Wednesday, September 23, 2009

Economic Contribution of the Housewife

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.

Wednesday, September 16, 2009

Economic Contribution of the Housewife: Issues for Discussion

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?

Monday, September 14, 2009

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

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.

Saturday, September 5, 2009

Current Economic Crisis

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







Wednesday, September 2, 2009

Current Economic Crisis

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?