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InvITs (Infrastructure Investment Trust): A Witty Conundrum ?

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InvITs (Infrastructure Investment Trust): A Witty Conundrum ?

Infrastructure projects require on an average 2-3years to generate steady cash flows. During course of this time an Infrastructure Company has to be accountable to banks for payment of loans. InvIT (also known as ‘Investment Investment Trust’) gives the company a leeway to fulfill such debt obligations quickly. InvITs raise funds from a large number of investors and directly invest in infrastructure projects or through a special purpose vehicle. Having said so, this blog post will try to answer all the questions that intrigue curious minds. The Blog will dwell into the history and working of InvITs and serve a constructive narrative to deal with challenges.

In December 2013, SEBI had introduced the concept of Infrastructure Investment Trusts (“InvIT”) by way of a consultation paper on InvIT. Securities and Exchange Board of India (SEBI) issued draft regulations for InvITs on 17 July 2014 which were kept open for public comments till 24 July 2014.The final regulations were issued on 26 September 2014. These regulations are known as the SEBI (Infrastructure Investment Trusts) Regulations 2014 hereinafter (the “2014 Regulations”).

InvITs are trusts that manage income-generating infrastructure assets, offering investors regular yields and a liquid way to invest in infrastructure projects. InvIT is a mechanism that enables developers of infrastructure assets to monetize their assets by pooling multiple projects under a single entity (trust structure). It enables direct investment of small amounts of money from possible individual institutional investors in infrastructure to earn a small portion of the income as return.

A trust may firstly conduct an IPO issue after which it may be listed on stock exchanges. InvIT Regulations do envisage private placement, subject to certain conditions.

The minimum application size for InvIT units is Rs. 10 lakh. This minimum size aims at delivering equal treatment to domestic investors and also Foreign Portfolio Investors. According to SEBI rules, at least 90% of funds collected, after payment of expenses, taxes and external debt should vest with the investors every six months. The Short-term capital gain on sale of units is taxed at 15% whereas long-term capital gains are exempted.

The four important parties to  InvIT units issue are sponsors, investment managers, project managers and the trustee. The Sponsor sets up the InvIT and appoints the trustee; he is required to hold minimum required percentage of total units of InvIT. The Sponsor collectively holds a minimum of 25% (twenty five percent) of the total units of the InvIT on post issue basis for a period of at least 3 years from the date of listing. This minimum cap keeps the sponsor susceptible to same amount of risks to which unit holders are also required to face by virtue of their investments in InvIT. The rights and responsibilities of the sponsor have been listed under Regulation 12 of 2014 Regulations. The Trustee is required to hold assets in name of InvIT for benefit of unit holders and he is tasked to ensure investment manager makes timely payment of dividend to unit holders. The Investment manager is required to make investment decisions in relation to underlying assets. Thereafter the investment manager ensures that assets have proper legal title and the contracts entered into are legal, valid and binding. The project manager is required to undertake the operation and management of InvIT assets, further a project manager is required to ensure execution of construction projects.

On March 15 2016, SEBI came out with circular permitting Foreign Portfolio Investors (FPIs) to invest in InvITs in pursuance of Regulation 21(1) (n) of SEBI (FPI) Regulations 2014 subject to terms and conditions as may be prescribed by SEBI from time to time.[1] The SEBI went ahead and issued Guidelines for public issue of units of InvITs where it expanded requirements in public issue.[2] SEBI’s circular dated October 20 2016 laid down the disclosure requirements related to financial information being provided in offer document/memorandum for InvITs. [3] The latest circular dated November 29 2016 contains continuous disclosures and compliance by trusts relating to statement of accounts, financial information etc. [4]

IRB Infrastructure was first Infrastructure trust to have been launched by toll-road builder IRB developers. IRB InvIT constitutes six special purpose vehicles consisting of toll-road assets aggregating to 3,645 lane kilometers of highways located across the states of Maharashtra, Gujarat, Rajasthan, Karnataka and Tamil Nadu. On the last day of public issue, it was oversubscribed 8.57 times. IRB’s Infrastructure investment trust closed 0.21% lower at Rs101.79 from its issue price of Rs102 on its listing day. It is currently down by 3.3% to Rs98.64 from its issue price

After IRB’s InvIT was listed on stock exchange in May 2017, IndiGrid Trust followed the trend by going ahead with its IPO issue that opened on 17 May 2017 and closed on 19 May 2017. IndiGrid became the second infrastructure trust to be listed on stock exchange following its IPO that was over-subscribed by 1.35 times. IndiGrid was expected to raise Rs 2,250 crore, but it surpassed its own estimation.  Despite surge seen in IPO, IndiGrid has failed to convince the investors as it ended the session 1.55% less than its issue price. IndiGrid got listed on BSE at its issue price Rs 100. Likewise it has tanked and NSE.[5] One of key reasons for this sharp decline may have been the Investor confidence in trust that was established on 21 October 2016. The operational risks involved in fund related to power transmission are much higher, thus it may affect the future performance of the fund.

Often touted as major investment opportunity for the opulent class of investors, InvITs have clearly failed to live upto the expectations. The results are quite visible; investors are far from convinced about implementation & results. Infrastructure sector is largely marred by delay in delivery of project which in turn results in lower returns. Further investor confidence is predominantly depended on form of interest and divided.  InvITs are subjected to the vagaries of stock exchange and any major tax reform like Goods and Service Tax can affect the Infrastructure Sector altogether.  Further Investor’s lack of control over investments and market decisions of trust add to vulnerability. If the InvITs can deal with investor’s concern over the risk return proposition, then its purpose can be better served.  The lack of clarity on tax regulations, related party transactions, operational risks serve as an impediment to the marketability of InvITs. Thus if these concerns are adhered to, the InvITs

 

[1] Investments by FPI’s in REIT’s, InvITs and corporate bonds http://www.sebi.gov.in/legal/circulars/mar-2016/investments-by-fpis-in-reits-invits-aifs-and-corporate-bonds-under-default_31893.html

[2] SEBI Guidelines for public issue of units of InvITs http://aibi.org.in/Circulars/Guidelines%20for%20public%20issue%20of%20units%20of%20InvITs%20-%20May%2011,%202016.pdf

[3] Disclosure of financial information in offer document/placement memorandum

for InvITs http://www.sebi.gov.in/legal/circulars/oct-2016/disclosure-of-financial-information-in-offer-document-placement-memorandum-for-invits_33518.html

[4] Continuous disclosures and compliances by InvITshttp://www.sebi.gov.in/legal/circulars/nov-2016/continuous-disclosures-and-compliances-by-invits_33736.html

 

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Maternity Leave Bill 2016: Job Half Done

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Maternal and Child health care seems to have been on this Government’s agenda for quite some. Hence post promulgation of Child labour (prohibition and regulation) amendment act 2016, the government has finally decided to amend the long awaited Maternal Benefit Act, 1961. The decades old Maternity Benefit Act 1961 catered to a different class of women altogether, primarily those actively involved in agriculture. As the provisions of that act have become redundant over a period of time, this Bill seeks to regulate the employment of women during the period of child birth, and provide maternity benefits. International Labour Organization has prescribed a standard 14 weeks for maternity benefit. Due to this amendment, India becomes only the third country to provide more than 25 weeks maternity leave and much higher than ILO’s standards. Though it is an Effective action in the direction of quality human resources, lessening malnutrition and other common fatal child diseases, there are certain shortcomings in act which require immediate attention.

The Maternity Leave Bill, 2016 was introduced in Rajya Sabha and was passed by RS on August 11, 2016. The passage of landmark Maternity Leave Bill shall pave way for a mandatory 26 weeks of paid leave for mothers as against the existing 12 (under the principal act).

