CAMPUS LAW CENTRE

STUDENT LAW REVIEW

Volume I Issue I

April 2013
A Students Union Publication

ISSN 2321-0028

CAMPUS LAW CENTRE

STUDENT LAW REVIEW
Volume I

Issue I

April 2013

Editorial Board 2012-2013

Editor-in-Chief
Siddharth Peter de Souza

Anu Chowdhry

President, Students Union

Ajitesh K Kir

Editors
Udit Rastogi

Patronin-Chief
Professor J.L. Kaul

Sumedha Sarkar

The Campus Law Centre Student Law Review (CLCSLR) seeks to publish and provide
avenues for student research and scholarship.
Published by the Students Union, Campus Law Centre, Faculty Of Law, University of
Delhi.
The publication of this Volume has been generously supported by Singh and Associates.
No reproduction, storage or transmission except via fair dealing of any part of this
publication may take place without prior written permission of the Students Union of
Campus Law Centre.
Please note that though every effort has been made to ensure that the information in
CLCSLR is accurate and appropriately cited/referenced, neither the Editorial Board nor
the Students Union shall be held liable or responsible in any manner whatsoever for any
consequences resulting from inaccuracies, errors or views taken by authors in the Journal.
Further, the views expressed by the authors are not necessarily those of the Editorial Board
or of any sponsors of Campus Law Centre Student Law Review.

Campus Law Centre Student Law Review 2013. All rights reserved.

ISSN 2321 0028 (Print)

Supported by:
Mr. Manoj K. Singh,
Managing Partner

Singh and Associates

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CAMPUS LAW CENTRE

STUDENT LAW REVIEW
Volume I
Foreword

Issue I

April 2013

CONTENTS

vii

Editorial

ix

Acknowledgments

xi

Articles
1

Capital Punishment and the Cultural Discourse of Femininity

in the Offence of Rape
Vanya Kumar

Child Sex Abuse: The Menace Decrypted

Susanah Naushad & Amana Ranjan

21

Democratic Dilemmas in Justifying Murder: The Case of

Targeted Killings under International Law
Nidhu Srivastava

47

Collective Dominance: How Does India Fare?

Charu Rawat

67

Anti-Competitive Implications of Reverse Payment

Settlements with Special Reference to India
Anirudh Krishan Gandhi and Hitakshi Mittal

87

GAAR-Is India Ready for a Double-Edged Sword?

Meghna Chandra

107

Understanding Traditional Knowledge in Post TRIPS Regime

Mayank Kapila

133

From Warsaw to Montreal-Ramifications of Developments in

Aviation Liability: An Indian Perspective
Swati Singh Baghel and Gargi Rajvanshi

151

iii

The Dilemma of Prospective Overruling: One Step Forward or

Two Behind?
Prithvi Rohan Kapur

163

10 The Curious Case of Shares with Superior Rights: Is The Ban

Imposed on Their Issue Justified?
Srinivasan Ramaswamy

175

11 Smile, Youre on Candid Camera Finding Solutions for

Privacy Violations by the Paparazzi in the Right of Publicity
Samira Varanasi

193

iv

A tribute to
Justice Jagdish Sharan Verma
(1933 2013)
Who inspired and believed in young people

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VOL.1 ISSUE 1

FOREWORD
I am pleased to introduce the inaugural issue of the Campus Law
Centre Student Law Review. An initiative of the Students Union, it is the
first ever student-edited and peer reviewed publication of the Campus Law
Centre, Faculty of Law (University of Delhi).
The Law Review has two primary goals. First, it will provide a forum
for students to discuss, debate and deliberate on contemporary legal issues.
Second, the Review will fulfil the needs of the Campus Law Centre student
community by encouraging writing, editing and research among the student
community. It will be an annual, peer reviewed publication with a student
Editorial Board committed to promoting legal scholarship.
Campus Law Centre has an outstanding tradition of producing some
of Indias most erudite legal minds and it is this culture that needs to be
preserved and nurtured by creating opportunities for law students who will
eventually take up a career at the Bar or the Bench.
The inaugural issue of the CLCSLR covers multidisciplinary issues
such as Capital Punishment in Rape statutes, developments in Indian
Competition Law, GAAR and tax avoidance, Aviation Liability and Doctrine
of Prospective Overruling amongst others.
I would like to commend the Editorial Board and Ajitesh K Kir,
President, Students Union, for this commendable effort and look forward to
the many contributions it is sure to make to legal discourse in the future.
Professor J.L. Kaul
Professor in-Charge
Campus Law Centre
April 2013
New Delhi

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EDITORIAL
In the academic session of 2012-2013, the Students Union of
Campus Law Centre, Faculty of Law, University of Delhi, resolved to start a
Student Law Review in the hope of encouraging legal research and
scholarship within the student community. The principle that the Students
Union sought to uphold was that the initiative would be entirely studentdriven in order to enable capabilities and engineer creative freedom.
The Campus Law Centre Student Law Review (CLCSLR) was
established in October, 2012 with the aim of promoting the inter-disciplinary
study of issues concerning law and society. The past year has been a
fascinating one in the legal arena, giving the Editorial Board the exciting
opportunity to select articles that are both unique and original contributions
to existing literature.
The inaugural edition of CLCSLR received an overwhelming
response with over 110 submissions from students across law colleges in
India and abroad. The quality and diversity of submissions affirmed our
belief that an innovative spirit was alive and prospering within the student
community. The task before the Editorial Board was therefore a difficult and
challenging albeit exciting one.
In an effort to ensure the highest quality of student research, the
Editorial Board invited a team of accomplished Reviewers who included
graduate students at reputed Universities across the world, Supreme Court
and High Court Law clerks and young working advocates. Their inputs and
comments greatly facilitated the process of preliminary and final selection.
The present volume of CLCSLR is interdisciplinary in nature and
covers a wide spectrum of issues. Vanya Kumar has examined the provision
of capital punishment in rape statutes to ascertain whether such punishment
is in fact antithetical to the interests of the victim. Amana Ranjan and
Susanah Naushad have researched legislative attempts in India to tackle the
menace of sexual crimes against children as well as critically examined The
Protection of Children from Sexual Offences Act, 2012. Nidhu Srivasatava
has discussed the normative implications of the use of targeted killings by
States through an analysis of the legal basis and limitations of such actions.
Two articles in this volume deal with the nascent and evolving
domain of Competition Law in India. Charu Rawat has provided an analysis
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of the viability of introducing the concept of collective dominance in India

while Anirudh Krishan Gandhi and Hitakshi Mittal have examined the
implications of reverse payment settlement agreements on competition
through a review of policy measures in the US and other jurisdictions.
Equally fascinating is Meghna Chandras examination of the need for
India to have systematic and time-bound General Anti Avoidance Rules
(GAAR) in place in order to check tax avoidance and deal with structural
loopholes in order to make the tax authorities more effective and powerful.
Mayank Kapila has discussed the need to understand traditional knowledge
as a worthy resource for creation of intellectual property in the post TRIPS
regime.
Swati Singh Baghel and Gargi Rajvanshi have discussed the
developments in aviation liability, by addressing the ambiguities and
deficiencies of the Indian legal framework and the need to fulfil the
objectives adopted by the Montreal Convention. Prithvi Rohan Kapur has
provided a critical analysis of the doctrine of prospective overruling and
examined the utility of and challenges that the doctrine poses. Srinivasan
Ramaswamy examines the ban imposed on shares with superior rights and
interrogates the rationale and justification for such a ban. The Volume
culminates with Samira Varanasis discussion on the relatively nascent Right
to publicity in India and the impact that such a right would have on pertinent
questions on privacy.
With this array of captivating articles, CLCSLR has begun an exciting
journey of engaging with important legal questions by providing a platform
to facilitate student research and scholarship.
It is the firm belief of the Board that in the years to come, CLCSLR
will continue to grow in both its frequency of publication and quality with
the continued support of the Faculty of Campus Law Centre and law
students across the world. On a final note, the Editorial Board hopes that
this volume presents a compelling read and offers fresh insights on these
issues of contemporary legal relevance.
Siddharth Peter de Souza, Ajitesh Kir, Anu Chowdhry, Udit Rastogi
and Sumedha Sarkar
April 2013
New Delhi
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ACKNOWLEDGMENTS
The Editorial Board would like to thank Mr. Aayush Agarwala, Mr.
Abhinav Jaganathan, Mr. Aditya Mathur, Ms. Mythili Vijay Kumar Thallam,
Ms. Preetika Mathur, Mr. Rohan Alva, South Asia Human Rights
Documentation Centre, Ms. Shivambika Sinha, Mr. Swapnil Gupta, Mr.
Utkarsh Saxena, Ms. Vindhya Srinivasamani, Ms. Vrinda Bhandari and Mr.
Zachariah Jacob for their invaluable counsel and assistance during the review
process, Mr. Abhishek Subarno for his assistance in publicity efforts and Ms.
Achala Upendran for her expert advice with the final manuscript. The
Editorial Board would also like to thank Mr. Anurag Rawal, Former
President of the Students Union for his support.
The publication of the volume would not have been possible without
the goodwill of Mr. Manoj K. Singh, Managing Partner, Singh and Associates
who supported and ensured the establishment of this Review.

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CAPITAL PUNISHMENT AND THE CULTURAL

DISCOURSE OF FEMININITY IN THE OFFENCE
OF RAPE
Vanya Kumar*
This article seeks to establish that the provision of capital punishment in
rape statutes, as well as the guiding rhetoric behind it, is antithetical to the interests
of the rape survivors, as it premised on the idea of rape as a fate worse than death.
The equation of rape with death is purely linguistic, however, it functions as
justification for a societal order that ostracizes rape victims and renders them
socially dead. Further, in this context, models of ideal victims are created, as
defined through Victorian notions of chastity, who deserves legal justice (and whose
rape is deserving of capital punishment), while relegating the other survivors and
their narratives to the margins. The marital rape exemption suggests that it is not
the violence, but rather the sexual nature of the crime which is often highlighted and
leads to the creation of categories of legitimate rape. This legitimacy not only
devalues the victim, but also creates hierarchies which are often contingent upon the
sexual history of the victim. It is further argued that such a penalty for a nonhomicide crime is contrary to all theories of deterrence and that the fundamental
message that is advocated through such a provision is primarily to the victim rather
than the perpetrator as it normalizes the need for sexual surveillance and moral
policing of the body of the woman and lays a greater burden of proof on her conduct.
I. INTRODUCTION

It is a fate worse than death.

It is true rape is a most detestable crime, and therefore ought severely and impartially to be
punished with death; but it must be remembered, that it is an accusation easily to be made
and hard to be proved, and harder to be defended by the party accused, tho never so
innocent.
Sir Matthew
Hale, 16761
* Ist Year, LL. B, Campus Law Centre, Faculty of Law, Delhi University
1 Blackstone, William; Coleridge, John Taylor: Commentaries on the laws of England: In
four books, Volume 2, Pg. 215.
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The recent gangrape of a 23-year-old victim in Delhi and the

widespread protests that followed garnered much attention. So much so that
the outrage acted as the immediate framework for the introduction of The
Criminal Law (Amendment) Bill, 2012 in the Lok Sabha on 4 December
2012 by the Minister of Home Affairs, Mr. Sushil Kumar Shinde. This Bill
seeks to amend the Indian Penal Code, 1860, the Code of Criminal
Procedures, 1973, as well as the Evidence Act, 1872, specifically in the matter
of sexual offences. Following this Bill, the Criminal Law (Amendment)
Ordinance, 2013, was promulgated by the President of India, Pranab
Mukherjee, on 3 February 2013. This Ordinance has been criticized on the
grounds that it ignores some of the major provisions envisaged by the Justice
Verma committee2, especially in the matter of marital rape and the
amendment of the Armed Forces (Special Powers) Act. However, External
Affairs Minister, Salman Khurshid, has stated that the ordinance serves the
sole purpose of addressing the sense of urgency within the country in the
interim period before the Bill is formally brought before the Parliament.3
One of the most contentious legal issues to have arisen from the case
in question is in relation to the repeated call for the provision of death
penalty in anti-rape laws. This call, while rejected by the Justice Verma
Committee, on grounds that it was a unanimous suggestion of even women
leaders who have been fighting for the cause for decades. The current trend
against the death penalty4 found partial validation in Section 8, Criminal Law
(Amendment) Ordinance, 2013, which under Section 376A has included a
maximum provision of death as punishment for instances of rape which
result in death or the persistent vegetative state of the victim.5
Coming as it did soon after the execution of Ajmal Kasab and just
before the execution of Afzal Guru, respectively the third and fourth
executions in India since 1995, this demand has also further fuelled the
debate concerning the sustainability of the death penalty in a democratic
state, especially in an era wherein humanitarian concerns, as voiced by
organisations ranging from intergovernmental bodies like the UNHRC and
non-governmental organisations like Amnesty International, have become
Constituted to recommend amendments to criminal law relating to quicker trial and
enhanced punishment for rape accused.
3 Open to revisions in anti-rape bill: Govt: Times of India. TNN 3 Feb 2013,
4 Didn't Talk to Shinde Even Once: Justice Verma: Outlook India, 27 Jan 2013
5 The Criminal Law (Amendment) Ordinance, 2013, Pg. 10
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the recognised basis, as well as the primary goal, of various legal systems
across the world. Interestingly enough, India was one of the 39 countries to
vote against a recent UN General Assembly draft resolution calling for a
global moratorium on executions6 with an agenda of further abolishing the
death penalty, claiming the States non-encroachable sovereign right to
determine its own legal system. Two days after this oppositional stance,
Kasab was executed.
The demand for capital punishment for rape has overwhelmingly
echoed from all strata of civil existence, including noted politicians like the
Leader of Opposition in the Lok Sabha Sushma Swaraj7, Punjab Chief
Minister Parkash Singh Badal8, AIADMKs V. Maitreyan and DMKs
Vasanthi Stanley9. In this context, it is noteworthy that within the scope of
the individual case of the Delhi gang-rape victim, no separate law need be
enacted in order to facilitate the application of the legal provision of the
death penalty to the alleged perpetrators of this particular crime. The accused
had initially been booked under sections 307 (attempt to murder), 201
(destruction of evidence), 365 (kidnapping or abducting), 376 (2)(g) (gang
rape), 377 (unnatural sexual offences), 394 (voluntarily causing hurt in
committing robbery) and 34 (common intention) of the Indian Penal Code.10
However, the unfortunate death of the victim ensured that section 302 of the
Indian Penal Code, the legal provision for murder, could be added alongside
the other offences listed under the Act.
II. CAPITAL PUNISHMENT IN INDIA AND THE RAREST OF RARE
DOCTRINE.
A. JUDICIAL PRONOUNCEMENTS

In India, culpable homicide amounting to murder is at present a

crime for which the death penalty may be invoked. Nonetheless, as is well
known, capital punishment in India is limited by the rarest of rare doctrine.
This doctrine was evolved through the ruling of the Honourable Supreme

Moratorium on the use of the death penalty (Document A/C.3/67/L.44/Rev.1)

Indian Express. N.p., n.d. Web. 15 Jan 2013.
8 Parkash Singh Badal Wants Death for Rapists, Times of India. N.p., 11 Jan 2013.
9 Delhi Gangrape Shakes Parliament; Jaya Bachchan Breaks Down, Sushma... n.d.: n. pag.
Indian Express. 24 Dec. 2012.
10 Delhi Gangrape: Police Invoke Murder Charges against Accused, Indian Express. N.p.,
29 Dec. 2012.
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Court in the 1980 case, Bachan Singh v. State of Punjab11, which restricted the
application of the death penalty to cases wherein the alternative option is
unquestionably foreclosed. The reasoning behind the ruling highlighted that
a real and abiding concern for the dignity of human life postulates resistance
to taking a life through law's instrumentality. In Rajendra Prasad v. State of
U.P12 it had earlier been held that the imposition of the death penalty must
relate not to the crime but to the criminal and that it was to be awarded only
when security of state or public order was threatened. In Machhi Singh v. State
of Punjab13 the Apex Court established that the distinguishing factors of a
rarest of rare case are:
1. Is there something uncommon about the crime which renders the
sentence of imprisonment for life inadequate and calls for a death
sentence?
2. Is the crime such that there is no alternative but to impose a death
sentence even after according maximum weightage to the mitigating
circumstances which speak in favour of the offenders?
In other judicial pronouncements, including Swamy Shraddananda v.
State of Karnataka14, the Supreme Court further restricted the grounds for
capital punishment by stating that the measurement of the rarest of rare
criterion is not only qualitative, that is, according to the subjective nature of
the crime, but also quantitative. In Santosh Bariyar v. State of Maharashtra15 the
Apex Court stated that the burden is on the prosecution to prove that there
is no possibility of rehabilitation and life imprisonment will be futile. It is
understood that the demand for death penalty in cases of rape wherein the
victim dies would be irrelevant, as Section 302 of the IPC and the Criminal
Law (Amendment) Ordinance, 2013 incorporate the same. The call for the
death sentence therefore, in order to create a distinction from what the law
already provides for, must pertain to non-homicidal rape. That is, through the
public discourse, rape in itself is sought to be made a capital crime. It is
noteworthy that Section 8 of the Criminal Law (Amendment) Ordinance,
2013 has sought to contain the demand, by creating an aggravated category

AIR 1980 SC 898

1979 AIR 916
13 1983 SCR (3) 413
14 2008 AIR 3040
15 Criminal Appeal No. 452 of 2006
11
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of rape contingent upon the condition of the victim, without including nonhomicidal rape per se within its ambit.
B. GLOBAL SCENARIO

It is therefore obvious that the legal system is increasingly moving

away from the death penalty, fortified perhaps by the global trend, as
international opinion of basic, standardized human rights gains worldwide
credence through general State consensus. According to a report published
by Amnesty International to mark the 10th World Day Against The Death
Penalty16, the number of abolitionist countries currently stands at 97, as
opposed to 80 in 2003, while 75 States are party to the Second Optional
Protocol to the International Covenant on Civil and Political Rights
(ICCPR-OP2), aiming at the abolition of the death penalty, a third having
joined in the last decade. Further, it was noted that even in retentionist
countries, severe legal restrictions are placed on the application of the death
penalty; for instance, in the case of Susan Kigula and 417 ors v. A.G.17 the
Supreme Court of Uganda found that prolonged periods on death row had
an adverse effect on the condemned prisoners physical and mental state and
thus held it unreasonable to hold a person beyond three years after
confirmation of the sentence.
Keeping in mind both the national and global scenario; punishment
for rape, whether homicidal or non-homicidal, would necessarily be bound
by the same restrictions imposed by Supreme Court judgments and
guidelines. Within this context, the position of non-homicidal rape becomes
important. According to the data provided by the National Crime Record
Bureau - the statistical wing of Indian Police under the Ministry of Home
Affairs, the reported cases in 2011 marked an increase of 873% from 1971
when the first rape case was recorded by the Bureau. However, these
statistics only underscore the reported cases; in 1995, a survey conducted by
the Institute of Development and Communication (IDC) in Punjab observed
that for every case of reported rape, there were 68 unreported instances.
While comparable statistics are not available for other cities, the widely-cited
number for the rest of the country is 1:10.18
1610th

World Day Against the Death Penalty: Ten Years of Progress: Amnesty International: ACT
50/009/2012
17 Constitutional Appeal no.3 of 2006, Uganda.
18Imposing Restrictions on Women like Dress Code Ensures More Violence against them,
Economic Times.N.p., 9th Jan. 2013.
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Within a superficial reading of the concerned data, it is immediately

evident that regardless of the qualitative nature and brutality of individuated
crimes, quantitatively speaking, rape in itself cannot be regarded as an
offence that comes under the doctrine of rarest of rare cases. It is implicit
that the inclusion of the death penalty in the Ordinance is suggestive rather
than absolute, and that judicial discretion will be paramount even in
pronouncing sentences for cases wherein the rape victim dies or enters a
permanently vegetative state. In fact, the sole interpretation of what
constitutes rarest of rare seems to rest in the hands of the higher judiciary;
in a 2013 judgment in Mohinder Singh v. State Of Punjab19a two-judge bench of
the Supreme Court commuted to life sentence the death penalty awarded by
the lower courts to a man accused of raping his minor daughter and killing
both the daughter and his wife20, stating that though the crime was
gruesome and grotesque, it could not be categorized as rarest of rare,
which, of course begs the question as to whether the doctrine can indeed
ever be understood objectively. A study of the Supreme Courts judgments
from 1950-200621 by Amnesty International and the Peoples Union For Civil
Liberties disturbingly highlights that the cases in which the death penalty was
imposed are often indistinguishable from those in which it was commuted.22
III. CAPITAL PUNISHMENT FOR RAPE: LEGAL PROBLEMATICS
Regarding the question of capital punishment for rape, concerns have
also been raised by groups such as Citizens Collective against Sexual Assault,
Sangat23, National Alliance of Peoples Movements, All India Progressive
Womens Association, National Forum for Single Womens Rights, etc.24
that, as in a vast majority of cases the perpetrator is known to the victim, the
possibility of the death penalty being applied will ensure that even fewer cases
are reported, as the victims will either be coerced into keeping silent or may
themselves shy away from assuming responsibility for the possible deaths of
1 Criminal Appeal Nos. 1278-1279 OF 2010
Supreme Court saves from noose man who raped daughter, killed her, wife, The Indian
Express.29 Jan, 2013 URL: http://www.indianexpress.com/news/supreme-court-savesfrom-noose-man-who-raped-daughter-killed-her-wife/1066129/.
21 Lethal Lottery: The Death Penalty in India. 2008. Amnesty International and the Peoples
Union for Civil Liberties.
22Alarming Vengeance, The Telegraph. 14thMarch, 2013.
23 A South Asian Feminist Network
24 Demand Justice and Equality for Women, Say NO to Death Penalty and Violence: Joint
Statement by Womens Groups, India Resists. December 24th, 2012
19
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relatives or friends. Further, if death is introduced as the penalty for both

rape and murder, then it would ensure that, in a low-risk, high-reward
scenario, the rapist would prefer killing his victim rather than risk the
implications of survival. The Supreme Court in various judgments including
State of Punjab v. Gurmit Singh & Ors25 has waived the need for corroboration
of the testimony of a rape victim which seems reliable in itself; however, the
greater the punishment for a crime, the greater becomes the standard of
evidence required for conviction. Rape, as an offence, is extremely hard to
prove beyond reasonable doubt in a court of law, as the case is usually based
on mere circumstantial evidence and lacks witnesses. Realistically, a higher
standard of evidence can only be understood as lowering the conviction rates
further, which are already abysmally low, standing at around 26% of the total
cases that make it to court26. Even now, the discretionary clause in Section
376 of the I.P.C. which allows for lowering the sentence of a rape accused
below the provided minimum of seven years for adequate and special
reasons, is made use of by various courts for biased judgments that often
consider the time elapsed since the incident, as in Baldev Singh & Ors. v. State
Of Punjab27, or the proposal of marriage by the rapist28, as both adequate and
special, and sometimes, grounds for acquittal altogether29. Even in State of
Punjab v. Gurmit Singh30, an otherwise landmark judgment because of the
guidelines laid down to facilitate the understanding of the rape survivor as a
victim rather than accomplice, the accused were sentenced to 5 years
R.I. clearly less than the statutory minimum of 10 years for gang-rape
taking into account that they were aged between 21-24 years of age at the
time when the offence was committed [and have] not been involved in any
other offence [since].

1996 SCC (2) 384

Source: Ministry of Home Affairs.
27AIR 2011 SC 1231. The Supreme Court reduced the sentence of the three appellants,
found guilty of committing gang rape, to the period of only about three and half years
imprisonment already undergone on the inexplicable grounds that the incident had taken
place fourteen years ago and that the perpetrators and victim had all been individually
married since.
28Additional Sessions Judge of Karkardooma court, Justice J M Malik deferred his judgment
by a day and ordered the victim to reply to a proposal by the rapist to marry her,
Manufacturing Consent: Rape verdicts reflect social prejudice. The Times of India
29Mumbai sessions court judge B. C. Singh acquitted Firoz Muneer Shaikh, the 25-year-old
accused in a 2003 rape case, after he agreed to marry his victim, Assault ends in wedlock.
The Times of India,.5 May, 2005
30 AIR 1996 SC 1393
25
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IV. DEATH PENALTY FOR RAPE: OTHER JURISDICTIONS

A. UNDER ENGLISH COMMON LAW

This paradox of the inverse proportionality of sentence to

conviction is indeed why capital punishment for rape was abolished under
English Common Law. The Abolition Bill was introduced by Lord Russell
on behalf of the government in 1841 as juries showed reluctance in
convicting a person of rape, based solely upon the evidence of the alleged
victim, as popular opinion often dictated that the woman may have had an
ulterior motive in bringing forth the charge.31 Following the debates in the
House of Commons, transportation for life32 was instead substituted
under Section 3 of the Substitution of Punishments for Death Act, 1841.
That Indian legislative thinking runs parallel to this discourse of fear of
malicious prosecution is undeniable; the Lok Sabha debates centred on the
Criminal Law (Amendment) Bill of 1983 highlighted the same
unsubstantiated presumption of a variety of cases of false accusations, the
provision of safeguards against which were considered of prime necessity,
even before the rape laws were actually amended. The anxiety that was
articulated in these debates was predictably phallocentric, implying, or even
explicitly stating, that [even if] the woman had not been raped, the man will
surely be raped in court.33 This is one of the major reasons why rape shield
laws34 that curb the defendants ability to cross-examine the sexual history
of the alleged victim were not introduced, even as it is commonly
understood that sexual behaviour evidence has greater prejudicial value
than it does probative value. This can likewise be inferred from the 1996
report by the Delhi-based NGO Sakshi35, wherein 109 judges from the
Supreme Court, district courts and high courts were surveyed, out of whom
68% said that 'provocative' clothes are an invitation to a sexual assault and
55% believed that the moral character of a woman is relevant in sexual
abuse cases. 90% of those surveyed also stated that they would not opt for
Historical development of the offence of rape.
In the Indian scenario, The Code of Criminal Procedure (Amendment) Act XXVI of 1955
(Amending Act, 1955) altogether abolished the punishment of transportation of a term of
years and transportation for life was replaced by imprisonment for life.
33 Moolchand Daga, Lok Sabha Debates, 1983, Vol. 42 (pg. 431)
34According to the Encyclopaedia Britannica: A rape shield law, statute or court rule,
introduced in the late twentieth century, is one that limits the ability of the defendants
counsel to introduce the accusers sexual history as evidence during a rape trial.
35 Sakshi (Organisation). Global Fund For Women. Gender & Judges: A Judicial Point of View.
1996.
31
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legal redress in a case of domestic violence involving their daughter or

other female relative.36 Thus, it can be gathered that this particular type of
evidence serves to undermine the testimony of the victim more at a cultural
level, than at the legal. That the lawmakers are guided by the same cultural
considerations and work within the honour/shame framework is obvious
through the rape laws which were finally enacted with the 1983
Amendment the rape shield laws that would conceal the identity of the
victim from publication and reiterate the discourse of shame were
considered of primary importance, while the rape shield law that could have
led to the exclusion of sexual history of the victim from holding evidentiary
importance was rejected. Thus, the Indian legislative system and the statues
formed therefrom exhibit traits comparable to the English juries, which had
initially led to the abolition of capital punishment under English law.
In a study37 published in 2009, 88% of the top U.S. criminologists
stated that capital punishment does not act as a deterrent to homicide. As
also noted by the Justice Verma committee38 and Amnesty International39,
the death penalty serves no legal purpose in terms of limiting the
occurrences of crime itself. The overwhelming conclusion seems to be that
even if the outraged call for the death sentence in cases of non-homicide
rape is to be catered to by statutory provisions, it will be symbolic at best
and possibly never actually implemented. The very real overhauls that the
provisions of ss. 375/6/7 require, both in terms of the definition of the
crime as well as the question of certainty of punishment, in order to serve
the ends of both public policy and natural justice, will easily be
overshadowed by the grandiosity of the purely metaphorical significance of
the provision of death penalty. The literal spilling of the rapists blood only
has symbolic significance in its correlation with the figurative restoration of
the victims hymen or virginal blood. The moral paralysis of the social
structure can be identified through an exploration of sexual stereotypes and
the cultural construct of purity, wherein retributive justice can be justified
through illusory associations.
If this demand is indeed steeped in rhetoric and more symbolic
than it is legal, then it becomes important to examine what the demand
Judges and the Gender, Outlook India, 3 Nov 2003.
Executions Lower Homicide Rates? The Views of Leading Criminologists. 99 Journal of
Criminal Law and Criminology 489 (2009).
38 Verma panel says no to death penalty: The Hindu. 23 Jan 2013
39 Death sentence may not deter rapists: Amnesty chief. DNA. 22 Dec 2012
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entails; that is, what precisely it serves as a symbol of. Significantly enough,
most of the recent debate and scholarship on capital punishment for rape
has centred on capital punishment in itself, with the advocates and
opponents propounding the pros and cons and efficacy of such a
punishment and the largely humanitarian concerns that it brings to the fore,
without interrogating the specificity of the demand or the more important
question that is implicit within it what distinguishes rape from other nonhomicide crimes and makes it an offence deserving of the death penalty in
the eyes of society?
B. LEGAL DEVELOPMENTS IN THE UNITED STATES

Tracing the parallel developments in the law of the United States in

regard to non-homicidal rape, it is noteworthy that the trend has been the
reverse away from the death penalty rather than towards it. In Rudolph v.
Alabama, three dissenting judges of the U.S. Supreme Court raised
contentions as to the constitutionality of a non-mandatory death penalty for
rape, questioning whether:
1. In light of the trend, both in [United States] and throughout the
world against punishing rape by death, does the imposition of the
death penalty [] for rape violate 'evolving standards of decency
that mark the progress of [our] maturing society?
2. Is the taking of human life to protect a value other than human
life consistent with the constitutional proscription against
punishments which by their excessive severity are greatly
disproportioned to the offenses charged?40
These contentions were obliquely examined in the case of Furman v.
Georgia wherein in a 5 - 4 decision of the Supreme Court, the death penalty
laws of states were effectively suspended as their discretionary application by
the authorized judges was held to be arbitrary and capricious41. However, it
was in Coker v. Georgia that the constitutionality of the death penalty for rape
of an adult woman was challenged and the provision first abolished. It was
held that a state-sponsored death of the rape-accused is a disproportionate
punishment and hence a violation of the Eighth Amendment to the United
States Constitution, which prohibits the federal government from imposing

40
41

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375 U.S. 889 (1963)

408 US 238 (1972)

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cruel and unusual punishments.42 As argued by David J. Karp in his analysis

of the judgment43, two models of excess can be developed in this crime-andpunishment scenario; firstly, the punishment for an offence may be
disproportionate because of a legally insupportable disparity between the
punishment for a particular crime and punishments for other crimes of
apparently more grave nature. And secondly, that the punishment in itself
may be disproportionate in terms of its severity as opposed to the harm
threatened or caused by the crime. Both these models were conflated in the
proceedings on rape in Coker v. Georgia, as, describing the punishment as
grossly disproportionate and excessive, it was explicitly stated that the
reasoning behind the distinction developed between the case of homicide
and non-homicide rape in the judgment was that: rape [] in terms of moral
depravity and of the injury to the person and to the public, does not compare
with murder, which involves the unjustified taking of human life. The
murderer kills; the rapist, if no more than that, does not. Life is over for the
victim of the murderer; for the rape victim, life may not be nearly as happy as
it was, but it is not over and normally is not beyond repair.44
C. SYMBOLIC JUSTICE AND THE INDIAN JUDICIAL BURDEN

While the above judgment has been widely criticized on various

grounds including its alleged disjunction with the lived social realities of rape
victims, it combats one of the most prevalent beliefs that forms the driving
force behind the demand for capital punishment for rape: the idea that rape
is a fate worse than death. This viewpoint, which is continuously reiterated
in the present debates with various parliamentarians referring to the rape
victim(s) as a zinda laash45, implying that a rape survivor (as pointed out by
Flavia Ages, a vocabulary shift from victim to survivor is desirable)46
occupies a liminal space between the dead and the living. That this
perspective has pre-existed in the country, including the governmental
domain of the political elite, can easily be grasped by noting that in 2002, the
then Deputy Prime Minister advocated the death penalty for rape in the Lok

433 U.S. 584 (1977)

Karp, David J. Coker v. Georgia: Disproportionate Punishment and the Death Penalty
for Rape. Columbia Law Review, Vol. 78, No. 8
44 Coker v. Georgia, 433 US 584 - Supreme Court 1977, p. 598
45 Take the shame out of rape. The Indian Express, 28 Dec 2012
46 Agnes, Flavia: No Shortcuts on Rape: Make the Legal System Work. Economic and
Political Weekly, Vol XLVIII No. 2, pp. 12-15
42
43

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Sabha on behalf of the government47 claiming that many members were of

the opinion if someone committed murder, the person was hanged. But for
rape, which was worse than murder, no such punishment is meted out to the
culprit. In which context, the Supreme Court in State Of Uttar Pradesh v. Ram
Sewak And Ors48 restated that penal laws, regardless of the fact that their
deterrence factor were no guarantee in prevention of crime, which could only
be curbed by change brought about in the way of life, thinking and
outlook.49 The judicial burden, therefore, has always been to curb the
societal need for easy solutions, wherein every once in a while a pyrrhic
victory is won by raising a particular instance of violence against women in
India and fighting an emblematic battle for justice in an individuated case,
which does not address the entrenched misogyny within the system or
demand the stricter implementation of prosaic but vital demands, like nontinted vehicle windows and setting up of rape trauma centres, or exclusion of
sexual behaviour evidence like the archaic two-finger test. The worse than
death standpoint often serves to form the rhetorical justification for the
provision of capital punishment. The implicit suggestion, within the same
model of proportionality as suggested above, is that, if rape is worse than
death and death warrants capital punishment, then rape, by default, warrants
the same, at the very least.
V. RAPE STATUTES: RHETORIC AND ACTUALITY
A. PARLIAMENTARY DIALOGUE

However, as is immediately obvious on analysis, this manoeuvre of

equation is purely linguistic; the metaphorical death of the rape survivor is
herein equated with the real death of a homicide victim. The so-called
death of the former is bound by the discourse of shame, wherein there
exists a correlation of family and territory with the body of the woman and
the defilement of one is taken as an attack on the other. This
conceptualization is also prevalent within war scenarios within which the
primary mode of assertion of supremacy over an enemy region is often to
rape their women, as it is the woman who is associated with the male
territory, as well as the family unit, and thus, her chastity is symbolic of the
pride and honour of the family or nation. The current demand inherently
Advani favours death sentence for rapists: The Times of India, 26 Nov 2002
AIR 2003 SC 2141
49 Deterrent laws no guarantee to prevent crimes: SC,
http://www.rediff.com/news/2002/dec/23sc.htm, last accessed on March 10, 2013
47
48

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legitimises systemized sexual control of women by seeking to establish a

regulatory framework that protects women by imposing restrictions on
their behaviour. As noted by sociologist Pratiksha Baxi, the proposal to
hang the rapist is squarely located in the politics of memory, which
manipulates public outrage, to deflect attention from those conditions
which create, normalise and sustain violence against women.50 This image
of the protector then becomes a natural form of social definition for the
male figure, further vindicating an excess of aggression and machismo that
the law in itself seeks to curb.
This is obvious through the contradictory dichotomy that is created
within this discourse; wherein the speech-making runs tangential to the
actuality of the situation, as is explicit within the parliamentary dialogue on
the issue. While overtly, the concern addressed is the legitimate fear of
abuse of due process of law, couched within it are misogynistic terms that
reiterate a cynical vision of rape survivors, as substantiated by statements
made within the Lok Sabha itself. For example:
Some girls are very clever and are the agents of police. These days it's the world of
politics, police can falsely accuse anyone it wants on charge of rape. What is the
way of saving oneself from them? You have written here that the girl's past history
will not be asked, then how will you come to know about the girl?51
Flavia Agnes, exploring this issue, notes that the fear of false
complaints is all pervasive within our legal system right from the time a
victim tries to register the complaint to the time of the trial.52 The actual
implementation of graver forms of legal punishment is resisted, because it
is essentially a burden on the masculine agenda on which the rape statues
are premised; mostly created and implemented by male figures, however,
the rhetoric of death penalty consistently remains strong as in a 2002 case, in
which the then Defence Minister joined the chorus for capital punishment
for rape.53 As the statutes are not actually influenced by the grandiloquence
in the public sphere and oftentimes even the minimum prescribed penalty
for the offence is waived in individual cases, the conclusion to be drawn
from this paradox seems to be that the discourse of death penalty is a
50Baxi,

Pratiksha. Rape, Retribution, State: on Whose Bodies? Economic and Political Weekly,
Vol. 35, No. 14 (Apr. 1-7, 2000), pp. 1196-1200
51 Moolchand Daga, Lok Sabha Debates,1983: 431, 21 November
52Agnes, Flavia. No Shortcuts on Rape: Make the Legal System Work. Economic and
Political Weekly, Vol XLVIII No. 2
53 George Fernandes joins death-for-rapist chorus, Sunday Observer, 1 Dec 2002.
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societal comment not on the rapist, but on the position of the rape
survivor.
B. IMPLICATIONS OF THE MARITAL RAPE EXEMPTION

This distinction from other non-homicide crimes is drawn in cases

of rape because, rather than the experience of violence, it is the taboo
sexual nature of the crime that is often highlighted. This is clearly the case
even under statutory law, as suggested by the marital exemption for rape
under section 375 of the I.P.C. This exemption can be traced back to the
seventeenth century when Lord Chief Justice Matthew Hale opined, The
husband cannot be guilty of rape committed by himself upon his lawful
wife, for by their mutual matrimonial consent and contract, the wife hath
given up herself in this kind unto her husband, which she cannot retract54.
According to Susan Estrich, the continued force of the marital exemption
clause is the taking to the extreme of social notions that have made all
simple rapes difficult to prosecute, that is, the notions of presumed
consent made absolute.55 Indeed, the existence of an exemption is in itself
sufficient proof that the offence of rape highlights the sexual humiliation
while simultaneously erasing the violent base of the act; marital rape is not
legally culpable as it falls outside the realm of stigmatisation, falling under
the social jurisdiction of accepted relationships. The Joint Parliamentary
Committee report on the Criminal Law (Amendment) Bill, 1983, stated
that, under the decree of judicial separation, there is a possibility of
reconciliation between [the husband and wife] until a decree of divorce is
granted. Hence, intercourse by the husband with his wife without her
consent during such period should not be treated as, or equated with
rape.56 Pratiksha Baxi, in her analysis of the aforementioned report is of the
opinion that clearly then the rights of the husband over the wife and the
'interests' of the patriarchal family were privileged, normalizing the wide
scale violence used by men to enforce relationships of marriage.57
Outside of marriage, the prioritisation of the sexual integrity of the
feminine body as the sole relevant factor in the identity of the woman
herself has often led to arbitrary application of rape laws wherein
Gallo, Nancy R. Introduction to Family Law, pg. 137
Estrich, Susan. Real Rape, .pg. 72
56 JPC 1982:8
57 Baxi, Pratiksha. Rape, Retribution, State: On Whose Bodies? , Vol. 35, No. 14 (Apr. 1-7,
2000), pp. 1196-1200
54
55

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conviction of the perpetrator is contingent upon the perceived manner and

attitude of the victim, as in case of the Mathura judgment58 or the equally
infamous Suryanelli rape case59wherein the Kerala High Courts acquittal of
the 35 accused was based on the assumption that the victim's statements
could not be taken at the face value, because, in attempting to mortgage
ornaments earlier, she had shown deviant behaviour and the gang-rape
was described as the willing journey of a misguided girl.60 As argued by
David J. Giacopassi and Karen R. Wilkinson, there now exist degrees of
rape and, for all practical purposes, a woman can be raped a little.61 This is
because the important determining criterion of the offence is no longer
solely non-consent, which is an absolute, but often other mitigating factors
are taken into consideration to adjudge the culpability of the accused; the
degree of force used to overcome resistance and cause injury, the manner
of dress and style of the victim, etc. This subtle but important shift places
less value on the right to withhold consent, while elevating to a principle of
law the obligation of the female to place herself in jeopardy by resisting to
the point of injury before the courts will recognise a serious case of rape.
VI. HIERARCHIZATION AND CREATION OF THE IDEAL VICTIM
A. SOCIAL NORMS AND RAPE CULTURE

In the on-going public debate, hierarchies have been created in rape

cases for determining the degree of justice that is deserved by certain
victims. The entire gamut of rape culture and victim-blaming has been
ranged and everything stated from the the rape of a grown-up woman is
understandable; but rape of a minor is a heinous crime62 to your child
doesn't seem to be suffering that much, (in the recent case of the alleged
rape of a seven-year-old in a school toilet in Goa).63 The demand for capital
punishment is premised on a similar construction of the ideal victim. Such
a victim is also the ideal woman according to social norms and Victorian
models of chastity and the one whose violation is most deserving of justice.
Tuka Ram and Anr vs State of Maharashtra AIR 1979 SC 185
Joseph@Baby v.S.I. Of Police , CRL A No. 590 of 2000 (B)
60 A Rehearing in Kerala.Frontline. .Vol. 30.No. 04.
61Giacopassi, David J.; Wilkinson, Karen R. Rape and the Devalued Victim. Law and Human
Behavior, Vol. 9, No. 4 (Dec., 1985), pp. 367-383
62Rape of Grown-up Girls May Be Understandable but Assault on Infants Heinous, Indian
Express. N.p., 10 Jan. 2013.
63Goa Rape Case: Chief Minister Directs Cops to Act against Official, NDTV. N.p., 19th
Jan. 2013.
58
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This concept has been examined by Ann Cahill wherein she notes64 it is in
the specific moments and movements of this [feminine] body [that] the
defence of the sexual offender [is written]: she was somewhere she should
not have been, moving her body in ways that she should not have. These
factors are often viewed as extenuating rape, as society places the burden of
self-surveillance on the woman, to be able to either avoid being raped or,
at the very least, function as an ideal victim and ask for justice in case of a
sexual offence against her.
This oratorical construction has real implications in the context of
legal credibility of rape victims, which is one of the essential elements in
eliminating the need for corroboration of their testimony. The fringe
minorities, including wives, sex workers, etc., do not form a part of this
central discourse, as they are often seen as deserving of the violence they
experience, or at the very least, outside the domain of the law. Corollaries
to the discourse of capital punishment are often added, which place the
burden of receiving justice on the victims themselves; the district
government pleader in the matter of the aforementioned 2002 gang rape
case stressed that capital punishment for rape should be awarded only if
the victim is not in a position to fight back and defend herself.65This
derives from archaic notions of feminine selfhood as being defined through
chastity wherein it is popularly believed that a good woman, applying an
absolute moral categorization, would rather die than be raped. This
interpretation of femininity not only adds to the notion of rape as worse
than death, but also plays a role in socially shaming the rape survivors, who
are them understood as not placing the same valuation on their sexual
integrity, as the rational conclusion of the above premise is that a decent
woman would have resisted the rapist, even to the point of death. A
relatively greater burden of proof is imposed on the conduct of the victim.
In the United States, this was typified in Mills v. United States, wherein it was
made explicit that in the ordinary case where the woman is awake, of
mature years, of sound mind and not in fear, a failure to oppose the carnal
act is consent; and though she object verbally, if she make no outcry and no
resistance, she by her conduct consents, and the act is not rape.66 While the
same perspective is no longer made explicit, the judgment in Tukaram v.
Cahill, Ann J. Foucault, Rape, and the Construction of the Feminine Body. Hypatia, Vol.
15, No. 1
65 Legal experts split over death rap for rapists - TNN 28th Nov, 2002, 09.36pm IST
66 164 U.S. 644 (1897)
64

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State of Maharashtra67, or even the subsequent Supreme Court warnings to

the lower courts to not insist on corroboration of the victims testimonies
logically implies that courts often have the tendency to do so.
B. WORSE THAN DEATH PERCEPTION

However, the worse than death perception on which the discourse

of capital punishment is premised sends a far more distorted message to
rape survivors. As argued cogently by Corey Rayburn in his analysis of the
patriarchal rhetoric driving capital rape statutes:
The evidence is clear and is echoed by those who support the death penalty for
rape: being raped increases the rates of suicide for children and adults. Why then,
against what these advocates know, do they invoke rhetoric that makes death a
preferred option for those who have been raped? The most pernicious message
conveyed by comparisons to death is that those who have been raped have no
reason to live. If death is truly the lesser of two evils, why would someone hesitate
to embrace it as an escape from the horrific experience of rape? Such rationalchoice type evaluation may seem out of place in discussing the impact of rape and
the decision to commit suicide, but given that those invoking it are wedded to
deterrence theories that rely on the same premises, it seems a horrific oversight not
to consider the signals sent to women and children.68
Even apart from the burden of proving a case of rape, rape
survivors often function within a system that alienates them and inherently
views them as dead, implicitly suggesting that they should either have died
during the course of the rape while protecting their modesty, or have no
further reason to live. Far worse, these insidious communications are made
under the blanket idealization of providing justice to the victims through
imposition of harsher penalties on their perpetrators. Death herein
functions as a social death, that is, it is not defined as an individual experience
that aims to substantiate and delineate the trauma of a rape survivor, but
rather as their collective ostracism. This expression operates as the
justification of the attempts of a society to obliterate the narrative of violence
that it allows against its female citizens.

67
68

AIR 1979 SC 185

Rayburn, Corey. Better Dead Than R(ap)ed?: The Patriarchal Rhetoric Driving Rape
Statutes. St. Johns Law Review, Vol. 78, No. 4
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VII. CONCLUSION
The rationale of the early laws which provided for death sentence
for rape dealt not with concerns of the bodily autonomy of women, but
rather, was understood as property crimes against the sexual exclusivity of a
man to his wife. Even today, in societies that increasingly aim for
egalitarianism as the fundamental base of Constitutional authorities, the
patriarchal foundation of the statutes, as well as societal demands for
further amendments, expose the same attitudes couched in pleasing,
postmodern legal terms. Revealingly, most of the countries that currently
authorize the death penalty for rape69 are also the ones that historically and
globally have been condemned as being the most restrictive and indifferent
to the rights of women in general. The death rhetoric legitimises victim
blaming and normalizes the need for sexual surveillance and moral policing
of the body of the woman; in a State of the Nation survey on the safety of
women as part of CNN-IBN's Agenda for Change, the majority said that a
rape victim is ruined for life and that women should abide by a certain dress
code in public.70 The recent suggestions for the prevention of rape have
focused on gendered separation in public life and curbing the subversive
sexuality of women, which has historically been viewed as a threat to
masculine domination. However, following the Delhi gang-rape case and
the consequent public outrage and outpourings, many hitherto marginalized
victim narratives have, for the first time, made their way into the fold of the
mainstream, wherein the survivors have elucidated that they may have been
raped but are not dead, and refuse to let themselves be defined by a single
act of violence.71
That the death penalty, even if provided for within statute, will
neither act as a deterrent to rape itself or actually be implemented in a court
of law for non-homicide cases of rape is practically indisputable. However,
it is not only the legal changes envisioned, but the cultural discourse that
informs those changes which provides a glimpse into the legal system; as,
law after all, primarily serves as a means of regulating social interaction.
Theories of deterrence and retribution are based on the hypothesis of disincentivization of offences, as the practical origin of the theoretical models
Some examples include Iran, Egypt, Pakistan, Saudi Arabia, Vietnam, etc.
Rape victims are ruined for life, women should abide by a dress code in public, feels
India: CNN-IBN. 24 Jan 2013.
71 Abdulali, Sohaila. I Was Wounded; My Honor Wasnt. The New York Times.7 Jan 2013.
69
70

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is that if the punishments meted out were equivalent, the offender would
have no incentive to commit the lesser crime than the greater. In this
context, if the heated demand for capital punishment is any indication, it is
unfortunate that even today, in the rape-murder scenario; the greater of the
two crimes is believed to be rape and the rape survivors socially informed
that they would have been better off dead.

