Illayaraja and the Battle for the Composers Right

The well-known music director Illayaraja is not just well-known for his lovely tunes but also for defending his creative rights against other parties. In 2017, Raja sent the late vocalist SP Blasubramaniam a court letter prohibiting him from playing his songs in stage shows without his consent and demanded payment for performing his songs. Now, the same Illayaraja has sent a legal notice to the producer of a Malayalam movie named Manjummel Boys for using one of his songs (Kanmani Anbodu) in the film without his consent.

This brings up the legality of the composer’s rights in a musical work and raises the question of whether Illayaraja can sue or collect royalties, which could lead to a protracted legal battle over musical rights. The central issue in this field was who owns the composer or producer of a musical work. The producer will own the sound recording where the music composition and lyrics are written for the consideration of anything valuable or while working for an employer (the producer), in accordance with the landmark decision in Eastern India Motion Pictures and Ors. v. Respondent: Performing Right Society Ltd. and Ors. [i]. The underlying works (music composition and lyrics) will be covered under sound recording and as per section 17(b) and 17(c) of the Copyright Act.

The producers held the exclusive right to sound recordings made for motion pictures, according to a long-standing ruling. However, in 2012, the Copyright Act was amended to protect the rights of songwriters and composers who create underlying works. The new amendment also grants these authors certain economic rights. Before the amendment, music directors had certain rights to their work under sections 13 and 14 of the Copyright Act, but these rights were subsumed when the work was completed for a producer in exchange for payment and as his employee. In the footnote to his decision in the aforementioned case, Justice Iyer noted that producers are not required to reimburse composers for the use of their compositions.

The third and fourth provisos to section 18(1) mandate that the royalties earned by commercially exploiting the work shall be shared on an equal basis between the performer and the producer, reading new proviso with section 39A the new law that guarantees the right to royalty to composers and lyricists for use of their outside the film, the 2012 Amendment overturned the previous position and gave composers the right to claim royalty for the use of their work

Amendments provide the authors of underlying works the right to royalties for any use of their work by others unless it is used in the same film in a theatre .Illayaraja has similarly fought legal battles in the past, including Agi Music Sdn Bhd v. Illayaraja & Modern Cinema and Echo Recording Company v. Illayaraja[ii] (Civil Suit No. 308 of 2013 and Civil Suit No. 625 of 2014). The Madras High Court has noted that, in addition to having statutory moral rights, , Illayaraja—also have the right to royalties in those cases .

In the cases of IPRS vs. Rajasthan Patrika Ltd. and IPRS vs. Music Broadcast Ltd.,[iii] the Bombay High Court established that the 2012 Copyright Amendment confers a substantive right on authors of underlying works to claim royalties. Additionally, the composer is entitled to royalties for any sound recording that is shared in a public domain other than the original film. Consequently, when a sound recording from a motion picture is made publicly available, the true creators-the composer and lyricist are eligible for payment in accordance with current legislation and recent court rulings. The assertion made by Illayaraja in the most recent issue topics fell under this category.

Manjummel Boys is not the movie for which Illayaraja Created the song titled Kanmani Anbodu and the same was created by him to use in Movie named Guna which was produced by Alamelu Subramaniam. And also Illayaraja has not assigned or licenced his work to the makers of Manjummel Boys, and also there is no scope for conflict relating to ownership of song between Illayaraja and Producer of Guna movie since the producer has not assigned or licenced the song to the opposite party. Even such a conflict arise relating to ownership that doesn’t denies the right of music composer to claim royalty to his work since his composition is used outside the film.

Author : Anujus Pradeep, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD

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[i] Eastern India Motion Pictures and Ors. v. Respondent: Performing Right Society Ltd. and Ors. MANU/WB/0110/1978: AIR 1978 Cal 477

[ii] C.S.No.308 of 2013, C.S.No.625 of 2014 Madras High Court

[iii] Indian Performing Right Society Ltd. v. Rajasthan Patrika Pvt. Ltd. (IA No. 9452 of 2022) and Indian Performing Rights Society Ltd. v. Music Broadcast Ltd. (IA No. 1213 of 2022)

Harmony In Antitrust : Insights to the settlement and commitment mechanism under the competition amendment act 2023

ABSTRACT

This paper comprehensively examines the new Settlement and Commitment framework introduced in the Competition Amendment act, 2023. Throughout the course of this, it has been substantially explained how such an introduction marks a significant step towards enhancing enforcement efficiency of the Competition Commission of India (CCI).

Settlements are an important procedural tool because they let the entities and the target parties resolve their disputes effectively, quickly, and thoroughly. And improvement in behavioral conduct on any entity is sought by the commitment. However, The test for an acceptable settlement and commitment, therefore, is whether it addresses the anticompetitive conduct in a way that eliminates the harm and prevents its recurrence. The CCI in its procedure as discussed further in this paper establishes affirmation for such test

Companies do not have to engage themselves in the long drawn-out process of litigation. The expanding necessity of applying alternative dispute resolution approaches to the field of competition law and this paper it is grasped by starting with the definition and outlining a few real-life case scenarios. The comparison of this act with other nations and under other statutes helps to clarify the inspiration and influence of such a framework.

The competition law has always been dynamic and changing itself according to growing economic tendencies of the Indian market. The CCI has been always granted a high magnitude of powers when it comes to adjudicating a case, and such powers have been amended as per the growing needs of the economy, such as this introduction of non-litigation factors of settlement and commitment in the highly tech-globalized world.

INTRODUCTION

The primary means of enforcement under the Competition Act 2002 were conducting investigations, gathering evidence, and bringing legal action until this modification was passed. It took Competition Commission of India(hereinafter referred to as CCI) around six years in 2018 to pass the final order in India Glycols Limited v. Indian Sugar Mills Association and Others, where, The CCI had imposed penalties upon 18 sugar mills and 2 Associations (Indian Sugar Mills Association and Ethanol Manufacturers Association of India) allegedly rigging the bids in a joint tender for the purchase of ethanol for gasoline blends that Oil Marketing Companies (HPCL, BPCL, and IOCL) issued on January 2, 2013.^[1]

Also, it took around seven years to pass the final order in East India Petroleum Private Limited v. South Asia LPG Company Private Limited to pass the order.^[2]

As per the CCI Annual Report 2016-17 (‘Report’), 129 cases were pending before the DG in the year 2016-2017. Pertinently, the Report notes the following: “It is observed that the investigations are taking increasingly more time for completion. This partly reflects inadequate staff strength in the office of the DG and partly reflects increasing complexity of cases being referred to the DG by the Commission.”^[3]  

Each of these instances demonstrates how the commission and the businesses used additional resources, both material and temporal. If the appropriate non-litigation procedure had been followed, this might have been prevented.

The Madras High Court in the case of Tamil Nadu Film Exhibitors Association v. CCI 2015 , held that the Competition Act’s framework permits parties to reach a compromise or settlement, and the CCI may accept such a compromise or settlement. “If for instance, a party which is held guilty of entering into an Anti-Competitive Agreement or abusing its dominant position comes up before the Commission and agrees for the discontinuance of the agreement with an undertaking not to re-enter into such agreements or to indulge in the abuse of dominant position, we see no reason as to why the same should not be accepted by the Commission.”^[4]

Having taken inspiration from all the cases above, it was highly necessary to incorporate provisions of settling cases outside the purview of court.

The Settlement & Commitment structure was established in order to prevent large amount of time from being spent on antitrust problems during the litigation process. It contains characteristics that cause the market to correct more quickly. Without sacrificing the integrity of justice, these mechanisms have expedited the competition law while simultaneously streamlining it.

Section 48A (specifically talks about settlements) – (1) Any enterprise, against whom any inquiry has been initiated under sub-section (1) of section 26 for contravention of sub-section (4) of section 3 or section 4, may, for settlement of the proceeding initiated for the alleged contraventions, submit an application in writing to the Commission in such form and upon payment of such fee as may be specified by regulations

Section 48 B (specifically talks about offering commitments) – such measures that will be taken by the party to address the concerns of the Commission by paying a certain amount of fees for the application.^[5]

Commitment, as used in competition law jurisprudence, describes a procedure when an under-investigation corporation proposes to modify its business practices to meet the issues brought forth by the competition authority. Without a formal finding of infringement, this may result in the investigation being closed.^[6]

In a settlement, the company and the competition authority negotiate a settlement that usually entails the corporation admitting to the alleged infringement in exchange for a reduction in fines or penalties. Although the Competition Amendment Act’s settlement procedure does not actually require acknowledgment of guilt. Businesses that have been waiting for this will quickly take advantage of it rather than dragging out lengthy legal battles.

Section 48 before the amendment act did not require the parties to acknowledge their involvement in anti-competitive behavior. If found guilty of the violation, they could face legal action and punishment directly without having scope of settling in between.

Jayant Sinha, who headed the committee that recommended changes for the amendment in the Competition Act, in an interview contended that solving disputes through non litigation methods is a global practice, and a need of flexibility is to be given to the parties so that they can negotiate on their terms, therefore the new feature of flexibility is given and the admission of guilt is not necessarily mandated. These kinds of procedures should help the CCI expedite the resolution of antitrust cases, freeing up its limited resources in the process. Businesses can also stay away from ambiguity and drawn-out inquiries. In addition to providing victims with fair compensation, these negotiated remedies give authorities the ability to impose creative deterrents on responders.   

He also says that such provision is a landmark reform and an extraordinarily important step forward for competition law as it immediately brings us up to world-leading standards and paves a way to settle matters without going into a long drawn out set of proceedings from CCI, NCLAT, and Supreme Court ^[7]

PROCEDURE FOLLOWED-

In settlement of proceedings initiated for any alleged contravention, the alleged violator can submit an application in writing to the commission in such form and upon payment of such fee as may be specified by regulations. This settlement application has to be given after the Director General(DG)  issues a report under section 26. This report will be based on his findings and the investigation the DG has done up uptil now, the settlement application has to be given before the commission passes the final order if it thinks that it is in contravention of sections 3 and 4.

Initially, the CCI will establish a preliminary view regarding its approval of the commitment application or settlement application, depending on the situation. The applicant has 15 days to submit a revised proposal if the CCI is not pleased. Thereafter, the CCI shall invite third parties (including counter parties and the DG) to submit their opinion within 21 days.^[8]

It is upon the commission to consider such application basing itself on the nature, gravity and impact of such contraventions. CCI will provide for an opportunity to the third parties before grant of such application, which includes the director general, and the opposite party. For such an application to be accepted by the commission, the opposite party can submit their objection and suggestions to such settlement procedure.

If the commission finds it appropriate to not proceed with such an application, it can continue with the proceeding under section 26.

There can be no appeal made under section 53 b (appeal to appellate tribunal) i.e. the national company law appellate tribunal.  Once settlement and commitment are to be sought there is no appeal that can be made. The parties have to agree on that being the final decision. The benefit of this is twofold in the sense that the CCI can now move to other matters, and the companies can proceed with their work thus not affecting their efficiency.

