Here and here, I had discussed the recent views of the Supreme Court on the death penalty. In a recent case, Santosh Bariyar v. State of Maharashtra, the Supreme Court seems to have moved ahead on the abolitionist route.
A few commentators have pointed out that unless the judgment is read down, it will perhaps be impossible as a practical matter for a death sentence to be imposed. The judgment calls for strict compliance with all statutory procedures under the Criminal Procedure Code, and calls for additional evidence at the sentencing stage. The prosecution must prove all alternative options are foreclosed. In other words, the prosecution must show by leading evidence that there is no possibility of rehabilitation, and “life imprisonment will be futile and serves no purpose” whatsoever. This will be a huge burden, which the prosecution will hardly ever be able to discharge.
This post on Law and Other Things discusses the implications of the case.
The reading down of Dharmendra Textiles (relating to penalty) continues. After the decision of VIP Industries, the Pune Bench of the Tribunal in Kanbay has also adopted a narrow reading of the ratio of Dharmendra. The decision has also been explained by the Supreme Court in Rajasthan Spinning.
In Rajasthan Spinning, Aftab Alam J. (who was also on the Bench in Dharmendra) explains, “… the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter… we see no reason to understand or read that decision in that manner.” The Court however held that its observations were limited to the context of Section 11AC of the Excise Act. It must be noted, however, that the Court stated this only because of the fact that the particular question arose in the context of the Excise Act. The case should not be understood to mean that in its application to the Income Tax Act, Dharmendra would continue to be broadly read – the Court simply did not express an opinion on the aspect. Nonetheless, it is submitted that the observations are equally applicable to the Income tax Act – Dharmendra cannot apply ‘broadly’ to the Income Tax Act and ‘narrowly’ to the Excise Act. It must be read narrowly in both cases.
The present position is summed up in Kanbay, which is summarized on the ITAT website here. A post on the Indian Corporate Law blog dealing with the judgment can be found here. The development of law in this area has been traced in a number of posts on that blog, which are linked on this page.
The Mumbai ITAT Bar Association digest of recent cases, updated till the beginning of May 2009, is available here on the ITAT website. A consolidated digest of cases from January to May can also be downloaded from the link.
A few weeks ago, the SEBI passed an order (WTM/KMA/60/04/2009) in the Pyramid Saimira case, which raises questions pertaining to insider trading. The order resulted from SEBI’s investigation into the affairs of Pyramid Saimira, highlighted in this post. The particular sequence of events is discussed in several reports, linked here and here.
In its order (though only an interim one), the SEBI analysed the evidence before it in depth. The issue which the Board focused on was whether one Mr. Nirmal Kotecha (a promoter) was “using Mr. Amol Kokane as an instrument for his own trades.” Among the facts which enabled the Board to come to the conclusion that the issue deserved to be answered in the affirmative were the “volume of trades done by Shri Amol Kokane through India Capital Market, the scrips that were selected for trading in his name and the losses incurred by him on these trades, the counterparty details that have emerged from the bank trail and the call/ Short Messaging Service (SMS) charges incurred by Shri Kokane on his mobile number relative to his family’s annual income…” Added to this was a statement by Mr. Kokane that Mr. Kotecha was operating his accounts. From all these factors, the SEBI was able to come to a conclusion as to insider trading, as also foreign exchange and money laundering violations. Accordingly, the SEBI issued several interim directions forbidding certain persons from directly or indirectly dealing in the securities markets; and also stated that the order was to be treated as a show-cause notice to the persons named therein; calling upon the entities/persons against whom the order was issued to file their objections to the order.
On the face of it, the order poses no legal complexities, but what is noteworthy is the detailed examination of the evidence even at the interim stage. Also, the order presents an opportunity to highlight the scope of the powers of the SEBI to issue interim directions. The Board stated that it was acting under Sections 11 and 11B of the SEBI Act, 1992.
Section 11B (inserted by an amendment in 1995) states:
Power to issue directions.– Save as otherwise provided in Section 11 if after making or causing to be made an enquiry, the Board is satisfied that it is necessary –
(i) in the interest of investors, or orderly development of securities market; or
(ii) to prevent the affairs of any intermediary or other persons referred to in section 12 being conducted in a manner detrimental to the interests of investors of securities market; or
(iii) to secure the proper management of such intermediary or person,
it may issue such directions –
(a) to any person or class of persons referred to in Section 12 or associated with the securities market;
(b) to any company in respect of matters specified in Section 11-A,
as may be appropriate in the interests of investors in securities and the securities market.
(Emphasis added.)