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CHILD SEX ABUSE: THE MENACE DECRYPTED

Susanah Naushad & Amana Ranjan*
Drafting a comprehensive legislation against child sexual abuse is no
childs play. The brazen misuse of the existing law and the lackadaisical behaviour
of the Legislature have only encouraged perpetrators of these heinous crimes.
Acknowledging this premise, the authors of this paper have examined Indias
legislative attempts to contain the menace of sexual crimes against children. This
exercise has revealed that even the latest legislation in this domain, The Protection
of Children from Sexual Offences Act, 2012, falls short of many crucial criteria
essential to protective and preventive legislation for children. Looking at some
jurisdictions which have enacted strong anti-abuse legislations for children, the
authors have identified a number of benchmarks common to legislations of this
nature. India has paid lip-service to most of these parameters. A careful look at the
provisions on mandatory reporting and age of consent in the Act demonstrates
that they are divorced from the unique social reality afflicting children and others
concerned in India. In a spirit of reconciling the legal loopholes, the authors suggest
some recommendations. They also believe that the legislations litmus test lies in
effective implementation that is sensitive to the needs of the child and fashion most of
their suggestions accordingly.
Part I of this essay will serve as the introduction and foundation of the
essay. Part II will look at the legal framework of the menace of child sexual abuse
and the inadequacies in the present legal system, while Part III highlights the need
for a new legislation. Part IV will deal with the newly enacted Indian legislation Protection of Children from Sexual Offences Act, 2012 and Part V will provide a
critique. Finally, Part VI will shed some light on the global prevalence of the
problem and Part VII will lay down the essays concluding remark

* IVth and IIIrd year students of West Bengal National University of Juridical Sciences,
Kolkata.
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I. INTRODUCTION
It is an undisputed fact that child sexual abuse in India is increasing at
an alarming rate. Children form the majority of the country's population; they
are pegged as the future of the country. They carry with them hopes and
dreams to achieve greatness. However, the stark reality remains that fifty
three per cent of Indian children have been subjected to some form of sexual
abuse.1 While tackling the numerous issues plaguing society, the safety and
security of children have been grossly side lined. The Legislature has shown
an extreme nonchalance towards taking any steps to protect the most
vulnerable section of society. The inadequacy of punishment is one such
instance of legislative oversight and as a result, children have become victims
of brutal instances of sexual abuse. Years of legislative neglect have taken
material form with growing instances of sex tourism, pornography, child
rape, child trafficking, etc.
Indian culture is historically replete with evils like the devadasi system,
incest and forced prostitution. Even courts have a diminished record wherein
the Mathura rape case judgement acquitted two policemen who raped a
sixteen year old, claiming that she was habituated to sexual intercourse.2
Cases of such abuse usually go unreported in order to maintain the honour
and reputation of the family in society. Thus there is urgency for a specific
legislation that will be mindful of this unique social reality in India. We need
to realize that the primary reason for not bringing the perpetrators to court is
entrenched in the traditional family structure in which a large number of
children are raised. In India and other Asian countries like China and Japan,
children are taught from a tender age that the elders in the family hold
absolute authority and are to be respected and obeyed. The fear of
challenging their authority, reprimand and shame only escalate instances in
which the reporting of instances of these crimes is stalled. In 2007, 38
children were reported missing in Nithari, a village located on the outskirts of

Study undertaken by the Ministry of Women and Child Development on Child Abuse in
collaboration with UNICEF, Save the Child and Prayas NGO, (9 April 2007),
http://pib.nic.in/newsite/erelease.aspx?relid=26737(last visited 17 March 2013).
2 Tuka Ram v. State of Maharashtra, AIR 1979 SC 185.
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Delhi.3 These children were allegedly raped and murdered, causing a huge
public outcry which brought out the lackadaisical attitude of the government
towards rampant child abuse. This pressurized the Ministry of Women and
Child Development to expeditiously draft the Offences from Children
(Prevention) Bill, 2005 and lobby hard for its passage. In 2012, the
Parliament finally passed the Protection of Children from Sexual Offences
Act which has been hailed as a bold step towards protecting the children of
our country.
II. PROVISIONS HITHERTO
Indian children, who account for an overwhelming forty per cent 4 of
the entire population of the country, have, until recently, been placed in a
state of extreme vulnerability due to the indifference of the Legislature. The
lack of legal framework protecting children has only encouraged sexual
predators. One of the problems is that under the Indian legal system the
definition of 'a child' differs from law to law. Irrespective of the various
definitions however, there lies a mandatory obligation of Centre and State to
provide for and protect children. The Constitution of India under Article
21A says that States must provide free and compulsory education to all
children between the ages of six and fourteen in such manner as the State
may by law determine. Article 45 of the Constitution specifies that the State
shall endeavour to provide early childhood care and education for all children
until they complete the age of six. Article 51(k) lays down a duty that parents
or guardians provide opportunities for education to their child/ward between
the age of six and fourteen years.
The Indian Penal Code states that nothing is an offence done by a
child under seven years, and further, under twelve years, till he has attained
sufficient maturity of understanding as regards the nature of the Act and the
consequences of his conduct thereof.5 However, while punishing the
perpetrators of rape, the Code defines the age of consent to be below sixteen
Neelam Raaj, Children at Risk (14 Jan 2007), http://articles.timesofindia.indiatimes.com
/2007-01-14/special-report/27872204_1_nithari-migrants-crime-stats (last visited on 1
Sep 2012).
4 Government of India, Ministry of Home Affairs, Office of the Registrar General & Census
Commissioner, India, 2001 Census Data, Age Structure and Martial Status,
http://censusindia.gov.in/Census_And_You/age_structure_and_marital_status.aspx (last
visited on 17 March 2013)
5 PEN.CODE. 82 and 83.
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years.6 Furthermore, for purposes of protection against kidnapping,

abduction and related offences, a 'minor' is considered to be under sixteen
years of age in the case of a male and under eighteen years of age in the case
of a female. The Indian Traffic Prevention Act, 1956 defines a minor as a
person who has completed the age of sixteen years but not eighteen years,
whereas under the Child Labour Prohibition and Regulation Act, 1986, a
child is a person who has not completed fourteen years of age. However, the
Age of Majority Act, 1875 along with several other legislations7 considers a
'minor' to be a person under eighteen years of age. It is pertinent to
remember that India is a signatory to the United Nations Convention on the
Rights of the Child which defines a child as every human being below the
age of eighteen years unless under the law applicable to the child, majority is
attained earlier.8
In spite of the strong mandate set forth by national and international
laws for protecting the rights of a child, the Indian legislature did not step up
to fill in the inadequacies with stringent laws. A gaping loophole in the Indian
legislation can be seen in the Indian Penal code where the Code is silent on
child sexual abuse. The lack of legislative recognition of child sexual abuse as
a criminal offence often forces prosecutors to rely on generalized provisions
which are not equipped to deal with such abuse. In an attempt to criminalize
sexual offenders, the laws enacted for women, protecting them against sexual
offences, were extended to include children. However, this resulted in
criminalizing offences only against female children who were subjected to
peno-vaginal intercourse under the law.9 Sexual offences against male
children along with other forms of sexual abuse including exhibitionism,
voyeurism, oral or anal intercourse and touching are left unpunished under
the law. The only gender neutral provision that is provided in the Code is the
controversial section on unnatural offences10. Even though it was not
intended to prosecute child sexual abuse, it has been partially used to do so
by recognising the possibility of sexual abuse of boys. While this section is
equipped to deal with child sexual abuse that involve non penile-vaginal
PEN.CODE. 376.
Juvenile Justice (Care and Protection of Children) Act, 2000, 2(k), Protection of Women
from Domestic Violence Act, 2005, 2(b).
8 Office of the United Nations High Commissioner for Human Rights, United Nations
Convention on the Rights of the Child, art. 1 (Sept. 2, 1990),
http://www2.ohchr.org/english/law/crc.htm(last visited on Oct. 17, 2012).
9 PEN.CODE. 375.
10 PEN.CODE. 377.
6
7

24

2013 CLCSLR

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penetration, its high bench mark of the word 'penetration' leaves several
forms of abuse like molestation and penetration with objects unaddressed.
Unfortunately, such grave and rampant form of abuse can only be
prosecuted in the case of girls under the provision of the Code dealing with
outraging the modesty of women.11 However, the Supreme Courts
interpretation of what constitutes modesty of women has rendered this
provision inadequate as it states that children may find themselves incapable
of possessing this modesty.12 Furthermore, in cases of child abuse prosecuted
under section 354, the quantum of punishment is reduced to two years as
opposed to a minimum of seven years in the case of rape. Therefore, sexual
abuse in cases of boys and girls can only be prosecuted under simple or
grievous hurt13 which is extremely ineffective to address the offences of such
nature. The law treats instances of obscene gestures14 with relatively less
gravity, even though it may affect the child's psyche as severely as rape.
Similarly, the law is ill equipped to deal with instances of repeated abuse
against children.
In spite of the absence of legal mechanisms, the Supreme Court was
able to deliver justice in the Anchorage case.15 Anchorage Shelter was a home
for street children run by two retired British Navy Officers in Mumbai. In
2001, Childline India Foundation16, an emergency outreach service for
children in need of protection, received a call regarding abuse of children at
the shelter.17 After investigating the matter it was found that Duncan Grant,
Allan Waters and William D'Souza and the manager of the shelter were
inflicting chronic abuse upon their charges. After further investigation, the
three accused were charged when Waters and Duncan were found to be
absconding. To commence the trial, Grant had to be extradited from Africa
and Waters from the United States. The Sessions Court, after depositions
were made by four prime witnesses, convicted DSouza, Duncan and Waters

PEN.CODE. 354.
State of Punjab v. Major Singh, AIR 1967 SC 63 (The judges of the Supreme Court decided
that a seven and a half year old girl did not possess the modesty that could be outraged).
13 PEN.CODE. 319, 320.
14 PEN.CODE. 509.
15 Childline India Foundation v. Allan John Waters & Ors, (2011) 6 SCC 261
16 Childline India, Anchorage Case History, http://www.childlineindia.org.in/anchoragecase-history-updated.htm(last visited Oct. 27, 2012).
17 Childline India Foundation v. Allan John Waters & Ors, (2011) 6 SCC 261.
11
12

25

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for offences punishable under unnatural offences against man18, abetment19,

criminal conspiracy20, voluntarily causing hurt21, selling22 and buying23 minors
for prostitution and for subjecting children to cruelty24.
An appeal was sought by the accused. The State Government also
filed an appeal for enhancement of punishment. However, the High Court
set aside the conviction on grounds that the depositions were suspicious,
unreliable, not proved beyond shadow of doubt and not creditworthy.
Furthermore, it declared the statements of the prime witnesses inadmissible.
However, the Supreme Court adjudicated that the evidence and omissions
were not fatal to the prosecution's case as stated by the High Court as the
depositions clearly established rampant abuse. Corroborative evidence is also
not mandatory in cases of a sensitive nature and the testimony of the victims
makes for a stronger case. Lastly, the court, in the absence of any law
specifically protecting children from sexual abuse, drew reference from the
constitution which envisages a childhood free from any abuse and
exploitation. It mandates that the states make special provisions for children25
provide them with free and compulsory education26 and prohibits trafficking,
beggary and other forms of forced labour and exploitation27. It also relied on
the Directive Principle of securing health of children of a tender age28 to
uphold the convictions.
In Prerana v State of Maharashtra,29 the Bombay High Court slammed
the Juvenile Justice Board for its gross errors and inefficiency in protecting
and upholding the rights of children and laid down guidelines to make the
functioning more effective. Prerana, the petitioner, is a non-governmental
organisation that works with the aim objective of preventing trafficking of
women and children. It also rehabilitates victims of forced prostitution in
PEN.CODE. 377.
PEN.CODE. 109.
20 PEN.CODE. 120B.
21 PEN.CODE. 323.
22 PEN.CODE. 372.
23 PEN.CODE. 373.
24 Juvenile Justice (Care and Protection of Children) Act, 2000, 23.
25 INDIA CONST. art.15, cl. 3..
26 INDIA CONST. art.21-A..
27 INDIA CONST. art.23..
28 INDIA CONST. art.45.
29 Prerana v State of Maharashtra, 2003 2 MLJ 105.
18
19

26

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Mumbai. In the present case, the Social Service Branch raided a brothel
where four persons identified as brothel keepers were arrested and 24 twenty
four girls were rescued. The four arrested were charged for allowing the use
of the premises as a brothel30, for living on earnings from prostitution31 and,
permitting prostitution on the premises for the purpose of trade32 while the
twenty four females girls that were taken into custody pursuant to the
provisions33 of the Immoral Traffic (Prevention) Act, 1956 to ascertain their
age and family background. The results of the ossification test showed that
fourteen of the girls were adults while the rest of them were minors. The
court released the adults and directed the minors to appear in the Juvenile
Court. The Magistrate finally discharged the minor girls on the grounds that
they had not committed any offence, but and they were in custody for over a
month. It is pertinent to note here that firstly, minor girls who were forced
into the flesh trade were treated as the accused in spite of there being no
fault of their own. Under the Juvenile Justice Act, a juvenile who is found
soliciting can be classified as a juvenile in conflict with law34 as well as a
child in need of care and protection35 and thus cannot be treated as the
accused. Secondly, since they were children in conflict with the law, they
should have ideally been produced before the Child Welfare Committee and
not the Juvenile Board. And thirdly, the Juvenile Board committed a serious
error by releasing the minors; as the provisions of the Juvenile Justice Act
clearly state that minors must be sent to protective homes in the absence of
parents or guardians. By releasing them, the Juvenile Board has driven them
back to the flesh trade. In the Anchorage Case36, the Court relied on the
Constitutional obligations and the Directive Principles to emphasize that
children have to be protected and have a right to a free, healthy and an
abuse- free childhood.
The first legislation for the protection of children against abuse came
in the form of the Goa Childrens Act of 2003. It adhered to the United
Nations Conventions on the Rights of the Child. The Act criminalized child
abuse and meted out punishments for sexual assault, grave sexual assault and
Immoral Traffic (Prevention) Act, 1956, 3.
Immoral Traffic (Prevention) Act, 1956, 4.
32 Immoral Traffic (Prevention) Act, 1956, 7(2)(a).
33 Immoral Traffic (Prevention) Act, 1956, 15, 17.
34 Juvenile Justice (Care and Protection of Children) Act, 2000, 2(1).
35 Juvenile Justice (Care and Protection of Children) Act, 2000, 2(d)(vi).
36 Supra note 16.
30
31

27

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incest.37 It prohibits soliciting children for commercial exploitation in the

form of pornography or suggestive and obscene photographs.38 The act has
an all-encompassing definition of commercial sexual exploitation of
children as it includes all forms of sexual exploitation of a child including
visual depiction of a child engaged in explicit sexual conduct, real or
stimulated, or the lewd exhibition of genitals intended for sexual gratification
of the user, done with a commercial purpose, whether for money or kind.39
In 2005, the definition of grave sexual assault in the Act was amended40 to
include acts such as causing children to pose for pornographic photos and
films, forcing minors to have sex with each other, deliberately causing injury
to sexual organs of children, etc. Lastly, it laid responsibility on the Airport
authorities, border police, railway police, traffic police and developers of
movies and photos to report any inappropriate depiction of children in print
media or suspicion of trafficking41. Another initiation taken up by the Goa
Police was the drafting of a Child Code.42 This Code laid down several
guidelines on adopting child-friendly procedures due to the sensitivity of the
issue. Among other things, the Code included establishing child-friendly
police stations, prohibiting minors below fourteen from entering or using
cyber cafs unaccompanied, non-stigmatising semantics and the principle of
best interest. However, in spite of these legislations, several perpetrators of
paedophilic abuse have been acquitted due to lack of evidence.
Similarly, the Commission for Protection of Child Rights Act 2005
was a national legislation that put forth the constitution of children's courts
in states and districts to ensure expeditious trial for offences against
children.43 The Karnataka Government also implemented the Karnataka
Devadasis (Prohibition of Dedication) Act, 1982 and Rules, 1987 to put an
end to the devadasi system by penalizing those who encourage it. The

Goa Childrens Act, 2003, 8(1)-(3).

Goa Childrens Act, 2003, 8(15)-(3).
39 Goa Childrens Act, 2003, 2(jj).
40 Goa Childrens (Amendment) Act, 2005.
41 Goa Childrens Act, 2003, 7(9).
42 Goa Childrens Act, 2003, 13(14).
43 Mathew A. Lina,, Online Child Safety from Sexual Abuse in India, 2009(1) Journal of
Information, Law & Technology (JILT) (May 28, 2009), http://go.warwick.ac.uk /jilt /
2009_1 / mathew (last visited on 27 Oct 2012).
37
38

28

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legislation also arranged facilities for the rehabilitation of innocent victims.44

However, these laws were still insufficient to curb the menace of child sexual
abuse. The following section will address concerns as to why perpetrators
can slip through the net of these protective legislations. It will also carve out
the need for a separate legislation.
III.

NEED FOR A SEPARATE LEGISLATION

There has been extensive debate on whether the Indian Penal code
should be amended to include perpetrators or whether a separate law should
be drawn up to specifically address child sexual abuse. Child rights activists
have been pushing for a separate law to combat child sexual abuse, insisting
that it is the need of the hour`. In the case of Sakshi v Union of India45, a step
forward was taken to examine shortcomings of the Indian Penal Code when
dealing with cases of this nature. However, the Court did not adequately
address the entire breadth of issues, thereby failing yet again to effectively
insulate children in India from sexual abuse.
The Supreme Courts timely acknowledgement of the prevalence of
child sexual abuse in India and its alarming increase only increases the
necessity of creating and enforcing laws that protect children. In 2005, a bill
specifically protecting the rights of children against this menace was drawn
up while drafting the Offences Against Children Bill. This bill was drafted
and approved by the National Commission for Women (NCW) and the
Ministry of Women and Child Development. The bill sought to deal with a
spectrum of offences against children including sale/transfer sexual assault,
sexual/physical/emotional abuse, commercial sexual exploitation, child
pornography, grooming for sexual purpose, incest, corporal punishment,
bullying and economic exploitation.46 Furthermore, the bill made it clear that
these provisions were formulated to supplement the provisions and address
the shortcomings of the Indian Penal Code and the Juvenile Justice Act.
However, in 2007 the Ministry of Law rejected the Bill, stating that there was
no need for a separate legislation and that it would be repetitive of the
provisions of the Penal Code, Code of Criminal Procedure and the Indian
N.D. Shiva Kumar, Times of India (23 Jan 2009) http://articles.timesofindia.indiatimes.com
/2009-01-23/hubli/28030078_1_devadasi-system-ddpos-project-officer (last visited on 5
Sept 2012).
45 Sakshi v Union of India, [2004] 3 LRI 242.
46 Offences Against Children (Prevention) Bill, 2005.
44

29

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Evidence Act.47 This was primarily due to the lack of sufficient conclusive data
reporting instances of child abuse.48 While the National Crime Records
Bureau reported a significant increase in sexual offences against children that
included rape and trafficking of minor girls, it constituted only a negligent
percentage of the total crimes committed against children.49 However, it did
acknowledge the requirement of laws protecting children.50 It is extremely
unfortunate how legislative lethargy is becoming the root cause51 of the
under-reported nature of crimes against children and cognisance not being
taken thereof. The Ministry of Women and Child Development in 2007
initiated a National Study on Child Abuse to understand the extent and
magnitude of the problem. In 2009 the Ministry of Law prepared a tentative
draft of the Protection of Children from Sexual Assault Bill, 2010. This Bill
was unique as it stated that the onus of proving their innocence rested on the
accused, unlike the existing legislation where the onus lay on the
prosecutions ability to prove guilt. The Ministry of Law simultaneously
worked on the draft of the Prevention of Offences Against the Child Bill,
2009, which sought to address all offences against children, including sexual
offences. However, after several delays and complications in 2011, a specific
bill for prevention of sexual abuse against children was drafted
comprehensively and exhaustively under the initiation of the TULIR Centre
for the Prevention and Healing of Child Sexual Abuse which was finally
passed by the Rajya Sabha in 2011.52 This bill is now known as the Protection
of Children from Sexual Offences Act, 2012 (Hereinafter referred to as the
Act).

47Chetan

Chauhan, Ministry Rejects Bill for Child Protection (4 Sept 2007)

http://www.hindustantimes.com/News-Feed/India/Ministry-rejects-bill-for-childprotection/Article1246151.aspx (last visited on 1 Oct 2012).
48Ministry of Women and Child Development, Study on Child Abuse INDIA 2007,
wcd.nic.in/childabuse.pdf(last visited on Oct. 27, 2012).
49 Id.
50 Id.
51Havovi
Wadia, The Sounds of Silence: Child Sexual Abuse in India,
http://infochangeindia.org/children/analysis/the-sounds-of-silence-child-sexual-abuse-inindia.html (last visited 27 Oct 2012).
52 Id.
30

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IV. PROVISIONS OF THE ACT

This legislation is in response to the increasing instances of grave
sexual offences against children and low rates of conviction for the same. It
seeks to safeguard children from heinous offences of sexual assault, sexual
harassment, human trafficking and pornography.53This is the first legislation
in the country that deals specifically with offences against children and clearly
defines them. It includes within its purview the abuse of boys as well as
girls.54 The penalties for offences under this Act have been classified as per
the gravity of the offence, ranging from simple to rigorous imprisonment of
several years. The Court can also impose an additional fine on the
perpetrator.55 The Act also penalizes the attempt to commit an offence and
the abetment of an offence.56
The Act has made a distinction between sexual assault and aggravated
sexual assault, the penalty for the latter being more stringent. 57 An offence is
treated as aggravated when it is committed by a person who holds a position
of trust or authority in the eyes of the child, such as a member of security
forces, police officer, public servant, etc.
The burden of proof for offences such as Penetrative Sexual
Assault, Aggravated Penetrative Sexual Assault, Sexual Assault and
Aggravated Sexual Assault, has been shifted on the accused.58 This has been
done keeping in mind the greater vulnerability of children and the heinous
nature of the offences.59 Concurrently, the Act also provides for punishment
for making a false complaint or giving false information with malicious

Ministry of Women and Child Development, The Protection of Children from Sexual
Offences Act, 2012 (22 May 2012), http://pib.nic.in/newsite/erelease.aspx?relid=84409
(last visited on 21 Aug 2012)
54 The Protection of Children from Sexual Offences Act, 2012, 2 (1) (d).
55 The Protection of Children from Sexual Offences Act, 2012, 4, 6, 8, 10, 12, 14, 18, 21,
22, 23.
56 The Protection of Children from Sexual Offences Act, 2012, 16, 17, 18.
57 The Protection of Children from Sexual Offences Act, 2012, 7, 9.
58 Ministry of Women and Child Development, The Protection of Children from Sexual
Offences Act, 2012 (22 May 2012), http://pib.nic.in/newsite/erelease.aspx?relid=84409
(last visited on 5 Aug 2012)
59 Id.
53

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intent.60 However, the degree of punishment has been kept relatively low (six
months) to encourage reportage of crimes.
The Act has dropped the age of consent (16-18 years) clause and
labels any person below the age of 18 as a minor.61 This was done after a
controversial recommendation of a parliamentary committee on the pretext
of uniformity of laws (under the IPC and the Prohibition of Child Marriage
Act, a person below 18 is considered a minor).62 This effectively means that
any sexual interaction with a person below 18 years of age would constitute
an offence if a complaint is filed, or if it is discovered.
The Act specifies the establishment of Special Courts for trial of the
listed offences, keeping the interest of the child paramount at every stage of
the process by incorporating child-friendly procedures for reporting,
recording of evidence, investigation and trial of offences.63 The evidence of
the child has to be recorded within 30 days of reporting and as far as
possible; the trial has to conclude within a year. It also makes provisions for
the relief and rehabilitation of the child. Once a complaint is lodged at the
nearest Special Juvenile Police Unit (SJPU) or local police, the police is
required to make special arrangements for the child such as admitting the
child into a shelter home or to the nearest hospital within twenty-four hours.
They also have to report the matter to the Child Welfare Committee within
the same time frame. While reporting, the media cannot disclose the identity
of the child without taking prior permission from the Special Court.64
The National Commission for the Protection of Child Rights
(NCPCR) and State Commissions for the Protection of Child Rights
(SCPCRs) have been made the designated authorities to monitor the
implementation of the Act.65

The Protection of Children from Sexual Offences Act, 2012, 22.

The Protection of Children from Sexual Offences Act, 2012, 2 (1)(d).
62 Ministry of Women and Child Development, The Protection of Children from Sexual
Offences Act, 2012 (May 22, 2012), http://pib.nic.in/newsite/erelease.aspx?relid=84409
(last visited on 5 Aug 2012).
63 The Protection of Children from Sexual Offences Act, 2012, Chapter VII.
64 The Protection of Children from Sexual Offences Act, 2012, 23.
65 Ministry of Women and Child Development, The Protection of Children from Sexual
Offences Act, 2012 (May 22, 2012), http://pib.nic.in/newsite/erelease.aspx?relid=84409
(last visited on 5 Aug 2012).
60
61

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V. A CRITIQUE
The IPC does not take into account the range of sexual offences
committed on children and does not differentiate effectively between an
adult and a child. Also, it does not address sexual violence against the male
child except under Section 377 that criminalizes homosexual behaviour. The
present Act has the potential to instil hope in many child victims of abuse
who have been denied justice due to the loose ends in penal laws. The Act is
progressive in its approach. It is gender-neutral and lays down stringent
punishments for a range of sexual offences. It has introduced several
measures to prevent the re-victimization of children at every step of the
judicial process. It sets out provisions for the rehabilitation of these children.
However, there are several provisions in the Act that continue to serve as
causes for concern.
A. NO PREVENTIVE MEASURES

Overall, the Act does a fine job in dealing with cases of child sexual
abuse. However, nowhere does the Act mention provisions to prevent
abuse.66 The Act only lays down measures to be taken after the child has
suffered sexual abuse. It should certainly include provisions for prevention as
well, since punishment should never be the sole deterrent.67 In cases of child
abuse, prevention is certainly the best cure. Preventive measures should see
efforts from both family members and the state machinery.
A possible preventive measure can be the setting up of a website
which has details of first time offenders.68 Studies indicate that in most cases,
a perpetrator does not stop after abusing one child.69 This website will ensure
that such deviants are not hired by any school, universities, hospitals and
places where children traditionally assemble in large numbers.70

66Jose

Parapully,
Questions
of
Protection
(14
August
2012),
http://www.telegraphindia.com/1120814/jsp/opinion/story_15851586.jsp#.UIazp2CpSn
M (last visited on 6 Sep 2012).
67 Id.
68Pinky
Virani,
Child
Sex
Abuse
and
the
Law
(23
Jul
2011),
http://www.openthemagazine.com/article/nation/child-sex-abuse-and-the-law
(last
visited on 6 Sept 2012).
69 Id.
70 Id.
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Also, the Human Resource Development Ministry must develop and

introduce modules on sex education at the primary, secondary and senior
secondary level.71 The content of these manuals should include user-friendly
guidelines on identifying signs of child abuse and protection from the same,
and be upgraded with every successive class. This should also be
accompanied by teachers holding interactive sessions, where parents can also
participate.72
B. AGE OF CONSENT

Raising the age of consent for sex from 16 to 18 is definitely a step

back. A study conducted by the International Institute for Population Studies
(IIPS) and Population Council in 2010 in six states - Andhra Pradesh, Bihar,
Jharkhand, Maharashtra, Rajasthan and Tamil Nadu - on youth between the
ages of 15 to 21 years revealed that instances of pre-marital relationships
amongst those above 16 years is higher than ever before.73 There was a
definite progression in reported physical intimacy and sexual experience with
romantic partners: 42 per cent of young men had indulged in consensual
sexual activity with their partners, while 26 percent of young women had
engaged in sexual relations. Moreover, the increasing number of Habeas
Corpus petitions filed in various High Courts by young couples seeking the
right to exercise their choice in personal relationships is also evidence of this
trend.74
At a time when kids are attaining puberty much earlier than in the
past and social mores about alternative sexuality are getting more relaxed, this
provision is clearly regressive. This provision can and will be enforced in a
manner that puts young adults indulging in consensual sex at the risk of
unwonted harassment.75 It will also deter young people from exploring their

Id.
Id.
73Geeta
Ramaseshan, Law and the Age of Innocence (19 June 2012),
http://www.thehindu.com/opinion/op-ed/article3543940.ece (last visited on 6 Sept
2012).
74Id.
75 Flavia Agnes, Consent and Controversy (22 June 2012), http://m.indianexpress.com
/news/consent-and-controversy/948277/ (last visited on 6 Sept 2012).
71
72

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sexuality, which might lead to the development of psychological problems.

The law should not criminalize the very natural process of growing up.76
This provision, which was included on the pretext of uniformity in
the law, ironically conflicts with other Indian laws and social realities. The
IPC77 considers sex with a girl less than sixteen years, with or without her
consent, to be rape.78 This means that under the IPC, consensual sex with a
girl of more than sixteen years is not an offence. This is in direct conflict
with the above provision of the Act. Moreover, the IPC says that only
children below the age of seven years are incapable of committing crimes.79
Children between the ages of seven and twelve are capable of committing
crimes. However to prove the same it has to be shown that they have
attained sufficient maturity of understanding to judge the nature and
consequences of [their] conduct on that occasion.80 On reaching the age of
thirteen, a child is treated at par with others vis--vis his ability to commit a
criminal offence.81 Thus, according to the Indian legislators, a child of
fourteen years is mature enough to understand the nature and gravity of the
crime he commits; however he is considered underage and incapable of
giving valid consent for intercourse.
Another lacuna born from such an unreasonable provision is that
sexual intercourse between two consenting teenagers, for example a
seventeen year old girl and a nineteen year old boy, will result in the boy
being charged with the offence of child sexual abuse even if the age
difference between both of them is negligible and both the teenagers have
engaged in safe, consensual sex.
The American Psychological Association, the premier association of
psychologists in the world, observes that a minimum age difference of five
years should exist between the victim and the perpetrator for the sexual act
to be considered abuse. Even under Swiss law, although the age of consent is
fixed at sixteen,82 exceptions are accepted if the age gap between the parties is
Id.; T.K. Rajalakshmi, Blind to Realities ( 10 June 2012), http://www.frontlineonnet.com
/fl2910/stories/20120601291009900.htm (last visited on 7 Sept 2012).
77 PEN.CODE. 375
78 Id.
79 PEN.CODE. 82
80 PEN.CODE. 83.
81 Ibid
82 Swiss Federal Criminal Code, 1937, Art.187(1).
76

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three years or less.83 A similar position is reflected in the law of Israel, where
sexual intercourse with a child of fourteen is considered rape (consent is
immaterial). However, when one of the parties is between fourteen to sixteen
years and the age difference between both the parties is less than two years,
sexual intercourse is considered legal if it is consensual.84 Such a flexible
stance ensures that while sexual intercourse between adults and children
remains illegal, teenagers are not harassed by the law if they engage in
consensual sex.
Moreover, there might be some borderline cases in which the age
difference of the involved patties rests on the margins of the permissible
level. In such cases, the Courts must adopt a lenient stand and refer these
children to counselling and classes on safe sex, pregnancies, sexually
transmitted diseases and other fallouts of intercourse rather than sentence
them to imprisonment.85 It is important to ensure that the law of the country
strikes a healthy balance between protecting its children from abuse on the
one hand and protecting the sexual freedom of young adults on the other.86
It is one thing to believe that it is too early for teenagers between
sixteen and eighteen to engage in sexual activity. However, criminalizing all
consensual sexual activity in the belief that everyone below eighteen is a child
and that too in a divergent society where child marriages persist on the
one hand and teenagers are increasingly becoming conscious of their
sexuality on the other can have dreadful consequences. Given the ground
reality of violence perpetuated by Khap and caste panchayats against young
couples, raising the age from sixteen to eighteen years for consensual sexual
behaviour will give them greater leeway to socially ostracize and discriminate
against couples engaging in such acts as the concerned couples are now also
stripped of legal protection.87The Delhi High Court had also only recently
described the move to raise the age of consent from sixteen to eighteen as

Swiss Federal Criminal Code, 1937, Art.187(2).

Israeli Penal Code, 1977, 353.
85 Arun Mal and Pallavi Nautiyal, Towards Protection of Children Against Sexual Abuse: No
Childs Play 2010, www.nujslawreview.org/.../pallavi-nautiyal-and-arun-mal.pdf (last
visited 10 Sept 2012).
86 Id.
87Supra
Note 73; T.K. Rajalakshmi, Blind to Realities (10 June 2012),
http://www.frontlineonnet.com/fl2910/stories/20120601291009900.htm (last visited on
7 Sept 2012).
83
84

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regressive and draconian, while acquitting a youth of kidnapping and raping a

seventeen-year-old girl he had married..
What is required is the addressing of behavioural issues among the
youth through multiple ways, like sex education and counselling.88 It is a
better way to protect our adolescents rather than criminalizing the acts they
engage in.89
C. MANDATORY REPORTING

The Act also calls for mandatory reporting to designated authorities

by anyone who apprehends that an offence may be committed.90 The failure
to report the same is an offence. This provision is quite flawed. This will
encourage moral policing (a malaise in the present time) and even consensual
intimate behaviour may lead to complaints by ill-disposed and disapproving
family members and others, leading to the harassment of young adults.91
Also, in cases of privileged information such as information obtained
through lawyer-client discussion, psychotherapy or in the ceremony of
confession (reconciliation) to Catholic priests, will it be correct to follow the
provision?92 Catholic priests are required by their vow to maintain secrecy
about all information they have received in the sacrament of confession, and
therefore this requirement stands in violation of their sacred commitment.
On the other hand, penalizing a person for not reporting may prove
counter-productive given the social stigma attached to the issue.93 There are
several reasons, including fear of reprisals, shame, embarrassment, confusion
or denial, which may lead a child to refrain from reporting the matter.
Therefore, this is not a very child-friendly provision and should be altered

Supra Note 83.

Madhok,
Age
of
Innocence
(10
May
2012),
http://www.deccanchronicle.com/editorial/op-ed/age-innocence-066 (last visited on 7
Sept 2012).
90 The Protection of Children from Sexual Offences Act, 2012, Chapter V.
91 Supra Note 73.
92 Supra Note 66.
93 Kaushiki Sanyal, Standing Committee Report Summary: The Protection of Children from
Sexual Offences Bill, 2011 (14 March 2012), http://www.prsindia.org / uploads / media /
Protection%20of%20children/SCR%20summary Protection% 20of% 20Children%
20from%20Sexual%20Offences%20Bill%20.pdf (last visited on 9 Sept 2012).
88

89Sujata

37

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accordingly. Fortunately, the child is exempted from punishment for failure

to report.94
1. No provision for marital rape
The Act is also silent on the issue of marital rape.95 Under the IPC,
marital rape is an offence only when the wife is below fifteen years, three
years younger than the age of consent prescribed by the Act. Therefore, there
will be no relief if the wife is above fifteen years of age, although she will
come within the definition of a child under the Act.96 This is a void that
should be addressed.
2. Gender bias?
Although the Act is gender-neutral overall vis--vis the victim, it is
not so vis--vis the offender.97 Chapter II of the Act makes use of the
pronoun he to refer to the offender, in the definition of penetrative sexual
assault, thus excluding women as offenders. Even Chapter V, which lays
down the provisions of reporting, uses the pronoun he throughout.
Therefore, the Act can be interpreted to completely absolve women of the
responsibility of reporting.
3. No period of limitation
There is no period of limitation mentioned in the Act.98 This means
that even an act that was committed 50 or 60 years ago can be reported. This
aspect of the Act should be looked into. Having a limitation period exhorts
the law enforcement agency to investigate the crime promptly.99 Also, current
crimes are much simpler to tackle as compared to historic ones as obtaining
evidence gets tougher with every passing year. Furthermore, the need, desire
and determination to punish the perpetrator and seek justice also dwindles
with lags and delays caused due to inefficiency and disinterest.100
Moreover, it may not be appropriate to judge the accused on an act
which he had committed years ago, denying the possibility to reform. It may
The Protection of Children from Sexual Offences Act, 2012, Section 21(3).
Supra Note 73.
96 Id.
97 Supra Note 66.
98 Supra Note 85.
99 Amy Dunn, Criminal Law- Statute of Limitations on Sexual Assault Crimes: Has The
Availability Of DNA Evidence Rendered Them Obsolete? , 23 UALR L. Rev. 849 (20002001).
100 Id.
94
95

38

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also deny the accused a chance of fair trial, thus infringing his basic rights. 101
Therefore, there should certainly be some delineation of on-going or recent
abuse and abuse which happened a long time ago.
4. Protection from adverse consequences
A vital issue vis--vis the reporting of abuse that is absent from the
Act is the protection of those who report the abuse.102 If a teacher, for
example, reports that a student is being abused by his/her family member, he
or she may face adverse consequences, including loss of job and threat to life,
especially if the offender is in a powerful position. The child, too, may suffer.
Although the Act provides for the care and protection of the victim,103 there
is no provision for the protection of the person who has reported such
abuse. Obligation to report, without providing protection for the same,
makes little sense.
5. Provision for In-camera trial
This Act explicitly provides for in-camera trials.104 The requirement
for the same can be traced back to the case of Sakshi v. Union of India105, in
which an eight-year-old girl had been penetrated in three orifices by her
father. The Delhi High Court, in a preposterous judgment found the accused
guilty for the lesser offences of outraging the modesty of women and hurt,
instead of rape. The Supreme Court, however, widened the scope of sections
375 and 376(dealing with rape) to include other forms of sexual abuse
intended to humiliate, violate or degrade a woman or a child sexually.
Moreover, taking cognisance of the sensitivity of children in sexual abuse
cases, the Court made in-camera trials mandatory (earlier reserved only for
cases of rape) for cases of abuse without penile penetration. It is heartening
to see that this widely hailed directive of the Supreme Court was cemented
by the Act.

Id.
Supra Note 66.
103 The Protection of Children from Sexual Offences Act, 2012, 19(5) and (6).
104 The Protection of Children from Sexual Offences Act, 2012, 37.
105 [2004] 3 LRI 242.
101
102

39

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VI.

VOL.1 ISSUE 1

GLOBAL ALLEGIANCE AGAINST CHILD SEX ABUSE

Western society is not alien to instances of child sexual abuse.106

However, determining the rate of this form of abuse is tricky.107 A study has
revealed that almost 5 percent of boys and 18 per cent of girls have been
sexually abused in the United Kingdom and more than 23,000 instances of
abuse have been recorded by the police during 2009-2010.108 The situation of
United States is much worse. A literature review of 23 studies places the
estimate at an average of 17 per cent for boys and 28 per cent for girls.109
Although all the nations are in agreement on the idea that children
should be protected from heinous crimes like child sexual abuse, they do
little to enforce international conventions in this regard.110 Since international
law is not binding, most countries exploit children for their advancement,
although they are signatories to child rights conventions. This is most
prominent in the Third world and under-developed countries, where
instances of child marriage are still recorded (young girls are married off to
men who are much older), children are openly recruited for military
proscription and child prostitution rackets flourish.111
Another major problem with enforcing international child sexual
abuse laws is that different cultures and societies have different perspectives
on child-rearing and family systems. For example, in Japan, child sexual
abuse exists, however the same is hardly ever reported, as Japanese society is
characterized by closed family systems, where problems of the family are

106Kendall-Tacket

et al, Impact of sexual abuse on children: A review and synthesis of recent

empirical studies, Psychological bulletin 113 (1), 164-180 (1993).
107 Id.
108Lorraine
Radford, Child Abuse and Neglect in the UK today,
http://www.nspcc.org.uk/Inform/research/findings/child_abuse_neglect_research_PDF
_wdf84181.pdf (last visited on 30 Sept 2012).
109 Rind, Bruce, Philip Tromovitch, and Robert Bauserman, A meta-analytic examination of
assumed properties of child sexual abuse using college samples, Psychological Bulletin 124(1),
22-53 (1998).
110 David Finkelhor, The international epidemiology of child sexual abuse, Child abuse &
neglect, 18 (5), 409-417 (1994).
111Id.;
UNICEF, Child Sexual Abuse in eastern Caribbean, 2008-2011,
http://www.unicef.org/barbados/Child_Sexual_Abuse_Publication.pdf (last visited on 1
Oct 2012).
40

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kept close within.112 Even outsiders are unwilling to interfere with the
problems of other families.113 Similarly, many countries in Asia, Africa and
South America have developed laws against the sexual abuse of children.
However, there is a widely accepted belief in these countries that child
rearing is a private family matter and should not be interfered with.114 Thus
these laws exist mostly on paper and are not properly implemented.
However, the approach towards identification and reporting of child sex
abuse in these countries is slowly undergoing a change, which is a positive
step in the direction of solving this persisting menace.115
Today child sexual abuse is a criminal offence in nearly all countries
and is generally punished by severe penalties.116 The United States recognised
child sexual abuse as a type of maltreatment in the U.S. Federal law for the
first time in 1973.117 Child sexual abuse is illegal under federal law118 and
under every state in the United States,119 although the specifics of the law
varies with each state.
The process of reporting child sexual abuse in the United States is
fairly simple and prompt. Any person can make an anonymous report of
abuse to Child Protective Services (CPS), or the Department of Children
and Family Services (DCFS).120 Most states also have a toll-free hotline
112John

Dussich et al, Decisions not to Report Sexual Assault in

Japan,http://www.aic.gov.au/en/publications/previous%20series/proceedings/127/~/media/publications/proceedings/27/dussich.pdf (last visited on Oct. 1, 2012).
113 Id.
114 Supra Note 111.
115 Id.
116Roger J.R.., Sexual Abuse of Children: A Human Rights perspective, 1-6,176-180
(Indiana University Press 1999).
117Child Abuse Prevention and Treatment Act, 1974.
118U.S. Department of Health and State Services, Index of Federal Child Welfare Laws,
http://library.childwelfare.gov/cwig/ws/library/docs/gateway/ResultSet?upp=0&rpp=1
0&w=+NATIVE(%27sti+%3D%22Index+of+Federal+Child+Welfare+Laws%22%27)
&r=1&order=+NATIVE(%27year+%2F+descend%27 (last visited in Oct. 2012).
119U.S. Department of Health and State Services, State Statutes- Child Abuse and Neglect,
http://www.childwelfare.gov/systemwide/laws_policies/state/ (last visited on 2 Oct
2012).
120New York State Office of Children and Family Services, Concerned Citizen
Guide, http://www.ocfs.state.ny.us/ohrd/ccg/ccg.asp (last visited on 17 Oct 2012);
Department of Children and Family Services, State of Louisiana, Reporting Child Abuse
or
Neglect, http://www.dcfs.louisiana.gov/index.cfm?md=pagebuilder&tmp=home&pid=1
41

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operated by trained call screeners, who either open the case for investigation
or record the report. After that, a children's social worker or a caseworker is
sent to investigate the case. If the worker is satisfied that the charges are true,
the child is sent to Child Protective Services, and the accused is tried for the
offence.121
The State also designates certain individuals to observe and report
child maltreatment. Such individuals often include health-care workers,
school personnel, child-care providers, social workers, law enforcement
officers and mental health professionals.122 Even in the United States, an
adult who is in charge of a child and possesses knowledge of child sexual
abuse (for example, he/she knows that a stranger, a friend, or a family
member is abusing the child) and fails to report the abuse can be charged
with one or more crimes under the law.123
The United Kingdom still does not have a specific legislation dealing
with child sexual abuse and the Sexual Offences Act of 2003 is attacked every
time a crime of this sort is committed.124 This Act lays down definitions and
penalties for child sexual abuse offences, and applies to England, Wales and
Northern Ireland (with respect to offences). The Scottish Law Commission
came up with its evaluation of rape and sexual offences in December 2007,
which includes a similar consolidation and codification. The same is referred
09 (last visited on 17 Oct 2012); Department of Children and Families, State of New
Jersey,How and When to Report Child Abuse and Neglect, http://www.nj.gov /dcf
/reporting/how/index.html (last visited on 17 Oct 2012); Department of Health and
Human Services, State of North Carolina, About Child Abuse and Neglect, http://
www.ncdhhs.gov/dss /cps/about.htm#Reporting (last visited on 17 Oct 2012);
Department of Social Services, State of California, Report Abuse, http://
www.dss.cahwnet.gov /cdssweb /PG20.htm (last visited on 17 Oct 2012); Anne Reiniger,
Mandated Training of Professionals: A Means of Improving Reporting of Suspected
Child Abuse, Child Abuse and Neglect, 19(1), 63-69 (1995).
121Id.
122 Department of Children and Family Services, State of Louisiana, Reporting Child Abuse
orNeglect, http://www.dcfs.louisiana.gov/index.cfm?md=pagebuilder&tmp=home&pid
=109 (last visited on 17 Oct 2012)
123National Centre for Prosecution of Child Abuse National District Attorneys Association,
Mandatory
Reporting
of
Child
Abuse
and
Neglect
(Nov.
2011),
http://www.ndaa.org/pdf/Mandatory%20Reporting%20of%20Child%20Abuse%20and
%20Neglect-Nov2011.pdf(last visited on 17 Oct 2012).
124 Patricia J. Mrazek, Sexual Abuse of Children in the United Kingdom, Child Abuse and
Neglect, 7(2), 147-153 (1983).
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to in all matters of child sexual abuse in Scotland.125In 2006, the London

Safeguarding Children Board released guidelines for safeguarding children
abused through sexual exploitation.126 These guidelines lay down the
framework for a multi-agency response to the sexual exploitation of children,
covering risk-assessment, intervention, multi-agency planning meetings and
support plans, roles of different services (social services, police, education,
health) and prevention work.
The Indian Act, sadly, has failed to incorporate the important abovementioned provisions of legislation in other countries. Some features of the
London Board guidelines can also be included in the Indian Act, especially
with respect to the roles of different services (social services, police,
education, health)127 to make the latter a more comprehensive and effective
legislation. The concept of grouping children into three categories (low risk,
medium risk, high risk)128 can also be adopted which will help us take into
account the unique circumstances of each child and consequently help to
frame a better response/intervention strategy. In the same vein, the process
of reporting child abuse in our country could be made less tedious if, like the
United States, we could have a toll-free hotline number for complaints,
attended by trained screeners. Also, we could have a system where the State
designates certain individuals to observe and report possible maltreatment.
These small but significant borrowings from the US and UK legislation can
go a long way towards improving the Indian position vis--vis child sexual
abuse.
VII.

CONCLUSION

A staggering 41% of Indias population is constituted by children.129.

Therefore, the growing incidence of sexual violence, abuse and exploitation
125

Id.

126London

Safeguarding Children Board, Safeguarding Children Abused Through Sexual

Exploitation
(2006),
http://www.londonscb.gov.uk/files/conference07/sexual_exploitation_procedure.pdf
(last visited on 17 March 2013).
127Safeguarding Children Abused Through Sexual Exploitation, London Board 2006,
6,7,8,9,10.
128 Safeguarding Children Abused Through Sexual Exploitation, London Board 2006, 3.2.
129 Population in different age groups and their proportion in the total population, Ministry
of Home Affairs, Office of the Registrar General and Census Commissioner of India, (1
Dec
2005),
43

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VOL.1 ISSUE 1

of children does raise many concerns.130 The problem in India is acute owing
to its conservative social environment. For instance, incest will usually go
unreported due to the fear of social disgrace. Within a family, children will
feel victimized, as the crime would be suppressed and not subjected to the
usual criminal complaint procedure. This may have severe psychological
effects in the form of guilt, shame and depression in the child which deeply
affects their personality.131 It is difficult to assure ourselves that these
children will ever be able to get past the social opprobrium and fear.
Effective penalization is a means toward that much desired end.
The lack of a legal mechanism exclusively directed at curbing such
offences is the prime reason behind the breeding of sexual predators. The
IPC has never addressed crimes perpetrated against children and yet
legislature has continuously impeded several attempts at drafting a separate
and robust legislative instrument to this end. In the guise of this loophole,
which dilutes the sentences of offenders, it appears that the judiciary, along
with the reluctant legislature and ignorant executive, has also turned a blind
eye to the severity of the offence.
If art imitates life, the popular media has been doing a decent job in
painting the true picture of child abuse in India. The dismal state of
protection against child abuse has found mention in numerous popular
culture references such as television shows in the league of We the People and
Aamir Khan's Satyameva Jayate.
However, drafting a specific legislation targeting child sexual abuse is
only half the battle won. The next major impediment is compelling people to
come forward and report such offences. Additionally, due to the nature of
the crime and the victims being children, a higher onus is imposed on
investigation as it must be handled with adequate sensitivity. Therefore, the
legislation must make provisions ensuring that the child is not traumatised
further by the police, investigating agencies, court and components of the
legal system while seeking justice. Usually in cases of sexual abuse there is
http://censusindia.gov.in/Census_And_You/age_structure_and_marital_status.aspx (last
visited on 5 Oct 2012).
130 Supra note 105.
131Neeta Lal, Hidden Darkness: Child Sexual Abuse in India (2 May 2007),
http://www.asiasentinel.com/index.php?option=com_content&task=view&id=476&Item
id=34 (last visited on 5 Oct 2012).
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lack of forensic and conclusive incriminating evidence, lack of witnesses and

conflicting testimonies by the child. The law and enforcement agencies must
be sensitive and understanding of such circumstances and provide the child
with necessary aids like social workers or psychologists for comfort and
encouragement to give the most accurate evidence. At no point must the
child feel threatened, scared or incapable of telling the truth as it would
defeat the purpose of the legislation. Lastly, protection must be accorded to
the child during the course of the trial to make it as minimally harrowing as
possible. Therefore, all efforts must be combined to ensure that children do
not fall prey to such heinous crimes and live a healthy childhood.
The Indian story has found resonance in many countries without any
discrimination against race, religion or ethnicity. It has prompted legislatures
across the world to enforce laws criminalising child sexual abuse and
prodded international bodies into spreading awareness132.133

132Supra

Note 101, 111, 118.

Note 106.The United States has taken a keen interest in preventing such instances of
abuse by making their law child-centric and child-friendly. The United Kingdom and
Scotland have also been able to successfully deal with instances of child sexual abuse
despite not having a specific legislation as penalties are included in legislations that deal
with sexual offences at large. But some countries like Japan are still reticent in broaching
the subject of child sexual abuse even though it is widespread in the society.

133Supra

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DEMOCRATIC DILEMMAS IN JUSTIFYING MURDER:

THE CASE OF TARGETED KILLINGS UNDER
INTERNATIONAL LAW
Nidhu Srivastava*
The paper aims to answer the normative implications arising out of the use of
targeted killings by States. The researcher aims at putting forth legal and moral
justifications of targeted killings so as to decide the domain of of the same. The paper
mainly focuses on analysing major criticisms of targeted killings and their justifications,
presenting the legal basis and limitations to targeted killings and the moral dilemmas in
justifying it. Special attention has been given to the identification of targets of these killings.
The author has also analysed the controversy surrounding civilians participating in
hostilities. The paper states that though targeted killings are conducted in order to meet
certain foreign policy goals as well as to protect the general populace, it is also true that
targeted killings do not defeat terrorist organisations and may instead encourage further
events of revenge. Hence, targeted killings should only be opted for when the benefits so
achieved exceed the costs involved by a great margin.
I.

INTRODUCTION

Either openly or implicitly, the policy of targeted killing has been

adopted by States in recent times1 after Israel became the first country to
make public a policy of targeted killings of alleged terrorists in the Palestinian
territories. Even though the term targeted killing is neither defined under
international law,2 nor in any other particular legal framework,3 the United
Nations report on the same explains it as;
The intentional, premeditated and deliberate use of lethal force, by States or their
agents acting under colour of law, or by an organised armed group in armed
conflict, against a specific individual who is not in the physical custody of the
perpetrator.4

* IV Year, B.A. LLB (Hons.), NALSAR University of Law, Hyderabad

1 ALSTON, P., UN Report of the Special Rapporteur on extrajudicial, summary or arbitrary executions
General Assembly, 28 May 2010, 1, Available at: http://www2.ohchr.org /english /bodies
/hrcouncil/docs/14session/A.HRC.14.24.Add6.pdf, (Last visited 25 March 2012).
2 Id, 7.
3 Id.
4 Supra, note 1.
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Targeted killings are not accidental, but are deliberately taken on by

governments and their agents in times of peace as well as armed conflict 5 or
by organised armed groups in armed conflict.6 It may be legal or illegal but it
is seen to violate the right to life in almost all circumstances.7
The issue of targeted killings involves both costs and benefits. It
could only be justified if the benefits are far greater than the costs and if it
does not violate the fundamentals of humanity.8 To rationalize targeted
killings, we need to work on an assumption that the war against terror is a
just response to terrorist atrocities and hence, terrorists are liable to be killed
for the violation of jus ad bellum.9 The practice of targeted killing, in the
absence of any governing law, raises many questions. The extent to which a
democracy should go in taking the fight to the enemy; and the standards and
metrics it should use to judge the propriety and effectiveness of its actions
have always been controversial.10 One question which attracts even more
debate is who the lawful targets of targeted killings are.
The strategy of targeted killing is often rejected as ineffective, illegal
and immoral as it attracts worldwide condemnation, disrupts diplomatic
negotiations, fuels anger and increases the number of terrorists.11 Hence,
answering the normative implications arising out of the use of targeted
killings by States is also of critical importance. Legal and moral justifications
of targeted killings could help in deciding the domain of targeted killings.12
This paper mainly focuses on analysing major criticisms of targeted
killings and their justifications. Following the controversy over the targets of
targeted killings, the paper presents the legal basis and limitations of targeted
killings and the moral dilemmas in justifying them. A summary of the main
points raised is provided in the conclusion.
5Supra

note1, 8.
note1, 8.
7Supra note1, 10.
82 BYMAN, D, Do Targeted Killings Work?, Foreign Affairs, vol. 85, at 96, March-April 2006;
[hereinafter, Byman].
9 WALDRON, J.J., Violation of jus ad bellum- Can Targeted Killing Work as a Neutral
Principle?, (2011), NYU, Public Law and Legal Theory, Working Paper - 267, at 4-5, available at:
http://lsr.nellco.org/nyu_plltwp/267 (Last visited: 25 March 2012) [hereinafter Waldron].
10Byman, supra note 8, at 96.
11Byman, supra note 8, at 96.
12There are also conflicts over question whether terrorism is a criminal act or an act of war, if
terrorism is a criminal act, then targeted killings are an illegal method of law enforcement;
whilst if terrorism is an act of war, then targeted killings is simply a military tactic
6Supra

48

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II.

VOL.1 ISSUE 1

WHO MAY LAWFULLY BE TARGETTED?

By 2011, more than three Iranian nuclear scientists were killed either
by bombing or shooting. It was rather surprising that these killings did not
invite outrage or condemnation by the international community. Instead, as
Hasan13 puts it,14 these acts were considered as an expression of undisguised glee.
However the question remains, were these scientists the lawful targets of
such killing or not? The answer suffers from a lack of clarity.
Targeted killings come within the ambit of non-international armed
conflict, for which the rules regarding lawful targets are ambiguous. 15 In the
absence of any term such as combatant,16 States are allowed to attack the
civilians who directly participate in hostilities (DPH)17.18 However, the
definition of DPH has been left open to the States own interpretation.19
What is direct participation has not been universally accepted. Is it only the
membership in an organised armed group or the duration of participation
that is crucial in order to decide whether an individual is to be attacked or
not?20
If we assume that DPH only includes conduct close to that of a
fighter or what seems to be directly supporting combat, it would follow that
civilians providing financial support, advocacy, or other non-combat aid,
would not be liable to be attacked.21 However the ICRC Guidance22 describes
Mehdi Hasan is a British Political Editor at the Huffington Post United Kingdom. He is
also the presenter of al-Jazeera Englishs The Caf. He was a senior editor at the New
Statesman and a news and current affairs editor at Channel 4. He is co-author of Ed: the
Milibands and the Making of a Labour Leader. He has expressed strong views on
Diplomacy, Islam, Muslims and American Rhetoric expressed in his writing for The New
Statesman.
14HASAN, M., Iran's nuclear scientists are not being assassinated. They are being murdered, Jan, 16, 2012,
guardian.co.uk,
http://www.guardian.co.uk/commentisfree/2012/jan/16/iran-scientists-state-sponsoredmurder (Last visited: 26 March 2012).
15Supra note 1, 57 & 58 [Where as in international armed conflict, combatants may be
targeted at any time and any place subject to the other requirements of IHL].
16Supra note1, 58.
17Hereinafter, DPH.
18Supra note 1, 58.
19Supra note 1, 58.
20Supra note 1, 59.
21Supra note 1, 60.
22
Melzer, N., ICRC Guidance, Interpretive guidance on the Notion of Direct Participation in hostilities
under
International
Humanitarian
Law,

62,
13

49

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DPH as a continuous combat function.23 By this logic, these people may be

targeted at all times and in all places,24 as DPH for civilians could be limited
to each single act. Take for example any concrete preparatory measures for
that specific act constitutes DPH.25
The main problem here is to arrive at such a definition of DPH that
would not jeopardize the safety of civilians and at the same time not act as a
reward for an enemy. There might be cases where any enemy may
deliberately hide among civilian populations, hence putting them at risk.26 In
such situations the strategy of targeted killing might not be the best option
available, as it will end up jeopardizing the safety of civilians and hence
diluting the distinction between who may be killed and who may not.. Even
an indirect conduct could be included provided it has a belligerent nexus with
the harm caused, if the same is not protected by other human rights
standards according to ICRC guidelines.27 Thus, the real test becomes whether
the conduct constitutes an integral part of armed confrontations occurring between
belligerents.28 If the activity does not meet the criteria for DPH, 29 then States
response must conform to the lethal force standards applicable to selfdefence and law enforcement.30
The Public Committee against Torture in Israel and ors v. The Government of
Israel and ors31(Targeted Killings Case) of 2005 clarifies the position further
and summarizes the law of determination of DPH. Here the
petitioners challenged the targeted killings conducted by the State of Israel as
http://www.icrc.org/eng/assets/files/other/icrc-002-0990.pdf (Last visited: 26 March
2012) [hereinafter Melzer] [ICRC provides for three components of DPH. A threshold of harm
which is likely to result from the act, either by adversely impacting the military operations
or capacity of the opposing party, or by causing the loss of life or property of protected
civilian persons or objects; the act must cause the expected harm directly, in one step, for
example, as an integral part of a specific and coordinated combat operation as opposed to
harm caused in unspecified future operations; the act must have a belligerent nexus i.e., it
must be specifically designed to support the military operations of one party to the
detriment of another.
23Id.
24Id.
25Id.
26Melzer, Supra note 22, 62.
27Supra note1, 60.
28Supra note 1, 64.
29See:Hague Regulations IV, A. 22, A. 35(1) & 51 (discussing hostilities).
30Supra note 1, 64.
31 HCJ 769/02 (2005) [The case was heard by the Supreme Court of Israel sitting as the High
Court of Justice on December 11, 2005 by A. Barak, President D. Beinisch, and Vice President
E. Rivlin].
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being disguised as security measures.32 The Policy of targeted frustration

employed by the State was under question.33 As a basic principle, civilians
taking a direct part in hostilities are not protected from attack at such time as
they are doing so. 34 The essence of this basic rule is that a civilian must
refrain from directly participating in hostilities and if he does not do so, he
loses his status as a civilian as long as he is taking a direct part in hostilities. 35
Here it may be argued that terrorists participating in hostilities forfeit their
immunity as civilians, but do not lose the status of a civilian. The court
further observed that protection against military attacks is granted to civilians
unless and for such time as they take a direct part in hostilities36
Interpreting the term taking part in hostilities the court described
hostilities as acts which by nature and objective are intended to cause damage
to the army or otherwise.37 The act covers civilians using weapons, gathering
intelligence, or preparing himself/herself for hostilities against the army, the
state or the civilian population of the State. Moving on to the second limb of
51(3), the court analysed the phrase takes a direct part, by differentiating
between civilians who take a direct part in hostilities from civilians who take
an indirect part.38 It is however contended that the civilians who merely
support the adverse party's war or military effort cannot be considered as
combatants.39 This may include selling goods or supplying food or
sympathizing with the cause of one of the parties. The cases of direct
participation may include a person who collects intelligence on the army or
transports unlawful combatants to or from the place or supervises

32Targeted

Killings were employed across Judea, Samaria, and the Gaza Strip. Statistics show
that, these operations killed close to three hundred members of terrorist organisations and
more than thirty targeted killing attempts have failed. One hundred and fifty were killed
and hundreds wounded during the acts.
33The Policy allows the security forces to kill members of terrorist organisations involved in
the planning, launching, or execution of terrorist attacks against Israel.
34 This principle is manifest in 51(3) of Protocol Additional to the Geneva Conventions, 12
August 1949, and relating to the Protection of Victims of International Armed Conflicts
(Protocol I), 8 June 1977, which states;
Civilians shall enjoy the protection afforded by this section, unless and for such time as
they take a direct part in hostilities.
35See Targeted Killings Case, 31.
36See Targeted Killings Case, 32.
37See Targeted Killings Case, 33.
38See Targeted Killings Case, 34.
39Inter-American Commission on Human Rights, Third Report on Human Rights, 1999,
53, 56.
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operation.40 However, what is direct and indirect has always been a question
of debate in the international circle. In such circumstances, the facts of each
case have to be decided individually to see whether there is a direct
participation or an indirect one. While interpreting grey areas like this, a
liberal interpretation is to be adopted in favour of finding direct
participation.41 Contributing to the interpretation of this disputed clause, the
court further added that direct participation is not restricted merely to the
person committing the physical act of attack, but extends to the person who
plans or plots the act.42
Finally, moving on to the last limb of 51(3): for such time, a civilian
directly participating in hostilities forfeits his immunity for such time when
he is taking part in those hostilities and once that time passes, the protection
granted to the civilian returns.43
The clause takes a direct part in hostilities is qualified by the term for
such time.44 A civilian cannot be attacked for hostilities committed in the past.
If he is involved in a chain of hostilities, with short periods of rest in
between, he is not entitled to immunity as it is a continuing act.45 However,
each and every case has to be examined separately, to see the nature of the
act and duration of involvement.46
III.