“The ability to have a negotiated agreement and not having the ability to appeal it makes the amendment extraordinary.” Says Jayant Sinha.

A commitment procedure is to be initiated after the receipt of such information when the prime facie order is to be issued but before the receipt of the DG Report by the parties.

In the Commitment application, the alleged violator would have to provide the true and complete facts, including the gravity and impact of the contraventions and how the commitments offered would talk about the claimed infractions as well as the procedures for carrying out and keeping an eye on the promises made. The CCI may rescind its commitment or settlement order (and the investigation will restart) in the event that a party does not follow the terms of the agreement, does not disclose all relevant information, or if there is a major change in the facts. Additionally, the party will be responsible for covering the CCI’s legal expenses up to INR 10 million (about USD 120,000 / EUR 110,000).

In order to address the anticompetitive impacts of the alleged breach, commitments or settlement terms, as the case may be, can be created to restore competition through actions like divestitures and behavioral adjustments. Those impacted by the alleged anti-competitive actions have been given a voice by allowing comments from the other parties, and more transparency in antitrust enforcement has been sought.^[9]

Such settlement amount to be credited to the consolidated fund of India

The Amendment Bill gives third parties the right to sue for damages or losses they have suffered under Section 53N of the Act in situations where the CCI issues a settlement order.

Section 48C deals with an applicant who fails to comply with the order passed under section 48A or section 48B or when it comes to the notice of the Commission that the applicant has not made full and true disclosure or there has been a material change in the facts, the order passed under section 48A or section 48B, as the case may be, shall stand revoked and withdrawn and such enterprise shall be liable to pay legal costs incurred by the

Commission which may extend to rupees one crore and the Commission may restore or initiate the inquiry in respect of which the order under section 48A or section 48B was Passed.^[10]

QUANTUM OF PENALTY THAT WILL BE IMPOSED –

Previously, As per the Competition Act of 2002, the penalty levied by CCI could not exceed 10 percent of the mean “turnover” for the three preceding financial years.

But in the Excel Crop case, the Supreme Court held that the quantum of penalty has to be restricted to not more than 10 percent of the “relevant turnover” of the erring enterprise on grounds of proportionality to the violation. The “relevant turnover” had been defined as the turnover pertaining to the products or services (and the geography) for which the anti-competitive conduct of the parties relates to. This had a negative impact on the intended deterrent effect that such penalties should have had in the market as well as drastically reducing the scope of penalties that the CCI would have imposed.^[11] 

However, in the Excel Crop case, the Supreme Court ruled that, to be proportionate to the infraction, the penalty amount must be limited to no more than 10% of the “relevant turnover” of the offending firm. The turnover related to the goods or services (as well as the region) for which the parties’ anti-competitive behavior is relevant was previously referred to as the “relevant turnover.” This had a negative impact on the intended deterrent effect that such penalties should have had in the market as well as drastically reducing the scope of penalties that the CCI would have imposed.

The 2023 Amendment Act has “restored” the CCI’s authority to levy fines based on a party’s worldwide turnover. This was essential to making the non-adjudicatory methods more appealing to the parties.

Therefore, the enhanced criminal authority of the CCI is a desirable development that would not only strengthen the effect of deterrence against violations of competition law but also serve as a driving force behind the adoption of the mechanisms for commitment and settlement.

SIMILAR FRAMEWORK IN DIFFERENT COUNTRIES

Similar tools are already in place in several other jurisdictions such as the European Union, United Kingdom, USA Germany, Japan, and  Italy.

1. United States of America – Settlements are reached by working out the parameters of the remedy, drafting a precise and binding judgment, and then coming to an agreement with the parties, who consent to be bound by the final order’s terms, waive their rights to additional proceedings, and admit certain facts to establish jurisdiction. The agencies additionally publish or submit a complaint detailing pertinent details and claiming that the involved parties broke the law.  In the US, a settlement can only be accepted under specific circumstances. They’re as follows:

(A) A cartel is in place In order to enter into a plea agreement with the Antitrust Division, the defendant must be willing to

(B) admit guilt or provide a factual basis for the plea;

(C) Cooperation of the cartel participants (the inclusion in the cartel settlement of agreements by the settling party to provide full, continuing, and complete cooperation)  

(D) Promise by the Government not to bring further charges

In India, it is not required to acknowledge guilt.

2. European Union – The European Commission (EC) allows commitment judgments in all antitrust matters whereas for cartels, the settlement route is available.However, in India, all antitrust issues would be settled, barring cartels. Cartels may choose to go for leniency. Further, while a settlement decision establishes an infringement and requires an admission of guilt from the parties, a commitment decision does not establish an infringement and does not require any admission by the parties. In India such admission of guilt is not necessary. EC notes that typically parties opt for a settlement decision when they are convinced of the strength of the EC’s case in view of the evidence gathered during investigation and of their own internal audit. In such cases, they may be ready to admit their participation in a cartel and accept liability for it. It was brought to the notice of the Committee that between May 2004 to February 2014, the EC adopted 34 commitment decisions and 19 infringement decisions^[12] These procedures have proved to be more efficient and lead to quicker resolutions, since findings are not contested and the EC in particular can avoid the need, to draft detailed infringement decisions.For non-cartel behavior, the EC also uses an informal “cooperation procedure” in which infringement is found, structural remedies are imposed, and the parties receive a 30 percent reduction in fines in exchange for their cooperation.
3. LENIENCY, CARTEL, SETTLEMENT – Experts in India assert that cartelization is considered a grave offense, which is likely the reason it is excluded from the settlement plan. “There is already a clause that allows persons involved in cartels to come clean about their behavior and receive mercy on their punishment. According to Amol Kulkarni, head of research at CUTS International, a non-profit, non-governmental organization that works on public interest issues, “keeping cartels out of the proposed settlement scheme could be a balancing act.”^[13]

Section 46 of the Competition Act 2023 contains the Leniency Regulations, which provide that an entity requesting leniency must not only make essential disclosures but also stop participating in the cartel (unless instructed otherwise by the CCI) and provide full cooperation to the CCI.  Throughout the investigation and other processes before the CCI, such cooperation is necessary.  Furthermore, the requester for leniency shall not remove, alter, destroy, or hide any pertinent material related to the cartel.^[14]

3. JAPAN: The Japan Fair Trade Commission (JFTC) is empowered by the Anti-Monopoly Act (AMA) of Japan to formally accept voluntary promises from businesses that may have violated the law. Following notification, companies have sixty days to present proposed commitments and provide proof that the alleged infringement has stopped. Companies can utilize the process without having to admit that there has been an infringement. Therefore, it is not required to admit responsibility here either. The settlement process for cartel and bid-rigging charges is procedural; first, a leniency application is filed, and if it is approved, an application for negotiation is made.

4. United Kingdom– National authorities in Europe have also heavily relied on these mechanisms for antitrust enforcement. In February 2022, the UK’s Competition and Markets Authority (“CMA”) accepted commitments from Google in relation to the Privacy Sandbox for its Chrome browser.  The CMA is presently reviewing promises made by Google on its Play Store billing policies as part of a separate probe.

5. Germany – In its eleventh amendment act, the German Competition Act (Gesetz gegen Wettbewerbsbeschränkungen, or GWB) provided a number of remedies, including structural and behavioral modifications. Unlike CAA2023, which typically arises when there is a violation, these are introduced not just for cases where infringement has happened but also for market conditions that necessitate solutions. It recently accepted commitments offered by the German Olympic Sports Confederation and International Olympic Committee in respect of advertising restrictions imposed on the participants in the Olympic games and companies.

6. ITALY- The Italian Competition Authority also offers a settlement procedure that allows businesses accused of engaging in anti-competitive agreements or practices to do so. This conforms to the criteria set by Europe. The settlement procedure’s goals are to expedite the legal process and give the parties the opportunity to receive a reduction in penalty. Parties may benefit from a 10% reduction in fines for settling with the ICA if the ICA aligns its process with the European Commission’s.^[15]

SIMILAR MECHANISM UNDER DIFFERENT STATUTES

In order to keep up with the increasing number of litigation cases and lessen the workload for courts and tribunals, section 48 draws inspiration from various statutes as well. This allows for a concentration on more important cases rather than wasting time, effort, and resources on less serious harms.

The Securities and Exchange Board of India’s (SEBI) 2018 Regulations – gives SEBI more latitude to resolve some serious offenses, with the exception of situations that could have an impact on the entire market, result in losses for a significant number of investors, or compromise the integrity of the market. Additionally, it concentrates on increasing transparency in investor-related settlement matters (such as disclosure violations, refunds, and exit alternatives) and, for the first time, established a confidential settlement in exchange for assistance from SEBI in its investigations. ^[16] 

The Income Tax Act, 1961 also sets out a settlement framework – Any assessee who is the subject of an ongoing legal case before an income-tax authority may submit an application in the required format to the Settlement Commission in order to resolve the matter. The application cannot be withdrawn once it has been filed, and it must be submitted with the required fee. The aims are to decrease litigation, guarantee prompt tax collection, and give taxpayers the tools they need to clean house through negotiation and settlement. It is a crucial alternative dispute resolution procedure for settling tax disagreements involving direct taxes.

Vivad-se-wishwas is yet another significant plan. This program, “Vivad se Vishwas II – (Contractual Disputes),” was introduced by the Ministry of Finance’s Department of Expenditure, a one time settlement scheme, to efficiently resolve outstanding contractual disputes involving the government and government-affiliated enterprises. ^[17]

CRITICAL FACTORS –

1. Can the parties fear that their application will be used as evidence against them if rejected? The parties do not necessarily have to admit to their guilt as per the provisions. Following a thorough discussion, the Standing Committee recommended against requiring a party to “admit guilt” in exchange for agreeing to resolve a dispute or make promises.

However, Parties considering entering a plea for settlement should be mindful of the possibility of follow-on claims for damages. This possibility should be based on the nature, gravity, and future consequences of the alleged violation done.

Follow-on cases are claims for damages where the infringement of competition law has already been established by a competition authority

The CCI may utilize information disclosed in a settlement or commitment application against the relevant applicants or any other persons involved in the investigation who are not involved in the settlement or commitment procedures.

The investigation into the remaining infractions will continue, although in some circumstances, the settlement application or the commitment application, as the case may be, may be approved in connection to some (but not all) of the infractions mentioned in the DG’s investigation report.

The Draft Settlement Regulations stipulate that a settlement order shall not be regarded as a finding of contravention, even when a settlement will not prejudice the damages procedures.  This means that applicants may have difficulties proving loss as a settlement applicant in the event of follow-on damages. ^[18]

2. The fact that the amendment ignores the settlement in cartels is a significant disadvantage.   For corporations who would have preferred to settle out of court, including cartels would have been a practical step toward closing the proceedings. The claim that “cartels” benefit from leniency fails to recognize the fundamental distinction between leniency—a technique for starting investigations—and settlements, which are an effective means of bringing a lawsuit to an end.

