faced by law firms has been simply coping with the prevalent situation caused by the pandemic. There has been a lot said and spoken about the present times being to tackle and deal with a pandemic and not a “productivity contest”.

However, what people do not realise is, for an entity in the service sector, it has to live up to the expectations of the client, providing them with full support and catering to their requirements during the harshest of times and those who are able to do so, are the ones who are distinguished and leave a mark, for it is only a select few that meet the phrase “when the going gets tough, the tough get going”. In order to combat the situation caused by the rampant spread of Covid-19 various steps and measures have been implemented by law firms.

A major policy decision has been to ensure the health and safety of all members of the firm. Khaitan & Co has been in the forefront of ensuring that its members are protected from the virus and stay safe. It is one of the first few firms to set in place a “100% Work From Home Policy” which was enforced in letter and in spirit. This was a pre-emptive measure adopted by the firm, notably days before the national lockdown announced by the Central government.

Another major step taken by the firm was imposition of travel restrictions, for both client and personal travels, which was initially for international travel and later extended to domestic travel. Client engagement and interaction has been another important aspect during the lockdown, by sending regular updates, personal phone calls and conducting webinars.

A law firm has a wide client database and to prevent loss of business, it is imperative to periodically touch base with that database. Instead of shooting out generic emails about the various developments taking place with regard to Covid-19, which are already floating in abundance, the clients should be sent more personal emails updating them with those facets that influence and impact their business.

One more means of client engagement is reaching out to clients, to check up on them and enquire about any difficulty they might be facing and providing specific solutions to those. A common way of doing this has been conducting webinars on latest developments and client specific industry to converse, update and address queries of the clients. With the change and shift in the needs of the clients, firms have to be on their toes to address the concerns of the client and provide them with crisis management advisory.

Professional and personality development of the members of the firm has been another step taken to survive and get past the present situation. This has a two-fold benefit, the members are able to hone their skills and, at the same time, are occupied. Keeping members of the firm occupied in discussions on current and important legal topics and asking them to attend webinars on a variety of themes and subjects, apart from carrying out the usual work, helps in maintaining sanity and a healthy mental state.

Further, intra-team interactions and HR engagements to redress any concerns members of the firm might be facing have also turned out to be fruitful. To stay abreast with the present times, one has to be technologically advanced. Most law firms already have a dedicated IT team and a decent technological infrastructure. This existing basic or intermediate IT infrastructure has allowed law firms to operate remotely. The ability to work remotely, owing to the incapacity of working from office, has aided, and continues to aid, in serving the clients through this phase of the national lockdown.

Alongside, the firm has been able to improve, enhance and transform upon its IT infrastructure with the IT team working relentlessly through remote access. A strong and advanced IT infrastructure will go a long way in achieve the object of digitisation. Additionally, owing to the virtual hearings being conducted and it being anticipated that a certain category of hearings may continue to be held through virtual courts, law firms, lawyers and clients are required to have adequate and sufficient technology in place.

Furthermore, for appearing before the virtual courts, the conferences with senior counsels and clients are also being held through video conferences. Lawyers and clients, alike, are adapting to the current system of justice dispensation and keep themselves adept with the guidelines and standard operating procedures issued by the courts from time to time. Apart from these, law firms are periodically amending and introducing policies to tackle the pandemic and the diverse consequences it has brought with it.

One such measure has been the introduction of a dedicated Covid-19 resource centre on their websites. By means of this Covid-19 resource centre, law firms are regularly updating and posting about legal, regulatory, statutory developments. Various articles and information are also being posted to provide the clients and other visitors on the websites with a view on the key developments and the responses to the Covid-19 pandemic. The evolutionary theory propagated by Charles Darwin spoke of “survival of the fittest”.

The present times have demonstrated and showcased a different scenario. The key qualities being talked of and required for emerging from the present circumstances are: resolve, resilience, return, reimagine and reform. Turning over a challenging situation, like the present one, requires innovation, a cohesive team, and leadership (both in those managing and those implementing).

The lockdown has given an opportunity to halt for a moment to rethink, realign, strategise and prioritise the adoption of an inclusive approach that focuses along with professional growth, on the overall and personal growth of the entity in order to become leaner, agile, and adaptable. It is these measures that have supported the survival and will ultimately provide a base for blossoming.

Ajay Bhargava is a Senior Partner of the Dispute Resolution Team at Khaitan & Co, specialising in civil, criminal and corporate litigation. His fora of practise include Supreme Court, High Courts, Arbitration (International and Domestic) and various quasi-judicial tribunals.

Legally Speaking

Farmers at the centre of political debate once again: Looking at farm bills from competition lens

Prof (Dr) Vijay Kumar Singh

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It is surprising for many that ‘Kisan’ (the Farmer) is at the center of political debate and legislative action but for an election season. Generally, farmers in India are at the center of debate during Lok Sabha elections, as every political party has to make assurances in their manifestos for the farmers. Mostly these promises relate to ‘waiver of debt’ (karz mafi’), easy credit or some financial allowances. No one thinks to empower the farmer as a businessman himself to negotiate and be part of the competitive market regarding his produce. NITI Aayog in it policy paper in March 2017 proposed strategy and action plan for ‘doubling farmers’ income’. The present debate is going around the three legislations (Farm Bills) passed by the Parliament in a stormy monsoon session. While the proposal is awaiting final signatures of the Hon’ble President of India to become law with effect from 5th June 2020 (date on which the Ordinance was brought), let us have a look at the main features of the following legislation from competition perspective.

 • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 (Freedom of Choice to Sell Farmers’ Produce) 

• The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill 2020 (Framework for farming agreements) 

• Essential Commodities (Amendment) Act, 2020 (decontrolling supply of farm produce) An analysis of the aforesaid three Bills from the competition reforms perspective is a welcome step for the following reasons: 

FREEDOM OF CHOICE

 One of the greatest problems which have been highlighted across the governments in the past years was that of Agricultural Produce Market Committees (APMC) and its higher commission rates and exploitation of poor farmers. As the state APMC laws had restrictions, Competition Commission of India (CCI) had on several occasions said that “APMC laws and the pricing policy needs to be reviewed to remove competitive bottlenecks for the benefit of the farmers”. The new law takes away the exclusive rights of the APMC to trade in agricultural produce in an area. A farmer is free to choose competitive alternative trading channels for price discovery. While a trader would require mandatory PAN card, the farmer producer organizations or agricultural cooperative society are exempted. The freedom extends to the interstate as well as intra-state trade of farmer’s produce. No market fee by any name whatsoever can be charged under any state APMC Laws.

 Timely Payment to Farmer:

 Law requires the farmer to be given a receipt on the same day as an evidence of the trade and payment not later than 3 working days of the trade.

 Electronic Trading and Transaction Platform: Any person other than an individual may establish the ETTP for facilitating inter-State or intra-State trade and commerce of scheduled farmers’ produce in a trade area. This would be greatly helpful to the farmer to sell their produce online. This would be another open market, where competitors of ETTP would ensure advocacy, quality, and efficiency of their platforms. Though a government portal e-NAM exists, regulated privatization in this space would bring healthy competition. This is also forwardlooking keeping in view the focus on dynamically changing agri-economy, ecommerce and agri-exports.

 Price Information and Market Intelligence System (PIMIS): 

It is said that information and data is the ‘new oil’. Information is a double edged sword, while information asymmetry dissuades competition, information sharing sometimes may lead to anticompetitive practices like cartelization. Law enables the Central Government to develop a PIMIS for dissemination of information and would be a great tool at the hands of the farmers to know the demand and supply information for getting best for their farm produce. From competition perspective, the only challenge would be to monitor cartelisation in this space. 

CONTRACT FARMING:

 Fragmented small landholdings is one of the major challenges in India agricultural sector’s growth to which contract farming may be one solution. The second proposed legislation provides for empowerment and protection of farmers while entering into contract farming agreements if they wish to. The agreement would be in relation to the (a) the terms and conditions for supply of such produce, including the time of supply, quality, grade, standards, price and such other matters; and (b) the terms related to supply of farm services. Responsibility of the legal compliance part shall be on the sponsor. Rights of the sharecropper (bataidar) cannot be compromised through this agreement. Minimum period for this agreement would be one crop/livestock cycle and maximum 5 years, unless mutually decided more by the farmer and the sponsor wherein the production cycle of the crop is longer. 

Protection to Farmers: There shall be clarity on prices and would not depend on contingency. Farm produce under contract farming shall be exempted from the applicability of State Acts. Sponsor is prohibited from acquiring ownership rights or making permanent modifications on farmer’s land or premises. Farming agreement may also be linked to the insurance or credit instrument under any scheme of Central/State Government. A registration authority is contemplated to provide facilitative framework for registration of farming agreements. One of the provision clearly mentions that “no action for recovery of any amount due in pursuance of an order passed under this law, shall be initiated against the agricultural land of the farmer.” 

Minimum Support Price (MSP): This has been the most contentious issue in agriculture sector. While competition does not suggest prescribing any pricing, or MSP or subsidy, as this may be considered as market distorting. India being member of WTO has to also comply with the requirements on Agreement on Agriculture. A competitive market provides for price discovery based on demand and supply. Farm Bills does not provide any statutory backing to MSP. Otherwise, MSPs are announced by the government on the recommendations of the the Commission for Agricultural Costs and Prices (CACP) under the Ministry of Food and Agriculture for the enlisted crops (14 kharif, 6 rabi and 2 commercial crops). For sugarcane, Fair and Remunerable Prices (FRP) is declared. This topic requires a separate deliberation. 

Aggregators and Farm Service Providers: Small farmers may take services of “aggregator” who acts as an intermediary between a farmer or a group of farmers and a Sponsor and provides aggregation related services to both farmers and Sponsor as well as that of farm service providers like pesticide control, harvesting services, etc. 

Producer companies have now been proposed to be made part of the Companies Act 2013 under the 2020 Amendment (chapter XXIA-378A-ZU). ‘Producer companies include companies which are engaged in the production, marketing and sale of agricultural produce, and sale of produce from cottage industries.’

 DE-REGULATION:

Regulation of the supply of such foodstuffs, including cereals, pulses, potato, onions, edible oilseeds and oils may now only be done under extraordinary circumstances which may include war, famine, extraordinary price rise and natural calamity of grave nature by notification of the Central Government. An order regulating stock limit (hoarding) of agricultural produce may be issued in the following circumstances: (i) hundred per cent increase in the retail price of horticultural produce; or (ii) fifty per cent increase in the retail price of non-perishable agricultural foodstuffs, over the price prevailing immediately preceding twelve months, or average retail price of last five years, whichever is lower. Public Distribution System (PDS) or the Targeted Public Distribution System orders are exempted from application of this deregulation, which means that procurement for PDS will not be hit by this order. Some concession is also available to a processor or ‘value chain participant’ of agricultural produce. VCP includes a set of participants, from production of any agricultural produce in the field to final consumption, involving processing, packaging, storage, transport and distribution, where at each stage value is added to the product. 

What would need serious attention by the Government? 

