Whether Consumer court can give Interim order, without satisfaction of Jurisdiction?

October 5, 2020 (updated October 13, 2020) Published by Prakhar

“Jurisdiction” can be simply defined as power of the court to “entertain the suit” i.e. to admit for the purpose of consideration. Independent of the decision being taken rightly or wrongly, it is something which gives court power to take cognizance of the issue and decide the case. Consumer act is specialized piece of legislation, and its jurisdiction has been clearly defined. What happens if a complaint with prayer of interim order has been filed with relevant forum (eg. District Commission), but the opposite party decides to take defence of Jurisdiction. That is once an objection to the jurisdiction of the Commission to entertain the suit is raised at the hearing of an application for interim relief, is it imperative for and a mandatory duty of the Commission to decide that issue as a preliminary issue.

Beyond the power of Commission?:- It is to be noted that the Consumer forums and commissions as established are creatures of the statutes and derive their power from express provisions of the statute. Thus they must exercise their power expressly in consonance with the statute. Therefore prima facie any issue of order whether interim or final without having jurisdiction, would be beyond the provisions of the statutes, and the commission or forum would have acted beyond its scope.

What does statute say about it? It is to be noted that the S 36 titled “Proceeding before District Commission” and S 38 titled “Procedure on admission of Complaint” of The Consumer Protection Act 2019 are the relevant provision for the purposes of present analysis. S 36 (2) talks about how district commission must admit the complaint presented under S 35 of the Act, whereas S. 38 talks about how the complaint must be dealt with once the Complaint has been admitted, and also grants power for passing interim order. Since the Question of jurisdiction goes to heart of admitting the complaint itself, the complaint becomes inadmissible. And if no admission is made the commission does not have any power to pass interim order as well.

Jurisdiction as preliminary issue:- It is to be noted that the courts have recognized the jurisdiction as preliminary issue and The Hon’ble Supreme Court in Kiran Chit Fund v A Bal Reddy [(2008) 7 SCC 166] have identified the necessity to determine jurisdiction as preliminary issue specifically in respect of Consumer Protection Act.

In light of the abovementioned analysis and in light of present case laws, the author would like to opine that once an objection to the jurisdiction of the Commission to entertain the suit is raised at the hearing of an application for interim relief, it becomes imperative for and a mandatory duty of the Commission to decide that issue as a preliminary issue.

Another question that might arise herein would be what to do it such an order beyond the jurisdiction of the Commission has been passed against you? Should you comply with the order or whether you can ignore it? It is to be noted that despite the orders being beyond the jurisdiction of the Commissions, such interim orders already issued do not become non est, and non compliance of the order/decision regarding the jurisdiction alone might render you liable for disobedience and breach of the order. IF the party is unsatisfied with the orderand want to challenge the order itself, it might be in best interest of the party to apply for review of the order under S. 40 of the Act, or Appeal from the order under S 41 of the Act. (In case such order has been passed by the District Commission.)

Views expressed are personal, please take independent Legal advice from a professionals.

International Competition Law

September 24, 2020 (updated October 13, 2020) Published by Prakhar

Competition law talks in terms of economic market in relation to product and geographical which are distinctively homogeneous, and can be distinguished from conditions prevailing in any other market. In an attempt to define such market, it is entirely possible that it may be spread across various nations. Laws which govern are generally national and have territorial implications while markets have become international in various cases. Like in the recent judgment of WhatsApp the Competition Commission of India (Case No. 99/2016), [i] appreciated that the impact which particular policy change of the WhatsApp are “Global”, but they had to stick to India for purposes of evaluating the same.

Thus, for similar cases need for international competition law and international cooperation amongst various competition /antitrust authorities for various purposes including imposing of injunctions and other relevant remedies, obtaining evidences which might not be accessible otherwise, and also enforcing judgments, especially in a case where the company does not have any registered office in the country where it is found in breach of competition law, arises at this juncture.

This article attempts to sources for International Competition law which might be enlisted in treaties whether bilateral or multilateral platforms and also international principles of competition law which are widely accepted throughout the world which might have binding nature over Competition Commission of India.

Case for Extraterritorial application of Competition Law

National Competition law in many ways are meant to self-serve the interest of the nations. Competition law of one nation may not generally apply to foreign firms until and unless such enterprise seem to have an adverse impact on their domestic economic markets and many say this is means to counter “cross border economic terrorism” (as reiterated by Supreme Court in Haridas Export Case). It is quite common to see the cross border impact of foreign firms in the age of globalization and digitalization, with the emergence of MNC’s, INC’s, and outsourcing (to name a few common phenomena’s).

There may be broadly two solutions to such a problem, one is finding a solution at international level, and another one would be to find one at the national level. In the absence of International Biding competition policy, unilateral national enforcements have been sought for, whereby each commission on its own deals with antitrust issues based on effect particular conduct will have in its own jurisdiction. This may be proceeding from the assumption that extraterritorial conduct can be addressed at the national level through national antitrust law ( as can be seen in AGCM (Italian Competition Commission) initiating its own enquiry and imposing fine of 3 Million Euros, on WhatsApp-Facebook for changing privacy policy in spite of having European Competition Commission). [ii]But caution must be born in mind that unilateral conduct will reveal the very different story in practical situations.

In general most of the countries have tried to model their international model around that one followed by the European Union and one that of United States, thus it will be peculiar to discuss the same. Both of the regimes have in general extended their applicability of competition law beyond the national boundaries where adverse impact within their borders was found.

Extraterritorial application of US Antitrust Law

S. 1 of Sherman Act 1890, provides for extraterritorial application of United States antitrust law. The Same principle was applauded in United States v. Aluminium Company Case [iii](Also popularly known as “Alcoa Case”) wherein “effects doctrine” was propounded, according to which any conduct of foreign firm having a detrimental effect on the domestic markets, can be enquired under US antitrust laws.

This decision was indeed met with massive backlashes around the world, with various countries attempting to prevent discovery of evidence quintessential for overseas prosecution. Like British protecting of Trading Interests Act, 1980 was enacted to block discovery; such adverse reactions were again met by US Congress by passing Foreign trade antitrust Improvement act, 1982, wherein they attempted to clarify and limit extraterritorial jurisdiction, to “direct, substantial, and reasonably foreseeable effect”, on US market.

Extraterritorial application of European antitrust law

EU nations also seem to have incorporated “effects doctrine” in their respective statutes. This doctrine was also given credence in European Courts judgment of Ahlostron Osakeytio v Commission,[iv] wherein EU’s competition rules were applied on foreign enterprise (economic entity is defined as “enterprise” under EU competition law), and affecting commerce between member states.

Extraterritorial Application of Indian Competition law

S 32 of Competition Act of 2002 gives extraterritorial jurisdiction to Commission, to inquire into conduct which may have an appreciable effect on competition within India, which may have been transacted outside India. Though s. 32 is not comprehensive in regards with what kinds of Orders may be passed in such cases, the language of MRTP act which was previously enforced in India can provide valuable light on the same. But for the present paper, it would be sufficient to limit the same to understanding that there does exist extraterritorial application of Competition law in India.

