When a person intends to undertake legal proceedings against another, he notifies the recipient beforehand about his intention to do so. This is usually done by sending a legal notice to the recipient.

In simple terms, a legal notice is a formal written document through which the sender states his grievances to the recipient for him to acknowledge and fulfil the same. If the recipient fails to fulfil the same, a legal proceeding/suit will be initiated against him.

Sending legal notice as a warning before filing the suit will help settle the disputes without dragging the same to the court. Indian courts are overburdened with cases, and sending a legal notice can help resolve the matter beforehand.

Though sending a legal notice is not mandatory in all civil cases, a legal notice is sent as a safety measure. This is because of certain statutory provisions which make it necessary to send legal notice before filing the suit. Some of those instances are provided herewith.

1. Section 80 of the Code of Civil Procedure holds that a legal notice is to be issued if the opposite party to the suit is government. That is, if a government official has violated a person’s right, such person must issue a legal notice before moving to the court.
2. In case of dishonour of cheque, legal notice is to be sent.
3. In debt recovery procedures, a legal notice is to be served to the defaulter in accordance with the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act).
4. The employer must send legal notice to the employee if he deprives the employee of his salary in any way.
5. Other than these, in money recovery cases and cases relating to partition, eviction, etc., legal notice is to be sent.

Thus, legal notice is a powerful tool that can be utilised to arrive at a negotiation. This can prevent unnecessary litigations. Moreover, it saves money, time and energy of the parties and the courts.

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When and Why Is a Legal Notice Mandatory?
Sidhida Varma S

Marriage is similar to an investment where two people invest time, energy and money. When a marriage breaks, the person suffers not only mental trauma but also financial difficulties. Alimony refers to the maintenance or financial support provided by the spouse after divorce. It is given so that the spouse who has no means to carry out basic activities is provided with financial aid.

Eligibility to Get Alimony

The wife or the husband is eligible to get the alimony in accordance with their circumstances. The court will analyse and recognise their individual capacity. If a wife is not earning, the court will consider her educational qualification and ability to earn. The court will then decide her alimony. If the husband is not able to earn or is disabled and the wife is earning, the court will consider giving alimony to the husband.

As per section 25 of the Hindu Marriage Act, alimony of permanent nature is provided by the court to the wife or even the husband. If there is a considerable difference in the wife’s earnings compared to that of her husband and he is earning more, she is provided with the alimony so that she can maintain the same standard of living.

Further, section 125 of the Code of Criminal Procedure provides for the maintenance of wives, children and parents.

Related: Maintenance Under the Criminal Procedure Code

Calculation of Alimony

Alimony is paid either monthly, yearly or as a one-time payment. There is no hard and fast rule followed in calculating the alimony. Usually, it is ⅓ or ⅕ of the husband’s income. The court considers several factors such as standard of living, the conduct of both the parties, financial status and so on when it comes to fixing the alimony.

Thus the law relating to alimony helps the person who is financially not sound to face a difficult situation like this in a better way.

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What Is the Law Related to Alimony in India?
Sidhida Varma S

Introduction

During the early stages, the businesses gave little or no importance to domain names. They are treated as simply being a web address. As the usage of the internet expanded, more users and businesses joined the competition, making it necessary for businesses to thrive with a unique identity. Hence came the necessity of having the domain names registered.

Domain name disputes arose as a company decided to register its trademark as a domain name and found out that the same domain name is being used by someone else. Thus the question was raised as to whether or not domain names are to be considered as trademarks.

People argue and differentiate the same by standing on both extreme ends. One side argues that domain names are unique indicators, and it is not just the address of the homepage of a given website but also a specific indicator.

However, as in the case of many developed countries, India does not have a separate law for dealing with domain name disputes. Therefore, domain name disputes and cybersquatting are dealt with under trademark law.

This article deals with domain name disputes and their various aspects, including the remedies available and the role of WIPO in dispute resolution.

What Is a Domain Name?

IP address stands for Internet Protocol. It is the unique address of the website or a device that helps identify that website or device on the enormous worldwide web or a local network. In other words, just like your home address which is specific to you, an IP address is the unique address of a website or device like your phone, laptop, etc.

IP addresses are strings of numbers, and it is impossible to identify or remember them easily. For example, 192.158. 1.38 is an IP address.

A domain name is used to recognise IP addresses (IP – Internet Protocol). In other words, a domain name is a simpler way to remember, type and access websites.