This act has extended scope of maternity benefit to adoptive & commissioning mother as whereby she would be entitled to a maternity leave of 12 weeks (3 months). A commissioning mother is defined as a biological mother who uses her egg to create an embryo implanted in another woman. With proposed legislation to ban commercial surrogacy in pipeline, yet the bill has failed to extend the maternity benefits to surrogate mothers (non-commercial surrogacy). The bill is regressive as it entitles maternity benefits to adoptive mothers only if she adopts a child less than three months of age. Thus Bill can hinder adoption of infants/children over 3 months. This disparity in the treatment of Mothers across board  that is a surrogate mother being treated unequally as against a commissioning or adoptive mother clearly highlights ambiguity in provisions.

It is now mandatory for all establishments with 30 women workers or 50 total workers to provide creche facilities for their employees, either at the premises or within half a kilometer. The argument arises in case a woman is working in a small establishment which has less than 30 women employees. Hence such ambiguity in provisions would defeat its purpose. One of salient feature of this Bill is that women employees would have an option of working from home after the maternity leave is over if mutually agreed by both employee and employer.

The Supreme Court in Municipal Corporation of Delhi v. Female Workers’ (Muster Rolls) and another[1] came across question, whether only employees registered on muster roll are entitled to maternity benefit leave. The Delhi Municipal Corporation contended that it granted maternity leave to regular female workers i.e. those on their muster rolls. In response it was contended that the nature of work performed by those women on regular basis was hardly different from that of those working on daily wages. The court observed that the provisions of the Act would indicate that they are wholly in consonance with the Directive Principles of State Policy, as set out in Article 39 and in other Articles, especially Article 42.Thus the Supreme Court upheld the right of female construction workers to be granted maternity leave by extending the scope of the Maternity Benefits Act, 1961 to daily wage workers.

Article 42 specifically provides that the State shall make provision for securing just and humane conditions of work and for maternity relief, yet the Maternity Leave Bill 2016 bears no mention of maternity benefit being extended to unorganized labour (women employed as daily wagers or in construction sites)

This Bill bears a hard-line characteristic which shall deter the new businesses and flourishing companies from hiring married women as its employees as compliance of these norms shall be seen as burden upon resources of the company/business. Otherwise the employers can consider the work of the working mother not equal to that of males, thus causing gender disparity in payment of wages. This will be in contradiction to article 39(d) which aims for “equal pay for equal for equal work”.As the Maternity leave Bill is severely going to affect the Medium and Small Enterprises in terms of cost and logistics, the government must take responsibility to bear additional costs after the 12th week of paid maternity leaves.

At the cost of sounding a chauvinist to some, paternal care is equally important for overall development of an infant. This concept of Paternity leave shall serve two purposes- remove the social stigma prevalent that it is the mother’s duty to look after the infants/children and secondly it shall be beneficial for those sections of women who could resume their professional duties at workplace. Paternity leave may just help defeat the prevailing social problem of women quitting employment post marriage/child birth. The new bill must provide parental benefits to both the parents on a rationing basis like first 3 months to mother and the next 3 months both can share the leave, only then would we be able to deal away with gender stereo type.

To sum up, the bill is a progressive step towards fulfilling the directive principle of state policy as it ensures basic right of both the baby and mother to have a healthy life. But it would be a Job Half Done considering India has waited for 4 long decades for such an amendment which ensures maternity benefit to India’s present generation.The Lok Sabha shall have the prerogative to implement/ incorporate the necessary changes as discussed by us. A reasonable solution

Child Labour (Prohibition & Regulation) Amendment Act 2016- Failing their Future ??

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It seemed like the Alarming cries had fallen to deaf ears until the Parliament intervened by legislating on a long awaited reform (which better be called a  Job Half Done). On Pith & Substance Analysis of Bill, one would realize that the Amendment has not been able to do away with the blemish in the Principal Act i.e. Child Labour Prohibition and Regulation Act, 1986. The Principal Act seeks to prohibit the engagement of children in certain types of occupations and regulates the condition of work of children in other occupations.

It is thereby important to look into the Legislative History of this Bill. The Child Labour (Prohibition and Regulation) Amendment Bill, 2012 was introduced in Rajya Sabha on December 4, 2012. The Standing Committee on Labour submitted its report on the Bill on December 13, 2013. In May 2015, the Union Cabinet cleared the CLPRA Amendment Bill after making revisions. The Child Labour Amendment Bill was passed by the Rajya Sabha on July 19, 2016 and by the Lok Sabha on July 26, 2016.

In the landmark case of M.C. Mehta v. State of Tamil Nadu the Hon’ble Supreme Court held that children below the age of 14 years cannot be employed in any hazardous industry, mines or other works and has laid down guidelines for the protection of the economic, social and humanitarian rights of millions of children working illegally in public and private sectors.

The Child Labour (Prohibition & Regulation) Amendment Act 2016 bans employment of children below 14 years of age in all occupations and processes. There exists an exception which allows children under the age of 14 to work in non-hazardous family businesses, entertainment and sports activities (except circus) after school hours or during vacations, without compromising their safety and education. Despite recommendation of the Standing Committee to do away with such an exception which can be misused, the Ministry of Labour and Employment instead has expanded the ambit of exceptions to include ‘working of children in the audiovisual entertainment industry (films, TV, etc.) or sports activities.’.

The Bachpan Bachao Andolan v. Union of India case dealt with exploitation of Children in Circus, the legislature has seen to it that such nature exploitation is prohibited under the Amendment Act.  

The intention behind these exceptions may be promotion and inculcation of Business and entrepreneurship skills in Children; it might end up constituting a slippery slope towards legitimization of child exploitation. To counter the child exploitation argument, Clause 6 has been amended so as to prohibit child labor in any hazardous occupations, including when working with family. The Standing Committee opined widening the scope of hazardous processes to include all those occupations/processes that may jeopardize health, safety and morals of adolescents. Yet the Bill passed by the Parliament reflects no implementation of the same,

Despite power of the central government to specify kinds of non-hazardous occupations and processes in which adolescents may be employed, the Schedule A & B containing Hazardous Processes & Occupations has been limited to only 3 items.

The Clause allowing children to work only outside their school hours and during vacations is a contentious as there exists no specific monitoring mechanism which can supervise practical implementation of the same.

The definition of family enterprise is, “any work, profession, manufacture or business, with the engagement of other persons”. It is pertinent to note that the family member does not have to be the occupier of the family enterprise. The nature of engagement with other persons has also not specified. Thus definition of family and family enterprises is flawed as it can be used as colorable mean for child exploitation and without a monitoring authority to overlook exception the essence of this amendment shall be lost.

As I have rarely been so critical of Modi Government’s Policy Decisions, I would also like to highlight the Provisions which shall genuinely serve the purpose of the Principal Act.

The Amendment Act adds a new category of persons called “adolescent”.  An adolescent means a person between 14 and 18 years of age. The Amendment Act prohibits employment of adolescents in hazardous occupations as specified (mines, inflammable substance and hazardous processes).[1]

The Amendment Act aims to enhance the punishment for employing any child in an occupation.  It also includes penalty for employing an adolescent in a hazardous occupation.

The penalty for employing a child has been increased to imprisonment between 6 months and two years (from 3 months-one year) or a fine of Rs 20,000 to Rs 50,000 (from Rs 10,000-20,000) or both. The penalty for employing an adolescent in hazardous occupation is imprisonment between 6 months and two years or a fine of Rs 20,000 to Rs 50,000 or both.

The Amendment Act empowers the government to make periodic inspection of places at which employment of children and adolescents are prohibited. Though in my opinion powers exercised by the central government must have an independent operation with that of a Regulating Authority.

