Basics of Real Estate Due Diligence

by LFIAdmin | Dec 14, 2023 | Home

By Nazaqat Lal, Advocate & Solicitor, Bombay High Court

nazaqat_lal@hotmail.com | Dec 14, 2023

a. What is real estate due diligence?

Real estate due diligence is an investigative process undertaken to ascertain the title of the seller to the land, buildings/structures, flats, etc. and assess the risks involved in acquisition of such property.

The real estate diligence may involve due diligence of the land, land and structure thereon or a part of the structure such as a flat. The land maybe agricultural or non agricultural, it maybe freehold or leasehold.

The nuances vary from land to land and structure to structure but broadly speaking, a real estate diligence would ordinarily entail examining revenue records (in the case of agricultural land), a search at the office of the Sub-Registrar within whose jurisdiction the property is situated, issuing public notices, vetting title and property related documents available with the seller, vetting certain documents and permissions in respect of the land and building, inspection of original documents and a litigation search.

b. Why is real estate due diligence done?

One, there is a legal requirement and legal obligation on the purchaser to undertake due diligence.

Two, it is done to ascertain whether there are any risks attached to the acquisition of the property and any likely hindrances and/or disputes likely to arise on or after the acquisition.

Three, it is also done to serve as a mitigating factor should the property subsequently become the subject matter of a dispute/litigation. If the buyer has carefully undertaken due diligence prior to purchasing the property, courts will factor this in at the time of deciding the dispute.

A buyer who has undertaken sufficient due diligence is far better positioned to protect his rights in the property and/or be sufficiently compensated than a buyer who has not undertaken sufficient due diligence, despite them both having made full payment of consideration towards their respective properties.

To put it very simply, when a person is looking to acquire a property, he/she wants to be able to enjoy such property and be in quiet and peaceful possession of such property without claims from third parties. Real estate due diligence is done to ensure this.

Whether property is being acquired for self use or by way of investment, a substantial sum of money is involved and very often, a lifetime of savings and hard earned money. Not everyone is able to purchase multiple properties.

Therefore, it becomes even more necessary to ensure that the sole property being acquired has clear title or potential for the title to be clear prior to acquisition.

There are also situations where the buyer is already aware that the property is in dispute or carries certain risks with it. In such a situation, real estate due diligence may still be undertaken to ascertain the magnitude of the risk, ways in which such risk maybe mitigated and necessary safeguards suggested to be built into the documentation for the benefit of the purchaser.

c. Legal principles underlying real estate due diligence

‘Caveat emptor’ which means buyer beware is a fundamental principle underlying due diligence. A buyer is required under law to be vigilant and take all necessary reasonable steps prior to acquiring property.

Another fundamental legal principle underlying due diligence is that a transferor cannot pass a better title than he himself possesses. Therefore, due diligence is undertaken to ascertain what title the seller has and what risks, if any, are attached to the same.

d. What are some of the concerns that get highlighted in a real estate due diligence that could otherwise potentially go unnoticed?

Every land, structure or part of such structure has its own nuances. However, some common concerns that often get highlighted include rights of third parties (including banks/financial institutions), restrictive transfer covenants in the title documents, interest of minors in the property, not all legal heirs being party to certain documents, payment of consideration to some legal heirs to the exclusion of others, nominee holding the property on behalf of all the legal heirs and representatives of the deceased, insufficiently stamped documents, irregularly executed documents, unregistered documents where registration is mandatory, property being sold below ready reckoner value, rate of TDS, whether the seller is resident in India, an NRI or a foreign citizen, seller’s pending liability of direct and indirect taxes, building permissions with respect to OC, height restrictions, FSI, etc., restrictions on the use of the land and its transferability, ongoing litigations with respect to the property, outstanding payments pertaining to the property that may result in a charge on the property, etc.

e. Is real estate due diligence foolproof?

No. While the accuracy of the due diligence depends significantly on the reasonable care taken by the lawyers involved, it is still not foolproof. Real estate due diligence relies significantly on searches taken at various government offices such as the Sub-Registrar’s Office, Talathi’s office, etc. Records of older years may not always be properly maintained or easily accessible. While attempts are ongoing to digitize several documents and records, the digitization process has its own drawbacks. As a result, despite undertaking searches, all relevant documents may not necessarily show up in the search. A litigation search is also usually undertaken as a part of the real estate due diligence process. Again, while a high level of accuracy can be achieved, it is difficult to achieve foolproof results considering the number of dispute resolution fora and courts in which a dispute could have been filed with respect to such property.
Real estate due diligence also proceeds on several assumptions such as the genuineness of signatures on documents, documents continuing to be valid, subsisting and in force, documents being validly executed, sufficiently stamped and duly registered, all necessary permissions and approvals being obtained and continuing to be valid and subsisting, execution of documents being duly authorized, etc.

While the process is not foolproof and there is room for error for the reasons set out above, reasonable care taken by lawyers, search clerks and all those involved in the process of collating the title and other property related couments can to a great extent minimize the room for error.

f. What is the consequence of acquiring property without doing due diligence?

As set out above, in a dispute situation, a buyer who has undertaken sufficient due diligence is far better positioned to protect his rights in the property and/or be sufficiently compensated than a buyer who has not undertaken sufficient due diligence, despite them both having made full payment of consideration towards their respective properties.

By not undertaking due diligence, a buyer exposes himself/herself to several risks that have not been accounted for and which the buyer may find difficult to deal with when such risks attaching to the property arise.

To put it simply, acquiring property without doing due diligence is going in blind and leaving it entirely to destiny and chance that no major issues arise.

DO I REALLY NEED A PROPERTY LAWYER WHILE BUYING OR SELLING A FLAT?

by LFIAdmin | Nov 28, 2023 | Home

By Nazaqat Lal, Advocate & Solicitor, Bombay High Court

nazaqat_lal@hotmail.com | November 28, 2023

• My broker has given me a draft agreement that is commonly used for sale/purchase of flats. My broker will also arrange to pay TDS. Why should I engage a lawyer and pay legal fees?

• The seller is known to me and has assured me that there is nothing to worry about. Is due diligence necessary?

• While purchasing an apartment in a new project, there is little or no scope for negotiation with the developer. Why should I engage a lawyer and pay legal fees?

• A bank loan was taken at the time of purchase of the house. The bank would have done its due diligence before issuing the loan. Do I need to undertake due diligence if I am purchasing the flat?

• I am selling my flat. I am only concerned with receiving the consideration. Why should I engage a lawyer?

• No one actually responds to public notices. Can we avoid giving a public notice?

These are some of the questions most commonly asked to conveyancing lawyers. The common thread running through all these questions is the role of a conveyancing lawyer at various stages of a sale/purchase transaction.
A purchase/sale transaction broadly involves (i) due diligence, (ii) negotiation, and (iii) agreement drafting, execution and registration.

1. Due Diligence

a. What is due diligence?
Due diligence refers to the process undertaken by a buyer to satisfy himself about the title of the seller to the property he intends to buy. Exercising reasonable care, vigilance, and undertaking due diligence is a legal obligation cast upon the buyer.
A fundamental legal principle underlying due diligence is that a transferor cannot pass a better title than he himself possesses. Therefore, due diligence is undertaken to ascertain what title the seller has and what risks, if any, are attached to the same.
b. What does real estate due diligence entail?

Real estate due diligence broadly entails a search at the office of the Sub-Registrar within whose jurisdiction the property is situated, issuing public notices, vetting title and property-related documents available with the seller, vetting certain documents and permissions in respect of the building and land, inspection of original documents and a litigation search.

c. What are some of the concerns that get highlighted in a due diligence that could otherwise potentially go unnoticed?

Considering that every property and transaction has its own nuances, it is difficult to put down an exhaustive or indicative list. However, some concerns that may get highlighted include the rights of third parties (including banks/financial institutions), restrictive transfer covenants in the title documents, interest of minors in the property, nominee holding the property on behalf of all the legal heirs and representatives of the deceased, rate of TDS, whether the seller is resident of India, NRI or foreign citizen, seller’s pending liability of direct and indirect taxes, building permissions with respect to OC, height restrictions, FSI, etc., restrictions on the land and its transferability, ongoing litigations with respect to the property, outstanding payments pertaining to the property that may result in a charge on the property, etc.

d. Why is due diligence done?
One, there is a legal requirement and legal obligation on the purchaser to undertake due diligence. Two, it is also done to serve as a mitigating factor should the property subsequently become the subject matter of litigation. If the buyer has carefully undertaken due diligence prior to purchasing the property, courts will factor this in at the time of deciding the dispute.
A buyer who has undertaken sufficient due diligence is far better positioned to protect his rights in the property than a buyer who has not undertaken sufficient due diligence, despite them both having made full payment of consideration towards their respective flats.

e. Does a seller’s lawyer have any role to play at the time of due diligence?
The buyer’s lawyer is bound to raise queries and seek certain information and documents relating to the property. A seller’s lawyer is required at this stage to provide the necessary information and documents that would enable the buyer to conduct the due diligence satisfactorily.
In the course of the due diligence, the buyer’s lawyer may highlight certain concerns and risks to the buyer. Based on the risks and their potential impact, the buyer will decide whether to proceed with the transaction or not. The role of the seller’s lawyer becomes crucial to suggest options that would give comfort to the buyer and reduce the risk and its impact. Options may include certain additional representations and warranties by the seller, specific indemnities by the seller, etc.

