Month: January 2014

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Human Rights

Drug-related offences: When midnight raids without a warrant and urine and blood tests are illegal

SuhasaniRao_RainmakerfacultyRecently, questions were raised about the powers of the police and the protections available to the accused when Delhi’s law minister Somnath Bharti, accompanied by members of his party and the police, conducted an impromptu ‘raid’ on the residence of some African nationals, most of them women. Mr. Bharti supposedly took the drastic step — a raid without a warrant —following alleged police negligence of complaints made by other residents of the neighbourhood, of a drugs-and-prostitution racket in the locality.

Two statutes — Narcotic Drugs and Psychotropic Substances Act, 1985 (“NDPS Act”) and the Prevention of Illicit Traffic in Narcotics Drugs and Psychotropic Substances Act, 1988 (“PITNDPS Act”) — govern the offences of the consumption, illegal manufacture, illegal trade, and illegal distribution of narcotic drugs and psychotropic substances in India. The NDPS Act defines offences, prescribes the procedure for investigation including searches, seizure, and arrests, and provides for punishments for each offence. The PITNDPS Act focuses on detention orders.

Somnath Bharti

Both statutes are considered draconian and Indian courts have had to read down their stringent provisions often. For instance, ‘minor offences’ — those offences under the NDPS Act that carry punishments of jail terms less than three years —are now considered “bailable” by the Bombay High Court. In another landmark pro-rights’ judgment, the Bombay High Court found that Section 31-A of the NDPS Act, which provides for the death penalty in certain situations, did not measure up to the procedural safeguards envisaged by the Constitution. It is interesting to note that almost 32 countries in the world prescribe the death penalty for drug related offences, and India is one of these.

Search under the NDPS Act
In the NDPS Act, Chapter V (Sections 41 to 68) enlists the procedure for searches, seizures, and arrests. Search_NDPSAct_drugoffences_corrected.jpgUnder Section 42 — important in the recent context — an officer may search and arrest a person in relation to a drug offence without a prior warrant between sunset and sunrise, only if there is ground to believe that the time required to obtain such a warrant will enable the person to be searched to hide or dispose off the illicit items. In such a case, the officer carrying out the search needs to record his grounds for carrying out the search before conducting the search, along with the information on which his actions are based and send this to his superior officer within seventy-two hours. Section 43 of the NDPS Act provides for searches and seizures in public places (such as hotels and modes of conveyances).

Article 22 of the Constitution of India encapsulates the fundamental rights of an arrested person to be informed of the grounds for an arrest, to be produced before a Magistrate within twenty-four hours, and to mount a defence. This constitutional protection finds application in the NDPS too.

Under Section 50, a person has the right for the search to be conducted in front of a Magistrate or a Gazetted officer. Further, the officer carrying out the search must inform the person being searched of their right to have a Magistrate or a Gazetted Officer present when the search is to be carried out. Moreover, all searches of persons must be done after they have been clearly informed of their rights. Recently in Vijaysinh Chandubha Jadeja v. State of Gujarat, (2011) 1 SCC 609, the Supreme Court stated that any conviction based on the recovery of an illicit item in a search conducted without informing the accused of this right would stand vitiated. It is also a legislative requirement under Section 50(4) that only women police officers may search women.

Protections during arrest

Under Section 42 of the NDPS Act, a person may be arrested without a warrant, on the suspicion of the commission of a drug-related offence. Such an arrest, however, must be immediately followed by the provision of a written order outlining the grounds of arrest and the production of the arrested person before a Magistrate.

The Code of Criminal Procedure, 1973 (“CrPC”), sets out the general criminal procedure related to most penal offences  and fills in the gaps left by the NDPS Act and the PITNDPS Act. Under the CrPC, an arrest may be made by a junior police officer without a valid warrant upon a written order containing the substance of the order for arrest. The person under arrest must be produced before a Magistrate without delay and under Section 41(1)(a) of the CrPC, a person may be arrested without a warrant if there exists ‘reasonable suspicion’ of such a person being ‘concerned’ in a ‘cognizable offence’ (where arrest may be made without a warrant). Needless to say, offences under the NDPS are cognisable.