Since now we have looked at different regimes of Competition law, each having extraterritorial application which includes EU, USA, India besides these various other prominent antitrust law can be traced in Japan, Australia, Russia, South Africa, China, etc. all of them to certain extent provide for Extraterritorial application, which may have impact on international environment, thus looking at the International Competition law and its sources become important.

International Cooperation treaties

Principles of the market economy have been widely appraised around the globe since the early nineties, and subsequent to spread of competition law around the world, various treaties on the competition law has been concluded around the world. Though they may widely differ in their nature, some may provide for close cooperation (which might include facilitation for international enforcement of competition law violation), while others may contain only vague statements which are very general in nature (may possibly include only agreement to have regular talks). This agreement can be seen as a significant step towards international coordinated settlement and leniency programs for Competition law.

Bilateral Treaties

In the absence of coordinated international efforts, the problem of multilateral enforcement is mostly solved by bilateral, multilateral agreements between various antitrust agencies providing a working solution to the problem. This cooperation is primarily sought in the field of investigation, collecting evidence, claiming reliefs, and enforcement of orders, carrying business in the particular country. Thus, paving way cooperative unilateralism, wherein one agency can receive cooperative review from other organizations, and the appropriate remedy may be given.

The following table makes an attempt to identify all the Memorandum of Understanding which Competition Commission of India has entered into with different competition agencies around the world under the power bestowed under section 18 of Competition act. [v](The list may not be exhaustive, but the effort has been made to ratify the same of errors to the maximum extent.)

MOU entered between	Remarks	Date (latest first)
Federative Republic of BrazilRussian FederationsRepublic of IndiaPeople’s Republic of China Republic of South Africa	Finalized during International Legal Forum held in Saint Petersburg, Russia	19th May 2016
Competition Commission of India (CCI) Competition Bureau Canada (CB)	Concluded on sidelines of 2014 ICN Merger Workshop, in New Delhi	1st December 2014
CCI Directorate General for Competition of the European Commission (DG, Competition)	Concluded on the sidelines of the 3rd BRICS International Competition Conference	21st November 2013
CCIAustralian Competition and Consumer Commission (ACCC)	Canberra, Australia	3rd June 2013
CCIUnited States (FTC)	Washington D.C	27^th September 2012
CCIFederal Antimonopoly Service (Russia)	Moscow	16^th December 2011.

The International Competition Network (ICN)

It may be noted though there does not exist any binding international platform for Competition policy, there are international forum in which competition policy is can be coordinated (mostly bilateral in nature between the antitrust agencies of different nations) the most prominent ones are International Competition Network (ICN) and the OECD, paving the way for multilateral cooperation.

International cooperation within ICN network is gaining more and more prominence, with comprising of more than 132 competition authorities from more than 120 jurisdictions across the world. It has become platform for raising issues, for competition law enforcement, setting best practices, and standards besides facilitating cooperation amongst different agencies. [vi]

The annual conference of the ICN is held in member country every year, Annual Conference of 2021 being scheduled at Abu Dhabi. [vii]

Conclusion

Progressively with the interconnectedness of markets have made different jurisdictions come to the realization to come together to enforce and enact competition laws. Almost all jurisdictions around the world have provisions for the extraterritorial application of their domestic antitrust law around the world. Which has made it necessary to enter into agreements and treaties with other nations/antitrust authorities around the world; such efforts may take place at various levels from highly coordinated ones to general statements of understanding.

Though binding international platform does not exist as of now in competition law arena, a number of reasons, but there certainly exist multilateral platforms such as ICN providing platform for coordination at the bilateral level. Bilateral agreements entered among different nations provide substantial insight into the sources of International Competition law. Increasing cooperation among different agencies throughout the world is certainly the way forward for the International Competition law.

Views expressed are personal, please take independent Legal advice from a professionals.

[i] Vinod Kumar Gupta v. WhatsApp Inc., Order under 26(2) Case no. 99/2016 Competition Commission of India.

[ii] WhatsApp fined for 3 million euro for having forced its users to share their personal data with Facebook, Press Release, Autorita Garante Della Concorrenza E Del Mercato, 11 May 2017.

[iii] United States v. Alcoa, 148 F.2d 416 (2d Cir. 1945).

[iv] Ahlström Osakeyhtiö and others v Commission of the European Communities, C-89/85.

[v] International Cooperation, Competition Commission of India, http://www.cci.gov.in/international-cooperation (last accessed on 6th Sep 2017).

[vi] About ICN, Competition Commission of India, http://www.cci.gov.in/about-icn (last accessed on 6th Sep 2017).

[vii] Competition Commission of India (CCI) selected to host ICN 2018 Annual Conference in New Delhi in March –April 2018, Press Information Bureau, Government of India, Ministry of Corporate Affairs, 09-November-2016.

Oppression and Mismanagement

September 24, 2020 (updated October 15, 2020) Published by Prakhar

Majority Rule Principle

As a general rule when a particular motion has been passed and accepted by simple majority, the court ought not to interfere with the decision so taken by the majority. Justification for the non interference of the court lies on following grounds of “Corporation Principle”. Corporation Principle recognizes that the corporate is separate legal entity and thus any injury caused to corporation, only proper plaintiff for the same would be corporation itself. This rule was recognised in Foss v Harbottle [(1843) 67 ER 189].

Exception to Majority Rule

Such a rule favouring majority in all circumstances is dangerous in nature, it would allow majority to perpetuate any harm whatsoever it wants, even at the cost of minority. Further the minority might be barred from taking action on corporations behalf. Such idea by its very virtue and further implications ignores the fact that every shareholder by virtue of share has interest in the company, and management ought to protect that interest. thus various exceptions from this rules were drawn with time, which includes illegal and ultra vires act, act amounting fraud on minority, infringement of right members, and many others.[1]

Indian Scenario

Minority Shareholders can approach the court against the oppressive practice of majority shareholders, under the S 241 and 242 of the Companies Act, 2013. These provisions are similar to the provision u/s 397 and 402 of Companies Act 1956, which was in turn modelled around the S 210 of the English Companies Act, 1948. While the Companies Act provide for wider scope for filling the complaint, by also allowing the Minority to even pre-emptively apply for the remedy. Thus a injury does not actually need to subsist, but if court could be convinced that the action so proposed to be taken will lead to injury to the shareholders, the same can be prevented from happening at first place.[2]

Oppression- Definition

In Needle Industries Ltd. [AIR 1981 SC 1298] case the Hon’ble Supreme Court clarified the scope of word “oppression” for the purposes of Companies act, while doing so it heavily relied on the definition as propounded in Scottish Cooperative Ltd.[1954 SC 381.] Court defined that when operation of the company are conducted in a manner which lack probity and fair dealing, and are prejudicial to the particular group of members. Thus it gave the court wide amplitude of power while dealing with such situations, to reach equitable ground. Further court clarified that if the complaint is only because of management being inefficient that won’t fall within the purview of oppression, even if it causes certain degree of harm to particular group of members.