2. Negotiation

The commercials viz. the consideration, time period for payment, sharing of stamp duty and registration charges, etc. are usually negotiated between the buyer and seller. However, the specific clauses of the contract pertaining to the representations and warranties, indemnity, etc. are usually negotiated by the lawyers.

3. Agreement drafting, execution, and registration

While all agreements for sale by and large follow a standard format, the nuances involved in every transaction vary. These nuances require to be accurately drafted and risks and concerns identified during the due diligence process require to be addressed by way of representations, warranties, and indemnities.
At the time of execution, if one or more parties are a firm or company, the necessary authorisations are required. If any of the parties are unable to remain present for execution and/or registration, they may execute powers of attorney for the same. It is crucial to have a lawyer at the time of execution to ensure that the document is properly executed in accordance with the law for the time being in force to prevent the same from later being found to be unenforceable on account of defects in execution.

Conclusion

Till the time a dispute does not arise between the buyer and seller, the importance and necessity of having engaged a lawyer at the time of the transaction is seldom felt. The legal expenses borne in litigation or arbitration ordinarily far exceed the legal expenses involved in engaging a lawyer at the transaction stage. It is therefore, in the legal and commercial interest of parties to engage lawyers at the time of the transaction and endeavour to mitigate as many risks as possible by accurately drafted clauses in the agreement.

LEGALISATION OF ILLEGAL DRUGS IN INDIA

by LFIAdmin | Oct 25, 2023 | Home

By Ritabh Singh, Final Year student at the Government Law College, Mumbai

ritabhsingh44@gmail.com | Oct 25, 2023

(I) INTRODUCTION

The pharmacological definition of a drug is “a chemical agent which when taken into the body affects the processes or alters the structure or function of some part or parts of the organism”. This includes medical as well as illegal drugs. Drugs can simply be understood as substances that change the functioning of the human body and mind and which may make the consumer act in a manner they otherwise avoid[i].

Scientifically, drugs are of two kinds – natural and synthetic. Natural drugs have medical uses such as morphine, codeine and thebaine which are produced from opium. It also includes cannabis, which grows wild in many parts of the world, particularly in hilly and cold areas. Synthetic drugs are manufactured in factories and do not need any plant products as raw materials. LSD is an example of such a synthetic drug[ii].

An illegal drug is that which is made illegal by the government. It is a fact that consumption of illegal drugs for leisure leads to the development of mental health issues along with lung and heart diseases. Consumption of illegal drugs has been associated with decreased motivation which directly affects performance and leads to problems such as loss of memory, slowed reaction times, anxiety, panic, and social and interpersonal deficits. Chronic consumption also leads to a suppressed immune system, respiratory problems, and permanent damage to cognitive ability. Consuming illegal drugs can also be extremely addictive which can have serious consequences on an individual[iii].

However, certain illegal drugs also provide medical relief as they are used to ease the discomfort caused by cancer and other chronic diseases. Scientists have found that these illegal drugs offer therapeutic effects that can relieve nausea and stimulate appetite.

Consumption of drugs uncontrollably and being unable to quit is known as drug addiction. Drug addiction leads to innumerable health-related problems which negatively affect society. It is, thus, unanimously agreed that drug and addiction must be curbed; however, differences arise as to how it should be done. Some argue that the method of criminalizing drug abuse and addiction has not brought the desired outcome. The better alternative is making legal the consumption of illegal and addictive drugs in a controlled manner, as done with intoxicants such as alcohol, tobacco etc[iv]. Others argue that legalizing the consumption of illegal drugs will lead to the inevitable destruction of society and will cause more harm than benefit.

(II) ARGUMENTS IN FAVOUR OF LEGALISATION

1. It is accepted that recourse to illicit drugs is inevitable, though undesirable. It is the society’s failure to provide adequate opportunities for the relief of stress, boredom, loneliness or self-realization that leads to the consumption of illegal drugs. The need is for policies that help free individuals from circumstances that led them to consume illegal drugs, enabling them to quit autonomously. Better integration of addicts is required and the same must be achieved by allowing consumption of illegal drugs, if necessary.
2. It is argued that the policy of ‘the war on drugs’ has failed despite the colossal investments made by various governments. Courts and prisons are overburdened and there are more drugs in the market than before. Legalizing illegal drugs will reduce the number of prisoners and allow the courts to pass orders on matters having greater importance.
3. The addition of a harmfulness tax on the purchase of drugs will lead to the generation of extra revenue for the government which can be used for the betterment of the lives of addicts. Thus, the government will not be losing money on curbing the consumption of illegal drugs as it is under criminalization.
4. The illegal drugs circulating in the market are of a cheap and adulterated nature. Consumption of such drugs causes a greater health concern.
5. Once illegal drugs are legalized, the black market for the sale and purchase of such drugs will collapse. Illegal trade of drugs would take a nosedive under legalization.
6. The positive medical benefits of the consumption of illegal drugs are as indisputable as the negative effects. Medical and scientific uses of such drugs must be promoted and facilitated.
7. Legalizing illegal drugs will also create job opportunities through the operation of dispensaries, manufacturing plants, growing operations, etc.
8. It is argued by proponents of criminalization that crime would increase due to the effects of illegal drugs on the consumer. However, research shows that decriminalization or legalization of illegal drugs has little impact on the general crime rate.
9. How correct is it to punish someone for an action directed against themselves that does not affect anyone else but the person? Many legal systems have made consumption of illegal drugs a serious criminal offence which attracts huge fines and long imprisonment time. The addict must be rehabbed and not incarcerated.
10. What is the limit of the right of the state to control its citizen’s behaviour by infringing upon their liberties? If the state holds that it has the duty to safeguard its citizens, why only criminalize the consumption of illegal drugs? Why does the state not criminalize the consumption of alcohol (which has similar effects), tobacco (which is even more harmful than the consumption of illegal drugs) or every such item that harms the human body? The state cannot arbitrarily decide what commodities to legalize and what to criminalize citing its duty to safeguard its citizens[v].

(III) ARGUMENTS AGAINST LEGALISATION

1. In several countries, the drug cycle has begun to stabilize. Legalizing illegal drugs will result in re-stimulating a waning interest which will subsequently burden the health infrastructure of the country.
2. Citizens of poor countries try to replicate the lifestyle of citizens in developed countries. Groups most vulnerable to drug abuse are those where social cohesion is the weakest. While in rich societies there is a wide range of leisure pursuits to accompany legal and illegal drug consumption, in poorer settings, illegal drugs will serve as the central experience and thus result in increased addicts.
3. What will be the form of regulation is not decided upon. Should there be a bar to the purchase and consumption of illegal drugs made legal? What percentage of tax should be levied? What role will a regulatory authority have? Where will such drugs be sold? What would be the age limit allowing the purchase and consumption of such drugs? How will testing be done? It must be borne in mind that an excessive tax rate or an age limit to purchase and consume drugs will result in a continuation of the black market.
4. Illegal drugs do cause serious physical, mental, and social problems, rehabilitation for which is extremely difficult. The more accessible drugs are, the more people are to consume them and the more abnormal or uncontrolled behaviour will be witnessed.
5. Economic effects, especially in poor households, will be disastrous. The birth of an addict will lead to meagre or no money for essential commodities. Upliftment of the poor will become an even more challenging process post-legalization[vi].
6. Legalization, or even decriminalization, of illegal drugs, will send a wrong message to society by implicitly removing its unequivocal disapproval of use. It would suggest that the state has given up on its war against drugs.
7. A principal risk of legalization is that of irreversibility. It took 30 years from the identification of cigarettes with lung cancer to bring a reversal in the smoking habits of adults only in affluent societies. The poor are still the victims of tobacco. Once illegal drugs are legalized, criminalizing them will almost be impossible and the effects of the same will be everlasting.
8. Habits acquired during teenage and early adult life are particularly hard to dislodge. How will young adolescents be protected from such legalized drugs, especially if parents themselves are consumers? Children tend to behave like their parents, and a habit of consumption by the parents may lead to the ill of addiction for the child.
9. In today’s democracy, the state is a welfare state. It is obligated to safeguard its citizens and work for their upliftment. The state, after taking into account all the effects of illegal drugs, the socio-economic and cultural circumstances of its citizens, the possible revenue which can be generated, and the long-term and short-term effects of legalization/criminalization of certain drugs, has taken the informed decision to keep criminalized consumption of such drugs. Moreover, the state is nothing but the representation of the majority. Policies are merely the will of the electorate. The majority, due to various reasons, have decided to keep criminalized the consumption of illegal drugs.

(IV) POSITION IN OTHER COUNTRIES

A. POSITION IN THE UNITED STATES OF AMERICA

The legalization and criminalization of cannabis is a highly debated topic in the US. Many states in the US began decriminalization of small amounts of cannabis in the 1970s[vii]. In 1996, California became the first state to legalize medical cannabis, and Colorado and Washington became the first two states to legalize recreational cannabis. As of 2023, recreational use of cannabis is legalized in 23 states of the US[viii]. As for the sales of marijuana, in 2015 Colorado collected more than $135 million in taxes and fees on medical and recreational marijuana. Sales in the state have totalled over $996 million[ix]. However, this does not certainly translate to an improved economy as it is yet to be seen how much the state spends on direct health care costs. To provide an analogy, $13 billion collected in cigarette taxes is only about a sixth of the $75 billion spent in direct health care costs directly attributed to tobacco. Traffic safety also became a concern as the number of intoxicated drivers increased along with an increase in the number of accidents. Nearly 92,000 Americans died of drug overdoses in 2020, up from around 70,000 in 2017. During the same period, the rate of fatal overdoses rose from 21.7 to 28.3 per 100,000 people. Thus while revenue has increased, so have the problems associated with the consumption of drugs[x].

