Dealing with the Dragon

It sounds cliché to blame the British Raj for our present domestic and international problems. Unfortunately thanks to the British legacy, we are still grappling with the problems left by them. The present Indo-china dispute can be attributed to the British Raj, though it is difficult to say if they did it unknowingly or on purpose; to keep things contentious so that people squabbled with them even after their departure.

The present Indo China border dispute is indeed the making of the British. They defeated the Sikhs in 1845 and chose to govern the Kashmir & Ladakh by their proxy Dogra king, Gulab Singh. While they demarcated their boundaries on the western and southern sides, they left the eastern border with China un-demarcated. It was to be later demarcated by their appointed commissioners. This would be the area of Aksai Chin where both former colonies of the British would be staking their claims years after they left.

After defeating the Sikhs in the last Anglo Sikh War, the British forced Sikhs to sign a non-aggression treaty. They also signed Amritsar Treaty with their proxy Dogra King Maharaja Gulab Singh in February 1846 establishing their suzerainty often referred to as paramountcy over the state of Kashmir. They left the administration to Maharaja Gulab Singh, their proxy.

The whole mountainous area lying east of Indus River was left undefined. It was indeed a controversial decision that left a boundary of around 2150 kilometers un-demarcated which is a bone of contention between India and China even today.

Later WH Johnson was entrusted with the job boundary demarcation. He proposed the boundary line in 1865 which envisaged Aksai Chin as part of Kashmir. This was a unilateral decision but China did not object to it. Later McCartney-MacDonald in 1899 was entrusted to the same job. They suggested a new demarcation with included part of Aksai Chin within China by treating Indus watershed as the border. The Indus valley includes Galwan valley as it is the tributary of Shyok which is the tributary of Indus.

The demarcation was done on the basin boundaries rather than military control over the territory. This was the last British demarcation of the Indo China border and continued till 1947 and beyond. The Chinese Government on its part didn’t react to the proposal of 1899 but the British Indian Government on its own went ahead with Johnson line.

India has a reasonably strong case for Aksai Chin because there is evidence for it. If Amritsar Treaty, Johnson line, and McCartney-MacDonald’s demarcation are taken into account. Indian Rulers controlled the region militarily as well. They built a fort to protect trading caravans at Xaidullah. Dogras had traditionally established firm control over Ladakh under the suzerainty of first under the Sikh Empire and later under the British.

Even China had accepted this reality. There is evidence to show that China had informally accepted the Johnson line. The “Postal Atlas of China”, published by the Government of China in 1920s showed the boundary in Aksai Chin as per the Johnson line. The “Peking University Atlas”, published in 1925, also showed Aksai Chin in India

Galwan valley falls under India even by applying McCartney-MacDonald line of 1899. Thus, China has no claim over the entire Galwan valley. At present, LAC cuts through Galwan valley above 6 km from its confluence with Shyok River! So based on the historical evidence India has a very strong legal case.

The fact of the matter is that no official boundary had ever been settled between China and India. The India claims a boundary in the western sector similar to the Johnson Line of 1865, whereas China considers a line similar to the McCartney–MacDonald Line of 1899 as the boundary

Now here is the interesting part. Why this kind of loose border been allowed by the two regional powers for so long? Why did not china tried to assert its position all these years and why now? Why haven’t India asserted its claim all these years and why we are so bogged up by Chinese action now?

The answer is rather simple. No one cares. As Nehru ones put it, ‘not a blade of grass grows there’. And that is largely true. Apart from strategic and psychological value, there is not much for anyone there to fight for. The weather and difficult terrain is the number one enemy in the region. If the stakes were high enough the Indian and Chinese teams wouldn’t be patrolling the area with sticks and torches.

As they say, History repeats itself. It was not for the piece of land that China attacked India in 1962. China attacked India despite bonhomie and goodwill due to its domestic reasons. In the 1960s the Cultural Revolution wasn’t yielding good results and people’s unease was rising. The Chinese rulers wanted a mood swing and what better than an unnecessary war.

The conditions again are grim for china domestically as well as internationally. It has evolved as a merchant nation whose well being depends on business sentiment. It is flexing its muscle to ensure its empire consolidates. This is actually annoying other countries including the USA. Hence the South China Sea, Hong Kong, and India. But it makes a big mistake. It is alienating itself further while India gets the brownie points and international support. War and business don’t go hand in hand.

Now the big question for us is how do we deal with the dragon? By sending troops to the border and engaging in a limited war, or by cutting Chinese imports to bleed China economically or by indulging in a diplomatic and legal tussle.

Let’s examine the options one by one. Though India not India of 1962 and is a formidable power but so is China. Even if we can inflict damage on China we must be prepared for collateral damage. War with China would not be easy or short. And there is a real chance of limited war becoming a full-scale war to nuclear war! Besides, it will do us big harm economically and we cannot afford to speed up the economic slowdown.

