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THE IMPACT OF THE BANKRUPTCY AND INSOLVENCY CODE ON NON-PERFORMING ASSETS

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INTRODUCTION

Insolvency and bankruptcy laws are integral to any capitalist system. They serve as the foundation for the orderly dissolution or restructuring of a variety of company structures, including sole proprietorships, partnerships, and limited liability corporations. As a result, bankruptcy rules make it easier to re-allocate cash that has been locked up in a failing enterprise.

It is the state or condition of having more debts (liabilities) than total assets which might be available to pay them, even if assets were mortgaged or sold.

Bankruptcy is not exactly the same as insolvency. Technically, bankruptcy takes place when a court has determined insolvency, and given legal directions for it to be resolved. Bankruptcy is a determination of insolvency made by a court of law with resulting legal orders intended to resolve the insolvency.

Constitutional framework Under the Constitution of India ‘Bankruptcy & Insolvency’ is Entry 9 in List III Concurrent List, (Article 246 –Seventh Schedule to the Constitution) i.e., both Centre and State Governments can make laws relating to this subject.

POWERS OF RESERVE BANK OF INDIA TO INITIATE CORPORATE INSOLVENCY RESOLUTION PROCESS

Regulatory Framework

Under the Reserve Bank of India Act, 1934:

The Reserve Bank of India (“RBI”) is entrusted with the responsibility of regulating and supervising Non-Banking Financial Companies (“NBFCs”) by virtue of the powers vested in it pursuant to Chapter III B of the Reserve Bank of India Act, 1934 (“RBI Act”). The regulatory and supervisory objective of RBI is (i) to maintain the continued viability of NBFCs by ensuring that they function on healthy lines; (ii) develop an appropriate prudential framework for the NBFC sector; (iii) protect the interest of the depositors by comprehensive regulation of deposit taking NBFCs; (iv) curb un-authorized and fraudulent deposit acceptance by NBFCs; and (v) ensure protection to consumers of NBFC services by laying down of fair practices code.

In terms of Section 45-IE, if in the opinion of the RBI the affairs of an NBFC are being conducted in a manner detrimental to the interest of the depositors or creditors, the RBI may for securing the proper management of such company or for financial stability, supersede the board of directors of such NBFC. On supersession of the board of directors of the NBFC, an administrator shall be appointed who shall be bound to follow such directions as prescribed by RBI. Once the board of the NBFC is superseded the chairman, managing director and other directors shall from the date of such supersession vacate their offices and all the powers, functions and duties of the board shall, until the board of directors of such company is reconstituted, be exercised and discharged by the administrator. The RBI shall also constitute a committee consisting of three or more members who have experience in law, finance, banking, administration or accountancy to assist the administrator in discharge of his duties. Further, the employees of such NBFC, whose board is suspended shall assist the administrator by providing all information and details as may be required by the administrator to carry out his duties.

Insolvency and bankruptcy code:2016

The Insolvency and Bankruptcy Code was suggested in 2014 by the Bankruptcy Legislative Reforms Committee, chaired by T. K. Viswanathan (IBC). The IBC was created with the intention of consolidating and amending the laws governing reorganisation and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner in order to maximise the value of such persons’ assets, promote entrepreneurship, increase credit availability, and balance the interests of all stakeholders, including changing the priority of government dues payment. In May 2016, the IBC, 2016 was eventually adopted and published in the Indian Gazette. The legislation strives for insolvency resolution by insolvency experts in a time-bound way (originally 180 days, extendable by further 90 days under specific conditions, but currently extended to 330 days). The statute assures that the judicial and business parts of the settlement process are separated, rectifying previous legislative errors. Furthermore, the National Company Law Tribunal (NCLT), not the DRTs, would be the adjudicating authority under the IBC. As of now, the IBC is the only law that governs insolvency, bankruptcy, and the reconstruction of failing businesses, reducing the role of prior laws. A major legislative gap in the settlement of NPAs was closed with the passage of the IBC. The RBI replaced the existing CDR rules with a standardised and simplified general framework for the resolution of stressed assets under IBC in a circular dated February 12, 2018. Despite the Supreme Court’s ruling on 2 April 2019 that the RBI’s 12 February circular mandating lenders to commence loan settlement or restructuring even if the default was only for a single day was invalid, this circular undoubtedly represents the first step towards protecting the integrity of debt contracts.

