Current Legal Issues Forum

Is India Legally Prepared for the proposed changes in FDI in the Retail Sector?

2011-12-17T20:50:00.000-08:00

The background research for this CLIF session was put together by Surabhi Rajpal, Teaching Associate for the Corporate Law courses here at NLS.

We started with a timeline of the proposed FDI changes - the discussion on this issue has been going on for well over ten years. The first instance was that of the Task Force set up under MS Ahluwalia in 1999 which focused on enhanced FDI limits in the retail sector as a means of achieving greater economic growth to the Parliamentary Standing Committee Report in 2009 which stated that the social impact of these measures had not been taken into account.

What distinguishes FDI is that it purports to create a "lasting interest" in the productive assets of the economy. It also allows for influence over management in the entity that is being invested in. India has a sector-specific FDI policy, which is governed by inter alia, the Foreign Exchange Management Act and the regulations thereunder. Other legal instruments that may be taken into account are the press notes and circulars by the Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry. These circulars are usually notified by the RBI. Parliamentary approval is not necessary for the proposed changes, but the UPA government's idea was to create more legitimacy for this move.

The following issues were brought up to assess India's "legal" preparedness:

(a) under the constitutional scheme, the implementation of this policy would be the prerogative of the state governments (List II, Entry 27 in the Seventh Schedule) - does this move take the state governments into confidence?

(b) India's labour law situation is miserable - 95% of the labour force is unorganised sector; loss of jobs inevitable. Are our labour laws stringent enough to meet the challenge of violations in short term contracts & employment by MNCs?

(c) the megastores that invariably result from the opening up of these markets require huge tracts of land - under our land laws, acquisition for a "fair price" is allowed. Will acquisition proceed in a just fashion for private entities? How do we address the question of conversion of agricultural to non-agricultural land?

(d) will any of these measures fall foul of our obligations under GATS? Once investment is allowed, it will be difficult to regulate activity e.g. Thailand.

Our discussions on these questions brought up the following issues - (a) will it encourage innovation amongst the smaller vendors and thereby keep them in business? (b) what would be the role of the Competition Commission in this regard? (c) will greater regulation for e.g. limiting the number of players in a given geographical area like they did in China solve the problem? (d) Would minimum pricing as was the case in Germany when Walmart entered the market solve the problem? (e) what explains the attitude of the big domestic retailers?

Although the plans have been shelved for the time being because of political opposition, it was evident that India seemed legally unprepared for a move of this nature.

Temple Treasures and the Supreme Court

2011-08-08T12:19:00.000-07:00

We discussed legal issues surrounding the 'treasure' discovered at the Sree Padmanabhaswamy temple in Trivandrum. Having first read through the decision of the Kerala High Court in January 2011, the discussants were familiar with the history of the litigation, the temple's administration and the issues that had been raised in appeal before the Supreme Court.

One of the two writ petitioners in the case were Uthradam Thirunal Marthanda Varma, the brother of the last ruler of Travancore, Chithira Thirunal Balarama Varma. The issues before the Kerala High court were a] who could manage the temple and b] in what manner is this administration to be carried out? This in turn hinged upon an interpretation of the term 'ruler' in the Travancore-Cochin Hindu Religious Institutions Act read with Article 366 (22) of the Constitution.

The case was apparently filed because Uthradam Thirunal had apparently made a comment during a press interview to a leading Malayalam daily that the assets of the temple 'belonged' to the Travancore royal family. The civil courts in Trivandrum were approached by concerned devotees and the case ultimately came before the Kerala High Court. The High Court upheld the

claim of the state government, stating the administration of the temple, after the demise of the last recognised ruler of Travancore vested with the state government. Meanwhile, Uthradam Thirunal, after the death of Chithira Thirunal in 1992, had continued with appointing people to the temple administrative bodies. The Supreme Court was approached, seeking the writ of quo warranto in this respect.

Some of the issues that we discussed were:

1. Does Uthradam Thirunal have a viable claim to be ruler under the TC Hindu Religious Institutions Act? The majority of the discussants felt, upon a reading of the relevant Sections, Articles 366 (22), 363A, 295 and 296 of the Constitution that the administration vests with the state. This is in line with the reasoning of the High Court, although there appears to be a genuine legal lacuna in terms of who will continue to administer the temple, given that the State Government seems unwilling to take this up. The High Court's suggestion was that a statutory body or a trust should be created afresh, while respecting the rights of the royal family / denomination to worship freely.

2. Can the wealth of the temple be legally claimed by the royal family? This appears to be a non-argument, since idols are juristic persons under Hindu law, who can hold property and be taxed.

3. Are there problems with the way in which an ostensibly secular state such as India is implicated in the running of religious institutions like temples? We discussed the distinction between administration of temples as a religious matter and the religious practices themselves as a religious matter. Some of us argued that this was an artificial distinction (along the lines of the distinction between religion and religious practice in Article 25 cases).

4. In re the opening of Vault B, should courts take into account faith and belief? The question was one of public legitimacy too, some argued. The courts cannot go completely against public opinion. On the other hand, it cannot also be a situation where legal procedure is completely ignored.

We also discussed at some length the decisions in (a) N. Muraleedharan Nair (1991 - Ker HC), (b) M.P. Gopalakrishnan Nair (2005 - SC) and (c) G. Raman Nair (2005 - Ker HC) which deal with the question of whether elected representatives who are to be part of the Devasom Boards have to believe in temple worship themselves.

SC orders in the Salwa Judum Case

2011-07-15T08:51:00.000-07:00

We discussed the recent directions issued by the Supreme Court in the Salwa Judum case (Nandini Sundar and ors. v. State of Chhattisgarh) and the following broad issues:

1. Is the reasoning of the Court as far as Articles 14 and 21 are concerned unnecessarily convoluted? The reasoning of the court, in the case of Article 14 seems to be that the SPOs, appointed under the Chhattisgarh Police Act, 2007 (read with May 2011 rules) seem to be facing risks incommensurate with the skills training that they receive. Their service conditions are inadequate, again, for those purpotedly involved in a counter-insurgency operation. The second part of the Article 14 reasoning pertains to the fact that given that many of the appointments are of tribal youth, some of whom have had only limited schooling. This does not allow them to exercise proper judgment, given the particular conditions that they are facing. Q: Could this case have been wrapped up just by noting the lacunae of rules at the time of appointment?

The manner in which 'dignity', particularly, has been discussed in the context of Articles 14 and 21 seems to be a novel approach adopted by the Supreme Court. The order discusses this in the context of the Directive Principles (equitable distribution and sustainable development, among others) were "principles fundamental to the governance of the state'. Previously, it has been noted by the SC in the context of Article 21 (life as being more than mere animal existence).

2. Why was the implication of the Central Government in these orders important? The Central Government had submitted that beyond specifying the maximum number of SPOs who could be appointed and from supplying the funds required for the honararium, the Central Government pleaded ignorance of the situation. We discussed how historically the role of the Ministry of Home Affairs is deeply involved in the "management" of internal conflict, particularly on Naxalite violence. There is blatant disbelief expressed at the Government's affidavits in the order. Q: Apart from more obvious reasons why there is this disbelief, is the involvement of the Central Government important from the compensation for the SPOs affected by Naxalite violence (that the petitioners had asked for?)

3. Does this case demonstrate the limitations of the PIL model? The order is particularly concerned about the security of the SPOs who would be disarmed, and asks the very Government which was complicit in these unconstitutional appointments to ensure their safety.

4. The original petition (250/2007) had asked to stop the appointments of SPOs who were minors. Apart from the reference to tribal "youths" or "youngsters", the Court does not look at the impact of minority in any detail. Perhaps it is assumed. In one part of the order, the Court discusses how the "informed consent" of those who had received such limited training / skills could not be presumed, even if they were not above the age of eighteen.

Note that the decision has not completely negated the use of SPOs in Chhattisgarh, but has only restricted their deployment in case of natural / manmade disasters where relief work is necessary or to regulate traffic. Essentially the idea seems to place them in non-combatant positions.

We also discussed the use of SPOs in other states - particularly, Karnataka and Kashmir, and what the manner of regulation was in these instances. It appears that the SC's interpretation also takes cognisance of the peculiar nature of the Chhattisgarh situation, without buying into the argument by the Government that it was an exceptional situation which demanded "extraordinary" measures.

5. Were all the reliefs that were asked for addressed in the order? Notably, the case does not address the question of compensation even though a rehabilitation scheme has been proposed by the petitioners during the course of litigation. Further, the evacuation of the schools and hospitals is still being monitored. The CBI has also been directed by the Court to look into the burning of villages.

6. What were the consequences of the order? We briefly looked into how the disarming of SPOs was immediately carried out, but that there were some disquieting responses in and around the villages. The order specifically noted how the Court had ordered that the security of the SPos be ensured. Perhaps the disarming was immediate, proof of the SC's growing legitimacy as a public institution. In this context, we also discussed the not-so-immediate responses in the Right to Food cases or the deletrious effects of some of the orders from the Forest Bench.

7. Should the first few pages of the order (discussing constitutional visions and the ill effects of globalisation etc.) be ignored? Some expressed the idea that these might be necessary to convince the presiding judges of the gravity of the situations. Others shared experiences where the observations in a case (as opposed to the ratio of the case) had been cited before other benches in order to get a favourable order! While rhetoric in and of itself would not be useful without a legally reasoned order, it does play an important supplemental role. We also noted how cases such as Olga Tellis are cited and used to press constitutional arguments on say, dignity of

citizens, although the final order in the case was not favourable to the petitioner. Another example in this regard seems to be Menaka Gandhi.

There was also a brief discussion on the role of the Supreme court and judicial overreach and why citizens approach the appellate courts rather than use avenues open to approach the legislature. We also discussed a few initiatives where this scenario appears to be changing.

2011-01-13T01:40:00.000-08:00

We're thinking of reviving CLIF over the course of the next trimester at NLS! CLIF this year will be different because it will carry no course credit, it will be a discussion group in which people can voluntarily participate! Do write in with suggestions as to what you are interested in thinking through.

On an aside, we recently had a small group discussion on the rise and fall of the jury trial in India, using material from Gyan Prakash's new book, Mumbai Fables and the events surrounding Nanavati case. Issues that were raised included the role of laypersons in adjudication, the role of media in 'deciding' court verdicts and contemporary trials that have captured public imagination. More on this later. Watch this space!

NLS Reservations Case: Issues for Discussion

2009-10-07T10:07:00.000-07:00

Find below, issues for discussion for tomorrow's session, as identified by this week's group:

1. Discussing the history and purpose for the policy of reservation in India and analysing whether the judgment fulfils the underlying rationale to be achieved.
2. Can NLS, being a "national institute" but not one of "national importance" extended its reservation to SCs and STs at the all India level?
3. What is the rationale behind the Karnataka High Court's decision against National Law School?
4. What is the nature of Article 341 and the Presidential Order of 1950 and what are their implications for reservation made by a state for SCs at the national level?
5. What is ‘real equality’?
6. What kind of interpretation has the court given the phrases ‘with relation to the state’ and ‘for the purpose of the Constitution’ in Art 341(1)?
7. Has the court in the given case followed precedent with regards to the above two issues?
8. Questioning the constitutionality of the reservation policy formed after the judgement. Is it in accordance to Art 14 and Art 19(1)(e) of the Constitution?
9. The effect of judgement on admissions to NLSIU next year.
10. Is our reservation policy faulty? Should we rather adopt a method like that in the US or South Africa? Or is their policy not applicable under our circumstances?

Session 8: The NLS Reservations Case

2009-10-05T06:36:00.000-07:00

This week we will be discussing the NLS Reservations case (Lolaksha v. Convener, CLAT, WP No. 18534/2009. The judgment can be found at the url below:

http://164.100.80.145:8080/dspace/bitstream/123456789/200616/1/WP18534-09-10-09-2009.pdf

Declaration of Assets by Judges

2009-09-30T10:42:00.000-07:00

Find below the issues identified for discussion by this week's group:
We will be covering, broadly, the following themes in tomorrow’sdiscussion:
I The Judgement, Its Antecedents and Outcomes -

Evolution of details of judges assets coming into the public domain starting from 1997 Resolution
What is the content of the 1997 Resolution and is the intention behind reflected adequately in the judgment?
The CIC and High Court judgments- core issues raised
Reactions in the Media and from the Judiciary and other possible effects

II Supreme Court Jurisprudence on Declaration of Assets and Other Outcomes

Is the Supreme Court bound by its own decisions regarding declaration of assets by election candidates under the Representation of People Act? ( *Primary Reading: SCAORA*)
Independence of the Judiciary and Separation of Powers, Right to Privacy and the Right to Information Act- A curious interplay
The Conflict of Interest v. Wealth Accumulation debate- what all does a judge have to disclose? (in connection with the US Statues)

III Judges Assets Declaration Overseas

A comparison between the Ethics in Government Act, 1978 and Judicial Disclosure Responsibility Act, 2007 (USA) which mandates disclosure and the current judgment
Whether these principles should be incorporated into our system of disclosure given the varied nature of the judiciary in India and the US.

A copy of the CIC order can be found here:http://cic.gov.in/CIC-Orders/FB-06012009-01.pdf

Session 7: Declaration of Assets by Judges

2009-09-29T04:10:00.000-07:00

We will be discussing the issue of declaration of assets by judges this week. The prescribed reading is the judgment on the issue by the Delhi High Court (CPIO, Supreme Court of India v. Subhash Chandra Agarwal), WP (C) 288/2009, delivered on 2.9.09. It can be found on the Delhi High Court website (http://delhihighcourt.nic.in/).

Direct Taxes Code: Write up

2009-09-29T04:01:00.000-07:00

The following is the write up on the Direct Taxes Code, and the session discussions:

I. Pranab Mukherjee said, upon entering his office, that his Ministry would release a draft bill for a completely new, simplified tax code within the first 45 days of his tenure. True to his word, the draft bill, called the Direct Taxes Code (DTC) has been released for public comment. While the promises of lower, stable rates of taxation have caused many to view the code positively; the DTC carries forward many of the shortcomings of the Income Tax Act, 1961 and brings in a fair share of problems on its own. The provisions of the new code and some of the policy considerations they throw up will be the central concern of this paper.

I will begin by discussing the objectives behind the new code and the reasons the need for it was felt. I will then look at the effect of the provisions of the code on non-profit organisations with a view to balancing anti-avoidance concerns with incentivizing public welfare.

NEED FOR CHANGE
The IT Act has become very complex and virtually unintelligible to the common (wo)man by virtue of a complicated structure, numerous amendments, frequent policy changes, and a multitude of judgments that gave varying interpretations to already undecipherable provisions. This complexity has not only increased the cost of compliance for the average tax payer, but also made it costly for the administration to collect tax. Lastly, the tax base has been eroded significantly due to an increasing number of exemptions and horizontal inequity.
These are some of the reasons that the need for a simplified new code was felt.

The OBJECTIVES of the new code are therefore
· Simplification
· level-playing field for domestic and foreign tax players
· equity and non-discrimination
· removal of ambiguity to encourage voluntary compliance
· stability in the tax regime
· increase tax to GDP ratio
· eliminating distortions in the tax structure,
· introducing moderate levels of taxation and
· expanding the tax base by
o minimizing exemptions that have been eroding it
o Reducing ambiguity that facilitates tax avoidance by making provisions clear and less liable to varying judicial interpretation
o checking tax evasion.

It is important to observe that while some of the provisions of the new code are very similar, even identical to those of the IT Act, Pranab Mukherjee says in the introduction to the discussion paper released by the Finance Ministry that the new code is not an attempt to amend the old code and therefore should be read in isolation, rather than by comparing provisions of the old with the new. If the new code is to be read in this way, will the interpretation, understanding and plugging of the holes in the IT Act be extendable to the provisions adopted here?

This is significant in the context of the above objectives of simplifying the tax law in India, making it less ambiguous by reducing scope for varying judicial interpretation etc.
Throughout my discussion on the provisions of the new code, I will argue that while the problems raised by their wording might have been plugged by judicial interpretation in the past, it is defeating the above objectives to the code to import the provisions verbatim in the new code. Rather, it would have served the objectives of the government better to incorporate judicial wisdom accumulated over the years into the new code by wording provisions better. In my opinion, clarifying some of these contentious issues in the bill itself in simple language would not have endangered the desired simplicity of the code. Instead, it would have furthered the goal of helping tax payers understand their liabilities and plan accordingly.

TAXATION OF NON-PROFIT ORGANISATIONS AND OTHER TRUSTS
Currently, registered NGOs are under the income-tax net, but not liable to pay tax. The general rule is exemption from tax if the purpose is charitable. Thus it is that charitable public trusts and foundations have been a popular vehicle among corporate houses to bring in huge tax benefits. In fact, there are presently over 70,000 trusts and charitable institutions registered with the Income-Tax Department and get tax exemption on their activities.

The new code makes significant changes in this regime by making exemption the exception and taxation the rule. Under the code, non-profit organizations will be liable to pay tax at the rate of 15 per cent regardless of the nature of their work. The phrase “charitable purpose” in the IT Act has been replaced by the phrase “permitted welfare activities” which seeks to narrow the scope to-
o relief for the poor,
o advancement of education,
o provision of medical relief,
o preservation of environment,
o preservation of monuments or places or objects of artistic or historic interest
o any other object of general public utility.
But not
o any activity in the nature of trade, commerce or business, or
o any service in relation to any trade, commerce or business, for a fee or for any other consideration, irrespective of the nature of use, application or retention of the income from such activity.

An organization shall be treated as a non-profit organization if
· it is established for the benefit of the general public; it appears that the onus will now be on the organisation to demonstrate, by leading evidence, that the benefit has actually reached the general public. The amount of documentation to be maintained to demonstrate this may be, in certain cases, impractical. Thus it seems that rather than simplify matters, the code might be creating additional complications.
· it is not established for the benefit of any particular caste; the question that arises is whether a non-profit organization that works for manual scavengers, that tend to be dalits, would be excluded from the definition. It would seem that the judicial opinion on a similar provision in the old Act would apply here too, that such organization would not be excluded so long as it did not speak of itself as an organization dedicated to dalits. However, as I said earlier, I think it would serve the object of the code better to include that clarification in the code itself. Doing so would prevent unnecessary litigation and confusion thus increasing efficiency.
· it is not established for the benefit of any of its members- here again arises the contentious issue of what qualifies as the benefit of any of its members. Will the organization be excluded if it works towards fighting AIDS and the co-founder has AIDS?
· it does not intend to apply its surplus or other income or use its assets or incur expenditure, directly or indirectly, for the benefit of any interested person
· it is established for carrying on permitted welfare activities;
· it actually carries on the permitted welfare activities during the financial year;
· the actual beneficiaries of its activities are the general public;
· any expenditure by the organisation does not enure, directly or indirectly, for the benefit of any interested person;
· the funds or assets of the organisation are not used or applied or deemed to have been used or applied, directly or indirectly, for the benefit of interested person;
· the surplus, if any, accruing from its permitted activities does not enure, directly or indirectly, for the benefit of any interested person;
· the funds or the assets of the non-profit organisation are not invested or held, at any time during the financial year, in any of the forms or modes specified in section 91;
· it maintains such books of accounts and in the manner, as may be prescribed;
· it is registered as such under section 93; and
· it obtains a report of audit in prescribed form from an accountant before due date of filing of the return in respect of,- (A) the accounts of business, if any, carried on by it in accordance with the provisions of section 84; and (B) its accounts relating to the permitted welfare activities in a case where the gross receipts referred to in section 89 exceeds one lakh fifty thousand rupees;

The tax liability of a non-profit organisation shall be 15 per cent of the aggregate of-
(i) the amount of surplus generated from the permitted welfare activities; and
(ii) the amount of capital gains arising on transfer of an investment asset, being a financial asset;
The amount of surplus generated from the permitted welfare activities shall be the “gross receipts” as reduced by the “outgoings”.
The “gross receipts” shall be the aggregate of the following:-
(i) The amount of voluntary contributions (this would mean that donations would be taxable in the hands of the receiving organization though the donor would still enjoy exemption to some extent) received during the financial year;
(ii) Any rent received in respect of a property consisting of any buildings or lands appurtenant thereto;
(iii) The amount of any income derived from a business which is incidental to any of the permitted welfare activities; Profits of any business held under trust would not be eligible for concessional treatment even if such profits are to be mandatorily used for permitted welfare activities. This effectively overcomes the decision of the Supreme Court in the case of Thanti Trust, wherein it was held that exemption could not be denied to profits generated by a business of a charitable organisation which could not be utilised except for charitable activities. The only business that would now be permitted is which is incidental to the permitted welfare activities in a manner that the business itself is carried on in the course of actual carrying out of the permitted welfare activity.
(iv) Full value of the consideration received from the transfer of any investment asset, not being a financial asset;
(v) Full value of the consideration received from the transfer of any business capital asset of a business incidental to its permitted welfare activities;
(vi) The amount of any income received from any investment of its funds or assets; and
(vii) All other incomings, realizations, proceeds, donations or subscriptions received from any source.
The amount of outgoings shall be the aggregate of
(i) voluntary contributions received during the financial year by the nonprofit organisation made with a specific direction that they shall form part of the corpus of the non-profit organisation;
(ii) the amount actually paid during the financial year for any expenditure, excluding capital expenditure, on the permitted welfare activities; It is unclear what expenditure on permitted welfare activities would encompass. Would it include salaries paid to workers at the organization, expenses on media coverage, publicity etc that may not directly benefit the public but enable the organization to do so?
(iii) the amount actually paid during the financial year for any expenditure, excluding capital expenditure, on the permitted welfare activities;
(iv) the amount of capital expenditure actually paid during the financial year in relation to-
(a) any business capital asset of a business incidental to any of the permitted welfare activities; or
(b) any investment asset, not being a financial asset.
(v) any amount actually paid during the financial year to any other nonprofit organisation engaged in a similar permitted welfare activity;
(vi) any amount applied outside India during the financial year if the amount is applied for an activity which tends to promote international welfare in which India is interested and the non-profit organisation is notified by the Central Government in this behalf.

The income of any trust or institution recognised/registered under the religious endowment Acts of the Central Government or the State Governments shall be fully exempt from income-tax. However, donations to such trusts or institutions will not enjoy any deduction in the hands of the donor. I have not come across any rationale for this exemption so far.

The new regime shall not apply to any person who-
(a) holds any business under trust, notwithstanding a specific direction that the business shall form part of the corpus of such person or a specific direction that the income from the business shall be applied only for permitted welfare activities;
(b) carries on the permitted welfare activity involving the relief of the poor, advancement of education, provision of medical relief, preservation of environment or preservation of monuments or place or objects of artistic or historic interest and also carries on a business which is not incidental to the aforesaid permitted welfare activity
(c) ceases to be a non-profit organisation at any time during the financial year

In conclusion, it would appear that the provisions of the new code are perhaps unable to achieve the correct balance between incentivizing socially relevant work and preventing tax avoidance. What is definitely required are clarifications on some of the minute points raised. On a more fundamental level, it is even questionable as to why a non-profit organization that carries out welfare work the state is unable to ought to pay tax at all. An obvious concern is to avoid misuse, but is the appropriate response to impose a tax of 15 per cent or regulate the sector in other ways?

---

II.

A. The Treatment of Savings Under the New Direct Tax Code

The Direct Tax Code make significant departures from the system that is in operation at present, the most significant changes being that of, firstly, an increment in the exemption amount from Rs. 1 lakh to Rs. 3 lakh, and, secondly, an alteration from the exempt-exempt-exempt system (or ‘EEE’) to the exempt-exempt-tax system (or ‘EET’). For the purposes of conceptual clarity, the two systems are explained hereinunder:

i) Exempt-exempt-exempt (EEE) – Under the EEE system the exemption is total, and there is no tax liability incurred on contributions, on interest accrued for the period of interest or on the amount withdrawn.
ii) Exempt-exempt-tax (EET) – Under the EET system imposes a tax liability on the investment at the time of withdrawal alone, tax not being payable at the time of contribution or on the interest that accrues on the contribution (the last ‘T’ naturally referring to ‘tax’)

The Direct Tax Code provides for the latter system of EET, and taxes the contributions made in certain schemes for the purpose of reduction; while under the Income Tax Act, the EEE system operated. The distinction between the systems is obvious, and a rational actor would most certainly prefer the EEE system to the EET. This, however, does not imply that the same rational actor would prefer the old Income Tax Act of 1961, on the simple reason that the increase in the exemption limit counter-opposes the damage done by taxing the scheme at the time of withdrawal. The following examples will make this argument clear:

Case 1: Tax Liability of a male A, with income of Rs. 10 lakhs

Under the Old Tax Scheme:

Particulars
Amount
Income from Various Sources
10,00,000
Deductions
1,00,000
Taxable Income (=Income - Deductions)
9,00,000
Tax Liability (= Rs. 54,000 + 30% on Rs. 4,00,000)
1,74,000

Under the Direct Tax Code:

Particulars
Amount
Income from Various Sources
10,00,000
Deductions
3,00,000
Taxable Income (=Income - Deductions)
7,00,000
Tax Liability (=10% on Rs. 5,40,000)
54,000

Case 2: Tax Liability of a male B, with income of Rs. 3 lakhs

Under the Old Tax Scheme:

Particulars
Amount
Income from Various Sources
3,00,000
Deductions
1,00,000
Taxable Income (=Income - Deductions)
2,00,000
Tax Liability (=10% on Rs. 40,000)
4,000

Under the Direct Tax Code:

Particulars
Amount
Income from Various Sources
3,00,000
Deductions
1,40,000
Taxable Income (=Income - Deductions)
1,60,000
Tax Liability
0

Case 3: Tax Liability of a male C, with income of Rs. 5 lakhs

Under the Old Tax Scheme:

Particulars
Amount
Income from Various Sources
5,00,000
Deductions
1,00,000
Taxable Income (=Income - Deductions)
4,00,000
Tax Liability (=14,000 + 20% on Rs. 2,60,000)
66,000

Under the Direct Tax Code:

Particulars
Amount
Income from Various Sources
5,00,000
Deductions
3,00,000
Taxable Income (=Income - Deductions)
2,00,000
Tax Liability
4,000

From the above, it is clear that the new direct tax code significantly reduces the tax payable at the time of assessment. However, it is important to remember that at the time of making withdrawal from the investment scheme that is available for deduction of taxable income, a tax liability is incurred. In this regard, the benefit still accrues to the tax payer since the interest on the investment remains tax free and only the capital amount is taxable. Furthermore, in light of the larger tax slabs under the new Code, this amount payable should be significantly lesser than the amount that is liable to be included in taxable income over above the Rs. 1 lakh exemption limit.

