Role of the European Union in the Present Refugee Crisis

(Completed on 16.09.2015)

Introduction

Refugee regime has evolved with modern state systems and reflects changes taking place in international law and politics. The regime underwent a dramatic change during World War II to create a permanent framework to cope with the refugee problems through the United Nations High Commissioner for Refugees and the UN Convention Relation to the status of Refugees.[1]

Study in the subject has increased dramatically with increase in forced migration.[2]

The 1951 Convention Relating to the Status of Refugees has defined the term refugee to mean any person who owing to well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country.[3]

According to the European Commission migrant, refers to a person who leaves from a country or region to settle in another, often in search of a better life.[4]

Syria is the primary refugee producing country for Europe today due to its close proximity. A legal and policy crisis thus emerges.

 

Causes of the Refugee crisis

Instability in the Middle East has been the rule rather than the exception in the 21st Century. Its geopolitical and strategic role arises out of the fact that it is an important trading hub and is rich in resources like crude oil. Most countries share a common history, religion or culture.

Displacement is not uncommon due to the large number of Palestinian refugees produced in the last six decades. This time the problem has emerged not in the Israel Palestinian region but in Syria and Iraq.

The primary cause of the instability in the region is the organization Islamic State in Iraq and Syria commonly known as ISIS[5].  Earlier it was known as ISI which was a terrorist group funded by the Sunni dominated Saudi Arabia against the Shia dominated Iran. Nouri al-Maliki, the Shia prime Minister of Iraq discriminated and oppressed the Sunnis and his government is corrupt and inefficient. This lead to small scale Sunni rebellion. Its Army was is not loyal to the government. The ISIS gained control over some parts of Iraq and took advantage of the Arab Spring in 2010 which completely altered the power structure in the Middle East. ISIS and other armed groups joined the civil war is Syria and expanded their territorial control. In 2014 they declared a caliphate in the area the group controls from Aleppo in Syria to the province of Diyala in Iraq.

The rule established by them in the territories they governed was so harsh that even Saudi Arabia and the Al Qaieda were shocked and withdrew their support. They have committed massacres against civilians, suicide bombings, public executions, raids, abuse of women and children, execution of foreign nationals and have created an atmosphere of absolute terror and fear of death.

Nations have come together to form an Anti ISIS coalition and several nations have carried out activities of military intervention. The US has conducted several airstrikes as well. However, no country has been successful in dislodging the ISIS stronghold. Meanwhile the condition of ordinaly citizen worsens in the region. The ISIS is intolerant toward Shia Muslims, non-Muslims and individuals with dissenting opinion. All opposition is usually met with death. Therefore, the only way for individuals fearing persecution on the basis of their religion or point of view, it is to seek asylum in s neighbouring country.

The refugees board rickety boats and set sail for a country like Greece or Malta but often they hope to get picked up along the way by a passing ship.

Location of the Effect: Europe

The European Union was established by the Treaty of Maastricht. It was setup to provide a vessel for supplementary policies and forms of cooperation. It is considered to be a layerd organization comprising of the European Communities, CFSP and PJCCM.

The Treaty on the European Union and the European Union itself was created through a hard fought-out compromised between the proponents of the community method and proponents of traditional inter-state co-operation.[6] In a community method, governance in specific spheres is carried out by supranational institutions. In an inter-state cooperation model, initiative remains with the Member states and decisions are taken by unanimity. Although member states were wary of and resisted the former model due to fears that it would weaken state mechanisms in those spheres, the EU has structurally developed into more than mere cooperation.

The twenty eight members of European Union comprise of France, Italy, Germany, Belgium, Spain, Portugal, United Kingdom, Greece and Denmark among others. All members of the European Union are also members of the Council of Europe which is the leading human rights organization in the region.

 

European Laws on refugees

The law applicable to refugees in Europe would be conventions of the Council of Europe, laws of the European Union and treaties of the United Nations where the member states are signatories.

Article 14(1) of the Universal Declaration of Human Rights (UDHR), which was adopted in 1948, guarantees the right to seek and enjoy asylum in other countries. Also, 1951 Convention relating to the Status of Refugees and its 1967 Optional Protocol relating to the Status of Refugees cover several aspects of rights due to refugees.

Large-scale displacement as the result of armed conflicts found that the 1951 Convention definition did not go far enough in addressing the protection needs of their populations. [7]The 1951 Convention does not define how States Parties are to determine whether an individual meets the definition of a refugee. Instead, the establishment of asylum proceedings and refugee status determinations are left to each State Party to develop. This has resulted in disparities among different States as governments craft asylum laws based on their different resources, national security concerns, and histories with forced migration movements.[8]

EU Community law belongs to international law and is partly embodied in inter-state treaties but may often contain elements which are absent even in advanced international law. The focus is on common internal law among the Member States. Article 78 of the treaty on the functioning of the European Union requires EU member states to create a common policy on asylum, subsidiary protection and temporary protection to any third-country national requiring international protection. It also directs that the principle of non refoulement would be followed. It also directs states to create mechanism for determining which member state would be applicable for hearing an application. Article 78(3) envisages in an emergency situation where sudden inflow of nationals of third countries, and empowers the Council the Council, to adopt provisional measures for the benefit of the Member State(s) concerned after consulting the European Parliament.

Standards for the reception of applicants for international protection were laid down in 2013 by a directive of the European Parliament. It states that an applicant for international protection would be issued a document within three days of application certifying his/her status as an applicant[9]. Detention must be justified for every individual case and should not be applied as a general rule. It should be used only when less coercive measures do not work. It is allowed only under certain enumerated circumstances[10]. Detained applicants would also have access to free legal aid and speedy judicial review.

The Dublin Regulation laid down criteria for determining which Member state would be responsible. The relevant article to consider in the present situation is Article 13 which states that in case of irregular entry to the territory of a Member State by land or sea, the Member State thus entered shall be responsible for examining the application for international protection. That responsibility shall cease 12 months after the date on which the irregular border crossing took place. Article 3, however provides that where it is impossible to transfer an applicant to the Member State primarily designated as responsible because there are substantial grounds for believing that there are systemic flaws in the asylum procedure and in the reception conditions for applicants in that Member State, resulting in a risk of inhuman or degrading treatment within the meaning of Article 4 of the Charter of Fundamental Rights of the European Union.

 

Compelling states to bear responsibility

Asylum applicants from Syria rose to 122 thousand in the EU Member states in 2014, which equated to 20 % of the total from all non-member countries[11]. Thus, a need emerged to find mechanisms by which states could be held legally responsible to process the refugees. The Dublin regulation fixes primary responsibility on nations like Greece, Italy and Malta which receive most of the Syrian refugees because the State through which the third country national first enters Europe is considered the State responsible for adjudicating that national’s asylum claim.[12] Many of these asylum seekers are discovered in other nations like Germany and have to be returned to Greece to have their claims adjudicated.

Human rights organizations including Amnesty International have reported on unsanitary, degrading and overcrowded conditions in Greek detention Centres. There were also instances where the applicants were detained for prolonged periods. Additionally, asylum-seekers have claimed that they did not have access to a UNHCR representative or information about how to apply for asylum while in detention.[13]

In M.S.S. v. Belgium and Greece[14], The Court found that Greece had violated the applicant’s right to an effective remedy and that his detention conditions were degrading. It also found that Greece did not have an effective asylum system and any asylum seeker transferred to Greece under the Dublin Regulation risked grave human rights violation.

Most states of the European Union have either accepted or ratified 1951 Convention relating to the Status of Refugees and the 1967 Optional protocol[15].Non-refoulement is a basic tenant of refugee law and is also recognized by the 1951 Convention. States are prohibited from returning a refugee to the frontiers of territories where his or her life and freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion. [16] This a person must not be sent back to persecution. This principle is binding on all Member States.

In R (on the application of) ABC (a minor) (Afghanistan) v. Secretary of State for the Home Department [17] the claimant was a sixteen year old boy who escaped an abusive family and applied for asylum in UK. He was not granted permission because he was involved in his half brother’s death. The child’s welfare in such situation must be taken into account. Eact case, must be decided individually in light of the unique facts associated with it.

 

Europe’s Response

 

Most European governments were reacting with indifference to the biggest refugee crisis facing our continent in over two decades. Syrian refugees are often pushed back, while others, having arrived in Europe, ended up in detention. Moreover, as the conflict in Syria approaches its fifth year, in many European countries recognised Syrian refugees are still left to fend for themselves, without adequate measures to facilitate their integration, despite the obviously long-term character of their forced displacement.[18]

Countries are now struggling to address the basic needs of Syrian refugees. Problems include overcrowded schools and health facilities, the strain on water, sanitation and electricity infrastructures, and the lack of adequate housing. Syrians in Jordan and Turkey live outside the refugee camps, many of them being forced by extreme poverty to resort to desperate coping strategies, including begging or exploitative work.

Hungary put up a fence along the Serbian border. However, people would still cross the border by using clothes to blunt the barbed wire. Hungary was then forced to allow them to cross the fence at one point in order to avoid them crossing along its entire length.

Denmark said that it had already accepted its fair share of asylum seekers and would not take part in a proposal by the EU Commission to take a share of another 160,000 refugees.

 

Analysis

Large scale migration is an old concept but the crisis today is unprecedented. The Bible provides a compelling literary account of large scale migration of the ancient Israelites from Egypt to Canaan in the Exodus. Jews migrated before and during the Second World War to escape Nazi oppression. In fact they even crossed the Atlantic Ocean. It resulted in a crisis involving a large number for nation including the United States, United Kingdom and even Australia. The Israel-Palestine conflict also resulted in a massive displacement of Palestinian with six million registered refugees.[19] However, the crisis today is characteristically dissimilar from anything before it. The total number of refugees exceeded four million this year.[20]

Today, there are many binding international instruments which protect the rights of the refugees. The EU in particular is an area where humanitarian laws are well developed. There exist common standards for processing refugees and even provisions for sharing responsibility when dealing with a large number of refugees. Claims can be adjudicated at the domestic level and also at the EU level through the robust European Court of Human Rights. Also, several developed and highly industrialised nations exist in the zone. As a general rule, all EU nations share a cordial relationship with each other.

It is very important to call the refugees from Syria by the right name. They are refugees not migrants. The legal implications of the two terms are different. EU member states have legal obligations towards refugees which are not extended to migrants. The rights of refugees are also protected under international legal framework but migrants can only resort to municipal laws. Migrants may be deported to their home countries if they have not arrived with proper documents like visas and permits. Their basic human right of subsistence is also not protected and they cannot avail of state services in place to provide basic living conditions to refugees.