The Code’s provisions have been announced in stages and on a need-to-know basis. The sections of the Code relating to the Corporate Insolvency Resolution Process (CIRP) went into effect in December 2016. Individual insolvency provisions were planned to be published in three stages: first, personal guarantors to corporate creditors (effective December 2019), next partnership businesses and proprietorship firms, and finally other people (yet to come in force).

PROGRESS OF THE RESTRUCTURING AND INSOLVENCY ACTIVITY POST INTRODUCTION OF THE CODE

Despite the fact that the IBC was passed more than three years ago, its impact has been felt. As of February 2020, over 26,250 applications have been filed under the IBC, with roughly 3600 of them being accepted. 205 cases have been settled, and 890 cases have been liquidated, out of the accepted cases. Under the IBC, the period it takes to resolve a company has decreased from around 4.3 years to about 364 days. Furthermore, in comparison to their claims, financial creditors realised roughly 42% of their claims under settlement programmes. Gross nonperforming assets (NPAs) fell to roughly 9.1% in the fiscal year ending in 2019, down from 11.2 percent in 2018. 5 The average rate of recuperation through the Code is much higher than through other methods of recovery and exercise. According to the World Bank’s Doing Business Report’s ‘resolving insolvency index,’ 2020: (a) India’s ranking has risen from 136th in 2015 to 52nd in 2019, (b) the recovery rate has increased from 25.7 percent in 2015 to 71.6 percent in 2019, and (c) the recovery time has decreased from 4.3 years in 2015 to 1.6 years in 2019.

OVERVIEW OF THE PRESENT LEGAL FRAMEWORK UNDER THE CODE

The Code distinguishes between the business and judicial parts of insolvency and bankruptcy procedures. The legislation’s main goal is to safeguard the corporate debtor’s resuscitation and continuance by shielding it from its management and from a corporate death by liquidation. As a result, the Code is both an useful piece of legislation aimed at reviving a failing firm and a simple recovery law for creditors. As a result, the interests of the corporate debtor have been divided and separated from those of its promoters and/or management. As a result, rather than being adversarial, the settlement procedure protects the corporate debtor’s interests. The Code’s framework safeguards creditors’ interests in the liquidation waterfall by prioritising payments to secured creditors over payments to crown debts. However, it is the commercial wisdom of the majority of creditors to define, via discussion with the potential resolution applicant, how and in what way the corporate resolution process, including the distribution of cash, would take place throughout the resolution process. The following are some of the important components of the CIRP framework and the liquidation procedure for corporate debtors:

Corporate insolvency Resolution Process CIRP: On a minimum default of ‘1,00,00,000, a financial creditor (either alone or jointly), an operational creditor, or the corporate debtor itself is eligible to commence CIRP. The government recently increased the threshold limit for commencing CIRP from ‘1 lakh to ‘1 crore to avert bankruptcy procedures against medium and small businesses during the COVID-19 crisis. Upon admittance, a moratorium on litigation, asset transfers, and security enforcement begins. The board of directors is removed from office, and an interim resolution professional (IRP) is appointed to assume charge of the corporate debtor and its assets, among other things. Following that, IRP appoints a committee of financial creditors (CoCs). CoC is needed to make important (66 percent voting share) and regular (51 percent voting share) decisions that are not within the realm of IRP. The resolution professional (RP) creates the qualifying conditions for the submission of the resolution plan with the CoC’s permission and publishes an expression of interest. In order to prevent the tainted person from regaining power, some persons who are subject to impairment in or outside India under Section 29A of the Code are barred from proposing a resolution plan. With a 66% majority vote, the CoC approves a legally compliant, financially viable, and practical resolution plan, which is subsequently submitted to the NCLT’s relevant bench for approval. The corporate debtor must be liquidated if no resolution plan is received or authorised by the CoC by the end of the maximum resolution term, which is 270 days or 330 days (including litigation). The 330-day deadline is not required, and the Supreme Court regarded it as such in the case of Essar Steel India Limited vs. Satish Kumar Gupta & Others. 11 A corporate debtor may be restructured by a merger, amalgamation, or demerger as part of the resolution plan permitted under the Code.

