Author Archives: fireflieslegal2022

Statutory Arbitration OVERRIDES Contractual Arbitration

Statutory Arbitration OVERRIDES Contractual Arbitration

What is Statutory Arbitration?
 
There are various statutes providing for dispute resolution by way of arbitration, even though parties did not have an express arbitration clause between them i.e., Section 7-B of Telegraph Act,1885, Section 52 of Electricity Act, Section 76(2) of Electricity (Supply) Act, etc. In the same manner even Section 18 of The Micro Small Medium Enterprises Development Act, 2006 provides for dispute resolution by way of arbitration.
 
MSME: MSME stands for Micro, Small, and Medium Enterprises.
 
Prior to COVID 19 reforms announced in the month of May 2019, the enterprises under Micro, Small, and Medium Enterprises Development (MSMED) Act in 2006 were classified into two divisions. Manufacturing enterprises (engaged in the manufacturing or production of goods in any industry) and Service Sector. However, now this has been removed. Below you will find the earlier and revised definition of MSME:
 
Contractual Arbitration:
 
The term “Contractual” means, a contract between two parties doing business or entering into any legal transaction under the laws of India. Any business transaction which is of legal in nature is a contract, either in writing or oral. However, it is always advisable to have contract in writing or at least if not, then action shall be written such as supplying the goods on written work order or purchase order, having delivery challan as proof of supply, email correspondence, etc. further, it is also meant the terms the business parties have agreed too. The term “Arbitration” means a private process set up by the parties as a substitute for court litigation to obtain a decision on their dispute. The Arbitration in India is regulated by Arbitration and Conciliation Act, 1996 (as amended).
 
The term “Contractual Arbitration” means, wherein the business parties have agreed in writing either in form of Purchase Order or separate agreement dealing with terms of business or separate arbitration agreement and contains the clause of referring the disputes to arbitration means contractual arbitration. The term “contractual arbitration” itself speaks of its binding force under the Laws of India. The business contracts are regulated by Indian Contract Act, 1872.
 
Business entity registered under MSME are entitled to claim their money through MSME Council Arbitration and this is termed as Statutory Arbitration and has the same effect as Contractual Arbitration. In the event, there are two arbitrations co-existing, Aggrieved Party if MSME member has the choice of selecting arbitration method, whether Statutory or Contractual
 
Whether it is mandatory for the Business Entity to be a registered entity under MSME to avail Dispute Resolution remedy:
 
In India, most of the Micro, Small & Medium Enterprises/Industries become unviable mainly because of the delayed payments from the Parties. Due to huge pendency of cases normal commercial litigation takes very long time to get finality.
 
It is sad but a fact that even in this technology and consulting era most of the MSMEs do not understand the importance of arbitration clauses while entering contracts as they don’t prefer taking the advice of Legal Professionals with the only aim of avoiding Legal costs and hence when disputes arise they are left with litigations only. The Government has taken various efforts to support and protect the interests of MSME as they are the backbone of Indian GDP.
 
However, there was and is confusion whether a unregistered MSME Business entity can avail the benefits of MSME in regard to claiming of money via Arbitration Proceedings. This particular situation was dealt in case GET & D India Limited Vs Reliable Engineering 2017 SCC Online 6978, which came up before Hon’ble Justice Muralidhar of Delhi High Court. In the said case, the Parties had Two Supply Contracts and one of which had an arbitration clause also. On the complaint of the Respondent Small Industry, after hearing both the parties, the MSMED council passed an arbitration award and the appellant chose to challenge the said award before the Delhi High Court under Section 34 of the Arbitration & Conciliation Act,1996. The respondent challenged the said award on various grounds but the author has chosen three important questions which are relevant for this Article. Hence among the questions raised by the appellants, the following are relevant here:
 
1. Whether the dispute resolution prescribed U.S.19 of the MSME Act, 2006 over rides the arbitration clause in the contract?
 
2. Whether the requirement of deposit of 75% of the value of the MSME award to challenge the same under S.34 of the Arbitration and Conciliation Act,1996 can be waived by the High Court, on its discretion?
 
3. Whether an Industry Which could not register itself under the MSME Act, within the 180 days’ time given in the Act, can claim the benefits under the said Act, by registering later?
 
The Court held that since MSMED Act is a special act, providing a special dispute resolution mechanism providing beneficial provisions to MSMEs and Arbitration and Conciliation Act,1996 is a general legislation governing the arbitration space, MSMED Act the beneficial legislation should be given preference over the general act. Moreover, a contractual clause cannot override the statutory provision. Hence relying of the above proposition, it further held that the dispute resolution mechanism provided in the MSME Act overrides the arbitration clause incorporated in the Contract. The Court held that the benefits of the said Act would be available only after the registration of the industry under the said Act but registration of the old industries can be done later also. This is a beneficial clarification in favour of the MSMEs of India.

