Succession planning in proprietorships, family businesses and partnerships - The Daily Guardian
Connect with us

Legally Speaking

Succession planning in proprietorships, family businesses and partnerships

What would be the position in case of a firm having only 2 partners? If the deed of partnership contains a clause that upon the death of one of the two partners, the heir of the deceased partner enters the firm as a partner, would the firm continue?

Satyajeet A. Desai

Published

on

A person builds up a business by sheer dint of hard work and determination to succeed. Even one or two generations later, all the hard work put in by the founder is frittered away, either because of the unwillingness of the next generation to get involved in the business in the proper spirit, or because of internecine disputes, where each person or faction wants to do things in a particular manner, leading to the death knell of the business.

It is precisely because of this reason that it becomes extremely necessary that there should be a succession plan in order to see that not only do the heirs get their inheritance, but more importantly, the transition of the business from one generation to the next is without any major conflicts.

I propose to address the issue from the point of view of having a proper succession plan, and not the methodology of planning, as space constraints dictate brevity in this short opinion.

 In India, at least a fifth of the businesses are family owned, in the form of proprietary, HUF’s or partnerships. That itself is a substantial chunk of the overall economy in terms of business or commerce.

2 modes of Succession: From the point of view of succession itself, as is evident, there are two modes of succession; testamentary and intestate. When a person makes a will, it is testamentary, whereas when a person dies without having made a will, it is intestate succession, where the personal law governing the person comes into prominence and governs.

Will as a tool for succession planning: A will can be a good tool for passing on assets to immediate family members. So far as succession planning to a business is concerned, though it can be done by a will, it is desirable to have a separate succession plan also , so far as business is concerned. This can take the form of a separate succession planning strategy which is put on paper and be made known to the probable successors and also to those who are involved with the day-to-day business affairs. If, however it is done through a will, let us examine the various entities in conjunction with a will as a tool of succession planning to business.

1. Will & proprietorship business: If the business of the testator is run as a proprietary concern, a will is a good option. The testator can mention in the will itself as to what he or she intends to do with the business and to whom it goes to. If it is to be run by more than one heir, it can be mentioned as such . If the testator does not want to spell out the modalities of running the business in the will, a good option is also to have a separate document where such modalities could be mentioned amongst other things. A proprietary business succession may not pose many challenges in its execution, as it is essentially what we can call ‘a one man show’.

2. Will and business carried on by a HUF: In any business run by a Hindu Undivided Family, though all members may have a stake, it is essentially the ‘Karta’ or manager who takes the major decisions and runs the show. Each member of the family who is involved in the business has well assigned roles. So far as succession is concerned, it is of course the Hindu Succession Act which governs the field. This is of course in the case of intestate succession. The act however also recognises through section 30, that a Hindu can execute a will qua any assets which is capable of being so disposed of . This means that a Hindu can also deal with his share of the family or coparcenary assets. Therefore even a share of the business of the HUF could be dealt with in the will. Of course, in the absence of a structured succession plan.

A Family Arrangement or Family Settlement, which is known in Hindu law and recognised by the courts, can also be executed separately for the purpose of dealing with certain situations. But this ,I shall allude to a little later.

3.Will & business carried on by a partnership: It is normally observed that in cases of a partnership firm having more than 2 partners, there would be a clause in the partnership deed stating that in case of the death of one of the partners, one of his heirs would become a partner in the firm. The reason why a person who is a partner should mention in the will that he or she is a partner , and that as per the relevant clause of the partnership deed an heir can become a partner is that the heirs should be made aware of the same. If however the deed of partnership contains no such clause, then obviously it cannot be mentioned in the will that the testator nominates one of his heirs as a partner. This clause of the will would be rendered redundant in such circumstances. The heirs, however would be entitled to accounts in the above situation as per the relevant provisions of the Partnership Act,1932(section 37)

 That brings us to an interesting but important aspect. What would be the position in case of a firm having only 2 partners? If the deed of partnership contains a clause that upon the death of one of the two partners, the heir of the deceased partner enters the firm as a partner, would the firm continue. The answer is in the negative. When a firm has only 2 partners and if one of the dies, even though there may be a clause entitling an heir to step in as a partner, such a clause would be rendered redundant, as upon the death of one of the partners, the partnership no longer exists. This has also been held by the Supreme Court in Commissioner Of Income-Tax, … vs Seth Govindram Sugar Mills Ltd AIR 1966 SC 24 and reiterated in S.P.Misra vs Mohd. Laiquddin Khan (2019) 10) SCC 329.

What then could the partnership anticipate and do in such a situation? The clause as to the heir of a deceased partner being rendered redundant in view of the above, a provision can be perhaps introduced in the deed stipulating that upon the death of one of the partners in a partnership firm having 2 partners, since the firm would cease to exist, a new partnership firm would be formed with the heir or heirs of the deceased partner to ensure continuity of the business. Of course , a new firm would therefore come into existence and all the procedures as per law would have to be carried out. But if this situation is also mentioned in the will of the deceased partner, the heirs would also be made aware of the same in order to carry out the necessary documentation including a new partnership deed which would have to be entered into between the surviving partner and the heir.

Family Arrangement of Family Settlement as a mode of succession planning to a business: Hindu law recognises a Family Arrangement as a valid means of dealing with the issues of disputes within the family. It is normally entered into with a view to avoiding disputes which may happen in future apart from dealing with resolution of current disputes. Depending of course, upon the language it is couched in. This does not rest on any special rule of Hindu law, but flows from general principles and policy of law. It is governed by a special equity peculiar to itself and where the terms are fair, taking into consideration the circumstances of the case, the court makes every effort to recognise and sustain it. A settlement or family arrangement is recognized as a valid transfer of properties under Hindu law. Normally, courts do lean in favour of enforcement of such an arrangement. As is well known, a Hindu Undivided Family may be carrying on a business , and human nature being what it is, disputes may crop up which may have an effect upon the family and the family run enterprise. It is such an eventuality that can be warded off by the peremptory strike of entering into an arrangement not only in order to avoid such future disputes but also can be a very important document when such disputes do occur, and can also be drawn up to resolve them. In fact the decision of the Supreme Court in Sanghi v Western Indian State Motors Ltd (2015 AIR SCW 6542) is testimony to the fact that such a settlement could be accepted, even if it is subsequent to an award or other judicial proceedings, and would prevail even over the award, when there is a finding that it was entered into in order to amicably resolve familial issues. This was a case where the Supreme Court held that the settlement would override the arbitrators award as it was entered into to settle business disputes amicably.

