Leave No One Behind: Transformation Towards Sustainable & Resilient Society for All

Indian Legislation: Too Little & Too Late to Transform Indian Society

Today, December 3, is the International Day of Persons with Disabilities. Since 1992, the UN is promoting international observance of the Day. I am a great fan of the International Observance. On the Day (at the least) everyone is made to think of the observance cause. It ensures that some mainstream stakeholders get involved. It also ensures recognition, if not providing dignity to the cause. However, many critics have time and again told me that these causes are not for observance by the Day or the Week or even the Year. The causes such as PwD (I would like to consider PwD = Persons with Dignity) need to be part of the DNA of any sustainable and resilient society.

I am surprised many a times that as a society, we DO NOT THINK of PwD, whenever we do anything.

Anything that we design is ought to be designed for everyone including the PwD. However, we never think of PwD when we plan things, be it SWB Mission or Smart City Mission, be it digital India or e-governance. Each of one us is responsible for Leaving Our PwD Behind. Today, we must pledge for “LEAVE NO ONE BEHIND”. No doubt all the missions that we have undertaken since 2014 are attempting to transform India, we will end up having a disabled nation ourselves if we leave PwD behind, in whatever we do.

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It is not very surprising that in the Sustainable Development Goals (SDGs) undertaken by India, there is an oblique reference to PwDs in so far as Urban Development Mission are concerned. It does not figure in any other place, especially when it comes to overall development and rural focused missions and action plans. “By 2030, provide access to safe, affordable, accessible and sustainable transport systems for all, improving road safety, notably by expanding public transport, with special attention to the needs of those in vulnerable situations, women, children, persons with disabilities and older persons”.[1]

As per Census 2011, there were 2.68 Crores (2.21% of the Population) persons with disabilities. The National Sample Survey Organization (NSSO) in its 58th rounds during July-December 2002, estimated that the number of persons with disabilities in India was 1.85 Crores (1.85% of Population).

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The United Nations (“UN”) General Assembly adopted its Convention on the Rights of Persons with Disabilities (“UNCRPD”) on December 13, 2006. India ratified the UNCRPD on October 1, 2007. The objective of the UNCRPD has been to promote and protect the human rights and fundamental freedom by all persons with disabilities and to promote respect for their inherent dignity.

To give effect to the UNCRPD, the Rajya Sabha, on December 14, 2016, passed the Rights of Persons with Disabilities Bill, 2014 which repeals Persons with Disabilities (Equal Opportunity Protection of Rights and Full Participation) Act of 1995. The Bill received the President’s assent and came into effect on December 27, 2016 as the Rights of Persons with Disabilities Act, 2016 (“Act”). Further, on June 15, 2017, the Rights of Persons with Disabilities Rules, 2017 (“Rules”) was notified by the Government of India. This will fulfil the obligations on the part of India in terms of UNCRPD.

By ratifying the convention and embodying the same in the New Act and Rules, the following principles have been laid down for promoting and ensuring the empowerment of persons with disabilities:

  • Individual autonomy including the freedom to make one’s own choices and independence of persons;
  • Non-discrimination;
  • Full and effective participation and inclusion in society;
  • Respect for difference and acceptance of persons with disabilities as part of human diversity and humanity;
  • Equality of opportunity;
  • Accessibility;
  • Equality between men and women; and
  • Respect for the evolving capacities of children with disabilities and respect for the right of children with disabilities to preserve their identities, amongst others.

Key Definitions

The definition of a “Person with disability” under the Act is in line with the definition laid down in the UNCRPD to mean a “person with long term physical, mental, intellectual or sensory impairment which, in interaction with barriers, hinders his full and effective participation in society equally with others”. Further, the Act also takes within its purview the diversity of disability, be it gender, age or socio economic status.

The definition of discrimination as adopted by Act from the UN Convention states that “discrimination” in relation to disability, means any distinction, exclusion, restriction on the basis of disability which is the purpose or effect of impairing or nullifying the recognition, enjoyment or exercise on an equal basis with others of all human rights and fundamental freedoms in the political, economic, social, cultural, civil or any other field and includes all forms of discrimination and denial of reasonable accommodation.

The Act enshrines the UNCRPD further by expanding the number of disabilities to cover a more comprehensive list of disabilities such as acid attack victims, Cerebral Palsy to various Intellectual disability such as autism spectrum disorder and other specific learning disabilities.

Sensitive to All Genders

The Law, as per the UN Convention standards, is more gender specific or gender sensitive. It recognizes the need to provide welfare to women with disabilities. The Government is required to take measures to ensure that women and children with disabilities enjoy their rights equally with others. The Act strives to ensure reservation in allotment of agricultural land and housing in all relevant schemes and development programmes, with appropriate priority to women with benchmark disabilities.

Effect on the Private Establishments

The Act brings Private Establishments under its purview. Private Establishment under the Act means a company, firm, cooperative or other society, associations, trust, agency, institution, organisation, union, factory or such other establishment as may be notified by the Government.

Further, every establishment is required to maintain records of the persons with disabilities in relation to the matter of employment, facilities provided and other necessary information and every employment exchange has been required to maintain records of persons with disabilities seeking employment.

Incentives to Employers in Private Sector

In order to encourage the employment of persons with disabilities in the Private Sector, the appropriate Government and the local authorities have been directed to, within the limit of their economic capacity and development, provide incentives to employer in private sector to ensure that at least 5% of their work force is composed of persons with benchmark disability.

