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Understanding India’s Complex Commercial Surrogacy

Understanding India’s Complex Commercial Surrogacy

India has developed itself into a country with world-class medical facilities, with prices far lower than most developed countries. Medical tourism is accepted as a crucial form of tourism in India, with many major hospitals in the country even providing sightseeing trips around the country as part of the “Indian experience.” However, the proliferation of the industry has exposed a few darker […]

EXPLORING IMPACT OF COLONIAL RULE ON THE RELATIONS OF INDIA AND PAKISTAN

EXPLORING IMPACT OF COLONIAL RULE ON THE RELATIONS OF INDIA AND PAKISTAN

There is quite some tension prevailing between India and Pakistan. Current situation is formed by a series of unfortunate events. In this post we try to trace current state of  relations between the two countries to their colonial past. Introduction India’s relations with Pakistan are shadowed to a great extent by the underlying mistrust and […]

FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2003: A PRIMER

FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2003: A PRIMER

THE NEED FOR FISCAL PRUDENCE AND BUDGETARY MANAGEMENT The Finance Ministry has recently announced the constitution of a five member committee to review the Fiscal Responsibility and Budget Management Act, 2003. The Committee is to be headed by former revenue and expenditure secretary N.K. Singh, and is counting among its members stalwarts like Chief Economic […]

Kaveri Row and the legality of Bandhs

Kaveri Row and the legality of Bandhs

“Your right to swing your arms ends just where the other man’s nose begins.”   General Overview of Fundamental Rights in the Country Several freedoms have been enshrined under the Indian Constitution. As argued, most of these freedoms have been provided for under Part III of the constitution, as Fundamental Rights in the country. The […]

Local hosting of Data

Local hosting of Data

In this post we analyse economic cost and legal particulars of local hosting of Data.   Local hosting of data is perhaps required to reduce data transfer costs, assures access to important data (particularly in case of internet outages) and ensures security of data. In the current commercial context these are the basic advantages of […]

Understanding India’s Complex Commercial Surrogacy

098351BLOG-photo.jpgIndia has developed itself into a country with world-class medical facilities, with prices far lower than most developed countries. Medical tourism is accepted as a crucial form of tourism in India, with many major hospitals in the country even providing sightseeing trips around the country as part of the “Indian experience.” However, the proliferation of the industry has exposed a few darker spots as well. One such issue is the thriving institution of fertility tourism in India, popularly called “commercial surrogacy.”

In surrogacy, a woman carries a child to term for its intended parents via different fertility techniques, including IVF implantation. She is compensated for carrying the child, hence the term commercial surrogacy.

Commercial surrogacy was allowed in India for the first time in 2002 and has since grown into a massive industry within the medical profession. While no clear economic numbers are available, a World Bank study conducted in 2012 estimated the surrogacy business to be worth almost $400 million a year, with 3,000 fertility clinics across India.

However the legal complications with regards to commercial surrogacy came to the fore for the first time in 2008 when a Japanese couple contracted an Indian woman to serve as a surrogate. But before the woman could deliver the child, the couple got divorced. Thus the child was born legally parentless as well as without citizenship. Though the child was finally handed over to her grandmother, it opened questions about a practice that had continued unabated for a number of years. The culmination of these questions resulted in India’s draft Surrogacy (Regulation) Bill that was approved by the Cabinet in August 2016.

The draft bill provides for surrogacy as an option to parents who have been married for five years can’t naturally have children, lack access to other reproductive technologies, want biological children and can find a willing participant among their relatives. This would come as a major blow to fertility clinics in India, as most of them have thriving commercial surrogacy practices, which would be outlawed under the current form of the bill. Commercial surrogacy will result in 10 years’ imprisonment.

The bill also seeks to clarify the legal position of such a child and ensures that a child born of surrogacy will have all legal rights as a citizen. It would also restrict overseas Indians, foreigners, unmarried couples, homosexuals, and live-in couples from entering into a surrogacy arrangement. The surrogate mother has to be a married woman who has herself borne a child and is neither a non-resident Indian (NRI) nor a foreigner. Couples who already have biological or adopted children cannot commission a surrogate child.

As expected, the bill has generated a lot of debate around the country. Opponents have argued that by allowing surrogacy for select classes of citizens on the basis of their lifestyle, sexual orientation, and life choices, the bill would violate citizens’ Fundamental Rights as laid down in Article 14 of the Indian Constitution.

However, the bill seeks to be in step with the legal issues at the moment. Gay rights are still an evolving issue in India. While the Supreme Court is sitting on a review petition on Section 377 of the Indian Penal Code, pertaining to the status of gay rights, no clear legal stand on the issue has emerged. Hence at this point, conferring legal rights to a surrogate child to gay parents would endanger the rights of the child itself. The Surrogacy (Regulation) bill can clarify the rights for India’s gay population only once these larger legal questions (about the status of gay marriage, for instance) have been answered. Hence at this point, restricting surrogacy to relationships which have a clear standing in the eyes of law protects the rights of the child and ensures consonance with Article 14 of the Indian Constitution rather than doing disservice to it.

The second major issue relates to the question of disallowing commercial surrogacy and restricting foreigners from availing themselves of surrogacy in India. Since the inception of commercial surrogacy, a number of incidents have sparked unpleasant legal questions surrounding commercial surrogacy involving foreigners. In 2012, for example, an Australian couple who had twins by surrogacy arbitrarily rejected one while selecting the other. Such issues reveal the complexities that surround commercial surrogacy.

Meanwhile, we must also take into consideration the exploitation of women in the name of commercial surrogacy. In 2014, Al Jazeera carried a story which documented how Indian women were exploited in the name of commercial surrogacy. While these women actually did the hard work of carrying a child for nine months, fertility clinics often pocketed more than 50 percent of the amount that was promised to them. Over the years a number of news reports have carried similar stories. There have been few success stories of surrogate mothers being paid what they deserved; most have ended in dejection and despair.

Thus, it should come as no surprise that most countries of the world have banned commercial surrogacy. Thailand, which was until recently considered the commercial surrogacy factory of the world, banned the practice after an Australian couple who had twins through commercial surrogacy decided to leave the child with Down’s syndrome behind while accepting the healthy child. Today there is an absolute ban on commercial surrogacy in most countries of the world, with a complete ban on all forms of surrogacy in a few. Seen in this light, it is no surprise that the Indian government has taken its own step toward a ban in consonance with global norms (unlike the Hague Convention on Adoption, however, there is no clear convention on surrogacy worldwide).

Meanwhile, the banning of commercial surrogacy can perhaps open up doors for adoption as well. In a country like India, where one encounters frequent stories of children being abandoned by their parents out of poverty or social stigma, especially girls, banning commercial surrogacy could encourage parents to look toward adoption as a means of fulfilling their dreams of parenthood.

The draft Surrogate (Regulation) Bill seeks to comprehensively address the issue of surrogacy in India. While there are provisions that will definitely evolve with time, the heart of the bill is undoubtedly banning commercial surrogacy. This is indeed a step in the right direction. Profiting commercially from a woman’s womb by exploiting her helplessness is a terrible crime. An evolved society is one that seeks to protect the right of all. A poor woman is undoubtedly among the most voiceless of India’s citizens, and the draft Surrogacy Bill 2016 seeks to protect her.

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EXPLORING IMPACT OF COLONIAL RULE ON THE RELATIONS OF INDIA AND PAKISTAN

modi-sharif-meetjpg-dataThere is quite some tension prevailing between India and Pakistan. Current situation is formed by a series of unfortunate events. In this post we try to trace current state of  relations between the two countries to their colonial past.

Introduction

India’s relations with Pakistan are shadowed to a great extent by the underlying mistrust and military conflicts. Two nations have been at wars three times since independence. Trade between the two countries is quite low and is marred by various sanctions and barriers imposed by two countries over one another. Kashmir issue is a prominent reason for tension between the two countries. Both blame each other for indulging in terrorist activities over each other’s territories. These and many other events have been the defining aspects of the relationships between India and Pakistan.

Major characteristics of India’s relations with Pakistan have their determining factors in the colonial past of the sub-continent. Indian freedom struggle was largely confined within the boundaries defined by the colonial policies and legal system. In fact colonial government’s policies and laws were quite a determining variable in the outcome of the struggle. One of the major roles played by these policies was to foster the communal divide between the Hindus and the Muslims. Further, these policies particularly influenced the elites of the two communities. Another important factor was the authoritarian centralised governance system that was established by the British. This system of governance was a direct outcome of the colonial rule and its attempt to subjugate the native population. Circumstances during the independence ensured that both India and Pakistan inherit this authoritarian centralised system of governance and continue with it even after the enforcement of self-adopted constitutions. This system adopted after independence gave elites within India and Pakistan an unprecedented power to determine policies of the government and implement such policies. In this paper I have shown that elites in the two countries, i.e. army and bureaucracy in Pakistan and political elites and bureaucracy in India, shaped the relation between the two countries. I have also shown the implications of the biasness of elites on such policy and subsequently implications of such policy on relations between the two countries.

In the first chapter I have listed the major events that portray India’s relations with Pakistan. I use these events to list the main characteristics that determine India’s relations with Pakistan. In the second and third chapter I trace the origins of these determining characteristics to the colonial past, hence establishing the impact of colonial rule on relations of India with Pakistan.

Research Methodology

Aims and Objectives

The aim of this paper is to study the impact of colonial rule on the relations of India with Pakistan.

The objectives of this paper are:

  • To develop an understanding of the present relations between India and Pakistan and the main characteristics of the same.
  • To understand colonial policies and legal system relevant to the construction of religious identities and creation of two nations in the sub-continent and assess implications of the same on present relations between the two nations.
  • To look at the actions of different element within the independence movement and within the framework prescribed by colonial state, which in turn were largely affected by the colonial policies and assess the implications of the same on the relations between the two countries.

Scope and Limitations

The scope of the paper extends to the analysis of the relations between India and Pakistan, and the impact of policy of the colonial government on the same.

The basic limitation of the paper is that it discusses only the implications of colonial policy and other factors within the framework provided by such policies on the relations of India with Pakistan. This paper does not include other influencing factors like the international events, world wars and economic events etc.

Sources

The researcher has relied upon both primary and secondary sources such as communications between the viceroys and Secretary of State for India, letters and speeches of various political leaders in the freedom struggle, books, articles and research papers on the subject matter of this paper.

Mode of citation

The NLS Guide to Uniform Citation has been employed throughout the paper.

Hypothesis

In this paper I have argued that India’s relations with Pakistan are governed by mistrust and enmity which developed over the years of colonial rule. These combined with the strong centralised and authoritarian governance systems that the two countries inherited from their colonial past, form the basis of relation of India with Pakistan.

Research Questions

  1. What is the nature of relations of India with Pakistan?
  2. What are the main characteristics of relations of India with Pakistan?
  3. What policies of the colonial government lead to the present nature of relationship between the two countries?

Method of writing

An analytical method of writing has been used in this paper.

Chapterization

Chapterization is as follows:

Chapter 1: Relations of India with Pakistan.

Chapter 2: Underlying misunderstanding and colonial rule.

Chapter 3: Colonial Policies that led to authoritarian centralised governments.

Chapter I: Relations of India with Pakistan

In this chapter I have focused on relationship of India with Pakistan since the independence of the two countries. By analysing the same I will trace the main characters of the relations between the two countries. Thereafter in the subsequent chapters I will associate the same with the colonial rule.

India and Pakistan got freedom from the colonial rule at the same time. Post-independence, the two countries grew into two very different directions. At the time of height of cold war, when the state structure was still in formation, a combination of domestic, regional and international factors worked to undermine the role of parties and politicians and enhanced that of the civil bureaucracy and the military.[1] Both states inherited colonial governing institutions that were predominantly based on authoritarian centralised systems.[2] Hence, unelected bureaucracy and armed forced formed an important consideration for determining the future course taken by the two countries. In case of Pakistan, it failed to evolve a democratic political system because of organizational weakness of Muslim League.[3] Further in the aftermath of Partition, neither elected nor did non-elected institutions have a decisive edge. It was precisely due to this power vacuum created by wayward and venal politicians in command of parties with no effective bases of political support that democratic institutions were unable to function and consequently military and civil bureaucracy could assert themselves decisively.[4] Hence, Pakistan turned out to have a centralised governance structure controlled by non-elected institutions with Islam as the central tenant of Pakistani nationalism. On the other hand congress was the main political party in India.[5] Lack of sufficient support base for the regional political players and presence of congress on lower levels ensured that will of congress was imposed in the initial days of independence.[6] While congress as the premier political party was undoubtedly the main player in the newly independent country, its ability to enforce central authority owed much to the civil bureaucracy and army.[7] Precisely because of this reason bureaucratic authoritarianism still remains embedded in the non-elected institutions of the Indian state. In fact regular elections have often been supplemented with authoritarian methods in the name of preserving law and order in different regions.[8] Hence, India evolved a strong centralised system that was controlled by nexus between elected and non-elected institutions. Thus, although federal in form, the Indian and Pakistani state structures have been unitary and authoritarian in substance.

Relations of India and Pakistan since independence have been governed by policies undertaken by these centralised institutions. In turn the stand of these institutions has been affected by the international circumstances, domestic considerations and colonial structure of the basic governing institutions. Relations between the two countries have been defined by the three wars since independence, Kashmir issue, issues with respect to annexation of multiple princely states post-independence, freedom of Bangladesh after 1971 war, river water dispute etc.[9] Following may be treated as the events that define the nature of relationship between India and Pakistan.

Kashmir Issue and annexation of princely states post-independence

British under viceroyalty of Lord Mountbatten adopted the Balkans Principle of partition.[10] Under this principle India and Pakistan were made out of the British controlled territory and it was left to the will of about six-hundred independent princely states to either join either of the countries or to stay independent.[11] There were multiple material considerations that determined whether which country an Independent state would join. These factors included geography, communal composition of the state etc. Nizam’s Hyderabad, Junagarh and Kashmir were couple of major states that had issues with respect to their future after independence.[12] While Hyderabad and Junagarh were taken over by swift action of the Indian armed forces considering the communal and geographical dynamics that favoured them being with the Indian state, the same was not true for Kashmir.[13] Geographically Kashmir was land locked and shared borders with both India and Pakistan. Communally Kashmir was a Muslim Majority state with a Hindu ruler. Kashmiri ruler Raja Hari Singh was unable to stand against the tribal military intrusion backed by Pakistan and asked for India’s help. Subsequently, Raja Hari Singh signed the document of accession to India and became a part of the India. Thereafter, United Nations intervened and the matter has since been unresolved.[14] Pakistan’s stand is that referendum be organised and accession be determined accordingly.[15] India on the other hand claims that the king of Kashmir signed accession document and acceded his territory to India. [16] This conflict between the powerful central governments of the two countries has ensured tension and human right violation in the state since 1947. In fact the two countries have twice been to war over the issue. Most of the strategic decisions pertaining to the issue are taken by the central governments of the two countries.[17] Further, role of local population in determining their faith is minimal and religion based propaganda since late 1980s has resulted in polarization in the communities living for generations in the state. Such communal polarization has resulted in development of mistrust and enmity within different elements in the state.[18]

Wars

Since independence India and Pakistan have fought three wars. While two of them were over the issue of Kashmir, one being an undeclared war in 1947 and another in 1964, the third war resulted in creation of Bangladesh.[19] Primary reason for these armed conflicts has been the underlying mistrust between the two countries. This mistrust is on account of greater resource base and military power that India has over Pakistan. Further, such fears of being subdued by the large and powerful Hindu population have their roots in the colonial rule.[20] In fact a look at the war time speeches of leaders of the two countries and newspaper reports suggests of underlying mistrust within the two countries. Editorials published in the newspapers of the two countries, loudspeaker announcements etc. clearly show the inherent hatred on the lines of religion prevalent in the dominant narrative in the two countries.[21] While media in Pakistan was heavily influenced by the army and the elite bureaucracy, it was free from the government control in India.[22] However, media houses are controlled by the elites who have close relations with the ruling political and bureaucracy elites and share the intellectual space with them.[23] Hence role of dominant thought process of the elites in the two countries and their ability to control both popular opinion and resources by virtue of sitting at the helm of centralised authoritarian system were primary reasons for such wars.

Formation of Bangladesh

Bangladesh emerged as an independent country in 1971. Punjabi dominated Pakistani army controlled the central government. Even though Bengalis were in majority, they did not have any control over the government, its policies and development initiatives. This sense of subjugation encouraged unrest in East Bengal. Pakistani army responded brutally violating human rights. Subsequently, India chose to intervene and this led to the war of 1971 as a result of which Bangladesh was created.[24] This war was supposedly on account of manufactured hatred by the centralised authoritarian governments in the two countries. The general mood in Pakistan was against India as India had been taking Bangladeshi refugees and had also been helping the rebels. This motivated insecure Pakistan backed by United States to invade India. On the other hand massive waves of Bangladeshi refugees were becoming a headache for the Indian government. Backed by the Soviet Union, India retaliated to Pakistani aggression and helped in liberation of Bangladesh.[25]

Water Dispute

Indus water treaty form the basis of water distribution between the two countries. It was brokered in 1960s by the World Bank. It was an outcome of the fears of Pakistan that India might cause famines and droughts as all the sources of the rivers of Indus river basin lay in the Indian Territory. Though it has been one of the most successful water sharing agreements and disputes have been resolved by resolution mechanisms given within the agreement, though tensions remain high.[26] Further regional demands within the two countries have largely remained unaddressed. For instance Kashmir has very little share under the Indus water treaty.[27] Even though demands have been made at the local level, nothing has been done because most of the decisions with respect to such issues in both nations are taken by authoritarian central governments without giving due consideration to regional demands. Further, recent disputes like the Baglihar dam and others have still not been resolved amicably. Hence, even though treaty has ensured distribution of Indus waters since its signing, attitude of the two central governments are increasingly making it difficult to implement the provisions of the treaty. This is particularly so with the dispute resolution system prescribed under the treaty.[28]

Trade and Commerce

Trade and commerce have been low and potential of the same unexplored. In fact much of the trade between the two countries takes place by the route of third country.[29] Trade embargo is imposed by the central governments on the two countries as a result of constant struggles and hostilities between the two countries.

A pattern of constant hostility and mistrust can be traced in the history of relations between the two countries. Further decisions of central governments of the two countries have played a major role in shaping the history of conflict between the two countries. Hence, we can safely conclude that the main characteristics of the relations of India with Pakistan are the underling mistrust and the policy of the central governments of the two countries.

In the subsequent chapters I will show the precise reasons for the underlying mistrust between the two countries and roots of same in the colonial rule. I will also show that important aspects of the relations between the two countries are determined by the decisions of the authoritarian central governments that in turn are greatly influenced by the biases having their origins in the colonial rule.