Debt Recovery under MSME = Best in Business after IBC Law

Debt Recovery under MSME = Best in Business after IBC Law

There is no doubt that Delayed Payment has been and is the biggest problem majority of the business entities are facing and there are very fewer companies that pay to its vendors in time. This delay in payment to MSME creates a huge financial problem as due to this the money is stuck and the MSME business entities are not able to use the money for business growth and are stuck due to less finance and in fact, sometimes this money becomes claimable money and for this such business entities have to approach Court or Forum for recovery and this is where they have to approach Lawyers for recovery of money and in India to recover the money as such is a big headache from a legal point of view due to lengthy and more lengthy procedure and also a Litigation is a costly affair. It is very interesting to note that more than 38.95 lakh UAMs have been filed since September 2015 up to December 2017.

There are many benefits under the MSME Act and in fact, getting the business registered under MSME only plays an important part in availing the benefit of all the schemes under the MSME Act. One of the most important and best advantages given to all MSME holders is the simplest process and procedure to recovery their pending dues from MSME Forum which is nothing but popularly called Statutory Arbitration.

Just a quick look on Relevant Provisions for Recovery of Money

Chapter V of the MSMED Act contained the provisions with regard to the Recovery of the Outstanding from the Buyer in case of any service(s) availed or good brought by him

  • Section 15: It provides that buyer to make payment in case of any service(s) being availed or goods brought by him on or before the date as agreed in writing otherwise before the appointed date [The maximum period to be paid to the seller is 45 days from the day of acceptance or deemed acceptance]
  • Appointed date means the day following immediately after the expiry of the period of 15 days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.
  • Day of Acceptance means: (a) the day of the actual delivery of goods or the rendering of services; or (b) where any objection is made in writing by the buyer regarding the acceptance of goods or services within 15 days from the day of the delivery of goods or the rendering of services, the day on which· such objection is removed by the supplier;
  • Day of Deemed Acceptance means, where no objection is made in writing by the buyer regarding the acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services.
  • Section 16: Buyer shall be liable to pay compound interest with monthly rests in case of failure to comply with the aforesaid provision. Interest Rate will be 3 times of the bank rate notified by the RBI.
  • Section 17: Buyer to make payment along with interest.
  • Section 18: MSME may make a reference to the Micro and Small Enterprises Facilitation Council (“MSEFC”) and MSEFC may initiative on its own, action as it may deed necessary.


Objectives of MSMED Act 2006 in regard to Recovery of Money:

  • Statutorily binds the buyer to pay the MSME supplier within the statutory due date (within 45 days of the acceptance of the goods/service rendered)
  • Provide for penal interest statutorily in case of buyer defaults in making payment (The buyer is liable to pay compound interest with the monthly rests to the supplier on the amount at the three times of the bank rate notified by RBI)
  • Provide for an efficient statutory mechanism for expeditious resolution of supply and payment related disputes
  • Statutorily ensure to recover at least 75% of the due amount along with interest for disbursal of finance to the MSME supplier to keep it viable in case of buyer appeals in court [Please note that if the Appellant (not being the supplier) wants to file an appeal, no application for setting aside any decree or award by the MSEFC shall be entertained by any court unless the appellant (not being supplier) has deposited with it, the 75% of the award amount] – The objective of the remedy at Section 19 incorporating mandatory deposit of 75% amount in terms of the Award to entertain the appeal/ contest by the Buyer under Section 34 of Arbitration Act by the Buyer in the Court is in order to ensure timely flow of finance to MSME supplier so as to remain viable in the event of delay, default or dispute regarding payment by the buyer. The object of effective and expeditions remedy incorporated in Section 18(5) and section 19 of the MSMED Act 2006 is to be appreciated by reading together with Section 34(3) and Sec. 36 of Arbitration Act. The remedy and relief can be fairly deducted to securing at least 75% amount and disbursing that amount through Court to MSME supplier within six (6) months with the intent to retain its viability and financial health and to reduce incipience of sickness


How does MSME Registration help in the Recovery of Dues?

There is a defined period for raising any dispute regarding goods or services under MSME rules from delivery and if there is no such raised dispute/s, then raising dispute at later stages is of no use and these reasons have been used by many in court matters in any monetary claim as defense and hence this benefit take away one of the major Defense of the proposed defaulter and secondly, the invoice payment has to be made within 45 days from the date of invoice except for any credit period mutually agreed between parties to the business. In case there is a default in making the payment, the following steps are followed:
(The person who files the case is called Aggrieved Party/Claimant/s and against whom it is filed is called as Opposite Party/Respondent/s)

  • Issue MSME Civil Notice stating the provisions of MSME
  • In case of no payment, issue another Demand Notice
  • In case of no payment, then start drafting MSME Petition in the format as per MSME Act with the help of a legal advisor and not else as a legal advisor is the best to understand the importance of drafting and its relevance at the time of argument. The process is that one has to submit the reference letter as per Form1 of said Act and rules and thereafter Petition and then Petition once accepted then will be forwarded to MSME Department for Conciliation/Arbitration and in the event, there is no response from the defaulter, the Arbitration Proceedings will start to be held at MSME Office. As per MSME Act, all MSME proceedings shall be closed within 180 days and one of the prayers in MSME Petition shall always be claiming interest at the compound rate and other damages.