Coming to the Economic offensive, we are a net importer of Chinese goods but, our share of Chinese exports is two percent. It will hurt China but not to the extent of crippling it. We will again risk the slowdown of the economy if we do it in a rush of blood without any preparations. For example, Chinese input into India’s solar power is substantial; blocking the imports would mean putting a break on our quest for clean energy.

Now a viable option is a diplomatic and legal engagement which is as mentioned earlier is our forte. India can easily show to the world that the Chinese are indeed indulging in self-aggrandizement and discredit it worldwide. Today the world sentiment is against China and India is the flavor of the day. Rather than sending jets, we would do well to send our lawyers to the international court of justice. We have a very strong case and we are likely to muster more moral support that way.

Even if things don’t go in our favor for some reason we don’t lose any territory as the international court’s order is not binding. A clear win-win situation – Without incurring any loss of men and machines we can achieve our desired goal. If China does not fight us in the international court of justice even better. We have scored an outright victory and if it comes pleading it would be red-faced. This is not to suggest that it would immediately vacate the area or surrender. But it will eventually have to give in. It is also not to suggest that we should not deploy more army or not make our economy less dependent upon China. The present border dispute is an opportunity to settle the matter once and for all amicably. An opportunity to correct the British mistake made 174 years ago!


Article By: Dr Kislay Panday, Solicitor, Supreme Court of India

SUPREME COURT HELD THAT ROYAL FAMILY HAS CONTROL OVER KERALA PADMANABHA SWAMY TEMPLE

In a recent case of Sri Marthanda Varma (D) through L.R.s vs State of Kerala, a two-Judge Bench of the #SupremeCourt has passed a Judgment dated 13-07-2020 and held that the #abolition of #privypurses and #derecognition of #Rulers of Indian States under the Constitution (Twenty-Sixth Amendment) Act, 1971, did not take away the rights of the Ruler of Travancore and his descendants to supervise and have control over administration of Sri #PadmanabhaSwamy #Temple (the Temple) in #Thiruvananthapuram, #Kerala and the #properties thereof.

In this case, the Apex Court noted that Late Sree Chithira Thirunal Balarama Varma was the Ruler of State of Travancore and after his death, his younger brother, Mr. Uthradam Thirunal Marthanda Varma (the Appellant No. 1 herein) wanted to claim ownership, control and management of the ancient and great Temple. Thus, a Writ Petition was filed by him in the High Court of Kerala, which held that the Appellant No.1 could not claim to be in control or management of the Temple as successor to the last Ruler, on the ground that the Constitution (Twenty-Sixth Amendment) Act, 1971 and Article 363A of the Constitution of India 1950 terminated the privy purses and privileges of the Rulers of former Indian States. Thus, an Appeal against the said High Court Order has been filed before the Supreme Court.

The Apex Court made the following important observations in this case:

  1. That although the Temple was later taken over by Travancore Devaswom Board constituted under the Travancore-Cochin Hindu Religious Institutions Act, 1950 (the TC Act), the management and control over administration of the Temple and the properties thereof remained in the hands of the Ruler of Travancore.
  • That the descendants of the Ruler of Travancore continued to serve as ‘Dasas’, or servants of the deity in the Temple.
  • That based on the historical accounts, customary beliefs and practices, it was observed that the Ruler and his family members had deep involvement in the rituals and affairs of the Temple.
  • That although the concept of privy purses and rulership have been abolished by the Constitution (Twenty-Sixth Amendment) Act, 1971, but the private properties of the Ruler such as a sword, ceremonial weapon, or jewellery, etc, continued to remain available to the Ruler and his family members for normal succession and devolution under the law.

Thus, based on the aforesaid reasons, the Apex Court held that the administration of the Temple and the properties thereof that earlier vested in the Ruler of Travancore, would continue to be under the control and supervision of the Ruler and his natural successors.

Further, the Supreme Court constituted an Administrative Committee and Advisory Committee to work for a period of four months towards preservation of all the treasures belonging to the Temple, arrangement of audit of the Temple accounts for the last 25 years, maintenance of the Temple properties, etc. The Apex Court further directed the Committees to file the report by December 2020 in order to inform the Court about the developments in the said matter.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

SUPREME COURT CLARIFIES LAW ON ADMISSIBILITY OF ELECTRONIC EVIDENCE

The #InformationTechnology Act, 2000 which deals with digital and electronic records and documents had brought in its wake amendments in the #EvidenceAct 1872  (‘the Act’) to enable legal recognition of such digital and electronic documents. The law mandates any documentary #evidence by way of an electronic record under the Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure prescribed under Section 65 B. Section 65 B deals with the admissibility of #electronicrecords. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer.

Sections 65 A and 65 B of the Act, deals with electronic evidence and its admissibility in the Indian Legal System. In this article, the main discussion will be with respect to the requirement of a Certificate under Section 65 B (4) of the Act and the recent judgment on this point.