LEGAL PERMISSIONS

Terrorists have an irregular status.47 It is clear that International Law

recognises only two possible statuses of people: one being combatants and
the other civilians. While both these categories enjoy rights under
International Law, combatants are legitimate targets of an attack whereas
civilians are not.48 Even if a civilian participates in combatant activities, he
cannot be termed as an unlawful combatant. He retains his status, losing
40See

Targeted Killings Case, 35.

Targeted Killings Case, 34.
42See Targeted Killings Case, 37.
43See Targeted Killings Case, 38.
44See Targeted Killings Case, 39.
45See Targeted Killings Case, 39.
46See Targeted Killings Case, 40.
47Byman, supra note 8, at 101.
48Article 3 of the Geneva Convention provides for the status of civilians, and their
protection. This is considered as the basic principle of customary international law
41See

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certain privileges in case of direct participation in hostilities.49 Hence, one

who is not a combatant automatically becomes a civilian as there are only
two possible statuses can possess.
Terrorists are not military combatants. The Hague Regulations, 1
defines combatants as people who fulfil the following conditions;
The laws, rights, and duties of war apply not only to armies, but also to militia and
volunteer corps fulfilling the following conditions:
1. To be commanded by a person responsible for his subordinates;
2. To have a fixed distinctive emblem recognisable at a distance;
3. To carry arms openly; and
4. To conduct their operations in accordance with the laws and customs of war.
However, terrorists do not belong to the armed forces. They do not
enjoy international status similar to that of combatants. They are mostly
related to unlawful organisations, banned in various countries. They do not
enjoy the status of prisoners of war. They can be tried for their participation
in hostilities and judged and punished.50 Unlike States, they cannot declare
wars and are not legal targets of wars. They do not wear uniforms or have a
differential insignia.51 In Hamdi v. Rumsfeld52 it was observed that;
by universal agreement and practice, the law of war draws a distinction
between the armed forces and the peaceful population of belligerent nations and also
between those who are lawful and unlawful combatants. Lawful combatants are
subject to capture and detention as prisoners of war by opposing military forces.
Unlawful combatants are likewise subject to capture and detention, but in addition
they are subject to trial and punishment by military tribunals for acts which render
their belligerency unlawful.53

49Article

51(3) of Protocol Additional to the Geneva Conventions of 12 August 1949, and

relating to the Protection of Victims of International Armed Conflicts (Protocol I), 8 June
1977 defines the conditions for a civilian who participates in combat activities. He loses
civilian protections, and might be a legitimate target for attack. However, that is the case
only if he is taking a direct part in the hostilities and only if the attack against him is carried
out during such time of said participation
50 See Targeted Killings Case, 5.
51 Byman, supra note 8, at 101.
52 542 U.S. 507 (2004)).
53 Also see The Public Committee against Torture in Israel and ors v. The Government of Israel and ors,
HCJ 769/02 (2005).
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However, there is a disagreement regarding the existence of the third

category of unlawful combatant beyond combatants and civilians. Leaving
out this grey area of unlawful combatants, logically, if terrorists cannot be
considered combatants; they should be treated under international law as
civilians. A subsequent possibility is to look into the concept of DPH and
decide upon the protections available to the terrorists accordingly, if we
consider terrorists as civilians. Then again, as civilians, they should be
executed as part of a judicial process only.54 This means that it would be
illegal for United States to arrest Taliban terrorists, except in self-defence and
that these arrested terrorists can invoke Miranda Rights, demand legal
representation and application of natural justice principles.
A. LEGAL BASIS OF TARGETED KILLINGS
In absence of any governing law, the legality of targeted killings is a
big question. In the context of armed conflict, both International
Humanitarian Law and Human Rights Law apply.55Lex specialis determines if
a killing is legal or not.56 According to International Humanitarian Law,
targeted killing is lawful only when the target is a combatant.57 Here the
DPH controversy resumes, as International Humanitarian Law does not
seem to allow targeted killing of any civilian. However the ICRC Guidelines
and the Humanitarian Law should be read in consonance, regulating the
scope of targeted killings. Where IHL does not provide for a rule, or the rule
is ambiguous, guidance is drawn from Humanitarian law. For example, under
IHL targeted killing is only lawful when the target is a combatant or DPH of
a civilian.58 Qualifying the condition, ICRC proposes the Proportionality
Principle.59
A civilian taking a direct part in hostilities cannot be attacked, if less
harmful means may be employed to serve the similar purpose of security.
This means that if a terrorist taking a direct part in hostilities can be arrested,
54Byman,supra

note 8, at 101.
note 1, 29.
56Supra, note 1, 29 Human rights law and IHL apply coextensively and simultaneously
unless there is a conflict between them. In situations that do not involve the conduct of
hostilities e.g., law enforcement operations during non-international armed conflict the
lexgeneralis of human rights law would apply.
57The Manual on the Law of Non-International Armed Conflict, Int. Ins. of Humanitarian
Law, March 2006, 30.
58 Supra, note 1, 29.
59 See Rule 14, ICRC 2005 These basic standards apply in both the cases, where the armed
conflict is between States or between a State and a non-state armed group.
55Supra,

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interrogated and tried, then targeted killings shall not be opted for. 60 Trial is
preferable to use of force.61 It shall be the attempt of the State to follow the ruleof-law to the greatest extent possible. In McCann v. United Kingdom62 where
three terrorists from Northern Ireland were shot to death by English agents,
the European Court of Human Rights held that Britain violated their right to
life as the use of force was disproportionate and the authorities could have
taken alternative measures to capture them alive.
However, even in cases where the due process cannot be followed
due to emergent security threats, a possibility of action other than killing
should always be considered. There cannot be specific guidelines as to when
targeted killings should be opted for, but that depends upon the facts of each
case. A thorough investigation regarding the precision of the identification of
the target and the circumstances of the attack upon him is to be performed.
The attacks must always withstand the proportionality test in order to qualify
as legal. The killing must be necessary and the force used must be
proportionate to threat anticipated or created.63 Steps necessary in preventing
harm to civilians must be taken on a priority basis.64 These standards apply to
both, an international armed conflict and to a non-international armed
conflict.65
If a targeted killing is outside the context of armed conflict, human
rights law becomes the governing law.66 This is termed as the Law
Enforcement Model.67 It only applies to police forces or in times of peace. 68
Only the government officials who exercise police powers, in contexts where

See Mohamed Ali v. Public Prosecutor,1 A.C. 430 (1969).

Also see Th ePublic Committee against Torture in Israel and ors v. The Government of Israel and ors,
HCJ 769/02.
62 21 E.H.R.R. 97 (1995), 235.
63 Supra note 57 Proportionality requires an assessment whether an attack that is expected to
cause incidental loss of civilian life or injury to civilians would be excessive in relation to
the anticipated concrete and direct military advantage
64Supra note 57 Precaution requires that, before every attack, armed forces must do
everything feasible to: verify the target is legitimate; and determine what the collateral
damage would be and assess necessity and proportionality, and also, minimize the collateral
loss of lives and/or property. Everything feasible means precautions that are practicable
or practically possible taking into account all circumstances ruling at the time, including
humanitarian and military considerations.
65Supra, note 1, 30.
66Supra, note 1, 31.
67Supra, note 1, 31.
68Supra, note 1, 31.
60
61

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violence exists, are allowed to go for targeted killings.69 Urgency and

proportionate use of force may make a targeted killing legal.70 The use of
warnings, restraint and capture to reduce the level of use of force is also
appreciated.71 If a killing is for the sole purpose of an operation, it does not
derive any approval from human rights law.72 This is until and unless the
choice is between letting innocent people be killed and letting their law
enforcement officials use lethal force to prevent such killings.73 States are
obligated to exercise due diligence to protect the lives of individuals from
attacks by criminals, including terrorists,74 hence, Human Rights Law makes
targeted killings legal when strictly and directly necessary to save life.75
IV. JUSTIFYING TARGETED KILLINGS (?)
Targeted killing is criticized for compromising both legal and moral
values. It is alleged that this inevitably leads to the death of innocents as
collateral damage. As Kant puts it, an act shall be done only if at the same time it
could become a universal law.76 Pure morality should not interject personal or
subjective adulterants, regardless of who is acting. It is often contended that
the targeted killings manipulate pure morality. The victims are dehumanised
and treated as means to an end, rather than ends in themselves, hence,
violating human rights. To simplify, every human being has rights and enjoys
life and liberty as fundamentals, signifying human dignity. In devoid of these
rights, his existence trolls down to that of an animal. All human beings can
assert these rights against one another in case of violation or threat of
violation. Also, the basis for modern society is a condition of mutual respect
of rights in any situation.

69Supra,

note 1, 31 [Code of Conduct for Law Enforcement Officials, GA Res. 34/169 of

Dec. 17, 1979 (hereinafter, Code of Conduct), A. 1, Commentary (a) & (b); Basic Principles
on the Use of Force and Firearms by Law Enforcement Officials, 8th U.N. Conference on
Prevention of Crime and Treatment of Offenders, Havana, Cuba, Aug.-Sept., 1990] [hereinafter,
Basic Principles].
70Supra, note 1, 32.
71Supra, note 1, 32.
72Supra, note 1, 33 [A shoot-to-kill policy violates human rights law].
73Supra, note 1, 33.
74Supra, note 1, 33.
75Supra, note 1, 33.
76 7 Guthrie, S.L., Immanuel Kant and the Categorical Imperative, J. The Examined Life On-Line
Philosophy, (vol.2), available at: http://sguthrie.net/kant.htm, (Last visited on 27 March
2012).
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However, it is agreed that these rights are not absolute and may be
violated in cases of self, other, or national defence, by an innocent
aggressor.77 For value judgment on the issue of identification of an innocent
aggressor, the jus ad bellum criteria constitutes a real test. According to the
Moral Permissibility Principle, a war is morally permissible, if and only if the
act does not violate or pose a real and immediate threat to violate the right to
life of non-combatants.78 The Realist School of Moral Philosophy argues that
laws of morality must adjust to the laws of war rather than vice-versa.79
Today, this proposition cannot be supported in its strict sense, but in a
diluted one, as argued by Machon;
The Law Enforcement Model becomes insufficient in case of disturbing level of
violence inflicted, as such infliction has caused significant uncertainty about
suitability of situating criminal acts related to terrorism within the purview of law
enforcement and the terrorists operate within the territory of states either unwilling
or incapable of cooperating.80
The government carries out the killing in order to accomplish some
foreign policy goal. This goal could be victory in a war, preventing a nation
from building nuclear weapons, deposing an undesirable regime, etc. But, in a
case of use of violence where non-combatants are not afforded immunity, it
cannot be said to be just war even if the use of violence is in fact for a just
cause. Any right violated therein cannot be defended on the grounds of
national security, as is done in the case of targeted killings. It has to be
considered as homicide and not war, violating human dignity and nullifying
an individuals existence. Targeted killings present a similar picture, where in
the disguise of refuge of state, innocents are killed. These innocents are not
considered as right-bearers themselves, but as a channel of killing terrorists.
They are objectified and their right to life and liberty is annulled. Basic
humanity is put at stake for the sake of artificial values of camouflaged
operations. Is it correct to shred humanitarian values in the name of security?

77Statman,

D.,Targeted
Killing,
available
at:
http://www.ucl.ac.uk
/~uctytho
/StatmanTargetedKilling.html (Last visited on 28 March 2012); (Hereinafter Statman).
78Id.
79 Waldron, supra note 9, at 11.
80 Waldron, supra note 9, at 11.
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A. COST-BENEFIT ANALYSIS
Ideals of utilitarianism do justify targeted killings to a certain extent
on jurisprudential grounds. It can be argued effectively that the use of
targeted killing reduces the overall casualties, as it leads to more expedient
victories in armed conflicts.81 However, the same logic may be used to defy
targeted killings.82
No doubt targeted killings are always an alternative, but, they do
create strategic complications. They create martyrs that help a group sell itself
to its own community.83 Peace negotiations may also be complicated.84 It
often results in retaliation and vengeance. Moreover, when leaders are killed,
their followers are ready to step into their shoes. For instance, after the
Hezbollah strikes in the 1980s, fallen leaders were replaced at a great pace
and suicide attacks on Israel were accelerated.85 Further, the 1992 and 1994
bombings of Jewish and Israeli targets in Argentina came as a response to
Musawis death and kidnapping of Mustafa Dirani, a Hezbollah leader.86
These purely defensive measures impose a tremendous cost on
innocent people and also imperil civil liberties. In order to evaluate the cost a
civilian pays, Peter Bergen and Katherine Tiedemann of the American
Foundation in the report The Year of the Drone87 studied 114 drone raids.
They
concluded
that nearly
1200 people were killed, of which
between 549 and 849 were reliably reported militant fighters, the rest being
civilians.88 In the year 2012, 1,784 were killed in 1,324 incidents of targeted
killings.89 Since 1994, Karachi alone lost over 9,500 people to targeted

81Id.
82Id.

83Hezbollah

now venerates gures such as Musawi and uses them to rally the faithful and
demonstrate the groups commitment to ghting Israel. Khaled Hroub, a Cambridge
Universitybased expert on Hamas, argues that Israeli counterterrorism measures,
including targeted killings, have only increased the movements popular legitimacy
84Bymam, supra note 8 at 100.
85Byman, supra note 8 at 99.
86Byman, supra note 8 at 99.
87Bergen, Peter and Tiedemann, Katherine, The Year of the Drone: An Analysis of US Drone
Strikes in Pakistan, 2004-2010, Pak Tea House, February 24, 2010, Available at:
http://pakteahouse.wordpress.com/2010/03/02/the-year-of-the-drone-by-peter-bergenand-katherine-tiedemann/
88Id.
89Id.
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killings, the majority belonging to various political parties, particular sects and
sectarian groups.90
According to statistics compiled by Pakistani authorities, the
Afghanistan-based US drones killed 708 people in 44 attacks targeting the
tribal areas in 2009. 91 Statistics show that for each Al-Qaeda and Taliban
terrorist killed, over 140 innocent Pakistanis died.92 In total, it is claimed that
only 35 Al-Qaeda terrorists were killed in these strikes and while 1153
civilians died in suicide bombings in 2010 and 933 in drone strikes in the
same year.93
It is also true that heavy investment in intelligence and rapid-response
capabilities become a pre-requisite for a successful targeted killing policy.94
An efficient system of information sharing is required in order to collect data
and pass it on to the operatives. There should be a constant surveillance and
strike presence over targeted areas.95 Thus amplifying the costs involved.
On utilitarian grounds, the idea of deriving utility out of targeted
killings seems bleak. Further, is it logical to sacrifice the right to life merely
on utilitarian grounds? Dworkin argues that a fundamental right shall not be
taken away by the government, merely on utilitarian grounds. Even so, he
further provides for three limitations of this general proposition, one of
which is the idea of competing rights.96 In the event of a conflict of rights of
two individuals, the government has to make the right choice and eventually
protect the more important at the cost of the less important.97 On the face of
it, the policy of targeted killings may look like a case of tit for tat, however, it
clearly secures the rights of citizens of a state, whose right to life is violated
by terrorism and other kinds of violence.

Babakhel, Mohammad Ali, Targeted killings, Dawnopinion.com, 12 March 2013.

Jason, US Killed 700 Civilians in Pakistan Drone Strikes in 2009 ,Dawn, 2 Jan 2010.
Available
at:
http://www.dawn.com/wps/wcm/connect/dawn-contentlibrary/dawn/news/pakistan/18-over-700-killed-in-44-drone-strikes-in-2009-am-01 (Last
visited on 16 March 2013).
92 Ibid
93 Usmani, Zeeshanul Hassan, Pakistan Body Count, Florida Institute of Technology, March
15, 2010. Available at: http://www.pakistanbodycount.org/drn.php.
94Bymam, supra note 8 at 100.
95Bymam, supra note 8 at 100.
96DWORKIN, R., Taking Rights Seriously, 1978, at 193-194.
97Id.
90

91Ditz,

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Whether such counter-terrorism action through targeted killing is

effective enough or not is debateable. However, the Institute of Conflict
Management claims to give proof in favour of its effectiveness with regard to
the situation in Baluchistan where at least 22 Al Qaeda and six Afghan
Taliban militants have been arrested in 2009.98 Apart from arrests or killings
of terrorist leaders, these strikes have also added to the reluctance of the local
population to provide shelter to militants. Another report shows that key alQaeda operatives have been forced out of the tribal regions of Pakistan after
drone attacks killed twenty commanders in the past eighteen months.
Militants have moved into urban areas. The senior leaders of the militant
groups are giving up responsibility to the younger generation to control
operations on the ground.99
Targeted killings disrupt terrorist organisations, as they have a limited
number of experts. When they are killed, the expertise is lost. Bomb makers,
terrorist trainers, forgers, recruiters, and terrorist leaders are scarce; they need
many months, if not years, to gain a certain level of expertise100. Targeted
killings do force terrorists to spend more time and energy protecting them.
Thus, terrorists change their locations constantly, which are to be kept
secrets.101 Internal communication and motivation become difficult.102
Nevertheless, targeted killings are ineffective in ending the reign of
terrorism.103
However, it is often seen that targeted killings result in retributive
attacks and a consequent increase in the morale of the group.104 On a
practical level, there is little evidence to show that killing a terrorist, even if
high ranking, has a long lasting impact on groups ability and willingness to
continue to wage a terrorist campaign. These militant groups are said to have
widely shared ideologies, characteristics, long operational histories, and a

Johnston, Patrick B., The Impact of US Drone Strikes on Terrorism in Pakistan and Afghanistan,
RAND Corporation UCLA, 3 Jan, 2013.
99 Hussain, Zahid, Drone attacks in tribal Pakistan force al-Qaeda into urban areas, The
Times, 8 Aug 2009.
100Byman, supra note 8, at 103.
101Byman, supra note 8, at 104.
102Byman, supra note 8, at 104.
103Byman, supra note 8, at 104.
104Hunter, Thomas Byron, Targeted Killing: Self-Defense, Pre-emption, and the War on
Terrorism, Journal of Strategic Security, 2009, 2 (2): 1-52, p. 31. Available at:
http://scholarcommons.usf.edu/jss/vol2/iss2/1
98

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wide member and support base. Targeted killings may be useful when
employed against a smaller group, with less membership and support. 105
B. SOVEREIGNTY QUESTIONS
Targeted killings also raise important questions on the sovereignty of
States. Under Article 2(4) of the United Nations Charter, States are forbidden
from using force in the territory of another State.106 If a State conducts
targeted killings in the territory of a second State, with which it is not in
armed conflict, the killings are legal only if the second State consents, or the
targeting State has a right under international law to use force in self-defence
under Article 51 of the United Nations Charter.107 International law permits
the use of lethal force in self-defence in response to an armed attack as long
as the force is necessary and proportionate.108 There are two issues to be
examined here; one being that of consent to conduct the targeted killing and
the other of right to self-defence.
Consent to conduct targeted killing on the territory of another State
though not legally controversial, the permission to use of such force however
does not absolve the targeting State from its duty to abide by human rights
law during use of force. Additionally, the consenting State also has the
responsibility to protect against the arbitrary deprivation of the right to life.109
The United Nations General Assembly, Resolution on the Protection of Human Rights
and Fundamental Freedoms While Countering Terrorism110 summarizes this position
in the following words;
. states must ensure that any measure taken to combat terrorism complies with
their obligations under international law, in particular international human rights,
refugee and humanitarian law.
Every State has a right to lawfully authorize targeted killing on its
land, but it it may require the targeting State to show that the person against
whom lethal force is intended to be used is a lawful target and that the
105Id.

at36.
2(4), United Nations Charter: All Members shall refrain in their international relations from
the threat or use of force against the territorial integrity or political independence of any state, or in any
other manner inconsistent with the Purposes of the United Nations.
107 See United Nations Charter, A. 2(4).
108 Nicar.v. US, ICJ Rep. (1986), 194.
109 Supra note 57, 37.
110 A/Res/51/191, March 10, 2005, 1.
106Article

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targeting State will comply with the applicable law.111 In case of wrongdoing
by the targeting State, the concerned State may seek prosecution of the
offenders and compensation for the victims.
Another argument in this regard is that of self-defence, falling within
the tenets of Article 51 of the United Nations Charter. This article permits
the exercise of self-defence only in cases of exercise of actual force and
hostilities or a continuing threat, for which terrorism does qualify.112 The
right of self-defence may be invoked by a State as justification for the
extraterritorial use of force involving targeted killings,113 provided the use of
force is necessary and proportionate.114 But, the use of force against the nonstate actors, as argued by some, would be lawful only if the attack by such
actor could be attributed to a State.115 Such attribution is not an easy task. In
Nicaragua v. United Sates116, the principle set out by ICJ was;
An act of private individuals can be considered as an act of State only if it is
possible to demonstrate that private individuals or groups of individuals have acted
as de facto organs of a State or under its direction and control.
This principle was later codified in the International Law Commission
Draft Articles of State Responsibility.117
Hence, it could be said that international law does permit the use of
force against non-state actors, but to a limited extent. Only when a State is
unable to repress terrorist organisations operating in its territory and seeks
some international intervention, is the use of such force justified.118 In cases
Supra note 57, 38.
A. 51, United Nations Charter: Nothing in the present Charter shall impair the inherent right of
individual or collective self-defence if an armed attack occurs against a Member of the United Nations,
until the Security Council has taken measures necessary to maintain international peace and security.
Measures taken by Members in the exercise of this right of self-defence shall be immediately reported to the
Security Council and shall not in any way affect the authority and responsibility of the Security Council
under the present Charter to take at any time such action as it deems necessary in order to maintain or
restore international peace and security].
113Sofaer, A.D., Terrorism, Law and the National Defense, 126 Military L.R., vol. 89 (1989),
at 103.
114See Article 51, United Nations Charter.
115 Nigro, R., International Terrorism and the Use of Force against Non-State Actors, ISPIPolicy Brief, at 1-2, available at: http://www.ispionline.it /it/documents
/PB_150_2009.pdf (Last visited on 28 March 2012) [hereinafter Nigro].
116 ICJ Rep. (1986), 194.
117Article 8 provides that an act of private individuals can be attributed to a State if these
individuals operate on the instructions of, or under the direction and control of that State
118 But these standards are much more relaxed in cases where a number of States face threats
from a single non-state actor. Take for example the threat posed by Al Qaeda.
111
112

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where a State uses force against another State, the former has to demonstrate
the involvement of the latter in a terrorist attack according to the strict
criteria identified by the ICJ and by the International Law Commission as
well.119
C. RETRIBUTION
If we say that the people targeted have committed terrible crimes,
they deserve to suffer in response; then it could be said that the targeted
killing of these terrorists is justified. Obviously the argument can be objected
to. Prima facie, such an act of targeted killings amounts to retribution, which,
ideally should be imposed only by a court of justice following the due
process of law. Moral reasons compel the involvement of courts, but in most
cases of terrorism, recourse to a legal institution is not an option.120 Also, the
fact-finding role of a court is not of much importance in the case of
terrorists, as terrorist acts are often followed by an admission from various
organisations.121
V. FADING CHANCES OF NEGOTIATIONS
Criminology does criticize the targeted killing policy, as it neglects the
entire research on crime causation. It believes the people who have suffered
the events of victimization tend to change their perspectives regarding self,
group, community or others.122 The interaction between the micro
environment, macro environment and personality of a person 123 draws our
concern to a group of terrorists which also forms a subset of the victims.
There is obviously a difference between people whose occupational choice is
terrorism and the others who are caught in the trap of terrorism.124

Nigro, supra note 114, at 5.

This is because the countries that harbour them hardly ever bring them to trial within
their territories, nor do they extradite them to be tried in a foreign domestic or
international court.
121 Statman, supra note 77.
122 Hamden, R.H., Psychology of Terrorists: 4 types, retrieved, (2006), Available at: http://www.allabout-psychology.com, (Last visited on 29 Marxh 2012); (hereinafter Hamden).
123 Id.
124 The economics of terrorism is based on the hypothesis that terrorism is purely an
occupational choice and is based upon rationality and guided by benefits and costs.
While making this choice terrorists think rationally, considering their narrow interests
and also the interests of their families and groups, like rational economic beings. On the
other hand, the psychological theories have proven that the situations and the conditions
119
120

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Considering terrorism as a problem of psychological disturbances,

examining the same can develop certain reasonable guidelines for negotiation
with such people.125 The application of psychoanalytical theory in particular
cases would help in the prevention of the crime as well. Laws and policies are
mechanical in their application and do not consider the psychological
disturbances of people before killing.126 This mechanical process of adopting
targeted killing is nowhere helping subduing the crime but helps in arousing
the sentiments of others in the same waters and develops a feeling of
vengeance in them resulting in more of such acts. Present day policies of
targeted killings consider the inflictor of terror as the prime accused and seek
to punish him. The people who conspire the entire act form a group of
secondary accused, be it any anti-terrorism law like Prevention of Terrorism
Act, 2002 or Unlawful Activities Prevention Act or the PATRIOT Act of the
USA or any policy of targeted killings.127
But, this argument again is defeated by the question of feasibility of
arresting terrorists. The argument does not hold good especially when the

125

126

127

64

in which a person may resort to an act of terrorism should also be taken into
consideration while punishing them for the act; the person who causes the harm is
usually one who is highly emotional or is unthinkingly driven by his past experiences or
social conditions. Not all terrorists fight for political gain. The disobedient behaviour of
some terrorists may be due to unpleasant past or present conditions].
Frustration, insults, peer pressure, anger, feeling of revenge, incitement further enhance
the aggressive behaviour of a person. These acts of victimization should be
psychologically analysed to bring an end to such disturbances. Such persons should be
treated as mentally ill and given treatment for psychological disturbance.]
The mental state of a person committing an offence is the essence of punishment. If a
person committing the act is not in a condition to understand the nature of the act then
punishing him in the same way as others who committed the offence voluntarily is a
failure on the part of the criminal justice system. The truth is that such people are very
easily influenced and driven to work for someone with little or no interest on their own
part. They can kill without any remorse. The psychological position of such persons
suggest that they tend to manipulate the circumstances to convince themselves that the
people whom they are killing have hurt others and they deserve to suffer.]
None of the provisions of the said acts prescribes any psychological examination and
medical help, if required, to the arrested militants. The acts merely make provisions for
trial and punishment. There is no emphasis on looking into the reasons behind the crime
and to subdue the same is a mere mechanical exercise of positive law]

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entire world has witnessed various incidences of hijacking, kidnapping etc. to

free the arrested terrorist.128
VI. CONCLUSION
The policy of targeted killings since its very inception has witnessed
both criticism and support. It is no doubt true that targeted killings help
satisfying domestic demands for a forceful response to terrorism, 129 hence,
maintaining the faith of people in their own government.130 But, it is also
pertinent to note here that targeted killings play a pivotal role in encouraging
retaliation and more innocent death.131 A symbolic victory of killing a terror
leader seems to be insignificant, when weighed against the deaths
accompanied by the blowback. Targeted killings often act as catalyse for
terrorists represented movements, as argued by many.132
Even though, targeted killings may seem morally abhorrent prima
facie, as they dehumanise the victim, we must remember that these persons
are killed not simply because they are enemies and because they bear special
responsibility or play a special role in the enemys aggression. Those targeted
are usually personally responsible for atrocities committed against the lives of
innocent civilians.
The ability to carry out targeted killings is considered to be a wide
expansion of the power of the State. It is the duty of every government to
protect its populace. Even though human rights of all individuals are treated
as absolute, it becomes the duty of government to weigh and balance the
rights and interests,133 and security and subsistence of individuals. The

128See:

How Govt. Lost the IC-814 Hijack Deal, 8 Sept 2006, Available at:
http://ibnlive.in.com/news/govt-fumbled-ic814-taken-away/20846-3.html [One example
of this is the hijacking of the Indian Airlines Flight 814 on 24 December 1999, by Harkatul-Mujahideen, a Pakistani-based group, for the release of three militants Mushtaq Ahmed
Zargar, Ahmed Omar Saeed and Maulana Masood Azhar].
129Byman, supra note 8, at 102.
130Byman, supra note 8, at 102.
131Byman, supra note 8, at 102.
132 One popular example is Hezbollah. When Israel killed a key leader, Musawi Hezbollah,
his death became a rallying cry for the organisorganisation. Khaled Hroub, a Cambridge
University-based expert on Hamas, argues that targeted killings only increase popular
legitimacy].
133 Dworkin, Supra note 95 It may be explained by using Dworkins idea of competing rights
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government has a duty to aid and to protect the enjoyment of these rights. 134
On these grounds, targeted killings can be considered a governments duty,
provided the State acts within the purview of International Law. Blunt
exercise of violence is detested. States should follow the DPH limitations.
Also, the International Humanitarian Law and Human Rights Law should be
respected. It is agreed that targeted killing is a foreign policy tool and should
not be complicated further, provided it is exercised by States reasonably, in
urgent situations and only when there is a real threat to national security.

134

66

Shue, H., Security and Subsistence - Basic Rights: Subsistence, Affluence and US Foreign Policy, 1st
ed. 1980,at 54-55 [Subsistence can be defined as a right to the necessities of life or in
other words minimal economic security. It is as important as, and should be respected as
much as, the right to physical security, according to Shue. Security, according to Shue,
refers to Physical Security and is a basic right].

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COLLECTIVE DOMINANCE:
HOW DOES INDIA FARE?
Charu Rawat*
The Concept of Collective Dominance has received considerable thought in
Jurisdiction worldwide. This Article aims to provide an insight into how Collective
Dominance has been interpreted by the European Union. With the help of this analysis,
the article examines the viability of introducing the concept in India, based on the
hypothesis that the same is not provided for under the current Indian anti-trust legislation.
With this objective, the researcher first provides an overview of its development through
case laws, in the European Union. After establishing the requirements of proving
collective dominance, the author critically examines the concept in India, with the help of a
case law and a view to examine the way out. The author concludes the paper with
observations on how the European Union practice on the same could plug the required
loopholes.
I.

CONCEPT OF DOMINANCE IN EUROPEAN UNION

The concept of dominance in the European Union is engraved in

Article 102 of the Treaty on the functioning of the European Union.1
Dominance is a position of economic strength enjoyed by an undertaking'2
which enables it to prevent effective competition being maintained in the
relevant market, by affording it the power to behave to an appreciable extent
independently of its competitors, customers and consumers.3 Article 102
provides that dominance can be abused by one or more undertakings, by
exercising one of the several activities given under it.4 Collective dominance
is therefore a dominant position held by a number of undertakings, when
these undertakings present themselves or act together from an economic
point of view. Therefore, undertakings are in a position to collectively
dominate if five elements are established; the elements being:

One or more undertakings;

* Vth Year, B.A. LL.B (Hons.), National Law University, Delhi

1http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E102:EN:NOT,
(last visited on 19 Jan 2013).
2Entity engaged in an economic entity.
3Ariel Ezrachi,EU Competition Law: An Analytical guide to the leading cases, 3rd ed., 2012, Hart
Publishing, p. 165.
4Supra note. 2.
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A dominant position;
The dominant position to be held within the internal market or a
substantial part of it;
An abuse;
An effect on inter-state trade.5

While initial response to issues arising under Article 1026 was

primarily intended to address the issue of single dominance, the use of the
words abuse by one or more undertaking allowed courts to interpret the
same. Even though the evolution of the criteria which needs to be satisfied
for a positive finding of collective dominance have been discussed by courts
time and again, the Courts have been reluctant in laying down definitive
standards till date. However, the Commissions stand on collective dominance
has evolved over a period of time to a position, where the same can be
adopted by other jurisdictions to rely upon.
II.

EVOLUTION OF COLLECTIVE DOMINANCE:

CASE LAW ANALYSIS

As a concept, Collective Dominance has engaged the legal and social

fraternity. it was first taken up as an issue by the court in the Italian Flat Glass
Case.7 In this case three Italian flat glass producers formed a cartel
agreement. On the question of collective dominance, the court observed that
there was nothing, in principle, to prevent two or more independent
economic entities from being, on a specific market, united by such economic
links that, by virtue of that fact, together they hold a dominant position vis-avis the other operators on the same market. However, mere existence of
economic links could not be the sole determinant of collective dominance.
Heavy reliance was placed on projection by the undertakings as a single
economic entity in the relevant market.
A similar approach and line of thought was carried forward by the
European courts while interpreting clause 102 of the treaty. In the case of
Compagnie Maritime Belge Transports v. Commission8 CMB was found by the
5Alison

Jones and Brenda Sufrin, EU Competition Law: Text, cases and Materials, 4th ed., 2010,
Oxford University Press, p. 261.
6Previously known as Article 82.
7Joined Cases T-68/89, T-77/89 and T-78/89, Societa Italiana Vetro Sp A and ors.v. Commission
[1992] ECR II- 1403.
8Joined cases C-395/96P and C-396/96P, [2000] ECR I-1365.
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Commission to have abused a collective dominant position that it held with

other undertakings. Together, these companies formed a membership of a
linear conference and implemented a cooperation agreement which aimed,
through selective price cuts, to drive an independent competitor out of the
market. The Courts observation on the matter of Collective Dominance was
based on the satisfaction of three elements. First, the undertakings concerned
must constitute a collective entity vis-a-vis their competitors, their trading
partners and consumers on a particular market. Second, where such a
collective entity is established, the question is whether that entity holds a
dominant position. The final question to be looked into is whether the
entities abused its dominant position.
The Court held that economic links or factors giving rise to a
connection between the undertakings are relevant to the undertakings a
collective entity. Such links should enable the entity to function independent
of its competitors, customers and consumers. Even though an agreement,
decision or concerted practice may undoubtedly, where it is implemented,
result in the undertakings concerned being called collectively dominant, it
might not always be the case. A finding of collective dominance may also be
based on other connecting factors and would depend on an economic
assessment and, in particular, on assessments of the structure of the market
in question.9
What became clear from this judgment was that collective dominance
may be found when the undertakings operate as a collective entity even in
the absence of an agreement or of other links in law. This established a new
line of thought, which received assessment in the later cases.10
This facet of collective dominance was also highlighted in the
Discussion Paper of the Application of Article 102 to Exclusionary Abuses,
where the Commission noted that in order to establish Collective
Dominance, it is necessary to examine the factors that give rise to a
connection between the undertakings concerned. Such factors may flow
from the nature and terms of agreement between them or from the way in
which it is implemented to ownership interests and other links in law.
However, the existence of an agreement or of other links in law is not
indispensable to the finding of a collective dominant position. One also
Ariel Ezrachi, EU Competition Law: An Analytical guide to the leading cases, 3rd ed., 2012, Hart
Publishing, p. 272.
10Gencor Ltd v.Commission, Case T-102/96, [1999] ECR II- 753.
9

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needs to see the relevant market structure and the level of interaction
amongst the entities concerned.11
This was a practice more witnessed in the oligopolistic markets. Even
though competitiveness might also be a practised feature of such markets,
coordination was likely to emerge in markets where reaching a common
understanding was relatively simple and behavioural pattern of one was
likewise adopted by the others. The Commission was of the view that such
practices need not take the form of an agreement under all circumstances.
Coordination may result from practices resorted to by the entities. Such
practices may range from price coordination to limiting production, division
of market or even allocation of contract in bidding markets.12
With every case law that the Commission looked into, the concept of
collective dominance received expansive interpretation. In another case that
came up before it, Irish Sugar, the sole processor of sugar beet and the
principal supplier of sugar in Ireland were fined by the Commission.
Accepting the issue of collective dominance, the court held that a perusal of
the facts of the case left no room for doubt on the issue of Collective
Dominance. That being said, it held the entities to be collectively dominant
despite being in a vertical commercial relationship.13 Further, it was observed
that,
An abuse of collective dominance may result even if one of the entities
forming part of the collective entity took action. Therefore, the
requirement of presenting oneself as a single entity did not entail identical
conduct in every respect. It could be abusive behaviour by any one of them,
which could result in collective dominance in the relevant market.14
In the decision of Airtours plc. v. Commission15 , hailed as a landmark by
scholars, the Commission blocked a takeover by Airtours plc., a UK tour
operator and supplier of package holidays of First tours Plc., one of Airtours
competitors. Airtours is a tour operator and supplier of package holidays
based in the United Kingdom. First Choice is another UK based tour
11DG

Competition Discussion paper on the Application of Article 82 of the treaty to

exclusionary abuses, 2005, available at http://ec.europa.eu /comm /competition /antitrust
/art82/discpaper2005.pdf. (Last visited: 20 Jan 2013), 45, 46.
12Id, 47.
13 62, Irish Sugar plcv. Commission, Case T-228/97, [1999] ECR II- 2969.
14Id, 66.
15Case T-342/99, [2002] ECR II-2585.
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operator. Airtours first announced its intention to acquire First Choice on 29

April 1999 and notified the European Commission of the proposed
transaction pursuant to Regulation No 4064/89. On 3 June 1999, the
Commission decided to initiate proceedings under Article 6(1)(c) of
Regulation No 4064/89.
On 22 September 1999 the Commission reached a decision that the
notified concentration would lead to the creation of a dominant market
position in short-haul package holidays in the UK, as a result of which
competition would be significantly impeded in the common market. That
dominant position would be held collectively by Airtours/First Choice and
the other two leading tour operators Thomson Travel Group plc.and The
Thomas Cook Group Limited. The court laid down three conditions
necessary for a finding of Collective Dominance:
First, each member of the dominant oligopoly must have the ability
to know how the other members are behaving in order to monitor whether
or not they are adopting the common policy. Each member must also have
the means of knowing whether the other operators are adopting the same
strategy and whether they are maintaining it. There must, therefore, be
sufficient market transparency for all members of the dominant oligopoly to
be aware, sufficiently precisely and quickly, of the way in which all the other
members market conduct is evolving.
Secondly, the situation of tacit co-ordination must be sustainable over
time, that is to say, there must be an incentive not to depart from the
common policy on the market. This presupposes the existence of sufficient
deterrent mechanisms to convince all the undertakings concerned that it is in
their best interest to adhere to the common policy.
Thirdly, it must be established that competitive constraints do not
jeopardise the implementation of the common strategy. The market position
as well as the strength of non-allied companies must be analysed, the market
position and strength of buyers and potential for new entry indicated by the
height of entry barriers.16
It was emphasised by the court that any view of collective dominance
must be supported by convincing evidence thereof. Factors such as an
assessment of lack of effective competition between the operators alleged to
16Id,

62.
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be a dominant oligopoly and the weakness of any competitive pressure that

might be exerted by other operators, degree of market transparency and
existence of a credible retaliatory mechanism are things that must be kept in
mind.17 The judgment of Airtours provides an important contribution to the
development of the collective dominance doctrine. While continuing the
approach adopted in Gencor18, it further distils the concept and clarifies its
realm. It brought the concept closer to the economic concept of tacit
collusion, which too is based on a three pronged test. Airtours also limited
the scope of collective dominance to cases involving coordinated effects.
What emerges from a collective reading of the European case laws on
the scope of collective dominance is that, even though the courts have held
that economic or contractual links might not always be necessary in proving
collective dominance19, till date, they have not held entities to be collectively
dominant merely because they exhibited oligopolistic interdependence.
Application of collective dominance doctrine to Article 102 posed problems,
as standards based on which the concept evolved were on the same plane as
collective dominance under the ECMR.20
This admixture posed problems due to the difference in the nature of
evidence required for proving collective dominance. While the ECMR
provides detailed guidelines as to the economic assessment of collective
dominance and possible coordinated effects of a merger, such guidelines are
absent from Article 102.21 One possible reason for this absence stems from
lack of case laws dealing with this issue of other links. However, there is no
doubt that undertakings not having economic or legal links have displayed
collusive behaviour or common policies that have an adverse effect on other
competitors or price stability, even though the fraction might be very low.

17Id,

63.
Case T-102/96, [1999] ECR II- 753.
19Joined cases C-395/96P and C-396/96P, [2000] ECR I-1365.
20Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of
concentrations between undertakings (the EC Merger Regulation) Official Journal L 24,
29.01.2004.
21Lia Vitzilaiou & Constantinos Lambadarios, The Slippery Slope of Addressing Collective
Dominance under Article 82 EC, October 2009, Competition Policy International, available at
http://www.lambadarioslaw.gr/publications/en/2009/ vitzilaiou_oct_09_1_.pdf, (last
visited 20 Jan 2013).
18,

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In a recent judgment of the European court in the case of Bertelsmann

AG and Sony Corporation of America v. IMPALA22, it was observed that:
It must be borne in mind that when the commission examines the risk that a
collective dominant position will be created, it must assess, using a prospective
analysis of the reference market, whether the concentration which has been
referred to it, leads to a situation in which effective competition in the relevant
market is significantly impeded by the undertaking involved in the
concentration and one or more other undertakings which together, in particular
because of factors giving rise to a connection between them ,are able to adopt a
common policy on the market and act to a considerable extent independently of
their competitors, customers and consumers.
The court came up with a new, modified test of collective dominance
as stated in Airtours v Commission.23It stated that the three tests laid down by
the Airtours case24 might, in appropriate circumstances, be established
indirectly on the basis of what may be a very mixed series of indicia and
items of evidence relating to signs, manifestations and phenomena inherent
in the presence of a collective dominant position.25 Such correlative factors
include, in particular, the relationship of interdependence existing between
the parties to a tight oligopoly within which those parties are in a position to
anticipate one anothers behaviour and are therefore strongly encouraged to
align their conduct on the market in such a way as to maximise their joint
profits by increasing prices, reducing output, the choice or quality of goods
and services, diminishing innovation or otherwise influencing parameters of
competition.26
A. TACIT COLLUSION V. PRICE PARALLELISM:
WHERE TO DRAW THE LINE

Having established a rudimentary understanding of what constitutes

collective dominance, one could sum up to say that dominance by
undertakings, including undertakings having no economic or contractual
links, could be said to collectively dominate the relevant market, if they
engage in common practices by way of agreement or otherwise, which are
likely to impede competition in the market. What emerges from this is
22Case
23Case
24

C-413/06P, [2008] ECR I- 4951.

T-342/99, [2002] ECR II-2585.

Id.

25Supra
26Supra

note 22, 251.

note 22, 121.
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another issue, namely of when exactly entities can be collectively dominant

without agreement.
Scholars have indicated what can be referred to as tacit collusion or
conscious parallelism27, as a response to the no links situation, where
undertakings display common policies or behaviour.28 However, what poses
problems with interpreting existence of collusion is the fine line between
when parallelism assumes the form of collusion. 29 This problem assumes
greater significance in oligopolies, where the boundaries between these
concepts become elusive.30

27Conscious

parallelism is a situation where rival firms act similarly or interdependently..

Decisions about pricing structures and production levels, among other things, are made
with an awareness of each other's conduct, though these competitors do not have express
agreements to set prices. Conscious parallelism also exists in the United States, where it has
been described as the process, not in itself unlawful, by which firms in a concentrated
market might in effect share monopoly power, setting their prices at a profit-maximizing,
supra competitive level by recognising their shared economic interests and their
interdependence with respect to price and output decisions, referred from Ryan, Patrick
S., European Competition Law, Joint Dominance, and the wireless Oligopoly Problem,
Columbia Journal of European Law, Vol. 11, p. 353, 2005, available
athttp://ssrn.com/abstract=806046, (last visited 13 March 2013).
28Supra note 21.
29See Article 101 of TEFU and Article 102, TEFU.
30The essence of this problem has been very clearly stated in the OECD definition of
conscious parallelism contained in its Glossary of Industrial Organisation Economic and
Competition Law, Organisation for economic Co-operation and Development, p. 26,
available
at
http://www.oecd.org/regreform/liberalisationandcompetitionint
erventioninregulatedsectors/2376087.pdf, (last visited: 21 Jan 2013) :
Under conditions of oligopoly, the pricing and output actions of one firm have a
significant impact upon [those] of its rivals. Firms may after some period of repeated
actions become conscious or aware of this fact and without an explicit agreement
coordinate their behaviour as if they were engaged in collusive behaviour or a cartel to fix
prices and restrict output. The fear that departure from such behaviour may lead to costly
price cutting, lower profits and market share instability may further create incentives for
firms to maintain such an implicit arrangement amongst themselves. This form of
conscious parallel behaviour or tacit collusion generally has the same economic effect as a
combination, conspiracy or price fixing agreement. However, whether or not conscious
parallel behaviour constitutes an illegal action which is restrictive of competition is [a]
subject of controversy in both competition law and economics. Price uniformity may be a
normal outcome of rational economic behaviour in markets with few sellers and
homogenous products. Arguments have been advanced that the burden proof must be
higher than circumstantial evidence of concerted or parallel behaviour and uniform pricing
and output policies. In other words, conscious parallelism in and of itself should not
necessarily be construed as evidence of collusion. The problem arises more from the
nature of the market or industry structure in which firms operate than from their
respective behaviour.
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Parallel behaviour if practiced in oligopolistic markets is not looked

upon as anticompetitive by the European courts. The European treaty states
that each operator must determine independently the policy which he intends
to adopt on the market. Therefore, this requirement does not prohibit
entities from adapting themselves intelligently to the conditions of the
market.31
Collusion, on the other hand, is the practice of undertakings to
coordinate their behaviour in order to achieve monopoly profits, as opposed
to competition, where a firms actions depend upon and trigger the reaction
of its rivals. Evidence of collusion poses concerns when we talk about it in
the absence of an agreement amongst the concerned entities. It has been
pointed out by many that collusion without an agreement is not sustainable
and therefore not possible.32 However, rarity of an occurrence cannot be
equated with non-existence and therefore the need for regulatory
intervention cannot be denied. Suggestions to deal with the same include
study on a case by case basis, since anticipating that a given factor will lead to
one effect rather than another, invariably entails a degree of overgeneralisation and arbitrariness.33 The EU law has addressed tacit collusion
through the notion of collective dominance under Article 102, but the same
has never been enforced in an oligopolistic market, till date.
What emerges from the discussion on the drawing of a line between
accepted parallel conduct and collusion is that parallel conduct as such is not
covered under Article 101, and creates no presumption of any collusion on
its own. It leads to unacceptable conduct when there exists strong evidence
of such conditions of competition which do not correspond to the normal
market conditions, having regard to the nature of the products, the size and
number of undertakings, and the volume of the said market.34 It has been
established by case laws that the standard of proof is higher for establishing
collusion over mere parallel conduct. Therefore, while establishing any form
of collusion, one must remember that, while the treaty prohibits collusion, it
Rafael Allendesalazar et al., Oligopolies, Conscious Parallelism and Concentration, European
Competition Law Annual 2006, Enforcement of prohibition of Cartels, Hart Publishing,
available at
http://www.eui.eu/RSCAS/ Research/Competition/2006(pdf)/200610Comped-Allendesalazar.pdf, (last visited: 20 Jan 2013).
32 Chicago School of Thought.
33T. Kauper, Oligopoly: Facilitating practices and Plus Factors, in B. Hawk (ed.), Fordham Competition
Law Institute, 2007, 751, pp. 754-755.
34Case 48/69, Imperial Chemical Industries Ltd. (ICI) v Commission [1972] ECR 619, at 66,
accessed from supra note 31, p. 4.
31

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does not deprive entities of their right to adapt themselves intelligently to the
existing and anticipated conduct of their competitors.
The EU case laws on collective dominance figure both under Article
102 and the EU Merger Regulation. The debate on whether the two could be
treated on the same page still engages scholars.35 From a legal perspective,
there are several reasons to believe that collective dominance is one and the
same thing under both Merger control and Article 102.36 Reasons for the
above conclusion are that Merger judgments of the courts and Article 102
judgments not only receive mention, but are often quoted as precedents37 in
case laws involving both. The case of Laurent Piau v. Commission38dispelled all
existing uncertainties.39 What is relevant for the purpose of the present
analysis is the interpretation of Collective dominance by European courts.
The issue of whether the same falls within the Merger Control regulations or
under Article 102 is yet another discourse, which falls outside the scope of
the present study.
Based on the case law developed concept of collective dominance,
we proceed to examine the Indian Law on collective dominance in the
context of oligopolies and how the very concept of collective dominance
finds no mention in the present Legislation, thus outlining a need for
revisiting the same.
III.

COLLECTIVE DOMINANCE IN INDIA

The present Indian Anti-trust law is indeed an innovative and

adequately equipped piece of legislation, fulfilling Indias welfare and
socialistic values, with room for healthy competition at the national and

35Nicholas

Petit, The Oligopoly Problem in EU Competition Law, (Feb 5, 2012), Available at

SSRN: http://ssrn. com/abstract=1999829, (last visited: 19 Jan 2013).
36Id.
37The courts ruling in French Republic and others v. Commission [1998] ECR I-1375 was cited in
Compagnie Maritime Belgev. Commission, Joined cases C-395/96P and C-396/96P, [2000] ECR
I-1365.
38Case T-193/02, [2005] ECR II- 2585.
39A football players agent had filed a complaint in relation to restrictions placed by FIFA on
exercise of his profession. The Complainant argued that as an association of independent
football clubs FIFA occupied a dominant position. It was allegedly guilty of unlawful
abuse, by excluding certain football players agents from the market. The courts finding
was based on the three tests required to prove collective dominance from the Airtours
Judgment.
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international level. It derives most of its provisions from the EU Law, which,
undoubtedly, is the most evolved till date.
The authors research focuses on the aspect of collective dominance
by independent entities and proposes that the current law is not equipped to
provide for abuses of dominant position by collectively dominant yet
independent entities. The Author examines this proposition with the help of
analysis of a Case Law.40The concept of Dominance in India as envisaged
under Section 4 of the Act41 reads
No enterprise or group shall abuse its dominant position.
From a bare reading of the provision itself, it becomes evident that
dominance in India is confined to an enterprise or a group. A look at the
definition of both enterprise and group reveals that two independent
entities or even competitors in the relevant market, cannot under any
circumstance be engaging in activities which makes one lead to the inference
that they are abusing their dominant position.
An enterprise as defined under the Act42 refers to a person or
department of the government. Therefore, who can engage in anticompetitive practices or abuse of dominant position can be a person as
given under the Act.43 The categories covered under the definition of the
term person can cover independent entities only when they form a company,
an association of persons44 or body of individuals. Similarly, the definition of

40Consumer

Online Foundation v. Tata Sky Case no. 2 of 2009, Available at

http://www.cci.gov.in/menu/ MainOrderConsumer250411.pdf, decided on 24 March
2011, (last visited: 18 June, 2013).
41Competition Act, 2002.
42Competition Act, 2002, 2(h), states that,
Enterprise means a person or a department of the Government, who or which is, or has
been, engaged in any activity, relating to the production, storage, supply, distribution,
acquisition or control of articles or goods, or the provision of services of any kind, or in
investment, or in the business of acquiring, holding, underwriting or dealing with shares,
debentures or other securities of any other body corporate, either directly or through one
or more of its units or is located at the same place where the enterprise is located or at a
different place or at different places, but does not include any activity of the Government
relatable to the sovereign functions of the Government divisions or subsidiaries, w ether
such unit or division or subsidiary not including all activities carried on by the departments
of the Central Government dealing with atomic energy, currency, defence and space.
43Competition Act, 2002, 2(l).
44Competition Act, 2002, 2(l) (v).
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group45, restricts the scope of dominant position to entities related by

common management or control.
This essentially leads to the inference that in oligopolistic markets,
independent entities can engage in anti-competitive practices and may abuse
their position of dominance as a single economic entity, without entering
into any explicit agreement, as this is not something that the Competition
Act, 2002, intends to curb and restrain. One might argue the fact that, the
limited scope of Section 4 can be overlooked as Section 3 of the Act46 is
wider in scope, and covers anti-competitive practices being undertaken by
enterprises and persons. What inevitably gets overlooked in this approach is
that Section 3 of the Act deals with a situation where the enterprises or
persons have entered into agreements. This neglects the possibility that
there might be anti-competitive behaviour leading to abuse of dominance in
the relevant market even when there is no agreement between the parties.
Merely providing that agreement includes any arrangement or understanding
or action in concert even if the same is not in writing47, does not discount
the presence of intention or collective will to engage in anti-competitive
practices.
The term Collective dominance has received mention in several
Indian case laws till date. Many scholars have even argued that when we use
the term enterprise, by statutory application,48 we also include the term
group of enterprise in it.49 However, this point has received no explanation
by the regulator. Of the regulators position on the concept, what can be
Competition Act, 2002, explanation (b) to 5 states that, group means two or more
enterprises which, directly or indirectly, are in a position to Exercise twenty- six per cent. or more of the voting rights in the other enterprise;
or

Appoint more than fifty per cent. of the members of the board of directors in the
other enterprise; or

control the management or affairs of the other enterprise;

46Anti-competitive Agreements.
47Competition Act, 2002, 2(b) (i).
48General Clauses Act, 1897, 13.
49It was submitted that the word group can be broadly construed to include within its ambit
the concept of collective dominance. The literal interpretation of the word is A number of
people or things that are located close together or are considered or classed together.
Therefore a literal interpretation should be given to the word as far as possible and the
concept of collective dominance can be interpreted within the act as far as possible,
referred from Sudipto Sircar, A few thoughts on competition law in the technology and media sector,
http://www.iltb.net/2012/07/a-few-thoughts-competition-law-technology-media-sector/.
(Last visited: 13 March 2013)
45

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gathered from the case law discussion on this concept is that CCI has stated,
quite often50 that, the concept of collective dominance is not present in
India.51 If at all it is present, is to the limited extent of collective dominance
by a group under Section 4 of the Act.
This proposition therefore leaves no room for any doubts on the
need for recognising the concept of collective dominance in India, especially
in context of links other than structural in nature. In this context, the
Competition Commission of India recognised the absence of such a concept
in the case of Consumer Online Foundation v. Tata Sky Limited and Ors.52It is
difficult to state with certainty why this concept received no mention when
the Act first came into being, and whether the Legislators intended it to be a
part of the Act. However, it can be stated with conviction that, as most part
of our Competition Act is based on lines of European Law, which explicitly
incorporates the concept of joint dominance, scholars have interpreted the
concept to be a part of our legislation. However, the stand of the
commission, as given in certain decided case laws should be presumed to
clarify the prevailing uncertainties over it.
IV.