The biggest advantage of the MSME Act is that MSME overrides the Contractual Arbitration clause between the Parties (Refer, GET & D India Limited Vs Reliable Engineering 2017 SCC Online 6978)
One can also file the MSME Petition (prefer getting this drafted by Legal Advisor) on MSME portal in the following manner:

  • https://samadhaan.msme.gov.in/MyMsme/MSEFC/MSEFC_Welcome.aspx
  • Click on Case Filing for Entrepreneur/MSME.
  • Enter Udyog Aadhaar Number (UAM) which will be received by Business Entities when MSME Certificate is issued
  • Enter Aadhaar Number or Mobile Number as in Udyog Aadhaar(Only For Assisted filing cases)
  • Enter verification code as displayed
  • Click on the Validate Udyog Aadhaar button to receive OTP on email registered during Udyog Aadhaar registration.
  • Cases can be updated from the said website by all aggrieved party
  • Now, you will see an option Application entry which will help you to file an application and/or compliant with the appropriate authority, before filling it please keep the details of work orders and/or details of invoices ready or any other document which can prove your claim. You can provide the details over the portal, if it is less than 5 however, in case it is more than 5 then you can combined all invoices in single PDF and upload it over the web-portal and submit it, thereafter one more page will be pop-up for the review and final submission
  • All done now MSEFC will send this application to the concerned respondent and status of your complaint can be seen Entrepreneur Application list, the application will be proceed faster than that of the court, furthermore the concerned officer may ask you to come and advise you in case of any other document and/or information being required by him


What is MSME Samadhaan portal?

To address Delayed Payment to MSME Section 15-24 of The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 deal with the issues relating to the Delayed Payments to Micro and Small Enterprises (MSEs) by the buyers to the MSE supplier. In the case of delay in payment beyond 45 days, MSME suppliers may approach the Micro and Small Enterprises Facilitation Council (MSEFC) constituted under the Act in all States/UTs. Under Section 16 of the MSMED Act, delayed payment to supplier units, attracts compound interest with monthly rests at three times of the bank rate notified by the Reserve Bank. To further the objectives of the MSMED Act, 2006 the Ministry of MSME launched a portal (http:// samadhaan.msme.gov.in/) on 30th October 2017.

It is relevant to note that from the date of the launch of MSME SAMADHAAN Portal, i.e. 30th October 2017, MSME has filed 2927 applications related to delayed payments. These cases involve an amount of Rs. 744.65 Crore. This portal has also helped in getting the delayed payments getting settled mutually between seller and buyer. 105 mutual settlements have been done amounting to Rs. 8.87 Crore. Applications are getting converted to cases by MSE-Facilitation Councils in States. 264 applications have been converted to cases by 31.1.2018. This has empowered the MSEs to file their delayed payments cases directly. This is being monitored by respective Ministries/ CPSEs and State governments (this para has been taken from the Annual Statement for the Year 2017-2018 by MSME)

MSME + ROC Compliance = Removes Law of Limitation on Recovery of Dues:

In order to protect the interest of MSME the Central Government on 22.01.2019 has issued a notification under the MSMED Act, 2006 to ensure timely and smooth flow of credit to MSMEs and minimize sickness among them. As Per the Notification Number S.O. 5622(E), every specified company shall file an Initial Return in MSME Form I stating details of all outstanding dues to Micro or small enterprise suppliers existing on the date of notification of this order within thirty days from the date of publication of this notification. Please note that the Registrar of Companies (ROC) is asking the detail of the default and delay in payments to MSME (means Micro, Small and Medium Business entities whether they are individual, firm, LLP or companies) along with the complete list of the name, the amount outstanding, a period of delay with reason and total outstanding to MSME exceeding 45 days through filing the ‘MSME FORM I’ with ROC. The companies are also required to file the half-yearly report on the delay of payment to MSME as well as a one-time report. A half-yearly return MSME-1 specifying the payments outstanding to micro and small enterprises suppliers which are outstanding for more than 45 days from the date of acceptance or the date of deemed acceptance of goods or services stating the following: a)The amount of payment due, and b) the reasons of delay. The Penal provisions are serious for non-compliance. If the said details are not submitted to Registrar of Companies on MCA on or before 22.02.2019 or the information submitted is incorrect or incomplete, then the fine on the company is up to Rs. 25,000 and the Directors, CFO & CS shall be punishable for imprisonment up to 6 months OR fine not less than Rs. 25,000 up to Rs. 3,00,000 per person each.

Always Together??

Always Together??

Recently a non-regular client approached me after almost 1.5 years for seeking legal opinion on the almost broke relations with another partner in his partnership business and the reason to approach me is due to the fact that the relations were not in any possibility of gaining any good momentum for further business and it was just getting in personal and affecting per se. There were two partners at the time of initiating the fresh and new partnership business wherein my client was an experienced IT skilled and another partner was in marketing. It needs a mention that the business model of the said partnership was of my client solely and there was no contribution of another partner in any manner either as monetary investment or idea selling or else but was the partner in equal ratio and it seems that my client never expected the dispute will arise with another partner as another partner was someone own to my client since good years and he didn’t see it that way!
 
