Life has never been the same for all of us it was school first, then college, courts, office etc, etc., but that child heart always throng to meet the loved ones again and again, precisely for that reason we pledged to ourselves “we are parting to meet again” – and the time came to meet and share our life post our college life with our soul mates.

Now the question of “what if’s” struck my mind.

What if 15 adventurous souls meet up? What if 8 years bond of friendship meet up? What if they meet up after 3 years of gap? What if the to be future legal pundits meet up? What if they meet inside thick jungles, amidst wild life and wild streams?

Read more to get the answers to all the “What if’s”.

The 30 member initial crowd very soon narrowed down to 15 brave souls after hearing to the myths and the mysteries about this place. Undeterred by any myths or mysteries 15 brave souls headed to Nagalapuram on 18.12.2010 early morning to unleash themselves which in turn made a mark and created history.

The reunion was perfectly divided to suit the survivors and the predators. 6 survivors wanted to return back on the same day and 9 predators dreamt to tent and sleep on top of the mountain.

It was first the hidden treasure which welcomed us like pongal over flowing from the pot; nobody had any second thoughts to drench themselves with some Michael Phelps diving inside and exhibiting their almost forgotten stunts.

The daring souls soon became caring souls with each other enquiring about the other’s well being and what they are upto in these years. That’s how flied off the one hour trek in two minutes time passing across the banks of the village dam and trekking along an old jeep trail.

Soon we reached the gigantic trees and started clicking pic’s to hold it for a life time.

Soon to the tiring souls came the butterfly stream with crystal clear water which made us to dip inside and quench our thirst and gave an opportunity to chit chat like the way we used to do in our classroom.

After delight in the butterfly stream was the real task of hopping in the boulders, climbing small hill by holding the roots and branches of trees and sliding in the slippery soil. Not many would have done this before but still the heart was filled with thrill and happiness and the heart was pounding for the next surprise.

With the oldies leaking the secret about the crystal clear water pool and waterfalls inside the forest the entire group became energetic and started moving at a great pace.

Delight is not the word to describe the beauty of that crystal clear pool with a waterfall filing it up. As soon as the group saw this wonderful pool few jumped inside unmindful of anything while the others reserving for their turn to come up. Beating all the purest forms of water the stream water inside the forest was rejenuvating and refreshing. People galloped the water as if they are not gonna drink water any more.

After jumping, swimming, ferrying and taking a dip inside the natural water pool we all set to prepare our tea to refresh ourselves. Guys who ordered for tea at home and at restaurants started collecting fire wood and in no time created fire and with 30 minutes effort yummy tea was ready to refresh all the chilled body and tired nerves.

Then came the difficult moment were 6 survivors parted to the car with a sense of accomplishment and full of happiness. 9 predators then decided to trek ahead and reach the highest point in the mountain to set their camp there and stay overnight. The climb was a real challenge to few of us but never deterred the predators. At 6 in the evening we reached the camp site and set our camp and collected wood to prepare camp fire and dinner.

Hot soup came as nectar from the chill weather followed by few servings of maggi with project team in its full swing and the night which followed was something which none of the predators will ever forget in their life time 9 people inside one tent surrounded by rocky mountain, stream, water pool and pale white moon.

Woke up in the nature’s lap to see the forest at its peak beauty, after preparing and having our breakfast all the predators started trekking down and with heavy heart leaving thrilling memories all the predators came out of the forest at 12 noon.

“If’s and But’s’” were shunned down by the 15 survivors who created history by celebrating their reunion in an unforgettable manner.

Kudoos survivors and predators for being part of an historical event which was a milestone in the history of any “Alumni Event”. Standing class apart from the rest of the world is the School of Excellence in Law, Chennai batch of 2002-2007.

Certainly only to read, dream and wonder for a weak body, mind and soul and never to dare trying, these true stories are only meant to record an adventurous history. This was a three day mission starting from 18.2.2011 to 21.02.2011.

 The Indian real estate sector which was open to foreign direct investment through automatic route by virtue of Press note 4 of 2001 was restricted by Press note 3 of 2002 series which provided that foreign investors could, after obtaining prior government approval, develop integrated townships of a minimum 100 acres in size or containing a minimum of 2000 dwelling units and Press note 3 of 2002 restricted the flow of foreign direct investment in this sector and this led the government to open up the sector upto 100% under automatic route by issuing Press note 2 of 2005 subject to certain conditions thereunder.

Foreign investors by virtue of Press note 2 of 2005 are now allowed to invest 100 percent into an Indian entity involved in real estate development in India, without seeking prior permission from the Government of India, or the Reserve Bank of India, or the Foreign Investors Promotion Board, or the Ministry of Finance, subject to the conditions prescribed under Press note 2 of 2005. However, FDI is not allowed in real estate business i.e. dealing in land and immovable property with a view to earning profit or earning income there from.

 FDI in the Construction and Development Sector:

 Under Press Note 2 of 2005, Foreign Direct Investment  is allowed upto 100 percent in townships, housing, built-up infrastructure and construction-development projects which would include but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure, without  prior permission from the Government of India,  the Reserve Bank of India (RBI), the Foreign Investors Promotion Board (FIPB), or the Ministry of Finance (MoF), subject to the conditions prescribed under this Press Note 2 of 2005. The conditions include:-

                                 i.            With respect to the conditions relating to ‘Minimum Capitalization’, a minimum capitalisation of US$ 10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners and the funds would have to be brought in within six months of commencement of the business of the Company.

                ii.            The ‘original investment’ cannot be repatriated before a period of three years from completion of minimum capitalisation, however, the investor may be permitted to exit earlier with prior Government approval through the FIPB.

 DIPP has, on July 15, 2009 clarified in their Bulletin Board service that for the purpose of Press Note 2 of 2005, it is clarified that “original investment” means the entire investment brought in as FDI for the purpose of taking up Press Note 2 of 2005 compliant construction development projects which would then remain locked-in for three years.

 Prior approval may be required if the foreign investor has a prior investment in the same or allied field and Press Note 1 and 3 of 2005 are consequently attracted.

Recent modifications following Press Note 2 of 2005:

Press Note 7 of 2008  clarifies that the conditions and requisites detailed in Press Note 2 of 2005 are not applicable to non-resident Indians (NRIs) investing in real estate or in the real estate development sector. NRIs may invest in housing and real estate development projects across the country, for upto an extent of 100 percent.Further, the Master Circular on foreign direct investment dated July 01, 2009 prohibits foreign direct investment in construction of farm houses in India.

Investments in Industrial parks, exempted from Press Note 2 of 2005:

Press Note 3 of 2008 clarifies that investment which are made in Industrial parks are exempted from the application of Press Note 2 of 2005 and 100 percent FDI is allowed through automatic route both investing in the establishment of industrial parks and setting up an industrial park provided that the industrial parks meet the following conditions:

                          i.            The units should comprise a minimum of 10 units and no single unit shall occupy more than 50 % of the allocable area;

                        ii.            The minimum percentage of the area to be allocated for industrial activity shall not be less than 66 % of the total allocable area.