Author : Utkarsha Rananaware, A studentat ILS Law College, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD

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^[1]   India Glycols Limited v. Indian Sugar Mills Association and Others 2018.

https://pib.gov.in/PressReleasePage.aspx?PRID=1546553

^[2]   Manupatra, S.J. and Kumari, S. (no date) Manupatra, Articles. Available at: https://articles.manupatra.com/article-details/THE-SETTLEMENT-AND-COMMITMENT-SC-MECHANISM-AN-ANTIDOTE-FOR-THE-PREMATURE-BUSINESS-FRIENDLY-POLICY-OF-CCI (Accessed: 19 January 2024).

^[3]  The need for settlements and commitments under the Competition Act (no date) azb. Available at: https://www.azbpartners.com/bank/the-need-for-settlements-and-commitments-under-the-competition-act/ (Accessed: 19 January 2024).

^[4] Tamil Nadu Film Exhibitors Association v. CCI (2015)

http://www.scconline.com/DocumentLink/js2SjZ2X

^[5] Competition Amendment Act 2023, Section 48 https://www.cci.gov.in/images/publications_booklet/en/competition-amendment-act-2023-salient-features1684831868.pdf

^[6]  CCI Draft regulations https://www.cci.gov.in/images/whatsnew/en/background-note-settlement1692847181.pdf

^[7] CNBC (2022) Available at :  

(https://www.youtube.com/watch?v=b4xiF1HsECM

^[8] Prateek, P., Verma, T. and Vohra, R. CCI publishes draft regulations on settlement and commitment mechanism, Khaitan & Co. Available at: https://www.khaitanco.com/thought-leaderships/CCI-Publishes-Draft-Regulations-on-Settlement-and-Commitment-Mechanism (Accessed: 5 January 2024).

^[9] Guest Contributor (2023) Financialexpress, Opinion News | The Financial Express. Available at: https://www.financialexpress.com/opinion/a-new-era-of-competition-law-not-only-does-this-compel-violators-to-make-amends-but-also-gives-those-affected-a-voice/3286598/ (Accessed: 15 January 2024).

^[10]https://www.cci.gov.in/images/publications_booklet/en/competition-amendment-act-2023-salient-features1684831868.pdf

^[11] Excel Crop Care Limited v. Competition Commission of India & Anr., (2017) 8 SCC 47

^[12] Competition law review committee report page 45, 2019

Click to access Report-Competition-CLRC.pdf

^[13] Prasad, G.C. (2023) Cartels may be kept out of settlement purview, mint. Available at: https://www.livemint.com/news/india/cartels-may-be-kept-out-of-settlement-purview-11675963419838.html (Accessed: 29 January 2024).

^[14] Kakkar, A.K. and Chauhan, V.P.S. (2023) Cartels & Leniency Laws and Regulations Report 2024, International Comparative Legal Guides International Business Reports. Available at: 

https://iclg.com/practice-areas/cartels-and-leniency-laws-and-regulations/india (Accessed: 29 January 2024).

^[15]  Vassallo, G. et al. (2023) Main developments in competition law and Policy 2022 – italy, Kluwer Competition Law Blog. Available at: https://competitionlawblog.kluwercompetitionlaw.com/2023/05/05/main-developments-in-competition-law-and-policy-2022-italy/ (Accessed: 29 January 2024).

^[16] Gazal Rawal, R.G. (2022) Amendments to sebi settlement regime – a snapshot, India Corporate Law. Available at: https://corporate.cyrilamarchandblogs.com/2022/01/amendments-to-sebi-settlement-regime-a-snapshot/ (Accessed: 29 January 2024).

^[17] Government launches a one-time settlement Scheme Vivad se Vishwas – II (Contractual Disputes) to effectively settle pending contractual disputes, as announced in the Union Budget 2023-2, 2023

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1945072#:~:text=The%20Department%20of%20Expenditure%2C%20Ministry,by%20the%20Union%20Finance%20Minister.

^[18] DRAFT CCI (SETTLEMENT) REGULATIONS, 2023  https://www.cci.gov.in/images/whatsnew/en/background-note-settlement1692847181.pdf

Case COMMENT ON Zahira Habibullah H. Sheikh v. State of Gujarat (2004 Cr. LJ 2050 SC)”

Abstract

An overview of the Zahira Habibullah H Sheikh and Anr v. State of Gujarat and Ors [2004] 4 SCC 158 case is provided below. This case, also known as the “best bakery” case, is regarded as a landmark decision because it addressed issues such as witness tampering, the role of influential politicians in misleading the court, the impugned role of prosecutors, and the foundation of a free and fair trial in addition to the post-Godhra riot incident.

This case has been generally read, summarised, and evaluated in the headings below:Facts of the case, issues raised, Arguments made by the appellants, legal aspects , well known precedents , summary of the judgement,  conclusion, and recommendations. The legal provisions included in articles 14, 21, and 139(A) of the constitution, as well as sections 409(1), 173(8), and 311 of the CrPC, are the main subjects of the case.  Section 165 of the Indian Evidence Act of 1872 is also addressed. The supreme court reiterated in this decision the famous Bentham saying that “witnesses are the eyes and ears of justice”. The court addressed how the public administration, at times, affects the administration of justice and results in travesties of justice in its insightful judgement. It also advanced the triangulation of interest in criminal law.

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BACKGROUND

• An enraged mob set fire to the “best bakery” restaurant between 8:30 p.m. on March 1 and 11 a.m. on March 2 in retaliation for the Godhra tragedy, which occurred on February 27, 2002, and resulted in the deaths of 56 people, predominantly karsevaks, on the Sabarmati express in Gujarat.

• 14 people died as a result of this act of community rage-fueled incineration. The first appellant and main witness, Zahira Habibullah, saw the deaths of three bakery employees and eleven members of her own family. In addition to her, there were other witnesses.

• In June 2002, a charge sheet was submitted against the defendant. Nevertheless, numerous witnesses, including Zahira, changed their statements in court regarding the statements they made during the inquiry process. She claimed in court that she had been on the terrace when the event occurred and had missed seeing the criminals as a result. As a result, the trial court cleared all 21 of the defendants in the proceedings in its ruling from June 27, 2003, citing a dearth of evidence.

• Judge H U Mahida of the Additional Sessions then came to the conclusion that the police may have implicated innocent individuals in order to bring the criminals to justice. According to the appellant, the trial was inefficient, the investigation was defective, and the outcome failed to fulfil the goal of fairness in the criminal judicial system.
• When Zahira later went to the National Human Rights Council (NHRC), she claimed that she had been coerced into making a false deposition and becoming hostile by prominent politicians. As a result, many believed that the trial court’s decision was prejudiced and produced a serious miscarriage of justice.

• The Gujarat high court received an appeal, but it was dismissed by the court. Also, the state government’s request to start a new trial based on new evidence discovered in accordance with section 391 of the Criminal Procedure Code was denied. The same outcome occurred when a section 311 of the CrPC request for a re-examination of the witnesses was made.

• A Special Leave Petition (SLP) was filed to the Supreme Court by the National Human Rights Commission (NHRC), Zahira Habibullah, and Citizens for Justice and Peace. The court recognised this as a petition in accordance with Article 32 of the Indian Constitution.

AUTHORS COMMENTS ON LEGAL ASPECTS OF THE JUDGEMENT:

The case revolves around the interpretation of various articles of the constitution as well as sections from the CrPC and the Indian Evidence Act.

• Article 19 of Indian Constitution^[1]

The essential right to free speech and expression is guaranteed by Article 19 of the Indian Constitution.  The relevance of this basic right, and  its role in ensuring a fair trial can be seen in the Zahira Habibullah case.

The right to free speech and expression includes the right to transmit and receive information, and that this right is critical for democracy to work. In the context of a criminal prosecution, the right to free expression and expression allows witnesses to testify without fear of intimidation or retaliation.

The witnesses in the Zahira Habibullah case had been exposed to intimidation and harassment, which had contributed to their becoming hostile.

The state has a responsibility to protect witnesses and safeguard their safety so that they may testify freely and fearlessly.

The right to free expression applies to the media, which plays an important role in reporting on cases and maintaining openness in the judicial process. Also the media has the freedom to report on cases and voice their opinions as long as they do not obstruct the administration of justice.

Therefore in the Zahira Habibullah case, authors could believe that how much the value of free speech and expression is in ensuring a fair and impartial trial, as well as the need for witness protection and confidentiality.

• Article 21 of Indian Constitution[2]

The basic right to life and personal liberty is guaranteed under Article 21 of the Indian Constitution. The Supreme Court of India ruled in the Zahira Habibullah case that this basic right is necessary for the protection of human dignity and the rule of law.

The right to life and personal liberty in the context of a criminal prosecution includes the right to a fair trial devoid of fear, compulsion, and intimidation. The state has a responsibility to safeguard the safety and security of witnesses so that they can testify freely and fearlessly.

The right to life and personal liberty includes the right to justice. The witnesses in the Zahira Habibullah case had been denied access to justice due to the state’s inability to safeguard them and provide a fair trial.

In the Zahira Habibullah case, for example, the Supreme Court of India underlined the relevance of the right to life and personal liberty in ensuring a fair and impartial trial, as well as the necessity of witness protection and the state’s obligation to enable access to justice.

• Section 311 of Criminal Procedure Law^[3]

Section 311 of the Indian Criminal Procedure Code empowers a court to call and examine anyone who has previously been questioned or whose evidence has been considered during the trial. The goal of this part is to allow the court to clarify any uncertainty or elicit any further information that may be required for a fair judgement in the case.

“While considering the scope and ambit of Section 311”, It is observed in Mohanlal v. Union of India^[4] that the very usage of words such as “any court”,”at any stage” O”any enquiry or trial or other proceedings”, “any person” and “any such person” clearly spells out that the section has expressed in the broadest possible terms and does not limit the discretion of the court in any way.

However, as previously said, the breadth necessitates a comparable care that the discretionary powers be employed as the necessities of justice warrant and applied judicially with circumspection and in accordance with the rules of the Code. The second half of the provision gives the court no option, but obligates and compels it to take the required procedures if the new evidence to be collected is crucial to the just determination of the case, “essential” to an active and attentive mind, not one set on abandoning or abdicating. The purpose of the clause is to allow the court to reach the truth regardless of whether the prosecution or defence has failed to submit evidence required for a just and proper disposition of the case.

Section 311 in the Zahira Habibullah case was used to call Zahira and other witnesses to explain their prior comments. It was noted in the judgement that the case had far-reaching ramifications and that it was critical that justice be delivered.