The preceding analysis will leave any investor jumping for joy. However, before booking the tickets for Hawaii, two important observations are in order. Firstly, there has been significant pruning of the schemes for which deductions are available, the most important ones being housing loans, unit-linked insurance policies, house rent allowances, contributions to fixed deposits and LIC premiums. This has potential repercussions on the middle-class, since these are the most popular schemes under which deductions are claimed. Secondly, the schemes are taxable at the time of redemption leaving the greatest impact on the retired, a class of people who do not have a steady source of income. However, this criticism can easily be countered by bettering tax planning for retirement, a task that will be made more simple, since there is tremendous incentive to save in the income earning years.

The trade-off is simple – the taxable amount has fallen, but the number of investment schemes for which deductions may be claimed have been significantly been reduced. The focus of the new Code, according to the Discussion Paper, is on long-term capital formation, with incentives being tremendous for the same. The greatest threat to the atmosphere of optimism that has been generated by the new Code is nothing but a change of heart by the government; and it remains to be seen whether it will see the proposals in the draft Code through.

B. The Impact of the Direct Tax Code on the Tax-GDP Ratio

The Discussion Paper claims that tax base has eroded through a steadily escalating range of exemptions. GDP growth in the years post-reform has been formidable, while the tax-GDP ratio remained low for the most of the years since. The new Code doesn’t seek to improve the situation further, and the government seems to be placing too great a reliance on the view that households and firms, if taxed lightly will increase their consumption expenditure and will invest more, and this in turn will fuel growth. The problems with this argument are simple. Firstly, it underestimates the role of public expenditure and capital formation. Secondly, it advantages GDP growth even at the cost of reducing the role of direct taxation in reducing the inequalities brought about by economic growth. Thirdly, it completely ignores the role of tax-financed public expenditure in alleviating poverty, and providing a social security net. Fourthly, the government’s assumption may be entirely wrong which result in an even greater detriment to the revenue collections, thereby off-setting the Tax-GDP Ratio even further.

C. Presumptions

The new Code makes a presumption that an arrangement is entered into for the tax benefit alone, unless it is rebutted by the taxpayer. The tax benefit is defined, amongst other things, to mean a reduction, avoidance or deferral of tax arising. The issue which such a presumption is that generally, tax statutes are to be interpreted in strictly and in a manner that provides benefit to the tax-payer, however, with this provision wide discretionary powers are vested in income tax commissioner. It is yet to be seen if this presumption will stand the test of judicial scrutiny.

---

III.

A. What is tax avoidance?
People eliminate or reduce tax by following a transaction or many transactions that are legal. The various methods of Tax Avoidance are:
a) Legal entities
b) Country of residence
c) Double taxation

· Legal entities are a method that people follow when they want to go for tax avoidance. Under this method, people legally defer paying personal taxes by creating a legal separate entity to which they donate their property. The legal separate entity that is set up is often a foundation, company, or trust. The properties are transferred to the trust or company, as a result of which the income that is earned belongs to this entity and not by the owner. Usually, people are taxed personally on earnings and property that they own and thus by transferring property to a legal separate entity, individuals can avoid personal taxation although certain taxes such as corporate taxes are still applicable.
· Country of residence is another method that people adopt when they go for avoidance of tax. Under this method, the company or person changes the tax residence to a place that is a tax haven in order to lower the amount of taxes that they pay.
· Double taxation means that many countries charge taxes on the income that has been earned inside that country without taking into consideration, the resident country of the firm or person. So that people do not have to pay double taxes, once in the country where the income has been earned and then again in the resident country, many countries have gone for bilateral treaties of double taxation with other countries. This helps tax-payers as they are able to avoid paying double taxes.

B. Why is tax avoidance bad?

a) First there is substantial loss of much needed public revenue, particularly in a welfare State like ours.
b) Next there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, directly causing inflation.
c) Then there is “the large hidden loss” to the community some of the best brains in the country being involved in the perpetual war waged between the tax-avoider and his expert team of advisers, lawyers and accountants on one side and the tax-gatherer and his perhaps not so skillful advisers on the other side.
d) Then again there is the “sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it”.
e) Last but not the least is the ethics (to be precise, the lack of it) of transferring the burden of tax liability to the shoulders of the guileless good citizens from those of the “artful dodgers”.
C. Anti –avoidance principles
1. Business Purpose Rule
A transaction must have a main or predominant business purpose other than tax avoidance.
2. Substance over Form Rule
It is basically lack of economic substance. Even if a person carries out a series of legal transactions, if on the whole the main aim is tax avoidance, the transactions will be taxed. Furthermore, sham transactions which hide the economic reality of a transaction that exists in form only are also taxable. The Code is concerned not merely with the genuineness of a transaction, but with the intended effect of it for fiscal purposes. No one can now get away with a tax avoidance project with the mere statement that there is nothing illegal about it.
3. Step transaction doctrine
Under the new code, a series of connected transactions will not be regarded as a single transaction but rather taxed as individual transactions.
D. Blurring the line between evasion and avoidance
In India, the law is settled that tax avoidance is legal and evasion is not. A taxpayer may create a device to arrange his commercial affairs to minimize his tax liability and its acceptance is based on operation of law. While revenue authorities are entitled to decipher the true meaning of a transaction, they cannot substitute its legal effect by a perceived “substance of the transaction” without related provisions under the tax legislation for Anti-avoidance rules. However the new code proposes to introduce General Anti-Avoidance Rule (GAAR), which would erase the thin line between tax avoidance and tax evasion.
· How is the new code different from the existing position?
The Supreme Court in 1967 held in the case of Commr. of Income-Tax v. A. Raman & Co [1968] 67 ITR 11(SC) that avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the Income-tax Act. Legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but may lawfully be circumvented. This position was reiterated in the Mcdowell case in 1985. It was further held that tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods.
However, under the new code, Section 112 empowers revenue authorities to declare any arrangement as “impermissible avoidance arrangement” if it results in certain tax benefits or it creates rights or obligations which would not normally be created between persons dealing at arm’s length or it results in abuse of the provisions of the code, lacks commercial substance or lacks bona fide business purpose. It allows revenue authorities to disregard, combine or re-characterize any step in any such arrangement, or re-characterize equity in to debt and vice versa.
Currently, a company is considered “resident” in India for tax purposes, if “control and management” of the affairs of such company is situated wholly in India. It is now sought to provide for a more stringent test for tax residency — a foreign company would be resident in India even where a fraction of the “control and management” of its affairs are situated in India, thus leading to worldwide income of such companies being taxed in India.
The Code further seeks to widen the tax net to bring within its purview income earned from transfers, directly or indirectly, of any capital assets situated in India. The intent, among other things, seems to tax overseas income from transfer of shares of companies abroad having downstream India holdings; this controversy has also recently been a subject matter of extensive litigation by the revenue authorities at the highest judicial levels.
· The concerns regarding GAAR and the wide powers of the Commissioner
Essentially, whereas the tax and business group is not opposed to GAAR, the widely worded proposals require deeper reflection. A liberal interpretation of the present silent law could perhaps have led to tax leakages; we ought to learn from experiences of other countries. International experience has suggested that taxpayer uncertainty is the most frequently cited argument against GAAR. Under the proposed code, a Commissioner rank officer can invoke GAAR under (what in his discretion is) “impermissible tax avoidance arrangement”. This principle is over and above commercial substance test and any action that directly or indirectly abuses the provisions of the code. Simply stated, besides wide administrative power, this would be amongst the strictest form of GAAR legislated by a country. The taxpayer is to establish that obtaining a tax benefit was not the main purpose of the arrangement. On invoking the GAAR, the CIT may determine the tax consequences by amending, disregarding or re-characterizing the arrangement. GAAR would also override the applicable treaties, and directions of CIT would be binding on the assessing officer.
· What do we mean by “tax benefits”?
The main purpose of an impermissible avoidance arrangement should be to obtain a tax benefit. Tax benefit has been defined to mean a reduction, avoidance or deferral of tax, an increase in refund of tax, reduction, avoidance or deferral of tax that would be payable under the DTC .
· How to address the concerns?
A specialised panel would lend independence and objectivity before exercising discretion and would help to avoid prolonged litigation. The GAAR panel should focus on taxpayers’ behaviour and contentious issues, recognizing the fact that the tax administration has to exercise its discretion in a judicious fashion. Though the maximum penalty has been scaled to 200 per cent (from 300 per cent), prosecuting tax evaders, particularly the five identified non-cognizable offences, would raise eyebrows. For instance, Section 234, 235, 236, 239 and 249 (including failures to furnish tax returns, false statements in verification, willfully attempting to evade tax) have been made non-cognizable offences. There could be genuine reasons for failure to furnish tax returns or delay in payment of withholding tax. It is interesting to note that the specified non-cognizable offences override the code of criminal procedure, which is presently the case.
While in general, introducing GAAR is a step in line with many of the mature economies, in India, it is apprehended that wide discretionary power provided to the tax officers may be used without a developed guiding principle. There is apprehension that GAAR could be used against even genuine transactions, thereby affecting the investment climate in the country. The introduction of GAAR must be coupled with suitable administrative and judicial reforms.
---

IV. The DTC seeks to essentially, reduce compliance cost, minimise tax avoidance and broaden the tax base. While these objectives are desirable and the need to raise collections is understandable, increase in the tax collection ideally has to be without increasing the burden on existing taxpayers; widening of the tax base has to be without alienating the existing taxpayer; and improvement in compliance has to be without harassment in enforcement. The implications of some of the provisions like exemptions, treaty override, residency and anti avoidance rules seem to have created unintended disadvantages to the Indian multi-national rendering them uncompetitive in the global market.

1. Treaty Override
A startling new introduction in the Bill has been to introduce the concept of what is known as `Treaty Override’ [Section 258(8)(b)] in international tax parlance, seeking to neutralise the provisions of the treaties entered into by India with various countries, by providing that provisions of Treaty or Code, whichever is later in time, shall prevail. A corresponding provision in the Code, however, provides for the continuance of applicability of existing tax treaties entered into by India, once the Code comes into force. The aforesaid provisions certainly give rise to some confusion and dichotomy of views as regards ‘Treaty Override’.
In this context, it would be pertinent to note that treaties are solemn obligations that should not be disregarded except in extraordinary circumstances, and, as is often done, the country overriding the tax treaties should consult with its treaty partners.

As per current Indian domestic tax laws, where the central government has entered into an agreement with the government of any country outside India for granting relief from tax or, as the case may be, for the avoidance of double taxation, a taxpayer entitled to the treaty’s benefits may apply the provisions of the domestic tax law to the extent they are more beneficial to that taxpayer. This means that a non-resident taxpayer having a source of income in India has an option to be governed by either the provisions of the domestic Indian tax laws or the tax treaty, whichever are more beneficial to the taxpayer.

It is true that the Constitutions of some countries, for example the USA, permit treaty overriding through domestic law, as under such Constitutions, treaties are ranked equal to the domestic law, with the result that they are subject to the rule “lex posterior derogat legi priori”, i.e., later law overrides the prior law. Again, there are countries like France, whose Constitutions clearly give treaties a superior position as compared to the domestic law, by virtue of which treaty overriding through amendment of domestic law is not permissible. Though the Indian Constitution does not fall under either of the two extreme categories, yet, there is support and comfort available from at least the Directive Principles of State Policy of the Constitution, in the form of Article 51, which inter-alia requires the State to foster respect for international law and treaty obligations. The issue of whether treaty benefits can be unilaterally overridden by a State through domestic laws is also a vexed one.

Tax Treaties & International Law
Tax treaties are governed by the Vienna Convention. Though India is not a signatory to the Vienna Convention yet the principles of the Convention can nonetheless be applied to any Indian tax treaty, a proposition which finds support from the International Fiscal Association. Article 18 of the Convention provides that a State, which is party to a treaty, is obliged to refrain from acts which would defeat the object and purpose of the treaty. Article 26 of the Convention lays down the principles of pacta sunt servanda, i.e., “Every treaty in force is binding upon the parties to it and must be performed by them in good faith”.

Therefore, any unilateral act on the part of India to override existing tax treaties through the insertion of provisions in domestic tax laws would be in conflict with Articles 18 and 26 of the Vienna Convention.

Article 27 of the Convention provides that a party may not invoke the provisions of its internal law as justification for its failure to perform a treaty. Article 27 of the Convention is without prejudice to Article 46, which provides that a State may not invoke the fact that its consent to be bound by a treaty has been expressed in violation of a provision of its internal law regarding competence to conclude treaties as invalidating its consent unless that violation was manifest and concerned a rule of its internal law of fundamental importance. The said Article further provides that a violation is manifest if it would be objectively evidenced to any State conducting itself in the matter in accordance with the normal practice and in good faith. Revenue laws are not considered as laws of fundamental importance. These are required as fiscal measurements to support the economy of the country. Therefore, any unilateral act on the part of the Parliament to override existing treaty benefits in the manner referred to above through amendment of domestic tax laws, would again contravene both Articles 27 and 46 of the Vienna Convention.

Relevance of Tax Treaties
Double taxation treaties are essentially agreements between two countries that seek to eliminate the double taxation of income or gains arising in one country and paid to residents/companies of the other country. The idea is to ensure that the same income is not taxed twice. In many instance, however, these agreements are misused to evade taxes. This is called ‘treaty shopping’, where usually residents of a third country take advantage of a tax treaty between two countries. For example, many companies in other countries route their investments into India through Mauritius or Cyprus to take advantage of the tax treaty that these countries have with India. Both, India-Mauritius and India-Cyprus tax treaties provide that capital gains arising in India from the sale of securities can only be taxed in Mauritius and Cyprus. This means no capital gains tax on investments in securities routed through Mauritius and Cyprus, as they do not levy tax on capital gains.

To first briefly touch upon the historical importance of Mauritius in the context of total foreign direct investments in India, Mauritius tops the list with a 44% ($35.18 Billion out of $81 Billion) during the period lasting April 2000 to April 2009 (in contrast, Singapore stands at 9% and the U.S. at 7%). With a difference of 35 percentage points between the top two spots and Mauritius not being an investing country in its own right, it is anybody’s guess that Mauritius has been used as a holding company jurisdiction for making investments in India with actual investors being tax residents of countries outside Mauritius. The reasons for using Mauritius are simple: India has a tax treaty with Mauritius providing that gains on any transfer of shares in an Indian company by the Mauritius holding company shall not be taxable in India but in Mauritius as per the domestic tax laws in Mauritius. Domestic tax laws in Mauritius do not tax capital gains. Therefore, any transaction on account of the transfer of shares in an Indian company by a Mauritius holding company is a tax free transaction both in India and Mauritius.

The Indo-Mauritius tax treaty was unsuccessfully challenged in the famous case of Union of India v. Azadi Bachao Andolan and Anr. (2003)[1]. The following principles were expounded by the Indian Supreme Court in its decision:
An important principle that needs to be kept in mind in the interpretation of the provisions of the international treaty, including one for double taxation relief, is that treaties are negotiated and entered into at a political level and have several considerations as their basis.
The main function of a treaty should be seen in the context of aiding commercial relations between treaty partners and as being essentially a bargain between two treaty countries as to the division of tax revenues between them in respect of income “falling to be taxed” in both jurisdictions.
In a fiscal economy, certain evils like treaty shopping are tolerated in the interest of long term development.

Perhaps it was intended at the time the Indo-Mauritius treaty was entered into. Whether it should continue and, if so, for how long, is a matter that should best be left to the discretion of the executive as it is dependent upon several economic and political considerations.

Under the draft Direct Taxes Code Bill, 2009, however, power has been given to the central government to enter into an agreement with the government of any country to provide relief from double taxation and also for the purpose of exchanging information for the prevention of evasion or avoidance of income tax. Further, the draft Code provides that neither a double taxation avoidance treaty nor the Code shall have preferential status by reason of its being a treaty or law and that, in the case of a conflict between the provisions of a treaty and the provisions of the Code, the one that is later in time will prevail. This is a significant departure. India already has entered into tax treaties with about 75 countries. Given that the draft Code would come into force on 1 April 2011 if enacted, it would be later in time with respect to all 75 tax treaties and may override them (including Mauritius).

Of specific interest to current or would-be beneficiaries under the Indo-Mauritius treaty, the draft Code provides that any income from the transfer, directly or indirectly, of a capital asset situated in India will be deemed to accrue in India and thus will be taxable in India in the hands of a non-resident. Therefore, any transfer of an Indian company’s shares by a Mauritius holding company may become liable to tax in India under the new Direct Taxes Code (once enacted) without relief from the treaty.

The consequences of this provision are likely to hamper foreign investments as well as souring relationships with these countries since these tax treaties will be overridden without any negotiation or consultation with these respective countries.

Further, the General Anti-Avoidance Rules (“GAAR”) in Sections 112 and 114 are likely to put more and more foreign transactions under the scanner because even if new tax treaties are entered into or old treaties renegotiated after the Code comes into force, anti-avoidance and abuse provisions will come into play unless it is demonstrated to the satisfaction of the Indian revenue authorities that the holding arrangement is not an impermissible avoidance arrangement. According to the GAAR, an arrangement declared an impermissible avoidance arrangement shall be presumed to have been entered into for the main purpose of obtaining a tax benefit. The onus has been put on the taxpayer to prove that a tax benefit was not the main purpose of the arrangement. The general anti-abuse rule will override the provisions of the tax treaties.

The GAAR will have, associated with it, high administrative costs. Even if a treaty that comes into force after the enactment of the DTC and has to be notified, the Advance Ruling Mechanism wherein the taxpayer will process his documentation to prove that the transaction is not for tax-avoidance, the time period for such negotiation which could be anywhere between 2 to 3 months may just be too much of a waiting period for deals which are required to be done instantly and hence may prove to further take away from India’s image of being a lucrative country for investment.

According to the researcher, there doesn’t seem to be a justification of a double-safeguard in the form of GAAR for the treaties which are likely to be signed in the future, not only because it will deter any investment due to these barriers, since most of these treaties have provisions such as “limitation of benefits” or “beneficial ownership” neatly defined (Singapore).

B. Status of Foreign Companies
It is indeed heartening to note that the tax rates applicable to non-resident corporates are sought to be brought at par with the domestic companies, to be taxed at the rate of 25% from the current 34 per cent and 42.23 per cent (including surcharge and education cess), thus reducing the paper-work associated with it. However, correspondingly, the concept of the branch profit tax is proposed to be introduced (which appears to be somewhat akin to the permanent establishment tax levied on profits of business carried on by foreign companies in the United States), whereby an additional tax of 15% on branch profits is sought to be levied.

The Code further seeks to widen the tax net to bring within its purview income earned from transfers, directly or indirectly, of any capital assets situated in India. The intent, among other things, seems to tax overseas income from transfer of shares of companies abroad having downstream Indian holdings (Vodafone International Holdings B.V v. UOI, 2009 (4) Bom CR 258).

Under the current tax regime, a foreign company is considered to be a resident in India, if the control and management of its affairs is wholly situated in India at any time during the financial year.

Under the DTC, a foreign company would be treated as a resident in India if its place of control and management is wholly or partly situated in India at any time in the financial year.[2] Thus, if a foreign subsidiary of an Indian company is partly controlled and managed from India at any time in the financial year, it will be considered as a resident under the Code. The catch here lies in the interpretation of partly since the terms have not been defined in the DTC and this could lead to a flurry of litigation. The partly could even be 1%.

A direct consequence of foreign subsidiaries and joint ventures (JVs) of India headquartered companies being regarded as resident of India could result in dual taxation of such companies both in India as well as in the host country, subject to availability of foreign tax credit, which will have to be separately ascertained. Thus further complicates the situation for companies which derives income from sources in more than one country. In such a case, it will be open to debate whether the amount would be restricted only to tax in respect of income sourced in that country or be available in respect of whole of the income taxed in that country. Potentially, these could lead to double taxation resulting in a higher tax cost.

Deviating from the existing provisions of the Income Tax Act, the new code has proposed to tax interest payments by non-residents where the debt has been used to earn income from any source in India. This is likely to have a serious impact on cross-border leveraged buy-outs. Thus, if a reverse of Tata-Corus deal was to happen in India, this provision would possibly impose a huge burden on the company buying-out shares of an Indian company if these leverages are to the tune of billions of dollars like in the Tata-Corus deal.

Consider an example where a US company makes a bond issue in that country to mobilise funds to invest in shares of an Indian company. Since these investments would result in the earning income (say, dividends or capital gains) from an Indian source, interest payments on bonds can now be taxable in India under the code.

Large infrastructure projects in fields of oil and gas, ports, roads, etc which typically involve foreign entity in form of an engineering, procurement & construction (EPC) contractor. Normally, the key responsibility of this contractor is to provide advance technology not available in India, for which they are remunerated by way of royalties or fees for technical services (FTS).

Normally, the arrangement between the Indian project owner and the non-resident EPC contractor stipulates that taxes on income of the contractor are to be borne by the Indian party i.e. grossing up of taxation needs to be done.

The code proposes to increase the tax rates on royalties/FTS earned by foreign entities from 10% to 20%. Consequently, the said change would imply a considerable increase in costs for Indian project owners. In such cases, the onus/ burden of proof is on the Indian party to prove the genuineness of EPC structure, especially split contracts. The code retains the presumptive taxation regime for certain non-residents providing certain services to turn-key power projects, oil & gas exploration, etc. However, the provisions as drafted in current form leave a major ambiguity as regards determination of income, which needs to be sorted out.[3]

Further more, the definitions of FTC (Fees for Technical Services)[4] now include ‘development and transfer of design, drawing, plan and software or similar services’ and Royalty[5] now include ‘right to use of transmission by satellite, cable, optic fibre, ship or aircraft and live coverage of any event’. Hence, he increase from 10% to 20% is not only just in amount but also in terms of what is being taxed.

The researcher believes that all these provisions have been framed with an intention of increasing the instances of taxation while reducing the tax-rates for foreign companies thus trying to incentivise voluntary compliance to taxation. The move also seems to try and bring as many foreign transactions under the net or conversely encourage foreign establishments to operate fully in India and be taxed at 25% alone rather than as foreign companies with additional transactional taxes and breach-profit taxes. The reason for this could be that

Thus while the tax base has definitely been broadened, there seem to be many conditional provisions attached with them. While lowering of tax rates might be an incentive for these multi-national companies, whether increasing the incidents of taxation will actually let that happen will only be seen once the Bill is approved.

C. Other provisions affecting Corporations

A. Minimum Alternate Tax (“MAT”)
Minimum Alternate Tax is a tax that is levied on companies that have no tax liability as per the provisions of the Income Tax Act, although they make a profit, on account of the numerous deductions, depreciations and set-offs that are allowed. Thus, seemingly wealthy and prosperous companies are able to escape the tax net and the government loses thousands of crores of revenue in the process. In an attempt to cash in on this phenomenon of zero tax paying profitable companies, Minimum Alternate Tax was introduced back in 1984. Thus, essentially, MAT is used to calculate presumptive income so as to overcome the problems
of tax incentives and tax evasion.

According to the DTC, the basis for computation of MAT for companies has been shifted from book profits to gross assets. As a result, any company having gross assets as defined will be required to pay tax even if there is book loss. Such tax will be final without any carry forward.

While companies have been exempted from wealth tax, the 2% MAT on gross assets may be significantly higher than 25% on book profits, as it is in the Income Tax Act, 1961.[6] No provision for availing MAT credit for subsequent years is provided and the MAT exemption for SEZ developers and units is sought to be discontinued.

According to the Finance Ministry, the economic rationale for the assets tax is that investors can expect ex-ante to earn a specified average rate of return on their assets. The shift in the MAT base from book profits to gross assets will encourage optimal utilization of the assets and thereby increase efficiency.[7]

While for most functional companies this may not be an unfair assumption, for start-ups and companies that are yet to establish a business presence, it could be an additional cost to surmount.

The new 2% on gross assets could be significantly higher than 25% on book profits and will negatively affect capital-intensive companies with long gestation periods and may be required to pay MAT even in the initial years of low or virtually no profits and without deducting from their liabilities.

The other issue which in the opinion of the researcher, will arise, is that there is going to be huge cascading effect of the tax because in corporate structures, you will have organizations which holds shares in downstream company which inturn for various regulatory or other reasons have a third generation company. So each level of these companies are going to pay 2% of tax possibly without having profits especially if there are newer businesses including all the leverage which they would take on.

B. Investment Based Incentives
Another significant change in policy with respect to corporations which has been brought about is the rationalising of tax exemptions. Traditionally, the exemptions provided were ‘profit-based’ tax incentives in form of tax holidays for a certain number of years. Since profit is the basis for exemption, there is no incentive for investment and upgradation during the period of tax holiday. Such profit-linked incentives also lead to significant loss of revenue and encourage rent-seeking behaviour. The code proposes to replace the same by ‘investment-based’ incentive, which implies a tax exemption for the period until the whole of investment made by an entity is recovered.[8]
The new incentive augurs well for projects which are in high growth phase -- for example, the cross-country gas pipeline, which currently needs sustained investment for a number of years.