Extra-judicial testing

New-Programme-LaunchIn recent times, India’s domestic law enforcement has shown signs of disquieting vigilantism. It is a common practise during raids for the police to require all persons present at the venue of the raid to submit to blood or urine tests. This practise is completely extra-judicial. There is no mention in the NDPS or in the PITNDPS of the immediate testing of a person in relation to a drug-offence. Unlike some other laws, such as the Motor Vehicles Act, 1939 that provides for testing for the presence of alcohol in offences of drunk driving, there are no legal provisions under the NDPS Act to permit testing for drug use.

Time and again, the judiciary has asked for strict interpretation and application of stringent laws such as the NDPS, in order to minimise the risk of human rights’ violations. Body searches of an invasive nature, and sampling of urine or blood amount to a violation of the integrity of the human body. Such acts need to be authorised by law. Without specific provisions enabling such actions by law enforcement officials, investigations become fishing expeditions in the murky waters of human rights violations. Just last year, the Supreme Court laid down extensive guidelines on the interpretation and application of the legislative provisions relevant to testing such samples in Thana Singh v. National Bureau of Narcotics. The Court also highlighted the lack of adequate Central Forensic Science Laboratories that could possibly carry out such tests with minimal interference.

While the common practise of the law enforcement authorities to subject persons to such ‘tests’ without legislative or judicial authority is high-handed, it is yet to be more strictly monitored. On the other hand, a legal provision that regulates testing strictly in drug-related offences can also be a used by suspects, since innocence can then be proved on the basis of scientific fact.

Foreigner or not, it is important to know one’s rights when faced with accusations of having committed an offence under a strict legal machinery in place to combat drug trafficking. It is hoped that those tasked with formulating, upholding, and interpreting the law, ensure procedural safeguards at every stage of the criminal justice system in favour of the accused.

(Suhasini Rao is part of the faculty on myLaw.net.)

Note: The post has been edited once since publication.

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What now for the SEBI after Ordinance lapse?

DeekshaSinghIn July and September last year, the Securities Laws (Amendment) Ordinance, 2013 (“the Ordinance”) was promulgated to amend three key components of the securities law statutory framework—the Securities and Exchange Board of India Act, 1992, the Securities Contracts (Regulation) Act, 1956, and the Depositories Act, 1996.

The Ordinance was expected to enable the Securities and Exchange Board of India (“SEBI”) to effectively enforce the existing statutory and regulatory framework. We have discussed the provisions of the Ordinance here and here.

Despite being promulgated twice however, the Ordinance lapsed earlier this month and now cannot be reissued. What does this mean for the SEBI?

Diminished powers

Sections 10, 15, and 21 of the Ordinance had enhanced the power of the SEBI to take strict action against defaulters, including:

– attachment and sale of movable property;

– attachment of bank accounts;

– attachment and sale of  immovable property;

– arrest and detention in prison; and

– appointing a receiver for the management of the movable and immovable properties.

New-Programme-LaunchExercising the new powers it had been seeking for a long time, the regulator passed over 300 attachment orders for recovering close to Rupees 1,700 crore from defaulters. The lapsing of the Ordinance will not affect these orders, as they were made while the Ordinance was still in effect. However, the SEBI cannot pass such orders any longer even for defaults that may have occurred while the Ordinance was still in effect. While SEBI can adjudicate and declare fines and penalties against defaulters, they can no longer proceed against the property of defaulters or carry out arrests for non-compliance with orders.

New regulations

The Ordinance gave additional powers to the SEBI including the power to conduct search and seizure of persons and premises. The SEBI could also call for information and records relevant for information, including telephone call data records. Pursuant to the establishment of these new powers, the SEBI had, earlier this month, also issued the SEBI (Procedure for Search and Seizure) Regulations, 2014. Naturally, now that the SEBI no longer has the powers of search and seizure (more about those powers here), these regulations are no longer relevant.

At the same time that the search and seizure regulations were issued, SEBI had also issued the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2014. These regulations established a proper procedure for cases involving settlement, including eligibility for settlement, application and so on. The SEBI Chief has expressed the view that the settlement regulations mentioned above were issued while the Ordinance was in effect, and therefore, they continue to have the force of law.

