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PART B: RTI Act, 2005

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  •  When the Government announced that it will bring the bill in the Parliament to do away with the decision of CIC ruling that political parties are covered u/s 2(h) of the RTI Act (see BCAJ of July 2013) RTI Activists all over the country huddled together in a group and held the view that it is appropriate that political parties should be considered as “public authority”. Disregarding civil society’s strong objection as all political parties are in favour of exempting themselves from the RTI Act, Government tabled the bill in the Lok Sabha on 14-08-2013. Same reads as under:

BE it enacted by Parliament in the Sixty-fourth year of the Republic of India as follows: –

1. (1) This Act may be called the Right to Information (Amendment) Act, 2013 (2) It shall be deemed to have come into force on the 3rd day of June, 2013.

2. In section 2 of the Right to Information Act, 2005 (hereinafter referred to as the principal Act), in clause (h), the following Explanation shall be inserted, namely:-

‘Explanation- The expression “authority or body or institution of self-government established or constituted” by any law made by Parliament shall not include any association or body of individuals registered or recognised as political party under the Representation of the People Act, 1951.’

3. After section 31 of the principal Act, the following section shall be inserted, namely:-

“32. Notwithstanding anything contained in any judgment, decree or order of any court or commission, the provisions of this Act, as amended by the Right to Information (Amendment) Act, 2013, shall have effect and shall be deemed always to have effect, in the case of any association or body of individuals registered or recognised as political party under the Representation of the People Act, 1951 or any other law for the time being in force and the rules made or notifications issued thereunder.”

It is interesting to note that Prime Minister in his Independence Day speech on 15-08-2013 covered RTI as under:

“Through the Right to Information Act, the common man gets more information than ever before about the work of the government. This legislation is being used on a large scale at all levels. The Act frequently brings to light irregularities and corruption and opens the door for improvements. I am sure that the RTI will lead to further improvements in the way the government functions.”

Isn’t this a contradiction that in his speech he states “I am sure that the RTI will lead to further improvements in the way the government functions,” while by introducing the RTI Amendment Bill it excludes the way political parties function?

• In BCAJ of June 2013, it was reported that online RTI facility is created by the Government. The portal is a facility for Indian citizens to file RTI applications online and first appeals and also to make online payment of RTI fees. The facility was then made available only by a few ministries/ departments.

Now DoPT has extended facility of online filing of RTI Application and the first appeal to all ministries. Office Memorandum, dated 30-07-2013 reads as under:

Subject: Extension of RTI web portal for online filing of RTI application.

1. In continuation of this Department’s O.M. of even number dated 22-04-2013, it is intimated that the facility of RTI online web portal has been extended to 37 Ministries/ Departments of Government of India, so far (list enclosed). It is planned to extend this facility to all the remaining Ministries/Departments of Government of India by mid-August, 2013. This facility is presently not proposed to be extended for field offices/attached/subordinate offices.

2. It is again requested that training to all the CPIOs and First Appellate Authorities (FAAs) may be provided by the concerned Ministry/ Department, through the officials trained by DoPT/NIC. If required, further training can be provided by DoPT/NIC, on the request of the concerned Ministry/Department. User name/ password to all the CPIOs and FAAs are to be provided by RTI Nodal Officers of the concerned Ministry/Department. It is imperative that the RTI Nodal Officers update the details of the CPIOs/ FAAs in the system and issue user name and password to them at the earliest.

List of 37 ministries/departments include: –

1. DEPARTMENT OF ECONOMIC AFFAIRS

2. DEPARTMENT OF REVENUE

3. DEPARTMENT OF HEAVY INDUSTRY

4. MINISTRY OF SHIPPING

5. MINISTRY OF CORPORATE AFFAIRS

Full list & further details can be viewed on https:// rtionline.gov.in

• Mrs. Deepak Sandhu succeeds Shri Satyananda Mishra as Chief Information Commissioner at Central Information Commission.

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PART C: Information on & Around

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CBI goes to the Delhi High Court:

Vide provisions of section 24, RTI Act does not apply to the intelligence and security organisations specified in the Second Schedule.

The Central Board of Investigation (CBI) has been added in the Second Schedule to the RTI Act w.e.f. 29-6-2011.

The matter was taken to the Madras High Court pleading that the CBI is not the intelligence and security organisation. But, it was lost.

Mr. C.J. Karira made an application to the CBI asking it to furnish information relating to the status of sanction for prosecution against government officials facing allegations of corruption between 2007 to 2011. Same was denied. He filed an appeal to CIC. He pointed out that the information which the CBI declined to reveal on his RTI plea has been disclosed by the ministry of personnel in a number of responses to Parliament members. Hence, it is disclosable under Proviso to s/s. 1 to section 24.

The 1st Proviso to section 24 reads as under: Provided that the information pertaining to the allegations of corruption and human rights violations shall not be excluded under this sub-section.

The Commission in its decision directed the CBI to disclose the status of sanction for prosecution against government officials facing allegations of corruption between 2007 to 2011.

The CBI has now approached the Delhi High Court seeking exemption under the RTI Act from disclosing information held by it on allegations of corruption. The Delhi High Court has stayed the CIC Order and has fixed the matter on 3rd April for further hearing.

Mumbai Police

On an average, 120 Mumbai police personnel have died while on duty every year since 2002, with 98% of them succumbing to various illnesses, including cardiac arrest, according to an RTI reply. Other causes of death included illnesses such as diabetes, hypertension and heart-related problems, among others.

 “Due to long duty hours, a policemen cannot plan their days. They don’t get time to exercise. Moreover, when policemen are deployed at any place, they have to eat the food available there, which may be unhealthy,” Additional Commissioner of police (Crime) Niket Kaushik said.

Vice–Chancellor of Mumbai University:

A query filed by Mr. Anil Galgali an RTI activist under the RTI Act, revealed that the Mumbai University (MU) hired senior advocates to fight the cases challenging the VC’s job. The university had hired senior advocates, Rafique A. Dada – known for fighting tricky cases – Naushad Engineer and Sagar Talekar.

MU’s finance and accounts PIO A. R. Jadhav said the university had paid Rs. 4,10,900 to the three lawyers. MU legal adviser Ajit Karwande received a letter from advocate R. A. Rodrigus on 11th July, 2011, with bills that needed to be settled: professional charges of Dada (Rs. 3,30,900), Engineer (Rs. 45,000) and Talekar (Rs. 35,000).

Irrelevant Information:

Rejecting an RTI application filed by a Kandivali resident seeking information of the last 10 years on the appointment, transfer and retirement of Government employees in Maharashtra, Ratnakar Gaikwad (Chief SIC) wrote in the order:

“Applicants should not ask for detailed and irrelevant information as public information officers (PIOs), besides performing their statutory duties, are also engaged in the task of providing information to the people. In such circumstances, it would be appropriate if such information is sought which would bring in transparency and accountability in administration, halt corruption and is in public interest.”

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PART A: Orders of CIC

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  • Political parties: Section 2(h) of the RTI Act:

Three-member-bench of CIC [Satyananda Mishra (Chief IC), Mrs. Annapurna Dixit (IC) & M. L. Sharma (IC)] passed an order dated 03-06-2013 in the case where the Respondents were six political parties:

1. Indian National Congress/All India Congress Committee (AICC);
2. Bhartiya Janata Party (BJP);
3. Communist Party of India (Marxist) (CPM);
4. Communist Party of India (CPI);
5. Nationalist Congress Party (NCP) and
6. Bahujan Samaj Party (BSP).

The main issues raised by the complainants were: Disclosure of accounts and funding of political parties.

Some political parties in response to RTI applications of complainants stated that they were not “public authority” and hence not covered under RTI.

Chief Information Commissioner noted that the matters in hand raised complex issues of law and hence constituted a full bench as noted above.

Before the Commission, the complainants made extensive submissions to contend that Political Parties fall under the ambit of section 2(h) of RTI Act.

Above submissions were supported by various arguments including

(i) That section 80 GGB of the Income-tax Act which provides that contribution made by an individual or a company to a Political Party is deductible from the total income of the assessee. This provision is exclusively applicable to the Political Parties and is suggestive of indirect financing of the Political Parties by the State.

(ii) After various RTI applications were filed with the Central Agencies, it was discovered that Political Parties enjoy a number of “facilities” provided to them by the government. This is a clear instance of being “financed indirectly by funds provided by the appropriate governments” which puts Political Parties squarely under the definition of ‘public authority’ as provided for in section 2(h)(d) (ii) of RTI Act.

(iii) If closely monitored and totalled, the total public funds spent on Political Parties would possibly amount to hundreds of crores.

In its decision, Commission quoted Harold Laski:

“The life of the democratic State is built upon the party-system and it is important at the outset to discuss the part played by party in the arrangement of affairs. Briefly, that part may be best described by saying that parties arrange the issues upon which people are to vote. It is obvious that in the confused welter of the modern State, there must be some selection of problems as more urgent than others. It is necessary to select them as urgent and to present solution of them which may be acceptable to the citizen-body. It is that task of selection, the party undertakes. It acts, in Mr. Lowell’s phrase, as the broker of ideas. From the mass of opinions, sentiments, beliefs, by which the electorate moves, it chooses out those it judges most likely to meet with general acceptance. It organises persons to advocate its own view of their meaning. It states that view as the issue upon which the voter has to make up his mind. Its power enables it to put forward for election candidates who are willing to identity themselves with its view. Since its opponents will do the same, the electorate, thereby, is enabled to vote as a mass and decision that would otherwise be chaotic, assumes some coherency and direction. What, at least, is certain, is that without parties there would be no means available to us of enlisting the popular decision in such a way as to secure solutions capable of being interpreted as politically satisfactory.”

The Commission then notes:

The question before the Commission is whether INC/AICC, BJP, CPI(M), CPI, NCP and BSP can be held to be Public Authorities u/s. 2(h) of the RTI Act. The complainants have adduced the following three principal grounds to persuade the Commission to hold that the aforesaid Political Parties are Public Authorities, viz:-

(i) Indirect substantial financing by the Central Government;

(ii) Performance of public duty by the Political Parties; and

(iii) Constitutional/legal provisions vesting Political Parties with rights and liabilities

Substantial financing of Political Parties by the Central Govt.

After considering various basis of state financing political parties, the Commission concluded, we are of the considered opinion that Central Government has contributed significantly to the indirect financing of Political Parties in-question.

On the issue of “substantially financed” again it noted:

Large tracts of land in prime areas of Delhi have been placed at the disposal of the Political Parties in-question at exceptionally low rates. Besides, huge Government accommodations have been placed at the disposal of Political Parties at hugely cheap rates thereby bestowing financial benefits on them. The Income Tax exemptions granted and the free air time on AIR and Doordarshan at the time of elections also has substantially contributed to the financing of the Political Parties by the Central Government. We have, therefore, no hesitation in concluding that INC/AICC, BJP, CPI(M), CPI, NCP and BSP have been substantially financed by the Central Government and, therefore, they are held to be the public authorities u/s. 2(h) of the RTI Act.

Performance of Public Duty

Political Parties are the unique institution of the modern constitutional State. These are essentially political institutions and are non-governmental. Their uniqueness lies in the fact that inspite of being non-governmental, they come to wield or directly or indirectly influence exercise of governmental power. It would be odd to argue that transparency is good for all State organs but not so good for Political Parties, which, in reality, control all the vital organs of the State.

The people of India must know the source of expenditure incurred by Political Parties and by the candidates in the process of election. These judicial pronouncements unmistakably commend progressively higher level of transparency in the functioning of Political Parties in general and their funding in particular.

We may also add that the preamble to the Constitution of India aims at securing to all its citizens: JUSTICE, social, economic and political; LIBERTY of thought, expression, belief, faith and worship; and EQUALITY of status and of opportunity. Coincidentally, the preamble of the RTI Act also aims to promote these principles in the form of transparency and accountability in the working of the every public authority. It also aims to create an ‘informed citizenry’ and to contain corruption and to hold government and their instrumentalities accountable to the governed. Needless to say, Political Parties are important political institutions and can play a critical role in heralding transparency in public life. Political Parties continuously perform public functions which define parameters of governance and socio-economic development in the country.

In view of the nature of public functions performed by Political Parties, we conclude that Political Parties in question are Public Authorities u/s. 2(h) of the RTI Act.

Constitutional/legal provisions vesting Political Parties with rights and liabilities


The appellants have also contended that Political Parties have constitutional and legal rights and liabilities and therefore, need to be held to be Public Authorities. The argument runs thus. Political parties are required to be registered with the ECI u/s. 29A of R.P. Act, 1951-a Central Legislation. An association or body gets the status of a political party on its registration. ECI awards symbols to Political Parties under the Election Symbols (Reservation and Allotment) Order, 1968, only after registration. The ECI calls for details of expenses made by Political Parties in the elections. Contributions of the value of Rs. 20,000/- and above received from any person or a Company by a Political Party are required to be intimated to ECI u/s. 29C of the R.P. Act. ECI is vested with superintendence, direction and control of elections under Article 324 of the Constitution. ECI is also vested with the authority to suspend or withdraw recognition of a political party in certain contingencies. More importantly, Political Parties can recommend disqualification of Members of the House in certain contingencies under the Tenth Schedule. The contention is that the aforesaid constitutional/statutory powers of Political Parties bring them under the ambit of section 2(h).

We find the above submissions quite compelling and unerringly pointing towards their character as public authority.

It may be recalled that the INC/AICC and the BJP have made a bland assertion that they are not Public Authorities under the RTI Act. CPI(M) has disclosed some information to the Commission regarding allotment of land to it by the Central Government on certain terms and conditions but has not conceded that it is a Public Authority u/s. 2(h) of the RTI Act. The contentions of the above parties have to be rejected in the light of findings recorded herein above.

Based on above discussion, the Commission concluded:

In view of the above discussion, we hold that INC, BJP, CPM, CPI, NCP and BSP have been substantially financed by the Central Government u/s. 2(h) (ii) of the RTI Act. The criticality of the role being played by these Political Parties in our democratic set up and the nature of duties performed by them also point towards their public character, bringing them under the ambit of section 2(h). The constitutional and legal provisions discussed herein above also point towards their character as public authorities.

The Presidents, General/Secretaries of the Political Parties are hereby directed to designate CPIOs and the Appellate Authorities at their headquarters in 6 weeks time. The CPIOs so appointed will respond to the RTI applications extracted in this order in 4 weeks time. Besides, the Presidents/General Secretaries of the above mentioned Political Parties are also directed to comply with the provisions of section 4(1) (b) of the RTI Act by way of making voluntary disclosures on the subjects mentioned in the said clause.

[Complaints: (1) Shri Subhash Chandra Aggarwal (2) Shri Anil Bairwal vs. Respondents 6 Political Parties as noted above: CIC/SM/C/2011/00138 &000838 decided on 3rd June 2013]

Note: Many paragraphs as above are reproduction of the order.

PART C: Information on & Around

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Anna Hazare’s event at MMRDA ground, Mumbai by ‘India against Corruption’ (IAC)

IAC could not rent out the ground as it is not a registered trust. It then rented through Arvind Kejriwal’s NGO. Now through RTI query comes to light that MMRDA battled no similar compunctions in handing out discounts to the city Congress committee, also an unregistered body. In an RTI reply to Mumbai-based businessman Viren Shah, the MMRDA admits that in 2009, the Mumbai Regional Congress Committee (MRCC) was given concessions to hold political rallies on MMRDA ground twice. State BJP President Sudhir Mungantiwar said, “This is favouritism. Just because the Congress is the ruling party, doesn’t mean it can use the government machinery to favour its own, and that too during elections. If the Congress is given a concession, other parties should also be shown such considerations.”

  • RTI query by 10-year-old girl

Aishwarya Parashar of Lucknow stumped PMO officials with her query on when and by what orders was the title of ‘Father of the Nation’ conferred on Mahatma Gandhi. Asked what prompted her to file the RTI application on Gandhi and send it to the PMO, Aishwarya said how the term ‘Father of the Nation’ had always “somehow excited and interested” her after she read it in her social studies text book.

The PMO replied that they had no such record whatsoever and directed the query to the Ministry of Home Affairs, which then referred the case to the National Archives of India (NAI).

The NAI”s Assistant Director and CPIO Jayprabha Ravindran also had no answers to the poser by the Lucknow girl, and responded with an invite to Aishwarya asking her to visit the Archives to find for herself if there were any such relevant papers.

[It is in public knowledge that Subhash Chandra Bose gave the title of Father of the Nation to Mahatma. He, in his address on Singapore Radio on July 6, 1944 had addressed Gandhi as Father of the Nation. Thereafter on April 28, 1947 Sarojini Naidu referred Gandhi with the same title at a conference.]

[Note: I have just talked with the mother of Aishwarya in Lucknow, an RTI Activist congratulating her for this great story. It is rarely that a minor furnishes the query under RTI. In Mumbai the episode has appeared in atleast in 3 newspapers.]

A thought of the month

Many of the areas which have actually seen systemic reforms have also seen the disappearance of corruption.

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PART B: RTI act , 2005

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Amendments to Maharashtra Right to Information Rules, 2005:

It is strange but true that Govt. of Maharashtra published in Gazette two notifications related to RTI dated 16-1-2012 and 31-1-2012 amending Maharashtra Right to Information Rules. The Govt. never informed citizens about it. It was only by chance, advocate Vinod Sampat saw that in March-end and communicated the same to all RTI activists.

All RTI activists are very much agitated. PCGT arranged a meeting with the Chief Minister (CM) where Mr. Julio Riberio, I and 7 other RTI activists invited by me met the CM on 10-4-2012. After 30 minutes dialogue, CM stated that he would look in to the matter. These notifications read as under:

The Maharashtra Right to Information (Amendment ) Rules , 2012, Dt. 16.1.2012

General Administration Department

Mantralaya, Mumbai 400032, dated the 16th January 2012

Notification

Maharashtra Right to Information Rules , 2005.

No. CRTI./2009/C.R.398/09/VI. – In exercise of the powers conferred by sub-sections (1) and (2) of section 27 of the Right to Information Act, 2005 (22 of 2005), the Government of Maharashtra is hereby pleased to make the following rules further to amend the Maharashtra Right to Information Rules, 2005, as follows, namely:-

1. These rules may be called the Maharashtra Right to Information (Amendment) Rules, 2012.

2. After rule 3 of the Maharashtra Right to Information Rules, 2005, the following rule shall be inserted, namely:-

“3A. Request relate only to single subject matter:- A request in writing for information under section 6 of the Act shall relate to one subject matter and it shall not ordinarily exceed one hundred and fifty words. If an applicant wishes to seek information on more than one subject matter, he shall make separate applications.

Provided that, in case the request made relates to more than one subject matter, the Public Information Officer may respond to the request relating to the first subject matter only and may advice the applicant to make a separate application for each of the other subject matters.’’

By order and in the name of the Governor of Maharashtra

Nandkumar Jantre
Secretary to Government

The Maharashtra Right to Information
(2nd Amendment ) Rules , 2012,
Dt. 13.1.2012

General Administration
Department

Mantralaya, Mumbai 400032, dated the 31st January 2012

Notification


Maharashtra Right to Information Rules , 2005.

No. CRTI. 2008/CR 356/VI. – In exercise of the powers conferred by sub-section 27 of the Right to Information Act, 2005 (22 of 2005), and of all other powers enabling in this behalf, the Government of Maharashtra is hereby pleased to make the following rules further to amend the Maharashtra Right to Information Rules, 2005, namely:-

(1) These rules may be called Maharastra Right to Information (2nd Amendment) Rule 2012

(2) After Rule 3A of the Maharastra Right to Information Rules, 2005, the following rules shall be added namely:

3B. Procedure for seeking inspection of records: If after having considered the application filed by the applicant for seeking inspection of record under the s.s (1) of section 6, the Public Information Officer find it appropriate, the applicant may be granted permission inspect of the record and if he grants such permission the Public Information Officer shall requisition the record desired by the applicant for perusal, from the concerned section of the Department and shall give the same to the applicant for inspection in his presence or in the presence of authorised representative, during the office hours. While inspecting such record, the applicant shall be allowed to use pencil only and the information desired by the applicant shall be noted by him by pencil only and if applicant bring any writing instruments other than pencil, he shall deposit the same with the Public Information Officer and thereafter, he shall be allowed to inspect the record. The applicant shall not make any marking on the record by the pencil he is allowed to use during inspection.

By order and in the name of the Governor of Maharashtra

Nandkumar Jantre
Secretary to Government

CIC feels RTI is dying in Maharashtra

Shailesh Gandhi, India’s feisty Central Information Commissioner and an early crusader for the Right To Information Act, believes that the RTI Act in Maharashtra is being pushed into a coma from where it may not be able to recover.

According to one version, pendency of cases pending as on 31-12-2011 is 22,000.

As per the report in Times of India acting State Information Commissioner Bhaskar Patil has stated ‘At the end of the 2011, about 1.07 lakh appeals were pending disposal’.

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PART D: Good Governance

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How Does One Shame the Shameless in India

It took a horrific rape to expose our politicians. Suddenly the netas of Delhi were stripped naked. And there was no place to hide. Years of strutting around pompously and grand standing during one crisis after another, provided zero protection to these people as enraged citizenry took to the streets crying out for better governance, sickened by the apathy and abuse of power.

Excerpts from the Address of Narendra Modi:

“Development won today,” “There was thinking in our politics thatgood economics is bad politics. It was as if good governance did not suit on politics.”