IP address includes a personal computer accessing the internet, a server computer that hosts a website or a website itself. It refers to any alphanumeric designation registered with any registrar, registry, or other domain name registration authority that is part of an electronic address on the internet.

For example, our domain name is WritingLaw.com, and it’s registered with GoDaddy (an ICANN recognised organisation that lets you register domain names). Google.com, Apple.com, Wikipedia.org, YouTube.com, India.gov.in, Facebook.com, and FB.com are all domain names.

What Is Cybersquatting?

Cybersquatting refers to the practice where names of well-known, reputed and significant companies are registered as domain names to resell them for profits. People do such acts with the ill faith of trading the same for profits.

Domain Name Dispute Resolution in India

A person can register domain names in India. The Internet Corporation for Assigned Names and Numbers (ICANN) approved Uniform Domain Name Dispute Resolution Policy in 1999 (UDRP or UDNDRP). Uniform Domain Name Dispute Resolution Policy provides for the procedures that are to be adopted for a fast, seamless and convenient redressal of Domain Name Disputes.

On the lines of this policy, the “.IN” Registry formulated the IN Domain Name Dispute Resolution Policy (INDRP). Thus, the INDRP sets out the guidelines, terms and conditions for resolving a domain name dispute issue.

When an issue as to domain name dispute arises, the complainant being a registrant (one who has registered and is the holder of.IN internet domain name), can lodge a complaint with the “.IN “ registry.

Uniform Domain Name Dispute Resolution Policy (UDRP or UDNDRP)

The Internet Corporation for Assigned Names and Numbers (ICANN) approved UDRP in 1999. UDRP mainly deals with the provisions concerning domain name dispute resolution. This acts as a role model policy that deals with e-commerce. This policy is formulated to resolve disputes between the registrars and the domain name holders or registrants.

As per this policy, the registrars are bound to add a provision in their agreement that makes the registrants bound to follow UDRP and adhere to the consequences. The Uniform Domain Name Dispute Resolution Policy (UDRP) aims to resolve the disputes through alternative remedies, which is to not depend on court litigation every time.

Differences in the Functioning of UDRP and INDRP

IN Domain Name Dispute Resolution Policy (INDRP) only deals with the disputes arising out of a domain name registered and which is being used in the “.in” internet domain name. Whereas Uniform Domain-Name Dispute-Resolution Policy (UDRP) deals with the disputes arising out of any domain name. Moreover, UDRP deals with the instances in which domain names are cancelled, transferred and changed. INDRP does not provide for the same. Thus, domain name disputes are dealt with internationally using UDRP and nationally using INDRP.

Remedies Available Through UDRP

These are the remedies available under Uniform Domain-Name Dispute-Resolution Policy:

A complaint can be brought before the ADR (Alternate Disputes Resolution) providers of UDRP:

• If the domain name is the same or is similar to that of the complainant’s trademark, or
• If the domain name has been registered and is being used with an ill intention to resell the same, or
• If the current domain name holder has no connection or legitimate interest in the same.

Two remedies are available under UDRP:

• Cancelation of the domain name, and
• Transferring of the domain name.

The most common remedy is the transfer of the domain name. The reason is that the cancellation will lead to the domain name being available for use again on the internet for registration.

Role of WIPO in Domain Name Dispute Resolution

World Intellectual Property Organisation (WIPO) is a specialised agency of the United Nations. It took the mandate to promote the protection of intellectual property worldwide. After consultations with the members, WIPO prepared a detailed report containing recommendations for domain name issues. Based on the recommendations so provided, ICANN decided to adopt the UDRP.

World Intellectual Property Organisation also acts as a provider for dispute resolution mechanisms. The arbitration and mediation centre of WIPO provides time and cost-effective methods. WIPO has dealt with more than 50,000 cases.

Conclusion

As stated above, the law relating to domain name dispute and cybersquatting is dealt with under the trademark law. As in the case of developed countries, India is also in need of a more specific law. Both INDRP and URDP follow similar processes, but there are many procedural differences as well.

Domain names are indeed one of the key elements of e-commerce. Moreover, domain names act as an identity and create awareness as to what the brand value of the company is. It creates credibility and mobility for businesses.

In People Interactive Pvt. Ltd. vs Vivek Pahwa and Ors (2016), it was held that the domain names are just like the terrestrial or physical addresses. It directs a user to a particular part of the web. Therefore, domain name registration is really important for a safe and secure trade activity or e-commerce activity.

