LEGAL NEWS 14.12.2008

CJI assails media coverage of attacks
Legal Correspondent
New Delhi: The live coverage of the Mumbai terrorist attacks and the subsequent events by the media, in particular television news channels, drew critical observations from Chief Justice of India K.G. Balakrishnan here on Saturday.
Speaking at a conference on terrorism, rule of law and human rights, Justice Balakrishnan said: “The symbolic impact of terrorist attacks on the minds of ordinary citizens has also been considerably amplified by the role of pervasive media coverage.”
The Chief Justice said: “One of the ill-effects of unrestrained coverage is that of provoking anger amongst the masses. While it is fair for the media to prompt public criticism of inadequacies in the security and law-enforcement apparatus, there is also a possibility of such resentment turning into an irrational desire for retribution. Furthermore, the trauma resulting from the terrorist attacks may be used as a justification for undue curtailment of individual rights and liberties.”
He said: “Instead of offering a considered response to the growth of terrorism, a country may resort to questionable methods such as permitting indefinite detention of terror suspects, the use of coercive interrogation techniques and the denial of the right to fair trial. Outside the criminal justice system, the fear generated by terrorist attacks may also be linked to increasing governmental surveillance over citizens and unfair restrictions on immigration.”
Justice Balakrishnan said that apprehension and interrogation of terror suspects must be done professionally with adequate judicial scrutiny. “This is required because in recent counter-terrorist operations there have been several reports of arbitrary arrests of individuals belonging to certain communities and the concoction of evidence.”
The CJI said: “In the absence of bilateral treaties for extradition or assistance in investigation, there is no clear legal basis for international cooperation in investigating terrorist attacks. The pursuit of terrorists alone could not be a justification for arbitrarily breaching another nation’s sovereignty. Yet another practical constraint that has been brought to the fore with the Mumbai attacks has been the question of holding governments responsible for the actions of non-state actors. While one can say that there is a moral duty on all governments to prevent and restrain the activities of militant groups on their soil, the same is easier said than done.”

Mumbai police write to Centre on Ajmal’s plea
Staff Reporter
MUMBAI: The Mumbai police have written to the Ministry of Home Affairs (MHA) and the Ministry of External Affairs (MEA) on the surviving terrorist of the Mumbai attacks, Mohammad Ajmal Amir Iman’s plea seeking contact with the Pakistan High Commission in New Delhi.
Rakesh Maria, Joint Commissioner of Police (Crime) told reporters on Saturday that on December 11, Ajmal wrote a three-page letter in Urdu, seeking “consular access” and legal aid from the Pakistan High Commission.
Ajmal said in the letter that he and Ismail Khan, who was killed during the terror attack, are Pakistan nationals. He wanted Ismail’s body taken to Pakistan for cremation. The same day, the police wrote to the MHA and MEA “for onward transaction to Pakistani Consulate (sic),” Mr. Maria said.
Ajmal has given details of his training in the letter. He also named his trainers – Lashkar operative Zaki-ur-Rahman Lakhvi, Abu Hamza, Kahfa – and Hafiz Saeed, and handlers.
The Mumbai police have also written to Delhi about all the nine bodies of slain terrorists. “We have said that they are Pakistan nationals,” Mr. Maria said. He said that as per the forensic report received on Friday afternoon, “RDX and petroleum oil” were used in the taxi blast at Ville Parle. The explosive had a battery timer and around 8 kg of RDX was used, Mr. Maria added.

Ajmal seeks legal aid
MUMBAI: Mohammad Ajmal Amir Iman, who was arrested on November 26 during the Mumbai terror attack, has written a letter to the Pakistan High Commission seeking legal help. The letter has been forwarded by the Mumbai police to the External Affairs and the Union Home Ministries for necessary action, Joint Commissioner of Police Rakesh Maria told reporters on Saturday. — PTI

Bhardwaj: new anti-terror law coming
Legal Correspondent
New Delhi: The Centre will soon come out with a new comprehensive law to specifically deal with terrorist attacks, Law Minister H.R. Bhardwaj said here on Saturday. He was addressing an international conference on terrorism.
Later talking to reporters, Mr. Bhardwaj said “I [Law Ministry] have sent a proposal to the Home Ministry. Once it is approved, we will discuss the contents of the law and then place it before the Union Cabinet.”
Asked whether a Bill would be introduced in the current session of Parliament, he said: “We will draft the legislation after it is cleared by the Cabinet. We will try to balance right to life and liberty under Article 21 of the Constitution with reasonable restrictions.”
Earlier speaking at the conference, he said the time had come to bring in really effective legislation to combat terrorism, following the Mumbai attacks. “We would arm ourselves with laws specifically aimed at terrorist and disruptive elements. The government would very soon declare the contents of the law.”
International Council of Jurists president Adish C. Aggarwala and director S. Prabhakaran, who presided over separate sessions, said the deliberations of the two-day meet would be sent to the government for follow-up action.
Prime Minister Manmohan Singh presented the ‘International Jurists Award-2008’ to the Chief Justice of Canada, Beverley Mclachlin (administration of justice) and it was received by Canadian High Commissioner Joseph Caron; Ram Jethmalani (jurisprudence); the Law Society of England and Wales (Bar Affairs) — received by British High Commissioner Sir Richard Stagg; Prof. Peter Mutharika, University of Washington in St. Louis (legal education) and corporate lawyer Rohit Kochchar.
Law Day awards
Chief Justice of India K.G. Balakrishnan presented the Law Day award to Justice Ashok Bhan, Chairman, National Consumer Disputes Redressal Commission (administration of justice). Other awardees included Yathin Reddy, vice-president, Tamil Nadu Advocates Association, for his outstanding practice of law and for being a role model to young lawyers; Prof. S. Sivakumar, Indian Law Institute (legal education); senior advocate Mukul Rohatgi (jurisprudence); and Additional Solicitor-General Amarendra Saran (constitutional law).

PIL: why are police still using World War II rifles?
Legal Correspondent
New Delhi: The Supreme Court has issued notice to the Centre on a public interest litigation petition filed by the former Attorney-General, Soli Sorabjee, for a direction that it equip the police and security forces with modern weapons for countering terror attacks. A Bench, consisting of Chief Justice K.G. Balakrishnan and Justice P. Sathasivam, on Friday sought the Home Ministry’s response to the petition, which has expressed concern over the police using inadequate and outdated weapons. The Bench posted the matter to January 2009.
Appearing for the petitioner, senior counsel Mukul Rohatgi said the police personnel were ill-equipped to deal with terrorist strikes, particularly the November 26 attack at the Chhatrapati Shivaji Terminus in Mumbai. The police were still using World War II rifles and bullet-proof jackets. The killing of police personnel wearing bullet-proof jackets, including Anti-Terrorism Squad Chief Hemant Karkare, at the CST spoke volumes of the nature of equipment supplied to the force.
The Chief Justice told counsel: “Tell us, is there any country in the world where policemen posted in public places are fully protected? No doubt, police should be equipped with modern weapons at sensitive places. But arming police personnel with sophisticated weapons like AK 47 and posting them at public places like railway stations would only scare away people. Most of these incidents happen all of a sudden. It is not for us to say anything or express any opinion on what the police should be equipped with.” Mr. Sorabjee cited 18 major terror incidents since the 1993 Mumbai serial blasts. It was essential to impart comprehensive training to the police.

Judicial custody of Dwivedi extended
Rahi Gaikwad
Mumbai: The Maharashtra Control of Organised Crimes Act (MCOCA) court on Friday extended the judicial custody of Malegaon blast suspect Sudhakar Dwivedi alias Dayanand Pandey till December 16, public prosecutor Rohini Salian said.
Ten other suspects are now in judicial custody. They will be produced in court, along with Dwivedi, on December 16.Ms. Salian said an application demanding an inquiry into alleged leak of details from Dwivedi’s laptop to the media was filed in the court on Thursday.
The Anti-Terrorism Squad has to file a reply by December 16.The Matunga police are seeking custody of Malegaon blast suspect Lieutenant-Colonel Prasad Shrikant Purohit. “We have got the MCOCA court order; we will produce him in court for police custody,” said Sunil Deshmukh, senior inspector at the Matunga station.
Purohit is a “wanted accused” in a case registered against another Malegaon suspect, Sudhakar Chaturvedi, on November 4, 2008.
It pertains to a fake identity card and an unlicensed pistol recovered from Chaturvedi when he arrived at the Dadar station on November 4.
During interrogation, Chaturvedi said Purohit got him the identity card and the firearm.
“The identity card has been issued by the Deolali cantonment. The photograph on it shows Chaturvedi in Army uniform,” said Mr. Deshmukh.
Purohit was reportedly posted at the Deolali camp, Nashik, in 2006.
Earlier, while seeking custody of Chaturvedi, Ms. Salian told the court: “He is from Abhinav Bharat and close to Purohit.”
The Matunga case against Chaturvedi was registered under Section 171 of the Indian Penal Code (wearing uniform or carrying a token used by public servant with fraudulent intent).

Charge sheet filed in Gulberg Society carnage case
Special Correspondent
AHMEDABAD: The Special Investigation Team (SIT), appointed by the Supreme Court for a fresh inquiry into some of the incidents of communal riot in Gujarat in 2002, filed a 400-page charge sheet in the Ahmedabad metropolitan court on Friday on the Gulberg Society carnage.
The charge sheet was filed against 15 accused now in police custody. It declared nine other accused, including a former and a present BJP member of the Ahmedabad municipal corporation and a senior leader of the Vishwa Hindu Parishad absconders. Among them was a former Congress corporator.
A frenzied mob attacked the Gulberg Society in Chamnapura locality in the heart of the city on February 28, 2002, and burnt at least 37 people alive. Among those killed was a former Congress member of the Lok Sabha, Ehsan Jafri, while at least 85 people were injured in the riot. Several former residents of the Gulberg Society are still in the “missing” list, but are believed to have been among those who perished in the communal frenzy.
The Gulberg Society was among the dozen-odd comparatively gruesome incidents the apex court ordered for fresh investigation by the SIT, taking it away from the Gujarat police.

‘Uphold human rights by respecting others’
Staff Reporter
People urged not to rejoice at the misfortune of others
KRISHNAGIRI: People should ensure that they uphold human rights by respecting others, said Chief Coordinator (Training), National Human Rights Commission, P. Michael Vedasiromani, here on Saturday.
In his inaugural speech at a function here, Mr. Vedasiromani urged people not to rejoice at the misfortune of others.
To do so would hurt those who were suffering. This would be a violation of human rights.
He added that caste-based human rights violations were higher in India than in many others, including the developed nations.
Poverty denies human rights to many people around the world and particularly in India. Eradicating poverty will ensure that human rights are respected.
He said gender bias paved the way for human rights violations. To avert this it was necessary to fight against female infanticide.
Even though government is taking several steps including cradle baby scheme in government hospitals, it is the duty of society to concentrate on this issue. Men and women should respect each other.
Mr. Vedasiromani added that a good and corruption-free administration could make sure that human rights were upheld. The Governmental and non-governmental agencies should work jointly in this regard and make Krishnagiri a model district in India.
Collector V.K. Shanmugam said that rights and duties were two sides of the same coin. He said that freedom of thinking enshrined in our Constitution was our privilege and pride. He quoted human rights examples from Tamil literature.
District Judge Mr. C. Raghavan said various government schemes should reach the poorest of the poor.
For this, non-governmental organisations should act as a bridge between the government administration and the people. People should use government schemes and welfare measures for good purposes.
The Kaveripattinam M.L.A. Mr. T.A. Meganathan said human rights violations were taking place in police stations. He stressed 50 per cent reservation for women and said that only equality in all respects would safeguard human rights.
Mr. G.K. Dhas, Founder and Managing Trustee, Nobel laureate Mother Teresa Charitable Trust, presided over the programme and explained the activities of the trust in Tamil Nadu and other States in India.
More than 300 women and men from all walks of life participated in the training programme. Members of women self-help groups participated in large numbers.
Freedom fighter and political leader from Janata Dal (U), G.A. Vadivelu, former M.L.A. and trade union leader Mr. K.A. Manoharan, South India Cell for Human Rights Educational & Monitoring, Mr. R. Manohar; Professors C. Paranthaman and J. Vincent from Dr. Ambedkar Law College, Chennai; V.N. Viswanathan, Head of the Department of Political Science, Presidency College, Chennai were present at the inaugural function.
The Superintendent of Police, Anisha Hussein, spoke at the valedictory function.
State Vice-President of the Mother Teresa Trust Mr. S. Vivekanandan welcomed the gathering.
Karnataka State General Secretary, Mr. R. Shanmuga Sundaram proposed a vote of thanks.

Court dismisses publishers’ plea
Special Correspondent
CHENNAI: The Madras High Court has dismissed writ petitions filed by Rajeswari Puthaga Nilayam and 10 other publishers challenging the list of books and the mode of their selection by the Commissioner of Rural Development and Panchayat Raj for setting up village libraries under the Anaithu Grama Anna Marumalarchi Thittam.
According to an official release, Justice K. Venkataraman has upheld the mode of selection of books for the village libraries.
The scheme, launched in 2006-07, aimed at improving the physical and social infrastructure in all village panchayats over five years, according to the release.
A component was the setting up of village libraries in each panchayat at a cost of about Rs.2 lakh for the building, Rs.50,000 for furniture and Rs.50,000 for purchasing books, the release stated.

Judge inaugurates library room
Special Correspondent
KURNOOL: High Court Judge P.S. Narayana, who is the portfolio judge of Kurnool district, inaugurated a building that houses central Nazarath, computer room and library at the District Court Complex here on Saturday. The building was constructed at a cost of Rs. 26 lakh.
Addressing judicial officers and members of Bar Association, Justice Narayana called upon the junior advocates to imbibe the spirit and work culture from the senior members of the bar. District Judge Sunil Choudary, Bar Association president Ranga Ravikumar, secretary Prabhakar and Vice president G. Nagaseshaiah were present.