He quickly added that the people of the country too needed good governance and economic development of the kind seen in Gujarat.

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PART C: Information on & Around

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Pratibha Patil on Africa Trip

A month before she left office, the Centre spent a whopping Rs. 18.08 crore on the then president Pratibha Patil’s 10-day official visit to South Africa and Seychelles.

A reply to a RTI query has revealed that the Centre paid Rs. 16.38 crore to Air India for the special aircraft used for the two-nation trip from 29th April to 7th May last year.

The RTI reply revealed that an expenditure of Rs. 1.46 crore was incurred during her visit to the South African capital Pretoria, of which Rs. 71.82 lakh was spent on her local stay, Rs. 52.33 lakh on transportation and Rs. 22.12 lakh on other expenses. In Durban Rs. 23.55 lakh was spent on her visit, with Rs. 18 lakh going towards hotel stay and Rs. 5.27 lakh on transportation.

During her tenure at Rashtrapati Bhavan, Patil incurred expenses of Rs. 205 Crore on 12 trips to 22 countries.

School Principal

An RTI query filed by an activist might lead to the ouster of the current principal of a south Mumbai school. The reply to the RTI shows that the current principal of St Mary’s High School (ICSE) in Mazgaon is still at the post at 68 years of age while the state rules make it clear that school teaching staff and principal have to retire at the age of 58 years.

“I filed an RTI to check the status of 39 nonstate- board schools in the city, and found out that most are not following the rules as prescribed by the state education department,” said Nanasaheb Kute Patil, who filed the RTI query. The questions included whether the schools have all permissions prescribed by the government, annual fees demanded by them, age and qualification of teachers/principals, etc. “My aim is to make sure students don’t suffer because of school authorities,” he added. Following this, the south zone education department has sent a notice to the school asking them to remove the principal from his post.

Ajit Pawar

Ajit Pawar tendered his resignation on 25th September on moral grounds, after allegations of massive irregularities in irrigation projects in Vidharbha during his stint in previous cabinet as Water Resources minister. The governor accepted his resignation on 29th September.

From 30th September to 14th October, the state offered him facilities without any charge, according to the reply to an RTI application filed by Anil Galgali. A government resolution dated 12th October stated that after 14th October, Pawar was to be charged Rs. 5 a square foot if he wanted to avail of accommodation in the bungalow in Malabar Hill with an uninterrupted supply of all amenities – gas, water, power and telephone at state expenses. Officials from the general administration department said the rule/procedure was applicable on all cabinet ministers to allow them find new residences to ensure smooth transition from power.

But Galgali feels otherwise. “The high-voltage drama related to Pawar’s resignation was a well-planned political move,” he said. “If Pawar resigned from his ministerial post on moral grounds, then he should have shown the same morality and should have given back the Devgiri bungalow to the government. In the city’s slums, no one even gets a hut on rent for Rs. 5 a sq ft. If a government regulation (GR) states that outgoing ministers to be charged Rs. 5 a sq. ft for accommodation in a posh area like Malabar Hill, there is something fundamentally wrong and the GR must be amended.”

Security Firm

High-profile private security firm, NISA, with 45,000 guards on its payroll, has failed to file with Mumbai police with basic yet crucial details like how many of its personnel carry firearms. Yogesh Hilkar, a member of the NGO ‘Swabhiman’ run by Congress MLA Nitesh Narayan Rane, has uncovered these facts through a RTI plea.

“It is shocking that the company has not supplied details of all the armed men working with it. This is, potentially, a huge security threat,” when the Deputy Commissioner of Police, Headquarter (II) – who is responsible for maintaining a database of all the security agencies in the city and the Assistant Commissioner of Police from DN Nagar division, where NISA has its corporate office, have failed to furnish any details in this respect.

The company’s website (http://www.nisaeye.com/) notes that it is having 45,000 security personnel in its ranks, based at over 3,500 installations in India, and managed through about 45 branches.

 It claims that it’s been administering security to some of the biggest names in the corporate world since 1973.

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PART B: RTI Act , 2005

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The Government has decided to conduct a study on the implementation of the Right to Information Act to know the cost to the government in providing information to citizens under the UPA’s showpiece initiative and whether it has helped improve its “public perception about the extent of reduction in corruption”.

As per the RTI Act of 2005, only Rs. 10 fee is required to seek information from any public authority, but various government officials have complained of the huge cost they have to bear to divert resources and effort to answer RTI pleas.

The government has earlier got a study conducted from PricewaterhouseCoopers (PwC) in 2009 on the key issues and constraints in implementing the RTI Act. But, for the first time, the government is attempting to “calculate the cost to government in providing the formation under RTI”, as per the scope of work of the new study for which the Department of Personnel and Training has invited bids on 4th January. “To further strengthen the RTI regime, it has been decided to do a 360-degree study of the implementation of the RTI Act. The study will cover both states and the central government, across various sectors, and will cover public authorities at centre, state, district and panchayat level,” the bid document says. The scope of the study also involves assessing public perception about the extent of reduction in corruption. “Since the implementation of the Act there has been a significant and perceptible change in the level of transparency in the working of the governments at the Centre, state and the sub-state level,” the bid document claims. The scope of the study includes a study of trends in filing of RTI applications or appeals across the country. The government also wants an institution or organisation to study the use of the RTI Act by different types of applicants – in cases where applicant type is identifiable from the application. The study will assess the type of information sought and its classification into “personal information” sought by employees, procurement-related information sought “without any apparent objective/purpose” and general information sought without specificity across sections.

“The implementation of the provisions of the Act has to be studied from the perspective of both the demand and supply side. The approach to achieving the above is viewing RTI applications and their responses from the information seekers’ and providers’ angle,” the bid document says. The study will hence, determine the level of satisfaction among the people with functioning of the Act and the experience of public authorities at different levels in dealing with RTI applications and appeals, the document has mentioned.

[Extracts from ET dated 7-1-2013]

Good News for Mumbai RTI Applicants:

The office of the State Chief Information Commissioner will go paperless in less than a month. “If all goes well then our office will be paperless and we have developed a software for the purpose,” State Chief Information Commissioner, Ratnakar Gaikwad said.

Soon after his appointment in June, when Gaikwad visited the office of the Central Information Commissioner Shailesh Gandhi, he was surprised to see that there were no files on his table.

“I studied his working pattern and felt that it was possible to introduce a paperless office in Mumbai too,” he added. Gaikwad, who has set a target of disposing of 25 complaints/appeals daily, said no purpose will be served if information is not provided to an applicant as early as possible. “I am sure that we will be able to clear all the 2,098 appeals by March, 2013. Once the backlog is cleared, we will clear the appeals within 15days,” he said.

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PART D: good governance

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  •  E-governance:

E-governance equals good governance for the citizens of a country. The scale and ambition of the National e-Governance Plan (NeGP) is impressive. Some important projects that are at various stages of implementation include Passport Seva, India Post, income tax services, ESIC, setting up 2,50,000 common service centers (CSC) across 6,00,000 and more villages; the National Population Register (NPR) and the Unique Identification (UID) project. A state wide area network (SWAN) and state data centers (SDCs) are being set up to support the implementation of these and other projects. The government has also initiated ‘GI Cloud’ initiative to keep pace with technological advancements.

Making public services conveniently accessible to over 1.2 billion people in India spread across a vast geography is not an easy task, but is nonetheless vital for India’s continued growth. The success of e-governance initiatives is pegged in the timely implementation and smooth running. Technology is not a constant and it is important that policy guidelines and framework give scope for deployment of innovative IT infrastructure, like engineered system that can easily scale and adapt to the changing governance and public needs.

(Mr. Mahadeo P. Jaiswal in Transparency Review, Journal of Transparency Studies)

  • Ms Aruna Roy:

“The crisis in credibility today is at all levels of government. Effective implementation is as important as the legislations themselves. Our solutions do not lie in thoughts between one election and another but in addressing the lack of transparency and accountability in governance structures. My politics has always been to enhance the participation of people with in the democratic frameworks so that their voices are heard not just once in five years but every today.”

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PART C: Information on & Around

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  •  RTI AND & BMC:

The Brihanmumbai Municipal Corporation (BMC), the country’s largest civic body, has been fielding the most Right to Information (RTI) queries of any public institution across the state. Observers said this indicates the desire of Mumbai’s citizens to have greater participation in public affairs.

Following are the number of applications received by various P. As in Maharashtra and at BMC:

Year

State

 

BMC

%

 

 

 

 

 

2008

4.16L

 

46967

11.3%

2009

4.40L

 

59018

13.4%

 

 

 

 

 

2010

5.48L

 

72789

13.3%

2011

6.45L

 

90419

14.0%

2012

6.50L

plus*

1.02L

15.7%

*estimated

Activists said the BMC shouldn’t pride itself on getting such a high number of queries, as this indicates a lack of transparency. “This means that BMC has failed to put up information on its website suo moto. The BMC must understand that Mumbai is an active city, with greater citizens’ participation. So there are bound to be more RTI applications in the absence of data from the BMC,” said Shailesh Gandhi, former Central Information Commissioner and chairman of the Technical Advisory Committee (TAC) on RTI set up by the BMC.

Jinnah’s Speeches:

The Central Information Commission has asked the government to take a view on disclosure of two speeches made by Pakistan founder Mohammad Ali Jinnah during the pre-Independence era, which are in the archives of All India Radio and explain the reasons for withholding them if it intends to do so. Chief Information Commissioner Satyananda Mishra said more than 60 years after the country’s independence, the time has come when all concerned must decide what information relating to the pre-Independence period should be made available to public.

  •     Mr. Robert Vadra:

The PMO has turned down an RTI request seeking records of an affidavit it filled in connection with the probe into the alleged land deals made by Congress chief Sonia Gandhi’s son-in-law Robert Vadra on grounds of “confidentiality”.

Nutan Thakur of Lucknow, through an RTI application, wanted to know all the file notings related to the PMO affidavit placed before the HC. She also wanted to know about the action taken after her petition was received. In its first reply in April, the PMO claimed that since the matter is sub-judice, records cannot be disclosed. Thakur then argued that such details can only be withheld when there is an explicit order from the court.

Later, in a reply on June 6, the PMO said, “The office, keeping in view the SC ruling, has sought exemption as the matter has been treated as confidential.”

It quoted a Supreme Court order which said that exception u/s. 8(1)(e) (of the RTI Act) is available not only in regard to information held by a public authority in a fiduciary capacity, but also to any information given or made available by a public authority to anyone else for being held in a fiduciary capacity.

PART B: RTI Act, 2005

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Maharashtra Government has drafted Information Commission (Appeal Procedure) Rules, 2012. Same are in internal circulation but RTI Activists have managed to get the copy thereof.

These rules are complicated and all RTI Activists (signed by 89 RTI Activists) have opposed them and have made out a detailed letter to the Chief Minister with copies to

1) Shri Jayant Banthia, Chief Secretary, Govt. of Maharashtra

2) Principal Secretary – General Administration Dept.

3) Principal Secretary – Law and Judiciary Dept.

There are 11 sub-rules. Presently, there are no separate rules for appeal procedure. The Maharashtra Right to Information Rules contain one clause for Appeal Procedure (sub-rule 5).

Sub-rule 4 of the draft rules is the most objectionable. The same reads as under:

“Accompaniments to memorandum of appeal: – Every memorandum of appeal made to the Commission shall be accompanied by the following documents namely:-

(i) copy of application made to the State Public Information Officer;
(ii) self-attested copies of the order, letter, documents, or correspondence received from the State Public Information Officer and the first appellate authority;
(iii) copy of the first appeal;
(iv) copy of order if any, given by the first appellate authority against which the appeal is being preferred;
(v) date-wise list (Index) of the documents referred to in the appeal;
(vi) affidavit in the format given in Annexure “B” affixed with Rs. 2 court fee stamp;
(vii) any other document, as deemed fit by the appellant.” Objections raised by RTI Activists read as under:

The affidavit as referred to in rule 4 requires the RTI appellant to include additional personal details e.g. “name of father/husband, age – yrs., service /business”. This rule is a blatant violation of Section 6(2) of RTI Act 2005, which states, “An applicant making request for information shall not be required to give… any other personal details except those that may be necessary for contacting him.” Also, this affidavit only burdens the RTI appellant (who is quite often a common man, and not an experienced RTI activist) with a meaningless, difficult and costly legal procedure. Change needed: Provision for affidavit should be deleted. In compliance with the RTI Act, no extra personal details must be asked, other than the ones needed to contact him.

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Company Law

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Updates of Company Law from 15th April 2011 to 20th May 2011

The Ministry of Corporate Affairs as a part of the green initiative in Corporate Governance allowed paperless compliances by the companies. It has dispensed with physical sending of the Annual Report comprising of Balance Sheet, Profit and Loss Account, Director’s Report, Auditor’s Report to its members as required u/s.219 of the Act vide its General Circular No. 17/2011, dated 21- 4-2011. In lieu thereof it has clarified vide General Circular No. 18/2011, dated 29th April 2011, that the same are permitted to be sent by E-mail but subject to fulfilment of certain conditions.

Details available on:

http://www.mca.gov.in/Ministry/pdf/Circular_17- 2011_21apr2011.pdf  and

http://www.mca.gov.in/Ministry/pdf/Circular_18- 2011_29apr2011.pdf

The Ministry of Corporate Affairs has vide General Circular No. 19/2011, dated 2-5-2011, informed that the portal has a facility that allows the Registrar of Companies to mark a company as ‘marked as having management dispute based on the complaints received by them. This creates an alert and documents filed on the portal are not approved and remain in the registry as work in progress till it is demarked by the Registrar. The matters in which the Registrar of Companies shall use this facility is available on:

http://www.mca.gov.in/Ministry/pdf/Circular_19- 2011_02may2011.pdf

The Ministry of Corporate Affairs has vide General Circular No. 20/2011, dated 2-5-2011 has intimated regarding the E-form 32 pertaining to the particulars of appointment of directors, etc., and changes therein pursuant to section 303(2) of the Companies Act — filing of conflicting return by contesting parties.

Details about this Circular are available on

http://www.mca.gov.in/Ministry/pdf/Circular_20-2011 _02may2011.pdf

The Ministry of Corporate Affairs has vide Circular No. 21/2011, dated 2nd May 2011 given approval to the National Securities Depository Limited (NSDL) and Central Depository Services (India) Ltd. (CDSL), subject to the condition that they obtain a certificate from Standardisation Testing and Quality Certification (STQC) Directorate, New Delhi for providing electronic platform for electronic voting under the Companies Act, 1956. For details refer:

http://www.mca.gov.in/Ministry/pdf/Circular_21-2011 _02may2011.pdf

The Ministry of Corporate Affairs vide Circular No. 2/11, dated 8-2-2011, had granted a general exemption u/s. 212(8) to companies for attaching the balance sheets of subsidiaries to their annual reports, provided conditions specified therein were satisfied. The Ministry has clarified the same will apply to unlisted companies also in order to ensure transparency in those cases where balance sheets are not attached. For details refer:

http://www.mca.gov.in/Ministry/pdf/Circular_22-2011 _02may2011.pdf

The Ministry of Corporate Affairs has issued a corrigendum to Circular No. 9/2011, dated 31-3-2011 pertaining to Filing of Balance Sheet and Profit and Loss Account in eXtensible Business Reporting Language (XBRL) The following shall be substituted and read as under:

“(i) all Companies listed in India and their subsidiaries, having paid up capital of Rs.5 crores and above or a turnover of Rs.100 crores or above, excluding Banking Companies, Insurance Companies, Power Companies, NBFC’s and overseas subsidiaries of these Companies.”

For details refer:

http://www.mca.gov.in/Ministry/pdf/Circular_25- 2011_12may2011.pdf

The Ministry of Corporate Affairs vide General Circular No. 24/2011, dated 11-5- 2011 has clarified that when the beneficiary of the loan/guarantee/security is a Public Limited Company, approval of the Central Government needs to be sought only if provisions of sub-sections (d) and (e) of section 295 are attracted. For details refer:

http://www.mca.gov.in/Ministry/pdf/Circular_24- 2011_12may2011.pdf

The Ministry of Corporate Affairs has vide Circular No. 23/2011, dated 3rd May 2011 clarified that the effective date of the Companies (Particulars of Employees) Amendment Rules, 2011, as all Directors Reports u/s. 217 approved by the Board on or after 1-4-2011 irrespective of the accounting year, to which they relate. The MCA vide GSR 289(E) dated 31-3-2011 had raised the limit of employee’s salary to be disclosed in the Directors’ Report u/s. 217 to Rs.60 lac for the year or at Rs.5.00 lac per month in case of part of the year. For details refer:

http://www.mca.gov.in/Ministry/pdf/Circular_25- 2011_12may2011.pdf

The Central Government vide Notification GSR (E), dated 11-5-2011 made the following amendment in the Companies (Accounting Standards) Rules, 2006 called the Companies (Accounting Standards) Amendment Rules 201. In the said rules, in the Annexure under the heading ‘B. ACCOUNTING STANDARDS’, in the sub-heading ‘Accounting Standards (AS) 11 relating to ‘the Effects of Changes in Foreign Exchange Rates’, in Paragraph 46, for the words and figures “46. In respect of accounting periods commencing on or after 7th December 2006 and ending on or before 31st March 2011,” the following shall be substituted namely:

“46. In respect of accounting periods commencing on or after 7th December 2006 and ending on or before 31st March 2012.”

For details refer:

http://www.mca.gov.in/Ministry/notification/pdf/ Notification_G.S.R._11may2011.pdf

Business rules and taxonomy for XBRL reporting — Ministry of Corporate Affairs has informed that it is in process of finalising business rules and taxonomy for XBRL reporting. Final taxonomy and business rules would be circulated by 20th May, 2011. Stakeholders and companies have been requested not to buy accounting software before final business rules so as to avoid any inconvenience.

The Ministry of Corporate Affairs has been informed that Form 61 for normalising a company should not be filed by a dormant company which is desirous of getting struck off under the Easy Exit Scheme (EES), 2011. Such company should file Form EES, 2011 only. In case any charges are pending, such company is also allowed to file Form 17 for satisfaction of the same. Form 61 for normalising a company should be filed by only those dormant companies which are desirous of getting back to active status by filing the due annual returns and balance sheets.

CORRIGENDUM [F.No. 5/7/2011-CL V], dated 1-5-2011 — In exercise of the powers conferred by sub-section (1) of section 637 of the Companies Act, 1956, regarding the Delegation by Central Government of its powers and functions u/s. 25 of the Companies Act, 1956, namely, pertaining to the power to grant approval to dispense with ‘Limited’ in name of charitable or other company, to the Registrar of Companies, the Central Government has notified that it shall come into force w.e.f. 1st May, 2011.

Provided further that the applications received by the Regional Directors u/s. 25 of the Companies Act, 1956 during the period 17th March, 2011 till 30th April, 2011 will be dealt by the concerned Regional Directors.

The Central Government vide Order dated F. No. 52/26/CAB-2010, dated 2nd May 2011 has directed all companies to which the following Cost Accounting Records Rules apply and those which have an aggregate value of networth exceeding Rs.5 crore or aggregate value of turnover from sale or supply of all products or activities exceeding Rs.20 crore or those companies having listed securities whether in India or outside India to have their cost accounting records for each financial year commencing on or after 1st April 2011, audited by a Cost Auditor:

1.    Cost Accounting Records (Bulk Drugs) Rules, 1974
2.    Cost Accounting Records (Formulations) Rules, 1988
3.    Cost Accounting Records (Fertilisers) Rules, 1993
4.    Cost Accounting Records (Sugar) Rules, 1997
5.    Cost Accounting Records (Industrial Alcohol) Rules, 1997
6.    Cost Accounting Records (Electrical Industry) Rules, 2001
7.    Cost Accounting Records (Petroleum Industry) Rules, 2002
8.    Cost Accounting Records (Telecommunications) Rules, 2002.

Further the companies need to follow the revised procedure for appointment of Cost Auditor as given in the General Circular No. 15/2011 [52/2/CAB -2011], dated 11th April 2011.

The Central Government vide Order dated F. No. 52/26/CAB-2010, dated 3rd May 2011 for has directed all companies to which any of the following Cost Accounting Records Rules apply and those which have an aggregate value of turnover from sale or supply of all products or activities exceeding Rs.100 crore or those companies having listed securities whether in India or outside India to have their cost accounting records for each financial year commencing on or after 1st April 2011, audited by a Cost Auditor for:

(a)    Cost Accounting Records (Cement) Rules, 1997
(b)    Cost Accounting Records (Tyres and Tubes) Rules, 1967
(c)    Cost Accounting Records (Steel Plant) Rules, 1990
(d)    Cost Accounting Records (Steel Tubes and Pipes) Rules, 1984
(e)    Cost Accounting Records (Paper) Rules, 1975
(f)    Cost Accounting Records (Insecticides) Rules, 1993.

Further the companies need to follow the revised procedure for appointment of Cost Auditor as given in the General Circular No. 15/2011 [52/2/CAB -2011], dated 11th April 2011.

Appointment of Cost Auditor — The Cost Audit Branch under the Ministry of Corporate Affairs has revised the procedure to be followed by companies to appoint Cost Auditors u/s. 233B of the Companies Act, 1956. As per the revised procedure, the audit committee will be the first point of reference for appointment of the Cost Auditors. The Company will electronically file an application in E-form 23C within 90 days of the Commencement of the finan-cial year with the Central Government for approval and the same will deemed to be approved, unless the contrary is heard within 30 days.

