Thursday, October 21, 2021

Critical Analysis of Data Theft in Cyber Space

Critical Analysis of Data Theft in Cyber Space 

The word "Privacy" has been derived from the Latin word “Privatus which mean separate from rest”. It can be define as capability of an individual or group secludes themselves or information about themselves and thereby reveal themselves selectively. Privacy can be understood as a right of an individual to decide who can access the information, when they can access the information, what information they can access.Privacy is recognized at international level as Human Rights in different dimension as


 Privacy of person


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 Privacy of personal behavior


 Privacy of personal communication


 Privacy of personal data.

With advancement of latest technology for which many efforts at technological and legal level are done but still there is threat to information because the scope of privacy has been remain still untouched and to provide complete protection to information it is essential to cover the privacy. Although the digitization of data has created convenience in terms of Availability yet it has created havoc of data overflow that leads to difficulty in management of large data, it also includes personal and sensitive information like credit card information. Improper handling of this data can create damage and loss for individual as well Nation. Globalization and ICT revolution in India has changes the form of information drastically. It made information more accessible portable and handy  but it had yet  introduce some unforeseen mayhem and expose our private life has introduce some unforeseen mayhem and expose our private life.


Cyber-crimes can involve criminal activities that are traditional in nature, such as theft, fraud, forgery, defamation and mischief, all of which are subject to the Indian Penal Code. The abuse of computers has also given birth to a gamut of new age crimes that are addressed by the Information Technology Act, 2000.


We can categorize Cyber-crimes in two ways-


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The Computer as a Target :-using a computer to attack other computers.


e.g. Hacking, Virus/Worm attacks, DOS attack etc.


The computer as a weapon :-using a computer to commit real world crimes.


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e.g. Cyber Terrorism, IPR violations, Credit card frauds, EFT frauds, Pornography etc.


Cyber Crime regulated by Cyber Laws or Internet Laws. VI. Proposed Frame work:


Data theft is defined in Section 43 (b) of the Information Technology Act, 2000 (IT Act) as follows: “If any person without permission of the owner or any other person who is in charge of a computer, computer system of computer network, downloads, copies or extracts any data, computer database or information from such computer, computer system or computer network. It is the term used when any information in the form of data is illegally copied or taken from a business or other individual without his knowledge or consent.”


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“Data”, in its intangible form, can at best be put at par with electricity. The question whether electricity could be stolen, arose before the Hon’ble Supreme Court in the case “Avtar Singh vs. State of Punjab” (AIR 1965 SC 666). Answering the question, the Supreme Court held that electricity is not a movable property, hence, is not covered under the definition of ‘Theft’ under Section 378 IPC. However, since Section 39 of the Electricity Act extended Section 378 IPC to apply to electricity, so it so became specifically covered within the meaning of “Theft”. It is therefore imperative that a provision like in the Electricity Act be inserted in the IT Act, 2000 to extend the application of section 378 IPC to data theft specifically.


In the era of information technology (IT), data is an important raw material for all businesses, including brick and mortar companies, business process outsourcing units, banking, media and IT companies. Data has become an important tool as well as a weapon for corporates to capture larger market share. Given its importance, data security has become a big concern for all businesses. Data theft and piracy are huge threats that are forcing companies to spend millions of rupees on data analytics. In many cases, the bottom-line of a business depends on the security of its data. A recent episode of the popular television series, Game of Thrones, had kindled a huge discussion on data theft. Let us look at some of the issues involved in data security.


 Mobility-related Issues: The problem with data theft is that it has no international borders. For example, a computer system may be accessed in the US, its data manipulated in China and the consequences of that action felt in India. The fact that cyber criminals can operate across different sovereignties, jurisdictions, laws and rules is an issue in itself. Collection of evidence, in such circumstances, is complex. It requires investigations to be conducted in three different countries which may not even be on talking terms with one another; poor technical know-how of our cops only adds to the woes. Lack of coordination between various investigating agencies and navigating the extradition process of various countries is another headache. The absence of specific laws to deal with the crime of data theft is, however, the biggest problem; it allows a culprit to get away by picking and choosing from various legal loopholes, even after being caught.


Read also : Snoopingate and Right to Privacy

Our Data Protection Laws:


Data theft has emerged as one of the major cyber-crimes worldwide. India does not have specific laws to deal only with data protection, but we have the IT Act.


Section 43 (b) of the IT Act provides protection against unauthorised downloading, copying, extracting information, data or a database, by imposing heavy civil compensation which could run into crores of rupees. Section 43 (c) provides for compensation in case of unauthorised introduction of computer viruses or other contaminants. Clause (i) provides compensation for destroying, deleting or altering any information residing on a computer or diminishing its value.


Given the emergence of data theft, the law enforcement machinery may sometimes be unsure about the legal nature of the damage caused to the victim. The charges against the thief are framed based on the statement of the victim. It is therefore necessary that the victim is aware of the basic laws relating to information abuse. Some of the charges that can be filed against the perpetrator of data theft are listed below.


Charge:  Criminal Breach of Trust


Section 405 and Section 408 of the IPC


Penalty: Imprisonment of up to 3 years, or fine, or both. If committed by an employee (servant), it attracts imprisonment of up to 7 years, or fine, or both.


What is Criminal Breach of Trust: -: “Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits ‘criminal breach of trust’ ”


Charge: Penalty and compensation for damage to computer, computer system


Section 43 of the IT Act


Penalty: Compensatory penalty of up to Rs. 1 Crore.


Legal Provision: “If any person without permission of the owner or any other person who is in-charge of a computer, computer system or computer network -


(a) accesses or secures access to such computer, computer system or computer network or computer resource;


(b) downloads, copies or extracts any data, computer data base or information from such computer, computer system or computer network including information or data held or stored in any removable storage medium;


(c) introduces or causes to be introduced any computer contaminant or computer virus into any computer, computer system or computer network;


(d) damages or causes to be damaged any computer, computer system or computer network, data, computer data base or any other programmes residing in such computer, computer system or computer network;


(e) disrupts or causes disruption of any computer, computer system or computer network;


(f) denies or causes the denial of access to any person authorised to access any computer, computer system or computer network by any means;


(g) provides any assistance to any person to facilitate access to a computer, computer system or computer network in contravention of the provisions of this Act, rules or regulations made there under,


(h) charges the services availed of by a person to the account of another person by tampering with or manipulating any computer, computer system, or computer network,


(i) destroys, deletes or alters any information residing in a computer resource or diminishes its value or utility or affects it injuriously by any means; (i) Steals, conceals, destroys or alters or causes any person to steal, conceal, destroy or alter any computer source code used for a computer resource with an intention to cause damage, he shall be liable to pay damages by way of compensation not exceeding one crore rupees to the person so affected.”


Charge: Computer Related Offences


Section 66 of the IT Act


Penalty: Imprisonment of up to 3 years, or fine of up to Rs. 5 Lakh, or both.