Mandatory Observance of Accessibility norms and Transforming Existing Infrastructure

As per the Act, the Government will formulate rules for persons with disabilities laying down the standards of accessibility for the physical environment, transportation, information and communications, including appropriate technologies and systems, and other facilities and services provided to the public in urban and rural areas.

No establishment has been granted permission to build any structure if the building plan does not adhere to the rules formulated by the Central Government. No establishment will be issued a certificate of completion or allowed to take occupation of a building unless it has adhered to the rules formulated by the Central Government.

One of the important provisions in terms of transformation of existing infrastructure is contained in Section 45 of the Act,

“Time limit for making existing infrastructure and premises accessible and action for that purpose – 1) All existing public buildings shall be made accessible in accordance with the rules formulated by the Central Government within a period not exceeding five years from the date of notification of such rules:

Provided that the Central Government may grant extension of time to the States on a case to case basis for adherence to this provision depending on their state of preparedness and other related parameters.”

Rights of Persons with Disabilities Rules, 2017

The Rights of Persons with Disabilities Rules, 2017 which came into effect on June 15, 2017, imposes certain responsibilities on the Employers to ensure the rights of the persons with disabilities.

The head of every establishment has to ensure that the rights of or benefits provided to a disabled person under the Act are not denied and Grievances are tackled with as per the provisions prescribed under the Act.

Equal Opportunity Policy

An equal opportunity policy has been established under the Act. Every establishment is required to notify the equal opportunity policy which details the measures proposed to be taken by it in pursuance of Skill Development and Employment for persons with disabilities especially such as their vocational training and self-employment.

Every establishment is required to publish equal opportunity policy for persons with disabilities which they are required to display on their websites, if not, it needs to be displayed at a conspicuous place in their premises.

Atrocity as an Offence

The Act has gone a step further by including social issues faced by persons with disabilities on a daily basis by making certain actions aimed towards such persons as a punishable with imprisonment for a term which shall not be less than six months but which may extend to five years and with fine. Some of the offenses have been enumerated below:

  • Intentionally insulting or intimidating with intent to humiliate a person with disability in any place within public view;
  • Assaulting or using force to any person with disability with intent to dishonour him or outrage the modesty of a woman with disability;
  • Being in a position to dominate the will of a child or woman with disability and use that position to exploit her sexually;
  • Voluntarily injuring, damaging or interfering with the use of any limb or sense or any supporting device of a person with disability.

Too Late and Too Little:

By making the law and framing the rules, India has discharged its treaty obligation. It has aligned its domestic law to the UNCRPD. If in 2011 we had over 2.11 crores of PwDs growing at rapid speed, are we as a nation sensitive enough to the requirements of the PwDs. We must ask this question to ourselves, every day and not just today. Grant of a loan of Rs 50,000 to start a business sounds like an insult to PwDs. PwDs have no access to most of the government buildings, public infrastructure, utilities and information systems. With the Rules being effective, do we expect a transformation in the next five years?

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I am a firm believer that it is up to each one of us and not the government to change the future. Examples such as Mirchi & Mime restaurant chain in Mumbai, Pankh of Train that empowers PwDs with sustainable employment in retail industry and of course many NGOs that work in this space are the agents of change. We need the Government to transform from the current dismal state of affairs to at least accessible infrastructure. Just facilitate us as common citizens, we will ensure sustainable future for our Persons with Dignity. Legislative enactments and rules would discharge India’s treaty obligations however, what we truly need is considerable transformation. Even if the Government decides to provide physical and digital access to our PwDs in ALL government establishments and offices, in all public toilets and transport, in all sincerity in the hearts and mind, we will see a transformed society facilitated by the letter and spirit of law.

[1] Niti Ayog

http://niti.gov.in/writereaddata/files/Mapping-SDGs%20V19Ministries%20Feedback%20060416_0.pdf

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Legal Metrology:New Amendment Includes E-commerce and Pharma Industries

GST regime establishes one nation, one tax and one market. In this regard, the Central Government amended Legal Metrology (Packaged Commodity) Rules, 2011 to forbid the companies from selling the same product at different MRP (Maximum Retail Price). Companies who fail to adhere to theprovisions under GST and Legal Metrology will be penalised.

This amendment has revised the definition of“institutional consumer” to prevent the sale of commodities by institutions for their own consumption.

The Central Government has issued transition provisions and post transition provisions for sale of goods and revision in their MRP due to change in the rate of tax. The rate of tax will vary from 5% to 28% depending upon the classification goods, resulting in to change in price of a commodity.

Impact on various Industries:

  • The MRP on the pre-packed goods will have to be aligned with the tax rate under GST.
  • The expression “best before” and “Use by date” to be printed on the package.
  • Maximum retail price to be inclusive of all the applicable taxes.
  • Price to be in rupees and paise to be rounded off to the nearest rupee or 50 paise.
  • The name of country of origin or manufacture or assembly of the imported product to be mentioned on the package.
  • Month and year in which the commodity is manufactured or packed.
  • Barcode, GTIN or e-code to be mentioned on the package.

Impact on E-Commerce Industry:

  • E-Commerce operators have to adhere to the provisions mentioned in Legal Metrology (Packaged Commodity) Rules, 2011.
  • E-Commerce operators will be responsible for accuracy of declaration unless their activity is restricted to provide access to a communication system over which information is made available by the manufacturer or packer or importer.

Impact of cement industry:

  • The cement bags below 50Kgs are not required to bear the declarations.