My view is that while the SEBI Chief may be right about any settlements made under the regulations while the Ordinance was still in effect, the argument cannot be extended to mean that the SEBI has the power to issue settlement orders under the regulations now. The Preamble to the regulations clearly states:

“In exercise of the powers conferred by section 15JB of the Securities and Exchange Board of India Act, 1992, section 23JA of the Securities Contracts (Regulation) Act, 1956 and section 19-IA of the Depositories Act, 1996 read with section 30 of the Securities and Exchange Board of India Act, 1992, section 31 of the Securities Contracts (Regulation) Act, 1956 and section 25 of the Depositories Act, 1996, the Securities and Exchange Board of India hereby makes the following regulations to provide for the terms of settlement and the procedure of settlement and matters connected therewith or incidental thereto, namely:”

The sections mentioned in the initial part of the Preamble were all inserted by the Ordinance, and since the Ordinance has now lapsed, these regulations cannot be made applicable to proceedings against defaulters. The SEBI should issue a revised set of regulations for now, without making reference to the amended sections introduced by the Ordinance.

The lapsing of this Ordinance is a setback to the growth of the SEBI, which had been armed to cope with the large number of securities laws defaulters in our country. We can only hope that the positive effects of this Ordinance are not rendered meaningless and that an amendment is enacted giving the SEBI the necessary powers to effectively regulate our markets.

(Deeksha Singh is part of the faculty on myLaw.net.)

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State aid to Spanish football clubs cannot be justified using the Market Economy Investor Principle

SudiptoSircar_mylaw.netRecently, the European Commission (“the Commission”) commenced an investigation into the funding of seven Spanish football clubs. The Commission Vice President in charge of competition policy, Joaquín Almunia said, “Professional football clubs should finance their running costs and investments with sound financial management rather than at the expense of the taxpayer. Member States and public authorities must comply with EU rules on state aid in this sector as in all economic sectors.” The Commission will investigate the tax privileges of four clubs including Real Madrid and Barcelona, assess a widely reported land transfer between the City of Madrid and Real Madrid, and examine guarantees given by the state-owned Valencia Institute of Finance for loans that were used to finance the three Valencia clubs while those clubs were seemingly undergoing financial difficulties.

Sport and competition law in the EU

Sport has a significant role in the European Union’s economy. According to the European Commission (“EC”), it represents 3.7 per cent of the EU’s GDP and employs fifteen million individuals. Football constitutes the major chunk. It should not come as a surprise therefore, that the Union of European Football Associations (“UEFA”) and the clubs affiliated with it are no strangers to competition law investigations.

A number of concerns have occupied these investigations and final judgements. The joint sale of sports media rights was at issue in the U.E.F.A. Champions League, the F.A. Premier League, and the Bundesliga decisions, while the joint acquisition of sports media rights came under scrutiny in Eurovision I  and Eurovision II. The European Court of Justice has confirmed that the commercial exploitation of sporting events is covered by E.U. competition rules (the MOTOE case), and in the Meca Medina Case, the Court finally held that the compatibility of sporting rules with EU competition law should be examined on a case-by-case basis.

State aid in EU competition law

The Treaty on the Functioning of the European Union (“TFEU”), under Articles 107 to 109, provides the Commission with the power to deal with aids provided by member states to their domestic industry or enterprises, which could distort competition in the internal market.

Article107TFEU_stateaid

The second and third clauses of Article 107 provide for the situations that the Commission shall and may respectively, consider as compatible with the internal market. Article 108 provides for the procedure for monitoring any state aid and the consequence for any state aid that is incompatible with the internal market. Council Regulation 659/1999 and Commission Regulation 794/2004 were framed under Article 109. Commission Directive 2006/111/EC on “the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings” is also relevant to this discussion.

Why is state aid a problem?

To understand why this investigation is in progress today, we must turn to a report on the financial health and status of professional football clubs, Club Licensing Benchmarking Report Financial Year 2008, published by the UEFA in 2008 during Michel Platini’s term as President.

Sports-LawAccording to the report, most professional football clubs were facing recurrent losses. It warned of a dire financial outlook for European clubs and blamed it on the constant increase in players’ salaries, which amount to more than sixty per cent of a club’s expenses. The most important leagues — for the sport and for the economy — were (ironically) the ones with the greatest aggregated debt. The report advocated “financial fair play”.