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Domain Name Disputes and Their Redressal
Sidhida Varma S

Introduction

Children are the assets that society holds. Due to various social, economic or biological reasons, these children often travel in a deviated and agitated pathway different from their age group. Thus this creates a social system where children act against the law and hold conflict against it.

The juvenile justice system is an area of law that seeks to help these agitated children follow the right path with proper care and protection. The children contribute to the country’s future, and hence the juvenile justice system is built to provide a new healthy pathway for the agitated children. The idea with which such a system thrives is that the children, at their tender age, can be tackled with mild and understanding behaviour.

For the past few years, we have witnessed a surge in the crimes committed by minors. These often lead to a dilemma in the judicial system regarding what should be the right approach. In India, we do not follow a hard and fast rule, but the current system primarily prioritises rehabilitating children who require correction and guidance.

This article seeks to throw light on the peculiarities of the juvenile justice system in India, its history, development and current position in the world view.

History

Although the Indian Constitution seeks to protect its citizens through Fundamental Rights and imposes duties upon the state through Directive Principles of State Policy, a law for the protection of children and juvenile offenders was one of the basic requirements of post-independent India.

Thus, the Children’s Act of 1960 was enacted. This Act was a solid one. It prevented children from being imprisoned, and provided welfare, education, guidance and training to those who needed help. Moreover, the establishment of observation homes, special school systems, and so on were also some of the peculiarities of this Act.

Then came the Juvenile Justice Act of 1986. This is a result of the United Nations Minimum Rules for Administration of Juvenile Justice of 1985 (also known as Beijing Rules). Moreover, it was to bring a uniform juvenile justice law to the whole of India.

The Juvenile Justice Act of 2000 was an effort made to adhere to the principles set out in UN Conventions. This Act mainly dealt with the rehabilitation of minors. Further, section 4 of the Juvenile Justice Act, 2000 sets out for the Juvenile Justice Board.

Until the Nirbhaya incident (Delhi Gang Rape Case), we could see a reformative approach in treating juvenile offenders. With an increasing number of minors committing heinous crimes, the Juvenile Justice Laws needed to be updated. Thus, a retributive approach was adopted to treat the same.

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Claim of Juvenility

A juvenile is a person who has not attained the age of 18 years. A juvenile is a minor who has committed an offence and is in need of protection and care.

The claim of juvenility is to be determined by the Juvenile Justice Board. The claim of juvenility, when raised before any court or if the court is opinionated that a person is juvenile while and during the proceedings or on the date when the offence was committed, the court can inquire into the same and take necessary evidence in order so that the age of the person is found. A claim as to juvenility can be made during any stage of the proceeding of the case, even in the final stage or after that. The claim shall be recognised as per the provisions of the Juvenile Justice (Care and Protection) Act of 2000.

In the case Ashok Kumar and Ors vs State of Madhya Pradesh (2021), it was held that juvenility could be claimed at any time, even after the disposal of the case.

Juvenile Justice System in India

As stated above, it was the need of the hour to adopt a system that was deterrent and reformative at the same time. Thus, the Juvenile Justice Act of 2015 replaced the Act of 2000 (Juvenile Justice (Care and Protection of Children) Act, 2000). This new  2015 Act focused on creating a balance between deterrent and reformative approaches. Some of the peculiarities include:

• Under this law, children above 16 who have engaged in heinous crimes were made to be tried as adults after considering their mental capacity.
• It envisages the setting up of Juvenile Justice Boards and Child Welfare Committees in every district.
• It also included provisions relating to the adoption and requirements of the adoptive parents. Further, it also provides for the setting up of the Central Adoptive Resource Agency, which is to frame rules and regulations relating to adoption.
• Special courts were established to try juveniles only.

Constitution and Juvenile Justice

Being the fundamental law of the land, the Constitution of India provides rights and imposes duties. Further, it holds the working of Government Machineries.

Part III of the Indian Constitution provides the citizens with Fundamental Rights, and Part IV holds the general guidelines for framing government policies. Thus, The Government machinery will have to craft and formulate policies that will provide justice to the juveniles. This includes:

• The right to education
• Protection from child labour and forced bonded labour
• Protection from human trafficking, and so on.

Juvenile Justice System in Other Countries

The juvenile justice system is recognized all over the world. These are some of the juvenile justice systems that ensure the harmonious development of adolescence.

The United Kingdom

In the UK, the Children’s Act of 1908 established Juvenile Courts for the first time. The system followed in the country is a reformative one.

Further, the Children and Young Offenders Act of 1933 holds that the children should be tried in the courts specially made for juveniles only and sent to Remand Homes.