Liquidation process: Under the Code, a CIRP may or may not be followed by liquidation. Triggers for liquidation include (a) rejection of a resolution plan by NCLT if it fails to meet certain necessary conditions, (b) the resolution plan not being approved by the CoC by 66 per cent in value or no resolution plan is received, (c) a decision of the CoC to proceed with liquidation during the CIRP period, or (d) failure of the debtor to adhere to the terms of the resolution plan approved by NCLT. In the event that a firm has not made any payment defaults, it may decide to voluntarily dissolve the corporation. When NCLT issues a liquidation order, a liquidator is appointed, CoC is dissolved, and a stakeholders’ (creditors entitled to distribution) consultation committee is formed. Liquidator checks, acknowledges, or rejects creditors’ claims, creates an asset document, and takes custody of and controls all of the corporate debtor’s assets. The liquidator may sell the corporate debtor’s assets in bulk or individually, in parcel or slump sales, or on a continuing concern basis. Auction is the most common method of sale. A person who is ineligible under the IBC to propose a plan for the corporate debtor’s bankruptcy resolution

Other key features: The Code requires that transactions that are preferential, undervalued, or exorbitant in nature be examined for the advantage of creditors. The assessment review period is set as follows (a) two years where transactions are entered into with related parties and (b) one year in all other cases. Furthermore, transactions conducted with the aim to cheat creditors must be examined, although the Code’s provisions do not provide for a lookback time.

RECENT LEGAL DEVELOPMENTS

The government has raised the filing threshold for IBC cases from one lakh to one crore. Because of the rise in coronavirus infections, the government is considering suspending IBC registrations for a few months. The regulations pertaining to insolvency and bankruptcy of financial service providers were recently put into effect by the government (FSPs). Non-banking financial firms (which include home finance companies) with an asset size of 500 crore or more are currently covered by the regulations as a category of FSP (with the RBI as the financial sector regulator). Dewan Housing Finance Corporation Limited is the first FSP to be subjected to CIRP. The definition of “interim financing” was enlarged to include “any additional debt that may be disclosed.” As a result, certain pre-IBC financing may be eligible for inclusion in the category of ‘interim finance.’ Minimum filing thresholds under the IBC are (a) in the case of homebuyers/allottees, less than 100 homebuyers/allottees under the same project or at least 10% of the total number of such allottees; and (b) in the case of a class of creditors, less than 100 creditors of such class or at least 10% of the total number of such creditors. The ability to define important products and services that cannot be terminated during the moratorium has been given to RP (provided dues are paid during moratorium). Similarly, there will be no automatic termination/suspension of a licence, permit, registration, quota, concession, clearances, or any other right granted by the central government, state government, local authority, sectoral regulator, or any other authority, and they must continue during the moratorium subject to the payment of dues for services rendered during the moratorium.14 In many cases, it was noted that the corporate debtor does not have sufficient funds during the liquidation period. In effect, a modification said that COC must assess the firm’s liquid assets and compare them to the fees that the liquidator is anticipated to spend if the company goes into liquidation (liquidation cost). CoC will contribute to the difference, if any, between the liquidation costs and the liquid assets available to the firm if the estimate of liquid assets is less than the liquidation costs. Furthermore, secured creditors who choose to realise their security interest must contribute their share of the insolvency resolution process costs, liquidation process costs, and workmen’s dues (for the 24 months prior to the liquidation commencement date) to the extent of their relinquished security interest. They must pay these payments within 90 days of the liquidation’s start date. They must also pay any excess proceeds realised over the amount of their accepted claims within 180 days of the liquidation’s start date. The asset will become part of the Corporate Debtor’s liquidation estate assets if the secured creditor fails to pay such sums to the liquidator within 90 days or 180 days, as the case may be. 16 Secured creditors can’t sell assets to someone who isn’t allowed to file an insolvency plan (Section 29A).