CRITICAL ANALYSIS: CASE LAWS

1. Consumer Online foundation v Tata Sky Limited and Ors.53

Consumer Online foundation filed a complaint against four DTH
service providers.54 The allegations against them were grounded under

50M/S

Royal Energy Ltd. v. M/S Indian Oil Corporation, MTP Ce N. 1/23 (C-97/2009/3IR),
decided on 9 May 2012, available at http://cci.gov.in /May2011 /OrderOfCommission
/MRTP1-28main.pdf, (last visited 21 Jan 2013), Consumer Online Foundation v. Tata Sky
Limited and Ors, Case no. 2 of 2009, available at http://www.cci.gov.in /menu/
MainOrderConsumer250411.pdf, decided on March 24, 2011, (last visited June 18, 2013).
51M/S Royal Energy Ltd. v. M/S Indian Oil Corporation, MTP Ce N. 1/23 (C-97/2009/3IR),
decided on 9 May 2012, available at http://cci.gov.in /May2011/ Order Of Commission
/MRTP1-28main.pdf, (last visited 21 Jan, 2013), There is no case of contravention of
provisions of Section 4 also as PSU OMCs cannot be said to be dominant jointly as
concept of collective dominance is not envisaged under the provisions of Section 4 and
since each OMCs is an independent, legal entity and no company can be said to be
exercising control over other PSU OMCs, they are not part of the group within the
meaning of 5 of the Act.
52Case
no.
2
of
2009,
available
at
http://www.cci.gov.in
/menu/
MainOrderConsumer250411. pdf, decided on March 24, 2011, (last visited 18 June 2013).
53ibid.
54Dish TV India Ltd., Tata Sky Ltd., Reliance Big TV Ltd., Sun Direct TV Pvt. Ltd.
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Section 355 and Section 456 of the Competition Act, 2002. The informant
alleged that the above mentioned players restrained competition in the
Market by preventing interoperability between hardware and DTH signals
provided by different manufacturers and DTH service providers. The
informant argued that the DTH service providers prevented inter-operability
by restricting competition amongst them because once a consumer bought
hardware to have access to services of a particular DTH service provider, he
could not avail the services of any other provider unless he bought new
hardware from another DTH provider. Further, the DTH providers
procured STB (Set top box) from their select manufacturers, thereby
restricting the consumers. This practice of the service providers is preventing
interoperability and creating barriers for entry of new enterprises which
manufacture only STBs. It was argued that even though their behaviour
could not be attributed to an explicit agreement amongst themselves, it
certainly was indicative of a tacit understanding between the existing market
players.57
Of the several issues raised by the informant, the analysis is restricted
to the issue pertaining to abuse of dominant position by the DTH service
providers. The small number of players in the relevant market, indicate
oligopolistic nature of the market. As alleged by the informant, the DTH
service providers, by restricting interoperability of the STBs and the DTH
Signals, were restricting the market for enterprises which manufacture only
STBs.58 This being a pre-requisite for grant of license for providing DTH
broadcasting services was being violated by not one but all the service
providers. They were offering services subject to the consumers taking STBs
from them, which is illegal under the present Act.59
The matter was referred to the Director General whose findings
reveal an important fact towards collusion amongst the DTH service
providers. Based on his investigation, he submitted that the DTH Segment
required huge investment and was in its nascent stage in India. Therefore, at
that point in time, they could not have been interested in poaching each
other's clients. The behaviour exhibited by them of not making their
respective CAMs available in the market other than inbuilt CAM in their
55Anti-competitive

agreements.
note 37.
57Supra note 40, 13.
58Supra note 40, 18.
59Competition Act, 2002, 4(2) (d).
56Supra

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STBs and pairing and restricting of the viewing card with a particular STB,
raised questions of anti-competitive practices. Due to existing information
asymmetry in the relevant market, coupled with the position they enjoyed in
the market60, it would not be unfair to hold, prima facie that the DTH
operators were dominant in the relevant market and either independently
or collusively abusing the position.
The findings of the commission on the issue of abuse of dominant
position revealed that allegations made were vague and inconclusive. As
Indian law does not recognise the concept of collective dominance, a group
of different and completely independent entities or enterprises would not be
covered in the scope of 'group'61 as defined under the Indian Anti-trust
legislation. As the allegations made by the informant were centred on
individual dominance of the several players exercised by them by virtue of
their respective market share, the commission held that, individually, none of
the entities was dominant in terms of the Act.62
It is a rule of interpretation that a provision must be read literally,
unless, by doing so, it goes against the legislative intent of the enabling
statute. In terms of a literal reading of Section 4(2), of the Act, it can be
inferred that the words used by the law makers were intended to confine the
scope of the provision within the four corners of the law. Therefore, the use
of the word an enterprise can be applied in a pluralistic manner only when
the same constitutes an association or persons or a body of individuals, as
given under section 2(l) of the act.63 As in the instant case, the entities clearly
fall outside the scope of an enterprise or a group; they inconsequentially fall
outside the ambit of section 4, which applies to an enterprise or a group.
2. Royal Energy Ltd. v. IOCL and others64
The Concept of collective dominance received mention in the Royal
energy case where with a view to using alternative sources of energy, the
Ministry of Petroleum and Natural Gas came out with the Bio-Diesel
Purchase Policy. Under this policy, the Bio-Diesel suppliers could supply bio60The

6 DTH operators controlled nearly 100% of the market of the DTH services, p. 23 of
order, Available at http://www.cci.gov.in/menu/MainOrderConsumer250411.pdf,
decided on 24 March 2011, (last visited 18 June 2013).
61Competition Act, 2002, Explanation (a) to 5.
62Competition Act, 2002, Explanation (a) to 4.
63Competition Act, 2002, 2(l) (v).
64
Supra n. 51.
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diesel to the Oil Marketing Companies (hereinafter referred to as OMCs).

The OMCs could blend the bio-diesel with the High Speed Diesel which was
to be ultimately used as fuels for the vehicles. Under this policy, the OMCs
were to purchase the bio-diesel that met the BIS specifications at a uniform
price determined by the OMCs. As the price of High Speed Diesel was fixed
& regulated, the OMCs determined the purchase price of bio-diesel by
backward integration. This price was considered less than adequate and
below the manufacturing cost by the suppliers of bio-diesel. This was alleged
to be an anti-competitive agreement by the OMCs. The CCI ultimately held
that the OMCs could not be mandated to purchase the Bio-diesel at a price
higher than the price of the end product and make it commercially unviable
for the OMCs to operate.
Several issues pertaining to Section 3 and Section 4 were raised. With
respect to collective dominance, it was said that Collective Dominance as
accepted in Europe is a case where a group of unrelated entities that are
united by economic links collectively hold a dominant position in a
market. Although the decision does not provide any reasons for the same,
the reason may be because presently Section 4 provides that no enterprise
or group should abuse its dominant position. Initially the un-amended section
4 only provided that no enterprise shall abuse its dominant position and post
the 2007 amendment the term group was specifically introduced. The
definition of group is restricted to entities under the same management or
control. Therefore, it may seem that collection of enterprises that do not
form part of group was not considered by legislature to come within the
purview of Section 4. Also, whether a concept that has its genesis outside the
frontiers of India should cross the judicial borders to enter into India is a
question that will have to be decided. On the other hand, ordinarily it is a
statutory rule that a singular word would also include a plural. Therefore, by
that logic enterprise would also include enterprises and a group of enterprises
can abuse their dominant position. However, these issues have not been
effectively raised or decided by the CCI in the said case and therefore it will
still remain to be seen whether the collective dominance concept is envisaged
under Section 4.
Analysis:
These orders of the commission clearly call for a thought on the
concept of collective dominance in India. Abuse of dominance can take place
in a number of ways. As per the concept of abuse of dominance as it stands
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today, no enterprise or group shall abuse its dominant position.65 This

implies that the ambit of dominant position66 is to be analysed only when the
entity being examined for violation is either an enterprise or a group as
defined within the realm of the Act. Even though this application may
include vast numbers of cases within it, it can be said with certainty that
entities that fall outside the scope of a group can never be held liable for
abuse of dominance and collective dominance.
Before assessing the case from the point of view of collective
dominance, it is important to highlight the background, which supports the
Researcher's hypothesis. The facts highlight that, of the four ways in which a
viewer may review broadcast of TV programs; Cable TV followed by DTH
was the most popular. Being relatively new technology in India, DTH sought
to replace cable TV network that used cables to transmit signals.67 Also,
there was evidence of increasing use of DTH services in the coming years.68
Presence of few players in the market, due to small number of
licenses given by TRAI, indicates the oligopolistic nature of market. Based on
the concept of collective dominance as evolved from the case law in Europe,
it first needs to be established that the entities concerned were a collective
entity which could function as one single entity, independent of the conduct
of its market competitors. The six entities involved in the current case were
the main service providers in the market. The pattern of behaviour displayed
by these entities reveals that even though they were not in any agreement in
terms of their market practices, their pattern revealed common practices
being followed by all. What needs to be figured out here is, whether the
common policies adopted by all of them in the absence of any definite
agreement for the same could, as per the European decisions, be held to be
abuse of collective dominance.
Firstly, all the DTH service providers put together form an entity as
economic or structural links are not required for entities to be a collective
entity. Two completely independent entities therefore can be collective entity.
Individual Dominance of every entity is not required for them to be
collectively dominant. We, therefore look towards other relevant links which
65Competition

Act, 2002, 4(1).

Supra note 62.
67See p. 6 of the Order, see http://www.cci.gov.in/menu/MainOrderConsumer250411.pdf,
decided on March 24, 2011, (last visited June 18, 2013).
68See p. 8 of the order, see http://www.cci.gov.in/menu/MainOrderConsumer250411.pdf,
decided on March 24, 2011, (last visited June 18, 2013).
66

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could help us determine the collectiveness of the entities. The relevant

market in the case was the market of DTH operators. These service
providers were restricting competition amongst themselves, by engaging in
conduct leading to distortion of competition in the market. As was noted
earlier, that the market was in its nascent stage, all the service providers were
trying to replace cable TV market and not engage in competition amongst
them.
The conditions imposed by these service providers were onerous on
the manufacturers who did not sell the STB of the make supplied by the
DTH service provider to consumers as they could not avail the services of
another DTH operator until they bought new hardware. This would, in the
long run, drive the manufacturers of STB of different make to move out of
the market. This practice was being carried out by all the service providers,
without exception.69 Here, it is of great relevance that the market share
exercised by these four entities was more than 80% of the total DTH
market.70 Being the dominant players in the relevant market, their common
policies were undoubtedly driving competitors out and helping to circulate
consumer base amongst them.
To sum up, the DTH service providers took complete advantage of
the nascent market coupled with information asymmetry. Their practices
were not only forcing the manufacturers other than the select few who sold
their hardware, out of business, but they were also preventing consumers
from migrating to other providers by including an arbitrary clause in the
agreements. Can this conduct of these entities together not fall under
collusion with a view to establish their collective dominance?
As established by European case laws, it is certainly difficult to
draw the distinction between collusive and parallel behaviour. Whether in the
DTH operators case, it could be said that the operators employed more than
parallel conduct, sufficing to say that they were colluding, is not the only
possible interpretation. One might say that Market share of entities
combined can certainly not be the only factor to be applied to uphold
collusion and hence collective dominance. There need to be certain other
factors based on the factual matrix of the case in hand, which can be resorted
69See

p. 13 of the order, http://www.cci.gov.in/menu/MainOrderConsumer250411.pdf,

decided on March 24, 2011, (last visited June 18, 2013)
70See p. 15 of the Order, http://www.cci.gov.in/menu/MainOrderConsumer250411.pdf,
decided on March 24, 2011, (last visited June 18, 2013)
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to. In the instant case, if we take a look at a host of factors, including the
combined market share of the entities71, the nature of the products
involved72, the size and number of undertakings and also the fact that TRAI
(Telecom Regulatory Authority of India) itself provided for interoperability,
both commercially and technically,73 changed anything. Could the
Commissions decision have been any different had the concept of collective
dominance been prevalent in India, is certainly worth a thought.
V.

CONCLUSION

It is clear from the above discussion that oligopolies pose a major

challenge for competition law in various jurisdictions. They could even affect
the very essence of the objectives that Competition law aims to protect.
However, as pointed out earlier, this could not be a reason for either a
complete ban or a situation of no remedy. The law on collective dominance
might still be developing in other jurisdictions including EU. However, the
case laws there do explain the need for a mechanism to deal with situations
like oligopolies. The present article was not oriented towards reflecting on
the flaws or problems that come up with interpretation of a concept having
its presence in more than one Treaty or Article. The aim of examining those
case laws was to outline the significant need for having such a mechanism in
the first place.
Doubts, if any, on the existence of the concept of collective
dominance in India must be dispelled as, not only has the commission stated
the same in several decisions74, but also because, had the concept found place
in the current legislation, there would have been no requirement to table the
same in the Competition Amendment Bill, 2012, in explicit terms. The
amendment is clarificatory in nature, which shows the intention of the
legislators. Therefore, undoubtedly even when the commission did recognise
the fact that dominance either singly or jointly was possible, absence of the
words singly or jointly made it impossible for the commission to read them
within the framework of our legislation and gave room for abuse merely
71Id.

The Commissions order compares the DTH Market to the Mobile phone services where
a consumer can use any hardware to access the signals of any of the mobile service
providers as long as the consumer buys the SIM card of that particular mobile service
provider, p. 11 of the order, supra note 66.
73Seep. 36 of the Order, supra note 70.
74Id.
72

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because of the wording of the Act. This amendment will bridge the
difference of opinion and confusion on the state of affairs.
What the law would address now is abuse of dominance by an
enterprise either singly or jointly or by a group either singly or jointly. The
scope of collective abuse which was earlier confined to groups only is now
extended to entities which are not groups, but can exercise collective
dominance even without the presence of agreements as exists in oligopolistic
markets. Even though the dividing line between tacit collusion and adopting
similar practices due market requirements is very thin and vague, these
practices will lead to abuse which may go unnoticed and leave the market
open to anti-competitive practices.
This move is therefore, without question, a step forward in the right
direction, towards aligning the Indian Law with the best practices worldwide,
with the possibility of mending the loopholes present in others.

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ANTI-COMPETITIVE IMPLICATIONS OF REVERSE PAYMENT

SETTLEMENTS WITH SPECIAL REFERENCE
TO INDIA
Anirudh Krishan Gandhi and Hitakshi Mittal
The pharmaceutical sector can primarily be divided into two major sectors. One
innovating and the other cashing upon the innovations made, as has been duly facilitated by
the recent amendments to the IPR regime under Hatch Waxman Act in the US. The
leverage granted to generic medicines to enter the market without making the huge
investment in innovation, as done by the original drug manufacturer, has given rise to
massive litigation in US. Most of such challenges to the patents are settled through an out
of court settlement by the generic and the branded firm. These settlements involve restriction
on generic entry for a specified period along with payment for such delay. This paper deals
with the validity of such settlements as regards the competition policy adopted in US and
other jurisdictions, specifically India. It also suggests the manner in which such settlement
agreements can be harmonized with the competition policy.
I. INTRODUCTION
The Indian pharmaceutical industry has witnessed a robust growth of
around 14% since the beginning of 2007 from about Rs 71000 crores to over
Rs. 1 lac crores in 200910.1 This amounts to around 20% of total volume of
global generics.2 Owing to this phenomenal growth of the Indian
Pharmaceutical industry there is an immense possibility of a number of
reverse payment settlements being negotiated by Indian generic firms with
their branded counterparts in the near future. Therefore, the need of the
hour for India is to have a competition policy regime in place that can validly
reconcile such settlements in its framework.
Competition law has been understood as the Magna Carta of free
enterprise. Reverse payments settlements, prevalent in the US pharmaceutical
industry, pose a puzzle to the antitrust enforcement. Such settlements emerge
as an alternative to patent litigation between the manufacturer of a patented
drug and its would-be rival, the generic drug maker seeking to market a
competing version of the same drug prior to the patents scheduled

IVth Year, B.A. LL.B.(Hons) National Law University, Delhi

Summary
on
Indian
Pharmaceutical
Industry
(2010),
available
at
http://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_pharma2902.pdf.
2Id.
1Executive

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expiration. The widely accepted view held by authors grant such settlements
a per se Anti-competitive status as such agreements between the two market
players essentially restricts the generic entry leading to a creation of
competitive advantage for the manufacturer. However, the present paper
aims to challenge the above argument and attempts to bring out an
alternative understanding. It further seeks to envisage the prospects of such
settlements in the Indian paradigm and analyse the possible challenges that
the Indian legal framework might face while dealing with such claims.
Part I of the paper analyses the abuse of dominant status granted by
IPRs vis--vis the Competition policy that condemns such monopolization.
It further dwells upon the dire need for patent protection specifically to
promote innovation in the pharmaceutical sector. Part II presents the
conceptual understanding of reverse payment settlements and tries to
challenge the prevalent argument of such settlements being anti-competitive
in nature. It further gives the Federal Trade Commission (hereinafter referred
to as FTC) data on the nature of such agreements till date, provides the
landmark litigations on such settlements, discusses the tests that emerged and
were deployed by courts to deal with such litigations and lastly envisages such
a scenario in the Indian paradigm. Part III concludes the paper and makes an
attempt to reconcile such settlements with the competition policy.
II. COMPETITION POLICY: WHERE DOES
PHARMACEUTICAL SECTOR STAND?
Competition policy aims at securing consumer welfare by ensuring
fair competition in the market and avoiding undue dominance by any players.
However, the competition law of various jurisdictions does reconcile
intellectual property rights as valid for creation of dominant status in the
right holder as an incentive to the intellectual effort devoted in the
innovation. Thus, in a way both the competition policy and the IP regime
aim to foster development, research in innovation, promote public welfare
and benefit. This section highlights the interface between competition policy
and IPR. It delves into abuse of dominant position as recognised under the
competition law and the grant of dominance by IP Rights. It further narrows
down to the pharmaceutical sector and identifies the importance of
competition in the said sector.

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A. INTERPLAY OF ANTI-TRUST AND IPR

The Competition Policy envisages the idea that any firm holding a
dominant position with an exclusive right to exploit the same leads to an
appreciable adverse effect on competition in the relevant market3. There is an
inherent conflict between the patent law which grants limited monopolies to
inventors and the anti-trust laws which broadly condemn monopolies and
restrictions on competition.4
In US the corresponding term for abuse of dominant position is
monopolization or attempt to monopolize. The Sherman Act prohibits
conduct which monopolizes, or attempts to monopolize any part of trade or
commerce.5Dominant position is defined as a position of economic strength
enjoyed by an undertaking which enables it to behave to an appreciable
extent independent of its competitors, its customers and ultimately of the
consumers.6 The existence of dominant position per se does not produce anticompetitive implications. However, an abuse of such a position as described
under Section 4 of the Competition Act, 2002 bears appreciable adverse
effects on competition in India. Abuse may therefore occur if an undertaking
in a dominant position strengthens such position in such a way that the
degree of dominance reached substantially fetters competition.7
Section 19(3) of the 2002 Act visualizes the agreements that amount
to appreciable adverse effects to competition. The two broad categories of
business conduct recognised as abusive are first, the exclusionary abuse
where a firm prevents the entry of new competitors in the market8. Any
conduct that causes a principle deterrent to a new entry amounts to an abuse.
Second, exploitative abuse where a firm uses its dominant position in
disadvantage to others by charging high prices is detrimental to consumers
interest. The firm often enters into predatory pricing scheme whereby the
pricing is at a price which is below the cost, as may be determined by
regulations, of production of goods or provision of services with a
likelihood, or reasonable prospect, of later recouping the investment by
increasing prices. This practice of pricing below an appropriate measure of
Competition Act, 2002, 2 (r), (s) & (t) read with 19(5), (6) & (7) (India).
Geoffrey A. Manner, Competition Policy and Law under Uncertaintly, 498 (1st ed. 2011).
5 Sherman Act, 1890, 2 (US), see also United States v. Grinnel Corporation, 384 US 563(1966).
6 N. V. Netherlands Banden Industrie; Michelin v. Commission of the European, [1983] ECR 3451.
7 Europemballage Corporation and Continental Can Company Inc. v. Commission of the European
Communities, [1973] EUECJ C-6/72.
8 supra note 7.
3
4

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cost amounts to an abuse of dominant position since it is aimed at

eliminating competition in the short run and reducing competition in the
long run.9
An indisputable function of law is to strike an efficacious balance
between conflicting interests and to reconcile the evident anomalies in the
socio-economic system.10 The constant and inevitable tension between IPRs
and competition policy is sought to be resolved in various major jurisdictions
with the aid of flexibilities in law, guidelines and through judicial
interpretation.11 The recent innovation economics approach adopted by antitrust authorities in the various jurisdictions aims at resolving the tension
between the two by treating IPR and competition law as complimentary to
each other and striking a fair balance between the two.12
In Europe, the IPR/competition law interface finds expression in
Article 81 of the EC Treaty which discusses the compatibility of IPR
licensing agreements with competition policy. Further, in Nungesser v. EC
Commission13 the European Court of Justice concluded that exclusivity
provisions did not automatically infringe Article 81. The US law, under
Section 33 of the Lanham Act also pays special attention to the entanglement
of trademarks and competition law, based on the recognition of the fact that
trademarks become valuable property rights, as opposed to monopoly
rights14. Further, the United States Antitrust Guidelines for the Licensing and
Acquisition of Intellectual Property, 1995 recognises that competition policy
and IP laws are intertwined with the common objective of promoting
innovation and consumer welfare, and the licenses that blend the
complementary factors of production produce pro-competitive results.15
Article 40 of the TRIPS is regarded as the intersection of intellectual property
standards and competition law. It provides for an important exception from
the application of the agreement. Article 40.2 reads as follows,
Keith N. Hylton, Antitrust Law: Economic Theory and Common Law Evolution, 213 (1st ed.
2003)
10Eshan Ghosh, Competition Law and Intellectual Property Rights with Special Reference to the TRIPS
Agreement, available at http://cci.gov.in/images/media/ResearchReports/EshanGhosh.pdf.
11Id.
12Avinash Gupta, The Interface between Competition Law and Intellectual Property Rights, available at
http://cci.gov.in/images/media/ResearchReports/req1_20081103135559.pdf.
13[1983] 1 CMLR 278 (England).
14 The Lanham Act, 1946, 33(7)(b) (US).
15Robert D Anderson et al, Abuse of Dominant Position-Enforcement Issues, in Competition Law
Today 76 (Vinod Dhall eds. 2007).
9

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Nothing in this Agreement shall prevent members from specifying in their legislation
licensing practices or conditions that may in particular cases constitute an abuse of
intellectual property rights having an adverse effect on competition in the relevant
market.
B. IPRs-REWARDING INNOVATION EFFICIENTLY

Intellectual property rights are legal rights granted to creators and

owners of works that are results of human intellectual creativity. These
exclude others from exploiting a non-corporeal asset.16 They include patent,
trademark, design rights, copyright, etc. They may lead to significant market
power where there are no substitutes on either the demand or the supply
side, thereby creating a monopoly in the market.17 They pose an entry barrier
and make it harder for new competitors to enter the market.18 These
exclusive rights may be justified on the grounds that without the prospect of
an exclusive right, few firms would invest large resources in research and
development. The investor would meet competition from those who are not
investing and are able to take a free ride without performing any original R &
D.19 Thus, intellectual property rights work on the premise that information
itself is a public good but once known would be consumed at zero marginal
cost; discovering and making information useful requires input that are rival
and are susceptible to efforts to exclude others.20
There is a trade-off between providing the incentive to invest in
innovation and the liberty of others to exploit the protected product.21 Most
IPRs are limited in various ways by the legislation granting them to
encourage competition. They do not last forever. For instance, a
pharmaceutical patent lasts for twenty years and thereafter it is free to be
used by others.22 Further, the legislations also prescribe exceptions to the use
of these rights. Use of copyrighted work for fair use23, provision of

16Valentine

Korah, Competition Law and IPR in Competition Law Today 140 (Vinod Dhall ed.
2007).
17Id, at142.
18 Dr Birgitte Andersen, Intellectual Property Right Or Intellectual Monopoly Privilege: Which One
Should
Patent
Analysts
Focus
On?,
available
at
http://redesist.ie.ufrj.br/globelics/pdfs/GLOBELICS_0050_Andersen.pdf
19 Supra note 12.
20 Supra note 17, at 503.
21 Supra note 19.
22 Patent Act, 1970, 53 (India).
23 Copyright Act, 1957, 52 (India).
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compulsory licensing under patents24, use of copyright of a protected work

for research purpose are few such instances.25 Thus, these IPR rights cannot
be designated as an absolute restriction to use.
C. VITAL IMPORTANCE OF PATENT PROTECTION IN
PHARMACEUTICAL SECTOR

Competition forces the market players to search for better

permutations and combinations for providing greater profits with greater
efficacy.26 Competition in the pharmaceutical industry is centred on
development and innovation of new therapies. International competition in
the pharmaceutical industry has led to an increased growth in the industry.27
The manufacture of pharmaceutical products is an innovation to improve
public health and welfare. Competition in innovation is widely thought to be
more important than competition in providing another product altogether.28
As was argued by Joseph Schumpeter, competition in innovation ensures
better prices and quality and also brings in a new contribution to the market
for the greater public good.29
Patents are of a greater commercial importance in the field of
chemistry, pharmaceutical, and biotechnology than in other fields such as
engineering or electronics.30 A new chemical product is easier to imitate with
less investment than a complex new machine. To bring a new pharmaceutical
to the market requires a vast amount of investment; a major part of which is
spent on testing the compound for safety and efficacy.31 The pharmaceutical
industry develops products that take a very long time to reach the market but
once they do, they continue to be sold for years.32 Thus, pharmaceutical
companies are the most interested in excluding competition by obtaining the

24Supra

note 23, 84. s

note 24, 52.
26 T. Ramappa, Competition Law in India, pp. 12-34 (2nd ed. 2009).
27Document on International Pharmaceutical Trade Pattern, available at http://www.duke.edu /web/
soc142/team2/trade.html.
28Allan Fels, Competition and Regulation, in Competition Law Today, pp 112 (Vinod Dhall ed.
2007).
29Id.
30Supra note 16, at 498-500.
31Simon Priddis et. al., The Pharmaceutical Sector, Intellectual Property Rights and
Competition Law in Europe, in Intellectual Property and Competition Law, pp. 123-134
(Anderson et al. eds. 2011).
32Document on Pharmaceutical Patent, http://www.innovation.org /documents / File /
Pharmaceutical_Patents.pdf.
25Supra

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maximum possible effective patent term. The usual drug development

process involves four major steps33:
1. Lead Finding- Research Planning, obtaining test compounds and
screening. It takes an average of two years
2. Preclinical Trials in two stages that takes average of four to six years
3. Clinical Trials in three phases that takes about four to six years
4. Registration, Launch and Sales that requires two to three years
Further, it is estimated that out of approximately 5000 compounds
found to have activity in early testing only one out of every 5000 is ultimately
marketed.34 So there are a number of drugs that fail even after full clinical
trial. The average cost of producing a new drug is US$402 million. 35 The
period from first patent filling to the marketing of the new drug is therefore
typically between seven to fourteen years.36 Besides this, the products
ultimately reaching the market do not always guarantee financial success.
Pharmaceutical companies therefore look to the promise of monopoly
profits earned on that small proportion of marketed products to finance the
cost of bringing successful products to market, as well as funding the
ultimately unsuccessful projects. IP rights are immensely important to them
in ensuring the risks and rewards of innovation are appropriately balanced.37
In absence of a good patent protection for the compound, sales by imitators
with no research overheads would destroy any possibility of the innovator
recovering its investment.
D. ABUSE/ MISUSE OF PATENT IN PHARMACEUTICAL INDUSTRY

Patent Act, 1970 by way of Sections 2(m), 2(j) and 2(ja) provides that
the awarding of a patent is based on objective criteria of novelty, industrial
application and inventiveness of the product.38 If each of these criteria is not
met the patent is not granted.
A patent can be obtained for an initial discovery known as the
primary patent or on a new formulation of the same compound or molecule
33Id.
34Supra

note 16, at 563.

36Supra

note 32.

35Id.
37Id.

38The

Patents Act, 1970, 2(m), 2(j) and 2(ja) (India); Astra Zenaeca v. Commission, (1991)
ECR-I-3356.
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known as the secondary patent.39 A mere obtaining of patent does not

infringe competition law even if the applicants stated intention is to exclude
competition on that discovery.40 This amounts to being a legitimately gained
valid patent.
The Federal Trade Commission of the US recognises that in cases
where the initial application is broadly worded to include inventions, which
the applying company considers to have little or no prospect of being
developed or commercialized once granted, the company holds it to protect
itself against actual or potential competition. Such conduct amounts to abuse
of patent.41 Abuse of patent creates competition concerns when firms form
patent clusters. These clusters make it hard for the potential competitors to
understand the exact scope of the patent relating to the specific product.42
Further, if the initial patent were found to be obtained as a result of
misrepresentation, misleading conduct or fraud in the patent office just to
exclude rivals, it would amount to abuse.43
Competition concerns also arise in secondary patents (a kind of
evergreen patents44) obtained by building and developing on the existing
patent right either by discovery of a more effective way of formulating the
same product or in an easier way.45 This leads to a second generation patent
switching by improving upon the same first generation product in the
market.46 As a result, on the expiry of the initial primary patent the generic
will not be free to imitate the product because of the second generation
patent. The generic is left with the option to imitate only the First generation
drug which at that point would have been usurped by the second generation
product. So effectively the first patent itself gets a protection of way longer
period than designated for it. Such a protection to the original patent leads to
anti-competitive results, thereby constituting abuse of patents.
Swiss National Centre Working Paper on Legal Notion on Abuse of Patent Rights
available at, http://www.wti.org/fileadmin/user_upload/nccr-trade.ch/ wp3/3.5 /The%
20Legal% 20Rights.pdf.
40Id.
41Supra note 32.
42Id.
43Id.
44Supra note 40.
45Id.
46Claire Chandler, Is an Absolute Ban on Reverse Payments the Appropriate Way to
Prevent Anticompetitive Agreements Between Branded- and Generic- Pharmaceutical
Companies?, 86 TEX. L. REV. 647 (2007).
39

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In order to combat such adverse effects on account of ever-greening

of patents, the Indian Parliament introduced Section 3(d) in 2005. This subsection excludes the mere discovery of a new form of a known substance
which does not result in the enhancement of the known efficacy of that
substance from the ambit of invention. In Novartis v. Union of India47, Madras
HC observed that objective of this sub-section is to prevent ever-greening, to
provide easy access to the citizens of this country to life saving drugs and to
discharge their Constitutional obligation of providing good health care to its
citizens. Further, Sections 54-56 deal with a special type of patent called
patent of addition. Wherein, the grant of patent will not be refused only on
the ground of lack of inventive step. The qualifications provided for grant of
the said patent require the invention to relate to an improvement or
modification of the main invention and such an improvement must come
within the scope of an improvement described under the specifications of
the main invention. Section 54 further qualifies that the term of a patent of
addition shall be granted only for a term equal to that of the patent for the
main invention. Thus, the dilution of the requirement of novelty under
Section 56 ensures there is no abuse by way of ever-greening patents.
III.

REVERSE PAYMENT SETTLEMENTS AND

ANTITRUST IMPLICATIONS

As has already been explained Reverse payment settlements are

agreements alternative to litigation between the manufacturer and the
Generis drug firm resulting in the restriction of generis entry into the market
through various means. There are no straitjacket principles applied by courts
to reach decisions, leading to a varied view in case to case basis. This section
delves into the varied approaches evolved by the court and concludes by
outlining the prospects of such settlements in the near future by the
emerging Indian pharmaceutical industry.
A. PROCESS FOR GENERIC ENTRY LEADING TO
REVERSE PAYMENT CONSEQUENCES

The Drug Price Competition and Patent Term Restoration Act of

1984, commonly known as the Hatch-Waxman Act allows a generic
manufacturer to rely on the clinical studies performed by a previous pioneer
drug manufacturer. The generic drug manufacturer files an Abbreviated New
47(2007)

4 MLJ 1153.
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Drug Application (hereinafter referred to as ANDA) to get the approval of

US Food and Drug administration (hereinafter referred to as FDA).48 The
generic-drug manufacturer must certify that it is filing its ANDA under one
of four paragraphs: the pioneer drug is not covered by a patent (Paragraph I),
the patent covering the pioneer drug has expired (Paragraph II), the generic
drug will not be marketed until the patent covering the pioneer drug has
expired (Paragraph III), or the patent covering the pioneer drug is invalid or
not infringed by the generic drug (Paragraph IV).49
B. GENERIC ENTRY RESULTING IN REVERSE PAYMENT

When an ANDA application is certified under Paragraph IV, an act

of patent infringement is likely to occur and the branded-pharmaceutical
company can sue the ANDA filer for patent infringement.50A reverse
payment occurs when the branded-pharmaceutical company (plaintiff) in the
patent infringement suit agrees to pay the generic manufacturer (defendant) a
sum of money in the context of a settlement agreement wherein the generic
manufacturer agrees to certain terms. In return, the Generic agrees to either
exit the market for the life of the patent or to split the remaining life of the
patent i.e. delay its entry into the relevant market. A patent splitting
settlement is a settlement of patent litigation in which the alleged infringer
obtains the ability to exploit the patent but not for the full range of time or
uses. Thus, the patent holder continues to practice the patent for the entire
patent life while the infringer practices the patent for part of that life. 51 For
example, a patent might have ten years left to its life and the settlement might
permit the alleged infringer to enter five years from the date of the
settlement, splitting the patent 50-50.
Due to the above settlement, the patent is never litigated, and a court
never determines whether the patent is valid or whether the generic product
infringes on the patent. Such a settlement agreement that delays or prevents
market entry of the generic product is bad as it would have precluded
consumer access to a more affordable generic product.52 A patent holder
Carl Shapiro, Antitrust Limits to Patent Settlements, 34 RANDJ. ECON.391 (2003).
note 47.
50Thomas F. Cotter, Antitrust Implications of Patent Settlements Involving Reverse
Payments: Defending a Rebuttable Presumption of Illegality in Light Of Some Recent
Scholarship, 71 ANTITRUST L.J. 1069 (2003).
51Id.
52 Marc G Schildkraut, Patent-Splitting Settlements and the Reverse Payment Fallacy, 71
ANTITRUST L.J. 1033 (2003-2004).
48

49Supra

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essentially uses a reverse payment to bribe an alleged infringer to settle a

patent litigation on terms that are better for the patent holder and worse for
consumers than the expected outcome of the litigation.
C. REVERSE PAYMENT AGREEMENTS FILED SO FAR AS PER FTC

The FTC Bureau of Competition is an American Regulatory

Authority. The FTC works for consumers to prevent fraudulent, deceptive,
and unfair business practices and to provide information to help spot, stop
and avoid them.53 One of the major objectives of the FTC is to find out and
challenge anticompetitive conduct in the marketplace, including
monopolization and agreements between competitors.54 To achieve the
above objective, Section 1112 of the Medicare Prescription Drug,
Improvement, and Modernization Act, 2003 requires that brand-name drug
manufacturers and generic drug applicants file certain agreements with the
FTC and the Department of Justice. The FTC is empowered to undertake
enforcement actions against the pharmaceutical companies if the patent drug
agreements are not filed with the FTC. The Commission has taken antitrust
law enforcement actions55 against various branded and generic drug
companies whose allegedly anticompetitive agreements took advantage of the
provisions of Hatch Waxman Act.
During the fiscal year 2011 (October 1, 2010 to September 30, 2011),
the FTC received 156 final resolutions of patent disputes between a brand
and a generic.56 Twenty eight final settlements contain both compensation to
the generic manufacturer and a restriction on the generic manufacturers
ability to market its product. One hundred final settlements restrict the
generic manufacturers ability to market its product, but contain no explicit
compensation while twenty eight final settlements have no restrictions on
generic entry.57 As can be derived from the data available with FTC fiscal
year, 2011 witnessed the continued trend of record numbers of brands and
generics resolving patent litigation prior to a final court decision on the
merits and a significant numbers of such settlements potentially involving
53Document

presenting the missions of FTC, available at http://www.ftc.gov/ftc/about.shtm.

defining the Role of FTC, available at http://www.ftc.gov /bc/tech/ property/
index.htm.
55FTCs Enforcement Action against Sanofi-Aventis Watson Pharmaceuticals and Synthon Holding,s,
available at ,http://www.ftc.gov/opa/2011/05/sanofi.shtm.
56Report by the Bureau of Competition on Overview of Agreements Filed in FY 201, available at
http://www.ftc.gov/os/2011/10/1110mmaagree.pdf.
57Id.
54Document

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pay-for-delay. While there were no such agreements in 2004, the number of

such pay for delay settlements increased to twenty eight in 2011.
D. SIGNIFICANT COURT LITIGATIONS HOLDING REVERSE
PAYMENT SETTLEMENTS VALID

FTC generally holds that such agreements injure competition and

consumers, and articulates a ban on settlements where the generic drug
manufacturer receives anything in monetary value to defer its activities.
However, the FTC also grants flexibility by providing that if any payments
that can be linked to litigation costs and the Commission is notified of the
such settlements, then the parties need not worry about a
later antitrust attack. There have been various instances where the courts
have approached the issue of reverse payment settlements in a positive sense
rather than granting it a per se anti-competitive status.
For instance in, Schering-Plough Corp. v. FTC58, Schering owned a
formulation patent on the coating of its K-Dur 20 potassium supplement. In
the settlement, Schering and generic challengers agreed that in exchange for
payments reaching US$60 million, the generics would remain off the market
for a specified period of time and Schering would obtain licenses on
unrelated products owned by the generics. The Eleventh Circuit Court found
that because of Scherings underlying patent right, the agreements did not
result in any unreasonable restraint of trade. The court found the
agreements sufficiently narrow because they were commensurate with the
protections under the patent. Therefore, in this case the court went into the
merits of the settlement to come to a conclusion regarding its validity.
In re Tamoxifen Citrate Antitrust Litigation59 the Barr Laboratories
wanted to market a generic form of AstraZeneca Incs successful breast
cancer drug Tamoxifen. It was a compound patent held by AstraZeneca Inc.
The generic settled the case in exchange of US$21 million with a license to
sell Tamoxifen in the United States, and refrain from marketing its generic
formulation elsewhere until the patent expired. The Second Circuit court
threw light on the fact that a compound patent by its nature excludes all
generic versions of the drug. Therefore, it validated the settlement, holding
that the agreement did not exceed the scope of the patent because it did not
prevent the introduction of non-infringing products by the generic. The
58402
59In

98

F3d 1056, 1058 (11th Cir. 2005).

re Tamoxifen Citrate Antitrust Litigation, 466 F3d 187 (2nd Cir. 2006).

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Supreme Court has recently refused to interfere with the Second Circuit
Courts decision so the same is held to be final. 60
In Valley Drug Co v. Geneva Pharms, Inc61 the patent holder entered into
agreements with two generic manufacturers whereby the generics would
refrain from marketing their version for a certain period in exchange for
quarterly payments of US$6 million to one generic and monthly payment of
US$4.5 million to the other. The Eleventh Circuit Court found the per se
illegality treatment of such settlements inappropriate. The court primarily
held that unless the exclusionary effects of an agreement exceeded the
exclusionary scope of the patent, the agreements would not be subject to per
se antitrust condemnation. Since the agreement contemplated generic entry
into the market prior to patent expiration, this agreement was narrower than
the patents exclusionary effect, thus it was not found to be violating any
antitrust principles. This case again depicts the divergence of the courts
opinion regarding the nature of such agreements.
In the Cephalon litigation62 the generic drug companies agreed not to
market their generic version until a certain date in exchange for payments by
Cephalon for various licensing agreements, supply agreements, and research
and development deals. The Judge adopted the prevailing scope of the
patent test, pursuant to which the court first examines if the agreements in
question exceed the exclusionary patent right granted to the patent holder. In
this case, the terms of agreement improperly granted rights that went way
beyond the scope of Cephalons patent rights. Therefore, the settlement
agreement was adjudicated as being against anti-trust principles.
In Asahi Glass Co. Ltd. v. Pentech Pharmaceuticals63, the settlement
agreement between GlaxoSmithKline, the producer of branded-Paxil and a
generic manufacturer precluded the generic manufacturer from selling its
version in the fifty states. However, the settlement did provide the generic a
license to sell a generic version in Puerto Rico. Thus, the settlement
precluded the generic manufacturer from competing in the fifty states in
exchange for a right to sell in Puerto Rico. The court recognised the fact that
Glaxo paid the generic to stay out of the domestic market (e.g., by permitting
60News

Report Regarding Tamoxifen Litigation, available at http://www.drugs.com/news/u-ssupreme-court-denies-review-tamoxifen-citrate-antitrust-lawsuits-6372.html.

61344 F3d 1294, 1300 (11th Cir 2003).
62FTC v. Cephalon, Inc., 551 F. Supp. 2d 21 (2008).
63289 F. Supp 2d 986.
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it to sell branded-Paxil in Puerto Rico) and held that had Glaxo continued to
litigate its patent infringement claim, the generic would not have been able to
sell in Puerto Rico, and ultimately, the rest of the United States, until 2007.
According to the court, the settlement is, therefore, pro-competitive as it
enabled the generic to sell immediately in Puerto Rico.
Thus, the courts have in the recent days adopted varied approaches
and tests to determine the validity of reverse payment settlements instead of
resorting to the traditional approach or following a singular method of
determination.
E. PROMINENT TESTS TO DETERMINE THE ANTI
COMPETITIVE SETTLEMENTS

As is apparent from the above cases, courts have not tended to use
either of the traditional antitrust tests like per se or the rule of reason test,
instead evolving new tests to review competition issues raised by
pharmaceutical patent settlements. Per se test presumes reverse payment
agreements to be anticompetitive without going into their merits while the
rule of reason test starts with the assumption that such agreements are
tenable in law and then takes rebuttals against this assumption.
In re Tamoxifen Citrate Antitrust Litigation case, the Second Circuit
found that reverse payment settlements do not necessarily violate the
antitrust laws. The court enunciated a new test called the scope of the
patent test, holding that such settlements are not anticompetitive as long as
they do not block generics from entering the market after the brand-name
manufacturers patent rights expire. The Second Circuit also confirmed the
scope of the patent test in a subsequent reverse payment in Ciprofloxacin
Hydrochloride Antitrust Litigation.64 So the three-step process in the scope of
the patent test looks to:
1. The scope of the exclusionary potential of the patent;
2. The extent to which the challenged agreement exceeds that scope;
and
3. Any resulting anti-competitive effects.

64544

100

F3d 1323, 1333 (Fed Cir. 2008).

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The Quick look rule of reason test adopted by the Third Circuit65
starts with a presumption that a reverse-payment settlement is prima facie
evidence of an unreasonable restraint of trade, which can be rebutted by
proof showing the payment or other benefit was for a purpose other than
delayed entry or had some other pro-competitive benefit as was observed in
the Asahi Litigation.
F. REVERSE PAYMENT SETTLEMENTS- ARE THEY
REALLY ANTI-COMPETITIVE?

As seen above, there is no prescribed, straitjacketed formula to

determine if a reverse payment settlement is anti-competitive. Some cases
have simply declared reverse payments per se illegal. Other courts have
virtually declared such arrangements per se legal. Reverse payments are in a
state of flux. On the one hand, if the patent is invalid or not infringed, a
reverse payment resulting in a patent-splitting agreement could lead to later
entry than litigation.66 On the other hand, if the patent is valid and infringed,
such a settlement could not be anticompetitive because the patent holder
could have blocked the infringer from the market entirely.67 Indeed, the split
would be pro-competitive if it permitted the infringer to get in the market
before the end of the patent term.
1. Reverse payments being pro-competitive - Views Held
The reverse payments are not necessarily anticompetitive. There are
many circumstances where a reverse payment is necessary to resolve a patent
litigation and that resolution is better for consumers than continued
litigation. Settlements; even those containing reverse-payment provisions, can
ensure that consumers gain access to generic versions of branded
therapeutics prior to expiration of the patent covering the branded product.68
For instance, if the patent owner were to succeed in trial, the generic
manufacturer could not receive FDA approval until the patent expired.69
Then a reverse-payment settlement is the only mechanism that succeeds in

65Andrx

Pharms., Inc. v. Biovail Corp. Intl, 256 F.3d 799 (D.C. Cir. 2001).
Laura J. Robinson, Analysis of Recent Proposals to Reconfigure Hatch-Waxman, 11 J.
INTELL. PROP. L. 47, 47 (2003).
67Id.
68 Kent S. Bernard & Willard K. Tom, Antitrust Treatment of Pharmaceutical Patent
Settlements: The Need for Context and Fidelity to First Principles, 15 FED. CIR. B.J.
617, 624-25(2006).
69Id.
66

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ensuring market entry of a generic product prior to expiration of the patent

covering the branded product.
There are two major scenarios wherein reverse-payment settlement
agreements are theoretically pro-competitive. First, parties may fail to
accurately assess their likelihood of success in the upcoming litigation given
the complexities of patent litigation.70 Second, the generic manufacturer may
be willing to refrain from marketing its product until a negotiated date, but it
may be concerned that its present financial position does not allow it to
sustain its operations until this date.71 In this situation, it may be necessary
for the patent owner to provide some payment to the generic manufacturer
in order for the settlement to be finalized.
Every legal system aims to promote settlements and since in
pharmaceutical litigations the stakes are high and there is great degree of
uncertainty, such settlements should not be discouraged. Thus, an absolute
ban on all such settlements is not the appropriate means of preventing
anticompetitive settlements because it also bans certain pro-competitive
agreements.
2. Reverse Payment Settlements being Anti-Competitive
The Competition Act prohibits any agreements with respect to
production, supply, distribution and storage, acquisition of control of goods
which causes or is likely to cause appreciable adverse effect to competition.72
Further the Act provides that appreciable adverse effects to competition
include the creation of barriers to new entrants in the market foreclosure of
competition by hindering entry into the market.73 Thus, a reverse payment
settlement that essentially restricts the generic entry into the market for a
specified period amounts to being an anti-competitive agreement. The
harmful effects of anti-competitive agreements include intra-band
competition, compartmentalization of market, price monopoly, monopoly in
quality of goods and so on.74 Reverse payment settlement agreements
ultimately lead to these adverse consequences and therefore are in violation
of competition policy.
C. Scott Hemphill, Paying for Delay: Pharmaceutical Patent Settlements as a Regulatory Design
Problem, 81 N.Y.U. L. REV. 1553, 1564 (2006).
71Id.
72Competition Act, 2002, 3(i) (India).
73Supra note 75, 19(2).
74Supra note 29 at 562.
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G. INDIA AND REVERSE PAYMENT SETTLEMENTS

The Department of Pharmaceuticals, Ministry of Chemicals and

Fertilizers states that the Indian pharmaceutical industry ranks third in terms
of volume- i.e. 10% of global shares75 after USA which has 169 ANDA
approvals (needed for marketing generic drugs in the US), India had the
highest number (132 approvals) in the year 2007.76 Even considering that the
industry is moving up the value chain, studies77 have pointed out to several
inherent limitations on Indian firms that prevent them from maturing into
global firms due to low R&D intensity. Thus, the strength of the Indian
industry lies in offering price-based competition to the global pharmaceutical
industry by producing generic version of patented drugs.78Furthermore, as
mentioned above, seeing the phenomenal growth of the pharmaceutical
sector in the Indian paradigm, there is a great possibility of a number of
reverse payment settlements negotiated by Indian firms with their branded
manufacturers in the near future.
A litigation of the said nature has not yet come up before the Indian
courts. One of the only involvements of India in such settlements has been
in the Aventis litigation. Aventis Pharmaceuticals Inc. has been indicted in the
United States on the charges of instituting a patent infringement suit against
a generic competitor with the intention to delay the market entry of the
generic counterpart of its blockbuster heart drug Cardizem CD and then
entering into an agreement with the generic firm to prevent market access.
Aventis has the third largest market share amongst the multinational
pharmaceutical companies operating in India.79
Bristol-Myers Squib, present in India as Bristol- Myers Squib India
Pvt. Ltd., has been charged in the United States for indulging in practices
which blocked the availability of the cheaper generic counterpart of Taxol,
which is used to treat breast and ovarian cancer.80 While these cases have
75CEBTAD

Report 2011on Competition Law and Indian Pharmaceutical industry, available at

http://www.cci.gov.in/May2011/Advocacy/EnglishAnnualReport201011.pdf.
76Id.
77 Martin Adelman and Sonia Baldia, Prospects and Limits of the Patent Provision in the TRIPS
Agreement: The Case of India, 29 Vand. J. Transatl L. 507 (1996).
78Id.
79 Susannah Markandya et.al., Timeline of Paclitaxel Disputes, available at http://www.cptech.org
/ip/ health/taxol/taxol-timeline2001.html.
80Id.
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originated abroad, such practices may soon be identified in the Indian

marketplace as well. Thus the Indian laws need to be equipped to cope with
such a situation.
In light of the lack of legal framework, the most plausible course of
action at present could be a resort to Section 27 of the Indian Contract Act,
1872 that declares as void any agreement by which any one is restrained from
exercising a lawful profession, trade or business of any kind. Another
plausible future cause of action could be amendments to the Competition
Act provisions. The framework of competition law in India does not
envisage the possibility of anti-competitive agreements to settle patent
litigation. It is essential to suitably amend Section 3(5) of the Competition
Act, 2002 to bring such agreements within the purview of the Competition
Commission of India.81 Agreements involving transfer of economic value
and accompanied by a delay in market entry of generics should, as and when
they take place, be submitted to the Commission for ex post review.82 A
legal fiction may be created, which can regard such agreements as
presumptively unlawful, and imposing the burden of proof on the parties to
the agreement to exhibit a justification to allow the agreement to take effect.
However, a rigid per se rule against pay-for-delay agreements can be counterproductive as it can lead to inhibiting innovation by denying the generic a
source of income by means of a settlement. Thus, in the Indian perspective,
attempts should be made to reconcile some form of such agreements under
its competition policy.
IV.