State Governments on Board: Agriculture is a State subject (Entry 14); however, the aforesaid legislation are likely framed under the concurrent powers vested with the Central Government (Entry 33) as opening up the whole agricultural produce market would require interstate facilitation, which in turn would need intervention of Central Government. Integrating the agricultural markets as one common market for the whole country offers several opportunities but also challenges which needs to be addressed.

 Advocacy: Prime Minister has said that people are spreading rumors about the farm Bill’s disutility for the farmers. Hence it is necessary to educate the poor and gullible farmers about the benefits of the legislation and how they can avail it.

 Dispute Resolution System: Conciliation Board has been provided as the mechanism of resolution and SDM is made the owner of this process. While this is a welcome step, if Mediation mechanism could have also been included it would have been better. Further the SDMs handling this profile would require special training and an orientation towards service (‘sevak’) and support to farmers. MS Swaminathan National Commission of Farmers in 2006 recommended that “the “net take home income” of farmers should be comparable to those of civil servants”. Farmers need to be treated as equal partners in economic development of this country. Let it not become another license raj bureaucratic system.

 Paralegal Volunteers: The modern day farmer cannot be at the mercy of the traders. Farmers have to take assistance from legal professionals when entering into the legal contract. There is a huge opportunity to create para-legal professionals in each village who can help the farmers with their legal issues of farming contract and other disputes with traders. While the government shall provide for facilitation in terms of guidelines, some support through the existing village community information and service centers.

 Competitiveness of Farmers: It is important to raise the agricultural competitiveness of farmers with small land holdings. However, at the same time, age old sensitivities to subsidies and MSP needs to be taken care of by the government, once the farmer gets hang of the new system, things would improve. Any change meets with some resistance, and this is a huge change rather a transformation of its kind. The visualization of farmers have mostly been dictated in movies and Indian literature as poor down-trodden person being exploited by traders (sahukars); however, the present requirement is that we look at the brighter side, that is ‘mere desh ki dharti sona ugle, ugle hire moti’ (my country’s land produces gold and pearls – lyrics from movie Upkar). If the farmer’s son looks at farming as an entrepreneurship opportunity, a lot can change the way we look at farming and its potential. This will cure several ills like migration, job scarcity and rapid urbanization. Need is to suggest positive changes in the laws and support implementation to the core. 

Dr. Vijay Kumar Singh is Dean, School of Law at UPES Dehradun. Views are personal

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‘LEVY & DEMAND OF INTEREST’ ON BORROWERS DURING COVID-19

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In the wake of the pandemic and the subsequent lockdown, the Reserve Bank of India in March issued circular, allowing banks to grant a moratorium to borrowers on payment of installments for three months. An extension of the moratorium period was announced in May, making it a six-month moratorium. 

The objective behind the RBI circular was to “mitigate the burden of debt servicing on account of the disruption caused due to the pandemic”. As per the RBI circular, banks will be permitted to continue charging interest for the moratorium period also but the interest would be collected later.

 Later a petition (PIL) by Gajendra Sharma has been filed in the Supreme Court followed by petitions by various business groups & associations that the objective of the circular would be rendered futile if interest is levied later and further contended that interest should not be charged during the moratorium period. 

The RBI has rightly pleaded that waiver of interest during moratorium on term loan repayment would jeopardizes the financial health and stability of banks as well as the interest of debtors. The RBI has informed that the decision of moratorium was to ensure continuity of viable businesses and the regulatory package to defer payment of loan cannot be construed as a waiver. The RBI has also informed that banks are expected to run on viable commercial considerations and are guardians of the depositors’ monies and actions of the banks need to be guided by the interest of the depositors.

 Banks are important for any economic activity in the country and they should be financially viable at any point of time. Banks cannot be treated as charitable institutions to help only borrowers. Expecting banks to lend free without any interest can never be an acceptable proposition as they have to pay interest to depositors and depositors also cannot be expected to freely park their funds with the banks. 

When banks accept deposit, it is a contractual obligation. On their own, banks cannot deny paying interest to depositors. Even when banks provide moratorium to borrowers, it is the banks’ discretion and not borrowers’ decision. In the same way, when depositors park their money, the depositors are lenders to the bank and only depositors can decide whether to forego interest or whether there should be any moratorium on the funds lent. 

The Supreme Court of India (SC) hearing on the plea has asked the centre, Reserve Bank of India to “review” the issue whereas asked India Bank Association to see if new guidelines can be created. The Supreme Court has restrained banks from declaring any account of the borrower, which has availed the loan moratorium, as NPA due to non-payment of dues — principal or /and interest — until it decides the matter. 

“There are 133 lakh crore rupees in deposits with banks and interest has to be paid on them and the waiver will have a cascading effect,” said Tushar Mehta, Solicitar General on behalf of centre and RBI told the apex court in the same PIL. As per RBI’s estimates, out of the total Rs 102 lakh crore loan book, Rs 38.68 lakh crore was under the six-month moratorium. Suppose, this was carrying an average interest of 12%, the simple interest would work out to Rs 2.32 lakh crore for six months. On compounding (12.30%), the overall interest dues could aggregate to Rs 2.38 lakh crore, an additional loss of approximately Rs 6,000 crore (interest on interest). 

While hearing the pleas on 17 Sept, the apex court observed that the borrowers’ request for relief can’t be termed as adversarial. SC is inclined to consider that there can be no levy of interest on interest; they are yet to decide on the interest waiver. The RBI in its submission to the Supreme Court had stated that the lenders would lose Rs 2 lakh crore if interest for the moratorium period was waived. While posting the matter for further hearing on September 28, the SC had advised the GoI, the RBI and banks to come out with their final views on the request for waiver of accrued interest and interest on interest, and place all the documents before it for appropriate decision in the matter. SC would allow no more adjournments in the matter. 