A significant omission from the businesses eligible for investment-based incentive is a unit in special economic zones (SEZs). The list includes only developer of SEZ, though SEZ operations are NOT included. Sixth Schedule of the DTC lists all incomes that are exempt. It, however, does not include profits of newly established units in SEZs (currently exempt under Section 10AA; profits derived from operations in SEZ facility is exempt 100% for the first five years of operations and 50% for the next five years and 50% again for the next five years, subject to reinvestment).
Considering sunset clause for Section 10A/B, the IT sector has started migrating incremental business to SEZ facilities. However, if the exemption stands withdrawn, the future profitability may be subject to normal tax rates.[9]
The rationale behind this omission is hard to understand, especially when development of SEZs is a primary focus area for the government.
Thus, the DTC has seen a shift in policy which may or may not benefit large infrastructural investments. However, the process of graduating from the current Income Tax Act to the DTC will have to supported with really good justifications since the corporations which avail of the tax exemptions as per the 1961 Act will be left in a limbo with the change in the basis for computation of these taxes.

[1] MANU/SC/1219/2003.
[2] Section 198, DTC.
[3] See generally http://www.dnaindia.com/money/comment_will-direct-tax-code-prove-to-be-a-roadblock-for-infrastructure_1288374 (Accessed on September 23, 2009).
[4] Section 105, DTC.
[5] Section 240, DTC.
[6] 1(b) Second Schedule on Tax on Gross Assets, DTC.
[7] Ministry of Finance, Discussion Paper on the Direct Taxes Code, August 12, 2009, p. A-13, sourced from ://finmin.nic.in/DTCode/Discussion%20Paper.pdf.
[8] Supra note 7, at A-36.
[9] See generally http://www.reliancemutual.com/CMT/Upload/ArticleAttachments/draft%20Direct%20Taxes%20Code%20Bill.pdf (Accessed on September 23, 2009).

---Aqseer, Bhishaan, Archit, Leeneshwari

Session 6: Direct Taxes Code

2009-09-23T05:56:00.000-07:00

This week's session will focus on the proposed Direct Taxes Code. The discussion paper circulated with the code is the reading for the week. It can be accessed here.

The issues for discussion are as follows:

Introducing the Direct Tax Code (“DTC”)
1. What are the basic objectives of the DTC?
2. What are the salient features of the DTC?
3. How s the DTC going to effect non-profit organisations?

Presumptions and implication of the DTC on savings
1. What is the treatment of savings under the new DTC?
2. What are the implications on the tax-GDP ratio?
3. What are the implications of presumptions towards tax-evasion as envisaged under S. 114 of the DTC?

General Anti-Avoidance Rules
1. What are the judicial principles and tests laid down prior to the DTC in terms of tax avoidance?
2. Has the DTC blurred the distinction between tax-evasion and tax-avoidance?
3. What are the different tests to trace anti-avoidance and what are their consequences?
4. Are the powers of the Commissioner of Income Tax well defined?

Treaty Obligations and Business Transactions
1. How does the DTC affect treaty shopping in light of UOI v. Azadi Bachao Andolan & Anr.?
2. Will the DTC hamper foreign institutional investments (FII)?3. What is the effect on DTC on foreign vis-à-vis Indian corporations? How does this equate to the purpose of broadening the tax base?

Recommended Readings:

1. UOI v. Azadi Bachao Andolan & Anr, MANU/SC/1219/2003.
2. McDowell & Company v. C.T.O, MANU/SC/0154/1985.

3. The Direct Tax Code Bill, 2009

Economic Contribution of the Housewife

2009-09-23T05:46:00.000-07:00

The following is the write-up by the group leading this discussion:

The Economic Quantification of a Housewife’s Labour

The discussion of this topic has been divided into five main subheadings. The first deals with the detailed critique of the case National Insurance Co. Ltd. v. Minor Deepika and Others and discussed the different modes for quantification arrived at by different Courts in India and outside. The next section deals with position of law internationally, on the subject of the quantification of a housewife’s contribution while the third section deals with a law and economics model of a gender based division of labour, examining the factors that perpetuated such a gender based division - the constraints imposed on women by society and by themselves. In the fourth section of the paper, the recognition of the quantification of matrimonial property as a means of economically quantifying the contribution of a housewife is dealt with. This section looks at the idea of community property and examines the need for incorporation of such an idea into the Indian legal scenario. The last section provides an additional reason for economic quantification of the labour of a housewife by examining the judicial bias with respect to the rights allowed to a working woman and by analyzing the denial of economic opportunity outside the home.

SHWETHA –
CASE ANALYSIS AND MODES OF QUANTIFICATION

This week’s topic for discussion at the CLIF was Economic Quantification of Unremunerated Domestic Services of Women or Quantification of Housewives’ Services. The main case on which the discussion was based is National Insurance Co. Ltd. v. Minor Deepika and Others[1] which is an April, 2009 Madras High Court Judgment. In this case, a minor Deepika had lost both her parents in a motor vehicles accident that took place on 26.03.1999. She made claims for compensation for the death of her father as well as her mother by filing two separate petitions in the year 2000. The Tribunal had awarded Rs.11,10,576/− as compensation in the case of the father and Rs.6,52,000/− in the case of the mother. The appellants, that is the Insurance Company claimed that the amount had been reached at arbitrarily by the Tribunal and especially that the loss of dependency arising out of the mother will have to be reduced because she was not a working woman or a partner of the firm of which her husband that is the father was a partner and that she was merely a housewife. The Court felt that the amount arrived at by the Tribunal for compensation as regards the father was correct but it however dealt with the issue of the mother in much greater detail entering into the issue which is currently being discussed at this Forum, that is, the quantification of Housewives’ Services. There are two things which are interesting observations in this case. First being that,
In the case of Amar Singh Thukral and Others v. Sandeep Chhatwal and Others[2] one Mrs. Shakuntala Devi passed away and her husband and children filed a petition under the Motor Vehicles Act to claim compensation. In calculating this, the Court decided that the quantification of her household work will be Rs. 2500/- per annum and hence using a multiplier of 12 arrived at the amount of Rs. 40, 000/- to be paid as compensation. The appellants, that is, the husband and the children claimed that the compensation amount was far too low. The Court observed that in earlier cases in England dependants were to be compensated only for the value of the services lost to them by the death of a wife and mother. A wife’s companionship was ignored, likewise the grief and misery caused by her departure and, so too, a mother’s love, guidance and influence in bringing up children. Therefore the term ‘services’ was very narrowly construed. Therefore the Court opined that a narrow meaning should not be given to the meaning of the word ‘services’ but should be construed broadly and one has to take into account the loss of constant ‘love and affection’ as also of ‘personal care and attention’ by the deceased to her children, as a mother and to her husband, as a wife.
In an earlier English case of Mehmet v. Perry[3] quantification of housewives’ services was done under three headings: (a)Loss to the family of the wife’s housekeeping services.
(b)Loss suffered by the children of the personal attention of their mother, apart from housekeeping services rendered by her.
(c)Loss of the wife’s personal care and attention, which the husband had suffered, in addition to the loss of her housekeeping services.
In India, there have been cases since 1987 that have dealt with this issue. For instance in the case of Sunny Chugh v. Darshan Lal[4], it was stated by the Punjab and Haryana High Court that the housewife provides gratuitous service and had no retirement age, and her death would result in the loss of security in the family and therefore the Court awarded a compensation of Rs. 50, 000. In Jaimal Singh v. Paramjit Singh and Ors.[5], was another case where the housewife aged 40 years died in an accident in 1991. She was self-employed and undertaking stitching work apart from managing the household. The contention that she was earning by stitching clothes was rejected by the Tribunal. This Court accepted this finding but assessed her contribution to the family for purposes of cooking, cleaning, washing clothes etc. at Rs.700/- per month or Rs. 8, 400/- per annum. On this basis, her beneficiaries were awarded compensation of Rs. 1, 26, 000/- after applying the appropriate multiplier.
From the line of cases it is evident that arriving at the amount of compensation depends on the facts and circumstances of each case; the economic status of the woman and her family, whether or not she was a working woman as well, what was her age and so on.
In an interesting Supreme Court case concerning tort litigation, Lata Wadhwa v. State of Bihar[6] a devastating fire had broken out in Jamshedpur in March 1989. At least 60 persons, including women and children died and about 113 were injured. Supreme Court concluded that since the deceased ladies were housewives who were not earning any income, the figure arrived at by Justice Chandrachud in his report quantifying the value of their services at Rs.10, 000/- per annum for some and Rs.12, 000/- per annum for others was grossly low because these women came from a higher class of society and therefore the compensation awarded to them had to be much higher. Therefore the Supreme Court allowed for compensation of Rs.3, 000/- per month or Rs.36, 000/- per annum. Therefore in this case we find that for an unemployed housewife ‘sitting at home’ a distinction is made between one from a lower class and another from a higher class in calculating their annual income which can be seen to be a very arbitrary way of calculating it where the outcome in every case is different from the others. The fixing of the multiplier for calculation of the final compensation is another element which allows for arbitrariness to creep in. For example, in the case of Amar Singh Thukral the multiplier method with a combination of minimum wages per month was used to arrive at the final compensation. The multiplier was 16, the minimum wages at that point was calculated to be Rs. 1400 per month which was Rs. 17, 100/- a year which using the multiplier worked out to be Rs. 2, 24, 000/-. Personal expenditure was excluded to 1/3rd the amount and therefore the compensation awarded was Rs. 1, 50, 000/-. The rationale behind fixing of the multiplier is again different in each case where in some it is decided by the number of years in terms of working capacity the wife has lost by suffering from some personal injury and in others it may be based on the number of years the family may have been dependent on her.
In today’s world where women have increasingly been accorded independent legal status, what is the purpose of quantification of housewives’ services and should we determine the purpose before evolving a scientific mode of evaluation of the same? The General Recommendation No.17 of the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) deals with measurement and quantification of the unremunerated domestic activities of women and their recognition in the Gross National Product. The recommendation states that the measurement and quantification of the unremunerated domestic activities of women which contribute to development in each country will help to reveal the de facto economic role of women and it recommended that States should inter alia encourage and support research to evaluate the unremunerated domestic activities of women and to quantify and to include this in the Gross National Product.[7] It is recognized by this convention that most of the unpaid work around the world is performed by women and hence it is important to make an attempt to quantify the same.
An important role is played by the housewife because not only does she perform various tasks at home, but she liberates her spouse to devote his energy and time and attention to his work outside by which income and property is generated for the family. Thus in calculating the value of her housework, her husband’s income becomes a very important element. Having stated this, the different modes by which unremunerated domestic activities of women are quantified can be looked into. This can be looked at through two perspectives. First, where, as a result of injury or death, the services of the housewife have been lost and second, where as a result of injury, additional services have to be provided.
In National Insurance Company case which looks into the first perspective lays down the following as the modes of quantification
Motor Vehicles Act, Second Schedule- gives a value to the compensation payable in respect of those who had no income prior to the accident and for a spouse, it says that one-third of the income of the earning surviving spouse should be the value.
The opportunity cost which evaluates her wages by assessing what she would have earned had she not remained at home, that is what is the opportunity lost.
The partnership method which assumes that a marriage is an equal economic partnership and in this method, the homemaker’s salary is valued at half her husband’s salary.
The replacement method which evaluates homemaking by determining how much it would cost to replace the homemaker with paid workers.
From a general reading of the cases dealing with this issue in India, it comes to light that Courts either determine the compensation on the actual cost of hiring a replacement of her services, or a more general assessment of the value of the housewife’s services based on the current cost of domestic labour. In the article “What is a Wife Worth”[8] the authors mention the three broad factors taken into account when the services of the housewife are lost owing to death or injury. They are expenses or financial dependency (funeral, replacing her service with that of a cook, house maid, medical care and so on) earning potential or service dependency (income she may have earned had she been alive or had not been injured) and non-pecuniary losses or moral dependency (loss of love, care and affection). The authors also mention that in practice, the loss of the housewife’s services is always treated as being the husband’s loss rather than the wife’s, that is, it is seen as the loss of a service which the husband “owns” rather than a loss by the wife of the capacity to do a particular kind of work. I feel that this stereotype along with others such as the mother finding fulfillment at home with her children, while the father spends his day away from the home earning money to support his family needs to be changed.
Critiquing the Judgment
In National Insurance Co. Ltd. v. Minor Deepika and Others, the Court is not clear as to where these modes have been taken from, whether they have been effectively implemented and for what purpose they have been implemented. Thus, a very hazy picture is painted as regards which mode the Court thinks is most beneficial or practicable. Even after discussing all these modes in detail and speaking about how assigning economic value to the work of the house maker is an important task which must be undertaken, the final conclusion arrived at sticks to determining compensation as under the Motor Vehicles Act which by itself has its shortcomings. The amout of one-third the spouse’s interest is arbitrary. What is the justification behind the ‘one-third’ amount? The Court felt that while the option under the Motor Vehicles Act could be used to determine the value of the mother, the time had come to scientifically assess the value of the unpaid homemaker both in accident claims and in division of matrimonial property but they themselves never actually take any significant step in that positive direction. Even after this judgment, the lacuna in the law still remains. Despite the positive changes in society in terms of accepting more liberal notions of women’s rights, is our Judiciary lagging behind? I am of the opinion that the Judiciary through judgments such as these only brings out half-baked ideas about quantification of household services performed by women. What emerges from their views in the judgments continues to reflect the stereotypical notions about housewives which is exactly what we are trying to overcome.

Out of the three methods, I feel that the one of non-pecuniary losses is the most under-estimated. The value of the wife’s constant attendance, her help with homework and instruction on essential matters to do with upbringing, cooking for her family, cleaning the house, attending to guests and so on cannot be equated to that of any other ordinary case of calculating compensation. Let us take the example of the National Insurance CO. Case itself. The compensation under the heading of loss of love and affection for the father was Rs. 25, 000/-. However, the compensation under the same heading as regards the mother was even less, that is, Rs. 20, 000/- . Hence a uniform, fair and gender neutral mode needs to be developed.
As the law stands at present, a person who suffers some physical injury or death as the result of another’s tort has a right to compensation. One can compare and see that when a breadwinner of a family suffers such injury, factors such as him being the sole breadwinner, or that his family needs his support are taken into account and accordingly the compensation is increased. Thus, should this not be done even in the case of the housewife when her services are lost or in some way impaired owing to the amount of carework she does for her family and the household? What about the cases where she has to care for another injured member of the family. In such a case she is effectively doing the work of a hired nurse and this involves some extra effort apart from her already busy work schedule. Can such services also be taken into account when compensation is claimed in tort action claims?
Even in the field of Insurance law, as is specifically dealt with in the case for study, we find that no fixed mode has been adopted. Courts are now slowly accepting the fact that a woman’s unremunerated household or domestic service must also be accounted for. CEDAW and other International Laws such as The Australian Family Property Law, the recommendations of the National Organisation for Women, USA have opened up the arena for discussions on the economic rights for homemakers. An article in the Hindu by Geetha Padmanaban called “What’s her take-home?”[9], discusses briefly the contents and impact of the judgment in the National Insurance Co. Ltd. v. Minor Deepika and Others case. In this article the author highlights the positive impact of the judgment and shows how several women feel very optimistic about the way the Madras High Court have viewed their rights. In a BBC News Article, “Housewife would be paid £30,000”[10], it was stated that in a poll of 4,000 housewives conducted by alljoinon.com, the average housewife worked for nearly nine hours a day every day which means she would earn almost £30,000 a year if she was employed to do all the same errands. Thus this aspect of women’s rights is being taken forward in the positive direction world over. Thus our judiciary must also move away from stereotypical notions of unremunerated domestic activities and actively initiate discussions on this issue.

ATUL –
THE INTERNATIONAL PARADIGM
The issue of recognition and quantification of household work by the wife has long been a part of family laws in various countries. Section 25(2)(f) of the Matrimonial Causes Act 1973 (Eng) clause 18 in England and Wales directed courts to consider, while assessing the property share, the contributions of each of the parties to the welfare of the family, ‘including any contribution by looking after the home or caring for the family’. In the United States, Alternative B of the influential Uniform Marriage and Divorce Act required judges to consider a number of factors, including ‘the contribution of each spouse to acquisition of the marital property, including contribution of a spouse as homemaker’. Also, the Convention on the Elimination of all forms of Discrimination against Women (CEDAW), through its General Recommendation No.17, recommends the States Parties to encourage and support research to evaluate the unremunerated domestic activities of women and to quantify and to include this in the Gross National Product which, in turn would help in revealing the de facto economic role of women.
However, the most interesting legal position is in Australia where Section 79(4)(c) of the Family Law Act 1975 provides that the Court should consider, as one of the factors in property distribution, ‘the contribution made by a party to the marriage to the welfare of the family constituted by the such parties their children, including any contribution made in the capacity of homemaker or parent’. It must be noted that this issue in Australia is with respect to property distribution which generally arises during divorce. The position is different from the India as unlike the Indian concept of community property, the husband and wife have separate property system in Australia. In this opinion, I seek to address two aspects of Australian law on the issue of quantification of homemaker contribution. Firstly, the rationale behind the need to quantify homemaker contribution and secondly, the method adopted by the courts to measure and quantify such contribution.

PRINCIPLE OF JUSTIFICATION: As per Australian Courts, the justification for examining the homemaker contribution in property division is not in the household work that has been performed but the sacrifices made and the opportunities forgone which have an economic impact. The performance of household tasks does not itself have a financial impact which ought to be compensated by property transfers because even the husband confers many benefits on the wife. The homemaker contribution is less relevant for what homemakers do than for what they do not do instead. So, it is an opportunity cost which occurs when a person withdraws from, diminishes or restructures workforce participation in order to concentrate efforts on looking after the home and family.
Also, the purpose of assessing the homemaker contribution is to recognise its significance in the overall socioeconomic partnership, ensuring that women were not disadvantaged by their role specialisation. Because of that responsibility she may earn no income or have only small earnings but they indirectly contribute to the acquisition, maintenance and improvement of property. It was once famously said by the Court that the cock can feather its nest because it does not have to spend most of its time sitting on it. The homemaker contribution was therefore understood as having a relationship to the earnings of the other spouse because it freed that person to concentrate on earning activities. Thus, her contribution should be recognized not in a token way but in a substantial way.
In addition to all this, the mother's specialisation in caring for the daily needs of the family represents an indirect investment in the earning capacity of the primary wage-earner, and his success in the workplace is to some extent their success as a partnership. If this relationship breaks down, then both lose out on their investments. For fathers, that loss is a caretaker of the house and himself and may be proximity to the children depending on the custody of the children. But for women, the lost investment is in her partner's long-term earning capacity, since her specialisation in child-rearing has been an investment in his career success or the development of his business, assuming that he is in an occupation or business with a growth trajectory.

PRINCIPLE OF QUANTIFICATION: Keeping these principles in mind, homemaker contributions can readily be quantified if they are compared with the complementary efforts of the other partner by giving to those contributions equal weight irrespective of the roles the partners have undertaken. Couples who begin with modest assets and build up assets over a period of time through their efforts and investments should be treated as having contributed equally to the fruits of their socioeconomic partnership, and, with the exception of the rare cases invoking successfully the notion of special contribution or skill, they are. Thus, with regard to the quantification of household work there isn’t a big problem. However, the trouble comes when many of the assets do not represent the fruit of marriage partnership. Can the homemaker contribution yield any claim in relation to assets acquired other than by the efforts of the parties during the course of the marriage? These issues arise mostly in three types of cases- property acquired before marriage, inherited during marriage and acquired after separation. There have been two approaches that the Courts in Australia have followed in such cases.
First is the Nexus approach. It means that there must be some logical connection between the contribution claimed and the financial circumstances of the parties so as to justify apportioning some of that property on the basis of contribution. An important case in this regard is Jacobson v. Jacobson where nearly four years had elapsed from the time of separation to the trial. In this period, the husband had acquired two properties, to which, he argued, the wife had made no contribution. The wife, in the meanwhile, had had the onerous responsibility of caring for their teenage boy who was intellectually disabled. This was treated as a contribution to the husband's post-separation earnings because the wife's care for the child after separation left the husband ‘free to pursue his income-earning activities to the fullest extent’.
Second is the Balancing approach. This approach involves the Court in abandoning the requirement of a nexus between the homemaker contribution and assets acquired other than through the joint efforts of the parties. The judge is meant simply to consider all the different kinds of contributions, giving such weight to each as he or she considers appropriate, and placing them in the balancing scales with one another. As for example, in Shaw v. Shaw the husband brought significant wealth into the marriage but it was largely dissipated during the course of the 12-year marriage through luxurious living. At the end of the marriage, less than $2 million remained. The Court took the view that it should place a value on the wife's contribution even though there was no gain in wealth to which she could be deemed to have contributed. The wife, who had nursed her husband through a serious illness, was awarded 10-12 per cent of the husband's remaining property by way of contribution. This case, thus, established that a spouse can make a homemaker contribution which entitles her to a share of assets brought into the marriage by the other even though the effect of their marriage partnership has been mainly to spend, rather than acquire wealth.
The Balancing approach has been criticised from many corners. One of its criticism is explained by the gold bar example. Does it matter whether a party enters the marriage with a gold bar or inherits it on the last day of the marriage? Where the gold bar is inherited at the end of the marriage, there can be no real question of rewarding the homemaker contribution, for there is nothing in the fact of its existence which is capable of yielding a principle of justification or quantification. This is an open ended question as the Courts have been keen in following both the approaches.
Thus, the Australian law has been quite liberal in interpreting the law related to quantifying the homemaker’s contribution. But, is this approach appropriate with respect to the Indian conditions? Should the contribution of wife be taken as just any person doing household world or should she be considered as a partner in the socioeconomic partnership of marriage? Should she be compensated for the opportunity cost involved? These questions must be answered if we seek to apply these principles to the Indian scenario.

MEGHNA –
Gender Based Division of Labour

Manner in which Gender Bias in Division of Labour developed over the years:
According to Levi-Strauss, culture began with the exchange of women by men in order to cement bonds between families, thereby creating a society. Men thus benefit more than a woman from these social bonds and the division of labour between the sexes is a hierarchical one.[11] Another problem faced by women from Third World countries from tribal groups was the presence or arrival of the Western colonial administration. The Europeans encouraged men to head and support their families, superseding women’s traditional responsibilities. They entrusted local governance to male leaders and ignored women’s traditional participation in tribal society. The fact that these women were organized and had non-hierarchical governmental structures was not known to the colonists. Hence tribal groups lost their collective responsibility and came under the authority of their husbands. Women’s work became private for the benefit of their husbands rather than public for the benefit of the kin group. Thus it shows that there is an increase of sexual stratification along with the process of social stratification. Hence there is a decrease in the social status of a woman as there is now a change in production methods. This control is maintained directly by the man in the family but sustained by the State and religion.[12]
With the emergence of capitalism there is the creation of a wage-labour force. Labour was expanded by the removal of people from land, their subsistence base, so that they would be forced to work for wages. Wage expansion was done by having increased banking facilities and profits from slave trade and colonial exploitation. Hence domestic industries which had been created, where women used to participate in along with the men was destroyed with the process of industrialization.[13] Hence capitalism used these differences in family structures to perpetuate gender division of labour, by removing work from home; there was a further subordination of women. Thus men became less dependent on women for industrial production and women more dependent on men economically. Women’s subordinate position in labour market reinforced their position at home, which in turn reinforced the labour market. Through the use of trade unions associations and change in technology the job segregation was enforced and the domestic division of labour which required women to do house work and child care further perpetuated this segregation. Capitalists used women as unskilled, underpaid labour to undercut male labour wages, only to perpetuate a huge gender division of labour. Hence capitalism and patriarchy were the forerunners for the gender based division of labour that is currently seen.

Types of Occupational Segregation of Labour:
Two forms of occupational segregation are firstly horizontal segregation where men and women choose different types of work. For example personal secretaries are usually female and clerks are usually male. There is not much difference in the work provided but clerks are inevitably paid more than secretaries. Secondly is the vertical segregation which occurs when men typically work in higher grade posts and women in lower grade posts, for example a doctor is usually male and a nurse a female or when men are promoted higher up career ladders within occupations.[14] Hence there is a difference in sex earnings. Women are usually concentrated in the lower paying primary sector or lower grade posts. High vertical segregation within an occupation is highly prevalent with the proportion of women declining at each step up the career ladder. Absence of women in higher posts of decision making means that their interests are also not being looked after. Women need to exploit labour shortages as vigorously as male workers do, demand for access to higher grade of jobs through promotion, training and choose less undervalued work rather than making demands for only convenience factors such as flexible hours and workplace crèches.[15] Vertical segregation is hence a common way in which gender division of labour is seen.
Equal Pay for Equal Work?
The doctrine of equal pay for equal work is enshrined in Article 16(2) of the Constitution of India. It is based on the concept that as long as people are employed and doing the same category of work, they should be equally paid and discrimination based on sex should not be allowed. According to a theorist, Millicent Fawcett, the equal pay for equal work was fraudulent concept for women since women had been kept from obtaining equal skills at work and was not in fact equal.[16] Hence when there is discrimination against sexes at grass root level, laws providing for equal opportunity or pay falls flat as women do not have the qualifications or skill or education to compete for the same. On the other hand, there have been many theorists who believe that this concept is flawed. It was believed that since men have greater family responsibilities and duties, they should be given greater pay. The participation of women in the labour market and equal competition would only reduce the wages received by men as women require 20% less food for efficiency. This is based on the flawed concept that women have a general lower standard of living and are willing to work for less. Another concept that was used by Unions and in fact perpetuated unknowingly by social feminists was the concept of protection for working women, that women as a sex were weaker and hence required greater protection. An example is the case of Muller v. Oregon[17] where the Supreme Court of USA upheld the maximum hours concept for women based on the body structure of the women and her capacity to work for long hours as well as the ill effects it would have on her future race![18] Thus the concept that women are less efficient then men were further perpetuated.
Another interesting concept is the way in which data is collected and the provision of developmental schemes in rural India. When the census is taken usually the men are assumed to be the head of the family and data is taken from them, even though the woman does most of the agricultural work.[19] Hence training and practices to improve their skill is given to the men and not the women. Land titles are also granted in the name of the men. There is also the problem of gender bias during the time of data collection. This can be based on the gender of the Enumerator, or the cultural perceptions or even the way in which the questions are asked. Even here is the problem of the woman having the tendency of identifying themselves as only housewives when they are economically active. Thus there is an underestimation of her content of economic production as it is considered to be a part of the domestic duties.
A housewife is considered as a non-earning dependent as per the 1951 Indian Census.[20] In 1961 Indian Census the definition of a worker was based on gainful activity rather than earnings; however the activity referred to external employment. In 1971 it was more biased with those being considered as worker only for those who reported their economic activity as their main activity. Thus those women whose main activity were domestic work or due to cultural biases assumed it to be domestic work were counted as non-workers. In fact instructions were placed that a servant working as a cook would be considered economically active but not a woman who cooks in her own house for her family. In 1981, working has again been defined as participating in any economically productive activity. However this again does not consider the domestic work done by a woman. Further even when labour time is measured, the standard being eight hours, the female labour’s time is calculated as ½ or ¾ of the standard time based on the assumption that women are less efficient.[21] There is also a sex-typing of tasks so comparative efficiency between female-male cannot be made.