Policy on refugees is determined by state practices, international instruments and regional organizations. However, the decisions of a country must take into account the will of the people living in it. Public opinion is relevant in policy decisions because public pressures may coerce governments to change their stance. Governments of countries are more likely to look at the present crisis with distaste and lament at the infrastructural pressures an influx of refugees would create. However, Individuals and groups within a country are more likely to conclude that the present situation poses a humanitarian crisis and encourage the intake of refugees. Protesters gathered in capitals of Denmark and the UK to protest against their government’s position on the refugee crisis, as other demonstrations were planned in Germany, Spain, France and elsewhere. Danish police estimated that 30,000 people had gathered outside the Danish parliament building in Copenhagen on Saturday, shouting “Refugees are welcome” making clear that the government is wrong in their stance towards refugees.[21]However, the tide may soon turn and the very supporters of liberal refugee norms may begin demanding a cap on the refugee intake due to xenophobia or a fear that national resources and services would not be able to bear them.

Jordan hosts more than 630,000 Syrian refugees, on top of Iraqi and Palestinian ones, Lebanon hosts 1,172, 753 refugees, while Turkey houses 1,805,255 refugees[22]. Turkey became the world’s largest recipient of refugees (including those from Iraq) in 2014. Turkey’s is being deeply affected too, in spite of having the largest economy in the region and a strong state tradition. The ILO has found that unemployment has significantly increased in Jordan since Syrian refugees began to arrive in 2011[23]. The economies of Europe like Germany would be able to sustain refugees much better but have taken in a much smaller number of refugees.

Human Rights in the 21st Century have to be seen in the international global context and human rights instruments in themselves will not prove the ultimate panacea but provide a minimum standard which will become the norm and rather than the exception.[24] Integration policies should be overarching, covering human rights sensitisation

 

Conclusion

It is imperative for states to be sensitive towards the need of the hour. Non-entry policies should be done away with because they are counterproductive. Rather than reducing the number of immigrants, they increase irregular migration and encourage human smuggling.

Individuals found in inland states should not be returned to the countries which were their first entry point into the EU for processing. This is because the asylum system in Greece, Italy and other Mediterranean counties are already paralyzed. They are unable to fulfil even bare minimum requirements of refugees because of the large numbers. Therefore, they should be processed in those nations where they are discovered. Particularly, vulnerable persons like pregnant women should not be sent back for processing. The directives of the applicable international instruments must be followed in asylum detention centres.

The only sustainable solution is stability in the region. It is absolutely impossible for Europe to accommodate the entire number of people which can be expected to be displaced if this crisis continues for long. In fact, several members who are asylum seekers may never become citizens of any European Country. On the other hand public opinion does not allow nations to turn a blind eye to the problem or turn back boats full of Syrians. They are under pressure to accommodate refugees. It would not be viable to support their long term existence in Europe due to a lack of infrastructure and resources. Thus, the refugee crisis makes the EU more invested in in bringing peace to the region through humanitarian intervention if necessary.

 

[1] Laura Barlett, Global Governance and the Evolution of the International Refugee Regime, 14 International Journal of Refugee law 238(2011).

[2] Richard Black, Fifty years of refugee studies: From theory to policy, 35 International Migration Review 57 (2001).

[3] Article 1(A), available at http://www.unhcr.org/3b66c2aa10.html.

[4]Immigration Glossary, available at http://ec.europa.eu/immigration/glossary_en

[5] Also knows as Islamic State and ISIL

[6] Kapteyn & VerLoren van Themmaat, The Law of the European Union and the European Communities 53 (4th ed. 2006).

[7] Asylum and the rights of refugees International Justice Resource Centre available at  http://www.ijrcenter.org/refugee-law/.

 

[8] Asylum and the rights of refugees International Justice Resource Centre available at http://www.ijrcenter.org/refugee-law/.

[9] Article 6, Directive 2013/33/EU of the European Parliament and of the Council.

[10] Article 8 (It also states that grounds for detention must be laid down by national law).

[11]  Asylum Statistics available at http://ec.europa.eu/eurostat/statistics-explained/index.php/asylum_statistics.

[12] Art 10(1).

[13] Amnesty International Annual Report 2012-Greece available at http://www.refworld.org/cgi-bin/texis/vtx/rwmain?page=country&category=&publisher=AMNESTY&type=&coi=GRC&rid=&docid=4fbe393927&skip=0.

[14] Application No. 30696/09, ECHR 2011.

[16]  Art. 33(1) , 1951 Convention relating to the Status of Refugees

[17] [2011] EWHC 2937 (Admin)

[18] http://www.coe.int/en/web/commissioner/-/syrian-refugees-reset-needed-in-europe-s-approach

[19] http://www.unrwa.org/palestine-refugees

[20] http://www.unhcr.org/559d67d46.html

[21]http://www.aljazeera.com/news/2015/09/thousands-part-pro-migrant-rallies-europe-150912133235850.html (it is difficult to assess to what extent the protesters reflect the sentiments of Britain as a whole).

[22] http://www.unhcr.org/559d67d46.html.

[23] The Impact of Syrian refugee crisis.

[24] Rebecca m.m. Wallace and  Olga Martin-Ortega International Law 263  (6th ed. 2009).

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Majority Rule from Foss v. Harbottle

(Completed on 26.09.2015)

Introduction

A company is a juristic person which is conferred with a legal personality distinct from the members who form it. Decisions of the company represent the animus component of its personality and are taken by the Member Shareholders and the Board Members on behalf of the Company. The company also takes decisions regarding pursuing litigation.

Courts do not in general interfere in the management of the company on the insistence of shareholders in matters of internal administration as long as the directors are acting within the powers conferred to them under the Articles[1]. Judges have for long been reluctant to interfere in the internal affairs of companies[2]. For redressal of wrongs done to a company, it is believed that the action should prima facie be brought by the company which was laid down in Foss v Harbottle[3] and Mozley v Alston[4]. This rule is the foundation of common law jurisprudence regarding who may bring an action on behalf of the company. The rule in Foss v Harbottle is prudent since it is unnecessary to give recourse to the courts in regard to a matter which a company can settle on its own, or an irregularity which it can ratify or condone through its own internal procedure[5]. Without this rule, there would be such a large amount of frivolous litigation that the normal functioning of companies would be threatened.

However, a balance must be struck between the effective control of the company and the interests of the individual shareholders[6]. In certain circumstances therefore, an individual member is also allowed to bring an action on behalf of the company to compel the company to comply with its constitution and seek for remedy even when no wrong  has been done to him personally and the majority of members do not wish for the action[7]. There may also be collective litigation by a group of shareholders.

 

Foss v. Harbottle

Facts

The Victoria Park Company was formed by an Act which received assent in May 1837 whose purpose was to purchase around one hundred and eighty acres of land and create a park which would have houses, attached gardens and pleasure grounds. This land belonged to Joseph Dennison, a defendant, and others. Between the time that initial plans were made and the Act to form the joint stock company was passed, Dennison and some others who had agreed to form the joint stock company purchased land from the original owners rapidly so that at the time of passing of the act the Defendants owned more than half of the total land to be developed and re-sold it to the company greatly exceeding the price at which they purchased it. Also, the plaintiffs, defendants and several other persons subscribed for shares. The lands were transferred to the company in three ways. Transfer occurred by conveyance of the property to Victoria Park Company, to some defendant directors in trust for the company or by agreement.

The company was soon incorporated and significant construction took place. Several plots of land and buildings were let out. Four of the defendant directors did not pay up the calls and retained large sums collected from other members by calls. They appropriated these amounts to themselves and others in lieu of reduction of the increased chief rents.

The defendants also borrowed large sums of money from their bankers upon the credit of the company. They also wanted to mortgage the land belonging to the company. However the Act stated that this was not allowed till one half of the share-capital was paid. The defendants thus conveyed the property which was conveyed to them in trust and those properties given through agreement, to other person so that they could be mortgages. Three directors soon became bankrupt and their shares were transferred to the remaining defendants. The Property of the company was misapplied and wasted. The debts of the company were accumulating in the meanwhile. Thus, they profited from the establishment of the company at the company’s expense[8].

A bill was brought by two shareholders Richard Foss and Edward Turton on behalf of themselves and other shareholders except those who were defendants. It was alleged that the defendants purchase the land through an arrangement by which they concerted at or after the formation of the company with the object of deriving a profit or personal benefit from the establishment of the company.

Issue

The only issue dealt with was that of maintainability.

Arguments

Plaintiffs

The plaintiffs argued that the company should not be treated as an ordinary corporation. It was actually a partnership in the guise of a company. The directors were supposed to act as trustees of the plaintiffs. The Act of incorporation was to benefit the company, not to any of the rights of the proprietors inter se. The Act enabled proprietors to sue and be sue and excused them from following the exact form of proceeding applicable to a pure corporation. The remaining directors had refused to institute a suit since it was in fact against their personal interest.

Defendants

The defendants demurred and argued that the Plaintiffs did not have locus standi to represent the Corporation. Even if the plaintiffs had used the name of the corporation, the governing body of the company could have applied for a stay and an investigation would have followed. The case of fraud and equity was not made out by the plaintiffs.

 

Judgement

The demurrers were allowed and the defendants were not held liable. The bill was not maintainable. The court did not decide on whether the acts of the defendants were unlawful.

Ratio

The existence of board of directors de facto is apparent from the facts. The powers of the body of the proprietors is still in existence. If the court were to declare the acts complained of as void, and the plaintiffs are the only two proprietors who disapprove of it, the governing body of proprietors may call a special general meeting and approve the same acts which would binds the plaintiffs as well. It is for the board to decide which activities would be beneficial to the company and not the court.

Obiter Dicta

It was not a matter of course for any individual member of a corporation to assume to themselves the right of suing in the name of the corporation. The conduct with which the defendants are charged is an injury to the whole corporation. The corporation should sue in its own name and in its corporate character. It is not for an individual member to assume to themselves the right of suing in the name of the corporation when convening a general meeting was still possible and there was nothing in the circumstances which prevented the company from obtaining redressal in its corporate character.

If a case should arise of injury to a corporation by some of its members, for which no adequate remedy remained, except that of a suit by individual corporations in their private characters, justice would prevail over mere technicalities. However, a clear case of urgency must be made out.

Development of Majority rule

On application of the majority rule of Foss v Harbottle in subsequent cases, interpretation has led to the recognition of two principles from the case.

