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Corporate Litigation Skills

Declaring Independence Part 2: Sourcing Work for your Independent Practice

sourcing work

Declaring Independence  is a series by Tishampati Sen, an Advocate-on-Record who quit his job at a top-tier law firm to start his own practice. Setting up one’s own practice at a relatively young age is a challenge, albeit one that can have great rewards. Every month, Tishampati will look at an important aspect of going independent and have useful tips and advice for young lawyers who just want to break free! Read the previous post here.

I knew at the time of taking my first steps towards independent practice, that one of the formidable challenges in front of me would be of generating enough work to make a living. One of my greatest apprehensions at the time of making the move was that I might have to sit idle for many months before people would actually entrust with work. From the very beginning, therefore, I associated with and assisted eminent senior counsel and other advocates in their work so as to be ‘in – practice’ even while my independent work gathered momentum

But from very early on, in fact even before I had completely quit the firm that I was a part of, I had started pitching for work and trying to impress upon people the fact that a new hotshot lawyer was soon going to be available to take care of all their legal needs.

DRAWING A BOUNDARY

One of the key questions that people would ask me is “so what kind of work do you do?” and my immediate response would be “Everything”. But invariably the person would continue to look at me expectantly waiting for me to say something more, before finally nodding and uttering a dismissive “good”. But I didn’t know a better answer at the time. I was actually preparing myself to do all sorts of legal work. I had both transactional as well as dispute resolutions experience and intended to do both kinds of work in the future as well. Over a period of time, immediately after my “Everything”, I decided to add, “I do both litigation as well as transactional work” to fill the awkward silence. But to my surprise I was still met with a glazed look.

One of my more experienced colleagues heard my response one day and decided to rescue me. He let me in on a little secret. “Branding is important. People don’t like to believe that ‘everything’ is possible. Give them a boundary and a framework. When you give them your limitations, your capabilities also become believable; and if you haven’t discovered your limitations yet, invent them.”

This is one of the most important and beautiful lessons in human psychology for me. I am not sure if I completely believed it at the time, but the next time some one asked about the kind of work I do, my answer was a little more tempered. I still told them that I do everything but I also added an ‘except…’ and told them one or two things that I don’t do; or what I haven’t done yet – but was willing to do if the opportunity presented itself. Surprisingly, there were many more people now nodding and moving forward with the conversation. In fact, there were even some who would discount my ‘limitation’ and say “Yes, but after all it’s only another branch of law. If you study it, I’m sure you’ll pick it up.” 

FACTORS GOVERNING THE CHOICE OF WORK

There could be a few factors that could govern the kind of matters/work that one may want to source and take up at this stage:

1. Streams: There are some who, like me, enjoy both streams of practice and therefore may actively look to do all sorts of work in both transactional–advisory practice, as well as in litigation. In fact from my experience, the learnings in one could even help your develop your skills in the other. For example, the litigation experience and the understanding of the courts and the processes involved has helped me develop a different perspective on the language used in contracts. I now have an understanding that clauses that may seem air–tight in language may be looked at in a completely different context in court. As such, the advice on the transactional side is now more pragmatic than theoretical. Similarly the experience on the transactional side helps in grasping complex transactions better and may, therefore, allow one to articulate the issues involved much better in court.

However, there are also those who would much rather focus on any one stream (and within that, a sub-stream) to be able to build a brand and expertise in the subject. One cannot deny that in this field where a client’s interest and sometimes life is at stake, how the world perceives you may become relevant. Some time back when a friend needed legal representation for a family member who had unfortunately been tangled up in criminal proceedings, he was very clear that he wanted a ‘pure’ criminal lawyer. Not someone who also practiced criminal law. Similarly in sensitive matters such as divorce etc., parties may be more comfortable with an advocate who shows herself to have expertise in that field.

2. Forum of Practice: This is more relevant for the litigation side of the practice, as often advocates may also target work keeping the forum in mind. There are those who may have a wider network outside the city/state, as such it may make sense to consider appellate forums. The choice of the forum could also be impacted by various other considerations such as the kind of work that one enjoys (trial matters, versus consumer matters, tax etc.), the clientele typically associated with a particular forum, the regularity of proceedings in the forum, or simply what interests you more etc. Here again there could be the debate for specialisation versus exploration. I know of many young advocates who have focused on the practice in a few particular forums. Over a period of time they have developed a better understanding of the processes and the requirements in the registry and are able to better fathom the tendency and mood of the bench. These advocated then become much more in demand in these particular fora. However, on the flip side one may want to practice in various fora and over a much longer period have a much wider presence. In fact some might argue that having matters in various fora and the thrill of appearing before different judges with different opposing counsel is what makes the litigation practice exciting.