During the hearing, Zahira recanted her previous comments and claimed that she was pressured into delivering false testimony. She was found guilty of perjury and sentenced to one year in jail by the court. The court stated that Zahira’s shift in testimony was influenced by extraneous factors and resulted in a miscarriage of justice.

The employment of Section 311  in the Zahira Habibullah case emphasises the relevance of this provision in ensuring that justice is served and the judicial process is fair and transparent, and to ensure that the trial’s conclusion is just. However this same section was not invoked by neither trial court nor high court in Gujrat.

• Section 391 of Criminal Procedure Law^[5]

The competence of the appellate court to mandate the production of new evidence or the interview of witnesses is addressed under Section 391 of the Criminal Procedure Code (CrPC). Authors have evaluated the provisions of Section 391 CrPC in regard to the trial in the Zahira Habibullah case.

During the trial, several witnesses became hostile and did not testify as they had previously stated. The trial court used their previous remarks as evidence.

However, the prosecution had failed to adequately interrogate these witnesses, despite the fact that their testimony was critical to the case. The Section 391 CrPC allows the appellate court to direct the production of new evidence or the interrogation of witnesses, and concluded that this authority should be used only when the interests of justice require it.To reach this judgement, It examined the evidence of the material witnesses and noted various pertinent elements. The need for extra evidence must be considered in the context of the requirement for a just conclusion, and it cannot be used to fill a void.

This Court’s judgments in Jamatraj Kewalji Govani v. State of Maharashtra^[6] and Mohanlal Shamji Soni v. Union of India^[7] were stated during the proceedings for better clarifications.

In Rambhau v. State of Maharashtra^[8], it was determined that the purpose of Section 391 is to achieve the goals of justice rather than to cover gaps. The court must keep these beneficial ideas in mind. Though the court has broad power, it must exercise it judicially, and the legislation has provided a safety valve by mandating the recording of reasons.

As a result, the Supreme Court ordered that some witnesses be re-examined and that more material be produced in order to guarantee that the trial was handled properly and justly. The interests of justice should take precedence over procedural details, and it concluded that the appellate court has broad powers to guarantee that justice is done.

Thus, in the Zahira Habibullah case, the Supreme Court relied on Section 391 CrPC rules to require witness re-examination and the presentation of further material in order to guarantee that justice was done.

•  “Section 165 of the Indian Evidence Act states^[9]:

‘‘In order to discover or collect appropriate proof of important facts, the Judge may ask whatever question he pleases, in any form, at any time, of any witness, or of the parties.”

“Section 165 of the Indian Evidence Act of 1872” authorises a court to conduct an investigation in any matter where it believes it is essential. The authors analyse Section 165 of the Evidence Act to understand the SC’s order a retrial in a different state in the Zahira Habibula case when Zahira Habibula, who had previously identified the accused in the trial court, became hostile during the retrial.

The hostile witness had rendered it impossible for the trial to proceed, and the case had to be retried in a different state to ensure a fair trial. The  state administration is also to be blamed for failing to safeguard witnesses and for failing to prosecute effectively.

The Zahira Habibula case highlighted the necessity of witness protection and fair and unbiased trials in India. It also resulted in criminal justice changes, such as the implementation of witness protection programmes and the establishment of fast-track tribunals for instances involving communal violence.

Article 139 A(2) of the constitution :

‘‘The Supreme Court may, if it deems it expedient so to do for the ends of justice, transfer any case, appeal or other proceedings pending before any High Court to any other High Court’’

“This article allows the Supreme Court to transfer cases from one high court to another”, in cases where it feels that free trial may not be possible, by way of compromising the

witnesses or destruction of evidence in the home state.

 Section 409(1) of CrPC:

‘‘Whenever it is made to appear to the Supreme Court that an order under this section is expedient for the ends of justice, it may direct that any particular case or appeal be transferred from one High Court to another HighCourt’’

With respect to the the transfer of cases from one state to another we looked into the landmark judgment of Maneka Sanjay Gandhi vs Rani Jethmalani^[10] which clearly states that The primary imperative of the administration of justice is the assurance of a fair trial, and the fundamental criteria for the court to examine when a petition for transfer is made is not a party’s hypersensitivity or relative convenience, or the simple” availability of legal services or such minor grievances”. “Something more substantial, more persuasive, and more perilous from the standpoint of public justice and its concomitant environment is required if the court is to utilize its transfer.

AUTHORS COMMENT ON SUPREME COURT’S JUDGEMENT

• Regarding the public prosecutor’s improper actions

It was stated that they were “perfunctory and everything but fair without any specific goal of learning the truth and holding those accountable for the crime”

The public prosecutor, in the opinion of the court, did not carry out his duties honourably. The Trial Court “in turn appeared to be a quiet spectator, mute to the manipulations and preferred to be oblivious to sacrilege being perpetrated to justice” and The Public Prosecutor’s role was more like to that of a “defence counsel than one whose duty it was to provide the truth to the court”.

examining agency’s function

The Court cited Bentham when it said that witnesses are the “eyes and ears of justice.”

The Supreme Court overturned the High Court’s judgement, holding that an unjustified acquittal that is based on tainted evidence, a targeted investigation, a superficial trial, and the testimony of witnesses who have been threatened or intimidated is not an acquittal under the law and cannot have any credibility attached to it.

Regarding witness protection, the prosecutor may have attempted to safeguard the witness’s identity by asking for in-camera proceedings and witness protection. Moreover, he didn’t try to approach the wounded witnesses. In one case of flagrant misconduct, the public prosecutor opted to exclude a crucial witness because he was mentally unstable.

The trial court agreed with this without even the most basic checks to see if the witness in question was indeed mentally ill. Many witnesses were likewise not questioned without any explanation at all.

The reasoning of the court was that a fair and impartial trial might have determined the defendants’ guilt or innocence in the Best Bakery case.

Regarding the state government’s role

The State has a duty to protect witnesses, especially in sensitive matters, in the wider interests of society. As a guardian of its citizens, the State must make sure that witnesses may testify in safety during trials without worrying about consequences. The Court cited the numerous instances in which courts encountered witnesses who became hostile as a result of threats, coercion, or for financial or political gain. These incidents had the cumulative effect of undermining and destroying public confidence in the administration of justice, which resulted in anarchy, oppression, and injustice as well as the dissolution of the rule of law.

• The Fundamentals of a Fair Trial

Fair trial is defined as a “triangulation of the interests of the accused, the victim, and society,” while denial of a fair trial is defined as an injustice to the victim, society, and the accused. “A fair trial is one in which there is no bias or prejudice for or against the defendant, the witnesses, or the issue under investigation”. The court ruled that, as guaranteed by natural justice principles and articles 14 and 21 of the constitution, everyone has the right to a fair hearing.(Audi Alteram Partem). Due process of law must not be violated by a biassed trial.

• Defects in the management and conduct of both the trial and the appeal hearing

There were certain Flaws in the management and conduct of both the trial and the appeal hearing In its ruling, the Supreme Court made a number of significant general observations on the duties of courts, the functions of the criminal justice system, the right to a fair trial, and the treatment of witnesses.

When commenting on the criminal justice system and “the right to a fair trial”, the Supreme Court noted that the main goals of the justice system and the right to a fair trial are to protect the public from unfair trials and to ensure that everyone is treated fairly.

It should be a “search for truth and not a battle over technicalities” as the goal of a criminal trial is to “mete out justice, convict the guilty, and protect the innocent.” A trial that has the main goal of discovering the truth also has to be impartial towards all parties.  This “requires a delicate judicial balancing of competing interests…the interests of the accused and the public and to a significant extent that of the victim have to be weighed not losing sight of the public interest involved in the prosecution of persons who commit offences.”

Authors noticed that the Court decided that not only the accused must be treated properly; victims, their family members, and other relations also have an “inbuilt right” to be treated equally in a criminal trial, and denying both the accused and the victim a fair trial is an injustice.  An unfair trial will come from intimidating witnesses, pressuring them to provide false testimony, and failing to hear crucial witnesses.

• Criminal offences are social injustices

Criminal acts are public wrongs because they have an impact on the general population. As a result, the court cannot ignore what is best for society. By taking an active role in the trial and displaying intellect, the presiding judge must stop acting as a bystander and merely a recording device. This means that the judge has the authority to actively gather evidence when doing so is required to establish the truth and uphold justice. To avoid judicial overreach, this rule must, however, only be utilized in exceptions and with careful interpretation. Section 311 of the CrPC and Section 165 of the IEA of 1872 both confer these powers.

The trial itself did not adhere to the fundamental requirements of a fair trial, the court further found, even if the accused had been cleared by the trial court. There was therefore no legal acquittal in this case.

• “Transferring the matter to the Bombay High Court”

“The matter had to be moved to the Bombay high court under section 409(1) of the CrPC in order to ensure a free and fair trial”. The CJ was then requested to appoint a court of competent jurisdiction.

• Witness protection is an urgent requirement.

According to Bentham, “if the witness is unable to operate as the eyes and ears of justice”, the trial becomes putrefied and paralyzed, and it can no longer be considered a fair trial. The State has a duty to safeguard witnesses in the larger interests of society, particularly in delicate instances; as a guardian of its citizens, it must guarantee that witnesses can testify securely and without fear of penalties during trials.

Threats, compulsion, enticements, and monetary incentives may induce the witness to become hostile, as may political clout. Thus, in order to avoid making a farce of a judicial trial, the state must safeguard the witnesses. The victims were also granted the right to have a say in the nomination of the public prosecutor by the court.(contrary to how it actually happens).

Furthermore, the court ruled that the state of Gujarat must provide witnesses with security. If the witnesses want it, the state of Maharashtra will also provide them with the required protection.

“”The trial court has the authority under the Criminal Procedure Code and the Indian Evidence Act to recall and re-examine the adverse witnesses”.  The Supreme Court also ruled that the High Court’s determination that Zahira Sheikh was exploited by those with “oblique motives,” and that witnesses who filed affidavits were of unsound mind, untruthful, and easily influenced, without material or reasonable and tangible foundation.

• High court’s decision without justification was improper.

The high court denied the appeal on December 26, 2003, but stated that reasons will be provided later due to a lack of time due to the court’s closure for winter vacations. This was deemed undesirable by the Supreme Court.

CONCLUSION

The Authors concluded that the Supreme Court’s decision to compel a retrial and transfer of the Best Bakery case has been generally hailed as a “landmark.”

The Supreme Court specifically alluded to the relationship between access to justice and human rights protection in the instant case, and issued a number of observations on the role of state governments and courts in maintaining the integrity of, and public trust in, the legal system. Fundamentally, the Zahira Habibullah case highlighted serious concerns about the credibility of witness evidence, the necessity for witness protection, and the integrity of India’s legal system.

In the Best Bakery case, Zahira’s original evidence was critical, but her later reversal and the eventual acquittal of the guilty underscore the difficulties in guaranteeing justice in complicated and high-profile cases. To retain the public’s faith and confidence in the judicial system, it is critical to protect witnesses from intimidation and coercion, ensure impartiality and openness in the “judiciary, and respect the rule of law.”