Internal Management

In England, the courts of equity were hesitant in interfering between partners unless it was for the purpose of dissolving the partnership itself and this rule was gradually extended to include companies too. Courts were averse to enforcing duties which arose out of internal regulation. These internal regulations could be altered by the majority. In MacDougall v. Gardiner, a bill filed was by a minority shareholder on behalf of himself and other shareholders except the directors against the company and the directors. The articles gave the Chairman of any general meeting to adjourn a meeting and also the power to take a poll if demanded by five shareholders. The court concluded that if the thing complained of is a thing which majority of the company is entitled to do or when the thing complained of was done irregularly or illegally which the majority is entitled to do regularly and legally, there can be no use in having litigation about it the ultimate end of which is that a meeting is called and the majority approves the action[9]. Ultimately the majority the majority has the maximum control over the use of the company’s name in litigation[10].

 

Proper Plaintiff

The source of this principle stems from the separate legal personality of the company. The company is a separate legal entity distinct from that of its member shareholders. Injuries cause to the company by outsiders and its own directors due to breach of duties owed to the company must be remedied by the company itself.

In Edwards v Halliwell the proper plaintiff in a wrong affecting to the company was held to be the company itself[11]. Where an alleged wrong is a transaction which might be made binding on the company by a simple majority of members, no individual member of the company may bring an action against it because if a majority of members is in favour of what has been done, then cadit quaestio and it is considered that no wrong has been done to the company and there is no longer any reason for anyone to sue. Thus for erring directors, there may be absolution if all the shareholders are satisfied. The court also recognize that where the act is ultra vires, is a fraud on the minority or where the wrongdoers are in control, the majority rule cannot apply.

Derivative claim

Certain actions of the management are not eligible for ratification. In such instances, every shareholder is instilled with a right to bring action on behalf of the company.

A derivative claim arises only when the directors themselves are in breach of duty and there exists a risk of improper or conflicted decision-making by the board members. In a derivative claim the company is added as a defendant even if it is the company’s rights which are being asked for. It protects the interests of the members-and not merely their rights- which may be affected by the wrong done to the company.

The emergence of derivative claims are a reflection of the shift in the very jurisprudential foundation of minority rights. Minority rights were not the focus of common law jurisprudence. Rather, the focus on companies managing their own matters by expressing the will of the majority.

The majority rule of Foss v Harbottle is the common law principle on who may sue on behalf of the company which has, in England, been diluted by the statutorily governed derivate claim. Derivative claims provide an alternative for minority shareholders who simply need to approach the court with good faith. Courts will not dismiss their petitions mere because they are not the majority shareholders but will look into whether they fulfil statutory requirements even if they are not majority shareholders and do not exercise a substantial control over decision making. Since derivative claims in England can only be brought under the Companies Act, the rule in Foss v Harbottle is consigned to the dustbin[12].

It cannot be determined whether derivative claims should be available only in exceptional circumstances. In this regard it should be noted that he majority rule has not been struck down. English Common has always been more impressed by the risk of derivative claims being motivated by personal objectives than the risk that confining derivative claims would lead to less litigation than required for the benefit of the company[13]. Shareholders should not be allowed to involve companies in litigation without just cause because otherwise their benevolence would become detrimental to the company.

Exceptions to the majority rule

Common law allows shareholders to sue collectively by affirming litigation through an ordinary resolution in instances where the board does not wish to sue because if the board had exclusive right to initiate litigation in the company’s name there would be less litigation than what would actually be beneficial to the company[14].

 

Ultra Vires

A shareholder may bring action against a company in those instances where an act is ultra vires the Articles of Association. These actions cannot be made legal through ratification by majority members. The court held in Bharat Insurance Co Ltd v Kanhaiya Lal[15] that although a company is the best judge of its affairs with regard to its internal management, ultra vires application of its assets cannot be considered as internal management and any member may bring action.

Good faith is a key ingredient in determining maintainability in such instances since his action is for the purpose of doing justice to the company. If the plaintiffs conduct is also tainted or if there is inordinate delay, his claim may not be accepted.

Fraud on Minority

This exception was recognized by courts since Edwars v Halliwell. In Greenhalgh v Arderne Cinemas Limited [16]a special resolution would be liable to be impeached if the effect of it were to discriminate between majority and minority shareholders to give the former an advantage which the latter would be deprived of.

The court stated that it will interfere to protect the minority in Cook v Deeks[17]. If directors have acquired for themselves property or rights which they must be regarded as holding on behalf of the company, a resolution that the rights of the company should be disregarded in the matter would amount to forfeiting the interest and property of the minority of shareholders in favour of the majority[18].

Wrongdoers in Control

Rights of a minority shareholder is not limited to cases of fraud alone. It also extends to instances of breach of duty. A controlling shareholder or director has a fiduciary duty toward the company. The majority cannot appropriate to themselves the property of the company or the interest of the minority shareholders. When two directors who were also majority shareholders sold property belonging to the company to one of the directors knowing that the sale was undervalued, it was held that there was a breach of duty of the directors to the company even if there was no fraud alleged[19].

Acts requiring special majority

A special resolution was introduced in a general meeting to increase the monthly allowance and commission of the Managing Directors which was decided by a show of hands since no poll was demanded[20]. The plaintiff sought a declaration that the resolution was not binding since it did not have the appropriate majority. The Chairman had declared that 218 had voted for and 78 had voted against the resolution which on the face of it shows that it failed[21]. The court rule in favour of the plaintiff.

Individual Membership Rights

These rights are personal or indiviguals rights vested in eacd shareholder either by Articles or by a statute. The articles and the stature form the rights which the shareholder may personally enforce in the court[22].

It was held in Nagappa Chettiar v Madras Race Club, a shareholder is entitled to enforce his individual rights against the company like the right to vote, right to stand in elections for director etc.[23]If the shareholder however intends recover damages alleged to be due to the Company, the action should ordinarily be brought by the company itself.

The nature individual right could be best illustrated with an example. In Henderson v Bank of Australasia, the plaintiff moved an amendment to the proposed resolution[24]. The Chairman refused to record the amendment in spite of the fact that it was seconded and the original resolution was passed without amendments. No reasons were given for this decision either. It was held that the shareholders have a right to move amendments to resolutions.

Class Action

Class action[25] gives a member, depositor, or a group of them falling a class locus to restrain the company and its directors from a manner prejudicial to the interests of the company, its members or depositors. They must total to 100 members or the prescribed percentage for a company having share capital or for a company not having share capital, the class must be at least one-fifth of the total number of members or if they are depositors they must be 100 depositors or the prescribes percentage of depositors. As long as the action is brought by a group satisfying the abovementioned statutory requirements, it doesn’t need to be a majority shareholder.

Oppression and Mismanagement

In instances where section 214 of Companies Act, 2013 applies or section 397 and 398 of Companies Act 1956 applies. This a statutory right granted to a shareholder which overrides the limitations of the majority rule. The application must be made by one hundred members or members having one-tenth of voting power in companies having share capital or the must constitute one-fifth of the members in the company’s register[26]. The tribunal would entertain matters where business of the company is conducted in a manner which defrauds the creditors, members or other persons, oppression of any member, company was formed for any fraudulent purpose, management is guilty of fraud or misconduct towards the company and its members or withholding of information regarding affairs of the company.

Application in India

The majority rule has limited application in India. Courts have been hesitant to apply in instances where larger public interests is at stake. Where the interests of workers and public finds are involved, courts do not apply the majority rule.

In National Textile Workers’ Union and Ors v P.R. Ramakrishnan and Ors[27], a constitutional bench of the Supreme Court held that workmen cannot be denied the right to be heard before an order adverse to them is passed by a company judge because this would violate audi alterram partem which is a basic rule of natural justice. It was recognized that the worker’s right to be heard in a winding up proceeding can be derived from the Preamble and Article 38 and 43-A of the constitution and from general principles of Natural Justice. , It was also held that a company is more than merely a legal device used by shareholders to carry out business but must also focus on maximising social welfare. Its management should not be left merely to the suppliers of capital but also the suppliers of labour. It also recognized that a line must be drawn. Doctrines popular in England should not be mechanically applied to interpret Indian laws.

The dissenting judges opined that the rule in Foss v Harbottle should be applied particularly since the statute[28] stated in clear terms an exhaustive list of who might be made parties to a winding up petition. However, all other judges felt that its application would be abhorrent to the company law jurisprudence India with its strong socialist traditions. The Delhi High Court had also concurred that a mechanical application of the majority rule to Indian conditions would be misleading[29]. This is because India has a substantial state supported funding. The Staate’s shareholding may be small but the financial institutions which provide most of the funding and support corporate activities are state controlled and are thus accountable to the citizens of the nation. Applying the majority rule strictly will lead to a situation where the majority shareholders will be given more weightage ignoring the financial institutions which are the driving force behind the company.

A powerful alternative remedy exist in favour of aggrieved shareholders in the form of a claim of oppression and mismanagement. The provision was held to be an alternative remedy independent of the rule in Foss v Harbottle and only the statutory requirement of locus standi must be fulfilled. It is not necessary for the plaintiff to show that he falls under an exception to the majority rule[30].

 

Analysis

It is still a widely held view that the majority decides matters of litigation. A meeting is called to decide whether the company wishes to involve itself in litigation and the majority prevails in the meeting.

Foss v Harbottle allowed individual shareholders to approach the court in a very limited basis. This avoided a slew of litigations which would be detrimental to the interests of the company. Companies do not always contemplate litigation when a director breaches his duty but rather they look into what would serve best interest of the company. Sometimes litigation may actually be detrimental to the company rather than beneficial. There is often a possibility that the judgement might not be in favour of the company, it may not be in a position to carry out the verdict or even suffer a loss of reputation which outweigh the gains of litigation. It would divert the company’s resources into a non-productive activity. It may also lead to the formation of rival factions in the managerial level. The decision not to sue, however, may influenced by a particular director’s benefit and not that of the company.

There is a peculiar paradox created by the majority rule in Foss v Harbottle. The rule itself in in use in several common law countries including India. It has be constantly affirmed and even in cases where the courts carve out an exception, they first acknowledge the rule and stress on its necessity. However, the doctrine itself has been considerable diluted. In England, where the doctrine originated, it is overshadowed by the massive development of derivative claims. In fact if the factual matrix of the case appears again, it will undoubtedly favour the plaintiff shareholders. This is because the law laid down in Foss v Harbottle has developed into a more complex set of principles. It is now read with the exceptions laid down through later judgements and statutory provision. It would squarely fall under the exceptions of breach of duty, fraud on minority and mismanagement.