B.POSITION IN SWEDEN

Sweden has adopted complete criminalization of the consumption of drugs as it has made it illegal to sell or to possess drugs, except for medical use. In 1988 there was a change of policy aiming to show that society is against drugs of all kinds. In 1993, imprisonment was awarded for illegal drug consumption. The status of a national project is given to fighting against drugs in Sweden and achieving a drug-free society is viewed as a higher goal than simply keeping the drug problem within acceptable boundaries. The punishment accorded for the consumption of illegal drugs was adjusted by the policymakers to restrain young people from consuming illegal drugs and at the same time to make treatment better for those being imprisoned. A “if you are not with us, then you are against us” policy has been adopted by Sweden and the government can strongly intervene in the private lives of its citizens and require urine and blood tests. In 2023, the government proposed to increase criminal penalties, such as criminalizing attempts and conspiring to commit a narcotics offense. The Swedish drug policy has been highly effective in preventing drug use but seems to be less effective in preventing drug users from becoming drug addicts. Nonetheless, heavy drug use levels in Sweden are still below the EU average[xi].

(V) POSITION IN INDIA

Article 47 of the Constitution of India mandates that the “…state shall endeavour to bring about prohibition of the consumption except for medical purposes of intoxicating drinks and of drugs which are injurious to health”.

In India, the Narcotic Drugs and Psychotropic Substances (NDPS) Act, 1985 prohibits, except for medical or scientific purposes, the manufacture, production, trade, use etc. of narcotic drugs and psychotropic substances. Without going into the intricacies of the Act, the section dealing with the consumption of illegal drugs is under[xii] –

“27. Punishment for consumption of any narcotic drug or psychotropic substance. -Whoever consumes any narcotic drug or psychotropic substance shall be punishable,

(a) where the narcotic drug or psychotropic substance consumed is cocaine, morphine, diacetylmorphine or any other narcotic drug or any psychotropic substance as may be specified in this behalf by the Central Government by notification in the Official Gazette, with rigorous imprisonment for a term which may extend to one year, or with fine which may extend to twenty thousand rupees; or with both; and

(b) where the narcotic drug or psychotropic substance consumed is other than those specified in or under clause (a), with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both.”

India, thus, has criminalized the consumption and position of illegal drugs. The policy against consumption of illegal drugs in India is of a restrictive nature[xiii]. However, being a state between two of the world’s largest illicit drug-producing regions, India has been a transit country for the smuggling of illegal drugs for long. In certain areas, illegal drugs are grown and manufactured as well. This is how illegal drugs are made available for consumption in India.

(VI) LEGALIZATION IN INDIA?

To legalize illegal drugs in India, first the NDPS Act must be amended accordingly or repealed. Arguments invoking the liberty of citizens have been made by liberals, but it is quite unlikely that any government will take steps to legalize the same. As of now the same is not a political issue, which can make the legalization of illegal drugs a quick affair, but not a politically helpful one. However, subsequent political ramifications may motivate governments to not make any changes in the current law as the common consensus in the general population is heavily against the consumption of illegal drugs.

Considering the socio-economic conditions in India, it does not make sense to legalize the consumption of illegal drugs. As a country, we must focus on issues of overall development and growth. An obvious effect of legalizing illegal drugs in the country now will be that of burdening the health infrastructure, which is already facing mammoth challenges. The young and impressionable youth, especially those unemployed, already resort to the consumption of illegal drugs as a leisure activity or a coping mechanism[xiv]. It can also be said that the youth already fancies the consumption of drugs, being infatuated by Western movies and television shows wherein the same is propagated[xv].

An interesting parallel drawn by the youth of our country to consume cannabis is that “Lord Shiva used to indulge in the same“. This uneducated opinion stems from a lack of knowledge and abundant misinformation available on the same. To strike down this inconceivable argument, it is recommended that the entire story of Samudra Manthan[xvi] ( churning of the ocean ) be read. In short, it is said that the lord consumed Bhang to reduce the intensity of the poison he consumed. This event is extended to affirm his love for intoxication, which is factually unforgiving and mildly amusing as none of the Hindu texts acknowledge any liking or addiction of the lord for intoxication.

(V) CONCLUSION

In the end, legalization or criminalization of drugs is more of a social and ethical question than a legal and policy one. Does the money legalization consumption of illegal drugs generate have greater importance than the social and intellectual impacts it brings with it?

It does not make sense for the state to make the argument of safeguarding overall health. Many more injurious substances than drugs are freely sold in the market. The state has never arrested anyone for consuming food and drinks known to be unhealthy. What about personal choices known to be harmful to an individual? Will the state step in and prevent that as well on its undefined limits to intervene for social good? What is the problem in making personal choices that can be proved to bring no harm to anyone else? Lastly, the decision to consume drugs is on the consumer only. If that brings them happiness, what right does the state have to judge the same as legal or illegal?

At the same time, an individual’s right to consume drugs conflicts with the collective good of having a drug-addict-free society. The notion that individual consumption imposes no harm on society is not sustainable. In nearly all countries, alcoholics and those suffering from ailments due to tobacco consumption have access to public health care, whose costs the democratic society accepts as a collective burden. If the state must not infringe on the liberty of individuals by restricting them from consuming whatever they want to, the state must also not pay for the healthcare of those who caused themselves problems by consuming whatever they want to. In a developing country like India which is already dealing with various challenges, legalizing drugs will cause extraordinary problems, especially for the poor.  Perhaps later on consumption of certain drugs can be made legal, but for that adequate infrastructure must be built.

Lastly, reformation is more important than restriction. There is an apparent disproportion between the act of consuming illegal drugs and the punishment awarded for it. Instead of imposing heavy fines and rigorous imprisonments, a system of rehabilitation of the addict must be worked upon by the state. More rehabilitation centers with proper facilities must be constructed instead of prisons. It also makes little sense to criminally punish and legally extort an addict instead of helping him. An obvious reaction to this disproportion is that drug addicts fail to even seek help and treatment due to fear of criminal fines and imprisonment.

[i] “Legalizing or criminalizing drugs – the debate that never ends” – Maryam Mortzkar

[ii] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1526938/

[iii] https://positivechoices.org.au/students/what-are-illegal-drugs

[iv] ALCOHOL LEGALIZATION IN INDIA: A CRITICAL ANALYSIS OF LAWS, REGULATIONS AND FUTURE PRESPECTIVES – Mohammad Sameen Reshi, Aligarh Muslim University

[v] The Regulation-Legalization Debate

[vii] The effects of the legalization of recreational marijuana – Michael S. Paul, School of Law Enforcement

Supervision/Class L

[viii] https://mjbizdaily.com/map-of-us-marijuana-legalization-by-state/

[ix] Criminal Justice System Impacts of Cannabis Decriminalization & Legalization – Maggie Bailey, UNC School of Government

[x] https://www.pewresearch.org/short-reads/2022/05/31/concern-about-drug-addiction-has-declined-in-u-s-even-in-areas-where-fatal-overdoses-have-risen-the-most/

[xi] UN Office on Drugs and Crime – Sweden’s successful drug policy, a review of the evidence

[xii] Narcotic-Drugs-and-Psychotropic-Substances-Act-1985

[xiii] NATIONAL POLICY ON NARCOTIC DRUGS AND PSYCHOTROPIC SUBSTANCES

[xiv] Drug Abuse Monitoring System – UN Office of Drugs and Crime – pub by Ministry of Social Justice and Empowerment, GOI

[xv] Rapid Assessment Survey of Drug Abuse in India – Ministry of Social Justice and Empowerment, GOI

[xvi] SAMUDRAMANTHANA – San Sarin, Rashtriya Sanskrit Sansthan

Artificial Intelligence in Law; Will “Robot Lawyers” take over the profession?

by LFIAdmin | Feb 27, 2023 | Home

By Ritabh Singh, 4th Year Law Student, Government Law College, Mumbai,

ritabhsingh44@gmail.com | February 28, 2023

INTRODUCTION

Technology has been evolving ever since the invention of bows and arrows. The 18th century marked the beginning of the industrial revolution, an indelible period where machines took over human jobs requiring repetitive physical labour. In the 21st century, we are witnessing Artificial Intelligence (AI) take over jobs which require complex mental labour. From self-driving cars [1] to automated financial investments [2], AI programs are automating activities which have always required human intelligence to now perform these activities with greater efficiency and precision.

In the technology-shy profession of law, AI programs are being used to automate repetitive tasks which do not require a lawyer’s professional skill. Some believe that these programs will take away the practice of legal professionals, to which an opinion is provided in this article.

WHAT IS “AI” AND HOW DOES IT WORK

Artificial Intelligence can be described as technologies developed by using algorithms which are capable of performing intelligent activities by themselves. Intelligence is understood as the ability to learn, understand, reason and perform activities. When artificially, or by the use of technology, intelligent systems are developed which can perform complex activities, such systems are known as AI programs [3].