3. Realistic Evaluation of Reference of Work: Another perspective to keep in mind, while considering the kind of work that one may want to attract, is what would make sense in terms of being able to develop clientele. For example, as a young advocate it may make sense to spend as much time observing and assisting on trial matters, consumer matters, divorces etc., since the potential to have this nature of matters being referred to you by individual clients is much higher when on your own.

Even on the transaction front, it may make sense to initially focus on the kind of work that could lead to repeat requests and referrals by clients. For example focus could be on the issues facing start–ups that have great need for legal advice but may not have the budget to approach the established and eminent legal practitioners. Focusing on the individuals or smaller business units in the beginning may be a prudent starting point. 

CURB YOUR ENTHUSIASM

A common and popular advice seems to be that a junior advocate must be willing to take whatever work comes his way. Saying no to any work, no matter how tedious or boring it might seem, is almost sacrilegious. It makes sense of course – you must be willing to take the good with the bad, and only when you have had a varied and diverse experience can you even begin to identify your own unique strengths and weaknesses and likes and dislikes. In fact, a bit of a push and pressure may even help develop character and create the mettle to take up challenges. So the general idea is that one should never say no to work, and once accepted one must figure out the capacity and the wherewithal to handle the same.

However, there was one person who gave me contrary advice, which also made a lot of sense. This gentleman who has a thriving criminal practice, told me, over a cup of coffee, “it is equally important to curb your enthusiasm.” His point was that at the beginning of one’s independent practice, a junior advocate/lawyer must focus on work as much as self–development. “Eventually you have to start keeping in mind the balance–sheet, and focus on managing your office. Things like the supply of coffee for clients, printer cartridges, wages, etc., also start taking up your time. So value this time in the beginning. Now is the time to develop the lawyer within. Keep the businessman waiting for a while. Appreciate that since for now there is less work, you should read the law for the sake of reading the law. Sooner or later work will find you.”

He also warned me that taking up more than can be handled in the beginning could be more detrimental than not having enough work. If you tell a client frankly that you may not be able to handle his work, you may lose her/him temporarily. But servicing a client badly could lead to the loss of not just that client but many future clients as well. He called it “poisoning the line”, which had a nice dramatic ring to it and so it has stuck with me.

To close off this piece, I would like to remind you of what I had said in the beginning of this series: I am not qualified to give you advice as to your specific way forward. My only aim is to share my experiences and the views that others have selflessly and candidly shared with me. So, choose the viewpoint that suits you and your temperament best. See you next time!

Tishampati Sen

Tishampati Sen is an Advocate–on–Record  of the Supreme Court of India. He worked with one of the premier law firms of the country (in corporate transactions as well as dispute resolution) for many years before deciding to take the plunge of independent practice. He appears primarily before the Hon’ble Supreme Court of India, Delhi High Court and the National Consumer Disputes Redressal Commission.

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Litigation

How a CRZ violation is leading to a small revolution in Karnataka

Baad, a village near my village of Kagal in coastal Karnataka, hosts a fair every year at the Shri Kanchika Parameshwari temple. As children, the joy of going to this fair was unparalleled. During the fair, the yakshagana, a folk dance, used to take place in a big field near the temple. Instead of paying to watch this dance, my friends and I used to play a game of dappanduppi with mud stones. These memories remain as fond connections to our childhood.

In 2008, while I was completing the final year of my BA studies, I came to hear that this field had been sold and that a big resort would come up there. Many questions about why the owners would want to sell such a prosperous field, where farmers would grow rice and peanuts during the monsoons and vegetables during the summer months, plagued me.

satellite image of Nayak Hospitalities
Satellite image of the Nayak Hospitalities compound

Nayak Hospitalities (“NH”) was the buyer and as a result of the purchase, farmers’ fields, some public wells, and even a cremation yard, was acquired. Public access to a beach was also blocked. The loss of the wells affected the supply of drinking water to three villages – Baad, Jeshtapura, and Gudeangadi. After NH built a wall of about 15 to 20 metres height around the occupied land, fresh breeze from sea stopped blowing into the village. The villagers, who were also worried about the dangers posed by the crumbling of the wall during the rainy season, complained to the panchayat on two occasions and asked for the height of the compound wall to be reduced, but the panchayat did not take any action.