The United States

In the USA, the system followed is a simple one. Juvenile Justice courts and the whole system follow an informal way through police courts. Juvenile offenders, after the trial, if found guilty, are sent to the Children’s Homes or Certified Schools. The system aims at the correction and rehabilitation of children.

Analysis and Conclusion

The age group from 6 to 18 is a very sensitive one. It is the age when the children can be easily influenced. The influence may be good or bad. Thus, awareness is to be created among them to prevent exploitation, abuse, and other negative influences.

The reasons for juvenile delinquency (minor crime, especially that committed by young people) are hundreds. Unemployment, poverty, social or domestic reasons are the most common ones.

As we are witnessing high rates of children engaging in criminal activities, it has become necessary to have a legal system that effectively tackles the issues. The goal is to eradicate the root cause and provide a simple yet non-compromising system that will help rebuild the lives of the children. Thus, the justice system should be more open and friendly to the children.

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History and Development of Juvenile Justice System in India
Sidhida Varma S

Introduction

“Smell is a potent wizard that transports you across thousands of miles and all the years you have lived. – Helen Keller”

As a consumer, we are aware of the application of trademarks for that it refers to the quality and provides assurance as to the source of the product. The world market is getting more and more competitive and hence standing out becomes necessary for the sustenance of the product.

This article deals with the development of trademark law into an unconventional form of mark known as smell marks which refers to the protection of a particular scent or aroma that a product is composed of. It also tries to specify the various aspects for the development and registration of smell-marks in India.

Difficulty or Challenges in Relation to Smell Marks

Scents always create and reflect memories. Businesses try to induce these smells onto their products as a part of their business strategy and product development.

Trademark, as we know, is defined as a word, symbol, phrase, design, and so on, which helps in recognition of the product. It imparts uniqueness to the product.

To obtain registration with regards to smell is a difficult process. It is hectic and tedious. The applicant needs to represent the smell visually. Moreover, it is to be shown that this scent is distinctive.

If we were to represent it using its chemical formula, then the chemical formula represents the substances of the product and not the scent. Also, if written, the characteristics of the scent must be accurately and precisely quoted so that it will specifically depict such distinction.

Thus, the registration process is complicated and time-consuming. Olfactory marks, smell marks, or scent marks are non-conventional trademarks.

Another issue with the smell mark is its universal application. Many countries do not even recognise these non-conventional trademarks. Along with that, the scent or smell of something is subject to depletion over time. This is a fact that we must consider again.

Smell Marks in Indian Trademark Law

The definition of “trademarks” is provided in the Indian Trademark Act, 1999. It defines trademarks as a mark that can be represented graphically and is capable of distinguishing the goods and services of one person from another.

The above definition of trademarks does provide any reference as to the smell marks. Although the definition does not blatantly include or exclude the smell marks and their registration process, the area of smell marks is still an underdeveloped arena.

Smell Marks is a very dynamic area under the trademark law. It is ever-evolving and is of high scope. Although Indian trademark law explains the term mark as name, device, heading, signature, word, letter, and so on. It does not provide an exhaustive list. Thus this scent mark is an area under development in the country.

Although this is an interesting and innovative area under the trademark law with a high potency of its development, its functionality in Indian society is highly speculative.

As mentioned in the introduction part, to get it registered under the trademark law, the graphical representation of the same is necessary. The graphical representation is a doubtful scenario when it comes to the trademark. Further, the smell as such cannot be trademarked; the smell should have a quality or distinctiveness of the product that needs to be trademarked. Further, as per the Functionality Doctrine, if the so-called scent acts as a functional element to the product, it cannot be trademarked.

The Functionality of Smell Marks in Indian Society

It is a very complex and difficult process to identify and register these scent marks. Indian trademark law asks for the graphical representation of the feature, which is to be trademarked, but as the scents cannot be graphically represented, the scope of the same is cut off.

But in the Zippo Manufacturing Company and their famous windproof lighters case, the Indian court recognised a non-conventional trademark, that is, the shape of the lighter. Similarly, we can expect that the courts will recognize more non-conventional trademarks and apply the same. We can also hope for amendments to the current IP laws, which is the need of the hour.

International Application of Smell Marks

The smell marks and their application gained popularity in the famous case Ralf Sieckmann vs Deutsches Patent und Markenamt. This is a landmark judgement by the European Court of Justice and is based on the necessity of graphical representation of non-conventional trademarks.