Following the SC observation, the GoI has set up a three-member expert committee to scale the impact of waiver of (i)interest and (ii) interest on interest due to the COVID-19 related moratorium on the financial stability of the lenders as also to suggest measures to contain the financial constraints of various sections of society in this regard.

 While the Government at the highest levels is considering solutions in consultation with RBI and the scheduled commercial banks, if the Banking Law (i.e., levy of interest on loans and compounding of interest — interest on interest) which has been in practice since the time banking came into existence is rewritten, the fallout will be immense. Also these solutions cannot permit the restructuring of loan. If you look at the 2008 financial crisis, many borrowers opted for restructuring, and converted into longer-term tenures, this brought along moral hazards. That point in time, cash flows which ideally should have gone back to lenders, was used for further growth purposes. Restructuring also resulted in ever greening of loans, which eventually led to an NPA problem. 

Unfortunately, apart from force majeure doctrine there is no other legal remedy available to address the current situation but this also cannot be use as it only delay the performance of contract & do not waive it. The various petitions filed before apex court on this ground have also not achieved success. The doctrine of proportionality also not came to the rescue of such petitions as the contract or its performance has not been challenged but the discretionary power of Central Government & NDMA under Disaster Management Act have been mostly challenged under the petitions before the apex court.

 However, the 180 days moratorium and even the interest waiver might not be enough considering the Corona impact on businesses. Accordingly, the most viable solution for borrowers and the lenders might need to resort to one time settlements (OTS) to ease the financial burden and pave the way for a more conducive repayment schedule. The resorting to OTS would assume even more importance with the suspension of Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency & Bankruptcy Code (IBC) initiation to avoid the potential business disruptions. The Government also announced other amends and relaxation to the IBC including increasing the monetary threshold of default for the initiation of insolvency and resolution process, excluding the period of lockdown for counting the time-lines for any activity in relation to liquidation process, et al. The measures are collectively aimed at providing some safeguard to corporate debtors and would lead lenders to look at other modalities of recovery.

 With a view to channelize the money flow in the midst of the acute financial crunch and to provide impetus to have the economy running again, businesses and lenders might need to negotiate more and more closed room deals for debt restructuring/ OTS. Further, the OTS package deal may have various permutation and combinations of incentives including, inter-alia, interest waiver, conversion of unpaid interest into loan, partial waiver of principal portion of the loan. The tax implications under Section 28(iv) of the ITA on loan waiver being benefit or perquisite arising from the business was ruled out by the Supreme Court in the recent case of Commissioner v. Mahindra And Mahindra Ltd. 2018 which averred that the loan waiver is a monetary item to which the provisions which aim to tax benefit/perquisite, whether convertible into money or not, would not be applicable. 

While efficiencies can be built into most of these covenants of OTS, benevolent relaxations provided by various stakeholders including tax policy is required to enable the businesses opting for OTS to sail through these testing times and help in attainment of the Government’s vision of “Atmanirbhar” (self-reliant) India. 

Adv. Ankit Singh practices at the Delhi High Court

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MSMEs and Intellectual Property Rights

In this competitive market, one major issue faced by smaller entities is exploitation by larger entities and the same continues in case of the MSME sector.

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According to a research, IP-intensive industries generate 72 percent more value-per-employee than non-IP-intensive industries globally. This idea of establishment of L2Pro platform and training the MSME sector already get success in many different countries like France, Germany and the UK. 

On 14 October 2019 the Department for Promotion of Industry and Internal Trade (DPIIT) launched a platform named L2Pro (Learn to Protect, Secure and Maximize your innovation) to help MSMEs sector to maximize and promote innovation after acquiring knowledge of trademark, patent and copyrights and other plethora of aspects of Intellectual property rights. The DPIIT decided to launch and establish this platform for MSMEs and to collaborate for the long run benefit in terms of economic development and enhancement in figures of National output. 

This will not only promote and paves way to growth and extension in the national figure of MSMEs but also help in order to get edge in this competitive market and globalized world. With the establishment of L2Pro platform, India’s as a ground of 63 million gets enormous support in terms of learning and the platform designed in such a way that it will taught and help MSMEs to get better insight of the whole gamut of IPR.

 Before the introduction of L2Pro platform, concept of IPR and its related concepts like- Copyright, trademark and patents are totally beyond the reach of MSMEs sector and they have not even the basic knowledge of it. Without acquiring sufficient knowledge and training of IPR it will act as devastating element for any sector.

 IPR and its crucial role in MSMEs Sector 

In this competitive driven market the one major issue faced by any smaller entities is exploitation from larger entities and same continues in case of MSMEs sector in this competitive market. MSMEs looks exploitation as a major issue and threat and to combat this problem DPIIT came up with the idea of L2Pro so that MSMEs gets training and knowledge of IPR and to deal with problem of registration of product, filing of infringement suit to get remedy and to cope up with issue of exploitation of large scale industries. In the absence of it large scale enterprises exploits MSMEs sector by copying their innovation and earns a huge profit out of that innovation and this is also a major reason behind this idea. 

IPR and MSMEs Collaboration: A Global Scenario

 After the globalization and interlinking of nations the market becomes more competitive and full of exploitation and threat due to which it is very much important to provide a shield to the MSMEs sector so that they can protect themselves from all exploitation and threats and largely contribute to the national figure. According to a research IP-intensive industries generates 72 percent more valueper-employee than non-IPintensive industries globally. This idea of establishment of L2Pro platform and training MSMEs sector already get success in many different countries like- France, Germany and UK.