CONCLUSION

There have been arguments on both ends of the spectrum with

regard to the validity of reverse payment settlements vis--vis competition
policy. There can be no such thing as a singular position to determine the
nature of such settlements. The patents under pharmaceuticals are granted to
protect the innovation created after the huge investment made by the
branded drug firm. However a generic drug manufacturer can obtain the
right to market the imitated version of the drug without spending the
required R&D, time and money and thereby take a free ride over the
investment made by the original manufacturer. Under the usual
81Bhushan

Jatanis, Pay for Delay settlements: Potential threat to Indian Pharmaceutical sector, available
at http://cci.gov.in/images/media/ResearchReports/BhusanInterns010611.pdf.
82Id.
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circumstances he would challenge the patent of the branded manufacturer in

the court as being invalid and if the court decides in favour of generic, it
would obtain immediate market access. However with respect to recent
practice, the branded drug company being in a dominant position is able to
lure the generic to enter into a reverse payment settlement with them
whereby they pay the generic for the loss due to restriction from entry in the
market and further allow the entry for only a certain term of the patent.
Thus, the courts do not decide on the validity of the patent, rather it is
privately settled by the parties. Such agreements should not per se be declared
void but the extent of control exercised upon the generic that augmented it
to enter such a settlement need to be seen before validating these
agreements. Thus, as has been laid down by various cases, the scope of
patent and quick look rule of reason test should be adopted to decide their
validity in specific cases.
In order to harmonize such agreements, relevant amendments to the
competition laws of various jurisdictions are required. Further the court
practice of a particular jurisdiction should be such that it tries to analyse each
case in its peculiar facts and circumstances. The courts should make positive
efforts in trying to harmonize such agreements rather than choosing to
declare them per se void. Mutual settlements are encouraged in every legal
system, however it should be ensured that they do not go against the
prevalent competition practice and not hinder greater consumer welfare.

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GAAR IS INDIA READY FOR A DOUBLE-EDGED

SWORD?

Meghna Chandra

The General Anti-Avoidance Rules (hereinafter referred to as GAAR) finally

saw the light of day when the Finance Bill 2012 was tabled in the Parliament. There were
diversified views expressed by stakeholders including tax payers, FIIs, experts,
ASSOCHAM, etc. claiming on either side whether tax avoidance should or should not
be checked. The government took a stiff stand and the Bill was passed, but it has been
recently deferred till 2016. The tax authorities found themselves powerless during the
Vodafone judgment and the existing SAAR provisions proved to be ineffective. The
Standing Committee and the Shome Committee critically acclaimed GAAR and suggested
fixing of certain loopholes in order to avoid further discrepancies. Going by the trend, India
should have GAAR in place as the leading jurisdictions like USA, UK, Australia,
Canada, South Africa and China have already recognised its importance and have set
rules and precedents for the same, so that the economy does not suffer the perils of structural
loopholes in tax laws that allow the tax payers to circumvent them. India must learn
lessons from these countries and have GAAR in place in a structured and time-bound
manner in order to check tax-avoidance.
I.

INTRODUCTION

The income tax law of India traces its history back to 1961, but
numerous changes, additions and amendments have been made to it, making
it suitable to the needs of the people on one hand and the progressive nature
of the economy on the other. Until March 20121, there had never been a
general provision on anti-avoidance rules (GAAR) as opposed to certain
provisions in the Income Tax Act, 1961 which have specific anti-avoidance
rules. Judicial precedents have also contributed to the development of the
scope of tax avoidance in India. There is a need to understand the thin line
of distinction between various terminologies involved, like tax-avoidance, tax
evasion, tax mitigation, etc.
Tax planning, tax efficiency and tax avoidance by companies is not
equal to tax evasion. Tax evasion is the method of evading tax by dishonest
means like suppression, conscious violation of rules, etc. The prime

IVth Year, B.A.,LL.B.(Hons.), National Law University, Delhi

The Finance Bill, 2012 (16 March 2012).
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objectives of tax planning are reduction of tax liability, minimization of

litigation, productive investment, healthy growth of the economy and
economic stability. There is a very thin line of demarcation between tax
avoidance and tax evasion, though both result in avoidance of tax.2 In tax
avoidance, the tax payer reduces his liability to tax without incurring the
economic consequences that Parliament intended to be suffered by any tax
payer qualifying for such reduction in his tax liability.3 Simplistically, tax
avoidance is the attempt to minimize tax within the confines of the law and
often involves a transaction entered into in order to obtain a certain tax
benefit, like tax planning, tax mitigation, and both acceptable and
unacceptable forms of tax avoidance. Conversely, evasion relates to illegal
attempts to minimize tax.4
Tax avoidance is the legal utilization of the provisions of tax laws in
such manner as to minimize tax liability. Tax laws, however, contain specific
provisions to counter this tax avoidance. The Income Tax Act, 1961 contains
Section 92, 93 and 94 under Chapter X which deal with tax avoidance.
Section 92 to Section 92F relate to computation of income from
international transactions with regard to arms length price. Section 93 deals
with avoidance of tax by transactions resulting in transfer of income to nonresidents and Section 94 deals with avoidance of tax by certain transaction in
securities.5
II.

JUDICIAL TRENDS

As stated earlier, India has never had GAAR and has totally relied on
the judiciary to analyze any arrangement as being legal or not. India has a
long history of judicial trends which has laid down certain principles and
doctrines, some of which are borrowed from the English law. The judicial
pronouncements have also created confusion and certain contradictions in
their application. This was also one of the reasons that a need was felt to
codify the law, and remove doubts from the minds of many.

2Roy

Saunder et al, The Principles of International Tax Planning, 35 (2005).

3Id.
4Id.

5K.

108

N. Chaturvedi, Taxmanns Interpretation of Taxing Statutes, 142 (2008).

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One of the first cases wherein the Honble Supreme Court

commented upon the legality of tax avoidance is CIT v A Raman6where J.
Shah in his reported judgment stated:
....Avoidance of tax liability by so arranging commercial affairs that
charge of tax is distributed is not prohibited. A taxpayer may resort to a
device to divert the income before it accrues or arises to him. Effectiveness
of the device depends not upon considerations of morality, but on the
operation of the Income-Tax Act. Legislative injunction in tax statutes
may not, except on peril of penalty, be violated, but may lawfully be
circumvented.
After Ramans case, the Supreme Court took a stiff stand in McDowell
and Co. Ltd. v. Commercial Tax Officer7and supported the principle which was
laid down in IRC v. Duke of Westminster8and held that tax planning was
legitimate so long as it was strictly within the four corners of the law and any
colourable device or dubious methods to minimize tax incidence were not
legally permissible. In McDowell and Co. Ltd v. CTO9, evil consequences of tax
avoidance were summarized as follows:
i.
ii.
iii.
iv.

Substantial loss of much needed public revenue;

Serious disturbances caused to the economy;
Sense of injustice and inequality;
Ethics of transferring the burden of tax liability to the
shoulders of the guideless good citizens from those of artful
dodgers.

In Union of India v Azadi Bachao Andolan10, the principle of Duke of

Westminster has again been upheld in the quoted lines as, In our view, the
principle in Duke of Westminsters case11 is very much alive and kicking in
the country of its birth. The Madras High Court in 1988 in M. V. Valliappan
v ITO12while explaining the judgment of McDowells case stated that not
every attempt of tax planning is illegitimate and that not every transaction or
arrangement permissible under law having the effect of reducing the tax
6(1968)

67 ITR SC 11
154 ITR SC 148
8(1936) AC 1 (HL).
9(1985) 154 ITR SC 148
10(2003) 263 ITR SC 706
11(1936) AC 1 (HL).
12(1988) 170 ITR Mad. 238 (India).
7(1985)

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burden of the assessee should be looked upon with disfavour. It is only

colourable devices adopted for evading a tax liability that has to be
scrutinized.
The recent Vodafone case13which has been decided by Honble
Supreme Court has also to a great extent taken forward the legacy of taxavoidance in India.14
III.

WHAT TRIGGERED GAAR?

A. DIRECT TAXES CODE BILL, 2010

The general public perception regarding the introduction of GAAR

has been that the Vodafone case forced the tax authorities to enact GAAR and
make it workable owing to their helplessness in the absence of general
provisions of tax avoidance. However, the present GAAR provisions under
Chapter XA owe their origin to the DTC Bill of 2010 which was introduced
in the Lok Sabha on 30 August 2010 where, for the first time, a formal
distinction in proposed statutes was made between avoidance of tax and
evasion of tax, apart from them being differentiated by the judiciary alone.
Therefore, it would be wrong to impute a cause-effect relationship between
the Vodafone case and the present GAAR.
Under Part F of the DTC Bill, 2010, Chapter XI titled Special
Provisions relating to Avoidance of Tax deals with arms length pricing15, advance
pricing agreement16, avoidance of tax by transactions resulting in transfer of
income to non-residents17, etc. Also, Clause 123 deals with impermissible
avoidance arrangement and its consequences as defined under Clause 124.
Finally, the presumption of purpose which has been a topic of criticism for
the present GAAR provisions is also present under DTC Bill, 2010.18
B. STANDING COMMITTEE REPORT ON DTC BILL, 2010

The Direct Taxes Code Bill, 2010 was referred to the Standing
Committee on Finance of Parliament on 9 September 2010 chaired by Shri
Yashwant Sinha for detailed examination and report.19 The Committee
Vodafone International Holdings BV v. Union of India, (2012) 204 Taxmann SC 408
also IX (c).
15 Direct Taxes Code 2010, Clause 117.
16Id, Clause 118.
17Id, Clause 119.
18Id,Clause 125.
19 Taxmanns Guide to Standing Committee Report on Direct Taxes Code Bill, 2010.
13

14See

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submitted its report which was introduced in Parliament on March 2012 after
inviting objections and suggestions from various stakeholders. The important
recommendations of the Standing Committee were: 20
i.

ii.
iii.
iv.
v.
vi.

Greater clarity should be brought in the provisions by the MoF

and CBDT; if not, then the tax authorities will have unfettered
power which is subject to misuse;
The burden of proof should rest with the authorities and not tax
payers;
The Dispute Resolution Panel should be more independent;
GAAR should not have a retrospective application;
Interest of international investors must be protected under the
treaty regime;
Litigation should be avoided and proper guidelines must be
framed.

The recommendations made by the Standing Committee are

pragmatic and positive because they cater to the interest of all the
stakeholders involved. It is not just game-play of the Government; there
must be incentives for investors and corporations to sustain in India, rather
than investing behind a blindfold of suspicion and presumptions.
IV.

ANALYSIS OF SUBSTANTIVE PROVISIONS OF GAAR

Chapter XA of the Income Tax Act ranges from Section 95 to 102

and presents the provisions relating to tax avoidance. GAAR is applicable
where an arrangement can be declared as an impermissible avoidance
arrangement, if one of the steps of the arrangement or the whole of it fails to
pass the two-fold test, namely the main test and the critical test.
A. MAIN TEST

This test determines the main purpose of an arrangement or one of

the main purposes, and whether it is to obtain a tax benefit or not. The
definition of tax benefit is very wide and includes even the deferral of tax to
another year, including treaty benefits.

of Finance, 49th Report, Standing Committee on Finance on Direct Taxes Code Bill, 2010
available at <http://www.itatonline.org/info/index.php/download-report-of-standingcommittee-on-direct-tax-code-bill-2010/.

20Ministry

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While analysing the term main purpose under Indian GAAR, the
question arises how this main purpose is to be determined? Should it be
based on intention of the parties or should other facts and circumstances be
considered? A South African discussion paper on tax avoidance21 explains
that main has generally been construed to mean the dominant purpose.
Also, mainly has been construed as a quantitative measure of more than
50%22; as conveying the idea of dominance.23
Therefore, if the motive behind individual steps is to obtain a tax
benefit,but the overall scheme is not geared towards the same, the individual
steps will nevertheless be treated as an arrangement and GAAR may be
invoked. To clear doubts and prevent abuse of the GAAR provisions by tax
authorities, it must be made clear that the purpose of a party to the
transaction may be taken into account as one of the relevant facts, but this
will not be the determining factor in making such objective determination.
B. CRITICAL TEST

1. Abnormal Rights and Obligations Test

It deals with the creation of any right or obligation between parties to
the arrangement which would not normally be created between persons
dealing at arms length.24 Any person who evaluates what is normal for the
purpose of implementing GAAR will have to put himself in the shoes of a
businessman entering into the transaction.
2. Misuse or Abuse Test
What constitutes misuse or abuse is very subjective in nature.
According to the South African Revenue Service, a tax benefit may be denied
under the South African GAAR if that tax benefit would abuse or misuse the
object25, spirit or purpose of the provisions of the Income Tax Act.
Therefore, a purposive interpretation to these provisions is required.
3. Commercial Substance Test
An arrangement is deemed to be lacking commercial substance if the
substance or effect of the arrangement is inconsistent with or differs
21South

African Revenue Services, Discussion paper on Tax Avoidance and Section 103 of Income
Tax Act, 1962, available at <http://www.sars.gov.za/home.asp?pid=5981>.
22 SBI v. Lourens Erasmus (Edms) Bpk, (1966) 4 SA 434 (A) (South Africa).
23 CIR v. King, (1947) 2 SA 196 (A) (South Africa).
24 Finance Bill, 2012, Section 96(1)(a).
25 Id, Section 96(1)(b).
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significantly from the form of its individual steps or part; or it includes, or

involves round trip financing or an accommodating party or any element
having the effect of offsetting or cancelling each other; or a transaction
which disguises the nature, source, ownership or control of the fund. 2627
Therefore, even this test is a subjective test opening it to conflicting
interpretations.
4. Bona fide Purpose Test
An arrangement would be termed as an impermissible avoidance
arrangement if it is entered into or carried out by means, or in a manner,
which would not normally be employed for bona fide purposes.28 Bona fide is
a very general concept which needs more explanation. A transaction may
appear to be bona fide to one, and non-bona fide to another.
V.

CONCERNS OF ASSOCHAM AND FOREIGN INVESTORS

A. FOREIGN INVESTORS

Foreign institutional investors and others who have been investing in

India under the Double Tax Avoidance Agreement (Treaty) by way of a
holding company had strong objections when GAAR was initiated for the
first time under Direct Taxes Code Bill, 2010. Thereafter, when GAAR was
formally added to the Income Tax Act, 1961 by way of Finance Bill, 2012, it
upset FIIs and other tax planners, as their easy way out was sought to be shut
down completely.29 Corporations could be forced to restructure salaries of
employees if authorities concluded that these were structured to avoid taxes.
FIIs may have to pay capital gains tax for their investment in Indian
equities.30 The proposition of GAAR to give primacy to Chapter XA over tax
treaty31 has been seen as a threat to investments and loss of revenue to India
at a crucial time. The question which needs to be answered is do we need to
pander to these foreign institutional investors or strengthen our tax regime
and bring it at par with that of other developed nations?
26Id,

Section 96(1)(c).
National Seminar General Anti-Avoidance Rule (GAAR): Boon or Bane for the
Economy, (26 July 2012).
28 Finance Bill, 2012, Section 96(1)(d).
29See also IX (d).
30Gaurav Choudhary, Heres why GAAR jarrs, Hindustan Times (17th July 2012), available at
http://www.hindustantimes.com/business-news/WorldEconomy/Here-s-why-GAAR-jarrs/Article1-890763.aspx.
31 Income Tax Act, 1961, Chapter XA Section 98.
27ASSOCHAM,

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GAAR has been a part of the tax code of Canada since 1988,
Australia since 1981, South Africa from 2006 and China from 2008. Australia
and China also have SAAR in place to check abuse of tax treaties and
transfer pricing.32
B. ASSOCHAM

ASSOCHAM conducted a National Seminar on 26 July 2012 where

the theme was GAAR: Boon or Bane for the Economy?. The discussion paper
put forth various concerns of ASSOCHAM relating to certainty in
application, guidelines, due process, fairness, independence of the panel,
treaty overriding provisions, etc.33 Later, there have been many press releases
by ASSOCHAM34 wherein it has come down heavily on the violation of
interest of various stakeholders, including foreign industries, foreign
institutional investors, bona fide tax planners, the countries with which India
has favourable tax protecting regimes such as BIT, etc.
One of the press releases of 16 August 201235 strongly reiterated
ASSOCHAMs stand on GAAR, considering it to be unacceptable in its
present form because of its dubious and unclear stipulations with respect to
foreign entrepreneurs. According to ASSOCHAM, it might scar the image of
India internationally at a time when he gates for FDI in various sectors are
being increasingly opened.
VI.

GAAR AN INTERNATIONAL REGIME

Different jurisdictions have adopted different mechanisms to address

the issue of tax avoidance. Initially, tax avoidance was permissible in most of
the nations that viewed it as proper utilization of law. The United States
Supreme Court has stated that The legal right of an individual to decrease
the amount of what would otherwise be his taxes or altogether avoid them,
by means which the law permits, cannot be doubted.36 Thereafter, when this
practice of legal avoidance gained prominence resulting in a loss of revenue
32Deloitte,

General Anti-Avoidance Rules: India and International perspectives, available at

http://www.deloitte.com/assets/Dcom India/ Local% 20Assets / Documents / Tax%
20documents/GAAR%20-%20India%20and%20International%20Perspective.pdf.
33 ASSOCHAM, supra note 27.
34Available at www.assocham.org.
35ASSOCHAM
strongly opposes GAAR, (16th August 2012), available at
http://www.assocham.org/prels/shownews.php?id=3650.
36Tax Avoidance, available at<http://en.wikipedia.org/wiki/Tax_avoidance>.
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from direct taxes, the judiciary and the legislature of various countries came
into action, and thereby GAAR and its allied principles followed.
There are two ways of addressing the problem of tax avoidance first,
by evolving and recognising doctrines through judicial
pronouncements and second, by enacting a statute or set of rules called
General Anti-Avoidance Rules. Economies like USA and UK have adhered to
the vigorous judicial anti-avoidance doctrines, whereas Australia, Canada,
New Zealand and South Africa have enacted statutory GAARs.37
A. UNITED STATES OF AMERICA

USA does not have a statute in the form of GAAR. However, the
courts have recognised and applied various common law doctrines for tax
avoidance over the years. These doctrines are:
i.

ii.

Economic substance doctrine This doctrine was codified in US

law on 30 March 2010 through insertion of section 7701(o) in the
Internal Revenue Code (IRC) applicable to transactions entered into
after 31 March 2010. The touchstone of applicability of this section is
fulfilment of two pre-conditions. Firstly, the transaction requires that
the taxpayers economic position should be changed in a meaningful
way and secondly that the taxpayer should have a substantial purpose
for entering into such a transaction. This two-fold test reflects a
subjective and objective assessment of the tax-payer and the
transaction.
Substance over form doctrine This doctrine emerged during the
renowned case of Gregory v. Helvering38. The Court held,
. The transaction upon its face lies outside the plain intent
of the statute. To hold otherwise would be to exalt artifice above
reality and to deprive the statutory provision in question of all
serious purpose.39

The doctrine of substance over form is essentially that for Federal tax
purposes, a taxpayer is bound by the economic substance of a transaction
where the economic substance varies from its legal form.

John Avery Jones et al (ed.), Comparative Perspectives on Revenue Law: Essays in Honour of John
Tiley, pp. 11-20 (2008).
38 (1935) 293 US 465
39 Id.
37

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iii.

Step transaction This doctrine is often used in combination with

other doctrines. In the case of Commissioner v. Clark40 it was explained
as interrelated yet formally distinct steps in an integrated transaction
may not be considered independently of the overall transaction. By
thus linking together all interdependent steps with legal or business
significance, rather than taking them in isolation, federal tax liability
may be based on a realistic view of the entire transaction. The step
transaction doctrine originated from a common law principle
in Gregory v. Helvering41 which allowed the court to re-characterize a
tax-motivated transaction.42

iv.

Business purpose doctrine Gregory v. Helvering43 set out the

business purpose doctrine which lays down that where a transaction
has no substantial business purpose other than the avoidance or
reduction of Federal tax, the tax law will not regard such a
transaction as valid. The Court said: 44
When the statute speaks of a transfer of assets by one
corporation to another, it means a transfer made 'in pursuance
of a plan of reorganisation' of corporate business; and not a
transfer of assets by one corporation to another in pursuance of
a plan having no relation to the business of either, as plainly is
the case here. Putting aside, then, the question of motive in
respect of taxation altogether, and fixing the character of the
proceeding by what actually occurred, what do we find? Simply
an operation having no business or corporate purpose - a mere
device which put on the form of a corporate reorganisation as
a disguise for concealing its real character, and the sole object
and accomplishment of which was the consummation of a
preconceived plan, not to reorganise a business

v.

Doctrine of sham transaction Since the 1930s, the courts have

used what is known as the sham transaction doctrine to invalidate

(1989) 489 US 726, 738

(1935) 293 US 465 (USA).
42Step Transaction doctrine, at http://en.wikipedia.org / wiki / Step_transaction_doctrine.
43 (1935) 293 US 465
44 Id.
40
41

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deals designed solely to skirt income tax.45 As a general rule,

importing the sham transaction doctrine from the income tax to
estate and gift taxes areas has also been considered reasonable.46
B. UNITED KINGDOM

In the early to mid-twentieth century, the courts took a fairly handsoff approach to tax avoidance and observed that No man in this country is
under the smallest obligation, moral or other, so to arrange his legal relations
to his business or to his property as to enable the Inland Revenue to put the
largest possible shovel into his stores.47 Thereafter in 1981, the Ramasay case48
laid down the seeds of anti-avoidance tax considerations by way of judicial
activism wherein the doctrine of purposive interpretation was adopted,
noting that tax legislation should be read in accordance with its purpose, then
applied to a realistic view of the facts.
The United Kingdom is now seriously considering the introduction
of a form of GAAR after having relied for years on judicial doctrines of antiavoidance as expounded in cases like WT Ramsay Ltd v. IRC49, CIR v. Burmah
Oil Co. Ltd.50, Furniss v. Dawson51, Craven v. White52, Ensign Tankers (Leasing) v.
Stokes (HMIT)53.54
The contradictory principles developed in the UK cases have
impelled an Advisory Committee consisting of a distinguished people to
advocate for a moderate rule that targets abusive arrangements, but rejects a
broad spectrum general anti-avoidance rule.55
The proposed GAAR has two primary elements i.e. abnormal
arrangement having abnormal features, and abusive tax results. To assess this
45Chisholm

v. Commissioner, (1935) 79 F.2d 14 (USA).

S. Harrison & Robert S. Held, Sham Transaction Doctrine: How far will this income tax
concept invade the estate and gift tax planning realm?, Trusts and Estates, (February 2003) 11,
available at<http://www.harrisonheld.com/library/sham.transaction.pdf>.
47 Lord Clyde, Ayrshire Pullman Motor Services and Ritchie v. IRC, (1929) 14 TC 754 (UK).
48 (1981) STC 174 (HL).
49Id.
50 (1982) STC 30 (HL).
51(1984) STC 153 (HL).
52(1988) STC 476 (HL).
53(1992) STC 226 (HL).
54Donald G.H. Bowman ,A general anti-avoidance rule (GAAR) for the United Kingdom?, available
at
http://www.lexology.com/library/detail.aspx?g=bbb5e97a-8537-4234-a884-921c736
fea37.
55Id.
46Louis

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draft GAAR, a Committee was set up which made recommendations as well.

Thereafter the UK government announced that after consultation, GAAR
may be introduced through the 2013 Finance Bill. Certain precautions which
were recommended to be taken while introducing GAAR in UK were: 56
i.

ii.

iii.

Transactions that are outright unreasonable would come under

GAAR while admitting that unanimous agreement on reasonableness
of a transaction may be difficult to arrive at. This may be decided by
the appellate authority.
Arrangements not conceived solely for tax benefits are protected and
it requires the beneficiary to prove that the transaction was not
planned or designed solely for a favourable tax outcome.
The third safeguard requires HMRC57 to prove that the transaction is
not protected by the first two safeguards. This blocks HMRC from
using GAAR for a revenue objective. Only highly artificial tax
avoidance schemes are to be targeted.
C. AUSTRALIA

Tax avoidance has taken many forms in Australia including high

income individuals utilizing trust structures to split income with a nonworking spouse58 or under-age children59, thereby taking advantage of
Australias progressive tax rates scale. Australias GAAR was introduced in
1981 and is contained in Part IVA of the Income Tax Assessment Act 1936
(ITAA 1936).60
The assessment of a scheme (or transaction) is done in Australia
through a four-step process:
i.

Sham transactions - Sham transactions are those that purport to be

something that they are not. Under common law, such transactions
are not effective and the true character will be recognised under the
law.

Expert Committee, Report on General Anti Avoidance Rules (GAAR) in Income-tax Act, 1961,
92-93 (2012) available at<http://finmin.nic.in/reports/report_gaar_itact1961.pdf>.
57 Her Majesty's Revenue and Customs.
58 Federal Commissioner of Taxation v. Everett, (1980) 143 CLR 440 (Australia).
59The specific splitting of income with underage children has been negated as a tax planning strategy by
Division 6AA of Part III of the Income Tax Assessment Act 1936.
60Income Tax Assessment Act, 1936 http://www.austlii.edu.au / au / legis / cth /
consol_act/itaa1936240/
56

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ii.

Status under the law - If the transaction is not a sham, the

transaction must be effective under the substantive law. For
example, Section 8-1 of the ITAA, 1936 provides for deduction in
assessable income. To qualify as a deduction the expenditure must
be (at least in part) incurred in gaining or producing assessable
income; or it must necessarily be incurred in carrying on a
business for the purpose of gaining or producing assessable
income. Expenditure that satisfies this connection with the
assessable income requirement is further denied deductibility if the
expenditure is capital in nature or of a private or domestic nature.

iii.

Specific Anti-Avoidance Rules -If the transaction is effective in

the face of the law, it is then tested under the various SAARs located
throughout the tax legislation. These provisions aim at negating the
tax benefits associated with specific forms of transaction. These
anti-avoidance rules look through the entity structure. There are
many SAARs like trading in franking credits61, personal services
income62, foreign income deferral, employee share schemes,
company tax losses, trust tax losses, taxation of minors, etc.63

iv.

General Anti-Avoidance Rules -If the transaction does not fall

within SAAR, then the GAAR contained in Part IVA of the ITAA,
1936 are applied. Application of GAAR involves:
a. Compliance with statutory definition of scheme
which is so wide that it covers almost every
conceivable arrangement including informal and nonbinding agreements.64

61Buying

and selling shares just to claim the franking credits without holding on to them long
enough to bear ownership risk.
62Diverting income that is earned through your efforts into another entity with a lower tax
rate.
63Taxpayers
Australia Inc, Tax avoidance and tax evasion, available at
http://www.taxpayersassociation.com.au/investment/tax-evasion.html.
64Income Tax Assessment Act, 1936, Section 177A -scheme means (a) any agreement,
arrangement, understanding, promise or undertaking, whether express or implied and
whether or not enforceable, or intended to be enforceable, by legal proceedings; and (b)
any scheme, plan, proposal, action, course of action or course of conduct.
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b. This scheme must produce a tax benefit defined

under Section 177C.65
c. Finally, this scheme must have been entered into for
the dominant purpose of obtaining the tax benefit.
This is an objective test, using the reasonable person
yardstick. The assessment of purpose must be
ascertained by an exhaustive list of eight
considerations set out in Section 177D.66
If Part IVA applies, the Commissioner of Taxation has the power to
reconstruct the transaction for tax purposes only (other legal consequences,
such as transfer of property rights, are not affected), so as to remove the tax
benefit for the taxpayer.67 Part IVA attacks 'legal' means of tax avoidance
(that is, not criminal tax evasion or fraud) and does not require one to have
the deliberate intention to avoid tax.
D. CANADA

The general anti-avoidance rule is found in Section 245 of the

Income Tax Act of Canada68 introduced in 1988 and applies to transactions
entered into after 13 September 1988.69 If a transaction falls under Section
245(3) of the avoidance transaction, then the Canada Customs and Revenue
Agency can deny a tax benefit. Section 245 is an extreme provision and
should not be invoked routinely.70
The Federal Court of Appeal in the case of OSFC Holdings Limited v.
The Queen71provided for two tests under Section 245(3) that must be satisfied
in order for a transaction to be a tax avoidance transaction:

Income Tax Assessment Act, 1936, Section 177C.

Income Tax Assessment Act, 1936, Section 177D This Part applies to any scheme that
has been or is entered into after 27 May 1981, and to any scheme that has been or is
carried out or commenced to be carried out after that date (other than a scheme that was
entered into on or before that date), whether the scheme has been or is entered into or
carried out in Australia or outside Australia or partly in Australia and partly outside
Australia.
67Keith Kendall FTIA, Tax Avoidance in Australia ConTax Student e-Newsletter, 3
(September 2009) available at http://www.taxinstitute.com.au / files/ /dmfile /
Feature_Article_Sept09.pdf.
68 Income Tax Act, 1985 RSC c 1 (Canada).
69 Income Tax Act, 1985 Part XVI (Canada).
70 Jabs Construction Limited v. The Queen, 99 DTC 729 (Canada).
71 (2001) DTC 5471 (Canada).
65
66

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i.

A results test, which requires a determination of whether a

transaction or series of transactions would, but for GAAR, result
in a tax benefit, and

ii.

A purpose test, which focuses on the primary purpose of the

transaction (or the individual transactions that form the series).
Only if a transaction would result in a tax benefit is it necessary
to consider its primary purpose.

Canadian GAAR provisions are applied to a transaction which results

in a tax benefit to a party, unless the transaction is carried out for bona fide
purposes or it is not a misuse of the provisions of the Act.72 Recently, the
Canadian Supreme Court in the case of Copthorne Holdings Ltd. v. Canada73,
observed that GAAR requires three questions to be decided: (1) was there a
tax benefit?; (2) was the transaction giving rise to the tax benefit and
avoidance transaction?; and (3) was the avoidance transaction giving rise to
the tax benefit abusive? Providing further guidelines, the Court emphasised
that the transaction may have a tax purpose, but that does not necessarily
mean that the tax purpose will always be the primary reason for the
transaction. However, where a transaction takes place primarily for a non-tax
purpose, there will be no avoidance transaction. In the absence of an
avoidance transaction, the fact that a transaction may have a secondary tax
benefit purpose will not trigger the GAAR. Whether the transactions are
between parties at arms length or not should be immaterial.74
E. SOUTH AFRICA

The Income Tax Act, 1962 was amended in 2006 to introduce the
GAAR which applies to impermissible avoidance arrangements.75 The fourstep process of South African GAAR is:
i.
ii.
iii.

the existence of an arrangement;

the existence of a tax benefit;
the sole or main purpose of the avoidance arrangement is to
obtain a tax benefit; and;

Expert Committee, supra note 57.

(2011) SCC 63 (Canada).
74Stubart Investments Ltd v. The Queen, (1984) 1 SCR 536 (Canada).
75 Income Tax Act, 1962 (South Africa).
72
73

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VOL.1 ISSUE 1

the avoidance arrangement is characterized by the presence of

either of these:
a. Entered into or carried out by abnormal
means for a non-bona fide purpose;
b. Lack of commercial substance;
c. Creation of non-arms length rights or
obligations;
d. Abuse or misuse of the provisions of the
Income Tax Act, 1962.76

One of the major areas of criticism of the South African GAAR is

with respect to its remedy (or penalty). Section 80B allows the Commissioner
to remedy an avoidance arrangement using any method he deems
appropriate.77 This could result in the Commissioner levying higher taxes on
a taxpayer than are warranted, resulting in lengthy and costly legal battles.
F. CHINA

The Enterprise Income Tax Law of the People's Republic of China

has come into force from 1 January 2008 with major changes as compared to
the old law.78 Chapter VI, titled Special Tax Adjustments from Article 41 to 48
relates to tax avoidance. Article 47 states that If an enterprise enters into any
business arrangement without bona fide commercial objective that results in
reduced taxable revenue or income, the tax authority is entitled to make
adjustments based on reasonable methods.79
The Chinese law is very open-ended in nature and leaves a lot of
scope for interpretation of the use and misuse by the tax payers, and even by
the authorities. It must be noted that Article 58 of EITL, 2007 makes it clear
that in case of a conflict between the domestic law and any treaty entered
into by the Chinese government, the treaty shall prevail.80
76Id.

Income Tax Act, 1962, Section 80B (South Africa).

Income Tax Law of the People's Republic of China, available at
<http://www.thaicombj.org.cn/edit/UploadFile/2008111114927809.pdf>.
79Enterprise Income Tax Law of the People's Republic of China, Article 47, available at
<http://www.thaicombj.org.cn/edit/UploadFile/2008111114927809.pdf>.
80Enterprise Income Tax Law of the People's Republic of China, Article 58 In case any
provision in a tax treaty concluded between the government of the People's Republic of
China and a foreign government is different from the provisions in the present Law, the
provision in the said treaty shall prevail.
77

78Enterprise

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G. LESSONS TO BE LEARNT

Since all taxes are imposed by statute, all questions of tax are
ultimately ones that involve the interpretation and application of the statute.
The result in the Duke of Westminster case was as much a product of the literal
interpretation of taxing statutes that prevailed at the time in the UK and
Commonwealth countries as the result in the contemporary US case, Gregory
v. Helvering81, was the product of a more purposive approach to
interpretation.82
The Indian GAAR proposes that a transaction could become an
impermissible avoidance arrangement even if a step in it benefits the taxpayer. This
overarching Indian provision conveys a contrary position to the first UK
safeguard that seems to limit the scope of GAAR; and the second safeguard
is also milder than the implications of the Indian provision. Provisions
should not be such that they completely dis-incentivise the investors.
VII.

SHOME COMMITTEE REPORT

GAAR in India was not as well received as it was expected to be.

After much demand, the Prime Minister constituted an Expert Committee
on 17 July 2012 to assess the workability of GAAR in India. This Committee
was to be chaired by Dr. Parthasarathi Shome and three other members83,
who were carefully chosen for excellence in their respective fields. The
Committee submitted its report on 1 September 201284 on Chapter XA of the
Income Tax Act, 1961 along with allied rules and guidelines and gave
recommendations.
The Expert Committee had found numerous loopholes in GAAR
and made various recommendations. Some recommendations that have given
relief to many taxpayers, are discussed below:
i.

The implementation of GAAR may be deferred by three years

(it must be noted that ASSOCHAM has recommended the
deferral of GAAR by at least five years)85 because of:
a. Administrative reasons;

(1935) 293 US 465 (USA).

Avery Jones et al (ed), supra note 37.
83 Expert Committee, supra note 57.
84 Id.
85ASSOCHAM strongly opposes GAAR, supra note 35.
81

82John

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b. The tax officers must be trained in the use of GAAR

as an instrument of tax administration, rather than of
revenue generation;
c. Pre-announcement being a common practice in a
scenario of free flowing capital;
d. A proper understanding of the new legislation and
guidelines, while eschewing dubious tax avoidance
arrangements, needs time so as to allow legitimate tax
planning/mitigation.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.

Only those arrangements whose main purpose is tax benefit

should fall under GAAR.
Lacking commercial substance should be exhaustively
defined under Section 97.
The Approving Panel should be reconstituted.
A clear distinction should be made between tax mitigation
and tax avoidance.
A monetary threshold of rupees 3 crore of tax benefit should
be used for GAAR application.
GAAR should not be made applicable retrospectively.
There should be no overlapping in liabilities between SAAR
and GAAR; and GAAR and tax treaty.
An impermissible avoidance arrangement should be limited
to a specific portion and not to the whole.
For better and efficient administration of GAAR, time limits
should be prescribed for various assessment stages.
The Authority for Advance Ruling should be made applicable
to get prior consent on a transaction.86
VIII.

MERITS AND DEMERITS

A. BURDEN OF PROOF AGAIN SHIFTED ARMLESS AUTHORITIES

According to the original GAAR provisions, the burden of proof was

vested in the taxpayer and not in the revenue authorities. On the other hand,
the Indian judiciary has set precedents where the burden of proof rests with

86

Expert Committee, supra note 57.

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the revenue authorities.87 After much criticism, the position was clarified by
Mr. Pranab Mukherjee in the Parliament by amending Section 96. Presently,
the burden of proof rests with the revenue authorities. This immediate step
has been received well by the stakeholders.
The question however remains as to what was the reason for this
immediate step to be taken, and whether it is justified. Presumption of
innocence is featured as one of the principles of natural justice in India, more
so in criminal cases where the burden of proof to be discharged by the
prosecution is very high.
The preamble of GAAR advocates that:
..there is a need for statutory provisions so as to codify the
doctrine of substance over form where the real intention of
the parties and the effect of transactions and purpose of an
arrangement are taken into account for determining the tax
consequences, irrespective of the legal structure that has been
superimposed to camouflage the real intent and purpose.88
The constitutionality of shifting the burden of proof has already been
upheld by the Supreme Court in the case of Collector of Customs, Madras v.
Nathella Sampathu Chetty89 wherein the Court said that Section 178A of the Sea
Customs Act, 187890 is in line with the principle underlying the structure of
the rights guaranteed by Article 19 of the Constitution of India, namely, a
balancing of the need for individual liberty in the matter inter alia of the right
to hold property or of the right to trade, with the need for social control in
order that the freedoms guaranteed to the individual sub-serve the larger
needs moral, social and economic.91
It is not unknown that tax mitigation has taken a form of tax
avoidance, and the tax authorities become armless when they have to
87K

Chellaram v. CIT Bombay, (1980) SC 125 ITR 713 (India); K G Thomas v. CIT, (1985) SC
156 ITR 412
88Sukumar Mukhopadhyay, General Anti-Avoidance Rule and the burden of proof ,
Business Standard (7 May 2012) <http://business-standard.com/results/news/general-antiavoidance-rulethe-burdenproof/473569/>.
89 Collector of Customs, Madras v. Nathella Sampathu Chetty, (1962) SCR 3 786 (India).
90In 1955, the Sea Customs Act, 1878, was amended by the introduction of Section 178A in
that Act, which provided, inter alia that where goods were seized, under that Act in the
reasonable belief that they were smuggled goods, the burden of proving that they were not
smuggled goods shall be on the person from whose possession the goods were seized.
91 Sukumar Mukhopadhyay, supra note 88.
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circumvent an otherwise legal arrangement, and prove it illegal in lieu of

vague terms like lack of commercial substance, a non bona fide arrangement,
substance over form doctrine, etc. India would not be the lone country
where the burden of proof shall partially vest with the taxpayers. In other
jurisdictions like Australia, China, Ireland, New Zealand, the burden of proof
rests with the tax payers. In Brazil and South Africa, the tax authorities and
the tax payers share the burden of proof.92
As an emerging economy, India needs strict compliance with
provisions and cannot afford to lose revenue in the absence of sufficient
evidence. Therefore, the burden of proof must not completely rest with the
tax authorities; rather it should be shared by the assessee as well.
B. SHIFT TOWARDS COLOURABLE DEVICES

In the Duke of Westminster93, and in several subsequent tax cases

including Ramsay v. IRC94, Furniss v. Dawson95, Craven v. White96and others,
English Courts have consistently affirmed the cardinal principle that if a
document or a transaction is genuine, courts cannot go behind it to find out
the underlying substance. This principle has been applied in India too in
several cases, the more recent among them being the Azadi Bachao
Andolan97case and the Vodafone98case. The Supreme Court in the McDowell
case frowned only upon the use of colourable devices and resort to dubious
methods and subterfuges, and as clarified by the Supreme Court in the
Vodafone case, not all tax planning in general.99
C. LOOK AT APPROACH OR LOOK THROUGH APPROACH

In the famous Vodafone judgment100 of the Supreme Court which

overruled the Bombay High Court judgment101, the look at approach of
ASSOCHAM, supra note 27.
AC 1 (HL).
94(1981) STC 174 (HL).
95(1984) STC 153 (HL).
96(1988) STC 476 (HL).
97Supra note 10.
98(2012) SC 204 Taxmann 408 (India).
99KPMG, General Anti-Avoidance Rule in India, <http://www.kpmg.com / Global / en /
IssuesAndInsights/ArticlesPublications/taxnewsflash/Documents/india-april242012no2.pdf>.
100Supra note 13.
101Vodafone International Holdings BV v. Union of India, (2008) Bom HC 175 Taxmann 399
(India).
92

93(1936)

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Section 9 of Income tax Act, 1961 was challenged. The three judge Bench
stated that a look-at approach needs to be adopted for the transaction,
rather than a look through approach in interpreting the relevant tax
provisions. The Bench held that investment structures had to be respected
and it was to be determined whether an investment was made for
participation in the entity or whether it was a pre-ordained transaction aimed
at avoidance of taxes. The Bench also examined the need to review the
decision of the Supreme Court in Azadi Bachao Andolan102and concluded that
there seemed to be no reason to refer the decision for reconsideration by a
larger Bench. Finally, the Court stated that genuine strategic tax planning
could not be ruled against. The court said:
The question of providing look through in the statute or in the treaty is
a matter of policy. It is to be expressly provided for in the statute or in
the treaty. Similarly, limitation of benefits has to be expressly provided
for in the treaty. Such clauses cannot be read into the Section by
interpretation. For the foregoing reasons, Section 9(1)(i) held to be as not
a look through provision.103
It cannot be said that the Vodafone judgment was lopsided and went
against many past principles, because all the three judges based their
arguments on the special nature of the transaction between Vodafone and
HCIL. But, this judgment in fact opened the eyes of many with respect to the
distinction between avoidance which can be legal or illegal. This judgment
also triggered the need of implementing GAAR.
D. TREATY SHOPPING FAVOURABLE JUDICIAL TRENDS

Historically, Indian Courts have been favourable to tax payers when

it comes to treaty shopping in light of the Azadi Bachao Andolan case104.
There are certain treaties which India has signed where there is no
Limitation of Benefit Clause (LOB). For instance, the Indo-US treaty has
Article 24 as the LOB clause105; the India-Singapore treaty also has an LOB
clause whereas the India-Mauritius treaty (Double Tax Avoidance
Agreement) does not have it. Therefore, an investment through the Mauritius
102Supra

note 10.
note 13.
104Supra note 10.
105Article 24 stipulates that benefits will be available if 50% of the shares of a company are
owned directly or indirectly by one or more individual residents of a controlling state.
103Supra

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channel comes under a scanner in India, and creates doubts in minds of

many. What happens to the Vienna Convention on Law of Treaties
(VCLT)?
In the absence of the same, it may result in violation of international
principles of treaty interpretation.106Pacta sunt servanda is based on good faith.
In respect to international recognition of the concept, the VCLT under
Article 26 provides that international agreements are to be interpreted in
good faith.107 Also Article 27 states that domestic law will not be a defence
for non-observance of an international treaty.108 But, in case any international
agreement/treaty leads to unintended consequences like tax evasion or flow
of benefits to unintended persons, it is open to the signatory to take
corrective steps to prevent abuse of the treaty. Such corrective steps are
consistent with the obligations under the VCLT.109
Indian GAAR provides for a treaty override in case of a conflict, but
this has been much criticized lately. It must also be noted that in most recent
treaties concluded by China, specific provisions relating to GAAR have been
inserted. This means that in case of a conflict, GAAR will prevail over treaty
law.
IX.

DO WE REALLY NEED GAAR?

A. STRUCTURAL LOOPHOLES

The need for GAAR is usually justified by a concern that existing

laws, judicial practice and tax administration are not adequate to prevent the
erosion of the tax base from the use of sophisticated forms of tax avoidance
being adopted by the tax payers after the liberalization of the economy. 110
Until the introduction of statutory GAAR, judicial pronouncements based on
various principles existed and known instances of tax avoidance were dealt
by SAAR.
Tax avoidance is generally characterised by use or misuse of the tax
laws. This is often driven by structural loopholes in the law to achieve
106Deloitte,

supra note 32.

26 -Pacta sunt servanda Every treaty in force is binding upon the parties to it and
must be performed by them in good faith.
108Article 27 Internal law and observance of treaties - A party may not invoke the provisions of
its internal law as justification for its failure to perform a treaty. This rule is without
prejudice to article 46.
109 Deloitte, supra note 32.
110 ASSOCHAM, supra note 27.
107Article

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outcomes not intended by the Parliament.111 For dealing with such practices,
GAAR should be such that they address these loopholes and do not leave
any scope for misuse. There are certain reasons why GAAR will be an
improvement on SAAR and act as a complimentary tool to them.
B. GAAR COMPLEMENTS SAAR

SAAR is a set of rules which target specific known arrangements for

tax avoidance. They specifically lay down the conditions or situations where
they may be invoked and cater to the arrangements which Parliament had
envisaged.112
S.
No.

111
112

SAAR

GAAR

1.

They are more specific and They are very general in

help reduce time and cost application, involving high
involved in tax litigation.
cost of litigation and long
drawn battles.

2.

They provide certainty to

any tax payer while
arranging his affairs or
while
formalizing
any
arrangement.

3.

They do not generally grant They grant wider discretion

any discretion to the to Revenue Authorities to
Revenue Authorities.
invalidate arrangements as
impermissible tax avoidance.

4.

They are very specific and They

have
broader
have a limited scope of application resulting in more
application.
extensive interpretation.

They can more effectively

counter the tax payers out
of the box thinking in
devising new means of tax
avoidance.

Ralph Committee, J Ralph Review of Business TaxationA Tax System Redesigned (July 1999).
ASSOCHAM, supra note 27.
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X.

CONCLUSION

The Consultation document released by the UK government states

that a narrowly focused GAAR targeted at artificial and abusive tax avoidance
schemes would improve UKs ability to tackle tax avoidance while
maintaining the attractiveness of the UK as a location for genuine business
investment.113 India should partially move in the direction of UK by not
making broad GAAR provisions while at the same time maintaining some
checks. OECD provides that the general anti-avoidance rules would override
the provisions of the tax treaty.114 India has similar provisions. But does this
solve the problem? No! It just hampers the reputation of India with respect
to foreign investment. No one should forget what happened to India in the
White Industries case115, where India has been heavily penalized for violating the
India-Australia BIT.
The broad provisions of GAAR may even scrutinise and penalise the
use of favourable treaty jurisdictions to house intellectual properties such as
copyrights, trademarks, patents, etc. Indias GAAR is a replica of South
African GAAR to a great extent. Today, South Africa is in recession and
experts suggest loosening up the stringent GAAR.116 Given the tax and
operational advantages offered by the LLP route, many companies are
increasingly considering converting into an LLP. Even these conversions
may be evaluated under GAAR. Adverse consequences could ensue if it
cannot be appropriately demonstrated that the conversion was entered into
with bona fide commercial purposes.
Tax planning may be legitimate, provided it is within the framework
of the law. Colourable devices cannot be part of tax planning and it is wrong
to encourage or entertain the belief that it is honourable to avoid the
payment of tax by resorting to dubious methods. It is the obligation of every
citizen to pay their taxes honestly without resorting to subterfuge.
The budget presented this year (28 February 2013) has deferred
GAAR which will come into effect from 1April 2016 and will be applicable
113HMRC

(UK), General Anti-Abuse Rule (GAAR) Consultation document, available at

www.customs.hmrc.gov.uk/
114Id.
115UNCITRAL award of 30 November 2011
116Yaasir Haffejee, A critical analysis of South Africas general anti-avoidance provisions in income tax
legislation, available at http://www.nmmu.ac.za/documents/theses/1%20GAAR%20%20Yaasir%20Haffejee%20Dec2009.pdf.
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on transactions undertaken in the financial year commencing 1 April 2015

and in the following years.117
One fundamental question that needs to be considered deeply is: Is it
the right time to introduce GAAR? When the country is running a huge trade
deficit and consequently high current account deficit, dont we need more
capital inflow rather than sceptical investors? Experience has shown that
wherever GAAR has been introduced, the economy has taken a considerable
time to stabilise. GAAR in its present form reflects revenue collection which
in the long run is not going to earn the confidence of investors leaving them
in lurch of uncertainty. Presently, we need a time-bound program involving
all stakeholders in moulding the provisions and addressing their genuine
concerns.

117

Union Budget and Economic Survey, Union Budget 2013-14 (28th February 2013), available
at http://indiabudget.nic.in/ub2013-14/bh/bh1.pdf
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UNDERSTANDING TRADITIONAL KNOWLEDGE

IN POST TRIPS REGIME
Mayank Kapila

Initially, the developed world considered only property a resource of economic

significance and did not consider knowledge or information from the developing world a
resource oof any value. Recently however, when the developed world realised the importance
and potential of Traditional Knowledge (TK) as a worthy resource for the creation of
intellectual property, it tried to acquire the knowledge and genetic resources by defrauding
the traditional communities, under the garb of research expeditions or through the use of
force. This resulted in bio-piracy and the one-way flow of genetic resources and traditional
knowledge. Now the West is engaged in misappropriating the TK wealth of the developing
world of which the traditional communities are living in ignorance, and that too by neither
acknowledging them nor sharing any benefit with these traditional communities. This
debate has raised a number of substantial questions and has highlighted a lot of problems
related to the field of Traditional Knowledge. This research paper seeks to explain TK and
address the key issues within its domain.
I.

INTRODUCTION

In an era characterised by the globalisation of trade, culture and

communications, we are witnessing a meeting between two areas: on the one
hand, there is the intellectual property system as it is known today, and on
the other, the areas of genetic resources, traditional knowledge and folklore.
Until now the developed world has always super-imposed its rigid set
of IP protection norms upon the developing world and at the same time has
accused the developing countries of encouraging or at least not doing their
best to prevent piracy. Interestingly enough, in the recent past, the
developing countries have hit back with a counter-accusation against the
developed world and its corporations of stealing their wealth in the form of
traditional knowledge. Traditional knowledge and its relationship to the
formal IPR system has emerged as a mainstream issue in international
negotiations on the conservation of biological diversity, international trade,
and intellectual property rights, including the TRIPS Agreement. Over the
past few years, high-level discussions on the subject took place at the WTO,

II Year LL.M, NALSAR University of Law, Hyderabad.

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the Conference of the Parties to the Convention on Biological Diversity

(CBD), and at the World Intellectual Property Organisation (WIPO) which
has established an Intergovernmental Committee on Intellectual Property
and Genetic Resources, Traditional Knowledge and Folklore (IGC). Several
developing countries in these forums have adopted the view that TK and
folklore need to be protected legally, and have criticised the formal IPR
system for legitimising their misappropriation. The question is- what should
be done for its protection?
Solutions to the protection of traditional knowledge in IPR law may
be sought in terms of positive protection and defensive protection.
Positive protection refers to the acquisition by the TK holders themselves of
an IPR such as a patent or an alternative right provided in a sui generis system.
Defensive protection refers to provisions adopted in law or by regulatory
authorities to prevent IPR claims to knowledge, a cultural expression or a
product being granted to unauthorised persons or organisations. However,
even before seeking protection of TK the real problem is to identify and
define TK- what sort of knowledge qualifies as traditional knowledge? The
answer to this question is not as simple as it appears.
II. UNDERSTANDING TRADITIONAL KNOWLEDGE
Traditional knowledge is the information that people in a given
community, based on experience and adaptation to a local culture and
environment, have developed over time, and which continues to develop.
This knowledge is used to sustain the community and its culture and to
maintain the genetic resources necessary for the continued survival of the
community. Traditional knowledge is the body of knowledge built by a group
of people through generations living in close contact with nature. It includes
systems of classification, sets of empirical observations about the local
environment and a system of self management that governs resource use.1
Human communities have always generated, refined and passed on
knowledge from generation to generation. Such knowledge is often part of
their cultural identities. Traditional knowledge exists in the particular
knowledge which passes from one generation to the other as heritage of that
local or indigenous community. It may either relate to agriculture, medicine,
1Johnson,

1992, pp.3-4, see Graham Dutfield, Intellectual Property, Biogenetic Resources and
Traditional Knowledge, p.91.
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environment management practices, customary practices or religious beliefs.

TK has played and continues to play a vital role in the daily lives of a
majority of the population, especially in the developing world.
The use of plao-noi in Thailand2 for the treatment of ulcers, the use of
the hoodia cactus by Kung Bushmen in Africa3 to stave off hunger, the use of
turmeric in India for wound-healing, the use of ayahuasca in the Amazon4
basin for religious and healing purposes, the use of joublie in Cameroon and
Gabon as a sweetener can be cited as a few examples of traditional
knowledge.
The expression traditional does not necessarily, in all cases, mean
that the knowledge is ancient or static. It is representative of the cultural
values of a people and thus is generally held collectively and is not limited to
any specific field of technology or the arts.5 As Barsh explains:
What is traditional about traditional knowledge is not its antiquity, but
the way it is acquired and used. In other words, the social process of learning
and sharing knowledge which is unique to indigenous culture lies at the very
heart of its traditionality. Much of this knowledge is actually quite new, but
it has a social meaning, legal character, entirely unlike the knowledge
indigenous peoples acquire from settlers and industrialized societies.6
While TK is handed down from one generation to the other, this does
not mean that what each generation inherits is what it passes on; TK develops
incrementally, with each generation adding to the stock of knowledge.
It is also to be understood that TK is not necessarily local and
informal and that to assume this would exclude formalised traditional
systems of knowledge that are well documented in ancient texts and are part
of the cultural mainstream of countries such as the Ayurvedic, Siddha, and
Unani health systems of the South Asian countries. Such a narrow approach
would be wrong. In some countries, these systems are formalised to the
2Euphorbiaceae-plaonoi(medicinalplant),

http://herbstohealth.blogspot.in/2008/07/euphorbiaceae-plao-noi.html.
3 See: http://www.rebirth.co.za/hoodia/hoodia_xhoba.htm, for Kung Bushmen - Kalahari
Hoodia Gordonii plant known as Xhoba.
4 Ayahuasca.com Overviews Shamanism On The Origin of Ayahuasca.
5 Daniel J. Gervais, Spiritual but Not Intellectual? The Protection of Sacred Intangible
Traditional Knowledge, 11 Cardozo Journal of International and Comparative Law, 2003.A1
6 Barsh, 1999, p.73; see Graham Dutfield, Intellectual Property, Biogenetic Resources and Traditional
Knowledge, p.94.
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extent that they are studied at universities and have as high a status as
western biomedicine. In India, some commentators differentiate these
knowledge systems from local folk knowledge, which still tends to be orally
transmitted, even though they consider all these kinds of knowledge to be
traditional.7 Therefore, we have to view TK with a wider perspective in order
to understand its true nature and scope.
III.