A family arrangement can therefore, also be entered into as an alternative to a Succession plan, in order to deal with various issues which could be the basis of disputes in a family run business.

 What happens in the absence of a will or a succession plan: If we examine the issue of intestacy( person dying without a will) or the absence of a succession plan, what will be the situation?

 In case of a person belonging to a Hindu Undivided Family or a person belonging to any other religion, in cases of intestacy, the personal law of Succession applicable to the individual will prevail. But more importantly, the person who could have executed the will i.e. the prospective testator has lost the voluntary valid right and opportunity to distribute his estate by a will, to whomsoever he chose to, within the bounds of the law and therefore the consequence being that in the case of an intestate, the law takes over and the distribution therefore takes place as per the law applicable to the deceased. For a will is in the realm of what I term as a private legislation granted by the law to a person to deal with the distribution of his assets.

The intestacy of say, a Hindu will bring into play, the Hindu Succession Act, and his assets including his share in a family enterprise will be governed by that law. This in itself poses problems of another kind. If it is a case of asset distribution to heirs, the issue is not that complicated, as the law takes over, But if the very same person has a share in the family business, and dies intestate, the business may suffer as there would be a reworking as per the law. That is why , especially in case of a family run business, a will or a document dealing with succession assumes significance, as a person can leave behind clarity with regard to his business interests also.

Similarly , in case of a Partnership, if a partner dies intestate, the personal law applicable would prevail and may impact the business interests also. But , normally it is observed that a partnership deed would have a clause as to what would be the status of the partnership in case of death of a partner. Suppose there is a clause stating the manner and method of induction of an heir, it would prevail. This is, in fact akin to a succession plan. If, however there is no clause as to what happens upon death of the partner, his heirs would be entitled to accounts at best. And in case of a partnership firm with only two partners, the firm would obviously stand dissolved as explained above.

Why have a Succession Plan

What makes a family business different from a business set up by professionals is the ‘family involvement’ or ‘family dynamics’. It is therefore very important that in order to see that a family business takes measures to see to it that the succession to the next generation is free from any difficulties and that the transition is smooth. But having said that, it is pertinent to note that in a family run business there is a huge unseen factor of ‘emotional quotient’. In fact this is one of the barriers that has to be taken care of in a succession plan.

 In such businesses, the past has shown that the business may not survive the second generation, as a result of the above family dynamics that has been alluded to. The internecine squabbles of the home may often carry over to the business, leading to depletion of the business or even closure. In fact , India is not new to such disputes. Prominent families with well known business interests have suffered just because of the disputes within the family members, leading to the ultimate lessening or even demise of the business. A succession plan is therefore very relevant and necessary.

As I have stated at the beginning, I do not propose to delve into the dynamics of a succession plan, but only to its necessity. Such a document can also take into consideration issues like whether the family wants their own family members working in the business or whether they want to employ professionals to do the job and just be owners with well defined shares for themselves and their heirs and legatees, Leaving the running of the business to professionals as per the wishes and directions of the owners-stakeholders .

Will versus separate Succession Plan: What could be the differences between a Will and a Succession Plan?

 A Will , as mentioned earlier can deal with not only bequest of assets to immediate family members , but can also deal with the issue of who should succeed to a family business or part thereof, if it is an HUF business( as the testator can deal with his portion of the property). Of course if he dies intestate, Succession laws would prevail, as mentioned earlier.

A Succession Plan on the other hand, taking into consideration the wishes of all the stake holders of the business, can spell out the manner of succession, the method and the dynamics, including probable areas of responsibility. Something that cannot probably be done in a will, given the nature of the document, as it deals purely with bequests, and passing of property.

Will and Succession Plan: If a will is a document which deals with bequests and legacies, a succession plan document is what can be important for a family run business. While a will can certainly be used to leave a bequest of even a business, it would not be practicable to include all the finer points as to responsibilities and future vision in a will. What then is the way to do it seamlessly? The answer is simple. While the will sets up a bequest or bequests of personal and also business inheritances, a succession document can spell out the finer details and future of the business. Therefore, both can be used in tandem, as stated, thus making the future transition smooth and seamless.

 In order to see that the succession document for business is given a semblance of legal structure, all the principals involved should sign the document, thus giving it the legal binding and solemnity that the law requires for its future enforcement, while at the same time, leaving enough room to manoeuvre for future changed circumstances too.

Having said this, the attempt is to see that a person with assets and especially business interests should always think of executing not only a will but also have a succession plan for the same.

This will help in seeing that heirs do not suffer from the same difficulties that may happen in the case of intestacy, leading to long drawn out legal wrangles, while the business and ultimately, the family ends up suffering as a result of lack of planning in the present, by not having a vision for the future.

Sr. Adv. Satyajeet Desai practices at the Gujarat High Court. He is also Revising Author, Mulla’s Hindu Law & S.T Desai on The Law of Partnership.

The Daily Guardian is now on Telegram. Click here to join our channel (@thedailyguardian) and stay updated with the latest headlines.

For the latest news Download The Daily Guardian App.