Legal Provision: “If any person, dishonestly, or fraudulently, does any act referred to in section 43, he shall be punishable with imprisonment for a term which may extend to three years or with fine which may extend to five lakh rupees or with both.”


Charge: Infringement of Copyright


Section 2(o) and Section 63 of the Copyright Act


Penalty: Monetary fine commensurate with the magnitude of the offense. Further, infringement of copyright is a criminal offence.


Legal Provision: “literary work” includes computer programmes, tables and compilations including computer data bases”


In addition to the above, if the stolen data is shared with other parties (such as competitors), the victim can bring an action of criminal conspiracy, collusion, and furtherance of common intention, which makes such other parties an accomplice in the commission of the stealing of data


Data is an intangible asset whose value could run into millions of dollars, but Section 43 does not quantify the compensation to be paid. Hence, a complainant is dependent on the mercy of our courts and the intelligence of his lawyer.


Section 65:


This section provides for computer source code. If anyone knowingly or intentionally conceals, destroys, alters or causes another to do as such shall have to suffer imprisonment of up to 3 years or fine up to 2 lakh rupees. Thus protection has been provided against tampering of computer source documents


 Section 70:


This section provides protection to the data stored in the protected system. Protected systems are those computers, computer system or computer network to which the appropriate government, by issuing gazette information in the official gazette, declared it as a protected system. Any access or attempt to secure access of that system in contravention of the provision of this section will make the person accessed liable for punishment of imprisonment which may extend to ten years and shall also be liable to fine.


Section 72:


This section provides protection against breach of confidentiality and privacy of the data. As per this, any person upon whom powers have been conferred under IT Act and allied rules to secure access to any electronic record, book, register, correspondence, information document of other material discloses it to any other person, shall be punished with imprisonment which may extend to two years or with fine which may extend to one lakh rupees or both.


Can Data Theft be covered under IPC?


Section 378 of the Indian Penal Code, 1860 defines ‘Theft’ as follows


Theft – Whoever, intending to take dishonestly any movable property out of the possession of any person without that person’s consent, moves that property in order to such taking, is said to commit theft.


Section 22 of I.P.C., 1860 defines “movable property” as follows:


“The words “movable property” are intended to include corporeal property of every description, except land and things attached to the earth or permanently fastened to anything which is attached to the earth.”


Since Section 378 I.P.C., only refers to “Movable Property” i.e. Corporeal Property, and Data by itself is intangible, it is not covered under the definition of "Theft”. However, if Data is stored in a medium (CD, Floppy etc.) and such medium is stolen, it would be covered under the definition of ‘Theft’, since the medium is a movable property. But, if Data is transmitted electronically, i.e., in intangible form, it would not specifically constitute theft under the IPC Copyright laws: Copyright Act, 1957 Data extraction involves copying, and hence copyright laws are first ones that are analysed.  Under Section 2 (o) of the Copyright Act, 1957, defines data compilation (or a data set) as a “literary work”.  Section 14 of the Copyright Act, 1957 further grants several exclusive rights in favour of the copyright holder (content creator) as the first owner of such copyrighted works (the data compilation / data set) namely:  a. Right to reproduce data including storing it by any electronic means; b. Make copies of data; c.  Adapt data; d.  Communicate data to the public; and e. Translation of data


Section 51 of the Copyright Act further provides that a copyright is “deemed to be infringed” if any of the above enumerated rights under Section 14 are contravened without the permission of the copyright holder in the course of trade.


However, there are two areas that should be ascertained before determining infringement.  Ownership, and no fair use exception.  It is only the copyright holder / content owner can raise a claim.  Hence in the case of a content aggregator – for various users, it is the users who own the copyright and not the content aggregator.  This scenario occurs for websites where users generate the content – and the website is merely organizing the display / formatting of the content.  Section 52 of the Copyright Act lists various exceptions to copyright and care should be taken that the content extracted has not been used under the purposes outlined for fair dealing.


Information Technology Act, 2002, as amended (“IT Act”):  Section 10A of the IT Act provides for Validity of contracts formed through electronic means – Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.


Accordingly, clickwrap, browse-wrap and other means of contract formation on the internet are covered under this clause.  And most websites provide services to consumers under either of these means for contract formation.  For example, if a person has to accept the terms of service, by clicking “I Agree” or typing in “I Agree” – it is commonly known as a clickwrap agreement.  Under a browse-wrap agreement, a user may continue to use / browse a content owners website and consent of the user to the terms of the website are implied because the user continues to browse the website.  In India, there are no judicial precedents involving a browsewrap or clickwrap agreement / contract.


 


Does India have sufficient Laws?


The problem of data theft which has emerged as one of the major cyber-crimes worldwide has attracted little attention of law makers in India. Unlike U.K which has The Data Protection Act, 1984 there is no specific legislation in India to tackle this problem, though India boasts of its Information Technology Act, 2000 to address the ever-growing menace of cyber-crimes, including data theft. The truth is that our IT Act, 2000 is not well equipped to tackle such crime


How to file a complaint on data theft-


To file a complaint if data theft takes place, here are the following measures:


First of all, for the cyber complaint, write an application to the head of the cyber cell.


Provide the following things in the application:


Name


Address


Email address


Phone number


In case of hacking or say Data theft, the following details are required for cyber cell    complaint:


Logs of the server


A hard copy and soft copy of the defected page


If the data of the defected site is compromised you will need a soft copy of the original data as well as the compromised data.


Control mechanisms details of access in which you have to tell who has accessed your computer.


If you have any doubt or you are feeling suspicious about anyone, then you have to provide the list of those suspicions.


You can file a complaint from any of the cyber cells of the city or you can directly mail at their respective websites. Here is the complete information of the prominent cyber cells of the country. You can refer this link for the same.


How can companies prevent its employees or former employees to prevent them from committing data theft?


If the employees or the former employees of the company steals the data, the company has authority to punish them under section 66A of the Information Technology Act, 2005 which penalises or imprisons on those who commit computer related offences like damage to computer system or network or steals, conceals, destroys or alters or causes any person to steal, conceal, destroy or alter any computer source code used for a computer resource with an intention to cause damage.


Non-Disclosure Agreement


Moreover, the provision of Non-Disclosure-Agreement is also one of the ways in which the company can stop its employees or former employees from stealing the data. By signing an NDA, the employees are legally by means of a contract bound not to disclose data and other relevant information of the companies to third parties outside the course of business.


To observe privacy In Indian work culture we have to adopt above framework which clearly define general guidelines of information addressing in different phases. In this we cover all the necessarily measures while considering the threat to privacy and try to remove vulnerability present in the system. This model mitigates the risk to privacy to the appetite level. So that further threaten to privacy will reduce its impact. We divide the privacy protection in four phases Data Collection, Data Security, Data Process, and Data Access which describe are as follows.


(a)Data Collection:-


First step of privacy protection is start with data collection itself, there must be strict data collection policy impose by the top authority which clearly mention the following points-


 Information is collected by authorize appointed agency only.