As an Enviro-Legal Coordinator with the Centre for Policy Research (CPR)-Namati Environmental Justice Program, my job is to inform people about the law, and work with them to solve the various environment-related problems they face. I had helped conduct training programmes on awareness of the Coastal Regulation Zone Notification, 2011 (“CRZ Notification”) in Baad and surrounding areas. This led to discussions about the violations caused by NH and a decision to work together in collecting information, evidence, and pursuing remedies with the local authorities. Collection of information is central to the way we try to resolve problems. That way, if a similar problem arose in the district, a solution based on this case could be used.

Collection of information

The project had obtained clearance from the Ministry of Environment, Forests and Climate Change in December, 2010. Under this letter, permission had been granted to construct the resort on survey numbers 4 to 9, 11 to 13, 17, 19 to 21, 23, and 26 of Baad and survey numbers 14, 16, 18, and 19 of Gudeangadi. It also contained 12 specific conditions and 14 general ones but we observed that many of them had not been complied with.

Nayak Hospitalities compound area
Nayak Hospitalities compound area
  1. Construction on land in excess of permission given: The project had permission to construct on 5.26 ha, but ended up constructing on 9.67 ha. The land includes public property such as government wells, a cremation yard, a temple’s field, and also access to the beach.
  2. Construction in No Development Zone: Under the CRZ Notification, no new construction is allowed in the zone known as CRZ-III. However, the compound wall has been constructed in the 0-200m No Development Zone of CRZ-III.
  3. Access restricted: The lack of access to the three government wells located on NH’s property is leading to shortage of drinking water for the villagers living in the area.
  4. Non-permissible installation: The installation of a pumpset in the NDZ of CRZ-III is not a permissible activity. However, pumpsets have been installed on the NH site. This has reduced ground water in the region.

Advocating with authorities

I discussed strategy with the villagers and identified the relevant authorities. A letter was sent to the Regional Director (“RD”) of the Karnataka Coastal Zone Management Authority (KCZMA) office at Karwar. After a site inspection, the RD noted some violations and sent a report to the KCZMA and a notice to the proprietors of NH.

site inspection by regional director envrionment
Site inspection by Regional Director

Since no relief followed, the villagers and I decided to send letters to all relevant authorities including the District Commissioner (“DC”), Executive Officer (“EO”), and the Panchayat Development Officer (“PDO”). Site inspections were carried out and once again, notices were issued against NH. Upon request by the villagers, the panchayat on five separate occasions, gave notice to NH to reduce the height of the compound wall. This too had no effect. Finally, an order by the DC led to a reduction of the height of the wall from 15-20 meters to 6 feet. This was a small victory after two years of hard work.

Not a small victory

The victory was not absolute since the villagers still did not have access to the common land and the government wells. We used provisions in the Karnataka Land Reform Act, 1961, Panchayati Raj Act, 1993, and the Environmental Protection Act, 1986 and wrote letters to the DC, the EO, and the PDO. If any action had been taken pursuant to these letters perhaps a solution might have had been possible. The letters get transferred from one government department to another and my job then becomes to trace the status of the compliant. This is a waste of time, money, and energy.

The NH project is still inconvenient for the villagers in Baad and Gudeangadi and though their problems are not yet fully resolved, there is still hope. Through these two years, there has been immense support from the villagers of Baad and Gudeangad in working together to resolve the problems that they face. They now also have a pretty good understanding of the law and are in a position to seek remedies to their problems in the legal system. By working to get justice in this case, the villagers have also become more aware about the importance of the environment and common resources. This manner of legal empowerment has also helped them solve other small CRZ violations.

vinod photo

Vinod Patgar is an Enviro-Legal Co-ordinator with the Centre for Policy Research – Namati Environmental Justice Program.