Impact on pharmaceutical Industry:

  • Medical devices such as stents, valve, orthopaedic plants, syringe, pharmaceutical drugs and tools for operation shall fall under the ambit of pre-packaged commodity. They will have to adhere to the provisions of Legal Metrology (Packaged Commodity) Rules, 2011.
  • The National Pharmaceutical Authority of India has notified drugs prices for 761 drugs as the tax rate has been increased to 12%.
  • Health Ministry has withdrawn the bill to amend Drugs and Cosmetics Act. This bill has been withdrawn as a move towards aligning the law with GST provisions.

Transition Provisions:

  • The manufactures or packers or importers of pre packed goods have to declare the change in MRP after including the increased amount of tax due to GST for 3 months w.e.f. July 1, 2017 to September 30, 2017. The price can be revised by way of stamping, putting sticker or online printing.
  • A sticker with the revised lower MRP (inclusive of all taxes) should be affixed in cases where there is reduction in MRP due to change in the rate of tax. This sticker should not cover the MRP declaration previously made by the manufacturer or the packer on the label of package.
  • Use of unexhausted packaging material or wrappers is also allowed up to September 30, 2017 for making necessary correction in MRP.
  • Companies can claim credit of goods which will be in transit as on June 30, 2017.

DEFINITION OF ‘COMPANY’ UNDER RERA COULD CRIPPLE ITS APPLICATION

With the intent of protecting the interest of consumers, to promote fair play in real estate transactions and to ensure timely execution of projects, the Government of India finally introduced the much awaited and highly debated Real Estate (Regulation and Development) Act, 2016 (“RERA”) with the expectation that it would be a game changer legislation.

RERA, under which the States are empowered to have their own set of rules and authorities for its effective implementation, is set to achieve the much needed transparency and accountability of stakeholders in the real estate sector and only with the elapse of time, would one be able to measure its effectiveness. However, at this juncture it would be relevant to cite and interpret a seemingly innocuous anomaly, which appears to be a typographical error.

Nonetheless, its consequence is far reaching and has the effect of restricting the implementation of the legislation to certain category of persons only.

Section 2 (o) of the Real Estate (Regulation and Development) Act, 2016 defines the term ‘Company’ to mean:

“(o) “company” means a company incorporated and registered under the Companies Act, 2013 and includes,—

(i) a corporation established by or under any Central Act or State Act;

(ii) a development authority or any public authority established by the Government in this behalf under any law for the time being in force”

One may note here that under the Real Estate (Regulation and Development) Bill, 2013 which was introduced in the upper house in Parliament refers to the term company as “…a company incorporated and registered under the Companies Act, 1956…”.  The provisions dealing with penalty for offences committed by companies (Section 69 of RERA), however, contain a non-obstante which specifically defines ‘company’ for the purpose of the section to extend to and mean “any body corporate and includes a firm, or other association of individuals”.

The term ‘body corporate’ is not defined under the RERA. In view of the fact that the provisions of RERA are in addition to and not in derogation of any law currently in force, the term ‘body corporate’ then may be interpreted to include even the companies which are not necessarily incorporated under the Companies Act, 2013.

On the other hand, the definition of the term ‘company’ provided under RERA so far as its application thereunder would not permit the applicability of the definition of the term ‘company’ under the Companies Act, 2013 (which includes companies incorporated under any previous law) as (i) the provisions of RERA have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force and (ii) the definition of the term ‘company’ does not refer a company as defined under the provisions of the Companies Act, 2013.

The effect of this anomaly may lead to promoters who are incorporated under the provisions of the Companies Act, 1956, or any previous law, claiming that the provisions of RERA mandating registration are not applicable to them. In arguendo, as all promoters are required to register their real estate projects and the term ‘promoter’ has been defined under Section 2 (zk) to mean “a person……”, a restrictive interpretation is possible. To clarify, the definition of the term ‘person’ under the provisions of RERA amongst other things uses the term ‘company’, which term has already been defined to mean “…a company incorporated and registered under the Companies Act, 2013…” thereby making it applicable to companies which are incorporated under the Companies Act, 2013 as opposed to including companies incorporated under any previous law.

Neither the corrigenda published on March 26, 2016 nor the Real Estate (Regulation and Development) Removal of Difficulties Order, 2016 addressed this anomaly.

If left to the Courts to discern and clarify this anomaly, we can expect it to resort to most fair and rational method for interpreting a statute by exploring the mischief against which the statute is directed. As a statute is an edict of the legislature, in order to construe the same it is relevant to seek the intention of its maker. Courts are duty bound to construe the statute according to the intent of the legislature and if a statutory provision is open to more than one interpretation, the Court has to choose that interpretation which represents the true intention of the legislature. This task is often plagued with difficulties “….in as much as words used may not be scientific symbols having any precise or definite meaning and language may be an imperfect medium to convey one’s thought or that the assembly of the legislatures consisting of persons of various shades of opinion purport to convey a meaning which may be obscure….”. The Courts consider the legislation in a modern state is actuated with some policy to curb some public evil or to effectuate some public benefit. Laws are primarily directed to the problems before the legislature based on information derived from past and present experience. Laws may also be designed by use of general words to cover similar problems arising from future. But the Courts also recognize that it is impossible to anticipate fully the varied situations arising in future in which the application of the legislation in hand may be called for and words chosen to communicate such indefinite referents are bound to be in many cases, lacking in clarity and precision and thus giving rise to controversial questions of construction. Situations such as these can be avoided by taking care while drafting legislations.

Therefore, it is essential to revisit the definition of the term ‘company’ as provided under Section 2 of RERA and introduce adequate changes to give effect to true purport of the legislation.