CHALLENGES AND WAY FORWARD

IBC has enhanced creditors’ positions and changed India’s corporate credit culture. It has also influenced the behaviour of non-performing company promoters by establishing credit discipline. The impact of the IBC has been increased by the announcement of regulations linked to the beginning of insolvency of personal guarantors to corporate debtors. Other factors that complicate the proper resolution of firms under the IBC include: (a) the resolution applicant’s breach of the resolution plan after NCLT approval, (b) the lack of cross-border insolvency regulations and rules, (c) the lack of cross-border insolvency regulations and rules for group insolvency, (d) post-closure litigation by operational creditors, such as tax authorities or unsuccessful bidders, and (e) conflicting NCLT judgments, etc. Some of the issues encountered in the implementation of the IBC can be alleviated by (a) holding timely colloquia for NCLT judges and increasing interaction between practitioners from various jurisdictions; (b) sensitising various government and statutory authorities about the treatment of government and statutory dues under the IBC to reduce the scope for litigation and the resulting delay in the resolution of companies under corporate insolvency; and (ii) NCLTs according to higher prioritisation standards.

CONCLUSION

Following the adoption of the IBC, challenges to the resolution process at every level resulted in a slew of litigation, which caused delays and hampered the timely completion of such processes. Since the founding of the Securities and Exchange Board of India (SEBI), many modifications and judicial discussions have helped to close the vulnerabilities in the framework and ringfence both lenders and borrowers. However, fundamental adjustments that would strengthen the financial sector are required in the near future, Furthermore, we must alter our attention in order to balance the interests of diverse stakeholders and minimise friction caused by regulatory overlaps, if any exist. A fragmented approach to the insolvency process may not be in the best interests of the Indian economy, particularly in these times of uncertainty and scepticism.

Since the founding of the Securities and Exchange Board of India (SEBI), many modifications and judicial discussions have helped to close the vulnerabilities in the framework and ringfence both lenders and borrowers. However, fundamental adjustments that would strengthen the financial sector are required in the near future.

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The Unresolved Issue of AMP Expenses in Transfer Pricing – India

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One of the most perplexing yet significant concepts within the Transfer Pricing Dispute Resolution is with regards to the Advertisement, Marking and Promoting (AMP) Expenses that are drawn by the Indian Entities of a company for the products of its foreign Associate Entity. This concept has been surrounded by controversy and confusion since its inception within the practice and study of Transfer Pricing and this is because of the absence of any statutes or regulations dealing with it and its jurisprudence is built purely on the judicial precedents that have been delivered by the Tribunals and High Courts, however, interestingly even the courts appear to have a tough time dealing with issues pertaining to AMP expenses.

The origin of this dispute can be traced back to the United States Tax Court in the case of United States v. DHL Corporation, after the introduction of the US Regulations of 1968 which introduced an important concept pertaining to “Developer Assister Rules” as per which the entity which has incurred the AMP Expenses (Developer) would be treated as the economic owner of the brand which is being marketed even though it might not be its legal owner, and the legal owner of the Brand i.e., the Assister need not pay any compensation for the use of the brand by the developer. These regulations were grounded on the notion of equitable ownership of a brand on the basis of the fiscal expenditure and the risk incurred by them, and the legal ownership of the brand has not to be taken as one of the criteria for ascertaining who would be considered as the developer of the Brand or the intangible property in question.

However, it is pertinent to consider that the Transfer Pricing Rules in America create a clear distinction between “Routine” and “Non-Routine” expenditure, which is essential to understand the issue of the monetary remuneration that is given to the domestic associated entity for marketing intangibles. In DHL, the court framed the Bright Line Test (BLT) which created a distinction between the routine and non-routine expenses that were incurred by the companies. According to the Bright Line Test, it is necessary to ascertain the non-routine expenses that have been incurred i.e., for marketing purposes in contrast to the routine expenses that the incurred by the brand’s distributor for product promotion while ascertaining the economic ownership of the intangible in question.

The issue pertaining to AMP expenses was first dealt with in the case of Maruti Suzuki India Ltd. v. Additional Commissioner of Income Tax [(2010) 328 ITR 210] before the Delhi High Court, where the Bench held that the Advertisement, Marketing and Promoting Expenses will be considered as an international transaction only in cases where it exceeds the costs and expenses that have been incurred by comparable domestic entities which are similarly situated. However, the Delhi High Court’s judgement was remanded following which it was challenged before the Honourable Supreme Court in Maruti Suzuki v. Additional Commissioner of Income Tax [2011] 335 ITR 121 (SC) where it was overturned by the Apex Court.