DEFINING TRADITIONAL KNOWLEDGE

The concept of traditional knowledge is very dynamic and it changes

with the changing needs of a particular society or group of people associated
with it. Therefore, it is not easy to draw the boundaries within which this
expression can be confined. The term is often misunderstood and applied in
a confusing variety of ways.
Many use the concept of traditional knowledge interchangeably with
that of indigenous knowledge. Indigenous knowledge refers to knowledge
that is held and used by people who identify themselves as indigenous to a
place based on a combination of cultural distinctiveness and prior territorial
occupancy relative to a more recently-arrived population with its own distinct
and subsequently dominant culture.8
Traditional knowledge is, on the other hand, held by members of a
distinct culture and/or sometimes acquired by means of inquiry peculiar to
that culture, and concerning the culture itself or the local environment in
which it exists.9 Indigenous knowledge fits neatly in the traditional
knowledge category but traditional knowledge is not necessarily indigenous.
That is to say, indigenous knowledge is traditional knowledge but traditional
knowledge is not necessarily indigenous.
There is no concise definition of TK and it has been defined
depending upon the importance given or not given to some aspects. 10
Graham Dutfield, Intellectual Property, Biogenetic Resources and Traditional Knowledge, p.92.
UNEP/CBD/COP/3/Inf. 33, Annex 2.
9 Ibid.
10 In 2002, the International Council for Science (ICSU) defined traditional knowledge as a
cumulative body of knowledge, know-how, practices and representations maintained and
developed by peoples with extended histories of interaction with the natural environment.
These sophisticated sets of understandings, interpretations and meanings are part and
parcel of a cultural complex that encompasses language, naming and classification
systems, resource use practices, ritual, spirituality and worldview. According to Barsh,
[w]hat is traditional about traditional knowledge is not its antiquity, but the way it is
7
8

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Although the lack of a concise and acceptable definition may not seem to be
a hurdle, defining TK also sets the boundaries and contents of TK. 11 Instead
of confining TK to one particular field or limiting it as a matter of culture,
keeping a flexible and open ended view makes sense because TK is not
frozen in time, nor can it be limited to contributions from the previous
generations. But still, a clear definition helps in identifying the protectable
subject matter and also determines the scope of protection.
There are certain other International Documents and National
Legislations which define traditional knowledge. In 2006, WIPO
Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional
Knowledge and Folklore12 provided a definition of the term which states that the
term traditional knowledge refers to the content or substance of knowledge
resulting from intellectual activity in a traditional context, and includes the
know-how, skills, innovations, practices and learning that form part of
traditional knowledge systems, and knowledge embodying traditional
lifestyles of indigenous and local communities or contained in codified
knowledge systems passed between generations. It is not limited to any
specific technical field, and may include agricultural, environmental and
medicinal knowledge, and knowledge associated with genetic resources.13
In Brazil, Traditional Knowledge is defined as associated to genetic
heritage as information or individual or collective practices of an indigenous
or local community having a real or potential value and associated with the
genetic heritage.14 Thus the Brazilian law on this point associates traditional
knowledge with genetic heritage. The use of the word heritage conveys a
different meaning and suggests that traditional knowledge is not merely a
acquired and used. In other words, the social process of learning and sharing knowledge,
which is unique to each indigenous culture, lies at the very heart of its traditionality. Much
of this knowledge is actually quite new, but it has a social meaning, and legal character,
entirely unlike the knowledge indigenous peoples acquire from settlers and industrialized
societies, Russel Barsh, Indigenous Knowledge, in Spiritual and Cultural Values of
Biodiversity (D.A. Posey ed., 1999).
11 According to Leistner, [c]onsequently, definitions based on modern conventional law with
its distinction of protected intellectual property, and cultural property, which generally falls
into the domain public may thus be perilous to the very root concepts of the development of
traditional knowledge, Matthias Leistner, Traditional Knowledge, in Indigenous Heritage
and Intellectual Property: Genetic Resources, Traditional Knowledge and Folklore (Silke von Lewinski
ed., 2004).
12 Article 3 (2) of the Annex to document WIPO/GRTKF/IC/10/5.
13
Ibid.
14Article 7 of Brazil Provisional Measure No. 2186-16 of 2001 Regulating Access to the Genetic
Heritage, Protection of and Access to Associated Traditional Knowledge.
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form of property, but is equally connected with the cultural and spiritual
beliefs of the communities. Such information and practices are transmitted
from one generation to the other as heritage. The inclusion of the word
heritage conveys the holistic and sacred nature of traditional knowledge
under the law of Brazil.
The African Model Legislation for the Protection of the Rights of Local
Communities, Farmers and Breeders, and for the Regulation of Access to Biological
Resources 2000 provides a definition of Community Knowledge. It states that
Community Knowledge or indigenous knowledge is the accumulated
knowledge that is vital for conservation and sustainable use of biological
resources and/or which is of socio-economic value, and which has been
developed over the years in indigenous/local communities.15 Community
rights have been defined as the rights held by local communities over their
biological resources or parts or derivatives thereof, and over their practices,
innovations, knowledge and technologies.
The Peruvian law uses the term Collective Knowledge instead of
traditional knowledge. Article 2 (b) states that collective knowledge means
the accumulated, trans-generational knowledge evolved by indigenous
peoples and communities concerning the properties, uses and characteristics
of biological diversity.16
The core Committee of the TK Draft Bill 200917, India, provided an
elaborate and apprehensive definition of TK18, which states that Traditional
Knowledge refers to the collective knowledge of a traditional community or
a family related to a particular subject or a skill passed down from generation
to generation for at least three generations including but not limited to:
cultural products and practices from traditional communities such as
weaving patterns, pottery, painting, poetry, folklore, music and the
like;

15African

Model Legislation for the Protection of the Rights of Local Communities, Farmers and Breeders,
and for the Regulation of Access to Biological Resources 2000, (12/03/2011), http:
www.farmersrights.org/pdf/africa/AU/AU-model law00.pdf.
16 Peru Law No 27811 (2002).
17 It is a yet unpublished document prepared by the Core Committee on TK Protection and
discussed in Round Table Meeting on 25-26 January 2010 at the National Law School of
India University, Bangalore in association with the Ministry of Human Resource and
Development.
18 Article 2.17 of Traditional Knowledge (Protection and Regulation of Access) Bill of India 2009.
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genetic material discovered, selected, cultivated, domesticated,

developed or conserved by traditional communities, regardless of
whether they were used or can be used in the development of new
plant varieties or animal breeds or which can be harnessed for other
potential uses;
agricultural practices and devices developed from indigenous or
traditional material, customs, and knowledge;
medicinal products and processes developed from indigenous or
traditional material, customs and knowledge by traditional
communities;
all other products or processes not made by one person and which
was discovered through a community process, or when the person
making the innovation does not claim the knowledge as his own or
when the person has discovered it to be used openly for common
purposes;
discoveries, innovations and technologies made by communities that
are usually not recorded in written form, and are transmitted orally
from generation to generation.

According to one view, TK encompasses three dimensions and all

the three need to be acknowledged and protected. Traditional knowledge
encompasses three dimensions: a cultural aspect (it reflects the culture and
values of a community), a temporal aspect (it is passed on through the
generations and slowly adapts to respond to changing realities) and a spatial
aspect (it relates to the territory or the relationship which a community has
with its traditionally occupied/used lands and waters)19
Traditional Knowledge is difficult to define, but an attempt has to be
made to understand the policy objectives which might help in drafting a
general definition. Otherwise, an alternative is to not define TK but rather to
describe its essential characteristics which in turn will help in policy making
and will also give scope to a country to define it in accordance with their
domestic normative structure. From the above definitions, the common
elements of TK definitions are as follows-

19Development

of Elements of Sui Generis Systems for the Protection of Traditional Knowledge, Innovations
and Practices to Identify Priority Elements, CBD SECRETARIAT, 16, (Sept. 20, 2012), http:
UNEP/CBD/WG8J/5/6.
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TK is community based knowledge i.e. collective knowledge;

It is inter-generational i.e. passed from one generation to
another;
It is holistic in nature;
It is related to a particular territory and practices associated with
a particular community.

Therefore, any definition which includes these elements is satisfactory for

the identification of TK as subject matter.
IV.

IDENTIFYING STAKEHOLDERS

The question of who owns Traditional Knowledge assumes

significance in the attempt to understand the same.
Generally speaking, a knowledge holder is a person who identifies,
holds, develops, spreads, practices and maintains a particular system of
knowledge. A knowledge holder may be an individual, a group or a
community. However, in the context of traditional knowledge, the general
notion has been that only a group or a community is considered to be the
holder of TK. Since traditional knowledge is community knowledge
developed from the practices and experiments applying the trial and error
method by a specific community, the whole community can be identified as
the holder of that particular knowledge. In other words, traditional
knowledge holders have deep understanding and full information of the
knowledge in question. Though traditional knowledge is shared knowledge
which belongs to the community at large, there can be instances when such
knowledge is controlled and managed by a particular group or sometimes by
an individual within the community. In such a case the holders of TK
possess TK as trustees and have the responsibility to share that knowledge
within the community or outside as per the existing norms of the
community.
According to the World Intellectual Property Organisation (WIPO),
traditional knowledge holders are the persons who create, originate, develop
and practice traditional knowledge in a traditional setting and context.20
20

Intellectual Property Needs and Expectations of Traditional knowledge WIPO report on fact-finding
missions on intellectual property and traditional Knowledge (1998-1999), p. 26.
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Indigenous communities, peoples and nations are traditional knowledge

holders. But the question which remains unanswered is whether the term
indigenous community refers to aboriginals, indigenous people or tribals?
The Indian TK Draft Bill provides a definition of the term
Indigenous community as a group of people sharing common language,
customs, traditions and other distinctive traits, and who have, since time
immemorial, occupied, possessed, and utilized a territory except when such
possession is either prevented or interrupted by war, force majeure,
displacement or force, deceit or stealth, or other usurpation.21
In Brazilian Law, the definition of local community is provided as
Local community: human group, including remnants of Quilombo
communities, distinguished by its cultural conditions, that traditionally
organises itself throughout successive generations and through its own
customs and preserves its social and economic institutions.22
According to Peruvian Law, Indigenous peoples refers to aboriginal
peoples holding rights that existed prior to the formation of the Peruvian
State, maintaining a culture of their own, occupying a specific territorial area
and recognising themselves as such. These include people in voluntary
isolation or with whom contact has not been made, and also rural and native
communities. The term indigenous shall encompass, and may be used as a
synonym of, aboriginal, traditional, ethnic, ancestral, native or
other such word form.23
All these different definitions actually encompass the same basic idea
of a group of people residing in a specific geographical area, sharing the same
language, cultural and social values and practices, and retaining their
individual identity as a separate community.
There is no universal definition of indigenous and tribal peoples, but
ILO Convention No. 16924 provides a set of subjective and objective criteria
which are jointly applied to identify them. According to ILO, indigenous
peoples are of descent from populations who inhabited the country or
geographical region at the time of conquest, colonisation or establishment of
Traditional Knowledge (Protection and Regulation of Access) Bill of India, Article 2.8,
(2009).
22 Article 7(iii) of Brazil - Provisional Measure No. 2.186-16 Of August 23, 2001.
23Peru Law 27811, Article 2 (a), (2002).
24ILO Convention No. 169, Understanding the Indigenous and Tribal Peoples Convention,
1989.
21

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present state boundaries. They retain some or all of their own social,
economic, cultural and political institutions, irrespective of their legal status.
The Convention further defines tribal people as those whose social, cultural
and economic conditions distinguish them from other sections of the
national community and whose status is regulated wholly or partially by their
own customs or traditions or by special laws or regulations.
Many scholars restrict their approach to the above three as they live
in groups and form separate communities possessing knowledge about the
bio-resources around them and are governed by a separate normative system.
However, if we adopt this approach, then farmers who also have the
knowledge about the flora, soil and climate of a particular region suitable for
a particular crop may get excluded. From this perspective we also favour the
patenting of neem or haldi as we are then stopped from claiming that it is a
part of Indias traditional knowledge.
Other scholars believe that holders of traditional or indigenous
knowledge may come from a diverse range of populations and occupational
groups, such as traditional farmers, pastoralists, fishermen and nomads
whose knowledge is based on a particular place and is likely to be because of
a long period of occupancy spanning several generations. Often this
knowledge is differentiated from more generally-held knowledge and from
the knowledge of urbanized societies.
But still the issue stands as it is. Who holds Traditional Knowledge?

Is it the individual or a group, or

Leader of the community, or
The whole community, or
Small clan within each community, or
Communities collectively, or
Shared freely because Traditional Societies do not have concepts of
property or do not apply such concepts to knowledge.

There is no definite answer to this. The holder of such knowledge may

include a person living in an urban area because what constitutes TK is not
the area in which it is practiced but the type of knowledge which qualifies
for protection as TK. Further TK can be community knowledge or it can be
knowledge held by an individual which is inherited from his forefathers. It
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also depends upon the normative structure of the community or a group.

This gives rise to the next issue Property rights in TK- that of whether TK is
owned by the traditional societies or whether it is in public domain.
V.

A MOVEMENT FROM COMMONS TOWARDS

PRIVATISATION

The general notion about TK is that it is a community-based right,

evolved by the members of a particular community and used by them in their
daily life. Communities develop traditional knowledge as collective
knowledge and do not claim any personal rights to it. TK is developed by
using locally available resources and usually verbally passed from one
generation to the next.
Based on this assumption, a misconception has arisen that TK is
freely accessible to all and in the public. This notion gives rise to a debate
about the status of TK- whether it is community knowledge or knowledge in
the public domain.
One set of scholars supports privatisation of TK i.e. of granting
exclusive rights to the community concerned and the other set believes TK
should remain in public domain i.e. freely accessible to all.
A.

TK AS COMMON PROPERTY

Until the emergence of the Convention on Biological Diversity in

1992 and the FAO Treaty on Plant Genetic Resources in 200125, opinion had
hardened that the principle of common heritage of mankind regulated
international transfer of plant genetic resources.26 With respect to the food
grains, it is a belief that they form a part of common heritage as no single
State has ever been wholly sufficient to meet the food needs of its
population. Genetic resources gained value throughout the twentieth century
by virtue of increasing demand and decreasing supply. While organised crop
breeding increased the demand for genetic resources, genetic erosion that
accompanied agricultural modernization threatened the supply of those
25The

1983 conference establishing the FAO Commission and International Undertaking

affirmed a resolution stating that Plant genetic resources are a heritage of mankind and
consequently should be available without restriction.
26Ikechi Mgbeoji , Beyond Rhetoric: State Sovereignty, Common Concern & the inapplicability of The
common heritage concept to plant genetic resources, LEIDON JOURNAL OF
INTERNATIONAL LAW, 16 (2003), 821-837.
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resources. The development of plant breeding, the expansion of Breeders

Rights, and the recognition of genetic erosion as a social cost of agricultural
development seemed to portend the inevitable demise of common heritage.
The apparent failure of the common heritage system to contain the
degradation of crop genetic resources conforms to the Tragedy of the
Commons scenario.
The opinion that plant resources are a part of common heritage is
fallacious. The principle of common heritage is a recent development in
international law and therefore, prior to that, plant and genetic resources
have always been subject to the national jurisdiction of the country
concerned.27
However, with the rise of the information age, the flashpoint debates
about property have moved from land to information. The public domain is
now the cause clbre among progressive intellectual property and cyber law
scholars, who extol the public domain as necessary for sustaining
innovation.28 This creative commons movement has highlighted the benefits
of the public domain and has exposed the perils of property. The advocates
of the movement also argue in favour of placing TK and genetic resources in
the public domain. They contend that this will result in equal use of TK by
all which ensures better utilization of their knowledge and resources which
have until now been under-utilised. Further, the nature of TK makes it nonexhaustive (which is a wrong notion about TK) and therefore, it does not
suffer from the dangers of over-use.
Traditional knowledge being a community right and shared
knowledge is kept out of the purview of TRIPs. This has led to a
misconstruction that TK includes information falling in the public domain. It
is significant to note that the notion of public domain has been used to
serve as a tool to not only deny the claims of TK for IP protection but also
as a tool by the bio-prospecting corporations to legitimise the free
27Supra

note 26.
scholars obscure the distributional consequences of the commons. They presume a
landscape where every person can reap the riches found in the commons. This is the
romance of the commonsthe belief that because a resource is open to all by force of
law, it will indeed be equally exploited by all. But in practice, differing circumstances
including knowledge, wealth, power, access, and abilityrender some better able than
others to exploit a commons, Anupam Chander and Madhavi Sunder, The Romance of
the Public Domain, California Law Review, Vol. 92, 1331.

28The

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appropriation of what has come to be regarded as global commons.

However, this concept of global commons is misapplied to TK and to
regard TK as falling in the public domain and that too in a state of res-nullius
is an incorrect proposition. Traditional Knowledge does not become an
exploitable entity by falling in the public domain. It is controlled by various
sets of norms, either customary or religious, which govern the communities.
Traditional knowledge and resources are controlled and managed by special
normative systems of each community. Therefore, the concept of global
commons is alien to TK; however, it can be regarded as being in the state of
limited commons.29 Regarding TK in a state of limited commons signifies
vesting the rights of such knowledge either in the State or the local
community. Further this limited property regime implies that such
knowledge would be available to the members of that particular State or
community, as the case may be, for free but at a price to those outside.30
B.

TOWARDS PRIVATISATION

Under the garb of public domain, there is misappropriation of the

TK wealth of the developing world of which the traditional communities are
living in ignorance. Today, the developing countries are demanding
recognition through private rights over their traditional knowledge and
genetic resources. Granting them these rights would enable them to deal with
the cases of misappropriation of their wealth more effectively and also would
afford them a right to be indemnified or compensated for the wrong caused
to them with respect to TK wealth. Therefore, they are now presenting a
strong case for its privatisation. However, this case for privatisation is also
being misconstrued. The demand for private rights over TK is not about
privatisation as commonly understood. It nowhere deals with private rights
in the sense of conferring absolute rights over the resources with no access
to the third parties. Their claim includes a demand for enclosures which help
restrict access to the third parties. This idea of enclosure ensures that no
third party can use/misuse the resources belonging to a particular community
without their consent. This will be effective in granting communities the

Examples of Limited Commons- Traditional Knowledge Databases offered by China and

TKDL in India.
30Carol M. Rose, The Several Futures of Property: Of Cyberspace and Folk Tales, Emission Trades and
Ecosystems, 83 MINN. L. REV. 129 (1998) (proposing recognition and development of
limited commons property regimes).
29

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right to recognition and also the locus to demand compensation in case of

misappropriation of their resources without their consent.
Another philosophical argument in support of their contention is that
when a resource is in the public domain or is to be used in common, it will
lead to depletion of resources. Further, in such cases as the liability is to be
shared by all, the resources may be in danger of over-use for individual
benefit. An individual usually applies a simple calculation that by using the
resource in a particular way, the benefit which will accrue to him is much
higher as compared to the loss which is a small fraction as the loss is to be
borne by the community as a whole.31 Also, as no individual takes the
responsibility of managing the common property, such a property is bound
to be exhausted at a faster rate. To avoid such a situation, privatisation of
resources is the answer to the Tragedy of Commons.32
The threat of leaving TK in the public domain is nearly the same.
The genetic resources and knowledge will also face the danger of overutilization. Ultimately, this will lead to depletion of TK resources and also
disintegration or loss of the normative system which existed in the
communities. Therefore, there is a need for greater control over the
resources through privatisation.
However, applying Hardins solution33 to TK is riddled with
problems. Firstly, identification of holders of TK will prove to be a hurdle in
determining on whom the ownership/proprietary rights are to be conferred.
Secondly, if the holders of TK (earlier regarded as Trustees) on becoming the
owner/proprietor of the TK abuse their position, it will lead to the
destruction of the normative system of the communities. Thirdly, creation of
private rights on TK and genetic resources will lead to commoditisation and
will raise new challenges to the integrity and cohesion of the societies. This
concept will again be welcomed by corporations and bio-prospecting
countries as it will now enable them to enter into lawful agreements with the
holders of TK, which may result in over-use of genetic resources and
depletion of genetic wealth. Therefore, Privatisation of TK (in the strict
31Garrett

Hardin, Tragedy of Commons, SCIENCE , NEW SERIES, Vol. 162, No. 3859. (Dec.
13, 1968), 1243-1248, published by American Association for the Advancement of
Science.(15/10/2012)
http://links.jstor.org/sici?sici=00368075%2819681213%293%3A162%3A3859%3C1243
%3ATTOTC%3E2.0.CO%3B2-N.
32
Ibid.
33 Hardins solution refers to the problem discussed as Tragedy of Commons, Supra note 31.
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sense as proposed by Hardin) is not feasible in the light of above arguments.

The idea of creating enclosures is more realistic and can prove to be the
perfect solution to protect the rights of the TK holding societies and also to
check the problem of bio-piracy.
VI.

TRADITIONAL KNOWLEDGE AND IPR

The role of TK with its spiritual, cultural and economic values is

being increasingly recognised today. The products based on TK are
important sources of income, food and healthcare in developing countries in
particular, and in turn, for their sustainable socio-economic development.
Western societies in general had not recognised any significant value
of TK and the obligations associated with its use. These societies viewed TK
as information in the public domain which was freely available for use. The
concept of any compensation to the creators and possessors of TK also did
not exist. It is often argued that the rights of the indigenous people are being
violated when their access to resources and benefits from their contribution
to science and technology are ignored.
This has become the background for varying claims: for the
knowledge rights of the indigenous communities to be given parity within the
TRIPs framework; for the production of TK systems, for an end to biopiracy and the one-way genetic resource flow; for the development of
equitable benefit-sharing mechanisms; for community property rights, etc.
These are all rights which emanate from the central claim for knowledge
rights of the indigenous/traditional people which are as much aspects of
their socio-economic rights as rights to food or health.34
There is a push from the developing world to protect TK either as an
IPR under TRIPs regime or by adopting a sui generis model.
TRIPs has been criticised for being a pro-west agreement deliberately
ignoring TK as a subject-matter to be protected while being fully aware of its
economic potential which can be exploited by the western nations to their
advantage. Hence, before claiming protection under TRIPs, one has to
determine whether TK falls within the scheme of the agreement as a subject
matter.
34Rajshree

Chandra, Knowledge as Property- Issues in the Moral Grounding of Intellectual Property

Rights, 280, Oxford University Press (2010).
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Intellectual property is a legal concept that deals with creations of

human ingenuity. These creations, whether they are inventions, designs,
trademarks or artistic works, are considered to be property and are protected
for a certain period of time. Although there is no reason why such categories
of rights may not apply to various expressions of traditional knowledge,35
there are several characteristics of TK that create barriers to protection
through the use of existing forms of IPRs.
Possession and Ownership are probably the most important basis of
an intellectual property rights claim. An intellectual property is that which is
capable of being delineated, with an identifiable author or inventor and is
capable of being possessed or owned. On the basis of the location i.e., who
possesses it, knowledge may be categorised as individual knowledge,
distributed knowledge, or communal knowledge. According to Kibet A.
Ngetichs analysis, knowledge can exist in either of these forms in all societies,
including traditional societies.36 This feature is found in almost all traditional
societies, where privately held knowledge is not private in the exclusionary
sense and also the knowledge held by a handful of people in the communities
does not belong to them. It is community held knowledge and the holders do
not own it as such, but have obligations to share the knowledge within the
community.37 They may hold knowledge as trustees of the community.
The other necessary criterion that IP must meet is that it must be
considered non-obvious or novel. Indigenous knowledge often falls short
of this requirement as TK is often orally transmitted and evolves gradually. It
never actively endeavours to be novel or distinct from nature. For example,
in many indigenous communities, shamanic knowledge or medicinal
products are believed to arise from natural or supernatural sources as

For example, the knowledge of how certain plants within an indigenous groups homeland
are used to treat fever would fall under IP rights. Likewise, particular understandings of the
land, ecology, or environment of a certain area may also fall under IP rights. The key point
is that IP rights refer to knowledge that otherwise would not be available. It is not
knowledge gained through scientific experimentation, nor is it knowledge gained through
empirical deductions. Rather, it is knowledge that is gained (some may say earned) through
time, place and experience.
36Kibet A. Ngetich, Indigenous Knowledge, Alternative Medicine and IP Rights Concerns in Kenya. 11th
General Assembly, Theme: Rethinking African Development: Beyond Impasse, Towards
Alternatives (Maputo, Mozambique, 6-10 December 2005), Supra note 34 at p. 293.
37 Sometimes TK is possessed by the dominant caste/clan within the communities. These
persons possess a greater control over TK resources, but basic notion remains that TK is a
shared right and the holder in the community is in position of a trustee.
35

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opposed to being man-made or invented.38 The extent of what constitutes

natural and what is man-made differs from culture to culture, indicating
difficulty in determining what should be considered an innovation or simply
a product of nature. This has an implication for IP claims - unless a product
is substantially different from one found in nature, and is thus the result of
non-obvious human invention, the product or its knowledge cannot be
considered a subject of intellectual property.
A third feature which prevents TK from being regarded as
intellectual property is the element of disclosure. Traditional knowledge,
especially in India and China39 has gradually been disclosed as a result of
codification, wide use, or through collection and publication by
anthropologists, historians, botanists or other researchers and observers.40
The moment it is disclosed it becomes publicly available and hence, under
current IPR rules, lies in the public domain making it an obvious form of
knowledge that cannot be claimed as intellectual property. This problem has
been discussed in earlier parts of the article.41
These barriers have kept the traditional knowledge societies outside
the loop of intellectual property rights.
VII.

CONCLUSION

The very nature of TK poses a challenge to traditional notions of IP.

There are some inherent characteristics of traditional knowledge which make
it incompatible with the existing IPR regime. Though they are not considered
to be a protectable subject matter under TRIPs42, TK deserves protection
through a sui-generis model of protection. The African model43, the
N. Roht-Arriaza, 1996, Of Seeds and Shamans: The Appropriation of the Scientific and
Technical Knowledge of Indigenous and Local Communities, Michigan Journal of
International Law, 17 (919), 919-965.
39 D. Shankar, A. Hafeel, and T. Suma, 1999, Cultural Richness of Green Pharmacy,
Compass Newsletter, 2, p. 10.
40 M. Koning, 1998, Biodiversity prospecting and the equitable remuneration of
ethnobiological knowledge: Reconciling Industry and Indigenous Interests, Intellectual
Property Journal, 12.
41 See the discussion under sub heading- TRADITIONAL KNOWLEDGE- A Movement
from COMMONS towards PRIVATISATION.
42Supra note 34 at p. 297.
43 African Model Legislation for Protection of the Rights of Local Communities, Farmers and Breeders, and
for the Regulation of Access to Biological Resources, 2000. The principal objective of this
legislation is to ensure the conservation, evaluation and sustainable use of biological
38

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Philippines model44 and the Peruvian Model45 are some of the sui generis
regimes which can be studied. It is also to be noted that these issues cannot
be resolved without taking into account the rights of communities and the
unique nature of communally held knowledge and resources. The model of
protection should ensure adequate measures of protection and schemes for
benefit sharing. However, it should also cater to the holistic nature and
requirements of the traditional knowledge societies and should not be in
conflict with the normative systems existing in the communities.

resources, including agricultural genetic resources, and knowledge and technologies in

order to maintain and improve their diversity as a means of sustaining all life support
systems.
44 Philippines Model Act No.8371- An act to recogniserecognise, protect and promote the
rights of indigenous cultural communities/ indigenous peoples, creating a national
commission on indigenous peoples, establishing implementing mechanisms, appropriating
funds therefor, and for other purposes.
45
Peru Law No 27811 of 2002 is the law introducing a protection regime for collective
knowledge of indigenous peoples derived from biological resources. Traditional
agricultural knowledge, traditional medicinal knowledge, even traditional knowledge related
to sustainability of ecosystem and environment will be included, but traditional cultural
expression will not be covered by this law. The intention is to promote the use of the
knowledge for the benefit of the indigenous peoples and mankind in general 45 and to avoid
situations where patents are granted for inventions made or developed on the basis of
collective knowledge of the indigenous peoples of Peru without any account being taken
of that knowledge as prior art in the examination of the novelty and inventiveness of the
said inventions.

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FROM WARSAW TO MONTREAL RAMIFICATIONS OF

DEVELOPMENTS IN AVIATION LIABILITY: AN INDIAN
PERSPECTIVE
Swati Singh Baghel* and Gargi Rajvanshi**
Traditionally, air transport has been perceived as a luxury of the rich. But in the
last decade, with the advancement in technology and liberalization in government policies,
the aviation industry has grown by leaps and bounds. Mindful of this rapid increase in air
activity and its growing importance, the authors have critically analysed the national and
international legal framework governing liability of air carriers and the shift from a procarrier to a pro-consumer approach vis--vis Warsaw Convention to Montreal Convention.
Further, since this paper was written with the backdrop of the Mangalore crash of 2010,
the various developments in this case have been traced. Taking into account that this was
the first major international air accident since Indias accession to the Montreal
Convention, questions pertaining to establishing liability and calculation of damages have
been discussed in detail. Lastly, the authors have addressed the ambiguities and deficiencies
in the Indian legal framework and propose that it is imperative for the government to take
requisite action in order to achieve the objectives behind the adoption of the Montreal
Convention and the subsequent amendment of the Carriage by Air Act, 1972.
I.

INTRODUCTION

The year 2003 marked the centenary year of powered flight.1

However, famous inventors such as Leonardo da Vinci, John Stringfellow
and Lawrence Hargrave had conjured up ideas of how to get some of the
strangest machines to fly long before the Wright brothers famous first flight
at Kitty Hawk.2 Over the course of the century, on one hand air transport
has witnessed an exponential growth3 impacting global and national
economies and shrinking the World and on the other hand, the increased air
* V Year, B.A.LL.B. (Hons.), National Law Institute University, Bhopal.
**Assistant Professor, National Law Institute University, Bhopal; Ph.D. Research Scholar,
Indian Institute of Technology, Kharagpur.
1Buzz
Aldrin, L1 Gateport (November 28, 2012), http://buzzaldrin.com/spacevision/rocket_science/l1-gateport/.
2 Global Aircraft, History of Aviation (November 28, 2012),
http://www.globalaircraft.org/history_of_aviation.htm.
3 According to SITA Baggage Report, 2012, a total of 2.87 billion passengers travelled by air
transport in the year 2011. SITA, Baggage Report 2012 (November 23, 2012),
http://www.sita.aero/knowledge-innovation/industry-surveys-reports/baggage-report2012.
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activity has also seen the rise in aviation accidents resulting in death or injury
to passengers and cases of lost or damaged baggage/cargo.4 These
technological and legal realities posed pressing problems and necessitated the
establishment of a legal regime governing aviation liability internationally.
In this paper, the authors have followed a scheme where Part II
discusses the global legal regime governing the liability for international air
transportation primarily the shift from Warsaw Convention, 19295 towards
Montreal Convention, 19996. Part III deals with the liability of air carriers in
India, pre and post accession to the Montreal Convention, 1999. Part IV of
the paper further discusses the impact of Indias ratification to the Montreal
Convention on compensation, in the light of the 2010 Mangalore crash and
lastly, Part V provides the concluding remarks of the authors.
II.

AVIATION LIABILITY: THE GLOBAL LEGAL REGIME

The Montreal Convention is not an amendment to the Warsaw

Convention. Rather, the Montreal Convention is an entirely new treaty that
unifies and replaces the system of liability that derives from the Warsaw
Convention.7
The Warsaw Convention, 1929 was the first legal instrument laying
down the rules for liability and limitations of liability for international air
carriage, with the primary aim of fostering growth of the commercial aviation
industry. It became the law during the infancy of inter-continental aviation
and it soon proved itself incapable of adequately regulating liability issues in
the burgeoning jet age.8 Since the antiquated Warsaw Convention provided
for significantly low limits on carrier liability, the signatory nations were
provided with additional instruments, namely, the Hague Protocol, 1955;9 the
According to statistics published by SITA in 2011 the mishandled baggage rate has more
than halved since 2007. It has dropped from 18.88 bags per thousand passengers in 2007
to 8.99 bags per thousand last year. Ibid.
5 Convention for the Unification of Certain Rules Relating to International Transportation
by Air (1929).
6 Convention for the Unification of Certain Rules Relating to International Carriage by Air
(1999).
7 Ehrlich v. Am. Airlines, Inc., 360 F.3d 366 (2d Cir. 2004).
8 Gary A. Gardner and Brian C. McSharry, The Montreal Convention: The Scram Jet of Aviation
Law (December 2, 2012),
http://www.wilsonelser.com/files/repository/MontrealConvention_April2006.pdf.
9Protocol to Amend the Convention for the Unification of Certain Rules Relating to
International Carriage by Air (1955).
4

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Guadalajara Convention, 1961;10 the Guatemala City Protocol, 197111 and

Additional Montreal Protocols (1-4).12 These additional instruments sought
not only to raise the amount of compensation but also to supersede
Warsaws reliance on the out-dated gold standard and update rules with
respect to movement of cargo.13 However, these did not produce the desired
results due to a large number of States abstaining from ratifying them. In
Chubb & Son, Inc. v. Asiana Airlines14the US Court of Appeals observed, The
Warsaw Convention system includes the various laws, treaties and individual
contracts governing the international transportation of persons, baggage and
goods by air A single State might be bound to one version of the Warsaw
Convention with another State, a separate bilateral treaty with another State
and a separate contract with a private party.
This concurrent operation of multiple legal instruments created
confusion amongst the courts on the question of applicability of rules and
calculation of damages, leading to a situation of utter chaos and adding to
the woes of the aggrieved passengers.
Given this patchwork of amendments, supplementary conventions
and protocols established by the Warsaw system, there was a growing need to
establish a new legal framework for ascertaining aviation liability. As a result,
the Montreal Convention (hereinafter referred to as the Convention) was
adopted in 1999. It supersedes the Warsaw Convention and came into force
on 4 November 2003. The Convention reflects the changing goals of the
international community vis--vis air carriers and their passengers.15
Furthermore, it aims to consolidate the large number of rules and preserve
the body of case law interpreting and applying the Warsaw system.16
The preamble of the Convention lists protection of the interests of
consumers in international carriage by air and the need for equitable compensation based
10Convention

Supplementary to the Warsaw Convention for the Unification of Certain Rules

Relating to International Carriage by Air Performed by a Person other than the
Contracting Carrier (1961).
11 Protocol to Amend the Convention for the Unification of Certain Rules Relating to
International Carriage by Air (1971).
12 Collectively known as the Warsaw System.
13 Gardner and McSharry, supra note 8.
14 214 F.3d 301, 306 (2d Cir. 2000).
15 Gardner and McSharry, supra note 8.
16 Bartholomew J. Banino, Recent Developments in Air Carrier Liability under the Montreal
Convention, The Brief, Volume 38, Number 3 (Spring 2009); (November 28, 2012),
http://www.condonlaw.com/attachments/Banino%20Brief_Spr09.pdf.
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on the principle of restitution as its primary object. Under the new liability regime,
the major change brought about is the elimination of meagre and arbitrary
limits of carrier liability. A combined reading of Articles 17 and 21 of the
Convention states that air carriers will be held absolutely liable for the first
100,000 Special Drawing Rights (SDRs)17 of damages, even if damage was
caused by a third party, so long as the injury producing event meets the
conditions for liability and was not contributed to by the passenger. 18
According to Article 17 of the Convention, the carrier is liable for damage
sustained in case of death or bodily injury of a passenger upon condition that
the accident took place on board the aircraft or in the course of any of the operations of
embarking or disembarking. In case of damage sustained due to destruction or
loss of checked baggage, the carrier is liable when the event took place on board
the aircraft or during any period within which the checked baggage was in the charge of the
carrier and in the case of unchecked baggage, when the damage resulted from
its fault or that of its servants or agents. In practice, the compensation under the
Convention is computed for each case separately on the basis of proof of
loss.19 Calculation of loss suffered is based on a persons economic/net
worth, pecuniary and general damages and future prospects. 20 Some of the
determining factors include age of the person, educational qualifications,
employment status, income, dependants, loss of future income and alike.21 In
order to recover an amount exceeding 100,000 SDR, a carrier can escape
liability if it proves that (a) damage was not due to the negligence or other wrongful
17The

SDR is an international reserve asset, created by the IMF in 1969 to supplement its
member countries official reserves. Its value is based on a basket of four key international
currencies consisting of euro, Japanese yen, pound, sterling and US dollar. SDRs can be
exchanged for freely usable currencies. See, International Monetary Fund, Factsheet: Special
Drawing Rights (August 24, 2012),http://www.imf.org/external/np/exr/facts/sdr.htm.
18 Christopher R. Christensen, The Montreal Convention of 1999 (August 28, 2012),
http://www.condonlaw.com/attachments/montreal_convention_1999_CRC.pdf.
19See, Commonwealth v. Amann Aviation Pty Ltd. (1991) 174 CLR 64 at 116 and 118:
To satisfy the requirements of the principle, a plaintiff must affirmatively establish
assessable damage, that is to say, loss or injury which is capable of being measured in
monetary terms The application of that general principle ordinarily involves a
comparison, sometimes implicit, between a hypothetical and an actual state of affairs:
what relevantly represents the position in which the plaintiff would have been if the
wrongful act had not occurred and what relevantly represents the position in which the
plaintiff is or will be after the occurrence of the wrongful act.
20John Arthur, Damages and Equitable Compensation in a Commercial Setting (March 8, 2013),
http://www.gordonandjackson.com.au/uploads//documents/seminarpapers/Damages_and_Equitable_Compensation_-_John_Arthur.pdf.
21International Foundation for Aviation, Aerospace and Development, Note on Air Carrier
Liability Law in India for Ministry of Civil Aviation (December 2, 2012),
http://www.iffaadindia.org/iffaad.html.
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act or omission of the carrier or its servants or agents; or (b) such damage was solely
due to the negligence or other wrongful act or omission of a third party. Article 20 of the
Convention further provides for the exoneration defence when the carrier
proves that the damage was caused or contributed to by the negligence or other wrongful act
or omission of the person claiming compensation, or the person from whom he or she derives
his or her rights, the carrier shall be wholly or partly exonerated from its liability.
This is a significant departure from the 125,000 gold francs
(approximately $10,000) limitation placed on damages under the Warsaw
Convention.22 Thus, it can be said that the Montreal Convention is no longer
a Convention for airlines but a Convention for consumers/passengers.23
III.

THE INDIAN SCENARIO

In India, the rights and liabilities of air carriers are determined by the
Carriage by Air Act, 1972 (hereinafter referred to as the Act).24 It was
enacted (and amended in 2009) to implement Indias treaty obligations under
the Warsaw Convention (and later the Montreal Convention) according to
the constitutional scheme laid down in Article 253 read in the light of
Schedule VII List I Entry 14.25 It extends to the whole of India and is
applicable to Indian citizens involved in domestic carriage by air and in
international carriage by air, irrespective of the nationality of the aircraft
performing the carriage.26 According to Section 5, the Act does not bar the
applicability of acts like the Fatal Accidents Act, 1855 or any other law in
force in India.

22Gardner

and McSharry, supra note 8.

23Ibid.

As amended by the Carriage by Air (Amendment) Act (2009).

Under the VII Schedule of the Indian Constitution, Entry 14 of the Union List empowers
the Central government to enter into and implement treaties, agreements and conventions.
Further, Article 253 reads as follows:
253. Legislation for giving effect to international agreements Notwithstanding anything
in the foregoing provisions of this Chapter, Parliament has power to make any law for the
whole or any part of the territory of India for implementing any treaty, agreement or
convention with any other country or countries or any decision made at any international
conference, association or other body.
26 International Foundation for Aviation, Aerospace and Development, supra note 21.
24
25

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A. PRIOR TO MONTREAL CONVENTION ACCESSION

1. Determination of Liability and Compensation

From 1972 to 2009, India functioned under a low carrier liability
regime as set forth in the provisions of the 1929 Warsaw Convention
reflected in First Schedule (125,000 gold francs) to the Act and the Hague
Protocol, 1955 carrier liability regime as reflected in Second Schedule
(250,000 gold francs) to the Act.27 The application of law for determination
of quantum of damages to be awarded to Indian nationals depended on
which instrument had been ratified by both India and the international air
carrier. Apart from this, there were no provisions dealing with the
requirement of advance payment to be made by the carrier.28 Thus, most
claimants were left with no option but to go to a court of law in order to seek
compensation. The courts while dealing with the question of quantum of
damages relied heavily on motor vehicle claims and took into account various
determinants. In the 2009 ruling of the Gujarat High Court in the case of
Airport Authority of India v. Ushaben Shirishbhai Shah and Ors.,29the court
awarded an amount of Rs. 7.53 lakhs (approximately $16,700) as
compensation (and 9% interest from the date of filing the appeal) based on
factors like income of the victim in 1988 viz., Rs 1 lakhs (approximately
$2,200), likely residual life, potential expenses during residual life and loss of
future income.30
Further, Section 6 of the Act delinked the compensation payout from
the gold standard and pegged it to the currency exchange rate applicable as
on the date of payment.31 This worked to the detriment of Indian nationals
wanting to settle compensation with the insurers/carrier.32Later, in the
landmark judgment of Geeta Jethani v. Airport Authority of India and Ors33, the
27Ibid.

Pooja Yadava, Carrier Liability for Passengers (November 25, 2012),

http://www.psalegal.com/upload/publication/assocFile/AviationBulletinIssueX10052010030334PM.pdf.
29 (2010) 1GLR 321.
30 Yadava, supra note 28.
31 Section 6 of the Carriage by Air Act, 1972 reads as follows:
Conversion of francs Any sum in francs mentioned in rule 22 of the First Schedule or of
the Second Schedule, as the case may be, shall, for the purpose of any action against a
carrier, be converted into rupees at the rate of exchange prevailing on the date on which
the amount of damages to be paid by the carrier is ascertained by the Court.
32 International Foundation for Aviation, Aerospace and Development , supra note 21.
33 III (2004) CPJ 106 NC.
28

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Supreme Court upheld the order of the National Consumer Disputes

Redressal Commission directing compensation to be calculated by converting
the 125,000 gold francs provided for under the First Schedule into INR
value, thereby striking down the provisions of Section 6.
2. Jurisdiction
The prohibitive provisions required filing of claims against foreign
carriers in the territory of signatories of Warsaw Convention which could be
where the carrier had principal residence, primary place of business, the place
where the contract was made or the place of final destination of the flight. 34
This pro-carrier approach defeated the purpose of the enactment because in
most cases it was not feasible for the aggrieved to institute claims in foreign
countries.
Due to this, there is an absence of precedents in India dealing with
international aviation liability claims instituted under the Act. Instead, the
trend has been for claimants to file under the Consumer Protection Act,
1986 on the ground of deficiency of service, for cases ranging from delayed
flights to lost baggage to death.35
B. POST MONTREAL CONVENTION ACCESSION

India ratified the Montreal Convention, 1999 and in 2009 brought

appropriate amendments to the Carriage by Air Act, 1972. The Third
Schedule of the Act harmonises the provisions of the Convention.36
1. Two-Tier Liability and Compensation
As stated in the previous section, the Montreal Convention
introduced the two-tier liability system in India.37
(i) The first tier for damages resulting from death or bodily injury to
passenger consists of compensation not exceeding 100,000 SDR. In this
case, the liability of the carrier is absolute38 and it is incumbent upon a
34See,

Carriage by Air Act, Schedule I, Chapter III, Entry 28 (1972); Convention for the
Unification of Certain Rules Relating to International Transportation by Air, Article 28
(1929).
35 International Foundation for Aviation, Aerospace and Development, supra note 21.
36Ibid.
37See, Carriage by Air Act, Schedule III, Chapter III, Entry 17 and 21 (1972), as inserted by
the Carriage by Air (Amendment) Act (2009).
38 This amount does not reflect the minimum liability of the carrier. The Convention has left
the determination of the level of damage to the local law.
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carrier to make advance payment (which may later be off-set against final
compensation). It must be noted that this provision does not restrict the
carrier from affixing a higher rate of compensation by the terms of a
special contract executed between the carrier and claimant. Further, the
air carriers liability does not get extinguished by application of statute of
limitation.39 Mere delay on the part of claimant to approach the insurer or
to reach a settlement does not absolve the carrier of liability.
(ii) The second tier is for damages above the value of 100,000 SDR. In this
case, there is a presumption of fault of the carrier. Unless disproved by
the carrier, liability is unlimited. This applies in cases where the passenger
refuses to settle and claims higher compensation than that provided for
under the first tier by approaching a court of law on grounds of
negligence, pilot error, manufacturers defect etc. This entails
extinguishment of right to settle, even in cases where claimant withdraws
his/her case. Further, the limitation period for instituting the case is two
years from the date of accident.
Also, Section 6A permits conversion of compensation from SDR into
INR at the prevailing exchange rates.40
2. Jurisdiction
Adding to the list of four jurisdictions provided under the Warsaw
Convention for institution of claims, the Montreal Convention provides for
an additional jurisdiction,41 namely the principal and permanent residence of
the passenger, provided the carrier operating in such jurisdiction and such
territory is a signatory to the Convention. Given that the determination of
damages under the Convention is a matter of the local law, the jurisdiction

International Foundation for Aviation, Aerospace and Development, supra note 21.
Section 6A of the Carriage by Air Act, 1972 reads as follows:
6A. Conversion of Special Drawing Rights Any sum in Special Drawing Rights
mentioned in rules 21 and 22 of the Third Schedule shall, for the purpose of any action
against a carrier, be converted into rupees at the rate of exchange prevailing on the date on
which the amount of damages to be paid by the carrier is ascertained by the Court in
accordance with the provisions of rule 23 of the said Third Schedule.
41See, Carriage by Air Act, Schedule III, Chapter III, Entry 33 and 48 (1972), as inserted by
the Carriage by Air (Amendment) Act (2009).
39
40

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where a claimant brings an action becomes significant as the assessment of

damages may vary from one jurisdiction to another.42
IV.

THE IMPACT OF MONTREAL CONVENTION ON THE

MANGALORE CRASH OF 2010

The Mangalore Crash case is the first case dealing with the question of
liability of the carrier as provided for under the Montreal Convention and
Carriage by Air Act (amended in 2009). The brief facts were an Air India
Express on an International flight from Dubai crashed on landing at the
Bajpe International Airport at Mangalore on 22 May 2010, killing 158 and
injuring the remaining ten people on board including the crew.43 This
triggered the provisions of the Montreal Convention. The claimants could
potentially bring action in the UAE courts (depending upon where the
contract is made), or India (principal place of business of carrier) or any third
state provided the permanent residence of such claimant is a party to the
Convention.44 However, the insurers of Air India (formerly, National
Aviation Company of India Ltd.) offered a flat interim compensation to the
next of kin of the 128 deceased passengers i.e. Rs. 10 lakhs (approximately
$22,000) to each adult deceased passenger; Rs. 5 lakhs (approximately
$11,000) to each passenger below the age of 12; with Rs. 2 lakhs
(approximately $4,400) disbursed to each injured passenger.45 Further, the
families of six deceased crew members were forced to accept a maximum
compensation of Rs. 35 lakhs under the Workmens Compensation Act,
1923.46
As a result, a petition seeking for damages according to the Montreal
Convention was instituted in the Kerala High Court. The court47, comprising
a single-judge bench, held that cabin crew fell under the category of
international passengers according to Carriage by Air Act, 1972 and should
be paid 100,000 SDR, which equates to Rs. 75 lakhs each, as stipulated by the
International Foundation for Aviation, Aerospace and Development, supra note 21.
National Aviation Company of India Ltd. v. S. Abdul Salam & Ors. WA.No. 1197 of 2011().
44 Yadava, supra note 28.
45 Press Information Bureau, Government of India, Statement by Mr. Praful Patel, Minister of
State for Civil Aviation in the Upper House of the Parliament (Rajya Sabha) (December 10, 2012),
http://pib.nic.in/release/release.asp?relid=64012.
46See, TNN, Mangalore Crash: Crews Relatives move HC for Compensation, The Times of
India, June 25, 2012.
47Abdul Salam v. Union of India, 2011 (3) KLJ 662.
42
43

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Montreal Convention that governs compensation rules for air disasters.

Further the court observed,
The Carriage by Air Act is a special statute by itself, taking care of the situation,
particularly in the light of the steps being taken by India to join hands with other
countries, to give effect to various international conventions such as Warsaw, Hague
and Montreal What is intended in sum and substance, is uniformity and
certainty, at least to a specified extent, so as to treat everybody alike and to provide
necessary compensation; more so, when air traffic accidents are seldomWhen the
statute does not refer to payment of compensation with reference to age/income/loss of
dependency etc., it can never be connected to any such considerations.
However, in August 2011, a division bench of the Kerala High
Court stayed the verdict, directing Air India to work out an amicable
settlement with the families. Further, freedom was granted to the aviation
company to decide on the compensation amount based on tortious liability,
ruling that air carriers are liable to pay only for actual damages proved by the
claimants according to the Montreal Convention, 1999.49 As a result, an
appeal was taken to the Supreme Court against the order of the division
bench. In January 2012, an Apex Court bench of Justice Dalveer Bhandari
and Justice Dipak Misra issued a notice to the Central government and Air
India on the matter. The case will come up for hearing later in 2013. This
would be a landmark decision considering that no precedents exist on the
issue and the Supreme Court will be laying down the law with respect to
affixing of liability and computation of damages in cases of international air
carriage.
48

V.

CONCLUSION

As of 2010, 97 countries are signatories to the Montreal

Convention.50 With the majority of States being party to the Convention and
the increase in air activity in India and across the globe, Indias accession and
amendment to the Carriage by Air Act has definitely helped in bringing about
parity in the law governing aviation liability. This establishment of a uniform
48Supra

note 43.
Crash: Crews relatives move HC for compensation, The Times of India , June
25, 2012; (November 27, 2012),http://articles.timesofindia.indiatimes.com/2012-0625/kochi/32408662_1_cabin-crew-montreal-convention-air-crash.
50Convention for the Unification of Certain Rules for International Carriage by Air done at Montreal on 28
May 1999 (December 4, 2012), http://legacy.icao.int/icao/en/leb/mtl99.pdf.
49Mangalore

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legal regime has provided the long-awaited change in terms of enhanced

compensation and other pro-passenger/consumer rules. However, much
more needs to be done to clear the ambiguities and uncertainties in the legal
framework.
Firstly, though the Convention provides for a higher rate of
compensation in negotiations, the procedure for calculation of damages has
not yet been laid down. The Mangalore Crash case puts this law to test and it
still remains to be seen whether the Supreme Court will assess the absolute
liability of the air carrier on the basis of proof of loss principle or will be
much more liberal in granting enhanced compensation. According to the
Report of the Commission of Enquiry, the cause of the accident was the
negligence of the pilot. However, it has been alleged that the pilot was
fatigued due to overwork and was in fact unwilling to take the plane to
Mangalore.51 There are further allegations that the incident was not an
accident but was the direct result of deliberate failure of officials at the
highest level in the Director General of Civil Aviation, Airports Authority of
India, Ministry of Civil Aviation and the Government of Karnataka for
allowing the second runway to be built in criminal negligence of applicable
norms and standards.52 Thus, in the light of such circumstances, it is
imperative that the Apex Court decides the matter on a fast-track basis.
Prolongation of proceedings would only work to the advantage of the carrier,
resulting in out of court settlements with low compensation agreements.
Without losing sight of the primary objective behind the adoption of the
Convention i.e. the protection of interests of consumers, the court must
grant exemplary damages, defining a method for calculation of
compensation. This affixing of liability based on the human aspect would not
only serve as a strong precedent for future litigants but would also put an end
to the tug-of-war between the airlines and the victims of air accidents.
Secondly, by employing the words bodily injury, a deliberate omission
of provision for damages in cases of mental trauma and other mental injuries
has been made. It has often been seen that mental injuries can be equally, if
51See,

Air Marshal B.N. Gokhale, Government of India, Ministry of Civil Aviation, Report on
Accident to Air India Express Boeing 737-800 on May 22, 2010 at Mangalore (March 8, 2013),
http://dgca.nic.in/accident/reports/VT-AXV.pdf.
52Environment Support Group, Mangalore Air Crash Tragic Fallout of Criminal Negligence of
Planning
and
Regulatory
Authorities
(March
8,
2013),
http://www.esgindia.org/campaigns/bajpe/press/mangalore-air-crash-tragic-falloutcrimi.html.
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not more debilitating than, physical or bodily injuries. This limitation on the
scope of injuries would definitely give rise to inequities. Further, if the courts
were to step up to the task of providing a liberal interpretation to the term
bodily injury so as to encompass within it all mental injuries, it would defeat
the Conventions goal of international uniformity. Thus, it becomes
incumbent on the Government and the international community at large to
broaden the scope via requisite amendments.
Lastly, the Act only applies to international carriage and allows the
Central Government to notify the same rules for application to domestic
flights, under the provisions of Section 8(3).53However, since this power has
not yet been exercised by the Government to notify a revision in the
domestic carrier liabilities, a lacuna remains. Thus, the present difference in
compensation levels for domestic and international flights is unjustified and
is long overdue for revision.

53

Section 8(3) of the Carriage by Air Act, 1972 reads as follows:

8. Application of Act to carriage by air which is not international (3) [The Central
Government may, by notification in the Official Gazette, apply the rules contained in the
Third Schedule and any provision of section 4A or section 5 or section 6A to such carriage
by air, not being international carriage by air as defined in the Third Schedule, as may be
specified in the notification, subject, however, to such exceptions, adaptations and
modifications, if any, as may be so specified.