Chapter II: Underlying mistrust and colonial rule

Hinduism and Islam never existed in the Indian sub-continent in the manner they were perceived and subsequently constructed by the Europeans. In fact the limits imposed by meta-frame of thought process made European historians i.e. Indologists and Imperialists construct religious identities of the native population in a semantic manner i.e. assign every religion a text, assign them a place of worship etc. This construct was further affected by the selective and limited resources used for such construction.[30] This construction based on limited consultation was used as a basis for the colonial policies and laws. Policies like options in census and laws like personal laws, imposed by the colonial government on the natives were structured on the basis of their understanding of the sub-continent’s society.[31] An interesting implication of adopting these constructs in the form of policies and laws was that the sub-continent’s society modified itself in confirmation with this construct. Over the years Hinduism and Islam came to be perceived as the primary religions of the sub-continent. With time the people of the sub-continent started associating themselves with the two separate religious identities.[32]

British blamed the revolt of 1857 principally on Muslims. This resulted in them confining themselves to the pro Hindu policy. Impact of this policy can be realised by the fact that by 1871 there were 711 Hindu officials against 92 Muslims in the British administration.[33] However, a different view on the issue has been taken by Bose and Jalal. They are of the opinion that it was a mixed movement, not driven by particular community, but by shared interests. However they agree that the Hindu upper castes were able to secure greater share in the administration.[34] Hence, as the colonial rule progressed, material differences started to appear between the two communities. Hindus were swift to adopt the foreign education, become part of the bureaucracy, judiciary, bar and other prestigious positions. In fact most of the upper caste Hindus were also politically organised in the form of Indian National Congress.[35] On the other hand, Muslims, who were indeed powerful in the medieval times, were devoid of any authority and benefits of the colonial rule.[36] This situation was realised and articulated to a great extent by Syed Ahmed Khan, who proposed that for progress of the Muslim community they must pursue western education and secure positions in the administration.[37] Sir William Wilson Hunter, a senior Bengal civilian, blamed backwardness of Muslims on the inherent nature of their religion. He cited various statistics and proposed to include Indian Muslims in the administration in order to facilitate their progress.[38] Further, steps like introduction of Hindi as a language for writing petitions to the court along with Urdu made the Muslim population feel subjugation and generated a curious nostalgia for a glorious past.[39] However this sense was only prevalent among the Muslim elites and cannot be generalised to the masses.[40] This sense of subjugation transformed to insecurity at a later stage.

Policies of the colonial government contributed to the divide. Partition of Bengal and separate electorate for Muslims under the Indian Councils act of 1909 were two events that contributed to the creation of communal divide between the two communities. While Muslims favoured the partition of Bengal, congress was vehemently against it. As far as the question of separate electorate of 1909 was concerned, letters from lord Minto to the then secretary of state lord Morley clearly show that the British wanted to counterpoise the growing power of congress by helping Muslims raise as a political class.[41] Shimla deputation of 1906 and subsequent enactment in 1909 served the British interests in the form of creation of a political class of elite Muslims. This political class served as a counter balance to the Congress, which was then a party composed of Hindu upper caste elites.[42] It also resulted in creation of the Muslim league.[43]

Hence the material differences between the two communities i.e. the Hindus and the Muslims, was the origin of enmity and mistrust between the two communities. In order to have equal footing and protect their interests, elites of both communities organised themselves in political parties and prescribed religious identities to the same. This organization on religious lines was motivated by colonial construct of religious identities and policies of the colonial government that motivated prescription to such identities.[44] This thought construct of the elites prevailed even when the Congress and the Muslim league were transformed to a party of the masses.[45] Various speeches of Mouhammad Ali Jinnah suggest the prevalence of similar construct. In the presidential address to the annual session of the Muslim League held at Lucknow in 1937, Jinnah stated that the principle of parliamentary democracy cannot be applied to the heterogeneous Indian population. He was of the opinion that the Hinduism and Islam represent two distinct and separate civilizations. These civilizations have different and in some cases conflicting interests. The majority of Hindus in an undivided country would work towards the furtherance of their own interests and ignore large Muslim minority. This would lead to conflicts.[46] In his famous address in March 1940, in the meeting of Muslim league held at Lahore, Jinnah stated that a separate Muslim homeland was a solution to this problem.[47] While on the face of it Congress prescribed to secular notions, in the political circumstances that prevailed then, it undoubtedly appeared to be a party advocating against the interests of Muslims.[48] This appeared to be particularly so in the late forties and at the time when negotiations for independence were on.[49] As the Muslim League and Congress became increasingly powerful,

Riots, violence during the partition, direct action plan etc. were a manifestation of this divide and thought process, which in turn was a direct outcome of the colonial rule. This enmity and mistrust was carried forward and formed an important basis of post-independence relations of India with Pakistan. However, this enmity and mistrust was largely limited to the upper class elites of the two communities. It was only in the later stages of freedom struggle, when both Congress and Muslim League expanded their support base to the masses that the mistrust and hatred of the two communities became generalised. However it was only inherent to the elites and served their interests. At lower levels relations between the two communities were far more complex and had existed for generations.[50]

Hence, we may safely conclude that enmity and mistrust as ideologies were internalised primarily in the minds of elites of the two communities. Further this internalization was a direct outcome of the colonial rule.

Chapter III: Colonial policies that lead to authoritarian centralised governments

Authoritarian central governments in both India and Pakistan have their legacies in the colonial rule. According to Bipin Chandra the core purpose in the three stages of colonialism was to control the sub-continent in such a manner so that its resources can be utilised for the benefit of the Great Britain.[51] Governance structure, later adopted by India and Pakistan after independence, was largely a manifestation of the British undertakings during the third stage of colonialism. In order to secure the capital investments of the investors from the Great Britain, a strong authoritarian centralised government had to be established. In order to administer and maintain law and order such government had to have an efficient and large bureaucracy and army.[52] While army was modernised and disciplined, a large bureaucracy was realised in the form of recruitments on various levels.[53] This raising of bureaucracy was also supported by a set of laws that were used to make the central governments ever powerful.

First attempts at centralization were made in the form of passing legislations that made central government in the sub-continent powerful.[54] While central government was introduced in India by the Charter Act of 1833, it was only after the revolt of 1857 that the administration of India was made unitary and centralised by the Government of India Act of 1858.[55] Demands of Indians to be made part of the governance process was realised in the form of Indian Councils Act of 1861. However a close look suggests that the Viceroy had complete control over the functioning of such councils. He had the power to appoint Indians to the legislative councils and their function was of very limited nature.[56] While the subsequent legislations such as the Indian Councils Act of 1909 expanded the size of legislative councils and included more elected and non-elected members and the Government of India Act of 1919 introduced diarchy and bicameralism, Viceroy and the central government still exercised final say in all policy matters.[57] Lastly Government of India Act of 1935, which forms the fundamental basis of the constitutions of independent India and Pakistan, was also on similar lines. It abolished diarchy at the provincial level and introduced the same at the central level. Further by introducing the two levels of government, one at the provincial level and another at the state level, it introduced federalism in India.[58] However, most of the provisions of the 1935 act, including the provisions with respect to federalism remained largely unrealised due to the Second World War.[59] In fact governance remained centralised in nature with Viceroy having the ultimate power to decide upon all the issues and had the power to veto any decision of the councils.[60]

After independence India and Pakistan inherited more or less similar system of governance with slight modifications by virtue of Independence of India Act of 1947. Even drafting of the constitution was heavily influenced by the Government of India act of 1935 and catered to the interests of the elite sections of the two countries. These constitutions also brought along the centralised authoritarian government in the form of centre being more powerful than the state and centre having the primary say in the policy matters with the states being secondary units with substantially lesser power. Central government’s role under these constitutions was largely to protect the unity of the newly independent countries.[61]

Post-Independence, India and Pakistan established authoritarian and centralised systems of governance. This centralised system gave the central government an unprecedented power to supervene the interests of provinces, different sections of the society etc. and impose a single centralised narrative.[62] According to Bose and Jalal, while such a system was important for the survival of the newly independent nations with extraordinary diversity, it ensured that the colonial system of governance was carried forward even after the independence.[63] Hence, central governments comprising of elected and non-elected elites were at the helm of power. Elected members comprised of political representatives and the non-elected elites comprised of army and the bureaucracy.[64] Further, foreign policy was an exclusive domain of the central governments in the two countries.[65] Hence, relations between the two countries were to be dominated by the dominant narrative prevalent in the minds of controllers of the central governments.

Conclusion

The last two chapters trace the impact of colonial rule and policies of the colonial government on the identity construction of the Hindus and Muslims, creation of mistrust between the two communities and formation of authoritarian centralised governments in India and Pakistan. In these chapters I draw two major conclusions. Firstly, mistrust and enmity between Hindus and Muslims was a direct result of the policies of the colonial government and politics of self-interest by the two communities. Further, such enmity and mistrust were only confined to the elite sections of the two communities. Secondly, centralised authoritarian government was inherited by India and Pakistan from the colonial government. This form of government, which also controlled the foreign policy of the two countries, was controlled by the elites of the two nations. Hence, under such circumstances foreign policy of two countries was directly influenced by the biases of the ruling elites. Thus, as bias of the elites was primarily composed of mistrust and enmity, these two form the basic characteristics of the relations of India with Pakistan. This is not to say that mistrust and enmity were not present in the dominant narrative prevalent in lower sections of the society. However, the fact that elites were in control of the centralised authoritarian government in the form of them being part of the army and bureaucracy in Pakistan and elite political class and bureaucracy in India, makes their biases all the more important. Foreign policy of the two countries is the exclusive domain of the central governments of the two countries. The ruling elites, who in turn control the government, rely on their biases to formulate the foreign policy.

While limiting focus only on policy of the colonial government might appear to be a serious drawback, it in fact offers the widest perspective of the then colonial society. This is on account of the fact that policy of a government is formed keeping in mind the actual structure of the then existing society. Hence, even though resources relied on in the paper are limited, they are the best manifestation of colonial rule.

Hence, we can conclude that India’s relations with Pakistan are governed by mistrust and enmity which developed over the years of colonial rule. These combined with the strong centralised and authoritarian government that the two countries inherited from their colonial past, are the main characteristics of India’s relations with Pakistan.

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  10. G. Krishna, The Development of Indian National Congress as a Mass Organization, 1918-1923, 25(3) The Journal of Asian Studies 413, 420 (1966).
  11. B. Chandra, Colonialism, Stages of colonialism and the colonial state, 10(3) Journal of Contemporary Asia 272, 278-280 (1980).
  12. M. G. khan, Coalition Government and Federal Structure in India, 64(3/4) The Indian Journal of Political Science 167, 171 (2003).
  13. N. M. Masaldan, The Sphere of Political Government Under the Government of India Act 1935, 8(3) The Indian Journal of Political Science, 761, 763 (1947).
  14. S. Nag, Nationhood and Displacement in Indian subcontinent, 36(51) Economic and Political Weekly 4753, 4757 (2001).

 

Books

  1. S. Bose, and A. Jalal, Modern South Asian history, culture and political economy, (1998).
  2. H. Kulke, and D. Rothermund, The History of India, (4th edn., 2004).
  3. P. Heeks, India’s Freedom Struggle: A short History, (1993).
  4. B. Chandra et al, India’s Struggle for Independence, (1988).
  5. B. R. Nanda, The Making of a Nation, (1998).
  6. R. C. Majumdar, Struggle for Freedom, (1988).
  7. K. Adeney, and A. Wyatt, Contemporary India, (2010).
  8. M. E. David, Indian Legal and Constitutional History, (1984).
  9. B. M. Gandhi, Landmarks in Indian Legal and Constitutional History, (10th edn., 1993).
  10. R. Guha, India After Gandhi, (2007).

 

Constitutions

  1. The Constitution of India, 1950.
  2. The Constitution of Pakistan, 1973.

 

Essays in a book

  1. H. F. Owen, The Nationalist Movement in A Cultural History of India, 391, 395 (A. L. Basham ed., 1975).
  2. M. R. Anderson, Islamic Law and the Colonial Encounter in British India in Institutions and Ideologies: A SOAS South Asia Reader, 165, 169-173 (Arnold et al ed., 1993).
  3. G. Pandey, Nationalism versus Communalism in Partition of India: Why 1947? 59, 63 (K. Roy ed., 2012).
  4. A. I. Singh, The Success of the Muslim League: June 1945 to March 1946 in Partition of India: Why 1947? 199, 203 (K. Roy ed., 2012).

 

Letters

  1. Letter from Lord Minto to Lord Morley (June 13, 1906) available at http://gutenberg.net.au/ebooks05/0500261 h.html (Last visited on June 7, 2016).

 

Online sources

  1. Available at http://www.aljazeera.com/indepth/spotlight/kashmirtheforgottenconflict /2011/07/201178121 544 78992.html (Last visited on May 12, 2016).

 

Speeches

  1. M. A. Jinnah, Presidential Address, Lucknow (1937), in http://www.columbia.edu/itc/mealac/pritchett/00islam links/txt_jinnah_luck now_193 7.h7.html (Visited on May 9, 2016).
  2. M. A. Jinnah, Presidential Address, Lucknow (1937), in http://www.columbia.edu/itc/mealac/pritchett/00isla mlinks/txt_jinnah_lahore_ 1940. html (Last Visited on May 9, 2016).

__________________________________________________________________

[1] S. Bose, and A. Jalal, Modern South Asian history, culture and political economy, 201,202 (1998).

[2] Id.

[3] Id. at 203-205.

[4] Id.at 204-208.

[5] A. Ahmed, The Making of India, 33(11/12) Social Scientist 3, 6 (2005).

[6] Id.at 8.

[7] Bose, supra note 4, at 213, 214.

[8] Bose, supra note 4, at 213.

[9] A. Varshenay, India, Pakistan, and Kashmir: Antinomies of Nationalism, 31(11) Asian Survey 997, 998 (1991).

[10] H. Kulke, and D. Rothermund, The History of India, 223 (4th edn., 2004).

[11] Id.

[12] R. Guha, India After Gandhi, 44-60 (2007).

[13] Id. at 59-64.

[14] Id. at 72-76.

[15] Id. at 79.

[16] Id. at 80.

[17] A. Varshney, India, Pakistan, and Kashmir: Antinomies of Nationalism, 31(11) Asian Survey 997, 1005 (1991).

[18] Id. at 1015.

[19] S. Noor, Pakistan-India Relations and Terrorism, 60(2) Pakistan Horizon 65, 68 (2007).

[20] H. F. Owen, The Nationalist Movement in A Cultural History of India, 391, 395 (A. L. Basham ed., 1975).

[21] Bose, supra note 4, at 215, 217.

[22] P. T. Leeson, Media freedom, Political Knowledge, and Participation, 22(2) The Journal of Economic Perspectives 155, 164.

[23] Id.

[24] Bose, supra note 4, at 217.

[25] Bose, supra note 4, at 217.

[26] I. Singh, and K. S. Bhangoo, Irrigation System in Indian Punjab, 17(2) Munich Personal Archives 136, 142 (2013).

[27] Available at http://www.aljazeera.com/indepth/spotlight/kashmirtheforgottenconflict/2011/07/201178121 544 78992.html (Last visited on May 12, 2016).

[28] U. Z. Alam, Questioning the Water Wars Rationale: A Case Study of the Indus Waters Treaty, 168(4) The Geographical Journal 341, 344-346 (2002).

[29] N. Taneja et al, Normalizing India Pakistan Trade, 6 (Working Paper No. 267, Indian Council for Research on International Economic Relations, 2013).

[30] M. R. Anderson, Islamic Law and the Colonial Encounter in British India in Institutions and Ideologies: A SOAS South Asia Reader, 165, 169-173 (Arnold et al ed., 1993).

[31] B. R. Bhagat, Census and the Construction of Communalism in Colonial India, 36(46/47) Economic and Political Weekly 4352, 4354 (2001).

[32] Id. at 4355.

[33] P. Heeks, India’s Freedom Struggle: A short History, 153 (1993).

[34] Bose, supra note 4, at 168.

[35] B. Chandra et al, India’s Struggle for Independence, 71-72 (1988); B. R. Nanda, The Making of a Nation, 73-74 (1998).

[36] A. Peshkin, Education, the Muslim elite, and the creation of Pakistan, 6(2) Comparative Education review 152, 155 (1962).

[37] Id. at 156.

[38] B. R. Nanda, The Making of a Nation, 74 (1998).

[39] R. C. Majumdar, Struggle for Freedom, 148 (1988).

[40] Nanda, Supra note 34, 71.

[41] Letter from Lord Minto to Lord Morley (June 13, 1906) available at http://gutenberg.net.au/ebooks05/0500261 h.html (Last visited on June 7, 2016).

[42] G. Pandey, Nationalism versus Communalism in Partition of India: Why 1947? 59, 63 (K. Roy ed., 2012).

[43] Id.

[44] Bose, supra note 4, at 168.

[45] G. Krishna, The Development of Indian National Congress as a Mass Organization, 1918-1923, 25(3) The Journal of Asian Studies 413, 420 (1966).

[46] M. A. Jinnah, Presidential Address, Lucknow (1937), in http://www.columbia.edu/itc/mealac/pritchett/00islam links/txt_jinnah_lucknow_1937.html (Last Visited on May 9, 2016).

[47] M. A. Jinnah, Presidential Address, Lucknow (1937), in http://www.columbia.edu/itc/mealac/pritchett/00isla mlinks/txt_jinnah_lahore_1940.html (Last Visited on May 9, 2016).

[48] A. I. Singh, The Success of the Muslim League: June 1945 to March 1946 in Partition of India: Why 1947? 199, 203 (K. Roy ed., 2012).

[49] Id.

[50] K. Adeney, and A. Wyatt, Contemporary India, 227, 228 (2010).

[51] B. Chandra, Colonialism, Stages of colonialism and the colonial state, 10(3) Journal of Contemporary Asia 272, 278-280 (1980).

[52] Id.

[53] Id. at 280-283.

[54] M. G. khan, Coalition Government and Federal Structure in India, 64(3/4) The Indian Journal of Political Science 167, 171 (2003).

[55] M. E. David, Indian Legal and Constitutional History, 61-77 (1984).

[56] Id.

[57] B. M. Gandhi, Landmarks in Indian Legal and Constitutional History, 392-397 (10th edn., 1993).

[58] Id. at 400, 401.

[59] N. M. Masaldan, The Sphere of Political Government Under the Government of India Act 1935, 8(3) The Indian Journal of Political Science, 761, 763 (1947).

[60] Id.

[61] Bose, supra note 4, at 201-209.

[62] S. Nag, Nationhood and Displacement in Indian subcontinent, 36(51) Economic and Political Weekly 4753, 4757 (2001).

[63] Bose, supra note 4, at 201-209.

[64] Bose, supra note 4, at 206.

[65] Schedule VII List I Entry 10-12, The Constitution of India, 1950; Article 46, The Constitution of Pakistan, 1973.

FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2003: A PRIMER

THE NEED FOR FISCAL PRUDENCE AND BUDGETARY MANAGEMENT

The Finance Ministry has recently announced the constitution of a five member committee to review the Fiscal Responsibility and Budget Management Act, 2003. The Committee is to be headed by former revenue and expenditure secretary N.K. Singh, and is counting among its members stalwarts like Chief Economic Advisor Arvind Subramanian, RBI Deputy Governor Urjit Patel, NIPFP (National Institute of Public Finance and Policy) director Rathin Roy, and former finance secretary Sumit Bose.[1] The need for the refurbishment of the FRBM Act is perhaps best captured in the following words of Finance Minister Arun Jaitley spoken while he was presenting the Union Budget 2016-17- “While remaining committed to fiscal prudence and consolidation, a time has come to review the working of the FRBM Act, especially in the context of the uncertainty and volatility which have become the new norms of global economy”.[2]

What must be taken note of at the outset is the fact that the financial crisis was a major but not the only reason which made the FRBM Act obsolete. The man behind the legislation, former Finance Minsiter Mr Yashwant Sinha, has gone on record to say that the legislation is as good as dead in its present state. The FRBM Act as it stands today is clearly not enough to ensure fiscal prudence from the Parliament and thus the committee has been given the mandate to- “make its assessment and provide its views on the expected impact of its recommendations on the general government deficit and other FRBM parameters. The committee will also examine and give recommendations on any other aspect considered relevant in relation to the determination and implementation of the FRBM roadmap”.[3]

.The Fiscal Responsibility and Budget Management Act is a legislation enacted by the Parliament in 2003 to bring in fiscal discipline in the country. FRBM is essentially a fiscal sector legislation which set targets for both the central and state governments to reduce their fiscal deficit and eliminate their revenue deficit respectively in a time-bound manner.[4] There was a pressing need to enact the legislation as the rocketing government borrowing and the resultant debts incurred had eroded the financial integrity of the government to a great extent. The government was forced to borrow in the 1990s as it was tackling a high revenue deficit during those turbulent times. Greater borrowings will naturally lead to higher interest payments, and as was observed by the “Task Force on Implementation of the FRBM Act, 2003”-  “In 2000-01 and 2001-02, more than half of the revenue receipts of the Government were used up in merely paying interest on accumulated debt. In the 2004-05 Budget presented on 8th July, an enormous sum of Rs. 1, 29,500 crores is required to merely pay interest on this accumulated debt”.[5] Indeed, this was the time when interest payments became the largest expenditure item of the government.

As the coffers were being emptied, the need for fiscal prudence was recognized around all quarters and from this chaos emerged the Fiscal Responsibility and Budget Management Act, 2003. To arrest financial imprudence, the government has imposed on itself serious deficit cut targets under the Act. At this juncture, it suffices to note that the important objectives of the Act are inter-generational equity in fiscal management, i.e., debt undertaken for the benefit of the present generation should not be an unreasonable burden on future generations; long-run macro-economic stability; better coordination between fiscal and monetary policy; and transparency in fiscal operations of the government.[6]

Though the Act in its initial undiluted form seemed promising, it has been amended time and again by the governments to conveniently dilate the period of compliance whenever they ‘feel’ the need for the same. Most of the effective provisions of this Act have been relegated to the status of rules thus making the process of changing them easier through executive orders rather than through the amendment process of the Parliament. Two notable amendments to the Act merit mention at this juncture, viz., the 2012 and 2015 Amendment Acts. The 2012 FRBM Amendment Act changed the target of the legislation from “revenue deficit” to “effective revenue deficit”. Simply put, effective revenue deficit is what remains once grants for creation of capital assets are subtracted from the revenue deficit. Effective revenue deficit only takes the expenditure on consumption by the government into account. The 2015 Amendment has extended the target date to March 2018.

THE REGULATORY MECHANISM UNDER FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT AND ITS IMPLEMENTATION

The original Bill mentioned the goal of eliminating revenue deficit and reducing fiscal deficit to two and not three per cent of the GDP. The yearly reduction targets were pegged at 0.5% every year and the date for achieving the target was set at March 2006. All the contingent liabilities were capped at 0.5% of the GDP. This would have acted as a firm and rigid structure, as every change to the targets would have to be made through an amendment, a fine line to tread when dealing with matters as sensitive as public finance.[7]

But once the matter was referred to the Parliamentary Standing Committee, the Bill was significantly watered down.[8] The deadline to achieve the targets was thus extended to 2008, instead of 2006. The fiscal deficit target went up to 3% and yearly targets and caps on contingent liabilities got pushed to the rules. This move was significant because now these targets and caps can be meddled with by a mere executive order and not by an amendment as would have been required had the Act been passed in its original form. The FRBM Act and rules were notified by the then UPA government in July, 2004.

Under the present FRBM Act, it is the duty of the government to stick to deficit targets. This duty is only seldom observed. The Act empowers the Reserve Bank of India to take appropriate measure to control inflation. The government is required to see to it that the fiscal targets are achieved, and the only exceptions that are granted are natural calamities and issues of national security. However, the implementation of the Act was put on hold, interestingly not on either of the exceptional grounds mentioned, but citing the global financial crisis and the need for fiscal stimulus. The targets set under the Act have been postponed several times in later years, as they are but mere rules which can be changed through executive orders. The Act was amended in 2012 to shift the focus to elimination of effective revenue deficit and not revenue deficit and as per the Finance Act of 2015 the target dates for achieving the prescribed rates were further extended by three years to March 2018. Even Budget 2016-17 reiterates the aim to realize the fiscal deficit target of 3% by March 2018, from a target of 3.9% for 2015-16 and a target of 3.5% for 2016-17.[9]

Under the Act, the Finance Minister has to take explain the reasons and take corrective actions if the government fails to adhere to these targets. It is also provided that the government shall end borrowing from the Reserve Bank except for temporary advances and that the RBI will not subscribe to primary issue of central government securities post-2006. In the 2012 amendment, it was also provided to allow the Comptroller and Auditor General of India to periodically monitor compliance with the provisions of the Act. However, the Fourteenth Finance Commission under the chairmanship of Dr Y.V. Reddy remarked that this provision has been inadequate in ensuring compliance.[10]

A notable observation is that states succeeded in controlling their fiscal and revenue deficits, whereas the Act still remained spectacularly ineffective qua the Centre. This is largely due to the fact that States cannot borrow without the permission of the Centre, but Centre being the proverbial last watchman, has no one to watch over it.[11] This in a way gives to the Centre the right to act according to its own wishes and keep adding to the fiscal deficit. Does that mean that the FRBM Act is in itself redundant? The answer to the question posed above has to be in the negative. As of now, even a 0.2% relaxation of the deficit target kicks off a heated debate, which in the absence of the FRBM would not have happened. This, combined with the features upholding accountability and incorporated in the Act itself, stand testimony to the need of the Act.

 

 

ROADBLOCKS IN EFFECTIVE IMPLEMENTATION OF THE PROVISIONS OF THE FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT

Though the law after its introduction helped to reduce the fiscal deficit from 3.9% in 2004-05 to 3.1% in 2007-08 (inclusive of unpaid subsidy bills), it shot up to 8% in 2008-09 (inclusive of unpaid subsidy bills).[12] In the financial year 2008-09, the year targets under the initial Act were meant to be achieved, Revenue Deficit was budgeted at a mere 1.1% despite the implementation of the sixth pay commission recommendations, a massive farm loan waiver program and expansion of MGNREGA to all districts of the country. Such a situation is likely to lead to inflation due to the “crowding-out” effect and the unsustainability of high debt to GDP ratios. In short, there was a financial crisis on the horizon in India due to government’s casual fiscal responsibility policies that would have befallen us irrespective of the occurrence of the global financial crisis.[13]

Net financial savings of households is the common pool of financial savings which fund both the government undertakings and the corporate sector. If a huge chunk of these savings is taken by the government to meet its fiscal deficit, the corporate sector is, so to speak, “crowded-out” of the business, as the corpus of funds available to it is reduced significantly. Also, India’s government debt-to-GDP ratio is also alarmingly high, standing at around 65%. India has been able to maintain investor confidence despite such a high ratio because most of the government’s debt is in domestic currency. Since size of the fiscal deficit determines what happens to the government debt-to-GDP ratio over the successive years, it is desirable to bring down the fiscal deficit and consequently, the ratio.[14]

Fiscal rules, such as the ones notified under the FRBM Act are neither sufficient nor necessary to ensure good fiscal behaviour by the government. Montek Singh Ahluwalia argues that this usefulness is best brought out through the effect that these curbs have had on the States and on their financial consolidation.[15] Though it is extremely difficult to ensure such vigilance in a Parliamentary system, it can at least help spur a spirited discussion in the Parliament and have an impact on public opinion and highly susceptible market expectations.

Mr Ahluwalia contends that it is better to have transparent and credible fiscal rules which can be flouted than to have ineffective and poorly drafted rules or even worse, to have no rules at all. There seems to be no empirical grounding of the 3% ceiling for fiscal deficit. Also, to equate deficit of the Central Government with the deficit of the country is rather misleading.[16] Since under the Act there is a separate, though unspecified limit for the States, the general government deficit is much larger than a mere 3%, even under ideal conditions. In fact, the Fourteenth Finance Commission has recommended a 3% deficit target for the centre and another 3% for the States, thus adding up to a total deficit target of 6%.[17]

 

 

REVAMPING THE FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT: PROPOSED REFORMS AND THE WAY FORWARD

The Committee to revamp FRBM has been set up to examine the feasibility of having a fiscal deficit range instead of a fixed number as a percentage of GDP. It is argued that this will give the government greater flexibility and allow it to effectively tackle any exigencies that might arise. It is also within the committee’s mandate to study the feasibility of aligning the fiscal expansion or contraction with credit expansion or contraction in the economy. The committee will also look into the various factors, aspects and considerations going into determining the targets predetermined under the FRBM Act.[18]

There is an imperative need for a new FRBM Act with greater powers and for the establishment of an independent fiscal council. To use Isher Judge Ahluwalia’s words, the FRBM Act should be used as a “chastity belt” only to be loosened with “good reason”. There is a need for a new law which specifically invokes Article 292 of the Indian Constitution.[19] The Fourteenth Planning Commission had recommended a new law called the Debt Ceiling and Fiscal Responsibilities Act which specifically invoked and drew power from Article 292 of the Indian Constitution. The targets set under such an Act cannot be turned into rules which are amenable to change through an executive order, though rules may surely supplement such a law. As many as 30 countries have a body along the lines of an independent fiscal council, and they have all experienced different degrees of success according to the conditions that prevail in the country and its socio-cultural context. If the body is given relatively greater autonomy and the power to have some, but not all of its recommendations enforced, it will truly be a feat in itself and then such a body will be able to operate with some efficacy in the Indian setting.

It would be within the ambit of such a Council to undertake an ex-ante analysis of financial implications of budget proposals and to test them for soundness, simultaneously keeping the long term implications of the proposal in mind. Secondly, this council can also be put in-charge of the cost-benefit analysis of government policies and programmes. Thirdly, such a council can also monitor adherence to fiscal targets during a financial year and flag any likely deviations or stresses. [20] Thus, the Mid-Year Economic Analysis that is undertaken under the current framework can be attributed to a body especially charged with the purpose. For accountability, instead of having the CAG to periodically monitor compliance with provisions and having the finance minister give reasons and taking corrective action, this fiscal council can be made to report directly to the Parliament. It can exert moral pressure on the government to be fiscally prudent and thus ensure compliance with the targets.[21]

What is needed at this juncture is an ex-ante review which sees to it that fiscal responsibility is maintained and not violated. FRBM Act should not require specific numbers as the targets, but instead go for a range keeping in mind the crowding-out effect and sustainability of the government debt-to-GDP ratio discussed above.[22]  Another step that can be taken is apportionment of the total deficit between the Centre and the States.[23] Though past practice allows each State to borrow up to the extent of 1% of its Gross State Domestic Product (GSDP), this lending should be restricted and States with high debt ratios or low growth potential can be helped not with more borrowings but with more grant funds.[24] However, a pertinent question that Mr Ahluwalia fails to address is that how does the Centre with its own deficit to tackle come up with a grant-in-aid for such States? It can only do so by borrowing itself, making the grant redundant or it can reduce the grants allocated to the relatively more well-off States thereby stifling the developmental programmes undertaken in such States.

As has already been argued, flexibility in defining the fiscal deficit target is needed to deal with cyclical shocks. However at times, we may allow the deficit to exceed the target as a contra-cyclical measure. The quality and precision of our national accounts should be improved and it should be recognized that a finance council would only strengthen the working of the Finance Ministry, which up to now has been the lone protector of fiscal prudence.[25] Working on the assumption that the source of all investments made in the PSUs and PSEs is from the borrowings made by the government, it is logical to transfer equivalent amount of borrowings from the government’s books to a central holding company, christened as “Central Holding Company Ltd.” (CHCL), which will hold equity in PSUs. It is asserted that since a lot of money is being pumped in PSUs, and no proportionate income is accruing from them, it is leading to the creation of fiscal deficit. Thus, to avoid this sorry state of affairs, PSUs and PSEs have to be separated from the Consolidated Fund of India. Investment of central government will be transferred to the CHCL and then outstanding Government of India loans would be transferred to the same company. In this manner, the value of investment transferred by the Government of India and the amount of Government of India loans transferred would be equal. Any consequent disinvestment proceedings shall accrue to the CHCL and the redemptions of the loan would be made by the CHCL. Thus, with the researcher concluded his analysis on revamping the Fiscal Responsibility and Budget Management Act, 2003 and the avenues that can be taken to achieve the same.

 

[1] ENS Economic Bureau, Finance ministry announces 5-member panel to review FRBM Act, The Indian Express (May 18, 2016) available at http://indianexpress.com/article/business/economy/finance-ministry-announces-5-member-panel-to-review-frbm-act-2806039/ (Last visited on September 5, 2016).

[2] Id.

[3] ENS, supra note 3.

[4] P. Kaswan, Revenue Deficit and Fiscal Deficit, simply decoded (March 25, 2013) available at http://www.simplydecoded.com/2013/03/25/revenue-deficit-fiscal-deficit (Last visited on September 5, 2016).

[5] Report of the Task Force on Implementation of the Fiscal Responsibility and Budget Management Act, 2003, 1 (2004).

[6] Fiscal Responsibility and Budget Management Act, 2003.

[7] Seetha, The FRBM Act Needs More Teeth, Swarajya (February 15, 2016) available at http://swarajyamag.com/economy/strong-frbm-act-is-the-time-right-to-loosen-the-chastity-belt (Last visited on September 5, 2016).

[8] Id.

[9] Budget 2016.

[10] 14th Report of the Finance Commission of India, (2014).

[11] Seetha, supra note 7.

[12] T. Jose, What is Fiscal Responsibility and Budget Management (FRBM) Act? What are the amendments to it?, (2016) available at http://www.indianeconomy.net/splclassroom/223/what-is-fiscal-responsibility-and-budget-management-frbm-act-what-are-the-amendments-to-it/ (Last visited on September 5, 2016).

[13] Seetha, supra note 7.

[14] M.S. Ahluwalia, Time for a brand new FRBM Act, Livemint (March 30, 2016) available at http://www.livemint.com/Opinion/jsgoPSQ6WRh3eQo2p7ZsJL/Time-for-a-brand-new-FRBM-Act.html (Last visited on September 5, 2016).

[15] Id.

[16] Ahluwalia, supra note 14.

[17] 14th Report of the Finance Commission of India, (2014).

[18] Press Trust of India, Govt sets up FRBM committee on fiscal deficit range, The Times of India (May 17, 2016) available at http://timesofindia.indiatimes.com/city/delhi/Govt-sets-up-FRBM-committee-on-fiscal-deficit-range/articleshow/52313019.cms (Last visited on September 5, 2016).

[19] Seetha, supra note 7.

[20] Seetha, supra note 7.

[21] Seetha, supra note 7.

[22] Ahluwalia, supra note 14.

[23] Ahluwalia, supra note 14.

[24] Ahluwalia, supra note 14.

[25] Ahluwalia, supra note 14.

Kaveri Row and the legality of Bandhs

“Your right to swing your arms ends just where the other man’s nose begins.”

 

General Overview of Fundamental Rights in the Country

Several freedoms have been enshrined under the Indian Constitution. As argued, most of these freedoms have been provided for under Part III of the constitution, as Fundamental Rights in the country. The legal sanctity afforded to these rights is done to further and promote the rights of citizens, democratic values, and oneness and unity of the country. In a general overview of the rights, these freedoms have been made available only to the citizens (natural persons) in the country, however, these freedoms under Article 19 are subjected to reasonable restrictions imposed by the State, and by the law.

Kaveri Row – Bandhs

In the recent Kaveri Row, Bandhs, or a means of protest to paralyse the industry and commerce of a region, have crippled the state of Karnataka, and have caused losses, to the tune of Rs. 22,000 Crores in just a matter of days.[1]

A Hindi word meaning “closed”, Bandhs have become a norm for political parties and organizations to often call for such shut-downs, when they want to be heard. However, there have been a lot of questions about the legal validity of such protests, which have gained wide currency in the recent past, thanks to the efficacy demonstrated by these.

The Question of Legality

In the 1997 case of Bharat Kumar v. State of Kerala, the apex court of the country had the first opportunity to deal with the question of the legal validity of Bandhs in the country.[2] The apex court stated that no political party or an organization can claim that it is entitled to paralyze the industry and commerce in the entire State of Nation, and is entitled to prevent the citizens not in sympathy with its view point from exercising their fundamental rights or from performing their duties for their own benefit or for the benefit of the State or the Nation. It further went on to state that such a claim would be unreasonable, and could not be accepted as a legitimate exercise of a fundamental right by a political party or those comprising it.

Opining on the nature of Bandh’s in Bharat Kumar, the apex court stated that “The Government is duty bound to prevent unlawful activities like bandh which invades people’s life, liberty and property.” Further, the court opined that the Government was bound to pay compensation to those people who suffer “loss of life, liberty or property as a result of a bandh”, citing the same as a failure of the government to discharge its “public duty” to protect them.

In appropriate cases, even the organizers of the bandh may be directed to pay compensation.[3] Judicial opinion has even seen bandhs as a means of interference with the normal functionality of the courts, with opinions stating as far as “organizations interfering with the functioning of the courts commit contempt of court”, and are liable for punishment.

 

The legal distinction between Bandhs and protests

The distinction between Bandhs and protests has been one of the most complicated ones. In the general context, peaceful strikes are often referred to in the cases of protests by labour unions. However, years of judicial interpretation and reference to the two in common parlance require us to look at the legal distinction created between the two.

In one of the landmark judgments by the Patna High Court dealing with the issue of strike by Jharkhand Mukti Morcha, the court defined a peaceful strike as one “which does not interfere with the rights and properties of the people”.[4] In the instant case, the High Court awarded compensation against the State Government “for loss of property and death of a person during the bandh for failure of the authorities to take appropriate action and provide adequate protection to the people’s life, liberty and property”. The court was of the opinion that the government had failed to discharge “its public duty to protect the people during the bandh”.[5]

In an ancillary question addressed by the court, the High Court stated that the activities of the Morcha prevented the lawyers from accessing the premises of the court, thus obstructing with the smooth functioning of the court. Therefore, an action for contempt of court lied against the Morcha for the same.

 

Guidelines laid down by the Supreme Court

In the landmark judgement of T.K. Rangarajan,[6] while declaring ‘bandhs’ as unlawful, the apex court laid down the following guidelines for a peaceful protest.