For details refer:

http://www.mca.gov.in/Ministry/mcaoffices/CAB_ Circular_15-2011_11Apr2011.pdf

Participation by shareholders in the Gen-eral Meetings through electronic mode: The Ministry of Corporate Affairs has vide General Circular No. 27/2011, dated 20th May 2011 has clarified that shareholders of a company may participate in a gen-eral meeting through electronic mode i.e., video conference facility so long as other terms and conditions mentioned in the Circular are fulfilled.

For details refer:

http://www.mca.gov.in/Ministry/pdf/Circular_27-2011 _20may2011.pdf

Participation by Directors in meetings of Board/ Committee of Directors through electronic mode: The Ministry of Corporate Affairs has vide General Circular No. 28/2011, dated 20th May 2011 has clarified that directors of a
company may participate in a meeting/committee of directors through electronic mode i.e., video conference facility so long as other terms and conditions mentioned in the Circular are fulfilled.

For details refer:

http://www.mca.gov.in/Ministry/pdf/Circular_28-2011 _20may2011.pdf

Issue of Certificate by Digital Signature: The Ministry of Corporate Affairs has vide General Circular No. 29/2011, dated 20th May 2011 has decided that all certificates and standard let-ters issued by the Registrar of Companies will be issued electronically under the electronic signature of the Registrar. For details refer:

http://www.mca.gov.in/Ministry/pdf/Circular_29-2011 _20may2011.pdf

Ethics and u

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Shrikrishna (S) – My dear Arjun, how was your Diwali? Enjoyed?

Arjuna (A) – Yeah, it was cool. M-Vat date was extended. So I could relax.

S – But whenever I called, you were always out of your office.

A – Actually, my friend is contesting our Council’s elections. He used to take me along for canvassing.

S – Did you go for voting?

A – No. On the same day, we had a family gettogether. And after all, what is the use of voting!

S – Why? You should be concerned about who sits in your Council.

A – Our Council members do nothing except selfpromotion. They hardly care for the profession.

S – But then, that was all the more reason why all of you should have voted. It means you are yourself not serious about the profession. And then, what is the point in cursing the Council members? And have you enquired as to what they do in the council? I know a few of them who really slog for the members at the cost of their own practice?

A – I know, one should always vote. But the way the candidates were canvassing, it was nauseating. The less said the better!

S – Anyway! A few of my friends have received your Diwali greetings. But they said they don’t know you directly. How did they come on your mailing list?

A – While canvassing for my friend’s election, I thought, why not tap a few strangers for business. I took a few addresses from Satyabhama bhabhi.

S – But it is not permitted to write to such strangers. Don’t you know?

A – Why? What is objectionable about it? Other wise. How can you reach the potential client?

S – It is a misconduct for a professional.

A – This is too much! Whatever we do, you point out some misconduct. I think we should become Sanyasis. See, this is what our Council does. Then why should we vote for them?

S – Arey wah! Brilliant argument! Full of selfcontradictions.

A – Last time you told me, I should not do any business other than my practice. Now in practice, you are saying I should not even send greetings. Then how can I promote my practice?

S – See, your quality of service is your sole advertisement. Nothing else. You should build up reputation by your quality, sincerity and integrity.

A – Too idealistic! Remember, we are presently in Kaliyuga and not in Satyayuga. Who will listen to such orthodox thinking? In foreign countries, all this is permitted.

S – Are you sure about it?

A – I mean I have heard about it.

S – There were pressures on the Council too. But your Council in its wisdom rightly took a decision not to permit any form of advertisement. Unabashed publicity will ultimately work to your own detriment.

A – How?

S – Then resourceful firms will resort to rampant marketing. Can you afford to match that kind of spending?

A – That they are already doing. My friends are working there. They are fed up with the business targets.

S – To have such targets in itself is rather unethical. How can there be monetary targets for a professional firm?

A – Tell me then, what else is prohibited?

S – Just read clause 6 of the First Schedule. You should not solicit clients or professional work by circular, advertisement or even personal communication.

A – What if somebody does it for me?

S – No. The prohibition is for both direct as well as indirect publicity. Also, there is Clause 5 of the First schedule. It says, you cannot secure any work through the services of any person who is not your employee or partner. You cannot use any means which are not open to a CA.

A – Then how will a new entrant get any assignment?

S – You can approach another CA and request him for assignments. That is permitted. So also, you can respond to the tenders or enquiries issued by the users of professional services.

A – But why such restrictions?

S – Only then you can command respect. You can then be independent. Otherwise, you will be viewed by the society as a businessman. Remember, your profession is not a business.

A – It is a very slow process to build up confidence and reputation. Today’s world is so fast.

S – I agree. But your services are of personal and intimate nature. A satisfied client is the best advertisement. Quality alone will attract and retain clients; and not any other gimmick.

A – You mean to say, we should not advertise at all?

S – Not exactly. Certain ads are permitted – like changes in your partnerships; or dissolution; change of address or change in telephone numbers. But these should be in the nature of announcements. A bare statement of facts. Discretion should be used as to in which locality the concerned newspaper or magazine is circulated.

A – What about small classified ads?

S – That is also allowed. But only in the journal or newsletter of the Institute. Through this, you can give information about your services and seek work or even employment. It should contain only basic details like your name, address, phone, fax number and e-mail address.

A – But can we apply for empanelments?

S – Yes. But you cannot enquire whether any organisation is maintaining a panel. So also, having empanelled, you cannot make roving enquiries with such organisations.

A – I had heard that we cannot even quote our fees.

S – No. You can always quote your fees on enquiries being received or respond to tenders.

A – Some guys were after me, to have my name in their yellow-page directory. I refused since I was not very sure. Moreover, it was very expensive.

S – You can have it in the Directories published by Public Bodies or Private Bodies. But there are certain guidelines. Firstly, there should not be any extraordinary payment. It can be in the specified groups also. But it should be in your own town or city. It should be in normal print – but neither in bold font nor in a separate box.

A – Interesting. You mean, it should not be conspicuous.

S – That’s right. It should be in alphabetical or logical order. Not very prominent. No unreasonable payment. And any CA of that locality should be permitted to have his name in it. It cannot be exclusive for a few selected group of CAs. It can also be in electronic media.

A – What if you publish a book or an article?

S – You can mention your name but not the name of your firm. Even in your CVs when you deliver lectures, reference to your firm’s name should be avoided.

A – We started this discussion from my greeting cards. Can I not even mention the designation ‘chartered accountant’?

S – You can. In greeting cards or on invitation cards for marriages, other ceremonies, inauguration of your office, and so on. But remember, it should be sent only to your clients, relatives and friends!

A – I see CAs appearing on TVs, what should they do? Is it not their advertisement?

S – They have to use restraint. The details about themselves or of their firms should not be given in a manner that highlights their professional attainments.

A – And what about websites?

S – Websites are permitted; but I don’t have time to tell you so much in detail. Why don’t you refer to the detailed guidelines of your Council? There are as many as 22 points – about website!

A – In many journals, I see questions being answered by CAs. I feel, that is also a form of advertisement.

S – Yes. It is permitted. It can be in journals or magazines or newspapers or websites or TV channels. But remember, they should not mention anything beyond the fact that the person answering is a chartered accountant. No mention of his contact address; or his professional achievements.

A – My God! So many points involved! But I agree that I would not go to a doctor or a lawyer without any personal reference or recommendation. Certainly not by advertisement. It is futile for a professional.

S – Good. So better concentrate on quality. Growth will follow. More greeting cards will never fetch your clients.

A –  I agree; Bhagwan.

Om Shanti.

This is based on Clause nos (5) and (6) of First Schedule

Clause (5) – secure, either through the services of a person who is not an employee of such chartered accountant or who is not his partner or by means which are not open to a chartered accountant, any professional business:

Provided that nothing herein contained shall be construed as prohibiting any arrangement permitted in terms of items (2), (3) and (4) of this Part;

Clause (6) – solicits clients or professional work either directly or indirectly by circular, advertisement, personal communication or interview or by any other means:

Provided that nothing herein contained shall be construed as preventing or prohibiting –

(i)    any chartered accountant from applying or requesting for or inviting or securing professional work from another chartered accountant in practice; or
(ii)    a member from responding to tenders or enquiries issued by various users of professional services or organisations from time to time and securing professional work as a consequences.

Further, readers may also refer pages 135 to 153 of ICAI’s publication on Code of Ethics, January 2009 edition (reprinted in May 2009).

Ethics and u

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Gross negligence – Clause 7 of Part I of Second Schedule (contd.)

Series 5

Shrikrishna (S) –Arey Arjun, I am aware that this is the time of acute pressure of work for you. But why don’t you plan the work properly? Why such last minute rush every year?

Arjuna (A)– Hey Bhagwan! We are continuously into fire-fighting. There is no peaceful time at all! Every month, some deadline or the other. Our time-planning becomes a myth. The tax department also makes us dance to their tune any time.

S – Why? Don’t you have assistants? Why don’t you delegate some of the work?

A – Our trained articles always go on leave for exams exactly when we need them. Clients’ data is never ready when our staff is available.

S – Yours is a seasonal work due to common deadline for all tax-audits. So pressure is bound to be there. But in the Mahabharata War, it was fiercer. Death was constantly hovering around you. Still, you always looked fresh and cheerful.

A – True. But then, in that war, the fighting was only up to sunset. We could relax at nights. But in this war of tax-audits, we are fighting day and night.

S – But now everything is on computers. And there is e-filing. Then what is the problem?

A – This year, we need to upload our tax audit and other reports also. Upto last year, we were comfortable. After the returns were e-filed, we could peacefully complete the reports! Again, they are changing the forms and software every now and then. It is just chaotic!

S – You mean, fighting with a pen is more tiring than fighting with the bow and arrows. But, how do you ensure that the accounts you sign are alright?

A – Everything is Ram Bharose! Who has time to see all those things! Many of the audits we sign just like that! Now take these audits of other CA firms. All the partners of those firms are my good friends. Who has time to check their accounts? And it doesn’t look good also.

S – I remember, one Chartered Accountant signed another CA firm’s accounts in good faith like this. But unfortunately, in their scrutiny assessment, it was noticed that there was a small negative balance of cash on one day!

A – Oh God! Then what happened?

S – The tax officer simply forwarded it to your Institute as a case of negligence! Poor fellow suffered like anything.

A – But the regulation is too much. One friend of mine checked the accounts thoroughly. When that unit became NPA, the bank filed a complaint for negligence. It was revealed that he did not enquire about contingent liability. And there were many such liabilities of contingent nature. Taxation, labour litigations and what not!

S – Last time I told you, there is no end to the forms in which negligence takes place. Now, I am sure, all those company balance sheets you are signing now will carry a date of 31st August or 1st September. And I am also sure that in between, you must have sent e-mails about pending queries. That means you have created evidence of negligence against yourself!

A – No. You had once told me that a senior member of a very reputed firm was held guilty for such back-dating. So I take maximum care.

S – Good, another area of negligence is physical verification of fixed assets and stocks. Do you remember, in the Mahabharata, you used to take inventory of all weaponry—swords, bows, arrows, and also of horses, elephants, food grains and many other things. Are you doing it as an auditor?

A – We had studied all about stock-taking for the exam. In my friend’s enquiry of misconduct, there was no record at all of his ever visiting client’s office, or factory. No one from the auditor’s office ever went for stocks. And many items of machinery were not there. He used to just ‘rely on management’s certificate’.

S – I doubt whether he was obtaining any certificate. You people just mechanically mention in the report that you obtained certificates.

A – I agree. We are very much lax in taking the Management Representation Letter. I have heard stories of all such lapses being treated as misconduct.

S – Are you aware, nowadays, ROC’s inspection has been activated and there are many lapses in audit being reported? ROC is forwarding its observations directly to your Institute. And it is being treated as ‘information’ to initiate disciplinary proceedings.

A – Baap Re! I have heard many of my friends received notices from ROC’s office. They used to think that no one sees the audit reports of private limited companies. But what you say is alarming!

S – Another very important point—you people are under a sweet impression that if two directors sign the balance sheet, it is enough. But read section 215 of the Companies Act. It says what is necessary and important is the Board’s approval.

A – You had told me this once. But our friends sign in good faith, when even directors have not signed. And I know a case where the auditor signed it when only one director signed. Later on, the other director who was his brother, refused to sign the balance sheet. He wanted to take revenge on the CA since the CA had refused to take that director’s daughter as a ‘dummy’ article! So, one should never sign in good faith.

S – Quite strangely, many people argue that there was no mala fide intention. Remember, the Council is not concerned with your intentions but it wants to see whether you discharged the duties diligently. And quite often, those who claim to have clear conscience have a weak memory!

A – You started your philosophy again. Now I make a new year resolution from 1st October that I will prepare for next year’s audits right now!

S – That’s great! But let it not be the usual ‘New Year Resolution”!

Om Shanti !

The above dialogue between Shri Krishna and Arjuna is a continuation of earlier dialogues published in BCA Journals of May 2013 and June 2013. It deals with the terminologies ‘gross negligence’ and ‘lack of due diligence’ used in Clause (7) of Part I of Second Schedule. This is the most important and serious charge of misconduct. Discussion on this clause will continue.

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Company Law

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1) Commencement of Companies Act 2013:

The Companies Bill, 2012, received the President’s assent on 29th August 2013 and became the Companies Act, 2013 (new Act). The new Act was published in the Official Gazette on 30th August 2013. The same can be accessed at www.egazette.nic.in/WriteReadData/20 13/E_27_2013_425.pdf

Different sections of the new Act will become effective on different dates as may be appointed by the Central Government by notification in the Official Gazette. On 12th September 2013, the Ministry of Corporate Affairs (MCA) issued a Notification for commencement of 98 sections of the new Act, making them effective from 12th September 2013, the details of which areavailable on the MCA website.

The Ministry of Corporate Affairs has vide Circular 16/2013 Dated 18th September 2013 clarified that with effect from 12-9-2013, the relevant sections of the Companies Act 1956 which correspond to the 98 sections of the Companies Act 2013 brought into effect from 12-09-2013 have ceased to have effect from that date. The Circular can be accessed at www.mac.gov.in/pdf/ General_Circular_16_2013.pdf

The Ministry of Corporate Affairs has vide Circular No. 15 dated 13th September 2013, clarified that:

a) Section 2 (68) the Registrar of Companies may register those Memorandum and Articles of Association received till 11-09-2013 as per the definition clause of the Private Company under the Companies Act 1956 without referring to the definition of Private Company under the “said Act”.
b) Section 102 – Companies which have issued notices of General Meeting on or after 12-09-2013, the statement to be annexed to the Notice shall comply with additional requirements as prescribed in Section 102 of the Companies Act 2013.
c) Section 133 – Till the Standards of Accounting or any addendum thereto are prescribed by the Central Government, the existing Accounting Standards as notified under Companies Act 1956 shall continue to apply.
d) Section 180 – For notices for General Meeting issued prior to 12-09-2013, matters requiring special resolution under section 180 of the Companies Act 2013 as against ordinary resolution required under Companies Act 1956 may be passed in accordance to the requirement of Companies Act 1956.

2) Companies Removal of Difficulties Order 2013

The Ministry of Corporate Affairs has vide its Companies (Removal of Difficulties) Order 2013 dated 20th September 2013, notified for the transfer of all matters, proceedings or cases to the Tribunal constituted under Chapter XXVII of the Companies Act 2013, that the Board or Company Law Administration shall exercise the powers of the Tribunal under sections 24, 58 and 59 of the Act namely – section 24: Power of Securities and Exchange Board to regulate issue and transfer of securities, etc., and sections 58 and 59 pertaining to share capital and debentures: Refusal of registration and appeal against refusal and rectification of register of members respectively. The order can be accessed at

3) Relaxation of Last Date and Additional Fee in Filing E-Form 23C for Appointment of Cost Auditor

Vide general Circular No. 14/2013 dated 3rd September 2013, the Ministry of Corporate Affairs has decide to extend the last date of filing and to relax the additional fess applicable on e-form 23C up to 31st October 2013 i.e., the form can be filed up to 31st October 2013 or within 90 days of the commencement of a company’s financial year to which the appointment relates, whichever is later.

4) Draft Rules under the Companies Act 2013

The Ministry of Corporate Affairs has made the draft Rules for 16 chapters under the Companies Act 2013, live for public comments in the 1st phase to be received by 8th October 2013 and those in the 2nd Phase by 19th October 2013. The stakeholders can use the platform at www.ncbfeedback.mca.gov.in/ for providing their suggestions and comments on the draft rules.

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PART A : Decision of the H.C.

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The appellant, Mr. Arvind Kejriwal had questioned and challenged the interpretation of Section 11 of the RTI Act.

The Delhi High Court noted:

Section 11 of the Act has been given a marginal heading “third party information”. The term “third party” has been defined in section 2(n) of the Act to mean any other person including a “public authority” except the citizen who makes a request for information. Thus, a public authority which has the information or access to the information can be a third person. Section 8 of the Act provides exemption when information is not to be furnished or given. To interpret section 11, one has to keep in mind and also consider the exemptions provided in section 8(1) of the Act.

The core contention of the appellant is that the expression “relates to or has been supplied by a third party and has been treated as confidential by that third party” in section 11(1) of the Act should be read as “relates to and has been supplied by a third party and has been treated as confidential by the third party”. In other words, the word “or” used in section 11(1) should be read as “and”. In support of the said contention, it is submitted that purposive and not literal interpretation is required and if a restricted or narrow interpretation is given, then in all cases where information relates to third party, the Public Information Officer (“PIO” for short) would be required to issue notice to the third party or parties concerned. This may happen in most cases and it would make the Act unworkable. The appellant has pointed out instances like list of families below the poverty line, copy of contracts or bills, etc. between the public authorities and third parties, marks obtained in an exam, admissions or even information which is already in public domain would attract the procedure stipulated in section 11 unless the word “or” is read as “and”. It is submitted that in such cases, notices will have to be issued to third parties who may be spread all over India and this process itself may take days, if not months to be completed. Dealing with objections raised, in regards to the abovementioned procedure, would also make the Act tedious, result in procedural difficulties and delay furnishing of information and is therefore contrary to the legislative intent.

• The word “or” is normally disjunctive and the word “and” is conjunctive. However, there have been occasions when the Courts have interpreted and read them vice versa to give effect to the manifest intention of the Legislature as disclosed from the context. It is permissible to read word “or” as “and” and vice versa, if the legislative intent is clearly spelt out or some other part of the statute, requires such interpretation (See principles of Statutory Interpretation of G.P. Singh, 11th edition at page 455).

The Court then cited a number of Court decisions including the Supreme Court decisions in:

• People’s Union for Civil Liberties v. Union of India

• Central Board of Secondary Education v. Aditya Bandopadhyay.

The Court then noted and decided:

• Fair and just decision is the essence of natural justice. Issuance of notice and giving an opportunity to the third party serves a salutary purpose and ensures that there is a fair and just decision. In fact issue of notice to a third party may in cases curtail litigation and complications that may arise if information is furnished without hearing the third party concerned. Section 11 prescribes a fairly strict time schedule to ensure that the proceedings are not delayed.

• Thus, section 11(1) postulates two circumstances when the procedure has to be followed. Firstly when the information relates to a third party and can be prima facie regarded as confidential as it affects the right of privacy of the third party. The second situation is when information is provided and given by a third party to a public authority and prima facie the third party who has provided the information has treated and regarded the said information as confidential. The procedure given in section 11(1) applies to both the cases.

• The learned Single Judge in the impugned decision has dealt with and interpreted aspect of annual confidential reports and other factual aspects including the fact that inspection of several files has been allowed to the appellant and what the appellant is today seeking is merely the gradings. We would not like to comment on any of these aspects or issues as they were not specifically argued by either side. As noticed above, the matter has been remitted for fresh decision by the CIC. The observation made in the present appeal should not be construed as binding findings on any of the said aspects. We have interpreted section 11 of the Act and the observations made above are in that context. The appeals are accordingly disposed of.

[Arvind Kejriwal v. CPIO and Anr, Arvind Kejriwal v. Union of India: LPA Nos. 719/2010, 291 & 292/2011 decided on 30.09.2011 – (RTIR IV (2011) 368 (Delhi))]

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Laws and Business

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Fraudulent Transfers

Introduction

When a person has a debt and is not paying, then the creditor can approach the Court for an attachment of debtor’s property. If the debtor were to transfer his property with an intent to defraud the creditor, then the creditor would be left without any source to recover his debts. This act of transferring the property on the part of the debtor is known as ‘fraudulent transfer’. Various laws have dealt with this subject of fraudulent transfer by giving it different terminologies, such as voluntary transfer, private alienation, etc. Let us look at some of the important laws dealing with the subject of fraudulent transfer. In this age where several agencies, such as the Enforcement Directorate, are contemplating attaching properties of businessmen/companies the subject of fraudulent transfers assumes importance.