Finally, the case of Zahira Habibullah serves as a reminder of the continued effort required to reform the judicial system and secure justice for everyone.

The Zahira Habibullah case was a watershed moment in Indian legal history, addressing various critical topics such as witness protection, the authority of the appellate court, and the administration of justice. The lawsuit emerged from the 2002 Gujarat riots, which killed over a thousand people, predominantly Muslims.

The case involves the prosecution of numerous people accused of murdering several Muslims during the riots. During the trial, several witnesses became hostile and did not testify as they had previously stated. The trial court cited their previous remarks as evidence and acquitted several of the defendants.

“The case was subsequently appealed to the Supreme Court of India”, which considered various legal issues, including witness protection, appellate court authority, and justice administration. The court determined that witness protection was critical to ensuring a fair trial and emphasised the need of the state providing appropriate witness protection measures. The court also concluded that the appellate court had broad powers to guarantee that justice was done, and that the interests of justice should take precedence over procedural details.

In its decision, the Supreme Court ordered that some witnesses be re-examined and that further evidence be produced in order to guarantee that justice was served. The court also found other accused people guilty of murder and other crimes and punished them.

Overall, the Zahira Habibullah case was significant in Indian legal history, emphasising the significance of witness protection, the appellate court’s authority, and the administration of justice. The case prompted significant legal reforms, including the implementation of the Witness Protection Scheme, with the goal of ensuring that justice is served and the rule of law is protected.

Author : BHUMI SHARMA, A student at Symbiosis Law School Nagpur, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD

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^[1] Article 19, the Constitution of India, 1950.

[2]  Article 21, the Constitution of India, 1950.

^[3] Section 311, code of criminal procedure, 1973

^[4]“1991 Supp (1) SCC 271 : 1991 SCC (Cri) 595”, Mahanlal Shamji Soniv. Union of India

^[5] Section 391, code of criminal procedure, 1973

^[6] AIR 1968 SC 178 : (1967) 3 SCR 415 : 1968 Cri LJ 231, Jamatraj Kowaji Govani v. State of Maharashtra

^[7] 1991 Supp (1) SCC 271 : 1991 SCC (Cri) 595, Mahanlal Shamji Soniv. Union of India

^[8] (2001) 4 SCC 759 : 2001 SCC (Cri) 812, Rambhau v

State of Maharashtra

^[9] See, section 165, Indian Evidence Act, 1872

^[10] (1979) 4 SCC 167 : 1979 SCC (Cri) 934, Maneka Sanjay Gandhi v. Rani Jethmalani

Guarding the Financial Gates: A Comprehensive Examination of Money Laundering Prevention Legislations, Strategies and Regulatory Bodies.

The “Prevention of Money Laundering Act, of 2002” defines money laundering in India, and the study examines how illicitly obtained cash is hidden. It emphasizes the Hawala system, a clandestine money transfer scheme banned in India. Banks must maintain client confidentiality and follow Know Your Customer (KYC) standards to verify names and fund sources. Despite these safeguards, the article notes that commercial banks’ low KYC compliance and technology advances that enable speedier and more discreet transactions make money laundering regulations difficult to enforce. In conclusion, the essay recommends legal alignment, public knowledge of money laundering’s repercussions, and judicial vigilance to strengthen India’s anti-money laundering efforts and provide a strong legal precedent.

WHAT IS MONEY LAUNDERING?

To “launder” money is to make the origin of illegally obtained finances or assets appear to be lawful. In most cases, illegal behaviour is behind such a change of ownership or possession.[1] In India, “Section 2(1)[2]” read in conjunction with “Section 3[3]” of the “Prevention of Money Laundering Act, 2002” defines money laundering as an “endeavour to conceal the source of proceeds or property obtained through criminal activity.”[4]

MODE OF OPERATION OF MONEY LAUNDERING?

There are three basic concealment steps that make money laundering feasible. It commences with the initial placement stage. The majority of illegally obtained funds are liquid in nature. This money is then transferred, subdivided, and placed into the formalized framework for financial savings and investment. Typically, “banks and capital markets” serve function. Such stratification typically occurs in two ways.[5] The first stage, after depositing the liquid currency in a financial institution like a bank, is to convert it into monetary instruments like money orders. The second prevalent practice involves the acquisition and subsequent selling of assets, with the goal of concealing the true source of the funds and the identity of the original owner. “Integration” refers to the final phase of the money laundering process. The term “integration” describes the process by which money earned dishonestly is returned to the legitimate financial system. This is often accomplished through a banking mechanism so that the money can be recirculated within the economy.[6]

THE HAWALA SYSTEM

The Arabic word for trust is hawala. Hawala is a parallel remittance mechanism for money-laundering proceeds, similar to trusts. It is also called “Underground Banking”[7]. The transaction relied mainly on Hawaldar middlemen. Money is not physically transferred. The Hawaldar, who may be reached at the money source, makes it possible.

The Hawaldar then contacts a Hawaldar in the money-transfer sector. A commission is cut by the original Hawaldar, who collects and passes the payment to the transferee Hawladar.[8] Only until the transferee or his Hawaldar divulges a specific password can the money be received or collected. Thus, this system relies primarily on commercial contacts and mutual confidence. This money transfer method is popular since it avoids scrutiny and documentation and provides tax benefits.[9] Thus, it is great for money laundering. Indian law prohibits hawala transactions under the “Foreign Exchange Management Act, of 2000” and the “Prevention of Money-Laundering Act, of 2002”.

MONEY LAUNDERING IN THE INDIAN CONTEXT

“Money laundering” has emerged as a widespread concern across various echelons. The first aspect relates to the global level. The following level is associated with the occurrence of domestic money laundering. Several legislations have been promulgated to address these transactions, such as the “Benami Transactions (Prohibition) Act of 1988”, the “Income Tax Act of 1961”, “The Narcotic Drugs and Psychotropic Substances Act of 1985”, as well as the “Indian Penal Code” and “The Criminal Procedure Code”. However, the existing legislation has demonstrated its ineffectiveness in addressing the constantly evolving strategies utilized in the domain of money laundering. There existed a widely acknowledged imperative to enact legislation that expressly addresses the prevention of “money laundering”. Furthermore, the impetus to address the issue of “money laundering” in India was heightened as a result of the liberalization of the stock market and economy. Consequently, the “Prevention of Money Laundering Act, of 2002” was enacted, serving as a specialized legislation specifically designed to address this issue.

OBLIGATION ON BANKS

It is of utmost importance for financial institutions to continually bear in mind that the data obtained from customers during the course of initiating a new account is of a confidential nature, and any provided information should not be disclosed for the purpose of engaging in cross-selling or comparable endeavours.[10] Hence, it is imperative for banks to guarantee that transactions including data draughts, telegraphic transfers, or travellers’ cheques amounting to INR fifty thousand or above are recorded as debits in the customer’s account or subtracted from checks, rather than being settled through cash.[11] Nevertheless, these measures are counteracted by the implementation of “Know Your Customer (KYC)” norms, which serve to enable banks to confirm the identity of a prospective account holder as well as the origin of the funds being deposited into the bank. “The Reserve Bank of India” issues “Know Your Customer (KYC) Norms” through its Master Circulars. These rules encompass four fundamental characteristics that the Bank must investigate. The framework comprises several components, namely “Customer Identification Procedures, Customer Acceptance Policy, and Risk Management and Monitoring of transactions”.[12]

CONCLUSION AND SUGGESTIONS

India’s money laundering measures are still insufficient in fixing gaps, notwithstanding national and international legislation. The biggest challenge with money laundering laws is their enforcement. Commercial banks in India sometimes neglect Know Your Customer (KYC) rules to improve operational efficiency due to their competitive environment. KYC regulations are similar to standard form contract conditions for creating new accounts. The second issue is technical progress. E-commerce and encryption technology have increased transaction speeds, allowing monies to move quickly and preventing tracing. Legal alignment in India’s enforcement and investigation bodies is necessary to overcome the above challenges. This method is cheaper and more efficient. Additionally, money laundering’s negative effects must be communicated to the public, especially those who engage in complex and expensive banking operations. In summary, it is imperative for the judiciary to exercise heightened vigilance in matters pertaining to money laundering in order to establish a stringent legal precedent that upholds India’s money laundering legislation.

Author : Rajri Patel, A student at Symbiosis Law School, Pune, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD

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[1] V. Kumar Singh, Controlling Money-Laundering in India-Problems and Perspectives, 11th Annual Conference on Money and Finance in the Indian Economy, (23-1-2009 — 24-1-2009).

[2] The Prevention of Money Laundering Act, § 2(1), No.15, Acts of Parliament,2002, (India).

[3] The Prevention of Money Laundering Act, § 3, No.15, Acts of Parliament,2002, (India).

[4] Michael Lev and Peter Reuter, Money-Laundering: Crime and Justice, A Review of Research, Vol. 34, 289-376, (2006).

[5] Fauto Martis de Sanctis, Money-Laundering through Art: A criminal Justice perspective, 97-102, (2013 Edn.).

[6] Commonwealth Secretariat, Combating Money-Laundering and Terrorist Financing, 46-47, (2006 Edn.).

[7] Rob McCusker, Underground Banking: Legitimate Remittance Network or Money-Laundering System, (July 2005), (last visited on: Dec 3, 2023, 9:05 PM).

[8] Mayur Joshi, Occupational frauds and money, 6-8, (2005 Edn.).

[9] David C. Faith, The Hawala System, Global Security Studies, Vol. 2, Issue 1, 23-25, (2011).

[10] Vijay Singh, Controlling Money-Laundering in India-Problems and Perspectives, (January 2009), (last visited on: Dec 3, 2023, 12:05 PM)

[11] Suresh Padmalatha, Management of Banking and Financial Services, 108-109, (2011 Edn).

[12] Dhandapani Alagiri, Money-Laundering: Issues and Perspectives, 3-4, (2006 Edn.).

India’s Shift to an Independent Regulator for the Booming E-Gaming Industry

Introduction

The E-gaming sector which had earlier been planned to be regulated by self-regulatory organisation (SRO), however the the Ministry of Electronics and Information Technology (MeitY) has discarded those plans and seek to replace them with an independent regulator. NLU Delhi and the E-Gaming federation are now actively engaging in consultations with various stakeholders from the gaming industry to deliberate and determine the optimal trajectory for future gaming regulations

The nature and scope of these regulations could change the future of gaming in India.

This piece will seek to give a brief overview of the reasoning behind the shift from the original plan, why such regulations should exist and a glimpse into the regulations themselves.