 Imparting Education and training regarding IPR to MSMEs only is not sufficient. Providing holistic views on this particular arena is required along with providing different incentives to MSMEs sector to contribute to National economy through this long-run pairing.

 Online transfer or sharing of files never a debatable issue or contemporary issue before the Napster Case of P2P network comes in highlight in the year 2001 when some major companies decided to sue Napster Incorporation. Around 1990s, a network came in front of audience or consumer as a medium of peer-to-peer file sharing and soon attains popularity in the market for the sharing or transferring of music by converting it in mp3 format.

 Different companies sued Napster Inc. but the case of A&M Records, Inc. v. Napster Incorporation, draws attention of people towards the illegal way of sharing music and contributory & vicarious infringement. This case when addressed by the Court of Appeals for the Ninth Circuit many issues were taken into consideration. The first and major one is Fair Use Defence, Second one is Direct Infringement and last one is Contributory Infringement and while addressing all dilemma, court came up with different reasoning with legal support. 

Analysis of Case along with Legal Reasoning

 A&M Records, Inc. v. Napster Inc., is considered to be a landmark judgment in IPR field for the establishment of regulation of copyright in online file sharing. The Court of Appeals agreed to the legal reasoning applied by the district court and the judgment pronounced. Three issues were addressed by the court of appeals in order to deliver the judgment with proper explanation of legal reasoning as already mentioned.

 While dealing with the issue of Fair Use Defense, the court mentioned 17 U.S.C. Section 107 that talks about ‘Limitation on exclusive rights: Fair Use’ and laid down four most important factors to determine whether the use of that work falls within the ambit of Fair Use Defense or not. 

1. Whether use is for commercial purpose or not? 

2. Nature of the copyrighted work. 

3. Amount and sustainability of the portion used of the copyrighted work. 

4. What is the overall effect of the use on the copyrighted work? After analyzing and checking reasonability, the court of appeal held appropriate injunction with its opinion against any of Napster’s future infringing activities. But same peer-to-peer sharing issue again addressed by the court in the case of MGM Studious Inc. v. Grokster, Ltd. 

Post-related effects of Napster Case: Positive & Negative Implications 

Napster case has overall mix effect on music industries as well as on different arena. Some of the major effects that faced and noted down are that peer-to-peer sharing network leads in the decline of sale of CD and contribute in generating profit in illegal way. It is not like that it leaves only negative impact but also positive impact like exposing or interaction of an individual to different artists which is never possible without this network. 

So, as like everything peerto-peer file transfer has also both negative as well as positive implication and different forms of it developing with the passage of time and a remarkable and huge impact on economy’s output which also shifted the attention towards the MSMEs sector and how collaboration of IPR paves way in strengthening National output. 

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Legally Speaking

The delay disaster

The justice delivery system continues to lumber on for now, but the question really is whether it is delivering justice or whether the justice delivery system is maintaining a Nelson’s eye to all serious and severe problems arising from mounting arrears.

Amir Singh Pasrich

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Indian Judiciary

A little known fact is that during the pandemic there has been an increase in the number of cases pending in Indian courts by roughly 20,000 cases per day. A Delhi High Court Judge is reported to have calculated in 2009 that if we are to clear the arrears in the Delhi High Court, it might take up to 464 years. The Law Commission noted this in its 230th report and opined that the position “may not be that gloomy” but it was “still alarming”. That was their view on the 5th of August 2009. Eleven years later, the Chairman of the Law Commission has naturally moved on, the recipient of the report who was the then law minister has also demitted his office and several Chief Justices have been sworn in and then retired in the Supreme Court of India and in each of the High Courts. The justice delivery system continuesto lumber on…for now, but the question really is whether it is delivering justice or whether the justice delivery system is maintaining a Nelson’s eye to all serious and severe problems arising from mounting arrears. Are we not ignoring the tremendous injustices perpetuated upon every innocent person who remains under trial and is yet incarcerated while s/he is accused of an offence, but has not been adjudicated to be guilty? The favourite maxim of the courts that you are innocent until proven guilty is actually a chimera insofar as it concerns persons who don’t get bail once they are accused of a serious crime. It is even worse if such innocent folks happen to be poor, picked-up by an overzealous police officer who finds the right ingredients of suspicious activity, perceived notoriety and prior criminal record even if such prior criminal record is patently unproven. 

As a reader I would not blame you if you thought: “Surely not – Mr. Author – surely this system is better than that you would assume it to be in your pessimistic article? Surely, we have a system in place to put these people behind bars when they have actually done something wrong?” But the answer sadly is that 69% of India’s jails are occupied with undertrials who have not been convicted. That is the figure as of today. What is worse is that although we started understanding the seriousness of the problem somewhere in the late 90s when the Supreme Court issued its first set of serious directions in the case of Anil Rai vs. State of Bihar in the year 2001, we had no idea how much this behemoth would grow. Far from improving the situation, the number of pending cases has grown from 3.14 crore casesin the year 2009 to 3.46 crore cases today. Shockingly a report that showed a pendency of 3.34 crore cases in late July 2020 when seen in the context of pendency as on Friday, the 25thof September 2020 reflects an increase of 1.2 million cases in just 60 days. If we aren’t bothered about human rights, the effect of “pendency” on prisoners, or the consequences of sending other innocent people to jail for long periods of time (after all – they must have done something wrong!), perhaps our people may worry about money. After all, money determines everything and affects our day-to-day business. India strives to demonstrate its economic power through the new and renewed Ease of Doing Business (EoDB). Chambers of Commerce and business houses alike seek to “unclog the Indian legal system” so as to improve contract enforcement and have faster dispute resolution mechanisms. With courts still stuck in the pendency paralysis, it is clear that our money and the cost of pursuing an ordinary business will be compromised unless we begin with strictly enforced new measures for contract enforcement. Our companies will need to be “saved” from the clutches of civil court pendency which is robbing India of a major element of its business credibility. Mr. Fali Nariman, one of India’s most noted jurists, famously said that in some countries they have Order and in India we have Law. Should we not now quickly marry the two and deliver law and order so as to change international perceptions about how our courts involve themselves with dispute resolution in a purposive and result-oriented approach that might eventually be better than what is on offer elsewhere? What we really need is serious reform and steps for that must be identified soon. 