While there was no provision at all in the original Act for rehabilitation of children rescued from prohibited employment, the Amendment Act specifically provides for a Rehabilitation Fund for the benefit of both the children and adolescents. Remittances to this fund which includes fine collected from violators and contribution from States at the rate of Rs.15000/- per child and adolescent will be used for their welfare including education.

Conclusion

Whether this Amendment has Failed their Future ? It would be safe to call it a Rhetorical Question as on date, but effective implementation and control shall decide whether the Legislature & Executive has failed the future of these Children.

The Implications of Child Labour (Prohibition & Regulation) Act 2016 are inevitable, whether Good or bad as the Bill passed by both the Houses of Parliament has received the assent of the President Pranab Mukherjee and has also been notified. The UNICEF is mounting pressure on the Modi Govt. over wide provisions affecting Child Rights. Kailash Satyarthi – The Nobel Laureate and renowned Child Rights Activist has termed it as “India’s Lost Opportunity”. But what we can surely perceive from this Act is that Protection of Child Rights is going to be at Top of Agenda for quite some time considering Contentious Nature of this Amendment. To End on a Positive Note the Concept of Adolescent Rights shall also gained Recognition due to this Amendment.

[1] PRS Legislative Research http://www.prsindia.org/billtrack/the-child-labour-prohibition-and-regulation-amendment-act-2012-2553

 

Anatomization of the South China Sea Dispute

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This Blog Post shall shed clarity on the contentious award passed by the Permanent Court of Arbitration. It tries to unearth certain conflict of views in dispute, as it also discusses the shortcomings of the award & China’s claims in the dispute.  

Facts, Issue & Ratio

In 2013, the Philippines filed a case in the Permanent Court of Arbitration in The Hague, asserting its rights to exploit the 200-nautical mile Exclusive Economic Zone that extends from the archipelago into the South China Sea. The Philippines brought 15 claims under the United Nations Convention on the Law of the Sea (UNCLOS), to which both states are parties. China claimed that the Tribunal had no jurisdiction, and boycotted the proceedings. After almost three years of proceedings, the five-member tribunal issued its award on jurisdiction on Oct 29 last year. A hearing on the merits of the case was held late last November. The award issued on July 12, 2016 largely upheld Philippines claims.

The dispute is over territory and sovereignty over ocean areas, which involves having claim over two island chains namely Paracels and Spratlys. These island chains are beneficial not just in terms of Mineral wealth and fishing but also gives either nations a firm position in the south-china sea in turn affecting trade & commerce.

The tribunal stated that the root of the disputes at issue between the Philippines and China lies in fundamentally different understandings of their respective rights under UNCLOS in the waters in the South China Sea, and not in any intention by one of the parties to infringe the rights of the other.

The tribunal finally ruled that –

  • China cannot lawfully claim historic rights to resources within the nine-dash line.
  • China (and others) cannot claim an EEZ from land features above high tide in the Spratlys, which were all judged to be “rocks” entitled only to a 12 nautical mile (nm) territorial sea.
  • Mischief Reef was determined to be a low-tide elevation on the Philippines’ continental shelf. China has violated the sovereign rights of the Philippines in its exclusive economic zone (EEZ) by interfering with Philippine fishing and petroleum exploration activities, constructing artificial islands, and failing to prevent Chinese fishermen from fishing in the Philippines’ EEZ.
  • China has caused severe harm to the coral reef environment and violated its obligation to preserve and protect fragile ecosystems and the habitat of depleted, threatened or endangered species through its recent large-scale land reclamation and construction of artificial islands on seven features in the South China Sea.
  • The Spratly Islands as a group cannot generate any maritime zones as a unit. This appears to be an effort to pre-empt a Chinese claim to any maritime zones based on straight baselines that could be drawn around the Spratlys as a whole.
  • China has aggravated the dispute since the start of the arbitration process, particularly through large-scale land reclamation and artificial island construction activities, which have inflicted irreparable harm on the marine environment.

Though out of award passed by the tribunal, there lies lacuna over which Tribunal technically favored the Chinese –

  • Gaven/McKenna Reef was deemed to be a rock and not a low-tide elevation.
  • The tribunal claimed no jurisdiction in the standoff over Second Thomas Shoal, as it concerned military activities exempted by Article 298.
  • Traditional fishing rights for all states within the territorial sea of features in the Spratlys were apparently upheld based on the finding that the Philippines had traditional fishing rights at Scarborough.
  • The tribunal did not define what the nine-dash line might mean but only ruled on what it could not mean, namely, a claim to historic rights.

The Tribunal has failed to construe upon what is nine dash line. It would thereby mean that China’s Nine Dash Line claim would still stand test. Although the tribunal found that China’s claim to historic rights in the nine- dash line is not compatible with UNCLOS, it did not rule that the nine-dash line per se is illegal or invalid.

Secondly dispute with respect to Second Thomas Shoal also remains unanswered as tribunal had no jurisdiction.

It should be noted that the tribunal did not rule that it was unlawful in principle for China to undertake construction activities on the disputed islands that it occupies.

China’s Position

China claims by far the largest portion of territory – an area defined by the “nine-dash line” which stretches hundreds of miles south and east from its most southerly province of Hainan.

China has denied being bound by the arbitral award of the PCA as it holds the award as null and void.

The Chinese contend that the tribunal does not have the jurisdiction to preside over issues of sovereignty, as it regards ICJ (International Court of Justice) as an Adjudicating Authority to preside over such matters.

China contends that Tribunal prima facie has no power to interfere in the dispute as there has been a bilateral negotiation agreement between Philippines and China.

Thus China has prima facie questioned the Jurisdiction of the tribunal and hence it i snot bound by the award of the tribunal.

My Perspective

UNCLOS is a major treaty, but it covers only a very limited number of issues being contested in the South China Sea—excluding the most fundamental issues of sovereignty and sea boundary delimitation. An arbitral tribunal established under UNCLOS can only consider disputes on the interpretation or application of UNCLOS, and convention contains no provisions on how to resolve sovereignty issues. This is one of major limitations of PCA which means that issue of Sovereignty would remain unsolved.

The Question over Jurisdiction of the Tribunal has been China’s Primary objection, as issue of sovereignty needs to be taken up before the International Court of Justice according to well established principles of International Law.

Secondly the tribunal has erred in denying that there exists between China and the Philippines an agreement to settle the disputes in question through bilateral negotiation. Like in case of India and Bangladesh Land Border dispute, dispute was resolved vide negotiations between both the nations. But in this dispute, the tribunal erred in exercise of its powers and jurisdiction.

Distance between the Island and Mainland is never a critical element in cause of determination of sovereignty. Take for example – Great Britain exercising its sovereignty over Falkland Islands in South America.

Article 298 of UNCLOS provides that a state may “declare in writing that it does not accept any one or more of the procedures,” including for “disputes concerning the interpretation or application of Articles 15, 74, and 83 relating to sea boundary delimitations, or those involving historic bays or titles,” “disputes concerning military activities,” and “disputes concerning [certain] law enforcement activities.”

It is universally recognized that land territorial issues are not regulated by UNCLOS. Thus, the territorial issue in Nansha Qundao is not subject to UNCLOS. Thus position of law is quite clear with respect to ambit of operation of United Nations Convention on Law of Sea.

China on its part has also failed to understand that UNCLOS was established as a universal body of rules that is to be interpreted and applied by all state parties in the same manner, notwithstanding their historical and cultural traditions. (as claimed by China)

China’s only lawful claims in the South China Sea would be 12 nautical miles of territorial seas from the land features in the Spratly Islands deemed to be rocks above high tide. China cannot claim an EEZ from any land feature in the Spratlys, as none were judged to be islands under UNCLOS warranting such a zone nor can it claim any historic rights to resources, either, as the tribunal judged that China gave up those rights when it acceded to UNCLOS. The Tribunal’s ruling significantly restricts the scope of maritime claims that China can lawfully make under UNCLOS in the South China Sea.