Perpetuation of this Division by Women Themselves:
Constraints that female workers face are not just the dual role they play in the capitalist society (being a form of cheap, unorganized labour as well as a domestic work), but in also the woman’s own aspirations, the way in which they grow up, prepared to accept their role in the sexual division of labour.[22] Also known as the poverty of aspiration as women have a certain concept of woman’s work , hence a large number of girls associate femininity with domesticity, a role of a mother and wife that has been transmitted by family, peer groups, media and even by schools. Hence we see girls from a lower income class using employment as a stop gap between education and marriage and women from higher income families, choose those jobs based on their schooling to those stereotyped, low income professions which provides a notion of equality of opportunity.[23] It is a relationship between two structures of control of class and gender, based on which girls are willing to accept their future roles.

Additional Barriers that Women Face:
Women are inevitable considered as secondary workers or supplementary earners. During the 1980s India a saw rise in the participation of female labour in export oriented industries and it was considered as the feminization of labour, but it was later found out that these women were following regressive methods of employment and were the poorest paid in the chain of production.[24] Another problem that women face is that they enter the labour market in a much later stage after the completion of their reproductive roles of child bearing and rearing. Hence they lack a head start in comparison to men as well as their ability to work at an older age may not be as efficient. Further many women lack the education as they are considered as future homemakers and a waste of investment. Hence their skills are not very high. Many women though educated, if they are from are from better-off households, they abstain from working. Thus it is mainly the women from lower income families who work in a desperate urge to survive and thus they get exploited with low paying jobs as well as the fact that they also have very low level of education or skills and inevitably low paid.[25] Women are also are unable to participate in the labour market due to the fact that they are burdened with domestic chores. Thus women are considered as a cheap form of labour or efficient only for part time work.
Thus the gender division of labour has been perpetuated over the years by various social aspects of patriarchy and subordination which was later exploited using economic factors. Women themselves have continued this concept by enabling a poverty of aspiration and not limiting their job opportunities by burdening their abilities with domestic chores.

RADHIKA –
Recognition Of The Right To Matrimonial Property As Means Of Quantifying The Economic Contribution Of A Housewife
The housewives are the largest unpaid labour force in India.[26] However, domestic work is not visible as a result of the restricted definition of what economically productive work is. The work done by the housewife is often overlooked, but for the same work, people may be hired and remunerated for their services. The National Insurance Co Ltd v. Deepika[27] case itself talks about the fact that the monetary quantification of the housewife’s work has never really been addressed. This case goes beyond dealing with a mere accident claim and raises important issues of division of matrimonial property, which has far-reaching repercussions. It is in the event of the dissolution of a marriage that the question of division of matrimonial property and the quantification of each spouse’s economic contribution arises.

There are broadly two types of property relations between the husband and the wife, namely
(1) Separation of property system- In this system, the husband and the wife can independently control their property and there is no sharing of assets. The consent of the other spouse is immaterial regarding property decisions. However, marriage here, is not recognised as an economic partnership. On the dissolution of marriage, the wife is entitled to limited property rights as per the personal laws and to maintenance. However, the property mostly belongs to the wage earning spouse who may choose to disinherit the other spouse by way of wills. The maintenance amount granted may not be sufficient to maintain the wife either.
(2) Community of property system[28] - this system of division of matrimonial property prevails in civil law countries and is based on the notion of partnership of property. The spouses may enter into a contract with respect to their properties before marriage. The ownership and management of the property is joint, the assets are predetermined and in the event of dissolution of marriage either by death or divorce, each spouse gets a half share in the assets.

THE INDIAN SCENARIO

At present the concept of matrimonial property does not exist in India. In India, unlike English law, where husband and wife are considered to be one entity, classical Hindu law recognises the existence of man and wife independent of each other and the principle of separation of property between the husband and the wife was fully recognised. Hence a spouse cannot lay claim to the property of the other spouse, in excess of what has been stipulated by the personal laws. An interesting example to illustrate the separation of property principle would be that of stridhana or woman’s property. Whether stridhana is the joint property of both the husband and the wife has been a much debated issue. In Pratibha Rani v. Suraj Kumar[29], it was held that the stridhan property of a woman did not give the husband a joint interest in such property. The husband was the ‘mere custodian’ of the wife’s stridhan and the failure to return such property which had been entrusted to the husband or his relatives would constitute breach of trust as defined under S. 405 of the IPC.

The question of quantification of a woman’s contribution, manifested in the share of matrimonial property she is entitled to, arises in two cases:
(1) ON DEATH: In all personal laws, the spouse gets a certain share in the property of the deceased spouse which fluctuates depending on the presence of other kindred. Under Muslim law, the property rights of women are not at par with men. Among the Shias, the share of the male spouse is double that of the females. Similarly under Christian law as well, the father is better placed as far as property rights are concerned. [30] Moreover, under all the personal laws, the wives can be disinherited through wills. This clearly shows that the existing personal laws do not equally value the contribution of the husband and the wife to the accumulation of assets during marriage, the husband’s contribution being valued more in almost all laws.

(2) ON DIVORCE: Under the Hindu law, on divorce, the woman has no right to claim a share in the husband’s self-acquired property. In the event of breakdown of marriage, only the husband’s title to the house is recognised, clearly overlooking the woman’s contribution in terms of the effort and care put in by her while looking after the home and the family members. The man, on divorce becomes the exclusive owner of all the family assets and the income and the woman is left with pittance in the form of maintenance or alimony.[31]
The role of alimony, ideally, is to compensate the wife for the opportunity costs incurred by her by entering into the marriage and investing in it as well.[32] However, maintenance is generally seen as a ‘dole’ given to women and not as a matter of right.[33] It is taken to be an act of compassion rather than a quantification of the effort put in by her in the marriage. The wife on divorce, loses out much more as compared to a man. She may lose out on a right to reside in the matrimonial home or adequate standards of living as the maintenance amount granted is more than often, not enough.

THE WAY FORWARD

‘… the time has come to scientifically assess the value of the unpaid homemaker both in accident claims and in division of matrimonial property...’[34]

The existing laws are ill-equipped to recognise and quantify the ‘invisible’ work of the housewife. Some people are of the opinion that such work being invaluable, it is not possible to quantify it. However, the housewife may not have an independent source of income and her stridhana may not be sufficient for her to lead a comfortable existence. Moreover, in certain cases, it is because of the gendered norms in society and the sexual division of labour, that the wives are denied the opportunity of going out and working. This should not have the effect of denying them their right to matrimonial property which involves their contribution as well, and she should in fact be compensated for the same. Hence, there needs to be a law which recognises the fact that the accumulation of assets during the subsistence of marriage is a result of the joint and equal efforts of both the husband and the wife.
The model of ‘community property’ could possibly be adopted in India, where in the event of breakdown of marriage all assets should be equally divided.
The idea behind the community property is that the spouses contribute equally to the common savings, one of them by going outside to work and the other spouse by staying at home and managing the household and aiding his work as well, hence both are taken to have equally contributed to any property acquired.[35] However, whether the system of community of property will be feasible in India needs to be considered. In India, owing to the inherent gender inequalities the concept of joint ownership and management may not work, as the women, traditionally confined to their homes, may not be in a position to exercise their right and supervise the management of their property, leading to more and more control vesting with the husband, the creditors of the husband may also try satisfying their debts from the wife’s property.[36] Another problem could be that both may have conflicting interests as regards what they wish to do with the property. Finally it may defeat the purpose of women empowerment where the husband does not work either inside or outside the household, but by virtue of this provision, may be able to get one half share in the hard-earned property of his wife. This also raises an important issue of the quantification of the work of housewives belonging to different strata. In my opinion the same principle of quantification cannot be applied to a housewife who hails from a well-to-do family where she has help for all the domestic services and hence does not have much non-pecuniary contribution, and a woman who hails from the lower rungs of society and is expected to do both the household work as well as work outside without much contribution from the husband. Does the contribution of the housewife from the well-to-do family and the unemployed husband who does not contribute to the running of the household, need to be quantified at all?
Hence in India, the system of ‘deferred community of property’ may be adopted which tries combining the positive features of the two principles of separation of property and community property, wherein, the spouses have independent control over their assets during the subsistence of marriage and it is only on dissolution of marriage that the assets are equally divided between the two. However, adequate safeguards need to be provided to ensure that the spouses don’t interfere with the rights of the other spouse and in the event of that happening, the spouse may have the right to claim his/her share in the assets. Other safeguards could be considering only property acquired during marriage as joint property which would exclude assets acquired and gifts received before marriage and would help protect the traditional rights over stridhana. Short duration marriages may also be excluded from the application of the deferred community of property system in order to prevent viewing divorce as an attractive option. However, another difficulty in applying this system would be the fact that in cases, the division of assets may become acrimonious and spouses may be found guilty of hiding property and not bringing it into the fold of community property such that it is not liable for division between the two spouses. On the discovery of the above fact, provisions could be made to for punishing the erring spouse.
Finally, the contribution of a working woman also needs to be examined. Presently, the wife’s earnings (money or property) acquired by her during her marriage will be recognised as her separate property, as per Section 4 of The Married Women’s Property (Extension Act), 1959. However the fact that quite a few women have ‘broken the glass ceiling’, does not mean that the gendered norms are no longer prevalent and still there is no equality in the household. In fact the woman often ends up doing double the amount of work, juggling her professional responsibilities and her duties towards her family, hence in such a case should her contribution be doubly recognised and doubly compensated? A possible solution could be the introduction of the community property system because anyway, in modern times both the spouses contribute almost equally to the assets and should be entitles to an equal share in matrimonial property.
Hence at present, the denial of economic opportunity to the woman, through the ways the laws and policies are structured in our country, makes out a strong case for the recognition of the contribution of a housewife by giving her rights in the matrimonial property.

AKANKSHA –
The Woman’s Right to Economic Opportunity

In light of the present Indian legal position on the quantification of the economic contribution of the housewife, it is extremely important to look at her opportunities for employment outside the home. For, if the housewife’s effort within the home is not attributed with any economic worth, it is essential that she be able to have some way to attribute economic worth to herself. At present, she seems to be stuck between a rock and a hard place, with no chance of quantifying her household contribution and a judicial bias to her working outside the home.
Through this paper, I will briefly examine the attitude of the judiciary to the working woman and highlight the need for change in such attitude, so that women are allowed the right to economic opportunity.
One of the most obvious areas in which the discrimination women face comes to light is that of the determination of the matrimonial home and the advantages that go with it.
Matrimonial Home
The matrimonial home has been defined as “the common home of the spouses where both of them are expected to live together till circumstances permit, in order to share a common domestic life.” Living in a matrimonial home is said to be the right and obligation of both the spouses.[37]
The High Courts of different states have differed on the issue of who should have the right to determine the location of the matrimonial home. While in some cases it has been held that it is the sole right of the husband[38], in others it has been held that it must be determined at the convenience and benefit of both husband and wife[39]. There is no single trend that has been followed by the courts, yet in majority of the cases, the right to locate the matrimonial home lies with the husband. As of yet there is no judgment by the Supreme Court on the location of the matrimonial homes, which will help to lay at rest this controversy.
Restitution of Conjugal Rights
Primary amongst the issues associated with the matrimonial home is the concept of the remedy of restitution of conjugal rights– “companionship in the fullest sense between each of them, an entertainment of mutual friends, sexual intercourse”[40]. It allows for a spouse to file for restitution in a case where they have been abandoned in the matrimonial home by the other, to enable them to enjoy all the rights that come with the union.
In the most recent cases that deal with restitution of conjugal rights and women’s employment[41], the question of the location of the matrimonial home did not even arise; it was implicit that it would be at the husband’s residence.
The consequence is that, if a woman is working in a different state/ city from her husband, because she gets a promotion and wants to retain her job and at the same time maintain her marriage, what is she to do? If her husband does not approve of such a job or does not desire her to take it up, whatever the reason, he can file for restitution of conjugal rights and force her to rejoin him in the matrimonial home. However, when he gets a transfer, she is forced to accompany him. By taking such a step the courts are effectively ensuring that women do not have the right to pursue a career of their choice within a marriage as, if the woman’s career causes her to move out of the society of the husband, he can move the court for the restitution of conjugal rights and force her to rejoin him at his place of employment/ residence. By making this sort of provision unilateral, i.e. by allowing the husband to choose the matrimonial home and ensuring that the wife must accompany him, the court is only re-enforcing gender stereotypes and furthering the perception that it is the male members of a household alone, who are capable of earning and that their jobs are of greater importance than those of women.
In cases where the wife is earning a sum less than the husband, the courts have almost unequivocally granted restitution, saying that there is no need to augment the family income. However the need here is not the augmentation of family income but the liberation of women from the shackles of a patriarchal society by allowing them a means to stand on their own two feet
The reasoning behind the decision of the courts to allow the husband exclusive rights to determine the matrimonial home has been put forth in the case of Kailashwati[42] and it reflects the bias of the judiciary. According to this case, since the husband has been burdened with the legal obligation of providing for his wife and child, he should have the right to choose the matrimonial home. This argument is circuitous as it presumes that the wife is incapable of supporting herself and because of this incapacity denies her the right to have a say in the location of the matrimonial home, which in turn reduces her ability to earn and to support herself.
Custody
Another disadvantage of this stand of the court is that women face the fear of losing custody of their children. Even if they have just cause for living apart, this fear persists, as they are not allowed to move children outside of the matrimonial home and can be charged with kidnapping if they do. If the children settle down in the environment provided for them by the husband, the court will be reluctant to award custody to the mother and to re-locate the children. Thus some mothers take to removing the children from the matrimonial home by stealth. Though the courts will rarely hold a biological parent liable for kidnapping, the fact remains that a charge can still be filed against the wife and to ensure that women who live away from their spouses also have equal rights to child custody, there is a need for some reform to the present legal position.[43]
Additionally, the court seems to biased against the working woman – some courts have held that with the societal shift in urban areas, it is not possible to grant custody to the mother, as she, with her job will not have sufficient time to devote to the children[44] the Courts however, seem to ignore the fact that the husband too has a job and so the same reasoning should apply to him too! In many cases however, the court has held that the parents of the husband who live with him, will take the role of caregivers rather than the parents. This does not change the fact that the husband and wife remain in the same position with respect to their ability as caregivers and this factor should not be allowed to determine custody. Recently however, some courts however have held the opposite[45] – that a woman cannot be denied of the custody of her child merely because she is employed and this is a heartening trend.

The Social and Economic Basis for this Judicial Attitude
Men use their superior societal position to ensure that it is they who decide how women work, where they work and whether or not they work at all. Thus men derive a definite economic benefit from patriarchy, which gives it a material basis for existence.[46] The stranglehold that patriarchy had on our society also contributed to the notion that women did not have a role beyond that of a consort. It created gender stereotypes that advocated the idea that men were supposed to earn, to provide a home for their families and to protect their wives and women were supposed to be homemakers, to be obedient and to accompany their husbands as and where they went. These stereotypes were strengthened by the fact that women had been schooled not to ask questions, and so were content to accept status quo.
The judiciary – comprised largely of men has shown a tendency to rule in favour of restitution rather than the right of a woman to independent employment, thus showing the patriarchial tendency to behave in a manner that exerts control over women, ensuring their economic subordination. Such is the social conditioning, that even women judges have often ruled in favour of the men, citing the same reasons – the right of the man to have his consort with him, the inability of a working woman to have custody of her child etc. The judiciary, which has always looked to protect the institution of marriage, no matter what the cost, is willing to sacrifice the woman’s economic independence in order to bring the spouses back together.
Recommendation
The recommendation of the researcher is that the courts should recognize the existence of two matrimonial homes, one at the place of residence of the husband and the other at that of the wife. This will allow the wife to pursue employment at a place other than that of the husband’s residence, allow her to keep her children with her if she so wishes and also allow her the right to demand that the husband visit her to uphold her conjugal rights changing the provision from a unilateral one to one that works both ways. There is no reason why the man cannot change his residence in accordance with the job of the woman – no reason at all, why she should be compelled to follow him when he changes jobs or gets transferred, at the expense of her economic independence.

There is thus a need for change in the judicial attitude to allow for an atmosphere that is more conducive to the rights of a working woman. The possibility of two matrimonial homes should be considered and the sacrifice of the woman’s economic aspiration for the ‘saving’ of the marriage should stop.

[1] National Insurance Co. Ltd. v. Minor Deepika and Others, MANU/TN/1304/2009.
[2] Amar Singh Thukral and Others v. Sandeep Chhatwal and Others, 112 (2004) DLT 478.
[3] Mehmet v. Perry, [1977] 2 All ER 529.
[4] Sunny Chugh v. Darshan Lal, AIR (1985) P&H 343.
[5] Jaimal Singh v. Paramjit Singh and Ors., 1998 VI AD (Delhi) 469 c.f. Amar Singh Thukral and Others v. Sandeep Chhatwal and Others, 112 (2004) DLT 478.
[6] Lata Wadhwa v. State of Bihar, 2001 ACJ 1735.
[7] Supra note 1.
[8] See Generally: K.A.Clark, A.I. Ogus, “What is a Wife Worth?” 5(1) British Journal of Law and Society (1978) at 14-24.
[9] Geetha Padmanaban, “What’s her take-home?” The Hindu (4th August, 2009) available at http://www.thehindu.com/mp/2009/08/04/stories/2009080450590200.htm (accessed on 14th September, 2009).
[10] Anonymous, “Housewife would be paid £30,000” BBC News (19th February, 2008) available at http://news.bbc.co.uk/2/hi/business/7252504.stm (accessed on 14th September, 2009).
[11] Heidi Hartmann, “Capitalism, Patrirarchy and Job Segregation by Sex”, 1(3) Chicago Journals 137 (1976) at 141.
[12] Ibid at 146.
[13] Supra note 1 at 149.
[14] Catherine Hakim, “Explaining Trends in Occupational Segregation: The Measurement, Causes, and Consequences of the Sexual Division of Labour 8(2) European Sociological Review 127 (1992) at 132.
[15] Ibid at 145.
[16] Supra note 1 at 157.
[17] Muller v. Oregon, 208 U.S. 412 (1908).
[18] Supra note 1 at 165.
[19] Bina Agarwal, “Work Participation of Rural Women in the Third World: Some Data and Conceptual Biases” 20(51) Economic and Political Weekly 155 (1985) at 155.
[20] Supra note 8 at 157
[21] Supra note 8 at 161.
[22] Norma Sherratt, “Girls, Jobs and Glamour” 15 Feminist Review 47 (1983) at 47.
[23] Ibid at 48.
[24] Preet Rustagi, “Understanding Gender Inequalities in Wages and Income in India” 48(2) The Indian Journal of Labour Economics 319 (2005) at321.
[25] Ibid at 325.
[26] N. Jha, “Maintenance Laws Barely Maintain- A Need to Account For the Domestic Work as Contributing Equally to Marital Property”, 29(2) Indian Bar Review 105, 106 (2002).
[27] ¶ 7, MANU/TN/1304/2009.
[28] B. Sivaramayya, Matrimonial Property Law in India 8 (Delhi: Oxford University Press, 1999).
[29] MANU/SC/0090/1985.
[30] Poojitha, “Community of Property Regime: A Call for Matrimonial Property Rights”, 01(01) National Law School Journal 155,162 (1993).
[31] F. Agnes, Give Us Our Daily Bread: Procedures & Case Laws on Maintenance 9 (Bombay: Majlis, 1992).
[32] E.M. Landes, “Economics of Alimony”, 7(1) The Journal of Legal Studies 35 (1978).
[33] N. Gandhi et al., “Drafting Gender Just Laws”, 31(43) Economic and Political Weekly 2858, 2859 (1996).
[34] ¶13, National Insurance Co Ltd v. Deepika, MANU/TN/1304/2009.
[35] A. Laferrere, “Marriage Settlements”, 103(3) The Scandinavian Journal of Economics 485, 486 (2001).
[36] Supra note 3, at 7.
[37] Kamala Bhasin, What is Patriarchy (2nd edn., New Delhi: Kali for Women, 1994) at 6.
[38] Tirath Kaur v. Kirpal Singh AIR 1964 Punjab 28 ; Surinder Kaur v. Gurdeep Singh AIR 1973 P. & H. 134; Gaya Prasad v. Bhagwati AIR 1966 M. P. 212 and Smt. Kailashwati v. Ayodhia Parkssh, 1. L. R. (1977) 1 P.LkH.642.
[39] Sadhu Singh v. Jagdish Kaur AIR 1969 P. & H. 130; Shanti Nigam v. R. C. Nigam 1971 A L. J.; Mirchummal v. Devi Bai AIR 1977 Raj. 113 and N. R. Radhakrishnan v. N. Dhana Labhmi AIR 1975 Mad. 331.
[40] A.N. Saha, Marriage and Divorce, (5th edn., India: Eastern Law House Pvt Ltd.) at 17.
[41] Suman Kapur v. Sudhir Kapur AIR 2009 SC 589, Rajesh Burmann v. Mitul Chatterjee (Burman) AIR 2009 SC 651, Durgesh Sharma v. Jayshree 2008 (4) AWC 4160 (SC), Manjit Prakash v. Shobha Devi AIR 2008 SC 3032.

[42] Smt. Kailash Wati v. Ayodhia Prakash (1977) 79 PLR 216 (FB).
[43] Flavia Agnes, “Contesting Rights Over Children: Custody and Guardianship in Matrimonial Disputes” www.indiatogether.org/manushi/issue114/law.htm (11th September 2009)
[44] See generally, Anonymous, “Working Moms may not get Custody”, http://www.crisp-india.org/the-news/related-news/208-working-moms-may-not-always-get-child-custody.html (14th September 2009), Nadir Modi, “Child Custody: Mother or Father” http://www.ebc-india.com/lawyer/articles/94v3a3.htm, (14th September 2009), Flavia Agnes, “Contesting Rights over Children”, http://www.indiatogether.org/ manushi/issue114/law.htm (14th September, 2007), R.P. Jayakumar v. R. Jayanthi II (2007) DMC 163.
[45] M. Imranhullah, “ Womens employment no ground to deny custody in divorce cases, rules court” http://beta.thehindu.com/news/cities/Madurai/article16830.ece (15th September 2009).
[46] Kamala Bhasin, What is Patriarchy (2nd edn., New Delhi: Kali for Women, 1994) at 6.

Economic Contribution of the Housewife: Issues for Discussion

2009-09-16T04:43:00.000-07:00

Thsi week's gorup has identified the following issues for discussion:

1. In today’s world where women have increasingly been accorded independent legal status, what is the purpose of quantification of housewives’ services and should we determine the purpose before evolving a scientific mode of evaluation of the same?

2. What are the different modes of quantification of unremunerated domestic activities of women? Here the assessment of compensation will be looked at from two perspectives:
a) where, as a result of injury or death, the services of the housewife have been lost
b) where, as a result of injury, additional services have to be provided

3. Why have the Courts in India thought of this issue to be an important one for the purposes of discussion and have the judgments arrived at any significant conclusion?

4. What is the legal impact of quantification of services of the housewife? This will be looked at from the perspective of:
A) tort action in the case of personal injury, death and care for an injured member of the family
B) insurance law; and
C) matrimonial property disputes

5. What are the reasons for the gender division of labour?

6. Who can be held responsible for the perception of women being less efficient than men in the labour force?

7. What are the various barriers which prevent women from entering the labour market?

8. How has Australian law dealt with the issue of measurement and quantification of homemaker’s contribution? (Principle of quantification)

9. What is the rationale for departing from a set norm and coming up with such law? (Principle of justification)

10. What has been the role of CEDAW in promoting such laws?

11. How successful has the law been in achieving its purpose and what has been its impact on society?

12. Can the recognition of the right to matrimonial property help quantify the economic contribution of a housewife?

13. What are the existing property relations between a husband and wife? What is the relief available to her in case of termination of marriage?

14. Will it be feasible to implement in India, the system of 'community of property' where both the spouses have equal rights to matrimonial property? Will this help quantify the 'invisible' contribution of the housewife?

15. How has concept of matrimonial home in India been affected by judicial discretion?

16. How has this discretion affected the rights of working/educated married women?

Session 5: Economic Contribution of the House-spouse to the home

2009-09-14T04:28:00.001-07:00

This week's discussion will focus on whether, and if so how, to assign economic value to housework, particularly for full time houseworkers. We will be discussing this issue in light of the decision of the Madras High Court in National Insurance Co. v. Deepika, which forms the reading for this week.

Issues for discussion will be up by Wednesday.

Current Economic Crisis

2009-09-05T08:15:00.000-07:00

The students leading the discussions this week had the following opinions to offer on the current economic crisis (in the session discussions, we focused not only on the current economic crisis and regulatory failure, but also used the crisis as a context to look at how courts respond to changes in economic regimes. In particular, we looked at another epochal economic turmoil-the Great Depression- and the New Deal that followed. We examined the US Supreme Court's response to the New Deal, and the lasting impact this has had not only on US, but also Indian, law and political setup. In this context we also examined the approach of the Indian Supreme Court to the post-91 economic order, and analysed the changing jurisprudence of the Indian SC in this period-Aparna) :

1. On the recent economic crisis
In hindsight, the global economic crisis can be seen as a ticking time-bomb that went off, but which went undetected in an atmosphere of irrational exuberance and confidence in financial instruments in light of quick and unrealistic returns. The recent financial crisis has three primary identifiable causes: poor regulatory oversight, inadequate modelling of risks, and inefficient institutions for trading and managing complex financial instruments.