 

1. The organizer should meet the police to review and revise the route to be taken and to lay down conditions for a peaceful march of protest;

  1. All weapons, including knives, lathis and the like should be prohibited;
  2. All undertaking should be provided by the organizers to ensure a peaceful march with marshals at each relevant jurisdiction;
  3. The police and the State Government should ensure videography of such protests to the maximum extent possible;
  4. The person-in-charge to supervise the demonstration should be SP (if the situation is confined to the district) and the highest police officer in the State, where the situation stretches beyond one district;
  5. In the event the demonstrations turn violent , the officer-in-charge should ensure that the events are video graphed through private operators and also request such further information from the media and others on the incidents in question;
  6. The police should immediately inform the State Government with reports on the events , including damage, if any, caused by the police; and
  7. The State Government should prepare a report on the police reports and other information that may be available to it and should file a petition including its report in the High Court in question to take suo motu action.

Judicial Evolution and Interpretation

The Supreme Court in the landmark judgment of Communist Party of India v. Bharat Kumar affirmed the distinction drawn by the High Court between a “Bandh” and a call for “general strike” or “Hartal“. In doing the same, the court appreciated the nuanced distinction created between the two, in terms of the fundamental rights of the other citizens being affected in the former case. The court went on to sat that “there cannot be any doubt that the fundamental rights of the people as a whole cannot be subservient to the claim of fundamental right of an individual” or a particular section of people in the country.[7] Subsequently, this decision of the apex court was affirmed in the 2002 case of Indian National Congress v. Institute of Social Welfare and Ors.[8]

 

James Martin vs State Of Kerala:[9] in the name of Hartal or Bandh or strike no person has any right to cause inconvenience to any other person or to cause in any manner a threat or apprehension of risk to life, liberty, property of any citizen or destruction of life and property, and the least any government or public property. It is high time that the authorities concerned take serious note of this requirement while dealing with those who destroy public property in the name of strike, hartal or bandh. Those who at times may have even genuine demands to make should not loose sight of the overall situation eluding control and reaching unmanageable bounds endangering life, liberty and property of citizens and public, enabling anti-social forces to gain control resulting in all around destruction with counter productive results at the expense of public order and public peace. No person has any right to destroy another’s property in the guise of bandh or hartal or strike, irrespective of the proclaimed reasonableness of the cause or the question whether there is or was any legal sanction for the same. The case at hand is one which led to the destruction of property and loss of lives, because of irresponsible and illegal acts of some in the name of bandh or hartal or strike.

 

Unless those who organize can be confident of enforcing effective control over any possible turn of events, they should think twice to hazard themselves into such risk prone ventures endangering public peace and public order. The question whether bandh or hartal or strike has any legal sanctity is of little consequence in such matters. All the more so when the days are such where even law-enforcing authorities/those in power also precipitate to gain political advantage at the risk and cost of their opponents. Unless such acts are controlled with iron hands, innocent citizens are bound to suffer and they shall be the victims of the highhanded acts of some fanatics with queer notions of democracy and freedom of speech or association. That provides for no license to take law into their own hands. Any soft or lenient approach for such offenders would be an affront to rule of law and challenge to public order and peace.

 

The claim for compensation

With respect to the damages caused to the private persons and their properties, the apex court in George Kurian v. State Of Kerala,[10] held that the government should “adequately compensate (them) immediately as Government had failed to fulfil its constitutional obligation to protect lives and properties of the citizens” (emphasis supplied). Further, the court held that criminal cases should be taken against the offenders as well as the abettors to the offence.

Shiv Sena Party vs B.C. Deshmukh And Ors: By impugned order, the petitioners were directed to deposit by way of exemplary damages a sum of Rs. Twenty Lakhs each with the state Government in a separate fund to be named “30th July 2003 Bandh Loss Compensation Fund”. The said amount shall be deposited by the petitioners within a period of one week. In case the deposit is not made, the petitions shall stand dismissed without further reference to the court. In case the deposit is made and copies of receipts have been filed, the petitions shall then be listed for hearing.

 

 

[1] Rachel Chitral, Kaveri protests in Karnataka cost over Rs. 22000 crore loss, Assocham says Times of India 16th September, 2016 available at http://timesofindia.indiatimes.com/business/india-business/Cauvery-protests-in-Karnataka-cause-over-Rs-22000-crore-loss-Assocham-says/articleshow/54312863.cms

[2] Bharat Kumar v. State of Kerala.

[3] AIR 1999 Pat 169.

[4] Ranchi Bar Association v. State of Bihar

[5] Id.

[6] T.K. Rangarajan vs. State of Tamil Nadu 2003

[7] CPI v. Bharat Kumar

[8] Indian National Congress v. Institute of Social Welfare and Ors, (2002) 5 SCC 685.

[9] James Martin v. State of Kerala

[10] George Kurian vs State Of Kerala, 2004 (2) KLT 758.

Local hosting of Data

In this post we analyse economic cost and legal particulars of local hosting of Data.

 

Local hosting of data is perhaps required to reduce data transfer costs, assures access to important data (particularly in case of internet outages) and ensures security of data. In the current commercial context these are the basic advantages of local level hosting over cloud hosting.[1] However, when idea of local level hosting is looked at from the perspective of reducing cost of access to consumers and the same is qualified by the idea of ‘data of community interest’, following infrastructural and policy issues arise:

  1. What is the cost involved in hosting data at the local level? And how to reduce cost of local hosting?
  2. How to determine the data of community interest?
  3. What are the other issues that may arise of local hosting policy? (Fundamentally against the principles of net neutrality)

In case of the proposed setup (proliferation of broadband by Wi-Fi network), basic cost will include server’s acquisition cost, setting up the server, housing of server, uninterrupted electricity supply for the server and hence electricity backup, maintenance cost etc. Hence, fundamental concerns in this case is that whether this cost of setting up a server and subsequent maintenance of the same will be less than the combined cost of data transfer and cloud (external) storage of locally relevant and locally generated data. In order to determine the same, we have to firstly look at advantages and disadvantages of the two. Thereafter we can determine commercial viability of local hosting or determine measures to make local hosting commercially viable.[2]

Local level hosting

Advantages

  • Data is secure.
  • Run any application without any boundaries since full control is localised.
  • Faster access of files, backups and printers (distance is less).
  • Local access on the actual hardware in case of failure.
  • No need for Internet access in order to access user’s files.
  • Issue of internet outage largely decreases.

Disadvantages

  • Initial capital is very high in relation with cloud services.
  • Maintenance costs might be high in case there are several servers.
  • Require constant electricity supply.
  • IT support and will be required for the maintenance of the hardware and software of the server. (requirement of manpower)
  • Moving server to remote inaccessible locations.
  • Limited space for data storage.

Cloud hosting or hosting on the internet

Advantages

  • Stable monthly costs without any initial capital.
  • Limitless expansion of your servers based on your needs.
  • Savings on maintenance costs.
  • Access to your data from anywhere without any additional cost.
  • Pay as you grow schemes which correspond to cost savings in the long run.

Disadvantages

  • Not feasible to use any application that you desire.
  • Your data is stored in the cloud provider’s data centre.
  • Very difficult to change cloud service providers.
  • Accessing to your data might be slow since it is based on your Internet connection.

Commercially speaking, setting up of local servers requires large sum of capital and maintenance of such large number of servers, at geographically far-off places will also require large investments. This large initial investment overrides the long term benefit that may arise out of fast and unrestricted access to the internet, security of data, reduced cost of access etc.

Under such circumstances, where initial cost is high but the service pays over time, incentives have to be provided at the initial stage. These incentives will encourage initial cost bearing and over time local level hosting will pay for itself because of the reduced costs and subsequently service will become cheaper over time. Initial incentives can be provided in following three manners:

  • Government funded[3]: Government may subsidise installation of servers at the local level. This one time cost, which is indeed substantial, can be transferred directly to the private players or a public sector unit like BSNL may be asked to undertake the oversight of the setting up business. Once local servers have been set-up, management and up-keep of the same can be transferred to private firms. These firms can in turn be subjected to regular audits in order to determine the quality of maintenance. Tax rebates for setting up local servers to those operators who undertake Wi-Fi operations may also work as an alternative to subsidising the setting up of local servers. However, fundamental problem with this model is that government cannot continue to subsidizing maintenance and up-keep of local servers forever. This would be an inefficient approach. This might very well require some model of cost distribution to the local user base or content developers.
  • Transferring cost to the local user base: Cost of setting up and maintain local servers might very well be transferred upon the local user base. The best method to do this is to increase the cost of access to data stored over the local server. This method would only work if access to locally stored information is differentiated from access to information accessible from the rest of the internet. This would mean that locally stored information will have to be either accessible at a faster speed, will have to be more secure etc. or there will have to be specific information that is only accessible by using local server. The bottom-line is that locally stored information and access to the same has to be differentiated from the rest of the information in order to make this option commercially viable.
  • Transferring the cost to content providers: Issues of net neutrality arose because, “Internet Service Providers (hereinafter ISPs) attempted to collect fees from large content providers, arguing that such fees would allow them to upgrade their hardware to accommodate the growing demand and better serve the end user. Some ISPs proposed another way to raise revenue, charging content providers for a “fast lane” that would give priority to their content and ensure faster delivery to the end user.”[4] There is perhaps no harm in using a similar approach to finance local storage of data. A proportion of storage space can be exclusively used for storage of content of the content developer and the remaining proportion can be used for storing data of community interest. However, fundamental problem with this approach is that it involves basic net neutrality issues and TRAI has already declared any form of preferential data transfer illegal.

As per the researcher, a hybrid of above three will be the best solution for encouraging setting up of localized servers and subsequent local storage of data. Setting up of servers in rural areas where consumers cannot bare cost can be subsidised by the government. On the other hand, cost of such localization can be transferred directly to the consumers where they are financially capable of baring such cost. This includes increasing the cost of access to localised content on Airports, restaurants etc., perhaps the places where luxury tax is imposed. Lastly, places where substantial number of people access certain form of content, such cost can be transferred to the content developers. This could perhaps be done in market places, taxi stands etc.

Once infrastructure is created to host data at the local level, next big challenge is to determine whether what content or data is of community interest. The basic issue faced while determining the same is that different people in a community have different priorities and interests. Consequently determining community includes becomes difficult. This difficulty is further depend by the fact that no comprehensive legal definition of community interest exists.[5] Perhaps looking at public interest may be of some help in determining community interest. Public interest may be defined as “1. The welfare or well-being of the general public; commonwealth. 2. Appeal or relevance to the general populace: a news story of public interest.”[6] Considering this definition, following two methods may be adopted in order to determine community interest:

  • Public Trust Doctrine: The Public Trust Doctrine primarily rests on the principle that certain resources have such a great importance to the people as a whole that it would be wholly unjustified to make them a subject of private ownership. The said resources being a gift of nature, they should be made freely available to everyone irrespective of the status in life. The doctrine enjoins upon the Government to protect the resources for the enjoyment of the general public rather than to permit their use for private ownership or commercial purposes.[7]

This idea, along with the fact that explicit arrangement has been that private owner access to the publicly owned spectrum and rights of way necessary to exploit the technology is exchanged for public access and speech rights, ensures that public trust doctrine be applied to the proliferation of broadband by Wi-Fi.[8] This is due to the fact that information being stored locally is simply an extension of larger internet and hence is a public utility.[9] Further, a faster and secure access is being given to certain information because of it being important for public or in the interest of the community.

Hence, keeping the above two principles in mind, the power to determine the nature of information available on local servers should be vested with the government or any other body accountable and answerable to the government. Government may subsequently determine information of public importance and depending on the same determine the nature of information that is to be stored locally.[10]

  • Local community usage patterns: Local community may be allowed to determine the nature of information stored on the local server. This may be done by identifying the local data usage pattern. Hence, information accessed most frequently by the community may be identified and stored locally. Such information in turn may be collected by identifying the internet usage pattern of local community.[11] This will not only ensure cheap access to such information but will also ensure reliability of access considering the unreliable state of wire based broadband proliferation infrastructure. However, the basic drawback of this approach is that community may not store data important for it in the time of crisis. Hence, this method should only be adopted after due deliberation and behaviour tracing algorithms should be balanced for variables that are relevant for communities, but generally not considered by them.
  • Hybrid approach: This might very well be the best approach. This approach requires the government to determine the usage of a proportion of locally available space of the server and the remaining space may be used for storage of information depending on the local community’s usage pattern.[12]

Despite of all these infrastructure and policy considerations, saving and granting faster and cheaper access to selected content is against the core principles of net neutrality. Telecom Regulatory Authority of India’s ruling dated February 8, 2016, rules against this approach. However, regulation 6[13]may be used by the authority to relax norms in this case. Further, if above mentioned guidelines with respect to determining nature of data of community interest are considered, relaxations can be granted considering that it is the government and the local community that discriminates data, and not the ISPs or the content developers.

[1] Available at http://www.affinitytechpartners.com/3n1blog/2016/1/27/thinking-of-ditching-the-local-server-3-reasons-to-pause.

[2] Available at http://www.ibs.com.cy/assets/mainmenu/111/editor/Local%20server%20VS%20Cloud%20server-what%20I%20have%20to%20choose.pdf.

[3] Efficiency of government subsidies can be seen in various cases. Few examples: http://www.forbes.com/sites/gregsatell/2013/07/02/4-government-programs-that-drive-innovation/#6a1b951b64f2

[4] Available at https://hbr.org/2016/06/net-neutrality-rules-will-make-winners-and-losers-out-of-businesses

[5] P. Carter and J. Mayers, Division and Distribution of Community interest in defined benefit pensions (Available at http://lawschool.unm.edu/nmlr/volumes/18/1/04_carter_division.pdf)

[6] Available at http://www.dictionary.com/browse/public-interest

[7] Available at http://www.legalserviceindia.com/articles/ptdoc.htm; M.C. Mehta v Kamal Nath.

[8] Available at http://theconversation.com/private-networks-and-public-speech-net-neutrality-in-context-37261

[9] Internet was held to be a public utility in U.S.A’s federal communication’s ruling with respect to net neutrality. Available at http://www.nytimes.com/2015/02/27/technology/net-neutrality-fcc-vote-internet-utility.html?_r=0; Telecom Regulatory Authority of India held something on similar grounds.

[10] This may include local weather forecast, information related to agriculture etc.

[11] W. Aiello et al, Analysis of Communities of Interest in Data Networks, AT&T Labs-Research.

[12] Researcher recommends this approach.

[13] PROHIBITION OF DISCRIMINATORY TARIFFS FOR DATA SERVICES REGULATIONS, 2016.

The unintended consequences of welfare aid

INTRODUCTION

Poverty has emerged as one of the biggest challenges to the governments across the world in contemporary times. Ameliorating poverty and preventing it through insuring against socially recognized risks of income interruption are the most fundamental aspects of state social provision. The English social scientist Richard Titmuss defined social services as “a series of collective interventions that contribute to the general welfare by assigning claims from one set of people who are said to produce or earn the national income to another set of people who may merit compassion and charity”. Welfare policy, whether it is the product of governmental, voluntary, or corporate institutions, is concerned with allocating goods, services, and opportunities to enhance social functioning.1 While in a lot of countries, welfare is provided by governments, it is also supplemented by efforts of the social groups, charities, religious groups, Non-Governmental Organizations (NGOs) etc. Social welfare policy, a subset of social policy, regulates the provision of benefits to people to meet basic life needs, such as employment, income, food, housing, health care, and relationships.

Social Welfare Schemes are often created in response to some social problems. However, Welfare schemes are also seen as the causes of many problems. One of the biggest criticism of Welfare Scheme can be seen in the fact that it creates perverse incentive for the entitled people to find jobs. Such a concept is called as Welfare Trap, where the people entitled to social security benefits often see a higher opportunity cost in not taking up a job when they are on social security benefits.2

Thus, Welfare Trap has several unintended consequences: One, it creates a perverse incentive for people to find work and gain employment. Second, it affects the family structure, often leading to inadvertent results. Third, it has also been argued that Welfare Aid leads to the dysgenic effect.

 

CHAPTER – 1 

WELFARE TRAP AND ITS ECONOMIC IMPLICATIONS

Welfare trap is seen as one of the many contradictions of welfare policies. The term “welfare trap” denotes a welfare recipient’s reluctance and/or inability to break his/her dependence on public assistance. In a situation like this, welfare support perpetuates the dependency of the recipient on public assistance rather than raising them to a level that they do not need assistance anymore.3 According to the advocates of this phenomenon, there are two different views on why recipients can get stuck in a welfare trap.4 The first one takes a behavioural approach and explains that welfare trap is caused by recipients’ lack of necessary traits to climb the socio-economic ladder. Lack of these traits might be associated with individual psychology or social environment. According to this view, being in the welfare trap is seen as a consequence of the mistakes the recipients have made over and over again in their decisions. The other view, is a direct reflection of “economic orthodoxy5 and suggests that welfare trap is a result of an economic optimization in terms of opportunity cost, individuals make, when given the choices of receiving the benefits or taking up a job. Given this opportunity cost, individuals would deliberately choose to receive benefits instead of finding employment because the cost of giving up on the benefits and taking up a job is too high compared to the minimal pay they get when they cannot work and receive public assistance in the form of social security benefits. Thus, welfare support is seen as a disincentive to work.Also, the fear of being excluded from the welfare benefits force the people to avoid taking up jobs.7 Thus, this view sees the individual as a rational being making rational choices. According to this line of logic, welfare trap exists because the welfare system is full of disincentives for households to increase their work effort in order to keep on receiving benefits. Thus, various critics of the American Welfare system have claimed that it exacerbates the problem of poverty by making living in poverty preferable to acting in ways that would  promote upward mobility.8 Further, various countries that provide social security like the U.S., U.K., Canada etc. use a mechanism called the means-test. A means test can be referred to as a determination test, wherein an individual or family is assessed on the basis of their means to see whether they are eligible for governmental assistance or not. Means test quantity the savings and income of the applicant, and therefore, the social security benefits of the individuals are reduced, contingent on the income of the applicant. For instance, a mother with one child, on welfare payments, finds a job that pays her $50 per week. Thus, half of what she earns, say $25, would be deducted from the welfare payments leaving her just a gain of $25. In addition to taxes being deducted on her current income, she also has to pay child care and commuting costs, as her productivity to the society increases. Thus, she gives on domestic productivity in order to be productive to the society, which renders her worse off, before she acquired the employment. Thus, this creates a perverse incentive for her to take up a job and move up the economic ladder. This forces her to stay in poverty.To qualify as a recipient under the social security test, the means test assess the assets and incomes of individuals. Such tests discourage savings among individuals and force them to be destitute and poor to qualify for such tests. Thus, this test deprives them of any savings, making it harder for them to escape poverty.

Further, it has also been argued that parental welfare participation may encourage the dependency of future generations.10 While welfare stigma can be seen as a deterrent to welfare participation, but a parent’s participation may lower their offspring’s distaste for welfare. Thus, the welfare children may feel less stigmatized as the deterrent effect of the stigma may become attenuated.11 Second, parent welfare participation may lower the labour market opportunities of offspring. Since the welfare parents are less attached to work or career, children from welfare homes may be less aware of proper on-the-job behaviour, may even lack job search skills, and may have fewer job contacts. Thus, fewer market opportunities ensues a greater risk of later welfare dependency. It has also been argued that people getting once on welfare rolls, often end up living in poverty.12 These two factors contribute to the welfare dependency of the future generations, miring the poor further into the welfare trap.