The award adds clarity to certain extent w.r.t the law of the sea. The ruling sheds light on types of islands which would be entitled to resource zones and those which would not be entitled. The award ensures that the waters in the South China Sea outside the 12-nautical-mile territorial sea from the islands will be open to all states to exercise freedoms of conducting navigation & military activities.

Tribunal tried hard to go into the Pith & Substance of the dispute but it has largely failed in laying down whose territorial claims are superior among disputing parties or whether China’s Nine Dash Line is Illegal per se. The nine-dash line is still relevant because it shows the location of the various islands in the South China Sea over which China claims sovereignty. The difference is that as a party to UNCLOS, China can claim sovereignty only over those islands that meet the definition of an island in Article 121 of UNCLOS, that is, naturally formed areas of land surrounded by and above water at high tide.

Thus in my opinion it would be best suited for the parties to approach the International Court of Justice at Hague so that long impending dispute can be amicably settled, without question of jurisdiction looming over further.

Please Feel Free to Chip in your Dissensions, Opinions & Suggestions !!!!

 

Draft of Legal Notice for Breach of Contract by Employee

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       NOTICE

        By Regd. Post/Speed Post (A/D)

                                                                                                                   16 March 2011

Mr. XYZ

Law College Road ,

Pune.

 

Sub:   Legal Notice u/s 73 of the Indian Contract Act 1872

Dear Sir,

We are concerned for our client PQR Limited which has instructed us to notify you as under:

  1. Our Client is engaged, inter alia, in the business of manufacturing process control, Automation and Instrumentation products.

 

  1. That on 26 November 2010, you submitted your resignation letter to the HR Department of our client stating health problems as ground for your resignation

 

  1. Thereafter, the HR Department duly rejected your resignation letter dated 26 November 2010 as there existed a bond agreement with the company on July 1, 2009 whereby you had agreed to serve our client for a period of not less than 18 months.

 

  1. Thereafter you, vide your e-mail/letter dated 18 January 2011 informed our client about your discontinuance in service with immediate effect which as a result has hampered our client’s project and also caused them financial loss.

 

  1. According to your appointment letter you shall be liable to give 90 working days notice in writing to our client which you also failed to do. This is a clear violation of terms of the appointment letter you had signed and consented to at the time of your appointment.

 

  1. The Bond agreement also contains a clause whereby if our client is constrained from exercising his right due to any default on your part, our client shall be entitled to recover amount so demanded as a liquidated debt from you.

 

  1. Our Client vide email dated 26 February 2011 informed you that your resignation dated 18 January 2011 was not acceptable to them. Despite several remainders over breach of contract on your part, you have failed to abide by consent terms of your appointment letter.

 

  1. In the same email, our client has also communicated your liability to pay a sum of Rs 1, 19,340/- (One Lakh Nineteen Thousand Three Hundred and Forty Rupees Only/-) within 7 days of the date of email for the balance of mandatory notice you have failed to serve.

 

  1. However since you have failed and neglected to pay the amount due within 7 days of our client’s correspondence, our client has been forced to initiate legal recourse.

 

  1. You are, hereby called upon to pay sum of Rs 1, 19,340/- only, in addition to Rs. ________ as compensation for breach of contract and inconvenience caused to our client within a period of three weeks from the date of receipt hereof, failing which our Client without prejudice to the rights and remedies otherwise available to it, shall be constrained to initiate appropriate proceedings.

 

For _______

(Name of the Law Firm, LLP in the Space given Above)

 

Anon 

(Advocate)

 

Admissibility of Electronic Records as Evidence under Indian Evidence Act 1872

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Whether Electronic Records in form of SMS-Whatsapp Messages are Admissible in the court of Law

Section 2(1) (t) of the IT Act, an electronic record is “data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro filche”.

Text Messages qualify to be an electronic record as it is a data or record generated and stored , received or sent and fits into the definition of section 2(1)(t). Does fall under the ambit.

Section 4 of the IT Act 2000 gives legal recognition to the electronic records.

Section 65B. Admissibility of electronic records:

(1) Notwithstanding anything contained in this Act, any information contained in an electronic record which is printed on a paper, stored, recorded

or copied in optical or magnetic media produced by a computer (hereinafter referred to as the computer output) shall be deemed to be also a

document, if the conditions mentioned in this section are satisfied in relation to the information and computer in question and shall be admissible in

any proceedings, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of

which direct evidence would be admissible.

Sub-Section (1) of Section 65B lays down ground/basis for text messages as form f data on record to be an electronic evidence.

PARTIAL REMEDY – CONTEND THAT REQUIREMENT OF A CERTIFICATE IS NECEESSARY FOR Text MSG to be ADMISSIBLE (4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say, –

(a) identifying the electronic record containing the statement and describing the manner in which it was produced;

(b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showingthat the electronic record was produced by a computer;

(c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it. intervention) by means of any appropriate equipment.

In REKHA SHARMA VS CBI this principle of Certificate being given to an electronic record was considered.

Case Laws

State vs Mohd Afzal – Electronic Records are Admissible

It was held that the electronic records are admissible as evidence. If someone challenges the accuracy of a computer evidence or electronic record on the grounds of misuse of system or operating failure or interpolation then the person challenging it must prove the same beyond reasonable doubt.

The defendants had contended that the Computer and digital knowledge can easily be tampered with.

Fulfilment of 4 conditions under Section 65B(2) –

(a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;

(b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities;

(c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and

(d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities.

IN PEOPLE V WATKINS ( IMP CASE LAW PROVING ADMISSIBILITY)

The Illinois court provided a detailed analysis of the admissibility of the text message photos. To establish a foundation for admissibility, text messages are treated like any other documentary evidence. To authenticate a document, the proponent must present evidence to demonstrate that the document is what the proponent claims it to be. The proponent need only prove a rational basis upon which the fact finder may conclude that the document did in fact belong to or was authored by the party alleged. The trial court, serving a limited screening function, must then determine whether the evidence of authentication, viewed in the light most favourable to the proponent, is sufficient for a reasonable juror to conclude that authentication of the particular item of evidence is more probably true than not.

People v. Von Gunten (In California Court of Appeal) – Text Message can be transmitted by more than one person. Hence questioning the authenticity of message in question

Defendant laid an inadequate foundation of authenticity to admit, in prosecution for assault with a deadly weapon, hard copy of e-mail messages (Instant Messages) between one of his friends and the victim’s companion, as there was no direct proof connecting victim’s companion to the screen name on the e-mail messages.

Lorraine v. Markel American Insurance Company (D.Md. May 4, 2007) 241 F.R.D. 534.

Case provides a comprehensive analysis of how to authenticate digital evidence such as digital photos, email and text messages.

State v. Byrraju Ramliag: E-Signatures are admissible in court of law

Arbitration & Conciliation Amendment Act 2015 : The Way Forward

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                             Arbitration and Conciliation Amendment Act 2015

The Arbitration and Conciliation Act 1996 was enacted with the optimism that it would serve as a quick redressal mechanism to commercial disputes. Over a period of time the legislation has tried to consolidate enforcement of domestic as well as foreign arbitral award owing to which arbitration has become one of most preferred options to settle commercial disputes. It has minimised the supervisory and intervensionary role of courts in the arbitral process.  The Arbitration and Conciliation Act, 1996 (hereinafter “the Act”) is based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980. The Act had been in force for almost 2 decades and although arbitration had fast emerged as a frequently chosen alternative to litigation it had become afflicted with various problems such as those of high costs, frequent delays etc.