The loose monetary policy and low interest rates led to a sharp increase in housing prices. Basically, banks have the potential of earning huge sums from loans, but generally, loans are tied up for decades. To mobilize credit, these loans were pooled and converted into ‘securities’ and off-loaded to others. Securitization, originally created for the purpose of reducing risk, unfortunately ended up concentrating risk. The idea was that out of the pool of loans, even if some defaulted, the returns from the recovery of the other loans would offset the losses from the defaulting loans. The riskier the undertaking, the higher was the returns from interests. Therefore, institutions indulged in what is known as ‘subprime’ mortgages. The risk undertaken by these institutions was assessed by credit rating agencies. However, often, institutions were paying for risk on margin, and the actual extent of the risks failed to be captured. This, along with the conflict of interest of credit rating agencies and the ever-increasing complexity of these financial instruments, sent out a distorted picture of economic utopia, or the housing bubble. There was far too much debt and not nearly enough capital in the system. When the mortgages became non-performing, these securitized assets collapsed, affecting the entire worldwide financial system. An increase in loan incentives such as easy initial terms and a long-term trend of rising housing prices had encouraged borrowers to assume difficult mortgages in the belief they would be able to quickly refinance at more favorable terms. However, once interest rates began to rise and housing prices started to drop moderately in 2006–2007, refinancing became more difficult. With high default rates on subprime mortgages and adjustable rate mortgages (‘ARM’s), the inflated housing bubble burst.

Most importantly, there was loss of confidence in financial institutions. Because of the critical role banks play in the current market system, the effects were on everyone. This, coupled with a globalized system, led to a credit crunch, the shock of which spilled over a global financial crisis. In the wider economy, this credit crunch and higher costs of borrowing will affect many sectors leads to cutting down on consumption, leading to businesses struggling to survive and further, to job-losses. For the developing world, the rise in food prices as well as the effects of the financial instability and uncertainty in industrialized nations are having a compounding effect. To the extent that the Asian economy is decoupled from the Western financial systems, the subprime mortgage crisis has not affected Asian nations as severely as the West. However, many Asian nations have heavily invested in Western countries. In addition, there was increased foreign investment in Asia, mostly from the West. In an increasingly inter-connected world means there are always knock-on effects. Many Asian countries have seen their stock markets suffer and currency values going on a downward trend. Asian products and services are also global, and a slowdown in wealthy countries means increased chances of a slowdown in Asia and the risk of job losses.

The million dollar question now, is, whether regulation could have prevented this? It must first be noted that government policies and government supported enterprises like Fanny Mae and Freddie Mac were largely responsible in giving rise to the financial crisis in the first place. The Clinton and the Bush administration went to lengths to increase the national homeownership rate. It promoted paper-thin down payments and pushed for ways to get lenders to give mortgage loans to first-time buyers with shaky financing and incomes. The regulations to the Community Reinvestment Act made it possible for banks to turn home mortgages into securities. The Securities and Exchange Commission relaxed lending rules enabling investment banks to substantially increase the level of debt. Further, the Glass-Steagall Act, enacted after the Great Depression to separate commercial banks and investment banks to avoid potential conflicts of interest between the lending activities of the former and rating activities of the latter, was repealed. The most recent legislation was the Commodity Futures Modernization Act of 2000, which exempted derivatives from regulation. This enabled creation of special purpose non-banking financial institutions with limited liability to be formed for dealing in mortgage backed securities in secondary market, which did not come within the scanner of regulation. The cumulative effect of these measures was increasing the liquidity of the mortgage market, and freeing up capital to lend to homebuyers that otherwise would have been tied down to protect the banks from the risk of loan default. And this was stretched to form the speculative bubble.
At this juncture, the Basel Accords seem to be a tempting solution to prevent such situations from arising in the future. The core of the idea is to have international standards (implemented through domestic rule-making) on risk and capital management requirements to ensure that a bank holds capital reserves appropriate to the risk the bank exposes itself to through its lending and investment practices.

However, the issue remains if regulation is the answer, and if it is, how much regulation is desirable? Basel 2 contemplates that banks must have eight per cent of their exposures in capital. But if asset prices fall by 50 per cent as has been the case with the current financial crisis, this seems to be fall behind by a long shot. In fact, new regulatory standards in the form of Basel II accords are being debated with the unfolding of the limitations of the Basel II accords (The Basel requirements of capital standard as they stand do not take account of hedging, diversification, and differences in risk management techniques, especially portfolio management, and banks inevitably resort to regulatory capital arbitrage to structure the risk position in a manner that allows it to be reclassified into a lower regulatory risk category)

On the other hand, it cannot be denied that increasing minimum capital requirements will increase the cost of credit, and affect liquidity. Therefore, regulations aimed at being ‘fool-proof’ can backfire.

On an optimistic note, although the history of bubbles shows that the impact on the law can sometimes be adverse, the law can be changed for the better, for improvements that are needed. At present, the focus is only on bail-out plans, which are more in the nature of a shot-in-the arm, rather than a policy to address the root of the problem. From where we stand, the law can be a double edged sword. It can be used to prevent similar situations, for instance, by regulating credit rating agencies, implementing stricter restrictions on lending policies to ensure that the economy operates along a realistic assessment of risks rather than unfounded optimism. However, it is a very real fear that the law itself can lead to further situations of euphoria and crisis.

2. On the Great Depression and the changes it caused
The supreme court in the 1930’s went through three basic phases, first when Justice Hughes entered the court and along with Justice Roberts swung decisions towards upholding statutes that provide for certain regulations, etc.

The second stage was a relapse into the time of Justice Taft’s Supreme Court, with the cases of Adkins, etc striking down minimum wage legislations as unconstitutional. This was also the phase of cases like Panama and Schechter, which held dealt with delegation of power from the legislature to the executive. The Court held that the standard for delegation is that the policy must be decided by the Court and only the implementation of the policy could be delegated.

The third stage was from the beginning of Roosevelt’s second term in office (and it is fitting that this phase of the Supreme Court is defined in terms of an executive term). In light of (or coincidentally with) Roosevelt’s plan to add a judge each for all the judges of the Supreme Court above a particular age, Justice Roberts’ position on a number of issues, including minimum wage legislation, changed. From this point on, starting with the Parrish case, the Court holds 5-4 that minimum wages are unconstitutional, and proceeds to devalue economic due process entirely, moving away from the strict scrutiny earlier placed upon such restrictions. This phase is followed by the introduction of justices Hugo Black, Stanley Reed, Felix Frankfurter, William O. Douglas, and Frank Murphy in the place of Justice Brandeis, Justice Cardozo (who had replaced Justice Stone and decided the same way) and three of the Republican Justices Van Devanter, McReynolds, Sutherland, and Butler.

The three kinds of cases discussed are cases dealing with the legislative competence of the federal government, the delegation of power, and economic right violations. All three go through the same three phases. As far as the competence of the federal government is concerned, the effect of the widening of the scope of the federal government’s competence is felt even in the civil rights cases of the 1960’s with the federal government imposing laws on enterprises in states on the basis of extremely flimsy connections to it.

Thus basically the question is whether the economic crisis changed the mindset of the judges and therefore caused the change in the policy of the Court (even though Courts aren’t really supposed to have a policy) or whether there was merely a change in personnel. Since the major changes started before the change in personnel, it is reasonable to assume that some other change was caused. The impact of the depression was clear at least in terms of the popular support to Roosevelt and his plans, and it is possible that the Court bowed to this public opinion, or to the threat of court-packing.

The other questions that arise from this particular era are concerned with the impact of these decisions on future relations between the federal government and the states, between the senate and the president and between economic rights and welfare measures. The answer provided by the Court towards the end of this time period was resoundingly in favour of the federal executive in all three of these relationships, and the executive has been the strongest of the three organs since then.

The Court of this time did this for a few reasons. The first was provided by Justice Holmes in his seminal dissent in Lochner. He critiques the jurisprudence of the time as it was intrinsically connected with pushing a particular economic policy. The second is provided by Justice Stone in Carleone Products and Justice Brandeis in Hartford Fire Insurance Co., where the presumption of constitutionality is referred to. Both these basically refer to a level of respect for the other branches of government as well as a level of acceptance for the fact that their personal beliefs could be wrong.

3. On the regulatory state
What is the New Deal?
The New Deal was the name that United States President Franklin D. Roosevelt gave to a complex package of economic programs that he brought into effect between 1933 and 1935. The basic aim of the New Deal was to (i) give relief to the unemployed and badly hurt farmers (ii) reform business and financial practices and (iii) help the economy recover.

Impact of the new deal – Rise of Regulation
The New Deal increased Government regulation of the economy. The Great Depression had popularised the belief that an unregulated free market was the entire cause of the country’s grief during that period. FDR’s administration’s response was to insist on the need for countervailing governmental power that would be administered by ‘disinterested expert regulators’ as a means to discipline the market and stabilize the economy. Consequently, there was an expansion of administrative authority and the rise of the administrative state. Regulatory agencies were established to cover all aspects of the economy. (Some of these persist even today such as the Social Security System, Securities and Exchange Commission (SEC), and Fannie Mae. In India there regulators for Electricity, Insurance, Petroleum, Telecom and SEBI)

These were unprecedented both in terms of number of agencies and their scope of power. The agencies covered areas previously governed by State or local agencies or none at all. At the forefront of this change was the office of the President who had greater authority over agencies within the executive branch.

This burgeoning of regulatory agencies raises many issues concerning due process, federalism and separation of powers. The main issue concerns the extent to which legislative powers can be delegated to the executive. Additionally, importance must also be given to the gradually erosion of State autonomy and the creation of a centralised Government. This is important given that residuary power under the US Constitution lies with the State and not with the Centre.

The American Constitution has a strict principle of separation with the Legislature, Executive and Judiciary performing their respective functions. However, with the arrival of the administrative state, the executive headed by the President was vested with unlimited discretion in framing laws.

It is interesting to note that proponents of the New Deal believed that the existing the system of separated functions prevented the government from reacting flexibly and rapidly to stabilize the economy and to protect the disadvantaged from market fluctuations. They also believed that the distribution of powers among the three branches of government created political struggles. All this achieved was to hinder executive’s power to make regulatory policies. They also believed that judges did not possess the expertise to understand the issues addressed by the administrative agencies. Thus they sought to remove judicial review as well. Consequently, the creation of regulatory agencies and their ability to control different aspects of the economy and citizens lives raises questions about the impact of the burgeoning of regulatory agencies and the administrative state on separation of powers.

This view was reflected in the opinion of the Court in Cromwell v. Benson wherein the Court approved conferral of broad fact-finding and adjudicative authority on administrative agencies as consistent with the requirements of both due process and the separation of powers. Administrative agencies, Justice Hughes said, were necessitated “by the increasing complexities of our modern business and political affairs.” Later, in Humphrey’s Executor v. US and Myers v. US, the Court held that with respect to independent agencies exercising legislative and judicial functions, Congress might constitutionally restrict the President’s removal power as it had in the Act. Interestingly, the obiter stated that the President had sole power to remove purely executive officers in any manner he chose.

Role of the Judiciary

This brings us to the next aspect which is the importance of the role played by the judiciary during the New Deal reforms. It issued landmark judgment on many aspects such as the scope of federal power, the separation of powers, and constitutional protections for property rights. The judiciary’s contribution to New Deal reform can be analyses in two stages.

In the first stage (1935-1937), the Judiciary became a protector of ‘civil rights and liberties.’ The conservative majority of the court struck down many of FDR’s proposed reform legislations. The basis behind their decisions was (i) that the due process clause limited the power of the Government to regulate and (ii) that delegation of power to the executive could not be arbitrary and excessive.

Panama v. Ryan – authorized the President to prohibit the interstate shipment of “contraband” or “hot” oil produced in violation of quotas imposed by the state of production. The delegation of powers to the president was excessive as there was nothing in the section that guided the President concerning the circumstances under which he was to prohibit interstate transportation of hot oil. He had been conferred an unlimited legislative authority.

Schechter Poultry Corp. v. United States, the famous “sick chicken” case – section authorized the President to prescribe codes of fair competition to govern various trades and industries, and to approve codes proposed by trade and industry representatives. The section prescribed neither rules of conduct nor any meaningful standard to guide the exercise of the President’s “virtually unfettered” discretion to prescribe and approve codes. Additionally, it held that the Congress might authorize the executive branch to promulgate subordinate legal rules, so long as the legislation established standards sufficient to guide and confine the discretion of the executive in carrying out the declared legislative policy. But Congress could not alienate the essential legislative functions with which it was vested.

Carter v. Carter Coal Co. – The Bituminous Coal Act regulated the price at which bituminous coal moved in interstate commerce. It was struck down as the delegation of legislative power, not to a government official, but to private parties having interests possibly and often actually adverse to the competitors over whom they would wield such power, was “clearly arbitrary” and thus a denial of the rights safeguarded by the Fifth Amendment’s Due Process Clause.

Adkins v. Children’s Hospital – The Court invalidated a congressional statute authorizing the prescription of minimum wages for women working in the District of Columbia. Such a restriction could only apply to businesses that affected public interest. If it was applied to private businesses, it infringed their liberty of contract.

The end of the earlier obstruction to New Deal reforms posed by the judiciary came in West Coat Hotel v. Parrish, where the Court upheld a minimum wage law for women. This is called the switch in time that saved nine because the crucial turn was by Justice Owen Roberts who had earlier sided with the majority in striking down minimum wage laws, who now sided with the majority in upholding them. The decisions following Parrish systematically repealed all the previous decisions hindering New Deal reforms. The result was that virtual demolition of not only the judicially created doctrine of substantive due process but also of the Constitution's own basic principle of limited federal power. The Judiciary began to defer to the executive citing non expertise in understanding issues dealt with by administrative agencies.

(i) What are the limits of regulation? Can the judiciary place limitations on the executive’s power to legislate the ‘private sphere’?
(ii) Can the judicial deference to the executive in cases of regulatory agencies be reconciled with due process and rule of law?
(iii)

Impact on Civil liberties
At the end, the Congress and the federal administrative state exercised virtually unlimited authority over the nation’s economy. Constitutional dual federalism had been supplanted by fiscal cooperative federalism, as the ballooning federal budget bore witness to the national government’s commitment to guaranteeing economic security, promoting public works, and placating powerful constituencies. Substantive due process and related doctrines no longer posed a threat to state and federal regulatory programs, yet the federal judiciary increasingly invalidated government restrictions on the exercise of non-economic civil rights and civil liberties.

In Brown v. Mississippi, the Court overturned the murder conviction of a black man who had denied commission of the offense until subjected to a severe beating by police. The unanimous Court held that the brutal extortion of this confession, which constituted the principal basis for the conviction, was “revolting to the sense of justice.”

In Missouri v. Canada, the held that furnishing legal education within the state to whites while not doing so for its black citizens denied them equal protection.

Similarly, statutes were struck down for violating other civil liberties such as Due process of law, the right to Legal counsel etc. It also struck down legislations that prohibited illiterate people from voting.

Thus, while upholding economic regulation, the federal judiciary increasingly invalidated government restrictions on the exercise of non-economic civil rights and civil liberties

4. On freedom of trade and economy-based restrictions
In this section we will discuss the exact scope of the rights granted under Article 19 1 (g) of the Constitution and the scope of regulatory power given to the state under Article 19 (6).
Article 19 1 (g) grants the right, “to practice any profession, or to carry on any occupation, trade or business”.

Article 19 (6) – Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the rights conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to, -
i) The professional or technical qualifications necessary for practicing any profession or carrying on any occupation, trade or business, or
ii) The carrying on by the state or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise.

Three kinds of regulations permitted by judiciary:
a) Res Extra Commercium –Some trade and businesses are not considered trade or business at all. Liquor trade (Cooverji, Krishan Kumar, Khoday Distilleries), In fact in such cases restriction standards can be very strict (Mcdowell). Betting and gambling etc. are also not considered and hence are not protected. (State of Bombay v. R.M.D.C) Restrictions amounting to complete prohibition can also be imposed. However, Income Tax Act stipulates that these concerns can be taxed. State machinery exercises very strong control over these concerns.

b) Reasonable Restrictions in public Interest. – Some rights are not guaranteed under Article 19 1 (g); like a right to government contracts (Ram Jawayya – there was no right of private publishers to have their books selected as school text books, Krishan Kakkanth – government could specify conditions on purchase of pump-sets on government loans and private parties can not claim a right to sell their pumps). Similarly taxing is not considered restriction unless confiscatory even if it diminishes profits. (Federation of Hotel, Nazeeria Motor Service). Discriminatory taxes are not allowed. In Chintaman Rao and Krishnan Kakkanth the court explained the meaning of reasonableness required for Article 19 (6) and stated that the restrictions should . Narendra Kumar case – restriction might mean prohibition. Some cases where restrictions were held to be reasonable: Minerva Talkies – limit of 4 shows a day, Laxmi Khandsari – shortage of white sugar so ban on manufacture of khandsari for a few months. Cases where restrictions were held to be unreasonable: Chintaman Rao – absolute ban on bidi manufacture, sale of wheat within 15 days (Pratap Singh v. State of Punjab). Strict regulations are permissible on trading in essential commodities because regulations differ from trade to trade. In all the cow slaughter cases the courts have recognized economic interests as a standard of reasonableness (Quereshi).

c) Under Article 19 (6) (i) and (ii) – specific reference to State Monopoly - Akadasi Pradhan v. State of Orissa (1963) – presumption of reasonableness, The state is not required to justify its monopoly. Parliament can create trading monopolies in states under entry 21 in Concurrent list. However the monopoly should be for carrying on that particular trade and only to the extent that trade can be carried out in a monopolistic manner and not to facilitate such trade. Monopoly only for benefit of state not for third parties. And monopoly so created can be absolute or partial (Indian Drugs and Pharm Ltd.).

As far back as the first Constitutional amendment, 1951 the Parliament had its eye on regulation, state monopolies and nationalization. The reasonable restrictions under 19 (2) were not present but 19 (6) was present. One of the major things that was reiterated at the beginning of the amendment was that resources could be controlled by the government and can be nationalized if need arises.

In this light it is pertinent to ask; what is the nature of Indian economy? What prompts courts to give such wide ranging powers of regulation of businesses to the State? Looking at the preamble, the directive principles of state policy (Article 38 (1), 38 (2), 39 (b) and Article 39 (c)) it can be said that India does not follow a laissez faire economy. Directive Principles of State Policy assume importance because the operation of Article 19 is determined by directive principles by virtue of Article 31 C in 1971.

Article 38 (1) – socio-economic justice.

A 38 (2) – to minimize inequities in income.

Article 39 (b) and Article 39 (c) - Distributive Economic System .

Taking over administration of sick industries etc. is permitted under these Articles.

In State of Karnataka v. Ranganatha Reddy it was held that, “Material resources include all resources which can create wealth for the community and include all properties whether moveable or immoveable, whether privately owned or under public possession”. Individuals being members of community, individual property can also be considered the property of the community. Furthermore the court held in another case that “Nationalization can be one mode of distribution as well as prevention of concentration of wealth” (Maharashtra State Electricity Board).

Of Article 39 (c) Jaganmohan Reddy in Keshavananda Bharti said that the purpose is to prevent concentration of wealth to the common detriment.

Some examples of use of these provisions by the State include – nationalization, taking over management of public utilities from private hands, taking over mining of natural resources, taxing capital and wealth, land reforms, land acquisition, ceilings on land holdings etc. Also indicative of the fact that state can carry on business or trade and it is a legitimate function of the state.

It will be right to say that the government enjoys power to regulate and order the economy in any way it pleases.

Then in 1978, 44th Constitutional Amendment we have the introduction of the word ‘socialist’ into the preamble.

What is the impact of such introduction? The court considered this question in Excel Wear v, UOI – 1979. They opined that “Private enterprises create wealth which is essential for growth of national economy and this should not be sacrificed in favor of rigorous social control”.

Thus, we see that even in the presence of jurisprudence that suggests state power is absolute in terms of regulation; the courts have sought to modify their views slightly in favor of private enterprise. This position became more clear post 1991 liberalization when courts acceded to the government’s policy of privatization and disinvestment.

5. On federalism and economic relations
One view of the role of the state in a market economy is “markets whenever possible, state when necessary”. The general prescription that emerged from this observation was that markets should be left alone to do what they do well - allocate private, while the state should provide public goods, correct externalities, and regulate monopolies. Neoliberalism says that the classical idea of state intervention is based on an unrealistic model of a benevolent state. The state also intervenes for the same reason as everyone else – self-interest. Here lies the fundamental dilemma of economic liberalism: "The economist recognizes that government can do some things better than the free market can do but he has no reason to believe that democratic processes will keep government from exceeding the limits of optimal intervention". Posner also said "a government strong enough to maintain law and order, but too weak to launch and implement ambitious schemes of economic regulation or to engage in extensive redistribution, is probably the optimal government for economic growth."

When judging the performance of public and private sector companies against each other, is it justified to apply the same set of standards to both? This is in light of the fact that the Indian state in particular operates with a welfare objective in mind. How do different sets of standards (if applicable) play out in the presence of disinvestment?

The current period of privatisation comes after a long period of nationalisation and growth of the public sector. Disillusionment with central planning set in in the 1960s and continued through the 70s and 80s. this was a consequence of criticism of price distortions, along with protectionist and import substitution policies. The idea was to reduce government intervention in economic affairs.

The struggle with disinvestment is best illustrated through the BALCO case. In 2001, the Union sold 51% of its stake to Sterlite. Then the Chhatisgarh govt tried to buy this stake, as tribal rights and the rights of the striking workers were at stake. One of the main grounds for Jogi's opposition to the Balco deal rests on the premise that the sale violates constitutional safeguards under Schedule V of the Constitution. The provisions prohibit the use of land acquired from tribal people for private gain. The government argues that since Balco's public character has changed with its sale to Sterlite, the acquisition violates multiple legal provisions that guarantee protection to tribal people. Arun Shourie’s response was that the area had not been notified as tribal land. But the State government claimed otherwise.

However, the recent economic crisis coupled with the privatisation of major mortgage companies in the US (Fannie Mae and Freddie Mac) and what looked like the possible government takeover of one of the world’s largest private banking institutions, Citigroup make clear that greater regulatory surveillance is required. The key is to devise regulations such that they do not become counter-productive.

Constitutional law in the financial relations context:
As per K.T. Moopil Nair v State of Kerala, the taxing power of a state can be exercised only by authority of law. Therefore, the tax proposed to be levied must be within the legislative competence of the legislature imposing it; it must also be subject to the conditions laid down in Article 13. However, the majority here also laid down the principle that the entries in the legislative lists must be read as widely as possible.

In the Kesoram Industries case, the Supreme Court says that the Central legislature has legislative precedence over State legislatures in matters of public interest and importance. Again, the limit is set be Article 13, as the laws need to be ‘as per the authority of law’. This begs the question – can the state justify interference in financial matters citing public welfare? To what extent is this admissible?

Atiabari says that Art. 301 provides that the flow of trade shall run smoothly and without any hindrances at the boundaries of the states, or within the states themselves. Free trade has been held as essential for sustaining the economy. The idea behind Art. 301 is that the economic unity of the country provides the bedrock for the cultural, social and political stability and progress of the country.

It has been acknowledged in India Cement v State of Andhra Pradesh that taxation is a deterrence to free flow. A necessary effect of taxation is that trade flow gets altered favourably or adversely. It was held in Atiabari that an indirect or inconsequential restriction on trade would not violate Art. 301. (Test of direct and immediate restriction). By saying this, the Supreme Court rejected the argument that all taxes should be brought within the ambit of Art. 301 in the Bank Nationalization case. Instead it applied a “rational and workable” test – “Does the impugned restriction operate directly or immediately on trade or its movement?”

For the American stand, the dormant or negative commerce clause doctrine has been chosen for perusal. The dormant commerce clause is a judicial doctrine that implies a converse of the power bestowed upon the Congress by the Commerce Clause - a restriction prohibiting a state from passing legislation that improperly burdens or discriminates against interstate commerce. The restriction is self-executing and applies even in the absence of a conflicting federal statute. Came about in the landmark case Gibbons v Ogden. The basic premise of the doctrine is the exclusive grant of power over commerce to the Congress, even to the exclusion of state sovereignty and innovation.

Whether or not the framers intended for the Commerce Clause to be interpreted ‘negatively’ in this manner has been the subject of some debate. Critics of the doctrine, including Supreme Court Justices Clarence Thomas and Antonin Scalia, argue that it goes against the original intent of the framers, who wanted all power to rest with Congress. More recent jurisprudence (Tyler Pipe Indus v Washington State Dept. of Revenue ) suggests a deviation from the doctrine, making for a stronger federal government as the Commerce Clause grants power to the Congress by taking away from the states’ authority to do the same.

6. On the Impact of the New Economic Policy on judicial decisions in India
Before the liberalised, globalised and privatised era of the Indian economy, the judiciary tilted towards recognising the rights of the labour force in the country. After the New Economic Policy however, there has been an apparent change and the same judiciary now favours profit making objectives at the cost of the labourers’ rights. The change is reflective of a change from the social democratic period to the globalised period.

Through a series of Supreme Court decisions, numerous rights of the labour force have been denied to them. A string of decisions have overruled the existing decisions, in order to promote the so called ‘economic development’ of the country, not realising that it is coming at the cost of the rights of the poorest masses in the country.