In LG Electronics India Pvt. Ltd. v Assistant Commissioner of Income Tax [(2013) 140 ITD 41 (Delhi) (SB)], the Delhi Bench of the ITAT referred to the precedent by the Delhi High Court in Maruti Suzuki and held that the as per Chapter X of the Income Tax Act, 1961 the Assessing Officer has the right to make an adjustment for Transfer Pricing vide application of the Bright Line Test in issues pertaining to the AMP expenses that have been drawn by the Indian Entity, since this would fall within the ambit of an international transaction, and this would be deduced from the proportionally higher AMP expenses that were incurred by the Domestic Entity in contrast to two similarly situated domestic entities. The Revenue’s understanding that the AMP expenses which are incurred by the Domestic Associated Entity will inevitably result in a benefit to the Foreign Associated Entity in terms of increasing its brand value along with the lack of lack adequate compensation to the latter for the same, is the primary reason behind its attempt to bring all expenses pertaining to advertising, marketing and promotion within the ambit of the country’s Transfer Pricing Laws, thus it takes the job of applying an Arm’s Length Prince on such transactions which are used for AMP and the test that is most widely employed for this purpose is the Bright Line Test which used by the court in the case of LG Electronics, where it looked at the Bright Line, which is a line drawn within the total expenditure for the purposes of AMP which signified the average spending for the same purpose by comparable entities and any amount which would exceed the line would be considered as an international transaction which would represent the expenses that were drawn by the domestic entity for the building the brand value of the Foreign Associated Entity’s product.

The precedent in Sony Ericsson proved to be a gamechanger wherein the court went to the extent of overruling all of the abovementioned judgements with regards to whether AMP Expenses by the Domestic Entity would be considered as an internal transaction. In this case, the court did not face any issues in determining whether it would constitute an international transaction since the entities had submitted that the international between the Foreign Associated Entity and the Domestic Entity also included the money for the purposes of AMP. While the Revenue had relied on the precedent in LG Electronics to show cause for their application of the Bright Line Test in determining the part of the expenses towards AMP that would be considered as an international transaction. However, the court reject the Revenue’s submissions and reasoning while holding that the Bright Line Test did not have legislative or statutory backing and thus the precedent in LG Electronics was overruled with regards to the use and applicability of the Bright Line Test for ascertaining international transactions since this would be considered as an outcome of judicial legislation.

After the precedent in Sony Ericsson there has been a drastic change in the judicial approach towards issues pertaining to AMP expenses within the realm of transfer pricing. However, since the Court has failed to elaborate upon what would constitute an international transaction in Sony Ericsson, the courts and tribunals have gone back to the phase of drowning in confusion to deal with cases pertaining to AMP expenses and have struggled with determining a proper method for the same.

A transfer pricing adjustment can only be made when it has met the statutory framework of highlighting the existence of an international transaction, determination of the price and fixing an ALP in compliance with Section 92 C of the Income Tax Act. While the element of the international transaction was not disputed in all of the aforementioned cases, the primary issue was with regards what would constitute an international a transaction. The definition of an international transaction as per the Income Tax Act includes the parties to have an agreement between themselves for such a transaction and a shared understanding with regards to the transaction and its purpose. In LG Electronics and other cases prior to Sony Ericson, the primary criteria that were adopted by the courted in ascertaining international transactions and unsaid understanding, were on the basis of proportionally higher expenses with reference to comparable i.e. the courts had adopted the Bright Line Test which had been deemed incompatible with the Income Tax Act of 1961

At a glance at most of the cases pertaining to this issue, the Revenue has resorted to proving the existence of international transactions on the basis of the Bright Line Test, and most of the revenue’s judgements also fail to highlight or prove the same, otherwise except for the unique cases in which the Assessee Domestic Associated Entity and the Foreign Associated Entity had a written agreement between the two of them. This issue is purely because of the lack of any regulatory or statutory provisions within the Income Tax Act, and this was also brought to attention by the court in Maruti Suzuki(2011). In the absence of Statutory provisions and the inability to apply the Bright Line Test because of the precedent in Sony Ericsson, it becomes impossible for the revenue in such cases, especially in the absence of a written or express agreement between the Domestic and Foreign Associated Entities, where it is forced to assess the Domestic Entity’s subjective intentions however this method was also rejected in Maruti Suzuki(2011).