The 246th Report of Law Commission highlighted certain shortcomings in the act and hence stressed upon amending those provisions in the act. The Law Commission has also submitted a Supplementary to Report No. 246 on “Amendments to the Arbitration Act, 1996 on ‘Public Policy’- Developments post Report 246″, wherein the Law Commission taking into account subsequent decisions of the Supreme Court had recommended reformulation of amendment in Section 34(2)(b) of the Act.[1] The Commission recommended the addition of section 34 (2A) to deal with purely domestic awards, which may also be set aside by the Court if the Court finds that such award is vitiated by patent illegality appearing on the face of the award or by an erroneous application of the law or by re appreciating evidence.

The Government of India felt the need to amend certain provisions of the act so as to make arbitration more user friendly as well as cost effective method of settling commercial disputes. Acting on the recommendations of the Law Commission, Modi led government promulgated the Arbitration and Conciliation Ordinance 2015 to amend certain provisions of the Arbitration and Conciliation Act 1996 which received the assent of the President of India. The Arbitration and Conciliation Amendment Bill 2015 was introduced in both the houses of parliament in order to replace the ordinance. The Amendment Bill was passed by the Lok Sabha and Rajya Sabha on 17th and 23rd December 2015 respectively. The Amendment Bill received assent from the President on 31.12.2015 and post notification in the official gazette on 1st January 2016 the amendment act was deemed to have been in force since 23rd October 2015.

Applicability of Part-I of the 1996 Act to International Commercial Arbitration

The Principal Act consists of 3 parts which includes Part-I which deals with domestic arbitrations and international commercial arbitrations when the seat of such arbitration is in India. The Ratio in case of Bhatia International v. Bulk Trading SA[2] was that Part I of the Act (which provided for remedies such as awarding interim relief under section 9 of the 1996 Act, and setting aside of arbitral awards) was applicable only to an arbitration seated outside of India.

The Supreme Court in case of Bharat Aluminum & Co. v Kaiser Aluminium and Co.[3] held that that Part I and Part II of the Act are mutually exclusive. It further held that Part I of the Act only applied to arbitrations seated within India. This meant that no interim relief was possible in a foreign seated arbitration where the assets of a party/project under dispute were located within India.

Through the amendment of Section 2(2) of the 1996 act, it has been clarified that there is a specific agreement to the contrary, provisions of Part I would be available to parties, who are subject to a foreign seated arbitration.

Hence the parties to a foreign seated arbitration can approach the courts in India for interim relief, Appeals etc after fulfilling the following conditions:

  1. There should be no agreement to the contrary by the parties; and
  2.  An arbitral award made or to be made in such place is enforceable and recognized under the provisions of Part II of the Arbitration Amendment Act.

Hence parties to international commercial arbitration which is enforceable under Part-II of the 1996 Act have the option of approaching the courts to seek interim relief.

High Court’s Jurisdiction over International Commercial Arbitration  

According to Section 2(2) of the 1996 act all forms of arbitration were subjected to the jurisdiction of Civil Court of original jurisdiction in a district. Though only in certain districts would the high court have the jurisdiction under the letters patent. This position has changed post amendment in the definition of the term “Court” under Section 2(e) of the principal act.

The term “Court” now differentiates between domestic arbitrations and international commercial arbitrations wherein:

(a) Domestic arbitrations are subject to the jurisdiction of districts courts and High Courts;                                               (b) International commercial arbitration is subject to the jurisdiction of only High Courts (in exercise of its ordinary civil jurisdiction).

This particular amendment has been introduced in the context of the recently enacted Commercial Courts Act, which provides for the constitution of Commercial Divisions and Commercial Appellate Divisions with High Courts. The constitution of committed divisions within the high court would facilitate scrupulous adjudication of commercial disputes.

Neutrality of Arbitrators

The amendment act aims to negate the factor of partial adjudication on part of the arbitrator, thus to ensure fair and equitable arbitration proceedings it amended provision under Section 12 which lays down the grounds and procedure to challenge the appointment of an arbitrator. Thus under the amendment, the person approached in connection with possible appointment of arbitrator, shall disclose in writing about existence of any relationship or interest of any kind, which is likely to give rise to justifiable doubts. The inherent ambiguity in Section 12(1) (a) has been addressed vide the Arbitration Amendment Act, which elaborates on the type of circumstances that may raise justifiable doubts regarding the neutrality of the arbitrator. In addition, Section 12(1)(b) requires that a potential arbitrator should also disclose in writing any ground that may affect his ability to complete the arbitration within the prescribed time limit of 12 months. Furthermore Schedule 5 has been added which provides the guidelines to determine whether the circumstances exists which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.

Interim Relief by the arbitral tribunal in arbitration proceedings

The Principal act provided for no statutory mechanism whereby the arbitral tribunal could provide effective and enforceable interim relief. This amendment of Section 17 aims to empower the tribunals with special powers which would reduce the burden upon the Courts.

The amendment act empowered the tribunal to grant all kinds of interim measures which the court is empowered to grant under Section 9 and such order as granted by the tribunal shall be enforceable in same manner as if it was an order of the court.

An arbitration proceeding shall commence within a period of 90 days after the declaration of interim relief by the court. This provision shall limit the instances wherein the parties use the court procedures to deliberately delay the disposal of arbitration matters, and will ensure that arbitration is commenced in a time bound manner.

Stringent Timelines for determining Arbitral Award

In accordance with the arbitration-friendly jurisdictions, the amendment act has introduced a fast track procedure whereby arbitrations can be completed expeditiously. The arbitral tribunals have been granted a 12 month window for completion of arbitrations seated in India, which can be extended by six months with the consent of the parties. If the award is made within a period of six months, the arbitrator may get additional fees upon agreement by the parties. If the award is not made within specified period or extended period, the mandate of the arbitrator shall terminate unless the time is extended by the court. The Court while extending the period may also order reduction of fees of arbitrators not exceeding five percent for each month of delay, if the court finds that the proceedings have been delayed for reasons attributable to the arbitral tribunal. The amendment act inserted new provisions in form of Section 29A, 29B which solely deals with the fast track procedure to be followed by the arbitral tribunal as mentioned above.

Regulating the grounds of challenge

An arbitral award can be challenged only in accordance with the grounds provided under Section 34 of the 1996 Act. One such ground of challenge is when an arbitral award is made in conflict with the public policy. This aspect of public policy is subjected to wide interpretation, and hence over these years it has led to increase of vexatious claims. The new provision brought under Section 34 prescribes a time period of 1 year within which an application for setting aside the award needs to be filed. Secondly the party filing such an application needs to issue a prior notice to the other party regarding the same.

The scope of the term ‘public policy’ has been further qualified by amendments to the Explanations under Section 34(2) that that provide that an award shall be considered as against ‘Public Policy’ only when the making of an award was: (a) induced or affected by fraud or corruption; or (b) is in contravention with the fundamental policy of Indian Law; or (c) is in conflict with the most basic notions of morality or justice. Explanation 2 to Section 34(2)(b) provides that the test to determine whether an award is against the fundamental policy of India shall not entail a review of the merits of the dispute.

Time-bound disposal of Arbitral Awards

Addition of two new sub-sections (5) and (6) to Section 34, has paved way for speedy disposal of applications to set aside an award. A period of one year has been prescribed for the same that shall ensure time bound disposal of arbitration matters.

Section 36 has been amended to the effect that mere filing of an application for challenging the award would not automatically stay execution of the award. Award can only be stayed where the Court passed any specific order on an application filed by the party. Previously due to absence of such a provision, any party which would remain unsatisfied with the arbitral award would move to the court and get a stay over execution of such an award. The Court would further have to look into the matter all over again which would ultimately be a very time and cost consuming process.