No merger of Social Welfare Department wings: official
Special Correspondent
‘Joint directors being posted to districts to ensure better coordination’
Reforms introduced to expedite implementation of welfare measures: Bharatlal Meena
Post-matric hostels to be opened in naxal-affected areas
SHIMOGA: Secretary of the Social Welfare Department Bharatlal Meena denied here on Friday that the Backward Classes Welfare Department, B.R. Ambedkar Development Corporation, Karnataka Scheduled Castes and Scheduled Tribes Development Corporation and Deveraj Urs Backward Classes Development Corporation were being merged with the Social Welfare Department.
Reacting to reports appearing in a section of the press to this effect, he told pressperson that there were eight wings that came under the purview of the Social Welfare Department, including three corporations and two research institutes, and they would continue to function independently.
As part of restructuring the Social Welfare Department its joint directors were being posted to district headquarters to ensure better coordination among all departments and corporations which came under the jurisdiction of the Social Welfare Department, he said.
Mr. Meena said that no new recruitment was being made for posts of joint director as some officers working in the head office of the department in Bangalore were being posted as joint directors.
Mr. Meena said that there was no change in powers and authority given to the heads of departments coming under the purview of the Social Welfare Department. There would not be any financial or administrative changes in the functioning of the department, he said.
When asked as to why there should be any opposition to the proposed changes in the Social Welfare Department by some organisations working for the welfare of backward classes people, including the Bahumata Sanghatane whose members staged a dharna here on Friday against it, Mr. Meena said they were instigated by some vested interests who were not interested in the welfare of the backward classes people.
Several reforms were being introduced to expedite implementation of welfare measures by the Social Welfare Department, he said and added that condition of hostels being run by the department had improved considerably following steps taken to give them a new look.
He said that the joint directors of the Social Welfare Department, who would be posted shortly, would look after the activities of the hostels.
It had been decided to open 315 new hostels to meet the rising demand, Mr. Meena said and added that even after opening these hostels it would be possible to accommodate only about 20 per cent of eligible students in them.
It had been decided to frame separate Cadre and Recruitment (C&R) Rules for appointment of teachers to Morarji Desai Residential Schools.
He said that post-matric hostels would be opened in naxal-affected areas.

Assembly panel moots change of provisions
Roy Mathew
Aim is to protect environmentally fragile lands
‘Exclude only coffee and cardamom plantations’
Call to protect livelihood of small farmers
THIRUVANANTHAPURAM: The Committee on Subordinate Legislation of the Assembly has recommended that plantations other than cardamom and coffee should not be excluded from the provisions of the Kerala Forests (Vesting and Management of Environmentally Fragile Lands) Act.
The committee observed in its report that many of the fragile lands taken over by the government had tea, rubber and other crops standing on them and, hence, their exclusion from the definition of forests would defeat the purpose of the Act. So, only coffee and cardamom, which are cultivated in forests, needed to be excluded.
(If the government amends the Act as recommended by the committee, it will validate the takeover of tea and other plantations under the Act.)
The committee observed that some cultivated land belonging to small farmers had been taken over under the Act without compensation. Their livelihoods should be protected.
If cultivated land had been notified as environmentally fragile area, that should be reviewed within a specified time. Inspection by a committee specified under the rules should be made mandatory for all takeovers under the Act.
Besides forest officials, officials from Agriculture and Revenue departments and presidents of local panchayats should be included on the committee.
The absence of clear provision for de-notification of land vested in government under the Act gave considerable discretionary powers to the custodian and that led to conspiracies to de-notify fragile lands.
Hence, the rules should be modified with clear provisions on de-notification.
The committee urged that the environmentally fragile lands, remaining to be notified in districts such as Ernakulam, Kottayam, Alappuzha and Pathanamthitta should be notified urgently. Steps should also be taken to survey and demarcate lands taken over under the Act.
Trees on such land should not be cut. Complaints from land owners should be redressed through joint verification by forest and revenue officials.
The committee also recommended that amendments should be made to the Act to prevent destruction of hills, rock formations and grasslands near forest areas for construction purposes.
When backwaters are taken over as ecologically fragile land, provision should be made for ecotourism and controlled fishing activities.
Owners had been found destroying mangroves when the government tried to take over them.
So, owners should be encouraged to conserve them under their own ownership. Incentives might be provided for this.

Pension adalat
PALAKKAD: The Railway Pension Adalat of Palakkad Division will be held at 10.30 a.m. on Monday at Railway Institute in Hemambika Nagar, Olavakode. Nearly 100 Railway pensioners and family pensioners will attend it. Grievances will be redressed on the spot. Y.P. Singh, Divisional Railway Manager, Palakkad will preside. Representatives from pensioners associations, banks etc. would participate in the adalat, the Railway press release said. —Staff Reporter

160 cases settled
Thrissur: In all, 1,128 criminal cases related to compoundable offences were considered at adalats held at various places in the
district on Saturday. Among these, 160 cases were settled. The adalats, which began at 9 a.m. continued till 4.30 p.m. Many people visited the adalats for legal advice too.

Lawyers to take out protest march
New Delhi: Lawyers practising in different courts in the national Capital, including the Delhi High Court, will take out a protest march against the Mumbai terror attacks on Monday.
“The lawyers will march from the High Court complex to India Gate lawn at 3 on Monday afternoon,” said K C Mittal, president of High Court Bar Association (HCBA).
“The entire country is reeling under frequent barbaric acts of terrorists and even the courts are not spared by them,” Mittal said.

HC settles questions on medicos’ bond conditions
14 Dec 2008, 0330 hrs IST, A Subramani, TNN
CHENNAI: Settling all questions relating to the status of post-graduate medical students, “bond conditions” and “detention” of their certificates, the Madras high court has said the government cannot impose the bond conditions on students admitted under the all-India quota. Justice N Paul Vasanthakumar, disposing of a batch of writ petitions, said students who occupied the all-India quota seats need not serve in compulsory temporary government service for three years. They also need not pay Rs 2 lakh or Rs 3 lakh as compensation to the government, in case they choose not to serve in government establishments for the stipulated period. But the non-service students, who were admitted under the state quota and had availed themselves of stipend and a subsidised rate of fee, are bound to comply with the bond conditions under which they got admissions, the judge ruled. “If they are offered posting, and if they are not willing to join, they have to necessarily remit a sum of Rs 2 lakh or Rs 3 lakh, as the case may be, to the government.” Concurring with the submissions of advocate A Palaniappan, Justice Vasanthakumar noted that the binding nature of instructions to candidates was well-settled. He said: “It is beyond doubt that the prospectus is the rule of selection, which is binding on the parties. Thus, the students admitted under the non-service state quota, other than all-India quota, are bound to comply with the conditions.” Disapproving of detention of certificates of PG doctors, the judge said, “The bond condition nowhere stipulates retention of diploma/degree certificates or any other certificates.” He pointed out that the candidates had joined the course before the government order which provided for “retention” of certifications. Justice Vasanthakumar, citing an earlier order passed by Justice K Chandru, said retention of certificate was illegal and invalid. Earlier, advocate Palaniappan had argued that candidates admitted under the all-India quota had not applied for admission as per the prospectus issued by the Directorate of Medical Education. So the clause which provided for compulsory temporary service or compensation, would not apply to them. Additional advocate-general S Ramasamy, however, said the doctors could question the clause after having accepted the terms and conditions of the bond, joined the course and completed it. As they had enjoyed a subsidised rate of fee, they are obliged to serve the rural poor for a stipulated period.

Joshi to approach HC for counting of tender votes
14 Dec 2008, 0345 hrs IST, Trilok Sharma, TNN
Udaipur: Will the issue of tender vote change outcome of assembly elections in Nathdwara which was in news because of a single vote issue? Will the tally of the Bharatiya Janata Party (BJP) and Congress change? Will the Pradesh Congress Committee (PCC) chief C P Joshi manage to snatch a victory? These questions are doing the rounds ever since Joshi decided to file a plea in the high court over the 10 tender votes cast on December 4, which are still to be counted. It happened for first time in the history of Rajasthan assembly that someone lost by only one vote. BJP’s Kalyan Singh Chauhan with 62,216 votes defeated Congress’ Joshi by one vote, Joshi had 62,215 votes. According to a Supreme Court ruling, “In any state assembly election, if the number of tender votes can affect the counted result in anyway, then the party concerned has the right to ask for counting the tender votes, but only after filing a plea with state high court.” As the difference in the result is just a single vote, while the number of tender votes are 10, Joshi may just get lucky. On December 4, when polling for the 13th assembly formation was on, 10 bogus votes were cast in Nathdwara. When the real voters arrived and proved their identity, they were allowed to vote under the Tender Voting System. According to the Election Commission guidelines, these (tender) votes are to be kept in a sealed envelope and be a part of the counting process, till not needed. “So now when my fourth consecutive victory is being hindered by just one vote, I decided to plead before the high court to get these 10 tender votes counted,” said Joshi. According to Sub Rule 6 of Election Conducting Rule, 1961, if anyone else votes instead of the real voter, then the polling officer, after the identifying the real voter, may allow him to cast a tender vote. Tender votes are never a part of the normal voting, if not required. If the number of tender votes have any sort of impact on the result, then the concerned state high court can ask for the counting of these votes and it may be added to the total count, following which, the new result emerges.

HC will review its rules for RTI pleas
14 Dec 2008, 0206 hrs IST, Abhinav Garg, TNN
NEW DELHI: The chief justice of Delhi High Court AP Shah on Saturday admitted that some of the rules framed by it under RTI run contrary to the parent Act. Sitting next to chief information commissioner Wajahat Habibullah, justice Shah announced that such rules were already being reviewed and they might soon be amended or deleted. “A judge’s committee is reviewing the RTI rules of high court. Those provisions which don’t align with RTI Act will be removed,” justice Shah promised while addressing the International Conference of Jurists on Terrorism, Rule of Law and Human Rights at Vigyan Bhavan in the Capital. He was speaking on “Role of RTI in promoting rule of law.” HC’s rules on information sharing have repeatedly held to be “in direct conflict with RTI Act” by the Central Information Commission in its rulings and has come under severe criticism by RTI activists too. While clause 4(IV) of HC’s special RTI rules permit the court to allow access of information only to “affected persons” and deny to those who don’t explain why such an information is required, section 5 (A) exempts it from revealing any information which is not in the public domain. The CIC has taken a dim view of both these sections as also HC’s decision to charge Rs 500 for an RTI form instead of Rs 10 as mandated by the law. Even after the price has been scaled down to Rs 50 per form, it is still five times higher than what the Act has fixed. On Saturday, justice Shah signalled he wasn’t wedded to precedent when it came to opening up his courts under the RTI. “Dissemination of information must be totally open. Instead of an oath of secrecy we must take an oath of transparency,” he remarked, saying he was committed towards making HC and subordinate courts in the Capital “completely transparent.” He underscored the need for transparency saying that with the judiciary acquiring greater powers and the resultant clout it was all the more important that it should be made accountable under the RTI Act. “More transparency is needed in the judiciary,” the chief justice opined, conceding that ever since the RTI has come into effect even his judicial work has become more robust. He revealed how authorities now refrain from filing false affidavits in courts because the opposite party can easily file an RTI in the concerned department and get the correct information. “We receive a barrage of RTI requests everyday, perhaps we need to depute more staff,” justice Shah added. On his part chief information commissioner Wajahat Habibullah hoped HC would take CIC’s recommendations seriously and remove the sections in conflict with the RTI Act. He agreed with justice Shah that staff crunch hindered speedy furnishing of information as public information officers (PIOs) dealing with RTI applications were either overloaded with work or not trained to handle the responsibilities given. One way of easing the flood of RTI requests, Habibullah said, would be that every organization lists out its particulars and administrative information on its own, so that an applicant do not have to resort to an RTI to seek it.

CBI reopens investigations into Nanded blast case
14 Dec 2008, 1207 hrs IST, PTI
MUMBAI: The CBI has reopened investigations into the 2006 Nanded blast, which is being seen as a key indicator of a Hindutva group’s involvement in terror activities. The CBI also took custody of Rakesh Dhawde, one of the accused in the September 29 Malegaon blast even as the probe agency claimed that he had provided arms training to those allegedly involved in the Nanded incident. The decision to reopen the case was taken after some leads emerged during the investigations into the Malegaon case in which 11 people, including Lt Col Shrikant Purohit, have been arrested. “We have reopened the Nanded investigations,” CBI Director Ashwani Kumar said on Sunday in New Delhi. Dhawde has been remanded in CBI custody for three days, a senior CBI officer said, adding, if need arises, they would move court to take custody of others also. The CBI had charge-sheeted ten people in the Nanded case. But sources said it has not been able to trace the leads, as yet, provided by some of the accused who claimed to have admitted, before investigators, their role in the earlier cases. The CBI would also try and probe the links of those arrested in the Malegaon case including Lt Colonel Purohit, with the Nanded case. Earlier, CBI’s role had come into question from the probe conducted by central security agencies and Maharashtra’s ATS as the agency appeared to have not taken due cognisance of deposition of one of the accused arrested in the Nanded case. The accused, whose voice had to be restored by operating his vocal chord which was damaged in the blast, had told investigators that Naresh Rajkondwar, a Bajrang Dal activist, had allegedly planned three blasts outside mosques that shook Jalna and Parbani in Maharashtra in 2003 and 2004.

IFFK film selection challenged in Kerala HC
By DearCinema Desk Dec 14th, 2008
The Kerala High Court admitted a petition challenging the selection of films to the International Film Festival of Kerala (IFFK) to be held at Thiruvananthapuram from December 13.
Justice V Giri issued notices to the respondents including State Chalachitra Academy Festival Director, Secretary to the Department of Cultural Affairs, Selection Committee Chairman and members.
The petition was filed by director Arun R Nath alleging that the constitution of the selection committee was not in accordance with law.
The petitioner submitted that the committee did not include experts in every field.
Countesy: UNI

Cash-for-vote probe panel report likely tomorrow
14 Dec 2008, 1014 hrs IST, PTI
NEW DELHI: The suspense over the alleged cash-for-vote scam during the July 22 trust vote is expected to be over as the report of the Enquiry Committee is scheduled to be tabled in the Lok Sabha tomorrow. ( Watch ) The seven-member committee was set up by Lok Sabha Speaker Somnath Chatterjee after three BJP MPs — Ashok Argal, Fagan Singh Kulaste and Mahavir Bhagora — waved wads of currency notes in the House, alleging that huge sums were offered to them to save the Manmohan Singh government. In its report, the committee, headed by senior Congress MP V Kishore Chandra Deo, is understood to have suggested that the money trail could be probed by an investigating agency like the CBI or the Income Tax Department. The 600-page report will carry evidence given by witnesses and verbatim transcriptions of the sittings as also the “dissent” notes by some members. While Argal and Kulaste have appeared before the panel, Bhagora could not do so as he was suffering from a heart ailment. Samajwadi Party MP Reoti Raman Singh, BJP activist Sudheendra Kulkarni, Amar Singh’s alleged aide Sanjeev Saxena and Suhail Hindustani, who was seen in the CD released by CNN-IBN TV news channel which conducted the sting operation, and representatives of the channel have also deposed before the Committee.