India Regulates Tipping, Gratuity and Service Charges

Bakshish Please!
No Compulsory Tips!!
India Regulates Tipping, Gratuity and Service Charges

Stop the trade practice of collecting compulsory tips by levying the Service Charge as a part of the food bill. On April 21, 2017, the Government of India seems to have given a clear message to the Hotels & Restaurants owners.

Nature of Tips / Bakshish: When the Kings & Queens received extraordinary news or services from their subjects; they used to dole out the Bakshish to their subjects. British India experienced the practice to a different level and continued the Bakshish for the service, loyalty and at times alms. Independent India abolished the privy purses, kingdoms, fiefdoms, zamindari and other forms of societal divides but the practice of the Bakshish continued. Modern India experienced neo-rich and rich doling out tips, gratuities, Bakshish as a matter of practice. At times, tipping became very annoying. A bell-boy, a waiter or a purser actually waited, poised and gestured in very annoying manner and one was ashamed if one didn’t dole out tips. Unlike most of the other countries, where the tipping became a norm and one had to factor in up to 20% as tips, India following the Bakshish culture confused everyone on what the right tipping amount is. As per the Webster Comprehensive Dictionary, “tip” means small gift of money for service given, to a servant, waiter and porter or alike.

Tips as a part of Salary or Revenue Stream: Working in establishments that encouraged tipping meant that you earned tips more than your salary. The establishment owners realized that the tips were a part of revenue that was being generated within their establishment on which they had no control. 5 % to 7% of the hotel’s revenue constituted tips. The establishment owners became smarter and devised a way of charging Service Charge over and above the bill amount and collected at times almost 20% extra as and by way of the Service Charges. This became an independent revenue stream of the establishment owners. Almost invariably, only a portion of the money collected as and by way of the Service Charges found its way to the waiters, pursers, bell boys and those who served the customer. The Service Charges became a part of the bill and thus became Compulsory Tips!! A customer did not have choice of not paying even when the service was horrible.

What Courts said: In this regard, there has been very interesting discussion across plethora of judgments pronounced by Indian courts not about the Service Charge practice itself, but about Income Tax, TDS and  the collection of Service Charge & in turn payment (of part of collection)  to employees amounts to payment of ‘Salary’ (within the definitions under relevant Labor Laws).

Way back in 1976, in the Rambagh Palace Hotel, Jaipur vs The Rajasthan Hotel Workers[1] decided by the Hon’ble Supreme Court on 5 January, 1976 the then Hon’ble Justice VR Krishna Iyer held that:

“…It is well known that in important hotels in the country…the appellant is now a five star hotel…the customers are of the affluent variety and pay tips either to the waiters directly or in the shape of service charges or otherwise to the Management along with the bill for the items consumed. In Short, the true character of tips cannot be treated as any payment made by the Management out of its pocket but a transfer of what is collected to the staff as it is intended by the payer to be so distributed. It may also happen that more money comes in by way of tips into the pockets of the Management that is distributed by it …”

In 2011, in the Commissioner of Income Tax vs CJ International Hotels[2] in May 2011 while dealing with issue of TDS on Service Charge the Hon’ble Delhi High Court observed the following:

“… Once the tips are paid by the customers either in cash directly to the employees or by way of charge to the credit cards in the bills, the employees can be said to have gained additional income. When the tips are received by the employees directly in cash, the employer hardly has any role and it may not be even knowing the amounts of tips collected by the employees. That would outrightly be out of the purview of responsibility of the employer under Section 192 of the Act. But, however, when the tips are charged to the bill either by way of fixed percentage of amount, say 10% or so on the total bill, or where no percentage was specified and amount is indicated by the customer on the bill as a tip, the same goes into the receipt of the employer and is subsequently disbursed to the employees depending upon the nature of understanding and agreement between the employers and the employees. Different settings have different operating mechanisms with regard to collection and disbursement of the tips. Some of the outlets have in-built system of charging some percentage in the bills itself that may be either in the shape of “service charges” or “tips” or may be by any other name. Others leave it to the customers to indicate some amount either on percentage basis or in lumpsum as tips. In either case, these payments go to the receipts of the employer and are distributed either on weekly, quarterly or monthly basis. Such receipts at the hands of employees are nothing but their income for the purpose of Section 15. The system has been continuing and a large amount of income at the hands of the recipients generated through this channel of tips is escaping assessment. What is worse is that it is happening with the full knowledge of the employers, who are admittedly collecting and distributing this part of the income to the employees without evening knowing as to whether the same was being accounted for by them for the purposes of taxation or not. As soon as such amounts are received by the employer, an obligation arises on him to disburse the same to the rightful persons, namely, the employees. Simultaneously, a right accrues to the employees to claim the same from the employer. By virtue of his relationship of an employer and employee, a vested right accrues to the employee to claim the same …”

 There have been various judgments delivered by the Hon’ble High Courts and Hon’ble Supreme Court regarding the Service Charges dealing with TDS, Income Tax and Labour Laws. However, the practice of the Service Charge becoming ‘mandatory’ rather than remaining discretionary doesn’t seem to have been the subject matter of court decisions.

Service Charge as Trade Practice: On January 2, 2017, Press Information Bureau (“PIB”) of India, vide press release[3], stated that paying service charge is not mandated under any law and that a consumer can exercise his discretion to pay service charge. The Department of Consumer Affairs, Central Government sought clarification from the Hotel Association of India as well.  The Association had stated that service charge is discretionary in nature and in case a consumer is not satisfied with the service, he can waive off the same. PIB further stated that this practice which mandates the customer to pay service charge can be termed as an “Unfair Trade Practice” under CPA. The press release further advised hotels/restaurants to disseminate this information through display at an appropriate place in the hotels/restaurants that the service charge is discretionary and a consumer who is dissatisfied with the services can have it waived off.