Test for Oppression

For the purposes of showing that the conduct of majority was oppressive on minority one isolated even might not be sufficient, what is required to be shown is that the such conduct was continuous in nature. Further it is also required to be shown that not only such conduct was regular but also such conduct was harsh, burdensome, and wrong. Thus differentiating oppressive conduct from merely lack of confidence between majority and minority, and setting higher standard for the same. It is also further required that the propriety rights of the minority are being harmed in manner, which lack probity and fair dealing. It was held by Supreme Court of India in Shanti Prasad Jain v Kaliga Tubes [(1965) 35 Com cases 351].

The requirement of the act of oppression by majority on minority being continuous has been introduced by judicial pronouncement, though courts have not abrogated their jurisdiction to entertain petition when the conduct complained of oppressive though not continuous in nature. The courts have though categorically denied relief in case of conduct merely being inefficient, unwise or even careless on part of directors or key managerial personals. The onus of proving the oppression lies on the applicant only.

Views expressed are personal, please take independent Legal advice from a professionals.

[1] Surya Bhansingh, Deals with the Oppression and Mismanagement and its prevention under Company Law, Legal Service India, http://www.legalservicesindia.com/article/125/Oppression-&-Mismanagement.html (last accessed Oct 18, 2018).

[2] Sanchari Debnath, OPPRESSION OF MAJORITY BY MINORITY SHAREHOLDERS, 8th August 2013, Sashwaat Society of Research & Education, http://www.researchatsashwaat.com/display_article.php?article=NjU= (last viewed Oct 18, 2018)

Equitable remedies for seeding competition in Digital Market

September 23, 2020 (updated October 14, 2020) Published by Prakhar

Digital economy has raised various new questions in front of various competition enforcement authorities. Wide reliance on new methods for interacting with users, new business strategies involving huge reliance on data (accumulation and use of the same), have baffled authorities. What is the remedy for the same has further intrigued authorities across the globe.

The scope of this paper is to find search for out of the box equitable remedies which can be enforced by Competition Commission of India, which can bring competition to life in the field monopolized by few firms. For the purposes of this researcher has limited himself to study of Social Networking and Consumer Communication applications alone, by taking up Facebook Inc, and its services i.e. Facebook and WhatsApp as prime example.

Setting up background

Network Effect stifling competition:-

WhatsApp services are a part of the instant messaging communication industry where the value of service to the user increases as the number of users of the service grows. The classic example is the telephone. The more people own telephones, the more valuable the telephone network is to each owner. If there are N owners, each one of them can call the other N-1 owners: a total of N(N-1) communications can be made. Thus the network’s value grows with exponentially with number of users. The value of a network is proportional to the square of the number of members within the network. Thus, when a product/service becomes valuable with the increase of the number of users it is known as Network Effects.

The concept of network effects is not new to the Indian competition law jurisprudence and has already been recognized by Competition Commission of India as ‘Network effect means that a product/service become valuable with the increase of the number of users.’ (Prasar Bharati Vs. TAM Media Research Private Limited).[1] Furthermore, in another case Competition Commission explained network effect as the concept by which the value to the users in an industry increases with increase in the number of its users (MCX Stock Exchange Ltd. vs. National Stock Exchange of India Ltd.)[2]

WhatsApp introduced its services in the year 2008 and it was the first of its kind application that linked the user’s contact number in providing the communication services. Since WhatsApp used internet connectivity in sending messages and was free, thus it completely substituted erstwhile, similar service of SMS and grabbed an instant popularity in the relevant market. In mere span of five years, WhatsApp became the most popular means of instant messaging communication in the society and had emerged to be the only app that had an enormous user base of active users. In the present situation, WhatsApp has become a need of the hour and has the most monthly active users. In the present scenario, if a person is not using WhatsApp, he will be handicapped in communicating instantly and purposefully with his peers as it is the most popular consumer communication app and at the end of the day, he will, howsoever unwillingly, have to use the services of WhatsApp for communicating with them. Resultantly, the person becomes a part of the network and increases its network size, following to the same, his peers who desire to contact him will also join the network and start using the services of WhatsApp, thus giving a birth to a chain reaction.

In the present scenario, because of network effects, the consumers are dependent on the services provided by WhatsApp as it has become a valuable service for them because it has such an enormous base of active users. WhatsApp has become a must have application in every smartphone.

Therefore, one cannot simply shift to another consumer communication application available in the relevant market without bearing high switching costs. Thus, bringing WhatsApp to a position in which the users are dependent on its service because of network effects in which no matter what conditions WhatsApp imposes on its users they will have to accept it.

In light of Whatapp’s ignorance for privacy protection, a consumer may prefer a better technology or the benefits of a competitor’s business; however, he/she is prevented from doing the same by the presence of network effects. Consumer communication applications such as the present one rely entirely on the presence of a user network to be meaningful to their users. High concentration of users on one app means the existence of a wide network on it, which is difficult to replicate on another network in a short-term or with minimum effort. Even where the switching cost from the dominant network to another is low or even absent, as in the present case, the consumer will still not be able to switch to another network since network effects ensure that there is a high level of coordination required between the consumers; given the number of consumers, this coordination will be impractical and difficult to achieve.

The Researcher has used only the examply of WhatsApp in this particular case, while the same analogy can be stretched even towards the working of Facebook, due to constrain of wordlimit the researcher has made a decision to not include the same in the paper.

User as true asset for these companies

Herein it is to be noted that Facebook Inc and WhatsApp Inc. both are service providing platform, which is later used by users and the usage of the same creates value for the platform itself. Thus user is the real asset for any platform providing service, in following two ways:-

Asset in form of License: WhatsApp in consideration for providing its service takes a license from its users.[3] This license includes right to use, process, store, and sublicense, transfer these rights to others amongst various other rights. While the user continues to be the owner of the data so processed, they can use these data in the manner so provided in the License. Similar Licenses are also taken by Facebook Inc.[4] Later these entities utilize data so obtained under license for the purpose of processing, and providing services to the users, and further sustain the platform. Thus the license it has individually obtained from users is an asset for both entity i.e. Facebook Inc and WhatsApp Inc.

Global Perspective in regards with asset:- For the internet based services like that of WhatsApp Inc. which provides platform to its user, it is to be noted that valuation on basis “value per user” is prevalent practice. It is to be noted that European Competition Commission while considering the basis of valuation of WhatsApp took into account the value per user.[5] Thus it in fact shows that the real asset of any platform based service which includes Facebook and WhatsApp Inc is the users on its platform. Other Consumer Communication Applications similar to WhatsApp were also evaluated on the criteria on multiple occasions i.e. Rakuten’s acquisition of Viber, or Skype’s acquisition by Microsoft, Instagram acquisition by Facebook, or even when Line took out IPO in 2014.

Company’s own perspective:- Facebook Inc in “Unaudited Pro Forma Condensed Combined Financial Information (Exhibit 99.3).”,[6] filed before U.S. SECURITIES AND EXCHANGE COMMISSION, under head Intangible Assets acquired in connection with acquisition of WhatsApp title “Acquired Users”. Thus, Company admits that USERS on the platform are the true assets of the company.