Main Blog

The E-gaming market in India is growing at break-neck speed, with the annual revenue of the Indian gaming industry expected to almost double to $6 billion by 2028 from $3.1 billion in 2023. Even though India is leading the lines in E-gaming and mobile gaming in general, there existed little to no rules for regulating such a vast field. This meant there was nothing to safeguard the users of such games from any potential harm. Such a situation has even resulted in the loss of the life of a child who had spent real life money in a game without any supervision.

It was however, imperative that any rules that sought to regulate the e-gaming sector find the perfect balance between growth and regulation as the potential of such a large market cannot be ignored. The Minister of State for Electronics and IT, Shri Rajeev Chandrasekhar even asserting that “The rules are simple – we would like the online gaming ecosystem to expand & grow and be an important catalyst to India’s One trillion-dollar Digital economy goal by 2025-26. We also envision a bigger role for startups in the online gaming industry”. The India Gaming Report 2024 also expects paying gamers to reach 240 million by 2028 from 144 million paid users for games in 2023. The potential market is too huge to leave unregulated yet it should not be restrictive either.

Thus, the Ministry of Electronics and Information Technology (MeitY) came in and developed rules to regulate the e-gaming sector called the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023. These regulations included using a self-regulating body to direct these games to take measures to safeguard children including parental control, making online real money games which have been defined in the rules as “an online game where a user makes a deposit in cash or kind with the expectation of earning winnings on that deposit” require the approval of the regulatory body, and measures to prevent users from self-harm and addiction. As per these rules only online real money games need the approval of the regulatory body. Games that involve wagering or betting however are strictly prohibited and identity of the user must be verified before accepting any user deposit in cash or kind based on the identification procedure specified for entities regulated by the RBI.

According to these rules Self-regulatory bodies were to play a major role in supervising the gaming sector, however, the government are now planning to replace the Self-regulatory body with an independent regulator. This step was taken to maintain neutrality of the regulating body as an independent regulator would be much more impartial than an SRO. With the minister Rajeev Chandrasekhar stating that the SRO applications received by them were mostly from the gaming companies and industry itself and he had rejected them for the same reason. Thus, the implementation of these rules have been on hold and this has led to current scenario wherein NLU Delhi and EGF (E-gaming federation) an independent non-profit organization are in consultation with several industry stakeholders to create recommendations to the MeitY on how and what regulations should be implemented. Such consultations hopefully would lead to regulations that can provide both an opportunity for growth as well as prevent any misuse of e-gaming facilities. These recommendations are expected to be submitted to the MeitY after the elections.

Analysis and Conclusion

The shift from SROs to Independent regulators is a welcome one as SROs being non-governmental have a higher chance of being influenced by external factors. As with regards to the rules themselves, the guidelines so far are reasonable and E-gaming companies should welcome these rules as an approval from a regulatory body would surely help in solidifying the reputation of such companies and help the user separate wheat from chaff.

Author : Moosa Mihran S, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD

References

1. Economic Times, NLU preparing recommendations for a online gaming regulator, to submit to MeitY soon, The Economic Times (Mar. 25, 2024), https://economictimes.indiatimes.com/tech/technology/govt-plans-independent-regulator-for-online-gaming/articleshow/108754450.cms.
2. Economic Times, Indian gaming market revenue may double to $6 billion by 2028: report, The Economic Times (Mar. 27, 2024), https://economictimes.indiatimes.com/tech/technology/indian-gaming-market-revenue-may-double-to-6-billion-by-2028-report/articleshow/108827889.cms.
3. Government ushers in new era of responsible online gaming through strict guidelines for ensuring safety of Digital Nagriks and accountability of online gaming industry, (Apr. 20, 2023), https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1918383.
4. Jatin Grover, MeitY to prepare guidelines soon: Proposals for industry body rejected, Centre to regulate e-gaming, The Indian Express (Feb. 12, 2024), https://indianexpress.com/article/india/meity-to-prepare-guidelines-soon-proposals-for-industry-body-rejected-centre-to-regulate-e-gaming-9156525/.
5. The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023.
6. MeitY releases Draft amendments to the IT (Intermediary Guidelines & Digital Media Ethics Code) Rules, 2021 in relation to online gaming, (Jan. 2, 2023), https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1888143.
7. Times Now, Upset after losing Rs 40,000 in Free Fire, 13-year-old boy hangs himself to death, India News (July 31, 2021), https://timesnownews.com/india/article/teen-loses-40000-in-free-fire-hangs-himself-to-death-madhya-pradesh-bhopal/792879.

Comparative Analysis of Political Party as a Company

Introduction:

The content of this article is derived from the contentious exchanges between two seasoned attorneys in front of Delhi High Court Judge Swarna Kant Sharma’s bench. Arvind Kejriwal, the National Convenor of the Aam Admi Party and the current Chief Minister of Delhi is the target of an Enforcement Directorate case concerning one of the most notorious frauds involving AAP leaders. This article primarily addresses the Delhi High Court’s viewpoint, which is based on Mr. S. V. Raju’s learned ASG argument that a political party is firm for section 70 of the PMLA and that the petitioner, who is the national convenor, would be in charge of and accountable for its operations.

The apartment of Arvind Kejriwal, the current chief minister of Delhi, was searched by the Enforcement Directorate during their investigation into the scandals involving the Delhi excise policy. At 9:05 p.m., the Delhi government arrested Kejriwal on suspicion of money laundering related to the excise policy for Delhi for 2021–2022, and he was brought before the Rouse Avenue court where the ED is requesting custody. ED is granted judicial custody by the court from April 1, 2024, to April 15, 2024.

Kejriwal challenged the Enforcement Directorate’s arrest because it violated section 19 of the PMLA, 2002, and he asked that the arrest and the proceedings that followed be declared unlawful and unconstitutional in a petition filed before the Delhi High Court under Articles 226 and 227 of the Indian Constitution r/w section 482 Code of Criminal Procedure (Cr.P.C.).

Before the Hon’ble Bench of Her Ladyship Swarna Kant Sharma, Senior Advocate Abhishek Manu Singhvi submitted on behalf of the petitioner, arguing that the timing of the petitioner’s arrest—who is currently the Chief Minister of Delhi—affects “the level playing field” in the upcoming Lok Sabha Election 2024. The phrase “level playing field” includes three crucial components: First, it is a component of free and fair elections; second, democracy and elections go hand in hand; and third, democracy is a component of the “basic structure” of the Indian Constitution.

Therefore, he argued, the PMLA is being used to create an unfair playing field for the upcoming general election, and Kejriwal’s arrest directly interferes with the ability of free and fair elections to be held across the country and violates the petitioner’s right to run in the upcoming Lok Sabha Election 2024.

The learned senior counsel goes on to argue by citing the ruling of the Apex court, which stated that for an authorized officer to make an arrest, he must examine and evaluate the “materials in his possession” and use those materials to develop a reasonable suspicion that the subject of the arrest has committed a PMLA offense. However, in this instance, the ED violated Kejriwal’s fundamental rights by giving the officer permission to arrest him.

Finally, Learned Senior Counsel Mr. Singhvi argues that since section 70 of the PMLA only applies to Companies and the Aam Aadmi Party is a political party under section 2(f) of the Representation of the People Act, 1951, it cannot be held a company and Kejriwal cannot be held vicariously liable for an offense under section 3 of the PMLA. On behalf of the enforcement directorate, the leaned ASG, S.V. Raju, contended that the current case is unmistakably one of consent and waiver. He argued against the petitioner’s position, claiming that the Enforcement Directorate had complied with all procedural requirements outlined in Article 22(1) and (2) of the Indian Constitution and Sections 19(1) and 19(2) of the PMLA. He goes on to argue using the petitioner’s materials.

Additionally, it is argued that the most crucial factor to take into account is the fact that the Aam Admi party is the primary beneficiary of the criminal proceeds generated by the Delhi excise policy 2021–2022. The party used approximately 45 crore in cash during the AAP election campaign in the Goa Assembly Election, 2022. The respondent claims that this constitutes money laundering on the part of the party, which is prohibited by section 70 of the PMLA.

To bolster the argument In rejecting Singhvi’s submission, ASG claimed that the political party had registered under section 2A of the People’s Representative Act of 1951 because only individual associations were permitted to do so. The party also claimed that the petitioner, who is a national convenor due to his membership in the national executive and as head of the political affairs committee, was registered under the RP Act. Therefore, the petitioner bears the final responsibility for the money used for all election-related expenses, including their generation.

Applicability of section 70 of PMLA.

The Hon’ble Delhi High Court examines and compares section 70 PMLA with section 2(f) of the RP Act, 1951 after hearing arguments from the enforcement department and learned senior counsel for Kejriwal. The court refers to PMLA section 70, which says the following:

{“70. Offenses by companies.

• Where a person committing a contravention of any of the provisions of this Act or of any rule, direction, or order made thereunder is a company, every person who, at the time the contravention was committed, was in charge of and was responsible to the company, for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.

Explanation 1. —For this section, — (I) “company” means any body corporate and includes a firm or other association of individuals; and (ii) “director”, to a firm, means a partner in the firm.

Explanation 2. —For the removal of doubts, it is hereby clarified a company may be prosecuted, notwithstanding whether the prosecution or conviction of any legal juridical person shall be contingent on the prosecution or conviction of any individual.”}[1]

Hon’ble Court also reproduces relevant provisions of the Representations of People’s Act 1951.

These are as under:

{2(f) “political party” means an association or a body of individual citizens of India registered with the Election Commission as a political party under section 29A.}[2]

{29A. Registration with the Election Commission of associations and bodies as political parties. — (1) Any association or body of individual citizens of India calling itself a political party and intending to avail itself of the provisions of this Part shall make an application to the Election Commission for its registration as a political party for this Act.}[3] 

After analyzing both provisions, the Delhi High Court concludes that the corporation is an organization of individuals under section 70 of the PMLA and a political party, which is likewise defined as an association or a body of Indian citizens under section 2(f) of the RP Act of 1951.

A political party is a company exclusively under the PMLA Act, the Court ruled. However, what about the fundamental elements, nature, objectives, etc. of a business and a political party? We need to be aware of the definition of a company and the legal precedent that explains the fundamentals of a corporation to comprehend the distinction between a political party and a firm.

According to section 2(20) of the Companies Act, 2013 Company means a company incorporated under this act or any previous company law. Political parties would not register under this act. This definition does not point to the main meaning of the company let us see the definition given by the authorities.

{ Lord Justice Lindley – “A company is an association of many persons who contribute money or monies worth to a common stock and employed in some trade or business and who share the profit and loss arising therefrom. The common stock so contributed is denoted in money and is the capital of the company. The persons who contribute to it or to whom it pertains are members. The proportion of capital to which each member is entitled is his share. The shares are always transferable although the right to transfer is often more or less restricted.”

Chief Justice Marshall – “A corporation is an artificial being, invisible, intangible, existing only in contemplation of the law. Being a mere creation of law, it possesses only the properties which the Charter of its creation confers upon it, either expressly or as incidental to its very existence.”