I guess, the PIB press release didn’t have much impact. In fact, I have not seen any banners. As one post on the First Post put it[4]:

“… displaying that the payment of Service Charge is oservice_charge_LSPLptional displaying conspicuously the law that service charges are voluntary and that it is contingent upon services being found satisfactory is a farce. If displayed at the entrance, it would be the most embarrassing welcome a restaurant can extend to its customers and if displayed on the table, it might put an end to the appetite of the hungry family! Displaying the information that the staff in the restaurant is mandated to wash their hands after each visit to the washroom is confidence building whereas the display of the law on tips may well end up dispiriting the consumers …”

The Guidelines of April 21, 2017: Despite PIB press release, the Service Charge practice continued. The Government of India issued guidelines[1] attempting to regulate the practice of levying Service Charges and consequently curbing the practice of Compulsory Tips.  With these guidelines, entire Service Charge revenue stream of the hotels &restaurants has been killed.

There is no doubt that when a person visits a hotel or a restaurant for availing its hospitality service, which includes buying food & beverages and also avails their connected incidental services for consideration, such a person falls under the definition of “consumer[6]” under the Consumer Protection Act, 1986 (“COPRA”).] The COPRA also defines what constitutes Unfair Trade Practice[7] and Restrictive Trade Practice[8] Both the definitions are inclusive definitions; meaning thereby that other than those trade practices that have been provided for in the definition could also fall within the ambit of UTP or RTP. COPRA is basically an enactment that sets up and empowers adjudicatory mechanism for consumer disputes. It presupposed a dispute between a Consumer and supplier / provider of goods or services.

The Ministry of Consumer Affairs, Food & Public Distribution issued guidelines on 21 April, 2017 (“The Guidelines”). The Guidelines are meant for the protection of the consumers with regards to charging of the Service Charge. It was observed that as the customers were unaware about the provisions relating to the Service Charge, they continued paying the tips and gratuities in the bill. The Guidelines clarify that tip/gratuity and service charge stand on the same footing and hence, a consumer cannot be deprived of any service in case he chooses not to pay the same. The Government has distinguished between fair and unfair trade practices with respect to the Service Charge and issued guidelines that state the following:

  • The price of the product should cover the price of food as well as that for service.
  • Where a consumer places an order, he agrees to pay price of the product as well as applicable taxes only. Charging any extra amount, other than the price displayed on the menu without the consent of the customer would amount to unfair trade practice under the CPA. Unfair Trade Practice is that trade practice which the service provider adopts to promote sale or supply of any goods or service by an unfair or deceptive method.
  • Tip or Gratuity paid by the customer to the staff is for the hospitality received is to be considered as separate transaction between the customer and the staff of the restaurant, which is entered into at the consumers’ discretion.
  • Consumer is in a position to decide whether to pay any tip or gratuity after assessing the quality of service and not when entering the hotel or restaurant or placing the order. Hence, entry of the customer should not be considered as implied consent to pay service charge to restaurants or hotels and if an unjustified cost is charged to the customer, forcing them to pay service charge for food and services, it would amount to restrictive trade practice under section  2(1)(nnn) of the Consumer Protection Act, 1986. Section 2(1)(nnn) defines restrictive trade practice to include such a practice which tends to bring about manipulation of price in such a manner as to impose on the consumers unjustified costs or restrictions.
  • Therefore, the column of the service charge in the food and service bill must be kept blank, allowing the customer to fill it as per their assessment before making the payment. It should be clearly displayed in the bill that service charge is voluntary.
  • The consumer is entitled to approach appropriate Consumer Disputes Redressal Forum or Commission in case of any unfair/restrictive trade practice.

Fair Trade Practice / Unfair Trade Practice / Restrictive Trade Practice: The restaurants’ /hotels’ collection of the Service Charge from their customers if on voluntary basis and only if the customer is willing to pay would now be considered as Fair Trade Practice. The Service Charge column in the bill shall remain blank for customer inputs. The legal effect of the Guidelines is an interesting aspect. Do these Guidelines constitute ‘law’? As a student of law, I have always been fascinated by the practice of enlarging or curbing the scope & ambit of ‘law’ by issuing press releases, circulars, trade notices, guidelines, clarifications, circulars, etc. by respective ministries and the arms of the Government. There is no doubt that some of these communications will be considered as ‘the law’, some of them do not comprise ‘the law’. Whether the Guidelines constitutes applicable law is a question that would eventually be determined by a court of competent jurisdiction. The Guidelines clearly mention that it is the Government’s clarification.

According to the Guidelines “Placing an order by a customer amounts to his/her agreement to pay the prices displayed on the menu card along with applicable taxes. Charging for anything other than the afore-mentioned, without express consent of the customer, would amount to unfair trade practice as defined under the Act.”  The Guidelines further state that “Further, any restriction of entry based on this amounts to a trade practice which imposes an unjustified cost on the customer by way of forcing him/her to pay service charge as condition precedent to placing order of food and beverages, and as such it falls under restrictive trade practice as defined under section 2(1) (nnn) of the Act.”