Centre mulling law to punish cheating wives too
14 Dec 2008, 0628 hrs IST, Swati Deshpande, TNN
MUMBAI: A woman who cheats on her husband may land in the dock if the Union home ministry has its way. Despite vehement protests from the National Commission for Women (NCW) two years ago, the Centre is quietly going about seeking a response from each of the 30-odd state governments to the Mallimath committee’s recommendation that adulterous wives be penalised. As the law stands in India, only men can be criminally tried and punished for adultery. No criminal charges can be made against a wife for sleeping with a man who is not her husband. Section 147 of the Indian Penal Code (IPC) which makes adultery a crime for men lays down a sentence of up to five years in jail and also a fine. But an offence is registered only if the “aggrieved” husband whose wife has cheated on him files a criminal complaint against the other man. The state or the police can’t act on their own, nor on a complaint made by any other person. And the existing law clearly says that a wife shall not be punishable even as an `abettor’. Though adultery is a rising urban phenomenon and often the cause and ground for a divorce, and though in many parts of the world, especially in the European Union and many US states, the trend is to de-criminalise adultery, the Mallimath committee on criminal law reforms recommended about five years back that women should also be tried for adultery. The existing law is based on the mindset that a wife is a chattel possessed by the man who becomes the aggrieved person. The NCW opposed the amendment, saying that merely punishing a wife, would not save marriages. It also cited the socially disempowered position of women in India. In fact, the NCW, in a progressive move, recommended that adultery should be treated as a civil wrong (where compensation can be sought). In American states where adultery is still a crime, it is rarely prosecuted. The Union home ministry is, however, plodding away at generating feedback and data necessary to amend the law. A few months back, the Maharashtra government received a letter from the home ministry seeking its “views” on the recommendation. State law secretary M N Gilani confirmed that the state’s views have been sought in an all-India exercise to include `wife’ in the offence of adultery. As things stand, IPC section 497 is limited only to adultery committed with a married woman and the male offender alone has been made liable. It is not necessary that the adulteror should know whose wife the woman is so long as he knew that she is married. The Supreme Court, while upholding section 497 in 1985, observed that the “the wife involved in an illicit relationship with another man, is a victim and not the author of the crime…adultery is an offence against the sanctity of matrimonial home, an act which is committed by a man, as it generally is. Hence those men who defile such sanctity are brought within the net of law…” There is, however, a difference of views within the legal circles. Mridula Kadam, a divorce lawyer, said,”It takes two to tango and there appears to be a discrimation under the existing law which needs to be ironed out.” Mumbai-based women’s right activist and lawyer Flavia Agnes said, “The whole debate is unnecessary and dated and adultery sould be deleted as an offence. Making wives and single women criminally liable for adultery would be a retrograde step at cross purposes with the Domestic Violence Act and will only make life miserable for women who may have gotten into the illicit relation as a victim of circumstance or inducement.” The law: IPC section 497: Whoever has consensual sexual intercourse with a wife of another man, without the consent or connivance of that man, is guilty of adultery Punishment: maximum five years’ jail or fine or both The wife can’t be punished for adultery, not even as an abettor. The man who is guilty of adultery may or may not be married. The amendment recomended: “Whoever has sexual intercourse with the spouse of any other person guilty of adultery.”

Fake GCs father sent to judicial custody
14 Dec 2008, 0025 hrs IST, TNN
DEHRADUN: Major Shobharam Yadav, father of Sanjeev Yadav, who was arrested earlier this week for allegedly joining the Indian Military Academy with fake documents, has been sent to 14 days’ judicial custody . He was presented before the ACJM’s court under tight security here on Friday after which he was sent to judicial custody. The Gentleman Cadet had been handed over to the police by the IMA authorities on December 9 after his fake identity was detected just days before the passing-out parade. Sanjeev was sent to judicial remand for five days till December 15. Sanjeev had come to the IMA in 2005 as Sanjeev Yadav from Meerut after clearing the Service Selection Board (SSB). He was later expelled on disciplinary grounds from the Academy. Earlier this week, the IMA authorities discovered that Sanjeev had again been training at the Academy since July 2008 under the fake identity of Deepak who is his younger brother. Police interrogated Maj Shobharam Yadav and found that he had misinformed the police during the verification of the GC during his second tenure at the Academy. He had hidden the facts about his son from the police.

Lawyers, citizens take PIL route to reform govt after 26/11
Mumbai (PTI): It seems that citizens’ weapon of choice for battling the terror is PIL.
At the last count, six Public Interest Litigations (PILs) have been filed so far, urging the courts to force the government to reform the security set-up; and punish those whose lapses helped the terrorists.
The petitioners include a body of law firms, a woman who lost her son and daughter-in-law in the attacks, and even a former top law officer of the country.
How can a handful of terrorists enter Mumbai so easily and cause mayhem, asks petition filed in the Supreme Court by Soli Sorabjee, former Advocate General of India.
“Current level of training as well as weaponary possessed by police is antiquated and unable to cope with weaponary of the terrorists,” Sorabjee’s petition says, seeking direction to the government to provide modern weapons and equipments to police.
Though reluctant initially, the apex court issued notice to Central Government in this PIL.
Bombay High Court came literally within the ‘striking distance’ of terrorists on November 26. All the places where terrrorists struck are within the radius of two kilometers from the High Court building in South Mumbai.
Society of Indian Law Firms (SILF) has filed PIL in the Bombay High Court, asking why ‘Quick Response Team’ of Mumbai police could not do much when attacks began.
Another PIL, filed by advocate V P Patil, seeks action against M K Narayanan, National Security Advisor, blaming him for “negligence”.

Law Minister at the wheel in CBI’s U-turn on Mulayam case
Posted: Dec 14, 2008 at 0235 hrs IST
NEW DELHI: The Central Bureau of Investigation’s U-turn withdrawing its interim application in the Mulayam Singh Yadav disproportionate assets case this week came after Solicitor General Goolam E Vahanvati criticised the manner in which the agency calculated his assets and clubbed them with those of his relatives.
Vahanvati’s six-page opinion, “accepted” in writing by Law Minister H R Bharadwaj and effectively demolishing the CBI case, came days after an intervention by Mulayam’s daughter-in-law Dimple Yadav (wife of son Akhilesh Yadav).
In a letter on October 27 this year, she wrote to Prithviraj Chauhan, Minister of State for Personnel & Training — the DoPT is the CBI’s administrative Ministry — asking him to take “appropriate steps in the interest of justice.”
In her letter, a copy of which has been obtained by The Sunday Express, Dimple Yadav says that “all loans and properties are reflected, disclosed and were very much part of the assessment probe before income tax authorities. No irregularity was ever found by any authorities in regard to the income and assets of our entire family, leave alone Mulayam Singh Yadav.”
“The only advance received by Akhilesh Yadav (Rs 1.25 crore) and (his brother) Prateek Yadav (Rs 1 crore) from the Lisa builders Pvt Limited towards the sale of property at village Kamta Lucknow. Subsequently, sale deed was executed,” she wrote.
The CBI is said to have pegged the value of the “disproportionate assets” of the Yadav family at around Rs 2 crore. Vahanvati is said to have questioned the assessment of the agency that Mulayam owned several “benami” properties.
Citing several Supreme Court judgments, he also opposed the lumping together of assets of members of the Yadav family into one DA case when his sons and daughter-in-law are individual income tax assessees.
The case goes back to 2005 when a PIL was filed in the apex court by lawyer Vishwanath Chaturvedi in which he claimed that 18 registered and benami properties were owned by Mulayam, 11 by his son Akhilesh Yadav; six by Dimple Yadav and two by his second son Prateek.
These included a bungalow in New Delhi and several properties in Lucknow and Etawah as well agricultural land owned by the Yadav family, their fixed deposits and other investments, all adding up to hundreds of crores.
However, Mulayam, in his affidavit, denied the petitioner’s claims.
For example, he said that four plots in Gomti Nagar in Etawah belonged to people with whom he had no relationship; a property in Ramana Dilkhusha mohalla of Lucknow purchased for Rs 1.65 crore was bought for the party and was reflected in its balance sheet. And the Chaudhary Charan Singh Post Graduate College in Etawah was worth Rs 100 crore and managed by a society owned by Mulayam’s brother.
In March 2007, Justice A R Lakshmanan asked the CBI to file a status report on the allegation and to submit it to the “Union of India.” A review petition filed by Akhilesh Yadav is still pending in the apex court.
However, in October 2007, in a rare move, the CBI filed an interim application in which it pointed out that the agency has always had a free hand in registration of cases and has never been required to make a “reference” to the Central Government.
What appeared to be in October 2007 as an assertion of the CBI’s independence, ended up a year later with the DA case being yet another instance of the agency being forced to make a U-turn on the basis of legal opinion of one the Government’s seniormost law officers.
Early this month, the CBI asked the Supreme Court’s permission to withdraw its earlier application to register a corruption case against Yadav and his relatives.
It told the court: “After the filing of the application there have been further developments. Representations were received from the respondents and legal advice was sought. In view of the legal advice and directions of the Union of India, the interlocutory application filed by CBI may be allowed to be withdrawn.”
Compare that with its affidavit on October 26, 2007 where the CBI had said that it had completed the preliminary enquiry to ascertain whether the Yadav family owned assets disproportionate to their known sources of income.
The CBI had then said that it would file a regular case if verifications/enquires indicated commission of offence.
Surprisingly, CBI’s latest affidavit seeking withdrawal of the case makes no mention of its verifications or enquiries.

Harried petitioners find PIL offers no cure
14 Dec 2008, 0208 hrs IST, TNN
Ahmedabad: Handing out false assurances seems to be the easiest way to avoid court’s strictures in the face of public interest litigations (PIL) going by what several government departments have been doing. Once the PIL is disposed of, it’s back to business, with assurances forgotten. Trustee of Ganjshahid Bataushahid Dargah Masjid Jalil Qureshi and Kabrastan Trust had approached Gujarat High Court by filing a PIL complaining that AMC did not pay heed to their repeated representations regarding encroachment on the graveyard land. When this PIL came up for hearing before Chief Justice KS Radhakrishnan and Justice Akil Kureshi on September 24, AMC filed an affidavit admitting to there being illegal constructions on the land. The AMC assured the court that it had served notices to encroachers and would take harsh steps to restrain them. With this assurance, the court disposed of the PIL. However, three months later, people in charge of protecting the graveyard had to once again dash off a legal notice to municipal commissioner through advocate Neeta Bhatt reminding him of his assurances AMC had given in the court. They have also threatened to drag AMC to the court again if it failed to stop encroachment. Similarly, the AMC had promised to grow “10 times more trees” it had got cut in the old textile mill compounds in response to a PIL seeking protection for the city’s green cover. Accepting AMC’s word, Chief Justice Radhakrishnan and Justice MS Shah, had disposed of the petition. “Five months have passed, but nothing has been planted in those mill compounds. The court dismissed my PIL despite my insistence that the authorities should be made to implement what they said they would do,” said advocate Aziz Alvi. Last year, a jail inmate Shailesh Rawal had filed a complaint against jail authorities saying they were not releasing undertrial prisoners who have completed a certain period of imprisonment, with respect to the maximum possible punishment they could get for the crime. As per an amendment in law, in cases where courts cannot come to a definite conclusion after a certain period of time, undertrials should be set free. Rawal complained that jail authorities were not following it. A single judge took cognisance of the seriousness of the issue and treated it as a PIL observing that Rawal had no personal interest in it. A division bench further widened the scope of the petition by roping in legal aid societies across the state and appointing advocate Bhushan Oza as amicus curie. But, later, when jails claimed that they had no prisoners in this category, the PIL was dismissed on October 8.

Court to frame charges in Ludhiana City Centre scam case
Ludhiana: A court here will frame charges on January 10 in the multi-crore Ludhiana City Centre scam case in which former Punjab Chief Minister Amarinder Singh is an accused along with 34 others.
District Sessions Judge G. K. Rai on Saturday fixed January 8 as the last date for examination of documents by the defence and for filing a reply to the application moved by a key witness, Sunil Dey, requesting the court to cancel the bail of 19 accused.
In his application, Mr. Dey alleged that he was receiving threats from the accused. The court said it would consider framing of charges against the accused on January 10 after the prosecution contended that the defence was resorting to delaying tactics by seeking more time for examination of documents.
“One full year has passed but the accused or their counsel have not completed the examination of the documents made available to them,” the prosecution said. The defence, they charged, was using it as a “tactic” to get the trial delayed.
The defence counsel, however, reiterated that the examination of documents was a fundamental right of any accused. — PTI

Law Day Address to the Nation by
Hon’ble Mr. Justice K.G. Balakrishnan Chief Justice of India
On the occasion of Eve of National Law Day, 25th November,2008[1].11.08.pdf

On the occasion of another Law Day, the 58th of the Republic, I am addressing you with an air of expectation and a sense of fulfillment – the expectation at the steady unfolding of results of judicial reforms set in motion during the last few years and fulfillment on accomplishments which the system has achieved since I addressed you on the “State of Justice” last year. Law Day is significant not only to celebrate our journey on the path of Constitutional democracy and rule of law, but also to take stock of the promises which WE, THE PEOPLE OF INDIA, have given unto ourselves almost six decades ago. In the comity of nations, India’s justice system is appreciated and well received. Despite the problem of numbers, we have not compromised on the quality of justice delivered. We have enlarged the scope of fundamental freedoms and increased the space for democracy. We do have shortcomings and are rightly criticized for it. No institution in a democracy is above criticism. What is important is that criticisms are based on facts and performance. It is my responsibility as head of the judicial system to answer the criticisms, clarify the facts and defend the institution for enabling it to serve the litigant public better.
Let me reiterate on this occasion the commitment of every member of our judicial establishment to uphold the purity of justice and ensure its timely delivery to the millions who knock at our doors. I see it as a sign of our commitment to rule of law and of our convictions on the ability of courts to give fair and impartial justice. Yes, it might create congestion in courts and cause delay in the delivery of justice. But that is no ground to dissuade people having legitimate claims and grievances from seeking judicial time. The answer lies in improving the efficiency of the court system and expanding the infra-structure to cope with the situation. I am glad to report that efforts in this regard are yielding results which may acquire speed in the days ahead.
Let me explain few of the steps taken up in this regard so that you may appreciate the facts and continue to support the judiciary in the performance of its onerous tasks in difficult times.

The problem of Arrears and Delay:
Increasingly productivity through improved infra-structure, employment of alternative methods of settlement and adoption of better strategies of management and training have been the key elements of the drive against delay and pendency during the last few years.
For any organization, efficiency and productivity are directly linked to the infra-structure it commands. Infra-structure in terms of judiciary includes both human and physical infra-structure. On both fronts, the situation of the subordinate courts which handle 90 percent of litigation continues to be far from satisfactory. This is the responsibility of the State Governments even when the subordinate courts do devote considerable time in adjudicating cases under central laws as well. A committee appointed by the Government of India to study the impact of new legislation on the workload of the courts has recommended that the Union Government has Constitutional obligation under Entry 11 A of the Concurrent List read with Article 247 to provide adequate financial provision for implementation of Central laws through State Courts. The State Governments under the same principle are likewise obliged to meet expenditure of Courts for implementing laws on subjects in the State and Concurrent List. Hopefully the above recommendations will receive favourable consideration of the Central and State Governments and the infra-structural needs of subordinate courts will be met in the near future. Meanwhile the continuation of the Fast Track Courts which have reduced pendency of nearly 20 lakh criminal cases will accelerate the process to the advantage of litigant public.