As it happens many times of business being done on trust basis which I am totally against (you can refer my article named “Is it risk-free to do business on Trust and no written contracts” and in this case too there was no proper documented term sheet written agreement but only the trust. No proper partnership agreement was drawn as the partnership agreement was just a copy and paste from online and filling the blanks with their names and business and just had a simple notary which was done to open the bank account and this was and is certainly very bad news for my client. There was no specific clause on ownership of Intellectual Property Rights, way of dealing of Intellectual Property Rights and without any terms agreed, it was and is no doubt very hard to work out what the real understanding between partners was at the time they got together and that makes even worse to bring the legal separation which is fair to both parties.
 
As I have stated in my earlier articles of no business to be done on trust and without written contracts, I will suggest of having proper documentation in any business relations and this may include any business relations as this document is nothing but can be said as “Documenting Your Relationship!” It is very easy to use a standard template from online nowadays but you need to have legal guidance to have properly documented all the intentions and business purposes as that ultimately will define at the time of any dispute arising.
 
It’s never too late to try to put an agreement in place, especially if the relationship is still good. And it’s time and money well spent.

Best way to avoid Small Business Litigation

Best way to avoid Small Business Litigation

What is Litigation?
Litigation means “a dispute between two parties”. The disputes are generally in two categories; Criminal and Civil. In this brief article, I am referring to “Civil Disputes” arises because of transactions between the parties, commercial or non-commercial. The litigation comes when the parties are not able to resolve the disputes amicably.
 
Best way to avoid small business litigation is to:
· Written Agreements/Contracts.
· Being communicating regularly.
· Better to discuss relevant and prospective issues.
· Hold Meetings and keep Minutes of Meeting and get the same signed by all the Parties attending including the Owner/s to avoid any issues later.
 
Pre-Litigation Measures one can take:
· More care at the initial stages leads to latter stages being smooth and painless. Professional assistance committed to avoiding litigation can add value at each stage.
· Be very careful in choosing the parties with whom the business will be done.
· Spend time to find more about potential associate/partner.
· Start with some activities that build mutual understanding and confidence.
· Move into long-term or deeper involvement with caution.
· At each stage of the relationship, prepare clear documents that leave no room for misunderstanding.
· While in the relationship, take all possible care to avoid derailment.
· If things go wrong, try for the amicable resolution of problems.
· If amicable resolution not possible, try for exit by mutual consent.

Successful Business Requirement = Terms and Conditions/Contract

Successful Business Requirement = Terms and Conditions/Contract

a) Create Certainty:
Two Parties entering into a document containing Terms and conditions gives certainty of what product or service will be dealt with, how the payment will be taken care off, how to raise the invoices, other modalities of executing the business, raising of dispute if any and so on. It is important to understand that if there is terms and conditions being agreed upon for any commercial or non-commercial dealings, it completely set-out the intention and in fact satisfy the contractual mindset which is popularly called as consensus-ad-idem and then there is no uncertainty about what the Parties’ rights and obligations are and this only saves a lot of time and cost if there is any conflict arises and having dispute resolution terms agreed upon only resolves the areas of disagreement between Parties if at all it comes up in a very friendly and amicable manner. In brief, having terms and conditions bring CERTAINTY of what to be done and to avoid, timeframes and so forth
 
b) Avoiding to the maximum of not being taken to Court:
Having clear terms and conditions being agreed upon between the Parties, it only gives a document which makes the Parties bound by such document and this helps majority times of any customers to make a wrong claim against another bound party and in case there is any dispute, Parties can take the assistance of their legal attorneys and take the clarity of their stand against the dispute being aroused and this to ensure that no wrong claims are succeeded.
 
c) Ensure Greater Protection against any claims and gives the reasons to concentrate on Business Growth:
It is widely accepted notion that a Businessperson has only two things to do, Marketing and Innovation and else be taken care by its made system and hence executing Terms and Conditions only ensure the protection of business and once there is a certainly in place and system in place to ensure having certainty, the Business Parties can focus on the doing the work and getting paid on time.
 
d) Bring Awareness of Rights:
Certainty document only gives the clear reading of various rights and duties as mentioned and agreed and this helps and enable the non-default party to make successful claims or purchase of goods in the event of any breach of agreed business terms
 
e) Smooth compliance of Law:
Having clear terms and conditions helps either party to comply with Legal Obligations in all aspects and this also takes care of any customer related claims or IPR infringement claims and so on
 
In brief, to know the importance of Terms and Conditions, MSME Samadhan (under MSME Act) only entertains the money claims where it has Purchase Order and Invoice raised, and if not, then MSME does not entertain the claims.
 
Regular changes in the Terms and Conditions are important to keep your business dealing in line with changes in law and if you feel it has been a while of you not getting the Legal Due Diligence of your business documents, you can get in touch, because this period is the best time to sort all your concern if any

Post-death of Sole Proprietor in Sole Proprietorship Firm, what about Assets?

Post-death of Sole Proprietor in Sole Proprietorship Firm, what about Assets?

