Legal Recourse in Cases of Medical Negligence

Not defined in any Indian Act or Statute per se, medical negligence, in common parlance, is negligence by act or omission by a health care provider in which the treatment provided to a patient falls below the accepted standard of practice in the medical community and causes injury or death to the patient.
Since medical profession is the noblest of all professions, a medical practitioner requires a certain degree of skills and knowledge, due to which the standard of care is generally high. They can only be held liable, when the standard of care is reasonably less than the standard of care that is generally exercised by a competent practitioner.

Provided hereunder is an analysis of medical negligence in India and the legal recourse, both civil and criminal in nature, which can be sought in such cases.

The essential elements in any kind of negligence are:

1. Legal duty of care towards the plaintiff;
2. Breach of that duty;
3. Consequential damage caused to the plaintiff.

Doctors are said to be in a fiduciary relationship with their patients and it is on the basis of this relationship that the doctors can also be accused of negligence, which has now come to be known as medical negligence.

MEDICAL NEGLIGENCE: AS A TORT AND AS AN OFFENCE

The landmark case of Jacob Mathew v. State of Punjab [(2005) 6 SCC 1], provides answers to the two most important issues concerning medical negligence:

1. Whether there is a distinction between civil and criminal laws of negligence?
2. Whether a different standard is applicable for recording a finding of negligence when a medical practitioner in particular is to be held guilty of negligence?

The Apex Court held that it is the amount of damages incurred which is determinative of the extent of liability in tort; but in criminal law it is not the amount of damages but the amount and degree of negligence that is determinative of liability. To fasten liability in Criminal Law, the degree of negligence has to be higher than that of negligence enough to fasten liability for damages in Civil Law. The essential ingredient of mens rea (the guilty mind) cannot be excluded from consideration when the charge in a criminal court consists of criminal negligence.

Therefore, it is only when a person fails to give any thought to the possibility of there being any such risk, and nevertheless goes on to do it would be considered gross negligence. In other words, it is a complete disregard for possible consequences.
It was also held that the service which the medical profession renders to human beings is probably the noblest of all, and hence there is a need for protecting doctors from frivolous or unjust prosecutions. Many a complainant prefers recourse to criminal process as a tool for pressurizing the medical professional for extracting uncalled for or unjust compensation. Such malicious proceedings have to be guarded against.

CIVIL RECOURSE:

Civil suits in case of medical negligence can be filed for damages in torts (civil wrong) in the Consumer Disputes Redressal Forums established under the Consumer Protection Act, 1986 (the Act).

Ques: Whether services rendered by a medical practitioner falls within the ambit of service as defined in section 2(1) (o) of the Act?

The Act defines service as following:
Service means service of any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.

The Apex Court in Indian Medical Association v. V.P. Shantha [AIR 1996 SC 550], held that the service rendered to a patient by a medical practitioner (except where the doctor renders service free of charge to every patient or under a contract of personal service), by way of consultation, diagnosis and treatment, both medicinal and surgical, would fall within the ambit of service as defined in section 2(1) (o) of the Act. Distinguishing between contract of personal service and contract for personal service, the Court held that in absence of a relationship of master and servant between the patient and medical practitioner, the service rendered by a medical practitioner to the patient cannot be regarded as service rendered under a contract of personal service and are contracts for personal service and therefore is not covered by exclusionary clause of the definition of service contained in the Act.

The procedure for approaching Consumer Dispute Redressal Forum is mentioned as under:

1. Complaints may be made to:
   District Forums in case of complaints where value of goods or services rendered along with the compensation, if any, claimed does not exceed Rs. 20 lakhs;
   State Commission where value of goods or services rendered along with the compensation, if any, claimed is more than Rs. 20 lakhs but does not exceed Rs. 1 crore, and;
   National Commission where value of goods or services rendered along with the compensation, if any, claimed exceeds Rs. 1 crore.
2. The complaint to these statutory bodies has to be made within 2 years from the date of cause of action.
3. According to section 15 (Appeal) of the Act, any person aggrieved by an order made by the District Forum may prefer an appeal against such order to the State Commission within a period of thirty days from the date of the order. However, State Commission may entertain an appeal after the expiry of the said period of thirty days if it is satisfied that there was sufficient cause for not filing it within that period.
4. As per provisions laid down in section 19 (Appeals) of the Act, any person aggrieved by an order made by the State Commission in exercise of its powers may prefer an appeal against such order to the National Commission within a period of thirty days from the date of the order in such form and manner as may be prescribed. However, the National Commission may entertain an appeal after the expiry of the said period of thirty days if it is satisfied that there was sufficient cause for not filing it within that period.
5. Further appeal may be made to the Supreme Court within a period of 30 days from the date of order passed by the National Commission.