The Central Government was approached to create more special courts for disposal of corruption cases and family disputes which cannot brook delay without causing greater damage to public interest. In several States at the instance of the respective High Courts, evening courts have been established to clear pending cases requiring priority attention. In Tamilnadu, Andhra Pradesh and Gujarat, such courts have been proved to be quite effective in disposal of cases involving minor offences which are clogging our criminal justice system. Delhi has recently started evening courts initially for cases under Section 138 of Negotiable Instruments Act, involving small amounts. I am confident that other States will follow soon by establishing evening or morning courts to deal with cases involving petty offences. If these efforts of the judiciary are supported by Governments by providing better infra-structural facilities, productivity can be further improved to bring down pendency and delay in the near future.

I do not want to burden you with the statistics of cases filed, disposed and pending at each level of the judicial structure. All I want to convey on this occasion is that while the number of fresh cases instituted has been steadily increasing year after year, the number of cases disposed of has also increased substantially as compared to previous years. It indicates that our judges, overworked as they are, have been making every effort to steadily improve productivity even in adverse circumstances. I want to assure the public that judges are conscious of the problem of arrears and are making every effort to contain the rise of pendency of cases at all levels of the judicial system. Timely justice is the right of every litigant and speedy justice is the obligation of every functionary of the judicial system.

Judicial Education and Training:
I may in this context reflect briefly two significant initiatives undertaken by the Judiciary. Judges, like any other professionals, need continuing education and training to improve professional competence to deal with new challenges thrown up by changes in society, economy, polity and technology. Taking this into account, the Supreme Court had set up the National Judicial Academy five year ago which is now offering regular courses of training designed to cater to the needs of superior court judges. Simultaneously, each High Court has set up judicial academies to train judges newly inducted in the subordinate Courts and to provide continuing education to judges in service. The National Judicial Academy has devised year-long training plans in consultation with State Academies to ensure that every judge throughout the country has opportunity once in every year to learn and improve court and case management capabilities with support of technology and professionalism.
Simultaneously an E-Committee directly under the Supreme Court was set up to devise and implement a National Policy on computerization of judicial administration in order to expedite delivery of justice in civil and criminal cases. The project is being implemented in three phases over a period of five years. At the end of the first phase, reports indicate that a cost and time effective procedure is under way providing greater transparency, expedition and accountability to the system.
Alternative Methods of Delivery of Justice:
Litigation is time consuming and relatively expensive. In a country with a vast population of poor people, justice
has to be necessarily cheap and expeditious. For this, alternatives to litigation must be produced by the justice system. Parliament has provided the statutory basis for it by the recent amendments to the Civil Procedure Code and the Criminal Procedure Code. Taking advantage of these, the judiciary has prepared a National Plan for Mediated Settlement of disputes which included training of mediators, development of mediation manuals, setting up of mediation Centres in Court Complexes and spreading awareness about it among litigants through the legal aid services. Other modes of settlement are also being encouraged and judicial officers are instructed to promote ADR as a movement especially at the first level of courts where the bulk of poor litigants seek justice.
As standards of quality of justice delivered cannot be compromised, the ADR process cannot be accelerated without preparation and without demand from litigants themselves. It is hoped that in the next few years, like other jurisdictions outside India, litigants here would also prefer settlements outside litigation through negotiated arrangements. And proportionately it would reduce the problem of delay and pendency in litigation as well.
At the end of the day what I want to report on the issue of arrears is that we are on the right track with a multi-dimensional, well-planned national programme which has started giving rich dividends. With support from the Central and State Governments and co-operation of the bar and litigant public, I am hopeful that in the next couple of years substantial reduction in the number of cases pending in courts and in the time taken for disposal of cases will happen even if the fresh filings are going to increase continuously.

Judicial Corruption to be rooted out mercilessly:
Let me now turn to another subject which is worrying the public as media reports indicate. This is about judicial corruption, a subject which was not an issue in public discourse till recently. Let me admit straightaway that corruption and impartiality cannot co-exist. Under no circumstances can judiciary tolerate corruption even in its administrative staff.
For an organization which is nearly a million strong including 16,000 odd judges, five to six lakh lawyers and another 3 to 5 lakh ministerial staff to be free from corruption is a tall order, however desirable it be. The legal profession is independent and its discipline is the responsibility of the elected Bar Councils. The public perception of judicial corruption includes corruption by the lawyers and their staff.

Similarly, a substantial section of people who consider judiciary to be corrupt attribute it to the ministerial staff of courts and related offices. It is unfortunate that judiciary has to be bear the burden for corruption of people on whom the judiciary has no or little control.
So far as the 16,000 and odd judges who constitute the Indian judiciary I am responsible for their conduct as head of the system though I do not personally have legal and administrative control over them. Nonetheless, I have a duty to explain how the judiciary is enforcing discipline among the judges to ensure that people who approach the Courts will get fair and impartial justice. I would therefore inform you the steps I have taken as head of the judiciary to ensure a corruption-free judicial system

(i) Declaration of Assets by Judges:
The Supreme Court adopted a resolution as early as 1997 to declare assets voluntarily. I have requested Chief Justices of all High Courts to adopt similar Resolutions for declaration of assets by the judges of High Courts as well.
(ii) Restatement of Values of Judicial Life:
Again the Supreme Court in 1997 unanimously adopted a Resolution restating certain time-honoured best practices for judges to follow while they hold the high office. They form a code of ethics for judges to comply in public and private lives. I felt it necessary for High Court justices also to follow similar guidelines and therefore sent it to the High Courts requesting the respective Chief Justices to circulate it among the judges of the High Courts for compliance.
(iii) Model Code of Conduct for Subordinate Judiciary:
It was observed that the conduct of certain subordinate court judges particularly during visits of High Court judges to their places of work have not been of the standard expected of them. I have therefore formulated certain norms of conduct on their part which I requested the High Courts to consider and adopt for action by subordinate judges.
(iv) Strengthening and Streamlining Vigilance Cells in High Courts:
The Vigilance Cells in High Courts is the primary mechanism available to deal with complaints against subordinate judges. The Chief Justices’ Conference discussed the strategies to strengthen the cells to instill confidence and to expedite inquiries in appropriate cases, so that dishonest judges are eliminated and honest ones are protected.
(v) In-House Inquiry Procedure invoked against High Court Judges:
On receipt of allegations, inquiry through a Committee of Senior Judges was initiated against two sitting High Court Justices, of whom one was recommended to be removed through impeachment proceedings. The finding of the inquiry committee in the other case is awaited.

(vi) Periodical Performance Evaluation and Removal of Judges and officers of Doubtful Integrity:
I have written to the Chief Justices of High Courts to utilize their authority to review the work of all judicial officers firstly on attaining the age of 50 years and then when they attain the age of 55 years and to prematurely retire those found unfit, ineffective or having doubtful integrity. I have reminded them that this is expected under the Fundamental Rules and the Service Rules can be accordingly amended so that deviant behaviour can be effectively prevented. Such review of officers and employees of the Supreme Court is being carried out when they reach the age of 50, 55, 56, 57, 58 and 59 years. Experience has proved it to be an effective remedy particularly against ministerial corruption.

Several judges of doubtful integrity are being retired under this provision.
(vii) Tightening the Selection Procedure of Superior Court Justices:
A more detailed check-list to gather adequate information on suitability of prospective candidates for judgeship has now been evolved and sent to all High Courts. The Chief Justice who initiates the recommendations for his High Court has been asked to gather the details including personal antecedents on the new Questionnaire from Advocates and judicial officers being considered for appointment and get them verified. These data with supporting documents have to be forwarded along with recommendations. This is to avoid discovering a black sheep at a later stage when very little can be done, except resorting to the impeachment process.
There are several more steps being undertaken to rid the judiciary of corrupt elements spoiling the fair name of the justice system. All that I can do is to assure the public that the judiciary will not tolerate corruption and everything will be done, whatever be the cost, to uphold the purity of justice. In doing so, we have to ensure that the independence of judiciary is not compromised and the reputation of honest judges not harmed.
Legal Aid and Access to Justice:
Another issue which concerns a vast section of people seeking justice is the ability to access equal justice under law. The Government has accorded a crucial role to the judiciary to administer the Legal Services Authority Act which has multiple objectives. Rules have been framed under the Act and appropriate bodies have been set up at various levels to reach out the message of rule of law and equality in access to justice to every nook and corner of this vast country.
The Supreme Court Legal Services Committee grants legal aid to litigants in the Supreme Court which has over 200 advocates including Senior Advocates to render aid to deserving litigants. It maintains its own website and e-mail through which assistance can be obtained from anywhere. For middle income group the Committee renders assistance at subsidized rates through eminent lawyers.
Similar arrangements are in place at the High Courts and subordinate courts. Apart from giving litigational aid including the services of lawyers to represent in court, the Legal Services Authority organizes Lok Adalats to facilitate negotiated or mediated settlement of disputes. The programmes and policies are evolved and supervised by the National Legal Services Authority presided over by a Senior Supreme Court judge. It has undertaken a series of programmes to assist different sections of needy people particularly from the weaker sections.
As part of the legal literacy mission and social justice goals, NALSA has launched several campaigns for the successful implementation of the National Rural Employment programme, Protection of rights of women, Children, Dalits and the disabled persons. Legal aid is conceived as a social movement for the legal empowerment of all sections of people for equal justice under law. In this effort a national network of legal aid centres and civil society groups is being set up which can mobilize social action for good governance under law. This is a silent revolution under way to make a success of our democracy. In a small way the judiciary is extending a helping hand in this social empowerment mission though it is outside their usual function of adjudication and settlement of disputes.
I must on this occasion record my profound gratitude to my brother judges in the Supreme Court, High Courts and Subordinate Courts for the valuable efforts they are making to render timely justice to all litigants. Their sacrifices and commitment to justice have made rule of law an abiding principle of Constitutional democracy in our Republic. Let us all take a pledge on this Law Day that we will do everything possible to uphold the values of the Constitution and render justice to the people without fear, favour or ill will.
Jai hind !

‘Law Day’ function Organised by the Supreme Court Bar Association (SCBA)
New Delhi (November 26, 2008)
Address by Justice K.G. Balakrishnan, Chief Justice of India