A Sole Proprietorship is the simplest business legal entity. It has the least requirements to set up and infact the faster mode to start and set-up the business and it can be started even in a day without GST and if with GST then two days and infact this is one of the oldest and best traditional business entities to be found in India. There is no regulatory compliance except filing of IT Returns and GST Returns and this is anytime a seen as beneficial

As this being Sole Proprietorship which means the Sole Owner of the business, there is no separation between the business entity and the owner e.g. Lalit Jain, the Sole Proprietor of THE LEGAL DESK is one and the same. This means that the assets i.e. bank account, property; stock-in-trade, goodwill, as well as liabilities of the business belong to Lalit Jain.

A Sole Proprietor is a business owned by one person and has these features:-
1. Unlimited Liability;
2. Can sue or be sued in individual’s own name;
3. Can own property if individual has legal capacity;
4. Owner personally liable for debts and losses of business;
5. A Sole Proprietorship exists as long as the Owner is alive.

However, the biggest query comes as to what happens post the death of Sole Proprietor?
Briefly, whatever the Sole Proprietor owns as a business sole proprietor is treated as his personal assets and will be distributed according to his/her Will or under the rules of Indian Succession Act. This means the business assets that can be transferred will be passed on to the deceased Sole Proprietor’s beneficiaries under the law.

Distribution and Sale of Assets and Debts shall be as under post-death of Sole Proprietorship of the Business:
Assets: Subject to the wishes of the beneficiaries, the executor/administrator of the Sole Proprietor’s estate may sell the assets of the Sole Proprietorship to one of the family members. A beneficiary who buys the business and its assets may choose to continue with the business under his own name. Likewise, he may elect to sell the business to another family member, employ someone else to operate it for him or take up a partner for the business.

Debt: Where the business has debts, the executor/administrator may have no choice but to liquidate all assets of the business to meet any debt incurred by the business. If you are a sole proprietor, you should do a will to have a smooth transition of the business whether it is a sale or distribution.

However, in this today regular market changing trend and legal compliances, this type of Business Entity is not preferable and advisable

Starting an E-Commerce Business = Take a look at Legal Aspects

Starting an E-Commerce Business = Take a look at Legal Aspects

The rapid internet and technology advancement and the increasing accessibility and connectivity has created mass opportunities for the E-commerce industry and there is no doubt of this being future way of doing the business.

In view of the massive outreach in which the internet has created, there has never been a better time to start on an E-commerce business and infact if you have not don’t taken any steps till date it is almost saying good-bye to your business. E-commerce refers to the business that uses the internet platform for sale of goods or services via electronic means. The following discussion will touch on some of the essential legal aspects when one embarks on an E-commerce.

a) Trademarks
Domain names are a huge part of the E-commerce businesses. Many businesses will register domain names that contain their trademark to boost brand recognition. When creating domain names, one should be cautious not to infringe the trademark of other businesses by creating domain names that will confuse the general public or induce the general public to associate the website with another brand. The only negative aspect of these domains is that one has to buy all domains to confirm their brands. For eg., /fireflieslegal, thelegaldesk.in, thelegaldesk.co, legaldesk.co, etc. It is preferable to create a unique and distinctive domain name to avoid trademark infringement and also, more importantly, to establish a clear internet identity and to enhance brand recognition. Further, the E-commerce should register their trademark to deter and prohibit others from using similar or identical domain names. Should there be any unauthorized use of your registered trademark, as the proprietor of the trade mark, you are entitled to apply to court for relief (such as an injunction, damages or an account of profit) to be granted.

b) Terms of Use
One should also consider including a set of Terms of Use of the website which is a legal contract between the website owner and the users. The specifics covered in the terms would vary from business to business. It is recommended that you seek the advice of a legal counsel to ensure that the terms stated provide adequate safeguards for the business. It would be highly prudent to have the Terms of Use drafted to fit the nature of your business. As the website owner, the content and information on the site belongs to you and having detailed terms to inform the users of your intellectual property right can help to pre-empt and prevent potential infringement of intellectual rights.

c) Goods and Services Tax
In a business with a physical storefront, the collection of GST is straightforward. How then is GST imposed on E-commerce transactions? It is recommended that you seek the advice of a Taxation Expert to ensure that the methods of dealing with Taxation in regard to your business is being taken on all aspects

d) Income Tax
Apart from GST, another important tax consideration would be the imposition of Income Tax on E-commerce. It is recommended that you seek the advice of a Taxation Expert to ensure that the methods of dealing with Taxation in regard to your business is being taken on all aspects

MSME / Traditional Business = Ignoring Intellectual Property Protection is Winding Up Business

MSME / Traditional Business = Ignoring Intellectual Property Protection is Winding Up Business