According to Charles Murray, a dependency theorist, the changes in social politics and programs changed the rules which structured the poor’s behaviour. According to Murray, such rules further led to the poor being mired further into the trap. Thus, these rules encouraged the poor families to take welfare even when an able-bodied male was present in the house and not working. Also, such rules encouraged the poor to work less than full time and maximize their combination of wages and welfare. These rules made a welfare-subsidized poverty existence more bearable and led to an increase in proportion of births to unwed teenage mothers and growth in the number of poor female-headed families. The researcher, in the next part, would try to look at the impacts of welfare trap on the family structures.

CHAPTER – 2

WELFARE TRAP AND ITS IMPACT ON FAMILY STRUCTURES

Welfare is both a consequence and a cause of several conditions best described as social pathologies. These may include: Poverty, Dependency, Out-of-wedlock births, unemployment, violent crimes etc.13 But, one of the biggest criticisms of the American welfare system is that it promoted single mother headed families and unwed motherhood.14 The American social security system started in the year 1935 by the Social Security Act. Named as the ADC (Aid to Dependent Children), it provided a subsidy to families with fathers who were deceased, absent or unable to work. While the law was not limited to families headed by widows, it was viewed as a means of extending help to these families, who had had the misfortune to lose a breadwinner and who, as it was widely believed, should not be forced to rely on the paid work of a mother, who belonged at home.15 Thus, ADC was to provide children with “assistance at least great enough to provide, when added to income of the family, a reasonable subsistence compatible with decency and health”.16 The 1935 Social Security Act was not the first government income support provided to the poor children in the United States. In most cases, ADC provided additional federal aid to state mothers’ pension programs, which were already assisting “deserving” poor lone mothers. Since the Federal ADC was contingent on state contributions, the states had the discretion to determine the eligibility and grant levels.17

Some states under the ADC would require the children to live in “suitable homes” to continue receiving assistance from the state. “Suitable homes” was a sort of moral scrutiny of the home receiving state assistance. For instance, in Louisiana, there were several grounds for unsustainability.18 These grounds would terminate aid to the dependent parent or the mother if the same would live with a member of the opposite sex as husband or wife without a ceremonial marriage existing. Assistance, in such a case could not be resumed unless the individuals living as husband and wife entered into a valid marriage or ceased their relationship. In other cases, where the mother in the home had given birth to an illegitimate child at any time in the past after having been the payee of public assistance at any time in the past, or a mother in the home was found to be illegitimately pregnant, her assistance would be terminated.19 In such a case, her aid would not resume unless she could prove that the illicit relationship had ceased and she was maintain a suitable home for her children. In some cases, welfare aid could be withdrawn from the parent on account of promiscuous conduct or cases where the child was being abused, neglected or exploited.20

Another factor taken into consideration for Aid to Families with Dependent Children (AFDC) was the man-in-the-house rule. In calculating the level of ADFC grant required to meet the cost of necessities, the state deducted the income and resources of the basic family unit from the state defined subsistence income figure.21 The basic family unit, as defined by the state, consisted of the mother and her dependent children. However, in some of the cases, the income of the members living with the basic family unit was also considered in calculating the grant of the family. Thus, when the welfare aid was calculated, it was conclusively presumed that the attributed income was actually available. Thus, it was assumed that another man had taken the place of an absent father with or without having married the AFDC mother.22

As a consequence of the same, when the state attributed the income of an individual living with an AFDC family member, it imposed a moral judgment as to the duty of the attributee. It was reasoned that if the attributee had not been contributing, the reduction in the budget resulting from attribution would force the mother either to exact payments or expel the attributee from the household.23 The attribution presumption also provided the ADFC mother a very strong incentive to conceal the presence of the attributee. Such concealment would have led to prosecution under the welfare laws, morally affecting the children and defeating the main purpose of AFDC. Consequently, the attribution doctrine precluded the development of meaningful family relationships, leading to break up of the existing relationships, and provided an incentive for dishonesty.24 In order to lighten the burden of welfare costs, many states in the United States adopted the so called “man-in-the-house” eligibility rules. Accordingly, these rules disqualified otherwise eligible ADFC families because of the mother’s often sporadic sexual relations with a given man. But the apex court in the US struck down the rule in the case of King v. Smith, where it held that the parent could not be an individual with no legal duty to support the children of the AFDC family. Thus, this requirement was used to exclude “undesirable families” from aid, particularly children of never-married or African-American mothers.25 The ADC subsidy, originally intended to allow mothers to stay at home to care for their children, now had unforeseen consequences.26

CHAPTER – 3

WELFARE AID AND DYSGENIC EFFECT

In 1984, Charles Murray in his book “Losing Ground: American social policy” suggested that welfare causes dependency.27 He further argued that the number of recipients increased as the welfare increased, since there is little reason to work in comparison to the high welfare benefits that they receive for a very long period of time.28 Charles Murray and Richard J. Herrnstein have suggested possible merit to the dysgenic effect.29 While Eugenics is defined as the “science which deals with all influences that improve the inborn qualities of a race or with those that develop them to the utmost advantage30, Dysgenics is defined as the study of factors that produce the accumulation and perpetuation of defective or disadvantageous genes and traits in the offspring of a particular species.

According to William Shockley, Nobel Prize winning physicist, social support systems designed to help the disadvantaged had a regressive effect.31 He argued that AFDC and other programs tended to encourage childbirth, especially among the less productive members of the society, thus causing this dysgenic effect.32 Shockley in 1965 made a statement at the Nobel conference on “Genetics and Future of Man” about the problem of “genetic deterioration” in humans caused by the “dysgenic effect” or “evolution in reverse”. Dr. Shockley suggested that the mankind faced a dysgenic threat. He believed that the least intelligent people (people who scored low on an IQ test) were reproducing more than the intelligent people (people scoring higher on the IQ tests), and, this backward evolution, threatened the very basis of the human civilization. Further, he was of the opinion that the Blacks (with lower IQs) were reproducing faster than the Whites (with higher IQs), and the blacks were devolving with lower IQs, they faced the prospects of serious, permanent degeneration. Charles Murray and Richard Herrnstein have argued that there is a relationship between IQ and educational attainment, and fertility falls with the rise in IQ in the three different ethnic groups.33 The two prongs of their argument were: One, there were different proportions of women of each ethnic groups at different IQ levels.34 Thus, as they illustrated, the proportion of Black Women as a percentage of whole was higher at the lower IQ levels in comparison to White women, given the fertility rates of both of them were the same. Accordingly, higher fertility rates of these women would have greater impact on the Black population than the whites.35 Second, they contended that better educated women of all ethnic groups postponed child bearing. And since, the whites had the highest proportion of college-educated women, who delayed child birth, the gap between the whites and other minorities was likely to increase. Murray and Herrnstein, thus, provided merit to the dysgenic effect, and how the Blacks faced the threat of degeneration.36

Further, it has also been argued that welfare assistance programs like AFDC encourage the participants to bear more children.37 It has been argued that in the absence of welfare, the ability of women to raise more children than her own income can support comes from the “option of marrying a man with higher earnings”.38 However, welfare may provide an acceptable alternative to marriage for low-wage women, who do not want to sacrifice enjoyment of children. It has also been contended that welfare can raise the probability of divorce for low wage women by decreasing the return to specialization in marriage and raising the level of consumption.39 Also, married women who would otherwise choose to remain childless may “insure” against the income risk of divorce by having a child, thus guaranteeing contingent eligibility for programs like AFDC. Thus, such programs encourage the participants to bear more children, while raising the probability for divorce. Thus, this would further provide merit to the dysgenic effect.

However, contrary to the views of Charles Murray, it has been pointed that there is no conclusive evidence to support the dysgenic effect.40 It has been argued that Murray and Herrnstein have placed too much reliance on the IQ test, without examining into detail the socio-economic status of the parents.41 Although, the advocates of dysgenic effect could not provide any convincing evidence of the same, the effect coupled with the repercussions of the welfare led to a reform in the AFDC in the year 1996. With the passing of the Personal Responsibility and Work Opportunity Act, AFDC’s successor Temporary Assistance for Needy Families (TANF) came into existence. TANF, arguably, was a revamped version of the AFDC in terms that it limited the period for aid to a maximum of 60 months, where the person on aid had to find a job within 24 months of applying.

CONCLUSION

Welfare aid certainly has a lot of repercussions and probably this galvanized the American legislature into passing the Personal Responsibility and Work Opportunity Act, and replacing AFDC with Temporary Assistance to Needy Families (TANF). Thus, as per the findings of this paper, welfare leads to a lot of unintended consequences, which might work against the sole purpose of such aid to the general public. The researcher has, in the first chapter, concluded that, the welfare trap ensnares the participants, which often leads to loss of productivity of the individual and for the society since the participants feel better off not working. Further, participants give up on their savings to get the maximum benefits, thus, reducing their odds of coming out of this trap. Further, the researcher has concluded that the welfare scheme led to break-ups of existing relationships, and provided disincentives for getting married again. Various rules such as “suitable home” and “man-in-the-house” rule enacted by states in the US led to such consequences. In the third and final chapter, the researcher has tried to look at the dysgenic effect, as has been argued by Nobel Prize winning physicist William Shockley. The researcher, in this part of the project, has concluded that, although various authors have provided merit to the claims made by William Shockley regarding the threat of degeneration of blacks, there has been no conclusive evidence that suggests the same. The claims made in the book: “Bell curve: Intelligence and Class structure in American Life”, rely solely on the level of IQs in various communities, but fail to take into consideration a host of other factors.

Thus, to conclude, there have been several unintended consequences of welfare aid in different countries, which has led to the welfare trap. Individuals often find it difficult to cut their way through this morass, which often has serious implications on the family structure, making people more dependent on the welfare aid, trapping them further in this mire.

Endnotes:

Richard Hoefer, ADVOCACY PRACTICE FOR SOCIAL JUSTICE, 20 (2006).

WELFARE ‘TRAPPING’ PEOPLE IN POVERTY SAYS DUNCAN SMITH (May 27, 2010) available at: http://news.bbc.co.uk/2/hi/uk_news/politics/8707652.stm (Last visited on May 10, 2015).

Patrice Hill, Welfare to work law encourages low wages, raises dependency on federal benefits, THE WASHINGTON TIMES (November 3, 2013) available at: http://www.washingtontimes.com/news/2013/nov/3/welfare-to-work-law-encourages-low-wages-increases/?page=all (Last visited on May 10, 2015).

Nancy Fraser and Linda Gordon, A Genealogy of Dependency: Tracing a Keyword of the U.S. Welfare State, 19(2) CHICAGO JOURNALS 309,336 (1994).

Necati Celik, A different look at the welfare trap: Institutional Causes and remedies

Charlie Weston, Welfare trap is Stopping people from taking jobs (August 27, 2013) available at: http://www.independent.ie/irish-news/welfare-trap-is-stopping-people-from-taking-jobs-29529657.html

Sanford F. Schram, J. Patrick Turbett and Paul H. Wilken, Child poverty and Welfare Benefits: A Reassessment with State Data of the Claim that American Welfare Breeds Dependence 47(4) AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY 409,422 (1988).

John J. Antel, The Intergenerational Transfer of welfare Dependency: Some Statistical Evidence, THE REVIEW OF ECONOMICS AND STATISTICS 74(3) 467,473 (1992).

Angus Whitley, WELFARE TRAP FOR AUSTRALIA DISABLED PUSHES HALF TO POVERTY: JOBS (April 3, 2014) available at: http://www.bloomberg.com/news/articles/2014-04-02/welfare-trap-for-australia-disabled-pushes-half-to-poverty-jobs (Last visited on May 10, 2015).

William A. Niskanen, Welfare and the Culture of Poverty 16(1) CATO JOURNAL (1996).

Susan W. Blank, Barbara B. Blum, A Brief history of Work Expectations for welfare mothers 7(1) THE FUTURE OF CHILDREN WELFARE TO WORK (1997).

Catherine S. Hilam, Welfare reform: The family support Act in historical context 66(3) SOCIAL SERVICE REVIEW 349,377 (1993).

Linda Gordon, PITIED BUT NOT ENTITLED: SINGLE MOTHERS AND THE HISTORY OF WELFARE (1994).

C. Brown, PUBLIC RELIEF 1929-39, 309 (1940).

The “Suitable-home” Requirement, 35(2) SOCIAL SERVICE REVIEW 203,206 (1961).

AFDC Income attribution: The Man-in-the-house and Welfare Grant Reductions, 83(6) HARVARD LAW REVIEW, 1370,1386 (1970).

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Charles A. Murray, and Richard Herrnstein, THE BELL CURVE INTELLIGENCE AND CLASS STRUCTURE IN AMERICAN LIFE (1994).

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Warranties on goods

INTRODUCTION

Goods come with certain warranties, which if breached give right to the buyer to avail of certain remedies under the Sale of Goods Act, 1930. These warranties, their breach and the remedies so available are the subject matter of this paper.

The paper begins with a definition of warranties. The researcher both defines warranty and distinguishes it from condition. The researcher also distinguishes between a breach of a warranty given under Section 12(2) and a breach of a condition treated as a breach of warranty given under Section 13(2). The researcher moves on to the circumstances in which a warranty or a condition treated as a warranty may be breached and remedy for the same. The researcher discusses Section 59 of the Sale of Goods Act, 1930, which covers the remedy in case of breach of warranty. This is followed by a comparative analysis of the provisions for remedy for breach of warranty given under the Indian Sale of Goods Act and the English Sale of Goods Act. The researcher analyses the method for computation of damages under the Indian law and under the English law.

The researcher then engages in an analysis of remedy for breach of warranty of quality. The methods to be employed for the quantification are discussed with illustration. Immediately follows an analysis of when breach of condition is treated as a breach of warranty. The researcher then shifts his focus to when the condition of goods being of a particular description is breached and when the condition of goods being fit for a particular purpose is breached. The researcher also looks into some nebulous issues when dealing with breach of condition of goods being fit for particular purpose. He looks at the rights of the buyer to claim damages from the seller on account of the damages paid to the sub-buyer. The jurisprudence behind the issue is thoroughly perused. In conclusion, the paper ends with a discussion of the duties of the buyer if s/he is to successfully avail the remedy for breach of warranty.

DEFINING AND DISTINGUISHING A WARRANTY

The Sale of Goods Act, 1930 defines a warranty as- “A warranty is a stipulation collateral to the main purpose to the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.[1] To understand the concept of warranty better, it must be seen in contradistinction to how a condition is defined under the statute. The Sale of Goods Act defines a condition as- “A condition is a stipulation essential to the main purpose to the contract, the breach of which gives rise to right to treat the contract as repudiated.[2] Two major distinctions between a warranty and a condition become apparent here. First, a warranty is a stipulation which is collateral to the main purpose to the contract whereas a condition is a stipulation which is essential to the main purpose of the contract. Second, a breach of warranty gives rise to a right to only claim for damages but not to a right to reject the goods whereas the breach of a condition gives rise to a right to treat the contract as repudiated.

There may be circumstances, where the buyer may elect or be compelled to treat the breach of a condition as a breach of warranty. The first scenario is when the buyer may her/himself elect to treat the breach of a condition as a breach of a warranty.[3] The second such scenario will be when the buyer has accepted the goods or part of them voluntarily in such a way so as to preclude himself from exercising his right to reject them, he must treat the breach of condition as a breach of warranty.[4] It ought to be noted here that in most cases the warranty under scrutiny is not a warranty as defined under Section 12(2) but a condition being treated as a warranty under Section 13(2) of the Sale of Goods Act.[5] The task of distinguishing between a condition and a warranty is primarily of determining the intention of the parties.[6] When dealing with warranties, it has to be always kept in mind that a warranty can exist only when the subject matter of the sale is ascertained and existing.[7]

The quintessential example of when a breach of condition could be treated as a breach of warranty can be found in Svenska Handelsbanken v. M/s. Indian Charge Chrome and others.[8] In this case, the breach of condition of the capacity of the power plant being 108 megawatts was treated as a breach of warranty. The plaintiff did not repudiate the contract and kept working with the power plant. Even the prayer in the plaint was for diminution of the price of the power plant and hence in this case the plaintiff had elected to treat the breach of condition as a breach of warranty.[9]

BREACH OF WARRANTY AND REMEDY FOR THE BREACH

Breach of condition or warranties may be relating to title to the goods, quality, merchantability, description and fitness of the goods.[10] The remedy for breach of warranty is provided under Section 59 of the Sale of Goods Act, 1930. As this section forms the core subject matter of this paper, it would be expedient to reproduce the text of Section 59. Section 59 reads as follows-

59. Remedy for breach of warranty.- (1) Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may-

  1. a) Set up against the seller the breach of warranty in diminution or extinction of the price; or
  2. b) Sue the seller for damages for breach of warranty.

(2) The fact that a buyer has set up a breach of warranty in diminution or extinction of the price does not prevent him from suing for the same breach of warranty if he has suffered further damage.

Section 59 does not deal with cases of fraudulent misrepresentation, which may enable the buyer to set aside the contract nor with cases where by the express terms of the contract the buyer may return the goods in case of a breach of warranty.[11] Remedy in such cases will be better provided under Sections 57 and 61 of the Sale of Goods Act. Here it can clearly be observed that Section 59(1) is in complete harmony with Sections 13(1) and (2) of the Sale of Goods Act. In the case of a breach of warranty, it is the right of the buyer to elect to affirm the contract and have resort to the right of damages.[12] The buyer may in exercise of her/his right of election choose to treat the breach of a condition as a breach of warranty and such election will be backed by Section 59. But as stated earlier, where a buyer may have accepted the goods, thus being compelled to treat a breach of a condition as a breach of warranty, her/his remedy would be limited to suing only for damages under Section 59.[13]

Generally there are four remedies that can be claimed when a warranty is breached by the seller. These remedies are as follows-

  1. The buyer may claim a deduction from the price if the loss occasioned by the breach of warranty is less than the price; or,
  2. The buyer may refuse to pay the price altogether, if the loss equals the price; or,
  3. If the loss exceeds the price, the buyer may not only refuse to pay the price, but also claim the excess; or,
  4. The buyer may pay the price in all these cases, and sue the seller for damages for the breach of warranty.[14]

Sub-Section (2) clearly indicates that the right to claim damages is in addition to the right to claim diminution or extinction of the price, whichever may be the case.[15] This clearly indicates that the right to damages is in addition to and not in derogation of the right to diminution or extinction of the price.

Section 59, as regards the question of damages is based on the principle of restituo in integrum as the section intends to restore the parties to the original position they were in before entering the now-breached contract.[16] The buyer is recompensed for the monetary loss incurred owing to the breach of warranty. The fact that the quantum of compensation would be decided on the basis of actual loss and would be set off against the price also ensures that the terms of the restoration are fair for the seller too.