Applying the definitions of UTP & RTP to the trade practice of levying & collecting the Service Charges, one wonders under which exact provision this trade practice would fall under. Or is it part of the “inclusive” nature of the definition? On UTP, the closest that one could consider is section 2 (r) (1) (ix) stating that it is  a trade practice “materially misleads the public concerning the price at which a product or like products or goods or services, have been or are, ordinarily sold or provided, and, for this purpose, a representation as to price shall be deemed to refer to the price at which the product or goods or services has or have been sold by sellers or provided by suppliers generally in the relevant market unless it is clearly specified to be the price at which the product has been sold or services have been provided by the person by whom or on whose behalf the representation is made”.

Guidelines: Effective or Ineffective?: There is no prescription or prohibition in applicable law today that declares the Service Charge practice as illegal or prohibits the levy and collection of the Service Charge. The Guideline does not appear to have made any Rule of Law, neither is it the legislation. It falls short of such prohibition or declaration. Understandably, the Guideline is not in the realm of legislative competence. It is an administrative action. At the end, the Guideline virtually encourages the consumers to approach the redressal forums under the COPRA for the adjudication of their disputes qua UTP and RTP.

By issuing the Guideline, would the Service Charge practice stop?gov_guidelines

The likelihood of such practice being stopped may well depend (a) how do the owners of hotels & restaurants react; and (b) on courts setting the precedent in an appropriate case.  A direct consequence of the Guidelines notwithstanding whether any legal precedent or legislation has prompted it, has clarified the Government’s position. In all probabilities, the Consumer Courts would follow or get influenced by these Guidelines. The Guideline in a way is a very welcome move since it moves the caveat-emptor (buyer beware) fulcrum to seller beware!! If a hotel or restaurant continues to levy the Service Charge as compulsory tipping system, the fear of facing and losing the consumer case would prompt them to stop such a practice.

[1] AIR 1976 SC 2303

[2] ITAs No.475/2010, 476/2010, 860/2010

[3] http://pib.nic.in/newsite/PrintRelease.aspx?relid=156064

[4] http://www.firstpost.com/business/service-charge-at-hotels-dont-be-fooled-by-govt-notification-it-has-just-passed-the-buck-3184786.html

[5] http://consumeraffairs.nic.in/writereaddata/Guidelines.pdf

[6] Section 2(d) of COPRA,1986

[7] Section 2(r) of COPRA, 1986

[8] Section 2(nnn) of COPRA, 1986

Conflict of Interest

The nature of the legal profession is such that the client confides in a lawyer with utmost trust and confidence. The lawyer shares with his client not just a legal or contractual relationship but also a fiduciary one. It is a cardinal principle of the profession that the lawyer should put the client interest above his own. One of the duties in furtherance of this principle is that which relates to “Conflict of Interest”. Conflict of Interest is the influence on a lawyer that exists and which can negatively affect the client or the advice that a lawyer would otherwise give. In simple words, it is the personal interest of a lawyer in a particular matter which clouds the judgment that he requires to further his client’s interest. It is an advocate’s ethical duty to inform the client of his interest and not to accept any engagement which he may have an interest in.

The legal framework that exists in relation to “Conflict of Interest” is as follows:

Bar Council Rules on An Advocate’s Duty towards the Court

The Bar Council of India  rules prescribe important provisions with respect to Advocates duty in relation to conflict of interest. The Rules consist of specific “Rules on an Advocate’s Duty towards the Client” which includes the following key rules:

Rule 4 makes it mandatory for an advocate to make a full and frank disclosure to his client if he has connection with the parties of the suit or any interest that he may have and which may affect a client’s judgment to engage him. Rule 23 clearly states that an advocate who has advised a party in connection with the institution of a suit, appeal or other matter or has drawn pleadings, or acted for a party, shall not act, appear or plead for the opposite party in the same matter. The rule in its nature is wide enough to mean and include that any kind of involvement of an advocate in a matter will restrict him from appearing or pleading for the opposite party in the same matter. However, the rule is only limited to matters related to “suits” and may not relate to general advisory services. Rule 5 entrusts a general duty on an advocate to uphold the interests of his client by all fair and honorable means. Further, Rule 9 and 10 of the Rules restricts an advocate to represent any establishment in which he is a member or to appear in matter in which he has a pecuniary interest. Rule 15 states that an advocate should not misuse or takes advantage of the confidence reposed in him by his client.

Need for further legislation:

The above rules appear to have been framed keeping “Representation” of the suits in mind. However, given the general practice followed by various law firms, wherein more than one advocate is involved in a matter, there exist a need to address issues related to conflict of interest which may be perceived by any of the advocates in a law firm. To give effect to the purpose for which the above rules are drafted, a necessity to change the rules to expand their ambit and scope of application is of paramount importance.

Duty on a Law Firm:

The duty is not only limited to an advocate to disclose to a client any conflict but also on law firm to cast a similar duty on their associates and partners as well. The law firms are required to put in place a corporate governance system which is to be followed to avoid any scenarios leading to conflict in interest. The law firms should incorporate a check system to ensure that any existing lawyer of a firm shall not be involved in a matter that he may have an interest in. Further, a code of ethics for non-litigating lawyers who may be involved in advisory services in relation to any matter or otherwise is the need of the hour. It is the duty of every legal entity and lawyer to protect the interest of a client and hence the practice to perceive any conflict of interest should be taken seriously by the law firms since the same adversely affects the interest of the clients.

Client Awareness:

Just like a lawyer/law firm recognizes the need to inform the duty imposed on them with respect to confidentiality, they should further disclose to the client that he/she has a right to know if there exists a conflict of interest. For stringent implementation of the duty casts on the lawyers, a written declaration stating that there exists no conflict of interest should be given to the client and submitted to the court. Where there exists a conflict of interest, a statutory duty is imposed on the advocates to inform the client about the same. Only once the client is aware of an existent conflict of interest, can he guard his interest in relation to the same.