 Information is collected for lawful purpose only.


 Personal data shall be adequate, relevant and not excessive.


 Purpose of information collection must be mention.


If we capture the information properly then it is easy to maintain the information security in next steps. Government shall authorize the agencies for data collection government must also insure that they follow the regulation by doing periodic audit. Whenever information needs for collection it must be collected for lawful purpose only its commercial use is strictly avoided


(b)Data Security and Storage


After data capture, personal data shall be kept accurately and kept up-to-date. Appropriate technical and organizational measure shall be applied. Technical measures include all information security controls which are necessary to keep information security over internet. If data is store on the server then that server must be fully controlled by government of India. Server must be taken all security safeguard against unauthorized access, use and other modification. Organization measure includes classification of information according to its nature. ‘Segregation of Duties’ and ‘Need to know’ arranges the information according to its need no single person have full control over information user subject is fully mapped with its all information components.


(c) Data Process


Personal data shall be process fairly and lawfully here processing means not only computer processing. We have to process data only when the consent of user is involved, if the user is in contract and one of the party of the contract, process if it’s required for judicial proceeding, process if its legitimate use for national interest, process if it’s vital interest of data subject. Data should be process for only given purpose. After processing, the data must be properly disposed. Retention policy must be specified as including purpose and duration of retention.


(d) Data Access


The data access must follow Need to Know Basis. There must be control that information not goes beyond the Indian Territory. If data is going beyond territory then appropriate control must be taken to ensure that information is protected outside the India, there must be legal obligation between two countries about data handling. Within the country any Indian or non-government industry process the data they must have to follows all above the norms followed by the Indian government’(a) e-Governance


There is unique privacy challenges associated with e-governance due to large storage of personal and sensitive data. Obviously e-governance has given new dimension to development and globalization but there should be systematic improvements in governmental privacy leadership; and other technology-specific policy rules limiting, how the government collects and uses personally identifiable information. Government also has unparalleled opportunity to lead by example, by establishing strong, consistent rules that protect citizens without harming the government's ability of functioning. To achieve the specified goal we have to follow certain guidelines like:


 Creating a Union Chief Privacy Officer


 Installing chief privacy officers (CPOs) at all major departments


Shrikant Ardhapurkar et. al. / International Journal of Engineering Science and Technology


 Ensuring that Data Mining techniques are addressed by the Privacy Act


 Strengthening and standardizing privacy notices including "privacy impact assessments"


 Privacy Protection on agency website


 Complaint processing in case of breach of privacy


(b) e-Jurisdiction


Finally India got its first awaited model e-Court at the Ahmedabad City Evidently the implementation of e-court in India is in its commencing state The issues like privacy are still untouched. Without substantiation of the standard of technological framework and processes used by e-courts, the system of certainty upon which the courts and law are based has the potential to become inherently uncertain. It will be better to embed the privacy frame work to e court instead of including it later .The e-court must provide security and privacy of electronic filings. Court shall make any document that is filed electronically publicly available online.”


 There must be unified and coherent policy for the privacy protection and access rights.


 Except where otherwise noted, the policies apply to both paper and electronic files.


 The availability of case files at the courthouse will not be affected or limited by these policies.


 (c) e-Media


e-Media include television channels, radio, internet podcast, and all electronic journalism which are used by today’s media. Main purpose of media is to bridge the gap between government policy and public grievances. As there is no information classification in India every information is floated over the media its adverse impact is seen at 26/11 incident all government moves are shown on TV channel which is used by terrorist as a feedback they make their attack strong. Privacy is most concern about celebrities but media is big threat to their privacy every gossip of celebrity is become a Breaking new in most of the new channel. Casting couch is very popular tool used by media now a day which directly hammer the individual privacy. There is no guideline to handle this issue privacy frame will provide solution to solve this problem.


(d) BPO


BPO is Business process outsourcing in IT/ITES industries. BPO play major role for revenue generation in India, complement to BPO there are other types of industries also well establish like KPO (Knowledge process outsourcing), LPO (Legal process outsourcing) and others this is majorly based on information processing. India's BPO industry grew 60 percent to US $6.6 billion in the fiscal year ending 31 March 2008, according to the National Association of Software and Service Companies (NASSCOM), in New Delhi. India's business process outsourcing, or BPO, industry says its security standards match the best in the world. There has never been a major instance of data theft in India. Nonetheless, companies in the United States do fear such an event, says Richard M. Rossow director of operations at the U.S.-India Business Council in Washington, D.C. The fear is "not because they are at a higher risk of such a thing taking place in India, but rather because public perception of sending work to India is so bad that it will take only one major event for the affected company to 'pull the plug' on their India data service venture."


If we do not ensure companies about strong privacy protection framework, we will lose outsourcing sector. We still rely on some international standard but unless if we not have legal framework, it will difficult to safeguard stake holder interest. Privacy at work place is also ignored field, thousands of workers are work in the premises as ‘people are the weakest link in information security’ there must be guideline at work place like cell phone are strictly avoided, prior screening of employee, all work under electronic surveillance, technology used to access employees computer.


(e)Telecommunication:


Service providers (SPs) including Internet service providers, number-database operators, telecommunications contractors, emergency call persons; public number directory publishers, authorized researchers  and their respective employees must protect the confidentiality of information. The use or disclosure of any information or document which comes into their possession in the course of business must be restricted .This could apply,


For example, to law enforcement officers who receive billing information, who may receive information in connection with their functions, publishers who receive information in connection with the publication and maintenance of a public number directory, or other service providers who may have received information for billing or network maintenance purposes.


(f) Health


Health sector is the important concern in privacy. Your health information includes any information collected about your health or disability, and any information collected in relation to a health service you have received.


Many people consider their health information to be highly sensitive. Before proceeding it is very important to consider what all the issues that come under Health Information are:


 notes of your symptoms or diagnosis and the treatment given to you


 your specialist reports and test results


 your appointment and billing details


 your prescriptions and other pharmaceutical purchases


 your dental records


 your genetic information


 Any other information about your race, sexuality or religion, when collected by a health service provider.


There is certain legislative framework also prepared in other countries for the privacy issue like HIPPA and PSQIA- Patient Safety Rule made by US government.


Keeping all this in mind it is mandatory to have a proposed system of health domain that mainly focused on privacy from Indian perspective. We must have administrative safeguard, technical safeguard, physical safeguard that will clearly define policy and procedure to provide safety of patient information. It covers issues like- there must be supported proceedings in case if someone disclose health information without consent of patient, there must be a written set of policy procedure and designate a officer responsible for implementing the procedure, Policy must clearly define class of employees that are allowed to access Electronic Patient Health Information, access of equipment that contains sensitive information must be properly monitored and controlled, protect your system from direct view of public, before transmitting any information must ensure the authenticity of the other party.