Interoperability as remedy

Interoperability in its simplest terms can be defined as one platform’s ability to interact and work with other platforms. In regards with web software this is generally achieved through Application Programming Interfaces (API)- which by far allow different softwares to interact with each other in. Simplest example could be when different websites use Facebook’s API for the verification purposes on their website and also use the same to access various sets of data and sometimes even post on their behalf.

The benefits arising from interoperability provided by platform can significantly improve the overall conditions in the market. With new and noble markets emerging, such as various developers entering and developing tools which in turn make the platform more usable and valuable because of the innovative steps taken by future developers. Further it also paves way for entry of various new players in the market, making market more and more decentralized and federated, as we can see in the case of telephone services, email services and World Wide Web. Lack of interoperability and systematically closing down possibility of interoperability has helped Facebook/WhatsApp cement the position they currently enjoy in the market, unchallenged, and powerful enough even to topple elections.

The systematically closing down opportunity to interoperate can be seen very evidently from the “platform policy” of the Facebook itself. Although it is all done in the name of user, they generally tend to serve the purpose of enterprise. This has been elaborately deal in next session. Just to highlight attempt to frustrate the interoperability can be seen from condition wherein the Facebook actively prohibits developers from changing UI or / and further prevent even users from adjusting the same according to their own needs. Section 4.2 prevents offering “experiences that change the way Facebook looks and functions.” Read with other clauses such as “respect the limits we’ve placed on Facebook functionality,” evidences Facebook Company’s intend maintain tight control over their platform.

Perhaps the most express bar can be seen from the condition where Facebook explicitly bars any social network from communicating with Facebook which is enshrined in condition Section 4.1 states, “Don’t replicate core functionality that Facebook already provides.”

As a general practice most successful interoperability is powered by open standards. For example we can look at Email, which uses the protocols of SMTP and IMAP, which facilitates sending emails across the platforms, from Yahoo to Hotmail to Gmail, AOL, and virtually every other platform seamlessly. This has allowed users to choose the platform though which they want to host their messages as well the kind of service they want to avail in order to send across their messages. This has made Email a truly decentralized and federated market wherein competition still does exist.

Similar API’s for Social media services also exist in the market, these API have been approved and developed by World Wide Web consortium, ActivityStreams and ActivityPub, are prime examples of the same. Either Facebook could be forced to adopt either of these two open standards or open source the standard they are already having in place. This would allow new players to come into market, and make Facebook one of the many players in the market. Giving users more power and flexibility in terms of choosing platform which hosts their data on terms and conditions they find agreeable, and still manage to connect with their groups.

Thus these remedy not only cures the problem of concentration of the market, but also further paves the way for future development of the market, both in the direct competition in upstream and downstream, while at the same time ensuring the benefits to consumers.

Data Portability as remedy

Data portability defined in simplest terms is facilitation of movement of data from one platform to another platform. Data portability allows user to move from one platform to another, like in case you might be user of WhatsApp for years and have created multiple chats, stared message and other data; you might be hindered from actually moving to another platform for the fear of losing all that data. Thus allowing unhindered movement from one platform to another is facilitated by data portability for the existing users of the services.

Facebook has been one of the first firms to take advantage from data portability efforts taken up by different platforms, which in turn helped it growing its network. This could be seen where Facebook in its inital days used to borrow contact lists from Gmail and Live, for its users and which in turn built its social network.

While the Facebook while citing security reasons have very often than not shied away from giving its share in data portability. It would very often show the email address on profile (amongst other details) in form of images instead of text, thus making it impossible to download data in readily usable form.

One interesting development in this regards is Europe’s GDPR (General Data Privacy Regulation), which took effect from 25^th May 2018. It made it obligatory on part of social media to provide for data portability. Though Facebook has taken steps in that regards and allowed users to download their data in JSON format, but it is to be noted that the data so downloadable is only subset of total data which Facebook has in regards with user. Thus it is only compliance factor which has been changed and users have not been empowered in true sense. Thus using that data user cannot move to new platform.

Facebook has built itself taking advantage of data ported from other services and now it is high time it returns the favour.

It is also to be noted that the ownership of the data the user creates continue to lie with user as per “Statement of Rights and Responsibilities” issued by the Facebook. [7] “You own all of the content and information you post on Facebook,” further the definition of post not only include the information which is actively provided by user but also the information which Facebook automatically collects by observing the behaviour of the user pattern over its platform.

As the owner of the data the user ought to have more right and control over the data. As previously mentioned that Facebook has merely license to use the same, thus how that particular license has been used must be informed to user. And if user wants to revoke the license and take control over their data the same must be allowed.

Thus data portability is not only an issue of importance from point of view of competitors and upstream and downstream market, but also an question equity and justness from point of view of User.

Conclusion

The remedies so suggested in this paper that is Interoperability and Data Portability, possibility and power to enforce the same exists in the hands of Competition Commission of India. Not only these remedies remove the major hurdle in innovation and centralization which these company have caused, but also further pave the way for further innovation. And also at the same time ensure consumer welfare. Currently pattern of asking to pay damages causes only temporary setback to these companies and without any long term consequences which can improve the market. Once these remedies are being implemented on these companies, they will be forced to compete on strength of their product rather than just the dominant position they currently enjoy in the market. Further the users will be unfettered from sick system in which they are trapped. Freeing their data and giving them control are the first steps towards a cure.

Views expressed are personal, please take independent Legal advice from a professionals.

[1] Prasar Bharati Vs. TAM Media Research Private Limited , COMPETITION COMMISSION OF INDIA Case No. 70 of 2012.

[2] MCX Stock Exchange Ltd. vs. National Stock Exchange of India Ltd, COMPETITION COMMISSION OF INDIA, CASE NO. 13/2009.

[3] Your License to WhatsApp. In order to operate and provide our Services, you grant WhatsApp a worldwide, non-exclusive, royalty-free, sublicensable, and transferable license to use, reproduce, distribute, create derivative works of, display, and perform the information (including the content) that you upload, submit, store, send, or receive on or through our Services. The rights you grant in this license are for the limited purpose of operating and providing our Services (such as to allow us to display your profile picture and status message, transmit your messages, store your undelivered messages on our servers for up to 30 days as we try to deliver them, and otherwise as described in our Privacy Policy). https://www.whatsapp.com/legal/#terms-of-service

[4] https://www.facebook.com/legal/terms/plain_text_terms

[5] CASE M.8228 – FACEBOOK / MERGER PROCEDURE, European Commission, http://ec.europa.eu/competition/mergers/cases/decisions/m8228_493_3.pdf

[6] https://www.sec.gov/Archives/edgar/data/1326801/000132680114000047/exhibit993unauditedproform.htm

[7] https://www.facebook.com/legal/terms/previous?ref=new_policy

Tribunals and Basic Structure

September 21, 2020 (updated October 13, 2020) Published by Prakhar

Very high degree of importance is being given to access to justice under our constitution, with access to court being synonymous to access to justice.