Legally Speaking

COMMERCE & INDUSTRY MINISTER DISCUSSES MEASURES TO ENHANCE COVID VACCINE PRODUCTION WITH USTR

Tarun Nangia

Published

on

Piyush Goyal

Piyush Goyal, Minister for Commerce & Industry, Railways, Consumer Affairs and Food & Public distribution had a virtual meeting with Ambassador Kathleen Tai, US Trade Representative on 14th May 2021. The meeting focused on increasing vaccine availability in an inclusive and equitable manner to combat the Global pandemic caused by Covid-19. The proposal of India on waiver of certain TRIPS provisions to increase global vaccine production in order to take on the challenge of vaccinating the poorest of the poor and save lives was also discussed. The Minister thanked the USTR for the US announcing its support for India’s proposal. The Minister mentioned the supply chains for the vaccine manufacturers must be kept open and unbridled as the entire world is in dire need of vaccines. Both sides agreed to work towards the common resolve of increasing vaccine availability and saving lives.

Continue Reading

Legally Speaking

SELVI V STATE OF KARNATAKA: PUSHING THE CONTOURS OF FUNDAMENTAL RIGHTS

Feroz Pathan

Published

on

The landmark judgement of Selvi v State of Karnataka AIR 2010 SC 1974 delivered by Hon’ble Supreme Court bench led by the then CJI K.G.Balakrishnan comprising Justice R.V.Raveendran and Justice J.M.Panchal became a canonical law in medical examination of the accused.

This judgment proved to be a milestone in the criminal justice system of India as it pushed the contours of fundamental rights by zealously safeguarding the Right to Privacy(Art 21), Right against Self-Incrimination(Art 20 (3) ), and due process of law. The judgment still holds water given the fact that legislators have not yet legislated any explicit and specific law on medical examination of accused through the techniques such as narcoanalysis, polygraph examination, Brain Electrical Activation Profile (BEAP) and Functional Magnetic Resonance Imaging(FMRI) for purpose of criminal investigation. There is also no legislation so far that enumerates the offences that warrant their use.

The expression ‘personal liberty’ under Article 21 is of the widest amplitude and it covers variety of rights. Some of these rights have been elevated to the status of Fundamental Rights. Every individual has an indefeasible claim to protect, enjoy and defend his basic personal liberties by virtue of being born as human being. Thus involuntary administration of the above mentioned medical techniques/tests on the accused , witnesses or suspects so as to detect a lie or gauge the subject’s familiarity with information related to the crime basically infringes upon his right to privacy under Art 21.

The powers conferred upon the investigating and law enforcement agencies are not unguided, but confined by constitution as a grund norm and other legislations in force. It would be therefore non-sequitur to solely rest the investigation of the case on the test results of these medical examination techniques that create a likelihood of incrimination of the test subject. It will be detrimental to the fundamental right against self-incrimination of the accused guaranteed under Article 20(3). Furthermore, it will also jeopardize the interest of the society at large giving a dent to the principle of ‘Innocent until proven Guilty.’

It’s equally important from the perspective of justice to ensure that the process by which result is achieved or accused is prosecuted is also just, fair and reasonable, as observed by the apex court in Maneka Gandhi v Union of India AIR 1978 SC 597.The term ‘procedure established by law’ in Article 21 of the Indian Constitution safeguards the right to personal liberty against executive ‘excesses’ and ‘undue interference’ which is not supported by law, and law here means ‘enacted law’ or ‘state law’. As there is currently no state law regarding administration of these medical tests to accused, the rampant applicability of these tests on the accused transcends the fundamental right of ‘procedure established by law’ guaranteed to the accused under Article 21 of the Constitution.

The impugned techniques of investigation such as Narcoanalysis, Polygraph Examination, Brain Electrical Activation Profile(BEAP), Functional Magnetic Resonance Imaging(FMRI) have been time and again questioned regarding its scientific validity and relevance as the subject is often likely to divulge a lot of irrelevant and incoherent information during these tests.

Furthermore, the revelations through these tests will make a sense only when compared with the testimony of several other individuals or through discovery of relevant materials. The reliability and admissibility of evidences collected through these scientific/medical tests have been repeatedly questioned in empirical studies as some drug induced revelations need not always be true. For instance, the Narco analysis technique involves the intravenous administration of Sodium Pentothal, a drug which lowers the inhibitions on part of the subject and induces the person to talk freely.

Thus the facts revealed or disclosed by accused through these techniques can’t be imputed to him as it will mar the principles of ‘right to fair trial’ such as the requisite standard of proving guilt beyond reasonable doubt, the right of the accused to present a defence, reliability of voluntary statements, et cetera. These requirements are sine qua non components of ‘personal liberty’ guaranteed under Right to Life of Article 21 of the Constitution.

Moreover, the right to remain silent or to speak during the investigation is a sole volition and discretion of the accused under the law which can’t be overridden by investigation agency. Treating the statements made during such medical techniques/tests as inculpatory evidence is unjustified. The same should be even excluded from the trial congruent to the exclusionary rule in the evidence law. Under Section 161(2) of The Code of Criminal Procedure,1973, a person is bound to answer truly all questions relating to such case put to him by officer, other than questions, the answers to which would have a tendency to expose him to a criminal charge or to a penalty or forfeiture. Such medical tests also erode this provision of CrPC. It’s a trite law that justice should not only be done, but it should be seen to have been done.

The issue whether Polygraph test to accused is an intrusion and infringement of Right to Privacy(Art 21), Right against Self-Incrimination(Art 20 (3) ), and due process of law was thus dealt at considerable length by Supreme Court in this case.

The three judge bench held that the involuntary administration of either of the impugned tests could be viewed as a restraint on ‘personal liberty’. The most obvious indicator of restraint is the use of ‘physical force’ to ensure that an unwilling person is confined to the premises where the tests are to be conducted. Furthermore, drug induced revelations drawn from subject’s physiological responses can be described as an intrusion into the subject’s ‘mental privacy’. It’s also likely that a person could make an incriminating statement on being threatened with the prospective administration of any of these techniques.

Moreover, where a person undergoes the said tests is subsequently exposed to harmful consequences , though not of penal nature. The bench has also expressed its concern with the situations where the contents of the test results could prompt the investigators to engage in custodial abuse , surveillance or undue harassment.