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Corporate Litigation Skills

Declaring Independence: What to keep in mind when starting an independent practice

Declaring Independence  is a series by Tishampati Sen, an Advocate-on-Record who quit his job at a top-tier law firm to start his own practice. Setting up one’s own practice at a relatively young age is a challenge, albeit one that can have great rewards. Every month, Tishampati will look at an important aspect of going independent and have useful tips and advice for young lawyers who just want to break free!

Ever since I graduated from law school, I have enjoyed a wide variety of experiences. I have had the good fortune of starting my career with a large top-tier law firm in Delhi-NCR, where I trained with some of the finest lawyers and learnt how to be a legal professional. I gained experience in the transaction side of the practice, as well as in the dispute resolution side. I handled large deals and conducted negotiations and also learnt to prepare matters, draft pleadings and appear in various forums. However along the way I developed a strong desire and passion to be able to start something on my own. So finally, egged on by my family, much to the horror of some close friends and colleagues, I took the decision to quit the firm and work towards setting up my own practice.

Before we move on, let me say this right up front, this project is in no way an attempt to show-case life outside a law firm, or conversely the life within firm or to discuss which is better. I am only using this platform to share some of my experiences and lessons that I have learned in the process of setting up an independent practice.

Moving out of my Comfort Zone

One of the first things that I learnt when I told people that I am looking to quit the firm to start my own practice, was how woefully inadequate my life is! I had been looking at the world through rose tinted glasses. One very prominent senior colleague in the firm smiled at me and told me that I was having the “law firm mid–life crisis”. There were others who told me about the people who had tried their hand at starting their own practice, failed miserably and then could not even find a job at a law firm again. The fact is that we know of all the reasons why such a move could end up being detrimental.

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But I noticed that once I did take the step, let go of the safety net and swam into the rougher waters, there were plenty of people to hold my hand and show me the way. The funny thing is that most people will tell you only about what could go wrong, and I guess to a large extent that is needed so that you make an informed, practical decision. But happily, there are quite a few very successful advocates and legal practitioners out there, who have equally, and sometimes more remarkably left cushy jobs to follow their dream of having their own practice. These are people who understood the internal conflict and self–doubt that I was going through and gave me invaluable guidance and a pat on the back. Their only request was that I persevere even when I cannot see the light at the end of the tunnel. I still remember how a rather soft–spoken, quiet sort of a man, had looked squarely into my eyes and had said with a force I have never before noticed in him, “If you have a safety net, burn it. Only when there is a fire on your backside will you make this work”.

FIRST STEPS WHEN LEAVING THE FIRM

So if you are in a law firm and have decided to branch out on your own, the first few steps could possibly include the following:

1. Save, Save and Save

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Definitely give yourself a few months (if not a year or more) before you disclose that you plan to move out. Use the steady flow of income that is coming your way to create some savings. One of the great things that my wife helped me do was analyse our spending and expenses for a couple of months (of course being told that I don’t really need a new PS3 game, was like being relegated back to school), and we came up with a number which would be the average monthly expense. Keeping a plan/sum in mind may allow you to save while still not living like a hermit. Savings are definitely a must, since it gives a bit of a reassurance as to one’s financial sustainability in the initial period. Panic is a very usual and daily emotion in such a state, but it helps if your partner or family member or friend can keep reminding you of the savings and assure you that you will be alive and fed, even if you make nothing, or close to nothing, initially.

2. Choosing the kind of work while in the firm

This, to a large extent, depends on the structure followed in the firm and whether there is any option for you to be able to choose the kind of work that you would be involved in. In the firm that I was a part of, while work was mostly assigned, one did have some amount of say and control over the kind of matters that one could opt into. The firm attracted clients who were large corporate houses, or businessmen, and the work, that I was initially involved in, was mostly in the nature of writ petitions, or Special Leave Petitions, and some company matters. But I realised that it would be a while before corporate houses would approach me and pay me to go challenge the constitutional vires of certain laws. Therefore, based on the advice of friends and mentors, I tried to involve myself in a wide variety of litigations including matters in the lower tribunals, civil suits, certain minor criminal proceedings etc., so as to get a wide base of exposure. Most people in a firm would agree that the attraction of any particular matter or transaction is also often contingent upon the billing rate and the regularity of payment by the client. However, at this stage of declaring independence, the attraction is for the specific forums where the matter is listed and the nature of the dispute. A word of caution, though: while doing this in the firm your revenue and billing may take a hit. Swallow the embarrassment of the scrutiny that your performance may be subjected to, and remind yourself of the larger picture. A good friend once gave me the following perspective which was helpful: “Take it like being taught important skills and being given essential experience, and all the while being paid for it.”