Can an order asking certain persons to show cause as to why action should not be taken against them amount to an order “after making or causing to be made an enquiry”? In exercising it powers under Section 11B, the SEBI is presumably engaged in a quasi-judicial function; meaning that it must comply with the principles of natural justice. In that view, can an enquiry ever be said to have been ‘made’ even prior to giving an opportunity for hearing the alleged wrongdoer?
Of course, in Pyramid Saimira, an investigation had been on for some time. But, let us also consider a more extreme case. Does Section 11B empower the SEBI to take steps without hearing the alleged wrongdoer purely on receiving some information/allegations of malpractices? Can the SEBI say, effectively, that a complete investigation would take too long, and it is necessary to act with a sense of urgency even before the investigation makes any tangible progress?
Perhaps keeping in mind the controversies which could arise in this regard, the SEBI Act was amended in 2002, to introduce Section 11(4). The relevant parts of that Section read as follows:
Without prejudice to the provisions contained in sub-sections (1), (2), (2A) and (3) and section 11B, the Board may, by an order, for reasons to be recorded in writing, in the interests of investors or securities market, take any of the following measures, either pending investigation or inquiry or on completion of such investigation or inquiry, namely:-
…
(b) restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities;
…
Provided further that the Board shall, either before or after passing such orders, give an opportunity of hearing to such intermediaries or persons concerned.]
(Emphasis added – the text of the Act can be found here)
At first glance, the provisions (considering that quite broad powers are provided under all the sub-clauses) appear to be quite stringent – the SEBI is free to take strict action and give an opportunity to be heard only after the action has been taken. Cases such as Pyramid Saimira show that such a provision is perhaps necessary; given that in cases where insider trading is alleged, quick action would be of utmost importance.
A few important legal questions remain – what is the standard by which SEBI should decide whether there exists a necessity for an order under Section 11(4) r/w 11B? Is mere prima facie satisfaction sufficient? Or must the SEBI go into detail into whatever evidence that is available? In Pyramid Saimira, the SEBI has chosen the safer route – the available evidence was scrutinized in great detail. But, is such a deep appreciation of the evidence always necessary? If not, what test will the SEBI use to decide whether to act under the Sections?
I will try to answer some of these questions in a subsequent post…
A Division Bench of the Bombay High Court recently decided an important question pertaining to ‘squeezing out minority shareholders’ and schemes for reduction of share capital, in Sandvik Asia Limited v. Bharat Kumar Padamsi, MANU/MH/0237/2009. Mr. V. Umakanth has analysed the judgment here, and Mr. S. Sundaresan explains the significance of the judgment in a column here (also linked in Mr. Umakanth’s post).
Mr. Sundaresan notes:
The division bench has ruled that the “special resolution which proposes to wipe out a class of shareholders after paying them just compensation” is not unfair or inequitable… The core business issue involved here is not about whether the price paid for the shares would be fair, but whether an owner of shares in India has a vested right to keep his property, or whether other shareholders can force him to divest his property…
Justice Ravindra Bhat of the Delhi High Court has – through several important judgments – helped advance the understanding of intellectual property law in the country. While his judgments need not necessarily be seen as the only correct point of view, they at least have helped stimulate debate on several important issues. On this blog itself, his decisions have been the subject of much discussion, as evidenced in posts linked here. His recent judgment in CS(OS) No. 1692/2006, Warner Bros. v. V.G. Santosh, is another instance of a well-reasoned judgment which may well give rise to great debate. The case deals with parallel imports and the doctrine of international exhaustion of rights, and Justice Bhat held that the principle is not applicable to cinematographic works. But before going on to examine the learned Judge’s reasoning; a brief look at the facts of the case…
Facts:
The Plaintiffs carried on the business of film production. The films in which they claimed copyright were first published in the United States. Under the International Copyright Order, 1991 read with the Copyright Act, 1991, the plaintiffs therefore claimed copyright in the films even in India. The Defendant was a “movie club / video library” based in India; in the business of hiring out DVDs of popular and critically acclaimed films on rent to Indian customers. The Plaintiffs had not released some of their films in India, but the films had been released in the United States in DVD format. The DVDs were coded according to specific geographic zones. The Defendant legally bought these DVDs in the United States, and imported them into India. They then made available the particular DVDs (which had been legally bought by them) to their Indian customers.
The Plaintiffs alleged that these acts of import and hiring out amounted to an infringement of their copyright. The Defendant stated that the DVDs were bought legally – there was no copy of those particular DVDs. That being the case, it was contended that no infringing copy had been made. Further, relying on the “first-sale doctrine”, the Defendant argued that once a DVD has been legally sold to them by the Plaintiffs, the plaintiffs’ rights in that particular DVD were exhausted. Accordingly, the Plaintiffs could not exercise control over the particular DVDs after the first sale had been completed.