CRIMINAL RECOURSE:

Any act or omission thereof, becomes an offence only when the State considers it so. Because of the reasons abovementioned, the act done by medical practitioners in course of their duties, is to an extent protected by the Indian Penal Code, 1860 (IPC) under Chapter IV (General Exceptions) in its sections 80 (accident in doing a lawful act), 81 (act likely to cause harm but done without criminal intent), 88 (act not intended to cause death, done by consent in good faith for a person’s benefit), and 92 (acts done in good faith for benefit of a person without consent). The interpretation for above is that if established that the act or omission thereof is falls in the ambit of any of the above sections, then the same is not an offence under IPC.
This does not mean that medical practitioners can never be held criminally liable for any act of negligence committed by them. Grave medical negligence is not protected under IPC and the medical practitioner can be held liable for an offence if his/her act or omission thereof falls under sections 304A (death by negligence), 337 (causing hurt by act endangering life or personal safety of others) and 338 (causing grievous hurt by act endangering life or personal safety of others) of IPC.

The complaint mechanism in cases of criminal offence involves registering a First Information Report in a Police Station and then the Courts taking cognizance of the same. In Lalita Kumari v. Govt. of Uttar Pradesh [2013 (13) SCALE 559], it was held that under section 154 of the Code of Criminal Procedure, 1973, a Police Officer cannot refuse to register a First Information Report in cases concerning cognizable offence. The said judgement however provided exception, inter alia, in cases of medical negligence.

The judgement quoted Jacob Mathew Case and given below are the points for consideration while making a complaint/FIR accusing a medical practitioner of criminal negligence:

1. A professional may be held liable for negligence on one of two findings: either he was not possessed of the requisite skill which he professed to have possessed, or, he did not exercise, with reasonable competence in the given case, the skill which he did possess.
2. No private complaint will be entertained against any medical practitioner for prosecution against offences of which criminal rashness or negligence is an ingredient, unless the complainant has produced prima facie evidence before the Court in the form of credible opinion given by another competent doctor to support the charge of rashness or negligence on the part of accused doctor.
3. FIR can be refused to register till the time a preliminary enquiry is duly conducted and some credible evidence is found for such cases.
4. A doctor accused of rashness or negligence, may not be arrested in a routine manner (simply because a charge has been levelled against him). Unless his arrest is necessary for furthering the investigation or for collecting evidence or unless the investigating officer feels satisfied that the doctor proceeded against would not make himself available to face the prosecution unless arrested, the arrest may be withheld.
5. The famous Bolam Test as laid down in Bolam v. Friern Hospital Management Committee, [(1957) 1 W.L.R. 582, 586] would be applied while deciding the culpability of a medical practitioner:
   “The test is the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest expert skill; it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art.”

SOURCES:

Case Material on Law of Crimes – II, Faculty of Law, University of Delhi;
Case Material on Law of Torts, Faculty of Law, University of Delhi;
The Consumer Protection Act, 1986;
The Indian Penal Code, 1860;
www.indiankanoon.org

Dishonour of cheques: Section 138, Negotiable Instruments Act, 1881

Finding its place in Chapter XVII of Negotiable Instruments Act, 1881 (the Act), Section 138 pertains to dishonour of cheques for insufficiency, etc. of funds in the account. Dishonour of cheques is said to be an offence of private nature (offence between two parties not involving the State) and according to the said section, a person is deemed to have committed an offence if he has drawn a cheque which has been dishonoured due to lack of funds in the bank account.

ESSENTIALS:

Like every offence, the act of dishonour of cheque also has some essential elements. Provided hereinafter are the essential elements of offence as described u/s 138 of the Act:

1. The cheque is drawn by a person on an account maintained him in person;
2. The cheque is drawn in discharge of a legally enforceable debt or liability;
3. The cheque is presented for payment within the limitation period (3 months from the date of cheque); and
4. The cheque is returned by the Bank for want of funds in the bank account.

OBJECTIVE:
The Supreme Court of India in Electronics Trade & Technology Development Corporation Ltd., Secunderabad v. Indian Technologists & Engineers (Electronics) (P) Ltd. [(1996) 2 SCC 739], held that the object of bringing Section 138 on statute appears to be to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. Despite civil remedy, Section 138 intended to prevent dishonesty on the part of the drawer of negotiable instrument to draw a cheque without sufficient funds in his account maintained by him in a book and induce the payee or holder in due course to act upon it. It draws presumption that one commits the offence if he issues the cheque dishonestly.