The bench observed that – The theory of interrelationship of rights mandates that right against self-incrimination should also be read as a component of ‘personal liberty’ under Article 21. Hence, understanding of the ‘right to privacy’ should account for its intersection with Article 20(3).

Furthermore, the ‘rule against involuntary confessions’ as embodied in sections 24,25,26 and 27 of Indian Evidence Act,1872 seeks to serve both the objectives of ‘reliability’ as well as ‘voluntariness of testimony’ given in a custodial setting. The court reiterated the need to recognize the importance of ‘personal autonomy’ in aspects such as the choice between remaining silent and speaking.

The practical concerns that strengthens the case against the involuntary administration of the tests can’t be overlooked. Moreover, the claim that results obtained through these techniques will help in extraordinary situations is questionable. All these impugned tests need to be patiently administered and the forensic psychologist or the examiner has to be very skillful and thorough while interpreting the results. In Narco analysis, the subject is as likely to divulge false information as he/she is likely to reveal useful facts.

The court held that if it were to permit the forcible administration of these medical techniques, it could be the first step on very slippery –slope as far as standards of police behavior are concerned. In some of the impugned judgments it has been suggested that the promotion of these techniques could reduce the regrettably high incidence of ‘third degree methods’ that are being used by policemen all over the country. This is circular line of reasoning since one form of improper behaviour is sought to be replaced by another. There is a likelihood that investigators will increasingly seek reliance on impugned techniques rather than engaging in a thorough investigation.

The claim that use of these techniques will only be sought in cases involving heinous offences is also hallow since there will be no principled basis for restricting their use once investigators are given the discretion to do so.

The bench finally ruled that it doesn’t have the authority to permit the use of these techniques by way of enumerating the offences which warrant their use. By itself, permitting such qualified use would amount to law making function in the garb of adjudication, which is outside the judicial domain.

The Selvi case has thus put to rest a great consternation among the accused, witness, or suspects that they will be involuntarily forced to undergo polygraph test. The landmark Judgement in this case has emphatically pushed the contours of Fundamental Rights and reiterated that- ‘We don’t owe our rights to the constitution, the constitution is a result of our rights’.

The author is a criminal lawyer at Delhi

Continue Reading

Legally Speaking

PATIENTS OVER PATENTS

Published

on

Imagine! How beautiful that world would have in which the professionals would have been more anxious about public health rather than their own gains. what if they had suspended their intellectual property rights in an emergency for the sake of humanity? Not so many lives would have been seen agonizing on the roads. But unfortunately, in this unfortunate situation of global pandemic the patentees are more concerned of their own profits than the public health.  

The intellectuals are divided on the contentious issue of the suspension of Intellectual property rights and the protection of Public health. India and South Africa have floated an idea in the World Trade Organization of a patent waiver, overriding patent rules, allowing generic or other manufacturers to make vaccines and drugs till the people develop “herd immunity” and the pandemic is declared over. Hundreds of countries have come out in favour of India and South Africa. Many noble laureates, health advocates and human rights bodies also advocated for the patent waiver. However, the rich countries. Although USA and Europe have indicated that they are considering to support India, are reluctant to vote for the same because of their vaccine hoardings or vaccine nationalism and the plea to revoke intellectual property rights have so far been ineffective. 

Consequently, disturbing figures are coming out about the disparity in vaccination. To vaccinate about 70% of the total population, the world needs more or less 11 billion doses of the vaccine. presuming two doses per capita. Extraordinarily, more than 8.6 billion orders have been corroborated. But around 6 billion of these vaccines will go to rich countries, and the rest to the poor countries from where 80% of the population belong to.  

The People vaccine alliance reported that only 1 of the 10 people are likely to get vaccinated till the end of this year in 70 developing countries, while the Global North which accounts only 14% of the worlds’ population, has procured 3 times more vaccines than they require and has acquired more than half i.e. 53% of the total anticipated vaccines. A Country like Canada has reserved enough vaccine to vaccinate its citizen 5 times over, and no one knows about what has been written in kismets of 67 poor countries. 

THE PREVALENCE OF PUBLIC HEALTH OVER PRIVATE PATENT IN THE LEGAL

FRAMEWORK 

E. Gold identifies three broad approaches to conceptualising the relationship between patent rights and human rights: 

• The “Integrated approach,” which positions patents as a human right.  

• The “Coexistence approach,” which contends that while patent law and human rights law are distinct, they share a fundamental concern in determining the optimal amount of patent protection needed to incentivize and practise socially useful innovation. 

• The “Subjugation approach,” which states that human rights considerations should prevail over patent law when patent rights and human rights conflicts 

The “Subjugation approach” seems to be a perfect way to determine the confrontational relationship of patents and public health. The aforesaid approach never means to abolish or obliterate all the patent rights; rather it establishes the necessity and the essentiality of the public health when it is confronted with patents. Unsurprisingly, this is the same thing the laws endorse for. 

There are many provisions in different conventions and declarations which confirm that the public health is always to be given priority when it is needed and indeed having an upper hand. 

Article 12 of The International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises “the right to the highest standard of physical and mental health and makes it a necessity for the state parties to prevent, to treat and to control epidemic, endemic, occupational, and other diseases.” While the Article 25 of the Universal Declaration of Human Rights (UDHR) declares “a standard of living adequate for the health and well-being of himself and of his family” to be a human right. 

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement itself states in its Article 7 that the protection of intellectual property rights should go hand in hand with the socio-economic welfare. And a balance of rights and duties must be maintained.”And Article 8.1 of the same agreement references the same thing in a more lucid and strong manner giving all the rights the TRIPS members to take every step which as long as is for the protection of public health and is in accordance with the terms and condition of TRIPS agreement. 