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THE DILEMMA OF PROSPECTIVE OVERRULING: ONE STEP

FORWARD OR TWO BEHIND?
Prithvi Rohan Kapur
The doctrine of prospective overruling has been accepted as a part of the Indian
legal system. This doctrine which has great practical utility is however not free from
difficulties. This paper seeks to critically analyse this doctrine, and present the complications
that its application may lead to.
To place the position of the doctrine in Indias jurisprudence, a general
background on law- making powers of the Judiciary is first provided. Having set out this
basic framework, this paper goes on to explain the meaning of the doctrine, the theories that
operate behind it and the manner in which it has been accepted in India. The paper finally
goes on to establish the difficulties in the application of the doctrine to an increasing set of
statutory provisions. These complications include the difficulty in determining when the
principle may be invoked, the growth of parallel jurisprudence as its consequence, and the
perceived unfairness of the doctrine in certain circumstances, amongst others.
I. LAW-MAKING FUNCTIONS
Amongst the very first concepts that one comes across in the study
of the Indian Legal System is the demarcation of responsibilities between
various organs of the State.1 This demarcation has been internalized by all
participants, and resides not just in the realm of jurisprudential theory but
also in our constitutional framework. The everyday workings of our laws
require constant adjustments between executive and judicial functioning on
the one hand, and legislative prerogative on the other. A clear instance of this
adjustment is the position of the Supreme Courts declarations as the law of
the land.2 This paper attempts to highlight the limitations upon such
declarations and the odd position of the doctrine of prospective overruling
in this regard. While the term law has been broadly used in the Constitution
of India to include any ordinances, orders, bye laws, rules, regulations,
notifications, customs or usages having in the territory of India the force of
law3, the focus of our inquiry will be restricted to Statutory Legislation and
its interpretation by the higher judiciary.

IIIrd Year, LL.B Campus Law Centre, Faculty of Law, University of Delhi
Rai Sahib Ram Jawaya Kapur and Ors. v. The State Of Punjab, AIR 1955 SC 549
2 Article 141 , Constitution of India
3See Article 13, Constitution of India
1See

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At this juncture, it may be important to note two jurisprudential

questions that may naturally arise in the mind of the reader. The first is in
regard to the jurisprudential question of the correct definition of law itself,
and the other is what may constitute law making. These questions are not
intended to be touched upon in this analysis. What is taken up for discussion
is the limitation upon the exercise of what may controversially be called the
law making functions carried out by the Apex Court, and within this
context, the doctrine of prospective overruling. Article 141 of the
Constitution of India states that the law declared by the Supreme Court shall
be binding on all courts within the territory of India. In dealing with the
question of the interpretation of the word declared, Subba Rao CJ stated
that the term is wider than the words found or made.4 The Supreme Court
has held that to declare is to announce opinion. Indeed, the latter involves
the process, while the former expresses result.5 In this case, Mukherjee, J.
went on to state that the Court must do away with the childish fictions that
law is not made by the Judiciary.6 It may be concluded therefore that the
Supreme Court considers what may loosely be called law making to be part
of its functions. The other relevant Constitutional provision in this regard is
Article 142 under which the Supreme Court has the power to do complete
justice in matters before itself. The need for complete justice in a cause or
matter would depend upon the facts and circumstances of each case and
while exercising that power, the Court would take into consideration the
express provisions of a substantive statute.7 In this matter the Apex Court
also held that any prohibition or restriction contained in ordinary laws cannot
act as a limitation on the constitutional power of the Court. It has been
opined that these powers also exist independently of the statutes with a view
to do complete justice between the parties and are in the nature of
supplementary powers and may be put on a different and even wider footing
than ordinary inherent powers of a Court to prevent injustice.8 It is therefore
clear that this is a very wide power, and instances of its use even include
orders which quash criminal proceedings being conducted before any Court.9
These two Articles form the basis of the Supreme Courts powers with
respect to law making functions. Whilst the precise scope and ambit of these
4I.

C. Golaknath & Ors v. State of Punjab & Anr. 1967 SCR (2) 762
v. D.T.C. Mazdoor Congress Union AIR 1991 SC 101
6Ibid
7Delhi Judicial Service Association Tis Hazari Court v. State Of Gujarat and Ors. 1991 SCR (3) 936
8Durga Das Basu, Shorter Constitution of India, (14th ed. 2009) Volume 1, 1034
9Union Carbide Corporation v. Union Of India (1991) 4 SCC 584
5D.T.C.

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provisions has been the subject of much academic and judicial discourse, a
general overview of these powers is adequate for subsequent analysis.
II. PROSPECTIVE OVERRULING
A.

DEFINING PROSPECTIVE OVERRULING

The doctrine of prospective overruling, which has gained significant

attention in the United States, has also been accepted by the Apex Court of
India.10 Prospective overruling may be defined as the overruling of a previous
judicial precedent, but with application only to subsequent matters. In other
words, the newly declared law shall be applicable to transactions after the
date of such declaration. Thus, the new interpretation would apply only to
those matters which arise out of transactions entered into by persons after
the date of such overruling. For instance, the altered interpretation on
arbitration law in India is to apply to arbitration agreements entered into
after the pronouncement of the judgment which overruled the previous
position.11Another example is the matter of I.C. Golaknath (subsequently
discussed), where the Court held that Fundamental Rights cannot be
abridged or taken away by the amending procedure in Article 368 of the
Constitution. However, this overruling was applied prospectively, thus
leaving out its application to amendments already made from the time of the
commencement of the Constitution till the date of the overruling. Thus, this
device ensures that actions in the past are validated despite subsequent
alteration of the interpretation of the law which holds otherwise for all such
future actions. The reasoning of the principle is perfectly obvious. There is a
need in certain circumstances to alter the interpretation of a law which has
lost favour with the Supreme Court. In such cases, the Court may apply such
an altered interpretation only to future transactions, so as not to disturb the
transactions already entered into. It therefore has the clear advantage of
avoiding multiplicity of litigation and reopening of already settled matters.
B.

FOREIGN ORIGINS

The conceptual dichotomy created by this principle may be

understood through the following two theories. The first is the Blackstonian
theory named after Sir William Blackstone, its principal proponent. This
theory suggests that the function of the Court under the common law is
10See

Supra 4
Aluminum Co. & Ors. v. Kaiser Aluminum Technical Service, Inc. & Ors. (2012) 9 SCC

11Bharat

552

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merely to declare the law which is made by the legislative functionaries. The
judge finds the law and does not make it. This theory, as was explained in the
Golaknath case, would suggest that if a subsequent decision changes the
earlier one, the latter decision does not make law but only discovers the
correct principle of law.12 Blackstone argued that it is an established rule to
abide by former precedents13, and to keep the scale of justice even and
steady, and not liable to waver with every new judges opinion.14 By this
reasoning he proceeds to hold that the judge is not delegated to pronounce a
new law, but to maintain and expound the old one.15
The theory has indeed incited much criticism. It is obvious that
Blackstones conception of the Judge follows his general conception of the
law itself. In his paper titled Found Law, Made Law and Creation:
Reconsidering Blackstones Declaratory Theory16, William S. Brewbaker gave
a holistic criticism of the theory. The most damning criticisms provided by
the author are that the theory does not have any application to cases where
there are no previous governing decisions, and that Blackstone was unable
to keep distinct the task of the judge and legislator. The author states that
Blackstone's overall picture of the judicial role is out of balance; he
emphasizes the consistency, uniformity and inherent reason of law, but only
reluctantly and indirectly acknowledges the discretion that judges enjoy.17
While a complete analysis of Blackstone is a fruitful jurisprudential inquiry, it
suffices to say that the Blackstonian conception of the Judge is not one that
has universal acceptability. It may be noted that acceptance of the
Blackstonian proposition would suggest that all rulings of the Apex Court are
by necessity merely declaratory, and therefore, must apply retrospectively.
The second theory, called prospective overruling, was developed by
various American jurists. These included Cardozo, Canfield, Freeman and
Wigmore. Their reasoning was lucid and practical. It was felt that in certain
circumstances it is important to alter the law which becomes outdated,
12Supra

4
William Blackstone, Commentaries on the Laws of England, Vol. 1 [1753], Introduction,
Section III (Available at
http://oll.libertyfund.org/index.php?option=com_staticxt&staticfile=show.php%3Ftitle=
2140&layout=html#chapter_198647)
14 Ibid
15 Ibid
16 Brewbaker, William S., Found Law, Made Law and Creation: Reconsidering Blackstone's
Declaratory Theory (2006) Journal of Law and Religion, Vol. XXII, Page 255
17 Ibid
13Sir

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without compromising previous transactions. The doctrine was applied for

the first time in Great Northern Railway v. Sunburst Oil and Ref. Company.18 In
that case, Cardozo J, rejecting the contention that all overruling was to apply
retrospectively stated that A State in defining the elements of adherence to
precedent may make a choice for itself It may be so that the decision of
the highest courts, though later overruled, was law nonetheless for
intermediate transactions..
An American author on the subject remarks
that we employ the technique of prospective overruling as an exceptional
expedient when the traditional retroactivity would wreak more havoc in
society than societys interest in stability will tolerate.19 This theory therefore
imposes upon judges the power and responsibility to ascertain the
circumstances when an overruling is to apply only prospectively.
C.

ACCEPTANCE IN INDIA

The doctrine of prospective overruling was accepted in India for the

first time in the matter of I. C Golaknath v. State of Punjab20. The concept was
declared to be a part of Indian jurisprudence, with certain limitations. Justice
Subba Rao remarked, that It is a modern doctrine suitable for a fast moving
society. It does not do away with the doctrine of stare decisis, but confines it to
past transactions. Whilst there was divergence of opinion between the eleven
judges in this historic constitutional matter, the doctrine was finally accepted
by a thin majority. Chief Justice Subba Rao while speaking on behalf of the
majority reasoning that given the fact that the apex court can overrule its
own previous decisions, there could be no reason why it could not restrict
the operation of the same only to the future and not the past. It was held that
stability does not mean that injustice should be perpetuated. The Court went
on to acknowledge that the House of Lords itself had largely modified the
Blackstonian theory and by implication accepted in some form the idea of
prospective overruling. The Court however put the following limitations
upon the application of the doctrine in Indiaa. the doctrine of prospective overruling could be invoked only in
matters arising under our Constitution;

(1932) 287 US 358

John Bernard, Retroactivity: A Study in Supreme Court Doctrine as Applied, 61,
North Carolina Law Review, pp. 745-797 (1983)
20 supra 4
18

19Corr,

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b. it could be applied only by the Supreme Court as it has the

constitutional jurisdiction to declare its judgments as binding on all
the courts in India; and
c. the scope of the retroactive operation of the law declared by the
Supreme Court superseding its earlier decisions is left to its
discretion, to be moulded in accordance with the justice of the cause
or matter before it.
The doctrine has been applied in a variety of decisions. One such
matter was Indira Sawhney v. U.O.I 21, a case pertaining to the Governments
Reservation Policy, where the Court held that its decision would operate only
prospectively and would not affect promotions already made, whether on
temporary, officiating or regular/permanent basis.
The doctrine has also been discussed and applied in Waman Rao v.
Union of India22, Managing Director, ECIL v. B. Karunakar23, and more recently in
the arbitration matter of Bharat Aluminum v. Kaiser Aluminum Co24. Thus it
seems that the original requirement that prospective overruling may occur
only in cases involving constitutional matters does not hold true anymore.
It has been suggested by some authors that prospective overruling is
only a recognition of the principle that the Court moulds the reliefs claimed
to meet the justice of the case - justice not in its logical but equitable sense.25
In some sense therefore, it is argued that prospective overruling is a logical
extension of the power of the Court to do complete justice. In many
instances, the Court has denied relief claimed despite holding in the
claimants favour in order to do complete justice.26 Prospective overruling is
therefore acceptable as a natural extension of these principles. It has even
been held that prospective overruling is a part of the principles of
constitutional canon of interpretation.27
While accepting its entry into the domain of Indian jurisprudence,
prospective overruling runs into conceptual difficulties as far as the
conventional understanding of law making functions is concerned. This is
AIR 1993 SC 477
2 SCC 362
23AIR 1994 SC 1074
24Supra 11
25Durga Das Basu, Shorter Constitution of India, (14th ed. 2009),Volume 1, 1034
26Ibid
27Ashok Kumar Gupta v. State of U.P (1997) 5 SCC 201
21

22(1981)

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not because the courts cannot make law, or mould relief, but because in such
cases the Court purposefully denies the application of the correct position of
legislative provisions. For whilst the Court itself concludes that legislative
intention is for a provision to be read in a certain way, it refuses to apply
such interpretation to previous transactions. It may be noted from the
previous discussion that the law-making functions of the Executive and
Judiciary are not exercised in a manner that subverts legislative intention.
III. THE DIFFICULTIES
The trouble with an uncritical acceptance of prospective overruling
may be put concisely in the following points.
A.

WHERE DO WE DRAW THE LINE?

In ordinary matters when the Court moulds relief to do complete

justice, it does not effectively deny litigants a legal remedy. This may,
however, well be the case with prospective overruling and therefore the
conditions of its application must be well defined. Further, Courts must
ordinarily give legislative intention its full effect. Containing the effect of the
same to future transactions must be done only in circumstances of absolute
necessity.
The extended application of this principle into areas of law such as
arbitration may become problematic. For if a matter is to go into alternative
dispute resolution anyway, it seems difficult to conclude why the ordinary
arguments for prospective overruling should find application. In the specific
instance of the Bharat Aluminium Case (previously referred to), the Court
moulded relief to ensure that arbitration agreements that were entered into
on the basis of the law laid down previously were excluded from the
operation of the altered interpretation of the law. This position seems well
considered both in terms of equitable justice as also commercial certainty.
Parties that entered into an arbitration agreement keeping in mind the
principles enunciated by the previous Supreme Court ruling may not be
prejudiced in favour of following the then stated position of law. However,
the Court did not highlight the general principles regarding when such an
overruling ought to be done. It is uncertain as to what kind of issues the
Court would draw the line upon the application of this principle.

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B.

VOL.1 ISSUE 1

DEVELOPMENT OF PARALLEL JURISPRUDENCE

The doctrine may further have the effect of leading to the

development of parallel jurisprudence on the same point. To remove the
strain of delving into multiple explanatory examples, let us logically analyze
the concept using the following notation. Assume that the Court has before
it Case 1, where the court must come to the conclusion of whether a
provision Z should be interpreted to be mean Z or Z. The following
become consequential in arriving at either interpretationa. Analysis of the object of the legislation containing Z.
b. Interpretation of the wording of Z.
c. Interpretation of the other relevant statutory provisions, for instance
A, B, and F which are contained in the same Statute which contains
Z.
Now, assume that the previous position was that Z was to be
interpreted to mean Z, and the overruling states that Z should in fact be
interpreted as Z. If the Court applies prospective overruling, then Z shall
hold as the interpretation to all transactions after the date of such a
declaration.
Assume now that a subsequent litigation Case 2, in which the
question for consideration is the correct interpretation of the provision X
when applied to a transaction in the past. Since the Court has only
prospectively applied the interpretation of Z, there may be two possibilities
that might arise in regard to the interpretation of X in the light of the new
interpretation of Z. These may be neatly provided as(1) If Z is a wide provision, and the interpretation of Z as Z and Z in
itself affects the direct interpretation or application of X, then one
may conclude that an argument to interpret X in a manner consistent
with Z may be rejected as being against the substance of the
prospective overruling.
(2) If Z is a narrow provision, and the interpretation of Z as Z or Z in
itself does not affect the application of X, but only its interpretative
consistency with the rest of the statute, it would seem that there is no
restraint to interpret X in a manner consistent with Z. This is
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because the prospective nature of the interpretation only pertains to

Z and not to
In this way we have demonstrated the manner in which the parallel
jurisprudence shall develop in two clear waysa. In the more obvious manner, the parallel development shall be
temporal. All matters raised after the relevant date of overruling
shall be handled differently from those matters before, at least in
regard to the interpretation of Z. For instance, all matters
pertaining to the application of a particular Section overruled
prospectively will be treated according to whether the transaction
the section is applied to occurred before or after the overruling.
b. Even in regard to transactions entered into before the date of the
overruling, there seems to be no reason why all those cases that
would fall within the scope of the second case as previously
highlighted should not be treated differently from those which fall
into the first case. For instance, if the previous interpretation of a
particular section is overruled, that should be no reason why the
interpretation of another independent section in that statute should
not develop according to the newly declared law, irrespective of
when the underlying transaction took place.
C.

LIMITING THE LAWYERS ARGUMENT

The third troubling point are the limits upon the working lawyers
reasoning. It seems difficult to understand the plight of lawyers who may
well have to argue two different matters on the same day, applying different
positions of law to identical factual circumstances. Squarely dependent on
when the underlying transaction occurred, a particular view of the law will be
applied. This becomes very likely in the case of Arbitration law, as opposed
to Constitutional Law. For instance, an arbitration agreement entered into
before the date of the Bharat Aluminium judgment (previously referred) is as
likely to go into litigation as an arbitration agreement entered into after the
date of the judgment. However, different positions of law would be applied
to these cases.
In Constitutional matters on the other hand, by providing that the
altered law is to apply only to future transactions, the Court effectively
ensures that settled transactions would not be opened up on the grounds of
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the altered law. This would hardly be the case in arbitration law, as the
possibility of litigation for or in connection with such arbitration agreements
irrespective of the overruling is very high. The direct consequence, however,
would be the development of parallel jurisprudence.
D.

THE QUESTION OF FAIRNESS

There is a case to be made regarding the fairness of such a doctrine

for all those to whom the new interpretation does not apply. If an individual
himself takes the effort to argue upon the alteration of a well-established
precedent, it may be considered unfair not to apply the new interpretation to
his case. Even more unfair would be making the exception in his particular
case, and leaving out all other similarly situated matters. An answer was
sought to be provided to this unfair bargain in I.C. Golaknath, where the
Court held that such a person could take advantage of the new law in
subsequent matters. Whether such a situation would be entirely fair is
questionable.
Even under American Jurisprudence this question of inequity was
considered and it was stated that to refuse to apply the new rule here would
deprive appellant of any benefit from his effort and expense in challenging
the old rule which we now declare erroneous. Thus there would be no
incentive to appeal the upholding or precedent since appellant could not in
any event benefit from a reversal invalidating it.28
IV.

AUTHORS COMMENTS

No doubt, in many circumstances there is a need to restrict the

interpretation of a particular point of law to only future transactions. A
device which enables the same must be invoked in appropriate cases. Yet it is
the very question of appropriate cases that receives a vexed response. If the
power is considered one of moulding relief, it may not be confined by
imposing strict conditions on its application. On the other hand, given its
unconventional position, as also the complications that arise from its use,
some general principles regarding its application must be evolved. In
Constitutional cases regarding issues such as affirmative action or public
28Molitor

v. Kaneland Community Unit District No. 302, Supreme Court of Illinois, 1959, 18
Ill.2d 11, 163 N.E.2d 89, 97

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employment, or the validity of legislation, the application of the doctrine may

be well advised on efficiency and policy grounds. Further, in cases where the
altered law may affect the very root of a commercial contract ordinarily
entered into (as could be argued would happen in the case of the amended
arbitration law in India), the court may consider restricting the application of
its decision to future transactions. To restrain the floodgates of litigation, as
also to enable the smooth functioning of the government, this doctrine can
be appropriately invoked in Constitutional matters where chaos may be
created by a sudden change in the provision of the law.
Yet only because rights may be altered under the fresh interpretation
of the law may not in itself be a good ground to restrict the operation of the
judgment. Requirement of certainty, development of clear jurisprudence, and
an incentive to challenge settled positions of law often require retrospective
application of overrulings.
In an intuitive sense, both retrospective legislation and judicial
precedent seem difficult to reconcile with ideas of fairness and equity. Yet
both these conceptions are well founded in law. When juxtaposing the
difficulties and benefits of prospective overruling, it becomes clear that
closely competing principles are at work. While it may not be wise to stifle
the power of the Court to mould relief, it is certainly in the interest of
potential litigants and lawyers that clear principles regarding the application
of this doctrine be enunciated by the higher judiciary.

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THE CURIOUS CASE OF SHARES WITH SUPERIOR RIGHTS:

IS THE BAN IMPOSED ON THEIR ISSUE JUSTIFIED?
Srinivasan Ramaswamy
SEBI carried out an amendment to the listing agreement in the year 2009,
whereby the issue of shares carrying superior rights as to voting or dividend, with respect to
shares which have previously been issued, was prohibited. This presents a two-way problem.
The principal question arising here is whether the SEBI was empowered in law by the
Companies Act, 1956 or the SEBI Act, 1992 to carry out an amendment which sought
to nullify to a significant extent, the provisions of the Companies Act, 1956. On an
analysis of the legal provisions which lay down the powers and duties of the regulatory body,
we come to a conclusion that such an amendment was beyond the authority of SEBI.
Another ambiguity presented by this amendment on which this article throws light is that
the relevant amended provision is silent about the criterion which is to determine whether
the subsequent issue is superior in nature. After considering the permutations which are
possible in this regard, the author suggests considering the shares carrying the lowest rights
of all as the benchmark for the purpose of determining whether the particular issue was
superior in nature to those issued before. This line of interpretation flows from the idea that
the primary reason behind enacting this provision was to ensure that the public shareholders
were protected against possible misuse of voting powers by the directors of the company.
Furthermore, this article also seeks to argue in favour of lifting the ban on shares with
superior voting/dividend rights and suggest ways to ameliorate the situation.
I.

INTRODUCTION

The separation of ownership from management in case of a joint

stock company is an outcome of it having a separate entity from that of its
owners or shareholders.1 The shareholders retain the right to elect members
to the board of directors of the company and also vote on other fundamental
issues. The administrators or managers act as agents of the shareholders in
the general everyday management of the affairs of the company.2 Thus,
voting rights act as a powerful determinant of corporate control.3 This often

3rd Year, B.A., LL.B. (Hons.), W.B. National University of Juridical Sciences, Kolkata
Solomon v. Solomon & Co. Ltd. (1895-99) All ER 33 (HL).
2 Tara Gry, Dual Class Share Structure and the Best Practices in Corporate Governance,
(Aug. 18, 2005), http://www.parl.gc.ca/Content/LOP/researchpublications/prb0526e.htm
3 See, Manne, Some Theoretical Aspects of Share Voting: An Essay in Honor of Adolf A.
Berle, 64, Columbia Law Review,. 1427 (1964).
1

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results in a tussle between the shareholders and the management to gain a

greater say in the administration of the company. Therefore, the promoters
or the administrators have been known to issue shares carrying voting rights
disproportionate to their ownership, with a view to have more control over
the administration of the company. Initially, the Companies Act, 1956
(hereinafter referred to as Companies Act) permitted only the one shareone vote rule.4
An expert panel for the establishment of a new stock exchange was
constituted in 1991, under the able chairmanship of Mr. M J. Phewani. The
committee laid down the blueprint for issuance of shares which carried no
rights as to voting, by public companies which had an impressive track
record of paying dividends in the preceding couple of years or in four out of
the last five years or five out of the last seven years.5 These recommendations
made by the Phewani committee were incorporated in the Companies Bill of
1993 and 1997, thereby paving the way for the issuance of equity shares with
differential rights as to voting, dividend, or otherwise, although subject to
the prescribed upper limit of 25% of the issued share capital of the company.
These proposals saw the light of the day in the year 2001 by the virtue of
respective amendments enacted by the Parliament to the Companies Act and
other by-laws. However, the Securities and Exchange Board of India6, the
capital markets regulatory authority in India issued a circular on 21st July
2009 notifying the amendment of the listing agreement, whereby all the
companies listed on a stock exchange were prohibited from issuing shares
carrying superior rights as to voting or dividend vis--vis the rights on shares
which have already been issued.7 This measure taken by the regulatory body
raises several questions with respect to the issue of shares by companies in
the future inasmuch as they relate to shares carrying differential rights.
This article shall explicate the concept of equity shares carrying
differential rights and thereafter, the position of law in different countries
shall be evaluated, while providing a detailed analysis of the scenario in India
Section 88 of the Companies Act, 1956 prohibited the issue of shares with disproportionate
rights; however this provision has been abrogated by the Companies (Amendment) Act,
2000.
5 Shares Minus Voting, The Business Line The Hindu Financial Daily, January 11, 2011.
6 It may be noted that the abbreviation SEBI and its expanded form Securities and
Exchange Board of India have been used interchangeable throughout the course of this
article.
7Vide
Notification
No.
SEBI/CFD/DIL/LA/2/2009/21/7,
available
at
http://www.sebi.gov.in/circulars/2009/cirla2.pdf
4

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as well. Subsequently, this article will critique the amending circular issued by
the Securities and Exchange Board of India in the year 2009, pointing out the
various ambiguities contained therein and thereafter present suggestions in
favour of augmenting the existing law relating to shares with
disproportionate rights.
II.

ISSUE OF EQUITY SHARES AND THEIR

CONSEQUENT VOTING RIGHTS

Voting rights are vested with equity shareholders who are registered
as members in the books of the company.8 Therefore, every member of a
company holding equity shares has a right to vote in respect of shares at
every resolution placed by the company.9 However, voting rights cannot be
exercised in respect of shares on which call money has not been paid by the
member10. The issue of equity shares by a company may either carry full or
proportionate voting rights or differential rights with regard to dividend or
rights to participate in the management or otherwise. The right to vote
vested with shareholders is the residuary means of participating in the
functioning of the company, not vested with the management.11 The
proportionality principle thus underlines the view that a shareholder must
be entitled to the same ratio of capital inflow and voting rights.12 In India, the
one share-one vote was the norm till the year 2000 when the Companies
Act was amended by the Indian Parliament, whereby the issuance of shares
carrying differential voting privileges were permitted with effect from 13
December 2000. The issue of equity shares with differential voting and
dividend rights has further been recognised by the Companies (Issue of
Share Capital with Differential Voting Rights) Rules, 200113.14 Shares with
differential voting rights have been defined in the amended Section 2(46A)
of the Companies Act as any share which has been issued as carrying
Sharad Doshi v. Adjudicating officer, (1998) 3 Comp LJ 145.
Life Insurance Corporation of India v. Escorts Ltd (1986) 59 Comp Cas 548 (India).
10 The Companies Act, No. 1 of 1956, 181 (India).
11 C. S. Cheung et al., Controlling Opportunistic Behavior in Corporate Governance: The
Role of Disproportionate Voting Rights and Coat-tail Provisions, Journal of Institutional and
Theoretical Economics, Vol. 145, No. 3, 438-450 (1989).
12 Lack of Proportionality Between Ownership and Control: Overview and Discussion,
OrganisOrganisation of Economic Co-operation and Development (2007).
13 It may be noted that the terms Companies (Issue of Share Capital with Differential
Voting Rights) Rules, 2001 and Rules have been used interchangeably throughout the
course of this article.
14 Vide Notification No. GSR. 167(E), Mar. 9, 2009.
8
9

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differential rights in accordance with the provisions of Section 86 of the

Companies Act, 1986. Consequently, Section 88 of the Companies Act had
to be annulled since it prohibited public companies from issuing shares with
disproportionate rights as to voting, dividend, capital, or otherwise.15 The
Rules however, do not distinguish between equity shares solely on the basis
of the voting right which they carry, but also on grounds of dividend or any
other basis as may be prescribed.16 This therefore, gives autonomy to the
companies to issue equity shares which carry any of the aforesaid rights,
thereby differentiating itself with other classes of equity shares. There are
several prerequisites for a company issuing shares with disproportionate
rights as to voting, dividend or otherwise17(1) The company must have distributable profits as required by
Section 205 of the Companies Act in the three preceding financial
years prior to the year when the shares were decided to be issued.
(2) The company has not defaulted in filing annual accounts and
annual returns for three financial years, immediately preceding the
year in which it was decided to issue such a share.
(3) The company has not failed to repay its deposits or interest
thereon on due date or redeem its debentures on due date or pay
dividend.
(4) The Articles of Association of the company authorizes the issue
of shares with differential voting rights.
(5) The company has not been convicted of any offence arising under
Securities Exchange Board of India Act, 1992, Securities Contracts
(Regulation) Act, 1956, Foreign Exchange Management Act, 1999.
(6) The company has not defaulted in dealing with investors
grievances.
(7) The company has obtained the approval of the shareholders in
general meeting by passing resolution as required under the provision
The Companies (Amendment) Act, No. 53 of 2000 (India).
Companies (Issue of Share Capital with Differential Voting Rights) Rules, 2(1)(b) (2001).
17 Companies (Issue of Share Capital with Differential Voting Rights) Rules, 3 (2001),
Amended vide Notification No. G.S.R. 27 (E) dated 12.01.2002.
15
16

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of sub clause (a) of sub-section (i) of Section 94 read with sub-section

(ii) of Section 94 of the Act.
(8) The listed company has obtained the approval of the shareholders
in a postal ballot.
Section 86 of the Companies Act, 1956 also stipulates the issue of
two kinds of equity shares by a company limited by shares vis. equity shares
with voting rights and shares carrying differential rights as to dividend,
voting or otherwise in accordance with such rules and subject to such
conditions as may be prescribed. Section 87(1) however, envisages that every
member of a company limited by shares, holding equity shares shall have
voting rights in the company. Therefore, the provision implies that the
voting rights of all classes of equity shares have to be preserved although
they may carry differential rights. Differential voting rights on the shares can
only be made effective, by the virtue of a poll, since vote by a show of hands
is only possible in case of one person one vote.18 This provision of the
Companies Act vests voting rights in every member of the Company and no
company by virtue of its articles or otherwise can deny a member of his right
to vote on the basis of the number of the shares owned by such member.19
However, there is another category of shares with differential voting rights
that carry a right to vote, which may be contingent. The privileges carried by
these shares are on par with the rights enjoyed by other holders of common
stock. However, the differential privilege may come into force on the
happening or non- happening of a particular event i.e., non-declaration of
dividend etc.20
III.

HISTORY OF SHARES WITH DIFFERENTIAL

RIGHTS AND OTHER JURISDICTIONS

It was in September 1986 that the Securities and Exchange

Commission (SEC) in the United States resolved to abrogate its old law
against the listing of shares which carried less than full voting rights. 21 The
SEC a couple of years later in 1988 approved Rule 19c-4 that prohibited the
A Ramaiya, Guide To The Companies ACT 1109 (Arvind Datar et al. eds., 16th ed., 2006).
Id. at 1109.
20V. R. Shah, Issue of Equity Shares with Differential Voting Rights - An Analytical Study,
[2001] 32 S.C.L. 127 (Mag.).
21 New York Stock Exchange Listed Company Manual, 313 (May, 1985).
18
19

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issue of all shares which impinged upon the voting rights of existing
shareholders, thereby severely restricting the companys ability to issue shares
with disproportionate voting rights. However, this move by the Securities
Exchange Commission was subjected to severe criticism from various
spheres, including the corporate community as well the Congress which
however, had extended full support to SEC in 1926 when the one share-one
vote rule was introduced for the first time.22 But the United States Court of
Appeals for the District of Columbia Circuit invalidated this new rule and
restored the status quo ante.23 It was even debated that as far as relinquishing
of voting rights were concerned, the shareholders were well within their
rights to do so.24 Thus, the companies listed at the American Stock Exchange
were required to comply with the 1:10 limitation ratio with regard to the class
of shares with superior voting rights and the holders of the class of inferior
shares were given the right to elect at least 25% of the Board of Directors. 25
Also if the issuing companys board was dominated by independent directors,
then a majority of such directors must vote for the proposition, and if the
number of such directors is less than majority then all of them must assent to
it.26 The sub-committee of the New York Stock Exchange also provided that
the rights of all the shareholders shall be equal, except for the voting
powers.27 Shares carrying subordinate voting rights are known as dual-class
shares in the United States of America.28
The evolution of differential rights shares has been somewhat similar
in English law. English law recognised the one vote per share principle
which determined the amount of control over the company by ones
investment in the company. However, gradually the courts began upholding
measures taken by companies providing additional votes in resolutions
seeking to remove the board of directors.29 The Jenkins Committee
Louis Lowenstein, Shareholder Voting Rights and A Response to SEC Rule 19c-4 and to
Professor Gilson, 89 Colum. L. Rev., 980, 979 - 1014 (June, 1989).
23 Business Roundtable v. Securities and Exchange Commission, 905 F.2d 406 (D.C. Cir. 1990).
24Louis Lowenstein, Whats Wrong with Wall Street: Short - Term Gain and the Absentee Shareholder,
188 - 90 (1988).
25 See American Stock Exchange Guide (CCH) 10,022.
26 Joel Seligman, Equal Protection in Shareholder Voting Rights: The Common One Share, One Vote
Controversy,
54 Geo. Wash. L. Rev. 687 (1986)
27 Id.
28Paul A. Gompers et al, Incentives vs. Control: An Analysis of U.S Dual- Class Companies,
http://knowledge.wharton.upenn.edu/papers/1278.pdf (last visited Jan. 19, 2013).
29 See, Bushell v. Faith, [1970] 1 All E.R.53.
22

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constituted in 1962 also made several recommendations in favour of nonvoting shares inter alia such as higher rate of return, retention of control in
favour of restricted or non-voting shares.30 The Republic of Canada also
permitted the issue of shares with differential rights around the same period
as that of United States of America.31 An approval from the minority
shareholders is required prior to the issue of such shares. 32 Similarly, shares
carrying multiple votes were popularized in France in the earlier part of the
twentieth century and were commonly used as a measure to thwart hostile
takeover bids.33 However, this category of shares has now gained immense
popularity in the country.34 Superior voting rights in shares in France are
usually in the ratio of 1:2 if they have been held for two consecutive years
and four years in case of publicly traded scrips.35 Corporate laws in New
Zealand also permit a company to issue shares with special, limited or
conditional rights as to voting, provided the same is authorized by the
Articles of Association of the Company.36 However, as of now, Singaporean
law does not permit the issue of shares with superior voting rights, 37 although
the Ministry of Finance has proposed certain changes which seek to permit
issue of shares with no or multiple voting rights provided, such an issue is
authorized by the articles of the company.38

Weinberg And Blank, Takeovers And Mergers 70 (5TH edn., 2001).

Lewis D. Johnson & Bohum Pazderka, The Role of Stock market in Corporate Governance, The
Frazer Institute, http://oldfraser.lexi.net/publications/books/gamble/chapter2.html (last
visited Jan. 19, 2013).
32 5.2, Policy 3.5, Toronto Stock Exchange Venture Exchange Corporate Finance Manual, available
at http://www.tmx.com/en/listings/venture_issuer_resources/finance_manual.html.
33 Konczyk, Muriel, Big changes in ownership structures: Multiple votes in interwar France, Business,
Finance & Institutions: What Can We Learn From The Past?, University of Antwerpen,
Belgium, (Oct. 19, 2006), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=944808
34Renee Adams, One Share-One Vote: The Empirical Evidence, Review of Finance, University of
Oxford, (2008) 12: 5191.
35 Corporate Governance And Corporate Finance: A European Perspective, (Ruud A. I. Van
Frederikslust ed., Routledge Publishers) (2007).
36 New Zealand Companies Act, 1993.
37 Dual Class Shares not allowed in Singapore, Says SGX, Business Insider (Sept. 21, 2011)
http://articles.businessinsider.com/2011-09-21/wall_street/30183483_1_preferenceshares-dual-class-singapore-exchange.
38 Press Release, Ministry of Finance, Singapore, Ministry of Finance Completes Review of
the Companies Act (Oct. 3, 2012),
http://app.mof.gov.sg/TemNewsroomDetail.aspx?pagesid=20090924508092100125&page
mode=live&type=press&cmpar_year=2012&news_sid=20121003359996770534&AspxAu
toDetectCookieSupport=1
30
31

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IV.

VOL.1 ISSUE 1

DIFFERENTIAL VOTING RIGHTS SHARES:

VARIOUS VIEWS

Shares carrying superior voting privileges are in ordinary course held

by promoters and management personnel,39 because the issue of shares with
disproportionate voting rights facilitates them to have voting rights in a
greater proportion to their contribution to the capital of the company,
thereby negating the threat of an impending hostile takeover.40 Therefore
shares with lower voting rights usually carry greater dividends as incentives
for investors.41 This implies that voting rights play a pivotal role in
determining the ownership and administration of the company. Shares with
differential voting rights are a more effective way to tackle takeovers,
compared to other traditional mechanisms like poison pill and shark
repellent.42 Thus, if the present administrators are entitled to higher voting
rights, then the option of rejecting the offer is available to them. This
provides the owners of economic capital the added incentive to manage the
affairs free from all interference. Foreign investors are prohibited from
investing in shares with voting rights in certain jurisdictions in order to
ensure that the corporate profits are distributed within the economy. A
perfect example would be that of the Norwegian capital market where the
financial market regulatory norms regulated foreign investment in voting
shares till the year 1995 and only 33 per cent of the companys voting rights
were permitted to be held by foreigners.43
In a joint stock company, all the members may not be equally
interested in participating in the management. Participation in the
management of a company also offers little or no incentives to public
shareholders, owing to their comparatively low volume of investment in the
company.44 The differential voting shares are a step in that direction. Shares
with disparate voting rights provide the managers the advantage of raising
Seligman, supra note 27.
H. De Angelo & L. De Angelo, Managerial Ownership of Voting Rights: A Study of
Public Corporations with Dual Classes of Common Stock, Journal of Financial Economics
pp. 33 69 (1985).
41 Arnav Pandya, Change in Voting Rights, Business Standard, June 22, 2008.
42 Jeffrey N. Gordon, Ties That Bond: Dual Class Common Stock and the Problem of
Shareholder Choice, 76 Cal. L. Rev. 1 (1988).
43 B. A. Odegaard, 2000, Price Differences between Equity Classes: Corporate Control, Foreign
Ownership or Liquidity? Evidence from Norway 5 (Norwegian School of Management, Working
Paper No. 2/2000).
44 Gompers, supra note 29.
39
40

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capital without any significant change in the controlling rights over the
company.45 At the same time, they provide an opportunity to the retail
investors to earn greater returns on their investment in lieu of their voting
rights. Shares carrying inferior voting rights generally tend to offer greater
dividends at a lower price to attract retail investors. If these shares are issued
at a lower price, then these become more attractive compared to shares with
higher voting rights, since retail investors focus more on the appreciation of
their investment rather than being involved in the management. Thus the
differential voting rights shares enjoy a greater degree of liquidity in the share
market.46
One of the foremost criticisms levelled against shares carrying greater
voting privileges is that the voting powers vested with the management are
liable to be abused, to the detriment of the retail shareholders. The minority
shareholders are left out of the decision making process, since most of the
important decisions including the appointment of directors to the board of
the company are taken by those holding the shares carrying greater voting
rights. This results in lack of transparency in the activities of the company.
These issues involving corporate governance were highlighted by the
Adelphia and the Hollinger International Inc. frauds.47 These shares have also
not found any support from institutional investors owing to the aforesaid
factors and also due to the reason that these shares provide no avenue for
having a controlling stake in the company.48 Another criticism put forward by
many is that shares with differential voting rights act as an impediment to the
working of directors appointed by institution of public shareholders or
financial organisations, since the full time directors may have greater say in
the meetings of the company.49 Differential voting rights shares have often

Michel Magnan, Dual Class Shares: Governance, Risks and Rewards, Ivey Business Journal,
http://www.iveybusinessjournal.com/topics/leadership/dual-class-shares-governancerisks-and-rewards (last visited Jan. 13, 2013).
46Forester S.R. & Porter D.C., Dual Class shares: Are there return Differences, 20(6)
Journal of Business Finance and Accounting, pp. 893-903 (1993).
47 GRY, supra note 3, See, e.g., Gompers et al, Extreme Governance: An Analysis of U.S DualClass Companies, http://www.haas.berkeley.edu/groups/finance/dualpaper.pdf (last visited
Jan. 19, 2013).
48 Kai Li, et al., Do Voting Rights affect Institutional Investment Decisions? Evidence from
Dual
Class
Firms,
Sauder
School
of
Business
(Aug.
2007),
http://finance.sauder.ubc.ca/~kaili/dualclass_FM.pdf
49 George W. Dent Jr., Dual Class Capitalization: A Reply to Professor Seligman, 54 Geo.
Wash. L. Rev. 725 (1986).
45

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found to be traded at a discount,50 and have thereby led business managers to

take necessary steps to arrest the loss of shareholder value. Therefore, the
issue of differential voting right shares has oft been cited by experts as a
model of poor governance.51
V.

DIFFERENTIAL VOTING RIGHTS SHARES:

THE INDIAN SCENARIO

The issue of differential voting rights shares in India has been sparse
compared to other countries. TATA Motors Ltd. was the first company to
issue shares with disproportionate voting rights in 2008,52 followed by
Pantaloon Retail India Limiteds bonus issue and Gujarat NRE Coke Ltd.
rights issue in 2009.53 The differential voting right shares were priced at Rs.
305 per share as opposed to Rs. 340 for ordinary equity shares and carried
five per cent higher dividend than the shares with full voting rights as a
compensatory measure against lesser voting rights.54 The issue by Gujarat
NRE Coke has been viewed as a measure taken to thwart takeover moves by
rival coking coal companies, since this issue significantly increased the
promoters stake in the company to fifty-one per cent despite their
contribution to equity being only forty-one percent. The next company in
line was Pantaloon Retail India Limited in early 2009, when it offered shares
with differential voting rights as bonus to the existing shareholders of the
company. It was decided that the bonus shares with disproportionate voting
rights will be offered in the ratio of 1:10 vis--vis existing shares with full
voting rights held by shareholders on the record date.55 These bonus shares
carried 5 per cent dividend greater than that offered by the ordinary equity
shares, but ten of these differential voting rights shares carried only one vote.

Samie Modak, Tata Motors DVR Shares Trading at 45% Discount, The Financial Express
(Mumbai), April 7, 2011.
51 Ronald W. Masulis et al, Agency Problems at Dual- Class Companie, The Journal of
Finance, Volume 64, Issue 4, 1697 - 1727 (2009).
52 Deepak Korgaonkar, DVRs Outperform Ordinary Shares, The Business Standard
(Mumbai), March 12, 2012.
53 S. Hamsini Amritha, Differential Voting Rights, The Business Line - The Hindu Financial
Daily, October 5, 2008.
54 In Govern Research Services, All You Wanted to Know About DVRs, In Govern (2011),
http://www.ingovern.com/wp-content/uploads/2011/12/DVRs-Differential-VotingRights.pdf.
55ENS Economic Bureau, Pantaloon Offers bonus DVR shares, The Indian Express
(Mumbai), July 25, 2008.
50

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The issue of shares with differential voting rights has also received
support from the judiciary in the decision of the Company law Board in
Anand Perishad Jaiswal v. Jagatjit Industries56. In the instant case, the respondent
Karamjit Jaiswal along with an unlisted company LP Jaiswal and Sons Pvt.
Ltd held 7,418,748 equity shares amounting to twenty three and a half per
cent (eight and a half per cent by the respondent and fifteen per cent by his
firm) in Jagatjit Industries Ltd. which was involved in the production of
liquor. LP Jaiswal and Sons Pvt. Ltd. agreed to acquire two and a half million
differential voting rights shares which carried twenty votes each in Jagatjit
Industries, thereby bringing its stake in the company to a little more than
nineteen per cent up from fifteen per cent. The respondent later increased
his stake to thirteen per cent from eight and a half per cent by acquiring 2.19
million shares which carried full voting rights. Therefore, the twin share
acquisitions resulted in the holdings of the respondent and LP Jaiswal
increasing to thirty two per cent stake in Jagatjit Industries Ltd altogether.
The differential voting shares now owned by L. P. Jaiswal and Sons resulted
in the consolidation of voting rights worth thirty two per cent, thereby
enabling them to make a public announcement to acquire to the extent of
twenty per cent of the voting capital of the target company as was required
under the SEBI (Substantial Acquisition of Shares & Takeover) Regulations,
1997.
This differential issue however faced an obstacle when Anand Jaiswal
and Blossom Investments Pvt. Ltd, together owning eleven and a half per
cent in the target company altogether, filed a petition before the Securities
and Exchange Board of India challenging the pricing of differential voting
shares, citing lack of transparency in the issue. It was also argued before the
regulatory body inter alia that the in-principle approval as required by Clause
24(a) of the listing agreement, from stock exchanges had not been received;
violations of the SEBI (Prevention of Fraudulent and Unfair Trade Practices
Relating to Securities Market) Regulations, 2003, inappropriate pricing of the
shares to be issued and also issues regarding oppression of shareholders and
mismanagement had been raised. SEBI stated that it was not empowered to
decide upon this issue. However it stayed the issue of the shares until the
matter was finally adjudged on merits by a competent authority.57 The
56
57

(2010)1 CompLJ 509(CLB).

Anand Perishad Jaiswal v. Jagatjit Industries, Order No. WTM/TCN/01/CFD/APRIL/08,
(Apr. 8, 2008), available at www.sebi.gov.in/cmorder/jagatjitorder.pdf
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powers of SEBI have been enumerated under Companies Act, 1956 as well.
It stipulates that the provisions outlined by Sections 55 to 58, 59 to 81, 108,
109, 110, 112, 113, 116, 117, 118, 119, 120, 121, 122, 206, 206A and 207 in
case of listed companies and companies intending their shares to get listed,
inasmuch as they relate to issue and transfer of securities and non-payment
of dividend shall be administered by the Securities and Exchange Board of
India.58 Therefore, it stated that Section 55A did not confer powers on SEBI
to enforce the provisions of the Securities and Exchange Board of India Act,
1992. Hence, the matter was left to be decided on merits by a competent
court. Mr. Anand Jaiswal therefore moved the Company Law Board to
declare the impugned resolution passed at the target companys
Extraordinary General Meeting on June 16, 2004 as null and void, by virtue
of which 2.5 million shares carrying differential voting rights were allotted to
LP Jaiswal & Sons, with each share being entitled to 20 votes. The Company
Law board decided in favour of the validity of the resolution passed at the
meeting, stating that issue of differential voting shares is permissible under
Section 86 of the Companies Act read with the Rules enacted by Central
Government for this purpose. However, the respondents Jagatjit Industries
were directed to buyback the entire holding of Mr. Anand Jaiswal in Jagatjit
Industries Ltd. and L.P. Jaiswal & Sons Pvt. Ltd for a value of Rs.
365,000,000 in each of the companies, as per the terms of the settlement
agreed upon by the parties.
VI.

REGULATORY MEASURES AND SEBIS STAND ON SHARES

CARRYING SUPERIOR RIGHTS

The market regulatory authority brought in several modifications to

the existing provisions governing differential voting rights shares in the year
2009. Chapter VIII of the Securities and Exchange Board of India
(Disclosure and Investor Protection) Guidelines, 2000 was amended and
changes were affected in Rule 19(2)(b) of the Securities Contract Regulation
Rules, thereby facilitating easier listing of shares carrying differential rights. 59
However, pursuant to a board meeting, a press release was issued in the same
year notifying the prohibition of issue of shares carrying superior rights as to

58

The Companies Act, No. 1 of 1956, 55 (India).

Notification No. SEBI/CFD/DIL/DIP/
http://www.sebi.gov.in/circulars/2009/dip342009.pdf

59SEBI

186

34/2009/24/09,

available

at

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voting or dividend.60 Consequent to the amendment, the concerned clause

28A of the listing agreement read as follows:The Company agrees that it shall not issue shares in any manner which may confer
on any person, superior rights, as to voting or dividend vis--vis the rights on equity
shares that are already listed.
The various stock exchanges therefore were also required to make
the necessary changes to their listing agreements. This change was effected as
a measure to nullify the spirit of the Company Law Boards decision in
Anand Perishad Jaiswal v. Jagatjit Industries Ltd61, which permitted the issuance
of shares carrying disproportionate rights of voting or dividend. The
rationale behind such a move can be attributed to the power vested with the
company administrators to issue such shares to their advantage and reduce
the scope of the shareholders to take active participation in the day to day
functioning of the organisation.
VII.

CONTRADICTIONS AND LOOPHOLES IN THE

EXISTING LEGAL MECHANISM

It is pertinent to note that the aforesaid amendment to the listing

agreement is laden with its fair share of troubles. The amendment prohibiting
issue of differential rights shares meant that the shares previously issued by
TATA Motors Ltd., Pantaloon Retail India Ltd. and Gujarat NRE Coke Ltd.
were void in so far as they were shares carrying greater rights as to dividend,
although having lower voting powers. Therefore, this assumption prompted
TATA Motors to file a request dated 17 September 2009 seeking
interpretative guidance from SEBI under the SEBI (Informal Guidance)
Scheme, 2003.62 The SEBI vide a reply to the aforesaid request stated inter
alia the following63:(a) the existing shares with differential voting rights will continue to
have all the rights,

PR No.192/2009, available at http://www.sebi.gov.in/press/2009/1922009.html

Supra note 57.
62Letter by TATA Motors Ltd. to SEBI under the Informal Guidance Scheme,
http://www.sebi.gov.in/informalguide/Tata/tataletter.pdf
63 SEBIs reply in response to TATA Motors Ltd.s request under the Informal Guidance
Scheme, http://www.sebi.gov.in/informalguide/Tata/sebiletter.pdf
60
61

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(b) TATA Motors Ltd., shall be entitled to further issue shares of the
same class on the same terms by way of a bonus of rights issue,
(c) Subject to compliance with the SEBI (Issue of Capital and
Disclosure Requirements) Regulations, 2009, it may issue shares of
the same class by way of a follow on public offering,
(d) The Company was also permitted to issue Employees Stock
Options if the stock options are converted into the shares of the
same class, provided they are in compliance with the SEBI
(Employees Stock Options and Stock Purchase Scheme) Guidelines,
1999,
(e) It was also permissible to issue such shares on exercise of
convertible option by holders of Convertible Alternative Reference
Securities (CARS) contingent on the compliance with other
guidelines or regulations.
One of the foremost issues is whether it was within SEBIs law
making powers to amend the listing agreement which in terms abrogated a
law that had been brought into effect vide an amendment to the Companies
Act, 1956 by the Parliament in the year 2000. Section 55 of the Companies
Act merely enumerates the provisions of the statute which shall be
implemented by SEBI inasmuch as they deal with issue and transfer of
securities and transfer of dividend. The powers and functions of the
regulatory organisation have also been codified in the Securities and
Exchange Board of India Act, 1992. The Board has only been vested with
functions which include overseeing the functioning of stock exchanges
throughout the country, regulating and registering brokers, sub-brokers,
merchant bankers, underwriters and other intermediaries involved in the
financial market, monitoring venture capital funds, checking unfair practices
including insider trading, promoting awareness about the securities market,
regulating takeovers, mergers and acquisitions and activities incidental to the
aforesaid functions.64 The scope of Section 11A is also limited to regulation
or prohibition of issue of prospectus, offer document or advertisements.
Interestingly, in a somewhat similar scenario, a court in the United States had
vacated a rule adopted by the market regulatory body on the grounds that it

64

Securities and Exchange Board of India Act, 11 (1992) (India)

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lacked the jurisdiction to make such a rule.65 Therefore, it could be

understood in the light of the aforesaid provisions that SEBI inherently lacks
the power to prohibit the issue of shares with differential rights and such
discretion results in the annulment of a provision of an Act enacted by
Parliament.
The amendment by the countrys capital markets regulatory body
looks at only one side of the coin. The amendment introducing Clause 28A
in the listing agreement prohibits only the issue of shares with superior rights
with regard to voting or dividend, with the intention of protecting the
interests of the shareholders. However, it fails to take into account the fact
that an issue of shares carrying inferior voting or dividend rights vis--vis
shares previously issued by the company shall have the same effect as an
issue of shares with superior rights. This is because shares with inferior rights
would dilute the control of the new shareholders or the existing retail
shareholders (in case of a rights issue) over the company affairs with respect
to the persons on the board of the company or the promoter entity. This
again vests a significantly greater degree of control over the company with
the promoters. This one sided view of the matter taken by SEBI does not
serve the purpose it was actually intended for. This move also results in a ban
against the issue of shares carrying normal voting or dividend rights. This
amendment therefore, nullifies shares with inferior voting rights for all
practical purposes, since an issue of such shares would only be subscribed to
by the public if it promises greater dividends. But, even shares carrying
superior dividend rights have been prohibited by this amendment.
This conclusion throws light on another glaring ambiguity in the
impugned provision. SEBI has made no indication as to the benchmark
category with respect to which the differential voting rights shares are to be
evaluated. Thus, there are no clear parameters which could be used to
compare and differentiate the current issue of shares to the ones which have
been issued by the company previously. This problem arises especially when
the company has more than one class of shares listed. Therefore, in the
present scheme of things, it may be difficult to judge the validity of a
particular public issue. There may be instances where the company has not
issued shares with differential rights in the past. If such an issue materializes,
it may be argued that the concerned issue will be subject to the terms of the
previously issued one vote shares. Another scenario which needs to be
65

Supra note 24.

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considered is that if a company has issued shares with superior rights in the
past, then in the event of a subsequent differential issue, it could be argued
that the class of shares carrying the greatest rights must act as the benchmark
for the current issue of shares carrying differential rights. The possibilities
mentioned above although seem attractive are not tenable. All these
arguments remain only a figment of interpretation as SEBI has not issued
any directive in this regard nor have the courts had the opportunity to deal
with this ambiguity. Therefore, the author also finds it pertinent to point out
that applying the principles of purposive construction; the interpretations
mentioned above are fallacious. The object and purpose behind introducing
this amendment was to secure the interests of the shareholders against any
possible misuse of power by members of the board. Hence, the only
plausible interpretation of this provision would be keeping in mind the object
and scope of the amendment. Taking into account the foregoing analysis, the
benchmark for the newly issued shares must be the class of shares which
carry the least rights. This is because a particular issue, despite carrying lesser
rights than some of the previous issues, may still attract the provisions of this
clause as it may be carrying greater rights vis--vis shares issued earlier but
carrying lesser rights than the immediately preceding issue. Allowing such an
issue would result in the dilution of the control vested with holders of shares
with lesser rights. Hence, only the suggested interpretation would be
consistent with the text and purpose of the amendment.
It is also interesting to note that if the interpretation suggested above
is adopted, then it may result in another practical difficulty. The company
would only be entitled to issue shares carrying rights which are lesser than
the ones issued earlier. In that case the ones being issued will constitute the
yardstick for the next issue, which in turn must be of shares having even
lesser rights and so on. This poses a practical absurdity.
VIII.