The central question which researcher tries to answer through this submission is, whether by surpassing the jurisdiction of High Courts establishment of tribunals have violated basic structure on following counts i.e.

Federalism: – as the scheme for federal structure was envisaged even in Judicial Hierarchy as well, while High courts remain to be highest court in the state and not being subordinate to Supreme Court that is apex court in the nation.
Judicial Review: – The power conferred on High Courts to examine constitutional validity legislative act, as well as to exercise judicial superintendence over the tribunals and courts within their jurisdiction.
Separation of Powers: – Tribunals usually meet the demand of having technical and administrative members in it. These members are being appointed by the executive, and may even consist of members of executive. Further Tribunal very often acquire their sponsorship from the department, against which the matters will be brought to the tribunal itself, thus lis might exist. Thus appointment by executive for performance of judicial functioning can be seen to be in violation of doctrine of separation of Power, and on extension be seen as violation of judicial independence.

Case for Tribunal System in India

In order to reduce the workload of the Court, and also to expedite the process of decision making, before a forum comprising of experts in addition to lawyers, need to Tribunals was being realised. Especially in an era where myriad number of activities are being undertaken by the Government in various sectors, the need for availing services by people having specialized knowledge in these fields was being realised, for speedier and more effective administration of justice. [1]With Forty-second amendment act of 1976, Government took major step towards revamping the method of adjudication in the country, and Art. 323-A & 323-B were being introduced to the constitution. Through this amendment establishment of Administrative Tribunals for adjudicating in certain matters as specified was being made possible, both by Parliament as well as State Legislation. [2]

What is “Tribunal”?

The definition of word “Tribunal” does not exist in any statute, but Supreme Court has on various occasion tried to define what Tribunal might mean. In Jaswant Sugar Mills Ltd., Meerut v. LakshmiChand, it laid down that in order whether particular body which is required to act judicially can be classified as Tribunal or not, is that whether that particular authority has trappings of a Court, such as authority to compel witness, follow principles of evidence, power to impose sanctions. [3]While a court may be bound by strictly prescribed rules of evidence and procedure, Tribunals may enjoy liberty in the same regards. Thus they are not bound by all the trappings of the court.

Federalism

Background to the issue:-

On bare reading of Section 28 of Administrative Tribunals Act, 1985 it becomes explicit it was legislative intent to exclude the jurisdiction of High Courts debarring it from adjudicating and/or entertaining complaints in relation to service matters. Further it must be noted in this regards that the right to appeal is statutory right tracing itself to certain statute, and cannot be demanded as a matter of natural or inherent or any other right. In order for right to appeal to exist it must be traced back to statute books, relevant on herein is the Constitutional Framework. Right to appeal cannot be created by any agreement between the parties whatsoever or even by the court, as conferring of jurisdiction on courts is legislative function, and right to appeal can circumscribed by the conditions.

Thus in fact denying the High Court jurisdiction to entertain the dispute even for questions involving constitutional validity, would amount to bypassing the jurisdiction of High Court, and thus would be hitting the Federal aspect in Judiciary as being envisaged.

Background to power: –

Article 227 of Indian Constitution confers power on High Court to superintend all the courts and tribunals within their jurisdiction. The power so conferred is not limited for the purposes of enforcement of fundamental rights under part III but also extends for legal rights. This power so conferred is being exercised by use of prerogative writ, and is exclusive in nature, thus cannot be conferred to any other body except by amendment to constitution. Judicial mechanism as being envisaged by constitutional framers to check excess of legislative and executive power has been done to instil sense of confidence and faith in people. This lies to root of giving the high court superintendent over tribunals.

Supreme Court’s Take on the issue

Supreme Court dealt with the issue of exclusion of jurisdiction of High Courts under Art 226 & 227 by Art 323 A & 323 B in L Chandra Kumar, and held such exclusion was unconstitutional.[4] While declaring that jurisdiction so conferred on High Court to be inviolable part of basic structure, the same cannot be ousted. And at best the tribunals can be formed to supplement the courts in discharging the power so conferred to High Courts under constitution. Thus though art 323 A and 323 B may confer power to check constitutional validity of statutory provision and rules, yet such decision so taken will still be under radar of High Court and can be subjected to scrutiny by Division Bench of High court having territorial jurisdiction.

Thus power being conferred to High Court for purpose of superintendence over tribunals, was being recognized and overriding effect of Articles 323 A and B was annulled, for the reason being even with exclusion of jurisdiction clause conferring exclusive jurisdiction to Supreme Court, the jurisdiction of High to Judicial review under Article 227 cannot be denuded.

Reservations expressed to Supreme Court’s Decision

The purpose of formation of tribunals was to reduce the work load of the high courts, and provide expedite justice, but if appeals from tribunals are being preferred to high court in a routine manner the same will go on defeating the purpose of setting up tribunals at first place. As a remedy in Supreme Court from the decisions of Tribunal is anyways guaranteed and appeal to high court will only go lengthening the process of delivery justice.

Separation of Powers

Case for Appointment of Technical Members:-

Tribunals have been established with the object of discharging quasi-judicial duties by acting judicially which differentiates them from other administrative bodies. A Tribunal is neither a Court nor an executive body, but they have an obligation to act judicially. Tribunals are endowed with the judicial functions as distinguished from purely administrative or executive functions. Thus, for the efficient and effective working of these Tribunals, persons who have served in the higher judiciary should be appointed in accordance with the principles laid down by the Constitutional Courts.

If the Tribunals are intended to serve an area which requires specialised knowledge or expertise, the appointment of Technical members in addition to judicial members must always be welcomed, as they can provide an input which may not be available with the judicial members.

Doctrine of Separation of Powers:-

In most basic terms Doctrine of Separation of prescribes exclusiveness amongst different organs of the government i.e. legislature, executive, and the judiciary. Though in the Indian context this doctrine has not been recognized in strict terms, the assumption of functions of one organ by another has not been contemplated. Separation of powers continues to be part of basic structure of constitution.

The principle of separation of power when translated in terms of judiciary could mean independence of judiciary from any coercion by force which may be located within or outside the government. Further rule of law requires separation between judicial powers and executive powers.

Tribunals not being Independent:-

Taking a look at reality it could be easily observed that the Tribunals are not as independent as the judiciary, due to its very way of functioning and has excessive interferences from part of executive branch. This could be due to variety of factors including that the secretary of sponsoring department sits in Selection Committee to see the process of appointment, and also large amount of dependence on part of tribunals on sponsoring department, for sponsorship of infrastructure and funding for smooth function. The same is further exacerbated by the fact very often legislation in garb of expert member prescribes, that the member of sponsoring department are imbibed into tribunals. The same was observed by Supreme Court of India in 2010 in R Gandhi case. [5]

Thus it could be seen that how appointment of technical members by Executive can in de facto go on contravening the spirit of separation of power and independence of judiciary.