We are debating this issue in an online platform of the PHD Chamber of Commerce and Industry on this 26th of September, please feel free to find the link at www.phdcci.in and listen in. After this first initiative, another part of this article will emerge with suggested steps for reform based on the lessons of the past. 

Amir Singh Pasrich is Managing Partner of I.L.A. Pasrich & Company, Advocates. He is co-chair of the India Working Group of the International Bar Association (IBA) and is an elected member of the IBA’s LPD Council, he is also Chairman of the Law & Justice Committee of the PHD Chamber of Commerce.

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Legally Speaking

Know about farm bills that have been turned into law

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Farm bills

The farmer is the only man in the economy who buys at retail, sells everything at wholesale, and pays the freight both ways. This line by John F. Kennedy reflects the pain which a farmer faces in conducting his trade. The farm bills which passed through Rajya Sabha on Tuesday amidst great opposition from various parties and high voltage drama in the Upper House seeks to bring revolutionary changes in the trading process of farm produces. Farmers have showed up in huge numbers on the roads of Punjab, Haryana, Uttar Pradesh and many other states across the nation to show their dissatisfaction against these bills. Adding flare to the agitation Union Minister for Food Processing Industries, Harsimrat Kaur Badal resigned from the Central Government in solidarity with the farmers. The big question which arises is whether the leaders of such farmer groups which are up in arms against the bills really want to bring about change in the lives of the farmer or are just masquerading as the farmers to get political mileage. The bills which are due to presidential assent are The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill and The Essential Commodities (Amendment) Bill, 2020. These bills aim to channelize the trade of farm produces directly between the farmer and the buyer leading to economic welfare of the farmers. It is a very historic moment in the Indian agricultural scenario which seems to bring a revolutionary change just like the 1991 liberalisation and globalisation phase.

 Farmers’ Autonomy

 Terming the present three bills which are due for assent by the president of India, as “anti-farmer” bills is a rhetoric completely made in ignorance. These bills are rather providing flesh and blood to a farmer’s right to trade, commerce and intercourse as enshrined under Article 19 of the Constitution and Article 301 of the Constitution. The existing framework was set up by different state governments for the regulation of trade and commerce of agricultural produce, which is done through Agricultural Produce Marketing Committees (APMCs). This framework is hit by many deficiencies such as cartelization by APMC agents which lead to a non-transparent price fixation mechanism and paying variety of tax and cess which leads to up the total value of their farming cost. Additionally the existing framework creates a highly anti-competitive market system where there is rampant red tapism through licencing of traders, making it very difficult for a new trader to join in. 

The new farm bills seeks to create an alternate trading atmosphere which will be more conducive for the farmers and based on the principle of laissez faire attracting minimal governmental intervention. It aims to remove all the barriers and restrictions imposed on the trading autonomy of a farmer. The new farm bills are going to amplify the magnitude of the fundamental right to trade of the farming community in its fullest sense.

 Art. 19 of our Constitution ensure the freedom to practise any profession, or to carry on any occupation, trade or business. Moreover, Art. 301 ensures freedom of trade, commerce and intercourse throughout the territory of India. A conjunctive reading of Article 19 and Article 301 paints a greater constitutional mandate regarding an individual’s freedom to trade by supplementing it with freedom to trade inter-state or intrastate both. The definition of ‘trade area’ as per Clause 2(m) of the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 specifically excludes “market yards, sub-market yards and market sub-yards managed and run by the market committees formed under each state APMC (Agricultural Produce Market Committee) Act” and “private market yards, private market sub-yards,direct marketing collection centres, and private farmer-consumer market yards managed by persons holding licenses or any warehouses, silos, cold storages or other structures notified as markets or deemed markets under each State APMC Act in force in India”. In the existing framework due to reasonable restrictions, a farmer could only trade in the mandis regulated by the APMCs. But with coming of these bills into force, the farmers will have a choice to trade inside their outside that area with their free will and without any unnecessary obligations. It also allows farmers to freely trade through electronic medium. It aims to reduce the total farming cost which a farmer incurred in the existing framework by abolishing any kind of market fees charged by the state government subject to trade takes place outside the APMC market. 

Now a farmer will have negotiating power as regards to price of his produce. He can bargain the amount to his benefit and not just settle at the amount manipulated by existing trader cartels. He can participate in an agricultural market which is open to competition and not just controlled by a few big players. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 seeks to provide the farming community with a significant role to play in the agricultural market and not just be a raw material provider surrendered at the hands of agents and traders. It seeks to bind farmer and buyer in an agreement which takes place prior to production and price fixation is done with the consent of both the parties. This is known as ‘Contract Farming’. Such type of farming provides a farmer with benefits like there is drastic reduction of price related risk because they have already the price to their benefit. Any volatile market situation will not affect their pre-defined right to a certain amount of money. Many farmer groups are apprehensive that they will not get the appropriate amount for their produce. Their fear is also valid as it seems to them that they will not even receive the Minimum Support Price as big corporations may use their influence to get the agreement signed at a lower price. But all these fears should not exist as these bills are not here to replace the already existing framework of APMCs but to give an alternative which respects a farmer’s individual autonomy. If a farmer experiences that he is not able to get a price worth of his produce then he has the option to conduct his trade at the mandis setup by the APMCs. The sole aim of these bills is to recognize the individual autonomy of a farmer in conducting trade of his hardly grown produce. Another big advantage of this contract farming is going to be linkage of agreement with credit or insurance schemes of central or state governments. Now the farmers will not be dependent on local moneylenders for quick loans which led such farmers into a debt trap and with this linkage there will be a huge risk mitigation in the favour of farmers. 