 Other challenges faced by Law Firms:

Partners and Associates leaving one firm for another is a common scenario. However, the effect of the same has not been analyzed vis-à-vis conflict of interest. There exists no legal framework regulating the effect of a partner or associate leaving a law firm even though the duty that they perform is a fiduciary one. It is of paramount interest that certain obligations shall be imposed on the advocates when they resign from a particular law firm with relation to the matters that they were involved in. The Indian Legislature or Judiciary has however failed to recognize the same.

The Ontario Superior Court of Justice enumerated in D. Robert Findlay Law Office Professional Corporation Vs. Werner et al,2015 a number of guidelines concerning a lawyer’s professional obligations when leaving a law firm.

In summary, the guidelines provide that:

  • The client’s rights are paramount.
  • The client has the right to choose legal representation and to change that legal representation at any time.
  • There is nothing improper for a departing lawyer to contact a client to tell them they are leaving; however, contacting the client for the purpose of solicitation sis not permitted.
  • The law firm and the departing lawyer have a joint and individual duty to keep the client informed.
  • The client must be told in a timely manner that the lawyer with whom he or she has been dealing is leaving the law firm. Further, the client must be told of the options for continued representation by i) the law firm; ii) the departing lawyer; or iii) a new lawyer chosen by the client;
  • A client who chooses to follow the departing lawyer should confirm his or her wishes in writing.
  • The departing lawyer should consider providing an undertaking to the law firm to protect the firm’s account.

Similar guidelines with respect to the obligations that should be imposed on a departing lawyer should be adopted at least by the Bar Council of India. The non adherence to such guidelines can cause harm not only to the client but also to the law firm and its reputation. It is further unfair that a departing lawyer can take advantage of the information entrusted upon him during his tenure at a law firm.

Jeremy Bentham had rightly stated that the power of a lawyer lies in the uncertainty of law. However, law should not be so uncertain that it entrusts power in the hands of lawyer to hamper the interest of his client. More importance to “conflict of interest” and need for legislation/ regulation regarding the same is the need of the hour.

Government of India’s Termination of Bilateral Investment Treaties

  • Out of the 83 Bilateral Investment treaties signed by India so far, 58 treaties are being terminated. Notices have been sent to the respective Governments through diplomatic channels. In response to a starred question raised in the Parliament, Hon’ble Minister of Commerce & Industries informed the House in July 2016, that the Government of India proposes to renegotiate all those Bilateral Investment Pacts whose initial validity has expired and to replace them with new Bilateral Investment Treaties (“BITs”). It was further stated that the new Indian Model Bilateral Investment Treaty text aims to provide appropriate protection to foreign investors in India and Indian investors in the foreign country, in the light of relevant International precedents and practices, while maintaining a balance between the investor’s rights and the Government obligations.  These BITs will stand terminated from April 2017, though the existing investments will be protected under the “sunset” provisions contained in the Model BITs.
  • From 1994, when India started its BITs, until the end of 2010, BITs in India did not attract much attention. India also had only marginal involvement with Investment Treaty Arbitration (ITA), which refers to the dispute resolution mechanism available under BITs. During this period, India was involved in only one ITA dispute, and even this dispute did not result in an ITA award. However, the dispute which did not result in an ITA award against India is probably the most learning episode.
  • Following the closure of Dabhol plant in 2001, GE & Bechtel(the then shareholders of Dabhol Power Company) had pulled up GoI in arbitration proceedings under Indo-Mauritius BIT. It is now history. If one looks at the timelines, one realizes the great ignorance by the GoM, MSEB and GoI about the purport, the consequences and power of BIT arbitration especially when the Government actions are viewed by global standards of  “public good/ public policy” actions. It also reflected apathy towards the international law and sanctity of contracts.  Surprisingly, the turn of the events during 2002-2005 remarkably reflected GoI’s heavy reliance of its own Law Officers, protracted delays in Indian courts and such other factors that were seen as aiding and abetting “indirect expropriation”. Faced with prospect of an ex-parte award from International Arbitration Tribunal,on July 12, 2005, Bechtel and the Government of India and Maharashtra reached a settlement regarding the Dabhol power project. In exchange for $160 million in compensation for its equity and contractor claims, Bechtel agreed to forgo international arbitration over the expropriation of its investment. A portion of this financial settlement was subject to Indian taxation. Prior to the settlement under BITs arbitration on September 9, 2003, an independent arbitration panel had ruled unanimously that GE and Bechtel’s interests in the Dabhol Power Company (DPC) in the Indian state of Maharashtra, were improperly expropriated by the Indian Government.  The Tribunal had ordered a binding award of US$28.57 million each to Bechtel and GE for claims they brought against their political risk insurer, the Overseas Private Investment Corporation (OPIC), an agency of the U.S. Government.  The OPIC award was one of the pivotal aspects for expropriation claim under the BIT. The period after 2010 saw a surge in India’s involvement with ITA.Towards the end of 2011, India received its first adverse award in relation to a BIT in the White Industries Australia Limited V. Republic of India Case wherein the Tribunal held that India had violated its obligations towards the investor under the India- Australia BIT. This Award holds significance as it is the first known ITA Award against India. Besides the White Industries award, India has received numerous ITA notices from various investors and under various BITs. Claims by foreign investors against India have included challenges to various regulatory measures such as cancellation of telecom licenses and imposition of retrospective taxes.
  • The 260th Report of the Law Commission on Bilateral Investment Treaties submitted on August 27,2015 is probably the basis of Model BIT that the GoI initiated and currently wants the international community to adopt the Model BIT. The Model BIT attempts to address the problems faced by India especially regarding expropriation.
  • The 2015 Model BITs and the Law Commission’s Recommendations have probably missed out some very critical aspects relating to BITs.
  • BITs have mutual protection provisions and are reciprocal in nature. While GoI may try to reduce its risk on indirect expropriation claims, it ignores Indian investments at large and they become very risky, especially since Indian insurance companies do not offer comprehensive political force majeure risk cover. The Indian investors investing in foreign countries would also lose out on important risk mitigation measure.
  • The effect of serving notice to terminate existing BITs before new agreements are in place will result in the withdrawal of investment protection for investors into and out of India for a period of years, or indefinitely, pending the outcome of new negotiations.
  • As such, Indian policies (especially FDI Policies) do not give confidence to the international investing community. The regulatory and judicial intervention & delays in India are world-famous. Within the industry specific regulatory space, there are about 27 state jurisdictions (especially Electricity and now Real Estate Sector) with heterogeneous treatment to a given commercial or legal issue. The uncertainties in relation to the investments would not get compounded by the delays in entering into BITs.
  • When it comes to Foreign Investments, there is no argument about whether FDI in the nature of risk capital is a preferred destination compared to risk-free debt capital. However, when India embarks on promoting its destination through “Make In India”, we must realize that there is conducive atmosphere to protect FDI and not to embark on any action that is globally viewed as indirect expropriation. This is a large onus on India. This means that the regulatory, fiscal and legal measures undertaken in business are firm, enduring, non-discriminatory and sustainable. In the absence of these attributes and especially when the Governments are trying to protect the Public-Sector Undertakings, the Governments or domestic players in a discriminatory manner the consequences are detrimental. Instead of addressing these fundamentals, if BITs are tweaked to get out of the obligations, the inbound investments in India would suffer adversely. The risk coefficient of investing in India seems to have just gone spiral.