(g) E-Business


Indian economy majorly based on e-business outsourcing


We need a privacy framework purely focused on e-business and cover privacy issues and provide legal assistance in case of any fraud, crime .Issues that are need to cover under privacy framework like proper storage of sensitive credentials like credit card, safe credit of money during online transaction, Confidentiality, Integrity availability, authentication of party must be ensured before beginning of transaction, Encrypt the data before transmission of sensitive information, Restrict access based on need to know basis, assign unique identification to the parties that are involved in the business for authentication purpose. Also maintain the policy that addresses e-business privacy.


(h) Tourism


India is the vast combination of heritage and culture. Due to this reason it generates most of the revenue 6.23% to the national GDP and 8.78% of the total employment in India from the tourism industry. When tourist visits in India they perform several transaction, but there is no guarantee that this provided information is not further misused Each tourist must have right that their information is protected, corrected, erased as per their wish. Employing the most appropriate physical and technical measures, staff training and awareness, to ensure that unauthorized access to, alteration or destruction of personal data does not take place. Similarly, for the Medical Tourism the personal information of the patient must be protected. After the completion of the transaction the credit card information must be destroyed If such issues are covered in the privacy framework of the tourism then it must add on in Indian revenue, tourist feel safe while visiting the country, it also reduce the crime rate.


(i)National Security Surveillance


The collection of personal information by means of a surveillance system is lawful and justifiable as a policy choice, and if so, it must be ensured how privacy protective measures can be built into the system. " Reasonable expectation of privacy" is one of the keys to surveillance being legal. Using surveillance systems to address concrete, confirmed problems and/or incidents is acceptable only if the practice meets all statutory requirements. The activities like Access, Use, Disclosure, Retention, Security and


Disposal of Surveillance Records must be regulated -


 Prior to adopting a proposed surveillance program/practice an assessment of the impact on privacy is necessary


 Public bodies should consider public consultations prior to introducing surveillance and inform those impacted once adopted


 The design and operation of surveillance program/practice should minimize privacy intrusion to what is absolutely necessary to achieve its goals like designing and installing Surveillance Equipment


 System operators require privacy-sensitivity training


It’s a matter of preserving national security, heritage, culture and life of each citizen. When we talk about national security with privacy concern then it is more focused on the safeguard of country sensitive information, agreement and security policies. Privacy of national security can be breached when espionage like activity can be performed by an individual to harm the reputation of the country.


With respect to national security there is exemption of privacy from it. Must have separate framework with proper defined national security privacy guidelines. It must include that the government has authority to investigate about any citizen, can seize any personal information regarding an individual when it mounts to National Security, because it is primary and foremost concern. Authority can access information anytime whether it belongs to private and public interest if they found susceptible or threat to national security. It has overall authority as it is deal with the preservation of millions of life.


 Net neutrality case study-


Net neutrality is the principle that Internet service providers treat all data on the Internet equally, and not discriminate or charge differently by user, content, website, platform, application, type of attached equipment, or method of communication. For instance, under these principles, internet service providers are unable to intentionally block, slow down or charge money for specific websites and online content. This is sometimes enforced through government mandate. These regulations can be referred to as "common carrier" regulations. This does not block all abilities that Internet service providers have to impact their customer's services. Opt-in/opt-out services exist on the end user side, and filtering can be done on a local basis, as in the filtration of sensitive material for minors. Net neutrality regulations exist only to protect against misuse. As of August 2015, there were no laws governing net neutrality in India, which would require that all Internet users be treated equally, without discriminating or charging differentially by user, content, site, platform, application, type of attached equipment, or mode of communication. There have already been a few violations of net neutrality principles by some Indian service providers. The government has once again called in for comments and suggestions regarding net neutrality as of 14 August, and has given the people one day to post their views on the mygov forum. After this, the final decision regarding the debate will be made. On 28 November 2017 the TRAI released its recommendations on Net Neutrality. With that, India is one step closer to ensuring that net   neutrality is enforced nationwide.


The debate on network neutrality in India gathered public attention after Airtel, a mobile telephony service provider in India, announced in December 2014 additional charges for making voice calls (VoIP) from its network using apps like WhatsApp, Skype, etc.


In March 2015, Telecom Regulatory Authority of India (TRAI) released a formal consultation paper on Regulatory Framework for Over-the-top (OTT) services, seeking comments from the public. The consultation paper was criticised for being one sided and having confusing statements. It received condemnation from various politicians and Indian Internet users. The last date for submission of comment was 24 April 2015 and TRAI received over a million emails.


On 8 February 2016, TRAI took a revolutionary decision, prohibiting telecom service providers from levying discriminatory rates for data, thus ruling in favor of Net Neutrality in India. This move was welcomed by millions of Indians and also by people from other countries who are fighting or fought for net neutrality , and the inventor of the World Wide Web, Tim Berners Lee.


2017


On 28 November 2017 the TRAI released its recommendations on Net Neutrality. With that, India is one step closer to ensuring that net neutrality is enforced nationwide. Telecom minister Manoj Sinha said on 12 December that the TRAI's recommendations were similar to the views expressed by a DoT committee in 2015 that had also acknowledged the need for net neutrality and suggested allowing for legitimate traffic management. It had, however, disallowed exploitative or anti-competitive traffic management, app-based specific control within the Internet traffic and traffic prioritization on paid basis.


2018


On 14 June 2018, BEREC and TRAI have published a Joint Statement for an Open Internet.


On 11 July 2018, the Department of Telecommunications has approved TRAI recommandations on Net neutrality


There are no laws enforcing net neutrality in India. Although TRAI guidelines for the Unified Access Service license promotes net neutrality, it does not enforce it. The Information Technology Act, 2000 also does not prohibit companies from throttling their service in accordance with their business interests. In India, telecom operators and ISPs offering VoIP services have to pay a part of their revenues to the government.


Violations of net neutrality have been common in India. Examples beyond Facebook's Internet.org include Aircel's Wikipedia Zero along with Aircel's free access to Facebook and WhatsApp, Airtel's free access to Google, and RCom's free access to Twitter


Conclusion-


At 462.12 million, India has the second highest number of internet users in the world after China but lacks the legal framework to ensure data protection and privacy with current laws inadequate for the rapidly-evolving sector, say cyber security experts.


These are the laws which are applicable in today’s era for the prevention of data theft. Though these laws have been made by the legislature there is no proper implementation of these laws. Neither the executory body nor the caretakers have taken these laws seriously. On the other hand, when we talk about the citizens, they are even hardly aware of these laws.


This has led to a lot of increasing cyber-crimes including data theft in the I.T. sector. So it is the sheer need to make these people aware of these laws and direct the concerned authority for proper implementation and lodging proper complaints and providing justice to the victims. It is a common responsibility of the government and judiciary to seriously look into the laws and take strict actions if these laws are being violated in any form, be it by any person like the police officer, and common man, just anyone.