The question then arose before Justice Bhat as to whether the defendants actions of importing the DVDs, as also the giving on rent of the DVDs, amounted to infringement of copyright.
The Court’s reasoning:
Justice Bhat began by noting that whether or not the principle of exhaustion of rights applies, is a matter dependant on the particular statute before the Court. Among the points raised by the Defendant was that the Explanation to, Section 14 of the Copyright Act states, “For the purposes of this Section, a copy which had been sold once shall be deemed to be a copy already in circulation”. On this basis, it was urged that the doctrine of first sale applies in India, and there was no case of infringement.
However, as Justice Bhat noted Section 14(d) of the Act stated that in respect of cinematographic works, “copyright” would mean the doing or authorizing the doing of the following:
i. Making a copy of the film
ii. Selling or giving on hire or offer for sale or hire any copy of the film, regardless of whether such copy has been sold or given on hire on earlier occasions
iii. Communicating the film to the public
Thus, the content of copyright in case of cinematographic works is different from that in the case of literary works, dramatic works etc. The phrase “copy in circulation” was found in describing the copyright vis-Ã -vis literary, musical and dramatic works. It found no application in cinematographic works. On a plain reading of Section 14, the phrase was used to limit the copyright in the case of literary, musical and dramatic works only. In defining copyright vis-Ã -vis cinematographic works, the phrase was not used at all. Thus, Justice Bhat noted that while the exhaustion principle would perhaps be applicable to literary, musical and dramatic works; that would not mean that the principle also applied to cinematographic works.
Under Section 14(1)(d), in the case of cinematographic works, the right is “regardless of whether such copy has been sold or given on hire on earlier occasion”. This is in express contrast to the position regarding literary works. Hence, the nature of the bundle of rights which make up the copyright is different in the two cases; and the wording of the statute did not leave any room for the principle to be applied to cinematographic works. As the Judge put is, “…Parliament having intervened in one category of copyrights to grant a limited kind of exhaustion and consciously chosen not to extend it to others, sleight of judicial reasoning cannot extend its application…” Furthermore, on the question of parallel imports of cinematographic works, the Proviso to Section 51(b)(iv) states that importation for private use of the importer is not deemed to be an infringement. The very fact that this proviso was inserted into the statute would indicate that importation for commercial, non-private use would be tantamount to infringement.
On the face of it, therefore, a plain reading of the statute indicated that the Defendant’s arguments could not succeed. In order to get over this hurdle, the Defendant raised two ingenious pleas. They contended that as a matter of interpretation, there should be no disconnect between various intellectual property laws, and Courts should try to move towards a uniform interpretation and application of such laws. Section 30 of the Trademarks Act, 1999, and Section 107-A of the Patents Act, 1970, permit certain types of use and importation analoguous to that in the present case (see here for the previous discussions on ‘parallel imports’). It was therefore argued that the same should be extended over copyright so as to ensure uniformity between the different laws. Justice Bhat however turned the argument over, and said that if a specific provision allowed such use and import under the Trademarks Act and Patents Act, the absence of the provision in the Copyrights Act is a sure indication that the legislative intent was to not have the same treatment in this respect for copyrights. The other argument raised was that unless the interpretation put forth by the Defendant was accepted, the Copyright Act would be ultra vires the freedom to carry out trade under Article 19 of the Constitution. The Court rejected this argument as well. It was stated, “There is no public interest in insisting that such copies should be permitted, on the ground that the cinematographic films are not made available in the country. If that is the position, the defendant is always free to negotiate the terms of a license, in such of the films as are not available, for the purpose of their publication or performance in India…”
Accordingly, the Court came to the conclusion that the defendant’s actions would amount to infringement of copyright.
A few questions:
The decision itself is rather lengthy, but contains a detailed discussion of the principle of exhaustion of rights, as well as parallel importation. However, was the Court a bit too ‘literal’? Would accepting the defendant’s arguments really have been a case of “sleight of judicial reasoning”, or would it perhaps have been a legitimate exercise of interpretation? Should cases of this kind be decided – as a matter of policy – simply on the question of interpretation of the transaction as to whether a ‘sale’ has really taken place? Once a ‘sale’ takes place, ownership in the particular copy passes. Once admittedly the transaction is a ‘sale’, would it be possible to hold that all rights of the plaintiff in that copy are exhausted; not as a matter of interpretation of statute, but as a matter of the contract between the parties? I look forward to what our readers have to say on these issues…
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