The WTO ministerial conference also known as Doha declaration proved all the arguments of public health and private patents outlandish. And “Conclusively remarked”that intellectual property rights are undoubtedly crucial for the acceleration of the drugs and medicines. But its effects on the prices cannot be unforeseen. Which are undeniably an obstacle for the developing countries as the patents and the high medicine prices are correlated. The Doha declaration then recognized the issue   of public health and private patent and declared that the TRIPS agreement cannot restrict the signatories from taking measures to protect public health. And the agreement should be enforced in a manner that the public health could be protected along with access to medicine for all.  

It prioritised the considerations of public health and clarified that it does not only apply to certain selected provisions of TRIPS but extends over the whole of TRIPS agreement. The phrase “measures to protect public health”applies not only to medications, but also to vaccines, diagnostics, and other health resources required to make these items easier to use. Thus, the primacy of the public health can clearly be seen over private patent.  

People’s Vaccine:  The  Suggestion,  The  Solution. 

People’s Vaccine is critical for bringing the Covid-19 pandemic to an end. Because it can be mass-produced, distributed fairly, and made available to all people regardless of their status in all the countries. It can also enable the production of billions of additional doses in the shortest amount of time, ensuring availability and accessibility everywhere round the globe. 

To enforce People’s Vaccine, the government of all around the world should endeavour to 

• Support the idea put forward by India and South Africa to waive off some patent rules of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) 

• Protect public health by preventing monopolies on vaccine while making sure the sharing of “Know-How” and all the relevant information about the same 

• Allocate the vaccines  fairly to both developing and developed countries. As the discriminatory distribution of the same has already created a blatant gap  and hundreds of people are dying every day 

• Ensure the transparency in the process  

• Provide the vaccine for free or for a price that could be affordable by the very last member of the society 

The pharmaceutical companies argue that the suspension of intellectual property rights would put the kibosh on innovation and technology because they spend billions in the process of vaccine-making and take substantial risk. However, this is not the truth.  

First of all, suspending the intellectual property rights does not mean bulldozing the companies into loss. But to avail the vaccine at a Reasonable price considering the investments the companies have made. Now please don’t tell me that making an 80% profit margin is reasonable. Second, vaccine like Oxford-AstraZeneca is 97% publicly funded. And the governments have spent 93 billion. Which is people’s money, on corona vaccines. Thus, it is indeed a People’s Vaccine. 

CONCLUSION 

While addressing the World Health Assembly, Geneva. Mrs Indira Gandhi rightly delivered that “My idea of a better-ordered world is one in which medical discoveries would be free of patents and there would be no profiteering from life or death”. The monopolization of the vaccines has done nothing but subsequent denied drugs to poor people.  

We could stop up the pandemic way earlier. But the Patent on drugs and related products put up a Price Tag on human life right from the very beginning. Rapid Testing Kit’s patent took a very difficult test from the people in these testing times and made the pandemic last longer. The patent on the N95 mask made it difficult to take breath. I am frightened to hear the vaccine 1, Vaccine 2 and Vaccine 3 just like Covid wave 1, Covid wave 2 and so on……If all the people do not get vaccinated rapidly, quickly and speedily. The playing field is open to new strains that would continue to arise and would elude our current vaccines. Therefore, it’s  time for a new approach. This is important to realize our social and moral duty towards the society. The pharmaceutical companies must share their knowledge. Which is not really a new concept or something extremely out of the box. But this is how the flu vaccines are being dosed to the world by “Open Science” through the WHO’s  Global Influenza Surveillance and Response System (GISRS) from the last 50 years. Same goes with Polio Vaccine, which was not patented by its inventor, Jonas Salk. In an interview when he was asked about the reason behind it. he replied. “Well, the people, I would say. There is no patent. Could you patent the sun?” The answer is NO 

Continue Reading

Legally Speaking

MEDICAL NEGLIGENCE IN THE TIME OF COVID-19

Published

on

It has been almost fourteen months since the COVID-19 was declared as a pandemic by the World Health Organization.  The second wave of the novel coronavirus has significantly stressed the public healthcare system in India as the new cases are skyrocketing every day. This pandemic on one side has forced our Corona-Warriors, Doctors, into a challenging situation where they are overburdened with the caseload. On the other hand, the instances of medical negligence and patients being denied medical assistance are rampant. Due to the unprecedented rise in death toll due to COVID-19, the medical negligence litigation is expected to rise in the future. Let us first understand the concept of medical negligence in the light of decided case laws and the medico-legal issues that may arise in COVID-era.

WHAT AMOUNTS TO MEDICAL NEGLIGENCE?

The primary ingredients constituting negligence in normal sense are duty of care, breach of duty and resultant injury. Medical Negligence means any act or omission by a medical professional that deviates from the accepted medical standard of care. In case of medical negligence, a very high degree of culpability is required to hold a medical professional liable. The victim has the option of bringing a civil action or criminal action or both against the medical professional, as the circumstances of the case may require. Under civil law, negligence is punishable under law of torts or under Consumer Protection Act, 1986. Under the criminal law, if death is caused by “gross negligence” of the doctor, charges under Section 304A of the Indian Penal Code, 1860 can be framed. The Delhi High Court laid down three degrees of negligence: lata culpa (gross neglect); levis culpa (ordinary neglect) and levissima culpa (slight neglect). Slight neglect being too trivial is not punishable and ordinary neglect, as the name suggests, is not something unusual, hence it also ought not to be punished. It is gross negligence which is punishable, however, the degree of negligence and remedy shall depend upon the facts and circumstances of each case.