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Since my practice and work today includes both transactional as well as disputes work, I must share my learning on the transaction front as well. My experience in the firm on the transaction front was with the Projects team, under a truly brilliant partner and with an excellent team. Hence, I have always been very comfortable and confident in contract law, structuring deals and providing legal opinions on various rules and regulations. However, given the work split and team divisions in the firm, I did not have ample exposure to pure company issues relating to the shareholders rights, structuring and restructuring of companies. There seems to be plenty of work relating to the such company issues that are available for young independent lawyers to do. Especially, in the age of start-ups, corporate arrangements, shareholder agreements and restructuring become viable work opportunities. So while I had to pick up these skills along the way, with the help of friends, if you intend to do transactional work, get some experience on these while still with the firm if you can. It may not be as juicy as contractual, or other work, but get into it. You’ll thank me later!

3. Preparing the mind

Ask anyone else who has taken the same path before and they will tell you right out, your life will change once you have left the safe harbours of the firm. Of course there are many types of firms and how you feel will depend on the structure of the firm as well as how long you have spent there. But I never realised until I quit my job, how large a part of my identity was the firm name. Having had the good fortune of being a part of a top–tier law firm with a very recognisable and well–established name, I had always been very confident and proud of introducing myself to people and piggy backing on the firm’s goodwill. I guess it is presumed that since you are with this particular firm, you would be competent as an advocate and a contender. Corporates and business people recognise your firm name and you bask in its reflected glory. But once that identity goes, you are relegated to only being a lawyer. One of many. No matter how many times you tell people that you have your own practice or your own firm, unless you are (a) middle–aged, and (b) a known name (which is unlikely until you are middle–aged), it is often heard by people as “not employed”. One moment you are the hot-shot associate in one of the largest firms in the country and the next, you are just an advocate like the thousands around you. What’s more, the other advocates are more street smart than you and have something you don’t have yet – clients. Prepare yourself to re-invent your identity and image. You will have to build your reputation and goodwill from scratch.

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Simple perks like clean toilets, green tea, a court clerk who actually knows how to get things done, playing a cricket tournament as a part of the firm, running printers, office boys etc., may be sorely missed and the memory of the same could trigger a violent emotional outburst later. For all those who are overworked and stressed from working really hard in a law firm looking at going independent as a way out, to whom it looks like a way out from the crazy hours, working weekends, unreasonable clients etc., you are in for a shock! You will find yourself working just as hard (hopefully and eventually) when your work load increases. There are no longer any concept of weekends, all days merge into each other. Remember, shorter timelines for delivery and lower fees are the only USP that you have to offer in the period while the world figures out that you’re a legal genius and are willing to pay you top dollar.

KEEP THE FAITH

The one major learning I have had since I quit the firm has been that things have the propensity to work themselves out if one is willing to be patient and open to receiving help. Fortunately, as I mentioned earlier, there are plenty of very wonderful advocates and lawyers, who are very supportive towards ‘youngsters’ and happily act as mentors towards young advocates and lawyers. In the period since I quit the firm, the one thing that I am very proud of myself for is that I was able to swallow my pride, quickly get over my past identity and seek guidance from people who had been doing this before, including people who are younger than me. I have picked up invaluable lessons and tips on various issues, such as client handling, self–projection, preparing for a matter keeping in mind the concerned judges and the day on which the matter may be listed, settling upon the fee rates, and the way to remind clients and seek payment of the same. 

I look forward to sharing my experiences and learnings with you on this blog!

Tishampati SenTishampati Sen is an Advocate–on–Record  of the Supreme Court of India. He worked with one of the premier law firms of the country (in corporate transactions as well as dispute resolution) for many years before deciding to take the plunge of independent practice. He appears primarily before the Hon’ble Supreme Court of India, Delhi High Court and the National Consumer Disputes Redressal Commission.

Categories
Litigation Skills

When can a Civil Suit be disposed of without a trial? Lessons from the commercial courts law

Framing of issues, as I had observed in my last article here, sets the ball rolling for a conventional trial, that is, the recording of the evidence of both parties. But is a conventional trial mandated in every civil suit? In other words, can a suit be disposed of without parties having to go through this rigmarole? Yes.