Taking the example of granting of back wages (for the period of time they were unemployed) to employees who have been wrongfully dismissed from the employment, by the employer, we find that unlike earlier when employees were given wages for the period of unemployment in circumstances where their termination of services was invalid or illegal, the court now adopted a different approach. The Court formulated a principle of ‘no work, no pay’ and the reasoning behind the same was that since during the period of unemployment the worker did not contribute to the production. The rationale behind this has been to prevent economic discomfort being caused to the companies. There have been many cases stating this principle, such as the case of Allahabad Jal Sansthan v. Daya Shankar Rai [(2005) 5 SCC 124]. Similarly, even in the case of Reserve Bank of India v. Gopinath Sharma [(2006) 6 SCC 221], the Court reaffirmed the principle of ‘no work, no pay’.

Another disaster for the labour force came with the judgment in the case of Steel Authority of India Ltd. v. National Union Waterfront Workers [(2001) 7 SCC 1]. A 5 Judge Bench in this case overruled an earlier 3 Judge decision of the Supreme Court in the case of Air India Statutory Corporation v. United Labour Union [(1997) 9 SCC 377], where the latter case had abolished the contractual labour system, and granted them rights of permanent employees. The significance of the same lies in the fact that permanent employees are entitled to higher wages, and a scheme of other benefits such as pension plans, PF, bonuses etc. The contention is that employers want hire and fire policy and they do not want to take upon themselves the economic burden of providing these benefits.

Even when it comes to Workmen’s Compensation, there has been a dilution in the interpretation of ‘accident arising out of and during the course of employment’. Over the years the Supreme Court has taken out of this phrase the time period of going to and coming back from the place of employment. Basically there has been a shift from favouring the employees to the employer. The case at hand is Assistant Director, ESIC v. Francis Decosta [1996 CLR P. 812], where a worker who died on the way to work was denied compensation. It is important to contrast this with cases before 1990 where a bus conductor sleeping in his bus died of a heart attack, was granted compensation. (United India Insurance Company v. Gopalkrishnan 1989).

In the area of environment protection, the Supreme Court has ostensibly taken a pro-environment stand wherein it has tried to preserve the forests land. The article by Sunita Narain, ‘Our quality of mercy’, effectively highlights the actual implications of the Supreme Court’s judgments. It has stated examples where the Court has favoured environment protection, and how a few years later, the same court, has compromised on its earlier position. The first is an example of a group of fisherman who were denied the right to dry their fish in the forest land as it amounted to a ‘non-forest activity’, despite their proposal to plant mangroves in the forest and create a ‘sustainable development’ plan for the forest. As a consequence, about 10,000 fishermen lost their livelihood.

In contrast is the case of T.N. Godavaraman Thirumalpad v. Union of India [(2008) 9 SCC 711], where the Supreme Court allowed a company (Sterlite Industries) to acquire 700 hectares of forest land for a bauxite mine project, in return for Rs. 55 crores, and in addition to Rs. 50 crores that they would have to pay for a Wildlife Management Plan and compensatory afforestation.

The Supreme Court in the past has repeatedly emphasised on not allowing non-forest activities to be carried out in forest areas, but recently the trend has shifted to allowing for development, and in return, asking the companies to pay for compensatory afforestation or bear the expenses for restitution of the environment and ecology. In fact in the case of Rural Litigation & Entitlement Kendra v. State of Uttar Pradesh [1989 Supp(1) SCC 504], the Supreme Court categorically said that mining activity in the concerned area would be against ecological interest, and ordered the shutting down of all the mining activity in the particular area.

We can observe the change in the attitude of the judiciary. It’s important to think about the role of the judge in implementing the law. We need to think about the extent to which the judiciary should be looking at the economics of the case, and decide accordingly. The role of the judges as people understand is the protection of rights, but through a change in economic policy of the country we have observed a dilution in the rights upheld by the judiciary.

- Preeta Dhar
- Yaman Verma
- Nishita Vasan
- Parag Mohanty
- Niharika Rao
- Ankita Kansil

Current Economic Crisis

2009-09-02T10:06:00.000-07:00

Following are the issues identified by the group leading the discussion on the topic

Preeta Dhar---Recent Economic Crisis
1. Government policy and regulation (or the absence thereof)
2. Financial instruments adopted by financial institutions and ‘shadow banks’ - risk distribution financial mechanisms: hedging, securitization
3. Risk assessment, and credit rating agencies
4. Insulating from risk v. wagering
5. ARMs and how the bubble burst
6. Impact on the global economy

Yaman Verma---The great depression and the changes it caused
1. Is law what the judge thinks it is? Or is the Court's task was simply 'to lay the article of the Constitution which is invoked beside the statute which is challenged and to decide whether the latter squares with the former.'
2. Did the great depression change the definition of what constituted inter-state?
3. Did the great depression change the interpretation of what legitimate state action is? How?

Parag Mohanty---Freedom of trade and economy-based restrictions
1) What is the scope of the right granted under Article 19 1 (g) and what is the scope of regulation permissible under it?
a) Does the scope of the right depend upon the nature of Indian economy apart from public interest.
b) Has the scope changed over the years in response to economic changes?

Niharika Rao---Federalism and economic
1. Can a deregulated market oriented economy flourish in a centralisedfederal polity?

2. Are courts justified in ruling on fiscal matters (such as pricedifferences across the country) under the guise of constitutional lawinstruments such as legislative competence?

3. What kind of departure from India's original Union-centred federalfiscal policy does disinvestment respresent, considering the State retainscontrol of a majority of (partially) disinvested companies?

4. What is the role of the state in the economy?can the pub sec besubjected to the same criteria as those used toassess private enterprises?

Nishita Vasan---The regulatory state
What is the impact of the burgeoning of regulatory agencies and the administrative state on separation of powers?
What are the limits of regulation? Can the judiciary place limitations on the executive’s power to legislate the ‘private sphere’?
Can the judicial deference to the executive in cases of regulatory agencies be reconciled with due process and rule of law?
In the context of court-packing, what role does politics play in constitutional jurisprudence?
Do regulatory agencies unfairly infringe upon an individual’s economic freedom?

Ankita Kansil—New Economic Policy
1. How has the New Economic Policy (1991) influenced the approach of the judiciary towards rights of the labour in India?
2. What is the impact of the differential standard adopted by the judiciary in its approach to environment protection?

Session 4: The Current Economic Crisis

2009-08-17T00:55:00.000-07:00

This week's Forum will look at the current economic crisis. We will focus on the need for, and structure of, legal regulation in dealing with the economic situation, and will evaluate the response of both the government as well as the courts in this respect. We will also use this context to examine the impact of the Great Depression, and the New Deal that followed, on Amercian and Indian constitutional law and theory. In light of these discussions, we will debate the approach of the Indian Supreme Court to the regulation of economic activity and will evaluate the jurisprudence of the Court in areas like environmental and labour regulation. Unlike the previous sessions, there is no single legal text that captures these issues. Hence, we will be reading the following pieces for the Forum meeting:

1. Philip Wood, Can the law prevent another financial crisis?

2. David P. Currie, Constitution in the Supreme Court: The New Deal, 1931-1940, 54 U. Chi. L. Rev. 504 (available on Westlaw)

3. Sunita Narain, Our Quality of Mercy

Issues for discussion will be up by Wednesday.

R. K. Anand Contd: Guest Post by Kalyani Ramnath (NLS'09)

2009-08-16T23:53:00.000-07:00

On the issue of lawyers as contemnors

Case law has dealt with situations where the contemnor as a lawyer has demanded ‘an answer to [her] question’ and considered to have obstructed the functioning of the Court.[1] In the case of Court on its own motion v. State and Others,[2] the Delhi High Court held the lawyers in contempt for colluding with each other to determine the result of the case. A lawyer who wrote out a curse for each of the judges who refused to rule in his favour,[3] suggestions that ‘money rules the roost’ even when it comes to the judiciary,[4] slapping the presiding judge in open court,[5] saying that the public has lost trust in law and justice[6] and declaring that he would never bow before the court again[7] have been considered contempt of court. Omitting the name of the judge or the proceeding would not absolve the contemnor of guilt.[8] The defence used in such cases is sometimes is that they were performing their duties as a ‘fearless member of the Bar’.[9] Whether it be in the newspaper or at a press conference, several cases of contempt have been sustained against lawyers.[10] The reasoning employed here has been that even here, it must be a fair and unbiased criticism, made in a ‘detached’ manner. Scholars have suggested that in such cases, lawyer speech outside the courtroom should be given higher constitutional protection as strictly speaking, it is not a court but a public place where all citizens are entitled to free speech and expression. The test that could be used in this regard is that used by Justice Frankfurter in Re Snyder.[11] Where the words are spoken must be so closely enough related to the business of resolving disputes that it should not be deemed an open forum for expressive activities, higher constitutional protections will not apply. Hence, in the Indian context, in such cases, it may be argued that the more general restrictions on free speech as contained in Article 19(2) of the Constitution should apply. In such cases, lawyers ought to be considered citizens more than as officers of the court; this should not be considered a betrayal of the system. This will however, involve the removal of ‘contempt of court’ as a standalone restriction on free speech in Article 19(2).

[1] In Re Smt. Sadhna Upadhyaya, Advocate MANU/UP/0722/2008.

[2] (2008) 151 DLT 695.

[3] Court on its own motion v. Gulshan Bajwa (2007) 141 DLT 111.

[4] Raghuveer Singh v. Shiv Kumar Swami (unreported)

[5] Pritam Pal v. High Court of Madhya Pradesh AIR 1992 SC 902.

[6] Ajay Kumar Pandey v. State (1999) 1 UJ 151.

[7] L.D. Jaikwal v. State of U.P. MANU/SC/0077/1984.

[8] Harish v. Bal Thackeray (1997) 99 Bom L.R. 455.

[9] Re Vinay Chandra Mishra MANU/SC/0471/1995.

[10] In Re: Lalit Kalita (2008) 1 GLT 800; Perspective Publications (P) Ltd. v. State of Maharashtra MANU/SC/0302/1968; Bathina Ramakrishna Reddy v. State of Madras MANU/SC/0074/1952.

[11] 472 U. S. 634 (1985).

The RK Anand Judgment- A Critical Analysis

2009-08-14T21:03:00.000-07:00

The following is a summary of the class presentations, discussions and opinions by the students who led the Forum meeting on the R.K.Anand case:

1. On the Issue of Contempt of Court

a) The Standard of Proof in Contempt of Court Proceedings:- One of the striking issues in the recent judgment by the Supreme Court in R.K. Anand v.Registrar, Delhi High Court[1] is the manner in which the Court decided whether the charge of criminal contempt had been established or not. The standard applied was not different from the precedent case law. The approach of the Court was in consonance with the law laid down in a range of cases from In Re Vinay Mishra[2] to Daroga Singh and Ors. v. B.K. Pandey[3]. The Court spelt it out clearly that there is a difference between the manner of proof in a contempt proceeding and that in a criminal trial. While the standard of proof in both was said to be the same, namely, that of proving a fact “beyond reasonable doubt”, the manner of proof in both was contended to be different. The settled position of law was noted to be that proceeding of contempt of court was sui generis. The provisions of the Criminal Procedure Code and the Indian Evidence Act were not applicable in such a proceeding. Instead, the principles of natural justice was said to apply. Now, the established position of law is that the standards that need to be met in a contempt of court proceeding are those of fairness and objectivity, absence of prejudice to the person facing the charge of contempt and provision of the opportunity to the person to defend herself.

Adherence to the abovementioned standard raises a number of issues, especially with particular reference to the RK Anand judgment. The absence of a fixed procedure to be followed in these type of trials has led to the following shortcomings in the manner in which the contempt of court proceedings are conducted. In this regard, the lacunae which can be identified from a reading of the Supreme Court judgment are:

Firstly, the opportunity to cross-examine the witnesses is very rarely given to the person charged with criminal contempt. In the case of Daroga Singh and Ors., it was noted that one of the reasons for denying the opportunity to cross-examine is the need to decide the case expeditiously. R.K. Anand’s request to cross-examine Poonam Agarwal was turned down by the High Court. But the point to be noted is to what extent should interests of expediency be given priority to interests of fairness and uncovering the truth. Further, the reasoning behind denial of the opportunity to cross examine was that what had transpired between the parties were already there on the micro-chips and the CDs. It was stated that no statement by Poonam Agarwal would change this state of affairs. But the point to be noted is that it was the reliability of these CDs that was being questioned by RK Anand in the first place.

Secondly, IU Khan was let off the hook on the ground that the tape, containing his recording, submitted to the Court was incomplete and hence its veracity was not adequately established. However, it doesn’t seem that the veracity of RK Anand’s sting tape was proved either. Attempts to do so were struck down by the Court. For instance, the request by RK Anand to send the CDs to the Central Forensic Science Laboratory to determine whether it had been tampered was turned down. So it seems that different standards were applied to judge IU Khan and RK Anand.

Thirdly, the judgment states that RK Anand did not deny the recording, which was broadcasted by the news channel, in the first instance. This fact seems to have weighed against him, especially since, as is mentioned in the judgment, that IU Khan had, right at the beginning, claimed that the recording had been doctored. However, the fact of the matter is that the judges should not have referred to statements made by the persons, in interviews to television channels, in the first place. Such observations do not have any place in the judgment.

These faux pas which have been pointed out would not have taken place at all if the Criminal Procedure Code and the Indian Evidence Act procedural standards had been followed. There is no overarching reason as to why a contempt of court charge should be made subject to a different manner of proof as opposed to a criminal trial. This is especially since it is in the same genre as a criminal proceeding. The defence that, nevertheless, a “beyond reasonable” standard is being applied doesn’t hold good either. The problem is that by adopting a different manner of proving contempt of court charges, the courts seem to be ready to come to a conclusion that the “beyond reasonable doubt” standard has been satisfied more readily than in the case of criminal trials. Then the standard of proof in criminal contempt of court charges doesn’t continue to be the rigorous “beyond reasonable doubt” standard as the courts are claiming it to be. Thus, the judiciary is effectively bringing in a new manner of proving contempt of court charges according to what it thinks fit.

The lowering of standards for the prosecution to fulfil before a contempt charge is established is of great concern, especially in the light of a perception among some that the judicial institution is becoming heavily insulated from the public. Making it easier to charge a person for contempt would amount to giving a free rein to the judiciary to reprimand anyone who criticises it. This power is greater in light of the wide scope of the definition of “criminal contempt” in the Contempt of Courts Act, 1971. The justification of giving a sui generis label to contempt proceedings needs to questioned here. If it had been on par with a criminal trial, then the same manner of proving the charge would have had to be followed. Such an approach will only retrench the principles of natural justice standard which is being followed by the courts. Another option that seems viable, which surfaced during the course of the discussions, was to do away with the Contempt of Courts Act itself. Instead, provisions of Chapter X of the Indian Penal Code relating to the contempt of lawful authority of public servants may be used to charge a person for criminal contempt of court. This will ensure that the standard of “beyond reasonable doubt” is adhered to in substance since the manner of proof applicable will be that of criminal trials.

Another issue of concern, if the judges are not made to adhere to strict standards while charging a person for criminal contempt, is the fact that he will be a “judge in his own cause”. The Daroga Singh case offers a counter argument by stating that the prosecution of the person is not to protect the judges personally but to protect the administration of judges. However, in the light of instances like that of Arundhati Roy being charged of criminal contempt, the validity of such an argument needs to be questioned.

The notions that are a spill over from the colonial times linger on to portray the judges as high and mighty. The fact that truth was added as a defence to a contempt of court charge (accompanied with public interest) only recently shows how long these notions have been allowed to stay behind. There is no need to grant this protective shield to the judiciary. On the contrary, steps need to be taken to make its functioning more accountable and transparent. This is the need of the hour and not giving it blanket powers to convict any passer-by for criminal contempt. This is why there is a need to do away with the difference between standards of proof and manner of proof. High standards need to be applied for both and this can be done by laying down that the procedure for charging someone with criminal contempt should be the same as that of a criminal trial.

2. Why did the SC acquit IU Khan of criminal contempt of court while the HC had convicted him on the same evidence?

At the HC level, IU Khan was held in criminal contempt of court and was stripped of his designation as Senior Advocate. The court was convinced, “beyond a shadow of doubt”, that there was complicity between IU Khan, R.K.Anand and Kulkarni.

The court took into account various factors while convicting IU Khan. The court felt it was wrong on part of Khan to be so familiar with the star witness i.e. Kulkarni. When Kulkarni brought up the fact that he had not taken the summons, Khan instead of asking him to receive summons, asked Kulakrni to come to his house, even inducing him with whisky. The court found this behaviour of the Public Prosecutor to be completely inappropriate and unethical.

Another factor the mention of “Bade Sahab” by Kulkarni while talking to Khan. The HC was convinced that this was Anand, though there was no direct reference to him throughout the conversation. The Court did not accept Khan’s submission that the reference was to the Police Commissioner.

The Court felt that Khan also deliberately omitted to bring all these facts to the prosecution’s notice and thus, seriously impacted the BMW trial. Therefore, they held him in criminal contempt of court.

The SC on a careful consideration of evidence came to the conclusion that the HC had erred in its final decision though it concurred on the point that Khan’s conduct was inappropriate for a lawyer in general and a prosecutor in particular. But it said that there was a wide gap between professional misconduct and criminal contempt of court. The SC felt that Khan’s behaviour only amounted to criminal contempt of court. A major factor that influenced the court was that the transcript of the conversation between Khan and Kulkarni was incomplete and it was difficult to ascertain with certainty that “Bade Sahab” was a reference to Anand. The Court stated that what needs to be given weightage was what IU Khan understood by the reference and not what Kulkarni meant by it. Since it was difficult to determine this, SC acquitted Khan but gave the final discretion to The Full Court of the Delhi High Court on the question of whether or not to continue the honour of Senior Advocate conferred on him in light of the findings recorded in the SC judgment.

3. Professional misconduct vis-à-vis Criminal Contempt of Court

Khan’s behaviour was held to be professional misconduct whereas Anand was charged with criminal contempt of court. While Anand was given a period of eight weeks from the date of service of notice for filing his show-cause as to why punishment awarded to him should not be enhanced, Khan’s case was directed back to the Delhi High Court for consideration and he had no prior notice as to the action of the SC.

In the case In re Vinay Mishra, the SC held that under Article 142 of the Constitution the jurisdiction and powers of the Supreme Court which are supplementary in nature and are provided to do complete justice in any manner, are independent of the jurisdiction and powers of the Supreme Court under Article 129 which cannot be trammelled in any manner by any statutory provision including any provisions of the Advocates Act, 1961 or the Contempt of Courts Act, 1971. The implication of this case was that the SC was vesting in itself the power to try cases of professional misconduct by advocates which was actually vested in the Bar Council as per s.35 of the Advocates Act, 1961. Fortunately, this decision was overruled in Supreme Court Bar Association v. Union of India where it was held that the SC must not exceed its jurisdiction and it must act with restraint while exercising its powers under A.142. Thus, it was unacceptable for the Court to "take over" the role of the statutory bodies or other organs of the State and "perform" their functions.

While the Bar Council is considering cases relating to professional misconduct, it follows a fixed procedure where a Disciplinary Committee is set up, the advocate is allowed to defend himself and most importantly an appeal to the decision of the Committee lies with the SC. This procedure as contrasted with the contempt proceedings seems much fairer as the advocate is allowed one appeal. It is surprising that Criminal Contempt of Court which is a graver offence does not have either a fixed procedure or a process of appeal. With reference to the case, if IU Khan is dissatisfied with the decision of the Del HC, then it is highly unlikely that his appeal will be successful since the Supreme Court has already pre-judged the matter. Wouldn’t this amount to unfairness?

Another question that arises from this case is whether the court expects a higher standard of behaviour from the Public Prosecutors as opposed to other lawyers? If yes, is the court correct in its approach?

An interesting thing to note is that it seemed to have influenced the Court that in the interview immediately after the sting operation was aired, Khan said that the footage had been doctored while Anand had not questioned the credibility of the footage itself and gone on to defend himself. This brings in the issue of trial by media and how judges may be affected by it.

4. Role of the Media

Several issues emerge from the RK Anand which need to be scrutinized. It is important to conduct such scrutiny in light of recent incidents and practical considerations.

The question posed by Singhvi J. to the lawyers concerned was whether it was appropriate for the media to air the tapes during court proceedings of the BMW case? Does it adversely affect or prejudice the parties involved? At a broader level does this vitiate fair trial?

The present judgment explains that trial by media takes place where the impact of television or newspaper coverage on a person’s reputation creates a widespread perception of guilt regardless of any verdict in a court of law. In such cases the media has tried and found the person guilty and thus adjudicated upon the very issue pending before the court and this makes a fair trial virtually impossible regardless of the its result.

In this case, an important issue which came up before the Court was whether NDTV was guilty of criminal contempt under the Contempt of Courts Act? The Court held that this case fell squarely under the defence under the new S. 13(b) of the Act which provides that justification by truth and public interest put together form a defence. The Court also accepted Shri Salve’s compelling argument that NDTV was in fact trying to prevent the advocates’ an attempt to interfere in the course of justice. It exposed erring lawyers. Further, the stings had nothing to do with the accused, Sanjeev Nanda. It did not conjecture about the culpability of the accused which is what the Court thought the standard is. However, it is interesting to note at this point that there were television interventions even in December 2007 when the Anand contempt case was before the Delhi High Court.

Keeping in mind the possible repercussions of sting operations and the consequence of their being aired sub judice, Singhvi J. had raised the question on the implications of trial by media. In this context, counsel for Mr. I. U. Khan, Mr. P.P. Rao had raised this argument before the High Court by submitting that NDTV should have carried out the sting only after obtaining permission from the trial court or the Chief Justice of the Delhi High Court. In the alternative, he contended that they should have submitted the incriminating material to the court before its telecast. This argument was immediately rejected by Alam J. who noted that “it would be a sad day for the court to employ the media for setting its own house in order; and media too would certainly not relish the role of being the snoopers for the court.” His reasoning was that seeking prior permission would amount to pre censorship, which is a clear infraction of the right to freedom of speech and expression of the media.

However, in the very next paragraph, Alam J. seems to restrict this right by warning the media that it was not free to publish any report concerning a sub judice matter and a sting operation being more incisive and risky, would necessitate greater procedure being followed. He stated that “the legal parameter within which a report or comment on a sub-judice matter can be made is well defined and any action in breach of the legal bounds would invite consequences.” However, considering the potential implications the question of trial by media raised in this case, it is surprising that he did not explain what these ‘well defined’ parameters were; nor did he elucidate on the consequences of non compliance.

This issue thus assumes importance in light of the live telecast of the sting operation by NDTV. On 30th May, when the trial was in proceeding, NDTV had set up mobile units at R.K. Anand’s and I.U. Khan’s house, wherein they proceeded to show them the footage and ask them their opinions about the same. Simultaneously, they had a panel of eminent lawyers who were also being asked about their first opinion regarding the footage. R.K. Anand had twice refused to give his comments along with Sanjeev Nanda, although later he relented. However, this could also be done under the fear of unwavering media scrutiny, since his denial to give an interview could subsequently, easily be highlighted to impute guilt and fear. Furthermore, taking prima facie reactions from fellow colleagues raises questions about the impact on judicial proceedings, since they would comment based on the assumption that the sting operation was genuine. The potential consequences of such actions can only be ascertained if one juxtaposes the idea of a two hour long telecast (and the two day long viewing of the unedited version in the Supreme Court) with the eight minute clip presented by the defense to point out the inconsistencies in NDTV’s footage.

The second major question which needs to be considered is whether such publication on Television influence the judges who are hearing the same case? Is this evident in this judgment given Alam J.’s comments in parantheses splintered throughout the judgement? [Eg: Paragraphs 24 and 78, 125].

When a matter is sub-judice it is rather obvious that judges would naturally be influenced by what they read in the newspapers, watch on television and hear people talking about all around them. Further, there is some level of pressure on judges to give a particular verdict regardless of whether the application of legal reasoning results in the same conclusion.