There is no ambiguity with regard to the fact that electronic records can be used as evidence. However, there is lack of clarity with regard to the procedure for admissibility of electronic evidence under Section 65 B (4) of the Act. The Supreme Court opined in the case of Anvar P.V. vs. P.K. Basheer, (2014) 10 SCC 473,that any electronic evidence can be proved only in accordance with the procedure prescribed under Section 65 B of the Act. The Supreme Court in this case held that the purpose of these provisions is to sanctify electronic evidence. The necessity of giving an electronic certificate as required under Section 65 B is mandatory for treating such evidence as admissible in law.

Recently, three Judges Bench of Hon’ble Supreme Court of India in the case of Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal, CA Nos. 20825-20826/2017 passed a Judgment dated 14.07.2020 dismissing the Appeals and holding that the certificate required under Section 65B (4) is a condition precedent to the admissibility of evidence by way of electronic record, as correctly held in Anvar P. V. case.

The brief facts of the case is pertaining to the controversy that arose between the Appellant and the Respondent who were the nominees in an election. The dispute between the Parties related to their nomination papers in the election procedure. Election Petition was filed by the Appellant. During trial the Respondent relied on certain CDs/VCDs from the election office as evidence. The Appellant objected on the admissibility of the CDs/VCDs in the court as the said evidence was not supported by the ‘necessary certificate’ under Section 65 B of the Act. However, the High Court of Bombay relied on the statement of the CDs/VCDs operator in cross-examination that the said recordings were regularly recorded in the office and admitted the CDs/VCDs in evidence. Based on the said evidence without certificate, High Court declared election of the Appellant as void. High Court Order was challenged before the Supreme Court which referred the case to a larger bench of 3-Judges to decide on the issue of judicial interpretation of Section 65 B of the Act.

The Court was hearing a reference from the Division Bench, of the case reported as Shafhi Mohammad vs. The State of Himachal Pradesh [(2018) 2 SCC 801] which had ‘clarified’ that the requirement of a certificate under Section 64 B (4) being procedural, can be relaxed by the Court wherever the interest of justice so justifies, and one circumstance in which the interest of justice so justifies would be where the electronic device is produced by a party who is not in possession of such device, as a result of which such party would not be in a position to secure the requisite certificate.

Additionally, the issue was raised in Appeals in Arjun Panditrao Khotkar case that the law laid down in Anvar P. V. case requires reconsideration. However, the 3-Judges Bench held that the Shafhi Mohammad Judgment  was incorrect and the law laid down in Anvar P. V. case is the correct law and as such does not require to be revisited.

In a reference the Court dealing with the interpretation of Section 65 B of the Act that deals with admissibility of electronic records, the Court clarified that the required Certificate under Section 65 B (4) is not essential if the original document itself is produced. It also held that if a certificate which is a pre-requisite for admissibility of evidence under Section 65 B cannot be obtained as the person or authority concerned ‘refuses’ to share it, then summons could be sent by the court to such person or authority to produce it. This is subject to discretion being exercised in civil cases in accordance with law, and the requirements of justice on the facts of each case.

Therefore, in light of the rapid increase in the use of computer and internet, electronic and digital documents in India, the Supreme Court has upheld the mandatory requirement of compliance under Section 65 B of the Act for admissibility of electronic evidence. 

Lakshmi Vishwakarma

Associate

The Indian Lawyer & Allied Services

LEGAL IMPLICATIONS OF DEATH CAUSED IN POLICE ENCOUNTERS

In the recent times, it has been observed that a number of alleged #criminals have been killed in #police #encounters in India. Most recently, an infamous gangster, namely, #VikasDubey, was reportedly killed in an encounter by the #UttarPradesh (UP) Special Task Force (STF) on 10-07-2020, when the vehicle of the police convoy in which he was being brought to #Kanpur, overturned and he tried to flee. The gangster along with his accomplices had earlier allegedly killed eight UP police officers in an ambush in Bikru village near Kanpur.

The term ‘#policeencounter’ generally means an extra-judicial killing of suspected criminals by the police, apparently in self-defense. Section 46 of the Code of Criminal Procedure 1973 (#CrPC) provides that if a person to be arrested either forcibly resists the police officer’s action to arrest him, or tries to evade such arrest, the said police officer may use all necessary means required to effect the #arrest. However, the police officer cannot cause the death of the person, who is not accused of an offence punishable with death or with imprisonment for life.

Section 197 (1) of CrPC provides that a #complaint may be made against a public servant, thereby accusing him of the offence committed during the discharge of his official duties, only after obtaining a prior sanction of the Government.

Further, the #SupremeCourt in People’s Union for Civil Liberties & Anr. vs State of Maharashtra & Ors. Passed a Judgment dated 23-09-2014 and made the following observations regarding police encounters:  

1- The Apex Court condemned police encounters as it is not recognised by our criminal justice administration system. Although there are genuine circumstances when police officers, while performing their duty, have been attacked and killed. So only in such genuine circumstances, the #policeofficers are allowed to take action to protect themselves.