Contrary to fictional representation, AI programs do not possess human-like thinking or cognitive abilities and instead perform functions by using computational mechanisms. The most common way in which an AI program works is by providing the system with cosmic amounts of data, and then by using heuristics, the system detects patterns in the data and uses the knowledge, rules and information which have been encoded by programmers in the system, to execute its functions. Sometimes, the system is not even provided with any data. It is simply developed by using algorithms and has specific rules which it follows to function. Unlike humans, many AI programs do not even understand the meaning of the data it is provided with, yet by using patterns and rules, these systems function more efficiently than humans [4]. As time passes, such systems also learn how to function better by interpreting feedback, consuming more data and learning more patterns. This self-learning process is also a technology implanted in many AI programs, known as Machine Learning.

Different AI programs exist for specific purposes, and thus these programs are trained in a certain manner to achieve the objective of automation. Automation refers to the process in which AI programs perform activities automatically without the intervention of humans.

None of the existing AI programs are Strong AI programs, i.e, which implement human-like conscious thinking to function [5]. Strong AI programs are technologies which are in development.

CURRENT APPLICATION OF LEGAL AI PROGRAMS USED WORLDWIDE

a) Kira systems: This advanced legal AI program uses machine learning to identify, extract and analyse text in a given contract or document. It facilitates due diligence and can create a summary of documents. It is used for reviewing contracts and other documents [6].

b) Lex Machina: Lex Machina is used for predicting the behaviour of the judge, opposing law firms, lawyers and parties. It allows the user to then accordingly strategize and analyse the case [7].

c) Luminance: It is a document review legal AI program which uses machine learning and deep learning to maintain client records, generate and review contracts, and highlight key points and abnormalities in a contract [8].

Various other legal AI programs exist which facilitate legal research, legal opinion, drafting, pursuing litigation, and more. All these systems are available online and can be used after paying a nominal fee. The result of using such systems is that all repetitive work which required minimum professional intervention is now completed at a faster rate, thereby saving the creative energies of advocates.

FUTURE OF AI PROGRAMS IN THE LEGAL PROFESSION

On the non-litigation side of the legal profession, OpenAI’s ChatGPT has the potential to make legal practice redundant in certain areas. ChatGPT is an online chatbot (a form of AI) which has been fed tremendous amounts of data and functions on machine learning [9]. This chatbot provides precise and relevant legal advice, and can also draft various legal documents such as a Special Power of Attorney, Partnership Deed, etc. While the chatbot provides a disclaimer to not rely on its legal opinion and its drafts, the chatbot’s answers are extremely reliable and its drafts are fit for use. Moreover, the chatbot is easy to interact with, provides answers immediately and is available 24×7. The visible drawback is that this technology takes a lot of time and effort to train, and also its data has not been updated after 2021. In the profession of law, lawyers constantly update themselves with amendments and landmark judgements. Updating the chatbot’s data continuously will become very expensive and time-consuming. Another drawback is that the chatbot answers in a guessing language, which cannot be trusted by someone in need of legal help. However, even in its current state, it is a tool which can widely be used for legal advice and drafts, and the future potential it has in the legal profession is unquestionable.

In the litigation side of the legal profession, an American company called ‘DoNotPay’ had made headlines in early January of 2023 when it made public its plan to deploy a ‘robot lawyer’ in court to defend an accused in an alleged traffic violation case [10]. This ‘robot lawyer’ in actuality is a legal AI application which is accessible from a mobile phone or a desktop. The application would have heard the arguments in court and via a Bluetooth earpiece would have instructed the defendant accordingly. The trial which was to happen sometime in late February 2023 stands postponed as the state prosecution threatened the CEO of ‘DoNotPay’ with jail time for trying to conduct such an experiment in a court of law. The effectiveness of such legal AI applications cannot be confirmed as of now. However, it is possible that developing and using such AI applications can be of great use to an arguing counsel as well as a client. In India, an arguing counsel is not usually well-versed in the facts of a case, and he or she relies on a junior for the same. Using such a program instead of a junior can be extremely effective since the program can be fed with the facts of the case along with all the relevant statutes and judgements, which will directly help an arguing counsel. The program, being capable of legal reasoning, can further build upon the ongoing proceedings in a court to make strategic arguments, which can be referred to by an arguing counsel. Where clients require quality legal aid which they cannot afford, using such a program can provide massive help. The drawback here is that such a program does not perform well in activities which require critical reasoning and intuition. In a scenario where such skills are required, the program will not be of great help.

CERTAIN DRAWBACKS OF AI PROGRAMS

AI programs are not perfect and do give rise to significant problems, the first being that of ethics. There are numerous ethical questions which are raised against the use of AI programs, and an important one is using AI programs for deception and manipulation. The incredible ability of AI programs to create evidence from absolutely nothing can cause serious damage to the legal system. These programs can create ‘actual’ signatures on contracts along with ‘real’ audio and video clips of any relevant party to a case, which can frustrate the justice delivery process. Detecting the real evidence from the fake one is nearly impossible, and can be known only after it has been accepted by the user of such AI programs [11].

Secondly, following data patterns results in AI bias wherein the AI program learns to exhibit bias against a particular group. To illustrate, if in the data provided to an AI program, members of Group ‘A’ indulge in crime more than members of Group ‘B’, then the AI program will develop a bias against members of Group ‘A’ and will be more likely to tag them as criminals. This makes the AI program unreliable. As witnessed in the functioning of ‘judge-bots’, which are AI programs developed for judging criminals and helping a judge decide a particular case, the judge-bots handed over greater punishments for members of a group it had developed a bias against [12].

Lastly, it is not clear as to who will be held liable for mistakes committed by legal AI programs. Where a serious fraud or crime has been committed by the AI program, even if it is not intentional, there exists confusion about who should be held culpable – law firms, lawyers, clients or the developer of the AI program. No real punishment can be given to the AI program as it is not a conscious being.

CONCLUSION

To put everything in perspective, no, AI-powered robots will not take away the practice of lawyers in the next 20-30 years. However, repetitive and mundane tasks that a lawyer performs will certainly be automated. These tasks will be done at an unimaginably faster rate by legal AI programs and will give an incredible competitive edge against those who continue the manual performance of mechanical tasks. The takeaway is that those lawyers who employ AI programs will automate unnecessary tasks and will be able to use their time on more intellectual and complex issues, which will increase their value. Many top law firms which have begun employing legal AI programs have either laid off their juniors to reduce their costs or have their juniors perform more complex tasks which the AI program cannot perform. It becomes imperative for lawyers to take on more intellectual tasks and increase their competency to stay relevant. Lawyers will also have to educate themselves on AI technologies and must learn to use legal AI programs for their benefit and the benefit of their firms and clients.

It is uncertain what the later future will be, but the next 20-30 years of the legal profession will certainly be dominated by those who take advantage of legal AI programs and leverage it against those who don’t. The past has taught us that technological advancements always happen very quickly, but adopting these technological advancements is a dragged-out process. These advancements can’t be stopped; they can only be embraced to achieve greater success. In the oversaturated and strangely overworked profession of law, an investment in legal AI programs will provide great returns in both, the long and short run.

[1] RP ; Self-driving cars : Mike Daily & Others

[2] RP ; Research and Policy briefs – World Bank Chile Centre and Malaysia Hub

[3] RP ; Arrived at by: Legal definition of AI – Jonas Schuett, Goethe University Frankfurt

[4] RP ; Journal of Artificial Intelligence Research

[5] IBM ; Strong AI

[6] kirasystems.com

[7] lexmacina.com

[8] Lumninance.com

[9] OpenAI ; ChatGPT 3.5 – openai.com

[10] usatoday – AI ‘robot lawyer’ to take on speeding tickets in court

[11] Learn.g2 ; AI ethics are a concern

[12] AIMultipe ; Bias in AI

WHETHER A GIFT OF AN IMMOVABLE PROPERTY RESERVING A LIFE INTEREST (AMOUNTING TO CONDITIONAL GIFT) FOR THE DONOR IS VALID?

by LFIAdmin | Feb 4, 2023 | Home

By Heena Thalesar, Advocate

heenathalesar2233@gmail.com | February 2, 2023

There is a lot of confusion amongst lawyers and public in general “whether one can gift an immovable property reserving life interest for himself/herself?”

Many people would like to gift their residential premises to their children during their life time to avoid future unpleasantness amongst family members, however, at the same time they wish to safeguard themselves by retaining their life interest and the possession of the residential premises during the time they are alive.

Chapter VII of the Transfer of Property Act, 1882 (“the Act”) (Sections 122 to 129) deals with gifts generally and interalia provides for the mode of making gifts, which are as under:

(i) Section 122 of the Act defines “gift” as a transfer of certain existing movable or immovable property made voluntarily and without consideration by one person called the Donor to another called the Donee and accepted by or on behalf of the Donee.

(ii) Section 123 of the Act regulates the mode of making a gift and inter alia, provides that a gift of immovable property must be effected by (a) a registered instrument signed by or on behalf of the Donor and (b) attested by at least two witnesses. In the case of movable property, transfer either by a registered instrument signed as aforesaid or by delivery is valid.

(iii) Sections 124 to 129 deals with gifts of existing and future property, gift made to several persons of whom one does not accept, suspension and revocation of a gift, and onerous gifts including effect of non-acceptance by the Donee of any obligation arising thereunder.

The Hon’ble Supreme Court in Naramadaben Maganlal Thakker v. Pranjivandas Maganlal Thakker and Ors (MANU/SC/1045/1997: (1997) 2 SCC 255), inter alia, held that the execution of a registered gift deed and acceptance of the gift with delivery of the property together makes the gift complete. Thereafter, the Donor is divested of his title and the Donee becomes the absolute owner of the property. It was observed and held that since the Donor had executed a conditional gift deed and retained the possession and enjoyment of the property during lifetime, the Gift had become ineffective.