In this case, the applicant applied for a “methyl cinnamate” scent and described the same as “balsamically fruity with a slight hint of cinnamon”. The question was whether this description amounts to the graphical representation of the scent that is to be trademarked. Balsamically refers to as something that is Balsamic.

The European Court of Justice held that just a description of this kind cannot be treated as a graphical representation. It further held that a chemical formula representing the scent, a written description of the scent, or a physical sample of the scent does not constitute its graphical representation. This case law is a classic example that quotes the difficulty of smell marks and their registration.

The first smell mark was registered in the United Kingdom by Sumitomo Rubber. It used the floral fragrance of rose in its tires. Likewise, a few other registrations were also made in the United States.

Smell Marks – Analysis and Conclusion

Smell, sound and taste belong to the category of non-conventional trademarks. These are not widely accepted internationally but is still under consideration. The reason is its complexity and lack of having proper and combating laws to accommodate the same.

As discussed in the article, non-conventional trademarks are being used and accepted in countries like the UK, the USA, etc. The application of the same for the rest of the world is still a developing one.

The challenge that India is facing at this moment is with the registration process. The registration process to function smoothly needs to be made more lenient, but such leniency will create a doubtful pose as to where the law stands.

The non-conventional trademarks are definitely a challenging one. The Intellectual Property Law needs to develop multifold to give space to such complicated fields. Domestic and international laws need to adapt in such a way that they will accommodate such small yet complex aspects. Intellectual property rights are ever-evolving and dynamic; hence we need more research and development in specific fields of intellectual property.

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References: Wipro; SpicyIP; Sieckmann v Deutsches Patent-und Markenamt, Case C-273/00, 2003 E.T.M.R. 37; Sumitomo Rubber Co’s Application No. 2001416, 31 October

Smell Marks – Scope and Development in the Indian Trademark Law
Sidhida Varma S

“A minority is powerless while it conforms to the majority.”
-Henry David Thoreau

A company sustains based on a balance created among the majority and the minority. Whenever the majority takes the upper hand in the company’s affairs, the whole system upon which the company was built breaks down. There should be a proper balance when it comes to the rights of both majority and minority shareholders.

The general law holds that the majority shareholders can exercise control over the affairs of the company. This is the majority rule, rule of supremacy of the majority or majority supremacy rule.

This article deals with the development of company law and its provisions to prevent oppression and mismanagement in companies.

Development of the Concept of Majority Rule

The Rule in Foss vs Harbottle

The general rule is that the court will not interfere in the matters relating to the company’s management by the directors as long as they are acting within their powers enshrined under the Articles of the company. A shareholder is restricted to take any action concerning the internal disputes between the shareholders. This rule evolved as a result of the case, Foss vs Harbottle.

The facts of Foss vs Harbottle are as follows:

Two shareholders of the company brought an action against the directors of the company, claiming that they had been carrying fraudulent transactions due to which the property of the company was wasted in such transaction. The prayer was to force the defendants to make good the loss sustained by the company. The court, in this case, held that the fraudulent act of the defendants is not an injury to the individual but the whole corporation. The act is done by the persons in whose hand the corporation entrusted its powers for carrying out the functions smoothly. Further, it was held that an individual shareholder has no right to sue in this matter but the whole corporation on its own by exercising the corporate nature of the company.

Thus, the majority supremacy rule was established. The same principle was applied in several judgements that followed. The majority rule proved to be worthy in various scenarios:

• It strengthened the separate legal entity concept of the company.
• The wish of the majority prevails, and they decide on how the company is to carry out its affairs. The right of the majority is protected.
• The application of this principle can prevent many unnecessary futile suits.

Exceptions of the Majority Principle

Although the majority rule prevails, there are certain circumstances in which the rule is kept in check:

• Company acting beyond its power – Ultra vires: If the company is acting beyond its prescribed power in the memorandum, a shareholder can bring a personal or derivative action upon such breach. It can be brought against the company or its officers.
• Fraud on minority: In this scenario, an action can be brought by the minority shareholders if fraud or oppression has caused an unreasonable use of power by the majority against the minority. This should have resulted in gross unfairness to the minority. Further, it also includes scenarios where the majority shareholders appropriated the money, property and so on belonging to the company.
• Control in the hands of a wrongdoer: Sometimes, the control is in the hands of a wrongdoer, and he would not permit an action to be brought against them. To protect the company’s interest, a suit can be brought by the minority shareholders.
• To protect the rights of a single shareholder if infringed.
• Against oppression and mismanagement: The Companies Act provides the provisions concerning oppression and mismanagement in companies and the prevention of the same. This is to ensure remedy in the cases of oppression and mismanagement against the minority and combat the same. This acts as an exception to the majority rule as well.