Many clubs were registered as companies and shareholder contributions and other sponsorship helped, but several clubs survived on public intervention. State aid appeared in several guises including direct subsidies, sponsorship under non-market conditions, non-collection of tax or social security debts, and aid for the construction of sports infrastructure. Some of the allegations made by the Commission in relation to the Spanish clubs, paint exactly such a picture.

Therefore, this is a much-delayed investigation and has probably been triggered by public sentiment following the financial crisis. In fact, the present investigation is not unprecedented. In March 2013, the Commission had opened an investigation into the public funding of five professional Dutch clubs, including PSV Eindhoven.

MEIP

Subject to a caveat that it is a prima facie opinion based on the facts already available in public domain, the Commission does seem to have a case. At the time of writing, the E.C. was negotiating confidentiality issues with the parties.

Salaries of players account for a large share of a Spanish football club's expenses.
Salaries of players account for a large share of a Spanish football club’s expenses.
(Photo above is from Jan SOLO’s photostream on Flickr. Image alone published under a CC BY-SA 2.0 license.)

Under E.U. competition law, one of the principles for the justification of state aid is the Market Economy Investor Principle (“MEIP”), according to which public interventions in favour of market actors that carry out economic activities can be considered free of state aid within the meaning of EU law when they are made on terms that a private operator would have accepted under market conditions. If the MEIP is not respected, the public interventions will constitute state aid within the meaning of Article 107, because they confer an economic advantage on the beneficiary that its competitors would not have. I find it very hard to justify the measures and subsidies in favour of these clubs under this principle. Strictly on economic terms, the clubs should have either downsized or closed down a long time ago. It is quite possible however, that the clubs and the Commission will choose to settle any penalties and work out a formula for the gradual withdrawal of state aid.

(Sudipto Sircar, an Advocate at the Delhi High Court is the founder of the Indian Competition and Anti – Trust Blog. You can reach him at sudiptosircar@outlook.com)

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Time to provide a regulatory framework for health insurance

DeepaMookerjee.jpgWe all know the importance of health insurance. With the advent of cashless health insurance policies, the insured do not need to dip into their own pockets to pay medical bills. The hospital is reimbursed directly by the insurance company. This protects the insured from incurring high expenses due to medical claims, treatment, and sudden surgery or hospitalisation. Having a sound health insurance policy acts as a boon for the elderly.

So given its importance, one would expect a well thought-out regulatory regime governing the manner of setting up and operating health insurance companies. That is not the case.

The term ‘health insurance business’ is not defined in the Insurance Act, 1938 (“Insurance Act”). It only defines general, life, and miscellaneous insurance. What is even more interesting is that the IRDA (Registration of Indian Insurance Companies) Regulations, 2000 (which sets out the manner in which insurance companies should be set up) only recognises two types of insurance companies — life insurers and general insurers. There is no mention of health insurance or insurers.

To cover this gap, as a matter of practice, the Insurance Regulatory and Development Authority (“IRDA”) considers health insurance a mixture of life and general insurance business. It currently permits both life insurers and general insurers and also stand-alone health insurance companies to sell health insurance products. Examples of stand-alone health insurance companies include Star Health Insurance and Apollo Munich Health Insurance. Recently, the IRDA has also issued the detailed IRDA (Health Insurance) Regulations, 2013, governing the terms and conditions of health insurance policies.

The term ‘health insurance’ has been defined for the first time in the IRDA (Health Insurance) Regulations, 2013 as the means of effecting insurance contracts which provide for sickness, medical, surgical, or hospital expense benefits including assured benefits, long-term care, travel insurance, and personal accident cover. These regulations however, only provide clarity on how a health insurance policy should be structured, and not on how an insurer should be set up or regulated.

While the IRDA has been notifying circulars and regulations to bring health insurance within the fore of its regulations, there is still some way to go before we can say there is a clear regualtory framework.

For instance, the Insurance Act states specifically that the minimum paid-up capital for a life and general insurer is Rupees 100 crore. Health insurers are also forced to comply with this requirement since health insurance is considered a sub-set of either life or general insurance. There is no separate limit specified for health insurance.