DAMAGES FOR BREACH OF WARRANTY

Here, a comparative analysis of the provisions of the Indian Sale of Goods Act, 1930 and the English Sale of Goods Act, 1979 becomes highly useful. Whereas the Indian statute on sale of goods provides no method to compute damages in case of breach of warranty, the English statute provides for a method to compute the damages. Section 53 of the English Act is in pari materia with Section 59 of the Indian Act. Over and above what is provided for under Section 59, Section 53 also provides for a method for quantification of damages in sub-Sections (2) and (3). Sub-Sections (2) and (3) of the English Act are as follows-

2. The measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty.[17]

  1. In the case of breach of warranty of quality such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.[18]

In all of the modern commonwealth statutes on the sale of goods, for instance, the Singaporean Sale of Goods Act, 1999, sub-Sections for computation of damages have already been inserted. Much like the English Sale of Goods Act, the Singaporean Sale of Goods Act provides for remedy for breach of warranty under Section 53 and the provisions are in pari materia. This raises a question as to why provisions for measure of damages were not included in the Indian Sale of Goods Act. A probable answer to this could be that the legislature at that time thought that damages could well be governed by Section 73 of the Indian Contract Act.[19] Thus the measure of damages would be the loss or damage directly and naturally resulting in the usual course of things from the breach of warranty.[20] It cannot be argued that the reason for absence of such clause for measurement of damages is the antiquity of the Indian Act, as the clause for measurement of damages was present in the original English Sale of Goods Act, 1893. Thus, the former explanation seems a reasonable one.

Sub-Section (3) of the English Act concerns itself with the breach of warranty of quality. Even though the Indian statute has no similar provision, the cases have been decided along the principles set down in the aforementioned sub-Section. In the case of a breach of warranty of quality, the presumption is that the damages are equal to the difference between the actual value of the goods at the time of the delivery and the value they would have been of had they been in accordance with the terms of warranty.[21] But, where the claim is based on loss of profit, it should be calculated either by quantifying the difference between the price of the goods and the value of the goods as provided and accepting the claim only insofar as it is in excess of the amount.[22] Both the values discussed above are to be taken at the contractual date and delivery time of unless the circumstances warrant taking the value as of a later date.[23]

The buyer has an option to split up her/his total claim for damages into one for general damages in diminution or extinction of the price and the other for special damages for which s/he can bring a separate action.[24]

BREACH OF WARRANTY OF QUALITY AND REMEDY FOR THE BREACH

When it comes to breach of warranty of quality, “the presumption is that the damages would be the difference between what the goods are intrinsically worth at the time of delivery and what they would have been worth, if they would have been according to the contract”.[25] This difference is to be determined according to the market price at that time.[26] The best illustration of the breach of warranty of quality and the remedy for the same can be found in the matter of Dingle v. Hare. In this case the plaintiff had bought 20 tons of superphosphates guaranteed to contain 30 per cent of phosphate of lime at 5l. 5s. a ton but the lime content was actually lower and the superphosphates were valued at 2l. 2s. a ton. The damages were awarded at 3l. 3s. a ton.[27]

Though the date of delivery is the usual date at which the difference between the two values is to be fixed, circumstances may exist which render it necessary to take a later date.[28] Good evidence can be obtained of the difference in value if the actual damaged goods are sold with all faults.[29] The prevalent practice to deal with such cases is by way of a price allowance.[30]

Breaches of other warranties are governed by the general rule, given under Section 73 of the Indian Contract Act.[31]

BREAHCES OF CONDITIONS AS BREACHES OF WARRANTIES

The breach of condition as a breach of warranty can best be understood through the case of City & ID Corpn of Maharashtra Ltd v. Nagrenu Steel & Alloys Ltd.[32] In this case, the plaintiff was to supply to the defendant a certain quantity of mild steel round bars and cold twisted deformed bars. The seller was obliged to test the goods from some government institution and to despatch the test certificate. The last two bills were detained on the ground that some of the goods supplied were oversized. The seller argued that the buyer accepted the supplies without any protest despite knowledge and even the intention to treat the breach of condition as breach of warranty did not exist. The Court held that the buyer has failed to treat the breach of condition as breach of warranty. Remedies under Section 59 are not absolute and cannot be resorted to at any point or strategic point suitable to the buyer.[33] Thus, the Court held that the seller did not commit breach of contract but there was breach of warranty and damages were accordingly awarded.

  1. GOODS NOT ANSWERING TO THE DESCRIPTION-

When the buyer treats the breach of condition that the goods should answer to the description as a breach of warranty, the damages are not limited to those which follow from the breach of warranty of quality but are governed by the general rule laid down in Section 53(2) of the English Sale of Goods Act, that is, the estimated loss.[34] It is to be noted that the rule laid down in Section 53(2) of the English Act is alike that laid down under Section 73 of the Indian Contract Act and hence the effect of the application of the rule in the Indian context would substantially be the same.

This principle could best be understood through the case of Bostock & Co Ltd v. Nicholson & Sons Ltd.[35] In this case, the plaintiffs bought sulphuric acid which ought to have been commercially free from arsenic according to the description for the purpose of manufacturing glucose. The description later proved to be erroneous. It was held that the plaintiffs were entitled to recover the price of the acid and also damages representing the value of materials spoilt on account of mixing with the acid. However, the Court stopped short of awarding damages to the plaintiffs for the people who drank the beer made with the glucose supplied by the plaintiffs. The damages in this case were considered to be too remote.[36]

Thus, when the condition that the goods should correspond with a certain description is breached and treated as a warranty, the damages should in the ordinary course of things flow from that particular breach. If the consequences result exclusively from the breach in a usual state of things, they are ordinary and natural consequences of the breach and the defendant will be held liable.[37]

  1. GOODS NOT FIT FOR THE PURPOSE FOR WHICH THEY WERE SOLD-

Where there is a breach of warranty that the goods should be fit for a particular purpose, the damages should be such as naturally flow from the breach. The most famous case under this category is that of Jackson v. Watson & Sons.[38] In this case, the plaintiff’s wife died after eating tinned salmon which was bought from the defendant. Thus, this was a clear-cut case of breach of warranty that the tinned food should be fit for consumption by humans, and the plaintiff was entitled to recover expenses incurred for medical attendance on her, for her funeral as also a sum to compensate him for no more being able to avail of her services.[39] Also, the mere fact that damages cannot be assessed with certainty or precision will not relieve the buyer of his liability to pay damages for the breach of warranty under Section 59 of the Indian Sale of Goods Act.[40]

Now comes up an interesting issue. Where the buyer buys goods as being fit for a particular purpose, and re-sells the goods with the same warranty, and owing to the warranty being untrue, has to pay damages to the buyer, the situation becomes somewhat peculiar.[41] It may seem like that such damages flow naturally from the breach of warranty, and therefore it is irrelevant whether the original seller had positive or constructive knowledge whether the buyer intended to re-sell the goods. However, the courts have stressed the fact in such cases the resale by the buyer is within the contemplation of parties to the original sale.[42] Thus it appears that the case will fall not within the first rule but the second rule laid down under Section 73 of the Indian Contract Act.[43]

Hammond v. Bussey was argued and dealt with on this assumption.[44] There the contract was for steam coal fit to be used in steamers, and the seller knew that the buyer required it for the purpose of reselling. The coal was not fit for that purpose and the buyer had to pay damages to his sub-buyer in consequence. The issue was whether the buyer could recover the costs incurred by him in defending the action brought against him by the sub-buyer. It was held that he could as he had acted reasonably.[45]. The buyer had stood in the place of the seller while defending the fitness of the goods and hence a quasi-contractual relationship had been created. Also, the finding that sub-sale was to be taken as in the contemplation of the parties, exists in all cases where the buyer had been held entitled to recover damages which he has become liable to pay to the sub-purchasers.[46]

However, this hair-splitting distinction appears futile in most cases.[47] Even in case of breach of other conditions, the buyer may recover from the seller the damages and costs to which he may have become liable for in an action by the sub-buyer.[48]

DUTIES OF THE BUYER

The most important duties of the buyer are that the buyer should rely on the warranty and act reasonably.[49] A plaintiff is not entitled to recover the costs of defending an action if it is obvious that there is no defence to it. Also, if by the exercise of reasonable care he could have ascertained before reselling that the warranty was broken, he resells at his own peril.[50] Even if the buyer acquires the knowledge about the defect after the sub-sale is effected by him, he is not absolved from notifying the defect to the sub-buyer to enable the sub-buyer to avoid further loss or damage which may be caused due to such defect.[51] However, a buyer is not obliged to mitigate the damage by taking actions which he might be required to do under strict law but which would have severe repercussions for his business.[52]

CONCLUSION

This paper looked into the issue of breach of warranty and remedy for the same. The researcher began by defining a warranty and distinguishing it from a condition. A breach of condition gives the buyer the right to reject the goods; a breach of warranty does not.A buyer may also elect to treat a breach of condition as a breach of warranty or s/he may be compelled to treat a breach of condition as a breach of warranty. Whether a stipulation is a warranty or a condition depends on the intention of the parties.

A warranty or a condition may be breached with regard to title to the goods, quality, merchantability, description or fitness of goods. Section 59 of the Sale of Goods Act, 1930 provides for remedy in case of breach of warranty. The buyer may set up the breach of warranty in diminution or extinction of price or may claim damages for the breach. The right to claim damages is an additional right and not an alternative to the right to set up the breach in diminution or extinction of the price. Section 59 is based on the principle of restituo in integrum.

Section 53 of the English Sale of Goods Act is in pari materia Section 59 of the Indian Sale of Goods Act. Section 53 also provides for measure of damages, something Section 59 does not, because damages in cases of breach of warranty in the Indian context are provided for under Section 73 of the Indian Contract Act. Cases on breach of warranty of quality in India are decided under the same common law principles, as is evident from case law analysis.

In cases of breach of warranty of quality, there is a presumption that the damages are the difference between the intrinsic value of the goods and what the value of the goods would have been had they answered to the warranty. Both the values are to be taken at the time of delivery, but this may not always be the case and facts and circumstances of each case ought to be taken into account. When it comes to breach of condition of goods answering to the description treated as a breach of warranty, the damages are governed by Section 73 of the Indian Contract Act. The damages should be such as naturally and ordinarily flow from the breach. When there is a breach of condition that goods are fit for a specific purpose, and when this is treated as a breach of warranty, the damages should be such as which are the natural consequences of the breach. In cases where the resale by the buyer is in contemplation of the original parties, the case will not fall within the first rule but second rule under Section 73.

It is the duty of the buyer to rely on the warranty and to act reasonably. If the buyer knows that the warranty has been broken, he resells at her/his own peril. Even after the sale has been effected, the buyer has a duty to notify the defect to the sub-buyer. However, only a reasonable standard of care is to be applied by the buyer and s/he need not take extraordinary precaution which might be detrimental to her/his own business. Thus concludes the discussion on the breach of warranty and its remedy.

[1] Sec. 12(3), The Sale Of Goods Act, 1930.

[2] Sec. 12(2), The Sale Of Goods Act, 1930.

[3] Sec. 13(1), The Sale Of Goods Act, 1930.

[4] Sec. 13(2), The Sale Of Goods Act, 1930.

[5] T.S. Venkatesa Iyer, The Indian Sale Of Goods Act And The Indian Partnership Act, 134 (S. Venkataraman et al eds., 4th edn., 1984).

[6] L. K. Seng, Retreat of Continuing Warranties?, 9 Singapore Academy Of Law Journal 139, 147 (1997).

[7] Kanak Kumari v. Chandan Lall, AIR 1955 Pat 215 (Patiala High Court).

[8] Svenska Handelsbanken v. M/s. Indian Charge Chrome and others, AIR 1994 SC 626 (Supreme Court of India). [“Indian Charge Chrome case”]

[9] Indian Charge Chrome case, AIR 1994 SC 626, 645.

[10] Sir D. F. Mulla, The Sale Of Goods Act And The Indian Partnership Act, 131 (10th edn., 2012).

[11] Sir D. F. Mulla, and Sir F. Pollock, Sale Of Goods Act, 418 (Ramamoorthy ed., 6th edn., 2005).

[12] Seng, supra note 8, at 146.

[13] Commissoner of Inome Tax v. Prafulla Kumar Mallik, AIR 1969 Ori 187, 189-190 (Supreme Court of India).

[14] Mulla, supra note 10, at 131.

[15] Mulla, supra note 10, at 132.

[16] L. C. Sian, Damage For Breach of Contract For Sale of Goods, 13 Singapore Academy Of Law Journal 135, 146 (2001).

[17] Sec. 53(2), Sale of Goods Act, 1979.

[18] Sec. 53(3), Sale of Goods Act, 1979.

[19] Mulla, supra note 10, at 131.

[20] Sec. 73, Indian Contract Act, 1872.

[21] Mangilal v. Shantibai, AIR 1956 Nag 221 (Nagpur High Court).

[22] Cullinane v. British Rema Manufacturing Ltd., (1953) 2 All ER 1257 (Court of Queen’s Bench).

[23] Van Der Hurk v. R. Martens, (1920) 1 KB 850 (Court of King’s Bench).

[24] P.R. Aiyar, Law Of Sale Of Goods, 376 (S. Gupta ed., 9th edn., 2010).

[25] Dingle v. Hare (1859) 7 CBNS 145 (Common Bench).

[26] Pollock, and Mulla, supra note 11, at 423.

[27] Dingle v. Hare (1859) 7 CBNS 145 (Common Bench).

[28] Loder v. Kekule (1857) 3 CBNS 128 (Common Bench).

[29] Pollock, and Mulla, supra note 11, at 424.

[30] Biggin & Co Ltd v. Permantie Ltd [1951] 1 KB 422(Court of King’s Bench).

[31] Pollock, and Mulla, supra note 11, at 424.

[32] City & ID Corpn of Maharashtra Ltd v. Nagrenu Steel & Alloys Ltd, AIR 1992 Bom 55 (Bombay High Court). [“CIDCO case”]

[33] CIDCO case, AIR 1992 Bom 55.

[34] Bostock & Co Ltd v. Nicholson & Sons Ltd [1904] 1 KB 725 (Court of King’s Bench).

[35] Bostock & Co Ltd v. Nicholson & Sons Ltd [1904] 1 KB 725 (Court of King’s Bench).

[36] Bostock & Co Ltd v. Nicholson & Sons Ltd [1904] 1 KB 725 (Court of King’s Bench).

[37] Wilson v. Dunville (1879) 6 LR Ir 210, 217.

[38] Jackson v. Watson & Sons [1909] 2 KB 193 (CA) (Court of King’s Bench).

[39] Jackson v. Watson & Sons [1909] 2 KB 193 (CA) (Court of King’s Bench).

[40] Port of Calcutta v. West Bengal Corpn Pvt Ltd, AIR 1979 Cal 142, 151 (Calcutta High Court).

[41] Pollock, and Mulla, supra note 11, at 430.

[42] Pollock, and Mulla, supra note 11, at 430.

[43] Pollock, and Mulla, supra note 11, at 430.

[44] Hammond v. Bussey [1887] 20 QBD 79 (CA) (Queen’s Bench Division).

[45] Hammond v. Bussey [1887] 20 QBD 79 (CA) (Queen’s Bench Division).

[46] Pollock, and Mulla, supra note 11, at 431.

[47] Pollock, and Mulla, supra note 11, at 431.

[48] Pollock, and Mulla, supra note 11, at 433.

[49] Dobell & Co v. Barber & Garatt [1931] 1KB 219 (CA) (Court of King’s Bench).

[50] Wrightup v. Chamberlain (1839) 7 Scott 598.

[51] Biggin & Co Ltd v. Permanite Ltd [1951] 1 KB 422, 435 (Court of King’s Bench).

[52] Finlay v. Kwik Hoo Tong [1929] 1 KB 400 (CA) (Court of King’s Bench).

Picture can be found at: https://www.bittel.bg/web/files/public/clauses-pics/new/garancionni-uslovija/22033031-%5Bconverted%5D-1-500×273.jpg

Legalization of Medical Marijuana in India – The case in favour of cannabis

Legalization of Medical Marijuana in India

More States are passing laws to legalize trade, consumption and possession of Marijuana. Of late, a few states have legalized medical marijuana and have realized its uses in therapeutics. India passed Narcotic Drugs and Psychotropic Substances Act in 1985 thereby vigorously curtailing and regulating trade, possession and cultivation of narcotics, cannabis being one of them. However, since cannabis sativa is available in India without any hitch, therefore it is strenuous for police to regulate its consumption and trade.

In this paper, I aim to establish why medical marijuana should be legalized in India. In order to prove my hypothesis of legalization of medical usage of Marijuana in India, I have looked into the salubrious effects of Marijuana and how these effects help in ameliorating mental health of an individual. Furthermore, I have analyzed laws related to legalization of Marijuana across the globe by citing examples of the United States of America, the Netherlands and Uruguay. Lastly, I have taken considered the fact that similar to opium, the government can assume ‘responsible drug policy’ and limit growth and usage of Marijuana and this entire regulated activity shall not only curtail trade of adulterated Marijuana but also generate revenues.

The term medical marijuana refers to using the whole unprocessed marijuana plant or its basic extracts to treat a disease or symptom[i]. Marijuana plant contains chemicals, for example, THC (Tetrahydrocannabinol) that can be beneficial to treat a range of illnesses or symptoms. Of late, there has been advancement of Marijuana laws in several legal systems. Countries like Uruguay and the Netherlands (bars trade in marijuana) have legalized Marijuana in totality; several nations have taken a leap by recognizing the medicinal use of Marijuana.

Global Analysis of Legality of Marijuana

Since 1996, 23 American states, such as Colorado, Alaska and Puerto Rico have legalized medical cannabis as well as recreational use of cannabis. States have legalized marijuana despite the fact that possession or consumption of marijuana is an offense under Federal law.

Economic Benefits of Legalizing Marijuana

 Legalizing Marijuana not only has health benefits but also economic gains. Colorado and Washington have been taxing Marijuana heavily.  Both Washington and Colorado charge a 25 percent tax on pot sales, with even higher rates in some municipalities. The non-partisan Tax Foundation has estimated that Colorado will bring in nearly $70 million in new taxes[ii].

Similarly, Netherlands has generated almost $600 million in marijuana sales[iii]. Marijuana is now the third most exported crop in the Netherlands. If we take large number of cancer and mental health patients in India, it can be estimated that India shall also generate humongous amount of revenues by legalizing medicinal marijuana. .

Austria, Canada, Italy and Portugal etc. also permit the medical use of Cannabis.

Medicinal Use of Marijuana

Medicinal form of marijuana is not only effective in relieving pain arising from chemotherapy but also from long term-conditions such as glaucoma and nerve pain. Doctors, in the state where marijuana has been legalized, have been using it to treat muscle spasms caused by multiple sclerosis, effects of contagious viruses such as HIV, seizure etc[iv]. Though the human body synthesizes chemicals similar to marijuana, marijuana sometimes help those natural chemicals work better. Medical marijuana is inhaled, smoked, eaten or taken as a liquid extract. However, it at times causes dizziness, drowsiness, short-term memory loss and euphoria. These symptoms are generally short lived however; there are more serious side effects too which includes psychosis and anxiety[v].