PROCEDURAL ASPECTS:
1. Once the abovementioned conditions with regards to section 138 of the Act are fulfilled, the payee or holder-in due-course, as the case may be, would demand the payment of the said amount within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid.

2. When the drawer of the cheque fails to make payment of the said amount within 15 days of the said notice, such person shall be deemed to have committed an offence and shall, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both.

3. As laid down under section 142 (cognizance of offences) of the Act, no Court shall take cognizance of such offence except on a complaint, in writing, made by the payee or the holder in due course of the cheque, and the limitation period for making the complaint is one month of the date on which the cause of action arises. It is also provided in the said section that the offence is to be originally tried by no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate or a Judicial Magistrate of the First Class. 

With the growing number of cases in the said offence, it was realised by the Courts and Legislature alike that of the Act were found deficient in dealing with dishonour of cheques. Not only the punishment provided in the Act proved to be inadequate, the procedure prescribed for the Courts to deal with such matters was found to be cumbersome. The Courts were unable to dispose of such cases expeditiously in a time bound manner in view of the procedure contained in the Act. The Supreme Court of India, therefore in Indian Bank Association v. Union of India [2014 (5) SCC 590] laid down the guidelines to adopt necessary policy and legislative changes to deal with cases relating to dishonour of cheques so that the same are expeditiously disposed of in accordance with the intent of the Act.
The Act in view of the above was first amended in 1988 and then again in 2002 whereby sections 143-147 were added in the Act. The new provisions were incorporated with a view to encourage the culture of use of cheques and enhancing the credibility of the instrument. The said sections also intended to ease the procedural aspects and to ensure that genuine and honest bank customers are not harassed or put to inconvenience.

4. The offence, by virtue of section 143 (Power of Court to try cases summarily) of the Act, is now tried summarily and in accordance with sections 262-265 (summary trials) of the Criminal Procedure Code, 1973.
The interesting thing to be noted here is that although the Act provides for punishment of imprisonment up to 2 years or fine of amount double than that mentioned on the cheque, the Magistrate can only pass a sentence of imprisonment for a term not exceeding one year and an amount of fine exceeding five thousand rupees in the case of any conviction in a summary trial under this section. But if the Magistrate or the parties feel that the offence should not be tried summarily, the Magistrate shall after hearing the parties, record an order to that effect and thereafter recall any witness who may have been examined and proceed to hear or rehear the case in the manner provided by the said Code.

5. By virtue of section 145 (Evidence on Affidavit) and 146 (Banks’ slip prima facie evidence of certain facts) of the Act, the evidence for dishonour of cheque can be given on affidavit which can directly be cross-examined by the Counsel of the accused. The Court shall, on production of bank’s slip or memo having thereon the official mark denoting that the cheque has been dishonoured, presume the fact of dishonour of such cheque, unless and until such fact is disproved.

6. Section 147 of the Act is an overriding section and states that the offence of dishonour of cheque is compoundable offence, irrespective of anything mentioned in the Criminal Procedure Code, 1908.



SOURCES:
The Negotiable Instruments Act, 1881;
www.indiankanoon.org

Non-Judicial Grievance Mechanisms at National and International Levels

With legal recourse, anywhere in the world, normally being an expensive, complex and time-consuming means of seeking remedy, the need of the hour is to build a simpler route which caters to the alternate dispute resolution. A Non-Judicial Grievance Mechanism is a formal, non-legal complaint process that can be used by negatively affected individuals, workers, communities and/or civil society organisations.

Provided hereunder are some Non-Judicial Grievance Mechanisms at both national and international level:

NATIONAL:

Gram Panchayat/Nyayalayas
Regulated by the Gram Nyayalaya Act, 2008, Gram Nyayalayas or Gram Panchayats are self-governed bodies established at grass root levels for the purpose of providing access to justice to the citizens at their doorsteps and to ensure that opportunities for securing justice are not denied to any citizen by reasons of social, economic or other disabilities. At the discretion of the State on basis of area of population of a village, there can be one or more Nyayalaya for every village.

The Act states that the Gram Nyayalaya will be the court of Nyayadhikari (Judicial Magistrate of Class I) and he will be appointed by State Government in consultation with High Court.

The Nyayadhikari is required to hold mobile courts and conducts proceedings in villages. Jurisdiction of such Courts is both civil and criminal in nature, although Code of Civil Procedure and Evidence Act does not apply while deciding on the dispute. The disputes are rather resolved on the principles of natural justice. The Code of Criminal Procedure (without or without modifications), however, is applied for deciding criminal matters. The order passed by the Gram Nyayalaya is deemed to be a decree of the court and measures then are taken to execute the said decree summarily.