The Hon’ble Supreme Court in its another decision in K. Balakrishnan v. K. Kamalam and Ors. MANU/SC/1071/2003: (2004) 1 SCC 581 after recording the reasons inter alia held that “The High Court was, therefore, apparently wrong in coming to the conclusion that the gift-deed was ineffectual merely because the Donor had reserved to herself the possession and enjoyment of the property gifted.” However, Judgment of Narmadaben Maganlal Thakker was not discussed in this case.

In view of the apparent conflict between two above referred decisions, the above issues were referred to the larger bench in the matter of (Renikuntle Rajamma V/s. K. Sarwanamma – reported in AIR 2014 SC 2906) before the Hon’ble Supreme Court of India. While deciding the reference, the Hon’ble Supreme Court inter alia, observed and held that:-

(i) Careful reading of Section 123 of the Act which leaves no manner of doubt that a gift of immovable property can be made by a registered instrument signed by or on behalf of the Donor and attested by at least two witnesses and if the same is accepted by or on behalf of the Donee. A conjoint reading of Sections 122 and 123 of the Act makes it abundantly clear that “transfer of possession” of the property covered by the registered instrument of the gift duly signed by the Donor and attested as required is not a sine qua non for the making of a valid gift under the provisions of Transfer of Property Act, 1882. Judicial pronouncements as to be the true and correct interpretation of Section 123 of the Act have for a fairly long period held that Section 123 of the Act supersedes the rule of Hindu Law (ref: full bench Judgment of the High Court of Allahabad in Lallu Singh v. Gar Narain&Ors – AIR 1922 All. 467) if there was any making of delivery of possession an essential condition for the completion of a valid gift.

(ii) Section 123 of the Act makes transfer by a registered instrument mandatory. This is evident from the use of the words “transfer must be effected” used by the Parliament in so far as immovable property is concerned. In contradiction to that requirement the second part of Section 123 of the Act dealing with gifts of movable property, simply requires that gift of movable property may be effected either by a registered instrument signed as aforesaid or “by delivery”. The difference in the two provisions lies in the fact that in so far as the transfer of movable property by way of gift is concerned the same can be effected by a registered instrument or by delivery. Such transfer in the case of immovable property no doubt requires a registered instrument but the provision does not make delivery of possession of the immovable property gifted as an additional requirement for the gift to be valid and effective. If the intention of the legislature was to make delivery of possession of the property gifted also as a condition precedent for a valid gift, the provision could and indeed would have specifically said so. Absence of any such requirement can only lead us to the conclusion that delivery of possession is not an essential prerequisite for the making of a valid gift in the case of immovable property.

(iii) There is indeed no provision in law that ownership in property cannot be gifted without transfer of possession of such property. As noticed earlier, Section 123 of the Act does not make the delivery of possession of the gifted property essential for validity of a gift.

(iv) What is retained is only the right to use the property during the lifetime of the Donor which does not in any way affect the transfer of ownership in favour of the Donee by the Donor.

The effect of the above Judgment of the Hon’ble Supreme Court is that a gift of an immovable property merely on the ground that the Donor has reserved a life interest (or possession) cannot vitiate the gift provided other requirements of Section 123 of the Act are met with.

ADDITIONAL OVERRIDING PROVISIONS FOR SENIOR CITIZENS

The Maintenance and Welfare of Parents and Senior Citizens Act, 2007 (“2007 Act”) provides for effective provisions for Maintenance and Welfare of Parents and Senior citizens.

Section 3 of 2007 Act has overriding effect. It says that 2007 Act shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than 2007 Act or in any instrument having effect by virtue of any enactment other than 2007 Act.

Section 23 of 2007 Act provides that where any senior citizen who, after the commencement of 2007 Act has transferred by way of gift or otherwise his property subject to the condition that the transferee (Donee) shall provide the basic amenities and basic physical needs to the transferor (Donor) and such transferee refuses or fails to provide such amenities and physical needs, the said transfer of property shall be deemed to have been done either by fraud or coercion or under undue influence and shall at the option of the transferor (Donor) be declared void by the tribunal.

The effect of the above referred provisions of 2007 Act is as under:-

(a) the senior citizen (who has attained the age of 60 years or above) can, after the commencement of 2007 Act i.e. from 29th December, 2007, gift the immovable property subject to the conditions referred in section 23 of 2007 Act; and

(b) 2007 Act has overriding effect over all other Acts and therefore, such conditions imposed while gifting the immovable property shall be considered as valid.

A DETAILED ANALYSIS OF THE COLLEGIUM SYSTEM FOR THE APPOINTMENT OF SUPREME COURT AND HIGH COURT JUDGES

by LFIAdmin | Feb 4, 2023 | Home

By Ritabh Singh, 4th Year Law Student, Government Law College, Mumbai,

ritabhsingh44@gmail.com | February 02, 2023

THE COLLEGIUM SYSTEM AND THE ROLE OF THE COLLEGIUM

The recent battle of words between the executive and the judiciary finds its genesis in the ever controversial topic, i.e, the collegium system.

The Chief Justice of India (CJI), along with the four senior most puisne judges of the Hon’ble Supreme Court of India, form the collegium, and this body carries out the administrative function of recommending judges for appointment to the Supreme Court and the High Courts in India, and transfer of judges of the latter.

Only the collegium can initiate the process of appointment and transfer of judges and it recommends the names of suitable individuals for the appointment or transfer to the Council of Ministers. The collegium independently initiates this process as and when required.

The collegium only takes decisions of appointment and transfer for the constitutional courts, i.e, the Supreme Court and the High Courts. Judges of the District Courts are appointed by the Governor of the State in consultancy with the High Court of the State [1].

It is imperative to note that this system to appoint and transfer judges to the constitutional courts is not mentioned in any provision of law and has come into existence on account of past judgements of the Apex Court.

ROLE OF COUNCIL OF MINISTERS AND THE PRESIDENT OF INDIA

The names for appointment and transfer are recommended by the collegium to the Council of Ministers, who then aid and advise the President on the final appointment or transfer [2] of judges. The President is bound to exercise this function in accordance with the advice given by the Council of Ministers. Judges are then appointed or transferred by the President under his hand and seal [3]. The collegium does not directly recommend names to the President. In a scenario where the made recommendation is not accepted by the Council of Ministers, the recommendation is sent back to the collegium for reconsideration. However, if the same names are recommended again by the collegium, the Council of Minsters is bound to accept those recommendations and to advise the President to appoint or transfer the judges accordingly.

CONSTITUENT ASSEMBLY DEBATES ON APPOINTMENT

In the pre-constitution era, judges were appointed at the absolute discretion of the Crown [4], subject only to criteria of eligibility. Judges also held office till the Crown’s pleasure [5]. The age limit for retirement of judges was introduced in The Government of India Act, 1935 [6]. During the drafting of our constitution, it was agreed by the Constituent Assembly that appointment must not be left to the executive, which is why a mandatory obligation to consult the CJI was put in place. Several recommendations for the appointment and transfer of judges were made such as constituting a board of members to appoint judges; to subject confirmation of appointment by two-third votes of Parliament; to consult Council of States for appointment. The debates, which lasted a week, resulted in the enactment of Article 124 of our constitution [7], and a consultative process for appointment and transfer originated between the executive and the judiciary.

THE THREE JUDGES CASE

After our Constitution came into force, judges were appointed by the President as per the advice of the Council of Ministers, however, subsequent to the consultation with the CJI, who was the senior most judge of the Supreme Court. Primacy in appointment, per se, did not vest in any functionary as decisions on appointment and transfer were taken after following a consultative process. The CJI did not enjoy the power to appoint or transfer judges, the President only appointed or transferred judges on advice of the Council of Ministers, and the Council of Ministers consulted and concurred with the CJI on appointment and transfer of judges. However, in 1973, Justice A. N. Ray [8] was made the CJI after superseding 3 senior judges. In 1977 again, Justice Khanna was superseded [9] due to the scathing remarks he made against the government [10] of the day. Prior to these 2 supplants, Prime Minister Nehru in the year 1964 appointed Justice Gajendragadkar as the CJI, superseding Justice Imam, the reason being that Justice Imam was suffering from a serious illness [11]. However, this was done after proper consultation took place between the Council of Ministers and the CJI.

As the consultative process broke down in 1973 and 1977, questions on primacy in appointment and transfer of judges arose, and the same was first decided in S. P. Gupta v. Union of India [12] (also known as the First Judges Case). Justice Bhagwati, in the case, held –

“The Chief Justice of India, the Chief Justices of the High Courts and such other Judges of the High Courts and of the Supreme Court as the Central Government may deem it necessary to consult, are merely constitutional functionaries having a consultative role, and the power of appointment resides solely and exclusively in the Central Government…

It would therefore be open to the Central Government to override the opinion given by the constitutional functionaries required to be consulted and to arrive at its own decision in regard to the appointment of the judge in the High Court or the Supreme Court…. Even if the opinion given by all the constitutional functionaries consulted by it is identical, the Central Government is not bound to act in accordance with such opinion…”

Thus, primacy rested in the opinion of the executive as held in the above mentioned case. It was held in the First Judges Case that since the executive is accountable to the public, primacy in appointment and transfer must be with the executive. Concurrence with the opinion of the CJI was held not to be a pre-requisite in appointment or transfer of judges by the Council of Ministers. The question of primacy and concurrence was re-visited in SCARA v. Union of India [13] (also known as the Second Judges Case) wherein the Supreme Court overruled the judgement of the First Judges Case.