Dr. H.R. Bhardwaj, Hon. Union Minister for Law & Justice,
Esteemed Brother Judges, Mr. Milon K. Banerjee, Attorney General for India, Shri P.H. Parekh, President, Supreme Court Bar Association and his colleague, Shri K. Venkatapathy, Minister of State for Law & Justice, Respected members of the Bar,
Members of Media,
Members of the Supreme Court staff
and all those present here –
The annual ‘Law Day’ function gives us an opportunity to collectively reflect on the state of the legal system in our country. At a symbolic level, it commemorates the adoption of our Constitution 59 years ago – and in doing so it reminds us of the values and ideals enshrined in the same. While some sceptics may dismiss discussions about these constitutional values as a largely theoretical exercise, we only have to look back on the last six decades to understand the role of our courts as agents of social change.
This project of social transformation is still unfolding and in the long run it will succeed only if we acknowledge and fulfil our responsibilities as participants in the justice-delivery system and more importantly as concerned citizens. The strength of our judicial institutions is a pre-condition for a meaningful engagement with the
constitutional values. Hence, aspects such as the intertwined questions of improvements in judicial infrastructure and access to justice, the quality of justice-delivery and judicial accountability are foremost concerns for all of us.
Today, I would like to draw your attention to the progress made in recent months with regard to each of these aspects. While the emphasis may be on the roles and responsibilities of judges at different levels, I must also state that advocates and administrative staff are core stakeholders in the legal system and they too have distinct obligations to the litigating public. In this regard, it is indeed quite appropriate that the Supreme Court Bar Association (SCBA) will be observing 2008-2009 as the ‘Year of the litigant’.
From the viewpoint of the ordinary litigant, the most prominent problem is that of undue delay in the disposal of cases and the mounting of arrears before courts at all levels. Pendency of Admission and Regular matters in the Supreme Court as on 1st November, 2008 was Twenty Nine Thousand Seven Hundred Six and Nineteen Thousand Five Hundred Fifty Seven respectively. Thus, the total pendency of cases in the Supreme Court as on 1st November, 2008 was Forty Nine Thousand Two Hundred Sixty Three cases.
Total pendency of civil cases in the High Courts as on 30th September, 2008 was Thirty Lakh Eighty One Thousand Fifty Three and that of criminal cases was Seven Lakh Fifty Four Thousand Six
Hundred Fifty Four. Thus, a total of Thirty Eight Lakh Thirty Five Thousand Seven Hundred Seven cases were pending in the High Courts on 30th September, 2008. The largest pendency of cases was in the High Court of Allahabad where Eight Lakh Eighty Seven Thousand Four Hundred Two cases were pending whereas Four Lakh Forty Six Thousand Nine Hundred Seventy Five Cases were pending in the Madras High Court as on 30th September, 2008.
So far as subordinate courts are concerned, Seventy Four Lakh Ninety Two Thousand Five Hundred Sixty One civil cases and One Crore Eighty Eight Lakh Ninety Seven Thousand Two Hundred Seventy Nine criminal cases were pending as on 30th September, 2008. Thus, a total of Two Crore Sixty Three Lakh Eighty Nine Thousand Eight Hundred Forty cases were pending in the subordinate courts as on 30th September, 2008.
As against the pendency noted above, the disposal of the cases by various courts was to the following order.
Fifty Seven Thousand Four Hundred Eighty Nine ‘Admission’ and ‘Regular’ matters were disposed of by the Supreme Court between 1st January, 2008 and 31st October, 2008 as against a total of Fifty Six Thousand Five Hundred Forty cases in the year 2006 and Sixty One Thousand Nine Hundred Fifty Seven cases in the year 2007.
Eleven Lakh Ninety Eight Thousand Five Hundred Ten cases were disposed of in the High Courts and One Crore Fourteen Lakh Twenty Two Thousand Four Hundred Eighty Six cases were disposed of in the subordinate courts during the first three quarters of the current year.
Sanctioned strength of High Court Judges was increased from 725 to 886 in November, 2007. Recommendations were made between January, 2007 to 15th November, 2008 for appointment of 149 High Court Judges out of which 123 have already been appointed. 28 Chief Justices and Judges of the High Courts were transferred from one High Court to another High Court. 12 Chief Justices of High Courts were appointed between January, 2007 and October, 2008. Recommendation has already been made for appointment of 2 more Chief Justices. 6 Supreme Court Judges were appointed between January, 2007 and August, 2008. Recommendation was made to Government of India to increase the strength of Judges in Supreme Court from 26 to 31.
It is pertinent to point out that the rate of disposal per judge in terms of absolute number of cases has been consistently increasing over the last few years. However, the perception of an immense backlog is strengthened by the fact that the rate of institution of proceedings has been growing far more than the rate of disposal. In this scenario, the solution seems obvious, which is that of appointing more judges. However, the process of creating more courts and appointing more judges at the subordinate level is one which needs backing from the executive. For its part, the judiciary has significantly increased the sanctioned number of high court judges in November 2007. However, a substantial change will come only with the expansion of the judiciary at the subordinate level, which is largely dependent on State governments when it comes to infrastructural concerns.
The much required expansion of the judiciary must also be done in a strategic way so as to tackle the backlog in categories of litigation which have been empirically identified with the mounting arrears. For instance pursuant to the Chief Justices’ conference held in April 2008, I had written to the Prime Minister about the urgent need to establish Family Courts in all districts of the country, since these Courts had been set-up only in 138 districts by that time. We also chose to highlight the need to establish 69 additional Courts for the trial of corruption cases being investigated by the Central Bureau of Investigation (CBI). Another area with a heavy backlog is that of cases pertaining to the dishonour of cheques, filed under Section 138 of the Negotiable Instruments Act. One proposal in this regard is the establishment of additional magistrate’s courts to decide these cases. Measures have also been taken to ensure the timely appointment of subordinate court judges. Another set of suggestions that came up during the Chief Justices’ Conferences was that of setting up morning / evening Courts at the subordinate level and the extension of working hours at High Courts in order to further improve the rate of disposal.
While such strategies for expanding and streamlining the judicial institutions are of the utmost importance, but we must also promote the culture of resorting to Alternative Dispute Resolution (ADR) methods such as mediation, negotiation and conciliation. While private business players have been quick to rely on methods such as commercial arbitration, the ordinary litigant is often unaware of the advantages of arriving at ‘out-of-court’ settlements. In this regard, we have begun the implementation of the National Plan for Mediation which envisages capacity-building as well as increased awareness about mediation at the grassroots level. With the introduction of the amended Section 89 in the Code of Civil Procedure, the onus is on judges and lawyers to strengthen the functioning of Court-annexed ADR mechanisms. We have already made strides in this direction with the evolution of the Lok Adalat system. After all, in many social settings where litigating parties have long-standing relations, resorting to civil litigation is seen as a means of confrontation and harassment rather than problem-solving. On the criminal side, the introduction of provisions for ‘plea bargaining’ is another tool that can be used to tackle the caseload relating to petty offences.
At this juncture, it is pertinent to mention the role of the National Legal Services Authority (NALSA) and the various state and district-level authorities under it. These authorities have been discharging the mandate of organising Lok Adalats at different levels and have also been conducting legal literacy camps all over the country. It is heartening to note that with the passing of each year, more and more
members of the bar are volunteering for ‘Legal Aid’ programmes and also acting as amicus curiae in pending cases. In recent months, NALSA has also undertaken some useful projects such as the workshops on reporting of court proceedings for media personnel and the initiative for strengthening the implementation of the National Rural Employment Guarantee Scheme (NREGS). Some of these initiatives point to the wider social role that practicing lawyers can play outside the formal courtroom setting.
Coming to issues pertaining to the quality of justice-delivery, it is important to refer to two long-term responses that are unfolding as we speak. The first of these started with the launch of the E-Courts project in July 2007. This project envisages a five year span for wholesome computerisation in the Indian judiciary. While at present the judgments of the Supreme Court, all the High Courts and some district courts are available in a user-friendly manner through the Judgment Information System (JUDIS), the agenda is to ensure that judgments/orders of all courts and tribunals will be made freely available online. While e-filing has already been introduced in the Supreme Court in October 2006, the ultimate objective is to enable advocates, litigants and staff to track proceedings at all stages through a website. The E-Courts project also envisages the installation of computer rooms at all judicial complexes as well as the equipment needed for video-conferencing. I must also mention that the Supreme Court Registry has contracted a private company for the task of creating an online archive of all records stored in its’ record room. On the completion of this exercise, all documents and minute
details pertaining to judicial as well as non-judicial functions of the Supreme Court will be readily available. On a general level, the integration of information technology into the judicial system will enable easier access to legal materials for all parties as well as more efficient allocation of matters and case-management. Such structural changes will definitely have a positive impact on the quality of submissions made by counsels as well as decision-making by judges.
The second long-term measure in respect of improving the quality of justice-delivery is that of ‘judicial education’. While legal education at the undergraduate level has undergone a significant transformation on account of the establishment of several autonomous National Law Universities, it is the cause of ‘Continuing Legal Education’ for sitting judges which holds more immediate importance. The establishment of the National Judicial Academy (NJA) at Bhopal in 2003 was a step in this direction and the said institution has developed a robust programme for training judges in relatively newer areas of litigation and ‘case-management’ techniques. Following this example, several states have also established judicial academies to provide periodic training to judicial officers. The role of these academies is of immense importance since judges at all levels are confronting litigation dealing with new areas that they are not familiar with, such as intellectual property and international finance among others. Even though this problem will eventually cease to be one as the next generation moves into mainstream roles in the legal profession, it is still of utmost importance to equip sitting judges with the knowledge necessary to decide such cases.
Concerns with the quality of justice-delivery are necessarily linked to those of judicial accountability. In recent months, the media has widely reported on matters relating to corruption in the higher judiciary. Instead of offering a knee-jerk response, we have been attempting to tackle corruption at a systemic level. It would not be appropriate to speak of proceedings against specific individuals at this forum, but I would like to refer to some of the measures taken in recent times:

• I have requested the Chief Justices of the various High Courts to adopt resolutions similar to the one passed by the Supreme Court (on 7th May, 1997) which pertains to the declaration of assets by judges and periodic updating of the same.

• The ‘Restatement of values of judicial life’, which was the subject-matter of another resolution passed by the Supreme Court in May 1997, has been circulated to the various High Courts. This resolution seeks to guide conduct by members of the higher judiciary in their professional and personal lives.

• By way of a letter written on 5th July, 2008 I have also requested all High Courts to adopt a ‘Model Code of Conduct’ which contains specific directions for the conduct of subordinate judicial officers, especially in the context of visits by superior judges.

• In addition to these normative measures, I must also refer to the need for strengthening the ‘Vigilance Cells’ at High Courts, which function as a forum for complaints against subordinate judges. In respect of the higher judiciary, you are all well aware of the ‘In house procedure’ that has been used for inquiring into allegations of corruption.

• At present there is a practice of reviewing the performance of a judge when the said person completes the age of 58 years, as per the decision in the All India Judges Association case. However, it is widely felt that such a performance review should also happen on the completion of the age of 50 years and 55 years respectively. Such periodic performance reviews will not only serve as a reliable basis for deciding on appointments, transfers and removal – but will also act as a strong disincentive for individuals to engage in corrupt practices.

• Measures have also been taken to tighten the selection procedure for the higher judiciary. A model questionnaire has been circulated to the various High Courts, which seeks more detailed information about advocates and judicial officers who are to be considered for elevation to the position of High Court judges. In addition to personal antecedents, the questionnaire also asks whether a person under consideration for elevation has a spouse/blood relation practicing at the same High Court.

I must on this occasion record my profound gratitude to my brother Judges in the Supreme Court, High Courts and Subordinate Courts and members of the Bar and all who are connected with our proud judicial system, for the valuable efforts they are making to render timely justice to all litigants. Their sacrifices and commitment to the cause of justice have made the ‘rule of law’ an abiding principle of Constitutional democracy in our Republic. Let us all take a pledge on this Law Day that we will do everything possible to uphold the values of the Constitution and render justice to the people without fear, favour or ill-will.
Jai Hind!

CJI attacks media coverage of terror attacks
J. Venkatesan
“Public resentment may turn into an irrational desire for retribution”
New Delhi: The live coverage of the Mumbai terrorist attacks and the subsequent events by the media, in particular television news channels, came in for critical observations from Chief Justice of India K. G. Balakrishnan here on Saturday.
Speaking at a conference on terrorism, rule of law and human rights, Justice Balakrishnan said, “The symbolic impact of terrorist attacks on the minds of ordinary citizens has also been considerably amplified by the role of pervasive media coverage. In India, the proliferation of 24-hour TV news channels and the digital medium has ensured that quite often some disturbing images and statements reach a very wide audience.”
Expressing concern at such coverage, the CJI said, “One of the ill-effects of unrestrained coverage is that of provoking anger amongst the masses. While it is fair for the media to prompt public criticism of inadequacies in the security and law-enforcement apparatus, there is also a possibility of such resentment turning into an irrational desire for retribution. Furthermore, the trauma resulting from the terrorist attacks may be used as a justification for undue curtailment of individual rights and liberties.”
“Instead of offering a considered response to the growth of terrorism, a country may resort to questionable methods such as permitting indefinite detention of terror suspects, the use of coercive interrogation techniques and the denial of the right to fair trial. Outside the criminal justice system, the fear generated by terrorist attacks may also be linked to increasing governmental surveillance over citizens and unfair restrictions on immigration,” he said.
Justice Balakrishnan said apprehension and interrogation of terror suspects must be done in a professional manner with adequate judicial scrutiny.
“This is required because in recent counter-terrorist operations there have been several reports of arbitrary arrests of individuals belonging to certain communities and the concoction of evidence.”
The CJI said that “in the absence of bilateral treaties for extradition or assistance in investigation, there is no clear legal basis for international cooperation in investigating terrorist attacks. The pursuit of terrorists alone could not be a justification for arbitrarily breaching another nation’s sovereignty. Yet another practical constraint that has been brought to the fore with the Mumbai attacks has been the question of holding governments responsible for the actions of non-state actors. While one can say that there is a moral duty on all governments to prevent and restrain the activities of militant groups on their soil, the same is easier said than done.”

The Competition Act And Its Relevance

By Roudra Bhattacharya on December 13, 2008
The Competition Act, 2002, which still hasn’t been completely enforced as yet, was devised as a replacement of the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969. This act moved away from the earlier emphasis of curbing monopolies in particular industries, to a more particular and directed approach towards promoting competition and thereby increasing the size and scope of industry. Better competition is believed to lead to higher efficiency in competing companies, thereby leading to a better allocation of given resources.

An interesting fact to note about the Competition Act is that it frowns upon the abuse of dominance by a particular company, but not dominance per se. It has also negated certain clauses which were already under the protection of the Consumer Protection Act, 1986, and which had been repeated in the earlier MRTP Act. Largely based on the post-reform (1991) era, the new act is far more clear with certain well-defined punitive measures against offenders. Definitions regarding groups and mergers are now more explicit and result oriented.

There has been however some debate regarding the ambiguity and effectiveness of this new act. FICCI or the Federation of Indian Chambers for Commerce and Industry has expressed concern over the provisions regulating mergers and acquisitions in this act. It feels that such curbs might result in a slow down of the industry, particularly in the current larger world scenario. Citing the Section 5 of this Act, under which turnover thresholds are based, it states that an Indian company with a turnover of Rs. 3000 crore cannot acquire another Indian company without prior notification and approval of the Competition Commission. On the other hand, a foreign company (outside India) with turnover of more than USD 1.5 billion (or in excess of Rs. 4500 crore) may acquire a company in India with sales just short of Rs. 1500 crore without any notification to (or approval of) the Competition Commission being required. Such procedures might hamper indigenous growth, making it tougher for Indian industry looking for expansion through acquisitions.

There are also other irregularities with this act. For example, the Section 3(5) of this law excludes all IPR (Intellectual Property Right) from its applicability. Thus, companies with IPR can tend to monopolise industry. This is very relevant in the field of genome research and biotech firms. Such firms can have the sole licence to medicines developed through such research, besides other key genes of organisms they might discover. Medication derived through such research might become their own prerogative, which can affect pricing strategies. This means that the product, with the absence of competition in the industry, might be priced at an unaffordable price for most consumers.

Other concerns relate to the supreme control of the CCI, or the Competition Commission of India, the regulatory body covering the act. It is feared that the CCI will become a super regulator as other regulatory authorities will be subject to Competition Law. This means that regulation will largely centre around the CCI and the other bodies will loose strength and relevance. Leaving such control on a single authority is always a risky task.

The CCI, a committee of ten members besides a chairperson, has been designed to minimise the politicisation of appointments. A selection by a collegium will ensure the appointment of a judicial member, besides members from economics, international trade, commerce, industry, finance, etc. However, there is certain ambiguity in this attempt to make the CCI free from political intervention. Certain clauses to the act state that the government by notification may exempt a class of enterprises in the interest of national security/public interest, any agreement arising out of an international treaty/agreement, and (or) an enterprise performing a sovereign function on behalf of the government. The last bit is very disturbing as it leaves a huge scope for corruption and malpractice. The government can effectively blanket any industry/company from the purview of the CCI as it wishes, which amazingly is in stark contradiction to the so-called attempt to making the CCI free from political intervention.