Appeals in criminal matters lie to the Court of Sessions within a period of 30 days from the date of judgement and appeals in civil cases lie to the District Court within 30 days from the date of judgement.

Lok Adalats/Niti Melas
This form of Alternate Dispute Settlement Mechanism evolved as a part of CILAS (Committee for implementing Legal Aid Schemes) with the objective of taking justice to the doorsteps of the poor and to give speedy and cheap justice to those who cannot afford to fight the costly legal battle.

Lok Adalats treat the issue as differences and not as cases and therefore try to resolve them rather than contest it. A dispute is resolved by discussion in an informal atmosphere in which parties and members of the Lok Adalat participate and a settlement is reached by mutual and free consent. The Lok Adalats are constitutionally valid bodies and every award passed by it is deemed to be a decree of a civil court. The said award is binding and no appeal lies under this award to any Court simply by the virtue of the fact that the award is reached by mutual and free consent of both the parties.

Lok Adalats are regulated by Legal Services Authorities Act, 1987. The Act states that these Adalats may be organised in areas as deemed fit by its authorities for any of the dispute which is not brought before any Court provided that the dispute is not related to any offence not compoundable under any law.

Lok Adalats are not governed by Code of Civil Procedure but by principles of justice, equity and good conscience.

Tribunals

Tribunals are self-governed bodies established outside the judicial hierarchy to decide certain types of disputes between citizens or between the government and the citizens. These are presently established at 2 levels:

1. District Level Tribunals (for e.g. Claims Tribunals under Motor Vehicles Act)

2. High Court Level Tribunals (for e.g. NCLT under Companies Act, 2013)

These are established to provide for speedy disposal of cases and to reduce pressure on the already clogged Civil Courts. Once a Tribunal is established, a Civil Court does not have any jurisdiction to entertain the cases falling within the jurisdiction of the said Tribunal. The establishment of Tribunals however does not exclude the jurisdiction of Supreme Court of India. Tribunals in certain cases can also impose penal sanctions and can try certain categories of criminal offences as provided in the Constitution of India.

Commissions
Commissions are constituted by the Government of India either on ad hoc or permanent basis, to guide, advice or provide solutions to various issues coming under the concerned ministry. Not a Non-Judicial Grievance Mechanism per se, but Commissions formed for various purposes take up complains and issues with Competent Authorities and ensure that the justice is done in an expeditious manner.

INTERNATIONAL:

Compliance Advisor/Ombudsman (CAOs)
Compliance Officer/Ombudsman is an independent recourse mechanism especially for projects supported by the International Finance Corporation and Multilateral Investment Guarantee Agency (MIGA)- the private sector lending arms of the World Bank Group. CAO was established in 1999 and reports directly to the President of the World Bank Group. CAO works to address the concerns of individuals or communities affected by IFC/MIGA projects, enhance the social and environmental outcomes of IFC/MIGA projects, and Foster greater public accountability of IFC and MIGA.

The Office of the CAO is based in Washington, DC.

The Assam Tea Case, which involved TATA Tea and which concerns matters of grave Human Rights violations is referred to CAOs for dispute settlement. The matter is under due process of settlement.

National Contact Points (NCPs)
NCPs are national structures established and financed by governments of the members of Organisation of Economic Co-operation and Development (OECD) and the states voluntarily associated to the framework programme. NCPs give personalised support on the spot and in applicants' own languages. The NCP systems can vary from one country to another from highly centralised to decentralised networks, and a number of very different actors, from ministries to universities, research centres and special agencies to private consulting companies. The network of National Contact Points (NCPs) is the main structure to provide guidance, practical information and assistance on all aspects of participation in various research programmes of European Commission.

SOURCES:
Case Material on Jurisprudence I: Legal Method, Indian Legal System and Basic Theory of Law, Faculty of Law, University of Delhi;
Teachings of Ms. Komala Ramachandra at Summer Course on Business and Human Rights, Indian Law Institute, New Delhi;
www.grievancemechanisms.org;
www.cao-ombusman.org;
www.ec.europa.eu;
www.ncw.nic.in

Right to Water: Onus on State and Business Houses

Water is the essence of life and its importance cannot be undermined in any way. However, it is a fact interesting to note that even after being such an important part of life, no State expressly recognises right to clean water as a fundamental right for its citizens.

Presented hereunder is an analysis of responsibility of States and business enterprises in ensuring clean water to its citizens.