2- The Supreme Court has further laid down standard #guidelines for thorough investigation in the cases of death and grievous injury caused in police encounters. The important guidelines have been listed below:

i) Police to record tip-offs received about criminal movements or activities in writing or in electronic form.

ii) Police to register FIR regarding death caused in an encounter with the use of firearms and to forward the same to court under Section 157 CrPC.

iii) Senior police officials to conduct independent investigation in such cases.

iv) Magistrate to conduct proper inquiry and send report of the same to Judicial Magistrate.

v) To inform the National Human Rights Commission (NHRC) about such incident/encounter. Unless required, NHRC may not be involved for investigation.

vi) To inform the next of kin of the deceased-alleged criminal and the police officer’s family about the incident/encounter.

vii) To initiate disciplinary action against the concerned police officer and to suspend him, in case the evidence shows, use of firearms in the encounter killings.

viii) To follow the scheme laid down under Section 357-A of CrPC in case compensation has to be granted to the victim or his dependents, who have suffered loss or injury as a result of the police encounter.

Further, the Supreme Court has held in the aforesaid case that the said guidelines/norms have to be treated as law declared under Article 141 of the Constitution of India 1950, i.e. the law declared by the Supreme Court shall be binding on all courts within the territory of India and thus, have to be strictly followed in cases of death or grievous injury caused in police encounters.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

SUPREME COURT ALLOWS SERVICE OF SUMMONS AND LEGAL NOTICES VIA WHATSAPP, EMAIL AND FAX

In the recent times, #courts have allowed service of #LegalNotices by #Email. In a more recent development that happened this week, the Hon’ble Supreme Court of India enlarged the scope of #digital service of notices and #summons by stating that notices and summons could now be served on parties through Email, #Fax and instant messaging application such as #WhatsApp.

The Order was passed by Bench of the Chief Justice of India, Justice S.A. Bobde along with two other Judges. The Attorney General, who was present in the matter, voiced his concerns about the Government Departments not being comfortable with service of summons and notices through Whatsapp because as per him “it was a completely encrypted platform”. However, the Bench did not accept the Attorney General’s stand and stated that service would be deemed to be completed if there was a double “blue tick” against the message which would indicate the message has been duly read.

Now that notices and summons can be served through the digital media which currently includes messaging applications it brings in its wake speedy implementation of court process where summons are concerned. Hitherto, service of summons by physical means stretched the service of summons to several hearings as the receiving party always found ways to refuse the summons mostly by paying off the postman. This new move prevents unnecessary delays in the process of law. Though this new means of service of summons and notices maybe a result of #COVID-19, it is no doubt an excellent way to reduce timelines in litigation. It is hoped that this new development will come to stay.

The Chief Justice of India, stated as follows:

“If the two blue ticks are there then it can be proved under Evidence Act…so Whatsapp can be used (for summons)”.

The Supreme Court also extended time for filing matters by extending the period by 45 days in matters pertaining to the Debt Recovery Tribunal and under Commercial Courts Act. However, it refrain from extending the limitation period in cheque bouncing matters and held that validity of cheque was the subject matter of Reserve Bank India and as such the Court did not want to intervene.

In another very interesting matter pertaining to the National Company Law Appellate Tribunal that has shut down completely as one of its employees was detected as positive for Coronavirus. The Supreme Court held that just for one employee who has detected positive for Coronavirus the NCLAT cannot close its doors of justice and asked the NCLAT to find a way for online hearings in the matter which was titled as Marathe hospitality v. Mahesh Surekha.

Lakshmi Vishwakarma

Associate

The Indian Lawyer

Legal Remedies for Corona affected

Dr. Kislay Panday, Solicitor, Supreme Court of India

The lawyers across the continents in the past few months have been hit with a slew of #coronavirus related legal matters. This is not surprising given the scale and magnitude of the #diseases which is indeed spreading like wildfire.

In India especially the last four weeks have been rather disturbing as the cases as well as the deaths are mounting. Some people affected by the disease are directly impacted while many others have had to face many situations for no fault of theirs.

These situations were often created by their employers, landlords, neighborhoods, even #hospitals, and law enforcers. Many people in the last few months have lost their #jobs or lay off or had a #salary cut despite a government directive to the contrary. There have been cases where landlords threw out the stuff of #medicalpersonnel fighting corona on the pretext that they can bring in corona!

This is the most unfortunate situation as when we need to be united against the virus we are busy using it to further our own petty ends. The coronavirus does not #discriminate, but people do.  The coronavirus has and will continue to impacts all societies and economies.

The biggest legal issue that has come to our notice is #employment-related. In the wake of a shrinking economy and rampant loss of customers, the companies after companies are laying off their workforce, often illegally on the pretext that they have no funds to sustain them.