Investment in Hotel and tourism sector – exempted from Press Note 2 of 2005:

Press Note 2 of 2006 has clarified that investment in hotel and tourism sector and special economic zones shall be exempted from the applicability of Press Note 2 of 2005, in these sectors 100 percent FDI are allowed  vide Press Note 4 (2001 Series).

Real estate mutual funds- (REMF’s): The Securities and Exchange Board of India (SEBI), vide a press release number PR- 166/2006 dated June 26, 2006 has given investors the option to invest in REMF’s.

The mutual fund schemes are allowed to invest, (a) directly in real estate properties within India; (b) mortgage (housing lease) backed securities; (c) equity shares/ bonds/ debentures of listed/ unlisted companies which deal in properties and also undertake property development and in, (d) other securities.

REMF’s are governed by SEBI (Mutual Fund) Regulations, 1996 and the schemes are to be close – ended only and the units shall be listed on stock exchanges. Foreign Institutional Investors are allowed to invest in REMF’s.

Proposed Foreign Investments (National Security Concerns) Act:

There is also a proposal to enact an Act called the Foreign Investments (National Security Concerns) Act, to bestow powers upon the central government to ensure national security is not compromised by FDI.

Government to tighten rules for FDI approvals:

FIPB now intends to scrutinize proposals in which funds are routed through tax havens like Mauritius, and those that fall under a proposed ‘sensitive list’, even if they are under the current automatic approval route.  FIPB would make it mandatory if the investment is in the ‘sensitive list’ and real estate has been included in the proposed ‘sensitive list’.

Proposed Real Estate Investment Trust (REIT):

        i.            SEBI had proposed in 2008, to recognize and constitute a new category of investors which would have the option of investing in real estate sector vide the Draft Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2008.

      ii.            Under the draft REIT regulations, an REIT has been defined thus: ‘a trust registered under the Indian Trusts Act, 1882 and registered with the Board under these regulations, whose object is to organise, operate and manage real estate collective investment’.

    iii.            REIT would operate like a mutual fund, however, as one where investments of individual investors are invested in real estate, rather than stocks of companies.

     iv.            Despite the fact that the Draft REIT Regulations for India have been formulated by SEBI, they continue to remain in the draft stage and are hosted on SEBI’s website for public comments.

 RBI MASTER CIRCULARS / NOTIFICATIONS WITH RESPECT TO REAL ESTATE:

(1)   RBI Master Circular on Housing Finance dated 12/01/2009:

• The Reserve Bank of India by a Master Circular RBI/ 2009-10/75 DBOD. No.DIR. (HSG). BC.08 /08.12.01/2009-10 has sought to consolidate the framework of rules/regulations and clarification on Housing Finance issued by Reserve Bank of India from time to time. The object of the regulation has been stated to be to ensure the orderly growth of housing loan portfolios of banks.
• It states that in view of the need to increase the availability of land and house sites for increasing the housing stock in the country, banks may extend finance to public agencies and not private builders for acquisition and development of land, provided it is a part of the complete project, including development of infrastructure such as water systems, drainage, roads, provision of electricity, etc. and that such credit may be extended by way of term loans.
• The project should be completed as early as possible and, in any case, within three years, so as to ensure quick re-cycling of bank funds for optimum results. If the project covers construction of houses, credit extended therefore in respect of individual beneficiaries should be on the same terms and conditions as stipulated for direct finance.
• It has been advised that banks should have a Board approved policy in place for valuation of properties including collaterals accepted for their exposures and that valuation should be done by professionally qualified independent valuers.
• As regards the valuation of land for the purpose of financing of land acquisition as also land secured as collateral, banks are guided to: Extend finance to public agencies and not to private builders for acquisition and development of land, provided it is a part of the complete project, including development of infrastructure such as water systems, drainage, roads, provision of electricity, etc.
• In such limited cases where land acquisition can be financed, the finance is to be limited to the acquisition price (current price) plus development cost. The valuation of such land as prime security should be limited to the current market price. Wherever land is accepted as collateral, valuation of such land should be at the current market price only.
• The RBI has noted that while the development of real estate is welcome, there is a need for the banks to curb the excessively risky lending by exercising selectivity and strengthening the loan approval process.
• Banks have been directed to ensure that the borrowers have obtained prior permission from government/local governments/other statutory authorities for the project, wherever required and that while the proposals could be sanctioned in normal course, the disbursements should be made only after the borrower has obtained requisite clearances from the government authorities.

(2)   RBI’s Second Quarter Review of Monetary Policy for the Year 2009-10 dated 05.11.2009:

• The RBI has decided to increase the provisioning requirement for advances to the CRE (commercial real estate) sector classified as ‘standard assets’ from the present level of 0.40 per cent to 1.00 per cent.

(3)   RBI Notification on Guidelines on Classification of Exposures as Commercial Real Estate (CRE) Exposures dated 09.09.2009:

• Bank finance to developers of infrastructure facilities in SEZs would be taken as infrastructure lending, as against the 2006 ruling that classified these as commercial real estate (CRE) exposures.
• Final guidelines on the definition of CRE exposures, necessitated due to risks involved in the real estate and Basel-II Framework are also laid out in this notification, which states inter alia that banks can finance cost of land development, which will be classified as CRE for the reason that the source of repayment would be the lease rentals, however, loans for acquiring land to private developers for setting up of SEZ are not permitted. It also states that banks should keep in mind the substance of the transaction rather than the form.
• The guidelines are based on principles and come with illustrative examples based on which banks should be able to determine. For example, it is possible that an SEZ may be developed by a single company entirely or mainly for its own use. In such cases the repayment will depend on the cash flows generated by the economic activities of the units in the SEZ and the general cash flow of the company rather than the level of real estate prices. It should not then be classified as CRE. In cases where lease rentals are insulated from volatility in the real estate prices by way of lease agreements for periods not less than that of the loan, such cases need not be treated as CRE from the time such conditions get fulfilled.
• These guidelines have further clarified that exposure towards acquisition of units in SEZs or purchase and working capital requirements etc. would not be treated as CRE exposure and consequently would be treated as infrastructure lending.

(4)   RBI Notification on Assessment of Group Risk – Exposure to Real Estate Sector dated 24.09.2009:

• Notification No. RBI/2009-10/167 states that, as a matter of prudence, banks may meticulously assess the inherent group risk of their borrowal accounts falling under the purview of the real estate sector.
• It states further that they may, while assessing the loan requirements of large builders / land developers, carefully analyse the financial credentials / viability of the borrowers on a consolidated basis supported by the consolidated accounts / position of the group as well as the financial credentials / viability of the relevant unconsolidated related entities such as Special Purpose Vehicles (SPV’s).