While the decision in Sony Ericsson has left the Revenue and Courts baffled with regards to the method, they should use to ascertain international transactions in matters pertaining to AMP expenses, hopefully, this will finally come to a conclusion since it is currently being heard by the Country’s Apex Court. It is of the utmost importance for the Apex Court to elaborate upon the method and procedure that must be followed by the revenue in determining cases pertaining AMP expenses and issue guidelines for the same.

The origin of this dispute can be traced back to the United States Tax Court in the case of United States v. DHL Corporation, after the introduction of the US Regulations of 1968 which introduced an important concept pertaining to “Developer Assister Rules” as per which the entity which has incurred the AMP Expenses (Developer) would be treated as the economic owner of the brand which is being marketed even though it might not be its legal owner, and the legal owner of the Brand i.e., the Assister need not pay any compensation for the use of the brand by the developer. These regulations were grounded on the notion of equitable ownership of a brand on the basis of the fiscal expenditure and the risk incurred by them, and the legal ownership of the brand has not to be taken as one of the criteria for ascertaining who would be considered as the developer of the Brand or the intangible property in question.

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INSURANCE COMPANY SHOULD NOT SEEK DOCUMENTS WHICH ARE BEYOND THE CONTROL OF INSURED TO FURNISH, SAYS SUPREME COURT WHILE SETTLING CLAIM

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The Supreme Court in the case Gurmel Singh vs Branch Manager, National Insurance Co. Ltd observed that due to circumstances which is beyond the insured control and which the insured is not in a position to produce while settling the claims, the insurance company need not be too technical and ask for documents.

While settling the claim, it is found that the insurance companies are refusing the claim on flimsy grounds and/ or technical grounds further which the insured is not in a position to produce due to circumstances beyond his control, While settling the claims, the insurance company should not be too technical and ask for the document As the insurance company ought not to have become too technical and ought not to have refused to settle the claim on non­ submission of the duplicate certified copy of certificate of registration as due to the circumstances beyond his control, the appellant could not produce on payment of huge sum by way of premium and the Truck was stolen, once there was a valid insurance. As the appellant was asked to produce the documents which are beyond the control of the appellant to produce and furnish those documents.

An amount of Rs. 12 lakhs along with interest @ 7 per cent from the date of submitting the claim, the appellant is entitled to the insurance and to pay the litigation cost of Rs. 25,000 to the appellant, the court held while allowing the appeal.

the insurance company has become too technical while settling the claim and the insurance company has acted arbitrarily, observed by the court in this case.

As when an appellant produced the registration particulars which has been provided by the RTO and further the appellant had produced the photocopy of certificate of registration and was just being solely on the ground that the original certificate of registration i.e., which has been stolen is not produced and the non-settlement of claim can be said to be deficiency in service. Therefore, the Insurance companies are refusing the claim on flimsy grounds and/or technical grounds, the facts and circumstances of the case. Furthermore, the appellant had tried his best to get the duplicate certified copy of certificate of registration of the Truck. the insurance company must have received the copy of the certificate of registration, even at the time of taking the insurance policy and getting the insurance.

the appellant has not produced either the original certificate of registration or even the duplicate certified copy of certificate of registration issued by the RTO, mainly on the ground the insurance company has not been settled in an appeal before the Apex Court. The bench further noted that the photocopy 5 of certificate of registration and other registration particulars as provided by the RTO, was being produced by the appellant.

The bench comprising of Justice MR Shah and the justice BV Nagarathna observed and contended that, in many cases, it is found that the insurance companies are refusing the claim on flimsy grounds and/or technical grounds.

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Supreme Court seeks response of Union and states on plea for guidelines to prevent sexual harassment of students in schools

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The Supreme Court in the case Nakkheeran Gopal v UOI & Or’s observed that any kind of harassment including the sexual harassment being carried out at educational institutions The Court while allowing the writ petition issued a notice seeking protection of children.

The plea stated that there is a vicarious liability upon the State Government to implement any law for the well-being and also for the protection of the children in their respective states.

the petition states that to implement any law for the well-being of children and also for the protection of the children in their respective states, it is the responsibility of the State Government and the plea further mentioned that it the vicarious liability of the State Government and It will be considered the lapse on the part of the State Government if there is Any lapse on the part of the educational institution as it remains a crucial department in the State Government With respect to the relevant organization, including Educational Institution, stated in the plea before the court.

The petitioner argued that till date no specific mandate or the law or the guidelines have been issued by the respective States and inspire of alarming rate in the offence against the children especially at school premises.