Thursday, June 17, 2021

Vacant Tribunals: Crowding Litigants

 Vacant Tribunals: Crowding Litigants

'Justice delayed is justice denied' as an adage is commonly understood and will safely find no or very less opposition in any civic society. First brush with this adage was as a law student, however, it is as relevant as when visited first. Unfortunately, its relativity in Indian context never seems to fade away. Recently, as per the response to a query in Rajya Sabha1 , as per Ministry of Law and Justice the total number of cases pending before following Courts are:

Supreme Court62,054 (as on August 31, 2020)
High Courts51,57,378 (as on September 20, 2020)
District & Subordinate Courts3,45,71,854 (as on September 20, 2020)

While disposal of pending cases has gathered much steam in recent times, need for additional judges in all the Courts is well known. Delay in the context of justice dispensation is undeniably painful for a litigant and such delay becomes even more agonizing when statutory commissions and tribunals established for such specific (mostly speedy) adjudication of disputes and exercise of delegated legislation is marred by delay or nonfunctioning.

Conceptually, tribunals have been established for being cost-effective, accessible, free from technicalities, expeditious, rapid and efficient being manned by experts. The concept of tribunalization was developed to overcome the crisis of delay and backlogs in the administration of justice. In this regard, Law Commission of India Report No. 2722 issued back in 2017 highlights the plight of high pendency.

Failure to function for non-appointment of members/chairpersons due to lethargic approach by selection committees and central/state government despite being in the know of such vacancies well in advance, is no less than tragic for a litigant.

Recently, Supreme Court (SC) in Rojer Mathew v South Indian Bank Ltd & Ors3 pointed out the imperative need for the process of appointments to the tribunals to be seamless in order to fill vacancies arising from retirement or unforeseen causes and large-scale vacancies having the affect of rendering tribunals defunct. SC observed that 'The surest way to deny access to justice is to keep a large number of vacancies' and further held that keeping vacancies unfilled for tardy procedures or other reasons denudes the efficacy of the tribunal as a dispute resolution mechanism. Referring to its view in L. Chandra Kumar4 , it reiterated that there should be one wholly independent agency for the administration of all tribunals and highlighted that efficiency of tribunals is getting marred by huge backlogs. Resultantly, it went on to direct Central Government to formulate a new set of rules ensuring non-discriminatory and uniform conditions of service, including assured tenure and undertake the 'judicial impact assessment' of all the tribunals referable to the Finance Act 2017 and submit findings before competent legislative authority.

SC as recent as August 2020, twice extended the term of Mr. V.K. Jain, Member (Judicial) NCDRC due to time being taken in selection and appointment of new Member (Judicial) by the government5 . History seems to repeat itself too often and through a familiar script in the context of vacancies in such statutory/quasi-judicial forums. The recent forum falling prey to such lackadaisical approach is Central Electricity Regulatory Commission ('Central Commission'), which is not functioning since August 28, 2020 in terms of the order of SC 6

Central Commission's functioning is restricted due to non-appointment of Member (Legal) and being contra to SC's judgment dated April 12, 2018 in the matter of State of Gujarat & Ors v. Utility Users Welfare Association & Ors7 , wherein, interpreting provisions of the Electricity Act 2003 (Act), the Court held that there should at least one person possessing requisite legal expertise and qualification in law as member of state commissions for carrying out adjudicatory functions. Through this decision, it also directed that every vacancy arising in such commissions, post the date of judgment should be first filled with the Member (Legal). For Central Commission not being benefitted with the appointment of Member (Legal) upon a vacancy arising (and member finance having been appointed prior), functioning of Central Commission has been stopped by the SC.

Central Commission has an approximate pendency of nearly 1005 petitions/applications pending adjudication of which nearly 177 are reserved for orders, 110 are at the hearing stage and 256 are pending completion of pleadings with 456 petitions / applications pending scrutiny. Section 78 of the Electricity Act provides for constitution of the Selection Committee which is entrusted with responsibility of selecting Members of Appellate Tribunal and the Chairperson and Members of Central Commission. Section 78(5) and 85(2) provides a period of one month (in case of death, resignation or removal) and six months before superannuation or end of tenure for making a reference to the Selection Committee and the Selection Committee in-turn [through Section 78(6) and 86(3) of the Act] has been mandated a period of three months from the date of such reference to finalize the selection. Even the appointments to the Appellate body established under Section 110 of the Electricity Act 2003 has been marred by similar approach for appointments of chairperson and/or members. Despite the time frame being mandated in the Act, appointments have taken their own time, leading to over-burdening of one Bench or the serving Judicial/Technical Member. Bearing in mind the need to expeditious disposal of appeals filed before Appellate Tribunal, Section 111(5) of the Act provides for an endeavor to dispose of such appeals within 180 days from the date of receipt of such appeal. However, the intent for expeditious adjudication is bound to be defeated in absence of timely appointments.

Further, non-functioning of the Central Commission has led to added burden on the already burdened Appellate Tribunal as all urgent matters that were to be adjudicated before Central Commission are now being taken up by the Appellate Tribunal8. Pendency of disputes not only includes the contractual disputes between the generators and licences but also include tariff fixation for power generating and transmission companies. Since most of the claims for stakeholders are in the nature of pass through with interest in form of carrying cost (owing to delay in recovering payments not attributable to entity claiming such cost) which is ultimately passed on to the end consumer i.e. public at large.

One of the prominent purpose of tribunalization is speedy justice, however due to self-created conundrum sufferer is the one who has no or minimal say in the process. All concerned stakeholders must recognize the urgency and make necessary amends where required. Lastly, need for justice dispensation has had many words in its favor but it is not misplaced to quote Ciecro who propagated that 'justice is the crowning glory of all virtues'. And for history repeating itself, our first brush with adage 'justice delayed is justice denied' also could not find a more suitable rhetoric.

Footnotes

1. Response to unstarred question no. 1381 in Rajya Sabha by Ministry of Law and Justice

2. "Assessment of Statutory Frameworks in India" issued in 2017

3. (2020) 6 SCC 1

4. L. Chandra Kumar v. Union of India (1997) 3 SCC (L&S) 577

5. Kudrat Sandhu v. Union of India; Order dated August 26, 2020 in Misc Appl No. 919/2020 in WP (C) No. 279/2019

6 .Orders dated 28.08.2020, 25.09.2020 and 26.10.2020 passed in Contempt Petition No 429 of 2020 titled as K K Agarwal v. Sanjiv Nandna Sahai & Anr

7. (2018) 6 SCC 21

8. The Appellate Body has total 4 members (2 'Judicial' and 2 'Technical' members) including chairperson and sittings are conducted in two separate benches.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


Maintainability Of A Section 7/Section 9 Ibc Proceedings During The Pendency Of Winding Up Petition

 

The Hon'ble Supreme Court of India by its recent judgment passed on 1st March, 2021 in A. Navinchadra Steel Pvt. Ltd Vs. SREI Equipment Finance Limited & Ors1 has settled the law in respect of maintainability of a section 7 and/or Section 9 Petition filed under Insolvency and Bankruptcy Code, 2016 ("IBC/Code") after the admission of winding up Petition/during the pendency of the winding up Petition qua the same Corporate debtor.