For instance, a suit may be disposed of through rejection of the plaint on the ground that, having regard to the pleadings contained in the plaint, the suit is barred by law under Order 7, Rule 11(d) of the Code of Civil Procedure, 1908 (CPC”). Order 7, Rule 11 provides six grounds for rejection of a plaint, some of which are factual in nature and some are procedural. Ground (d) is legal. Procedural grounds relate to curable defects and are not necessarily fatal to the suit. Factual grounds are usually treated as issues which require trial and therefore do not result in rejection of the plaint upon filing of an application invoking such grounds. These are framed as preliminary issues for trial and taken up at the stage of final arguments based on evidence led by the parties. A legal ground however, could result in the rejection of the plaint and even the decree of the suit, before trial. For example, if a defendant in a suit for copyright infringement takes the defense that the subject matter in which copyright allegedly vests, is ineligible for copyright protection since it falls outside the definition of “work” under the Indian Copyright Act, 1957, it may be possible for a court to reject the plaint and decree the suit on that ground alone if it concurs with the defendant.

Another provision which may be invoked to obviate the need for trial is Order 12, Rule 6, which empowers a court to pronounce judgment and decree a suit on the basis of admissions of fact made by a party to the suit in a pleading or otherwise, orally or in writing. This would, however, require such admission to be unequivocal, unambiguous, and material to the claim of the plaintiff or defense of the defendant, as the case may be. If there is scope for more than one plausible interpretation of the fact or further evidence needs to be led in relation to that fact, a court may deem it fit to allow the suit to proceed to trial on the ground that a clear-cut case of admission as required under Order 12, Rule 6 has not been made out by the applicant.

A suit may also be decreed in terms of a settlement arrived at by the parties under Order 23, Rule 3. While a judgement delivered under Order 7, Rule 11 or Order 12, Rule 6 is appealable, a consent decree is not unless the terms were arrived at by fraud or misrepresentation.

Summary judgment under Order XIIIA of the CPC

The CPC as amended by the Commercial Courts Act, 2015, has provided yet another way to decree a suit of a commercial nature without it having to go through the motions of a conventional trial. Order XIIIA of the amended CPC, which I have discussed once earlier in the series, provides a mechanism under which a summary judgement may be delivered in commercial suits if the conditions set out in the provision are satisfied. In a recent judgment of a division bench of the Delhi High Court, I had the privilege of assisting the Court in examining the stage at which Order XIIIA may be invoked, the manner of its invocation and application. I was instructed in this matter by the NCR-based law firm, Sim & San.

The judgement, which I would strongly recommend law students to read, discusses the institution of a suit in great detail with analysis that spans several provisions of the CPC. One of the questions before the Court, perhaps for the first time, was whether it is open for a court to invoke Order XIIIA suo moto in a commercial suit to dismiss it even before issuing summons to the defendant.

In addressing the issue, the Court undertook a detailed examination of the scheme of Order XIIIA, including its placement in the CPC after issuance of summons to the defendant under Order V and before framing of issues in Order XIV. A clear reading of the procedure laid out reveals the following:

  1. An application under Order XIIIA is contemplated to set the ball rolling.
  2. The application may be made at any time after summons has been served on the defendant, but not after issues have been framed in the suit.
  3. The application may be moved by either the plaintiff or the defendant.
  4. What the application must specifically contain has been prescribed in Rule 4 of Order XIIIA.
  5. The respondent to the application must be given a period of 30 days to respond to it.
  6. Apart from the evidence already on record, both parties may lead additional evidence to support their respective contentions.
  7. A date of hearing in the application must be fixed, of which the respondent to the application must be informed.
  8. The necessary grounds on which a summary judgement may be delivered by a court are – (a) that the respondent to the application (either the plaintiff or the defendant) has no real prospect of succeeding in the suit and (b) there is no compelling reason why the suit should not be disposed of before recording of oral evidence.
  9. Rules 6, 7, and 8 set out the various orders that a court may pass in deciding such an application.