THE WAY AHEAD

It is clearly discernible that Clause 28A of the listing agreement is

fraught with lacunae and severe ambiguities. Although the number of listings
in the Indian capital market has been on the rise, this provision has never
been put to test owing to the number of companies issuing differential rights
shares in India being negligible and this is evinced by the fact that the market
has witnessed only a couple of such issues in the last three years. The
changes brought forward by SEBI have not served the purpose they were
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actually meant to serve. The management could still consolidate all the
controlling power by issuing shares with inferior voting rights to the public
shareholders. Although the shares with inferior rights enjoy a greater degree
of liquidity in the market and also higher dividends thereby enjoying public
confidence,66 the blanket ban on shares with superior rights as to dividend or
voting or otherwise is not justified. The issue of superior right shares is not a
malpractice in itself like insider trading; it merely increases the probability of
the companys board resorting to such issue to grab a greater share of
control. Therefore, the regulation of such shares may be done on a case by
case basis by SEBI, instead of simply putting an end to the issuance of such
shares. SEBI may require the concerned entity to submit a report explaining
the need for such an issue and also point out the impact of such an issue on
the existing shareholders of the company. Even if such a practice is not
adopted, it must clarify all the ambiguities regarding the amendment.
Alternatively, SEBI could also take a leaf out of the New York Stock
Exchanges book, which limits the voting rights per share to the ratio of 10:1
or the French law restricting it to 2:1. Another possible alternative would be
to retain the law on the issue of shares with differential rights, but an issue of
shares carrying superior voting rights may be subjected to a vote by the
minority shareholders of the Company as is done in Canada.67 A proposal to
issue such shares must also have the assent of all the independent directors
of the company.68
On one hand, the Indian securities market is still in a nascent stage
and an unclear legal provision laden with flaws like these is an absurdity in
itself and would only compound the problem, thereby attracting greater
manipulations of the law. Excessive regulation is uncalled for, since it deters
a company from maximizing its potential by opting for a favourable capital
structure.69 The Companies Bill, 2011 also contains a provision permitting
the issue of shares with differential rights as to voting, dividend or
otherwise.70 If this Bill is passed by the Parliament without any alterations to
the concerned provisions, then it may have some serious legal ramifications.
Therefore, the need of the hour is to rethink the ban on the issue of shares
Forester, supra note 47.
Supra note 30.
68 Seligman supra note 25.
69Abhishek Nath Tripathi, Shares With Differential Voting Rights: A Legal and Economic
Analysis, 15 Student B. Rev. 74 (2003).
70 Companies Bill, Bill No. 121, 43 (2011)
66
67

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with superior rights imposed by SEBI and/or amend it accordingly to avoid

any confusion regarding the same.

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SMILE, YOURE ON CANDID CAMERA FINDING

SOLUTIONS FOR PRIVACY VIOLATIONS BY THE PAPARAZZI
IN THE RIGHT OF PUBLICITY
Samira Varanasi*
The right of publicity is a relatively unrecognised proprietary right in India. While
it has found mention in a few Indian judgments, our judiciary relies heavily on the
American courts interpretation of this right. It is argued that while the right developed in
the United States out of frustration with the right to privacy that afforded celebrities little
protection from unwarranted commercial exploitation of their public images, the American
justification for the right of publicity is vague and elusive and consequently prone to
unbridled expansion. This paper envisages a restrictive publicity right that has its basis in
a justification similar to that of trademark rights. It argues that such a justification would
also be more effective in protecting the right of privacy of celebrities, not only in cases where
their images are being commercially exploited by advertisers but also against unwarranted
intrusion of the paparazzi in their private spheres. This proposed right would fill the
loopholes in the right to privacy without the risk of unchecked expansion.

I.

INTRODUCTION

The right of publicity has been defined to mean the inherent right of
every human being to control the commercial use of his or her identity1. It was born out
of the right to privacy in the United States and has currently attained the
form of a full-fledged property right. Celebrities have traditionally used it to
prevent the use of their names, photographs, likenesses or identities in
advertisements without their permission. This has been hugely empowering
for celebrities who intend to control the exploitation of their images without
their knowledge.
At present, the right of publicity has not been statutorily recognised
in India. However, of late the courts have started to take notice of this right.
For instance, in DM Entertainment Pvt. Ltd. v. Baby Gift House2, toy
manufacturers who modelled their toys on Daler Mehndi were sued for
violation of the right of publicity. The Delhi High Court recognised publicity
rights as a sub-species of privacy rights whose violation would attract Articles
19 and 21 of the Constitution. In American law, the right of publicity is
* Vth Year, B.A., LL.B. Course, NALSAR University of Law, Hyderabad
1 5 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition 28.1 (4th ed. 2004)
2 MANU/DE/2043/2010
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gradually growing out of a right merely associated with the right to privacy
into a distinct property right recognised on Lockean principles, much like
copyright. However, there has been a concern that the scope of this right has
been extended beyond comfortable limits. As art is becoming increasingly
commodified and deification of celebrities is becoming increasingly rampant,
it becomes important to consider whether it would be prudent to import this
concept into Indian law.
This paper examines the major problems that have arisen during the
application of the right of publicity law, whether based on common law
jurisprudence or a statutory right. It concludes that the biggest threat posed
by the right of publicity has been the undefined scope of this right which has
led to its unbridled expansion in the United States to the point that, on many
occasions, it comes dangerously close to stifling competing interests such as
the First amendment freedom of speech of speech of the alleged infringers.
In an attempt to find a common solution for problems arising out of the
undefined scope of the right of publicity, the paper tries to confine its scope
to the original purpose of its introduction by developing a trademark-like
justification for the right and rejecting the justifications finding basis in
copyright law that have been furnished for the right to publicity.
II.

THE ORIGIN AND DEVELOPMENT OF THE LAW ON

THE RIGHT OF PUBLICITY

The right of publicity traces its origins to American jurisprudence on

the right to privacy. In 1898, Samuel Warren and Louis Brandeis wrote an
authoritative work on privacy rights titled The Right to Privacy.3 .
Lamenting the fact that recent cultural and technological developments,
especially an overreaching press, had effectively trivialized the private space
of the individual4, they made a case for a right to privacy or a right to be left
alone vested in individuals. In their discussion of an individuals right to
privacy, they also suggested vesting in every individual a proprietary interest
in his or her personality.5 However, since the core concern of the article was
to protect the privacy of private life6, the right to privacy envisaged by
Warren and Brandeis did not extend to information which had been put in
Samuel D. Warren & Louis D. Brandeis, The Right to Privacy, 4 Harv. L. Rev. 193 (1890).
Ibid. at 195.
5 Id. at 205.
6 Id. at 215.
3
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the public sphere through voluntary disclosure7 or in which the public had a
legitimate interest.8
Unfortunately, just five years after the publication of this article, the
New York Court of Appeals in the case of Roberson v. Rochester Folding Box
Co.9 refused to grant the claimant remedy on the ground that the
unauthorized use of her picture in the defendants advertisement had caused
her mental and physical distress. It reasoned that there was no precedent in
the case law for Warren and Brandeis so-called right of privacy10. However,
it recognised the need for legislation to protect the interests of persons
whose pictures or name are used without their consent for advertising11. In
response, the New York legislature enacted a statute to this effect12.
Two years later, in Pavesich v. New England Life Insurance Co.13, the
Georgia Supreme Court explicitly accepted the premise of the Warren and
Brandeis article and held that the unauthorized use of a persons photograph
in a testimonial advertisement would result in a cause of action for the
violation of the right of privacy.
However, the plaintiffs in both the aforementioned cases asserted
claims that could comfortably be founded on the right to be left alone. It
was easy for them to claim that their images were representative of their
persona and had so far, enjoyed the luxury of anonymity; and that their
sudden public disclosure had caused mental distress to them. However, the
same argument could not be made so convincingly by celebrities, who had
not only consented to, but also invested time and effort in putting their
personas within the realm of public information. The basis for violating the
right to privacy was based on the tort law concept of personal injury to
dignity and state of mind. Courts were unable to grant a remedy for any kind
of mental distress that could have been caused to a public person from the
additional publicity that would have resulted from appearing in an

Id. at 218.
Stacey Dogan and Mark A. Lemley, What the right of publicity can learn from trademark
law, 58 Stan. L. Rev. 1161, at 1168-69.
9 171 N.Y. 538, 64 N.E.442 (1902)
10 Id. at 544,547, 64 N.E. at 443, 444.
11 Id. at 545, 64 N.E. at 443.
12 1903 N.Y. LAWS CH. 132, 1-2 (codified as amended as N.Y. CIV. RIGHTS LAW 50,
51 (McKinney 1990)).
13 50 S.E. at 70, 74-77.
7
8

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advertisement.14 The best known of such cases is OBrien v. Pabst Sales Co.15,
where the Fifth Circuit Court rejected the claim of a college football player
seeking remedy against a beer company that had purchased his photograph
from the college publicity department and used it on the football calendar on
the ground that since the plaintiff had gained a reputation in the national
media and repeatedly posed for photographs for use in publicizing himself
and [his] team, he had surrendered his right to privacy. Thus, they held that
the publicity he was complaining of was the publicity that he had been
seeking all along and hence there was no cause for complaint to begin with.
It is William Prossers 1960 article titled Privacy that has the
reputation for translating Warren and Brandeis insight into terms that could
easily be adopted by the American legal system.16 He acknowledged the
appropriation of the plaintiffs name or likeness17 to be a tort that could
result in the violation of the common law privacy right. This right, as
opposed to the other rights identified by Prosser18 was to protect an interest
that was not so much mental as it was proprietary19. Action against this tort
was justified on the ground that allowing an individual to control the use of
his or her persona would help protect against the unpermitted use of
personal identity that would have the potential of causing injury to selfesteem and dignity.20
One of the first judgments to have recognised the right of publicity
was Haelan Laboratories v. Topps Chewing Gum21. In Haelan, the court held that
in addition to the New York statutory right to privacy, a man has a right
in the publicity value of his photograph, i.e., the right to grant the

O'Brien v. Pabst Sales Co., 124 F.2d 167, 169 (5th Cir. 1941), cert. denied, 315 U.S. 823
(1942); Paramount Pictures Inc. v. Leader Press, Inc., 24 F. Supp. 1004 (W.D. Okla. 1938)
(posters of movie stars), rev'd on other grounds, 106 F.2d 229 (10th Cir. 1939); Martin v.
F.I.Y. Theatre Co., 10 Ohio Op. 338 (C.P. Ct. 1938) (theater poster of actress).
15 124 F.2d 167, 169 (5th Cir. 1941), cert. denied, 315 U.S. 823 (1942).
16 Paul M. Schwartz and Karl-Nikolaus Peifer, Prossers privacy and the German right of
personality: Are four privacy torts better than one unitary concept? 98 Cal. L. Rev. 1925,
at 1942.
17 William L. Prosser, Privacy, 48 Cal. L. Rev. 383 (1960) at 389.
18 (1) Intrusion upon the plaintiffs seclusion;
(2) Public disclosure of embarrassing private facts; and
(3) Publicity which places the plaintiff in a false light in the public eye
19 William L. Prosser, Supra n. 8, at 406.
20 John R. Braatz, White v. Samsung Electronics America: The Ninth Circuit turns a new
letter in California Right of Publicity Law, Pace L. Rev., VOL. 15, ISSUE 1, FALL 1994, ART7
21 202 F.2d 866, 868 (2d Cir.), cert. denied, 346 U.S. 816 (1953).
14

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exclusive privilege of publishing his picture.22 The court, however, believed

that it was immaterial to decide whether or not such a right was proprietary.
In 1954, Melville B. Nimmer wrote the landmark article, The Right
of Publicity23, which is said to have contributed to the law on the right of
publicity in the same way as Warren and Brandeis article did to the law on
privacy24. He claimed that celebrities, having allowed certain aspects of their
life to become public, have waived their right of privacy25. Further, he
reasoned that in most cases, a celebrity could not claim that the use of his or
her name, photograph or likeness would cause mental distress to him or her
and that allowing recovery under the right to privacy would offend the
sensibilities of ordinary persons because what the celebrities really seek is
payment for the use of his or her publicity value26. Further, since the right to
privacy is personal and non-assignable, he opined that granting permission to
another to use his or her name or likeness would simply amount to a release
from the liability for invasion of the right to privacy.27 Having found that
legal theories like unfair competition, breach of contract or defamation were
inadequate to protect celebrities publicity value, he concluded that there was
a need for a right of publicity which could be recognised as a property
capable of assignment and subsequent enforcement by the assignment.28
In light of this, many courts29 and even commentator J.T. McCarthy30
have agreed that while right of privacy protects against an unpermitted use of
personal identity that has the potential to cause injury to self-esteem and
dignity, the right of publicity protects the proprietary and commercial value
of a persons identity and persona. Therefore, while the two rights are quite
similar, they can be distinguished on the ground that invasion of privacy by
appropriation of name or likeness does not require the appropriation to be
22Ibid,

202 F.2d at 868.

Melville B. Nimmer, The Right of Publicity 19 Law & Contemp. Probs. 203, 216 (1954),
cited in Michael Madow, Infra n. 27 at 130 n. 13.
24 Steven J. Hoffman, Limitations on the Right of Publicity, 28 Bull. Copyright Soc'y 111
(1980).
25 Nimmer, Supra n. 24, cited in John R. Braatz, Supra n. 18, at 172.
26 Ibid.
27 Id.
28 Id.
29 Rose v. Triple Crown Nutrition, Inc., No. 4:07-CV-00056, 2007 WL 707348, at *3 (M.D.
Pa. Mar. 2, 2007); Pooley v. Nat'l Hole-In-One Ass'n, 89 F. Supp. 2d 1108, 1111-12; Jim
Henson Prods., Inc. v. John T. Brady & Assocs., Inc., 867 F. Supp. 175, 189 (S.D.N.Y.
1994)
30 JT McCarthy, The Rights of Publicity and Privacy, vii (1992), 5.8(A) &(C).
23

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done commercially, whereas violation of right of publicity does. This also

means that unlike the right to privacy, the right of publicity is transferable by
license or assignment31. Thus over time, the right of publicity, which was
developed out of frustration32 with the law on the right to privacy in the
United States, soon began to take the form of a purely proprietary right33.
The inconsistencies in this approach will be examined in the subsequent
sections.
III.

THEORETICAL JUSTIFICATIONS FOR THE

RIGHT OF PUBLICITY

Since the right of publicity is still in the process of development, it is

imperative to examine possible justifications for such a right and finally
identify the most persuasive one. Most justifications fall into three categories:
the copyright/ incentive theory, the exhaustion or allocative-efficiency theory
and the moral or natural rights theory.
A. COPYRIGHT/ INCENTIVE THEORY JUSTIFICATIONS

The incentive theory rests on the rationale that a failure to protect

works would result in a situation where people are not incentivized to
produce more works.34 Copyright law is an attempt to incentivize and
promote the creation of valuable works of authors for the larger benefit of
the society so as to ensure discourse and deliberation of these works. The
incentive for the same is provided in the form of protection from
reproduction that is made available to all copyrighted works. Any copying of
copyrighted material done without the permission of the copyright holder
can only be for a limited and transformative purpose, such as to comment
upon, criticize, or parody a copyrighted work35. Thus, any new work that
makes use of a copyrighted work can do so only if it is able to prove that it is
making fair use of the copyrighted work and that it is not a substantial
reproduction of the same.
Michael Madow, Supra n. 3, at 130 n.14.
Ibid at 167.
33 Cepeda v. Swift & Co., 415 F.2d 1205, 1206 (8th Cir. 1969); Estate of Presley v. Russen, 513
F. Supp. 1339, 1355 (D.N.J. 1981); Uhlaender v. Henricksen, 316 F. Supp. 1277, 1282
(D. Minn. 1970)
34 Stewart E. Kirk, Rhetoric and Reality in Copyright Law, 94 Mich. L. Rev. 1197, 1198-1204
(1996).
35 Available at http://fairuse.stanford.edu/Copyright_and_Fair_Use_Overview/chapter9/9a.html
31
32

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The incentive theory has often been used to justify publicity rights.36
For instance, in the case of Zacchini v. Scripps-Howard Broadcasting Co.37, where a
performer brought a publicity claim against a news broadcasting channel that
taped and aired the footage of his entire act, the United States Supreme
Court observed that:
The State's interest in permitting a right of publicity is in protecting the
proprietary interest of the individual in his act in part to encourage such
entertainment. . . . The State's interest is closely analogous to the goals of patent
and copyright law, focusing on the right of the individual to reap the reward of his
endeavours and having little to do with protecting feelings or reputation.38
However, in Zacchini, the defendant had taken not just an image or
identity, but an entire performance, making it a fit case to apply the copyright
justification. Subsequent to this judgment, courts began to apply copyright
laws fair use doctrine to balance competing interests of celebrities against
those of broadcasters who claimed a right under the First Amendment. The
zeal to justify the right of publicity based on the incentive theory has also led
the courts to selectively apply the fair use doctrine. Balancing First
Amendment based values of the copier against the incentives for celebrities
to creatively express themselves is integral to the fair use doctrine. However,
there is scarcely an opportunity for this balance to be factored into an
argument in favour of right of publicity. Thus, frequently, while concepts
such as transformative use are applied to protect a celebritys right of
publicity, American courts tend to ignore the balance between the right of
publicity and the First Amendment right of freedom of speech.39
Another reason why adopting copyright justifications in their entirety
to justify the right of publicity could be misleading and counter-intuitive40 is
that there is little to support the claim that celebrities would invest less
energy and talent in their public image (that being the work if one were to
Randall T.E. Coyne, Toward a Modified Fair Use Defense in Right of Publicity Cases,
29 Wm. & Mary L. Rev. 781, 812 (1988)
37 433 U.S. 562 (1977)
38 Ibid. at 573, 576.
39 Comedy III Prods., Inc. v. Gary Saderup, Inc., 21 P.3d 797 (Cal. 2001), cert. denied, 2002
U.S. LEXIS 212 (Jan. 7, 2002) (No. 01-368); See also Jennifer L. Koehler, Comedy III
Productions v. Gary Saderup Inc.: Finding a balance between the Right of Publicity and
the First Amendment Freedom of Speech, Santa Clara Computer and High technology law
journal,
Vol.
18,
Issue
1,
Article
6,
1-1-2002,
available
at
http://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=1297&context=chtlj
40 Stacy L. Dogan & Mark A. Lemly, Supra n. 6 at 1187.
36

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draw an analogy to copyright law) without a publicity right. Even if that was
the case, it is almost absurd to claim that encouraging fame would further a
societal purpose. The copyright analogy would have been sufficient to
support the right if it encouraged the production of any identifiable value. In
light of the flaws in the incentive theory justification and the dangerous
trends associated with it, it seems inadvisable to incorporate the same in the
Indian jurisprudence on the Right of Publicity, if we were to have a statutory
right to that effect.
B. ALLOCATIVE EFFICIENCY JUSTIFICATIONS

Frequently, the allocative efficiency theory has been used to

justify the right of publicity41. This argument is based on the fear that unless
the distribution of resources, which in this case would be information about
celebrities, is controlled, the value of the product itself, that is the personality
of the celebrity that contributes to his or her status, would dwindle and this,
eventually would lead to overall economic inefficiency.42 This is known as the
tragedy of commons argument, which is the idea that unless control and
centralization of resources such as fame, personal resources and the like takes
place, there exists a danger of overuse and eventual reduction of value in
these resources leading to overall economic inefficiency.43
However, the inconsistency with this argument is that while it fits
well in the context of tangible property, fame and personal information is
intangible.44 As Mark Lemly points out, the problem lies with the inherent
lack of understanding of the non rivalrous and non-depleting nature of the
property in question i.e. information, and that the tragedy of commons
Gloria Franke, The Right of Publicity vs. The First Amendment: Will one test ever
capture
the
starring
role?,
available
at
http://weblaw.usc.edu/why/students/orgs/lawreview/documents/Franke_Gloria_79_4.p
df (last visited on March 19, 2013); Michael Madow, Private Ownership of the public
image:
Popular
culture
and
publicity
rights,
available
at
http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1756&context=californial
awreview (Last visited on March 19, 2013); Kim Fox, A brand new image? Should
personality
rights be
recogniserecognised
in
the
UK?
available
at
www.kent.ac.uk/law/ip/resources/ip_dissertations/2005-06/Fox.doc (Last visited on
March 19, 2013).
42 William M. Landes & Richard A. Posner, Indefinitely Renewable Copyright, 70 U. Chi.
L. Rev. 471, 485 (2003)
43 Mark F. Grady, A Positive Economic Theory of the Right of Publicity, 1 UCLA Ent. L.
Rev. 97, 109 (1994)
44 Mark A. Lemley, Ex Ante Versus Ex Post Justifications for Intellectual Property 71 U.
Chi. L. Rev. 129, 144-47 (2004)
41

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argument would stand only if the information is either under produced or

over distributed.45 Moreover, it is believed that such an argument would also
be anti-market because it seems to argue that the value of the celebritys
image will reduce with overuse46.
C. MORAL/ NATURAL RIGHTS JUSTIFICATION

A strong justification comes from the moral rights theory. 47 Rather

than focusing on a theory of personal liberty, this theory advocates a labour
based moral right i.e., the right of an individual to his or her own labour and
protection against unjust enrichment by competitors.48
The moral rights theory finds basis in the Kantian philosophy that an
individual has the right to control the use of his own person and that any
unauthorized invasion of the same by anyone else is a an infringement of a
persons inherent right of freedom.49 Prof. McCarthy summarizes the
argument aptly by stating that-perhaps nothing is so strongly intuited as the notion
that my identity is mineit is my property to control as I see fit. Those who are critical of
this principle should have the burden to articulate some important countervailing social
policy which negates this natural impulse of justice.50
Thus, the idea of giving an authors proprietary interest in his identity
is based on the fact that he has invested time and energy in earning the
celebrity status and must be allowed the control and use of the same.51 When
an advertiser borrows this fame that belongs to the celebrity to promote his
own product, the advertiser must do so only with the permission of the
celebrity.
The natural rights theory makes room for the argument that while
there might not be any visible economic harm to the individual, there is a
possibility of unjust enrichment (for example a third party exploiting the
information of the individual for economic gain by selling it to advertisers).
Id.
William M. Landes & Richard A. Posner, Indefinitely Renewable Copyright, 70 U. Chi.
L. Rev. 471, 485 (2003).
47 Roberta Rosenthal Kwall, Fame, 73 Ind. L.J. 1, 57 (1997).
48 Edward J. Bloustein, Privacy as an Aspect of Human Dignity: An Answer to Dean
Prosser, 39 N.Y.U. L. Rev. 962, 989 (1964)
49 Alice Haemmerli, Whose Who? The Case for a Kantian Right of Publicity, 49 Duke L.J.
383, 411-30 (1999)
50 J. Thomas Mccarthy, The Rights of Publicity and Privacy 1.3 (2nd ed. 2011).
51 Andrew T. Coyle, Finding A Better Analogy For The Right Of Publicity, 77 Brook. L.
Rev. 1167.
45
46

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Therefore, by adhering to this theory and establishing a right, an individual

needs to only show unjust enrichment and an infringement of right, and not
necessarily economic harm.52
However, Professor Michael Madow points out a flaw in this
justification: the fact that the celebrity is not the sole and sovereign author of what
she means for others53 Celebrity value is not created entirely by the labour of the
celebrity, but also by the cultural and contextual meaning and recognition
given to this status by the media and the audience54.
In spite of this, the natural rights theory has found wide acceptance
in the courts55. However this theory has fuelled unchecked expansion of the
scope of the right. For instance, in Vanna White v. Samsung Electronics, America,
Inc.56, Vanna White was able to successfully claim that an advertisement using
a robot modelled on her was usurping the control that she had in her
persona as a matter of natural right. This case could have far-reaching
consequences since it has a tendency to blur the distinction between the
identity of a celebrity and a role that the celebrity may be playing causing the
scope of the persona protected under this right to expand beyond
permissible limits.
D. THE TRADEMARK LAW JUSTIFICATIONA MORE COMPELLING
JUSTIFICATION FOR THE RIGHT OF PUBLICITY

Unlike the other theories, the trademark justification actually gives a

reason to protect the right of publicity. It is also the closest analogy to the
right of publicity57. The purpose of trademark law is to protect the integrity
of a marks meaning by preventing uses that would result in customer
confusion or interfere with their mental association between the mark and
the product it endorses. This seems a legitimate justification for the right of
publicity as well.58 Thus, in order for any celebrity to establish a violation of
the right of publicity, the holder of the right must first establish that there
has been a commercial exploitation of the celebritys public image; and
William Prosser, Privacy, 48 Cal. L. Rev. 338.
Michael Madow, Supra n. 5, at 195.
54 Natalie Grano, Million Dollar Baby: Celebrity Baby Pictures and the Right of Publicity,
20 Fordham Intell. Prop. Media & Ent. L.J. 609, 639.
55 Jeffery J. Brown, Defending the right of publicity: A natural rights perspective, 10 Intell.
Prop. L. Bull. 131 2005-2006
56 White v. Samsung Elecs. Am., Inc., 971 F.2d 1395, 1401 (9th Cir. 1992)
57 Stacey Dogan and Mark A. Lemley, Supra n. 11, at 1190.
58 Ibid.
52
53

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secondly, that such exploitation has had an adverse effect on the mental
association that the audience makes between the celebrity and his or her
public image.
In addition to a reason to protect publicity rights, the trademark law
justification also provides a clear idea of the scope of the right of publicity,
which as we shall see in the subsequent sections, is particularly useful. The
right of publicity is explained hereafter using four prominent prongs of
trademark law and their rationales in an attempt to understand the scope of
the right of publicity cases.
1. Likelihood of confusion
The rationale behind the use of trademarks by product manufacturers
has been to build goodwill in their products and reduce the costs of finding a
product that a consumer may have to incur. This rationale forms the basis
for trademark law. Traditionally, consumer confusion cases targeted passing
off cases involving competitors who tried to cash in on source confusion that
might have been created in the minds of the consumers. However, courts
have often found that even in cases where the infringers are not necessarily
competitors of the trademark owners, consumers might assume that the
maker of one sponsors the production of the other and blame the trademark
of the owners for any defect in the purchased good.59 Thus, frequently, even
if the consumers are not led to believe that trademark owner is the one
selling the product, the use of a similar trademark might give them an
impression that the trademark owner is still somehow affiliated with the
infringers products. Hence, the likelihood of confusion rationale draws
attention to the fact that there has been a commercial exploitation of the
celebritys image that has resulted in an undesired, if not adverse effect on
the mental association that the audience may have made between him and his
public image.
This rationale applies more to right of publicity cases because the use
of a celebritys name, image, voice or likeness of a celebrity in an
advertisement would probably give the audiences an impression that he or
she intends to endorse the advertised product60. As has already been
discussed, there is a strong chance in such cases that the celebrity does not
59
60

Robert G. Bone, Enforcement Costs and Trademark Puzzles 90 Va. L. Rev. 2099 (2004).
Grant v. Esquire, Inc. ; Hogan v. A.S. Barnes & Co ; James Treece, Commercial Exploitation
of Names, Likenesses, and Personal Histories, 51 Tex. L. Rev. 637, 647 (1973).
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wish to be associated with the product so endorsed. Thus in Midler v. Ford

Motor Co.61, when Ford Motor companys advertisement played the voice of
an impersonator hired to imitate the vocal style of Bette Midler, the singer,
who did not lend her voice or songs to advertisements for product
endorsements as a matter of principle, sued for infringement of her right of
publicity. The Court held in her favour, primarily because the use of the
impersonators voice had misled the consumers into believing that she
endorsed Fords products. American law allows some protection to
celebrities against false endorsement under section 43(a) of the Lanham Act,
which protects unregistered marks or trade names.62 A right of publicity
based on trademark justifications can strengthen this protection afforded to
the celebrities.
On the other hand, this rationale fails in cases like Carson v. Heres
Johnny Portable Toilets63, where the plaintiff claimed that his right of publicity
had been violated when his tag line, Heeeeeeeeeres Johnny had been used
for a portable toilet; or Vanna White v. Samsung Electronics America, Inc.64. In
both cases, the advertisements of the defendants had been quite clear about
the dissociation of the celebrities from their products. There was little scope
for consumers to be misled into believing that the celebrities endorsed such
products.
In spite of this, the ruling in Vanna White v. Samsung Electronics
America, Inc. allowed the standard for violation of right of publicity to be
lowered from actual customer confusion to mere recognition because of the
evocation of the celebritys personality in the advertisement. Such expansion
of the right of publicity has often been justified on the ground that it finds an
analogy in the overzealous judicially created trademark law doctrine of
initial-interest confusion, which tests whether the defendant's use of the
plaintiff's mark was done in a manner calculated to capture initial consumer attention

849 F.2d 460 (9th Cir. 1988)

Landham v. Lewis Galoob Toys, Inc.; Waits v. Frito-Lay, Inc; Laura A. Heymann, The Birth of
the Authornym: Authorship, Pseudonymity, and Trademark Law, 80 Notre Dame L. Rev.
1377, 1434-44 (2005)
63 849 F.2d 460 (9th Cir. 1988).
64 971 F.2d 1395, 1401 (9th Cir. 1992)
61
62

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even though no actual sale is finally completed as a result of the confusion.65 However
recent trends suggest discarding the initial-interest confusion doctrine66.
2. Trademark Dilution
Even in the absence of consumer confusion, trademark law does
prevent the use of a mark in some exceptional cases based on the doctrine of
trademark dilution. This doctrine allows the owners of sufficiently famous
marks to claim protection against other producers commercial exploitation
of those trademarks for their own products, even if such products were
unrelated.67 This doctrine is said to be targeted at reducing consumer search
costs.68
Dilution can take place in two ways: first, the significance of a mark
can be blurred by associating the mark with lots of different products; and
second, by associating the mark with unwholesome products. This test
intends to carve out a limited right for owners of famous marks. An instance
of the first would be one where a unique mark, for example, Philips, which is
associated with electronic household items, is being used to market
completely unrelated products like pressure cookers69. Even if the consumers
understand that the two Philips trademarks intend to market different
products, an increase in the distribution of Philips marked products would
make it difficult for the consumer to tell which producer is responsible for
any particular product.
Tarnishment occurs when the infringer uses the mark to sell goods
which are either of poor quality or of offensive nature and consequently, take
away from the goodwill that the famous trademark holder garnered with its
customer base70. As a result of this, even if consumers acknowledge the
Dr. Seuss Entrs. v. Penguin Books (9th Cir. 1997) 109 F.3d 1394, 1405.
Dwyer Instruments, Inc. v. Sensocon, Inc., 2012 WL 2049921; Lamparello v. Falwell; Bosley Med.
Inst. v. Kremer; Eric Goldman, More Evidence That the Initial Interest Confusion Doctrine
is Dying--Dwyer v. Sensocon, Technology and Marketing Law Blog, June 15, 2012, available at
http://blog.ericgoldman.org/archives/2012/06/more_evidence_t.htm
67 Bolger v. Youngs Drug Prods. Corp. ; Va. Pharmacy Bd. v. Va. Citizens Consumer Council, Inc;
Hoffman v. Capital Cities/ABC, Inc.
68 Stacey Dogan and Mark A. Lemley, Supra n. 11, at 1198.
69 SC dismisses Kunj Aluminium plea over Philips trademark row, Financial Express,201203-12, available at http://www.techzone360.com/news/2012/03/12/6181638.htm
70Britt N. Lovejoy, Tarnishing the dilution by Tarnishment cause of action: Starbucks Corp.
v. Wolfes Borough Coffee Inc. and Secret Catalogue Inc. v. Moseley compared
http://btlj.org/data/articles/26_1/Web%20PDFs/623-654_Lovejoy_090811.pdf
(Last
visited March 18th, 2013).
65
66

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difference between the two marks, their subconscious associations of

unwholesome products with the famous trademarks may tarnish the image of
the famous trademark. . Thus, while it is possible for a big brand to bring a
suit for tarnishment of trademark against the producer of pornographic
material, it would not be possible for it to do the same against the producer
of a t-shirt that shows a cartoon character urinating on it. This is because in
the latter case, the t-shirt maker is continuing to reinforce the association
between the trademark and the product it seeks to endorse, even if he is
doing it in a way that the trademark holder may not agree with71. Thus, such
cases would not fall within the ambit of the definition of trademark dilution.
Similarly, a right of publicity claim on the basis of dilution cannot be
made unless the claimant is able to establish that the infringer of the right is
acting in a way as would dilute the association that the audience makes
between the claimant and the public image of the claimant72. Based on this
rationale, Vanna White would not have been able to claim a violation of the
right of publicity because the robot modelled on her did nothing to dilute the
association that the audience made between Vanna White and her public
image. If anything, the robot reinforced it by the very act of evocation that
Vanna White complained against. Hence, it is submitted that under both the
rationales, i.e., likelihood of confusion and the trademark dilution, Vanna
White should not have been able to sustain a violation of right of publicity
claim. On the other hand, it would be pertinent to consider a case such as
Elvis Presley Enterprises, Inc. v. Capece73. This case involved a claim for violation
of the right of publicity of Elvis Presley by the Velvet Elvis bar. While this
came up subsequent to Presleys death and consequently, does not satisfy
either of the trademark law rationales; because there was no chance that
patrons of the bar associated the bar with Elvis Presley, had he been alive,
this would have been a fit case for a claim for violation of right of publicity
on the ground of dilution of public image. It is emphasized that this
rationale effectively defeats the call for a post mortem right of publicity74.75

71Stacey

L. Dogan & Mark A. Lemley, Trademarks and Consumer Search Costs on the
Internet, 41 HOUS. L. REV. 777, 794 (2004)
72 Britt N. Lovejoy, Supra n. 70.
73 141 F.3d 188 (5th Cir. 1998).
74 Cairns v. Franklin Mint Co., ; Joseph J. Beard, Casting Call at Forest Lawn: The Digital
Resurrection of Deceased Entertainers--A 21st Century Challenge for Intellectual Property
Law, 8 High Tech. L.J. 101, 146-70 (1993).
75 Stacey L. Dogan & Mark A. Lemley, Supra n. 11, at 1196.
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3. Merchandising rights
This theory of trademark law does not find basis in the reduction of
customer search-costs. Instead, it is based on the trademark as property
approach and is a manifestation of the assertion of the trademark holders
control over the merchandise bearing a trademark.76 Merchandising cases
thus view the trademarks as product features than as brands77. However, this
has been a very shaky justification primarily because of the absence of an
inherent right of the trademark holder to make money by trading on the
value of a trademark78. In the absence of consumer confusion, the courts
have often been hesitant to recognise the merchandising rights in themselves
and have always attempted to validate the rights of the trademark holders on
the basis of consumer expectation in the interest of competition.79
The right of publicity proponents would prefer this rationale because
it allows them to control any use of their name or image, or for that matter,
any aspect of their personality for profit, even where the desire of the alleged
infringers was to show them in an artistic, parody or news format. Based on
this rationale, Martin Luther King, Jr.s estate, claiming that the defendant
was trading on the goodwill that ought to belong to Kings family prevented
the sale of his busts80; the descendants of The Three Stooges prevented sales
of t-shirts that portrayed their likenesses81; Arnold Schwarznegger filed a suit
against the manufacturers of Schwarznegger bobble-head dolls82; and Jessica
Simpson sued a company for marketing a ring that looked like her wedding
ring83. The complaint in all these cases, much like in trademark cases with
claims regarding violation of merchandising rights, has been that the
defendants, while not having advertised something based on their names or
Ibid. at 1203.
Id.
78 Saxlehner v. Wagner; Playboy Enters. v. Netscape Communications (Berzon, J., concurring); David
J. Franklyn, Debunking Dilution Doctrine: Toward a Coherent Theory of the Anti-FreeRider Principle in American Trademark Law 56 Hastings L.J. 117 (2004); Mark A. Lemley,
What's Different About Intellectual Property, 83 Tex. L. Rev. 1097 (2005); Wendy J.
Gordon, On Owning Information: Intellectual Property and the Restitutionary Impulse,
78 Va. L. Rev. 149, 167 (1992)
79Stacey L. Dogan & Mark A. Lemley, Supra n. 11, at 1205.
80 Martin Luther King, Jr., Ctr. for Social Change, Inc. v. Am. Heritage Prods.,
81 Comedy III Prods., Inc. v. Gary Saderup, Inc
82 John Broder, Schwarzenegger Files Suit Against Bobblehead Maker, N.Y. Times, May 18,
2004, at A16.
83 Simpson v. Inspired Silver, Inc., No. SACV 05-3 (DOC (ANx) (C.D. Cal. filed Jan. 3, 2005).
76
77

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likenesses still made money using the famous name, which the plaintiffs
claim to have exclusive control over84.
Just like in trademark cases where merchandising rights are claimed
to have been violated, in all of the aforementioned cases, the celebrities claim
complete and exclusive control over their public image to the extent that any
use of the same even for purposes such as artistic expression would require
their consent. However, the use of the merchandising rights argument alone
does not satisfy the two pronged test for establishing violation of right of
publicity. One cannot rely entirely on the commercial exploitation of the
public image of the celebrity alone in order to establish the right of publicity.
It must also be established that such commercial exploitation takes away
from the public image that the celebrity seeks to maintain for his/her
audience. Hence it is suggested that the merchandising rights rationale be
used only along with the likelihood of confusion rationale.
Moreover, allowing such a right to exist would severely curtail artistic
expression. For instance, if a T-shirt used an image of a celebrity to spoof the
celebrity, it should not be considered to be violation of merchandising rights
because the T-shirt does not seek to commercially exploit the popularity of
the celebrity in any way. On the contrary, it quite evidently dispels any
assumption that the celebrity may be endorsing such a T-shirt. Thus, the
Court rightly rejected Tiger Woods claim that he owned the exclusive right
to depict his image in ETW Corp. v. Jireh Publishing Inc.85
However, the rationale of the Court in this case which considered the
competing interest of the artist who had made the painting at issue, which to
the court, was art of sufficient quality that the Court could declare to be
protectable expression in itself,86 is flawed. Such emphasis on transformative
use similar to cases of copyright would lead to the conclusion that had the Tshirt at issue merely depicted a photograph of Tiger Woods, it would be
considered to be a sufficient infringement of the right of publicity rights. The
judiciary should avoid the adoption of such reasoning. As has already been
discussed, a more appropriate reasoning would have been based on the idea
of consumer confusion. It is quite possible for a section of the consumers to
assume that Tiger Woods himself endorsed the T-shirt and that it was a part
Factors Etc., Inc. v. Pro Arts, Inc; Winterland Concessions Co. v. Sileo; Restatement (Third) of
Unfair Competition 47 cmt. b (1995).
85 332 F.3d 915, 936-38 (6th Cir. 2003)
86 Ibid at 938.
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of official merchandise. Such use of the T-shirts actually confuses this section
of consumers.
On the other hand, the suit in Comedy III Prods., Inc. v. Gary Saderup,
Inc was instituted subsequent to the death of the Three Stooges where there
was no scope for consumer confusion. Hence, most courts deciding on
trademark issues emphasize the need for consumer confusion to exist, rather
than relying on the naked right to control the use of any mark.88 An example
is the case of Rock and Roll Hall of Fame and Museum, Inc. v. Gentile Productions 89,
where the plaintiff obtained trademark protection for its museum and sought
to prevent the defendant, a photographer, from selling photographs that
prominently featured the museum. The Court did not attempt to analyze
whether or not the defendants photographs were sufficiently artistic.
Instead, it relied on the case of Estate of Presley v. Russen90, which held that
registering the use of one image of Elvis Presley did not justify trademark
rights over every picture of Presley and held that the plaintiff had not made
trademark use of the overall design of the museum to brand particular
goods and therefore, they could not claim protection for the same.
87

This paper argues that much like merchandising rights, publicity

rights seek to protect the public persona of the celebrities as the subject of
protection. However, owing to obvious inconsistencies if they were
protected as standalone rights, courts must couple them with the traditional
justifications such as consumer confusion and dilution of the public persona
of the celebrities. Thus, the emphasis should also be on the fact that the
commercial exploitation of the celebritys public image has had an impact on
the mental connection that the audience makes between the celebrity and his
image. The protection under trademark can extend only to those particular
images, poses, distinctive features that the trademark owner has sought
protection for. However, the right of publicity is a broader right and
encompasses the overall public persona of the celebrity. This paper attempts
to define these boundaries.

21 P.3d 797 (Cal. 2001)

Stacey L. Dogan & Mark A. Lemley, Supra n. 11, at 1207.
89 134 F.3d 749, 750-51 (6th Cir. 1998)
90 513 F. Supp. 1339, 1363-64 (D.N.J. 1981)
87
88

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IV.

VOL.1 ISSUE 1

PUTTING PRIVACY BACK IN THE RIGHT OF PUBLICITY:

USING PUBLICITY RIGHTS OF PUBLIC FIGURES TO
PROTECT THEIR RIGHT TO PRIVACY

Celebrities, whether in India91 or abroad92, have often

complained about the intrusive behaviour of paparazzi that go to great
lengths to get candid photographs of them. In all these encounters, the
paparazzi managed to get information that would have, at best, satiated the
publics curiosity regarding celebrities private lives. It is doubtful that such
Big B back home, upset with paparazzis insensitivity India today, February 24, 2012,
available online at http://indiatoday.intoday.in/story/amitabh-bachchan-discharged-fromhospital/1/175099.html (Last visited October 22, 2012); Paparazzi damages Preity Zinta's
car at Winfrey's party Hindustan Times, January 17, 2012, available at
http://www.hindustantimes.com/Entertainment/Tabloid/Paparazzi-damages-PreityZinta-s-car-at-Winfrey-s-party/Article1-798300.aspx (Last visited October 22, 2012);
Preitys ankle twists in paparazzi assault, Times of India, September 5, 2012, available at
http://articles.timesofindia.indiatimes.com/2012-09-05/newsinterviews/33582982_1_actress-preity-zinta-debut-production-flashes (Last visited on
October 22, 2012).
92 Catriona Wightman, Mischa Barton slams paparazzi: It's stalking and beyond invasive
Digital
Spy,
July
30,
2012,
available
at
http://www.digitalspy.co.uk/showbiz/news/a396178/mischa-barton-slams-paparazzi-itsstalking-and-beyond-invasive.html (Last visited on October 22, 2012); Miley Cyrus lashes
out at photographers sitting in front of her home Gossip Cop, July 15, 2012, available at
http://www.gossipcop.com/miley-cyrus-attacks-paparazzi-twitter-photographers/ (Last
visited on October 22, 2012); Donna Peerce, Rob Pattinson confronts invasive paparazzi:
Stalking celebrities should be against the law, examiner.com, July 27, 2010, available at
http://www.examiner.com/article/rob-pattinson-confronts-invasive-paparazzi-stalkingcelebrities-should-be-against-the-law (Last visited on October 22, 2012); Hilary Duffs
run-in with invasive paparazzi celebrity-gossip.net, September 2, 2012, available at
http://celebrity-gossip.net/hilary-duff/hilary-duffs-run-invasive-paparazzi719746?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Celebr
ityScandalsTheGossipGirls+%28Celebrity+Scandals%3A+The+Gossip+Girls%29 (Last
visited on October 22, 2012).
92 Pink penned an open letter dated June 22, 2011 condemning the intrusive tactics adopted
by the paparazzi as they tried to take pictures of her baby: available at
http://www.pinkspage.com/us/news/important-note-pnk (Last visited on October 22,
2012); Chris Tryhorn, Rowling wins the privacy trial, The Guardian, May 7, 2008,
available
at
http://www.guardian.co.uk/media/2008/may/07/medialaw.pressand
publishing; Jeffrey Scott Shapiro, Paparazzi, haven't you learned? Dont endanger Kate
Middleton like Princess Diana, Fox News, September 15, 2012, available at
http://www.foxnews.com/opinion/2012/09/15/paparazzi-havent-learned-dontendanger-kate-middleton-like-princess-diana/ (Last visited on October 22, 2012); Steven
Baxter, The Kate Middleton topless photos are the grossest invasion of privacy New
Statesman,
September
14,
2012,
available
at
http://www.newstatesman.com/blogs/media/2012/09/kate-middleton-topless-photosare-grossest-invasion-privacy (Last visited on October 22, 2012).
91

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information was of any real significance to the public. In most of these

examples, celebrities were caught in public places where celebrities,
especially in the United States, have virtually lost their right to be left alone.
While on one hand, the American laws support of the freedom of
press is exemplary, its support of the right to privacy on the other has been
shockingly meagre93. It does not come as a surprise then that it offers scarce
protection to the privacy of individuals who have been photographed in
public places94. This would endanger the right to privacy of individuals even
further in public places. American media persons have often relied on the
newsworthiness exception to the right to privacy to seek immunity from
legal action even in the face of gross privacy violations on their part95. Legal
experience indicates that so long as the name, photograph or picture used in
the published article has a real relationship with the article96 and the article is
not an advertisement in disguise,97 any published article about any subject of
public interest has been considered to be newsworthy98. The
newsworthiness exception has been otherwise defined very broadly to even
include descriptions of actual events such as weddings99, of latest fashion
trends100, guides to nude beaches101, etc.
However, the repetitive display of callousness by the paparazzi has
driven some states to enact anti-paparazzi legislations. California, for instance
Florida Star v. B.J.F, 491 U.S. 524 (1989) (in a shocking display of callousness, this
judgment reversed an award of damages to a rape victim whose name had been published
in a newspaper on the ground that the matter was on public significance the name had
been reported in a police report).
94 Daly v. Viacom, Inc., 238 F. Supp. 2d 1118 (N.D. Cal. 2002); Wilkins v. Nat'l Broad. Co., Inc.,
84 Cal. Rptr. 2d 329 (Cal. Ct. App. 1999); Gill v. Hearst Publishing Co., 253 P.2d 441, 444
(Cal. Sup. Ct. 1953).
95 Time, Inc. v. Hill, 385 U.S. 374 (1967); Sidis v. F-R Pubrg, 113 F.2d 806 (2nd Cir. 1940);
Eastwood v. Super. Ct., 149 Cal. App. 3d 409 (Ct. App. 2nd Dist. 1984), superseded by
statute, CAL. CIV. CODE3344 (1997); Carlisle v. Fawcett Publ'ns, Inc., 201 Cal. App. 2d
733 (Ct.App. 5th Dist. 1962)
96 Murray v. New York Magazine Co., 27 N.Y.2d 406, 409 (1971); Thompson v. Close-up, Inc., 98
N.Y.S.2d 300 (App. Div. 1950)
97 Murray v. New York Magazine Co., 27 N.Y.2d 406, 409 (1971); Alina Raines, Case
Comment: Messenger v. Gruner + Jahr Printing and Publishing, available at
http://www.nyls.edu/user_files/1/3/4/17/49/v46n3-4p781-796.pdf
98 Beverly v. Choices Womens Med. Ctr., 78 N.Y.2d 745, 751(1991); Stephano v. News Group
Publications, , 64N.Y.2d 174.
99 Freihofer v. Hearst Corp., 65 N.Y.2d 135 (1985)
100 Stephano v. News Group Publications, , 64N.Y.2d 174; Abdelrazig v. Essence Communications, 639
N.Y.S.2d 811 (N.Y. App. Div. 1996).
101 Creel v. Crown Publishers, Inc., 496 N.Y.S.2d 219 (App. Div. 1985).
93

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has amended its Civil Code102 to control excessive prying of media-persons

into the lives of celebrities. It is targeted at acts of picture-taking, sound
recording and similar invasive techniques of reporting that the paparazzi may
engage in, especially when the plaintiff is engaged in a personal or familial
activity under circumstances in which the plaintiff had a reasonable
expectation of privacy.103
Further, the court in Virgil v. Time, Inc.104 proposed a test to narrow
down the scope of the newsworthiness exception and place reasonable
limitations on the right to report105 by holding that an issue would not be
considered newsworthy if a reasonable member of the public, with
decent standards would recognise that he has no concern with the
information being presented. It further clarified: [t]he fact that [people]
engage in an activity in which the public can be said to have a general interest
does not render every aspect of their lives subject to public disclosure. A federal
court in Galella v. Onassis106 relied on the opinion of the Supreme Court in
Time v. Hill107 that stated that the First Amendment would apply to all
information which is needed or appropriate to enable members of
society to cope with the exigencies of life. It held that information which
was intended merely to satisfy the curiosity of the public regarding the lives
of celebrities could not be considered newsworthy. Therefore, the reporting
of the paparazzi which involved filming of practically every mundane detail
of Onassis and her childrens lives could not be protected as being
newsworthy108.
It is proposed in this paper that the justification of dilution of the
celebritys personality can be used to control prying and aggressive paparazzi.
Having established in the previous sections that the right of a celebrity in his
or her public image is similar to the right of a trademark holder in his or her
mark, it can be argued that just like merchandising rights are based on the
trademark as property approach and are a manifestation of the assertion of
the trademark holders control over the merchandise bearing a trademark,
publicity rights are based on the idea that the celebrity has a proprietary
CAL. CIV. CODE 1708.8 (West 2010).
Ibid. 1708.8(a)-(b)
104 527 F.2d at 1129.
105 Keith D. Willis, Supra n. 108, at 188.
106 353 F.Supp. 196, 216 (S.D.N.Y. 1972)
107 385 U.S. 374, 388 (1967) (quoting Thomhill v. Alabama, 310 U.S. 88, 102 (1940).
108 Galella, 353 F.Supp. at 225
102
103

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interest in his or her public image and is entitled to assert exclusive control
over the same. However, as has already been discussed the merchandising
rights test needs to be accompanied by the test of consumer confusion. The
celebrity can also argue that the significance of his or her public image is
being blurred by associating the mark with lots of different products.
The obvious exceptions to this would be where the celebrity makes
appearances at events where he or she expects the paparazzi to be present or
where the uninvited intrusion into aspects of the celebritys life are justified
on the ground of newsworthiness as defined and limited in the Virgil and
Onassis judgments. For instance, if the celebrity is indulging in illegal activities
like embezzlement of money, then he or she, just like any ordinary being
loses protection against media probing. However, he or she would be
justified in not allowing pictures of his or her family or residence being taken
surreptitiously on the ground that such media focus would dilute his or her
public image. The test of reasonable expectation of privacy as laid down in the
California Civil Code109 can be applied in order to determine what the
celebrity could view as being outside of his public image.
The propositions put forward in this section can be summarized as
follows: A celebrity has a proprietary right in his or her public image, which
disallows only such use of the image that is likely to adversely affect the
mental connection that the celebrity would like the audience to establish
between the celebrity and his or her image. Any kind of reporting that
adversely affects this mental association would only survive if it satisfies the
test of newsworthiness. The newsworthiness exception can be satisfied only
if two requirements are met: first, the information that is sought to be
provided is needed or appropriate to enable members of society to
cope with the exigencies of life; and second, that it respects the reasonable
expectation of privacy that any person may have if he or she is performing
activities that a reasonable person may consider to be private. This test of the
right of publicity would be able to protect the privacy of a celebrity, while
allowing the press enough freedom to crackdown on instances where
celebrities may actually be indulging in activities that might adversely affect
the interests of the public.

109

Supra n. 119.
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V. CONCLUSION: DEVELOPING THE RIGHT OF

PUBLICITY IN INDIA
While publicity rights have been acknowledged by the Indian
judiciary,110 the jurisprudence on this subject is quite limited. The first case to
acknowledge character merchandising in India was Star India Private Limited v
Leo Burnett India (Pvt.) Ltd111. However, that case primarily dealt with the
public image and the goodwill generated by the characters of the popular
television soap opera, Kyunki Saas Bhi Kabhi Bahu Thhi, whose producers
accused the defendants of appropriating the public images of the characters
of the soap in their commercial advertisement for Tide detergent. The Delhi
High Court in ICC Development (International) Limited v Arvee Enterprises112 held
that publicity rights are also a species of privacy rights whose violation would
attract Articles 19 and 21 of the Constitution. However, it took a more
evolved stance in DM Entertainment Pvt. Ltd. v. Baby Gift House113, which relied
on Ali v. Playgirl Inc114s focus on a performers proprietary interest in the
profitability of his public reputation or persona to hold that the right of publicity
protects against the unauthorized appropriation of an individuals very persona which
would result in unearned commercial gain to another115. While DM Entertainment did
use trademark jurisprudence, it was largely because the plaintiff company was
incorporated with the object of managing Daler Mehndis advancing career
and the artist had assigned all his rights, title and interest in his personality
inherent in his rights of publicity along with the trademark DALER
MEHNDI as well as the goodwill vested therein in the plaintiff company.
However, the DM Entertainment case remains the only case where a serious
attempt was made to recognise the right of publicity.
While there is scope for development of the right of publicity in
India and the jurisprudence used to define the same has largely been
imported from the United States of America, it is important to have a sound
justification for the right in India before importing the same into Indian
110DM

Entertainment Pvt Ltd v Baby Gift House, MANU/DE/2043/2010; ICC Development

(International) Limited v Arvee Enterprises, 2003 (26) PTC 245 (Del); Star India Private Limited v
Leo Bunett India (Pvt.) Ltd., (2003) 2 B.C.R. 655
111 (2003) 2 B.C.R. 655
112 2003 (26) PTC 245 (Del).
113 MANU/DE/2043/2010
114 447 F Supp 723
115 DM Entertainment Pvt. Ltd. v. Baby Gift House, Supra n. 54, 13.
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jurisprudence. An analysis of the sparse case law on the subject reveals that
the Indian judiciary has not engaged in such an exercise. In light of the
aforementioned, India should develop a right of publicity with a justification
that is analogous to trademark justifications. It would in all probability, give
Indian celebrities a stronger crutch than the right to privacy to avoid having
pictures of themselves or their family members been taken by the paparazzi
against their will in spheres they consider private.

215