Must See: 9 Types of Directors in a Company

Prevention of Oppression

Oppression refers to the deviation from fair play in relation to the conditions set out concerning the rights of the shareholders. Oppression refers to the abuse of power in a company. Let’s see some remedies for this:

Remedy Against Oppression

The provisions of the Companies Act provides for remedial action against the oppression of the majority against the minority. These provisions are included with an intention. It is to protect the shareholders and safeguard the public interest. The right so conferred to the minority shareholders through these provisions is known as “qualified minority rights”.

Sections 397 and 398 of the Companies Act provided for the remedy. Whereas, in the Companies Act of 2013, sections 241 and 242 hold for the relief:

• The first remedy available to the affected minority is to apply to the tribunal. Under section 241(1) of the Act, it is explained that if any members are disappointed that the company’s matters are being carried out in a prejudicial, oppressive or in a manner that is against the public interest, such persons may apply to the tribunal for relief.
• Further, it holds that any member who complains that a material change has been brought about without protecting the interests of the shareholders, debenture holders and so on, for which the material change is prejudicial, oppressive or is in a manner that is against the public interest, the members may apply to the tribunal as in the manner prescribed in section 244 of the Companies Act.

Instances of Oppression

These are instances for which various judgements are passed against the oppressing majority:

• The majority shareholders force the minority with risky objects without their willingness.
• If a member is prohibited or deprived of his ordinary membership rights.
• When the majority is putting the minority shareholders under a heavy burden which is unjust, unfair, harsh and inhuman.
• If the company’s affairs are being carried out in a matter that is not in compliance with the provisions of the Companies Act.

Must See: What Is NCLT and NCLAT Under Company Law?

Prevention of Mismanagement

If the company affairs are being carried out in a prejudicial manner against public or company’s interest, or if any material change is brought about management and control of the company, then relief can be availed as per section 241(1)(b) of the Companies Act, 2013.

Material change here refers to any change brought or alteration made in the Board of Directors, company shares ownership and so on. If there is proof that the affairs are being carried out in a prejudicial manner, that will be sufficient for the relief.

Tribunal and Its Powers

The tribunals have a wide power when it comes to the question of oppression and mismanagement in the companies. The powers of the tribunals are provided under sections 241 and 242 of the Companies Act. The tribunal may make any order as it finds necessary to regulate the conduct of the company’s affairs:

• Winding up order: The tribunal may pass a winding-up order if it believes that the affairs of the company are being conducted in an oppressive or prejudicial manner. Moreover, it affects the interests and rights of the members as well as the public. Further, if the tribunal holds that it is just and equitable to wind up the company, it may do so by taking into consideration all the aspects of the same. But the tribunals avoid the same because it will lead to a worse situation, and eventually, the company’s business will be dealt with by the majority.
• Other orders dealing with the regulation of the conduct of the company’s affairs, purchase of shares, termination, setting aside or modification of any agreement and so on as per section 242(2) of the Companies Act, 2013.
• Interim relief as per section 242(4) of the Companies Act, 2013: Any party to the proceeding can make an application for interim relief. This is to ensure proper regulation relating to the conduct of affairs of the company.

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Case Laws Related to Oppression and Mismanagement in Companies

Rajahmundry Electric Supply Corporation vs A Nageshwara Rao (1956)

In this case, the court observed whether mismanagement is sufficient to pass a winding-up order. The contention was that the mere misconduct on the part of the director would not amount to mismanagement, and a winding-up order cannot be passed as it is an affair of ‘internal management. Hence, it was contended that no courts can interfere.

The court here ruled that, if circumstances exist, apart from that misconduct, which renders it necessary to protect the interest of the shareholders for which they want nothing but winding up, then the court may look into the same.

In this case, the Vice-Chairman of the company mismanaged the affairs of the company and drew huge amounts from the company to satisfy his personal affairs. Here, there was sufficient evidence of mismanagement.

Mohan Lal Chandumall vs Punjab Co. Ltd (1961)

In this case, the court held that depriving a member of his ordinary membership rights amounts to oppression. Here, a public company had to amend its Articles due to compulsion under statutory direction. The non-trading members were deprived of their right to vote, to call meetings and so on.

The court held that there was oppression and directed the company to buy shares of the members who complained and to allow them to walk out with the money they invested therein.