Nowhere does Order XIIIA permit a court to invoke and apply this framework suo moto, much less dismiss the suit even before the defendant enters appearance. Apart from the fact that Order XIIIA does not empower a court to do so, such power, if it had been vested, would have been at loggerheads with the adversarial legal system followed by Indian courts. Extracted below are the relevant observations of the Division Bench in this regard:

“23. From the provisions laid out in Order XIIIA, it is evident that the proceedings before Court are adversarial in nature and not inquisitorial. It follows, therefore, that summary judgment under Order XIIIA cannot be rendered in the absence of an adversary and merely upon the inquisition by the Court. The Court is never an adversary in a dispute between parties. Unfortunately, the learned Single Judge has not considered the provisions of Order XIIIA CPC in this light. 24. In view of the discussion above, since no summons had been issued and obviously no application had been filed by the respondents for a summary judgment, the learned Single Judge could not have dismissed the suit invoking the provisions of Order XIIIA CPC.

  1. In view of the discussion above, since no summons had been issued and obviously no application had been filed by the respondents for a summary judgment, the learned Single Judge could not have dismissed the suit invoking the provisions of Order XIIIA CPC.”

 To me, the court’s recognition and reinforcement of the adversarial nature of the Indian legal system, notwithstanding the amendments made to the discovery mechanisms in the CPC in 2002 and through the Commercial Courts Act, 2015, is one of the highlights of the decision. In the near future, we can expect a few more decisions that revolve around provisions introduced through the Commercial Courts Act.

In the next part, I will proceed with a discussion on commencement of and preparation for trial.

Sai Deepak is an engineer-turned-law firm partner-turned-arguing counsel. Sai is the founder of Law Chambers of J. Sai Deepak and appears primarily before the High Court of Delhi and the Supreme Court of India. He is @jsaideepak on Twitter and is the founder of the blawg “The Demanding Mistress” where he writes on economic laws, litigation, and policy. All opinions expressed here are academic and personal.

Categories
Corporate Specialised

How do e-Wallets like Paytm work?

In the dawn of demonetisation, most of us have found ourselves adapting to new payment mechanisms and methods. The government’s strong push towards a cashless society seems to be ushering in the age of the e-wallet. Paytm alone is responsible for more transactions per day than the combined average daily usage of all the debit and credit cards in India. Mobile wallets, which many of you are using these days, are a type of pre-paid instrument. But what are pre-paid instruments? How do they work?

Here are some frequently asked questions, which should provide some clarity on the conceptual and regulatory framework behind pre-paid instruments in India.

I am hearing this term for the first time. What is a pre-paid instrument?

Pre-paid instruments are payment instruments that facilitate purchase of goods and services, including by way of funds transfer, against the value stored on such instruments. The value stored on these instruments represents the value paid for by the holders of such instruments.

The issuers of pre-paid instruments have tie-ups with various merchants, and you can use the value stored on your instruments to carry out transactions with these merchants.

Ok. That’s a very legalese definition. Did the Reserve Bank of India come up with it? What is the regulatory framework for pre-paid instruments?

Actually, yes! The Reserve Bank of India (RBI) first provided the guidelines on pre-paid instruments (let’s just call them PPIs) in 2009. Over the years the RBI, issued several notifications (yes, they were not as dynamic as today!) in relation to PPIs. It then decided to consolidate all these notifications in a Master Circular (which gets updated on a yearly basis). Pre-paid instruments are subject to the Payment and Settlement Systems Act, 2007.

The latest Master Circular – Policy Guidelines on Issuance and Operation of Pre-paid Payment Instruments in India was notified on 01 July 2016. You can have a look at that here. You will find all the definitions and other details in this Master Circular.

Cool! So I guess then a PPI is a regulated instrument and one needs to have the approval of the RBI to issue one?

Yes. The RBI provides licenses to issue PPIs. All persons proposing to operate payment systems and involved in the issuance of PPIs have to seek authorisation from the Department of Payment and Settlement Systems, RBI, under the Payment and Settlement Systems Act, 2007.

Ok. If mobile wallets are one type of PPIs, what are the other types?

PPIs can be issued as smart cards, magnetic strip cards, internet wallets, mobile accounts, mobile wallets, paper vouchers and any such instrument, which can be used to access the pre-paid amount. A mobile wallet (Paytm, Mobikwik etc.) is one type of PPI. However, this is a dynamic sector and entrepreneurs are devising new prepaid mechanisms everyday.