Prof. Haney – “A company is an artificial person created by law, having separate entity, with a perpetual succession and common seal.”}[4]

The firm that is incorporated under the Firm Act is explained in detail in the definition above. Following its registration under the Companies Act of 2013, the business acquires the legal competence to sue or be sued, buy property, and function as a separate and distinct legal entity from its members. This process makes the firm a body corporate.

The company is incorporated to make money from its trade and business, as stated clearly in Lord Justice Lindley’s definition: “A company is an association of individuals who contribute money or money worth stock and employed in some trade or business and who share the profit and loss arising therefrom.” The Political Party is a non-trading organization that supports democracy and strives to carry out its political duties, protect the Constitution, and install a strong and capable national leader.

A political party has a constitution and a manifesto that is not legally binding on the party; neither document is the equivalent of a memorandum. Businesses are required to show their memorandum of association at the time of registration. Political parties participate in democratic processes and serve as a mirror for a variety of societal opinions. They report to the voters and operate in the public interest. Political parties have a vital role in the democratic system even though they are more transparent and nonprofit institutions.

Conclusion:

As we describe in the article, political parties are fundamentally different from profit-driven companies in terms of their goal, responsibilities, and societal function. Consequently, the Hon’ble Delhi High Court has expressed ambiguity regarding whether a political party is a Company, on the fact that both include associations of individuals. The Shiv Sena Case is a historic ruling by the Indian Supreme Court. It involves two factions of the political party, the Shiv Sena: one led by Thackeray and the other by the Shinde group. The leader’s differing ideologies caused division among the political party. Now the party’s objectives and goals were divided by the ideology of the leader. Whereas, the Company has one director and a board of its members who follow the memorandum and Article of association without any division in the company. The Company cannot be divided between two major groups of members. Thus, in the author’s opinion, the Political Parties, which is an association of the individual or body of individuals, have possessed the nature of a company yet are not wholly a company. The Honorable Court relies on the S.V. Raju submission and solely considers the definitional aspects of the Political Parties and the Company, neglecting to consider other aspects of both, which are abstracted in every way. This case needs to be taken to the Supreme Court for an appeal to have the opacity removed.

Author : Harshit Tiwari, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD

Reference:

1. Live law –  https://www.livelaw.in/
2. The Indian Kanoon – https://indiankanoon.org/
3. Supreme Court Cases – https://scc-amity.refread.com/
4. Taxmann-https://www.taxmann.com/post/blog/what-is-a-company-definition-characteristics-and-latest-case-laws
5. Bar and bench – https://www.barandbench.com/

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[1] https://indiankanoon.org/doc/1700659/

[2] https://indiankanoon.org/doc/197965473/

[3] https://indiankanoon.org/doc/23690917/

[4] https://www.taxmann.com/post/blog/what-is-a-company-definition-characteristics-and-latest-case-laws

Evolution of India’s Corporate Law Development

MAIN BLOG

History of corporate law in India has changed a lot to meet the emerging needs of the business environment of the country. Critical scrutiny of the evolution of corporate law in India which focuses on the significant turning point and the impact on innovative business strategies.

1. Historical Evolution of Indian Corporate Law: The history of company law in India dates back to 1850, when the Companies Act was enforced based on English law. Subsequent acts, such as the Companies Act of 1913 and the Companies Act of 1956, were drafted to govern companies in India.

2. The Companies Act of 2013: In 2013, this act marked a significant impact in corporate governance laws of India. It introduced several new provisions with objectives to increase obligation, transparency and shareholders’ rights. For example, appointment of independent directors to have an audit committee for a corporation.

3. Judicial decisions’ effect on corporate law: Judicial decisions have significantly shaped the corporate law in India. For example, the Supreme Court in its historic decision in the famous case of Tata Consultancy Services v. State of Andhra Pradesh where the court reaffirmed the federal character of corporate law in by stating that it is the Central Government that has the exclusive power to incorporate companies.

4. Current Corporate Law Trends: Strong focus on simplifying rules and enhancing ease of doing businesscan be seen from the last few years in India. Insolvency and Bankruptcy Code, 2016 improved the credibility of Indian business environment, which fast tracks resolution process for financially troubled firms.

Case Laws Influencing Indian Corporate Law

• Salomon v. Salomon & Co. Ltd. (1897): This landmark ruling had introduced the notion of corporate personhood, which lies at the heart of modern corporation law.

• State of West Bengal v. Associated Contractors (2015) – This case influenced company governance standards in India by emphasizing duty and transparency in public procurement processes.

CONCLUSION

Evolution of corporation in India can easily identify how focused US is to make a business-friendly environment. India has positioned itself as a desirous place for investment and business expansion by taking global best practices and adjusting to change realities.

Author : Shashank Shekhar, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD

REFERENCE

• Companies Act, 2013
• Insolvency and Bankruptcy Code, 2016
• Chakrabarti, Rajesh and Kagade, Mandar, Corporate Governance — Evolution and Challenges in the New Companies Act (June 21, 2018), https://ssrn.com/abstract=3200708 (last visited- 0104/2024)
• Emerging Trends in Corporate and Commercial Laws of India (2019), https://cbcl.nliu.ac.in/wp-content/uploads/2019/11/Emerging-Trends-in-Corporate-and-Commercial-Laws-of-India.pdf (last visited- 1/04/2024).
• Institute of Company Secretaries of India, Corporate Law Study (Institute of Company Secretaries of India, 2018). https://www.icsi.edu/media/webmodules/publications/FinalCLStudy.pdf (last visited- 31/03/2024)

Google Play Billing Policy: Whether Anti-Competitive In Nature

ABSTRACT:

The goals of both, namely the maximization of public welfare, can be compared in terms of how competition law and policy handle the process as well as to those of political democracy.[1] But because of the quick rise of e-commerce and the digital market, it has grown increasingly complex. The paper describes the entire situation by the way of taking an example of the contemporary Indian problem that occurred in relation to the Google Play billing system, contextualize it with the competition law and its current state, and draws attention to the shortcomings in the ruling itself.

INTRODUCTION:

Due to the rapid growth in field of e-commerce and digital market place there has been an insurgence of platform to facilitate the process and in turn gaining power from it. This new field is governed by multiple laws but the focus of the article is on the competition law which keeps the power of the platforms in check in order to preserve the right of freedom of choice and welfare of the consumer by keeping in check the competition in the marketplace.

The Google Play Billing System (hereinafter “GPBS”) in context to the digital market place of Google Play have been in spotlight as was fined for anti-competitive practice which was been followed. The GPBS has been rightfully charged by Competition Commission of India (hereinafter (CCI) and in this article after critically analyzing the facts, issues will lay down the judgement of the court, then point out the Main Factors which the Commission took aid in order to reach an ultimatum as well as substantiating it and then even pointing out the lacunae that even this judgement suffers from.  

ANALYSIS:

India has seen a drastic change in the technology and in the modern times due to increasing availability of electronic devices as smart phones, laptops, etc. with the supplement of the Internet has been the epicenter for the emergence of the e-commerce platform and mobile payment systems. Due to this emergence as the law changes with the change to the society so there has been changes, amendment and even addition of laws or legal provision governing the area of the digital market place. In Businesses operating in the digital market place in India have to comprise with multiple laws such as:

1. The Information Technology Act, 2000,[2]
2. The Indian Contract Act, 1872,[3]
3. The Consumer Protection Act, 2019,[4]
4. The Competition Act, 2002,[5]
5. The Payment and Settlement Systems Act, 2007,[6]
6. The Reserve Bank of India (RBI) regulations on digital payments,[7]
7. The Copyright Act, 1957,[8]
8. The Trademark Act, 1999,[9]
9. The Patents Act, 1970.[10]

But, this article focuses on the aspect of assessing the junction where the interfaces where two domains of completion law and the digital market place meets, in the recent times due to the fine imposed by the CCI against the Google for GPBS being anti-competitive in nature and impugned monetary fine of Rs. 936.44 crores as result of the case of XYZ vs Alpahabet Inc..[11]

XYZ v. ALPHABET INC.:

BACKGROUND:

There was a two-fold allegation made by the informants on Google as recognized by the commission, firstly was the mandatory use of the GPBS for purchasing apps as well as to conduct in-app purchases restricts the choice available to the app developers and also keeping in mind the 30 percent service tax which may be 15 in some cases which is mandatory to be given to Google under the GPBS for any purchasing of the app for the google play store and for ant in-app purchases as well. Secondly, was that the other mobile wallets and UPI apps are not accepted as legitimate payment methods in the Google Play payment system.[12]

Issue arose:

1. Whether making the use of Google Play’s billing system (GPBS), exclusive and mandatory by Google for App developers/owners for processing of payments for App and in-app purchases and charging 15-30% commission is violative of Section 4(2) of the Act?
2. Whether exclusion of other UPI apps/mobile wallets as effective payment options on Play Store is unfair and/or discriminatory as per Section 4(2) of the Act?
3. Whether pre-installation and prominence of Google Pay UPI App (GPay) by Google is in violation of Section 4(2) of the Act?

WHETEHR GPBS PRACTICE IS ANTI-COMETITICE IN NATURE OR NOT:

Yes, the GPBS system was anti-competitive in nature and the commission was right in its approach and holding them liable under 4(2)(a)(i),[13] 4(2)(a)(ii),[14] 4(2)(b)(ii),[15] 4(2)(c),[16] and 4(2)(e) of the Act.[17] and we can analyze each of the aspects discussed by the court while substantiating it even further:

GPBS:

GPBS is the proprietary billing system of the google, in which the app developer makes account with Google, and in this system the Google gets its “service fee” on all the app purchase or in-app purchase. In the due process of creating an account by the app developer with Google they have to agree to the DDA (Developer Distribution Agreement) and the DPP (Developer Program Policies) which clearly mandates the compulsory use of the GPBS.[18] Further, if seen in the Section 4 of the Google Play’s Payment Policy can be clearly inferred that the not only does it mandates the use of GPBS,[19] but in addition it also has an “Anti-steering provisions” which means it also restrict the ability of the app-developer to inform the consumer about in-app purchase from some elsewhere. There were number of factors as to why the GPBS system is anti-competitive in nature such as subsequently discussed.

DISCRIMINATORY PRACTICES:

Then Court finally highlighted the part of discriminatory practice which comes to light when we see that YouTube which is owned by Google does not use GPBS but YouTube is in connection with third-party payment processors directly, Google had given liberty to YouTube but not to the others who still have to follow the GPBS and have to pay the exorbitant rate of 15-30% service fee every time putting them at a disadvantage;[20] (cite) When we say discriminatory practice, we say so in the light of the practices which results in denial of market access in violation of provisions of section 4. (cite para 40 Arshiya Rail Infrastructure Limited Vs. Respondent: Ministry of Railways Arshiya Rail Infrastructure Limited vs. Ministry of Railway: MANU/CO/0076/2012). Also, the Supreme Court itself has interpreted denial of market access under Section 4(2)(c) widely, noting that denial of market access ‘in any manner’ would fall under its ambit, regardless of whether it is a denial of access to competitors or denial of access to players in vertically affected markets.[21] So the denial of market access used in this context is an umbrella term. Here, Google turning a blind eye to the YouTube in turn to increase their revenue allowed them engage with a third-party payment processor and like others they are charged significantly lesser fee then they themselves charge to others which ranges from 15-30%.