Way Forward:-

A simple way to counter this problem would be to simply sever all the ties that particular tribunal has with the executive department, especially in terms of finances. This can go on long way to ensure independence of judicial function performed in tribunals.

Judicial Review

Background

Judicial review has been repeatedly held to part of basic structure of the Constitution, Basic features of the constitution cannot be abridged or affected even by constitutional amendment and are liable to struck down. Judicial review as envisaged by constitution is exclusive in nature, thus any law made under constitution and interpretation of constitution is responsibility of judiciary. Thus examination of Judicial control over the tribunals becomes necessary before enacting any law.

Supreme Court’s Verdict

In RK Jain v. Union of India, Supreme Court recognized that the tribunals lack the efficiency in exercising judicial review, while considering whether these tribunals could be effective substitute for High Court with respect to powers envisaged under constitution. [6]Further relying on MB Majumder case,[7] it was held that Tribunals are cannot be effective substitute for High Courts, especially in a case wherein tribunal assumes jurisdiction wrongfully, the jurisdiction of High Court and Supreme Court cannot be ousted. Any such attempt at best is an attempt to encroach the jurisdiction of higher judiciary to superintend and thus tempering of basic structure of constitution.

Further the above contention of Judicial Review was bolstered in case of L Chandra Kumar, [8]wherein it was held that power of Supreme Court and High Court to scrutinize the constitutional validity of legislation can never be excluded. The power to superintendent the courts and tribunals by High Court is part of basic structure, and High Court cannot be made court only for constitutional interpretation by divesting all its other functions. Thus role of Tribunals was to be seen more to be in line to supplement the functioning of higher judiciary rather than to substitute the same.

Supreme Court in Union of India v. R Gandhi while determining scope of NCLT and NCLAT, divested its power of judicial review to Tribunals to certain extend by carving out leeway for the same and held that the Tribunals can enjoy power for judicial review for specified subject, if the same subject has not been specifically vested in courts by express provisions. [9]

In Mohammed Ansari v. Union of India, Supreme Court held that the Tribunal has very limited jurisdiction only for limited purpose for which it is given power under statute, and not outside the same. [10]While in Union of India v Major General Shri Kant Sharma, Supreme court limited the scope of intervening in proceeding which was duly proceeding before the Tribunal. [11]Though Major General Sri Kant Sharma, is currently under scrutiny before Supreme Court in Union of India v. Thomas Vaidyan case. [12]

In Madras Bar Association Case Supreme Court held that, any attempt to transfer judicial power would be in violation of Basic Structure, but same can be done if the tribunal or court so created conforms to standards and salient feature of the court it attempts to substitute.

Summary

It could be summarily commented that judicial review is definitely one of the most crucial aspect of basic structure and is indispensible, thus any new mode of adjudication can be created as long as it doesn’t compromises with the standard of judicial review.

Conclusion

Tribunals have found their way in Adjudication of disputes in India, due to various advantages such as efficiency in terms of time and money, in addition to expertise of adjudicators; they confer as compared to judicial mechanism that was in place. Though establishment and administration of tribunals touches various aspect of basic structure such judicial review, separation of power, and federalism.

As held in IR Coelho v State of Tamil Nadu while defining what all constitute aspects of basic structure covering all the three hereinabove mentioned aspects, held that any law in violation of the basic structure is liable to be struck down. These concepts are intrinsically linked to each other, as it is impossible to imagine existence of rule of law in absence of judicial review. The difference between three organs of state would be rendered meaningless, if they try to transgress in each other domain, and thus any attempt by executive to enter the domain of judiciary must be strictly checked.

Legislation attempting to bypass the jurisdiction of high court in favour of Supreme Court has been held to be void, and while upholding the federal structure even in judiciary the power of High court over the tribunals in its jurisdiction has been recognized. Thought the same may go on defeating the purpose of establishing the tribunals and introducing additional step in the process of adjudication. While appointment of executive member in tribunal and further deriving their sponsorship from the executive, could go defeating the independence of judiciary in tribunal system, but same can easily be done by ensuring new and independence method of appointment and sponsorship.

Tribunals have come a long way in administration of justice to masses, and by providing proper provisions which ensures that the tribunals upkeep with the benchmark of judiciary, they could radically alter the mechanism for justice delivery in Indian Context.

Views expressed are personal, please take independent Legal advice from a professionals.

[1] Sarayu Satish, THE TRIBUNAL SYSTEM IN INDIA- INCREASING IN IMPORTANCE BUT INCREASING IN EFFECTIVENESS?

.http://www.westminsterlawreview.org/downloads/The%20Tribunal%20System%20in%20India%20-%20Final.pdf

[2] Law Commission of India, Assessment of Statutory Frameworks of Tribunals in India, Report No. 272, October 2017.

[3] Jaswant Sugar Mills Ltd., Meerut v. Lakshmichand, AIR 1963 SC 677.

[4] L. Chandra Kumar v. Union of India, AIR 1997 SC 1125.

[5] Union of India v. R. Gandhi, President Madras Bar Association, (2010) 11 SC 1899;

[6] R. K. Jain v. Union of India,AIR 1993 SC1769.

[7] M.B. Majumdar v. Union of India,AIR 1990 SC 2263.

[8] Supre 4.

[9] Supra 5.

[10] Mohammed Ansari v. Union of India, (2017) 3 SCC 740.

[11] Union of India v. Major General Shri Kant Sharma, (2015) 6 SCC 773.

[12] Union of India, v. Thomas Vaidyan M, Civil Appeal No. 5327/2015, order dated 16.11.2015.

Doctrine of Reasonableness and Non-Arbitrariness- through case laws

September 19, 2020 (updated October 13, 2020) Published by Prakhar

Concept of reasonableness and non arbitrariness is a golden thread running throughout the fabric of Constitution. Any administrative action which is arbitrary, irrational, unreasonable, or discriminatory, runs the risk of Judicially Reviewed and subsequently declared ultra vires. Through this paper researcher makes an attempt to analysis the doctrine of “Arbitrariness” and “Unreasonableness” in the administrative functioning, and the consequences thereof through the usage of landmark cases.

Mistakes are the greatest teacher; only challenge that remains is to learn from the same. Following this approach and due to constraints of time and word limit the researcher has limited the Case analysis to the cases wherein courts have held that there was Arbitrariness and/or Unreasonableness, in the administrative functioning. Followed by deep analysis as why that particular action was classified as so, and its implications.

For the purpose of analysing the judicial position researcher has chosen four cases wherein Courts held that the acts of administrative to be “Arbitrary” and “Unreasonable”. First one of them is Robert v Hopwood,[1] which is one the most landmark cases in this respect. Followed by S. R. Bommai case,[2] which is very landmark judgment in this respect in India, but researcher has constrained himself from going in depth for the same for the reason of being various other political, constitutional, and legal provisions being at play. This is followed by Onkar Lal Bajaj[3] case which deals with en bloc cancellation of various licenses without having any solid grounding for the same. The final case in the analysis is Ivy C. Da. Conceicao case,[4] which one of the recent Supreme Court judgments in this regards and lays down the principle very clearly.