Business has not changed but the way of doing the business has changed and infact the change is on fast track mode thanks to Technology. Due to this fast track mode, many of the traditional business who never changed the way of doing the business have either wind up their business or have been forced to change with bad impact on their business future. In today’s business production of goods / providing of services is not enough but how it reach in market on time i.e., thereby giving rise to a good transportation system, delivery system and if this system is given on real time then it only adds to the revenue in small margin. This is where most of the business fill the gap and ensure proper system and revenue model. There is no doubt that in this era new technologies have changed the way business has to be done. New business model has come up wherein the people are now becoming the Admin of the Whatsapp Group or Telegram Group and are allowing marketing the goods once the payment is made for using the group. This is the totally new model of business since good years now. This new business model can be taken as new concept but surely not a work to get registered under Copyright or Patent Act. It is important to note that the markets are getting shrink due to technology and the best example is that you can see how the manufacturer are now directly connect to the end consumer. The change in technology, way of doing the business, is nothing but in business sense intangible assets of the business owners. For ex.., Tribhovandas Bhimji Zaveri is a brand and is the best example of well-known mark in Jewellery Business, Kalyan Jewellers are making their way in terms of branding of your products, etc. The markets are now being branded with brands and infact the branding has become a major source of saleable goods source in the market. Conventionally, Indian Micro, Small and Medium Enterprises (MSMEs) have relied on creating and protecting tangible assets-from land, machinery to office equipment-together with their revenue and receivables, to boost their valuation and prestige among their peers and in the industry. MSME means the micro, small and medium business owners and they are the backbone of Indian Economy. Within MSME itself, there are new start-ups and traditional business which is going on since more than 100 years. Herein the intention of this Article is to share the relevance of Intellectual Property amongst the Business Owners specially Traditional and those who still have not realised the importance of Intellectual Property Rights. The best illustration to share is of Waman Hari Pethe a Jewellery store. They have marketed their products and created a brand with their brand name, Waman Hari Pethe and this is enough to give best and tough competition to any other Retail Jewellery store. Today the valuation itself of the brand Waman Hari Pethe in Jewellery market can be valued than more than 50 unbranded retail jewellery store and they can only earn by selling their brand. This itself is a way to earn but sadly most of the MSME and unorganised are not taking this branding and valuation as their business strategy and hence losing out to competitors.
 
What is Property and importance of Property as Asset for any Business Owners?
 
Property is of two kinds:
  • Corporeal Property i.e., property in material or physical form such as land, building and chattel. Corporeal property is tangible and can be seen through eyes since it has got certain corpus (physical structure).
  • Incorporeal Property i.e., property in immaterial form or non-physical property which results out of intellectual efforts like patents, trademarks, copyrights, designs, etc. It is the latter category of Incorporeal Property which is called as Intellectual Property Rights popularly. Incorporeal Property is intangible. Property, which is intangible in the sense, cannot be seen through eyes is classified as intangible property like lease, mortgages, patents, copyrights, trademarks, etc.
In Today’s Competitive global knowledge economy, all businesses irrespective of their size and scale are bound to create ‘intangible assets’ of various kinds and their value may even exceed their ‘tangible assets’.
 
What is Intellectual Property?
 
Intellectual Property refers to creation of mind such as inventions, designs for industrial articles, literary, artistic work, symbols which are ultimately used in commerce and in turn is a profitable asset in many manners. Intellectual Property rights allow the creators or owners to have the benefits from their works when these are exploited commercially. These rights are statutory rights governed in accordance with the provisions of corresponding legislations. Intellectual Property rights reward creativity & human endeavor which fuel the progress of humankind.
 
Intellectual Property is an Integral Part of Business Growth:
 
Traditionally, physical assets have been considered responsible for the overall value, competitiveness and growth of a company. In recent years, however, the situation has dramatically changed. Due to the growing importance of information technology based products, automation and an upcoming service industry, the intangible assets are often becoming more valuable than the physical assets of the companies.
 
What is the important of Law in Business?
 
It is well known fact that law plays a key role in the business development process in general and a pivotal role in the growth of private business in particular. In all countries, law, which is often used to maintain the status quo, has also had an essential role in guiding and legitimizing the processes of change. It is the instrument for introducing orderly development and reconciling diverse interests.
 
Intellectual Property Law is like a basket of eggs laid by several legal species and common gene. Patent, Copyright, trademark, design, passing-off, confidential information and others have common dominant characteristics. They deal with the knowledge based economy-cum-industry. The law concerning them governs the creation, use and exploitation of the creative efforts of the mind
 
Intellectual Property Rights exists in different works involving Intellectual or mental labour. Generally, speaking any Intellectual efforts having commercial value could be given protection. Intellectual efforts in the field of literature, artistic, science, engineering, manufacturing, business, agriculture, etc., gives rise to Intellectual Property rights. Depending upon the nature of the Intellectual work and field of application Intellectual Property rights have been classified into different kinds which is as under:
  1. Trademarks
  2. Copyrights
  3. Industrial Design
  4. Patent
  5. Geographical Indications
  6. Semiconductor chips and integrated circuits; and
  7. Trade secrets
The objective of enactment of statutes, governing IPRs is to ensure adequate standards of protection exist in member countries.
 
What function does Intellectual Property do for Business?
  • It identifies the Product/Services and its origin
  • It guarantees its unchanged quality
  • It advertises the Product/Services
  • It creates an image for the Product/Services.
  • Link between Manufacturer/Service Provider and Customer
  • Instrument of publicity – “the silent salesman”
  • Symbol of Goodwill
  • Intellectual Property is a Asset
How Intellectual Property is an Asset?
 
It is not far away the fact that Bank will start giving the Loans only on basis of valuation of IPR and most prior usage and well-known mark is the Loan will be accessible.
  