The burden of proof generally lies on the complainant to prove that the doctor acted grossly negligently. In certain situations, the Courts have invoked that the principle of Res ispa loquitur (things speaks for itself) in cases where the patient suffers a complication which is not contemplated normally. It is no more res integra that medical negligence cannot be attributed to a doctor so long as he performs his duties with reasonable skill and competence. Merely because a doctor chooses one course of action in preference to the other one available, he would not be liable if the course of action chosen by him was acceptable to the medical profession. Indian Courts have adopted the United Kingdom’s Bolam Test of Medical Negligence and has been using it to adjudicate cases of medical negligence. The Bolam’s Test as laid down in Bolam v. Friern Hospital Management Committee, gives more emphasis on what medical practice ‘is’ rather than what the practice ‘should be’. As per the Bolam’s Rule, the following criteria’s that have to be fulfilled to fix the culpability of the medical professional-

1. It must be proved that the there is a usual and normal practice;

2. It must be proved that the defender has not adopted that practice;

3. It must be established that the course the doctor adopted is one which no professional man of ordinary skill would have taken if he had been acting with ordinary care

Hence, to prosecute a medical professional for negligence as per this test, it must be shown that the medical professional did something or failed to do something which in the given facts and circumstances no medical professional in his ordinary senses and prudence would have done or failed to do. In nutshell, to ascertain the culpability it needs to be proved that the doctor made a mistake which no careful and skillful medical practitioner would have made in the given facts and circumstances. The Supreme Court of India while protecting the rights of medical professionals, in a recent order categorically held, “Wrong Diagnosis is not a ground for Medical negligence and the medical professionals should not be dragged into criminal proceedings unless negligence of a high order is shown.”

GUIDELINES GOVERNING THE PROSECUTION OF DOCTORS UNDER 304B IPC

Considering that the medical profession renders noble service to the society, the Apex Court Jacob Mathew v. State of Punjab (2005), laid down the following guidelines governing the prosecution of doctors for the offence of criminal negligence to protect them from unjust and frivolous prosecutions

1. A private complaint may not be entertained unless the complainant produces prima facie evidence before the Court in the form of a credible opinion given by another competent doctor to support the charge negligence.

2. The investigating officer should, before proceeding against the doctor accused of negligence, obtain an independent and competent medical opinion, preferably from a doctor in government service qualified in that branch of medical practice.

3. A doctor accused of negligence should not be arrested in a routine manner unless, his arrest is necessary for furthering the investigation or unless there is a flight risk.

It was further held that to prosecute the medical professionals for criminal medical negligence, something more than mere negligence had to be proved. The Court added that, “Medical professionals deal with patients and they are expected to take the best decisions in the circumstances of the case. Sometimes, the decision may not be correct, and that would not mean that the medical professional is guilty of criminal negligence.” 

In the case of Indian Medical Association v. Shantha, Supreme Court held that the patients aggrieved by the deficiency in treatment, from both private clinics and Govt. hospitals, are entitled to seek damages under the Consumer Protection Act, 1986. Furthermore, in Mohan Dai Oswal Cancer Treatment & Research Foundation case (2019), NCDRC held the Doctor vicariously liable for the acts of his team which assisted the doctor in every sphere in rendering treatment to the patient. The onus is on the hospital and doctor to explain the exact line of treatment rendered which resulted in the incident. 

MEDICO-LEGAL ISSUES IN COVID ERA

Steps taken by the Government by deploying final-year medical and nursing students to offer services in COVID patient management are undoubtedly commendable and in good-faith but it follows certain legal implications. For instance, if a patient dies due to a trainee doctor’s inexperience or lack of knowledge of a particular symptom or medication, what will be the culpability of the trainee doctor? As per the settled legal principles, it is presumed that a professional entering into a particular profession professes a reasonable level of skill which shall be exercised with reasonable degree of care and caution. The law doesn’t expect an extra-ordinary knowledge or skill, but rather a reasonable degree of skill and knowledge. Another legal issue that may arise in future is, in an extraordinary situation like this, where rapidly rising cases have resulted in the number of intensive care patients exceeding the healthcare capacity, will the same medical “standard of care” apply in ascertaining the medical negligence? The major issue with this health crisis is confusion about its pathogenesis and unidentified treatment. The Indian Council of Medical Research in consultation with the Ministry of Health & Family Welfare has issued various guidelines on Clinical Management of COVID-19 depending upon the severity of patients. While determining the “standard of care”, the Courts may take into consideration such guidelines, clinical protocols and best practices in COVID-19 management issued by the appropriate authority, and decide on case-to-case basis, if a case of medical negligence is made out. The authors strongly recommend that comprehensive guidelines for adjudicating medical negligence cases should be formulated by the Judicial Officers and Medical Council of India. There should a set minimum standard of care that should be devised to balance the interests of the patients, doctors and nation, as a whole. The legislature may also consider extending limited protection to Doctors under Section 73 of Disaster Management Act and Section 4 of Epidemic Diseases Act. The actions of Doctors and Hospitals taken in good-faith during this health emergency may be given certain immunities by carving out cases of gross-negligence and malpractices’ as exceptions.

“While doctors who cause death or agony due to medical negligence should certainly be penalized, it must also be remembered that like all professionals doctors too can make errors of judgment but if they are punished for this no doctor can practice his vocation with equanimity”, as held in Martin F D’Souza case (2009). Extraordinary situations require extraordinary measures and there are always chances of collateral and unintended errors. There is no denying that a medical practitioner faced with an emergency situation like COVID-19 tries his best to treat the patient and save his life. It must be remembered that he does not gain anything by acting negligently; therefore, it will be for the complainant to clearly make out a case of gross negligence before a medical practitioner is charged with medical negligence. Under the fear of legal action, a medical professional cannot be expected to perform his best and charging doctors for medical negligence in the absence of well-formulated guidelines in these times would be a disservice to society.

Authors are Advocates practising in Delhi High Court

Continue Reading

Legally Speaking

NEED TO INCREASE WOMEN REPRESENTATION IN THE FIELD OF CYBER SECURITY: JYOTI ARORA

Tarun Nangia

Published

on

In the last two years, the number of cyber attack incidents has gone up to almost 3 lakhs from 1.5 lakh incidents that took place in the year 2018 and in order to stop these attacks there is a need to diversify the representation in the field of cyberspace, said Jyoti Arora, Special Secretary & Financial Adviser, Ministry of Electronics and Information Technology (MeitY). Govt. of India

Arora mentioned that the digital penetration and people’s dependence on the digital space has gone up multiple folds in the last one year due to the pandemic. “Even in the government service, people are relying more on online means right from getting the vehicle registrations, passport renewals, or even paying taxes. This brings the importance of electronic security,” Arora said at the virtual Awards & Conclave on Women in Cyber – Making a difference organized by The Associated Chambers of Commerce of India (ASSOCHAM).