(5)   RBI Notification on Finance for Housing Projects dated 26.10.2009:

• Notification No.  RBI/2009-10/191 states that, while extending finance to housing schemes, Urban Cooperative Banks are advised to stipulate as part of terms and conditions that:
• The builder / developer / company, disclosed / would disclose in the pamphlets / brochures etc., the name(s) of the bank(s) to which the property is mortgaged.
• The builder / developer / company would append the information relating to     mortgage while publishing advertisement of a particular scheme in newspapers / magazines etc.
• The builder / developer / company would indicate in their pamphlets/ brochures that they would provide No Objection Certificate (NOC) / permission of the mortgagee bank for sale of flats / property if required. Banks are also advised to ensure compliance of the above terms and conditions and funds should not be released unless the builder / developer / company fulfill the above requirements.

 EXPECTED CHANGES IN INDIAN LEGISLATION WITH RESPECT TO THE REAL ESTATE SECTOR:

Draft Model Act for Real Estate (Regulation of Development) Act:

1.         i.            The Ministry of Housing & Urban Poverty Alleviation (Housing Section), on 3^rd September, 2009 came out with a Draft Legislation on the Model Real Estate (Regulation of Development) Act.
2.       ii.            The proposed Act is concerned inter alia, with, the “establishment of a Regulatory Authority and an Appellate Tribunal to regulate, control and promote planned and healthy development and construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties, and to host and maintain a website containing all project details, with a view to protecting, on the one hand the public interest in relation to the conduct and integrity of promoters and other persons engaged in the development of such colonies and to facilitating on the other, the smooth and speedy construction and maintenance of such colonies, residential buildings, apartments and properties and for matters connected therewith or incidental thereto.”

The key highlights of the proposed legislation would be:

1. A project would not be allowed to be advertised before registration with the Regulatory Authority. This registration would ensure that the project has obtained all sanctions. The advertisements should be specific and clear without any misleading images or highlights about the project.
2. Builders should use proper terminologies and would be required to give a detailed specification of carpet area, super built up and floor area. In addition to that, they would also need to give information about all the extra charges levied for common spaces such as corridors, parking and lifts, etc.
3. Any individual who plans to buy a property can inspect all the documents pertaining to approvals, sanctions, any other relevant document related with the property. The draft has made this mandatory for developers.
4. Developers would be required to make the buyers aware of the fact if they have taken any loan against that property. The regulatory body would have to ensure that the end products delivered to the buyers is what they had in mind at the time of investment.
5. All property transactions, sale or purchases, would be logged with the Regulatory Authority thereby making Income Tax an obligation. This step would also ensure the elimination of illegitimate property and black money.

The Bill is, however, still in the draft stage and if approved by the legislatures of various State Governments, it would herald an era of increased regulation in the real estate sector.

Insurance cover likely for real estate deals:

Recent reports seem to suggest that some Insurance companies are ready to cover the risks that are involved in real estate deals through various Insurance policies and their Insurance products are awaiting the approval of the Insurance Regulatory Development Authority (IRDA). In India, none of the property transactions, whether they are large acquisitions or a simple sale of a land or a flat, are covered through an insurance policy by an Indian insurer. Thus, title insurance is likely to cover the potential owner of a property against loss from defects in title.

Introduction-

The legal arena has faced several dimensions over how to construe the clause of “agreement in restraint of legal proceedings” incorporated in Insurance agreement in specific and other agreements in general which was made clear by the Parliament by amending Section 28 of the Indian Contract Act but, still there seems to be some uncomfortableness on this issue. There have been instances where Courts have interpreted this clause in the lines of National Insurance Company case which have roots primarily in English law, which may not appreciate the well established mischief rule of interpretation and the intention behind the legislation.

This article endeavors to answer the above issue faced by lawyers and the courts for some time now, that is, the question of whether or not to follow the law laid down by the Supreme Court in National Insurance Co. Ltd case in the light of the Amendment to Section 28 of the Indian Contract Act.

Is waiver of a claim to sue under an agreement valid in the light of Section 28(b) of the Indian Contract Act?

This question has a controversial and very interesting history behind it and squarely falls within the ambit of Section 28 of the Contract Act. Section 28 declares any agreement that absolutely restrains a person from enforcing a contract as void but it has been the general practice of Insurance and other companies to incorporate clauses in their agreement to such effect, for example, ‘‘if a claim be made and rejected an action or suit cannot be commenced within 6 months or 1 year after the rejection of the claim”. These kinds of clauses have been held to be in conformity with Section 28 of the Contract Act by the courts time and again.

    The law on this point has been interpreted in the following manner so as to enforce such an agreement which amounts, in reality, to an agreement in restraint of legal proceedings. There is undoubtedly a marked distinction between a condition which so limits the time within which a suit may be brought to enforce rights and one which provides that there shall no longer be any rights to enforce. Such a condition is not illegal in itself. This position was given legal sanctity by the Supreme Court in the case of National Insurance Co. ltd., which held that “an agreement which in effect seeks to curtail the period of limitation and prescribes a shorter period than that prescribed by the law would be void as offending Section 28 of the Contract Act. This is because such an agreement would seek to restrict the party from enforcing his rights in Court after the period prescribed under the agreement has expired even though the period prescribed by law for the enforcement of his rights would have not yet expired. There could, however, be agreements which do not seek to curtail the time for enforcement of rights but which provide for the forfeiture or waiver of rights if no action is commenced within the period stipulated by such agreement. Such a clause in the agreement would not fall within the mischief of Section 28 of the Contract Act[2].

The relevant aspect of this judgment is based on the provisions of Section 28[3] of the Contract Act that stood prior to the Amendment. An amendment was made to Section 28[4] of the Indian Contract Act and a new clause was added.

 The unrest legal position –

Even though the phraseology of Section 28 is explicit and strikes at the very root by declaring any agreement curtailing the normal statutory period of limitation to be void courts in India having been influenced by the distinction drawn by English Courts in case of ‘extinction of rights by agreement’ and ‘curtailment of limitation’[5] which was done by drawing a distinction between forfeiture of rights by terms of contract and curtailment of time for enforcement of contract, with the former being barred and the latter not being barred by Section 28.

The settled position of law before the Amendment was that Section 28 would invalidate only a clause in an agreement which restricts a party from enforcing his right absolutely or which limits the time within which he may enforce his right. Section 28 before the Amendment, did not come into operation when contractual terms spelt out the extension of right of a party to sue or spelt out the discharge of a party from any liabilities[6].

A distinction is assumed to exist between remedy and right and this distinction is the basis on which a clause barring remedy is void, but a clause extinguishing rights is valid. This approach may be sound in theory, but in practice it causes serious hardship and might even be abused. In order to remove these anomalies, Section 28 was amended by the Indian Contract (Amendment) Act 1996 (Act 1 of 1997)[7].  Thus, the artificial distinction between a clause providing for extinction of rights after a specified period has been eliminated[8], however, there are cases wherein it has been held that clauses filed after the specified period of limitation in the agreement would be void because the Amendment to Section 28 (b) does not have any retrospective operation[9].