RIGHT TO WATER AS A FUNDAMENTAL RIGHT:

While the 1^st generation Human Rights focusses on the civil and political rights of an individual, the 2nd generation Human Rights pertains to socio-economic rights of an individual which, inter alia, comprise of right to clean environment, right to education and right to adequate standard of living. Therefore, even if no State expressly recognises the right to water as a fundamental right, it remains a basic right of individual and cannot be disregarded. It becomes the duty of every State to ensure clean water for its citizens.

India recognises its right to water in Chapter III, article 21 of the Constitution of India, which is the main pillar providing support to the basic rights of individuals.

“No person shall be deprived of his life or personal liberty except according to procedure established by law.”

The abovementioned Article has been interpreted in the wider sense and not only includes physical act of breathing, but also includes all other rights of an individual which makes his/her life worth living. Access to clean water is one of the essentials required for decent living of an individual and thus automatically falls under the ambit of ‘right to life’. This ‘right to life’ cannot be revoked under any circumstance and therefore it becomes all the more important for the State to see whether these rights are properly enforced or not.

The current Government of Delhi formed by Aam Aadmi Party (AAP) recognises the importance of this right and provides water for every individual and gives upto 20 KL per month of free water to its domestic consumers having functional water meter.

Even internationally, the International Covenant on Civil and Political Rights and International Covenant on Economic, Social and Cultural Rights have duly acknowledged in their declarations that the right to adequate standard of living necessarily includes access to clean water. The United Nations Organisation, in UN Water Conference, resolved back in 1977 that every individual, irrespective of his/her socio-economic status has the right to have access to safe drinking water for fulfilling their basic needs.

ENFORCEABILITY BY THE STATE:

Especially in the Indian perspective, it is not only a responsibility but also a duty of the State to ensure that the right to have access to clean water of every individual is not violated. The Directive Principle of State Policy as regards provision of clean water to its citizens is now brought under the realm of duties of the State. The Supreme Court of India has held in various cases that it is imperative on the State Governments to ensure proper water supply and storage for its citizens. The State List given under Schedule VII of the Constitution of India also provides for the states in India to provide water to its citizens.

Despite all the constitutional provisions, it is rather interesting to note that even though the right to have access to water is an important socio-economic right, many States, including India to an extent, have not been able to fully enforce this right simply because of lack of adequate resources.

ENFORCEABLITY BY THE BUSINESS HOUSES:

The Government of India has delegated some of its responsibilities to business houses under the Companies Act, 2013 (the Act). Although integration of business activities with Human Rights is a concept that has been around for many years, it is only recently that the issue has gained importance with onset of concept of Corporate Social Responsibility by the corporate houses. Schedule VII of the Act mandates the competent companies u/s 135 of the Act to invest certain proportion of its profits, inter alia, towards eradication of hunger, poverty and malnutrition, promotion of preventive health care and sanitation, and availability of safe drinking water.

Apart from this, another emerging trend in the business arena is the enforcement of human rights by body corporates and business enterprises. With privatisation of water becoming a common phenomenon in many countries, it is only justified that the business enterprises along with the States ensure that the right to have access to water is not only enforced, but also not violated.

In the case Perumatty Grama Panchayat v. State of Kerala [2004 (1) KLT 731], Hindustan Coca Cola Beverages Ltd. established a factory in Plachimada in Palakkad district in Kerala and derived large quantities of groundwater for its production purposes. The village Panchayat opposed drawing of ground water in the area and did not renew the license of the factory once it expired. The Kerala High Court, in this case held that the Panchayat was right to not renew the license and thereafter enforced the fundamental right of individuals in the area- the right to have access to clean water. The Court ordered the company to pay compensation for the difficulties faced by the inhabitants of the area due to alarmingly low levels of groundwater in the area.

The Supreme Court, in various other cases, has time and again reiterated the importance of fundamental rights and held that rights of people are and will be important than the financial losses the enterprise suffers.

CONCLUSION:

Even though the question whether business enterprises are liable to ensure socio-economic rights of the people still remains unanswered with too many loose ends, from the above study, it can be conveniently said that the business houses do not only have a moral, but to an extent, also a legal obligation to safeguard the such rights of the individual which essentially includes the right to have access to water. Even though there is a long way to go before business houses are held as liable as the Sate for enforcement of these rights, the integration of human rights with business has already begun and the day is not far away when it will become a reality. Businesses take so much from the society and it is justified that they give it back in some form or another.