The majority rule serves a dual purpose. Firstly, it prevents large scale litigation. Secondly, it makes possible for genuine grievances to be resolved by using its exceptions. The existence of the majority rule encourages the aggrieved shareholder to raise issues of poor management in General Meetings and communicate with the management regarding their need for redressal. This would give a bona fide management time to find out the individuals responsible. On the other hand an unsatisfactory reply or attempts to supress relevant facts would actually strengthen the case of the minority shareholder. A minority must not initiate litigation until it has first tried to get the company to do so.

 

[1] Rajahmundry Electricity Supply Corp Ltd v. A Nageshwara Rao, AIR 1956 SC 213 217.

[2] K.W. Wedderburn, Shareholders Rights and the Rule in Foss v. Harbottle 15(2) Cambridge Law Journal 194 (1957)

[3] (1843) 2 Hare 461.

[4] (1847) 1 Ph 790.

[5] L.S. Sealy, Foss v Harbottle: A Marathon where Nobody Wins 40(1) Cambridge Law Journal 31(1981).

[6] Avtar Singh Company Law  479 (16th ed., Eastern Book Company, Lucknow 2015).

[7] G.K. Kapoor and Sanjay Dhamija, Company Law and Practice 704 (19th ed., Taxmann, New Delhi 2013).

[8] Supra note 3, 469.

[9] (1875) 1 Ch. D 13, 25.

[10] Supra note 2, 201.

[11] [1950] 2 All E.R. 1064, 1066.

[12] Gower and Davies, Principles of Modern Company Law 615 (8th ed. Thompson Sweet and Maxwell, London, 2008).

[13] Supra note 21 at 610.

[14] Id., 607.

[15] AIR 1935 Lah 792.

[16] [1951] Ch. 286.

[17] [1916] 1 A.C. 554.

[18] Id. at 564.

[19] Daniels v Daniels, [1978] Ch. 406 409.

[20] Dhakeswari Cotton mills v Nil Kumal Chakravorty, AIR 1937 Cal 645.

[21] Id. at ¶9.

[22] S. Chumir, Challenging Directors and the Rule in Foss v Harbottle 4 Alberta Law Review 98 (1965)

[23] AIR 1951 Mad 831(2) ¶12.

[24] (1890) 45 Ch. D. 330 338.

[25] Section 245.

[26] Section 213(a).

[27] (1983) 1 SCC 228.

[28] Section 447, 450(2), 478(3), 517, 518, 542, 543, 549(1), 556, 557, Companies Act 1956. See also Rule 34,Company (Court) Rules,1959.

[29] Industrial Credit Investment Corporation of India Ltd. v Parasrampuria Synthetics Co. ILR (1998) 1 Del 136.

[30] S. Manmohan Singh v S. Balbir Singh ILR (1975) 1 Del  427.

Law of Passing of in India

(Completed: 02.11.2015)

Introduction

Passing off is a common law tortious remedy which is available in a wide range of situations including protection of the rights in case of unregistered trademarks[1].

It refers to the species of unfair trade competition or of actionable unfair trading by which one person, through deception, attempts to obtain an economic benefit of the reputation, which the other has established for himself in a particular trade or business[2]. Article 10 (1) of the Paris Convention requires states to provide protection against unfair competition. Acts which create confusion regarding the establishment, goods or industrial and commercial activities of the competitor, making false allegations to discredit the same or making allegations to mislead the public are prohibited[3]. Passing off seeks to prevent only those trade misrepresentations that are injurious to a trader’s goodwill.

No person should be allowed to extract unauthorized benefits from the labour of another. Passing off is a remedy whereby a person is prevented from trying to wrongfully utilize the reputation and goodwill of another by trying to deceive the public through passing off his goods[4].

Trademark infringement is a violation of the exclusive rights granted to the owner or registered proprietor of a trademark under the Trade Marks Act, 1999. Passing off arises when an unregistered trademark is used by a person who is not the proprietor of the trademark in relation to the goods and services of the trademark owner. Statutory mechanisms protect the registered owner while common law grants protection to the goodwill of the honest concurrent prior user. Section 27(1) of the Trade Marks Act provides that no infringement action may be brought by an unregistered trademark holder while Section 27(2) specifically saves the remedy of a passing off action. These two systems are complementary, and in practice both actions are usually twinned, with neither remedy is superior or inferior in the same dispute[5].It is therefore an alternate remedy for a registered trademark owner and the only remedy for an unregistered trademark holder.

Origin

The origins of passing off actions are deeply rooted in tort law. The primary purpose was to prevent the deceit of the public. The rule that there is no property in a trademark apart from the business or trade in connection with which it is employed is a cardinal rule in trademark law[6].Goodwill is the proprietary right protected by a passing off action[7].In Millington v Fox, the court observed that when the plaintiffs had proper title to the trademark, they had the right to seek the court of equity’s assistance in enforcing the same[8]. However, Perry v Truefitt[9] indicated a shift away from the proprietary aspect, where the court observed that a man cannot sell his goods under the pretext that they are the goods of another man. The law thus developed as the common law doctrine of passing off in England and unfair competition in the United States[10]. Today it gives rise to wide ranging liability.

Application of English Decisions

India has inherited its common law traditions from the UK. Although, the decisions of the courts of the UK are in no way binding on the Indian courts, the principles and trends reflected in them are of strong persuasive value in India. Indian courts have constantly looked to the law in England to resolve disputes in intellectual property law. What would be considered a dissimilar mark in England may be considered a similar mark in India because the latter is a country where English words may sound phonetically same to many Indians in spite of differences in spelling[11]. Thus the English law cannot be applied strictly and in its entirety but it would still form an important interpretative tool.

Tests for passing off

Two tests for passing of are used in India. One has three ingredients while the other has five. Generally, the three essential ingredients required for a successful passing off action are proof of goodwill, misrepresentation and damage to good will which is the classical trinity test[12].

A trademark or trade dress may be so deeply associated with the source that the mark itself is attached to the goodwill and reputation of the source. Goodwill is generally considered to be territorial in nature. Transborder good reputation is generated due to intensive marketing, product placement and promotion. Moreover, media is accessible throughout the world. In India, transborder reputation is protected under certain circumstances. The concept of well known trademarks are recognized in India. For same, similar and closely related products, trademarks recognized in a foreign country may be protected in order to promote commercial morality, prevent consumer confusion and stop Indian traders from taking undue advantage of the reputation earned by foreign traders[13]. In Daimler Benz v Hybo Hindustan[14], the defendant, a garment manufacturer was restrained from using the mark of the plaintiff, a car manufacturer although their goods were dissimilar.

Misrepresentation is sine qua non of a passing off action. It can be understood as the use of the same or deceptively similar trademark or trade name which deceives about the source, nature or quality of the product. It must be a relevant misrepresentation about the source of the goods through any symbol like a trademark, name, get up, product shape etc.[15]. The real question in each case is whether, as a result of misrepresentation, there is a real likelihood of confusion of the public and consequent damage to the plaintiff[16]. The court must estimate the state of mind of the relevant section of the public and see if there is any likelihood of confusion.

Damage as an essential ingredient is understood as a loss of sales which is caused by a misrepresentation which successfully confuses the customer.

Its application can be seen in Yahoo! Inc v Akash Arora[17] where the court determined passing off in case of domain names using the test of the above three conditions.

In Ervin Warnik B. V. v. J. Townend & Sons (Hull) Ltd.[18], five characteristics of passing off were recognized. The five essential elements were (1) misrepresentation by a trader in the (2) course of trade (3) to prospective customers of his or ultimate consumers of goods and services supplied by him which is (4) calculated to injure the business or goodwill of another trader and which (5) causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so. The Supreme Court followed this criteria in several cases including the landmark decision of Cadila Healthcare, Ltd. v. Cadila Pharm., Ltd.[19].

In Laxmikant V. Patel v. Chetanbhai Shah[20], the court held in a special leave petition found that fraud is not a necessary element and absence of fraudulent intention i.e. innocently using the same or similar trademark or trade name is not a defence but proof of fraudulent intention would assist the defendant in establishing a probability of deception, The fact that the plaintiffs business is confined to one part of the city does not result in denial of injunction in another part of the city[21].

Maintainability

The plaintiff must establish that a prima facie case exists by showing that there was actual or probable damage to the goodwill of the plaintiff’s business according to the test laid down in Erven Warnik. If the plaintiff fails to do the same, the passing off action would not be maintainable. The burden of proving that there is a likelihood of the defendant’s goods being passed off as the goods on the plaintiff also likes on the plaintiff[22].

The plaintiff is never required to prove knowledge, malice or fraudulent intent of the defendant to seek injunctory relief in a passing off action[23].

It is not necessary for the plaintiff to prove that the mark is used exclusively by him or for his goods. Champagne producers were entitled to restrain wine produced outside the Champagne District of France from being sold using the name Champagne although no one producer had exclusive right to use the word[24].

Jurisdiction

A passing off action may be initiated in the District Court or High Court in accordance with their territorial jurisdiction. It could be in the place where the plaintiff resides, plaintiff conducts business or where the cause of action arises.

Cause of Action

A cause of action would arise only when there is actual use of the impugned trademark so merely an application for registration or advertisement in a Trademark Journal would be insufficient grounds for approaching the court[25]. This is because such activities would not lead to damage of goodwill. The cause of action for passing off is complete as soon as a relevant misrepresentation is made which is likely to create confusion even if no actual deception and damage to the plaintiff takes place[26].

Mere delay in bringing a passing off action would not defeat the case of the plaintiff[27].

Honest concurrent prior user

A passing off action may be brought against a registered proprietor of a trademark. Although registration is conclusive proof of ownership of the trademark, registration cannot be pleaded by the defendant in a passing off action[28]. The rights of the honest concurrent prior user override those of the registered owner of the trademark. In NR Dongre v Whirlpool Corporation[29], an injunction was passed against a registered proprietor from using his registered trademark.

When a passing off action is brought against one who has registered the trademark as his own, the plaintiff must be a prior user, otherwise, the defendant would be in a position to claim infringement[30]. The plaintiff must be an honest concurrent prior user. He must also use the same continuously from a time prior to the registration of the trademark by the defendant. The burden of proving that there was prior and continuous use is on the plaintiff[31].

He must have used the trademark in good faith without deceiving consumers regarding the source of the product. Where both the defendant and the plaintiff were deceiving consumers by using the trademark of another, no cause of action can arises[32].