Administration of Intellectual Property Rights in India
 
Patents, designs, trademarks and geographical indications are administered by the Controller General of Patents, Designs and Trademarks which is under the control of the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry. Copyright is under the charge of the Ministry of Human Resource Development. The Act on Layout Design of Integrated Circuits will be implemented by the Ministry of Communication and Information Technology
 
How Can Intellectual Assets Help MSME?
 
The assets of an enterprise may be broadly divided into two categories: a) physical assets – including buildings, infrastructure, machinery, working capital and other financial assets and b) intangible assets – including human and intellectual capital comprising of creative and innovative capacity, ideas, know how, patents, designs and brand reputation. Thus, during the course of business, a firm may create and own various intangible assets that include customer goodwill, human skills embodied in its workers, good management practices as well as IPRs in the form of patents, designs and trademarks. These IPRS are particularly seen as means of providing returns to innovation and creative activities.
 
Today Intellectual Property is more valuable than the physical property. Business entrepreneurs invest huge amount of their funds in research and development to acquire and protect Intellectual Property.
 
The protection of Intellectual Property Rights is important for the economy and for its further growth in areas such as research, innovation and employment. Understanding the importance of Intellectual Property Rights, it shall be always taken as an integral part of its Business Strategy. To remain ahead of competitors, business entities must either continuously introduce radically new products and services or make small improvements to the quality of existing products and services. Changes are also made in response to customer needs; therefore almost every product or service used in daily life gradually evolves as a result of a series of big or small innovations, such as changes in design or improvements in a product’s look and function.
 
The time is already moving fast for those business entities who have still not acted on protecting their IPR and more they delay, be ready for winding uo your business very soon and if not now then surely not far also

Understand Power of Attorney, its need, dangerous side and its restriction

Understand Power of Attorney, its need, dangerous side and its restriction

If you have watched shows like “Suits” or “How to get away with murder” or other similar shows, you must have come across the term “Power of Attorney”. A common man’s understanding of power of attorney is different from its legal sense. So, what is Power of Attorney?
 
The definition of power of attorney lies in the “The powers of Attorney Act, 1882”. According to section 1A of the act, “Powers-of-Attorney” include any instrument empowering a specified person to act for and in the name of the person executing it. This means, a legal document which gives a person the power or legal authority to act for another person as their representative for banking, legal, financial investment, business and other purposes. Even though there is a separate central act pertaining to powers of attorney, the basic principles of such documents are governed by the various sections of the Indian Contract Act, 1872.
 
A power of attorney is mainly of two types:
 
• General Power of Attorney: A general Power of Attorney gives wide-ranging powers to the attorney or the agent which authorise them to do all acts connected with a particular trade, business or employment. For example- Z is the manager of B’s firm. Z’s authority extends to the doing of everything necessary for carrying out the business of B’s firm.
 
• Special Power of Attorney: A Special Power of Attorney gives only specific powers to the attorney or the agent which authorise them to do only a single act. For example- A is employed by X, residing in Mumbai to recover a debt due to X in Delhi. A may adopt any legal process necessary for the purpose of recovering debt. Once the debt is recovered, special power of attorney comes to an end.
 
What is the need of Power of Attorney?
 
Sometimes it becomes almost impossible for a person to look after all its legal and business affairs; That can be a result of old age, poor health, lack of expertise or any other reason. This is when power of attorney comes to picture. It allows you to authorise a person to carry out either a particular act or all acts connected with your trade, business, employment etc. It acts as a helping tool for a person who is incapable of performing those acts due to above mentioned reasons.
 
Why Power of Attorney is dangerous if not given properly?
 
When a person (A Principal/Donor) gives power of attorney to another person (An Agent/Donee), he authorises that person to carry out all the act in the name of the Principal. This means that the Agent would have full legal power to act in the name of the Principal and that the actions of the Agent would be considered as the actions of the Principal. This concept is based on the legal maxim “Qui facit per alium facit per say” which means, He who acts through another does the act himself. Giving a person power of attorney would mean that the principal would be responsible for his agent’s action.
 
Power of attorney is an extremely dangerous document if not given properly. It is very easy to misuse this authority for personal gains.
 
One must think thoroughly before giving someone the power of attorney. This is because, when a person appoints someone be their Agent, he is basically sharing the decision-making power with the Agent. For example- when the donee spends the donor’s money to benefit the donee, rather than the donor, without permission. Power of Attorney makes the donor liable for donee’s action in the due course of the purpose. Thus, an agent’s fraud committed in the course of the purpose is equivalent to fraud committed by his principal. To conclude we can say that it is very important for a person to choose his donee/agent very carefully.
 
Should there be any limitations for Power of Attorney?
 
The answer to this question would always be a yes. When selecting an agent, one must always consider the risks involved. In order to safeguard one’s interest, its important to limit the power of attorney so that the agent cannot misuse his power. Another way of limiting the scope of power of attorney is to make sure the document gives third parties the ability to exercise some supervision over the donee. There is no guarantee that an agent will always work in a bona fide manner. In order to be safe from agent’s fraud/bad intentions, one must limit the scope of the power of attorney. Not limiting the authority of the agent/donee may result in heavy losses.
 