Courts view on ‘agreement in restraint of legal proceedings’ clause–

 The effect of the Amendment to Section 28 made it clear that any clause extinguishing the right of a party or discharging any party from the liability in respect of any contract on expiry of a specific period would be void[10]. An arbitration agreement limiting the time during which a claim can be made by a party, was held to be clearly against public policy and in view of Section 28 of the Contract Act, void[11].

In the case of Explore Computers, [12] the Delhi High Court held, “it is not open to contend that if any suit or claim is not filed within one month of the expiry of the bank guarantee, the right of the plaintiff to institute any legal proceedings itself is extinguished. Such a plea would fly in the face of the amended Section 28 and cannot be discharged from the liability nor can the rights of the plaintiff be extinguished by inclusion of the clause providing so”.

The contention that the contractor’s right to claim arbitration comes to an end after the expiry of 90 days from the date of intimation was also held to be not sustainable[13]. In the case of Pandit Construction[14], the Court held that in view of the said pronouncement, the reasoning of the learned arbitrator could not be sustained that the claim was time – barred. The award to the extent that it holds that the claim of the petitioner is barred by time would, thus, be liable to be set aside.

An understanding of the above judgments thus, makes it amply clear that Court’s should consider the ramifications of the Amendment to Section 28 of the Indian Contract Act and refrain from ignoring the intention behind the Amendment which is the mandate of the legislature.

However, very recently the Supreme Court in the case of H.P. State Forest Co. [15] endorsed the view and held that “curtailment of the period of limitation is not permissible in view of Section 28 but extinction of the right itself unless exercised within a specified time is permissible and can be enforced. If the policy of insurance provides that if a claim is made and rejected and no action is commenced within the time stated in the policy, the benefits flowing from the policy shall stand extinguished and any subsequent action would be time-barred. Such a clause would fall outside the scope of Section 28 of the Contract Act. This, in brief, seems to be the settled legal position[16]”.

When the issue of Section 28 (b) vis-à-vis a negative covenant was raised before the Supreme Court in the Unit Trust of India case,[17] the Court went on to say that “it is not necessary for us to enter into the question as to whether clause 7.5 of the agreement is hit by Section 28 of the Indian Contract Act or not” –  the High Court, however, held that the disputed clause would be hit by Section 28 of the Indian Contract Act and kept silent on this particular issue.

Thus, after reading the above two Hon’ble Supreme Court judgments there seems to be some unrestness with regard to Section 28 (b) of the Act, which results in untold inconvenience to the many hapless individuals who enter into Standard Form Contracts with absolutely zero negotiating power. This unrestness may be interpreted in a manner close to the contractual rights of citizens. It would be sensible, therefore, to avoid any blanket rule applicable to limitation clauses and leave examination of such clauses to the context of the legislation[18]. The provisions of the Limitation Act are based on public policy and if a contract is made fettering or cutting down the period of limitation, such a contract being against the provisions of the Limitation Act should be construed as being opposed to the principles of public policy. Such a clause would then be hit by Section 23 of the Indian Contract Act. Hence, such a stipulation in a contract, fettering or curtailing the period of limitation ought to be considered to being operative and even if such a stipulation were present, the option to institute legal proceedings within the period of limitation prescribed by the Limitation Act should be made available.[19]

The Madras High Court in the case of Oriental Insurance Co[20]held, It is clear that by the Indian Contract (Amendment) Act, 1997, the original Section 28 has been replaced by a new paragraph in which extinction of right unless exercised within specific period of time, the law stands after this Amendment not only the curtailment of limitation period is permissible, but also the extinction of right, if sought to be brought by the agreement within a specific period, which period is less than the period of limitation prescribed for the suit under the contract in question is also rendered void. The period of limitation is three years[21]. The National Insurance Co. judgment dealt with the unamended part of Section 28 (b) and therefore does not hold good in law[22].

The Amendment to Section 28 prohibits clauses which seek to extinguish the rights of any party thereto, or discharge any party thereto from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights to such extent, is void.[23]. Thus, the law as it now stands after this Amendment, can be stated thus-not only is the curtailment of limitation period impermissible, but also the extinction of rights, if sought to be brought by an agreement within a specified period, which period is less that the period of limitation prescribed for the suit under the contract in question is also rendered void[24].

Intention behind the Amendment-

It is imperative to understand the history behind the enactment of Section 28 (b) of the Contract Act in order to appreciate the real and proper intention behind it. It was intensively debated in Parliament, particularly the anomaly caused by Section 28 and the real need to bring in an Amendment. The Union Law Minister who presented the Bill said “Presently, Section 28 allows parties to an agreement to substitute their own period of limitation in place of the period laid down in the general law of limitation. But they are free to provide that if a party does not sue within a specified period, within the rights accruing under the contract, it shall be forfeited or extinguished or that party shall be discharged from all liability under the contract. This distinction is very fine and a  number  of litigating  contracting  parties  have  found  it  difficult  in  practice  to ascertain this very fine difference between what is meant by extinguishing  of a right and what is meant by extinction of a remedy. This anomaly is sought to be cleared by virtue of this Section 28”[25].

Section 28 of the Indian contract Act has been substituted by a new paragraph. The impact of this new paragraph is considerable, because it changes the entire basis of the original Section 28. The Amendment has a very chequered history. It was first introduced in the Rajya Sabha on 27-07-1992 as “The Indian Contract (Amendment) Bill 1992. However, after the chequered history in Parliament, the Bill became a Statute in 1996 and received the assent of the President and was published in the Gazette of India, Extraordinary, Part – II dated 8-01-1997h and come into force with effect from that date[26].The statement of objects and reasons of the Amendment Bill reads as follows:

“The Law commission of India has recommended in its 97^th report[27] that Section 28 of the Indian Contract Act, may be amended so that the anomalous situation created by the existing Section may be rectified:

It has been held by the courts that the said Section 28 shall invalidate only a clause in any agreement which restricts any party thereto from enforcing his rights absolutely or which limits the time within he may enforce his rights. The courts have, however, held that this Section shall not come into operation when the contractual term spells out an extinction of the right of a party to sue or spells out the discharge of a party from all liability in respect of the claim. What is thus hit by Section 28 is an agreement relinquishing the remedy only i.e., where the time-limit specified in the agreement is shorter than the period of limitation provided by law. A distinction is assumed to exist between remedy and right and this distinction is the basis of the present position under which a clause barring a remedy is void, but a clause extinguishing the right is valid. This approach may be sound in theory but in practice it caused serious hardship and might even be abused. It is felt that Section 28 of the Indian Contract Act of 1872 should be amended as it harms the interest of the consumer dealing with big corporations and causes serious hardship to those who are economically dis-advantaged. The Bill seeks to achieve the above objects”[28].