Development in India

The law of passing off in India has been crystallized by judicial interpretation. Therefore, it is imperative to look into case laws in order to chart out the course of general and recent developments.

Since it is necessary that the damage relate to the plaintiff’s goodwill, the two types to damage that are clearly recognized are under passing off are diversion of sales and injurious association[33]. Over the years the courts in England and India have widened the ambit of passing off actions on the insistence of plaintiffs. It has been extended to professional and non-trading activities as well[34].

In Larsen & Toubro v Lachmi Narayan Trades[35] the plaintiff used L&T in names of many of its subsidiaries. The defendant used LNT or ELENTE. The lower court granted an injunction restraining the defendants from using those deceptively similar names but permitted the use of LNT in extended explanatory form. The Delhi High Court on appeal decided that the use of LNT by the defendants was not bona fide and was likely to cause confusion. It was already proven that L &T had acquired a definite and distinct reputation among the buyers. In the same case, the court also noted that the test of field of activity was no longer applicable so the defendants could not use a mark phonetically similar to the plaintiffs even for those goods which the plaintiff did not produce[36].

The expanding horizons of passing off action is illustrated by Bata India Ltd v M/s Pyare Lal & Co.[37] where a passing off action was brought against a producer of dissimilar goods. The court elucidated a practical understanding of the consumers’ decision making during purchase. It observed that a lay customer would know that the name Bata refers to shoe manufacturers but would not know that Bata does not produce foam. The use of the name Bata to sell foam in indicative of intent and a passing off action would not be barred merely because Bata does not produce foam.

Interlocutory Relief

In Mahendra & Mahendra Paper Mills Ltd. v Mahindra & Mahindra[38] was the registered trademark of Mahindra &Mahindra and had also earned a reputation for a certain standard of good services. The defendant began a company with the name Mahendra & Mahendra Paper Mills Ltd. The court found a prima facie case of irreparable prejudice. The Supreme Court held that the trial court was correct in granting an interim injunction restraining the defendants from using the name Mahendra. The court also held that it was a well settled principle that when an interim injunction in a suit for passing off is sought, the court must decide whether there is a likelihood of confusion or deception, no witness is entitled to say whether that mark is likely to deceive or cause confusion and all factors likely to create deception or confusion must be considered in combination like the nature of the market, class of consumers, extent of reputation, trade channels, connection in course of trade and others[39].

The Supreme Court has found that in a passing of action it is usual and in fact essential for the plaintiffs to seek a temporary or ad interim injunction and once a prima facie case is made out the general practice of the courts is to grant a prompt ex parte injunction followed by the appointment of a Local Commissioner if necessary[40]. The plaintiff would be correct in approaching the Supreme Court if an injunction is not granted when a prima facie case is established because such a situation would fall within the ambit of the exceptions under which the Supreme Court admits Special Leave Petitions. A refusal to grant an interim injunction would lead to a failure of justice and cause irreparable harm to the plaintiff which cannot be undone at a later stage[41].

Dilution

Erosion of distinctiveness and dilution which have the potential to damage good will are also recognized under passing off. Dilution as an injury was developed in England particularly in a series of drinks cases[42]. In the Elderflower Champagne[43] case, the champagne producers opposed the use of the word champagne for a fizzy non-alcoholic drink. The court found that the real harm in this matter was not a loss of sales but rather the erosion of the uniqueness of the word champagne would occurs which would damage the exclusive reputation of the champagne houses their goodwill. When, dilution occurs, there is misrepresentation and there is a chance of consumer confusion regarding the commercial origin or quality of the goods. Erosion of distinctiveness is considered a type of damage to under passing off in some jurisdictions. The Indian Courts have been hesitant in considering dilution as a separate cause of action. In Caterpillar Inc. v Mehtab Ahmed & Ors.[44], the defendant was using marks identical to the plaintiffs in the footwear manufactured by it. The court observed that dilution did not have to be supported by consumer confusion. It found that the only object of the defendant for using the plaintiff’s mark was to deceive the consumers. Also, it held that the plaintiff had a right to protect its mark, reputation and goodwill from and risk of dilution in the act of passing off by the defendants. Moreover, for well-known trademarks, the likelihood of confusion is not relevant in passing off actions but rather the unauthorized use which would lead to erosion of the goodwill, reputation and distinctiveness of the plaintiff.

In several cases after Caterpillar, the courts have held that consumer confusion is a prerequisite for a passing off action. Therefore, the law with regard to dilution has not been consistent.

Industrial Design Passing Off

A passing off action may be brought with respect to designs provided the action contains the necessary ingredients to maintain such a proceeding[45]. A holder of a registered design may alternatively institute a suit against a defendant who is also in possession of a registered design. However a composite suit of infringement and passing off action would not lie[46].

The remedy of passing off is also available in the case of designs. Mere copying however is not passing off a design because there is no monopoly unless there is registration of the design. The defendant must also make a false representation that the article which he is selling is made by the plaintiff[47].

Reverse passing off

Reserve passing-off occurs where the defendant markets the plaintiff’s product as his own. A wholesaler or retailer removes or obliterates the original trademark without authorization before reselling the goods[48]. The original trademark owner’s products are acquired by the competitor who sells those goods claiming that they are his own and thus increasing its goodwill while reducing the original trademark owner’s sales. It may be through express or implied manner[49]. In express reverse passing off, the competitor would replace the original trademark with his own while reselling it while in implied passing off, the product would be sold unbranded[50]. In both cases, credit is denied to the original trademark holder after its first sale to the competitor who is taking advantage of the same.

In Sheila Mahendra Thakkar & Ors. v Mahesh Naranji Thakkar[51], the appellant changed the main ingredient in his  product sold with which the product being sold was actually of the same composition as the product with a different brand name which was assigned to the respondent and the court had to determine if that was passing off. The court considered the leading English cases on reverse passing off. The court observed the following:

In the present case, the appellant is in effect selling the product Vandevi Powder (Yellow) which legitimately belongs to the respondent… [Which]… is to perpetuate a misrepresentation on public… First, there will be a direct loss of business of the respondent. Secondly, there will be damage caused to the reputation of the respondent’s brand… [Because]… the appellant is wrongly generating the goodwill of his product which is in fact the product of the respondent. Prospective customer here is not left to perceive the difference between the two products. He is persuaded to buy a product under the name Vandevi Superfine Powder which is in fact a different product i.e Vandevi Powder (Yellow) which belongs to the respondent. This action on the part of the appellant clearly falls within the ambit of tort of passing off[52].

Domain Name

Domain names come within the purview of mark under the Trade Marks Act. A passing off action for a domain name may be brought in the same manner and fulfilling the same conditions as a passing off action for a trade mark or trade name. In Yahoo! Inc v Akash Arora the court recognized that a very alert vigil is necessary and a strict stance must be adopted to prevent passing off of domain names because they are easily accessible across the globe[53].  The plaintiffs claimed that its website was registered with Network Solutions Incorporated two years before the defendant’s website and Yahoo was its registered trademark in several countries outside India.  The Court has also observed that domain names hold an important position in e-commerce in Dr. Reddy’s Laboratories Ltd. v Manu Kosuri[54]. Here, the defendants ran a business of registering domain names and then selling them. The court granted a permanent injunction restraining the defendants from using the trademark or domain name drreddyslab or any other deceptively similar domain name.

 

Analysis

The impact of passing can be felt on businesses entities and consumers alike. The law of passing off in India is a boon to its growing commerce and industry. It allows an effective remedy for those producers who do not have a registered trademark as well as an alternate remedy to registered trademark owners. The interest of the public is protected too. When consumers develop an association with a source they trust and its mark, it incentivises other entrants and competitors in the market to bank on or take advantage of the goodwill associated with that mark. Passing off seeks to stop such deception.

There is a palpable risk that trademarks would be used to protect monopolies and restrictive trade practices. In those sectors which are dominated by monopolies, it helps to further the life of the monopoly and quash new entrants from riding on their goodwill. Law leans towards the plaintiff since the Indian courts as seen above take a very broad view of what amounts to misrepresentation. This makes it more likely for the monopolist with deep pockets to trample out competition.

The most notable feature of passing off actions in India is the court’s liberal approach towards granting ex parte injunctions. Indian Courts are generally wary of passing far reaching orders in the ex parte stage. In fact, the Anton Piller relief has never been popularized in India. However, the granting of ex-parte injunction when a prima facie case has been made out seems to be the rule and not the exception.

India has remain firmly rooted from the common law traditions from which passing off evolved, constantly referring to judgements made by English courts, but it has grown and flourished in light of realities and challenges unique to the nation.

Bibliography

Statutes

Article 10 (1) of the Paris Convention as amended in 1979

Section 27(1), (2) and 34 of the Trade Marks Act, 1999

Cases

A.G. Spalding v A.W. Gamage Ltd., (1915) 32 RPC 273

Bata India Ltd v M/s Pyare Lal & Co., AIR 1985 All 42

Bollinger, J. Costa Brava Wine Co. Ltd., (1959) 3 All ER 800

Cadila Health Care Ltd. Cadila Pharmaceuticals Ltd., (2001) 5 SCC 73

Caterpillar Inc. v Mehtab Ahmed & Ors., (2002) 99 DLT 678

Daimler Benz v Hybo Hindustan., 1993 SCC OnLine Del 605

Dr. Reddy’s Laboratories Ltd. v Manu Kosuri, (2001) 58 DRJ 241

Heinz Italia and Anr. v Dabur India Ltd (2007) 6 SCC 1

Honda Motors v Charanjit Singh, (2002) 101 DLT 359

Kemp and Company & Ors. v Prima Plastics Ltd., 2000 PTC 96 113

Larsen & Toubro v Lachmi Narayan Trades., ILR (2008) 2 Del 687

Laxmikant V. Patel v. Chetanbhai Shah, (2002)3 SCC 65

Mahendra & Mahendra Paper Mills Ltd. v Mahindra & Mahindra, (2002) 2 SCC 147

Mohan Lal v Sona Paint & Hardware, (2013) 200 DLT 332 (FB)

National Sewing Thread Co Ltd v James Chadwick and Bros Ltd, (1953) SCR 1028

NR Dongre v Whirlpool Corporation, AIR 1985 Del 300

Ramdev Food Prod. Pvt. Ltd. v. Arvindbhai Rambhai Patel & Ors., AIR 2006 SC 3304

Reckitt & Colman Products Ltd. v. Bordan Incorporation, (1990) RPC 341 (HL)

Sheila Mahendra Thakkar & Ors. v Mahesh Naranji Thakkar, (2003) 5 Bom CR 491

Supriya Prabhu v Janus Remedies, (2008) 36 PTC Bombay

Tattinger v Allbev, [1994] 4 All ER 75

Wander Ltd. and Anr. v Antox India P. Ltd., (1990) SCC 727

Yahoo! Inc v Akash Arora, (1999) 78 DLT 285

Books

S. Gopalkrishnan and T.G. Agitha, Principles of Intellectual Property (1st ed., Eastern Book Company, Lucknow, 2009)

V.K. Ahuja, Intellectual Property Rights in India 1 (1st ed., Lexis Nexis Butterworths Wadhwa, Nagpur, 2012)

Articles

Dev Gangjee, The Polymorphism of Trademark Dilution in India 7(1) Transnational Law and Contemporary Problems 611 (2008)

Frank I Schechter, The Rational Basis of Trademark Protection 40 (6) 813 Harvard Law

Review (1927).