A person does not have a direct control over its donee, and this makes power of attorney a very risky thing. For example- B, a donee of A has the power of attorney to manage A’s banking affairs. B can take a loan and buy a property in A’s name.
Due to all such risks, there must be certain limitation imposed on the donee in order to safeguard the donor’s interests.
 
What are the restrictions of Power of Attorney?
 
Not everyone can give power of attorney to a person. Only a person who is competent to enter into a contract can give the power of attorney to a person. According to section 11 of the Indian Contract act, a party is competent to contract if:
 
a) he is of the age of majority i.e 18 years of age;
b) he is of sound mind, and
c) he is not disqualified from contradicting by any law to which he is subject.
 
Usually, the power of attorney is revoked on the death of the principal or if the principal goes bankrupt or becomes insane. However, a person can extend the power of attorney till even after his death. Such intentions must be mentioned in the agreement.
 
 Written By Ms. Vaishnavi S (Intern) and seen by Adv Lalit K Jain

Notes on various Cyber Crimes In India

Notes on various Cyber Crimes In India

[Offences under Information Technology Act from Serial No. 1 to 27]
 
1. Tampering with computer source Documents Sec.65
 
2. Hacking with computer systems , Data Alteration Sec.66
 
3. Sending offensive messages through communication service, etc Sec.66A
 
4. Dishonestly receiving stolen computer resource or communication device Sec.66B
 
5. Identity theft Sec.66C
 
6. Cheating by personation by using computer resource Sec.66D
 
7. Violation of privacy Sec.66E
 
8. Cyber terrorism Sec.66F
 
9. Publishing or transmitting obscene material in electronic form Sec .67
 
10. Publishing or transmitting of material containing sexually explicit act, etc. in electronic form Sec.67A
 
11. Punishment for publishing or transmitting of material depicting children in sexually explicit act, etc.
in electronic form Sec.67B
 
11. Preservation and Retention of information by intermediaries Sec.67C
 
12. Powers to issue directions for interception or monitoring or decryption of any information through
any computer resource Sec.69
 
13. Power to issue directions for blocking for public access of any information through any computer
resource Sec.69A
 
14. Power to authorize to monitor and collect traffic data or information through any computer resource
for Cyber Security Sec.69B
 
15. Un-authorized access to protected system Sec.70
 
16. Penalty for misrepresentation Sec.71
 
17. Breach of confidentiality and privacy Sec.72
 
18. Publishing False digital signature certificates Sec.73
 
19. Publication for fraudulent purpose Sec.74
 
29. Act to apply for offence or contraventions committed outside India Sec.75
 
21. Compensation, penalties or confiscation not to interfere with other punishment Sec.77
 
22. Compounding of Offences Sec.77A
 
23. Offences with three years imprisonment to be cognizable Sec.77B
 
24. Exemption from liability of intermediary in certain cases Sec.79
 
25. Punishment for abetment of offences Sec.84B
 
26. Punishment for attempt to commit offences Sec.84C
 
27. Offences by Companies = Section 85
 
28. Sending threatening messages by e-mail = Section 503 of Indian Penal Code
 
29. Word, gesture or act intended to insult the modesty of a woman = Section 509 of Indian Penal Code
 
30. Sending defamatory messages by e-mail = Section 499 of Indian Penal Code
 
31. Bogus websites, Cyber Frauds = Section 420 of Indian Penal Code
 
32. E-mail Spoofing = Section 463 of Indian Penal Code
 
33. Making a false document = Section 464 of Indian Penal Code
 
34. Forgery for purpose of cheating = Section 468 of Indian Penal Code
 
35. Forgery for purpose of harming reputation = Section 469 of Indian Penal Code
 
36. Web-Jacking = Section 383 of Indian Penal Code
 
37. E-mail Abuse = Section 500 of Indian Penal Code
 
38. Punishment for criminal intimidation = Section 506 of Indian Penal Code
 
39. Criminal intimidation by an anonymous communication = Section 507 of Indian Penal Code
 
40. When copyright infringed = Copyright in a work shall be deemed to be infringed Sec.51
 
41. Offence of infringement of copyright or other rights conferred by this Act. Any person who knowingly infringes or abets the infringement of Section 63 of The Copyright Act
 
42. Enhanced penalty on second and subsequent convictions = Section 63A of The Copyright Act
 
43. Knowing use of infringing copy of computer programme to be an offence = Section 63B of The Copyright Act
 
44. Obscenity = Section 292 of Indian Penal Code
 
45. Printing etc. of grossly indecent or scurrilous matter or matter intended for blackmail = Section 292A of Indian Penal Code
 
46. Sale, etc., of obscene objects to young person = Section 293 of Indian Penal Code
 
47. Obscene acts and songs = Section 294 of Indian Penal Code
 
48. Theft of Computer Hardware = Section 378 of Indian Penal Code
 
49. Punishment for theft = Section 379 of Indian Penal Code
 
50. Online Sale of Drugs = NDPS Act
 
51. Online Sale of Arms = Arms Act