The Appellant in this matter contested the maintainability of a section 7 IBC Petition filed before a National Company Law Tribunal ("NCLT") post admission of the winding up Petition qua the same Company on the basis that irreversible/irretrievable steps have already been taken in the winding Petition post its admission and appointment of provisional liquidator by the Hon'ble Bombay High Court. That as per the section 446 of the Companies Act, 19562 no suit or other legal proceedings can be commenced or continued once there is admission of a winding up Petition. It was also argued that it is inaccurate to imply that a winding proceeding shall inevitably result in corporate death as there are provisions under the Companies Act, 1956 regarding compromise and arrangement3 as a result of which the winding up court could stay the winding up and order restructuring. Lastly, it was contended that the only route available was to seek transfer of the Company Petition in winding up from Bombay High Court to the NCLT instead of filing a section 7 Petition.    

In favour of the maintainability of the section 7 IBC Petition, it was argued that section 7 IBC proceeding is an independent proceedings which can be initiated anytime even after the winding up order. That Code has an overriding effect in view of section 238 under IBC and the non-obstante clause contained therein. As a result, in case of any conflict of the Code with the Companies Act4, the Code shall prevail being a special statue. It was also contended that no irreversible steps had been taken in the instant winding up Petition as the provisional liquidator continues to be in control of the assets of the Company and the private sale of an asset of a company by a secured creditor who opted to stay outside the process of winding up cannot be considered as irreversible/irretrievable step taken in the winding up process.   

The Hon'ble Supreme Court and the both the contesting parties in this case heavily relied upon the findings given by the Hon'ble Supreme Court in its earlier decision in Action Ispat & Power Pvt. Ltd Vs. Shyam Mettalics & Energy Ltd.5 ("Action Ispat") where the Apex Court using its discretionary power upheld the transfer of the winding up Petition from the Delhi High Court to the NCLT, post admission of winding up Petition even after liquidator had taken control assets of the Company. In doing so, the Hon'ble Supreme Court considered the beneficial result of IBC for a Company in the red and held that so long as the actual sales of the immovable/movable properties have not taken place, nothing irreversible is done to warrant a Company Court from staying its hands on a transfer application. It is only when winding up proceeding have reached a stage where it is it is irreversible/impossible to set the clock back that the Company Court shall proceed with the winding up proceedings.                 

After considering the relevant facts of the case, findings given in the Action Ispat matter and jurisprudence on the subject matter in detail, the Hon'ble Supreme Court upheld the maintainability of the section 7 IBC proceeding and observed that mere fact that a winding up petition is admitted or pending shall not trump any subsequent attempt for revival of the Company through a section 7 and/or Section 9 Petition filed under IBC. That section 7 and/or Section 9 Petition filed under IBC is an independent proceeding which is to be tried on its own merits and only where a company in winding up is near its corporate death that no transfer of winding up proceeding would take place to the NCLT to be tried as a proceeding under IBC.

Conclusion

The findings arrived by the Hon'ble Supreme Court in this case is aligned with the objective of IBC delineated in Swiss Ribbons (P) Ltd. v. Union of India (2019) 4 SCC 17 briefly being that IBC being a special statue dealing and providing for the revival of a Companies which are in the red and also welcoming the larger public interest and the economy of a country.

Footnotes

1 2021 SCC OnLine SC 149

2 Equivalent to Section 279 of the Companies Act, 2013

3 Section 391 to 393 of the Companies Act, 1956

4 See section 446 of the Companies Act, 1956/Section 279 of the Companies Act, 2013

5 2020 SCC OnLine SC 1025

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Supreme Court Ends Extension Of Limitation Period

 

In order to alleviate difficulties faced by litigants and lawyers owing to the COVID-19 pandemic and consequent lockdown, the Supreme Court of India had passed an order on 23rd March 2020 in Suo Moto Writ Petition (Civil) No. 3 of 2020, extending periods of limitation prescribed under general and special laws with effect from 15th March 2020 for filing petitions, applications, suits, appeals and other proceedings till further orders. The said order of the Supreme Court was extended from time to time.

On 8th March 2021, upon reviewing the situation, the Supreme Court was of the opinion that although the pandemic had not ended, there was considerable improvement in the circumstances and that the order dated 23rd March 2020 had served its purpose. Accordingly, the Supreme Court disposed off the Suo Moto Writ Petition vide its order dated 8th March 2021 with the following directions:

  1. In computing the period of limitation for any suit, appeal, application or proceeding, the period from 15.03.2020 till 14.03.2021 shall stand excluded. Consequently, the balance period of limitation remaining as on 15.03.2020, if any, shall become available with effect from 15.03.2021;
  2. In cases where the limitation would have expired during the period between 15.03.2020 till 14.03.2021, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 15.03.2021. In the event the actual balance period of limitation remaining, with effect from 15.03.2021, is greater than 90 days, that longer period shall apply;
  3. The period from 15.03.2020 till 14.03.2021 shall also stand excluded in computing the periods prescribed under Sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings;
  4. The Government of India shall amend the guidelines for containment zones, to state. "Regulated movement will be allowed for medical emergencies, provision of essential goods and services, and other necessary functions, such as, time bound applications, including for legal purposes, and educational and job-related requirements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Party Autonomy In Arbitration: Supreme Court Upholds Change Of Venue Permissible By Mutual Agreement

 

In a recent judgment1, the Supreme Court of India ("Supreme Court") opined that parties to an arbitration by mutual agreement can change the venue/ place of arbitration and that the new venue/ place of arbitration becomes the 'seat' of arbitration. Thus, when a place of arbitration is mutually chosen by parties, the courts at the agreed place, have exclusive jurisdiction to regulate the arbitration proceedings.

Facts

A purchase order was entered into between Gujarat Fluorochemicals Ltd. ("GFL") and Jayesh Electricals Ltd. ("JE"/ "Respondent") for the manufacture and supply of power transformers at wind farms. The arbitration clause in the purchase order provided for Jaipur to be the venue of arbitration with the Court in the State of Rajasthan having jurisdiction over the disputes arising out of the purchase order.

Thereafter, the entire business of GFL was sold to Inox Renewables ("Inox"/ "Appellant") on a slump sale basis. A Business Transfer Agreement ("BTA") was executed between Inox and GFL to which the Respondent was not a party. Under the BTA, Vadodara was designated as the seat of arbitration with the courts at Vadodara having exclusive jurisdiction over disputes under the BTA.

Disputes arose between Inox and JE and the High Court of Gujarat appointed a sole arbitrator. The sole arbitrator passed an award in favour of JE. A section 34 petition was filed by Inox in a commercial court in Ahmedabad ("Commercial Court") which was opposed by JE on the ground that as per the arbitration clause in the BTA, only the courts at Vadodara have jurisdiction to hear the challenge to the arbitration award. The Commercial Court at Ahmedabad, relying upon the BTA, accepted the case of JE and held that the courts at Vadodara alone would have exclusive jurisdiction.