Suman Naresh, Passing Off Goodwill and False Advertising: New Wine in Old Bottles 45(1) The Cambridge Law Journal 97(1986)

William M Borchard, Reverse Passing Off-Commercial Robbery or Permissible Competition, 67 The Trademark Reporter 1 (1977)

 

[1] N. S. Gopalkrishnan and T.G. Agitha, Principles of Intellectual Property 504 (1st ed., Eastern Book Company, Lucknow,2009)

[2] Wander Ltd. and Anr. v Antox India P. Ltd., (1990) SCC 727 ¶16

[3] Article 10 bis (2)

[4] Ramdev Food Prod. Pvt. Ltd. v. Arvindbhai Rambhai Patel & Ors., AIR 2006 SC 3304 ¶ 50

[5] Dev Gangjee, The Polymorphism of Trademark Dilution in India 7(1) Transnational Law and Contemporary Problems 611 612 (2008)

[6] Frank I Schechter, The Rational Basis of Trademark Protection 40 (6) 813 822 Harvard Law Review (1927).

[7] A.G. Spalding v A.W. Gamage Ltd., (1915) 32 RPC 273

[8] 3 Myl. &C 338 (1838)

[9] (1842) 48 ER 749.

[10] Schechter, supra note 6 at 820

[11] Cadila Health Care Ltd. Cadila Pharmaceuticals Ltd., (2001) 5 SCC 73 94

[12] Reckitt & Colman Products Ltd. v. Bordan Incorporation, (1990) RPC 341 (HL)

[13] Rob Mathys India Pvt Ltd v Synthes Ag Chur, (1997) 17 PCT 669

[14] 1993 SCC OnLine Del 605

[15] Suman Naresh, Passing Off Goodwill and False Advertising: New Wine in Old Bottles 45(1) The Cambridge Law Journal 97 99 (1986)

[16] Honda Motors v Charanjit Singh, (2002) 101 DLT 359

[17] 1999 SCC OnLine Del 133

[18] (1979) 2 All ER 927 932

[19] Supra note 11

[20] (2002)3 SCC 65

[21] Id. ¶ 8

[22] National Sewing Thread Co Ltd v James Chadwick and Bros Ltd, (1953) SCR 1028

[23] Naresh, supra note 15 at 102

[24] Bollinger, J. Costa Brava Wine Co. Ltd., (1959) 3 All ER 800

[25] V.K. Ahuja, Intellectual Property Rights in India 1 607 (1st ed. Lexis Nexis Butterworths Wadhwa, Nagpur, 2012)

[26] Naresh, supra note 15 at 103. See Spalding v Gamage (In this matter, a passing off action was brought by the manufacturers of sporting goods whose competitors acquired some of their waste footballs of inferior quality and advertised them under the plaintiffs name. Although no actual sales had taken place, the court held the plaintiffs were entitled to nominal damages)

[27] Heinz Italia and Anr. v Dabur India Ltd., (2007) 6 SCC 1 ¶ 16 (Court held that since Glucon D and Glucose D were phonetically similar it amounted to passing off)

[28] Section 27 (2), Trade Marks Act, 1999

[29] AIR 1985 Del 300

[30] Section 34, Trade Marks Act, 1999

[31] Ahuja, supra note 25 at 582

[32] Supriya Prabhu v Janus Remedies, (2008) 36 PTC Bombay

[33] Gopalkrishnan, supra note 1 at 505

[34] Ahuja, supra note 25 at 584

[35] ILR (2008) 2 Del 687

[36] Id. at ¶ 12. See also Sunder Parmanad Lalwani and Ors v. Caltex (India) Ltd., AIR 1969 Bom 24 (The court held that there existed a likelihood of confusion between Caltex watches and Caltex petrol)

[37] AIR 1985 All 42

[38] (2002) 2 SCC 147

[39] Id. at ¶ 16 (This was not an exhaustive set of principles)

[40] Laxmikant, supra note 20 at ¶ 13

[41] Laxmikant, supra note 20 at ¶ 17

[42] Gangjee, supra note 5 at 616

[43] Tattinger v Allbev, [1994] 4 All ER 75

[44] (2002) 99 DLT 678

[45] Mohan Lal v Sona Paint & Hardware, (2013) 200 DLT 332 (FB) ¶ 34

[46] Id. at ¶ 36

[47] Kemp and Company & Ors. v Prima Plastics Ltd., 2000 PTC 96 113

[48] William M Borchard, Reverse Passing Off-Commercial Robbery or Permissible Competition, 67 The Trademark Reporter 1 (1977)

[49] Id. at 2

[50] Id.

[51] (2003) 5 Bom CR 491 (The two parties were supposed to trade in nine types or qualities of Vandevi each according to the deed to dissolution)

[52] Id. at ¶ 17

[53] (1999) 78 DLT 285 ¶ 13 (Yahoo brought a passing off action against the defendants who launched a website called yahooindia)

[54] (2001) 58 DRJ 241

Ombudsman in India

Introduction

Modern democratic systems are characterized by welfare orientation. The resultant expansion of the bureaucracy increases scope of abuse of this power and discretion by civil servants and gives rise to citizen’s grievances with administration[1]. A balance must be struck between the administration and the public at large to protect the ordinary citizens against violation of their rights or abuse of power and address their grievance. Control over the executive is exercised through the judiciary, Parliament or and internal review. However, they often prove to be inefficient or insufficient. Thus, an independent body is required to check administrative excesses impartially.

Ombudsman is derived from ‘ombuds’, a Scandinavian word which means officer or commissioner particularly one who has the duty of investigating and reporting to Parliament on citizen’s complaints against the government[2]. The Ombudsman is an official appointed to receive and investigate complaints of citizens against the government and its officers[3].

Today, the ombudsman exists in over 120 counties albeit with structural variations[4]. They may operate on the national or central level, state or regional level and even municipal level. Generally, the ombudsman exists outside the administrative hierarchy. Its job is to identify instances of maladministration when there is a complaint or when he acts suo moto. Its functioning is discreet and inquisitorial, not adversarial thus allowing the executive body an opportunity to correct itself. The complainant does not lead evidence. Rather, the ombudsman enquires into the matter to determine whether the claims are justified since it has access to departmental files and communications. It doesn’t have the same powers as a court. Expenses are generally paid out of taxes with no fee for filing complaints. Thus, an Ombudsman may be functionally defined as an independent government official who receives complaints against government agencies and officials from aggrieved persons, who investigates and who if the complaints are justified, makes recommendations to remedy the complaints[5]. The Ombudsman is an institution essential to ensure Rule of Law and human dignity in a society[6].

Origin and development

Although some authors claim that ombudsman like institutions are an age old phenomenon dating back to the Arab Mohtasib Rome’s Tribune or the Qin Dynasty’s version but the ombudsman we know today evolved in Europe.

The first ombudsman was a temporary post which was created in 1713 by Charles XII whose function was to ensure that various public officials followed the law and worked with fairness while the King was away at war. The office of the Hogsta Ombudsmannen was in operation for seventeen years. This mechanism was reived in 1809 which is often regarded as the first ombudsman. The parliamentary ombudsman’s office continues to this day. It allowed the Riksdag to monitor the executive and ensure that executive bodies complied with the law and avoid an all-powerful tyrannical King. The Chancellor of Justice, the Civil Ombudsman and Military Ombudsman acted independently communicating officially only to avoid overlapping duties. The Swedish Ombudsman and his deputy are appointed to office for four years by a special selection committee. He must supervise the observance of laws, prosecute those who improperly discharged public functions and inspect prisons and hospitals. He also acts as a prosecutor in some instances. He cannot reverse the decision of a court or administrative body.

Finland, whose administrative practices were similar to that of Sweden adopted Ombudsman 110 years later[7]. Norway established its own ombudsman for military affairs in 1952 and civil affairs in 1962.However, the institution gained attention and popularity in Europe only after Denmark adopted it in 1955.

It is often regarded that there are two versions of ombudsman, the Swedish and the Danish. In the Danish version, he is an investigator and reporter to the Parliament restricted to the central government and its programs. The Swedish version is one where he is a prosecutor as well and can examine the entire administration and courts too[8].

The Danish Ombudsman[9] is elected by the parliament to receive complaints about public administration. He may criticise authorities and recommend the reopening of any case or even persuade them to alter their Decision. However, he cannot make administrative decisions himself. He has jurisdiction to consider matters involving legal questions but not matters which require specialist knowledge. He makes visits to public institutions like prisons, psychiatric institutions and social care homes[10]. He consolidates parliamentary control over both ministers and officials unlike Sweden where the ministers are not under the control of the Ombudsman. His most important function however, is to protect the man on the street against injustice, arbitrariness and abuse of power.

Guyana was the first developing country to adopt it. In spite of being a former British Colony, it introduced the office of the Ombudsman in 1966 prior to its introduction in the United Kingdom. One of the primary reasons for its establishment was

The Ombudsman in England is known as the Parliamentary Commissioner whose office was created by the Parliamentary Commissioner Act 1967. He is appointed by the monarch and remains in office till the age of 65 years. The statute also states which departments lie or and outside its purview. Since several aspects of potential mal administration like government contracts, appointments dismissal and others lie outside its jurisdiction. He doesn’t investigate cases where the court may be approached. He has a discretionary power to refuse to investigate cases where there are insufficient grounds of mal administration shown. The Ombudsman has no power to enforce its decisions but only to report. The Parliamentary Commissioner for Administration (PCA) investigates complaints against central government and certain other bodies controlled by ministers to reports to the parliament and a complaint may be made only through a minister[11]. Thus, a citizen cannot reach the Ombudsman directly. He can compel the attendance and examination of witnesses the same way a court can. He is free to investigate in any manner he thinks is appropriate. He lays before each house a general report every year on his performance and a special report on his investigating on any case which so requires it.