This is a rather bizarre situation as no one can take such an effect as this goes grossly against the labor laws and established employer-employee relations. At best they can cut perks (that too if permitted in the contract if any).

Having said that, given our system of jurisprudence anybody is free to seek #legalremedies and so the #court cases are inevitable. To the employees serving in various companies, I have good news, if you are fired by your boss on the pretext of the corona pandemic he is on the wrong side of the law.

The reason is simple, unlike in the west where ‘force majeure’ is categorically mentioned, it is most likely to be absent in Indian #contracts. Interestingly enough even if it is there it has no legal value.  The expression ‘#forcemajeure’ or an #actofGod does not exist in the Indian statutes. 

The Indian Contract Act which provides the framework of any contract is silent on the term `force majeure’.  The court rulings have been rather varied, from case to case, depending on other facts brought to its notice.

In the absence of the ‘force majeure’ clause, Sec 56 of the Contract Act becomes relevant which is about `frustration of contract’ implying that the contract has become impossible or unlawful. This then opens a new legal tussle which can rage for years as it becomes courts prerogative to interpret the law in the matter brought before it.

Besides, even if the term ‘force majeure’ is mentioned in a contract it does not imply `#pandemics’ per se, as it typically covers catastrophes like war.  This is indeed good news for the employee who has been wrongly terminated or whose salary has been drastically slashed by the company in order to safeguard its own interests and pass on the burden of Corona pandemic on the hapless employees.

However, it is not that simple as if anyone who has ever fought a case in court knows the time and energy it takes to get justice.  We are doing all we can to help people in this time of crisis. Our team is dealing with such cases and using knowledge and experience to determine the best we can do to provide succor to these people.

 We have started this service ‘#probono’ and is open for anyone wronged by his employer or anyone on the pretext of coronavirus.  We have also started a helpline for corona patients who can dial-in for any legal advice absolutely free of cost 24X7 The Pandemic we are facing is unprecedented and we need not forget that it should be an opportunity to help others rather than profit from it at the expense of others.

Article By:  Dr. Kislay Panday, Solicitor, Supreme Court of India

PIL FILED IN SUPREME COURT IN THE TAMIL NADU-CUSTODIAL DEATH CASE

Recently, a Public Interest Litigation (#PIL) has been filed in the Supreme Court on or around 03-07-2020 seeking a direction that the #TamilNadu #ChiefMinister does not hold the portfolio of #HomeMinistry till the completion of the investigation and trial in the alleged father-son #custodialdeath in Tamil Nadu.

In the said matter, the Madurai Bench of the Madras High Court had passed an Order dated 24-06-2020 by taking #suomotocognizance in the matter of The Registrar (Judicial), Madurai Bench of the Madras High Court vs The State of Tamil Nadu and 5 others W.P. (MD) No.7042 of 2020, pertaining to the alleged custodial death of Late Tr. #Bennicks and Late Tr. #Jeyaraj in #Sathankulam, Tamil Nadu.

A suo moto cognizance is generally exercised by a high court under Article 226 of the Constitution of India 1950. In a number of other instances, the courts have evoked their judicial conscience based on newspaper and media reports and have taken suo moto cognizance of cases, to ensure speedy justice and preservation of human rights.

In this case, Late Tr. Bennicks and Late Tr. Jeyaraj were arrested by Sathankulam Police Station Officers on 19-06-2020, based on a complaint which stated that the Deceased Prisoners had refused to shut their mobile shop after the permitted time and further, threatened, abused and prevented the police officers from discharging their official duties during the Covid-19 period. Thereafter, they were shifted to Sub-Jail on 20-06-2020. But on 22-06-2020, both the #RemandPrisoners were admitted to Government Hospital, Kovilpatti, where they passed away.

Based on the complaint of Jail Superintendent, two #FIRs were registered in Kovilpatti Police Station on 23-06-2020 with regard to the death of the Deceased Prisoners. Further, the family members of the Deceased Prisoners also filed a Petition in the Madras High Court on 23-06-2020, against the alleged #policebrutality of Sathankulam Police Officers, which led to the death of the Deceased Prisoners.

The Madras High Court in the suo moto case passed an Order dated 26-06-2020 and directed the Judicial Magistrate, Kovilpatti to visit Sathankulam to conduct inquiry and local investigation, as the family members of the Deceased Prisoners were not in a mental and physical condition to travel to Kovilpatti, which is 100 kms away from Sathankulam.

It has been further noted in the Order dated 29-06-2020, that the State Government of Tamil Nadu had planned to transfer the case to Central Bureau of Investigation (CBI). Further, as the Sathankulam police officials were not cooperating with the inquiry of the Judicial Magistrate, the Madras High Court directed the District Collector to depute Revenue Officers in Sathankulam, to assist the Magistrate in his inquiry.