The new Act, although a welcome change over the outdated MRTP Act, does come with certain flaws. Some changes like increasing the threshold limit (turnover, asset value) for it to come under the purview of the Commission were introduced in 2006. Also, the waiting period for approval has been reduced and fixed to a maximum of 210 days, to minimise wastage of time. Some Indian economists argue that this act has been a result of regular prodding by the WTO to open up our economy further. What effect the CCI has on the industry is yet to be seen, and it is felt that there are yet more measures needed to protect our indigenous industry. Once the new Act comes into full effect, only then will its relevance be fully known.
Roudra Bhattacharya

Takeover Code
Since the initiation of the liberalization and globalization policies in India in July 1991, an attempt is definitely being made by our policy makers to recast the institutional, organizational and legal arrangements in line with those practiced in the established market economies. In view of exploring the changing institutional framework in the context of economic reforms, the objective of this paper is to examine the recent scenario in the private corporate sector in India and to evaluate the position of corporate control mechanisms in relation to takeovers in India and other parts of the world. In the course of analysis, the article reviews the various corporate policies adopted or recommended in different countries over time and raises certain related issues pertaining to and in contrast with the situation in international markets and the international regulatory regime that might throw light on the on-going process of designing of an appropriate regulatory framework for India in the post-liberalization regime.SECTION ONE – THE CONTEXTUntil a couple of year’s back, the news that Indian companies having acquired American-European entities was very rare. However, this scenario has taken a sudden U-turn. The recent upsurge in the Indian markets, inflow of funds and the greater “India Story” has seen Indian companies both big and small going “shopping”- shopping for bigger fish in the global ocean. Indian companies are scouring the world for the best buys. But the most glaring point to take note of is that it is not only the bigger companies with deep pockets alone who are on the prowl. Medium-sized companies, many of which are relatively unknown, are venturing into forays to acquire global status by acquiring companies in the United States, Europe and South-east Asia. Buoyant Indian Economy, extra cash with Indian corporate, Government policies and newly found dynamism in Indian businessmen have all contributed to this new acquisition trend.The trend which started with the Information Technology companies and Information Technology Enabled Services has now spread to the pharmaceuticals, automobile, chemicals, health-care, gems and jewelry and heavy industries sectors, to name a few.
On account of globalization and growing cross-borders trade and liberal trade policies including free trade zones and international investment incentives and policy framework in both the developed and developing economic markets, there has been an upsurge in growth and expansion of corporate bodies world over. Takeovers have been effective machinery for balancing global economics and prompt the aforementioned phenomenon.Broad Concept and Meaning of a TakeoverThe term “takeover” implies the acquisition of control of shares in one company by another company or persons or group of related companies or persons. A company is said to be taken over when the acquiring company or the person is able to nominate the majority of members on the board of directors of the company being acquired, on account of the voting power they command at the shareholders meeting .M.A. Weinberg, one of the pioneers in treatising the law in practice relating to takeovers, has defined a takeover as:“a transaction or a series of transactions whereby a person (individual, group of individuals or company), acquires control over the assets of a company, either directly by becoming the owner of those assets or indirectly by obtaining control of the management of the company. Where shares are closely held (that is by a small number of persons), a takeover will generally be effected by agreement with the holders of the majority of the share capital of the company being acquired. Where the share are held by the public generally, the takeover may be effected (i) by agreement between the acquirer and the controllers of the acquired company, (ii) by purchase of shares on the stock exchange, or (iii) by means of a ‘takeover-bid’.”Thus, technically a takeover in business refers to one company (the acquirer, or bidder) purchasing another (the target company). When a bidder makes an offer for another, it will usually inform the board of the target beforehand. If the board feels that the value that the shareholders will get will be greatest by accepting the offer, it will recommend the bid. Otherwise it will reject it. And if the board rejects, the bid will become “hostile”. If the bidder makes the offer without informing the board beforehand, the offer is also considered hostile. If the price offered is high enough, shareholders may vote to accept the offer even if management resists converting this hostile bid into a success . Before proceeding any further, it is pertinent to broadly examine the kinds of takeovers.Takeovers – Kinds and Methods:Takeovers may be broadly classified into three kinds:i. Friendly Takeover: A friendly takeover is with the consent of the target company. In a friendly takeover, there is an agreement between the management of two companies through negotiations and the takeover bid may be with the consent of majority or all shareholders of the target company. Ideally a friendly takeover is a result of negotiations between two groups. Therefore, it is often called negotiated takeover.ii. Hostile Takeover: When an acquirer company does not offer the target company the proposal to acquire its undertaking but silently and unilaterally pursues efforts to gain control against the wishes of existing management, such acts of acquirer are known as ‘hostile takeover’. Such takeovers are hostile on the management and are thus called hostile takeover. The main consequence of a bid being considered hostile is practical rather than legal. If the board of the target co-operates, the bidder will be able to conduct extensive due diligence into the affairs of the target company. It will be able to find out exactly what it is taking on before it makes a commitment. A hostile bidder will know only the information on the company that is publicly available and will therefore be taking more of a risk. Banks are also less willing to back hostile bids with the loans that are usually needed to finance the takeover.iii. Bail Out Takeover: A “Bail-out Takeover” implies takeover of a financially sick company by a profit earning company to bail out the former is known as bail out takeover. Such takeover normally takes place in pursuance to the scheme of rehabilitation approved by the financial institution or the scheduled bank, who have lent money to the sick company. The lead financial institutions, evaluates the bids received in respect of the purchase price track record of the acquirer and his financial position. This kind of takeover is done with the approval of the Financial Institutions and banks.Modes of Takeovers :i. Staged Acquisition: Staged acquisition occurs in several stages with foreign investor initially acquiring only an equity stake, and gradually increasing their equity to 100%. Staged acquisitions allow continued involvement of previous owners where they are unwilling to sell outright, or favoured to maintain legitimacy with local consumers. The major drawbacks of this mode of takeovers are (i) shared control being a source of conflict and (ii) uncertainty over conditions of eventual full takeover.ii. Multiple Acquisition: This mode of acquisitions involves entry by acquiring several independent businesses, and subsequently integrating them. Through multiple acquisitions global players can build a nationwide strong market position in a traditionally fragmented market.iii. Indirect Acquisition: This is a mode of acquisition outside the focal market of a company that also owns an affiliate in the same emerging economy. The prime objective of the indirect acquisition may be outside the country. The affiliate may be a strategic asset motivating the acquisition, but this is rare. However, locally, the local affiliate may or may not fit with the existing local operations.iv. Brownfield Acquisition: A Brownfield acquisition is one in which the foreign investor subsequently invests more resources in the operation, such that it almost resembles a Greenfield project. Brownfield acquisitions provide access to crucial local assets under control of local firms that are in many other ways not competitive. The main drawback of this form of an acquisition is that the post-acquisition investments may exceed the price originally paid for the acquired firm.Logistics of Takeovers:Takeovers are primarily strategic in the regard that they are thought to have secondary effects that permeate beyond the mere expansion of profitability. For instance, an acquiring company may decide to purchase a company that is profitable and has a superior distribution network in new areas which the acquiring company can utilize for its own products as well.Further, a target company might be attractive because it allows the acquiring company to enter a new market without having to take on the risk, time and expense of establishing a concern de novo. An acquiring company could decide to take over a competitor not only because the competitor is profitable, but also in order to eliminate competition in its field and make it easier, in the long term, to raise prices.Also, a takeover could be a vehicle to fulfill the corporate theory that the combined company can be more profitable than the two companies would be separately due to a reduction of redundant functions.The general notion in relation to takeovers is that large companies initiate takeovers in order to improve their revenues (sales to customers) without giving sufficient regard to profit, which generally takes a hit when a company is acquired because of all the associated costs. Moreover, a premium is always paid if the target company is financiallyhealthy and not already desperate to be taken over.Thus, takeovers are used as a means to achieve crucial growth and are becoming more and more accepted as a tool for implementing business strategy, whether they involve Indian companies wanting to expand or foreign companies wishing to acquire market share in India. Some of the other motivating factors behind takeovers are the desire to acquire a competency or capability, to enter into new markets or product segments, to enter into the Indian market generally, to gain access to funding resources, and to obtain tax benefits.
Cross border acquisitions, both friendly and hostile, are increasingly international. Yet, the legal regimes governing acquisitions differ significantly, even where the purposes of relevant statutes or regulations, for example, the protection of investors, are compatible. Further, securities laws frequently are given extraterritorial effect and therefore regulatory disparities can lead to conflict and confusion.Takeovers are dynamic corporate events and all the various permutations and combinations of the moves of the relevant parties and the resulting outcomes cannot be envisaged. For the market for corporate control to perform efficiently in the sense of effective utilization and management of corporate resources that will ensure improved performance of companies after the consolidations take place, it ought to take place within the orderly framework of regulations.It is important that such critical processes like substantial acquisition of shares and takeovers, which can significantly influence corporate growth and contribute to the wealth of the economy through rational allocation and optimal utilization of resources, take place within the orderly framework of regulations. The regulations have to be so devised that they outline the principle, which could be the guiding lights for the unexpected events that could crop up later.Experience in India and in the Western Countries reveals that there are several kinds of malpractices, which arise in the context of takeovers and require regulatory counter measures. In this relation it is pertinent to study the regulatory regime in India in contrast to the regulatory regime governing takeovers world over.
Regulations Governing Takeovers in India Prior to 1991:Although prior to 1991, takeovers were restricted under Indian law, in terms of industrial licensing laws and restrictive statutory provisions, takeovers, mergers and acquisitions were not unknown. In fact, business houses like the Goenka group, or the Manu Chhabria group grew largely through acquisitions; earlier on some business houses such as the Bangur group grew mainly by taking over erstwhile Anglo-Indian firms (Bagchi (1999: 58)) .Merger and acquisition activities continued to take place in the manufacturing sector in India during the 1980s. Since 1986 onwards, both friendly takeover bids on negotiated basis and a few hostile bids too, through hectic buying of equity shares of select companies from the stock market have been reported frequently .The policy regime in the 1990s has greatly liberalized the possibility of industrial restructuring and consolidation through mergers and takeovers by removing various restrictions. With the adoption of liberalization policies in 1991, the Government omitted the relevant sections and provisions from the Monopolies and Restrictive Trade Practices Act, 1969 (“MRTP Act”) involving pre-entry scrutiny, by the MRTP (Amendment Act), with effect from 27.9.91 . With this, the need for prior approval of the Central Government for merger and acquisition activities was abolished. The availability of flow of funds through global depository receipts (“GDRs”) and Euro-issues has reduced the problem of finance. This, together with the dismantling of the Foreign Exchange Regulation Act controls in 1991, has led to a rise in the number of mergers and takeovers, actual and proposed.Regulations Governing Takeovers Post Liberalization of the Indian Economy:The policy and regulatory framework governing takeovers evolved through the 1990s. In 1992, government created the SEBI with powers vested in it to regulate the Indian capital market and to protect investors’ interests. SEBI also took over the functions of the office of the Controller of Capital Issues (“CCI”). In November 1994, with a view to regulating the takeovers, SEBI promulgated the “Substantial Acquisition of Shares and Takeover Regulations”. The SEBI regulations on takeovers were modeled closely along the lines of the UK City Code of Takeovers and Mergers. The Indian regulations have borrowed substantial concepts from and procedures from the UK code, e.g., the term “persons acting in concert”, the compulsory requirement of making a public offer on acquisition of a particular level of shares, the emphasis on following the spirit, rather than the letter, and so on. However, the essential difference is that the Indian takeover regulation is a law while the UK City Code is not .The 1994 Takeover Code was observed to be inadequate in handling the complexity of the situation. Hence, a committee chaired by Justice P.N. Bhagwati was appointed in November 1995 to review the 1994 Takeover Code. The committee’s report of 1996 formed the basis of a revised Takeover Code adopted by SEBI in February 1997. The revised Takeover Code provides for the acquirer to make a public offer for a minimum of 20% of the capital as soon as 10% ownership and management control has been acquired. The creeping acquisitions through stock market purchases over 2% over a year also attracted the provision of open offer. However, acquisitions by those owning more than 51% ownership do not attract the provisions of the code. The price of the public offer is to depend on the high/low price for the preceding 26 weeks or the price for preferential offers, if any. In order to ensure compliance of the public offers, the acquirers are required to deposit 50% of the value of offer in an escrow account. Furthermore, the acquirer has to disclose sources of funds. Some more amendments to the code were announced by the government in October 1998. These amendments include revision of the threshold limit for applicability of the code from 10% acquisition to 15%. The threshold limit of 2% per annum for creeping acquisitions was raised to 5% in a year. The 5% creeping acquisition limit has been made applicable even to those holding above 51%, but below 75% stock of a company.Current regulations, by making disclosures of substantial acquisitions mandatory, have sought to ensure that the equity of a firm does not covertly change hands between the acquirer and the promoters. Moreover, the right of the existing management to withhold transfer of shares under Section 22A of the SCRA, dealing with free tranferability and registration of listed securities of companies has been withdrawn in the recently introduced Depository Regulations Act, 1996, with effect from 20.9.1995. However, under Sections 250 and 409 of the Companies Act, target companies can shelter against raiders if the proposed transfer prejudicially affects the interests of the company.Buyback of shares has been recently introduced and the Takeover Code will not include companies that are planning offers under the buy-back norms. However, takeover defense mechanisms as poison pills for incumbent management as in US and UK are not allowed under the current regulations.The main objective of the regulations governing takeovers is to provide greater transparency in the acquisition of shares and the takeover of ownership and control of companies through a system based on disclosure of information. Instead of discovering that the management of the company one owns has covertly changed hands, resulting in huge gains for the promoter, a shareholder could now expect to be informed each time, and at what price a firm’s equity changed hands. Moreover, if the shareholder had less faith in the new owners, he could sell the shares without incurring a loss, since SEBI regulations stipulate that a buyer must make a public offer to buy shares at the same price at which the acquisition is made. The current regulations on takeovers in India seem to have taken a liberal view towards takeovers.Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulation, 1997.As specified hereinabove, in India, the primary regulations governing takeovers is SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 , popularly known as the “Takeover Code.” These regulations seek to regulate the whole process of acquisition and takeovers, based on principles of transparency, fairness and equal opportunity for all. The Takeover Code lays down the procedures governing any attempted takeover of a company whose shares are listed on one or more recognized stock exchanges in India.The regulations imperatively try and set up a structured disclosure mechanism to ensure greater transparency. Thus one of the most important aspects of the Takeover Code is that any acquirer of more than 5%, 10%, 14%, 54% or 74% of the shares or voting rights in a company has to disclose, at every stage, the aggregate of his or her shareholding or voting rights. The disclosure must be made to the company and to the stock exchanges where shares of the target company are listed .There are various other, continual disclosure obligations; for example, the acquirer also has to disclose to the company and the relevant stock exchanges any purchase aggregating two percent or more of the share capital of the target company within two days of such purchase and must also disclose what his or her aggregate shareholding will be after the acquisition. A failure to make such disclosure will incur a penalty of Rs. 250 million or three times the amount of profits resulting from such failure, whichever is greater .Moreover, before acquiring shares or voting rights that (together with the shares or voting rights held by persons acting in concert with the acquirer) would entitle the acquirer to exercise 15% or more of the voting rights of a company, the acquirer must make a public announcement that he or she will acquire, at a minimum, an additional 20% of the equity shares of the company .Interpretational Issues:Under the Regulations, an “acquirer” means any person who, directly or indirectly, acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either by himself or with any person acting in concert with the acquirer;Further, a “person acting in concert” comprises, -(1) persons who, for a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement orunderstanding (formal or informal), directly or indirectly cooperate by acquiring or agreeing to acquire shares or voting rights in the target company or control over the target company,(2) without prejudice to the generality of this definition, the following persons will be deemed to be persons acting in concert with other persons in the same category, unless the contrary is established :(i) a company, its holding company, or subsidiary or such company or company under the same management either individually or together with each other;(ii) a company with any of its directors, or any person entrusted with the management of the funds of the company;(iii) directors of companies referred to in sub-clause (i) of clause (2) and their associates;(iv)… … … … ..These definitions have been examined by SAT in the case of Modipon Ltd. vs. SEBI & Ors where it was held that since the provisions of regulation 2(1)(e)(2) defining person acting in concert being a deeming provision, must be read in conjunction of regulation 2(1)(e)(i) which states that persons acting in concert comprises of persons who for a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding (formal or informal) directly or indirectly, co-operate by acquiring or agreeing to acquire shares or voting rights in the company or control over the target company. Further, the SAT observed that a promoter as such need not be an acquirer automatically. Any person, and shareholder including the promoter will become an acquirer or a person acting in concert with the acquirer, only if he falls within the definition of these expressions provided in regulation 2(b) and 2(e). It is the conduct of the party that decides the identity. A dormant promoter or a promoter simpliciter who neither acquires nor agrees to acquire shares or voting rights or control over the target company is not anacquirer and his shareholding in the target company cannot be considered as the shareholding of the acquirer warranting exclusion from the public shareholding. Similarly, if the characteristics of a person acting in concert stated in the definition are found missing in the case of a person, it may not be proper to consider him as aperson acting in concert with the acquirer.The Bombay High Court in the case of K.K. Modi vs. SAT has also clarified as to when a person can be said to be acting as person acting in concert. The relevant observations in the judgment are as under :“As the Tribunal has rightly pointed out, there is no hard and fast rule that a promoter must always be deemed to be an acquirer or a person acting in concert with the acquirer. On the facts, it may be held that a promoter shares the common objective or purpose of substantial acquisition of shares with the acquirer. It may well be that he may not share the said common objective or purpose. If he does, he shall be deemed to be a person acting in concert with the acquirer but if he does not, he cannot be deemed to be an acquirer merely because he happens to be a promoter. Regulation 2(1)(e)(2) also makes this clear. The persons named therein are deemed to be persons acting in concert with other persons in the same category, unless the contrary is established. It, therefore, follows that even though there is a presumption that the persons described therein maybe deemed to be persons acting in concert with the acquirer, the presumption is rebuttable, and therefore, in each case, the facts have to be examined to reach a conclusion as to whether a person is or is not acting in concert with the acquirer for the purpose of substantial acquisition of shares or voting rights or gaining control over the target company. He may do so by an express agreement or understanding, and the agreement or understanding may be proved decide to increase his shareholding in the company by substantial acquisition of shares or voting rights in the company. The mere fact that one of the promoters of the company wishes to do so, is no reason to hold that the other promoters also necessarily share his objective or purpose. The other promoters may, in fact, be opposed to the acquirer acquiring further shares in the target company, and if they fail to prevent the acquirer from doing so, they may be inclined to dispose of the shares held by them. In such a situation, it cannot be said that the other promoters share the common objective or purpose of the acquirer. ” (emphasis supplied).In Phiroze Sethna Pvt. Ltd. v. SEBI the SAT has held that the term ‘acquirer’ covers not only completed acquisition but also agreement to acquire. Persons acting in concert are those who co-operate in different ways with the acquirer so that he achieves his objective of acquiring shares or voting rights or control of the target company. The facts of each case determine whether a person is or is not acting in concert with the acquirer. Their actions are the determining factor. It must be shown that they are acting in concert with the acquirer. In the same case SAT interpreted Regulation in the following terms:“It is clear from a perusal of Regulation 11(1) that for this clause to be triggered :(a) the acquirer should have made acquisition of shares or voting rights in the target company during earlier financial years to the extent of more than 15% but less than 75%;(b) the acquisition of additional shares or voting rights that triggers Regulation 11(1) during the relevant financial year should provide the acquirer more than 5% of voting rights;(c) the same acquirer should be involved, in the acquisitions of both the initial shares as well as additional shares; and(d) such acquisitions should be either by the acquirer himself or with the persons acting in concert with him.It is important that the identity of the acquirer and the persons acting in concert with him is clear to all. There should not be any ambiguity about the identity of such persons as they carry certain duties and obligations.”In Hardy Oil Pvt. Ltd. v. SEBI the SAT observed that a plain reading of Regulation 10 makes it abundantly clear that no acquirer shall acquire 15% or more shares or voting rights in a company unless he makes a public announcement to acquire shares of such company in accordance with the Regulations. The word “unless” in the opinion of the tribunal, only mandates that as and when the Regulations get triggered or become applicable, the acquirer has to make a public announcement to acquire shares of the target company in accordance with the Regulations. It does not mean that a public offer has to be made before the acquisition. The Regulations only impose an obligation on the acquirer to make a public announcement if he/it acquires the requisite percentage of shares. The word unless may have different connotations and in each case the context in which it is used will have to be looked into to find out the correct meaning. In some circumstances, the word unless may mean a condition precedent but it need not necessarily be so in every case. Having regard to the context in which it is used in Regulation 10, the tribunal were clearly of the view that it makes the acquisition conditional upon a public announcement being made and it does not mean that the public announcement has to be made before the acquisition. Such public announcement could be made before or after the acquisition.One of the meanings assigned to the word ‘unless’ in Black’s Law Dictionary (6th edition) is “a conditional promise” meaning thereby that the condition has to be met irrespective of the time frame in which the promise is to be fulfilled.Further, SAT held that if making of a public announcement was a condition precedent as contended on behalf of the appellant, then the Regulation would have read “unless such acquirer has made a public announcement” instead of “unless such acquirer makes a public announcement”. Use of the word ‘makes’ merely signifies the mandatory nature of the public announcement which could be made before or after the acquisition. Regulation 10 does not prescribe the time frame within which such an announcement is to be made. The time schedule for making such an announcement is prescribed by Regulation 14. Clause (1) of Regulation 14 provides that the public announcement referred to in Regulation 10 shall be made not later than 4 working days of entering into an agreement for acquisition of shares or voting rights. Regulation 14(1) does not refer to the date of acquisition. It only refers to the date of entering into the agreement for acquiring shares. Shares could be acquired within four days of entering into the agreement or thereafter and the period of four days for making the public announcement shall start running from the date of the agreement. It is possible that an agreement to acquire shares may be entered into today and the shares are acquired the following day. The acquirer would still have three more working days to make the public announcement because the period of four days is to start from the date of the agreement and not from the date of acquisition. It is, therefore, wrong to contend that the public announcement must always precede the acquisition of shares.Furthermore, it was observed that the explanation to Regulation 11 makes it clear that the acquisition referred to in Regulation 10 and 11 would include both direct and indirect acquisitions. If one read Regulation 14(1) in isolation it would cover both direct as well as indirect acquisition but when this clause is read along with clause (4) thereof it leaves no room for doubt that Regulation 14(1) deals only with direct acquisitions and Regulation 14(4) deals with all indirect acquisitions. The language of clause (4) of Regulation 14 is clear and it provides that in the case of indirect acquisition, a public announcement shall be made by the acquirer within 3 months of consummation of such acquisition.In the landmark case of In Re: Sterling Investment Corporation Private Limited; In Re: Shapoorji Pallonji and Company Limited; In Re: Cyrus Investments Limited the tribunal held that the acquirers plea that the violation of Regulation 10 and/or Regulation 12 was technical in nature in view of the difficulties of interpretation of the Regulations and due to a bonafide belief that they were not required to make a public offer for the shares acquired and also their contention that they had not acted deliberately in defiance of law or in conscious disregard of their obligations and had not made any gain or unfair advantage nor had they caused any loss to any one, and the default, if any, was not of a repetitive nature and thus there was no “mens rea” on their part and hence having regard to the fact that they had not committed any default in the past, no proceedings ought to have been initiated against them, would not stand good in law, since the words of Regulation 10 would not attract any contrary interpretation as inferred by the acquirers in this case.Case Studies:i. Luxottica v. SEBI:In April 1999, in a global acquisition, the Luxottica group of Italy acquired the sun-glass business of Bausch & Lomb, US, for $ 640 million. As Bausch & Lomb, US, had a 44% in Bausch & Lomb India through B&L South Asia Holdings, the control of the Indian subsidiary passed into the hands of Luxottica upon the takeover.The Luxottica group also appointed its nominees on the board of B&L India and later rechristened it as Ray Ban Sun Optics India. The board was reconstituted in October 2000. B&L India was incorporated by Montari Industries and Bausch & Lomb in 1990 to manufacturer and market soft contact lenses, eye-care solutions, frames and sunglasses.Despite a change in management control in B&L India, Luxottica failed to make the 20% mandatory open offer to shareholders. In its reply to a show-cause notice from Sebi, Luxottica clarified that there was no question of violation as the deal was not an acquisition but only a merger under rule 31 (j)(2) of the Takeover Code. In a complaint filed with SEBI last year, small shareholders alleged that the acquisition of shares by Luxottica attracts the provisions of regulations 10, 11 and 12 of the code.In January 2002, SEBI started investigation into the matter and issued a notice to Luxottica SPA of Italy for a hearing to ascertain whether there was any violation of the takeover code following its indirect acquisition of Bausch & Lomb India.In August 2002, SEBI came out with a ruling that Luxottica had violated regulation 10 and 12 of the Takeover Code and directed Luxottica to make a 20% open offer for RayBan by taking 28 April 1999 (the date of global acquisition) as the reference date. It asked the Italian company to make a public announcement within 45 days of the order and also pay a 15% interest to shareholders from April 1999 till the date of actual payment of consideration.On 29 October 2003, Luxoticca Group SPA and Rayban Indian Holdings announced an open offer to acquire 20% equity of Rayban Sun Optics India at Rs 104.3 per share. This apart, shareholders are also eligible to receive 15% interest of Rs 70.68 per share. As per an order dated 29 August 2003, the interest would be paid only to shareholders holding shares on the day of the acquisition of 28 April 1999.However, on 18 November 2003, the Supreme Court (SC) stayed the SAT order dated 29 August 2003 concerning Luxottica SPA’s open offer for shares of RayBan Sun Optics. Earlier, Luxottica had filed an appeal with the apex court on 12 September 2003 under Section 15Z of the SEBI Act against the judgment and the final order dated 29 August 2003 passed by SAT. In the mean time, SEBI has also filed its counter appeal before SC against the SAT order, which primarily relates to shareholders’ eligibility to receive interest.ii. Technip SA vs. SMS Holdings Pvt. LtdIn the above matter, eight appeals were heard together on the issue of application of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 to the control of South East Asia Marine Engineering and Constructions Ltd. (SEAMEC) acquired by Technip through Coflexip without making public announcement. SEBI had directed Technip to make a public announcement and also to pay interest @ 15 per cent per annum to the shareholders for the delayed public announcement. In appeal, SAT had held that the applicable law to the question as to when control of SEAMEC has been taken over by Technip was the Indian law. The view of SEBI was that the applicable law for determining the date on which Technip acquired control over Coflexip would be the French Law. In the appeal filed by Technip before the Supreme Court, it was urged that the applicable law was French law since Technip and Coflexip were both registered in France and the takeover of Coflexip by Technip also took place in France. Hon’ble Supreme Court was pleased to uphold SEBI’s order and set aside the order passed by SAT. Hon’ble Supreme Court was pleased to observe that for the purpose of determining Technip obligation under the Takeover Code, SAT should have addressed itself as SEBI had done to the question whether ISIS and Technip were acting in concert to obtaincontrol over the target company i.e., SEAMEC.
iii. Swedish Match Singapore Case:Swedish Match Singapore agreed to acquire majority shareholding in Haravon and Seed subsequent to 17th December, 1997 wherefor the public offer was made. SMS comprising of Haravon and Seed had 28.28 per cent and 10.33 per cent whereas Jatia Group comprising of AVP and Plash had 5 per cent and 15 per cent respectively whereas public / others had 41.39 per cent shares. In concert with each other the two Groups acquired shares from public.On or about 25th August, 1999 by acquiring preferential shares the Swedish Match Group obtained 52.11 per cent and Jatia Group obtained 24.11 per cent as a result whereof in Wimco the shares held by public/others came down to 23.78 per cent. Both Swedish Group and Jatia Group were exercising the joint control. By reason of Jatia Group obtaining out of the joint control by transfer of shares in favour of Swedish Match Singapore, a subsidiary of Swedish Match AB (apart of Swedish Match Group) obtained 74 per cent of shares whereas shares i.e. Haravon – 46.18 per cent, Seed – 5.93 per cent and SMS – 21.89 per cent. Thus, the extent of shares of Jatia Group came down to 2.22 per cent. Jatia Group sold their shares to public as a result whereof shares of public became 23.78 per cent. S.M.S. is a subsidiary of the Singapore Match Group. The Swedish Match is the holding company being the owner of the 100 per cent shares of SMS. It stands categorically admitted by the Appellants herein that acquisition of shares from Jatia Group in favour of SMS was done by the Swedish company as a group and not as an individual company. Factually, therefore, it is not correct to contend although in its notice dated 28-1-2002. SEBI had given indication thereof, that SMS had acquired 21.89 per cent shares of its own. Even if SMS had done so, Regulation 10 would apply as no public announcement was made therefor.SMS was a part of the Swedish Match Group and they acquired 21.89 per cent shares from Jatia Group. On or about 25th August, 1999, indisputably, Swedish Group and Jatia Group acted in concert with each other. By reason of acquisition made in September, 2000, Swedish Group, as acquirer, together with Jatia Group, had acquired more than 15 per cent but less than 75 per cent of shares. Any of those acquirers whether Swedish Match Group or Jatia Group, therefore was prohibited from acquiring by itself any additional share entitling it to exercise more than 5 per cent of the voting rights.The SAT held that Regulation 11 does not brook any other interpretation. If additional shares are acquired entitling an acquirer to exercise more than 5 per cent of the voting rights, the statutory embargo to the effect that the acquirer (in this case Swedish Match Group) must make a public announcement to acquire shares in accordance with the Regulation comes into operation. If such a meaning is not assigned, the disjunctive clauses contained in the expressions “either by himself or through or with person acting in concert with him”, may not carry a true and effective meaning.Critical Evaluation of the Regulations:There are a number of problem areas that needs immediate attention of the regulators to make the Code more meaningful in the interest of investors at large. Certain exemptions such as preferential offers and stake transfer to co-promoters have been misused by the incumbent managements and should be brought under the purview of the Code. The terms such as ‘change in control’, ‘persons acting in concert’ and promoters need to be clearly defined. Another area of concern for small investors is the provision relating to open offers mainly its size and pricing. There is an absence of simple and transparent regulations and a high degree of ad-hocism and confusion on how the changes in ownership stake at the global level affect the application of the Code. The present creeping acquisition limit of as high as 10 per cent hardly leaves any room for raiders to put the inefficient managements on their toes and should be reduced. However, special provisions should be made for professionally managed companies without any identified promoter group to protect them from hostile takeovers.SEBI should also provide for better disclosure norms governing corporate M&As. The role of financial institutions in the case of a takeover should be well defined. The provisions for bailout takeovers should not limit competition and bring maximum benefits to financially weak companies thereby benefiting the economy. The issue of disinvestment of PSUs needs to be elaborately addressed in the Code.Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 :Under the Foreign Exchange Management (Transfer and Issue of Security by a Person Resident Outside India) Regulations, 2000, any acquisition of shares of an Indian company by a nonresident must comply with the foreign-exchange laws. Such an acquisition may be by way of subscribing to new shares or acquiring existing shares. Foreign investments in sectors or activities subject to the RBI’s automatic route do not require any prior approval of the FIPB. Under India’s present FDI policy, any sale of shares from a resident to a nonresident (and vice versa) is permitted under the RBI’s automatic route, provided certain conditions (inter alia, those relating to pricing) are complied with.