Meaning of fraud
Since we are examining the concept of a fraudulent transfer, let us first understand the meaning of the term fraud. U/s.25 of the Indian Penal Code, 1860, a person is said to do a thing fraudulently if he does so with an intent to defraud and not otherwise. Hence, to prove a charge of fraud, mens rea or a culpable state of mind is a must. The term defraud has not been defined in the Code. However, its general meaning presupposes two elements, deceit or intention to deceive and an injury to someone. The Supreme Court in the case of Dr. Vimla v. Delhi Administration, 1963 SCR Supl. (2) 585, has held as follows:

“. . . . . . the two adverbs, ‘dishonestly’ and ‘fraudulently’ are used alternatively, indicating thereby that one excludes the other. That means they are not tautological and must be given different meanings . . . . . . . . The word ‘defraud’ includes an element of deceit. Deceit is not an ingredient of the definition of the word ‘dishonestly’, while it is an important ingredient of the definition of the word ‘fraudulently’. The former involves a pecuniary or economic gain or loss, while the latter by construction excludes that element. Further the juxtaposition of the two expressions ‘dishonestly’ and ‘fraudulently’ used in the various sections of the Code indicates their close affinity and therefore the definition of one may give colour to the other. To illustrate, in the definition of ‘dishonestly’, wrongful gain or wrongful loss is necessary enough. So too, if the expression ‘fraudulently’ were to be held to involve the element of injury to the person or persons deceived, it would be reasonable to assume that the injury should be something other than pecuniary or economic loss. Though almost always an advantage to one causes loss to another and vice versa, it need not necessarily be so. Should we hold that the concept of ‘fraud’ would include not only deceit but also some injury to the person deceived, it would be appropriate to hold by analogy drawn from the definition of ‘dishonestly’ that to satisfy the definition of ‘fraudulently’ it would be enough if there was a non-economic advantage to the deceiver or a non-economic loss to the deceived. Both need not co-exist. . . . . . ”

In S. P. Changalvaraya Naidu v. Jagannath, 1994 (1) SCC 1, it was held that a fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another’s loss. It is a cheating intended to get an advantage. Fraud as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which includes the other person or authority to take a definite determinative stand as a response to the conduct of the former either by word or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and injury inures therefrom, although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous.

Fraud is a conduct either by letter or word, which induces the other person or authority to take a definite determinative stand as a response to the conduct of the former either by word or letter — State of Andhra Pradesh v. T. Suryachandra Rao, Appeal (Civil) 4461 of 2005 (SC).

The Supreme Court in Ram Chandra Singh v. Savitri Devi, 2003 (8) SCC 319, held that it is well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations which he knows to be false, and injury ensues from the same, although the motive from which the representations proceeded may not have been bad. In an ‘action of deceit’ the plaintiff must prove actual fraud. Fraud is proved when it is shown that a false representation has been made knowingly, or without belief in its truth, or recklessly, without caring whether it be true or false.

In Ram Preeti Yadav v. U.P. Board of High School, JT 2003 (Supp. 1) SC 25 it was held that fraud is a conduct either by letter or word, which induces the other person, or authority to take a definite determinative stand as a response to the conduct of former either by word or letter. Although negligence is not fraud, but it can be evidence on fraud.

Civil Procedure Code The Civil Procedure Code, 1908 (‘the Code’) deals with the provisions relating to a Court decree and its execution. In case of a decree from a Court, the Court may require any person to pay any sum to the decree holder (or the plaintiff). In case the defendant fails to do so, the Court can, in execution of its decree, attach the movable and immovable properties of the defendant and recover the amount due by disposal of these assets. According to the CPC, an attachment prevents a private-transfer and no person can benefit from a subsequent transfer of the attached property.

Section 64 of the Code provides for such private alienation. Once a property has been attached, any private alienation of such property by private transfer or delivery and any payment to the judgment debtor of any debt, dividend, etc., contrary to such attachment shall be void as against all claims enforceable under the attachment. Section 64 applies whether the property stands in the name of the judgment debtor or any other person who is a name lender, i.e., benami property — Pradyut Shah, AIR 1979 Bom. 166. However, if the transfer is by an operation of law or pursuant to a Court order, then section 64 does not apply. For instance, a sale consequent to a later attachment would prevail even if there was an earlier attachment on the sale date — Rukmani v. Ram AIR, 1942 Nag. 36. It only covers private transfers, such as, voluntary sales, gifts, mortgages. It may be noted that the private transfers are not void ab initio, but only void as against all claims enforceable under the attachment. There is a difference of opinion amongst various Courts as to whether or not any private transfer after attachment but in pursuance of a contract of sale executed prior to attachment is covered by section 64. Various decisions have held that in order that an attachment renders a subsequent alienation as void u/s.64, the attachment must follow the due process laid down under the Code, e.g., Rules 41 to 57 of Order 21.


Indian Penal Code, 1860

Under the Indian Penal Code (IPC) if the following four conditions are satisfied:

(a)    the accused removes, conceals, delivers the property or transfers it or causes to transfer it to someone;

(b)    the above is done without adequate consideration;

(c)    the intention of the accused was to prevent the distribution of that property among his creditors or some other person’s creditors; and

(d)    he must act in a dishonest or fraudulent manner then the accused shall be punished with imprisonment of a term up to 2 years and/or fine.

Similarly, if a person fraudulently or dishonestly prevents any debt which is due to him from being made available to him for the payment of his debts, then the person shall be punished with imprisonment of a term up to 2 years and/ or fine. Thus, this provision seeks to prevent debtors from dodging their dues by preventing receipts from accruing to themselves.

A dishonest or fraudulent execution of an instrument which purports to transfer/charge any property and which contains any false statement with respect to the consideration for such transfer/ charge or to the beneficiaries of such transfer/charge is punishable with imprisonment of a term up to 2 years and/or fine. Benami conveyances would be covered within the scope of this provision.

A person who dishonestly or fraudulently conceals or removes property belonging to himself/ some other person or dishonestly releases any demand or claim to which he is entitled shall be punished with imprisonment of a term up to 2 years and/or fine.

We have already examined the meaning of the term fraud. Let us now see the meaning of the term ‘dishonestly’. Section 24 of the IPC defines ‘dishonesty’ as doing anything with the intention of causing wrongful gain to one person or wrongful loss to another person. Wrongful gain is defined as the gain by unlawful means of property to which the person gaining is not legally entitled. Conversely, wrongful loss means the loss by unlawful means of property to which the person losing it is legally entitled. A person wrongfully gains when he retains/acquires wrongfully. A person loses wrongfully when he is wrongfully kept out or deprived of property. Thus, in order to attract a charge of dishonesty, wrongful gain or loss is a must.

Presidency-Towns Insolvency Act

The Presidency-Towns Insolvency Act, 1909 deals with the law relating to insolvency as applicable in the cities of Mumbai, Chennai and Kolkata. Section 56 of this Act enunciates the doctrine of Fraudulent Preference. Every transfer by a debtor of his property, every payment made, every obligation incurred and every judicial proceeding taken or suffered by him is fraudulent and void against the Official Assignee, if all the following conditions are satisfied:

(i)    at the time of the transaction, the debtor was unable to pay his debts

(ii)    the transfer must be in favour of a creditor

(iii)    the transfer must be with a view to give a preference to that creditor over other creditors

(iv)    the creditor has in fact been preferred over other creditors

(v)    the debtor must have entered into the transaction without any compulsion

(vi)    the debtor must be adjudged insolvent on a petition presented within 3 months after the date of the transaction.

However, the rights of a bona fide person acquiring a title in good faith and for valuable consideration are not affected by the above doctrine.

Section 57 of the Act provides for the protection of bona fide transactions. Subject to the provisions relating to fraudulent preferences, in case of an insolvency, the following would not be affected:

(i)    any payment by the insolvent to any of his creditors

(ii)    any payment or delivery to the insolvent

(iii)    any transfer for valuable consideration; or

(iv)    any contract or dealing by or with the insolvent for valuable consideration.

However, the transaction should take place before the date of the order of adjudication and that person with whom such transaction takes place does not have notice of any insolvency petition.

Transfer of Property Act

The Transfer of Property Act, 1882 also deals with the concept of a fraudulent transfer. According to section 53, every transfer of immovable property made with the intent of defeating or defrauding the creditors of the transferor shall be voidable at the option of any creditor who is defeated or delayed. Thus, the following important conditions must be satisfied:

(i)    The transfer must be of an immovable property. Unlike the previous two Acts, this section only applies to immovable property. What is an immovable property would be a matter of fact and unless it is a clear-cut case of classic land and building, it would have to be ascertained on a case-by-case basis.

(ii)    Section 5 of this Act defines a transfer of property to mean any act by which a living person conveys present or future property to one or more other living persons. The expression living person has been defined to include a company, AOP and BOI.

(iii)    The transfer must be made with an intention to delay or defraud one’s creditors. Hence, mens rea or a culpable state of mind on the part of the transferor must be demonstrated. Unless the same is proved, section 53 would not apply. Further, if the intention is to give preference to one creditor over another, then this section would not apply — Sharp v. Jackson, (1899) AC 19. The transfer must be to delay the creditors.

(iv)    The transfer is not void ab initio. It only becomes voidable at the creditor’s option. If the creditor sues to avoid the transfer, then he must do so on behalf of all the creditors. The onus of proving that the transfer was made with an intent to delay or defeat creditors lies on the creditors — Daulat Ram v. Ghulam Fatima, (1926) 89 IC 953. However, once the fraud is established, then the onus of proving good faith shifts to the debtor — Amarchand v. Gokul, (1903) 5 Bom LR 142.

However, section 53 does not impair the rights of a buyer in good faith and for consideration. Hence, if a buyer has purchased immovable property without notice of the intention on the part of the debtor to delay his creditors and he has paid good consideration for the same, then his title is not impacted by section 53. This section is subject to the law of insolvency.

Companies Act

U/s.531 of the Companies Act, 1956, any transfer of property, whether movable or immovable, delivery of goods, payment, execution, etc., taken or done by or against a company within 6 months before the commencement of winding-up of a company, is invalid and is treated as a fraudulent preference of the creditors if the same would, in the case of an individual’s insolvency petition, be deemed to be a fraudulent preference. The preference is fraudulent when the substantial and dominant motive was to prefer one creditor or particular creditors — Mohandas v. Tikamdas, (1917) 37 IC 250. It is important to prove that both the transferor and transferee had a common intent to defraud creditors and if the transaction was made in good faith for valuable consideration then the same is not void — Official Liquidator v. MD, AP State Financial Corp., 115 Comp. Cases 284 (AP).

Similarly u/s.531A, such transfer made by a company is void against the liquidator if it is made within one year before the presentation of a winding- up petition. This however, excludes a transfer in its ordinary course of business or in favour of a purchaser in good faith and for valuable consideration. The person who has been fraudulently preferred would be subject to the same rights and liabilities as if he had personally agreed to become a surety for the company’s debt. The extent of his liability is equal to lesser of the mortgage or charge on the property or the value of his interest. The value of his interest is to be determined as on the date of the transaction which constitutes the fraudulent preference as if the interest was free of all encumbrances other than those to which the mortgage or charge for the company’s debt was then subject. This section even applies to transfers made by book entries — Jayanti Bai v. Popular Bank Ltd., 36 Comp. Cases (Ker.).

Income-tax Act

Section 281 of the Act provides that where during the pendency of any tax proceedings or after the completion of the same but before the service of a tax recovery notice, any assessee creates a charge or transfers any of his assets in favour of any other person, then such a charge/transfer would be void as against any tax claim. However, this section does not apply where the transfer is made for adequate consideration and without notice of any previous proceedings/tax demand or with the prior approval of the Assessing Officer. This section applies to any asset being land, building, machinery, plant, securities, bank deposits, provided the same are not stock-in-trade of the assessee. The Bombay High Court has, in the case of Twinstar Holdings Ltd. 260 ITR 6 (Bom.) held that where shares held as investment were converted into stock-in-trade and the only purpose of such conversion was to avoid attachment of the shares by the Department to recover tax, the transfer was void.

Conclusion

Although the legal position appears quiet straight-forward on this issue, its practical implementation is a different ballgame altogether. Whether or not a particular transfer is a fraudulent transfer is a matter of fact, circumstances and evidence. One would have to make a deep study of the evidence before arriving at any conclusion. For instance, whether a settlement by a person on a trust amounts to a fraudulent transfer or is an act of valid asset protection, needs to be carefully scrutinised.

Ethics and u

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Bhagwan Shrikrishna

 (S) — Hey you Arjuna, why are you looking so weary? In that Mahabharata War, you were so brave! What’s the matter? Arjuna
(A) — That war was much simpler. Either kill or get killed. Now as a CA, I am dying every day.

S — Where is your bravery gone? Where is that old uprightness? Why are you so depressed?

A — I don’t get time for regular exercise. Just sitting before the computer whole day. My spine is bent like my bow!

S — Are you still having a spine? Err-sorry — a bow?

 A — What do you mean? I wonder why people believe that CAs don’t have a spine! Anyway, you wanted to tell me something about ethics. Is it a long list?

S — No dear. Only a few rules of fair practice as a professional.

A — That reminds me. They say everything is fair in war. That made the war simpler. In practice, they expect us to be fair. True and fair! That is the difficulty. How can a thing be true as well as fair at the same time?

S — Yes I agree there are dilemmas. But in all fairness, one has to be true.

A — Actually, I left my bow and arrows and took up this pen. I separated from Bhima, Nakula and Sahadeva. Somehow, I was holding on to Dharma. But many situations compel me to go away even from Dharma. I feel insecure.

S — You are right. Remember, Dharma alone will protect you. Dharma is Yudhishthira — ‘yudhi’ means ‘in a war’. ‘Sthira’ means stable, unshaken. Dharma is nothing but ethics. That will make you stable in war-like situations.

 A — Our Council does not allow us any freedom. It thrusts those meaningless ethics on us. Even a little deviation, and there is punishment. I have lost my independence.

S — Arjuna, independence is always very costly. Its cost is nothing but ‘eternal vigilance’. Independence does not mean freedom of behaviour.

A — Then what it is?

S — It is freedom from fear. Fearlessness comes not merely by sword but by shield. Ethics is that shield. It is not a burden.

A — But if I do something wrong in the interest of my client, why should the Council punish me? How does a small wrong matter?

S — Remember dear. If you compromise on your principles, a client may pay you money but will never give you respect. Not only that, but he will treat all CAs alike — amenable to temptation — and willing to compromise.

 A — Oh, that will spoil the image of whole profession!

S — Precisely. The Council is more concerned with credibility of the profession. Therefore, the punishment to the wrongdoer. You remember, whenever Gopikas complained to my mother Yashoda, she used to scold me, beat me; and used to tie me up. Mother wants to uphold reputation of the child and also of the family.

A — But many times, complainants themselves are wrongdoers. They are even fraudsters. Why does our Council not do anything to them?

S — The Council is there to protect you and the profession. It just wants to see that its members behave properly. The Council is not so much concerned with the behavior of others.

A — This is not fair. So then the others go scotfree?

S — No. There are other forums to deal with such people. The Council only expects that you don’t become a party to the misdeeds.

 A — But if nobody is adversely affected by my mistake, then how and why is the Council concerned? S — For example?

A — I certify incorrect accounts of a charitable trust, its income is exempt any way!

S — Do you mean tax is the sole purpose of certifying the accounts? I think the tax consultant in you is overpowering the auditor in you.

A — But then tell me who else is affected?

S — All the users of your accounts, Members, beneficiaries of the Trust, Regulators, Lenders . . . . .

A — See, if anybody suffers due to my wrong certificate, I will compensate him. Or what if he pardons me on his own? Then what’s the issue? Unnecessary harassment! Where is the loss then?

S — Loss of respect, my dear! Loss of credibility. The sole foundation of your profession is its credibility. Can you leave a thief merely because he compensates you for the theft? Was it the practice in your Pandava’s Kingdom?

A — No. If a wrongdoer is let off, he will do more wrong. And that would tarnish the king’s image if he lets of a thief.

S — Unfortunately, though Government today does not understand this, the Council is very much conscious about it. Moreover it is like Paap (Sin) and Punnya (Bliss). The debit cannot be adjusted against credit. You cannot undo misconduct by doing good. Good may or may not be rewarded; but bad is punished. Same like Adhyatma (Spiritualism).

A — Many times, there are mischievous complaints. There is dispute between two parties and the auditor is made a scapegoat! He is victimised only to exert pressure on other party.

S — That is precisely why your work should be perfect in absolute sense — regardless of whether it suits someone or not. See, you were asking about the Trust. There could be dispute among Trustees or among members. And you would become vulnerable!

A — And what if the complainant wants to withdraw the complaint later on?

 S — See, this is a quasi-criminal proceeding. And so he cannot withdraw the complaint as a matter of right. That can be done only with the consent of the Board of Discipline or the Disciplinary Committee.

A — I think we were happy and at peace in the exile!

S — But man has destroyed jungles and has become junglee himself. Money has assumed supreme position. Society is looking upon you CAs to bring monetary discipline. But if you CAs prefer to be a part of the indiscipline, who will save the mankind ?

A — I am realising a little bit. You mean to say that we Pandavas should not become one like Kauravas!

S — You said it! Om Shanti! Important principles

The above dialogue between Arjuna and Shrikrishna is intended to bring out important principles in disciplinary proceedings. We can summarise the principles as follows :

1. The complainant need not come with clean hands. The Council is not concerned with, nor has jurisdiction over the complainant’s behaviour or conduct.

2. The fact whether the complainant or anybody else is aggrieved or has suffered any loss or not is of no consequence while holding a member guilty or otherwise.

3. It is of no avail even if the member compensates the complainant for any losses. It does not undo the misconduct.

 4. Even if the complainant pardons the respondent member, or offers to withdraw the complaint, or does not pursue it, or remains absent at the hearing, the member is not automatically absolved. The Council steps into the shoes of the complainant and takes it to the logical conclusion.

5. Complaint, once lodged, cannot ordinarily be withdrawn except with the permission of the Board of Discipline or the Disciplinary Committee [Rule 6 of The Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of cases) Rules, 2007].

6. Misconduct includes both professional misconduct as well as ‘other misconduct’. The latter is too wide; and goes beyond the ‘Code’. — i.e., beyond the items listed in the Schedules. It implies a behaviour unbecoming of a professional.

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Laws and Business

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Introduction
In the commercial and legal world, one often comes across a transaction being executed through a power-ofattorney. It is a means by which a person who is unable to be physically present to carry out a task or a transaction, does so through another person. While most of us may be conversant with the concept of a power-of-attorney, it would be interesting to note that there is a separate Act, i.e., the Powersof- Attorney Act, 1882 (Act), which governs the law relating to powers-of-attorney. In addition, certain other statutes also regulate the law in relation to powers-of-attorney. Let us have a brief overview of the law in this respect.

Meaning
The Act defines a power-of-attorney to include any instrument empowering a specified person to act for and in the name of the person executing it. Thus, there is an inclusive definition of the term. The following are the key features emanating from the definition:

(a) It is an instrument;
(b) The instrument must be executed by some person, known as the donor of the power;
(c) It must empower a person specified in the instrument, known as the donee of the power; and
(d) The donee must be empowered to act for and in the name of the donor.

The Bombay Stamp Act, 1958, defines a power-of-attorney includes any instrument empowering a specified person to act for and in the name of the person executing it and includes an instrument by which a person, not being a lawyer, is authorised to appear on behalf of any party in any proceeding before any Court, Tribunal or authority. However, it does not include a vakalatnama given to an advocate which is stamped with the court-fees.

Effect

Under section 2 of the Act, if the donee (holder of power-of-attorney), based on his discretion:

(a) executes any instrument or does any act;
(b) under his own name, signature and seal, if seal is required;
(c) but under the ambit of the authority conferred on him by the donor of the power-of-attorney; then such instrument or act would be treated in law as if it had been execution or done in the name, signature and seal of the donor. The legal effect of the power is that the acts of the donee, when done under proper authority, are treated as if they were done by the donor. This is an important provision of the Act, which gives legal sanctity to all acts done by a donee on behalf of the donor.

Thus, the position of the donee-donor is similar to that of an agent and his principal. A power-of-attorney’s origins may be traced to the legal maxim qui facit alium facit per se, i.e., what one can do directly he can also do through an agent. But one crucial difference as compared with an agent-principal relationship is that an agent must sign in the principal’s name while the power-of-attorney holder signs his own name.

The object of the aforesaid section and of the Act is to effectuate instruments executed by an agent, but not in accordance with the rule of the Contract Act. It does not confer on a person a right to act through an agent. It presupposes that the agent has the authority to act on behalf of the principal and protects acts done by him in exercise of that authority but in the agent’s own name — Rao Bahadur Ravulu Subba Rao v. CIT, 30 ITR 163 (SC).

In the case of Suraj Lamp & Industries P. Ltd. v. State of Haryana, (2012) 1 SCC 656, the Supreme Court has held that a power-of-attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property. The power-of-attorney is creation of an agency whereby the grantor authorises the grantee to do the acts specified therein, on behalf of the grantor, which when executed will be binding on the grantor as if done by him. It is revocable or terminable at any time unless it is made irrevocable in a manner known to law. Even an irrevocable attorney does not have the effect of transferring title to the grantee.

In State of Rajasthan v. Basant Nehata, (2005) 12 SCC 77, the Apex Court held that a grant of power-of-attorney is essentially governed by the Contract Act. By reason of a deed of power-of-attorney, an agent is formally appointed to act for the principal in one transaction or a series of transactions or to manage the affairs of the principal generally conferring necessary authority upon another person. A deed of power-of-attorney is executed by the principal in favour of the agent. The agent derives a right to use his name and all acts, deeds and things done by him and subject to the limitations contained in the said deed, the same shall be read as if done by the donor. A power-of-attorney is, as is well known, a document of convenience.