Analysis and Conclusion

Oppression is an unjust act whereby the voice of the minority is suppressed. It is the act of exercising power to suppress the powerless. Mismanagement, on the other hand, refers to a situation whereby the affairs of the company are being carried out in an unwarranted manner. For a very long time, the iron curtain was made strong and wide with the help of majority rule evolved through Foss vs Harbottle.

With the advent of provisions as to relief against these unjust and unwanted practices, the Company Law holds for the protection of the minority against the savage acts of the majority. If we were to look into the current way as to how the tribunals arrive at a decision, we might find that the tribunals are doing a balancing act with the majority rule and the rules that protect minorities from oppression and mismanagement. The need of the hour is to uphold just and equitable practices in the companies and bring about proper management as to the affairs of the same.

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3. Mergers and Acquisitions in Banking Sector and Its Impact

Prevention of Oppression and Mismanagement in Companies
Sidhida Varma S

The aim of a business organisation is to grow and maximise profits. Mergers and acquisitions (M&As) are considered as a reliable mechanism to achieve the same.

For an organisation, it is crucial to embrace a mergers and acquisitions wave to find sustenance in the globalisation-led ever-growing world of market competition.

Financial markets play an essential role in the development and well-being of a country. The expansion and consolidation of it have become the need of the hour. The banking sector can be privatised and strengthened with significant mergers and acquisitions activity.

Gaining a competitive advantage over domestic and international markets has become the banks’ priority. For this, mergers and acquisitions is a prerequisite.

But before taking the leap of faith into the wave of mergers and acquisitions, there are a few aspects that the banks need to reconsider. Their compatibility, user-friendliness, preparedness of banks, etc., need to be considered.

Let us learn more about these below.

What Are Mergers in the Banking Sector

In simple terms, merging can be defined as the process by which the board of directors of two companies decide, come together and amalgamate their companies to vote in their favour. In this process, the acquired company ceases to have a separate or distinctive existence but becomes a part of the acquiring company.

A company does a merger to expand into new territories and acquire more markets until the product lines of both companies unite.

Here, through amalgamation, the assets and liabilities of the selling company are engulfed and absorbed by the buying company.

What Are Acquisitions in the Banking Sector

An acquisition is more like a game of control. Here, an entity buys most of the shares of another entity to have control over it. That is, the buying company acquires more than 50 per cent of the shares or ownership stakes of the target company.

Examples of Mergers and Acquisitions

Here are some of the examples of major M&As in the Indian banking sector:

• 1993 – Punjab National Bank acquired the New Bank of India.
• 2017 – Bharatiya Mahila Bank was merged with the State Bank of India.
• 2017 – State Bank Associate Banks were merged with the State Bank of India.
• 2019 – 27 Public Sector Banks were merged to reduce it to 12. This was a central government-forced bank merger.

Why Mergers and Acquisitions

The Indian banking sector is growing at a rapid pace. This sector is the most prominent service sector in India.

In the last few decades, the achievements made by the banking sector contributed to the development of the country as a whole. Due to this growth at an astonishing pace, new dimensions are to be achieved.

Mergers and acquisitions are the vital ingredients that will accelerate new dimensions in the banking industry. These help the local banks to modernise and achieve a world-class level of competence.

Moreover, in countries like India, the Public Sector Banks (PSBs), where the involvement of mid-level employees, corruption and political interference is high, the accumulation of NPAs (Non-Performing Assets) and bad debts can cause stagnation and deterioration of the banking system as a whole.

This can be prevented through mergers and acquisitions as it helps in more control over these banks. An example is the centre-forced bank mergers after the accumulation of high levels of NPAs during 2018-19.

Mergers and acquisitions help in:

• Improvement and revamping of production.
• The expansion of markets.
• Protecting the existing markets.
• The stabilisation of markets.
• The strengthening of the financial sector.
• The disposal of underperforming, outdated and unwanted assets.
• Satisfaction of the customers through grassroots level services and expanded geographical outreach.

History of Mergers and Acquisitions

India’s history in mergers and acquisitions dates back to 1921, when the Imperial Bank of India was formed through the amalgamation of three presidency banks.

Narasimham II Committee Report, 1998 as ‘Committee on Banking Sector Reforms’ stated that India needs to have larger and stronger banks for the betterment of the economy. For this, necessary M&As are to be promoted in the banking sector. After the three phases of banking reforms, India stands strong on its own feet with a stabilised financial position and global competence.