Dispute Resolution

 After introduction of these bills into the parliament there was a huge hue and cry across the nation against introduction of ‘contract farming’. It is being perceived that due to unequal bargaining powers between a corporation and a small farmer, the agreement may heavily favour the interest of corporations and be detrimental for poor and illiterate farmers. But these doubts are really uncalled for because the bill already provides enough safeguard through its provisions from Sections 3 to 12. The biggest problem is when there are parties with unequal bargaining powers, the party with the high bargaining power like corporations draft boilerplate contracts and insert dispute resolution clauses which bends in their favour and party with a lower bargaining power is kept away from justice. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, introduces a dispute resolution provision to cure this mostly used method to deny access to justice to party with a lower bargaining power. It is a big step in the direction of providing access to justice to the farming community by introducing conciliation as a method of dispute resolution. It saves a farmer a whole lot of money and time by keeping him away from litigation. Now a farmer could resolve his agricultural dispute in a speedy manner without knocking the heavy doors of courts. 

The power-sharing gauntlet 

Post-tabling the concerned farm bills, the Upper house witnessed opposition admonishing the bills on the account that it was a brazen attack on the federal structure of our constitution. It is hereby rebutted that the concerned bills do not in any case breach the constitutional limits. Moreover, they bolster the idea of cooperative federalism.

 The legislative power sharing between the centre and the state has been enunciated in seventh schedule of our constitution. The seventh schedule of the Indian constitution has three lists. List I refers to the subjects under the Centre or the Union, List II refers to the state list and List III refers to the concurrent list where the states and the Centre are co-sharers of power and responsibility.

 Entry 33 of the Concurrent List says that Centre and the States have powers to control production, supply and distribution of products of any industry, including agriculture. Further, Entry 34 of the concurrent list deals with price control. Conjunctive reading of Entry 33 and Entry 34 connotes that the centre has power to make laws on trade and commerce in production, supply and distribution of products of agricultural industry and further on fixation of the prices. Constitutional propriety of Centre to make laws on agricultural products flows from the above mentioned entries of Concurrent List. Thus, the centre in no way is encroaching upon the laws making powers of the state. 

Moreover, the concerned farm bills do not crumble upon the idea of cooperative federalism envisaged by our constitution. The above proposition can be well elucidated by the following stance: 

1. Agricultural Produce Market Committee i.e. APMCs are established by a state government though their respective state legislations. APMCs are physical market places where farmers are required to bring their produce to the market if they have to sell it there. Gradually, these APMC’s have become de facto monopolies because of the fact that almost all farmers used these markets to sell their produce which resulted in no serious competitions. 

2. Farmers Produce Trade & Commerce (Promotion & Facilitation) Bill, 2020 seeks to ameliorate the mischief created by the state APMCs. The concerned bill allows intra-state and inter-state trade of farmers produce outside: (i) the physical premises of market yards run by market committees formed under the state APMC Acts and (ii) other markets notified under the state APMC Acts. 

What can be construed is that Farmers Produce Trade & Commerce (Promotion & Facilitation) Bill, 2020 will eliminate the restriction that used to be imposed by the state APMC’s. It seeks to demolish the dens of monopolistic power which throttle the Indian farmer. The concerned bill creates a legal framework to set up markets that will run parallel to what the states have established through APMCs. Thus, it in no way, restricts the operation of the state APMC’s. What is does is that, it expands the horizons of options for the Indian farmers to sell their produce. 

Cooperative federalism, also known as marble-cake federalism, is a concept of federalism in which federal, state, and local governments interact cooperatively and collectively to solve common problems, rather than making policies separately but more or less equally. This step significantly bolsters the notion of cooperative federalism in a way that, now, the farmers will have two recourses, i.e. either to sell their produce through the state established APMC’s or do it individually by virtue of Centre’s Farmers Produce Trade & Commerce (Promotion & Facilitation) Bill, 2020. Thus, the concerned bill seeks to establish the harmony between the centre and state.

 Concluding Remarks

 The bills which are being protested are not ‘antifarmer’ but those who are protesting these bills are certainly ‘anti-farmer’, they are trying to impede the positive change which is going to boost the economic condition of farmers. The farm bills aim to enhance the scope and freedom of farmers to trade. The Government has introduced these bills to further enlarge the individual autonomy of farmers to trade as guaranteed under Article 19(1)(g). India is witnessing the epitome of co-operative federalism wherein without any kind of encroachment on the State’s framework; the Centre has carved an alternative method for the welfare of farmers. Both the frameworks are mutually exclusive of each other. The Farm Bills are breaking the chains of cartelization and licencing away from the farmers which stood in the path of their glory. The economic boost which the farmers will now experience will never let a food provider die of hunger.