Such pressure and influence is what is commonly referred to as “trial by media”. While it may bear positive fruits in some case, excessive action of this kind might cause, in some way or the other, censorship of judges in high profile cases. For instance, in the Jessica Lal case, there was tremendous pressure on the judiciary to reopen the matter and consider it again. To that extent, perhaps trial by media is not necessarily undesirable. However, if the media starts examining evidence, making confidential information such as the results of a narco-analysis case public and then announcing verdicts or pre-judgments on its own accord, then it should be strongly castigated. There are sound legal bases for why certain kinds of evidence are not even admissible in a court of law. Regardless of the normative question of whether such evidence should or should not affect the reasoning of a judge, it positively does affect.
One of the issues raised in the court was the role of lawyers. Alam J., bemoaned the erosion of professional values amongst lawyers which resulted in the erstwhile noble profession turning into a trading business. This decline in standards is especially marked in cases of professional ethics which has seen senior advocates taking part in TV debates and interviews discussing cases pending before the court. This might seem contradictory in respect of Alam J.’s earlier stance wherein he saw no fault in R.K. Anand being made to answer questions in a live telecast through out the world. Another interesting point brought out by the judges was the role played by the various State and National Bar Councils who provided unstinted support to any cause brought up by the lawyers. However, it had been lax in maintaining professional standards and ensuring statutory compliance. One of the reasons for this castigation could be the surrounding circumstances in which the case was being heard. It was the time when news was rife about protests by lawyers about the recent amendment in the CrPC relating to bail and about the strikes and clashes by the Madras lawyers. It is possible that these facts played in the minds of the judges when they were deciding the case.
The next issue which needs to be studied is the constitutional foundation of sting operations and whether they are justified keeping in mind the recent faux pas in the Uma Khurana case. The right to freedom of press has its roots in the right to freedom of speech and expression enshrined in Art. 19(1)(a) of the constitution. In Romesh Thapar v. State of Madras, the Court said that “The public interest of freedom of discussion (of which the freedom of press is one aspect) stems from the requirement that members of a democratic society should be sufficiently informed so that they may influence intelligently the decisions which may affect themselves. ….In some the fundamental principle involved here is the peoples’ right to know.” Again, in Bennett Coleman and Co. v. Union of India, it was held that the concept of peoples’ right to know is located in Art. 19(1)(a). However, several contentious questions emerge from this background. First, what is the purpose of the media? Whether the media should have the discretion to decide what it airs? Who decides what “public interest” is? Further, over what information does the public have a “right to know”? In most of these cases, the Court talks about Government accountability and about the freedom of press regarding matters therein. What about private persons committing crimes and the presumption of innocence until proven guilty? These are some of the themes which need to be looked into.
This leads us to the critical question of ‘to what extent can the media go and to what extent should a person be informed?’ This issue is relevant in light of the cheap publicity sought by many media channels by engaging in sting operations. Women like Uma Khurana become victims of publicity stunts and entrapment cases (which are strictly prohibited in the United States for their inducement to commit wrongs) and this can be evidenced by the fact that there is a proliferation of video graphic stings as opposed to audio/print sting operations. Playing on public interest and viewership in a framework bereft of uniform standards is dangerous and even Alam J. seems to recognize this when he comments on the possibility of media houses editing footage to give it a certain prejudicial slant. This was evident in this case, when although I.U. Khan was interviewed properly, the full telecast was shown only once and later the anchors were picking out and repeating certain statements made by him. The burden during sting operations has to be much higher since one has to show both genuiness and bona fide.
The next question is the pertinent issue of whether India needs laws on ting operation keeping in mind the above issues. The Uma Khurana case occurred while the media was vehemently opposing the Broadcasting Bill. Several editorials were written in defence of the media, arguing that this was a one off case of irresponsibility on part of Live India and that the entire media should not be put to disrepute because of it. However, it is interesting to note that there are no laws or regulations or even judgments which lay down guidelines for sting operations. It is ironical that while India has stringent laws on wiretapping under the Telegraph Act, 1885, there is nothing to regulate videographing of a person using deceptive means.
In the United Kingdom, the British Press drafted a Code of Conduct to be enforced by the Press Complaints Commission set up by the Press itself. One of its provisions clearly provides that subterfuge can be justified only in the public interest and only when material cannot be obtained by other means. The second test of inaccessibility to material except by deceptive means is an important test which we should consider. Further, the Code of Conduct has clearly enumerated guidelines as regards what constitutes “public interest” which leaves nothing to ones imagination. Further, the Code requires that the editor must present a full explanation to the Commission demonstrating how the public interest was served. This is an additional check on the unbridled powers of the media and also keeps its freedom in tact.
Similar to the provisions in United Kingdom, CNN in the US too has strict policy guidelines limiting the usage of hidden cameras. They have come out with a four point program which includes:
Firstly, the information or evidence to be gathered by a hidden camera should significantly contribute to a story that is of substantial value to society or of vital public interest.
Fishing expeditions are not permissible insofar as there should be some expectation of illegal behaviour or wrongdoing.
Before using a hidden camera a journalist must first try and exhaust alternatives for obtaining the interview or information and thus he should resort to them only in cases of last resort.
The prior approval of the senior editors and management is a perquisite and sometimes the permission of the federal agencies is also required.
Thus, the message sent out there is loud and clear: good television is not enough reason to use a hidden camera. However, in India we have no law governing sting operations, no uniform internal regulation, no broadcasting code of conduct and an ambivalent law on privacy. At the same time, India has traditionally been an opaque society with a prevalence of corruption. Thus, a prohibition of sting operations is not the solution.
This gives rise to the question of who decides what is ‘public interest’: it is the government (who would do so by attempting to pass the draconian Broadcasting Bill, 2006); the viewers, the courts (as the custodians of morality) or the management in the media companies (whose sole consideration would be the rise in TRP’s)? This question posed a challenge to the court, since Sunil Kulkarni, the man behind the sting operation, wanted to delay the publication of the sting by three weeks because he feared for his safety. Does the witness’s safety constitute public interest?
The problem with self regulation is that it is only part of the answer. After the Uma Khurana case, Barkha Datt and other media doyens vociferously argued for a self regulatory code which would govern their operations. However, public memory being short, this was soon forgotten. This issue came up again during the present case, within similar arguments being voiced. Nevertheless, this issue will again die down and resurface only in time for the next controversy. This raises the all important question of what, if any, should be the role of the government in regulating this highly competitive, TRP driven media industry?

5. On the Issue of Recusal

One of the issues the RK Anand judgment discusses is of a disturbing new trend in the judiciary. This issue comes up because of RK Anand’s application asking J. Sarin to recuse himself on a number of frivolous grounds. Recently Ram Jethmalani got J. BN Agarwal to recuse himself from the Uphaar tragedy case wherein the Ansal brothers sought bail. The reason for recusal was that Ram Jethmalani had previously criticized J. Agarwal and was therefore embarrassed to present arguments before him. Of course, J. Sinha who was next on the roster granted bail promptly. Another recent instance is of J. Pasayat who recused himself from the Nandi Corridor case on mere oral submission of the alleged apprehension of bias and without dealing with the recusal application when Shanti bhushan alleged that Since HD Gowda had been rapped by Judge Pasayat during an earlier hearing Gowda had "reasonable apprehension regarding likelihood of bias and want of impartiality on the basis of relevant material in his possession and having regard to the antecedent events". All these have been cited often as instances of “bench fixing” which has been seen as the new method of a litigant choosing his/her bench.

Clearly in this case, J. Aftab Alam takes a stand on this matter of Bench fixing. He follows up on Mr. Salve’s argument that the allegations made by RK Anand, though not entertained by the Bench, did in fact have an impact on his sentence. Mr. Salve contention was that RK Anand’s petition is a brazen attempt to browbeat the High Court and that the recusal petition is the reason why he was given only a token punishment. The Supreme Court agrees with this stand and while condemning the action deeply, it asks RK Anand to show-cause why his punishment must not be increased. The Supreme Court emphasizes that RK Anand has not shown any regret for his gross misdemeanor and the petition is an indication of him defying the High court’s authority. One can connect this stand of the Supreme Court with their statements earlier as to how a motivated application for recusal is bound to cause “hurt” to the judges. Agreed that such senior members of the judiciary must be shown respect, but does this attitude show us that these judges, who have been placed on such a high pedestal, can never be accused of bias? Both J. Sarin’s response to the application as well as J. Alam’s comments on the recusal petition are an indication of how aghast they are by this allegation. And while RK Anand’s attempt at Bench fixing must be condemned, an allegation of bias is taken to be akin to doubting the integrity of the judges and questioning the neutrality and freedom of the judiciary.

In the State of West Bengal & Ors. v. Shivananda Pathak & Ors((1998) 5 SCC 513), the Supreme court notes that “Much harm is done by the myth that, merely by taking the oath of office as a judge, a man ceases to be human and strips himself of all predilections, becomes a passionless thinking machine.” This statement is quoted by J. Sarin in his lengthy response to the recusal application. In this context it is interesting to note both J. Alam’s as well as J. Sarin’s shock and outrage at an allegation of bias.

So what should the standard be for allegation of bias? When do we see it as a genuine concern and when is it an attempt at thwarting the court? I’d like to agree with the principles laid down in Ranjit Thakur v. Union of India (AIR1987 SC 2386), particularly the following statement. “As to the tests of the likelihood of bias what is relevant is the reasonableness of the apprehension in that regard in the mind of the party. The proper approach for the judge is not to look at his own mind and ask himself, however, honestly, “Am I biased”; but to look at the mind of the party before him.”

The Supreme Court criticizes the time and effort taken by J. Sarin to respond to the allegations. It is felt that the grounds on which recusal was asked for should have been rejected at a glance. Do judges have to spend their time in refuting the allegations and defending themselves? J. Sarin’s response to the petition can be said to be caustic and on the defensive. He repeatedly makes reference to the statement of RK Anand “It seems stars of both do not match” and derides the same. Do such sort of allegations lead to bad blood between the advocates and the judges. It must be mentioned that the lawyers know that most judges, hurt by the allegations will recuse themselves as seen in the case of both J. Pasayat and J. Agarwal. So it is an easy way out for the lawyer to get a favourable bench.

Soli Sorabjee believes that in a case of conflict of interest is the proper course is for the lawyer to recuse himself. Should this be the norm? In any case, in a case of clear “bench fixing” hopefully the bar will take a firm approach and judges will refute the allegation rather than recuse themselves.

-Aathira Menon
Megha Kaladharan
Reeba Muthalaly
Sneha Mohanty
Vrinda Bhandari

[1] Criminal Appeal No. 1393 of 2008.
[2] AIR 1995 SC 2348.
[3] (2004) 5 SCC 26.

The R.K. Anand Case: Issues for Discussion

2009-08-12T07:38:00.000-07:00

The group of students presenting the R.K.Anand case have identified the following issues for discussion:

ISSUES IN THE R.K. ANAND JUDGMENT

I. Trial by Media and Sting Operations:
In this case, the media has essentially caused 3 things to occur:
First, the initiation of proceedings against RK Anand, IU Khan and others.
Second, possibly influenced the judges while hearing the same case
Third, made these tapes available to the Court in these proceedings.

Key questions which need to be discussed in this context are as follows:

1. Whether it was appropriate for the media to air the tapes during court proceedings of the BMW case? Does this adversely affect or prejudice the parties involved? At a broader level, does this vitiate fair trial?
2. Who decides what is “public interest” and at what stage? Would it have not served “public interest” if NDTV had turned in the tapes to the judges (since any way, the High Court can take suo moto notice of contempt cases) instead of airing them?
3. Was NDTV under an obligation to delay or not air at all the tapes in view of Sunil Kulkarni’s reluctance to get them aired?
4. Does such publication on Television influence the judges who are hearing the same case? Is this evident in this judgment given Alam J.’s comments in parantheses splintered throughout the judgement? [Eg: Paragraphs 24 and 78].
5. At a broader level, do sting operations invade the right to privacy of people and is this justified, keeping in mind the recent faux pas like the one in the Uma Khurana case?
6. The larger question is whether India needs laws on sting operations keeping in mind the issues aforementioned and existing provisions in other countries? What should the sanction be, if any, for non-compliance?

II. On Contempt of Court

Is it justified to have a lower standard of proof in a contempt of court proceeding vis-à-vis a criminal trial? For instance, R.K. Anand was not allowed to cross examine the NDTV reporter, Poonam Aggarwal, who was in charge of the sting operation. The issue which arises here is whether concerns of expediency should be given a priority over those of fairness.

IU Khan was let off by the SC while the HC had previously convicted on the same evidence. Was the SC correct in doing this? In this context, how does one determine the nature and degree of punishment in contempt of court cases?

Is there a difference in the punishment meted out to lawyers vis-à-vis other parties in contempt of court cases?

What weightage should be accorded to electronic evidence in convicting a person?

III. On Recusal
1. What constitutes “conflict of interest”?
2. What should the standard be in light of the increasing trend of advocates’ attempts to “fix” benches?
3. Was the Supreme Court justified in criticising Sarin J.’s lengthy defence for not recusing himself? Is such a “defence” necessary?

IV. Miscellaneous
In the judgment it is mentioned that Sanjeev Nanda refused to take part in the Test Identification Parade. Does the right against self incrimination extend to the right to refuse to take part in a TIP?

Session 3: The R. K. Anand Judgment

2009-08-11T02:54:00.000-07:00

At this week's Forum session we will discuss the R. K. Anand judgment (R.K. Anand v. Registrar, Delhi High Court) delivered by the Supreme Court on 29.07.2009. It is available on JudisPlease read the judgment for the session. Issues for discussion will be up on this blog by 8:00 p.m. on August 12, 2009.

The Naz Foundation Case

2009-08-08T07:27:00.000-07:00

The students leading the discussions on the Naz Foundation case have the following opinions to offer on the issues discussed at the Forum:

INTRODUCTION

The Naz foundation judgement is a path breaking judgment in many ways. Since the social and criminal issues have been debated to death in the public discourse, we believe it is germane to look at the vital constitutional implications. These were discussed under the following heads:
1. Importation of Sexual Orientation into sex through analogy.
2. The horizontal application of fundamental rights.
3. The usage of the doctrine of strict scrutiny.
4. Privacy, dignity and constitutional morality.

ISSUE 1: SEX BEING ANALOGOUS TO SEXUAL ORIENTATION:

Article 15(1) of the Indian Constitution prohibits discrimination on various grounds including sex. In the Naz foundation case the Delhi High Court cited various case law to say that you can import terms into Article 15(1) by analogy. The court interpreted sexual orientation as being analogous to sex and thus held that discrimination on these grounds is prohibited.
In order to analyse whether this can be done and is constitutionally valid it is fruitful to look at the various theories of constitutional and statutory interpretation. Every theory starts from the premise that the primary source of interpretation must be the words. If there is any ambiguity we look at external and internal aids to construction.
The first theory that can be used in the analysis is the original intent theory.
In this you look at the Original intent in other words what framers intended. There are two strands of this, semantic Originalism based on what the framers intended to say, and what they intended to do. This can be understood using the example of school segregation. When the laws of school segregation were overturned in Brown v Board of education, a lot of people opposed this saying that the framers did not intend this. The argument being that as the body reflecting popular sovereignty only the legislature has the authority to do this. Seen from this perspective, Naz foundation judgment is clearly wrong as when framers spoke of article 15 they did not mean sexual orientation, for if the framers had intended that sexual orientation should be read in to sex then article 377 would have been unconstitutional or read down at 26th January 1950 itself.
It can be argued that maybe the framers specifically intended that law should not reflect changes in the original values that the framers thought desirable and that it requires the long and hard consideration needed for a constitutional amendment.
3. According to Justice Antonin Scalia constitution is to be considered in the court as the paramount law. The constitution has an effect superior to other laws, is the sort of law that is the business of the courts, an enactment with a meaning that is fixed and ascertainable though derived known to those learned in law. If constitution was not this but something that would apply to current societal values then should not the legislature rather than the courts determine its content?
4. Lack of an Alternative: If there is to be consistency and predictability then there must be a consensus that judges will adopt something to replace originalism. Question is what can this be? Locke? Mills? Rawls ideas? Though originalists also have differences they have a common point of departure.
5. Once the original import of the constitution is cast aside to be replaced by fundamental values of the current society why are we invited only to “expand on” freedoms and not contract them? Consider the Coy v iowa case. Two young girls were permitted to testify against the defendant by using a screen. It was argued that this violated the right of the sixth amendment allowing the criminal defendant to be confronted with the witnesses against him. This a contraction of the rights of the accused. Similarly the US Supreme Court has narrowed the contract clause of the constitution well short of its meaning. How can we not see this as a contraction of our rights?
Thus the idea is even if one is to assume that the constitution was intended to be this evolving document. Is it the courts prerogative to do this?
According to this theory such a reading of sexual orientation being analogous to sex is wrong.
General criticisms against the originalist interpretation.
1. It is very difficult to ascertain the original understanding of an ancient text. It involves looking at the constitution, amendments, and Constituent assembly debates, understanding the social and political atmosphere of the time. More suited to the historian than the lawyer.
2. There are many instances of confusion regarding the interpretation. For example in the Myers case, Justice Taft held that the president had the owner of both appointment and removal of executive officers as the British crown has these powers and son when the framers of the American constitution used the word executive power they were including both. This case cited Fleming v Page to say that the association of removal with appointment is not incompatible with the republican form of government. However the Fleming v page case also held that with respect to the distribution of political power there was a major difference between the united states and Britain and that there was no resemblance regarding the powers of the executive forms of the government. As can be seen there are multiple and every differing interpretations.
3. Lawrence tribe Harvard law professor feels that for provisions like the ninth amendment, the originally understood content of these provisions has nothing to do with how they are applied today. Constitution invited the judges to expand freely on freedoms.
4. Stanford dean Paul Brest “practise of constitutional decision making should only look at the practises which are fundamental to our society. Text, original understanding precedent is important, but they are defeat able in the eyes of changing public values.”
5. Yale professor Owen Fiss says whatever the constitution originally meant the constitution makers should give concrete meaning and application to those values that give society its identity.
6. Whole idea being that the judge might allow his own predilections to intervene. Difficult to distinguish between political values important to him personally and those values which are considered important by the society.
The Second theory of interpretation:
Dworkin says you must distinguish between what the framers intended to say and what they intended their words to achieve. Consider the segregation case again. By virtue of the fact that a term like equality used ( broad term) and did not use narrow definition like non segregation shows intent to lay down a principle that cud be interpreted according to changes in social conditions. Like Hart makes a difference between concept and conception. For example you have the concept of democracy and various conceptions like Plato’s rule of elected aristocracy, parliamentary and presidential democracy. When framers use democracy they lay down a concept not conception so you can interpret democracy as parliamentary and presidential democracy both are fine. Dworkin says moral reading of the constitution. On this ground you can defend Naz. Framers said non discrimination on basis of sex so allowed for importation by analogy.
Newest theory by Bruce Ackerman
In “we the people” he argues you have certain things called constitutional moments when because of widespread political exigencies you need a break in the position of law. May not be supported by precedent but is justified by the exigencies. He believed that each judgment writes a story. You must stay within the framework is what Dworkin says. Ackerman says at times due to the situations prevailing due to the exigencies can break with precedent and move in new direction. For example Keshavananda Bharati is a constitutional moment. Naz is one too can say it is demanded by exigency though case law does not. Constitution has to be seen as a dynamic instrument. This is something courts should do.

ISSUE 2 HORIZONTAL APPLICATION OF LAW
The Naz Foundation judgement in Paragraph 104 states as an obiter that Article 15(2) is meant to be read horizontally, that is, that Article 15(2) is available against individuals. The issue of whether the fundamental rights are to be read as enforceable against citizens or against the state only is a contentious topic in constitutional law today. While Classical Liberal theory and early cases such as Samadasani v. Central Bank of India and Vidya Verma v. Shiv Narain Verma seem to lean towards an understanding of these rights being “vertical”. A recent reaffirmation of this is seen in the Zoroastrian housing case. However, do such ideas need to be reassessed in today’s context? We find that today, the State has given up control over the commanding heights of the economy to private actors. Authors such as Upendra Baxi also suggest that with globalization marks the birth of new forms of territorialisation/de-territorialization of diverse state forms within which the duties of allegiance and powers of governance stand routinely recast, performed and exercised. Further, we find incidents where celebrities such as Emran Hashmi have been denied access to housing, allegedly on the basis of their religion, indicative perhaps of an existing trend in society, where the need for enforcement of fundamental rights against other citizens is necessary. A more horizontal application of Fundamental Rights can be seen in ruling of the Supreme Court. For one, we find that the definition of State under Article 12 has been ever expanding, settling today to mean any “agency or instrumentality” of the State (ruling in the Ajay Hasia case). Further we see instances of DPSPs being read into the Fundamental rights, increasing the responsibility of private actors by enhancing the responsibility of the state (MC Mehta v. Kamal Nath). Moreover, we find that private actors are being included as respondents in Writ Petitions resulting unfavourable remedy to those whose right have been violated by bodies that are not the state (Vishaka Judgement).
The horizontal/vertical divide raises many important questions. One such question is whether the current test for the meaning of the word “state” is sufficient, given changing circumstances. The Zee Telefilms standard of “functionality” was rejected. But do circumstances today require a relook at the definition of the State? Flowing from this is the debate over what the responsibility of private parties are? While the constitutional scheme subscribes to equality, are private individuals expected to adhere to these standards and can the state force private bodies to comply with such values? On the one hand, private bodies are separate from the government for this very reason, that they can make autonomous decisions, or on the other hand, should such autonomy be waived depending on the degree of the discrimination? Can private parties be excused if their intent is associative discrimination for the promotion of the interests of a specific group? Can their discrimination be excused if there are other viable alternatives? Or is it that such changes cannot be determined by the courts at all, and such application can only be at the initiative of the legislature? There is the additional matter of the consequence of horizontality as well. Will the courts be able to bear the burden of multiplied litigation? If this were to be controlled, what standard could be applied?

ISSUE 3: PRIVACY, DIGNITY AND CONSTITUTIONAL MORALITY
The Naz foundation judgement touched on many issues dealing with the right
to life. The court held that the right to privacy is violated by this and that interference into this personal sphere of life was considered to be arbitrary and illegal, as privacy was not just about occupying free private space, but to develop and express your personality. The
homosexuals right to dignity is violated through their constant harassment and their inability to live a fulfilling life. Further, the court held that constitutional morality is not the morality of the public. But the values espoused by the constitution, such as equality and
non-discrimination.

However, the moot point in this regard is whether the ruling of court ensures the homosexual couple a meaningful livelihood. While sexuality is in some cases not crucial to one’s functioning in public life, most noticeably in the sphere of healthcare, with regard to employment, housing, etc. sexuality may not be relevant. The most impact that the acceptance of alternate sexualities would have is on personal laws, though currently, LGBT rights in regard to adoption, marriage, IVF, etc. are not on par with heterosexuals.

The second matter of discussion was on international jurisdictions and what the Naz foundation borrowed from other countries. There was extensive usage of case law from countries like USA, where homosexuality has been decriminalized, through cases such as Bowers v. Hardwick and Lawrence v. Texas. Reference is made to the Wolfenden Report and to cases from Australia.

The issue of going beyond mere decriminalization of homosexuality is relevant here, as recently performance and registration of civil unions has been permitted by the government here. While several rights have been accorded to LGBT groups even in international jurisdictions, such as adoption, IVF, surrogacy, etc. there is still apprehension with regard to
granting equality in terms of marriage. Is there a time right to grant homosexuals the right of marriage or perhaps civil union even? Do these issues warrant a new analysis of equality, which goes beyond the conventional rational nexus and intelligible differentia test, which can account for the manner in which different people experience inequality and how this is such an experience can be caused by inaction as well? Can such inequality be remedied by the government at all and is this process of acceptance hindered by the hetero-normativity of advertisements and movies?

ISSUE 4 STRICT SCRUTINY:

Strict Scrutiny is one of the three standards for judicial review of legislative. These standards of legislative and administrative action are a rational basis, Intermediate scrutiny, Strict scrutiny. In this process Governmental action is subjected to careful judicial inquiry and scrutiny so as to ensure that the personal right of equal protection of the laws has not been infringed. The relevant case laws are Regents of the University of California v. Bakke 438 US 265 and (1978) Parents Involved in Community Schools v. Seattle School District, (2007). Indian cases are Saurabh Chaudri and Others v. Union of India and others, (2003), Ashok Kumar Thakur v. Union of India, (2008), Anuj Sharma’s case (2008).
The important issues discussed in this regard as seen in the forum were: The various tests that can be used to check the constitutionality of any statute namely the rational basis test, heightened scrutiny test and then strict scrutiny. There is a gradation here in that strict scrutiny that requires a state interest. In this the presumption of constitutionality is taken away.

The theory good but the big criticism is that the Strict Scrutiny is strict in theory and fatal in fact. No government action can survive all 3 prongs of the test. It is used even in the US only to strike down affirmative action measures. The US also has softer affirmative action like diversity quotient not reservations. Government can prefer higher diversity quotient than others. Such measures are however routinely struck down by Strict Scrutiny.

An important matter for discussion is the validity of the usage of strict scrutiny in the Indian scenario. While the Anuj Garg case was reported in 2007 and upheld the usage of strict scrutiny, while the Ashoka Kumar Thakore judgement looked upon the strict scrutiny test as a threat to the laws in place. However, the Anuj Garg case was reported only in December 2007 and hence could not be used by the judges in the Supreme Court case while deciding the Ashoka Kumar matter. There is a recent Madras High Court judgement Lifestyle Influence Spa v. Government of Tamil Nadu, also upholds the usage of strict scrutiny.

The Naz foundation case read the two cases harmoniously, however, the larger matter of debate is whether the doctrine of strict scrutiny needed to be applied at all. Would the rational basis standard have been sufficient?

These questions are relevant because while harmoniously reading the cases the Delhi High Court ruled that strict scrutiny would apply in all cases except those of affirmative action. But how is it to be ascertained, what exactly constitutes affirmative action?

CONCLUSION

The matters discussed in the forum were chosen due to their contemporary importance and due to their potential for altering the existing positions of law on many constitutional matters. We find that many of the interpretations are contentious. Currently, it is important also to ask: are these interpretations likely to be accepted by the Supreme Court? Are such interpretations wise strategy, if the interests of many affected by s. 377 are at stake?

Session 2 - The Naz Foundation Case

2009-08-05T08:03:00.001-07:00

The discussion in the current legal issues forum tomorrow, the 6th of August will be based on the recent Naz foundation judgement. Since the criminal and social issues surrounding this judgement have been discussed extensively, we chose to focus our presentation largely on the constitutional aspects of this judgement. The issues that will be dealt with by us include:

1. What is the constitutional basis for the premise that sexual orientation is analogous to sex? We will address the debate surroundingthis question using the principles of constitutional interpretation.

2. What are the implications of the horizontal application of Article15(2)? Is such a reading of the article constitutionally sound?

3. What is the Doctrine of Strict Scrutiny? What are the Constitutional implications of its applicability?

4. Does the position of Naz foundation on Article 21 allow for the protection of the rights to Privacy and Dignity?

5. How have other jurisdictions interpreted provisions similar to s. 377?

6. What are the implications of the Naz foundation judgement on the Age of Consent?

These issues are not exhaustive and we hope that more avenues of discussion develop from the ones mentioned. In order to facilitate discussion, we recommend reading the Naz Foundation case and also urge you to bring a copy of the Constitution along!

Death Penalty Continued: Comments by Mrinal Satish, Visiting Professor, NLSIU

2009-08-03T01:47:00.000-07:00

I’d like to highlight some other interesting issues in the Bariyar judgment. The Supreme Court seeks to make a distinction between “principled sentencing” and “judge-centric sentencing” and then again between “principled sentencing” and “consistency”. This raises the question of what “principled sentencing” actually means. The judgment (in my reading) does not offer an explanation to this term. However, reading this judgment with an earlier judgment of the Supreme Court in State of Punjab v. Prem Sagar [JT 2008 (7) SC 66], where the Court (speaking through Justice S.B.Sinha) had stated that sentencing ought to be reasoned and rational, the conclusion one can draw is that the Supreme Court is calling for a more rational approach to sentencing (which also comes out from the decision of the Court in Aloke Nath Dutta, [2006 (13) SCALE 467]. What is “rational” is again debatable.