While construing a Statute, the Court is not bound to forget the history behind the legislation and the surrounding circumstances, which existed at the time, and the mischief[29] which the new enactment intended to cure. Historical back ground (Law Commission’s recommendations) may have to be looked in to discover the real intent of legislature[30]. The main purpose of interpretation of an Act is to ascertain the real and actual intention behind the legislation and the Courts cannot override the legislative intent specifically expressed in the enactment[31]. If the intention of the legislature is clear, that intention constitutes the law.

Committee reports are among the most useful sources of enacting history. As to the statutory objective of particular provisions of an Act, a report leading to the Act is likely to be the most potent aid; it would be mere obscurantism not to avail of it[32]. Where the Act has been laid before parliament and the legislation is introduced in consequence of that report, the report itself may be looked at by the court for the limited purpose of identifying the mischief that the Act was intended to remedy, and for such assistance as is derivable from this knowledge in giving the right purposive construction to the Act[33]. It would be very clear after a perusal of the Objects and reasons for the Amendment, the Law commission report and also the Parliamentary debate, that the real intention in bringing in an Amendment to Section 28 of the Indian Contract Act. While ascertaining the true canon of construction applicable to Section 28 (b) of the Indian Contract Act, these aspects stare us in the face.

What would be the consequences if there is a settlement etc. after a breach of contract. Will Section 28 (b) have any application?

A very interesting question that arises in the light of the legal uncertainty is as to the consequences when a settlement has been arrived at between the parties after a breach of contract, and the parties have agreed not to raise any dispute regarding the settlement in the Courts of law, with respect to the application of Section 28 (b) to any dispute to the settlement which has been arrived.

Where an agreement for compromise and entire claim of maintenance on receipt of full and final settlement was accepted by the parties, the Court held, giving effect to an agreement which overrides this provision of law, i.e., Section125 of the Cr. P.C., would be tantamount to not only giving recognition to something which is opposed to public policy but would also amount to a negation of it[34]. That is what exactly Section 23 of the Contract Act provides for the agreement pleaded being opposed to public policy and against the clear intendment of Section 125 of the Cr. P.C cannot be enforced or be a shield in Court of law[35].

However, if under a particular bargain, the rights of the parties were extinguished, that would be permissible and, that will not hit the provisions of Section 28 of the Contract Act and as such would not be violative of Section 23 of the Contract Act. But if rights are not extinguished but only the remedies are barred different consideration would apply[36].

The general principle is that everyone has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity which may be dispensed with without infringing any public right or public policy[37]

As a general rule, any person can enter into a binding contract to waive the benefits conferred upon him by an Act of Parliament, or, as it is said, can contract himself out of the Act, unless it can be shown that such an agreement is in the circumstances of the particular case contrary to public policy. Statutory conditions may, however, be imposed in such terms that they cannot be waived by agreement, and, in certain circumstances, the legislature has expressly provided that any such agreement shall be void[38].

The Madras High court held that in the view of Section 28 of the Contract Act, which prohibits agreements which have, for their object, restraining independence from enjoying the fundamental right of resorting to Court of law for redressal of relief., the agreement did not restrain the Contractor from taking legal recourse or compelled him to have his right to take legal remedy[39].

Thus, from the above judgments, it may be inferred that where through a settlement after a breach of contract, one of the parties to an agreement waives or forfeits his right to adequate consideration, it is valid provided he does not waive away or abridge a right provided under an Act or law which may be considered as void to that extent. Therefore, a person cannot forfeit his right to approach the court through a settlement which is arrived at after the breach of the contract which is prohibited by Section 28 of the Indian Contract Act[40]. It is thus clear, that the object of this new paragraph in Section 28 is to declare that when any clause in an agreement not only bars a remedy, but also extinguishes the right, it shall be void to that extent. Therefore, many earlier decisions of different High Courts and of the Supreme Court in which a clause which does not debar the remedy, but extinguishes the right is held to be valid shall no longer be treated as a good law.[41]

Conclusion-

The argument that the curtailment of the period of limitation is not permissible in view of Section 28 (b) but extinction of the right itself unless exercised within a specified time is permissible and can be enforced is sound in common law or it is backed by judicial decisions is a negation of the fundamental right to approach the Court and would fly away in the light of the Amendment to Section 28 of the Indian Contract Act. The law declared by the Supreme Court in National Insurance case is no more the binding law and Section 28 (b) which is self explanatory, a plain reading of which leads to the construction that limiting the period lesser than as prescribed by the statue is void, time has now arisen to evolve a jurisprudence close to the lives of the citizens by protecting their right to move the Court.

The Amendment rectifying the defect in Section 28 of the Indian Contract Act should be given a literal and logical interpretation by properly appreciating the intention of the legislature in the light of Parliamentary debates, objects and reasons for the Amendment, Law commission report and thereby upholding the intention behind the enactment of Section 28 (b) of the Indian Contract Act.

Introduction:

People who knock the door of Court’s of law will certainly get justice but at the cost of one party loosing the battle but people trying to resolve the matter through ADR will have high satisfaction with nobody loosing the legal battle indeed, that’s the essence of ADR. An attempt has been made in this research work to highlight the ADR process in the light of the UNCITRAL model law with special focus to Indian legal regime governing Alternative dispute resolution.

The settlement of disputes is tending to shift from national courts to arbitration by neutral private tribunals and other modes of Alternate Dispute Resolution[1]. With ever escalating costs of litigation by way of lawyer’s fees, Court fees and other expenses, Court litigation has been progressively becoming more and more prohibitive. The dilatory tactics adopted by the defending parties in the over-crowded courts makes for indefinite delays. This has resulted in the evolution of the Alternative Dispute Settlement Resolution[2]. In the language of Justice Krishna Iyer “a legal adjudication may be flawless but heartless, but a negotiated settlement will be satisfying even if it departs from strict law[3]”.This has lead to the evolution of ADR across the globe which ensures an “all win” situation to the parties.

Arbitration and Conciliation Act modeled in the light of UNCITRAL Model law-

The UNCITRAL was created by the General Assembly in 1966[4] to enable the United Nations to play a more active role in reducing or removing legal obstacles to the flow of international trade[5]. The U.N. recognized that various economic and legal differences existed between States. These differences were the source of many of the problems that hindered the advancement of an integrated international trade system. “The General Assembly considered it desirable that the process of harmonization and unification of the law of international trade be substantially coordinated, systemized, accelerated, and that a broader participation by States is secured[6].”

The 1996 Act consolidates and amends the law relating to Domestic Arbitration, International commercial arbitration and enforcement of foreign arbitral awards taking into account the UNCITRAL Model law on International commercial arbitration and UNCITRAL Conciliation rules[7].

The Model law on International Commercial Arbitration is designed for use in all legal and geographical regions. The General Assembly recommended to all the states throughout the world to enact modern arbitration legislation based on the Model law. These guidelines have since been codified in the Arbitration and Conciliation Act 1996[8].