Thereafter, the report of the Magistrate was filed in the Madras High Court, which stated that a few police officers at Sathankulam Police Station had tried to cause disappearance of the evidence in this case, which is based on the statement of Ms. Revathy, Head Constable, Sathankulam Police Station. Thus, the Madras High Court appointed a CB-CID Officer to investigate this case, until the case is handed over to CBI, vide Order dated 30-06-2020. This would ensure that no evidence is tampered until the investigation is complete.  

Meanwhile, the Chief Minister of Tamil Nadu, Shri. Edappadi K Palaniswamy, reportedly issued a public statement on 24-06-2020, stating that the Deceased Prisoners had succumbed to certain illness and not due to police atrocities. As a consequence, the PIL was filed in the Apex Court praying that the Tamil Nadu Chief Minister is retrained from holding the portfolio of Home Ministry till the completion of the investigation and trial. This is to ensure a free and fair probe and trial in this case.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

IMPLEMENTATION OF AMENDMENTS IN INDIAN STAMP ACT, 1899 AND RULES MADE THEREUNDER

The Central Government had amended the Indian Stamp Act, 1899 (‘the Act’) on 01.04.2019. The implementation of the amended provisions of the #IndianStampAct, 1899 brought through #Finance Act, 2019 and Rules made thereunder has come into force on 01.07.2020.

Accordingly, the Central Government has notified implementation of the amendments in the Act, and in Indian Stamp (Collection of stamp duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019 [(‘Stamp Rules’) or (‘Amendments’)] which will facilitate ease of doing business. This will also bring uniformity and affordability of the stamp duty on securities across States and thereby build a PAN India securities market.

The Amendments have been carried out with respect to securities market transactions. This provides the manner in which #stampduty shall be levied and collected by such agencies and then transferred to the concerned state governments.

The basic framework which is being created by the Central Government through the Amendments is creation of the legal and institutional mechanism to enable States to collect stamp duty at one place by one agency. The collection of Stamp Duty shall be carried out through the Stock Exchanges or Clearing Corporations authorised by the Stock Exchange or by the Depositories, when any security is being sold, transferred or issued through these platforms.

The Central Government has also notified the Clearing Corporation of India Limited (CCIL) and the Registrars to Issue and Share Transfer Agents to act as collecting agents. The collecting agent may deduct 0.2 per cent of the stamp-duty collected on behalf of the State Government towards facilitation charges before transferring the same to such State Government.

The collecting agents have to transfer collected stamp duty to the State Government within three weeks of the end of each month. Any collecting agent who fails to collect the stamp duty or fails to transfer stamp duty to the State Government within fifteen days of the expiry of the time specified, shall be punishable with fine which shall not be less than one lakh rupees, but which may extend up to one per cent of the collection or transfer so defaulted.

The stamp duty rates being implemented through the Amended Indian Stamp Act with effect from 01.07.2020 are:

Stamp Duty Rates

InstrumentRate
Issue of Debenture0.005%
Transfer and Re-issue of debenture0.0001%.
Issue of security other than debenture0.005%
Transfer of security other than debenture on delivery basis;0.015%
Transfer of security other than debenture on non-delivery basis0.003%
Derivatives–– 
(i) Futures (Equity and Commodity)0.002%
(ii) Options (Equity and Commodity)0.003%
(iii) Currency and Interest Rate Derivatives0.0001%
(iv) Other Derivatives0.002%
Government Securities0%
Repo on Corporate Bonds0.00001%

The benefit of such Amendments is that cost of collection would be minimised while revenue productivity is enhanced. Further, this system will help develop equity markets and equity culture.

Some Key Highlights of Stamp Rules Amendments:

The amendments inter-alia provide for the following structural reforms—

  1. “States cannot collect stamp duty on any secondary record of transaction associated with a transaction on which the depository/stock exchange has been authorised to collect the stamp duty. This is to avoid multiple incidences of taxation.
  2. The collecting agents shall within three weeks of the end of each month and in accordance with the Rules made in this behalf by the Central Government, transfer the stamp-duty collected to the State Government. The concern State Government will be where the residence of the buyer is located and in case the buyer is located outside India, to the State Government having the registered office of the trading member or broker of such buyer and in case where there is no such trading member of the buyer, to the State Government having the registered office of the participant. The collecting agent shall transfer the collected stamp-duty in the account of concerned State Government with the Reserve Bank of India or any scheduled commercial bank, as informed to the collecting agent by the Reserve Bank of India or the concerned State Government.
  3. In the extant scenario, stamp duty was payable by both seller and buyer whereas in the new system it is levied only on one side (payable either by the buyer or by the seller but not by both, except in case of certain instrument of exchange where the stamp duty shall be borne by both parties in equal proportion).
  4. The collecting agents shall be the Stock Exchanges or authorized Clearing Corporations and the Depositories.
  5. For all exchange based secondary market transactions in securities, Stock Exchanges shall collect the stamp duty; and for off-market transactions (which are made for a consideration as disclosed by trading parties) and initial issue of securities happening in demat form, Depositories shall collect the stamp duty.
  6. The Central Government has also notified the Clearing Corporation of India Limited (CCIL) under the jurisdiction of RBI and the Registrars to an Issue and/or Share Transfer Agents (RTI/STAs) to act as a collecting agent. The objective is to bring OTC derivative transactions reported to CCIL and physical space (non-demat) transactions in mutual funds handled through RTI/STAs under the ambit of stamp duty regime so as to avoid any tax arbitrage.
  7. The collecting agents shall within three weeks of the end of each month transfer the stamp-duty collected to the State Government where the residence of the buyer is located and in case the buyer is located outside India, to the State Government having the registered office of the trading member or broker of such buyer and in case where there is no such trading member of the buyer, to the State Government having the registered office of the participant.
  8. The collecting agent shall transfer the collected stamp-duty in the account of concerned State Government with the Reserve Bank of India or any scheduled commercial bank, as informed to the collecting agent by the Reserve Bank of India or the concerned State Government.
  9. The collecting agent may deduct 0.2 per cent of the stamp-duty collected on behalf of the State Government towards facilitation charges before transferring the same to such State Government.
  10. For many segments, there is reduction in duty. For example, the rate prescribed is lower for issue of equity/debentures and for transfer of debentures (including re-issue) to aid capital formation and to promote corporate bond market.
  11. For equity cash segment trading (both delivery and non-delivery-based transactions) and options, since rates are to be charged only on one side in line with the new scheme, it can be stated that there is an overall reduction in tax burden.
  12. Secondary market transfer of instruments which are traded with differences in a few basis points, like interest rate / currency derivatives or corporate bonds are being charged at a very lower rate from the existing rates. For the newly introduced ‘repo on corporate bonds’, a far lower rate is specified, since similarly positioned repo on Government Securities is not subject to duty.
  13. No stamp duty shall be chargeable in respect of the Instruments of transaction in stock exchanges and depositories established in any International Financial Services Centre set up under section 18 of the Special Economic Zones Act, 2005.
  14. Tax arbitrage is avoided by providing the same rate of stamp duty for issue or re-issue or sale or transfer of securities happening outside stock exchanges and depositories.
  15. Mutual funds, being delivery-based transactions in securities, were supposed to have been paying the duty as per various State Acts. All mutual fund transactions are thus liable for stamp duty and the new system has only standardized the charges across states and the manner of collection of stamp duty.”

[Source: PIB Release ID: 1635399]

Lakshmi Vishwakarma

Associate

The Indian Lawyer

NEW CLASSIFICATION AND REGISTRATION PROCESS FOR MSME NOTIFIED

The Union Ministry of Micro, Small and Medium Enterprises (‘MSME’), vide Notification No. S.O. 2119(E) dated 26.06.2020, declared the new process of classification and registration of enterprises as #MSME. This Notification comes into effect from 01.07.2020. The Notification deals with the manner of calculation of investment in plant and machinery. It deals with turnover classification for MSME and updation of information and transition period for the classification.

It also emphasizes registration of all existing and new MSME in the Udayam registration portal. For this purpose an enterprise will be known as Udyam and its registration process will be known as ‘Udyam Registration’.

The Government has already issued a Notification number S.O.1702 (E), dated 01.06.2020,  to make the change in the MSME definition in accordance with #Aatmanirbhar Bharat Package on 13.05.2020.This was also made effective from 01.07.2020.

The Notification dated 26.06.2020 states that Udyam Registration can be filed online based on self-declaration with no requirement to upload documents, papers, certificates or proof. It also clarified that this is possible because the Udyam Registration process has been fully integrated with the Systems of Income Tax and Goods and Services Tax and the details filled can be verified on the basis of Permanent Account Number (PAN) or Goods and Services Tax Identification Number (GSTIN) details.

As per the revised definition, vide Notification dated 01.06.2020, an enterprise shall be classified as a MSME on the basis of the following criteria, namely:–

EnterprisesInvestment and TurnoverLimit
MICROInvestment in plant and machinery or equipments;  Does not exceed Rupees 1 Crores    
Turnover  Does not exceed Rupees 5 Crores
SMALLInvestment in plant and machinery or equipments;  Does not exceed Rupees 10 Crores  
Turnover  Does not exceed Rupees 50 Crores  
MEDIUMInvestment in plant and machinery or equipments;  Does not exceed Rupees 50 Crores
TurnoverDoes not exceed Rupees 250 Crores

Earlier, MSMEs were classified in two categories, such as manufacturing and service enterprises. Now this has been removed and both will be the same. Moreover, if any enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, then it will cease to exist in its current category. And it will be placed in the next higher category. However no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover.  

All units shall be collectively treated as one enterprise if they are listed with the same Goods and Services Tax Identification Number (GSTIN) and Permanent Account Number (PAN). Further, for all of such entities, the turnover and investment figures shall be seen together and only the aggregate values will be considered for deciding the category as micro, small or medium enterprises.