Execution of a power-of-attorney in terms of the provisions of the Contract Act as also the Powers of- Attorney Act is valid. The donee in exercise of his power under such power-of-attorney only acts in place of the donor subject of course to the powers granted to him by reason thereof. He cannot use the power-of-attorney for his own benefit. He acts in a fiduciary capacity. Any act of infidelity or breach of trust is a matter between the donor and the donee and does not affect an outsider.

Revocation of a power

A power-of-attorney can be terminated or cancelled by the principal by revoking his authority or by the power-of-attorney holder renouncing his authority. A power-of-attorney is revoked by implication in the following circumstances:

(a) The donor expressly revokes all powers given by him;
(b) The donor dies;
(c) The donor becomes of unsound mind; or
(d) The donor becomes insolvent.

In any of the above situations, the power comes to an end. In Prahlad v. Laddevi, AIR 2007 Raj 166 it was held that a power comes to an end on the demise of the donor. Any acts done by the donee thereafter in pursuance of such a power are invalid.

However, if the donee not being aware of the above situations, does any act or makes any payment in good faith pursuant to the power-of-attorney, then he shall not be liable in respect of such payment or act. But any person interested in the money so paid shall continue to have a right against the recipient and he will have the remedy against the recipient as he would have had against the payer, if the payment had not been made by him.

According to the Indian Contract Act where the agent has himself an interest in the property which forms the subject matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest. Thus, in cases where the power-of-attorney is coupled with interest it is irrevocable. For instance, A gives authority to B to sell A’s land, and to pay himself out of the proceeds, the debts due to him from A. This power cannot be revoked by A. In State of Rajasthan v. Basant Nehata, (2005) 12 SCC 77, the Apex Court held that except in cases where power-of-attorney is coupled with interest, it is revocable.

Evidence of power-of-attorney

Any power-of-attorney which has been verified by an affidavit, statutory declaration, notarisation, etc., and which has been deposited with a High Court or District Court shall be treated as sufficient evidence of the contents of the instrument.

The Indian Evidence Act, 1872 provides that any Court shall presume that every power-of-attorney executed before and authenticated by a Notary Public, Court, Judge, Magistrate, Indian Consul or Vice-Consul was so executed and authenticated. This is the reason why powers-of-attorney are notarised. The presumption about the authenticity is a mandatory provision. The Delhi High Court in the case of Kamala Rani v. Texamco Ltd., AIR 2007 Del. 147 has held that the onus lies on the other side to prove that the power-of-attorney is not genuine.

 A donee of a power-of-attorney cannot give evidence in Court on behalf of the donor — Rajiv Gadkari v. Smt. Nilangi Gadkari, AIR 2010 (NOC) 538 (Bom.) 2010. The Patna High Court in the case of Rajmuni Devi v. Shyama Devi, (2007) 9 RC 309 (SC) has held that a power-of-attorney holder cannot depose on behalf of the donor, but can appear as a witness on behalf of the principal.

A power-of-attorney holder cannot depose and be cross-examined in Court on matters which only the principal is expected to have knowledge of — Janki V. Bhojwani v. IndusInd Bank Ltd., 2005 Vol. 107 Bom. LR 28 (SC).

Power-of-attorney of married woman

A married woman who is not a minor has powers, as if she were unmarried to appoint an attorney on her behalf.

Can a donee sign under Income-tax Act for donor?

If the Income-tax Act or the rules made thereunder specifically require the personal signature of the assessee, then the same cannot be delegated by way of a power-of-attorney. This is would be a circumcision of the field of operation of the Power-of-Attorney Act and such a curtailment of powers is not ultra vires — Rao Bahadur Ravulu Subba Rao v. CIT, 30 ITR 163 (SC). All that section 2 of the Act provides is that there can be a delegation of powers and the manner of doing so. However, if any other enactment requires a personal presence or signature, then the two Acts operate in separate fields. The Court laid down this principle under the 1922 Income-Tax Act in relation to signing an ap-plication for registration of a firm. The rules required the partner to personally sign the application. It may be noted that Rule 22(5) now expressly permits such an application to be signed by a power-of-attorney holder in the case of a person absent from India.

Stamp Duty

Under the Bombay Stamp Act, 1958, a power-of-attorney is liable to be stamped as follows:

(a)    When executed for the sole purpose of registering documents — Rs.100. Most of the builders give a power-of-attorney in favour of their employees for registering the agreements for sale/flat ownership agreements with buyers.

(b)    When authorising a person to act in a transaction — Rs.100.

(c)    When given without consideration authorising specified relatives to sell or transfer immovable property — Rs.500.

(d)    When any person other than cases covered by (c) above authorising to sell or transfer immovable property — the same duty as on a conveyance on the market value of the immovable property, e.g., 5% on the stamp duty ready-reckoner value. One of the ways to avoid payment of stamp duty was to give a power-of-attorney to a person authorising him to sell the property and receive consideration equal to the market value of the property for such a power. This method is very prevalent in Northern India. In 2008, the Bombay Stamp Act was amended to increase the duty on such a power from 1% to 5%. Thus, now such powers are at par with a conveyance of immovable property.

A power-of-attorney given to manage and sell an immovable property and hand over the consideration to the owner cannot be treated as a conveyance for consideration and hence, charged with stamp duty as on a conveyance — Suman Kumar Sinha v. State of Jharkhand, AIR 2009 Jharkand 53.

It is not necessary that every power-of-attorney ex-ecuted abroad must be presented before the Collector for adjudication of stamp duty. Only those powers which have been executed abroad and on which no stamp duty has been paid need to be adjudicated. If proper duty has already been paid, then nothing further needs to be done — Anitha Rajan v. Revenue Divisional Officer, AIR 2010 Kerala 153.

A power-of-attorney is to be compulsorily registered only if it creates an interest in immovable property and not otherwise — B. Maragathamani v. Member Secretary, Chennai Metropolitan Development, AIR 2010 Madras 61.

Transfer of property by power of attorney

A very popular mode of transferring immovable property in Northern India was by adopting a combination of a sale agreement, general power-of-attorney and a will. This facilitated the avoidance of a conveyance and thereby saving on stamp duty for the buyer. The modus operandi in such transactions was for the owner to receive the agreed consideration, deliver possession of the property to the purchaser and execute the following documents or variations thereof:

(a)    A sale agreement by the vendor in favour of the purchaser.
(b)    An irrevocable general power-of-attorney by the seller in favour of the purchaser authorising him to manage, deal with and dispose of the property without recourse to the seller.
(c)    A will bequeathing the property to the purchaser (as a safeguard against the consequences of death of the seller before the transfer is effected).

The Supreme Court had in the case of Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana, (2009) 7 SCC 363 referred to the “ill effects of what is known as general power-of-attorney sales”.

In its latest decision in the case of Suraj Lamp & Industries P. Ltd. v. State of Haryana, (2012) 1 SCC 656, the Court has held that there cannot be a sale of immovable property by execution of a power-of-attorney, nor can there be a transfer by execution of an agreement of sale and a power-of-attorney and will. It held that these kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges on deeds of conveyance, to avoid payment of capital gains on transfers, to invest black money’ and to avoid payment of ‘unearned increases’ due to Development Authorities on transfer.

It also held that the observations of the Delhi High Court, in Asha M. Jain v. Canara Bank, 94 (2001) DLT 841, that the “concept of power-of-attorney sales have been recognised as a mode of transaction” when dealing with transactions by way of sale agreement/ general power of attorney/will are unwarranted, unjustified and unintendedly misleading the general public into thinking that such transactions are some kind of a recognised or accepted mode of transfer and that it can be a valid substitute for a sale deed. Such decisions to the extent they recognise or accept transactions by way of by way of sale agreement/ general power-of-attorney/will as concluded transfers are not good law.

The Apex Court however, carved out a niche for genuine transactions where the owner of a property grants a power-of-attorney in favour of a family member or friend to manage or sell his property, as he is not able to manage the property or execute the sale, personally. It also held that a power-of-attorney holder may however execute a deed of conveyance in exercise of the power granted under the power-of-attorney and convey title on behalf of the grantor.

It only clamped down upon transactions, where a purchaser pays the full price, but instead of getting a deed of conveyance gets a sale agreement/general power-of-attorney/will as a mode of transfer, either at the instance of the vendor or at his own instance.

Registering a property under a power

The Sub-Registrar of Assurances permits a power-of-attorney holder to register an instrument on behalf of the donor. However, the power must first itself be registered before the Sub-Registrar. For this purpose the donor and the donee must both go to the Sub-Registrar. Further, the Sub-Registrar insists that both the donor and the donee sign the power before him.

Conclusion

To sum up, a simple power-of-attorney has been the subject matter of great controversy and litigations. Chartered Accountants would be well advised to consider whether the power-of-attorney relied upon by their clients is valid or not. When in doubt, they should consider obtaining an opinion. One is reminded of the quote by W. H. Auden which ended as follows:

“……There is always another story, there is more than meets the eye.”

Direct Taxes

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The Finance Bill 2011, received the Presidential Assent on 8-4-2011.

The Finance Bill 2011, received the Presidential Assent on 8th April, 2011.

Circular No. 1/2011 F. NO. 142/1/2011-SO(TPL), dated 6-4-2011 regarding Explanatory notes to the provisions of the Finance Act, 2010.

New tax return forms notified — Notification No. S.O. 693(E), dated 5-4-2011.

For the A.Y. 2011-12, the CBDT has notified new Income Tax Return Forms Sahaj for individual tax returns and Sugam for taxpayers falling under the presumptive taxation scheme as prescribed.

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Part A : ORDERS OF the COURTS

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? Section 2(h): Public Authority Thirteen educational institutions had filed writ petitions in the Uttarakhand High Court. A common question of law was involved in all these petitions. All the petitioners before the Court were societies or schools run by societies. Each claimed that the school was entirely privately funded and since they are not ‘public authority’ as defined u/s.2(h) of the Right to Information Act, 2005 (the Act), cognizance cannot be taken against them by the State Information Commission, under the Act.

Their contention before the High Court was that they are neither covered under items (a) to (d) u/s.2(h), nor under the ‘include’ part of that clause (h) as they are not owned, controlled or substantially financed directly or indirectly by funds provided by the appropriate government. Hence they are not ‘public authority’!

It was their contention that in order to get covered under that ‘includes’ part of the clause (h) the society has to be one which is owned or controlled by the government and in any case that ‘control’ exercised by the government should be ‘deep and pervasive’ control inasmuch as the management committee of the school should be controlled by and large by government nominees or by government authorities.

The Court held that these institutions are not ‘public authorities’ as they are not owned or controlled or financed by the government. None of these petitioners owes its existence to a notification or order of the Government, therefore, so far as this part, as to whether the petitioners are ‘public authorities’ is concerned, the same stands settled and it is held that institutions, such as the petitioners are not ‘public authorities’ under the Right to Information Act.

The Court considered another aspect of these writ petitions, that is though the petitioners may not be a ‘public authority’ as defined u/s.2(h) of the Act, whether the education department of the government or any other government department, being a public authority, through its Information Officer or the Appellate Authority under the Act can compel the petitioners to furnish information, which is being sought from these public authorities. For example in case the Public Information Officer in the Department of Secondary Education of Government of Uttarakhand is requested for information which pertains to any of the petitioner schools, the question would be, whether the Public Information Officer of such a public authority can compel the petitioner to furnish this information to that public authority. The answer to this is also to be found in the Act itself. The petitioners here would fall under the category of the ‘third party.’

Section 11 of the Act deals with the subject of ‘Third party information’. The Court took the view that section 11 would apply where petitioners have already given certain information to a public authority, let us say the Department of Education or any other State department. In case the petitioners attach any confidentiality to such information, they must inform the public authority of their intentions. The public authority thereafter, whenever it wants to disclose such an information to any citizen, it must give a prior notice u/s.11(1) of the Act to the ‘third party’, which is the petitioners in the present case and u/s.11(1) of the Act, when this notice has been given, the petitioners shall have an opportunity to represent before the public authority. In case, the public authority still decides to go ahead and furnish such information u/s.11(3) of the Act, this decision must be communicated to the third party who then has a right to file an appeal against this decision u/s.19 of the Act read with section 11(4) and then a right to file a second appeal. Apart from this, the ‘third party’ also has a remedy to directly approach the State Information Commission u/s.18(1)(f) of the Act.

The Court also considered one more aspect, i.e., section 8(1)(j) which relates to personal information. The Court considered 2 situations: One when the information is already held by the public authority such as department of education. In such a case the Court held that provisions of section 11 must be complied with before the information held is provided to the citizen-applicant. Two, the information is not held by the public authority, e.g., department of education. In such case the Court asked: Can the Public Information Officer compel the petitioners to furnish certain information from the records of the petitioners’ office even though such information has not been furnished under any provisions of law by the petitioners before this public authority?

The answer to it, the Court stated would be in negative as it would be an invasion on the privacy of these institutes not being a public authority. Moreover, in case such ‘information’ is not already there with such public authority, it cannot be information ‘which is held’ by the public authority and therefore, it would not be covered under the definition of ‘right to information’ given u/s.2(j) of the Act.

Note: In the last part of this decision it is held that the information which is not on the records of the public authority is not ‘held’ and is hence not covered u/s.2(j) defining ‘right to information’. This part is in contrast to the decision of CIC reported in March 2011, BCAJ. I note that under the definition of ‘right to information’ u/s.2(j) what is covered is not only ‘held’ by but also ‘under the control of’ any public authority. I would imagine that Department of Secondary Education, Government of Uttarakhand has ‘a control’ over all the schools to get whatever information it needs. On that assumption, one needs to consider whether this part of the decision is correct or not.

[Asian Education Charitable Society & Ors. v. State of Uttarakhand & Ors., decided on 9-2-2010 {2010 (2) ID 552}]

Section 8(1)(g): Section 8(1)(g) reads as under: Section 8(1), Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen:

(g) Information, the disclosure of which would endanger the life or physical safety of any person or identify the source of information or assistance given in confidence for law enforcement or security purposes;

The Jharkhand Public Service Commission, Ranchi (JPSC) filed a writ petition in the High Court of Jharkhand challenging the orders passed by the State Information Commission whereby it gave direction to JPSC to furnish the various information sought by the applicant.

The applicant had sought information regarding the names of the members of the interview board who selected candidates for the post of lecturers, etc.

The Commission directed JPSC to furnish the various information i.e., the names of the members of interview board, etc. to the applicant.

High Court of Jharkhand ruled as under:

“As regards the information regarding the names and identities of the members of the Interview Board, the same cannot possibly be furnished in view of the fact that confidentiality regarding the names and identities of the members of the Interview Board needs to be preserved.

Considering the facts and circumstances of the case and also in the light of the discussions made above, claim of the petitioner that the information sought for in respect of the names of the members of the Interview Board cannot be furnished since it would violate confidentiality, appears to be a reasonable objection.

[Jharkhand Public Service Commission v. State of Jharkhand and Others, decided on 19-5-2010. {RTI R1 (2011) 227}]

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Ethics and u

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(Engaging in Other Business………)

Shrikrishna (S) – Arey Arjun, Why are you looking so tired? Your pressure of September is still not over?

Arjuna (A) – September is over; but not our pressure.

S – I am sure, the Dandiya was keeping you busy late night.

A – Kaash! CAs were that fortunate!

S – Why? What happened?

A – By 30th September, returns were e-filed. But now we are signing all balance-sheets and reports. Besides, I have to do so many things for this Diwali.

S – Why? For CAs, what is special about Diwali?

A – Diwali has nothing to do with my practice. But that other business of mine! That consumes lot of my time.

S – What business?

A – Don’t you know? We are into trading of construction material. We have a few agencies.

S – We means who?

A – My wives Droupadi and Subhadra. They are directors but I only have to manage everything. It is our family business.

S – What do you mean by family business? Was it started by your father Pandu Chacha?

A – No. I only started it. I am also a director in Bhima’s company. Bhima runs a gym.

S – And what do you do in your business?

A – Get orders, procure material, manage the workers, look after Government authorities – and what not!

S – Have you sought your Council’s permission?

A – What for? In my business, I am just shown as a manager. My wives are directors and I draw only remuneration. In Bhima’s company, I look after administration. Actually, Nakula and Sahadeva want me to become a partner in their firm. They are into share-trading.

S – For Dharma’s sake, please don’t do that! Council does not permit all this.

A – I have already thought of it. I will become partner in my HUF capacity. Simple!

S – When you were a student in Guru Dronacharya’s school, you were very brilliant and focused. You could see only one single eye of the fish! But now, I find that you are simultaneously looking at so many things – except your profession and its ethics!

A – Why? What’s wrong?

S – Firstly, remember, an HUF as such can never be a partner. Only an individual or a company can be partners. – either a natural person or a legal person.

A – But HUF is also a person.

S – You are not able to think of any law except the Income Tax Act. Partnership is governed by Partnership Act and not by tax laws.

A – But I have formed firms where same individual is partner in both capacities – that is himself and also as Karta. None else.

S – Anyway, that’s a separate topic. Council will not recognise any activity under socalled HUF, if it is not a genuinely ancestral business.

A – This is very unfair. If I am serving my clients well and they don’t have any complaints, why should the Council come in the way? How is it concerned?

S – See, the council has two major concerns. Firstly, your profession is very demanding. It requires continuous update of knowledge. Council feels that you should pay undivided attention to the profession.

A – Ah! I can manage all things simultaneously.

S – If that is so, why are you signing the hard copies of balance sheet now, after the returns are e-filed?

A – OK. What is the other point?

S – Remember; as a businessman, you are likely to invite lots of risks and liabilities. Due to the financial or other worries, you may often compromise on your principles. That is most dangerous. Your quality of work then suffers. Moreover, doing certain businesses may hamper the dignity of your profession. And under the guise of promoting your business, you may even advertise your profession. This is unfair and not desirable.

A – Yes, Sometimes I also lose my patience and don’t feel like attending office, if I have to execute orders and manage the funds for business. But then, I have heard that the Council allows us to become a director in a company.

S – You are right. You can even be a promoter; and also a director in a board-managed company. But you cannot be an executive director.

A – What do you mean by that?

S – You can be only a ‘Director Simplicitor’. You may attend board meetings, participate in discussions; but cannot be involved in execution.

A – Can I sign cheques?

S – Council says, ‘no’. You should not sign any documents, bills, contracts, letters and the like.

A – This is strange. But I know many CAs who have a private limited company with only two directors – only husband and wife.

S – Then they must be signing the balance sheet also! – That is also not looked at with favour by the Council. Unfortunately, nowhere it is defined as to what amounts to ‘engaging in a business’.

A – And many CA friends of mine are doing regular trading in shares.

S – Blissful ignorance! You said you draw remuneration as Manager.

A – Yes. I am showing it in my income. What’s wrong?

S – You have to seek permission from the Council for any employment – be it full time or part – time. Even college lecturers have to seek permission.

A – And then what happens?

S – See, there is a prescribed application form, Council examines how much time you are required to devote for the other occupation. What are your financial stakes, and so on.

A – You mean I should have obtained permission?

S – Yes, obviously. And then, you will be treated as in part time practice.

A – So what?

S – You cannot then do attest function – cannot sign balance sheets as auditor! And cannot keep articled trainees.

A – Oh my God!

S – There is a recent real story. Mr. A was a CA who did active business in a private limited company in which his friend B, an engineer was the other director. There were the only two of them. B’s son completed articleship with A and passed his CA.

A – Then?

S – There was a serious dispute and litigation between A and B, and ‘B’s son filed a complaint against his own ex-boss ‘A’ that he was an executive director.

A – How ungrateful! Complaint against his own Guru!

S – Yes, And the Guru was held guilty of professional misconduct!

A – For each and everything, one has to approach the Council?

S – No, Council has announced certain general permissions and certain items require special permission. That is Regulation 190A.

A – Now, what do I do?

S – Better withdraw your name from everywhere. Stop signing any documents of business at once. And don’t join Nakula and Sahadeva as a partner.

A – Then who will sign the balance sheet of Bhima’s company?

S – Better induct someone. It always happens – many CAs start business knowingly or unknowingly. They avoid taking permission. Afterwards, when they come to know the seriousness, they are afraid of approaching the Council.

A – Then, what should they do?

S – Either stop the other activity; or approach the Council. Better late than never. Voluntary application may prove your bonafides.

A – Bhagwan, I forgot to mention one small thing. I have an agency of LIC ; but it is in Subhadra’s name; and a sub-brokership in Droupadi’s name.

S – Do they really do it themselves? Do they really know the business?

A – No, I have their Power of Attorney to do everything.

S – Then better take your own insurance! Also enquire about professional indemnity insurance. Dear Arjun, I saved you many times in Mahabharata War; But with your Council, I wonder whether I will be able to help.

A – How can you say so? You are God – Omni potent and Omniscient.

S – True. But I save only honest and righteous people. Not those who compromise on ethics.

‘Om Shanti’.

NOTE :
The above dialogue is with reference to Clause 11 of the First Schedule which reads as under:

Clause (11) : engages in any business or occupation other than the profession of chartered accountants unless permitted by the Council so to engage:

Provided that nothing contained herein shall disentitle a chartered accountant from being a director of a Company, (not being a managing director or a whole time director), unless he or any of his partners is interested in such company as an auditor;

Further, readers may also refer pages 211 to 225 of ICAI’s publication on Code of Ethics, January 2009 edition (reprinted in May 2009)

Part A : ORDERS OF the COURTS

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Section 20(1) of the RTI Act: Penalties
Section 20(1) provides for penalty on Public Information Officer (PIO). Sub- section (1) provides six types by default –

PIO

— refuses to receive an application for information,
— does not furnish information within the time provided under the Act,
— malafidely denies the request for information,
— knowingly gives incorrect, incomplete or misleading information,
— destroys information which is the subject of the request,
— obstructs in any manner in furnishing the information.