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Mobile Wallets like Paytm and Mobikwik are Pre-Paid Instruments

Broadly the RBI classifies PPIs into the following types: Closed, Semi-Closed and Open Payment Instruments.

What are Closed System Payment Instruments?

These are payment instruments issued by a person for facilitating the purchase of goods and services from him/it. These do not permit cash withdrawal or redemption. As these instruments do not facilitate payments and settlement for third party services, issue and operation of such instruments are not classified as payment systems. (A pre-paid card in your canteen or a food court can be considered a type of closed system payment instrument.)

What are Semi-Closed System Payment Instruments?

These are payment instruments, which can be used for purchase of goods and services, including financial services at a group of clearly identified merchant locations/establishments, which have a specific contract with the issuer to accept the payment instruments. These instruments also do not permit cash withdrawal or redemption by the holder.

Mobile wallets like Paytm and Mobikwik are semi-closed payment instruments.

What are Open System Payment Instruments?

These are payment instruments, which can be used for purchase of goods and services, including financial services like funds transfer at any card accepting merchant locations (point of sale terminals) and also permit cash withdrawal at ATMs.

Debit cards are open system payment instruments.

Are there any limits in relation to the value that I can store in the PPIs?

Currently, the limit is Rs. 20,000 per month for PPIs where minimum details of the customers have been collected.

This limit can be extended up to Rs 1,00,000 per month after collecting the appropriate KYC (Know Your Customer) documents from the holders.

Ok. So what can I do with my pre-paid instruments?

Let’s only consider semi-closed PPIs from now on, as these are the most commonly used. Your scope of usage of a semi-closed PPI is dependent upon the number of merchants the PPI issuer has tied up with. Generally you can use your PPI for payment of utilities with these merchants and for transferring money to other PPIs.

e.g. Paytm has a tie up with Uber and not with Ola. So you can use your Paytm wallet to make a payment for Uber but not for Ola.

Ok. So what happens to the money after I transfer it to my PPI?

Every PPI issuer (like Paytm, Mobikwik etc.) is required to create an escrow account with a bank, where all the money collected from its customers are credited. This account is a non-interest bearing account. The PPI issuer is required to create a security on this account in favour of the PPI holders (customers like you and me). Therefore the holders are secured and in the event of liquidation/bankruptcy of the PPI issuer, the merchants/PPI holders shall be given preference to the other creditors of the PPI issuer.

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There are strict norms, which regulate any debit or credit of this escrow account. However at no point of time can the amount in the escrow account be less than the aggregate of the balance amount in all the corresponding PPIs and all pending payment instructions in favour of the merchants. So don’t worry, your money is safe with a PPI issuer!

Can I redeem the money stored in my PPI?

No. You are not allowed to redeem your money from a semi-closed PPI. However if that particular PPI is being closed or if the RBI decides to stop this entire product of PPIs (highly unlikely, the RBI usually does not reverse a decision), the customers shall be allowed to redeem the amounts stored in the PPI, within the expiry date of the PPI.

Who can issue PPIs? Are all PPI issuers NBFCs or banks?

Only banks can issue Open PPIs. Non Banking Financial Companies (NBFCs) and other persons can issue Closed and Semi-closed PPIs. These persons need to have a minimum paid-up capital of Rs. 500 lakh and minimum positive net-worth of Rs. 100 lakh at all times. Only companies incorporated in India are eligible.

As mentioned earlier, the authorisation of the RBI is required.

If I keep my money in my bank account it earns me interest. Can I earn interest on the amount stored in my pre-paid instrument?

The money in the wallet or PPI can only be used for transactions against the value stored in such instruments.

You will not earn interest on the amount stored in the wallet.

I heard of an offer where I can get cashback points if I use a mobile wallet. How does this work?

These are usually marketing offers. The merchant may be offering the product at a discount to increase sales. The discounted amount is then credited back into the PPI.

At times, the PPI issuer may also credit the PPI with an additional amount to incentivise customers. A PPI can be funded/reloaded by third parties, so the PPI issuer is transferring the cashback amount to your PPI.

Hope this is of help! Do take some time to go through the RBI Master Circular for more details.

Abhishek is a legal and business strategy consultant with ePaylater, one of India’s first one- click checkout payment solutions. This article should not be construed as legal advice. The views expressed in this article are his personal views and opinions. He can be reached at abhishek.ray@epaylater.in.