SOURCES:

The Companies Act, 2013;

The Practical Lawyer [June 2016 Edition];

Teachings of Prof. Jernej Letnar Cernice, Summer Course on Business and Human Rights, Indian Law Institute, New Delhi;

The Curious Game of Right to Water [(2016) PL HR June 82];

www.delhi.gov.in;

www.business-humanrights.org;

www.mca.gov.in;

www.indiankanoon.com

Supreme Court on General Principles of Contract

Sir William Anson, a noted British jurist, defines a contract as a “legally binding agreement made between two or more persons, by which rights are acquired by one or more to acts or forbearance on the part of other or others”. In India, the contracts are governed by the Indian Contract Act, 1872, most of which has been derived from the British Common Law of Contract or from principles of equity, justice and good conscience accepted in all civilised societies. The first part (sections 1-75) of Indian Contract Act, 1872 (the Act), deals with general principles of contracts and is applicable to all the contracts so formed under the Act.
Despite the fact that the law has been in existence for over 140 years, time and again it comes before the courts for interpretation even on basic ingredients of validity of contract due to the fact, as laid down by M. Hidyatullah, J. in Bhagwandas Goverdhandas Kedia v. M/s Girdharilal Parshottamdas & Co. [AIR 1966 SC 543], that the law was made in time where modern means of formation, execution and discharge of contract were neither available nor anticipated.

Attempt has been made to address the following issues in light of recent Supreme Court judgements:

• Whether a written agreement can be considered valid even if not signed by the parties to agreement?
• How is a consideration different from condition for performance of contract?
• Whether a time-bound contract can be enforced after the expiration of the stipulated time?

To start with, an agreement becomes a valid contract when the conditions as mentioned under section 10 of the Act are duly fulfilled.

• Section 10 of the Act (What agreements are contracts): All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.
  Nothing herein contained shall affect any law in force in India, and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.

Interpretation: On the basis of above, the essentials of a valid contract include:
1. Valid offer and acceptance
2. Intention to create legal relations
3. Competence to contract
4. Lawful consideration
5. Free consent
6. Lawful object
7. Not expressly declared void
It is also to be noted that the Act is not exhaustive for the provisions of law pertaining to contracts. Other Acts such as Specific Relief Act, 1963, Registration Act, 1908, Transfer of Property Act, 1882 or any other Act which contains such provisions as regards a contract can also be relied upon unless the Act expressly repeals provisions of any Statute, Act or Regulation.

Question of law: Whether a written agreement can be considered valid even if not signed by the parties to agreement?

• Section 2(h) of the Act: An agreement enforceable by law is a contract.
• Section 2(e) of the Act: Every promise and every set of promises, forming the consideration for each other, is an agreement.
• Section 2(a) of the Act: When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.

Interpretation: Based on the abovementioned sections, an agreement requires at least two persons: One who makes the proposal and other who accepts the proposal and both parties must be consensus ad idem (agreeing upon the same thing in the same sense).

Since the Act is silent on the type of documentation of the agreement, it may be oral, written or implied, depending upon the conduct of the parties, unless it is expressly so required by any other law, statute or regulation.

The above mentioned issue was recently adjudged by the Supreme Court of India which held that signature on an agreement is not a formal requirement according to any statute or law. The Supreme Court, in Govind Rubber Ltd. v. Louids Dreyfus Commodities Asia (P) Ltd. [(2015) 13 SCC 477], stated that there may not be any dispute with regard to the settled proposition of law that an agreement even if not signed by the parties can be spelt out from correspondence exchanged between the parties. However, it is the duty of the court to construe correspondence with a view to arrive at the conclusion whether there was any meeting of mind (consensus ad idem) between the parties which could create a binding contract between them. It is necessary for the Court to find out from the correspondence as to whether the parties were ad idem to the terms of contract.

Question of law: How is a consideration different from condition for performance of contract?

• Section 2(d) of the Act: When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.

Interpretation: The consideration therefore, must flow at the desire of the promisor, to promise or any other person. It can be a past, present or future consideration and should bear some value.

In the recently decided case of Commissioner of Central Excise v. Indorama Synthetics (I) Ltd. [2015 10 SCC 793], the Supreme Court of India laid down the difference between consideration and condition in a contract. The Court held that distinction between a consideration and condition would depend upon whether a reasonable man would or would not understand that the performance of the condition was requested as the price or exchange for the promise.

Question of law: Whether a time-bound contract can be enforced after the expiration of the stipulated time?

• Section 56 of the Act: Agreement to do impossible act: An agreement to do an act impossible in itself is void.
  Contract to do act afterwards becoming impossible or unlawful: A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
  Compensation for loss through non-performance of act known to be impossible or unlawful: Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.