The Australian Ombudsman system established in 1976 is a two tiered where most states have one Ombudsman and the Centre has one too. He is appointed by the Governor General. He cannot investigate into actions of Ministers but only his delegates and departmental advice given to him. He can investigate general administrative activities of the government and its business activities too. Ombudsman has no power to set aside or substitute an administrator’s decision. When he notices a defect in the system he may report the same through a special report to the House of Parliament.

Its presence in a large number of counties, although with substantial legal and governmental differences shows that it is a highly flexible system.

Reasons for Growth

The formation of a Welfare State in India lead to a proliferation of administrative agencies. The state took over a large gamut of functions in order to raise the standard of living of the people and incentivise economic growth. The government grew in size and extensive powers were given to government agencies. Existing mechanisms for adjudicating grievances are weak and ineffective to deals with the problems of administrative personnel accountability. It made necessary new protection against executive and administrative mistakes and abuse of power.

The traditional concern of guarantee of legal rights of the individual has become greater in modern times. The individual and private businesses required protection from misuse of administrative discretion.

The legislature often makes legislation is skeleton form and delegates wide quasi legislative powers to the executive. These wide discretionary powers must be controlled

The legislator does not have enough time after studying and discussing legislation to adjudicate complaints. He also lacks the funds to do the same. He is often unable to have direct access to the files of other ministries and may not Party considerations effect a legislator’s efficiency in handling complaints.

Courts play a role in correcting governmental abuse. Litigation is an expensive remedy and the adversarial system places a heavy burden on the aggrieved person to substantially prove his claims which is often difficult because the litigant doesn’t have access to departmental files. Courts are also restricted by various legal technicalities by which certain administrative acts lie outside the purview of the court. Administrative tribunals also follow an adversarial system with legal representation. They are also slow and do not have a significant impact on dispute resolution in instances of maladministration.

Internal grievance resolution mechanism exist in government department but they are not effective because they form a part of the same organization against whom the grievance is. Even if the higher authority record the complaint, it has a tendency to affirm the decision of its subordinate rather than inquire into it. Thus, all of these channels are time consuming, rigid and lack independence.

The ombudsman on the other hand evolved as an independent body unlike internal executive mechanisms. It is a part of the legislature but parliamentary control over its workings are generally limited. Its independence leads to impartiality. Its method is inquisitorial unlike the administrative tribunals and courts. It is also inexpensive because there are no fees involved. Thus it would appear that the ombudsman makes up for all the flaws of other channels of redressal. However, this would be a fictitious opinion because the ombudsman is not without its limitations. It cannot make policy or reverse the decisions of the administrative officials. There are no appeals. Its decisions are not binding reportable judgement.

An ombudsman supplements existing mechanisms like courts, legislatures, executives and administrative courts.

Indian Ombudsman

In India, control over the executive through Parliament and Parliamentary Committees. Judiciary can also exercise control over the government when it flouts a statute, the constitution of principles of Natural Justice. However, propriety rather than legality should be a greater concern while assessing executive decisions[12]. Legality can be achieved through judicial control for propriety however, independent scrutiny is required. The need was brought to light with the India Against Corruption movement from 2011 and 2012 which gained national attention and encouraged legislature on the subject.

The Central Government has attempted to establish an Ombudsman over the administration for the last several decades but these attempts proved to be abortive. In 1966, the Administrative Reforms Commission suggested the adoption of the Ombudsman institution in India. It look into account the unique situation in India with the parliamentary, quasi-federal government. This was accepted by the Government and the Lok Sabha enacted the Lokpal and Lokayukta Bill, 1968. The Lok Sabha passed it but Rajya Sabha did not. Thereafter, it was introduced seven more times in Parliament, the last time in 2001. However, the Bill lapsed each time except in 1985 when it was withdrawn.

The first successfully enacted anti-corruption law was 1947 was the Prevention of Corruption Act and criminal liability was added in 1988. According to the statute, any public official receiving gratification except for legal remuneration as a reward for performing his duties or omitting to perform them is liable for the act[13]. Structurally, these institutions are nothing like the traditional Ombudsman but they do increase administrative accountability.

The Right to Information Act was enacted in 2005 which appointed Information Officers and made Government Departments liable to reveal information on a nominal fee in compliance with a fixed timeline. However there are several exceptions and no protection for whistle-blowers. The Lokpal and Lokayuktas Act was finally enacted by the parliament in 2013.

United Nations Convention against Corruption was drafted in 2003. It required states to create mechanisms at the domestic level to combat bribery, nepotism, embezzlement and money laundering. It required the implementation of preventive measures too. India has signed and ratified the treaty.

Central Vigilance Commission

The Central Vigilance Commission was created in 1954 on the recommendation of the Committee on Prevention of Corruption[14]. The committee was tasked to examine the various aspects of corruption in Government Departments and recommend measures to check it[15]. The CVC became a statutory authority with the Central Vigilance Commission Act 2003.

Composition

It is comprised of the chairperson who and two other Commissioners who are appointed by the President. The Chief Technical Examiners Wing consists of engineers who conduct audits of construction works and investigate into them. The Commissioners for Departmental Inquiry consists of fourteen officers whose function is to conduct oral inquiries into public officials against whom there are departmental proceedings.

Jurisdiction

Members of All India Services, Group ‘A’ officers of the Central Government, Public Sector Banks, Executives and officers of Public Sector Undertakings and other government employees fall within the CVC’s Jurisdiction.

Powers

It exercises superintendence over the functioning of the Delhi Special Police, investigates offences under the Prevention of Corruption Act, enquires or causes an inquiry on a reference of the Central Government and reviews the progress of the applications for sanction of prosecution under the Prevention of Corruption Act. It exercises powers of a civil court[16]. It has the power to accept written complaints for disclosures on any allegation of corruption. Citizens may file online complaints and mechanisms are created to record whistle-blowers as well. It is free from all executive control.

Lokpal

The Lokpal is a central, autonomous apex body empowered to investigate and prosecute politicians, bureaucrats and judges. The ARC recommended setting up of institutions moulded on the Ombudsman of Scandinavian Countries and the Parliamentary Commissioner for investigation in New Zealand.

Composition

Lokpal according to the 2013 Act shall consist of a former Chief Justice of India or a Judge of the Supreme Court or any eminent person. Fifty percent shall be judicial members and the fifty percent shall belong to the Scheduled Caste, Scheduled Tribe, Other backwards classes Minorities and women[17]. Selection committee is diverse. Consists of the Prime Minister, Speaker of the Lok Sabha, Leader of Opposition, Chief Justice and one eminent jurist[18].

Generally a judge or a lawyer or high officer appointed by the parliament. Makes a report to the parliament and sets out reactions of citizens against the administration. Makes his own recommendations to eliminate the causes of complaints[19].

Jurisdiction

The body will have powers of a civil court. It will have access to all departmental files and other powers to enable it to conduct enquiry

Lokayukta

The Lokayukta is a state level Ombudsman. He deals with complaints of maladministration against public officials like Ministers, Members of Legislatures, civil servants, bureaucrats and the police. He is usually a former High Court Judge or Supreme court Judge. The first Lokayukta enactment was passed by Orissa in 1970 but the first Lokayukta was established in Maharashtra in 1971. Karnataka established its Lokayukta in 1984.

Structure

The structure of the Lokayukta differs from state to state. Some states have created a Lokayukta and an Up Lokayukta like Rajasthan, Karnataka, Andhra Pradesh and Maharashtra while other states only have a Lokayukta. Punjab and Orissa have designated officials as Lokpal[20].

Jurisdiction

There is no uniformity in jurisdiction either. The Chief Minister is Included within the jurisdiction of the Lokayukta in Himachal Pradesh, Andhra Pradesh, Madhya Pradesh, and few other states while he is excluded in Maharashtra, Bihar, Rajasthan and other states. The members of State Legislatures, authorities of local bodies, corporations, companies and societies are included in the jurisdiction of the Lokayukta in most states.

Power

Lokayukta have the power to accept complaints from citizens in the form of grievances due to mal administration and allegations of corruption. In most states they are also empowered to act suo moto. They may also require the assistance of investigating agencies. They have the power to call for documents from government departments.

Banking Ombudsman

The banking Ombudsman was set up in 1995 but was greatly modified by Banking Ombudsman Scheme, 2006 in order to provide a speedy, impartial and cost effective forum for consumers to settle disputes outside the adversarial court system. It was brought into effect by a direction of the RBI under the Banking Regulation Act 1949[21]. The Ombudsman is an official in the rank of Chief General Manager or General Manager appointed by RBI. The appellate authority is the Deputy Governor of the RBI.

Nature of Matters

Complaints regarding banking services are received by the Ombudsman. Non-payment or inordinate delay in making payments, non- adherence to prescribed working hours, refusal to open or close deposit accounts or a delay in the same, violation of RBI directives, levy of charges without prior notice and deficiency in internet services are grounds for which a complaint may be made[22].

Powers

The Ombudsman’s territorial jurisdiction is determined by the RBI. He has the power to call for information, general powers of superintendence over his office, to make expenditure according to the rules, prepare the budget and send an annual review to the Governor of the RBI.  He has the power to exercise mediation and conciliation services. When the terms of settlement offered by the banking company are accepted by the complainant, the Ombudsman passes a final binding order enforcing the same. If no settlement can be reached in a month the ombudsman may pass an award or reject the complaint.

Insurance Ombudsman

It was created in 1998 through a government notification and its primary function is to protect the interests of consumers i.e. policy holders. The insurance ombudsman is a person belonging to the insurance industry, civil service or judicial services.  It is supervised by Insurance Regulatory and Development Authority of India and a governing body of representatives of insurance companies[23].

Nature of Matters

Complaints are made in writing addressed to the Ombudsman with Competent jurisdiction. The Ombudsman takes up complaints regarding repudiation of claims by an insurer, dispute regarding premium paid or payable, legal construction of the policy for claims, delay in settlement, mental agony and harassment and non-issue of insurance documents after payment of premium.

Powers

The power to perform conciliation and the power to pass awards is with the Ombudsman. The award is binding on the insurance company which must act upon it within three months. He may make recommendations as he thinks fit and send the same to both insurance company and complainant in order to encourage a settlement. The ombudsman has no jurisdiction over insurance contracts valued over Rs 20 lakhs.