If any of the above is committed without any reasonable cause it is provided that the Commission shall impose a penalty on PIO at Rs.250 per day but not exceeding Rs.25,000 .

Issue that has been raised from time to time is whether word ‘shall’ makes impositionof penalty mandatory or ‘shall’ here means ‘may’ and it is optional for CIC to levy or not to levy the penalty.

On 11th April, 2011, CIC Shailesh Gandhi has ruled as under in the case of complainant Mr. Attar Singh v. PIO, Vivekananda College:

The RTI application was furnished on 04-02-2010. The information was provided on 08-04-2011 after the decision of CIC.

After the hearing in the matter of penalty, CIC writes:

If without reasonable cause, information is not furnished within the time specified under sub-section (1) of section 7, the Commission is duty- bound to levy a penalty at the rate of Rs. 250 each day till the information is furnished. Once the Commission decides that there was no reasonable cause for delay, it has to impose the penalty at the rate specified in section 20(1) of the RTI Act and the law gives no discretion in the matter. The burden of proving that denial of information by the PIO was justified and reasonable is clearly on the PIO as per section 19(5) of the RTI Act.

Decision:
As per the provisions of section 20(1) of the RTI Act 2005, the Commission finds this a fit case for levying penalty on Mr. Rajender Kumar Wadhwa, PIO & Administrative Officer. Since the delay in providing the information has been over 100 days, the Commission is passing an order penalising Mr. Rajender Kumar Wadhwa Rs.25000 which is the maximum penalty under the Act.

The Chairman, Vivekananda College is directed to recover the amount of Rs.25000 from the salary of Mr. Rajender Kumar Wadhwa and remit the same by a demand draft or a Banker’s Cheque in the name of the Pay & Accounts Officer, CAT, payable at New Delhi and send the same to Shri Pankaj K. P. Shreyaskar, Joint Registrar and Deputy Secretary of the Central Information Commission, 2nd Floor, August Kranti Bhawan, New Delhi-110066. The amount may be deducted at the rate of Rs.5000 per month every month from the salary of Mr. Rajender Kumar Wadhwa and remitted by the tenth of every month starting from May 2011. The total amount of Rs.25000 will be remitted by 10th September, 2011.

[Mr. Attar Singh v. PIO, Vivekanand College, University of Delhi. Decision No. CIC/SG/C/2010/000502/11484- Penalty]

Section 2(h): Public Authority
Madras High Court (Madurai bench) in a judgment delivered on 06-07-2010 has extensively discussed the words ‘includes’ and ‘substantially financed’ as they appear in section 2(h) which defines ‘Public Authority’.

R. Sivaprakasam sought xerox of the day book pertaining to a receipt of Rs.3, 00,000 received by Karanthai Tamil Sangam (Sangam). Same was denied to him. Subsequently, in response to RTI application made District Registrar, Thanjavur directed Sangam to furnish xerox of the day book as above. This direction is put to challenge in the writ petition.

Sangam submitted that information sought is not ‘information’ as defined u/s2(f), Sangam is not a public authority as defined u/s2(h) and in any case information sought is exempt u/s 8.

Hereunder, I am confining only to the part of the judgment deciding on applicability of section 2(h).

In one earlier judgment the Madras High Court had held as under:

The word ‘substantial’ is not defined in the Act. For the word ‘substantial’ it is not possible to lay down any clear and specific definition. It must be a relative one, however, ‘substantial’ means real or actual as opposed to trivial. ‘Substantial’ also means practicable as far as possible, hence the word ‘substantial’ not to be construed as higher percentage of the estimated amount or otherwise.

The Court then reproduced certain paras (NOs.15 to18, 21&23) from the said judgment as under:

“15. If we look at the definition of section 2(h), it is clear that the appellant-company does not come under the provisions of section 2h(a), (b), (c) or (d), but thereafter section 2(h)(d) of the definition clause uses the word ‘includes’. It is well known that when the word ‘includes’ is used in an interpretation clause, it is used to enlarge the meaning of the words and phrases occurring in the body of the statute. Reference in this connection can be made to G. P. Singh’s ‘Principles of Statutory Interpretation’ in the 10th edition of the said treatise, the learned author formulated that when the word defined is declared to ‘include; such and such, ‘the definition is prima facie extensive’ (page 175 of the book). In support of the aforesaid formulation, the learned authority has referred to a number of decisions. The latest decision referred to in support of the aforesaid proposition was rendered in the case of Associated Indem Mechanical P. Ltd. v. W. B. Small Industries Development Corporation ltd., AIR 2007 SC 788 of the report, the learned judges held as follows:

“10. The definition of premises in section 2(c) uses the word ‘includes’ at two places.It is well settled that the word ‘include’ is generally used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute; and when it is so used those words of phrases must be construed as Comprehending, not only such things, as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include [see Dadaji al ias Dina v. Sukhadeobabu AIR 1980 1 SCR 1135, Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. AIR (1987) 2 SCR 1 and Mahalakshmi Oil Mills v. State of A.P. AIR 1989 SC 335: (1989) SCC 164.”]

16. Therefore, obviously the definition of bodies referred to in Section 2(h)(d)(i) of the RTI Act would receive a liberal interpretation, and here the words which fall for interpretation are the words ‘controlled or substantially financed directly or indirectly by funds provided by the appropriate Government.’

17. We are here concerned with the interpretation of the definition clause in the RTI Act. The Act has been enacted ‘in order to promote transparency and accountability in the working of every public authority’. In the Preamble to the Act, it is made clear that ‘democracy requires an informed citizenry and transparency of information which are vital to its functioning and also to contain corruption and to hold Governments and their instrumentalities accountable to the governed’. From the Preamble to the Act it is clear that revelation of information may cause conflict with the other public interest including efficient operations of the Governments, but the Act has been enacted to harmonise these conflicting interests while preserving the paramountcy of the democratic ideal.

18. The RTI Act thus attempts to inculcate openness in our democratic republic. It has to be accepted that one of the salience of openness in democracy is an access to information about the functioning of the public authorities.

21. The RTI Act is virtually enacted to give effect to citizen’s right to know. Citizen’s right to know has been construed by the Hon’ble Supreme Court a

PART A : Decision of the H.C.

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Section 24 of the RTI Act

In the BCAS of July 2011, the Government’s Notification dated 09.06.2011 was reported under which the Central Board of Investigation (CBI) was exempted from the purview of the RTI Act (the Act) by including the CBI in the Second Schedule to the Act.

Above notification was challenged by a PIL before the High Court of Madras on the ground that it is ultra vires Article 14 of the Constitution of India.

According to the petitioner, in the light of the various scams, the country has become rudderless in the war on corruption and at this juncture, the Government instead of becoming more transparent has become reactionary by resorting to Section 24 of the Act by granting blanket exemption to the CBI. The petitioner further contended that respondents had over looked the first proviso to Section 24(1) of the Act under which information pertaining to allegations of corruption and human rights violation cannot be exempted under Section 24 of the Act. Further, Section 24 exempts only intelligence and security agencies and CBI which is an investigating agency cannot be granted a blanket exemption. It was also contended that the plea that investigative data requires confidentiality has been adequately taken care of in Section 8(1) (g) and (h) of the Act. It wass further submitted that Section 24(3) of the Act mandates that every notification issued under Section 24(2) shall be laid before each house of Parliament, and failure to do so renders the exemption null and void. It was the case of the petitioner that the exemption is bound to create chaos as several writ petitions will be filed challenging the orders passed by the Central Information Commission in their decisions against the CBI, since the CIC has no power to set aside the notification.

In reply, Union of India filed the counter affidavit inter alia contending that the exemption to the CBI under Section 24 is not a blanket exemption inasmuch as it is subject to the provisos to Section 24 of the Act. The exemption was granted after the Government received representation from the CBI stating that difficulty was being faced by it in its working and the legal opinion was received that opined that the CBI qualifies as a security and intelligence organisation under Section 24 of the Act.

The judgment of the High Court dismissing the writ petition runs into 21 printed pages and is very interesting. However, I herewith reproduce only the concluding part of it.

“We find no justifiable reasons to depart from such findings which appear to have been arrived at after considering all material placed before the Government, taken note of by the Committee of Secretaries and other authorities prior to issuance of the impugned Notification. Admittedly, there is no allegation with regard to the decision making process or that there was any arbitrariness in the procedure adopted so as to offend Article 14 of the Constitution. It is submitted by the learned Additional Solicitor General appearing for the first respondent that Notification has been placed before both Houses of Parliament and would be taken up for consideration in the ensuing Session.

In view of the above, we hold that the impugned Notification is neither ultra vires section 24 of the RTI Act nor violative of the provisions of the Constitution of India.

In the result the Writ Petition fails and same is dismissed. No costs, Consequently, connected Miscellaneous Petition is closed.”

[S. Vijaya lakshmi vs. Union of India & another w.p. 14788 of 2011 & M.A.1 of 2011 dated 09.09.2011.- Reported in RTI R1 (2012) 106-126]

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Company Law

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1. Amendment to Companies ( Corporate Social Responsibility Policy) Rules

The Ministry of Corporate Affairs has notified the following amendment on 12th September, 2014 in the Companies (Corporate Social Responsibility Policy) Rules 2014. In Rule 4, in sub-Rule (6) after the words “but such expenditure” the words and comma “including expenditure on administrative overheads” shall be inserted. Consequently, the clarification (iv) in General Circular No. 21 of 2014 dated 18-06-2014 stands omitted.

2. Clarification regarding Accounting Standard – AS 10 – Capitalisation of Cost

The Ministry of Corporate Affairs has vide General Circular No. 35/2014, dated 27-08-2014, clarified issues with respect to the capitalisation of borrowing costs in Competitive Bid power projects:

1) As per Accounting Standards AS-10 & AS-16 issued by ICAI in consultation with ASB, borrowing and other costs incurred during extended delay in commencement of commercial production after the plant is otherwise ready, should not be capitalised as it does not increase the worth of the fixed assets.

2) As per AS 16, capitalisation of some part of the project which is capable of being used while construction continues for the other units should be capitalised once that part is ready for commercial production

3) it is further clarified that AS-10 & AS-16 are applicable irrespective of whether the power projects are ‘Cost Plus Projects’ or ‘Competitive Bid Projects.’

3. National Advisory Committee

The Ministry of Corporate Affairs has vide circular dated 18th September, 2014 constituted an Advisory Committee to be called the National Advisory Committee on Accounting Standards, consisting of the Mr. Amarjit Chopra, Dr. A. S. Durga Prasad, Shri R. Sridharan and CA K. Raghu and others, to advise the Central Government on the formulation and laying down of accounting policies and accounting standards for adoption by companies or class of companies under the said Act.

The Chairperson and members shall hold office for a period of one year from the date of publication of this notification in the Official Gazette or till the constitution of National Financial Reporting Authority u/s. 132 of the Companies Act, 2013 whichever is earlier. 4. U seful Life Of Asset The Ministry of Corporate Affairs has vide notification dated 29th August, 2014, substituted the following in Schedule II of Companies Act 2013 – Part A Para 3 (i), substituted;

(i) The useful life of an asset shall not ordinarily be different from the useful life specified in Part C and the residual value of an asset shall not be more than 5% of the original cost.
Provided that where a Company adopts a useful life different from what is specialised in Part C or uses a residual value different from the limit specified above, the financial statements shall disclose the difference and the justification supported by technical advice.’

In Part C under the heading Noted – the para 4 shall be substituted by:

4(a) Useful life specified in Part C of the Schedule is for the whole asset and where cost of a part of the asset is significant to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part shall be determined separately.

(b) The requirement under sub-paragraph (a) shall be voluntary in respect of financial year commencing on or after 01-04-2014 and mandatory for financial years commencing after 01-04-2015.

(c) in para 7 (b) for the words ‘shall be recognised,’ the words ‘may be recognised’ are substituted.

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PART C: Information on & Around

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• Misuse of plot near Mantralaya on Madame Cama Road:

An investigation using the Right to Information Act by Mumbai Mirror has found out that the 19 ministerial bungalows situated on Madame Cama Road in Mumbai, next to the New Administrative Building of Mantralaya, are illegal.

The 5-acre plot had originally been earmarked for a public garden and, in 1979, the government had even promised that the bungalows would be demolished and the plot handed over to BMC for developing the garden.

This, however, was never done. The ministerial bungalows were constructed in the 1950s and are being maintained by the Public Works Department. When Mirror sought an explanation from PWD Minister Chhagan Bhujbal, he said, “It’s a very old case. I do not remember much.”

Several prominent citizens have opined that the government must hand over the plot for the garden. Among them, architect P. K. Das, whose firm had once prepared a plan for the makeover of Nariman Point, said, “In the Development Plan for Mumbai, the land is reserved for a garden and is meant for public use. This has been taken over and built upon. The ministers’ bungalows and sheds housing PWD offices must be cleared and the land utilised for its reserved purpose. There is a comprehensive redevelopment plan for this plot by the MMRDA, which was cleared by the state’s empowered committee which is headed by the chief secretary.”

The area’s citizens group is all for a garden. Atul Kumar of the Churchgate Nariman Point Residents Association said, “The city is starved of green spaces. The government must do away with these bungalows and develop a garden on the plot.”

• Eastern Freeway:

The third phase of the Eastern Freeway up to Ghatkoper, which is thrown open to motorists in April, has witnessed a 23% increase in cost ever since work started in 2007.

“The project’s cost rose from Rs. 847 crore to Rs. 1,106 crore because of delay in rehabilitation of project-affected people and slow execution of work,” RTI activist Anil Galgali said.

Galgali had sought information about the Eastern Freeway project from the MMRDA. The work on the stretch between Chhatrapati Shivaji Maharaj Vastu Sangrahalaya to Anik Junction was scheduled to be completed by 18th January, 2011 after the work order was issued in January 2008. “There was a delay of 29 months in executing this phase of the project,” Galgali added.

• RTI & Housing Society in Mumbai:

At a special general body meeting on Sunday 30- 03-2014, of the Salsette Catholic Society in Bandra, it expelled a member for harassment through the RTI Act.

54 of the 73 members present voted in favour of the motion to expel Leslie Almeida. Earlier, Almeida had not replied to a showcause notice issued by the society that said it would allow him to present his side. But at the meeting, the members did not give Almeida an opportunity to speak as they constantly interrupted him. The committee, however, made a 90-minute presentation on why he should be expelled.

Father Michael Goveas, parish priest at St Andrew’s Church, suggested an inquiry be set up to prove the allegations against Almeida. The society’s secretary, Cornel Gonsalves, said the society had been dragged into a personal dispute, and has been harassed with hundreds of RTI applications.

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PART B: RTI Act, 2005

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• RTI Humour:

Chinese scientists gave environmentalism boost by inventing a printer that uses water instead of ink on rewritable paper This printer might trigger interest in India for an entirely different reason. Given the babus’ reluctance to allow the spirit of RTI legislation to prevail, they could use this invention in their line of work. What can an RTI petition achieve when the reply comes with blank pages?

• Sad story of RTI:

RTI Activist from Pune, Vihar Durve, Sought information from DoPT about the names & addresses of RTI Activists murdered/injured/harassed/assaulted etc. during 2005 to 2013. The information received is shocking. The number of persons affected as above in more than 8 years is as high as 151. The individuals murdered are 23, which includes Maharashtra 6, Gujarat 4 and 13 from other 9 States.

In 2014 also, the number of persons Killed/ Committed Suicide in Maharashtra as per my information is 2.

• Western India RTI Convention

Western India RTI Convention

Few RTI activists met in Mumbai last month to consider the proposal to organise such Convention in Mumbai. All the activists endorsed the proposal.

The BCAS Foundation (of Bombay Chartered accountants’ Society) offered to become a platinum sponsor by contributing at least 50% of the cost of organising the Convention to be incurred.

The Department of Civic and Social Justice of Dr. Ambedkar Center for Social Justice, University of Mumbai offered to host the convention at its campus premises and to provide many other complimentary facilities. Accordingly, we, the RTI activists of MUMBAI, are pleased to hold a twoday convention in MUMBAI, the dates fixed are 7th & 8th June.

We invite RTI Activists from Maharashtra, Gujarat & Goa and other States to join and be a part of this historic event.

The Convention Convener is Bhaskar Prabhu of the Mahiti Adhikar Manch. Shailesh Gandhi is the guide, Ms. Aruna Roy shall inaugurate the convention and be with us for both the days. Anyone Interested may join as delegate. For Registration form and other details please mail to: mahitiadhikarmanch@gmail.com or narayanvarma2011@ gmail.com

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PART A: ORDERS OF CIC & the court

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• Appeal –Section 19(3) of the RTI Act:

The Appellant through an RTI application dated 19-12-2012 sought certain information regarding a notification dated 15-09-2011 by which Bharat Petroleum Corporation Ltd, public authority had invited the applications for dealership within the range of 2 kilometer of Bhaniyawala NH 72. The application made included queries such as how many applications have been received for the dealership; to provide name, address and telephone numbers of applicants; when was the site inspection conducted; to provide the name, strength and designation of the officers who were part of the Inspection Committee, to provide a copy of Inspection report and so on.

The CPIO furnished the information sought but the appellant was dissatisfied with the information supplied to him by the CPIO.

In the appeal before the CIC, the appellant not only requested that the full information sought be provided to him but also sought some additional information like, yardstick being followed for giving dealership in respect of highways; a copy of objection raised by the Site Inspection Committee in respect of yardstick etc.

During the hearing, the Respondents pointed out that the Appellant in his present appeal before the Commission has sought additional information which he had not sought in his original RTI application. At that stage, he is not allowed to seek information other than sought in his RTI application.

The Commission ruled:
“The Commission agrees with the Respondents that the information now sought by the Appellant in the present appeal did not form part of his original RTI application. Therefore, the Commission is not in a position to allow the disclosure of the information which had not even been sought by the appellant in his RTI application. An information seeker cannot be allowed to expand the scope of his RTI enquiry at appeal stage. No disclosure can, therefore, be directed to be made in the present appeal of the Appellant. The Appellant, however, may file a fresh RTI application, if he so desires.”

[Harish Prasad Divedi vs. Bharat Petroleum Corporation Ltd. Appeal No CIC/LS/A/2013/001477-SS decided on 28-01-2014: (RTIR I (2014)132(CIC)]

• Section 7(9) of the RTI Act:

Section 7(9) of the Right to Information Act reads as under:

7(9) An information shall ordinarily be provided in the form in which it is sought unless it would disproportionately divert the resources of the public authority or would be detrimental to the safety or preservation of the record in question.

In the writ petition, the petitioner sought expeditious disposal of petitioner’s appeal under the Right to Information Act, 2005 as well as a direction to respondents to pay amount of ` 3,01,000/- as compensation. Petitioner had also prayed for a direction to take disciplinary action against respondent No.1.

The petitioner had sought the information under 23 different items. The petitioner stated that he is a financier who gives advances to various contactors working with Director General, Deference estates.

The Court held:
“Keeping in view the width and amplitude of the information sought by the petitioner, it is apparent that the prayers in the writ petition are nothing short of an abuse of process of law and motivated if not an attempt to intimidate the respondent.”

“In the opinion of this Court, the primary duty of the officials of Ministry of Defence is to protect the sovereignty and integrity of India. If the limited manpower and resources of the Directorate General, Defence Estates as well as the Cantonment Board are devoted to address such meaningless queries, this Court is of the opinion that the entire office of the Directorate General, Defence Estates and Cantonment Board would come to stand still.” The court then reproduced the relevant Paragraph, from the Supreme Court decision in CBSE vs. Aditya Bandopadhyay, [(2011) 8 SCC 497].

Then it quoted para 39 of the Supreme Court decision in ICAI vs. Shaunak H. Satya, [(2011) 8 SCC 781], as under:

39. “We however agree that it is necessary to make a distinction in regard to information intended to bring transparency, to improve accountability and to reduce corruption, falling u/s. 4(1) (b) and (c) and other information which may not have a bearing on accountability or reducing corruption. The competent authorities under the RTI Act will have to maintain a proper balance so that while achieving transparency, the demand for information does not reach unmanageable proportions affecting other public interests, which include efficient operation of public authorities and the Government, preservation of confidentiality of sensitive information and optimum use of limited fiscal resources.”

Consequently, the Court deemed it appropriate to refuse to exercise its Writ Jurisdiction, and the petition was dismissed. This Court was also of the view that “misuse of the RTI Act has to be appropriately dealt with, otherwise the public would lose faith and confidence in this sunshine Act. A beneficent Statute, when made a tool for mischief and abuse must be checked in accordance with law.”