Computation of Costs

Computation of cost to be awarded to the parties under the Act are to include factors like conduct of parties, whether frivolous counter claims are made, whether reasonable offer to settle dispute is refused by any party, etc. The amount awarded by the tribunal shall carry interest at rate of 2% p.a. more than the current rate of interest, from the date of award to the date of payment.

Section 31A has been added to provide for comprehensive provisions for cost regime. It shall be applicable to both the arbitrators as well as related litigations in the court. It will avoid frivolous, merit-less litigation/arbitration. This Section has been inserted in parallel to provision under Section 36. The ultimate aim of both the sections is to avoid frivolous merit-less litigation and execution of arbitral award as decided by the arbitral tribunal.

Conclusion

These amendments are aimed at taking drastic and reform-oriented steps to bring the Indian arbitration law on a par with global standards and provide an effective mechanism for resolving disputes with minimal court interference.

Since the inception of the 1996 Act, there have been no amendments to the act whatsoever leading to affecting the functioning of arbitral tribunals in large run. This amendment was introduced with the ultimate aim of restoring confidence in the institution of Arbitration as a mode of dispute settlement.

 

[1] The 246th Law Commission Report, http://lawcommissionofindia.nic.in/reports/Report246.pdf .

[2] (2002) 4 SCC 105

[3] (2012) 9 SCC 552

Claim Construction: Learning the Art

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Introduction to Claims

A claim is portion of specification which fulfils a separate and distinct function. It and it alone defines monopoly; and the patentee is under a statutory obligation to state in the claims clearly and distinctly what is the invention which he desires to protect. The office of a claim is to define and limit with precision what it is which is claimed to have been invented and therefore patented.[1]

‘Claims’ define crux of the invention, which are provided in fresh page after detailed description of the invention.  Any aspect of the invention which s not claimed is said to be ‘disclaimed’ and is open to public for its usage. Also, it becomes very difficult for patentee to establish infringement on any third party on such grounds. It is further stated that the patentee’s duty is not to prevent all possible argument as to whether there is or is not infringement in particular case, but to enable the court to formulate the questions of fact to be answered.

Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement obligates its members (member countries) to include a mandatory requirement that an applicant for a patent in their jurisdiction should provide a disclosure that enables a person skilled in the art to practice the invention. However TRIPS agreement makes it optional for its members to seek disclosure of best mode from patent applicants in their jurisdiction.

Article 29 of the TRIPS agreement deals with the enablement requirement and disclosure of best mode.

Practically, in a patent application, the claims are usually worded in broader perspective keeping all the possible infringer in mind. However, such over broad claims may not always be supported by sufficient description. Hence Claims in a specification should always be backed by sufficient experimental data.

The duty of a patentee is to formulate his claim in such a way as to define with clarity the area of his monopoly; the claim is the solemn operative part of the specification in which the patentee sets himself to achieve that purpose.[2]

A patentee must mark out with adequate distinctiveness the boundary of the territory that he claims to be exclusively his own.[3]

The claim is usually drafted in a number of paragraphs serially numbered. The first claim which is made is as wide as possible.

The subsidiary claims refer to the main claim and include qualifying or explanatory clause on the various integers of the main claim or optional features. They may also contain independent claims. Although the claim clauses consist of a number of claims, the totality of the claims must relate to one invention only.

Claim Construction

It should be remembered that a claim is a statement of technical facts expressed in legal terms defining the scope of the invention sought to be protected.

A specification containing two independent claims shall not be allowed. To allow such a specification would be against the public interest and its effect would be to sacrifice clarity, succinctness, which are required by the act and to condone avoidable security and ambiguity.[4]

A claim could be limited by intended purpose and reference may be made to the body of the specification in the claim. Section 10(5) of the Indian Patents Act 1970 confines claim to a single invention or a group of inventions linked in so as to form a single inventive concept but this must be read so as to be consistent with Section 10(7) which enables an applicant to include claim in respect of “developments of, or addition to, the invention, that is the invention of the complete specification subject of Section 10(4), if they are developments or additions for which he could make a separate application under Section 6. Section 10(4) of the Indian Patents Act 1970 requires disclosure of best mode of carrying out the invention, as contemplated by the investor(s).

General Guidelines for construction of claims for patents

  1. The claims should define clearly and with precision the monopoly claimed so that the others may know the exact boundaries of the area within which they will be trespassers.
  2. The claims should prima facie provide the boundary of protection from the Patent alone.
  3. The court can receive evidence as to the meaning of technical terms in the claims, but the eventual ascertainment of the boundary of claims remains a task for the court alone.
  4. A claim must be given a purposive construction.
  5. The Court is entitled to distinguish between the essential and unessential features of an invention as claimed and to regard the scope of protection.
  6. The Court will not artificially strain the construction of a claim so as to include in the scope of protection a variant which has a material effect on the working of a patented invention.
  7. The mere fact that the defendant’s product or process represents an improvement does not necessarily enable infringement to be avoided.
  8. A Claim will not be capable of including a variant which itself of obviously equivalent function to the claimed feature at the date of publication of the patent.[5]
  9. The court will not extend the scope of a feature or features where the patentee has committed himself to the exclusion of variants.[6]

 Enablement/Sufficiency of Disclosure in Specification                                                          The patent specification provides a written description of the invention and the manner and process of making and using it. It includes the field and background of the invention, the drawings, detailed description of the invention, preferred embodiments, best mode of practising the invention and the patent claims.

One of the requirements for the grant of a patent in all jurisdictions is that the disclosure in the patent (usually, the specification) must enable persons of ordinary skill in the art to practice the invention, i.e., make the invented device or successfully practice the disclosed method. Failure to enable is grounds for invalidating a patent. In European Patent Law lack of enablement is referred to as insufficiency.

The term ‘sufficiency of disclosure’ refers to adequacy of pertinent information to be provided in the specification to enable an average skilled person to perform the invention. It is stated in Halsbury’s Law that insufficiency of description has two branches:
(1) complete specification must describe ‘an embodiment’ of the invention claimed in each of the claims and that the description must be sufficient to enable those in the industry concerned to carry it into effect ‘without their making further inventions’ and

(2) That the description must be fair i.e. it must be fair i.e. it must not be unnecessarily difficult to follow.[7]

The Complete Specification is a techno-legal document which fully and particularly describes the invention and discloses the best method of performing the invention. It is an extremely important document in the patent proceedings and hence it is advised that it should be drafted with utmost care without any ambiguity.

A complete specification must constitute the following aspects besides the title –

1) A full and particular description of the invention and its operation or use and the method by which it is to be performed;

2) A disclosure of the best method of performing the invention which is known to the applicant and for which he is entitled to claim protection.

3) A claim or claims defining the scope of invention for which the protection is sought. The Claim or claims should relate to one invention, whether the invention is for a process or for a product. It should be clear and succinct and be fairly based on the matter disclosed in the specification.

4) It should be accompanies by an abstract to provide technical information on the invention.

Section 10(4) of the Indian Patents Act, 1970, particularly deals with ‘contents of specification’, and lists out features to be covered in a complete specification. Drafting a complete patent specification in compliance with this section helps in overcoming the objections/ rejections raised by patent examiners during prosecution.

The complete specification should be drafted and submitted in Form 2 to the Indian Patent Office. It must be drafted in the following format:

1) Title;

2) Preamble of the invention;

3) Technical field;

4) Background of the invention;

5)) Objects of the invention;

6) Statement of the invention;

7) Brief description of drawings;

8) Detailed description of the invention;

9) Claims; and

10) Abstract

The complete specification must begin with an appropriate ‘Title’ which must not exceed 15 words. The title should not have any fancy language or abbreviation.

The Preamble of specification must state “The following specification particularly describes the invention and the manner in which it is to be performed. The preamble along with the title of the invention, address, and nationality of applicants should appear on the first page of Form 2.