In the recently decided case of State of MP v. M/S Ruchi Printers [2016 SCC Online SC 436], the court held that when time is an essence of the contract, the contract must be honoured within the stipulated time and no payment of any consideration of any kind is to be made in case of non-fulfilment of the contractual liabilities. In the present case, booklets were to be supplied to the State within a stipulated time which was further extended to 31st March, 2008. There was a specific condition in the contract that no booklet were to be received after the stipulated time. The apex court was of the opinion that the printers were very well aware that booklets were required urgently and time was the essence of contract and ample time was given to the printers to supply the booklets. Thus, the order for printing books stood cancelled on failure to supply within the stipulated period, because of which the contract came to an end and therefore no right of payment accrued from such contract.

On the basis of facts of the case, it was then held that the booklets which were printed after the stipulated time were without any work order in existence and no payment for such supply of booklets was necessary. However, payment for booklets which were supplied till the stipulated time ought to be made by the State.


SOURCES:

The Practical Lawyer [June, 2016 and February 2016 edition]
Case Material on Principles of Contract (General Principles), Faculty of Law, University of Delhi
Chartered Secretary [June 2016 edition]
www.scconline.com
www.sci.nic.in
www.indiankanoon.com

Corporate Affairs - An International Perspective

Rapid growth of multinationals and the era of cross border mergers has given rise to complex problems of implementation of international law. Purely national solutions to the problems of corporate control are of no avail. Therefore, the mechanisms and processes by which such international companies are governed becomes an area of vital importance for the nations they function in.

Given hereunder is an international perspective with regards to how the corporate affairs are governed, administered and regulated in the world’s significant economies.

NATION	GOVERNING ACT	ADMINISTRATIVE BODY	ADJUDICATING BODY
India	The Companies Act, 2013	Ministry of Corporate Affairs Registrar of Companies	NCLT
United Kingdom	The UK Companies Act, 2006	Secretary of State	Company Names Tribunal UK Courts of competent jurisdiction
United States of America	State Laws The Federal Constitution The Revised Model Business Corporation Act US Securities Act, 1934	Securities and Exchange Commission Federal Trade Commission	Federal Courts of USA
Australia	The Corporations Act, 2001	Australian Securities and Investments Commission	Federal Circuit Court of Australia Federal Courts of Australia

INDIA:

The Ministry of Corporate Affairs, Government of India is responsible for formulating strategies and policies related to the corporate affairs in the country. Governed by the Companies Act, 2013, the Registrar of Companies acts as the administrative body for the companies in India. Securities and Exchange Board of India (SEBI) acts as the regulatory body for the publically listed companies. The adjudicating authority for matters of corporate affairs lies with the newly constituted NCLT and NCLAT. The jurisdiction of all other civil courts will be dispensed with, once the NCLT becomes fully functional. The Supreme Court of India, subject to certain restrictions, still however remains the court of highest appeal in matters of corporate affairs.

It must also be noted that with the onset of The Insolvency and Bankruptcy Code, 2016, the power of adjudication in matters of bankruptcy and insolvency in companies, which earlier vested with the Debt Recovery Tribunal, will also be shifted over to the National Company Law Tribunal.

UNITED KINGDOM:

The Company Law in UK had undergone a major reform in UK under the Company Law Reforms. The Department of Trade and Industry was responsible for bringing out the new company law, which is now known as the UK Companies Act, 2006. While the Indian Legal System updated itself by constituting a Tribunal which specifically relates to corporate affairs, there is no separate adjudicating body specifically formed for such matters in UK. Usually, the powers of sanctioning the scheme of restructuring or of resolving an application for grievances of the stakeholders are vested with the courts of competent jurisdiction.

However, the Company Names Tribunal is a separate adjudicating body specifically constituted to provide a remedy for parties who are aggrieved by the registration of a company name in which they have a goodwill/reputation; specifically, that they suspect the name has been registered in order to extract money or to prevent the aggrieved party from registering the name.

UNITED STATES OF AMERICA:

There is no federal corporation statute as such in the US. Each state has its own corporate law regime and it provides for wide diversity of legislation and experimentation in the corporate form. However, the Federal Constitution ensures uniformity and harmony across the United States. Another harmonising factor is existence of model statutes which serve as uniform acts or drafting guides which may be customised by individual states. Revised Model Business Corporation Act largely serves as a guide for corporate laws for most of the states in US. Since the US has a long tradition of individual ownership of securities, the most significant of these federal laws applicable to corporations is the federal securities regime. Therefore many matters characterised as company law elsewhere have been characterised in the US as securities law and taken out of the ambit of state legislatures.