Perhaps the way to go, is to look at the changes proposed in the Insurance Laws (Amendment Bill), 2008 (“Bill”) which seeks to bring sweeping amendments to the Insurance Act. This Bill seeks to define health insurance and also insert a new provision for capital requirements for health insurance companies. As part of the considerable debate on this area, the Ministry of Finance has prescribed a reduced minimum paid-up capital requirement of Rs. 50 crore for health insurance companies, in order to facilitate the growth of health insurance in the country and reduce any entry barriers to a priority sector in the insurance space.

The views of the Ministry of Finance have not been accepted by everyone. Existing insurers such as Bharti AXA General Insurance Company and ICICI Lombard have for instance, stated that given the infrastructure and the service parameters required to reach the rural masses, the minimum capital requirement for heath insurance companies should remain at Rupees 100 crore. The success of the health insurance business depends to a lager extent on its credibility amongst the customer groups, which would entail substantially large startup costs. Coupled with large infrastructure and claim servicing requirements, a higher minimum paid up capital is required. In fact, the Standing Committee of Finance in its report recommended a minimum limit of Rupees 100 crore.

While it appears from public reports that this recommendation has not been incorporated in the current draft of the Bill, it is encouraging that such discussions are taking place. Unfortunately, the Bill is yet to see the light of day, though the Government has been keen to push it ahead in Parliament. It is time the indsutry woke up to the fact that health insurance is very specialised and requires deeper thought. Discussions such as the one above are few and far between and need to be expedited to provide a regaultory framework for health insurance.

(Deepa Mookerjee is part of the faculty on myLaw.net.)

Categories
Human Rights

[Video] Forest Rights Act encourages people to improve their land and regenerate forests: Ambrish Mehta

http://www.youtube.com/watch?v=Agx48qg1jYM&feature

The implementation in the state of Gujarat, of the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 (“the Forest Rights Act”), was the subject of a panel discussion at the India International Centre in New Delhi yesterday.

The distribution of land titles to members of forest dwelling communities is a key part of the law and about eight months ago, the Gujarat High Court chided the state government for not following the law while handling claims for titles. Acting on a Public Interest Litigation filed by an NGO named ARCH — Action Research in Community Health and Development, the Court ordered the state government to review all the claims to title that it had previously rejected. The Court also ordered the government to consider new types of evidence while evaluating the rejected claims and any new claims filed under this law.

Speaking on the panel, Ambrish Mehta, an ARCH trustee, placed the rights of the tribal cultivators of Gujarat in historical context. The conference was organised by the Centre for Policy Research, the Christian Michelsen Institute, and the University of Bergen.

Extracts from the edited transcript of Mr. Mehta’s talk:

ForestRightsGujarat’s tribal belt, in the eastern part of the state and neighbouring Rajasthan, Madhya Pradesh, and Maharashtra, had been largely ruled by Rajput kings. These kingdoms had British residents and the land settlement processes were quite sophisticated. Technically, the tribals were tenants of the concerned jaagirdaar or similar revenue authority. They were also forced to supply labour to the jaagirdar, which was a system similar to serfdom. At that time, even though the forests were owned by the kings, local communities could influence the way they were used. The British then nationalised the forests and reached an arrangement to exploit the timber from the Dang forests in exchange for a pittance. After Independence, the forests became reserve forests. Many people — even those who were cultivating — lost their land and were instead declared encroachers. Most of the land in villages was reserve forest and the communities did not even have rights to the forest produce.


The most serious deforestation in Gujarat also happened under the aegis of the Forest Department and in the name of scientific forest management. During the sixties and the eighties, the most productive mixed forests were felled to raise fast-growing teak plantations.

The Forest Rights Act came in this context and gave the tribals rights over the lands they were cultivating and rights over forest produce, including bamboo. They also have the right to manage forests as community forest resources.

We have been fighting an uphill battle with the state government for a proper implementation of the Act. Even though about 1,82,000 claims were filed, only 20,000 of them were approved. The rest were rejected. The Gujarat High Court held in May 2013 that all the rejected claims had to be reviewed and that all the evidence the government did not consider must be taken into account.

Previously, people did not act in the interests of the environment because they did not own anything. Once the rights came, they immediately started not only improving their land but also protecting and regenerating the forests. In many areas, there are forest regeneration committees. The enthusiasm had dipped when the government rejected their claims but now, with the judgment of the High Court, people are once again taking steps to improve their land and their cultivation.

(Aju John is part of the faculty on myLaw.net.)