Income Tax Ombudsman

This ombudsman is a person who is a former employee of the Government of India. He is independent of the Income Tax Department.

Nature of matters

Matters regarding delay in issue of refunds, non-acknowledgement of letters and documents sent to the department. Delay in allotment of pan number, delay in releasing seized books of accounts and documents, unwarranted rude behaviour among other issues may be complained of before the Insurance Ombudsman.

Powers

He has the power to facilitate settlement through conciliation and mediation, demand the production of from any Income Tax authority, suggest remedial measures and report his findings to the Revenue Department.

Judicial Development

The most important role of the judiciary in the Ombudsman mechanism has been its acknowledgement is the fact that a toothless Ombudsman is one which is ineffective. In other jurisdictions, the Ombudsman’s informal mechanism and non-binding recommendations act to its advantage and the mere mention of an official’s name in the annual report is sufficient threat to ensure compliance with the law and with the Ombudsman’s recommendation. In India, however, it makes the ombudsman weak. Legislative intent must be taken into account. In the Andhra Pradesh Lokayukta Act, 1983, the legislative intent was to make public servants answerable to the Lokayukta who would be a former Judge of the High Court. When an authority consists of high judicial dignitaries, they should be armed with appropriate powers so that their orders do not remain mere opinions and paper directions[24]. However, the court also realized the limitation of the statute which did not make implementation of the order mandatory.

It is plain as day that the courts would encourage treatment of an Ombudsman’s recommendations as mandatory. A constitutional bench of the Supreme Court observed that when an office of Lokayukta is held by a former Supreme Court Judge is difficult to assume that his report would be devoid of merits[25]. The Supreme Court in clear terms declared that it did not intend to lay down the abovementioned statement as law. It found that in the case at hand the Lokayukta had carried out detailed investigation and his report clearly reflected the same.  It also contained the materials which lead him to form the conclusion that the orders investigated were passed in a clandestine manner with the officials involved deliberately and knowingly ignored the realities of the case.

A liberal interpretation is given to the powers of the Lokayukta wherever possible in order to allow it to cover a larger realm of matters. Such liberal interpretation clearly shows that courts believe that the office of the ombudsman should not be continually bound and gagged. The Lokayukta had the power to suo moto investigate into matters where the Upa Lokayukta had jurisdiction as long as it shows reasons[26]. It also has the power to recommend suspension in an interim report in order to further its investigations if a prima facie investigation brought allegations against that official.

Analysis

The effectiveness of the Central Vigilance Commission may be seen in its Annual Report of 2014[27]. The Commission tendered advices in 5867 cases during the year 2014 when the total number of cases reported to it were 64410. It advised major penalty proceedings in 624 cases and minor penalty proceedings in 270 cases. In pursuance of the Commission’s advice, the competent authorities granted sanction for prosecution against 133 public servants during the year 2014. Data is not available in the same manner for the various lokayuktas.

The Haryana Lokayukta had 1023 pending cases and received 692 complaints in 2013-14 out of which it disposed 807 complaints[28]. However, the government implements only a small fraction of the cases disposed by the Lokayukta.

The very existence of Ombudsman would increase transparency by acting as an independent viewer to government files. There is a growing demand in India to shift to a more open form of government. Part of the liberal democratic leaning. Actions and decisions of the government should be open to public discussion and criticism. Keeping administrative decision making may promote efficiency buy also breeds arbitrariness. Today, public suspicion has undermined public confidence in administration.

The fact that a decision of an Ombudsman like a Lokayukta is not binding but merely directory should be considered an advantage. This allows the ombudsman to ensure that the grievances of the citizens comes to the attention of the parliament without upsetting the administrative mechanism. However, lack of implementation would render the Ombudsman irrelevant.

The Lokpal Act fills several gaps present in the existing Ombudsman like institutions. Perhaps its most important advantage is its wide jurisdiction. It covers even the Prime Minister and Members of the Judiciary. The independence of the Lokpal would be protected by the fact that the composition Selection Committee. The Lokpal would not consist of bureaucrats and politicians. Remedy would be delivered swiftly because the act provides for time limits. A decision must be given in a year and executed in two years.

The power to sanction prosecution der the Prevention of Corruption Act would now lie with the Lokpal. It would also have its own prosecution Wing.

It would have the powers of a civil court in matters of securing attendance of a person, discovery and production of documents and issue commissions for the examination of documents and witnesses. It may direct seizure of important documents and retain the documents in custody. It may attach property. It may recommend transfer or suspension of an officer once a preliminary case is made out. It may utilize any authority or investigating agency. Thus it has extensive powers.

Special Courts would also be established under the act to decide cases arising out to the Prevention of Corruption Act and this act.

Perhaps the only disadvantage of the Lokpal is that it will not have the power to receive complaints of corruption from common people. It is the Parliament which will make these decisions. Also, it remains an advisory body. It may only forward its report to the competent authority which would have the final powers to decide whether to take action or not.

The Ombudsman is a very flexible mechanism which can alters its form to suit topical problems. Its use in developing countries is still worthwhile because it serves two purposes which all developing countries desire-it promotes the general efficiency of administration and bridges the gap between the government and the people[29].

However some authors argue that this institution may prove to be successful in countries with a small population but unsuccessful in populous countries like India.

Authors like Walter Gellhorn are of the opinion that the ombudsman’s potential as a procedural system is largely bound up with our commitment to the adversary system since the ombudsman and adversary systems are substantially competing procedures for the regularization of informal processes; each is based on a different conception of the dispute resolution process and reflects different underlying social and political values. While the two systems could coexist in harmony if spheres of influence were delineated reflecting the appropriateness of their respective procedures, the spread of the adversary system, in response to the perceived commands of procedural due process, into many areas of administrative decision making has stymied the development of the ombudsman alternative[30].

Conclusion

In a liberal democracy, justice and fairness are the pillars of administration. It is imperative to avoid administrative delay, dis courtesy and mal administration. In a developing country where large scale powers are conferred upon a government, there is a tendency towards corruption and maladministration.

It can be clearly perceived that the spirit and the structure of the Ombudsman of the Ombudsman has been emulated in various institutions in India. It may be said that as of today there in no central authority which clearly undertakes the role of the Ombudsman. Rather, a group of Institutions at the Central and State Level, have divided up the functions of the Ombudsman among themselves.

The effectiveness of these institutions should not be measure by the degree of similarity with other Ombudsman. Their actual successes in dispute resolution should be their measure of effectiveness. From the above data, it appears that the Ombudsman institutions in themselves have managed to deal with a fair percentage of complaints and have also recommended penalties. The implementation is left to the government and is thus a matter for which they cannot be criticized.

Their effectiveness may also be determined by the extent to which they have been successful in raising public awareness and encouraging participation of citizens. The Lokayuktas have caused investigations over the last few years over matters which either treasury or opposition would have wished to suppress. Their reports have brought to light in various instances the complex problem of corruption which prevails.

There is no clear substitute to the Ombudsman. India requires a central ombudsman at the earliest which may work along with other legislative, judicial and administrative control mechanisms to check the powers of the executive increase administrative accountability and public confidence in the redressal mechanisms and the administration itself.

[1] M. Laxmikanth, Public Administration 218 (7th ed., Tata McGraw Hill Education Private Limited, New Delhi 2011).

[2] H.W.R. Wade &C.F. Forsyth, Aministrative Law 84 (9th ed., Oxford University Press, New Delhi 2013).

[3] C.K. Takwani, Lectures on Administrative Law 426 (5th ed., Eastern Book Company, Lucknow 2012).

[4] UNTERM, The Ombudsman available at http://unterm.un.org/dgaacs/unterm.nsf/8fa942046ff7601c 85256983007ca4d8/2e129932e6473e6a85256fd50061e131?OpenDocument (last visited on September 20, 2015).

[5] Bernard Frank, The ombudsman-a challenge 2 International Bar Journal 30 32 (1971).

[6] Bernard Frank, The Ombudsman Revisited 4 International Bar Journal  128 130 (1975).

[7] Hing Yong Cheng, The Ombudsman or Citizen’s defender: A Modern Institution 377 Annals of American Academy of political and social science vol 20 21 (1968). .

[8] Jan-Erik Lane, Public Administration and Public management :the principal agent perspective 134 (2nd ed, Routledge Taylor and Francis, London 2006).

[9] The office was created under the Parliamentary Ombudsman Act, 1955.

[10] Folketingets Ombudsmand, The Danish Parliamentary Ombudsman available at https://en.ombudsmanden.dk (last visited on September 19, 2015).

[11] John Alder, Constitutional law and administrative law 106 (6th ed., Palgrave Macmillan 2007).

[12] S P Sathe, Administrative Law (7th ed Lexis, Nexis Butterwoths Wadhwa, Noida, 2009).

[13] Section 7.

[14] Santhanam Committee.

[15] Laxmikanth, supra note 1 221(The government accepted 106 out of 137 recommendations. The committee also recommended to the Constitution, Indian Penal Code and other statutes).

[16] Section 11.

[17] Section 3.

[18] Section 4.

[19] C.K. Takwani, Lectures on Administrative Law 427 (5th ed., Eastern Book Company, Lucknow 2012).

[20] Laxmikanth, supra note 1 226.

[21] Section 35(A) (It gives RBI power to issue binding directions to one or more banking company).

[22] Section 8.

[23]Insurance Regulatory and Developmental Authority of India, Ombudsman available at https://www.irda.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?page=PageNo233&mid=7.1 (last visited on September 30, 2015).

[24] Institution of A.P. Lokayuktas/ Upa Lokayukta v T. Rama Subba Reddy, (1997) 17 SCC 42 ¶ 17.

[25] M.P. Special Police Establishment v. State of M.P. (2004) SCC 788.

[26] Ch. Rama Rao v. Lokayukta (1996) 5 SCC 304.

[27] Central Vigilance Commission, Annual Report 2014 available at http://cvc.nic.in/ar2014.pdf (last visited September 24, 2015).

[28] Haryana Lokayuka, Lokayukta Haryana Annual report for the period from 01.04.2013 to 31.03.2014 available at http://www.hrlokayukta.gov.in/annual_reports/Annual%20Report%202013-14.pdf (last visited September 24, 2015).

[29] Cheng, supra 7 note 21.

[30] Paul Verkul, The Ombudsman and the limits of the Adversary System 74 (4) Columbia Law Review 846 (1975).