The Court held that the provision for consultation with the CJI was introduced since it was realized that the CJI is best equipped to assess the worth of the candidate and his or her suitability for appointment as a judge. While the appointment must be a result of a participatory consultative process, in the event where there is an impasse due to disagreement between constitutional functionaries, the opinion of judiciary, which is symbolized in the opinion of the CJI, has primacy. Since personal traits of members are best known by the CJI, opinion of the CJI will not only have primacy, but will be determinative in the process of appointment and transfer. It was also held that the senior most judge of the Supreme Court shall be appointed as the CJI.

The Court held that the notion of the judiciary not being accountable to the public is a myth and has no real basis. In actual practice, the CJI and the Chief Justices of High Courts are held accountable for proper functioning of their courts and appointments made to their courts, not only by the public but even by the Bar. In response to the argument that provisions of the Constitution must be restricted to the interpretation which the framers intended, the court held that the current issue was not foreseen and therefore, was not discussed by the framers of the Constitution. The term ‘consultation’ in Article 124 of the Constitution was held to be understood as ‘concurrence’, meaning that the Council of Ministers are bound to concur with the opinion of the CJI in matters of appointment and transfer of judges. The Court went on to accept formation of a collegium, as the same was held more credible, and this collegium consisted of the CJI and the two senior most puisne judges of the Supreme Court. The primary function of this collegium would be to recommend names of suitable individuals for appointment and transfer in the constitutional courts to the executive. The executive had the option of refusing such recommendations after providing reasons to the collegium. However, if the same name was recommended again by the collegium, then the executive would be bound to accept such recommendation and appoint or transfer the individual.

In the Special Reference by the President, in exercise of authority granted by the Constitution of India, in 1998 [14] (also known as the Third Judges Case), the Supreme Court increased the number of senior most puisne judges in the collegium from two to four. It was a judgement which furthered the decision laid down in the Second Judges Case.

THE NATIONAL JUDICIAL APPOINTMENT COMMISSION

The National Judicial Appointment Commission (NJAC) Act was passed in 2014 which sought to introduce a body consisting of the CJI, two senior most puisne judges of the Supreme Court, the Law Minister and two eminent individuals (appointed by the CJI, Prime Minister and the Leader of Opposition), which would appoint and transfer judges in the constitutional courts. It sought to abolish the collegium system and to bring in transparency in the process of appointment and transfer of judges.

The Supreme Court held the NJAC Act as unconstitutional in 2015 [15]. The basis on which the Court held the Act as unconstitutional was the judgement passed in the Second Judges Case. The Court further held that the Act interfered with the independence of the Judiciary and would give primacy in appointment and transfer of judges to the political parties of the country. Since then, the Supreme Court has invited suggestions to improve the collegium system, and in 2017, the collegium publically uploaded its recommendations for appointment and transfer, along with reasons for the same. Recently, the collegium has even publically provided rebuttals to the objections raised by the executive, as seen in the appointment of Advocate Saurabh Kripal and Advocate Somasekhar Sundaresan, among others. However, arguments for right to reputation emerged, which remains imperative to consider.

CONCLUSION

The problems associated with the collegium system that had come to light was the cavalier attitude shown towards nepotistic elements and the total enigma surrounding the rationale behind appointments and transfers. It is unconscionable to have certain individuals exercising unfettered power. The consultative process must be followed to ensure cohesive constitutional functionaries. Independence of Judiciary is indeed of paramount importance, but the very purpose of democracy is defeated if only certain individuals exercise unalterable and uncheck power, as the collegium is accused of exercising.

On the other hand, political parties transcending in the domain of judiciary will end up corrupting the entire institution, and justice will remain unattainable. As said by Dr. B. R. Ambedkar, absolutism of any kind would result in a stunted growth of the nation. Keeping this in mind, there should be constructive communication between the executive and the judiciary, instead of the bickering of words which the nation has been a witness to.

[1] Article 233(1), Constitution of India

[2] Article 74(1), Constitution of India

[3] Appointment of judges in Supreme Court and High Court: Article 124(2) and 217(1) respectively; Transfer of judges of the High Court: Article 222(1)

[4] Section 101, Government of India Act, 1919

[5] Section 102, Government of India Act, 1919

[6] Section 200 for the Federal Court, Section 220 for the High Courts

[7] In the debates of the constituent assembly, appointment of judges is under Article 103

[8] Appointed as the 14th CJI, 1 day after the decision in Kesavananda Bharati case was delivered

[9] By Justice M H Beg, who became the 15th CJI

[10] In ADM Jabalpur v Shivakant Shukla, 1976 AIR 1207

[11] Supreme Court Observer

[12] AIR 1982 SC 149, 1981 Sup (1) SCC 87, 1982 2 SCR 365

[13] Supreme Court Advocates-on-Record Association v. Union of India, 1993 (WP/1303/1987)

[14] SR 1/1998 Re: Appointment and transfer of judges

[15] Supreme Court Advocates-on-Record Association v. Union of India, 2015 (WP/13/15)

PRACTICAL ASPECTS OF LIS PENDENS – SECTION 52 OF THE TRANSFER OF PROPERTY ACT, 1882

by LFIAdmin | Jan 10, 2023 | Home

By Ritabh Singh, 4th Year Law Student, Government Law College, Mumbai,

ritabhsingh44@gmail.com | January 09, 2023

Introduction

The principle of Lis Pendens – ‘Lis’ meaning litigation/dispute and ‘Pendens’ meaning pending – is embodied in this maxim, and it finds itself codified in Section 52 of the Transfer of Property Act, 1882. While the doctrine was found in the English case of Ballamy v. Sabine, Privy Council has observed its purpose as follows[1]:

“Broad purpose of Section 52 is to maintain status quo unaffected by act of any party to the litigation pending its determination. The applicability of the section cannot depend on matters of proof or strength or weakness of the case on one side or other in bona fide proceedings. To apply such test is to misconceive the object of the enactment”.

In simple words, the doctrine of Lis Pendens rules that neither party to the suit can transfer, or otherwise deal in anyway with the suit property in a manner which affects the rights of the other party. The doctrine thus, restricts alienation of the suit property, to avoid creation of any third party rights which further prolongs justice due to endless litigation.

Application of doctrine

The doctrine of Lis Pendens is applied as mentioned under section 52 of the Transfer of Property Act, 1882. However, it is paramount to note that by certain state amendments, it is mandatory to also register a notice of Lis Pendens in order to give effect to the doctrine.

Section 52 of Transfer of Property Act, 1882 was amended in the State of Maharashtra by Bombay (Amendment) Act 14 of 1939 [2] and the same reads as follows:

52. (1) During the pendency in any court having authority within the limits of India excluding the State of Jammu and Kashmir established beyond such limits by the Central Government, of any suit or proceeding which is not collusive and in which any right to immovable property is directly and specifically in question, if a notice of the pendency of such suit or proceeding is registered under section 18 of the Indian Registration Act, 1908, the property after the notice is so registered cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the court and on such terms as it may impose.

(2) Every notice of pendency of a suit or proceeding referred to in sub-section (1) shall contain the following particulars, namely:-

(a) The name and address of the owner of immovable property or other person whose right to the immovable property is in question;

(b) The description of the immovable property the right to which is in question;

(c) The Court in which the suit or proceeding is pending;

(d) The nature and title of the suit or proceeding; and

(e) The date on which the suit or proceeding was instituted.

In its application in the State of Maharashtra, Section 18 of the Registration Act, 1908 has been amended as follows:

a) Delete the word “and” after clause (e)

b) After “and” in (e), add – notices of pending suits or proceedings referred to in Section 52 of the Transfer of Property Act, 1882

The effect is same in the State of Gujarat [3].

Thus, following are the necessary conditions for the application of the doctrine:

a) The suit shall be pending in a competent court.

b) The suit shall not be collusive/friendly in nature.

c) A right to immovable property must be directly and specifically in question.

d) A notice of Lis Pendens shall be registered under section 18 of The Registration Act, 1908 with the concerned Registrar/Sub-Registrar. [Applicable in the State of Gujarat and Maharashtra]

Effect of doctrine

On the application of the doctrine, any transfer made during the pendency of the suit is not void ab initio or illegal, but only makes the purchaser bound by the decision of the court [4]. The rights of the parties are only subservient to the decision of the court. If the transferor’s title is upheld, the sale will be valid and the transferee’s title will not be affected [5]. The doctrine of Lis Pendens is thus intended to strike at attempts made by parties to circumvent jurisdiction of court through private dealings to create third party rights [6].

Removal of Lis Pendens

In certain circumstances, a notice of Lis Pendens is filed to intentionally drag parties to litigation, and delay transactions of the immovable property. In such cases, court has the discretionary power to lift the operation of Section 52. The court itself has provided the aspects be borne by it when it considers exemption of operation to deprive plaintiff of fruits of litigation [7], though these are not exhaustive:

a) Can party be relieved only on a court imposing conditions? Is imposing conditions a prerequisite?

b) On facts pleaded by the plaintiff, will he prima facie, be entitled to the relief of specific performance of the contract?

c) If court concludes that specific relief cannot be granted, then while considering the alternative relief of damages which the plaintiff in the suit for specific performance is entitled to, should the plaintiff be secured?

d) If to be secured, should it only be the market value of the property on the date of the suit at time when the suit is filed be considered?