The petition further states with this regard that children can also themselves be coerced into becoming tools in furtherance of illegal and dangerous activities and under this circumstance the Increased online time can lead to grooming and both online and offline exploitation.

It is essential to ensure the constitutional right to dignity of children provided under Article 21 of the Constitution of India, while protecting children against sexual abuse when they are exposed to predators, which is compromised, stated by the petitioner in the plea.

The petition states that it indicates immediate concerns and measures for intervention are of paramount significance and further the court stated that this calls for the implementation of legislative actions and community-based interventions through virtual media to prevent a further rise in the statistics and to ensure child protection and when the safety of the children is at stake especially at educational institutions which is supposedly to be the safest shelter, and that too during this tough time. As it is necessary to Protecting the basic rights of children and is of utmost concern as otherwise there will be a posting of a substantial threat to the future and this would leave a regressive impression.

It is the fundamental right of the children under Constitution of India to engage and study in an environment when he/ she feels safe from any kind of emotional or physical abuse and is free, further being argued in the petition.

The bench comprising of Justice Indira Banerjee and the Justice CT Ravikumar observed and sought responses of the Union and the States for guidelines for the educational institutions for the protection of the children and also for the enforcement of the fundamental rights of Children at the educational institutions.

It is essential to ensure the constitutional right to dignity of children provided under Article 21 of the Constitution of India, while protecting children against sexual abuse when they are exposed to predators, which is compromised, stated by the petitioner in the plea.

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IN MEDICAL NEGLIGENCE COMPENSATION CLAIMS, MCI FINDINGS REGARDING DOCTORS’ PROFESSIONAL CONDUCT HAVE GREAT RELEVANCE: SC

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The Supreme Court in the case Harnek Singh vs Gurmit Singh observed while considering medical negligence compensation claims that the findings of the report of Medical Council of India on professional conduct of doctors are relevant.

from the date of SCDRC order as compensation thereafter the court directed the Respondents to pay to the complainants a total amount of Rs. 25,00,000 with interest @ 6% per annum. the complainants have made out a case of medical negligence against Respondents 1 and 2 and are entitled to seek compensation on the ground of deficiency of service and the court hold that the decision of the NCDRC deserves to be set aside. in reversing the findings of the SCDRC and not adverting to the evidence on record including the report of the MCI, the court is of the opinion that the NCDRC has committed an error. The case of medical negligence leading to deficiency in his services, the above-referred findings of the MCI on the conduct of Respondent 1 leave no doubt in our mind that this is certainly, observed by the bench.

The bench further observed that he opinion and findings of the MCI regarding the professional conduct of Respondent 1 have great relevance while referring to the contents in the report of MCI.

The issue raises in the above-mentioned case is weather a professional negligence is established by the complainant as per the standards governing the duty to care of a medical practitioner on the part of Respondent As the NCDRC gave its decision without referring to the MCI finding the complainants/appellants submitted, in an appeal submitted by the Apex Court. this complaint got summarily disposed of and they filed appeals before Medical Council Of India The Ethics Committee of MCI held one doctor medically negligent and issued a strict warning to be more careful during the procedure and to be more diligent in treating and monitoring his patients during and after the operation he complainants had also made a complaint to the Punjab State Medical Council against the professional misconduct of the doctors, hospitals, surgeons, While the proceedings were pending before the SCDRC.

the complaint and two among the opposite parties were allowed by SCDRC to directly pay Rs. 15,44,000 jointly and severally and Rs. 10,000 as costs as the appeal was allowed by The National Consumer Disputes Redressal Commission of these opposite parties and set aside the order of the SCDRC holding that negligence was not proved by the complainants.

The bench comprising of Justice UU Lalit, justice S. Ravindra Bhat and the justice PS Narasimha also observed and contended the question of intention does not arise that in the proceedings for damages due to professional negligence.