Arora informed that India has almost 750 million internet users and boasts of having the second largest internet user base in the world. “This interconnectivity has also given the emergence of cyber security threats. The government has taken several steps in this regard as a part of its National Cyber Security Policy which includes setting up of Cyber Swachhta Kendra for detecting botnet infections and malware analysis in India and to notify, enable cleaning and securing systems of end users so as to prevent further infection,” She informed.

Sheenam Ohrie, vice-president, Dell Digital and CIO Leader, APJ, Dell Technologies explained that there is a need to encourage diversity and make the cyber security industry accessible to everyone. “In the last one-year 52 percent of all the domestic companies have seen some or the other form of cyber-attacks. We need to have an army capable of having new ideas and so there is a need to groom diverse talents,” She said.

 Ohrie also stated that the cyber space is a male dominated industry and there is a need to bring people from diverse backgrounds and empower women leaders.

Mini Gupta, partner, EY informed that promoting women in the cyber security business can make a huge difference as they bring a different thought process to the table. “Women are known for their multi talking skill sets. Though things are changing, there is a lot more that needs to be done,” She said.

 Speaking on the representation in the cyber security space, Gupta explained that there is 30 percent representation at the entry level, 10 percent at the management side and just 1 percent at the top leadership. “In the recent past more and more women have come forward to fill the jobs and even the organizations have noticed the difference that has made in their style of working,” She pointed out.

Santha Subramoni, global head, TCS Cyber Security Practice said that India has a huge IT talent base and has the potential to become the destination for all kinds of cyber security solutions. “In this current pandemic all companies are innovating and running their businesses. It has become a perimeter-less and a boundary- less environment today and so the need to protect their systems becomes all the more important,” She said.

  Subramoni also added that the size of the cyber security business globally has gone up to around $250 billion and India has hardly touched a business size of $7.6 billion. “So, in the true sense, we have barely scratched the surface. There is also a lot of business on the periphery which would mean the non-IT business for the analysts and defense personals which India can also tap,” She explained.

Deepak Talwar, National Security Officer, Microsoft & Chairman, ASSOCHAM National Council on Cyber Security stated that diversity drives innovation and market growth. Talent does not need an identity, a gender or bias to prove its worth. Diversity can come from many places and does not require a decade of prior experience. Building diverse team had always been advantageous to solve complex problems.

Talwar explained that there with an estimated shortfall of 3.5 million security professionals by 2021, the current talent gap to be addressed with “a sense of urgency”. To fill this cyber talent gap there should only be one clear way “understand and acknowledge the power of diversity”. Diverse teams need to be working quickly to address the constantly changing cyber security and privacy landscape and there is plethora of opportunities in the field of security, compliance, privacy and many such specialised domains in every sector and every level of jobs to be filled,” he said.

Continue Reading

Legally Speaking

VIOLATIONS OF HUMAN RIGHTS UNDER THE SEMBLANCE OF SOVEREIGN IMMUNITY

Published

on

WHAT IS SOVEREIGN IMMUNITY?

Sovereign immunity, or state immunity, is a principle of customary international law, by virtue of which one sovereign state cannot be sued before the courts of another sovereign state without its consent. Put in another way, a sovereign state is exempt from the jurisdiction of foreign national courts. Thus, the question of immunity is at the same time a question of jurisdiction: only when the court already has jurisdiction will it become meaningful to speak of immunity or exemption from it. For this reason, sovereign immunity is also referred to as “jurisdictional immunity” or “immunity from jurisdiction.” Because different types of legal proceedings may be brought against foreign states, sometimes courts find it necessary to refer to jurisdictional immunities of states. In history, the words “ex-territoriality” and “extra-territoriality” were also used in this sense. The current law of state immunity has developed predominantly as a result of cases decided by national courts in legal proceedings against foreign states. Doctrinal debates among the scholars are of much later occurrence and consist mainly of comments on decided cases. The fact that the law of state immunity is primarily judge-made law gives judicial decisions a prominent position among the possible sources of international law as contemplated by Article 38 (1) of the Statute of the International Court of Justice; instead of being a “subsidiary means for the determination of rules of law,” they are now a main source of legal rules. This feature of the law also shapes and determines the contours of a research guide on sovereign immunity.

INTERNATIONAL DIMENSION

Sovereign immunity always had two dimensions – a national and an international one. So far, the international community has witnessed several attempts to codify the law on sovereign immunity, but until now only the European Convention on State Immunity (ECSI) has entered into force.1 However, even this Convention has received only eight ratifications since 1972, with Germany having been the last state to ratify it in 1990.2 The United Nations have, of course, also worked on the matter – for several decades. Still, since its adoption in December 2004, the UN Convention on Jurisdictional Immunities of States (UNCJIS) has not been ratified by enough states in order to become effective.3

Parallel to these efforts on the international level, some states enacted national legislation on sovereign immunity, most importantly the US Foreign Sovereign Immunity Act (FSIA).4 Other states include the UK, Australia, Canada, and South Africa.5 States, for whatever reason has forgone the opportunity to pass national legislation rely on international custom to determine the scope of immunity which foreign states might claim. In doing so, most states – or, to be more precise, their courts — assume that sovereign immunity serves as the basic rule until the existence of an exception has been proven.6

To conclude, in constitutional monarchies the sovereign is the historical origin of the authority which creates the courts. Thus the courts had no power to compel the sovereign to be bound by them as they were created by the sovereign for the protection of his or her subjects.