In a case, where there is no concluded contract between the parties, it would be highly inequitable to continue the cloud on the title of the property, especially when even if the plaintiff leads evidence, the chances of success are very dismal. Thus, operation of section 52 is lifted off from the suit premises, even if the notice of lis pendens was registered and fulfilled all conditions to be valid [8].

Conclusion

While registration of the notice is compulsory in Gujarat and Maharashtra, it is not so in rest of the states. This creates a peculiar problem. Transferors in a pending suit sell off the premises to unsuspecting purchasers who do not have any means to check if the premises are subject to any pending litigation. This jeopardizes the subsequent purchaser, who after investing all his earnings gets dragged in litigation, the result of which may deprive him out of the money invested as well as the possession of the suit [9].

The solution to this is that every state must make it compulsory to register a notice of Lis Pendens with the local registrar while filing a suit to dispute title of property. This will enable the subsequent purchaser to check if any litigation is pending on the premises. In cases where a Lis Pendens if filed to intentionally cloud genuine title, the courts have the power to remove the same after considering all the facts of the case, and the nature of the suit.

[1] Gouri Datt Maharaj v. S K Sukur Mohammed [AIR 1948 PC 147]

[2] The Transfer of Property and The Indian Registration (Bombay Amendment) Act, 1939

[3] Act 11 of 1960, S. 87; Gujarat A.L.O 1960

[4] Hardev Singh v. Gurmail Singh (2007)

[5] T G Ashok Kumar v. Govindammal & Anr. [2010 (Civil Appeal No .10325 of 2010)]

[6] Rajendra Singh & Ors. v. Santa Singh & Ors. [1973 AIR 2537, 1974 SCR (1) 381]

[7] Shantilal J Khona v. Anandrai Shivlal Dave [ 2002 (3) Bom. C.R. 346]

[8] Ambaji Developers & Ors v. Mukundrai D Sanghavi (2019)

[9] 12th Report by Law Commission of Karnataka (18.8.2010)

A CHANGE IN AFFIRMATIVE ACTION OF RESERVATION – AN IMPORTANT JUDGEMENT BY THE HON’BLE SUPREME COURT OF INDIA

by LFIAdmin | Dec 16, 2022 | Home

By Ritabh Singh, 4th Year Law Student, Government Law College, Mumbai,

ritabhsingh44@gmail.com | December 16, 2022

Introduction

The 103rd Constitution Amendment Act was assented by the President of India in January 2019, and this amendment introduced a 10% reservation for Economically Weaker Sections (herein referred as EWS) for admission in central-run public educational institutions and private educational institutions, and for employment in central public institutions.

The amendment added clause 15(6) and 16(6) in the constitution which allowed state action of providing for reservation for EWS, which in itself is a permissible affirmative action, but to the exclusion of categories mentioned in Article 15(4), 15(5) and Article 16(4).

Various petitions were filed before the Hon’ble Supreme Court of India challenging the amendment for being discriminative against backward classes and violating the basic structure of the constitution.

A Five Judge bench of the Hon’ble Supreme Court, in Janhit Abhiyan v. Union of India [1], delivered its judgement on November 7, 2022, upholding the constitutionality of the 103rd Amendment in a majority of 3:2.

Arguments in the case

Challenging arguments, by the petitioners, relied on Constituent Assembly debates, the Preamble and various judgements of the Hon’ble Supreme Court, to show that the concept of reservation itself was to address historic inequalities and that the special provisions for specific classes is an action of positive discrimination, which in itself forms a congenital feature of the basic structure of the constitution. The reservation which the amendment propounds to create is not for a class, but for a section of society which will exist indefinitely, based not on economic condition but financial incapacity and which rewards poor financial behaviour; thus is not reliable for reservation.

The petitioners pointed out that there is no reasonable classification for the creation of the class, and the created classification does not have any nexus to the object to be reached, thus violating Article 14 [2]. Economic criteria as the sole factor for reservation had not been accepted earlier, and the ceiling limit of 50% is breached by the said amendment [3]. A few arguments were made that the amendment could be sustained if the phase “other than” was read down [4] by the court to be “in addition to”. Lastly, reservation cannot be used as a poverty alleviation scheme to reach development goals.

In support of the amendment, the Union of India argued that the amendment does not violate the basic structure, but fosters it, and that a constitutional amendment can be struck down only when it changes the identity of the constitution [5]. Creation of a new class fosters ‘economic justice’ and reservation for EWS is maintainable, as seen under Right of Children to Free and Compulsory Education Act, 2009 [6].

It was further argued that exclusion of classes already mentioned in Article 15(4) and Article 16(4) does not violate equity code and is necessary to avoid dual benefit. The 10% ESW reservation is in addition to the 49.5% existing reservation for categories under the said provisions. Moreover the concept of equality and reservation is changing and evolving, and such affirmative action must be positively interpreted to benefit the targeted class.

The Minority view

The minority judgement was delivered by Justice J Ravindra Bhat and the then Chief Justice of India, U U Lalit. They held that economic criteria for educational reservation under Article 15 was acceptable, however EWS reservation under Article 16 for governmental jobs has to be struck down. The exclusion of SC/ST/OBC is a constitutionally prohibited form of discrimination. They form the majority of EWS, and depriving them of the said benefit directly benefits the upper class which has faced no historic discrimination, defeating the very intent of reservation. Article 16(4) is premised on adequate representation, and reservation for EWS is not for lack of representation, thus being unqualified.

A breach of the 50% ceiling limit itself will result in compartmentalisation, and any reservation for EWS will lead to virtual deletion of Article 15(4) and 16(4). The ceiling limit existed to balance reservation and open competition. The amendment legitimizes discrimination by exclusion to benefit targeted group. However the EWS, i.e the targeted group, itself is created by exclusion of economically weaker sections of SC/ST/OBC who remain economically weaker due to being subjected to discrimination in all dimensions.

The Majority view

The majority judgement was delivered by Justices Dinesh Maheshwari, Bela Trivedi and J B Pardiwala, which upheld the 103rd Amendment and accepted creation of provisions for reservation of EWS as permissible affirmative action to ensure inclusion and held that the 50% ceiling limit is not sacrosanct and has been by-passed previously in certain circumstances. The classification for EWS is not an unreasonable one and has a clear purpose of achieving substantive equality. Justice Trivedi held “Just as equals cannot be treated unequally, unequals cannot be treated equally”, and the exclusion of SC/ST/OBC is valid. Reservation, in itself, is not to be continued forever and must be revisited to fulfil the object of having a casteless and classless society. Justice Maheshwari held that compensatory discrimination, wherever applied is exclusionary in character and acquires worth only after exclusion of other classes.

The argument to read down the specific provision was rejected as the intent of the legislature is clear and unambiguous from the provision itself. Since the 10% reservation is in addition to the existing reservation, the question of reducing reservation of existing communities does not arise. Since the objective of reservation is to provide a level playing field to an underprivileged class, creation of the same for EWS after taking in account the current situation, the state is permitted to provide reservation for EWS.

The Effect

Since the constitutional amendment has been upheld, various states seek to increase reservation above 50%. Jharkhand Assembly passed a bill [7] to increase reservation to a total of 77% for SC/ST/OBC. However an imperative point to note is that the judgement in the said case allows reservation only for EWS, which is a new form of affirmative action. The decision of 50% cap applies to caste based reservation, and not new forms of affirmative actions. Breaching this 50% cap for communities already included in this 50% might be struck down by the court for being in violation of the ceiling limit.

Conclusion

The Majority judgement took note of the UNGA Resolution passed on 25th October 2015, for the eradication of poverty and all its forms. State action, in the form of the 103rd amendment, attempts to eradicate poverty by providing for additional reservation of 10% for EWS. However such reservation will continue for a long period as there will always be poor. Reservation as a solution is itself for a limited period. Now that affirmative action has created reservation for a new class, there is no restriction on how many other classes may be reserved by such action, leaving the question of social equality for the general and unreserved class, an already much debated issue.

[1] WRIT PETITION (CIVIL) NO. 55 OF 2019
[2] Article 14: Equality before law
[3] INDIRA SAWHNEY v. UOI – AIR 1993 SC 477
[4] Doctrine of reading down: Power of courts to interpret meaning of a provision to save it from it being declared illegal.
[5] M NAGARAJ v. UOI [WRIT PETITION (CIVIL) 61 OF 2002]
[6] Society for unaided private schools of Rajasthan v. Union of India (2012)
[7] 11th November, 2022

Can a woman be punished under Section 354 of IPC? (Assault or Criminal force on a woman with the intent to outrage her modesty)

by LFIAdmin | Dec 15, 2022 | Home

By Shivam B. Trivedi, Advocate

rshivamtrivedi798@gmail.com | December 14, 2022

Introduction

The general understanding is that a woman cannot be charged under Section 354 of IPC, however, the true interpretation differs.

Section 354 of the Indian Penal Code, 1860 (“IPC”) is enacted with the objective of maintaining decent behaviour in the society and to protect women who are subject to criminal force and assault. If any person (irrespective of gender) uses criminal force on any woman with intent to outrage her modesty or with the knowledge that her modesty will be outraged, he or she will be punished.