Moreover, the U.S. Food and Drug Administration (FDA) has not recognized or approved the marijuana plant as a pharmaceutical. However, FDA’s disproval of medicinal marijuana has not come in the way of its legalization. FDA requires clinical studies in large number to determine risks and benefits of marijuana as a recreational drug and this has not happened so far[vi]. Though organizations like the American Academy of Pediatrics, Minnesota Medical Association and the American Society of Addiction Medicine have not affirmed the therapeutic use of cannabis plant due to lack of proper research in this field. However, they have not discarded medical efficiency of THC which is an active chemical in Marijuana[vii].

Laws pertaining to Marijuana in India

Possession, consumption and trade in Marijuana are illegal in India under Narcotic Drugs and Psychotropic Substances Act, 1985 and Prevention of Illicit Trafficking in Narcotic Drugs and Psychotropic Substances Act, 1985. NDPS was passed to satisfy India’s treaty obligations under the United Nation’s Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.

Though the act was amended in 2014 and the government adopted a new category of ‘essential narcotic drugs[viii]. However, cannabis was not included in the same. The 2014 amendment has broadened the object of the bill. Now, it is to prevent illicit use of drugs and to also promote the medical and scientific use of narcotic drugs and psychotropic substances[ix]. This 2014 amendment has opened the way for research and medical use of marijuana. However, NDPS is a penal statute, therefore, any step in legalization of Marijuana shall have to be affirmed by the Parliament.

Almost 1-2 percent of India’s population suffers from major mental disorders and 5 percent of Indians have minor depressive disorders[x] One in every four Indian is affected by anxiety disorder[xi]. Marijuana has known to treat the symptoms of anxiety and depression patients. Every year over seven lakh cancer patients are registered in India and almost three million Indians have cancer[xii]. Chemotherapy is one of the most effective treatments to contain rapid growth of malignant cells. However, one of the side effects of chemotherapy is extreme pain. Legalization of marijuana for medicinal use in India shall not only help these cancer patients to mitigate pain from chemotherapy but shall also be a less expensive and better choice when contrasted with sedatives and analgesics.

Adoption of ‘Responsible Drug Policy’

Drug laws in India are archaic and outmoded. NDPS is not only extremely harsh but also too ideal to be effective. The minimum sentence for drug dealing is 10 years and a fine of Rs 1 lakh. However, the minimum punishment for rape in India is seven years.

Drugs and laws, together, engage a genuine question of civil liberty, health and equity in a cardinal way that cannot be disregarded and regulated by archaic and utopian laws. It is high time that the government relaxes the provisions of NDPS with respect to medicinal usage of Marijuana.

Instead of taking up a rehabilitative approach against the offenders, the act takes retributive approach thereby severely negating the human rights of an individual and his odds to rehabilitate.

Taking example of cultivation of Opium in India, in which alkaloid morphine is an active ingredient, is not only freely licensed but is also used for medicinal purposes.  Because of the responsible usage and curtailment by Government, Opium not only generates revenues for the government but also is imported globally as a medicine. Restrictive usage of Opium has led to availability of unadulterated Opium grown by licensed farmers.

The 2014 amendment of the NDPS has paved a way for Government to cultivate and commercialize Marijuana as a medicine. Like Opium, the legislators can come up with a restrictive and responsible policy for consumption, trade and usage of Marijuana as a medicine. This shall not only help several mental health and cancer patients but shall also be available in unadulterated form. Apart from this, certain parts of India are geographically suitable to grow good quality cannabis. By legalizing medicinal usage of Marijuana, there will be curtailment of illicit trade and consumption of marijuana and also, government will be able to generate revenues from trading it. .

 By adopting a ‘responsible drug policy’, the government can take a step further and legalize medicinal usage of Marijuana.

[i] What is Medicinal Marijuana? Retrieved from https://www.drugabuse.gov/publications/drugfacts/marijuana-medicine.

[ii] Shane, Scott. Why Colorado and Washington Were Wise to Legalize Pot? Retrieved from https://www.entrepreneur.com/article/230942.

[iii] Europe: Dutch Marijuana Tax Revenues at $600 Million a Year, Crop Is Country's Third Largest Export. Retrieved from http://stopthedrugwar.org/chronicle/2008/may/09/europe_dutch_marijuana_tax_reven.

[iv] Welsh Jennifer and Loria Kevin. 23 Medical Uses of Marijuana. Retrieved from http://www.businessinsider.in/23-Medical-Uses-Of-Marijuana/articleshow/34015633.cms?format=slideshow.

[v] Payne, Cathy and Healy Michelle. Marijuana’s Health Effects: Memory Problems, Addictions. Retrieved from http://www.usatoday.com/story/news/nation/2012/12/06/nih-marijuana-effects/1751011/

[vi] ibid.

[vii] American Society of Addiction Medicine Rejects Use of 'Medical Marijuana,' Citing Dangers and Failure To Meet Standards of Patient Care. Retrieved from http://www.prnewswire.com/news-releases/american-society-of-addiction-medicine-rejects-use-of-medical-marijuana-citing-dangers-and-failure-to-meet-standards-of-patient-care-118534464.html.

[viii] http://www.prsindia.org/billtrack/the-narcotic-drugs-and-psychotropic-substances-amendment-bill-2011-1988/

[ix] Parliament Passes the NDPS(Amendment) Bill, 2014: many gains; some losses. Retrieved from http://www.lawyerscollective.org/updates/parliament-passes-ndps-amendment-bill-2014-gains-losses.html.

[x] Jha, Neeti. High Anxiety. April 13, 2014. Retrieved from http://www.newindianexpress.com/magazine/High-Anxiety/2014/04/13/article2161024.ece.

[xi] Iyer, Malathy. One of Every Fpur Indians Affected by Anxiety Disorders, 10% are Depressed. Oct 6, 2013. The Times of India. Retrieved from http://timesofindia.indiatimes.com/home/science/One-of-every-four-Indians-affected-by-anxiety-disorders-10-are-depressed/articleshow/23599434.cms.

[xii] Retrieved from http://cancerindia.org.in/cp/index.php/know-about-cancer/statistics.

Criminal Liability for Cyber Crimes

Introduction

Cyber infrastructure has been increasing at an exponential rate ever since its inception. This compound increase in the number of devices connected with the network and the sheer size of the internet presents multiple challenges. As a consequence of exponential pace of increment and giant size of the network, traditional notions of criminal liability are incapable of being applied in their entirety. This problem is further enhanced by the complex interaction between computers and the humans.

In this paper I have established criminal liability for the cyber offences pertaining to divulgence of personally identifiable information. I have shown that such an act attracts all the elements of criminal liability and hence is a criminal offence. For the same, I have primarily proved the fundamental elements of criminal liability. Secondly, I analyse the nature of cyber offences and establish the different types of cyber offences and difficulty in assessing them against the standard parameters of criminal liability. Thereafter I develop the basic understanding of Personally Identifiable Information and assess them against the elements of criminal liability. Using this assessment and the concept of mala in se offences, I argue that the stated offence must be treated as criminal in nature and criminal sanctions must be imposed for the same.

Criminal liability for a Crime

In this chapter I elaborate upon the fundamental elements comprising criminal liability. I will primarily focus on fundamental principles of criminal liability and give a philosophical perspective of liability for a crime. Thereafter I will trace the existence of fundamental tenants of criminal liability in the statutory provisions applicable in India. Lastly I will also look at understanding of the criminal liability developed by way of case laws.

Philosophy of criminal liability

All criminal liability in common law evolves out of the Latin maxim ‘actus non facit reum nisi mens sit rea’, which means that an act is in itself not an offence until the same is not accompanied by a guilty mind.[1] Hence for a crime to be there, there must be an act (actus reus) accompanied with mental element (mens rea) to do the same. Further, the criminal act must directly result in harm or the chain of events originating from the act should directly result into the harm.[2] This principle is called causation. If there is any intervening event, such that it breaks the chain of events which resulted in criminal harm, then the individual committing the act shall not be liable for the harm.[3] This is precisely because harm caused is not a result of the act of that individual, but is the direct result of the intervening event. Thus there are four important tenants of criminal liability. These included actus reus, mens rea, concurrence between the two and causation.

The wrongful criminal action comprises of an act that is criminal in nature,[4] threat to do an act that is criminal in nature,[5] omission to do an act prescribed by law[6] and possession.[7] All the above mentioned actions have some form of physical construct.[8] In fact traditional notion of actus reus is built up on actions taking place in the real world.[9] Further an act is either inherently criminal in nature or is criminal because of being defined such in law.[10] These types of acts are called mala in se and mala prohibita respectively.[11] Acts like murder and grievous hurt are mala in se and acts like doing an act in violation of license norms is mala prohibita. For a criminal liability to exist, actus reus should be coupled with mens rea.[12] This is a must requirement except in the cases of strict liability.[13] Mens rea further comprises of intention, recklessness or criminal negligence.[14]

It’s not just enough to have actus reus couples with mens rea. There must be a direct congruence between the two i.e. criminal intent must be present at the time of commissioning of the criminal act.[15] Along with congruence there must also be direct link between the criminal act and the harm.[16] This causational link means that the resultant harm must be a direct and unobstructed result of the wrongful action.[17]

When all the above mentioned elements are present, a crime is committed and wrongdoer is consequently liable for the act. The only exemption under these circumstances is either because of some justification for the act or an excuse.[18]

Criminal Liability under the IPC

A similar criteria is defined under the Indian penal code for criminal liability. Actus reus is given under definition of various offences.[19] For instance s. 320 of the Indian penal code defines various action that constitute grievous hurt. Similarly, s. 319 defines actions that constitute the offence of hurt. Further, criminal intimidation is defined under s. 506 of the Indian penal code. This is the sections that defines a form of actus reus involving threat to do a criminal harm. Hence, under the Indian penal code, actus reus has been defined as within the definition of the offence. On the other hand mens rea under the penal code is well apparent by the use of words like voluntary, knowingly, intentionally etc. For instance, s. 322 of the Indian Penal Code adds an element of mens rea to the offence of grievous hurt by addition of the word voluntarily along with the offence. A similar approach can be seen in other case of other offences like murder[20], culpable homicide[21] etc. While the Indian Penal Code does not explicitly mention the term causation, its language makes it fairly clear that the doctrine of causation has been incorporated in the act. For example, under section 304A of the Indian Penal Code, death of the person should be the direct outcome of rash and negligent act of the wrongdoer. A similar pattern is language of the Indian Penal Code may be traced with respect to concurrence of the mens rea with actus reus. All these elements are used in various sections of the Indian Penal Code in order to determine criminal liability. Lastly, even with all these elements present, a wrong dower might be absolved of the criminal liability because of the excuse[22] or justification.[23]

Development of criminal liability by case laws.

A similar pattern has been noticed in the development of such principles by case laws. While statutes pertaining to determination of criminal liability are clear on actus reus, causation and concurrence, mens rea is often a contentious aspect.[24] It is not only difficult to prove mens rea, but often times offences involving some socio-economic offences require for strict liability on part of the offender. Hence, only in the cases wherein statutes explicitly prescribe for not considering mens rea and asserting strict liability on the perpetrator, may the principle of strict liability be applied.[25] According to Justice Subba Rao in M. H. George case,[26] all offences are to be constructed in light of the common law principle of mens rea until the statute explicitly provides otherwise. A similar stand was taken in the case of Nathulal v. State of Madhya Pradesh.[27]

Hence, we may safely conclude that following construct the fundamental elements of criminal liability in India:

  1. Actus reus or physical element as defined within the statutory definition of the offence.
  2. Mens rea or mental element as defined by virtue of certain keywords within the statute. Further, a strict liability has to be considered if provided so under the statute.
  3. Concurrence of actus reus and mens rea and the meaning of causational link are present within the language of statutory definition.
  4. These ideas apply to both mala in se and mala prohibita offences.

 

The basic tenants of cyber offences

In this chapter I will elaborate upon basic elements of cyber offences. I will be focusing only on computer or internet based offences and not on computer or internet aided offences. This is primarily due to the fact that computer or internet aided offences generally fit well within the traditional framework of criminal liability. It is only the internet and computer based offences that present a challenge to the traditional notions associated with criminal liability.

I will chart out various cyber offences under the Indian Penal Code and the Information technology act. Thereafter, I will chalk out their basic elements of such offences.

Types of cyber offences

There is no one definition of cyber offence. In fact, the Information Technology Act, 2000 does not even define a cyber offence. It simply prescribes for certain actions to be offences under chapter XI[28]. Further offences under Indian Penal Code may also be read in order to determine liability for a crime involving computer or the internet.

There are fundamentally two types of cyber offences. The first are the computer and internet assisted offences.[29] In such cases, traditional crimes are done using computers. While these are not easily physically manifest able, their understanding in terms of criminal liability is well established.[30] Such crimes include Sale of contraband through encrypted network, intellectual property rights violation, copyright violation, revenge porn, fraud schemes and identity theft etc. Such offences are defined under different statutes and thus it becomes easy to determine criminal liability in such instances. Precisely computers are only intermediary in such cases.[31] Hence, except for some instances of problems with fulfilling some elements of actus reus and concurrence, all other elements of criminal liability are fulfilled by such offences.[32]

The second type of offences include the once that use computers as the subject of offence.[33] Such crimes have their part and parcel in the cyber world and are an outcome of the interactions between the computer and other source machines over the internet.[34] Such offences include Hacking for information, banking Frauds, Identity theft, Cyber extortion, divulgence or extraction of personally identifiable information etc.[35] these offences present multiple challenges when viewed from the perspective of traditional notion of criminal liability. For instance an unethical hacker might want to target an individual with a self-propelling worm virus. However, by virtue of its very nature the worm spreads to other devices as well. Under such circumstances, thought the mens rea was only limited to causing harm to the specific victim, it resulted in a larger harm other devices as well. Determination of liability under such circumstances is difficult because the perpetrator never intended to cause harm to other devices.[36] In fact much of the problem under such circumstances arises out of the fact that every single device connected to the internet is the victim and perpetrator at the same time.[37]

Offences under the IPC, NDPS act and other statutes

Under the Indian Penal Code and the Narcotics Drugs and Psychotropic Substances act[38], following sections have been frequently used in order to punish perpetrators for cyber offences:

Sr. No. Offence Section Applicable
1 Sending threatening messages by E-mail s. 503 IPC
2 Word, Gesture or insult the modesty of a woman s. 509 IPC
3 E-mail spoofing s. 463 IPC
4 Forgery for purpose of cheating s. 468 IPC
5 Forgery for purpose of harming reputation s. 469 IPC
6 Criminal intimidation by anonymous communication s. 507 IPC
7 Obscenity s. 292 IPC
8 Theft of computer hardware s. 378 IPC
9 Online Sale of Drugs NDPS Act
10 Online sale of Arms Arms Act[39]
11 Copyright infringement s. 63[40]

 

It is fairly clear that the above mentioned list is not comprehensive and there are multiple other offences possible under different existing statutes. However, the pattern suggests that these are cyber aided offences. These offences had been traditionally committed without aid of any involvement of cyber domain. These offences have a well-established understanding of criminal liability associated with them and computers or internet just functions as a medium.

Offences under the IT Act, 2000 and IT (amendment) Act, 2008

Under the Information Technology Act[41], following sections have been frequently used in order to punish perpetrators for cyber offences:

Sr. No. Offence Section of the IT act
1 Tampering with computer source documents s. 65
2 Hacking with computer systems, Data Alteration s.66
3 Cyber terrorism s. 66F
4 Violation of privacy s. 66E
5 Publishing or Transmitting obscene material in electronic form s. 67
6 Unauthorised access to protected system s. 70
7 Penalty for misrepresentation s. 71
8 Breach of confidentiality and privacy s. 72
9 Publishing false digital signature documents s. 73
10 Publication for fraudulent purpose s. 74
11 Failure to protect personal data s. 43A[42]

 

Multiple other cyber offences are covered under chapter XI of the Information technology act 2000. Further, offences defined under this act involve computers and other devices of similar nature connected to the internet, as both perpetrators and victims of offences. However the fact that such offences take place in their entirety over the virtual space, presents a challenge to the assessment of such offences in terms of criminal liability. Precisely due to this difficult in proving the criminal liability, multiple offences have strict liability prescribed to them[43] and mens rea is not applicable to them.[44] However, such offences only attract civil liability.[45] Other offences that are similar in nature to the ones prescribed under IPC and other above mentioned statutes have a terms like voluntary that prescribe for mens rea.[46]

Hence, cyber offences are fundamentally of two types. Both types, fulfil basic tenants of criminal liability, though after slight modifications.

 

Personally Identifiable information

Different jurisdictions have different definitions of Personally Identifiable Information (Hereinafter PII). Some definitions of the same are as follows:

  1. Personally identifiable information (PII), or Sensitive Personal Information (SPI), as used in US privacy law and information security, is information that can be used on its own or with other information to identify, contact, or locate a single person, or to identify an individual in context.[47]
  2. The term used is more often “personal information”, which may be somewhat broader: in Australia’s Privacy Act 1988 (Cth) “personal information” also includes information from which the person’s identity is “reasonably ascertainable”, potentially covering some information not covered by PII.)[48]

A similar approach is taken by other agencies and Legislations in defining PII.[49] They often have definitions followed by a list of examples at the end. Though this list is not comprehensive, it provides a fair understanding of the kind of information that constitutes PII. In general, the PII laws and regulations indicate towards a definition consisting of the following two basic elements:

  1. Specific information or a set of information.
  2. Specific information can indicate to a specific person or a set of information in a specific context can indicate to a specific person.

In the context of India, section 43A[50] defines civil liability for loss of PII, but does not define PII. The PII is defined under the Information Technology Rules, 2011.[51] These rules also define a list of different types of information that either individually or in group constitute personally identifiable information. As per section 43A, if any information of the nature of PII is divulges and wrongful loss is caused to an individual due to the same, such an individual is eligible for compensation. Further the section also states that such liability is imposed when the body corporate is negligent in implementing and maintaining reasonable security practice and procedure. Hence, we can conclude that there are following elements of PII in India:

  1. Some form of personal information as defined under the IT rules, 2011.
  2. Such personal information is released in an undesirable manner and results in wrongful loss or wrongful gain to some person.
  3. Such release of information is due to the inability of corporate body to maintain reasonable security and procedure. (is negligent in implementing the stated procedure).
  4. Strict liability for offence.

 

Criminal liability associated with personally identifiable information

Any offence that fulfils the fundamental elements of criminal liability is to be treated as a criminal offence.[52] As per the IT rules, actus reus of the stated will be release of any information labelled as PII under the rules. Such release must be from the possession or control[53] of the body corporate due to lack of reasonable security practice and procedure on part of such body corporate. Hence, if such information is released, and stated conditions are met, it will be enough to fulfil actus reus element of criminal liability.