The Model law is tailored to apply to arbitration where (a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different states; or (b) the place is situated outside the state in which the parties have their place of business[9].

The Indian Act adopts the following provisions from the Model law:

a)      The definition and form of the arbitration agreement under Section 7 of the Act.

b)      The duty of the judicial authority to refer the parties to arbitration where an action is brought before it in breach of the arbitration agreement under Section 8 of the Act.

c)      The power of the Tribunal and of the Court to grant interim measures of protection in support of arbitration Sections 9 and 10 of the Act.

d)     The composition of the arbitral Tribunal under Section 2(d) read with Section 10.

e)      Appointment of Arbitrators under Section 11.

f)       Grounds of challenge to an Arbitrator under Section 12.

g)      Procedure to challenge an arbitrator under Section 13.

h)      The grounds for setting aside the arbitral awards under Section 34 of the Act.

The Apex court of the country has opined that “The provisions of the 1996 Act have to be interpreted uninfluenced by the principles underlying the 1940 Act. In order to get help in construing these provisions, it is more relevant to refer to the UNCITRAL Model law rather than to the 1940 Act[10]. The Apex court went ahead to pronounce that “Though the 1996 Act was enacted in the light of UNCITRAL Model rules but it has gone beyond the scope of the said Rules[11].

Conciliation and Mediation used as ADR in India-

Regulation of Arbitration laws by conciliation or mediation is a novelty of modern arbitration law[12]. The Arbitration Act of 1996 by virtue of Section 30 highlights the importance of Settlement and suggests that the Tribunal may encourage the parties to settle the disputes through Mediation, Conciliation or any other procedure to encourage a settlement.

“Mediation may be regarded as a half-way house between conciliation and arbitration. The role of the conciliators is to assist the parties to reach their own negotiated settlement, and he may make suggestions as appropriate. The mediator proceeds by way of conciliation but in addition is prepared and expected to make his own formal proposals or recommendations, which may be accepted as they stand or provide the basis of further negotiations leading to a settlement. Such recommendations may be similar inform to an arbitrator’s award, but the crucial difference is that the parties do not undertake in advance to accept them[13].”

In its historic judgement in Salem Bar Association case[14], the Supreme Court has directed the constitution of a committee to frame draft rules for mediation under S. 89(2) (d) of the CPC. Consequently, the Committee presided over by Mr. Justice M. Jagannadha Rao, Chairman of the Law Commission of India has prepared a comprehensive code for the regulation of ADR process initiated under S 89 of CPC. Which consists of two parts–Part I: ADR Rules 2003 consisting of “the procedure to be followed by the parties and the Court in the matter of choosing the particular method of ADR” and Part II: Mediation Rules, 2003 consisting of “draft rules of mediation under section 89(2) (d) of the Code of Civil Procedure[15]”.

Conciliation is a process to gain the goodwill by the acts of the Tribunal which induce friendly feelings between the parties and to compose their disputes by offering the parties a Voluntary settlement[16].

Mediation means that a third party acts as an intermediary between the parties for the purpose of reconciling the parties and inducing the parties to settle their disputes[17].

MED- ARB and ARB-MED-

The mediator becomes an arbitrator and renders as enforceable decision following the mediation process on all issues where the parties fail to reach an agreement this is called MED-ARB short for Mediation and Arbitration[18].

Another recent development is allowing as arbitrator to act as a mediator after he has heard the Arbitration which is called as ARB-MED short for Arbitration and Mediation. The arbitrator reveals the arbitration results only if there is no agreement in mediation. This gives the arbitrator-mediator considerable power in facilitating the negotiation[19]. This provision is based on Art (1) of UNCITRAL Conciliation Rules 1980. A prototype procedure was formulated in Art 30 of the Model law which has now been codified in Section 30 of the Act[20].

If through mediation and conciliation or any other procedure the parties settle their disputes the Tribunal terminates the arbitration proceedings. If the parties request and the Tribunal had no objection then the Tribunal records the settlement and makes an award on the agreed terms[21]. Such an award acquires the status of a decree[22].

Conciliation proceedings-

Part III of the Act 0f 1996 comprising 21 Sections deals with various aspects of the conciliation process. It adopts, with minor contextual variations, the UNCITRAL conciliation Rules 1980. One of the most important value additions in the Act is that the conciliator is not bound by Civil Procedure Code 1908 or the Indian Evidence Act 1872[23].

Enforcement of Foreign Arbitral Award-

The Arbitration Act of 1996 deals with the enforcement of foreign awards in Part III only in relation to States which were parties to the New York Convention on the Recognition and Enforcement of Foreign Awards of 1958, and the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Awards of 1927[24].

Before moving on to the enforcement of foreign Arbitral award it would be more pertinent to deal with whether a particular award is a foreign award or not. It would be appropriate to refer to Section 44 of the Arbitration and Conciliation Act 1996, which reads as follows:

“Definition. – In this Chapter, unless the context otherwise requires, “foreign award” means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960 –

(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and

(b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies”.

An award in pursuance of an arbitration agreement governed by Indian Law, if the conditions under Section 44 are satisfied, will not cease to be a foreign award, merely because the arbitration agreement is governed by the law of India[25]

An award for being a “foreign award” the following conditions must be satisfied (a) there is commercial relationship between the parties (b) award is made in a Convention country and (c) award is made in pursuance of a written agreement between the parties[26].

Conditions for Enforceability of Foreign Awards-

Section 48. Conditions for enforcement of foreign awards. –

“(1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that-

(a) The parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or

(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

(2) Enforcement of an arbitral award may also be refused if the court finds that-

(a) The subject-matter of the difference is not capable of settlement by arbitration under the law of India; or

(b) The enforcement of the award would be contrary to the public policy of India.

Explanation. –Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption.

(3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security”.

Section 48 of the Act provides for various grounds on which a “foreign award” can be set aside by the Indian Courts and the person who wants enforce the foreign award has to satisfy the Court about the nature of foreign award.

Enforcement of Foreign Award-

An award is not a court-judgement as it is founded on a contract of the parties. Furthermore, it does not have the status of a judgment because it is not the act of a sovereign of the State in which it was made. It will not have the status of a judgment in any other country either. Hence it cannot be enforced without the court intervention in India or in any other country[27].

Section 49 of the Act deals with enforcement of foreign awards it says-

“Enforcement of foreign awards –Where the court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that court”

The procedure for enforcement of a foreign award is the same as for the enforcement of a domestic Award. However, the provisions of the Act of 1996 shall prevail in case of any inconsistency with its provisions and other Acts[28]. If the conditions for enforcement are fulfilled for enforcement of a foreign award it shall be deemed a decree of the Court and executed as such[29]. Enforcement of a foreign award or execution of a foreign award will mean the same thing. The foreign award is treated as a decree of the Court[30].