B. UNITED STATES OF AMERICAIn the United States most large corporations are publicly owned and federal law protects investors primarily through mandated disclosure in capital raising and change of control transactions, and the prohibition of fraud and manipulation in the public securities markets . Tender offers are regulated by the SEC pursuant to the Williams Act , which amended the Securities Exchange Act of 1934 (“Exchange Act”) in 1968. The Williams Act was sought to effectively remedy block purchases and large rapid accumulations, which could result in changes in corporate control, were taking place secretly .The Williams Act generally deals with the disclosure obligations of bidders and was intended to equalize the protection of investors in takeover contests . The Williams Act also gives investors equal or fair rights to participate in the public tender offer.Any person who acquires a beneficial interest of five percent or more of any class of equity security subject to the annual and periodic reporting provisions of the Exchange Act (essentially, the common stock of all publicly traded issuers) must file a statement of ownership with the SEC within ten days after such acquisition . Further, the filing must state the purchaser’s future intentions with regard to the target company; that is, whether the purchaser intends to make a tender offer or engage in some other control transaction . A bidder must commence an offer within five days of a public announcement of an offer that includes the price and number of securities sought .The Williams Act and implementing SEC regulations also address certain substantive or procedural aspects of tender offers. These include making tendered shares withdrawable for a specified period of time, requiring pro rata acceptance when an offer for less than one hundred percent of shares is made, requiring that tender offers be made to all security holders, and that all offerees be paid the same price . In addition, § 14(e) of the Exchange Act contains a general tender offer antifraud provision prohibiting the use of all fraudulent, deceptive, and manipulative acts and practices in connection with a tender offer and gives the SEC authority to define, and prescribe means reasonably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative. Pursuant to such authority, the SEC adopted Rule 14e-3 , which, among other things, prohibits anyone in the possession of insider information about an unannounced tender offer from trading on such information.The Williams Act generally facilitates tender offers, but corporate governance in the United States is left to state law. Further, corporate fiduciary duty regulation under state law is not, as a general matter, preempted by the Williams Act, so the SEC does not regulate the defenses available to a bidder . In Schreiber v. Burlington Northern, Inc., it was argued that a renegotiation by a target company of the terms of a tender offer breached the company’s fiduciary duty to its shareholders, was manipulative, and violated the antifraud provisions of the Williams Act . The United States Supreme Court rejected this argument, however, holding that the Williams Act dealt with disclosure, not unfairness in the takeover context. As a matter of state law, although directors are obliged to exercise due care and loyalty , and must obtain the highest price once a company is on the auction block , they have considerable latitude in resisting a takeover bid . Further, state statutory law can be quite protective of directors attempting to block an unwelcome bidder .
C. UNITED KINGDOMi. The City Code on Takeovers and Mergers:The rules of engagement for any proposal to obtain control of a U.K. public company are set out in the City Code on Takeovers and Mergers (“Code” or “Blue Book”). The Code is administered by the Panel on Takeovers and Mergers (“Panel”). It is a developing body of general principles, rules and guidance notes published and amended from time to time by the Panel. The Code is supplemented by general and case-specific rulings issued by the Panel. There is also a wealth of non-published guidance that has precedential significance. This considerable body of materials represents the accumulation of over 35 years of Panel regulation of public takeovers in the U.K.The Panel asserts authority only in relation to change of control transactions where the target is either a U.K. public company (whether or not or wherever listed) or its equity securities have been traded during the last 10 years and in either case the company has some substantial administrative connection with the British Isles (U.K., Channel Islands and Isle of Man). The Panel has traditionally refused to accept jurisdiction merely because the target is U.K. incorporated; its concern is to regulate transactions only where the target is clearly within its control range although the scope of Code application will change upon introduction of the measures designed to implement the European Takeover Directive due in 2006. For similar control-related reasons, although not prescribed in the Code, the Panel invariably insists that an overseas bidder be represented by a U.K. regulated adviser in order that it can exercise effective jurisdiction over a participant on the bidder side.The Code is not intended to be subjected to detailed legal interpretation and is not static. It must be applied according to particular circumstances consistent with the general principles. The most important principles of the Code are:• equality of information to all bidders and all shareholders;• an offer should only be announced if the bidder is able to implement it in full (this includes a requirement to be fully financed from the outset);• during an offer period or when one is in contemplation no action can be taken by the board of the target out of the ordinary course that could frustrate any bona fide offer;• all documentation should be prepared with the highest standards of care and accuracy;• all parties must endeavour to prevent the creation of a false market; this particularly relates to indications of bid intentions; and• all shareholders (of the same class) must be treated equally.The Panel encourages consultation and is prepared to exercise discretion when applying the Code and when developing or adjusting its provisions. Consultation is discrete and generally highly interactive and rapid.Often described as a consensus driven, non legal structure, the Code and the authority of the Panel to enforce it is in effect secured by operation of the financial services regime. In particular, regulated entitles such as financial advisers are vulnerable if they allow a client to breach the Code. Furthermore, breach of the Code will have negative implications when interpreting the market abuse provisions in the Financial Services and Markets Act 2000 (“FSMA”).Further, breach of the Code or cocking a snoop at the Panel may at the least draw a public criticism, the broad implications of which are uncertain, or result in the London market “cold-shouldering’ those in breach the Code and who refuse to be bound by Panel determinations.Finally, implementation of the European Takeover Directive will place the current structure on a statutory footing by mid 2006, which expected broadly to replicate much of the existing requirements there will be some detailed alterations to the bid process. The relationship with the Panel as statutory regulator is also likely to change over time.
ii. Other Laws:Although there is no comprehensive legislation dealing with offer process, a miscellany of laws and regulations may be applicable, the key ones being as described below.Provisions of the Criminal Justice Act 1993 regulate insider dealing while the FSMA imposes market abuse rules that affect any publication or activity that could have market implications.The Companies Bill received the Royal Assent and became the Companies Act 2006 (the 2006 Act) on November 8, 2006 . The 2006 Act consolidates all previous companies legislation and will replace (with a very few minor exceptions) the Companies Act 1985 in its entirety. The provisions on shareholder communication, and in particular the electronic communications provisions, were brought into force in January 2007, at the same time as the provisions implementing the EU Takeovers Directive and the EU Transparency Directive. The remainder of the 2006 Act will be brought into force by October 2008 .The 2006 Act’s impact on the rules on financial assistance and directors’ duties are of particular interest with regard to takeovers.Financial Assistance: The 2006 Act abolishes the prohibition on the giving of financial assistance by private companies and their subsidiaries for the purpose of acquiring shares in that company. In accordance with the Second Company Law Directive (77/91/EEC) , the prohibition on giving financial assistance will be retained for public companies under the 2006 Act . [FN102] The new rules on financial assistance have been broadly welcomed.An EU Directive amending the Second Company Law Directive was formally adopted and published this year . The new Directive states that public companies will be able to provide financial assistance if certain conditions are met .Directors’ Duties: The 2006 Act codifies the common law and equitable principles that presently govern the duties owed by directors to their companies. While some of the seven codified duties set out in the 2006 Act are relatively uncontroversial, others have been criticized. Although the 2006 Act provides that the new statutory duties shall have effect in place of directors’ common law and equitable duties, regard must be had to the common law and equitable rules and principles in interpreting and applying the statutory duties.The EU Takeovers Directive was implemented in the United Kingdom on May 20, 2006 . The implementation of the Takeovers Directive has led to some substantive changes to the current regulatory system in the United Kingdom. The regulations place the Panel on Takeovers and Mergers on a statutory footing for the first time, giving the Panel powers to make rules on takeovers, introduce a new criminal offence for breach of the takeover documentation requirements, and make changes to the squeeze-out procedures on bids .
D. AUSTRALIAOwing to a number of scandals in the securities markets of Australia in the 1980s, it now has an extensive scheme of takeover regulation. It is embodied in a federal law which is implemented by each state adopting the federal legislation; this serves as a means of assuring uniformity among states . A National Companies and Securities Commission (NCSC) has authority to monitor trading in target company securities, and to administer the takeover legislation.Prescribed information must be set forth in tender offer materials, which must be registered with the NCSC and served on the target company and appropriate securities exchange before it can be used and before a tender offer can commence . The target company then must prepare and file with the NCSC a statement containing its recommendation and prescribed information, including unpublicized changes, if any, in its financial condition . Both the bidder’s materials and the target company’s materials must be transmitted to the shareholders .There are special procedures if the takeover is to be effectuated by purchases on a stock exchange . There are also detailed substantive provisions governing, among other things, the period the offer remains open, conditions to the offer, market purchases, and best price requirement . If specified percentages are acquired, then the bidder can compel the remaining shareholders to sell on the same terms , and, if the bidder acquires ninety percent, the remaining shareholders that did not tender can compel the bidder to buy their shares on the same terms, which they previously refused .
Recently, India has made a number of high profile, multi billion dollar acquisition in Europe and North America. In early 2007, Tata Steel acquired the Anglo- Dutch Steelmaker Corus and the Indian aluminium firm Hindalco acquired its U.S- Canadian rival, Novelis. India’s auto industries are also making their global presence felt. Tata motors have already acquired the South Korean firm Daewoo’s truck making unit and is not expanding itself in Latin America in partnership with Italy’s Fiat. Another company Mahindra and Mahindra, India’s largest tractor and utility vehicle maker is already selling tractors in Texas and is believed to acquire a gearbox company in Italy. Also, Indian Pharmaceutical firms have embarked on an aggressive global expansion. Last year Ranbaxy made a number of Acquisitions in Europe, United States and Africa and is now eyeing Germany’s Merk Generics. Likewise Hyderabad based Dr. Reddy’s Laboratories has already acquired the German drug maker Betapharm. Moreover, Sun Pharmaceuticals, India’s most valuable drug maker is buying Israel’s Taro Pharmaceutical Industries.The study of FICCI on India’s Inc Acquisition abroad points out eight different strategic reasons as to why are Indian companies acquiring entities globally.
HUTCH – VODAFONE:Hutchison Telecommunication International Limited (HTIL) is a leading global provider of telecommunication services. It offers services in Hong Kong and operates or is rolling out mobile telecommunication services in Macau, India, Israel, Thailand, Sri Lanka, Ghana, Indonesia and Vietnam. “HTIL” is a listed company with American Depositary Shares quoted on the New York Stock Exchange and Shares listed on the Stock Exchange of Hong Kong. Recently HTIL decided to exist Indian market and thereby sold its entire holdings in Hutch Essar Limited (HEL) to Vodafone International Holding B.V a subsidiary of Vodafone Group Plc. HTIL held 52 per cent of HEL directly, another 15 was held by Asim Ghosh, Hutchison Essar managing director and Analjit Singh, chairman of Health care group Max India and the remaining 33 per cent was held by Essar Group, an Indian conglomerate but two-thirds of its stake is in turn controlled through an offshore company for tax reasons, classifying it as foreign. HTIL thereafter entered into a Contractual settlement agreement with the Essar Group, under which the Essar Group announced proposed disposal of its interest in Hutchison Essar Limited for a cash consideration of approx US$11.1 Billion.The controversy which arose was 15% stake belonging to local partners were held indirectly by HTIL and that HTIL through a complex shareholding arrangement, has violated an Indian law that limits foreign direct investment in domestic Telecom Operators to 74 per cent.Vodafone thereby filed an application with “Foreign Investment Promotion Board” (FIPB) with regard to its foreign direct investment. FIPB gave its approval stating the Vodafone’s holding in the joint venture with Essar is 52% and did not include 15% held by local partner. However, FIPB was of the opinion minority shareholders in the new venture can only sell their stakes to Indian residents.
MITTAL – ARCELOR:Mittal Steel, owned by L N Mittal & family, has its headquarters in London and Rotterdam. It has plants in 14 countries spread across Europe, Asia, North America and Africa. Its first acquisition took place in 1989. Arcelor was founded in 20 02 by merger of Abred of Luxembourg, Arcelia of Spain and Usinor of France. Its turnover is valued at 033 billion. Its plants, joint ventures and subsidiaries are spread across 60 countries. In the year 2006, Mittal Steel made an offer to acquire Arcelor. Its original offer to Arcelor was for 017.5 billion. In May it increased the offer to 024 billion and the final offer was 026.9 billion. Mittal’s final offer was accepted. Mittal paid 040.37 a share for Arcelor nearly double the price, it was trading before the first bid was made. When Mittal made first bid, Arcelor rejected it with vengeance. It recommended to shareholders not to sell shares to Mittal as the two companies did not share the same strategic vision, business model and values. A couple of European governments did not like the idea of an Indian taking over an European company. The French foreign minister felt it would affect 28,000 jobs and that the bid was ill-prepared and hostile. However, Mittal Steel said jobs would be safeguarded. Arcelor took the matter to regulators to thwart the takeover. But the regulators did not find any anti-trust provisions being violated and asked Arcelor not to issue shares to anyone without investors’ explicit consent. To begin with, Arcelor refused to meet Mittal until a string of demands were met and simultaneously arranged a 013 billion deal with Severstal of Russia to keep Mittal away. As shareholders wrath grew over the Severstal agreement and pressures from other quarters increased, Arcelor accepted Mittal’s final bid. Arcelor had to pay 0130 million as a fine to Severstal for breaching the contract. Ultimately, L N Mittal succeeded in acquiring Arcelor. Now the combined capacity of Arcelor Mittal is 109.7 million tonnes.
TATA-CORUS:The London-based Corus Group was one of the world’s largest producers of steel and aluminum. Corus was formed in 1999 following the merger of Dutch group Koninklijke Hoogovens N.V. with the UK’s British Steel Plc. Tata Steel is the India’s largest private sector steel company. Tata Sons is the promoters of the Tata Steel with approximately 23.8% of share capital of Tata Steel. Tata steel was in look out of various acquisition opportunities including the Corus Group. Soon Tata steel started the discussions with the Board and Management of the Corus Group and made a non-binding offer to acquire 100% equity in Corus Group at 455 pence per share. Tata Steel UK, a UK resident wholly-owned indirect subsidiary of Tata Steel, was formed just for the purpose of making the Acquisition. Corus Group received competiting offers from both Tata Steel U.K and CSN Acquisition Limited. Thereby the Panel on Takeovers and Mergers announced the last day for each Tata and CSN to announce revised offers for the company shall be 30th January 2007. The final revised offer announced by Tata Steel was at price 608 pence in cash per Corus Share. However the final revised offer announced by CSN Acquisition was at price 603 pence in cash per share. The Corus directors consider the terms of the Final Tata Offer to be fair and reasonable, so far as Corus Shareholders are concerned. Given that the price of the Final Tata Offer is five pence above that of the Final CSN Offer, the Corus Directors believe that the Final Tata Offer represents the best value for Corus Shareholders. At the Court meeting and Extra-ordinary meeting shareholders approved the Scheme of arrangement between the Corus Group and Tata Steel U.K by the requisite majority. Thereby Corus announced to implement the recommended offer by Tata Steel UK Limited.


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