ACCESS TO DATA:

All the Google-owned services have access to the all data giving competitive advantage as a result of having access to this downstream competitors’ data set. Google would be able to use this information to enhance its offerings and more effectively target its potential clients. On the other side, the downstream rivals wouldn’t have access to the entire data set, which would hurt their ability to compete;[22] as can be inferred from the clause 9.2 of the DDA,[23] and also from the “Share usage & diagnostics information with Google” as explained on the Google Play’s Support page itself.[24] From the very insurgence of the digital marketplace access to data have been both an enabler and driver of competition and like any tool it serves the competitive as well as the anti-competitive services. There are companies like Google in at this very instance we can see that it misused their data access and companies not being careful not to abuse their control over the data will harm consumer welfare as well as limit the competition.

INNOVATION AND BARRIER TO ENTRY:

The GPBS has an adverse effect on the even though Google argues that GPBS as evident from its averments that it aids in levelling the playing field for app developers and stops monopolistic practices by app shops. On the other hand, while in reality as accepted by the commission as well GPBS stifles innovation by preventing developers from experimenting with fresh business models and sources of income.[25] The same argument is forwarded with respect to barrier to entry as it raises barriers to entry for competitors and inhibits developers’ capacity to provide alternative payment systems, Google’s requirement that app developers utilize its billing system reduces competition and choice for app developers and customers.[26]

UPI

There was another issue of UPI, Google has made only itself available to the intent flow technology while the other UPI only have access to the collect flow technology, to differentiate between in intent flow and collect flow in simple terms would be that, intent flow is a connected chain of steps, user-friendly and simple while collect-flow technology is a broken chain of steps which are disconnected with each other,[27] through this this Google was discriminated between developers of “similarly placed apps, equally placed transactions”.[28] While rejected the last contention as the option of pre-installation is available to all the others just because one utilizes it does not make it abuse of dominant position.

LIMITATION TO THE JUDGEMENT:

The main aim of the competition law is to maintain the following aspects:

1. Prohibition of anti-competitive agreements
2. Prohibition of abuse of dominant position
3. Merger control
4. Consumer protection

When any practice which is in contravention of any of the point and is having an adverse-effect on market competition is an anti-competition practice.[29]

With the rise of the e-commerce and digital marketplace there has been a sharp rise in anti-competitive practice like price-fixing, predatory pricing, Exclusive dealing, tying and bundling, abuse of market power.

As said by Ashok Kumar Gupta, chairman of Competition Commission of India that, “Digital markets are epicenters of technological innovation but lately they have become zones of “entrenched and unchecked dominance”,[30] all this has been possible due to the presence of lacunae in the act of competition law itself. Some of the lacunae are:

LACUANE 1: “RELEVANT MARKET IN DIGITAL MARKET PLACE”

The “relevant market” defined in Indian Competition law,[31] is based on the geographic region as in Section 2(s),[32] and the nature of product or service being offered as in Section 2(t),[33] which is ingenious only in case of the single side transaction, but does not take into account the interconnectedness of the sellers on each other which occurs in a multi-side transaction. There are substantial differences between a multi-side transaction and a single side transaction such as the unlike the traditional market where there was a seller and a buyer, here there can be multiple buyer as well as seller and may at times for one buyer to earn money there has to be involvement of other buyer, all of the people interact through a platform which is to say there is an intermediary role and there is a degree of the network effect, there are pricing models and even risk allocation.[34]

The biggest limitation to Indian Competition Law is the Multi-sided transaction as it is not possible to find the “relevant market” based on the available test, when looking at judicial procurements we see that courts have only recognized multi-sided nature of platform,[35] but have not adopted any means to aid the situation as can be seen from the subsequent judgement including Xyz v. Alphabet Inc.,[36] where to the CCI did not give any weightage to the multi-sided nature of the app store which connects the smartphones users to app developers just applying the tradition test of substitutability and geographic region just gave three separate relevant market and had delineated between market for licensable mobile operating system for smart mobile devices and the market for app store for Android OS.

Keeping in mind the past inconsistent judicial procurements with respect of “relevant market” in competition law ranging from cases such as Matrimony.Com Limited vs Google LLC & Ors,[37] Make My Trip case,[38] to contemporary cases such as Harshita Chawla,[39] Delhi Vyapar Mahasangh cases.[40]

LACUNAE 2: DETERMINATION OF DOMINANT POSITION AND ABUSE OF POWER BASED ON SHARES:

Market share measures the percentage of total sales or revenue in a market that a company controls, but it does not take into account other factors that can affect a company’s ability to exercise market power, such as barriers to entry, network effects, economies of scale, and access to data or other resources. Even though, in the judgement the court while accessing the case of Xyz v. Alphabet Inc.,[41] the court had taken into account other factors such as access to data, entry barriers, etc. but had clearly stated that the Commission is of the view that market share is one of the primary though not determinative parameters to assess dominance in a relevant market.[42] Accepting market share as a dominant factor to access the dominance in the market place can be very misleading in the current age witnessing the rise of e-commerce and digital market place as mentioned above.

CONCLUSION:

To sum up, the key takeaway from this article is that GPBS was anti-competitive in nature and is one of the major accomplishment of the CCI in identifying the issue and then delivering the judgement it in a very detail and a descriptive manner had discussed the issue while shedding light to the aspects of discriminatory practice, access to data and even to the effect of innovation and the barrier on entry, while also highlighting the second clubbed issue of UPI which was discussed then afterwards highlights the lacunae which the decision itself suffers from and through this highlights lacunae we can clearly see the way forward which is, accepting and understanding our own shortcomings which is that unlike other countries with competition law India still falls a bit short, India as a way forward just as a suggestion can take two different ways like:

1. Can pass a similar ruling as the seminal ruling of Ohio v. Amex, the CCI can take into account the feedback effects and competitive constraints in transaction and non- transaction platforms which is unique to the multi-side transaction,[43] or
2. Can either join or create something similar to the Digital Markets Act in the EU,[44] so that the there is a separate legislation to deal with digital market place altogether.

While at the current juncture though there is the Competition (Amendment) Bill, 2022, which a has passed both the Lok Sabha as well as the Rajya Sabha on March 29, 2023 and April, 3 2023 respectively and one of its key issue is analysing digital market, so the India may in the future successfully tackle issues such as which arose at the current instance.[45]

Author : Arkadeep Poddar, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD

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[1] JSTOR: INDIAN COMPETITION LAW: GLOBAL CONTEXT, by B.S. Chauhan, published in Journal of the Indian Law Institute, July-September 2012, Vol. 54, No. 3 (July September 2012), pp. 315-323, at page 315,  available at, https://www.jstor.org/stable/44782475, (last visited 14^th May, 2023).

[2] The Information Technology Act, 2000.

[3] The Indian Contract Act, 1872.

[4] The Consumer Protection Act, 2019.

[5] The Competition Act, 2002.

[6] The Payment and Settlement Systems Act, 2007.

[7] Master Direction on Digital Payment Security Controls, Reserve Bank of India, available at, https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12032&Mode=0, (last visited 14^th May 2023).

[8] The Copyright Act, 1957.

[9] The Trademark Act, 1999.

[10] The Patents Act, 1970.

[11] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63.

[12] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63.

[13] The Competition Act, 2002, § 4(2)(a)(i).

[14] The Competition Act, 2002, § 4(2)(a)(ii).

[15] The Competition Act, 2002, § 4(2)(b)(ii).

[16] The Competition Act, 2002, § 4(2)(c).

[17] The Competition Act, 2002, § 4(@)(e).

[18] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 249.

[19] Google Play, Google Play’s payment policy: Google Terms and Services, § 4, Rights and Restrictions, available at, https://play.google.com/about/play-terms/index.html, (last visited on 14^th May, 2023).

[20] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 29.

[21] Competition Commission of India v. Fast Way transmission Pvt. Ltd., Civil Appeal No. 7215 of 2014.

[22] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 282, 284.

[23] Google Play Developer Distribution Agreement, clause 9.2, available at, https://play.google.com/about/developer-distribution-agreement.html, (last visited on 14^th May, 2023).

[24] Google Play Support page: “Share usage & diagnostics information with Google”, available at https://support.google.com/accounts/answer/6078260?hl=en, (last visited at 14^th May, 2023).

[25] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 314.

[26] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 186, 193.

[27] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 354.

[28] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 355.

[29] Competition Commission of India v. Bharati Airtel Limited and Ors. (2018) SCC OnLine SC 2678.

[30] Khurana and Khurana Advocates and IP Attorneys, The Antitrust issues in digital markets – Modifiable anti-competitive conduct of Artificial Intelligence, published at 12^th October, 2021, available at, https://www.khuranaandkhurana.com/2021/10/12/the-antitrust-issues-in-digital-markets-modifiable-anti-competitive-conduct-of-artificial-intelligence/, (last visited at 14^th May, 2023).

[31] The Competition Act, 2002, § 2(r).

[32] The Competition Act, 2002, § 2(s).

[33] The Competition Act, 2002, § 2(t).

[34] Business Model Analyst: Mutisidedx Platform Business Model, available at,  https://businessmodelanalyst.com/multisided-platform-business-model/, (last visited 14^th May, 2023).

[35] Vijay Gopal Vs. Big Tree Entertainment Pvt. Ltd. (BookMyShow) and Ors., 2022 SCC OnLine CCI 36.

[36] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63.

[37] Matrimony.Com Limited vs Google LLC & Ors, 2018 SCC OnLine CCI 1.

[38] Makemytrip India Pvt. Ltd. MMT and Another V. Competition Commission of India and Others, 2022 SCC OnLine Del 4440.

[39] Harshita Chawla (informant) Whatsapp Inc. and Facebook Inc. v. Competition Commission of India, 2020 SCC OnLine CCI 32.

[40] Amazon Seller Services Private Limited, represented by its Authorized Signatory Mr. Rahul Sundaram v. Competition Commission of India, represented by its Secretary and Others, 2021 SCC OnLine Kar 12626.

[41] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63.

[42] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 164.

[43] IndiaCorpLaw: Delineating Relevant Market for Multisided Platforms: Transaction vs Non-Transaction Platforms, by Harshit Upadhyay and Sanigdh Budhia, publishe at October 26, 2022, available at, https://indiacorplaw.in/2022/10/delineating-relevant-market-for-multisided-platforms-transaction-vs-non-transaction-platforms.html, (last visited 14^th May,2023).

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