Mediation Center’s in Bangalore and Delhi – A Step taken by the Judiciary towards “Co-operative problem settlement”-

There is no legal battle, there is no legal war and more importantly there is absolutely no defeats in the mediation process, the mediators are satisfied that they have settled some dispute and the parties are satisfied that both of them have won their case this is what they call as “co-operative problem solving” the outshoot of this is Mediation.

The High Court’s of Delhi and Bangalore have got their own Mediation Center’s trained by  American experts in Mediation with their own indigenous rules and keeping in mind the Statutory mandate under Section 89 of the Civil Procedure Code. Successful mediation, followed by a decree, does not alone leaves in happy ending but also ensures the plaintiff to a refund of court fees in terms of Section 16 of the Court Fees Act, 1870.

Cases which are suitable for Mediation:

All civil cases, except those where there are serious allegations of fraud may be referred for Mediation. For eg., Rent cases, partition, matrimonial, labour, specific performance, money, damages, injunction, declaration, land-lord and tenant, intellectual property, Cheque Bounce Cases.[31]

Procedure for setting the Mediation-

Mediation is one of the Alternative Dispute Resolution Methods contemplated under Section 89 of the Code of Civil Procedure. Mediation is a process in which a neutral third party assists the disputing parties to creatively resolve their disputes without going to trial. Mediation presents a unique opportunity for dispute resolution with the involvement and participation of all the parties and their advocates[32]. As per provision of Order X Rules 1-A of the CPC after recording admission or denial of documents, the Court is under an obligation to direct the parties to opt for any of the four modes of alternative dispute resolution including mediation.

Bangalore Mediation Centre- Silicon Valley’s way of Mediating-

On the initiative of the High Court of Bangalore and with ample support from the Advocates from the High Court of Bangalore the Mediation Centre has been a success story and has induced the litigants to resolve the disputes amicably.

Under Sec.89 of CPC, in case there is element of settlement in a matter, the Presiding Officer may refer it for Mediation.  The parties are also at liberty to seek for mediation, if they so desire by filing a memo in Court. The Court may therefore suo motu refer the matter to the Mediation centre or the parties can volunteer to settle the matter amicably through Mediation. There are around 2414 number of cases settled[33]. All these things go on to establish that Bangalore is marching ahead not only in the IT industry but also in Mediating with the additional news that Bangalore Mediation Centre is also gearing up to take private cases for Mediation[34].

Delhi Mediation Centre- Capital City leading by Example[35]–

The Delhi Mediation Centre has been a role model Mediation centre for many of the other Mediation center’s across the sub-continent. This pilot project is running under the auspicious guidance of the Supreme Court of India. The Mediation Centre is manned by Additional District Judges who have been given extensive training to act as mediator[36].

Three Mediation Centres are functioning in Delhi District Courts at Tis Hazari Courts, Karkardooma Courts and Rohini Courts Complex. Delhi District Court Mediation Centre’s receive cases for mediation not only from all the four District Courts but also from the Supreme Court of India and Delhi High Court. With has high as 9000[37] cases settled by the Delhi Mediation Centres. This centre certainly leads by an example in settling the disputes amicably through Mediation.

Mediation under USAID-

USAID works with NGOs in Karnataka and Rajasthan on the issue of violence against women. The program provides legal information, counseling, mediation and representation services. Nearly 75,000 women have directly benefited from the program[38]. USAID’s Gender and the Law program helps Indian women increase their access to justice. Working with state officials in Karnataka and Gujarat and local non-government organizations, the program:

• Educates women about Indian laws and increases their access to paralegals and lawyers;
• Works to combat skewed gender ratios by increasing the dignity of the girl child;
• Disseminates information on Muslim women’s rights to Muslim women and religious leaders;
• Establishes counseling centers for women that offer mediation, legal advice and referrals to experts;
• Improves the knowledge, skills and gender-sensitivity of medical and legal sector personnel;
• Conducts research on key legal and social issues and disseminates findings;
• Attempts to change attitudes and behaviors regarding violence against women;
• Creates local, alternative channels of dispute resolution that are more sensitive to the needs of women and their families; and
• Provides technical advice to groups working for legal, policy and institutional reforms to protect women, such as the country’s recently passed domestic violence law.[39]

Copy right protection for Software-

Computer software is protected by Copyright Act[1] under the Indian legal regime under the garb of “literary work[2]”. Section 2 (o) of the Act says,

“literary work includes computer programmes, tables and compilations including computer data bases.”

 Section 2 (ffc) of the Act says,

“computer programme” means a set of instructions expressed in words, codes, schemes or in any other form, including a machine readable medium, capable of causing a computer to perform a particular task or achieve a particular result.”

The protection is afforded by Section 13 (1)[3] of the Act which provides that copyright shall subsist inter alia in original literary works. Section 14 (b) of the Act speaks about the Copyright owner’s right as regards Computer programme it says,

Section 14 (b) in the case of a computer programme-

(i) to do any of the acts specified in clause (a);

 (ii) to sell or give on commercial rental or offer for sale or for commercial rental any copy of the computer programme:

Provided that such commercial rental does not apply in respect of computer programmes where the programme itself is not the essential object of the rental.”

Since a computer programme is covered by the Copyright Act, it will also be subject to the general principles of copyright law in India as laid down by the courts.

Registration is not mandatory-

Section 45 makes a provision for registration of the copyright. However, registration is not a prerequisite condition for protection of copyright[4]. However, it is advisable to get it registered as it is prima facie evidence of subsistence of copyright and admissible in evidence in all courts of law without further proof or production of the original[5].

Civil Remedies-

When copyright in any software has been infringed, the owner is entitled to all remedies by way of Injunction, damages, accounts and otherwise as are or may be conferred by law for the infringement of a right[6]. All infringing copies are deemed to be the property of the copyright owner who may take proceedings for their recovery[7].

Computer databases and software programs have been protected under the Copyright Laws in India and pursuant to this software companies have successfully curtailed piracy through court orders[8].

Defences[9]–

            The making of copies or adaptation of a computer program by the lawful possessor of a copy of such computer program from such copy:

1) In order to utilise the computer program for the purpose for which it was supplied

2) To make back-up copies purely as a temporary protection against loss, destruction or damage in order only to utilise the computer program for the purpose for which it was supplied.[10]

These are the possible defence’s which may be taken in the case of violation of copyright.

Patentability of Software under the Indian legal regime-

The Patent Act prohibits patenting of “a computer programme per se”[11].  Therefore generally software is not patentable “other than its technical application to industry or a combination with hardware”[12]. However, after the defeat of Amendment 2004 which added proviso 3 (k) before the Parliament now it is very clear software “standing alone” is not patentable under Indian law.[13]However the recent controversy over the Indian Draft patent manual 2008 clause 4.11.7 with regard to Section 3 (k) needs a specific mention[14].