The technical field section shall mention as to which field the invention belongs to. The background of the invention shall distinguish the invention with that which is being already practised. It shall discuss the teachings of the prior art and thereby mention the drawbacks or disadvantages for the same.

The objective of the invention is to bring about necessity of the invention. It is aimed at bringing about the solutions, advantages achieved by employing the invention at hand.

Statement of invention must cover all the independent claims put in the specification. It must be drafted in English and must have its own independent standing (not obvious as other claims).

The invention must be backed with brief drawings or graphical data that aid the understanding of the invention. Eg- Molecular diagram of a new type of sugar

A detailed description of invention must cover all the objectives of the invention at hand; it must be explained with help of drawings and experimental data. This detailed description must be such that a man of ordinary art- prudence is able to understand the characteristics- aesthetics of the invention.

Claims define the contours of rights, if and when a patent is granted for an invention. In a complete specification the description is followed by claims. Since, claims define the scope of legal protection, it is suggested that they should be drafted carefully to cover all the aspects of the protection being sought at the same time adequately distinguishing the prior art from the claimed invention.[8] Each claim is a separate invention and hence all the claims are not held invalid for one claim being invalid.

For Eg-            A Point ball pen comprising of:

a roller ball nib

a shock absorbing technology

a rubber coating on body of pen

An abstract is essentially summary of matter contained in a specification.[9] It should contain the title of invention and must not exceed more than 150 words.[10]It must contain the reference number accorded to the drawing in the specification.

A provisional patent application does not require claims, but it is a good practice if claims are provided in a provisional application. Incorporating claims in a provisional specification reduces the risk of losing priority during litigation or infringement proceedings. Provisional document acts as actual priority document that shall be referred along with complete specification by the courts at the time of infringement or litigation proceedings for establishing the facts of invention at the time of complete and Provisional stage.

In Press Metal Corporation Limited v. Noshir Sorabji Pochkhanwalla,[11] it was held that- It is the duty of a patentee to state clearly and distinctly the nature and limits of what he claims. If the language used by the patentee is obscure and ambiguous, no patent can be granted, and it is immaterial whether obscurity in the language is due to the design or carelessness or want of skill. In the above mentioned case the grant of patent was refused on the same ground of clam being written in obscure and ambiguous language.

** ( The Information relied upon in this Article are observations from P Narayanan’s Fourth Edition of Patent Laws)

[1] Lord Chelmsford in Harrison v. Anderston Foundry Co (1876) LR 1 App Cas 574

[2] Norton & Gregory Ltd. v Jacobs (1937) 54 RPC 271 at 276

[3] Clay v Alcock & Co Ltd. (1906) 23 RPC 745

[4] Beloit Corporation Appln [1974] RPC 478 at 483

[5] Heath v Unwin 2 WPC 296

[6] Furr v C.D. Truline [1985] FSR 553

[7] Halsbury, 3rd edn. Vol. 29p. 66 Para 138

[8] The Patent Manual, www.ipindia.nic.in

[9] Rule 13(7)(b) of the Indian Patent Rules 2003

[10] Rule 13(7)(c),(d) of the Indian Patent Rules 2003

[11] 1982 PTC 259 (Bom)

Preetisingh Mukandsikh & Ors. V State of Gujarat & Ors. : Landmark Property Law Judgement

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Preetisingh Mukandsikh & Ors. v State of Gujarat & Ors.

    Before CJ Bhaskar Bhattacharya, Justice AL Dave and Justice V.M. Sahai

4 Letters Patent Application and Special Civil Applications filed before the Gujarat High Court  

Issue before the Court: Whether a Person who does not own Agricultural Land within the State of Gujarat can be treated to be a non-agriculturalist within the meaning of the Act simply because he does not cultivate any agricultural land within the State of Gujarat and on that ground, the purchase of any agricultural land by such a person will be hit by the provisions contained in Section 89 of the Act. 

The Letters Patent Appeal is an appeal from a decision of single judge to another bench of the same court. It was a remedy provided when High Courts were first created in India by the Letters Patent in 1865. It is the only remedy available against the decision of single Judge of the High Court; otherwise the remedy would lie with the Supreme Court.

Facts –

The Subject Matter of the 4 LPA’s indicated the decision of the District Collector, Kutch who issued instructions to the concerned Mamlatdar to freeze the ‘Khedut Khatas’(agricultural accounts) of the appellants until further instructions on the ground that the appellants are agriculturalists belonging to other states and, therefore, they are illegally holding agricultural land within the state of Gujarat.

The Appellants had also challenged the Circular issued by the Revenue Department of Government of Gujarat which indicated that “any sale of land made to any non-agriculturalist in Gujarat on strength of his status as an Agriculturalist in any other state outside Gujarat would attract provisions contained in Section 63 of Bombay Tenancy & Agricultural Lands Act 1948, Section 54 of Saurashtra Ordinance and Bombay Tenancy & Agricultural Land (Vidharba and Kutch Region) Act 1958 on strength of certificates about their status as Agriculturalists in other states.

The Learned Single Judge had dismissed all these Writ Petitions. Being dissatisfied the appellants preferred the aforesaid four LPAs and the divisional bench being prima facie satisfied decided to entertain it.

The Definitions of Agriculturalist and to cultivate personally were duly considered as given under Section 2(3) and 2(12) of the Bombay Tenancy and Agricultural Land Act 1958 Respectively. Section 89 of the said act bars the transfer of Agricultural Land to Any Person who is not an agriculturalist under section 2(3) of the Act.

Held-

The Division Bench led by The Chief Justice Bhaskar Bhattacharya, held that Interpretation of definition of Agriculturalist as given under Section 2(3) to that of a Person Owning and Cultivating Land personally in Gujarat is Incorrect. Further ‘Nothing in the Act suggests that the ‘Agriculturalist’ must be a person who cultivates land in Gujarat and not outside.’ Similar definition given under the Gujarat Agricultural Land Ceiling Act, 1960 was considered whereby Agricultural land of a Person situated outside India is also to be considered for computing the ceiling limit.

The Court’s clarified the ambit derived under Section 89 of the Bombay Tenancy and Agricultural Land (Vidharba and Kutch Region) Act 1958, whereby Agriculturalist is to Interpreted as any person in India who cultivates agricultural land personally even if such land is situated outside the state of Gujarat.

The Court found Substance in Appellants contention that a person who does not own agricultural land within the State of Gujarat at the time of Purchase cannot be treated to be a non-agriculturalist within the meaning of the act simply because he does not cultivate any agricultural land within the state of Gujarat and on that ground alone, the purchase of any agricultural land by such person will not be hit by the provisions contained in Section 89 of the Act.

The Bench did not approve of Advocate General’s submission that application of Gujarat Agricultural Land Ceiling Act 1960 as applied by virtue of Section 5(3) of the Bombay Tenancy Act cannot lead to a situation whereby a tiller from outside the state of Gujarat can also become agriculturalist in the State of Gujarat.

The court observed that”Agriculturalist” is a qualification and State Legislature is entitled to accept any person, who is recognized agriculturalist in other state of India as an agriculturalist in the State of Gujarat. There is no prohibition contained in the Act to prohibit purchase of land at the instance of an agriculturalist having an agricultural land outside the State except for the purpose of ceiling and if such a prohibition was there, it would definitely be violative of Article 15 of The Constitution of India.”

The Court in consonance also quashed the order of the Authority freezing the land of the petitioners. The Government’s Circular to similar effect was also quashed.

The Bench has not looked into all the petitions individually and hence directed the Court to have a Look into all Matters Individually.