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WHERE THE CLAIMS OF EVENTS HAVE BEEN SUCCESSFULLY ESTABLISHED BY THE PROSECUTION, SECTION 106 OF THE EVIDENCE ACT APPLIES TO CASES: SUPREME COURT

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The Supreme Court in the case Sabitri Samantaray vs State of Odisha observed here chain of events has been successfully established by the prosecution, from which a reasonable inference is made out against the accused, the Section 106 of the Indian Evidence Act applies to cases.

in light of Section 106 of the Evidence Act the High Court rightly observed that as how the deceased lost his life and the onus was now on the appellants to disclose further the court observed that the appellants have failed to offer any credible defense in this regard and it can be deduced that the entire sequence of events strongly point towards the guilt of the accused appellants the burden was on the appellants to prove it otherwise as once the prosecution had successfully established the chain of events.

in the light of the statements made by all the sets of witnesses, with such an intention when analyzed and the fatal injuries sustained by the deceased at the relevant place and time further the court contended while dismissing the plea that it certainly makes out a strong case that death of the deceased was indeed caused by the appellants. in establishing intention of the accused-appellants for the commission of the offence, the prosecution has succeeded, the Court notice.

whenever an incriminating question is posed to the accused and he or she either evades response, or offers a response which is not true, in a case based on circumstantial evidence then in the chain of events such a response in itself becomes an additional link, when a case is based on circumstantial evidence As Section 106 of the Evidence Act from its burden to establish the guilt of an accused is in no way aimed at relieving the prosecution. where chain of events has been successfully established by the prosecution, it only applies to those cases from which a reasonable inference is made out against the accused.

the Section 106 it merely prescribes that when an individual has done an act and in no way exonerates the prosecution from discharging its burden of proof beyond reasonable doubt Thereafter the onus of proving that specific intention falls onto 9 the individual and not on the prosecution. If the accused had a different intention than the facts are specially within his knowledge which he must prove, with an intention other than that which the circumstances indicate. As the Section 106 of the Evidence Act postulates that the burden of proving things which are within the special knowledge of an individual is on that individual. Although the Section in no way exonerates the prosecution from discharging its burden of proof beyond reasonable doubt, observed by the Bench as the said provisions Since it is all based upon the interpretation of Section 106 Evidence Act, the contentions of either

the bench comprising of CJI NV Ramana, Justice Krishna Murari and the justice Hima Kohli observed and contended whenever an incriminating question is posed to the accused and he or she either evades response or that which being offers a response is not true then such a response in itself becomes an additional link in the chain of event, in a case based on circumstantial evidence.

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Legally Speaking

A candidate has no legal right to insist that the recruitment process set in motion be carried to its logical end: SC

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The Supreme Court in the present case Employees State Insurance Corporation vs Dr. Vinay Kumar observed that the recruitment process set in motion be carried to its logical end as the candidate does not have a legal right to insist.

The bench directed the Corporation-appellants to take a decision regarding whether to complete the recruitment process, bearing in mind all relevant aspects within a period of two months, while allowing the appeal further it stated there is however no doubt from holding that the employer is free to act in an arbitrary manner.

A recruitment process which is set in motion be carried to its logical end candidate who has applied does not have a legal right to insist that Even in the select list may not clothe the candidate with such a right and that too even in the inclusion of a candidate.

A recruitment process carried to its logical end and the process set in motion, the candidate who applied does not have the legal right and thereafter the court further contended that the cardinal principle we must bear in mind is that this is a case of direct recruitment, observed by the bench.

The Court further said that it is quite likely that any candidate who may have being desirous of applying, may not have applied being discouraged by the fact that the advertisement has been put on hold and by agreeing with the applicant the court contended and said that the direction to conclude the proceedings within 45 days is unsupportable.

The recruitment process set in motion be carried to its logical end and the Candidate who has applied does not have a legal right to insist the recruitment process.

The ground raised by the appellants for not proceeding with the procedure of direct recruitment is untenable, the respondent contended before the court and on the other hand on account of certain developments which took place, there may really be no need to fill up the post of Associate Professor and the respondent may not have a right as such, the appellant contended before the Apex Court.

The High Court which dismissed the writ petition filled by the Corporation and it directed the Corporation to conclude the process positively within a period of 45 day. the Corporation filed appeal before the Apex Court, Aggrieved with this direction.

The bench comprising of Justice KM Joseph and the justice Hrishikesh Roy observed that Even inclusion of a candidate in the select list may not clothe the candidate with such a right and it does not mean that the employer is free to act in an arbitrary manner, the bench clarified.

The recruitment process set in motion be carried to its logical end and the Candidate who has applied does not have a legal right to insist the recruitment process.

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