Background

Arbitrary:- Broadly speaking when any person in authority, uses his authoritative position to act by ignoring reason or/and facts un-sustained by principle or provision of rule, based on personal preferences or/and prejudices, he is said to be acting arbitrarily.

Reasonable:- It is very difficult to define the term “Reasonable”, but can be defined in reference to circumstances of actor, wherein acting reasonably actor would know or ought to know.

Cases

What is the test of reasonableness that can be employed to determine whether particular set of executive decision is unreasonable and arbitrary? Whether simply because court finds particular exercise of executive power unreasonable, makes the exercise unreasonable? Careful reading of all these judgments shows that Courts have applied higher standard for classifying certain executive action to be unreasonable. Merely because Judge thinks, that the action has not been done in best regards to prudence, necessity, or convenience, unaccompanied by necessary qualification and/or exceptions does not make it unreasonable. For being classified as such the action taken must be such that, no justification for the same exists in the mind of reasonable person, or it manifests unjustness, capriciousness, partiality, and inequality in its operation. Thus very high degree of standard of proof is required for action to be classified as unreasonable and arbitrary as will be illustrated in the following section with the help of various case laws.

Roberts v Hopwood, 1925 AC 578

Brief Facts

Metropolitan Borough Council was given discretion to determine wages for the workers. Invoking this provision min wage of four Euros per week was fixed for lowest grade of worker by the authority. World War had just ceased and cost of living had reduced drastically, from 176 percent to 82 percent, and as per auditor one euro must have been fixed back. Court held that exercise of power disregarding the labour conditions was not proper exercise of discretion thus action was bad, and word “think” was read as “reasonably think”.

Analysis

In Roberts’s case if we carefully analyse, that prevalent market cost for min wage per week was 1 Euros per Week for the period objections were being raised in the court, while the Council had fixed it to be 4 Euros per week. This period was subsequent to World War 1, though during the war cost of labour and living had increased but situation was getting back to normal, and prices were going back down.

An objective analysis of the high amount being given, clearly reveal that no matter how discretion was exercised such large amount of wages couldn’t have been arrived by anyone, and it seems like a pure gift (gratuitous in nature). The very fact that council had failed to take into account relevant facts, which were work to be done, and purchasing power of the sums paid. The decision seems to be made on basis in blatant ignorance of existing facts, thus classified it as unreasonable and arbitrary.

Reservations

The Court seemed to be very insistent that the work done and purchasing power must have been taken into account while determining wages. TO this point of the court, researcher would like to raise critic to relying on Kruse v Jognson’s case,[5] since the test in this particular test is whether exercise of power is such that in utter disregards to facts or law, courts must be very reserved and reluctant in determining how particular discretion ought to be exercised. By laying down certain criteria and test which courts wants to be considered while determining whether wages paid were proper or not, court is in fact entering into discretion of conferred upon local authority. Though in this case their does not seems to be any justification for exercise of power by authority for reaching particular wage, the court’s expectation in regards with criteria to be tested for determining price didn’t seem to bear any impact on outcome. But the very fact court is trying to come up with some sort of absolute standard is in itself problematic. And thus case must be appreciated to be good in law, to the extent of reservations expressed by researcher.

S. R. Bommai v. Union of India, (1994) 3 SCC 1

Brief Facts

Emergency powers were being invoked by President u/a 356 of Constitution. Court unwilling to interfere with this extraordinary power granted in constitution unless Mala Fide is shown on the face of it. Held, that the conclusion so reached was so unreasonable that no reasonable person could ever come to it. Thus, Presidents decision not justifiable, thus bad exercise of executive power.

Analysis

In Bommai’s case wherein exercise of Emergency power, the facts taken into consideration were not the facts that ought to be taken into consideration as per law, but were the facts which were more politically driven. The law clearly lays down that State must be failing to run as per provisions of constitution, while the application of this provision seems to be done in regards with every state government having different government from the one in Union. Thus only test that needs to be applied is whether president applied any test to take into consideration, whether state cannot be run in accordance to provisions of constitution. Executive’s failure to illustrate the same shows that the action was capricious and arbitrary.

Onkar Lal Bajaj v. Union of India, (2003) 2 SCC 673

Brief Facts

There was allegation in Newspaper in regards with allotment of retail outlets for petrol pumps, LPG, and SKO LDO dealerships having touch political patronage, with name of around 160 allottees. This further caused uproar in Parliament, subsequent to this uproar in press and parliament, Prime Minister directed that all such allotments were to be cancelled, and selection process to be started from scratch citing the reason of fair play, larger public interest, and probity in government. Terms of agreement provided government with power to cancel allotment at any stage without providing any reasons.

Court held that in absence of official data about the impact of cancellation of such allotment in En bloc, without any application of mind to veracity of media exposure, was exercise of executive power without application of mind, making them unreasonable and arbitrary, and thus bound to be quashed.

Analysis

In Onkar Lal Bajaj case, it seems that executives were befuddled by the controversy raised by the newspaper; hurriedly even without cross checking the veracity of the claims cancelled en bloc the whole allotments. What was the rational of cancelling whole of the allotment process when particular names of allottees were being raised by the newspaper? Was it not possible to separate tainted allottees from the genuine one, especially when insinuation was in regards with less 10% of the allottees. All these together goes on showing that there was no application of mind, and the action taken were whimsical, and arbitrary, and thus unsustainable.

Reservations

Court suggested ideally there must have been setting up of commission to probe into allotment to political kin, and beneficiaries, based on allegations in controversy. Relying on Pukhraj v Collector of Central Excise, MP,[6] researcher would again like to critic, court should not lay down best practices merely because of the fact that many possible way exist for exercise of particular “reasonable” discretion that exists. And court must limit itself to question whether discretion was exercised by executive taking into account facts and law.

Ivy C. Da. Conceicao v. State of Goa and others, (2017) 3 SCC 619

Brief Facts

Appellant was teaching government aided minority educational institute for 21 years, was qualified for the post of Principal, but was only appointed in-charge Principal. While certain other persons who were less qualified than him for that particular post, were appointed as Principals. Minority Institutes has discretion in appointing and promoting, head of institutes unfettered by guidelines issued by state, and thus Autonomous in their functioning. Held though autonomous, even minority institutes are bound to follow fair procedures in exercise of their power, which is both reasonable and fair. The matter was sent back to HC to consider whether exercise of that power was done reasonably.

Analysis

In this particular case fact relates to appointment of principal, contention of the appellant is that based on the criteria of seniority he must have been appointed to that particular post. While Institute argues that as being bestowed with the status of minority it can appoint principal on the basis it deems fit. And the other persons appointed as Principal were well qualified, thus there was nothing done extra legal, as they were otherwise well qualified to be appointed as Principal. But reading of the judgment clearly states that nowhere it is mentioned how they reached the particular conclusion of appointing someone as Principal, and someone else equally qualified was not appointed in that position. To this very aspect Supreme Court directs HC to reinitiate the enquiry to check if there has been application of the mind.