Information Technology and Software protection in India-

The Information Technology Act, 2000[15] is a generic legislation, which articulates on range of themes, like digital signatures, public key infrastructure, e-governance, cyber contraventions, cyber offences and confidentiality and privacy. The aims and objectives of the Act include enabling or facilitating the use of electronic commerce and providing equal treatments to users of paper-based documentation and to users of computer-based information[16]. The Act covers some computer related crimes and prescribes the following punishment for them.

• Tampering with computer source documents [17]
• Hacking with computer system [18]
• Publishing of information which is obscene in electronic form[19].
• Breach of confidentiality and privacy by disclosing any electronic information to any other person without consent of the concerned person[20]

Amendments to Section 43 comes as a welcome measure for Data protection-

Section 43 that has been widely interpreted as a clause to provide data protection in the country. This section has been improved to include stealing of computer source code[21] for which compensation can be claimed[22]. Data protection has now been made more explicit through amendment of this Section which provides for compensation to an aggrieved person whose personal data including sensitive personal data may be compromised by a company, during the time it was under processing with the company, for failure to protect such data whether because of negligence in implementing or maintaining reasonable security practices[23].

In the light of the above made observations it would be safe to conclude that “software” is more considered to be a literary work rather than a patent and mostly protected and litigated under the Copyright Act. The Information Technology Act which provides for criminal remedies has brought about certain Amendments for data protection but time only can answer whether it can satisfy the industrial requirements of a specific legislation protecting “software” and database.

Under the TRIPs Agreement ‘trade secrets’ are referred to as ‘undisclosed information’. The Agreement defines trade secret as-

“An information is a trade secret if-

(1)   it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question:

(2)   has commercial values because it is secret, and

(3)   has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.”

Even though India has an obligation to comply with TRIPs Agreement unlike the US and other developed countries India has no legislation dealing with trade secrets. In India, protection of trade secrets is common law based[1].

The primary statutory protection of trade secrets comes from section 27 of the India Contract Act 1872 and basic principles of common law.  Courts have interpreted this Section 27 of the Contract Act to include agreement which can protect trade secrets and nondisclosure agreements has not against restraint of trade, granting relief to injured parties in the form of enforcing nondisclosure agreements between employer and employee.  However, courts have been less willing to enforce agreements relating to post employment restraints on the employee.

The Supreme Court in Gujarat Bottling case[2] asked a relevant question that how Pepsi may ask Coca Cola to part with its trade secrets to its business rival by supplying the syrup etc for which Coca Cola holds the trade marks to GBC which is under effective control of Pepsi. The recent Delhi High Court decision in Diljeeth Titus[3] case also further vouches for the fact that confidential information of the employer can be protected.

In Escorts case[4] the Delhi High Court restrained from manufacturing, selling or offering for sale of the Pick-N-Carry Mobile Cranes that are substantial imitation or reproduction of the industrial drawings of the plaintiffs or from using in any other manner whatsoever the technical know-how. In Burlington[5] case the Delhi High Court again restrained carrying on any business including mail order business by utilising the list of clientele/customers included in the database of the petitioner. In Manjunath [6] the Supreme Court went to affirm that “The disclosure by an employee of trade secrets and other confidential information obtained by him in the course of his employment is a “breach of trust””

Protection of Trade Secrets and Confidential information under Indian IPR laws-

The issue of Copy right protection to confidential information was discussed by the Delhi High court in Diljeeth Titus[7] case and the Court held “Thus the real test was the degree of employment control to determine whether it was a contract of service. There may not be employment in the strict sense of employment of a workman or a labourer but the degree of control would determine the obligations of the parties” by pronouncing this the Court upheld the Copy right in database. The employee shall not during his employment nor at any time afterwards divulge nor communicate to any person corporation or firm any information which he may receive or obtain in relation to the company’s affairs and customers and all instructions drawing notes and memoranda made by the employee or which may come into his possession while engaged as aforesaid shall be the exclusive property of the company’[8]

In Zee Tele film case[9] the Bombay High Court approved triple test that where a plaintiff sues, relying upon breach of confidence, he must establish three elements. These are: (1) that the information was of a confidential nature; (2) that the information was communicated in circumstances importing an obligation of confidence; and (3) that there has been an unauthorised use of the information to the detriment of the person communicating it.

Where it was undertaken by the parties “not to publish or cause to be published any work on the same subject at or about the price of sale which might reasonably be regarded as conflicting or likely to conflict with the sale of copyrighted works” this kind of confidentiality clause was held not to be violative of Section 27 of the Indian Contract Act[10].

 Remedies for protection of Trade Secrets and confidentiality under the Indian Law-

Injunction preventing the third party from using trade secrets, return of confidential information and Compensation for damages are the common remedies which are available under the Indian Jurisdiction.

Section 72 of the Information Technology Act 2000 deal with breach of confidentiality and privacy and any breach will attract imprisonment upto 2 years, fine upto 1 lakh.

The Bombay High Court in Urmi Juvekar [11] held that action of breach of confidence succeeds only if Plaintiff could identify clearly what was the information he was relying on and has to be shown that it was handed over in the circumstances of confidence and could be treated as confidential.

Non-compete clause and the law regulating it in India-

If there is negative covenant restricting the employee from taking any other employment, and the employee leaves the service, the negative covenant can be enforced to the extent that the unexpired part of the term of service would be essential for the fulfillment of the contract.[12] In Gujarat Bottling[13] Case the Supreme Court said any Non disclosure clause shall be applicable only during the period of service and any restraint beyond the service is violative of sec. 27 Indian Contract Act.

A negative covenant that the employee would not engage himself in a trade or business or would not get himself employed by any other manner or whom he would perform similar or substantially similar duties, it is not therefore a restraint of trade unless the contract as aforesaid is unconscionable or excessively harsh or unreasonable or one sided [14].

A contract which is in restraint of trade cannot be enforced unless (a) it is reasonable as between parties; (b) it is consistent with the interest of the public.[15] In BLB Institute case[16]the Court reiterated that under Section 27 of the Contract Act: (a) a restrictive covenant extending beyond the term of the contract is void and not enforceable, (b) the doctrine of restraint of trade does not apply during the continuance of the contract for employment and it applies only when the contract comes to an end, (c) as held by this Court in Gujarat Bottling v. Coca-Cola this doctrine is not confined only to contracts of employment, but is also applicable to all other contracts.

Non-Solicitation Agreement-

Generally negative covenant during the period of the agreement is considered not to be hit by law but there are certain non-solicitation agreement which is prima facie negative in nature and still stand as an exception and are enforceable even after the conclusion of the agreement and are held by the Courts to be valid in law. The Delhi High Court in Wipro case[17] held “the non-solicitation clause does not amount to a restraint of trade, business or profession and would not be hit by Section 27 of the Indian Contract Act, 1872 as being void”.

In Pepsi Co[18] case, where an attempt by one company to induce the employees of Competitor Company to join the employment of inducing company contrary to the contract of employment prohibiting such employment was not permitted by the Court and the Court said Non-Solicitation clause is not hit by the provisions of Section 27 of the Indian Contract Act, 1872.