Must Read: Evolution of the Banking System in India

Government’s Interest in Mergers and Acquisitions

Mergers and acquisitions are one of the main strategic agendas utilised by the government to have control and supervision over domestic banks and reform the banking sector to achieve a position in the global financial system.

Legal Provisions Concerning Mergers and Acquisitions

The M&A in the banking sector renders us a prospective future to compete with the global markets, but it has to be controlled to prevent unlawful practices. These are the provisions relating to various statutes which regulate mergers and acquisitions in the banking sector. This is not an exhaustive list, but it includes some significant aspects that control and restrict M&As practices.

1. The Banking Regulation Act, 1949

Section 44A of the Banking Regulation Act states that the companies shall amalgamate only if the same is approved by a two-thirds majority of the shareholders of each amalgamating company. Further, it is sent to the RBI for its sanction.

2. The Competition Act, 2002

The Competition Act monitors the restrictive and trade practices in relation to firms that are players in Indian markets. The need is to prevent the abuse of power and stop the anti-competitive practices put in use after the M&As. Sections 5 and 6 deal with the regulation of M&As.

3. The Companies Act, 2013

Chapter XV of the Companies Act, 2013 holds that in case of a merger between a bank and a company, it requires, at first instance, the approval of the High Court and then the Reserve Bank of India.

The amalgamation of a banking company with a non-banking company is also dealt with under sections 391 and 394 of the Companies Act.

4. Income Tax Act, 1961

The Income Tax Act provides provisions relating to the tax concessions or benefits concerning amalgamation and merging of banks. It also deals with various tax benefits and taxable deductions in relation to M&As.

Positive Impacts of Mergers and Acquisitions in the Banking Sector

One of the most pertinent positive impacts of mergers and acquisitions would be the better monitoring and control of bad debts and NPAs.

Moreover, it has helped the Indian banking industry to grow in a rapid phase.

More productivity and less lethargy of Indian markets, newly introduced and innovative technological advancement, stable financial health, etc., are some of the major achievements of the banking sector.

Other achievements include more job opportunities, new customers, an increase in capital, better managerial skills, etc.

Negative Impacts of Mergers and Acquisitions in the Banking Sector

If we were to consider the negative impacts of the mergers and acquisitions in our banking sector and the economy as a whole, it is the use of tax paid by the common person to save these systems and banks from sinking and failing.

Moreover, due to the very process of mergers and acquisitions, the local and small banks have lost their identity.

Profit maximisation is the sole aim of these business entities. The common person is at the receiving end, being vulnerable to these negative approaches adopted to boost the profit of the banking organisations.

The risk factor is another element that we must consider.

Read: Prevention of Oppression and Mismanagement in Companies

COVID and Mergers and Acquisitions

As we observe the impact of the COVID-19 crisis, we will see that it has made the economic and corporate process slow down and continue in uncertainty. We can now see different strategies and approaches to mergers and acquisitions after this. This has led to the use of more creative and innovative collaborations. Although the pandemic has slowed down the process, the post-pandemic phase is what we will have to look forward to.

Future of Mergers and Acquisitions in the Banking Sector

The future of mergers and acquisitions in the banking sector revolves around the technological and globalisation led market advancement happening around the world.

In the near future, we will be able to see innovative platforms leading the Indian markets.

As the markets are expanding on a global scale, the strengthening of the domestic banks and opening of the economy to flourish is what it takes to be in a developing economy.

Mergers and acquisitions boost the banking sector if the same is implemented properly and efficiently. Indian banks will be able to capture the market with more customers through M&As. For that, the Indian banks are to be made compatible, self-sufficient and productive at an international level.

The banking sector in India is growing and expanding further. With that, the result is the merging of the world economies together with mergers and acquisitions.

Must See: What Is NCLT and NCLAT Under Company Law?

Conclusion

“Mergers generate substantial synergies” – Roger Altman

As stated above, mergers and acquisitions are beneficial for the banking sector as a whole. Still, to have a successful merger or acquisition, the banks must be compatible for the same. It should have relatedness and must be capable of combating cultural differences.

Moreover, organisational skills play an important role in the success of M&As. The aim should be to have a synergy-based merger that will tackle these players’ shortcomings and improve strategic risk management, corporate governance, etc.

The banking sector must keep its pace steady with the dynamically growing agriculture and industrial sectors.

The growth should be sustainable, and it must work together with the environment and the current needs of society.

Mergers and acquisitions help the economy grow on a global player level.

Read Next:
1. 13 Characteristics of a Company
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Mergers and Acquisitions in Banking Sector and Its Impact
Sidhida Varma S