Salient Features

One very peculiar thing about this case needs to be noted, Supreme Court directed HC to enquire whether there has been application of mind to relevant facts and law, and cautioned HC from restricting itself from applying the criteria of seniority alone. This shows the correct application of law by the Supreme Court, wherein they have not taken enquiry or laid down certain criterion that needs to be fulfilled, but whether some criteria has been fulfilled.

Implications

This could mean that it would be reasonable exercise of power if some rational is laid down, for example selection on basis of seniority amongst various applicable candidates, based on residence and proximity, experience, other qualifications such as past performance, feedback, interview by independent committee, all of these could or any one alone could also be taken into consideration. And executive might even engage in simply chosen amongst eligible candidates by way of lottery. Even lottery could be reasonable method of choosing the candidate. Whatever may be the criteria, it need not be best, can be applied to particular case and would be classified as totally reasonable by court.

Conclusion

Arbitrary and unreasonable exercise of executive power without application of mind needs to be quashed. Any definite standard or even best practise has its own limitations and drawbacks. It is also possible to reach diametrically opposite results, in a reasonable manner by application of same set of facts and law. A law could not be termed as unreasonable only for the reason the judge presiding thinks that particular law is unreasonable or there exists a better method for the same. To be classified as unreasonable under administrative law it is required that the particular law is so unequal and partial in its operation between different classes, is so manifestly unjust, if evinces gratuitous or oppressive interference with right of those involved, shows bad faith, so that no justification could come of them by reasonable man. Thus only thing required to be judicially scrutinised is that, whether there was application of mind in regards to facts and law, in particular situation?

Judges in most of the cases tried to go beyond the scope of this review, and have laid down the relevant factors which ought to have been taken into account while exercising particular executive power, although in the above mentioned cases because of lack of any reasonable expectation it didn’t have impact on the ratio decendi, but it could be deleterious impact in long term, wherein authority might have to take those factors as dominant consideration while reaching particular outcome. Judiciary must try to avoid such laying down of standards as there does not exist any absolute standard to which Authority must be conform too.

[1] Roberts v Hopwood, 1925 AC 578.

[2] S. R. Bommai v. Union of India, (1994) 3 SCC 1

[3] Onkar Lal Bajaj v. Union of India, (2003) 2 SCC 673

[4] Ivy C. Da. Conceicao v. State of Goa and others, (2017) 3 SCC 619

[5] Kruse v. Johnson, (1898) 2 QB 91.An action of the authority cannot be held to be unreasonable merely because the court thinks it to be unreasonable.

[6] Pukhraj v D R Kohli, Collector of Central Excise, Madhya Pradesh, AIR 1962 SC 1559. Supreme Court took a view that it was not sitting in appeal over the decision of the authority and all that was necessary was Prima Facie ground about reasonable belief.

Views expressed are personal, please take independent Legal advice from a professionals.

Whether it is necessary for Board of Directors to be present at AGM?

September 15, 2020 (updated October 13, 2020) Published by Prakhar

Annual general meeting is statutorily mandated gathering of interested members. At the AGM, the directors of the company present a annual report of the company to its shareholders, and further informs them about their past performance and strategy. Shareholders are given an opportunity to vote on various issues such as appointment of directors, executive, dividend, compensation, selection of auditors, and other resolutions.

The purpose of AGM is to provide shareholders opportunity to meet and discuss matters in relation to company. Since the owners of company that is shareholders are different from the ones managing the company that is board of directors. Thus it provides an opportunity to shareholders to know about the affairs and working of the company, represent their thoughts and concerns about the company or its functioning.

Companies act provide for AGM to be conducted in the absence of director, wherein Chairperson can give explanation for absence of director from the meeting. But what if whole board is absent?

That is serious issue to be concerned about, that whether a AGM can be conducted in absence of all of the Board of Directors. Because there are so many instrumental values such as satisfying the shareholders in regards with conduct of company, making them answerable and empowering shareholders. And also intrinsic values which might be associated with the same, since owner and manager are different, making manager answerable to owner.

The statutory exception that provides for Chairpersons explanation for absence of director should be used only in cases in which it would be very difficult for directors due to various reasons to be physically present for the meeting. Procuring presence of all directors might be quiet cumbersome for the company, and might come with high cost involved in the same, and the intention behind carving out such exception is best to continue conduct of company smoothly without hassle. But when none of the director is present in the meeting, it defeats the whole purpose of AGM. AGM shouldn’t be conducted just for sake completing the formalities as required by the statute, but it must be conducted taking in regards the ulterior motive for conducting the same that is shareholder and directors interaction.

Further it is also possible that complete absence of Board of Directors from Meeting might evidence, presence of mismanagement of the company, and its intention to evade statutory obligation it owes to its shareholders, and might be proceeded before relevant tribunals.

Views expressed are personal, please take independent Legal advice from a professionals.

Related Party Transfer

September 13, 2020 (updated October 13, 2020) Published by Prakhar

Related party refers to existence special relationship between body corporate and other party prior to corporate own transaction. Thus these relationships are no way related to company’s own transactions. Related party has been defined under Company Act, 2013 under section 2(76), which defines related party in reference to Directors or Key Managerial Person and their relative, and firms & company in which are partners, and firms which they are directors with more than 2% share capital. The definition proposed here is not exhaustive in nature, but only illustrative. Further these provisions apply to all company i.e. private and public alike.[1]

Related Party Transactions are Allowed

S 188 of the Act governs the conditions regulating how Related Party transactions are to be entered into, i.e. by disclosure and ratification of the same before and by the Board of Director and Shareholders. Thus these transactions have been allowed by the Act, and are not banned per se.

All the transactions falling within the purview of S 188 need to be disclosed in Board Report along with justification for the transaction, for the purpose of approval. Further if certain thresholds are crossed these can only be approved by special resolution in General Meeting. These thresholds can be broadly transaction involving more 10% or 100 crore of sale/purchase/supply, of goods or services/ property, and appointment of related party to office of profit in the company or subsidiary.

In the proceedings dealing with related party transactions, such related party are required to abstain from voting in the same. Once the requirements under this provisions are satisfied RTP can be proceeded with.

Arms Length Transaction

It can be seen as exception to Related Party Transaction rule, thus if the transaction which is under scrutiny is conducted in Justifiable and fair manners. Thus if a transactions can be said to be free from any bias that may crop in due relations between party, they can be exempted from compliance in this section.[2]

Views expressed are personal, please take independent Legal advice from a professionals.

[1] Vikrant Rana and Rupin Chopra, A Brief Overview Of Related Party Transactions, Mondaq, 26 July 2017, http://www.mondaq.com/india/x/614332/Contract+Law/A+Brief+Overview+Of+Related+Party+Transactions (last viewed Oct 18, 2018)

[2] Related party transactions, Companies Act 2013, Ernst & Young Global Limited, https://www.ey.com/in/en/issues/governance-and-reporting/ey-compass-on-companies-act-2013/ey-cfo-companies-act-2013-related-party-transactions (last viewed Oct 19, 2018).

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