The second issue that I’d like to highlight is the factors that the court says ought to be considered in a sentencing hearing (Paragraph 49 of the JT Judgment). The Court says that motive, nature of the offence, impact of the crime, culpability of convict, quality of evidence are relevant factors. In the next paragraph, the Court states that socio-economic status of the offender can also play an important role in sentencing. An objective analysis of whether the convict can be reformed or not is considered the most important factor. In this context, in my view, the first set of factors that the Court deems fit to consider while sentencing are all factors that are also considered relevant for convicting/acquitting the accused person. If these factors are re-considered while sentencing, the distinction between the trial phase and the sentencing phase that the Legislature sought to make by introducing S. 235(2) into the Cr.P.C. is obliterated. Further, in my understanding, the purpose of S. 235(2) and analogous provisions of the Cr.P.C. dealing with pre-sentence hearings, appears to be designed to give an opportunity to the court to determine which theory of sentencing is most appropriate for the crime and the criminal, and to make a determination of the appropriate sentence in that context. As regards whether the accused can be reformed or not, most, if not all courts in India, do not have the assistance of a trained probationary officer or a psychologist to make such an assessment. Judges determine the same based on “objective” factors. This in itself leads to arbitrariness, since the “judge-centric” approach kicks in into such an assessment.

The third troubling factor in the jurisprudence of the Supreme Court on the death sentence issues is the power of the High Court (in death reference cases) and the Supreme Court (when these death references are appealed). The Supreme Court in Bariyar cites State of Maharashtra v. Sindhi, [(1975) 1 SCC 647)], where the Court had held that the High Court must reappraise, reassess and reconsider the entire facts and law and come to its own conclusions, independent of the view expressed by the trial judge. While, at one level, this acts as a safeguard and ensures that the evidence is objectively determined, the fact that at each level of the Courts, re-appreciation of evidence is permitted is problematic, since “judge-centric” interpretations might impact such re-appreciation. It is interesting to note that the Supreme Court has in other circumstances stated that re-appreciation of evidence should be an exception and not the norm.

The other very interesting issue that comes out of the Bariyar judgment is the application of Art. 14 of the Constitution of India to sentencing. In the Royappa case [(1974) 4 S.C.C. 3], the Supreme Court had held that that if an act is arbitrary, it is violative of the right to equality guaranteed by the Constitution of India. Discussing the meaning of the term “arbitrary,” the Court ruled that decision making ought to be based on equivalent relevant principles, applicable to all individuals who are similarly situated. Further, the Court also ruled that equality is the very basis of the doctrine of “rule of law,” which is the core value in a democratic Constitution. Commenting on this decision, H.M. Seervai remarked that if the existing system of sentencing in India is tested against the principle laid down by the court, the system will be unconstitutional, since there are no rational rules for sentencing. The Bariyar judgment brings back this debate to the fore. Does “arbitrary” sentencing or disparate sentencing violate Article 14? Bariyar seems to suggest it does. In my opinion, it definitely does. Sentencing also ought to be based on constitutional values, and there cannot be a different set of rules (or no rules at all) for sentencing. Hence, if there are no rational reasons given, the system becomes unconstitutional.

Hence, in my view, it is time to re-visit the Bachan Singh judgment and test the constitutionality of the death penalty in light of the various factors that have emerged post- Bachan Singh. Examined in light of these factors, the only answer that is possible is that the “rarest of rare” case doctrine is not really taking away arbitrariness in sentencing, which then makes imposition of the death sentence fall foul of the Constitution of India.

Session 2: Naz Foundation

2009-08-02T22:18:00.001-07:00

Thanks for making the CLIF on Death Penalty a great success. We unfortunately ran out of time even with the additional half hour that we debated the issue. I hope you will continue the discussions on the blog. A group of students has decided to take up Justice Sinha's challenge, and will be undertaking an exhaustive study of the application of death penalty in India.

This week's CLIF is on the Naz Foundation judgment. Please read it for the next session. Since there have been various discussions on campus on the judgment, the Forum will focus on the implications of Naz Foundation for constitutional adjudication, looking at issues like the horizontal application of equality rights, the open-endedness of the Art. 15(1) categories, the issue of strict scrutiny, etc. This is only an illustrative list. A detailed list of issues for discussion will be posted on the blog by Wednesday.

The Death Penalty Debate

2009-08-02T05:55:00.000-07:00

The group leading the discussions on Death Penalty have the following opinions to offer on the issues discussed at the Forum:

ARBITRARINESS IN DEATH PENALTY : CAN BARIYAR PROVIDE A QUICK SOLUTION?
Reading of the Bariyar judgment will make one realize that the Court is not stating anything substantially new, rather Justice Sinha is reiterating the principles laid down in Bacchan Singh. The Court elaborates on the element of pre sentence hearing mentioned in Section 235(2) of the Cr.P.C and also states that the recording of special reasons under Section 354(3) of the Cr.P.C provides a safeguard to prevent arbitrary imposition of death sentence. The “special reasons” mentioned in Section 354(3) is based on the evidence adduced at the stage of sentencing. This evidence is based substantially on the background of the criminal and the prosecution needs to show that the accused is beyond any form of reform and rehabilitation. According to Justice Sinha, the irrevocability of death sentence makes it imperative on the Court to resort to this punishment only when alternative option of punishment, i.e. life imprisonment will not serve any purpose. Highlighting the objectives of punishment like detention, retribution and reformation, the Court states that death sentence provides no scope for any of these objectives and hence should be used only in situations where “alternative option is foreclosed”. Justice Sinha also urges the judiciary to not be influenced by public outrage while imposing death sentence. He emphasises the importance of individual rights over majoritarian aspirations and states that social necessity can’t be a justification for the imposition of death sentence.

The factor that makes this judgment significant in the arena of death penalty is that, through this case the judiciary wants to prove that the decisions post Bacchan Singh have not been consistent in applying the principles laid down in Bacchan Singh. Moreover the Court has provided an elaborate study of its previous decisions to show the arbitrariness that is prevalent in the system in the area of death sentence. The judgment not only evokes a sense of disapproval in the mind of the reader to the prevalent system of death sentencing policy, the data given by the Judge about the number of countries that has abolished death sentence makes the readers wonder whether the Court through its decisions is promoting for an abolition of death penalty in toto. However Justice Sinha treading the safe path does not comment on the existence of death penalty as a punishment, but only criticizes the method of its implementation.
Judicial subjectivity is an element that is inevitable in every sentencing procedure. There is a responsibility on the judiciary and its mechanisms to ensure that individual biases and prejudices are kept to its minimum, while awarding death sentence, the gravest of all punishments. At the expense of being cynical, I feel that arbitrariness is a menace that can’t be wiped out from the death sentencing policy, irrespective of any safeguards. The judgment of Bariyar, citing Bacchan Singh, states that the prosecution needs to prove that the accused is not capable of any reform. At this juncture I want to highlight the folly of this procedure. Firstly, it is extremely difficult to prove that an accused is beyond any possible rehabilitation and secondly the evaluation of this rests once again on the judiciary who do not have the expertise to gauge such an important issue on the basis of which the sentence will be given. The assistance of expertise is not going to wipe out the arbitrariness, because there are other judgments in which the Court to suit its whims and fancies have disregarded expertise opinion.[1] Therefore it once again boils down to the personal predilection of the judges. Suppose the accused comes before a judge whose opinion on death sentence is similar to Justice. Prasayat, then the burden of proof on the prosecution will reduce tremendously. Considering the irrevocability and graveness of the punishment, I am of the opinion that this judge centric approach should not be allowed to continue. Moreover the judiciary itself has admitted that judicial discretion can’t be curtailed in case of sentencing. Therefore I feel that death sentence as a punishment should not continue, when the judiciary has dismally failed to prevent the arbitrary nature of its sentencing policy.
-Meera Sreekumar
[1] Dr.Nikhil Dattar v. Union of India.

-----------------------------------------------------------

The endless debate on whether death penalty should be abolished or not, in the light of the gamut of case laws, remained endless even at the first meeting of the CLIF. Though each and every person has certain, and mostly staunch, notions about the issue consensus is a far fetched dream. Though for us sitting in a classroom it was quite easy to air our opinions by a show of hands such is not possible for the judges of the Supreme Court and thus the confusion about what Supreme Court opines about it persists. This write up is my take on the issue and my opinions on the where India is or should be headed with matters pertaining to death penalty. This short write up seeks to address three issues which had been brought up in the CLIF discussion. It commences with a discussion on why death sentence should be abolished followed by a critique of the judgement of Santosh Kumar Bariyar v. State of Maharastra. Finally I would like to express my opinions on the issue of how to conceptualize a “principled sentencing” policy for matters regarding capital punishment should be decided by the Supreme Court.

An unswerving abolitionist, I am of the view that capital punishment should be done away with. I base my sentiment on two arguments. The first of the two is that one can never be sure of the truth. From a realist perspective every Indian is aware of the amount of corruption plaguing the criminal justice system and if such is the case a person can never be cent percent sure of whether the accused deserves death or not. Though people who want to retain the concept feel that given the heinousness of crime the guilty deserves to be dead, but none would take the responsibility for the ambiguity that the guilty might not be the guilty in reality. If the Indian justice system is against euthanasia on the argument that probably the person might just be revived then I think it should also give a second thought to this aspect of argument against death penalty.

The second issue which I have with death penalty is the lack of policy behind the same. For a while the scholars attributed death penalty to have deterrence value but the same has been proven wrong by studies time and again. After the death of a person the reformative theory gets swept out of the picture and thus remains the retributive theory. But judges are usually not keen to state the same as it is analogous to the “eye for an eye” theory. The argument is usually camouflaged under the veil of ‘protection of society’ but the argument doesn’t hold good after the Sharaddhanand Swamy case which made life imprisonment for the life of a person and ensured that such criminals never interact with the society. This according to me is a fairer option because it serves to protect the society from these anti social elements and also leaves scope for correction in mistakes in administering justice. It ensures that to get to the end, whatever it may be, that the justice system plans to achieve, injustice isn’t caused to an innocent in the process of getting to the end.

The case of Bariyar is an important step towards the concept of abolition of death penalty, or atleast the minimal use of the same. Many abolitionists have welcomed the judgement but there are a couple of aspects of the judgement which according to me can be assigned the term lapses in justice. Though the case does well by not attributing death sentence the reason for the same given is that they were not criminals but were friends. According to the philosopher John Gardner in his essay in the “Gist of Excuses” he says that a person cannot be excused because he committed a crime once because it might not be out of character but the beginning of his evil character and by condoning the same we will be causing great injustice to the society.

Further the case lays down the new test for determining the rarest of the rare which is that if the judge is convinced that the person is beyond reform then only death penalty should be imposed. In the case of Niketa Mehta which deals with rights of abortion six different doctors gave different views, all based on scientific analyses, about whether it was safe for her to undergo an abortion. If such is the case of scientific study how is the judge (not a science student) supposed to decide whether a person is or isn’t beyond reform especially when he is dealing with the field of psychology which is not yet greatly advanced in India. This might lead to arbitrary decisions regarding whether a person deserves a death penalty or not.

Since Bachhan Singh v. State of UP, the phrase “rarest of rare cases” has been manipulated by various judges in various cases. Each interpretation adds a new facet to the phrase leaving it as ambiguous as possible. In the CLIF discussion it was noted that whether or not a person gets convicted and to what extent are the aggravating and mitigating circumstances incorporated in a decision is based on the personal biases of each judge. If such is the circumstance then even though the case is referred to the largest bench on the Supreme Court, the decision will be based on the notions of the majority which might again be biased and the same will still not ensure justice to the one person who gets hanged even though he is innocent. I base my notion on Hart’s proposition that there cannot be a shared sense of morality and the argument that the majority decision is not always the right decision.

Thus I am of the opinion that death sentence should be abolished and in circumstances where the need to use the same arises the person should be punished with life imprisonment for life because it is better to be a little lax to the guilty than being unjust to the innocent who get trapped.
- Rachita Nadig

----------------------------------------------------

In this brief opinion, I seek to address two aspects of death penalty jurisprudence in general and with respect to India, in particular. Firstly, I seek to make an argument in favour of abolishing the death penalty on the basis of the reformative theory of punishment. Further, I argue that it is virtually impossible to remove the element of arbitrariness from death penalty sentencing and while the Bariyar judgment takes an significant step in this direction, it comes riddled with its own problems in the realm of death penalty jurisprudence.

Death penalty is the harshest form of punishment which can be imposed upon an individual by the State and therefore, raises many pertinent questions regarding its legitimacy. According to me, the principal aim of punishment must be the reformation of the criminal. However, the punishment of death sentence completely forecloses the possibility of reformation. The only ends which it can even aspire to achieve are the objectives of deterrence and retribution. However, the nexus between the death sentence and deterrence is not very credible and empirical studies have often indicated that deterrence has more relation with the certainty of getting punished rather than the degree of punishment inflicted. Therefore, the only end which death sentence seems to achieve is that of retribution, which begs the question if we want to create the kind of society which is based upon a bloodthirsty ‘an eye for an eye’ penal policy. I believe that death penalty is a barbaric mode of punishment which doesn’t deserve a place in a civilized legal system. Whatever be the offence committed by a particular individual, the State can’t be given the right to take away life. Another strong argument in favour of abolishing the death sentence is based on its irrevocability. There’s no way to reverse a sentence of death if it is later discovered that the person executed was actually innocent. The abolitionist movement against death penalty is gaining strength worldwide, with ninety-four countries having abolished the death sentence and another thirty-four not having used it for at least the past ten years.

Another problem with the sentence of death in India is the arbitrary manner in which it is imposed. The landmark decision in the case of Bachchan Singh established that death sentence should only be imposed in the ‘rarest of the rare’ cases. However, what essentially constitutes ‘rarest of the rare’ has been the subject of varied judicial interpretation. Machhi Singh identified five factors which the court must consider to determine whether a case falls within the category of ‘rarest of the rare’. However, the relative weightage of each of these factors remained largely a matter of judicial discretion. The latest Supreme Court judgment on this issue in the Bariyar case points to this problem of uneven application of the law in death penalty cases. This essentially means that the lives of convicts are virtually dependent on judicial whim.

I believe that this problem of arbitrary infliction of death penalty due to excessive judicial discretion is an incident of the very nature of the demands of a sentencing policy for such a severe punishment as death and though this element can possibly be minimized, its influence can never be completely done away with. This is because while on the one hand, arbitrary infliction of death due to excessive judicial discretion is considered to be a problem, on the other hand, a certain degree of judicial discretion in sentencing a person to death is definitely required as there is not even a single crime for which a blanket death punishment can be imposed and the circumstances in which the crime was committed and the circumstances of the criminal deserve attention, a fact also recognized by the Supreme Court by declaring mandatory capital punishment sentences as unconstitutional. Therefore, this dilemma of the adequate amount of judicial discretion which must be conferred in such cases remains quite hard to resolve.

The Bariyar case has added another dimension to the debate by interpreting the judgment of Bachchan Singh in a radical manner. The judgment makes it mandatory that a proper pre-sentence hearing be conducted and holds that a death sentence can only be imposed if the prosecution is able to adduce sufficient evidence to show that a convict can’t be reformed and hence death sentence is the only viable option. The judgment raises a number of questions about the feasibility of such a pre-sentence hearing and by laying down the requirement of such a high standard of proof, the judgment places a virtual moratorium on the death penalty.

However, the judgment falls short of achieving all that is desirable since the judiciary has still remained shy of addressing the problem directly by tackling the bull by the horns. After enumerating several instances of arbitrary infliction of the death penalty, the judgment, instead of referring the matter of constitutionality of the death sentence to a larger bench, takes a roundabout way to put an end to the penalty of death by erecting a high standard of proof for its infliction.

Also, I believe that we need to give some thought to the alternative to death penalty, which according to the Swami Shradhananda case is imprisonment for life, without any scope for remission. Such a penalty again fails to achieve the goal of the reformative theory of punishment which is oriented towards rehabilitation of the convict in the society.
-Sanjam Arora

---------------------------------------------------------------

The Death Penalty and Bariyar: The Road Ahead

The death penalty jurisprudence in India has been witness to extreme changes within a wide ranging bandwidth. The transition from the ‘death penalty as the rule and life sentence as the exception’ to ‘life sentence as the rule and death penalty as an exception’ has altered the entire conception of capital punishment. This has in part been facilitated by the concept of ‘rarest of rare’ cases, wherein the death penalty can be imposed only when the act committed is such in nature so as to shock the collective conscience of the society, as a brutal and savage act beyond the contemplation of a reasonable man. The adoption of this doctrine had the fundamental effect of restricting the imposition of the death penalty drastically. However, an offshoot of it culminated in the introduction of a greater element of uncertainty and subjectivity in its award at the hands of the judge/s concerned. For a long time there were no clear guidelines of determining if a case fell within the ‘rarest of rare cases’ category or not. In effect, it relied totally on how the judge/s perceived the ‘rarest of rare’ classification and the subsequent irregularities in decisions on various occasions has reaffirmed the above claim of subjectivity.
However, the recent landmark case of Santosh Kumar Bariyar v. State of Maharshtra[1] has had some impact in clearing the air over this subjectivity by making the imposition of the death penalty almost impossible. This has been done by the Supreme Court by ruling towards a higher and more comprehensive standard that focuses on working with and not against the accused. The determination of the nature of the accused and the probabilities of his/ her reform will be extremely difficult for any court of law. Thereby, more often than not it would rather lead to a sentence of life imprisonment than to one of life imprisonment, if such be the nature of the offence.
In view of the above developments, I believe that the course chartered by capital punishment in Independent India has been one that has constantly tended towards an increasingly restrictive interpretation. Although I support the death penalty as a punishment, I also believe that the Bariyar judgement has been a welcome step towards promoting much needed clarity over a topic as important as that of the death penalty.
- Sartaj K. Singh
________________________________________________________________________

I shall endeavour to make a case in favour of abolishing the death penalty through the conclusions I have drawn from my reading on the matter, as well as the opinions I can safely express therein.

The new standard laid down in the Bariyar case is excellent in the sense that it counters one of the many ugly heads of arbitrariness that cloud the realm of death penalty sentencing. The fact that evidence has to be provided to assert that the accused is beyond redemption is an excellent step to ensuring that the sentence of death in India is no longer being used to worship the false god of deterrence, or to support the bloodthirsty jaws of retribution.
Of course, there are some flaws when we come to the question of reformation. If the person is capable of reformation, and thence sentenced to life imprisonment, the recent definition of life imprisonment as the whole life, without the chance of remission, makes reformation and rehabilitation kind of redundant. And of course, there is the question as to what constitutes reformation, given that our judiciary in their infinite wisdom, have considered yoga and meditation to be sufficient proof of reformation, while true remorse even the handing over of oneself to the authorities, has failed to meet this standard.
While the Bariyar judgment takes note of the arbitrariness associated with death sentences, it fails to take note of numerous other forms of randomness that infest the process. From institutional negligence that has seen a mercy petition lie forgotten in a governor’s desk for nine years (the Dhananjoy Chatterjee case), to the lack of documentation of death penalty cases that has resulted in the details of Bachan Singh’s execution to be never recorded (for all we know the man may yet be languishing in a godforsaken cell somewhere, at least as far as the records tell us), our system needs a great deal of overhauling to ensure that the right to life is not snuffed out without the due process of law being followed.
A certain degree of care must be paid to our international obligations with regard to the issues like the death penalty, as well as our own judicial positions. While we currently violate Article 6(1) and 6(2) of the International Covenant on Civil and Political Rights by keeping mandatory death sentences for crimes such as that under Section 31A of the Narcotic Drugs and Psychotropic Substances Act of 1985, the same also violates the 1983 Bitto Singh judgment that declared Section 303 of the Indian Penal Code unconstitutional.
An automatic right of appeal to the Supreme Court should lie with all those sentenced by a High Court to death. This was a key feature of the Constituent Assembly debates, especially out of concern for the poor who are sentenced to the same. However, today, only those whose acquittals have been reversed by a High Court to become death sentences are entitled to the same, while those whose sentences are enhanced from life imprisonment to death are not. Perhaps this is one of the answers to former President APJ Abdul Kalam’s wonderment as to why all the people on death row were of the “poorest of poor”.
This last factor is also important, given the fact that many among the poor cannot afford good legal representation, and are instead forced to do with government appointed lawyers who are either rookies or couldn’t care less, or both. On the other hand, the rich get away with impunity.
The current legal stand on commuting sentences is a horrible jumble when it comes to factors like delays and mental incapacity. The court has refused to commute the sentences of those who have been part of the judiciary’s regular process of prolonging proceedings till the accused has gained white hairs, even if some of them have served the old standard of a life sentence in jail. Even if some of them may go mad after this treatment, we still execute them, even though the point of punishing them is lost on them (as is the point of us punishing them as a result).
Lastly, I would like to state clearly that while I am firmly in favour of abolishing the death penalty when it comes to normal so to speak crimes, I am a staunch supporter of it when the crime in question is on a larger scale, that is, it can fit within the framework of a crime against humanity, a war crime, or genocide. But till then, especially given the innumerable lacunae in our judicial system, it is far wiser and far more just, to try and reform the person.

As the famous author Robert Jordan puts it, “Nobody can have fallen so far in the Dark that they cannot walk again in the Light”

-Vakasha Sachdev
[1] Santosh Kumar Bariyar v State of Maharashtra 2009 (7) SCALE 341.

Death Penalty: Issues for Discussion

2009-07-29T08:02:00.000-07:00

This week's group has identified the following as the main issues for discussion at tomorrow's forum. Please think about them, as you read/re-visit the judgment:

Bariyar Issues

1. What constitutes “Rarest of Rare”?

2. Is Bariyar feasible? Or has it imposed a moratorium on the death penalty?

3. What is the rationale behind the death penalty (in light of Bariyar),given Shraddhanand’s definition of life imprisonment?

4. Does the Bariyar standard affect judicial discretion?

5. The question of reformation of the criminal wrt remission (is thejudiciary curtailing the power of the Executive of sentence and parole?)(Shawshank Redemption)

Additional Issues

1. Mandatory Death Sentences and violation of Article 6 of the ICCPR

2. Global Opinion on the death penalty

3. Mode of Execution: is hanging inhumane?

4. Delays and negligence by administrative and judicial officers(Dhananjoy Chatterjee)

5. Should age and mental imbalance (at the time of execution) affectexecution of death penalty?

Please feel free to add to these issues in the comments section, if you think there is something more that needs to be discussed or highlighted.

EDIT (Aparna): We should also debate the "big-picture" issue of the justification/constitutionality of death penalty- and examine Bariyar's contribution to the debate. Has the court added to the moral and constitutional debates on death penalty by focusing on the more pragmatic issue of "arbitrariness"? How does that shape our understanding of whether the death penalty is constitutional? Also, once the court took cognizance of arbitrariness in the capital punishment regime, did it abdicate its responsibility by not refering the matter to a larger bench for a re-examination of Bachchan Singh?

Session 1: Death Penalty

2009-07-26T05:07:00.000-07:00

This week we will discuss recent developments in India's death penalty jurisprudence in light of the Supreme Court's decision in Santosh Kumar Bariyar v. Sate of Maharashtra. The judgment can be found here. Please read it for this week's session. We will meet at 4:00 p.m. on July 30, 2009 (Thursday) in the 5th year classroom.

Suggestions for additional reading (optional):

Bachchan Singh v. State of Punjab

Machhi Singh v. State of Punjab

Amnesty's Report on "Lethal Lottery: The Death Penalty in India"

EDIT: The link to the judgment seems to break ever so often. The judgment is available on JUDIS and Manupatra. It is dated 13th May, 2009 and was delivered by Justice S. B. Sinha. As additional reading it might also be instructive to go through Swamy Shraddananda @ Murali Manohar Mishra v. State of Karnataka (Judgment of Justice Aftab Alam delivered on July 22, 2008. Citation AIR 2008 SC 3040).

Introducing CLIF

2009-07-26T03:52:00.000-07:00

The Current Legal Issues Forum (CLIF) is an initiative at the National Law School, Bangalore, for providing a platform to discuss, debate, analyse and critique legal developments of contemporary importance. While the Forum is being setup mainly for the benefit of NLS students, it welcomes and actively solicits inputs on the blog from NLS students who are not part of the Forum, from other members of the NLS community, and from anyone interested in the topics we are discussing. Your views and opinions will enrich the quality and content of our deliberations.

The Forum will meet once a week for a 2-hour session to discuss topics and readings assigned for that session. The topic for each week’s discussion will be decided the previous week and a group of students will be assigned the task of leading discussions. Students can either sign up to be graded for one-credit, or can audit some or all sessions without grading. The Forum will meet every Thursday between 4:00–6:00 p.m. Where possible, the Forum will invite other Faculty members and outside experts to speak on the issue under discussion.

This blog has been set up for facilitating Forum discussions, and to carry the conversation beyond the class-room. Readings for each session will be posted on this blog. Given the number of people who have expressed interest in the Forum, each week’s topic will have to be assigned to a group of students who will have to divide up responsibilities between them. The group of students responsible for a week’s reading will post on this blog issues for discussion by 5:00 p.m. on the Tuesday of that week. The group will also be responsible for initiating and leading discussions at that session. By Friday evening, the group will post on the blog, a write-up on that week’s readings, a summary of the class discussions, and their own views (individual or collective) on the subject.

Since students will be working as a group, they will be expected to read beyond the assigned material for the week for which they are responsible. They should be familiar with the most important legal developments on the topic of discussion and should know the important previous cases, statutory measures, reports, etc on the area of their responsibility. Students will be graded as a group for the presentation component of the course. As far as possible we will try forming groups such that they cut across batches. Each registered student has to be involved in leading discussions and writing up on ONE session of the Forum.

The evaluation scheme will be as follows:

1. Discussion and Write up (comprising issues for discussion, leading classroom discussions, and final write up): 80 (graded as a group)

2. Class Participation: 15

3. Attendance: 5

4. Total: 100

Students interested in participating in the Forum for credit are requested to sign up with the Exam Dept.