Inox challenged the order of the Commercial Court2 before the High Court at Ahmedabad ("High Court"). The High Court referred to the arbitration clause in the purchase order and held that even assuming that Ahmedabad would have jurisdiction, if one were to go by the arbitration clause in the purchase order, exclusive jurisdiction is vested in the courts at Rajasthan and hence the appropriate court would be the court at Jaipur. In spite of this observation, the High Court dismissed the challenge filed by Inox and upheld the Commercial Court's order. 

Arguments

Counsel for Inox argued that the BTA was irrelevant as it was not between Inox and JE. Relying upon the judgment BSG SGS Soma JV v. NHPC Limited3 ("BSG SGS Soma"), it was argued that the impugned judgment failed to consider that the arbitrator had recorded in the award that the venue/ place of arbitration was shifted by mutual consent to Ahmedabad, as a result of which the seat became Ahmedabad and hence the courts at Ahmedabad had exclusive jurisdiction.

Counsel for JE argued that even if the place of arbitration is shifted by mutual agreement, it requires a written agreement4. It was further argued that the purchase order explicitly states that the courts at Rajasthan would have jurisdiction and therefore the arbitration clause stating that the arbitration is to be held at Jaipur is independent. Further, counsel for JE argued that the shift of venue has reference to only Section 20(3) of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") as Ahmedabad was a convenient place for arbitration, with the seat continuing as Jaipur.

Supreme Court's Judgment

The Supreme Court observed that the sole arbitrator had recorded in his award that the parties have "mutually agreed, irrespective of a specific clause as to the [venue, that the place] of the arbitration would be at Ahmedabad and not at Jaipur." the parties have "shifted the venue/place of arbitration to Ahmedabad". The Supreme Court held that it is not necessary that the parties should have shifted the venue only by written agreement.

The Supreme Court relied upon BSG SGS Soma (which relies upon the judgment of Indus Mobile Distribution (P) Ltd.5) where it was held that whenever there is the designation of a place of arbitration in an arbitration clause as being the 'venue' of the arbitration proceedings, the expression 'arbitration proceedings' would make it clear that the 'venue' is really the 'seat' of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place.

Relying upon BSG SGS Soma, the Supreme Court held that the moment the seat is chosen as Ahmedabad, it is akin to an exclusive jurisdiction clause, thereby vesting the courts at Ahmedabad with the exclusive jurisdiction to deal with the arbitration. The Supreme Court further held that the aspect of concurrent jurisdiction as dealt with it the BALCO judgment6 does not arise in the present matter, as parties mutually agreed to substitute the venue at Jaipur, with Ahmedabad as the place/ seat of arbitration under Section 20(1) of the Arbitration Act. .

The Supreme Court observed that the reliance by JE's counsel on the judgment in Videocon7 is misplaced, as in that matter the arbitration clause explicitly provided that any amendment or modification to the contract will have to be written and signed by all parties. However, in the present matter, no such clause akin to the one in the Videocon matter was present.

The Supreme Court further held that the arbitration clause in the purchase order must be read as a whole and therefore it cannot be accepted that the jurisdiction of courts in Rajasthan is independent of the venue being at Jaipur. It was noted that in the purchase order, courts in Rajasthan had been vested with jurisdiction only because the seat of arbitration was Jaipur. Once the seat was changed by mutual agreement/consent, courts at Rajasthan were no longer vested with exclusive jurisdiction.

In conclusion, the Supreme Court vide this judgment has upheld the findings in BSG SGS Soma and has given priority to party autonomy and mutual consent, thereby doing away with the strict necessity of a written agreement.

Footnotes

1. Inox Renewables v. Jayesh Electricals Limited [Civil Appeal No. 1556 of 2021 decided on April 13, 2021]

2. Special Civil Application No. 9536 of 2021

3. (2020) 4 SCC 234

4. (2011) 6 SCC 161, (2017) 7 SCC 678

5. (2017) 7 SCC 678

6. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552

7. (2011) 6 SCC 161

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


Shifting Of Seat Of Arbitration


The above judgment finally settles a vital question of law regarding the shifting of seat of arbitration and the change in jurisdiction of court arising due to such shifting of seat of arbitration. The appeal before Supreme Court was preferred from the judgment passed by the High Court of Gujarat, holding that the courts at Jaipur, Rajasthan would have the exclusive jurisdiction to entertain application for setting aside the arbitral award under Section 34 of the Act.

Brief Facts of the Case:

In the present case, a purchase order dated 28.01.2012 ("purchase order") was entered into between M/s Gujarat Fluorochemicals Ltd. ('GFL') and Jayesh Electricals Ltd. ('Respondent') for the manufacture and supply of power transformers at wind farms. The arbitration clause contained in the said purchase order provided that the arbitration shall be conducted by three arbitrators in accordance with the Act and the venue of the arbitration shall be Jaipur, Rajasthan.

Thereafter, the entire business of GFL was sold to Inox Renewables Ltd. ('Appellant') by way of a slump sale.2 The transfer of entire business was done by way of an Agreement dated 30.03.2012 ("Agreement") executed between Appellant and GFL, and the Respondent was not a party to the said Agreement. In the said Agreement, the seat of arbitration was designated as Vadodara and the exclusive jurisdiction qua disputes arising out of the agreement was also vested with courts at Vadodara. Thereafter, on an application filed by Respondent and on joint request of Appellant and Respondent, the Gujarat High Court on 05.09.2014 appointed a sole arbitrator to resolve the disputes arose between the parties in relation to the purchase order. The Sole Arbitrator thereafter, passed an award dated 28.07.2018 awarding a sum of Rs. 38,97,150/- along with interest of Rs. 31,32,650/- as well as Rs. 2,81,000/- towards quantified costs. The sole arbitrator also recorded that the venue/ place of arbitration was shifted to Ahmedabad from Jaipur by mutual consent of both the parties.

The Appellant challenging the award dated 28.07.2018, filed an application under Section 34 of the Act before the Commercial Court, Ahmedabad. The Respondent, however, challenged the jurisdiction of the Commercial Court Ahmedabad and contended that courts at Vadodara would have jurisdiction in the matter. Such objection was accepted by the Court vide its judgment dated 25.04.2019. Aggrieved by the above judgment dated 25.04.2019, the Appellant preferred a special civil application before the Gujarat High Court. The High Court however, held that in view of the purchase order, the courts at Jaipur, Rajasthan would have jurisdiction and not the courts at Vadodara or Ahmedabad. The Appellant thereafter challenged the judgment of Gujarat High Court before the Supreme Court of India.