Other Highlights of Notification dated 26.07.2020

  1. An enterprise can be registered just on the basis of Aadhaar number.
  2. Investment in ‘Plant and Machinery or Equipment’ and ‘Turnover’ are the basic criteria for classification of MSMEs now;
  3. Exports of goods or services or both shall be excluded while calculating the turnover of any enterprise whether Micro, Small or Medium;
  4. The Ministry of MSME has established a strong facilitation mechanism for the MSMEs. This process is in the form of ‘Single Window Systems’ at the district level and regional level. This will be helpful for those entrepreneurs who are unable to file the Udyam Registration.

Now, the Facilitation of MSMEs will be a simple and yet fast-track. It is a revolutionary step towards Ease of Doing Business.

Lakshmi Vishwakarma

Associate

The Indian Lawyer

Call for Papers | National Law School of India Review

National Law School of India Review is inviting contributions for its forthcoming Volume 33, Issue 1.

About

NLSIR is the flagship law journal of the National Law School of India University, Bangalore. In its 33rd year now, the NLSIR is a bi-annual, student-edited, peer-reviewed law journal, which holds the distinction of being the first Indian student-run law journal to be cited by the Supreme Court of India, in its decision in Action Committee, Unaided Private Schools v. Director of Education. Notably, we have also been cited recently in the Supreme Court’s landmark judgment, Justice K.S. Puttaswamy v. Union of India, which established the Fundamental Right to Privacy in India. NLSIR has also been recently cited in Justice R. S. Bachawat’s Law of Arbitration and Conciliation, a leading treatise on arbitration law in India.

To further our aim to encourage legal writing, provide inclusive legal scholarship, and contribute to issues at the forefront of contemporary legal discourse, the Board of Editors is inviting submissions for its forthcoming Volume 33, Issue 1. 

Submission Guidelines

1.    All contributions submitted to the NLSIR should be original, and should not have any plagiarized content.

2.    By submitting contributions to NLSIR, the author(s) confirms that the manuscript is not being simultaneously considered for publication elsewhere (online or print). 

3.    Pieces with relevance to India or Indian law are particularly welcome. This, however, is not a prerequisite.

4.    Submissions are accepted for the following categories:

§  Long Articles: Between 5,000 and 10,000 words. Papers in this category are expected to engage with the theme and literature comprehensively, and offer an innovative reassessment of the current understanding of that theme. It is advisable, though not necessary, to choose a theme that is of contemporary importance. Purely theoretical pieces are also welcome.

§  Essays: Between 3,000 and 5,000 words. Essays are more concise in scope. These papers usually deal with a very specific issue and argue that the issue must be conceptualized differently. They are expected to make an easily identifiable and concrete argument.

§  Case Notes and Legislative Comments: Between 1,500 and 2,500 words. Case Notes are expected to analyse any contemporary judicial pronouncement, or a new piece of legislation, whether in India or elsewhere. The Note must identify and examine the line of cases in which the decision in question came about, and comment on implications for the evolution of that branch of law. In case of Legislative Comment, the Note must analyse the objective of the legislation, and the expected legal impact.

§  Book Reviews: Between 2,000 to 3,000 words.

5.    The journal is flexible regarding the word count depending on the quality of the submission. All word limits are exclusive of footnotes

Formatting Guidelines 

1.    The body of the manuscript should be in Times New Roman, font size 12 with 1.5 line spacing. The footnotes should be in Times New Roman, font size 10 with single line spacing.

2.    The manuscript should contain only footnotes (and not endnotes) as a method of citation. Citations must conform to OSCOLA (Oxford University Standard for the Citation of Legal Authorities) (4th edn.) style of citation.

3.    Authors are required to adhere to the NLSIR Style Guide which can be found here.

Submission Procedure

Submissions may be emailed to mail.nlsir@gmail.com under the subject “33(1) NLSIR – Submission”. All submissions must contain the following:

1.    The manuscript in a .doc or .docx format. The manuscript should not contain the name of the author, their institutional affiliations, or any other identification markers. The title of the manuscript should indicate the sub-theme that the author(s) have chosen.

2.    A separate cover letter in a .doc or .docx format, containing the Name of the author, Professional Information, Title of the manuscript, and Contact information.

3.    An abstract of not more than 150 words.

General Information

1.    The deadline for submissions is October 30, 11.59 PM.

2.    Co-authoring of papers among individuals of the same or different institutions is permissible, for a maximum of three authors

3.    Upon submission, every manuscript will undergo two internal reviews by the Board of Editors. If approved in both the rounds, it is subject to a double-blind peer review process. 

4.  We hope to update authors on the submission within 4 weeks of their submission.

Contact

For more information, please visit www.nlsir.com. For queries, write to us at mail.nlsir@gmail.com. You can subscribe to NLSIR here.