Mens rea is not required to be proved for this offence for the language of the section 43A imposes strict liability. However, the fact that this has simply resulted in imposition of civil liability is problematic. This is primarily because violation of an Individual’s privacy is a mala is se crime. Violation of privacy in turn is mala in se because under the constitution’s article 21[54] and article 19[55] privacy is an integral part of an Individual’s right to live with dignity and is also important to ensure an individual’s free movement through the territory of India.[56] A similar view with respect to privacy has been taken in multiple other international conventions.[57] Further, these instruments represent the moral epitome of the collective consciousness of human society and thus must be treated as representing those actions which are inherently undesirable. Hence, because violation of privacy of an individual is morally undesirable in all domains, it must be treated as mala in se and perpetrator must be criminally liable. In order to determine presence of mens rea in the corporate body, the test of directing will and mind for corporate criminal liability must be used.[58]

Lastly, causational link exist between mens rea and actus reus because loss or harm to an individual due to divulged information is a direct consequence of inability of body corporate to take prescribed care. Further, the concurrence between the two is clear because inability to care results in contemplable loss.

Hence, as all the elements of criminal liability are satisfied by the cyber offence pertaining to PII, it should be treated as criminal offence with consequences of similar gravity.

Conclusion

Criminal liability for any offence depends on presence of fundamental tenants of criminal liability in that offence. These tenants include mens rea, actus reus, concurrence between the two and a causational link between the act and the harm. Further, cyber offences are the ones that either involve computers or other devices of similar nature connected to the internet. There are offences only limited to cyber domain or offences using cyber domain as assistance for committing traditional offences. However, because of their typical nature, cyber offences present a challenge to traditional notions associated with criminal liability.

In the light of the above given assertions, I have established in the paper that cyber offence pertaining to the divulgence of Personally Identifiable Information (PII) satisfy all the basic elements of criminal liability and hence must carry criminal sanctions along with it. The paper shows that divulgence of PII is in fact a mala in se offence and hence must attach criminal sanctions of equivalent gravity. Further challenges to the domain of liability for criminal offences pertaining to PII are imposed by newer technology advancements like reconstruction algorithms.[59] Such algorithms collect personal data about an individual’s online behaviour and use the same for reconstructing that individual’s identity.[60] An attempt has been made to deal with such issues in jurisdictions like japan and California However such attempts are limited and don’t impose criminal liability upon the perpetrators.[61]

Major challenges in determining the criminal liability for cyber offences in future shall evolve because of increasing interactions between devices and algorithms. These hybrid systems will be missing any human element and this will present entirely new set of challenges to the traditional notions of criminal liability.

[1] E. Coke, Manuscript on Criminal law, folio 10 (1600).

[2] M. S. Moore, Causation and Responsibility: An Essay in Law, Morals and Metaphysics, 3-20 (2009).

[3] Id.

[4] D. J. Baker, Glanville Williams Textbook of Criminal Law, 112 (2012).

[5] Id. at 117.

[6] Id. at 167.

[7] Id. at 196.

[8] M. Corrado, Is there an act requirement in criminal law?, 142(5) University of Pennsylvania Law Review 1529, 1530 – 1534.

[9] Id.

[10] M. L. Travers, Mistake of law in Mala Prohibita Crimes, 67(3) The University of Chicago Law Review 1301, 1309 (1995).

[11] Id. at 1303.

[12] Coke, supra note 1, at 10.

[13] R. A. Duff, Answering for Crime: Responsibility and Liability in the Criminal law, 230 (2007).

[14] Id.

[15] C. M. V Clerkson, Understanding Criminal Law, 156 (2005).

[16] Id.

[17] J. F. Stephen, A history of Criminal Law of England Vol. II, 134 (2014).

[18] K. Greenawalt, The perplexing Borders of justification in Justification and Excuse in the Criminal Law341,344 (M. L. Corrado, ed., 1994).

[19] Sec. 121 – Sec. 510, Indian Penal Code, 1860.

[20] Section 300, Indian Penal Code, 1860.

[21] Section 299, Indian Penal Code, 1860.

[22] Section 76 to section 95, Indian Penal Code, 1860.

[23] Section 96 to section 106, Indian Penal Code, 1860.

[24] W. L. Eskridge, Dynamic Statutory Interpretation, 275 (1994).

[25] Brent v. Wood, [1946] 175 LT 306 (House of Lords).

[26] State of Maharashtra v. M. H. George, 1965 AIR 722 (Supreme Court of India).

[27] Nathulal v. State of Madhya Pradesh AIR 1966 SC 43 (The Supreme Court of India).

[28] Chapter XI, Information Technology Act, 2000.

[29] S. W. Brenner, Cybercrime: Criminal Threats from Cyber Space, 21 (2010).

[30] J. Clough, Principles of Cyber Crime, 46 (2010).

[31] Brenner, supra note 29, at 21.

[32] Clough, supra note 30, at, 46.

[33] Brenner, supra note 29, at 21.

[34] Brenner, supra note 29, at 21.

[35] Clough, supra note 30, at, 53.

[36] Clough, supra note 30, at, 56.

[37] Brenner, supra note 29, at 63.

[38] Narcotic Drugs and Psychotropic Substances Act, 1985.

[39] Arms Act, 1959.

[40] Section 63, Copyright Act, 1957.

[41] Information Technology Act, 2000; Information Technology (Amendment) Act, 2008.

[42] Section 43A, Information Technology (Amendment) Act, 2006.

[43] Section 43, 44 and 45 of the Information Technology Act, 2000.

[44] S. V. Joga Rao, Law of Cyber Crime and Information Technology Law, 157 (2004).

[45] Id.

[46] Id.

[47] Section 2 (l), The Privacy Act, 2011. (California, USA)

[48] Section 2 (f), Privacy Act, 1988. (Australia)

[49] European Union Directive on Privacy data, 1995 European Data Directive 95/46/EC, 1995; E. McCallister, Guide to Protecting the Confidentiality of Personally Identifiable Information (PII) at National Institute of Standards and Technology (2010).

[50] Section 43A, Information technology (Amendment) Act, 2008.

[51] The Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011.

[52] M. L. Travers, Mistake of law in Mala Prohibita Crimes, 67(3) The University of Chicago Law Review 1301, 1309 (1995).

[53] Section 43A, Information Technology (Amendment) Act, 2008.

[54] Article 21, The Constitution of India, 1950.

[55] Article 19, The Constitution of India, 1950.

[56] Govinda v. State of Madhya Pradesh, 1975 AIR 1378 (The Supreme Court of India); Meneka Gandhi v. Union of India, 1978 AIR 597 (The Supreme Court of India).

[57] Article 12, Universal Declaration of Human Rights, 1948; Article 17 of the International Convent on Civil and political rights.

[58] Standard Chartered Bank v. Director of enforcement, AIR 2005 SC 2622 (The Supreme Court of India); DPP v. Kent and Sussex Contractors ltd., (1944) 1 All E.R.119 (Privy Council); Meridian Gold Fund Management v. Securities Commission, [1995] 3 All ER 918 (Privy Council).

[59] Available at https://www.cs.sfu.ca/~wangk/pub/paper-125.pdf (Last visited on April 14, 2016).

[60] Available at https://www.cis.upenn.edu/~aaroth/Papers/privacybook.pdf  (Last visited on April 14, 2016).

[61] B. Hostetler, 2015 Compendium on Data Privacy Law, 106 (2015)

The enforceability of porn contracts: Nobody analyses it better

INTRODUCTION

With the growing demand for internet pornography in India, and its usage becoming more rampant and widespread around the world, the adult entertainment industry has become an important centre of commerce in its own right.[1] With 13% of all internet searches being for erotic content,[2] and the worth of the industry being pegged at $97 billion dollar globally in 2015,[3] the industry does show immense commercial potential. However, be that as it may, the industry still remains on the fringes of the mainstream world and is only now beginning to command some respect in the Western world. As any other large industry, the adult entertainment industry requires the protection of the judicial system to ensure that the tremendous financial value invested in the business is not sacrificed due to broken promises, faulty expectations, or criminal sanctions.[4] In this paper, it is the researcher’s motive to analyse the law governing the desirability of adult entertainment industry contracts, the problems associated with their enforceability, and the role of the State and its machinery in the enforcement of such contracts, should it be realized that it is desirable to have such contracts enforced.

With the proliferation of websites vending adult content in India catering to distinctly Indian tastes[5] and the new-era resurgence of India’s iconic softcore porn, names like Savita Bhabhi have gained international recognition and are making their mark in the international pornography industry.[6] Thus, it has become an imperative to analyse the implications of the making such contracts in India and making sure that they are enforced. Given the fact that there is not much research available any discussion on the topic soon gets mired in moral-political arguments, we at Project Legal Renaissance have taken this initiative to attempt to clarify the position qua enforcement of such contracts. With the government lifting its draconian ban on pornography after coming under heavy fire for curtailing an individual’s private freedom and for excessive moral policing, pornography is not illegal in India per se[7] and thus the enforceability of contracts made between those who choose to participate in the venture becomes of quintessential importance.

The researcher for the limited purposes of this paper shall overlook the constraints posed by Section 292 of the Indian Penal Code[8] and assume that no criminal liabilities will follow for those pursuing such ventures in India. Thus, this paper is purely an intellectual exercise in itself and is meant to analyse the predicament that is the enforceability of adult entertainment industry contracts in India purely from a contract law perspective and the need, if any, of the government intervention in the enforcement or non-enforcement of such contracts based on principles of public policy.

LEARNING THE ROPES (PUN INTENDED): WHAT IS AN ADULT ENTERTAINMENT CONTRACT

In modern times, adult entertainment contracts are contract that lay down the rights and the obligations that exist between the agent and the adult entertainer. Earlier, such entertainers were required to contract directly with the producing studio for a certain number of films in which they were required to perform. But after the infamous Brent Corrigan[9] scandal in which Sean Paul Lockhart, who appeared in adult movies under the name of Brent Corrigan[10] was forced to have unprotected sex by the producer of a Studio Lockhart was under a contract with under the threat of breach of contract (though unsuccessfully so), the nature of contract shifted to an agency contract with the adult entertainer assuming the status of an independent contractor and entering into a contract with her/his agent rather than with the studio itself.[11]

However, even agents may only look after their interests, and given the sleazy connotations that are often associated with the industry, their enforcement might become an issue. To solve this problem, given the independent contractor status of the adult performers, a standard form contract which is generally administered as a matter of trade practice to any other independent contractor should work. A cue can be taken here from the American State of California. In California, an agent is only allowed to use a pre-approved Talent Agency Agreement. This agreement must be pre-approved by a California Labour Commissioner.[12] Such “exclusive talent agency” contracts operate between the parties to the contract for a limited term and are well-equipped to protect the rights of the performer while taking cognizance simultaneously the interest of the agent. The agent is only given the power to “advise, counsel or direct” the adult entertainer and thus the entertainer retains a significant amount of leverage in her/his dealings with studios creating adult content.[13] Thus, up to this point, the contract as understood as an exclusive agency contract does not raise any significant legal issue as to act as a hindrance to the enforcement of such contracts.

WHEN IT GETS HARDCORE: THE MORAL AND PUBLIC POLICY IMPLICATIONS OF ENFORCEMENT OF ADULT ENTERTAINMENT INDUSTRY CONTRACTS

Though the issue is mired in controversy and is the subject of heated moral dialectics, the researcher pleads the reader to try to analyse the researcher’s argument in a level-headed manner. Going back to the Brent Corrigan case mentioned above,[14] the first problem that arises is whether the enforcement of such a contract against the will of the performer would amount to rape or some other form of non-consensual sexual intercourse constituting an offence as per the laws of the land. For the sake of clarity, the facts of the above mentioned case were that the underage adult performer had claimed that he was underage when entering into a contract with the studio when the producer of the company brought numerous charges against him, including one for breach of contract, for failing to perform his contractual obligations. The adult entertainer had two films remaining on his contract when the charges were brought and in both the films he had to be the “recipient” in bareback scenes.[15] This case is an excellent one to prove the point that enforcement of every sexual contract need not result in rape, as first, in such cases, as in the cases of breach of other service contracts, the Courts shall refuse to force specific performance.[16] Also, performance of such a contract may be prohibited for public policy reasons in India.[17]

Another concern that might be raised qua enforcement of an adult entertainment contract is that it promotes leads to promotion of prostitution, even though only substantially, and thus has a significant impact on the moral fibre of the society. In the US, there are concerns that the proliferation of the porn industry would lead to more and more people being found in violation of the anti-pornography, prostitution and pandering laws. Critics of the enforceability of the adult entertainment industry contracts argue that at its core, pornography involves paying people to have sex on film.[18] In the Indian context, Section 292 serves the purpose the pandering and anti-pornography laws serve in the US. Since there is solicitation, and consideration involved, it satisfies the elements of prostitution. Also, the crew may be booked under voyeurism charges brought under Section 354C of the Indian Penal Code.[19]

However, what such an approach fails to take into consideration is the different approaches and attitudes of the prostitution and pornography industries. Existing jurisprudence has failed to distinguish between pornography and prostitution in a reasonable manner that takes into consideration their differing relationships to disease, drugs and violence.[20] The Courts should adopt, when the time comes, a countervailing public policy favouring enforcement of adult contracts without prejudicing the motive of the State to put a curb to prostitution and other activities that it may consider to be infelicitous vices. If the contracts are to be properly enforced, the State and all its instrumentalities ought to see the industry as a legitimate, non-criminal entity.[21]

What also has to be kept in mind is that the enforcement of such contracts is in the best interest of both the performers and the producers. Though the contractual employment in the industry has been increasing, the contracts have been practically rendered useless because of the non-enforceability of the same. In the US, it has been suggested that there are two reasons for the non-enforcement of the contracts. First, an extreme hostility pervades between the legal profession and the adult film industry, with the latter often being incessantly harassed by the former to wring out every extra penny. Second, the industry has itself been sceptical of the enforceability of its own contracts, for obvious reasons.[22] It is very difficult to get such a contract enforced in a Court of law, as it is highly likely that one seeking recourse might as well be persecuted by it, especially given the nature of the industry.  While the benefits for the studios and the producers to have legally enforceable contracts are manifest, even performers gain from such contracts as the contracts can help performs prevent physical and psychological harm and ensure that performers are not coerced to do anything that they are not comfortable doing.[23]

Then comes perhaps the most important question with respect to India, and that stems from Section 23 of the Indian Contract Act. Public policy concerns are a legitimate concern. However, as the researcher has suggested above, if a new approach which does not compromise on laws which genuinely try to regulate immoral activity and at the same time decriminalizes and takes the stigma away from the porn industry could be formulated, it would solve all these problems. The test laid down under Section 23 is what the Court regards as immoral and opposed to public policy[24] and following the researcher’s lead if the Court considers the industry only as a financial, non-criminal entity and nothing else, then even this problem can be solved. If pornography has been selectively unbanned, and prostitution has been not, it follows that pornography is not against public policy in its true sense and thus there should be no real conflict between pornography and public policy.[25]

Also, as there can be a genuine niche that can be carved out for State interference. As the US uses the Internet Corporation for Assigned Names and Numbers (ICANN) to regulate the Domain Name System and Courts orders can be issued through ICANN to the registrars to take the illegal material down,[26] a similar framework can be set up in India. The contract that ICANN signs with the domain name registrars incorporates these terms in a manner that the two problems of enforcement- jurisdiction and injunctive reach are effectively overcome.[27] Thus, contracts can be used to take down illegal content, making sure that the legitimate contracts which protect the rights and interest of the performs and producers are rendered enforceable by solving a lot of moral problems involved.

CONCLUSION

Thus, it is the researcher’s contention that nothing within the Indian legal system inherently stops one from having an adult entertainment contract enforced in India. All that is needed is for the judiciary to take a more industry-friendly and humane approach and a lot many hurdles will be overcome. State may interfere whenever necessary, and the terms of such intervention may be defined in a contract with an independent body which may enlist the situations in which state intervention is warranted. This would rule out a lot of problems and be a huge step towards making such contracts enforceable. This is the researcher’s submission.

[1] Covenant Eyes, Pornography Statistics, (2015).

[2] Id, at 8.

[3] C. Morris, Things Are Looking Up in America’s Porn Industry, NBC News (January 20, 2015) available at http://www.nbcnews.com/business/business-news/things-are-looking-americas-porn-industry-n289431 (Last visited on July 30, 2016).

[4] A. Gilden, Sexual (Re)consideration: Adult Entertainment Contracts and the Problem of Enforceability, 95(2) Georgetown Law Journal 541,  541 (2007).

[5] A. Gupta, Growth of the Porn Industry in India, Desiblitz available at http://www.desiblitz.com/content/growth-of-the-porn-industry-in-india (Last visited on July 30, 2016).

[6] J. Overdorf, Meet India’s first porn star, globalpost (October 8, 2010) available at http://www.globalpost.com/dispatch/india/090430/indias-first-porn-star (Last visited on July 30, 2016).

[7] N. Khomami, India lifts ban on internet pornography after criticism, The Guardian (August 5, 2015), available at https://www.theguardian.com/culture/2015/aug/05/india-lifts-ban-on-internet-pornography-after-criticisms (Last visited on July 30, 2016).

[8] Section 292, The Indian Penal Code, 1860.

[9] Cobra Video, LLC v. Lockhart, No. 06cv0293J(LSP) (S.D. Cal. Mar. 8, 2006).

[10] Cobra Video, LLC v. Lockhart, No. 06cv0293J(LSP) (S.D. Cal. Mar. 8, 2006).

[11] Gilden, supra note 4, at 545.

[12] Adultbizlaw Legal, Porn 101: Choosing an Agent – Part-1 (September 26, 2012), AdultBizLaw, available at http://adultbizlaw.com/porn-101-choosing-an-agent/ (Last visited on July 30, 2016).

[13] Clause 2, Exclusive Contract Between Artist and Talent Agency, available at http://adultbizlaw.com/wp-content/uploads/2012/09/Talent_Exclusive_Contract.pdf (Last visited on July 30, 2016).

[14] Cobra Video, LLC v. Lockhart, No. 06cv0293J(LSP) (S.D. Cal. Mar. 8, 2006).

[15] Cobra Video, LLC v. Lockhart, No. 06cv0293J(LSP) (S.D. Cal. Mar. 8, 2006).

[16] Steven Shavell, Specific Performance Versus Damages For Breach Of Contract, 23 (Discussion Paper No. 532, John M. Olin Center for Law, Economics, and Business, Harvard Law School, 2005).

[17] Section 23, The Indian Contract Act, 1872.

[18] Gilden, supra note 4, at 541.

[19] Section 354C, The Indian Penal Code, 1860.

[20] Gilden, supra note 4, at 562-563.

[21] Gilden, supra note 4, at 563.

[22] The Legal Barriers To Enforcing Pornography Contracts International Law Essay, UK Essays (November 2013), available at http://www.lawteacher.net/free-law-essays/international-law/the-legal-barriers-to-enforcing-pornography-contracts-international-law-essay.php?cref=1 (Last visited on July 30, 2016).

[23] Id.

[24] Section 23, The Indian Contract Act, 1872.

[25] Section 23, The Indian Contract Act, 1872.

[26] 21 Pac. McGeorge Global Bus. & Dev. L.J. 79 2008.

[27] 21 Pac. McGeorge Global Bus. & Dev. L.J. 79, 109 2008.