Case before Supreme Court:

The Appellant contended that since the place/ venue of the arbitration was shifted to Ahmedabad by mutual consent, therefore the seat of arbitration became Ahmedabad and hence, jurisdiction had also been vested with the courts at Ahmedabad. The Appellant relied on the judgment of BSG SGS SOMA JV vs. NHPC Limited3 to support its case. On the other hand, the Respondent, while relying on the judgments of Videocon Industries Ltd. vs. Union of India4 and Indus Mobile Distributor Pvt. Ltd. vs. Datawind Innovations Pvt. Ltd.5, argued that even if the venue is shifted to Ahmedabad by mutual agreement, the seat cannot be changed without a written agreement between the parties.

The Respondent also argued that vesting of exclusive jurisdiction with the courts at Rajasthan was independent of the arbitration clause. Respondent further argued that the mutual agreement for shifting of venue of arbitration was in reference of Section 20(3) of the Act only, which provided that unless otherwise agree between the parties, the Arbitral Tribunal may choose a convenient place to hold meetings and conduct hearings. Therefore, even if the venue of arbitration was shifted to Ahmedabad, the seat of arbitration always remained at Jaipur.

Supreme Court's Findings:

The Supreme Court while allowing the appeal of the Appellant, held that the shifting of 'venue' from Jaipur to Ahmedabad is in effect a shifting of the venue/ place of arbitration with reference to Section 20(1) of the Act, and not with reference to Section 20(3) of the Act. Section 20(1) of the Act provides that the parties are free to agree on place of the arbitration. The Court held that since the sole arbitrator has recorded that by mutual agreement, Jaipur as a 'venue' was replaced by Ahmedabad, therefore, the courts at Rajasthan are no longer vested with the jurisdiction to entertain any of the applications under any provision of the Act. The exclusive jurisdiction was vested with the courts at Ahmedabad, as the seat of the arbitration was changed to Ahmedabad. The Supreme Court in view of the above, referred the matter back to courts at Ahmedabad to hear the application under Section 34 afresh.

Conclusion:

The above judgment settled a vital issue regarding change in seat of arbitration by the parties and the effect of such change on the jurisdiction of the courts. It has been observed that many times parties tend to shift the venue of arbitration by mutual agreement at the stage of arbitration, but later on tend to resist the jurisdiction of courts which are not convenient for the resisting party. The above judgment also upheld the fundamental premise of arbitration i.e. party autonomy, which has been enshrined in the UNCITRAL model law also. The above judgment paved the way forward for the parties to mutually decide or shift the seat of arbitration even after the initiation of the arbitration proceedings.

Footnotes

1. MANU/SC/0285/2021; Civil Appeal No. 1556/2021 decided on 13.04.2021

2. Section 2(42C) of Income Tax Act, 1961 - "slump sale" means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales.

3. (2020) 4 SCC 234

4. (2011) 6 SCC 161

5. (2017) 7 SCC 678

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances

Striking Of Defense In Commercial Suits

 Striking Of Defense In Commercial Suits

The foremost objective upon receipt of summons of a suit for a Defendant(s), is to prepare a defense and represent oneself, whether it be an individual or company. Every party is statutorily bound to appear before the Court and present their case within stipulated time.

The present article deals with the amendments made by the Commercial Court Act, 2015 in the Code of Civil Procedure, 1908 and the effect on striking of defense in Commercial Suits.

The Code of Civil Procedure, 1908 stipulates time period for filing written statement in ordinary suits and The Commercial Courts Act, 2015 came into force on October 23, 2015 along with certain amendments to the Code of Civil Procedure, 1908 with regard to filling of written statement in any suit of a commercial dispute of a specified value, which are as follows:

Filing of Written Statement- Ordinary Suits v. Commercial Suits

ORDINARY SUITSCOMMERCIAL SUITS
In the Order V Rule 1 Sub-rule (1) of the Code of Civil Procedure, 1908, the second proviso applicable to ordinary suits  states that when a defendant has failed to file his written statement within the stipulated period of 30 days, the Court shall give him extension to file his written statement by recording his reason for the delay in writing. However, such extension should not be later than 90 days from the date of service of summons.In the Order V Rule 1 Sub-rule (1) of the Code of Civil Procedure, 1908, the proviso applicable to commercial disputes of a specified value states that when a defendant has failed to file his written statement within the stipulated period of 30 days, the Court shall give him extension to file his written statement by recording his reason for the delay in writing and on payment of costs as the Court deems fit. However, such extension should not be more than 120 days from the date of service of summons and on expiry of 120 days, the defendant shall forfeit his right to file the written statement and the written statement should not be taken on record by the Court.
Similarly, in the Order VIII Rule 1 of the Code of Civil Procedure, 1908, the proviso applicable to ordinary suits states that when a defendant has failed to file his written statement within the stipulated period of 30 days, the Court shall give him extension to file his written statement by recording his reason for the delay in writing. However, such extension should not be later than 90 days from the date of service of summons.Similarly, in the Order VIII Rule 1 of the Code of Civil Procedure, 1908, a new proviso was substituted applicable to commercial disputes of a specified value stating that the defendant must file written statement of his defense within 30 days from the date of service of summons upon him. In event of failure to do so, the Court has the discretion to extend the time for filing of the Written Statement, by recording the reasons for the delay. However, such extension should not be more than 120 days from the date of service of summons and on expiry of 120 days, the defendant shall forfeit his right to file the written statement and the written statement should not be taken on record by the Court.
In the Order VIII Rule 10 of Code of Civil Procedure, 1908 applicable to ordinary suits states that on the failure of the defendant to file his written statement within the permitted time, the Court shall pronounce judgment against the defendant, or make such an order in relation to the suit as it thinks fit which shall be of the nature of a decree.The above was re-emphasized in the Order VIII Rule 10 of Code of Civil Procedure, 1908, applicable to commercial disputes of specified value stating that the Courts do not have the power to grant further extension beyond the statutory time provided under Order VIII Rule I of Code of Civil Procedure, 1908.


The Supreme Court of India in SCG Contracts India Pvt. Ltd. Vs. K.S. Chamankar Infrastructure Pvt. Ltd. and Ors.1 has upheld the abovementioned provisions under Code of Civil Procedure, 1908 applicable to commercial dispute stating that, the abovementioned provisions would show that ordinarily a written statement is to be filed within a period of 30 days. However, a grace period of further 90 days is granted to the defendant which the Court employ by recording the reasons in writing and payment of costs as it deems fit. The Apex Court reiterated that Court has no further power to extend the time beyond period of 120 days. Further, on expiration of period of 120 days from the date of service of summons, the defendant shall forfeit his right to file the written statement and the Court shall not allow the written statement of the defendant to be taken on record.

CONCLUSION

In a Commercial Suit, where the defendant has failed to file his written statement within the period of 30 days from the date of service of summons, the Court has the discretion to allow further period to make such submissions which may not exceed 90 days. If the Defendant has failed to file his written statement beyond the stipulated period of 120 days from the date of service of summons, the Defendant shall forfeit the right to file his written statement and the Court shall not allow the written statement of the Defendant to be taken on record.

Footnote

[1] AIR 2019 SC 2691

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.