Conviction of a woman under section 354 of IPC

Usually, the charge under S.354 of IPC is levied upon men. There has not been any noteable judicial precedent highlighting the conviction of a woman under S.354 of IPC. However, the court of Metropolitan Magistrate, Mazgaon, Mumbai, in the year 2022 in case no.7000138/PW/2021took cognizance of the complaint filed under S. 354 of IPC against a woman and after considering the evidence, sentenced her (being the accused) to imprisonment for a term of one year with fine of Rs. 5,000/-. (State of Maharashtra v/s Rovena Aadnya Amit Bhosle) holding that the Accused (being a woman) should be protective and sensitive towards women.

Essentials of Sec 354 of IPC

The essential conditions necessary to be satisfied to get a conviction under S.354 of IPC are as follows:-

~The presence of an assault/criminal force/ physical force;

~The physical force must be used with the intention of outraging the modesty of a woman or there must be knowledge that such act is likely to outrage the modesty of a woman;

However, it has been observed that if there is no intention to outrage the modesty or if it has not been proved beyond reasonable doubt that the intention was malafide in nature then conviction under S.354 of IPC would not be possible. [Bhanu Singh v/s State Of Chhattisgarh,2022]

Analysis

If and when it is proved to the satisfaction of the court, after considering the evidence submitted during the course of trial, that the accused person who is charged with an offence under S.354 of IPC is convicted, then the court shall sentence the Accused person (irrespective of gender) to imprisonment which shall not be less than one year but which could extend to five years and the convict shall also be liable to fine. The offence u/s. 354 of IPC can be committed by any man or woman. A woman can assault or use criminal force over other woman as equally and effectively as any man. The pronoun ‘he’ used in the expression “that he will thereby outrage her modesty” must therefore be taken u/s 8 of IPC as importing a male or female. Therefore, u/s 354 of IPC, a man as well as a woman both can be held guilty. It cannot be maintained that woman is exempted from any punishment under this section.

Conclusion

From the aforesaid, it could be concluded that S.354 of IPC is gender neutral in nature and the general presumption that S.354 of IPC could only be invoked against men has been changed and women in the society could take shelter under this section against any form of aggravated assault not just against men but against anyone. However, the aforesaid view of the writer is absolutely personal and subject to corrections.

EFFECT OF NOMINATION IN A CO-OPERATIVE HOUSING SOCIETY

by LFIAdmin | Nov 18, 2022 | Home

By Nazaqat Lal, Advocate & Solicitor, Bombay High Court

nazaqat_lal@hotmail.com | November 19, 2022

INTRODUCTION

​Myth is existing in the mind of general public that upon death of a member of Co-operative Housing Society, the Nominee of such member becomes the Owner of the Flat.

There is a general practice in housing societies of members making nominations for their respective flats. The nomination form is then submitted to the secretary or chairman of the society. After the member’s demise, the society in its meeting takes note that the member has passed away and based on the nomination form, inducts the nominee as a member and notes the same on the share certificate. It becomes imperative to understand what the purpose and legal effect of making a nomination is. A nominee holds the flat in a fiduciary capacity, i.e. as a trustee for the legal heirs of the deceased till such time the legal heirs are determined by the applicable succession laws. A nominee does not become the owner of the flat by virtue of the nomination. In order to become an owner of a flat, it will have to be received by way of gift, Will, family arrangement or other such similar document.

LEGAL POSITION

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The Maharashtra Co-operative Societies Act, 1960 (“the said Act”) governs co-operative societies. Section 30 of the said Act deals with transfer of interest on death of a member. This provision has come up for interpretation before the Bombay High Court on several occasions as there is invariably a dispute that arises between the nominee and the legal heirs regarding the vesting of ownership rights in the flat of deceased member.

In the case of Ramdas Shivram Sattur v. Rameshchandra Popatlal Shah, the Bombay High Court followed its previous decision in the case of Gopal Vishnu Ghatnekar v. Madhukar Vishnu Ghatnekar and held that a nominee does not become the owner of the properties in question. The purpose of nomination is to protect the rights of the deceased member in the subject matter of nomination till the legal representatives of the deceased take appropriate steps and to give a valid discharge to the society.

A recent judgment of the Bombay High Court in the case of Karan Vishnu Khandelwal v. Honourable Chairman/Secretary Vaikunth (Andheri) Co-operative Housing Society Ltd. & Ors. has once again brought to the fore the effect of nomination in case of a co-operative housing society versus the rights of legal heirs. While this judgment reiterates the well settled legal position that a nominee is merely a trustee and shall hold the flat in his capacity as trustee till the time the legal heirs are ascertained, the manner in which it is drafted is likely to cause some confusion. The brief facts of the case are set out hereunder to better appreciate the findings.

Brief facts

1. One, Mr. Mannalal Khandelwal (“Mannalal”) was the owner of a flat in Vaikunth (Andheri) Co-operative Housing Society, Mumbai (“the said Flat”).

2. During his lifetime, he made a nomination in favour of his grand son (son of a predeceased son), the Petitioner herein. The nomination was duly acknowledged by the managing committee in its meeting and recorded in the nomination register maintained by the society.

3. Thereafter, Mannalal died without leaving behind a will.

4. After his death, one of his sons, Rajendra (Respondent No. 2) made an application to the society seeking transfer of membership and issue of share certificate in his name. He also submitted an NOC and indemnity bond from his brother, Krishnakumar. On this basis, Rajendra sought 2/3rd share and interest in the said Flat. The society rejected Rajendra’s application.

5. Rajendra preferred an appeal before the Deputy Registrar Co-operative Societies. The Deputy Registrar allowed the appeal and held that since Respondent No. 2 had acquired 2/3rd right in the said Flat and to that extent, his interest be noted in the society record. In consequence, the Deputy Registrar acknowledged 2/3rd undivided right of Respondent No. 2 and 1/3rd right of the Petitioner in the said Flat and directed the society to make an entry in its records.

6. In revision, the Divisional Joint Registrar upheld the order of the Deputy Registrar and dismissed the revision application of the Petitioner.

7. Aggrieved by the order of the Divisional Joint Registrar, the Petitioner approached the Bombay High Court.

Decision

The Bombay High Court set aside the order of the Divisional Joint Registrar on broadly two grounds (a) the impugned order was in breach of the principles of natural justice and (b) the impugned order was against the law. It is the latter ground that we are concerned with.

Analysis

The Bombay High Court placed reliance on the judgment of the Supreme Court of India in the case of Indrani Wahi v. Registrar of Cooperative Societies, Section 30 of the said Act and the Maharashtra Cooperative Societies (Amendment) Act, 2019 whereby Section 154B-13 came to be inserted in the said Act.

Section 154B-13 reads as under –

“154B-13. Transfer of interest on death of a Member

On the death of a Member of a society, the society shall transfer share, right, title and interest in the property of the deceased Member in the society to a person or persons on the basis of testamentary documents or succession certificate or legal heirship certificate or document of family arrangement executed by the persons, who are entitled to inherit the property of the deceased Member or to a person duly nominated in accordance with the rules:

Provided that, society shall admit nominee as a provisional Member after the death of a Member till legal heir or heirs or a person who is entitled to the flat and shares in accordance with succession law or under will or testamentary document are admitted as Member in place of such deceased Member:

Provided further that, if no person has been so nominated, society shall admit such person as provisional member as may appear to the committee to be the heir or legal representative of the deceased Member in the manner as may be prescribed.”

What emerges from the above is that a society is empowered to transfer the right of a deceased person on the basis of (i) testamentary documents, (ii) succession certificate, (iii) legal heirship certificate, (iv) family arrangement or (v) duly made nomination. However, it is expressly clarified that a nominee shall be admitted as a provisional member. Therefore, a nominee is merely a trustee who holds the flat till the time the legal heirs are ascertained.

In the case at hand, Mannalal had made a valid nomination in favour of his grandson (the Petitioner). However, he had died intestate, i.e. without leaving behind a Will. Therefore, the Society was directed to transfer the flat to the Petitioner in his capacity as nominee (trustee) and admit him as a provisional member till the time Rajendra (Respondent No. 2) was able to obtain a succession certificate or legal heirship certificate or testamentary document, as the case maybe.

What the Divisional Joint Registrar had done was in effect, ascertained the shares of the parties as per the applicable succession laws, given that Mannalal had died intestate. While this would likely be the eventual manner in which the ownership rights in the said Flat devolve, the Bombay High Court did not want to give a go-by to the nomination and the compulsory requirement of obtaining a legal heirship certificate or letters of administration without will that would have to be obtained by the heirs of Mannalal given that the flat is situated in Mumbai. The Bombay High Court therefore, directed the society to admit the Petitioner as a provisional member and call upon Respondent No. 2 to furnish the necessary documents on the basis of which the legal ownership in the flat would eventually vest. At first glance, it may appear that the Bombay High Court held in favour of the nominee as against the legal heirs. However, what it has done is to recognize the nominee as an interim trustee till the time Respondent No. 2 procures the necessary legal documents acknowledging his ownership right and the ownership right of all other legal heirs in the flat.

Conclusion

​

In light of the Maharashtra Cooperative Societies (Amendment) Act, 2019 and the aforesaid judgments of the Supreme Court of India and Bombay High Court, it becomes amply clear that in the eyes of a law, a nominee is a trustee and does not acquire ownership rights in a flat by virtue of nomination. Therefore, if the intent of a member is to vest ownership rights in a person, he/she will have to do the same by way of gift, Will, family arrangement or other such document; a nomination alone will not suffice. It is also important for societies to take note of this so that after a member’s demise, the ownership rights in the flat finally vest in the legal heirs or such person as maybe named in the Will or family arrangement or other such document, and not in the nominee.