[Shail Sahni vs.Sanjeev Kumar and Ors. W.P. (C) 845/2014 decided by the High Court of Delhi on 05-02-2014. (RTIR I (2014) 220 (Delhi)]

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Company Law

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1. Companies (Amendment) Act 2015

The Ministry of Law and Justice (Legislative Department) has on 26th May 2015 issued the Companies (Amendment) Act 2015. Further vide notification dated 29th May 2015 provisions of the Companies (Amendment) Act 2015 other than those stated in paragraph (d) and (e) below which are yet to be notified shall come into force from 29th May 2015. Some of the important amendments include:

a) Insertion of Clause 76A – Punishment for contravention of Section 73 or Section 76 relating to acceptance of Deposits:—

“76A. Where a company accepts or invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of the manner or the conditions prescribed under section 73 or section 76 or rules made thereunder or if a company fails to repay the deposit or part thereof or any interest due thereon within the time specified under section 73 or section 76 or rules made thereunder or such further time as may be allowed by the Tribunal under section 73,— (a) the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees; and (b) every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both: Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or willfully with the intention to deceive the company or its shareholders or depositors or creditors or tax authorities, he shall be liable for action under section 447.”.

b) Insertion of 4th Proviso to Section 123(1) pertaining to declaration of Dividends:-

“Provided also that no company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company for the current year.”

c) Insertion of Clause (ca) to Clause 134(3) (c ) for reporting of frauds:

“(ca) details in respect of frauds reported by auditors under sub-section (12) of Section 143 other than those which are reportable to the Central Government;”

d) Section 143 (12) is to be substituted with:

“(12) Notwithstanding anything contained in this section, if an auditor of a company in the course of the performance of his duties as auditor, has reason to believe that an offence of fraud involving such amount or amounts as may be prescribed, is being or has been committed in the company by its officers or employees, the auditor shall report the matter to the Central Government within such time and in such manner as may be prescribed:

Provided that in case of a fraud involving lesser than the specified amount, the auditor shall report the matter to the audit committee constituted under section 177 or to the Board in other cases within such time and in such manner as may be prescribed:

Provided further that the companies, whose auditors have reported frauds under this sub-section to the audit committee or the Board but not reported to the Central Government, shall disclose the details about such frauds in the Board’s report in such manner as may be prescribed.”

e) Proviso to Section 177 (4) (iv) is to be inserted:

“Provided that the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to such conditions as may be prescribed;”.

The Amendment Act can be accessed at http://www. mca.gov.in/Ministry/pdf/AmendmentAct_2015.pdf and the notification can be accessed at http://www. mca.gov.in/Ministry/pdf/Notification_31052015.pdf

2. Copies of resolution passed u/s 117 (3) (g) are not open for inspection

The Ministry of Corporate Affairs has vide Notification dated 29th May 2015, inserted the following proviso to the Companies ( Registration Offices and Fees ) Rules 2014, to Rule 15:

“Provided that no person shall be entitled under section 399 to inspect or obtain copies of resolutions referred to in clause (g) of sub-section (3) of section 117 of the Act.”

Notification can be accessed at http://www.mca.gov. in/Ministry/pdf/Rules_31052015_5.pdf

3. Companies ( Incorporation ) Second Amendment Rules 2015

The Ministry of Corporate Affairs has notified further amendments to the Companies (Incorporation) Rules 2014 on 29th May 2015 as follows:

a) In Rule 12, the following proviso is inserted:

“Provided that in case pursuing of any of the objects of a Company requires registration or approval from sectorial regulators like Reserve Bank of India, Securities and Exchange Board, registration or approval, as the case may be, from such regulator shall be obtained by the Company before pursuing such objects and a declaration in this behalf shall be submitted at the stage off incorporation of the Company. “

b) Rule 24 pertaining to the Declaration at the time of commencement of business or exercising its borrowing powers to be filed by a director in Form No.INC.21 along with the fee is omitted

c) Form INC-13 pertaining to the Memorandum of Association and Form INC-16 for License under Section 8(1) of the Companies Act, 2013 have been modified

Full notification can be accessed at http://www.mca. gov.in/Ministry/pdf/Rules_31052015_3.pdf

4. Companies (Declaration and Payment of Dividend) Second Amendment Rules, 2015.

As per the Amendment dated 29th May 2015, the Rule 3, sub Rule – 5 to the Companies (Declaration and Payment of Dividend) Rules 2015 which pertains to “No company shall declare dividend unless carried over previous losses and depreciation not provided in previous year are set off against profit of the company of the current year the loss or depreciation, whichever is less, in previous years is set off against the profit of the company for the year for which dividend is declared or paid.” – is omitted.

Full notification can be accessed at http://www.mca.gov.in/Ministry/pdf/Rules_31052015_2.pdf

5. Clarification on repayment of deposits accepted by the companies before the commencement of the Companies Act, 2013 under section 74 of the said Act

Vide General Circular No 09/2015, the Ministry of Corporate Affairs has clarified regarding processing of the deposits related complaints received from investors under section 74 of the Companies Act, 2013 (the said Act) in respect of defaults made by companies in repayment of deposits accepted by them before the commencement of the said Act i.e. before 1st April, 2014 and filing of prosecutions against defaulting companies by the Registrars of Companies/Regional Directors. As per the notification, a depositor is free to file an application under section 73(4) of the said Act, with the Company Law Board if the company fails to make repayment of deposits accepted by it. Further the company may also file application under section 74(2) of the said Act with the Company Law Board seeking extension of time in making the repayment of deposits accepted by it before the commencement of the provisions of the said Act.

Further, attention is also drawn to Explanation appearing below Rule 19 of the Companies (Acceptance of Deposits) Rules, 2014 which clarifies the conditions subject to which a company would be deemed to have complied with the requirements laid down in Section 74(1)(b) of the Companies Act, 2013 Companies can repay deposits accepted prior to 1st April, 2014 in accordance with terms and conditions for which the deposits had been accepted.

It is also clarified that there is no bar on the Registrar of Companies for filing of prosecution against a com- pany if such company fails to make repayment of de- posits accepted by it under the provisions of the Com- panies Act, 1956 or Companies Act, 2013, subject to the contents of para 3 above.

Full circular can be accessed at http://www.mca.gov. in/Ministry/pdf/General_Circular_9-2015.pdf

6.    Exemptions for Section 8 Companies with Charitable Objects etc

Notification dated 5th June 2015, directs that certain provisions of the Companies Act, 2013, shall not apply or shall apply with exceptions/modifications:
 

Exemption from Application of certain Provisions to Section 8 Companies

Provision
of the act

Pertains to

Exceptions,
Modifications and Adaptations

Section 2(24)

Definition of Company Secretary

shall not apply.

Section 2(68)

Private Company

The requirement of having minimum paid-up share
capital shall not apply.

Section 2(71)

Public
Company

The
requirement of having minimum paid-up share capital shall not apply.

Section 96(2)

Annual
General Meetings

After the
proviso and before the explanation, the following proviso shall be inserted,
namely:-

 

Provided
further that the time, date and place of each annual general meeting are
decided upon before-hand by the board of directors having regard to the
direc- tions, if any, given in this regard by the company in its general
meeting.

Section
101 (1)

Notice
of Meeting

For
the words “twenty one days”, the words “fourteen days” shall be substituted.

Section
118

Minutes of
general Body Meetings, Board meeting etc

The section
shall not apply as a whole except that minutes may be recorded within thirty
days of the conclusion of every meeting in case of companies where
the articles of
association provide for
confirmation of minutes by circulation.

Section
136(1)

Right of member to copies
of

audited
financial statements

for
the words “twenty one days”, the words “fourteen days” shall be substituted.

Section 149 (1)
the first

proviso to
sub-section (1)

To appoint
more than fifteen
directors after passing a special resolution

shall
not apply

Provision
of the act

Pertains to

Exceptions,
Modifications and Adaptations

Sub-sections (4), (5), (6),

(7), (8),
(9), (10), (11),

clause (i)
of sub-section

(12) and
sub-section (13) of section 149

For Board
of Directors of Company

Shall
not apply.

Section 150

Selection
of Independent

Shall
not apply

Proviso to
sub-section (5) of section 152

Explanatory
statement for appoint- ment of Independent Director

Shall
not apply

Section 160
for Director- ship

Right of
persons other than the retiring Directors to stand

Shall not
apply to companies whose articles provide for election of directors by ballot

Section 165 (1)

Number
of Directorships

Shall
not apply

Section 173(1)

Meetings
of Board

Shall apply
only to the extent that the Board of Directors, of such Companies shall hold
at least one meeting within every six calendar months.

Section 174(1)

Quorum
for Board Meetings

In
sub-section (1) – for the words “one-third of its total strength or two
directors,
whichever is higher”, the words “either eight members or twenty five
per cent of
its total strength whichever is
less” shall be substituted;

(b) the following proviso shall be inserted, namely:-

“Provided
that the quorum shall not be less than two members”.

section 177 (2)

Audit
Committee

The
words “with independent directors forming a majority” shall be omitted.

Section 178.

Nomination
and Remuneration Committee and Stakeholders Relationship Committee.

Shall
not apply

Section 179.

Powers
of Board

Matters
referred to in clauses (d), (e) and (f) of sub-section (3) may be decided by
the Board by circulation instead of at a meeting.

Section 184 (2)

Disclosure
of interest by Director.

Shall apply
only if the transaction with reference to section 188 on the basis of terms
and conditions of the contract or arrangement exceeds one lakh rupees.

7.    Exemptions to Private Companies
Notification dated 5th June 2015 in the interest of pub- lic directed that certain provisions of the Companies
 

Act 2013 shall not apply or shall apply with such ex- ceptions, modifications and adaptations as follows:

Provision of Companies act 2013

Pertains to

Exceptions,
Modifications and Adaptations

Section 2(76) (viii)

Related party definition

i.e (vii)
any person on whose advice, directions or instructions a director or manager
is accustomed to act – Shall not apply with respect to Section 188

Section 43 and 47

Kinds of
Share Capital and Voting Rights

Shall not apply where MOA and AOA of private
company so provides

Section
62(1) (a) (i) and 62(2)

Further
Issue of Share Capital

shall apply
with following modifications:-

 

In clause
(a), in sub-clause (i), the following proviso shall be inserted, namely:-
Provided that notwithstanding anything contained in this sub-clause and sub-
section (2) of this section, in case ninety per cent of the members of a
private company have given their consent in writing or in electronic mode,
the periods
lesser than
those specified in the said sub-clause or sub-section shall apply.

Section
62(1) (b)

Issue of
share capital under ESOP to employees

In clause
(b), for the words “special resolution”, the words “ordinary resolution”
shall be substituted

Provision of Companies act 2013

Pertains to

Exceptions,
Modifications and Adaptations

Section 67

Restrictions

on purchase by company or giving of loans by it for purchase
of its shares

Shall not apply to private companies –

(a)in whose share
capital no other
body corporate has invested any
money;

(b)if the borrowings of such a company from banks or financial institutions or anybody corporate is less than
twice its paid
up share capital
or fifty crore
rupees,
whichever is lower; and

(c)
such a company is not in default in repayment of such
borrowings subsist- ing at the time of making transactions under this section

Section
73(2) clause

(a) to (e)

Prohibition of

Shall not
apply to a private company which accepts from its members monies not
exceeding one hundred per cent.

 

Acceptance
of Deposits from Public

of
aggregate of the paid up share capital and free reserves, and such
company shall
file the details
of monies so accepted to the Registrar in such
manner as may be specified

Section 117(3) (g)

Resolutions
passed in pursu- ance of sub-section (3) of section 179 wrt Powers of the
Board of Directors

Shall not Apply

Section 141(3) (g)

Limit on
the number of audits per partner

Shall apply with the modification that the words
“other than one person com
panies,
dormant companies, small companies and private companies having paid-up share
capital less than one hundred crore rupees” shall be inserted after the words
“twenty companies”

Section 160

Rights of persons other than retiring Directors to stand for
Directorship

Shall not Apply

Section 162

Appointment
of Directors to be voted individually

Shall not apply

Section 180

Restrictions
on Powers of Board

Shall not apply

Section 184(2)

Disclosure
of Interest by Director

Shall apply
with the exception that the interested director may participate in such
meeting after disclosure of his interest.

Section 185

Loan to Director, etc

Shall not apply to a private company –

(a)in whose
share capital no other body corporate has invested any money;

(b)if the borrowings of such a company from banks or financial institutions or any body corporate is less than
twice of its
paid up share
capital or fifty
crore
rupees whichever is lower; and

(c)
such a company has no default in repayment of such
borrowings subsist- ing at the time of making transactions under this section

Section 188
(1) second proviso

Voting by related party

Shall not apply

Section 196 (4) and (5)

Appointment
of managing Director, Whole time Director or Manager

Shall not apply

The private companies, while complying with such ex- ceptions, modifications and adaptations, of the aforesaid Table, shall ensure that the interests of the shareholders are protected.

8.    Exemptions to Nidhi Companies

Notification dated 5th June 2015 has directed that certain provisions of the Companies Act 2013 shall not apply or shall apply with certain exceptions, modifications and ad- aptations to Nidhi Companies.
 

9.    Exemption to government Companies

Notification dated 5th June 2015 has directed that certain provisions of the Companies Act 2013 shall not apply or shall apply with certain exceptions, modifications and ad- aptations to Government Companies. The Government companies, while complying with such exceptions, modi- fications and adaptations, shall ensure that the interests of’ their shareholders are protected.

PART C: Information on & Around

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CAG SEEKS RTI ACCESS TO GOVT FILES::

The Comptroller and Auditor General (CAG) of India wants the Centre to grant to Right to information (RTI ) powers as it has been facing problems in securing details relevant to its audits of government finances and decision- making.

CAG Shashikant Sharma has written a letter of finance minister Arun Jaitley demanding that the federal auditor be given RTI powers to access information and a penal provision be included in the existing CAG’s Duties and Powers Act (DPC Act) to make it mandatory for furnishing of information in a time bound manner.

The federal auditor has issued a note on how information denial has been causing the problems.

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PART B: RTI Act, 2005

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THE WHISTLE BLOWERS PRO TECTION ACT, 2011:

The above Act received the assent of the President on the 9th May, 2014. The objectives of the Act are noted here under:

AN ACT to establish a mechanism to receive complaints relating to disclosure on any allegation of corruption or willful misuse of power or willful misuse of discretion against any public servant and to inquire or cause an inquiry into such disclosure and to provide adequate safeguards against victimisation of the person making such complaint and for matters connected therewith and incidental thereto.

Please note that in mentioning year 2011 in the title is not my or printing mistake. The fact is that the Bill was introduced in the Parliament in 2011. It took 4 years to finally become an Act. It may also be noted that though it is now an Act, it is not in operation because no rules and regulations are notified per section 27 of the Act. The said section reads:

” 27. The Competent Authority may, with previous approval of the Central Government or the State Government, as the case may be, by notification in the official Gazette, make regulations not inconsistent with the provisions of the Act and the rules made there under to provide for all matters for which provision is expedient for the purposes of giving effect to the provisions of this Act.”

It may also be noted that both the central and state Governments are authorised to make rules, The State Government is authorised to make regulations also.

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PART A: Decision Of CIC

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Section 19 (1) of the RTI ACT:
Vide an RTI application dated 15-05-2012 the appellant sought information on thirteen issues as contained in his RTI Application.

The first appeal was filed on 13-08-2012. As the desired information was not provided by the CPIO vide Order dated 14-08-2012, First Appellate Authority held that the Order of the CPIO is modification to this extent that the information pertaining to the undersigned is already available in public domain at SI. No. 183 of the Civil List, 2012.

Decision
It is to be seen here that the appellant, vide his RTI Application dated 15-05-2012, sought some information from the respondents on 13 issues. During the hearing of the appeal it was submitted by Sh. Harinder Dhingra, appellant that he had not been provided the required information on any issues of his RTI application dated 15- 05-2012. However, it was rebutted by the respondents by stating that the required information, as sought for, was provided to the appellant vide their letter dated 06-07- 2012. It was further submitted by the appellant that his First Appeal was decided by the same officer, in respect of whom, the information was sought and it is against the Law.

Being aggrieved by the aforesaid response, First Appeal was filed by the appellant on 13-07-2012 before the FAA (Sh. Arun Kumar Addl, Commissioner (IGI) Airport, T-3 New Delhi 37), who vide his order dated 14-08-2012, upheld the decision of CPIO. Hence, a Second Appeal was preferred before this Commission.

On careful perusal of the record, it was revealed that the appellant sought some information in respect of Sh. Arun Kumar, Addl. Commission (ING), who decided the First Appeal. It has also been corroborated by the Sh. Arun Kumar, Asstt. Commissioner & CPIO, Sh. Dalveer Solanki, Asstt. Commissioner & CPIO, present before the Commission for making the submissions on behalf of the respondents, in the case.

It is a well settled position in the eyes of Law that there should be no judge of his own cause. This is one of the principles of natural justice and no one should violate the same.

Even the Hon. Judges of the High Court & Supreme Court take care of this Rule while deciding the cases. In the present case, it is now admitted fact that the person against whom the information was sought became a First Appellate Authority and decided his own case i.e. as to whether information in respect of himself is to be provided or not to the appellant.

Thus, the First Appellate Authority (Sh. Arun Kumar) violated the principles of natural justice. It is immaterial whether he has decided the case rightly or wrongly.

In view of the above, the order passed by FAA is not legally tenable and deserves to be quashed and set aside. Therefore, it is quashed accordingly. Thus, the case is remanded back to the respondents with a direction to put up the case to another FAA (to be nominated by the head of the department in case Sh. Arun Kumar is still acting as FAA ) for its disposal in accordance to the provisions of Law, within 30 days from the date of receipt of this order under intimation to this Commission.

(Harinder Dhingra vs. O/o the Addl. Commissioner of Custom, IGI Airport, Terminal 3, New Delhi, File No. CIC/ SS/A/2012/003238/KY decided on 02-04-2014. Citation: RTIR II (2014) 238 (CIC)

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Company Law

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Full Version of the Circulars/Notifications can be accessed at http://www.mca.gov.in

1. Company Law Settlement Scheme, 2014
The
Ministry of Corporate Affairs, vide General Circular No. 34/2014 dated
12-08-2014, has launched the Company Law Settlement Scheme, 2014
(CLSS-2014), to enable companies who have failed to file annual
statutory documents (Annual Return and Financial Statements) an
opportunity to file them and enable them:

1. To make their default good by filing belated documents at a reduced additional fee of 25% of actual fees.

2. Avoid penal action, especially disqualification of the Directors u/s. 164(2) of Companies Act, 2013.

3.
I nactive companies can get their companies declared as ‘dormant
Company’ u/s. 455 of the Act by completing the filing at reduced penalty
and get themselves declared as ‘Dormant Company’ by filing e-form MSC- 1
at 25% of the fee for the form or apply for strike off by filing e-form
FTE at 25% of fee payable.

4. Grants immunity from prosecution
for delayed filing. Under the Companies Act, 2013 the quantum of
punishment has been enhanced for repeated defaults in section 451.

The Scheme is in force from 15th August, 2014 to 15th October, 2014.

CLSS shall not apply to the filing of belated documents other than the following:

1. Form 20B-Form for filing annual return by a company having share capital.

2. F orm 21A-Particulars of Annual Return for the company not having share capital.

3. F orm 23AC, 23ACA, 23AC-XBRL and 23ACA-XBRLForms for filing Balance Sheet and Profit & Loss account.

4. Form 66-Form for submission of Compliance Certificate with the Registrar.

5. F orm 23B-Form for intimation for Appointment of Auditors.

Further, CLSS shall not apply in the following cases:
1.
Companies against which action for striking off the name under s/s. (5)
of section 560 of Companies Act, 1956 has already been initiated by the
Registrar of Companies; or

2. Where any application has already
been filed by the companies for action of striking off name from the
Register of Companies; or

3. Where applications have been filed for obtaining Dormant status under section 455 of the Companies Act, 2013;

4. Vanishing companies.

Companies
need to file an application in the e-Form CLSS 2014 to seek immunity
for filing belated documents. After granting the immunity, the Registrar
concerned shall withdraw the prosecution(s) pending, if any, before the
concerned court.

2. Clarification With Regard Section 139 (5) and 139 (7) of Companies Act, 2013

The
Ministry of Corporate Affairs has vide General Circular No. 33/2014
dated 31st July, 2014 issued clarification regarding appointment of
Auditors to deemed Government Companies as no specific provisions of
deemed Government Companies are included in the New Act. It is clarified
that the new Act does not alter the position with regard to audit of
such deemed government Companies through C & AG and thus such
companies are covered under s/s. (5) and (7) of section 139 of the new
act.

Further, the Shareholders Agreement and the Articles of
Association envisaging control, are to be taken into account to decide
whether an individual Company other than those refereed above is covered
under the provisions of s/s. (5) and (7) of section 139 of the Act.
Also, clarified that where a newly incorporated Company requires the
appointment of Auditor by the C & AG, it is the primary
responsibility of the Company to inform the same to the C & AG and
to share such intimation to the relevant Government so that the
Government can also send a suitable request to the C & AG.

3. Clarification On Transitional Period For Resolutions Passed Under Companies Act, 1956

The
Ministry of Corporate Affairs has vide General Circular No. 32/2014
dated 23rd July, 2014, clarified that resolution approved or passed by
Companies under the relevant applicable provisions of the old Act during
the period 1st September, 2013 to 31st March, 2014, can be implemented,
in accordance with the Old Act, notwithstanding the repeal of the
relevant provision subject to the conditions:

(a) that the implementation of the resolution actually commenced before 1st April, 2014; and
(b)
that this transitional arrangement will be available upto expiry of one
year from the passing of the resolution or 6 months from the
commencement of the corresponding provision in the New Act whichever is
later.

It is also clarified that any amendment to the resolution must be in accordance with the relevant provision of the New Act.