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Legally Speaking

Fifty one shades of speech

J. Sai Deepak

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In the previous piece, this author had raised the following questions in the process of etching the contours of public morality: “The sum and substance of these discussions is that under the framework of the Indian Constitution, it is the State, meaning thereby the Executive and the Legislature but not the Judiciary, which has the power to invoke public morality within reasonable bounds for the purposes of placing reasonable restrictions on fundamental rights guaranteed by Part III of the Constitution. The Judiciary’s role is limited to examining the constitutional validity of the claim made by the State that the latter’s action is in the interest of or furthers public morality. 

That said, what are the parameters that must be applied to such an examination? In other words, how does the State demonstrate that its action represents public morality? What kind of exercise must the State undertake, if at all required by the Constitution, to assess public morality in relation to a given right? Or does the Constitution grant elected representatives the unfettered right as parens patriae i.e. parent of the nation, to speak on behalf of their constituents on every issue merely because they have been elected? Can members of the State form an opinion on public morality in relation to a given issue or topic without consulting members of the society to marshal some form of concrete evidence to base their positions on? Critically, in the context of a diverse society such as Bharat, how can the State hope to do justice to varying and often conflicting positions on public morality?

… Does this mean that the scope of use of public morality by the State as the basis for limiting individual freedoms is limited to public spaces? What is the position of the Indian civilization and the Constitution on the spaces and contexts in which public morality may be used as a legitimate restriction on individual rights? What constitutes public morality within the framework of the Indic civilizational worldview and what are its sources?” 

While the author’s original intent was to address these specific questions in the present piece, a legitimate and related digression is warranted in the current atmosphere to give the discussion a much more relevant and concrete peg. Over the last few days, “hate speech” has become the talk of the town because some have taken offense to the contents of a certain programme which, they believe, target a particular community. While the Ministry of Information and Broadcasting, and the Hon’ble Supreme Court, are simultaneously, and perhaps incongruously, seized of the case, it may be worthwhile to understand the relationship between speech, culture and public morality. In the interest of fair disclosure, this author is appearing on behalf of a few Intervenors in the proceedings before the Supreme Court. Therefore, in the interest of propriety, he shall desist from commenting on the specific merits of the case. The focus of the instant piece is the meta nexus between speech and civilizational ethos.

 Language, while acting as the vehicle for expression of thought, results in speech. Therefore, speech could be treated as but one form of expression, and for the purposes of the discussion at hand, may be treated as a broad representative of varied forms of expression. To reduce speech to merely a collection of words is to betray one’s ignorance and superficial understanding of human psychology, both individual and collective. Speech, in fact, contains the markers of a civilisation’s journey, depth and the values it believes in. One could go even a step further to make the point that speech is perhaps the most literal, visible, audible and ubiquitous expression of public morality. The lessons, beliefs, achievements, tragedies, the objects of worship and hatred of a people take the shape of similes, idioms, usages, proverbs and even cuss words. Therefore, to police speech, is to police not just the ability to express thought, but thought itself because policing the formers chills and stifles the latter, thereby killing the idea at source. 

Given the implications of policing speech, society is naturally expected to be extremely cautious and selective in handing the right to police its speech and thought to any particular organ as part of its social contract with the State. To hedge against unilateralism and authoritarianism, the republican premise is that it is safer, if not the safest, to put faith in organs which are vulnerable to and are the product of the will of the people, namely the Legislature and the Executive. Even if this choice has the inherent risk of surrendering one’s individual right at the altar of a process which ruthlessly rewards the numerical majority, it still puts faith in the deeper churn of a society and its tendency to see the light through trial and error. Perhaps this is because of the unspoken belief in the existence of a “society” which shares a common minimum pool of values and aspirations, notwithstanding differing political perspectives and ideological persuasions. More often than not, this common minimum pool of shared values and aspirations traces its origins to the fundamental ethos of a people or a civilization i.e. the shared ethos which justify the reason for the existence as a single national/ civilizational, and hence political unit. This demonstrates that politics cannot faithfully and fully reflect the bonds that connect the members of a society. It also explains why as part of a social contract an individual is assumed and expected to submit to the dispensation which the majority has elected even if the individual is at loggerheads with the dispensation’s positions.

 In view of the above rationale, an organ, such as the Judiciary, whose rectitude is its hallmark and is presumed to translate to impartiality and objectivity, cannot, must not and is not designed to attempt to step into the shoes of elected organs. This is not only because it violates the rules of “the” social contract, namely the Constitution, but also because it deprives the people of their say in the process of laying down the law, which partakes significantly, if not solely, from public morality. Critically, since notions of public morality vary from society to society and even within society, only the State, namely the Legislature and the Executive but not the Judiciary, is competent to and mandated to prescribe the red lines of free speech.

 In a brilliant paper titled “Morality as a Legitimate Government Interest” published in Penn State Law Review in 2012, Daniel F. Piar, then a Professor of Law at Yale Law School, examined in detail the United States Supreme Court’s tendency to homogenize moral standards in the name of the Constitution (a.k.a constitutional morality), and concluded as follows:

 “As discussed above, moral diversity yields numerous moral benefits to individuals and to the society that they constitute. To resist the proliferation of moral diversity is to deny that we are a pluralistic society. If we are to remain true to our liberal commitments, we must acknowledge—and accept— that the world is full of matters on which people of reason and good will are apt to disagree. A productive moral diversity then may flourish, to the betterment of each of us and our society. 

The law, however, has trod a more dangerous road, threatening to suppress diverse responses to moral issues through a homogenizing constitutionalism. If society is to retain the social and personal benefits of moral diversity, society will need to be attentive to the points at which the law impedes it, as well as to the opportunities in law for sustaining it.” Why should the logic be any different in the Indian context?

 J. Sai Deepak is an Advocate practising as an arguing counsel before the Supreme Court of India and the High Court of Delhi. 

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