International Registration of Trademarks under Madrid Protocol

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International Registration of Trademarks under Madrid Protocol

The Madrid system (officially the Madrid system for the international registration of marks) is the primary international system for facilitating the registration of trademarks in multiple jurisdictions around the world.

The Madrid system provides one single procedure for the registration of trademarks in several territories. It is governed by two treaties, ‘the Madrid Agreement concerning the international registration of marks’ (briefly known as Madrid Agreement) and the ‘Protocol relating to the Madrid Agreement’ (briefly known as Madrid Protocol).The Madrid agreement and Protocol are administered by the International Bureau(IB) of the World Intellectual Property Organization (WIPO) located in Geneva, Switzerland.

India became a member of the Madrid Protocol since July 08, 2013.As of June 2015, 94 countries have joined the Madrid Protocol.

The Madrid Protocol provides for the international registration of trademarks by filing a single application in one language in one set of fee in one currency. The Madrid protocol was adopted in 1989, though it came into force on April 1, 1996.

The Term of Registration of Trademark under the Madrid Protocol is 10 years from the sate if application. It is further renewable. A Natural person or legal entity who has a commercial establishment in, or is a domicile or national of  a country which is signatory to the Madrid Protocol.

    Objective of the Madrid Protocol

  • It facilitates the obtaining of protection for marks and from the date of international registration, the protection of mark in each of the designated contracting parties is the same as if the mark had been the subject of an application for registration filed direct with the Office of that contracting party.
  • As International registration is equivalent to a bundle of national registrations, the subsequent management of that protection is made such easier. As a result of International registration, there is only one registration to renew, and changes such as a change in ownership or in the name or address of the holder, or a limitation of the list of goods and services, can be recorded in international Register through a single procedural step.

    Applicant Requirements

A Madrid application can be filed by a natural person, or legal entity, having real and effective industrial or commercial establishment status, or being a domicile, or being a national of a Madrid Union Member Country. The Madrid Protocol allows applicants to choose the exact countries in which they seek protection

    Advantages of Madrid System

  • One International Application based on a basic application/registration.
  • Payment of one set of fees in one currency.
  • One Registration Number and One Renewal Date.
  • Seek Protection of mark in 90+ countries.
  • The registration can be further extended geographically.
  • Offices do not need to examine for formal requirements.
  • All subsequent changes to International registration may be recorded with IB and have effect through one single procedure.
  • Automatic registration in designated countries if the trademark office does not raise an objection in 12 or 18 months.

   Scope of an International Registration

An international registration is deemed to replace a national or regional registration for the same mark under Section 36E (6) of the (Indian) Trademarks Act and Article 4bis of the Protocol.

If the national or regional registration is not renewed, the holder of the international registration may continue to benefit from the earlier rights acquired by reason of that national or regional registration. The holder of an international registration can expand the geographical scope of the protection of his mark by filing a subsequent designation.

The following may also be recorded in the International Register (Article 9bis of the Protocol):

  • A limitation of the list of goods and services in respect of all or some of the designated Contracting Parties;
  • A renunciation in respect of some of the designated Contracting Parties for all the goods and services;
  • A cancellation of the international registration in respect of all the designated Contracting Parties for all or some of the goods and services;
  • A license granted in respect of all or some of the designated Contracting Parties, and for all or some of the goods and services. Information concerning changes, cancellation and licenses are published in the Gazette and notified to the designated Contracting Parties.

Provisions for International Registration under the Trademarks Act, 1999 

Pursuant to the Protocol, India has taken significant steps towards the alignment of its intellectual property regime with the global norms through the Trade Mark Amendment Bill (2009) which has led to the inclusion of a new chapter (!VA) in the Trademarks Act which exclusively deals with procedural and statutory requirements for international registration of marks.

Section 36A to 36G of the Trademarks Act entails the provision with respect to international registration of marks under the Madrid system. Under this provision, on receipt of notification from International Bureau with respect to a particular mark, the Registry will examine the mark under the provisions laid down under sections 9, 21, 63 and 74 of the Act and thereafter accordingly issue necessary directives (advertise or refuse) the application and apprise the international bureau with respect to the same within 18 months from the date on which it received the notification.

WIPO’s Notification on India’s Accession to the Madrid Protocol

In accordance with Article 5(2)(b) and (c) of the protocol, this Contracting Party has declared that the time limit to notify a refusal of protection shall be 18 months and that, where a refusal of protection results from an opposition to the granting of protection, such refusal may be notified after the expiry of 18-month time limit.

In accordance with Article 8(7) (a) of the protocol, this contracting Party has declared that, in connection with each request for territorial extension to it of the protection of an international registration and the renewal of any such international registration, it wants to receive an individual fee, instead of a share in the revenue produced by supplementary and complementary fee.

In accordance with Article 14(5) of the protocol, this contracting party has declared that the protection resulting from any international registration affected under this Protocol before the date of entry into force of this protocol with respect to it cannot be extended to it.

Procedure for International Trademark Registration

Stage 1: Basic application.

A pending application or a registration with the Indian Trademark Office (known as the basic application/registration) is a pre requisite for filing an application under the Madrid Protocol in India. The Indian Trademark Office will then certify that the information in the international application such as the mark, goods & services, color claim, etc. are as the same as that in the basic application/registration, the date on which the international application was filed and forward the application to WIPO.

Stage 2: Formal examination by WIPO.

WIPO conducts a formal examination to check if the application complies with the requirements of the Protocol and the other regulations. In case of any irregularities the same are notified to the applicant. The irregularities needs to be remedied within three months failing which the application will be treated as abandoned.

If everything is in order the application is recorded in the International Register and published in the WIPO Gazette of International Marks. WIPO will then send the applicant a certificate of International Registration and will notify the other trademark offices in the countries that the applicant has chosen to extend the protection of the mark. This does not mean the trademark is registered in other countries. The respective trademark office in each country (trademark office of the contracting party) determines the registration of the mark in their country by substantial examination of the application.

Stage 3: Substantial Examination by the trademark office of the contracting party.

The application passes through substantial examination at the trademark office of the contracting party exactly the same way as an application filed directly. The acceptance or refusal of the application is notified to WIPO within the applicable time limit (12 or 18 months). WIPO will then record the same in their records and notify the applicant about the decision of the trademark office of the contracting party. If the application is accepted then a statement of grant is issued and the registration is valid for a period of 10 years.

Any procedures subsequent to the refusal such as response to the objection, hearing, appeal etc. are to be carried out directly between the applicant and the respective trademark office without any involvement of WIPO.

Once the procedures are completed, the trademark office will issue a statement to WIPO either confirming the refusal or a statement of grant following the provisional refusal. The decision is recorded by WIPO in the International Register and published in the Gazette and a copy of the decision is sent to the applicant.

Difference between Madrid Agreement and Madrid Protocol

           S. No      Madrid Agreement     Madrid Protocol
1.     Basis of an International Registration Applications can be filed only after the national registration is complete. Applications can be filed despite the national registration pending.
2.     Time Limit for Refusal Period The Trademark Offices have to inform within 12months if any objections are raised. Each TM office can opt for a period of 18 months or longer in case of refusals based on opposition.
3.     Term of Projection Term of Registration is 20 years and thereafter subject to renewal. Term of Registration is 10 years and thereafter subject to renewal.
4.     Fee Structure Each TM office charges individually –fixed fee for designated contracting parties. Cost of filing an application is considerably less.
5.     Filing Language  Only in French English, French or Spanish
6.     Membership of EU European Union is not a party to the Agreement. European Union is a party to the Protocol.
7.     Flexibility in Choice of Origin Less Choice over Trademark Office, The Applicant may choose his office of origin based on establishment, origin or domicile.
     FILING BY INDIVIDUAL(S)  OTHER THAN INDIVIDUAL(s)
     SEARCH FEE                2500 INR      10000 INR