The Year 2016

The year that was……
The year that would be…….

Dear Friends,
The World changed in 2016.
That’s probably an understatement. Everything around us has changed in 2016 and the impact of the change was mammoth, immediate & cascading.

2016 saw a total of 413 amendments to various legislations in India. 101 new regulations came into effect. 72 drafts of proposed legislations were issued. Various authorities issued 79 clarifications on various regulations. There were 52 landmark judgments declared by various courts in India.

The Insolvency and Bankruptcy Code 2016 came into effect which will bring about reforms in the bankruptcy and insolvency regime of the country. The year also saw the coming into effect of the Real Estate Regulation and Development Act 2016 which aims at regulating the largely unregulated real estate sector. The Constitution (One Hundred And First Amendment) Act, 2016 was passed by both the houses in September, 2016. This amendment gave the Parliament and State Legislatures concurrent powers to make laws on the Goods and Services Tax. The Companies Act 2013 underwent some more amendments. The Office of Controller General of Patents, Designs and Trade marks (Indian Patent Office) on February 19, 2016 issued a revised set of Guidelines for Examination of Computer-Related Inventions. On 13 May 2016, the National Intellectual Property Rights (IPR) Policy was announced by the Government of India’s Department of Industrial Policy and Promotion (DIPP).

As practicing Lawyers, our world changed more than anticipated, expected or experienced in recent past.

Legaltech: In 2016, Legaltech space experienced unprecedented shift. Although the debate of Death of Conventional Lawyers is still out in open, it became an imperative that without the backup support of technology, lawyering output became strenuous. Conventional lawyers found it very difficult to deliver with competitive advantage. Nasdaq acquired the Boardvanatge for $ 200 Million. Diligant was acquired by Insight Venture Partners for $ 624 Million. Just these two examples show the trends in coming years about the legaltech space that is show-casing the value proposition of businesses that were built on robust and sustainable platforms.

Corporate Governance: On July 21,2016, a group of executives and CEOs of major US MNCs released “Commonsense Principles of Corporate Governance”. Although it is probably too early to determine the adoption of these principles across the Boards of the companies, they set the tone for practical good governance practices. In India we experienced some turmoil and change of guards across some of the very visible enterprises. These changes in the management brought to the foreground of business considerations a sharp discussion on corporate governance and ethics. It is a great sign and excellent opportunity for Indian companies now to exhibit in near future that a new era of Indian Corporate Governance can emerge setting high ethical standards and balancing the Business Judgment Rules and Stakeholders inclusiveness.

Compliance: Compliances with statutory & regulatory requirements have become more rigorous across the globe. Especially in India, the frequency with which the laws are changing is simply incomprehensible. When we analyzed our database of over 365,000 business tasks we realized that about 1.5 task changes every day. Team Legasis tried to capture how life of a lawyer or compliance executive changed during 2016 . We realized that while the cost of compliance is rising, cost of non-compliance vs cost of compliance is no longer a discussion issue. We also experienced “quacks” advising large corporates on critical compliance issues. The so-called technology and legal support providers tried to impress the clients with half-baked knowledge. Profile of some of these “experts” indicates that they are “uneducated”, thrown out of their jobs because of causes such as violation of Prevention of Sexual Harassment at work place, failed professionals who have no ethical base or simply not competent to support the requirements of businesses.

If you would like to know more about the new regulations that came into effect last year or about the various amendments that were brought about in 2016, please get in touch with me at suhas.t@legasis.in I look forward to hearing from you.