DOCTRINE OF SOVEREIGN IMMUNITY IN INDIA

The doctrine of sovereign immunity evolved from common law jurisprudence existed in United Kingdom based on commonly followed notion that ‘King can do no wrong’, the legal maxim for which is ‘rex non potest peccare’. The British rule in India had brought the ideologies, laws and culture of such nature within the country.

There are typically two forms of sovereign immunity- Immunity to Jurisdiction, which implies that one state government’s authority or an official if commits wrong in any other state, the state cannot be tried for that matter, hence, state courts do not have jurisdiction over another state. Another form is Immunity from Execution, wherein it would be improper for one state to seize any property of another state. However, both the immunities can be waived by the State themselves. The judicial trend for doctrine of sovereign immunity could be divided into Pre and Post Constitution era in India.

PRE-CONSTITUTION PERIOD

The doctrine was established for the first time in case of P&O Steam Navigation Company v. Secretary of State (5 Bom HCR App 1), Peacock C.J. classified ‘sovereign’ and ‘non-sovereign’ power and two-fold character of East India Company as sovereign power and trading company and interpreted Government of India Act, 1858. Whereas, in Secretary of State v. Hari Bhanji ( (1882) ILR 5 Mad. 273) the court took contrasting view and denied any distinction of sovereign and non-sovereign functions along with extending non-liability of Government for acts related to public safety. These cases were considered as Precedents, but still there was an ongoing judicial battle on distinction between sovereign and non-sovereign.

INTERSECTION OF CONSTITUTION AND JUDICIAL DECISIONS

Post enactment of constitution, there was resentment and filing of review petitions in courts by aggrieved petitioners for genuine damages, leading with a liberal and constitutional requisite, the Indian courts sway away from the ancient doctrine and narrowed the scope providing rightful justice and damages to the victims.

Article 300 of the Indian Constitution can be considered the torchbearer for eliminating the doctrine of sovereign immunity as it clearly laid down that Government of India as well as State may sue or can be sued along with pertinent description and applicability. In State of Rajasthan v. Vidyawati (AIR 1962 SC 933), the apex court first time dealt with the sovereign immunity post-constitution and laid down that in modern times, the State have social and welfare responsibilities and hence, required to function on constitutional norms and not invoke the defense of old feudal laws. Additionally, in Kasturi Lal Ralia v. State of UP (AIR 1965 SC 1039), SC took a view protecting the State from liability of torts committed by the servants within their statutory power, herein, in our view the court applied sovereign immunity partially to not let State suffer with undue litigations and damages.

INTERPLAY BETWEEN HUMAN RIGHTS AND SOVEREIGN IMMUNITY

In the 1996 case, D.K. Basu v. State of West Bengal, the Supreme Court held, “for the violation of the fundamental right to life or the basic human rights… this Court has taken the view that the defense of sovereign immunity is not available to the State… for the established violation of the rights guaranteed by Article 21 of the Constitution of India.”  Compensation awards and determinations that a lawsuit contains a breach of a constitutional right, rendering sovereign immunity inapplicable, are always rulings taken at the discretion of individual judges. “Courts often reject compensation lawsuits in fundamental rights cases,” according to SAHRDC. Apart from the lack of mandatory payments, de facto and de jure protection remains an external hurdle, limiting survivor reparation and allowing human rights violations to occur across India.

Internationally, the concept of sovereign protection has become a significant contributor to the most appalling condition of human rights enforcement. The ICJ ruled that Italy infringed on international law by granting Germany sovereign immunity from domestic sovereignty in the case of Jurisdictional Immunities of the State (Germany v. Italy). Germany has been accused of violating international humanitarian law and fundamental human rights. According to this principle, when a state violates secured human rights norms that are called peremptory international law norms, such as jus cogens, the state’s jurisdictional protection is not protected. The fundamental principles of international humanitarian law, the prohibition of torture and genocide, the right of self-determination, and the prohibition of violence are all examples of jus cogens. The principle argues that international law grants immunity to a state in cases of human rights abuses. According to this theory, sovereign immunity is not a jus cogens norm, and therefore ranks lower in the order than all other jus cogens principles. The International Law Commission (ILC) gave an example of a list on which the prohibition of crimes against humanity was considered a jus cogens. In order to correct human rights abuses, normative hierarchy theory states that the maintenance of jus cogens norms takes precedence over all concepts of international law. In his book Enhancing Global Human Rights, R. Falk mentions that the principle of non-intervention does not apply in situations of violation of human rights norms is well-established rule of law. For example, in Nada v. SSEAs, the Swiss Federal Court recognized fundamental human rights as jus cogens norms. Similarly, All states are required by Article 6 of the International Covenant on Civil and Political Rights (ICCPR) and Article 12 of the International Covenant on Economic, Social, and Cultural Rights (ICESCR) to accept the non-derogable right of everybody to the highest level of health and to take all reasonable precautions to contain and avoid epidemics, endemics, and pandemics. Sovereign immunity is not a protection that prevents the international community from taking civil action against human rights violations. The Soviet Union dropped its claim to exclusive jurisdiction at the Conference on Security and Cooperation in Europe and instead engaged in a meaningful discussion about the issues at hand in Belgrade.

However in Indian context in many a cases it is seen quite in contrast, In an otherwise excellent order by the Allahabad High Court on 1 September 2020, awarded no compensation was given to Dr Kafeel Khan for his unjustified detention. The court granted him bail and declared his detention under the National Security Act as illegal. He was arrested by the Uttar Pradesh government, which said he gave a hate speech inciting people to hate each other and inciting students on the basis of religion. Dr. Khan had instead issued a call for national integrity and reconciliation, as well as a condemnation of terror, according to the ruling. After months in prison for an offence he did not commit, he received no remuneration.

CONCLUSION

The doctrine is a torch bearer of an ancient principle, the requirement of which has been diminished in the modern contemporary world. The harmonious contrition of international and state laws along with judicial precedents on sovereign immunity have taken into account the essence of social protection by protecting human rights and eliminated the draconian aspect of complete immunity to sovereign states.

Continue Reading

Trending