There is no special court formed for matters relating to corporate affairs. The Securities and Exchange Commission is the administrative body for corporate affairs in the US. The Federal Trade Commission can be approached when issues related to consumer protection and competition aspects come into question. The rest of the jurisdiction lies in Federal Courts of the US.

AUSTRALIA:

Heavily borrowed from the common law of UK, the Australian companies are governed by Corporations Act, 2001 and administered by a single national regulatory authority, the Australian Securities and Investments Commission.

The adjudicating bodies for corporate affairs include Federal Circuit Court of Australia which hears less complex disputes in matters under family law, administrative, bankruptcy, industrial relations, migration and trade practices law. The Federal Court of Australia hears matters on a range of different subjects including bankruptcy, corporations, industrial relations, native title, taxation and trade practices laws, and hears appeals from decisions (except family law decisions) of the Federal Magistrates Court.

SOURCES:

Advanced Company Law – ICSI;

The UK Companies Act, 2006;

www.nclt.in;

www.mca.gov.in;

www.gov.uk;

www.australia.gov.au;

www.ftc.gov;

www.uscourts.gov

National Company Law Tribunal: What is it all about?

Chapter XXVII of the Companies Act, 2013 (the Act) deals with National Company Law Tribunal and Appellate Tribunal.

In exercise of the powers given under section 408 (Constitution of National Company Law Tribunal) and 410 (Constitution of National Company Law Appellate Tribunal) of the Act, Ministry of Corporate Affairs, Central Government constituted National Company Law Tribunal and National Company Law Appellate Tribunal to discharge powers and functions conferred on it by or under the Act with effect from 1^st day of June, 2016.

By virtue of powers given under section 419 (Benches of the Tribunal) of the Act, NCLT is slated to have eleven Benches- two at New Delhi (one of them being the Principal Bench) and one each at Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai.

M.M. Kumar, Judge (Retd.) has joined as the President of the NCLT and S.J. Mukhopadhaya, Judge (Retd.), Supreme Court of India has joined as the Chairperson of the NCLAT.

Given hereunder is the brief summary of the provisions relating to Tribunals, as provided under the Act.

CONSTITUTION OF THE BENCHES:

Pursuant to section 409 (Qualification of President and Members of the Tribunal) and section 411 (Qualifications of Chairpersons and Members of Appellate Tribunal), the Bench of NCLT is to comprise of The President, and such number of Judicial and Technical Members whereas the Bench of NCLAT is to comprise of The Chairperson, and such number of Judicial and Technical Members to discharge and exercise powers and functions or to hear appeals against the orders (as the case may be), as the Central Government deems fit.

JURISDICTION OF THE TRIBUNAL:

As provided under section 434 (Transfer of certain pending proceedings), the NCLT will exercise functions of:

·         Company Law Board,

·         Board of Industrial and Financial Reconstruction;

·         Appellate Authority for Industrial and Financial Reconstruction and;

·         Any District Court or High Court where proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies are pending. Due consideration however, must be given to the fact that provisions relating to mergers, restructuring and winding up under the Act have not yet come into effect.

ORDERS OF TRIBUNALS (Section 420):

The Tribunal is to pass an order as it may deem fit, after giving the parties to proceedings a reasonable opportunity of being heard and the said order can be amended with a view to rectify any mistake apparent from the record by the Tribunal, within 2 years of date of the order, if the mistake is brought to its notice by the parties. However, no amendment can be made in respect of an order against which an appeal is preferred under the Act.

APPEALS:

Section 421 (Appeal from orders of Tribunal) of the Act states that appeal against an order passed by the Tribunal, except in case of order passed with the consent of parties to the proceedings, can be preferred to the Appellate Tribunal within a period of 45 days from the date a copy of such order is made available to the aggrieved party, in such form and accompanied by such fees as prescribed. The said appeal can be entertained even after 45 days, but within a further period not exceeding 45 days, on the satisfaction of NCLAT that appellant was prevented by sufficient cause from filing the appeal within the said period.

Section 423 (Appeal to Supreme Court) of the Act states that an appeal to the Supreme Court may be filed by any person aggrieved by any order of NCLAT within 60 days from the date of receipt of order by the party. The appeal should however, be preferred on any question of law arising from the said order.

PROCEDURE:
As provided under section 424 (Procedure before Tribunal and Appellate Tribunal) of the Act, the Tribunal and Appellate Tribunal are not to be guided by the Code of Civil Procedure, 1908 and shall instead be guided by the principles of natural justice, equity and good conscience and it shall have the power to regulate its own procedure.

Sources:

The Companies Act, 2013;

www.mca.gov.in