4. Companies (Meetings of Board and its Powers) Rules, 2014

The
Ministry of Corporate Affairs has vide notification dated 14th August,
2014, issued the Companies (Meetings of Board and its Powers) Second
Amendment Rules, 2014, in exercise of the powers conferred u/s. 173,
175, 177, 178, 179, 184, 185, 186, 187, 188, 189 and section 191 read
with section 469 of the Companies Act, 2013 (18 of 2013), which shall
come into force on the date of their publication in the Official
Gazette.

In the Companies (Meetings of Board and its Powers) Rules, 2014:

(1)
in Rule 3, in sub-Rule (6), the words and commas,“which shall be in
India,” shall be omitted whereby the scheduled venue of the Board
meeting through video conferencing or audio visual will be the place
where the recording takes place.

(2) (a) in Rule 4, (a) in sub-Rule (1), for the brackets, figure and word “(1) The,” the word “The” shall be substituted;

(b)
in Clause (iv), for the words “consideration of accounts,” the words
“consideration of financial statement including consolidated financial
statement, if any, to be approved by the Board under s/s. (1) of section
134 of the Act” shall be substituted, i.e, Audit Committee meetings for
consideration of accounts is to now read, the Audit Committee Meetings
for consideration of any financial statement including Consolidated
Financial Statement cannot be done through video conferencing.

(3) in Rule 15, for sub-Rule (3), the following sub-Rule shall be substituted, namely:-

“(3)
For the purposes of first proviso to s/s. (1) of section 188, except
with the prior approval of the company by a special resolution, a
company shall not enter into a transaction or transactions, where the
transaction or transactions to be entered into, –

a. as
contracts or arrangements with respect to clauses (a) to (e) of s/s. (1)
of section 188, with criteria as mentioned below –

i) sale,
purchase or supply of any goods or materials, directly or through
appointment of agent, exceeding ten per cent. of the turnover of the
company or rupees one hundred crore, whichever is lower, as mentioned in
Clause (a) and Clause (e) respectively of s/s. (1) of section 188;
ii)
selling or otherwise disposing of or buying property of any kind,
directly or through appointment of agent, exceeding ten per cent. of net
worth of the company or rupees one hundred crore, whichever is lower,
as mentioned in Clause (b) and Clause (e) respectively of s/s. (1) of
section 188;
iii) leasing of property of any kind exceeding ten per cent. of the net worth of the company or ten per cent. of
turnover of the company or rupees one hundred crore, whichever is
lower, as mentioned in Clause (c) of s/s. (1) of section 188;

iv)    availing or rendering of any services, directly or through appointment of agent, exceeding ten per cent. of the turnover of the company or rupees fifty crore, whichever is lower, as mentioned in Clause (d) and Clause (e) respectively of s/s. (1) of section 188:

Explanation- It is hereby clarified that the limits specified in sub-Clauses (i) to (iv) shall apply for transaction or transactions to be entered into either individually or taken together with the previous transactions during a financial year.

b.    is for appointment to any office or place of profit in the company, its subsidiary company or associate com- pany at a monthly remuneration exceeding two and half lakh rupees as mentioned in Clause (f) of s/s. (1) of section 188; or

c.    is for remuneration for underwriting the subscription of any securities or derivatives thereof, of the company exceeding one per cent of the net worth as mentioned in Clause (g) of s/s. (1) of section 188.

Explanation.-

(1)    the turnover or net Worth referred in the above sub- rules shall be computed on the basis of the audited Financial Statement of the preceding financial year.

(2)    in case of a wholly-owned subsidiary, the special reso- lution passed by the holding company shall be suf- ficient for the purpose of entering into the transactions between the wholly owned subsidiary and the holding company.

(3)    the explanatory statement to be annexed to the notice of a general meeting convened pursuant to section 101 shall contain the following particulars, namely:-
a.    name of the related party;
b.    name of the director or key managerial personnel who is related, if any;
c.    nature of relationship;
d.    nature, material terms, monetary value and particulars of the contract or arrangement;
e.    any  other  information  relevant  or  important   for the members to take a decision on the proposed resolution.”

5.    Second amendment to Companies (Management and administration) rules, 2014

The ministry of Corporate affairs has on 24th july, 2014 vide Gsr 537(e) amended the Companies (manage- ment and administration) rules, 2014 by insertion of the following:

i.    in rule 9 after sub-rule (3) – “provided that nothing contained in this rule shall apply in relation to a trust which is created, to set up a mutual fund or Venture Capital fund or such other fund as may be approved by SEBI.”
ii.    and in rule 13 the words “either value or volume of the shares “shall be and the explanation shall be omitted.
iii.    In Rule 23 (1) for the words “not less than five lakhs rupees,” the words “not more than five lakh rupees” substituted.
iv.    In rule 27, in sub-rule (1) and in the explanation, for the word “shall”, the word “may” shall be substituted.

6.    Addition to Schedule VII – of Companies act, 2013

The Central Government vide Notification dated 6th August, 2014, Gsr 568 (e) has made the following amendment to schedule Vii pertaining to Corporate social responsibility:

insertion of
“(xi) slum area development.

Explanation – for the purposes of this item, ‘slum area’ shall mean any area declared as such by the Central Government or any state Government or any other Com- petent authority under any law for the time being in force.”

7.    ‘Class of Companies “ for the purposes of Section 203 (1) of the Companies act, 2013

Vide Notification No. S O 1913(E) the Ministry of Corpo- rate Affairs has on 25th July, 2014 it has notified that public Companies having :

a)    paid up Capital of Rs. 100 crores or more; and
b)    annual turnover of Rs. 1,000 crores or more; and
c)    which are engaged in multiple businesses; and
d)    have appointed Chief Executive Officer for each such business shall be the ‘class of Companies’ for the purposes of section 203 (1) of the Companies act, 2013 which pertains to appointment of Key managerial personnel.

8. Companies (removal of Difficulties) Sixth Order, 2014

The ministry of Corporate affairs has vide s o 1894 (e) dated 24th july, 2014, issued the Companies (removal of Difficulties) Sixth Order, 2014. To overcome the difficulties arising, and resultant disharmonious interpretation of Clause 76 of section 2 pertaining to related party, due to absence of the word ‘relative’ in clause (iv), the Central Government has issued the said order and amended section 2 as follows:

“In Clause (76) in sub-Clause (iv) after the word ‘manager’ the word ‘or his relative’ shall be inserted.”

Part A Decision of CIC

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TEP: Order of Information Commissioner Mr. Basant Seth:

Decision Notice:
A coordinate bench of this Commission in its order dated 18/06/2013 (File No. CIC/RM/A/2012/000926 Sh. Ved Prakash Doda vs. ITO) has held as under:

“6. It has been the stand of the Commission that in respect of a tax evasion petition, once the investigation is completed, the appellant should be informed the broad results of the investigation, without disclosing any details. The appellant has a right to know as to whether the information provided by him was found to be true or false.

7. The Commission accordingly directs the CPIO to provide to the appellant, if investigation has been completed, the broad outcome of the investigation without divulging any details, within ten days from date of receipt of the order.” Following the ratio of above cited decision, the Commission directs the CPIO to respond to the RT I application and disclose the broad outcome of the TEP without divulging any details, to the appellant after the assessment is completed.

The appeal is disposed of accordingly.

[CIC/RM /A/2014/001153/BS/8839 of 15.10.2015 in the matter of Md. Masoom Afzal vs. CPIO/ACIT, HO (Tech), Income Tax Department, Patna]

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Company Law

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1. The Companies (Acceptance of Deposits) Second Amendment Rules, 2015

The
Ministry of Corporate Affairs has vide notification dated 15th
September 2015 amended the Companies (Acceptance of Deposits) Rules,
2014. In rule 2, in subrule (1), in clause (c), for sub-clause (viii),
the following is substituted :

“(viii) any amount received from a
person who, at the time of the receipt of the amount, was a director of
the company or a relative of the director of the private company:

Provided
that the director of the company or relative of the director of the
private company, as the case may be, from whom money is received,
furnishes to the company at the time of giving the money, a declaration
in writing to the effect that the amount is not being given out of funds
acquired by him by borrowing or accepting loans or deposits from others
and the company shall disclose the details of money so accepted in the
Board’s report;”.

In rule 3, for the words “paid-up share
capital and free reserves”, wherever they occur, the words “paid-up
share capital, free reserves and securities premium account” shall be
substituted;”

2. Companies (Filing of documents and forms in XBRL ) Rules, 2015

The
Ministry of Corporate Affairs has vide notification dated 9th September
2015 issued the Companies (Filing of Documents and Forms in Extensible
Business Reporting Language) Rules, 2015. As per the said rules, all
listed Companies and their Indian subsidiaries or Companies having a
paid up capital of Rs.5 crore or Companies having turnover of Rs. 100
crore and above or Companies which were covered under the Companies
(Filing of Documents and Forms in Extensible Business Reporting
Language) Rules 2011 shall file the financial statements with the
Central Government using the XBRL taxonomy for the financial years
commencing 1st April 2014.

The rules further specify that
companies that are required to file the cost audit report and other
documents with the Central Government shall do so using the XBRL
taxonomy for the financial years commencing 1st April 2014.

3. Companies (Management and Administration) Amendment Rules, 2015

The
Ministry of Corporate Affairs has vide notification dated 28th August
2015 issued the Companies (Management and Administration) Amendment
Rules, 2015. As per the amendment, Rule 23 which pertains to special
notice to be given to the Company, the words “not more than five lakh
rupees” is substituted by the words “not less than five lakh rupees”.

The contents of Form MGT-7 for the Annual Return of the Company have been modified.

4. Companies (Accounts) Second Amendment Rules 2015

The
Ministry of Corporate Affairs has vide notification dated 4th September
2015 issued the Companies (Accounts) Second Amendment Rules 2015.

Following clauses have been inserted:

Rule 2 ( 1) (da)
‘Indian Accounting Standards “means the Indian Accounting Standards
referred to in rule 3 and Annexure to the Companies (Indian Accounting
Standards) Rules 2015

Rule 4A : Forms and items contained in the Financial Statements :
The financial statements shall be in the form specified in Schedule III
to the Act and comply with Accounting Standards or Indian Accounting
Standards as applicable. Provided that the items contained in the
financial statements shall be prepared in accordance with the
definitions and other requirements specified in the Accounting Standards
or the Indian Accounting Standards as the case may be.

The Ministry has also released the contents of the following forms

AOC – 4 [Earlier Forms 23 AC & 23 ACA] – Form for filing Financial Statements & other documents with the Registrar &

AOC – 4 CFS –
Form for filing Consolidated Financial Statements & other documents
with the Registrar, both to be filed with certification by CA/CS/CMA.

5. Alterations to Schedule III of Companies Act 2013

The
Ministry of Corporate Affairs has vide notification dated 4th September
2015 made the following alterations to Schedule III (General
Instructions for Preparation of Balance Sheet and Statement of Profit
and Loss Account) In Part I Balance sheet under the heading “Equity and
liabilities” for the term trade payables the following shall be
substituted:

Trade payables:

Total outstanding dues of micro enterprises and small enterprises.

Total outstanding dues of creditors other than micro enterprises and small enterprises.

Additional disclosures in Notes in relation to Micro, Small and Medium Enterprises have also been prescribed.

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Part B RTI Act, 2005

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State CIC lauds civic chief’s circular on RTI red tapism:
Maharashtra’s Chief Information Commissioner Ratnakar Gaikwad has applauded a BMC circular issued by Civic Commissioner Ajoy Mehta, aimed at reducing red tape over the implementation of the Right to Information Act, and now wants the state government to issue the very same circular to all state departments.

The BMC circular talks of how citizens who seek information under the RT I Act are often summoned to inspect documents even when the information they seek is not voluminous, or when they have not asked for an inspection. The circular asks BMC officials not to do so. Instead, they have been instructed to send the information directly to applicants, they should count the number of pages asked for, and charge the applicant for the information per page.

When the information sought is voluminous and an RT I applicant is called for an inspection, the circular says, applicants should not merely be dumped with the information, but the documents should be indexed and the pages numbered so that it is easy for applicants to find the information they are looking for.
(Also see in the issue of August 2015: page 94, Inspection of Documents.)

Grant for online filing of RTI Applications:
States can get financial aid from the Centre to set up facilities for the online filing of applications under the Right to Information (RT I) Act and other initiatives aimed at simplification and promotion of the transparency law. Various Administrative Training Institutes (AT Is) working under the states can also get grant of a maximum of Rs.4 lakh for setting up a helpline in regional languages for answering queries of the general public under the RT I Act, the Department of Personnel and Training (DoPT) announced on Thursday. “The facility of filing RTI applications and appeals online through the RT I online web portal has been launched and is being implemented in all the ministries or departments of the Government of India situated in New Delhi.

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Part A Decision of CIC

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RTI Stamps:

[CIC/SA/A/2015/000743 dated 24.07.2015; A. S. Berar vs. Dte of Education (East)]

In response to a RT I application, the Central Commission writes:

Neither the Act nor Rules state anywhere that the Public Authority should charge Rs.2 for writing a response or answering certain points under RT I, like ‘yes’ or ‘no’ or “information attached”. The Act does not provide for pricing the information or for collecting cost of searching the files or writing notes from them. Charging Rs.2 for the covering letter, or typing on paper, information collected from other files, is unheard of. These methods by the Public Authority will lead to delay or denial of the information.

The Commission also found that certain RT I sections are wasting paper in many ways. They write ‘letter is attached’, and that letter contains two sentences like ‘information sought is not available’. Such letter sent through three or four wings of the office reflect the office’s response and responsibility. At each stage, a file was built, letter was written after the file noting was approved and then posted.

In a response from the Ministry of Communications and IT Department of Posts on 18th October 2013 to a RTI petition filed by Mr. Subhash Chandra Agrawal, sent through the Ministry of Finance, it was stated: “As per costing exercises 2011-12, the operational cost of a postal order is Rs.37.45”. This means to realise IPO of Rs.6, the department has to spend Rs.37.45, besides wasting man-hours and stationery for writing the letter. The cost must have increased in 2015.

There are the commonsense points that PIO failed to notice.
(a) Postal order for less than Rs.10 is discontinued, thus asking for Rs.6 is meaningless.
(b) Even if IPO for Rs.10 is given to pay Rs.6, the public authority has to incur operational cost for IPO Rs.37.45 to transfer the cash.
(c) In writing a letter to appellant to demand Rs.10, the public authority has to spend at least one manhour.
(d) To post the letter, the IPO has to spend Rs.17 (for local speed post, Rs. 28 for non-local), or Rs. 22 (17 plus 5 Registered Post, for every next 20 grams or part of it Rs.5 additional), Rs. 27 (Registered Post-Acknowledgement Due).

Chief Information Commissioner Sri Satyananda Mishra in his order on 30.05.2012, in a second appeal filed by Subhash Chandra Agrawal cautioned the PIOs “It is not prudent to ask for Rs.2 per page in giving one page of information, because in the process, much more public money is lost in correspondence”. The IPOs for Rs.1, 2, 5, 7 were discontinued, but IPO of Rs. 10 is retained, perhaps for helping payment of Rs. 10 RT I fee. Because of non-availability of IPOs of smaller denominations, the applicants have to |pay more money than what is prescribed. For instance to pay Rs.12 copying charges, one has to take IPO of Rs.20.

In order to avoid all these complex and costly affairs, considering delay and wastage of money in collecting fee and charges, the Commission recommends to the Government of India, especially, the Department of Personnel & Training and the Department of Posts, to arrange exclusive stamps for RT I on the lines of Radio licensing stamps, which were used to collect the license fee decades ago. (a picture of those stamps is given below, * how these stamps were fixed in a license book for Radio can also be seen). It will be useful and easy to pay RT I fee or cost of copying if these RT I stamps are made in different denominations of Rs.2, 10, 50, and 100.

The Commission directs the respondent authority not to deny information on such trivial causes and not to waste public money in demanding small amounts. If charges to be paid are not worth the cost of typing and posting a letter etc., they should avoid it. The Commission directs the respondent authority to train the personnel in the RT I wing and sensitise them to understand the difference between fee, cost and value of letter or sheet containing information.

The Commission is also not convinced with the demand for refund of 6. Appellant is right in questioning the demand of a paltry amount as explained above, but Lt. Col. A. S. Berar should not have sought refund of Rs.6, because even in doing so, the Public Authority has to spend once again unnecessarily.

The respondent officer submitted that she would furnish the information after the remaining school responded to her forwarded letters. The Commission directs the respondent authority to furnish the information for the remaining 42 schools which might not take more than a page, without asking an IPO for Rs.2, within one month from the date of receipt of this order.

With the above observations, the appeal is disposed of. Mr. Subhash Chandra Agrawal commenting on the above judgement writes:

In a colorful pictorial CIC-verdict dated 24.07.2015 in appeal – number CIC/SA/A/2015/000743 wherein strongly reasoned recommendations citing RT I responses and earlier CIC-verdict are given for introducing RT I stamps in denominations of Rs.2, 10, 50 and 100 as the most convenient and enormous revenue-saving (of crores of rupees) mode for payment of RT I fees and other charges under the RT I Act.

CIC-verdict comes as a ready reckoner for concerned departments, namely Department of Posts and Department of Personnel & Training (DoPT) when it incorporates colorful photos of Radio and TV License fees stamps on lines of which RT I stamps can be issued.

With postal-orders below Rs.10 discontinued, there is no practical mode for making payments in fractions like Rs.2, 4, 6 and 8. High handling cost of Rs.37.45 to get RT I fees of Rs.10 is the other reason for suggesting RT I stamps.

Red-tapism and ‘jaisa hai chalne do’ bureaucratictheory has obstructed issuing of RT I stamps earlier also suggested in a full-bench CIC-verdict dated 27.08.2014 in appeal-number CIC/BS/C/2013/000149/LS when Department of Posts informed that Security Printing Presses at Nasik and Hyderabad expressed inability to print RT I stamps because of shortage of paper. At least now sincere and serious steps should be made for immediate introduction of RT I stamps.

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Part C Information on & Around

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Judges’ Assets:
The Bombay high court has rejected a petition that sought details of assets of judges under the Right to Information Act.

A
division bench of Justice S. C. Dharmadhikari and Justice G.S.Kulkarni
pointed out that the applicability of the RT I Act on information that
is with the Chief Justice in his fiduciary capacity is pending before
the Supreme Court. The Court dismissed the petition filed by advocate
Mathews Nedumpara, challenging the orders of the public information
officer (PIO) and the appellate officer that the information could not
be furnished as the matter was subjudice before the Supreme Court.

PM’s foreign trips:
Prime
Minister Narendra Modi’s foreign trips cost the exchequer over Rs. 37
crore with his Australia trip proving to be the most expensive one.

Documents
accessed under RT I Act reveal that Indian missions in 16 countries
spent Rs.37.22 crore in one year. Modi visited 20 countries between June
2014 and June 2015.

Among the most expensive trips were those
to Australia, the US, Germany, Fiji and China while the cheapest trip
was Bhutan which cost Rs.41.33 lakh. In Australia, the mission spent
over Rs.5.60 crore on hotel stay for the PM and his delegation and
Rs.2.40 crore on hiring cars.

The PM’s trip to New York in
September 2014 resulted in a spending of Rs.9.16 lakh on hotel
accommodation for the SPG delegation and Rs.11.51 lakh for hotel rooms
for the PM, and official of the foreign ministry and the PMO. The
delegation stayed at the New York Palace Hotel.

Another Rs.39
lakh was spent on car rentals for the SPG delegation while Rs.3 lakh was
spent on Prasar Bharati for coverage of the PM’s visit. In Germany, the
embassy spent Rs.3.80 lakh on hotel accomodation, Rs.1.31 lakh on daily
allowances and Rs.19,405 on local travels.

RTI show on DD:
DD
programme “Janne Ka Haq” was the only TV show in India which for over
nine years was based solely on RT I and transparency related issues. Its
popularity was high, especially in rural areas and small towns. Most
institutions against whom RT I queries were posed were obviously
uncomfortable, since an ordinary individual could challenge the system.
Janne Ka Haq was suddenly discontinued a fortnight back before it could
complete its 10th anniversary in January next year. The order to cancel
the show reportedly came from the top.

Landmark Order of Chief SIC, Maharashtra:
In
a landmark order passed by the state information commission, all
offices of cabinet ministers and ministers of states will henceforth be
treated as public authorites. The order gives scope for more
transparency in these offices, by bringing the conduct of ministers and
their activities under the RT I ambit.

The order was passed by
state chief information commissioner Ratnakar Gaikwad on an application
made by Fort resident Govind Tupe. It directs the chief secretary to
appoint the required staff so that offices of ministers take RT I
applications. The order has to be complied with by October 31.

Chief secretary Swadheen Kshatriya said, “We will comply with the order.”

Tupe had submitted an application to the office of the social justice minister, which was not replied to.

After
the Act was implemented, barring the chief minister’s office, other
ministers’ offices gradually stopped accepting applications, saying they
should be sent to the department concerned and not the ministry. But in
such scenarios, unless the applicant categorically asked about a
particular detail regarding the minister/ministry, s/he wasn’t given
that information. And, with the ministers’ offices left out of the RT I
ambit, applicants would fail to get information that only the minister
and his/her ministry was in the know of. Now, recommendations made by
ministers, letters they write and other details, like their schedule is
expected to be made available.

“When political parties are under RT I, there is no reason why these people and their conduct can’t be included,” said Tupe.

“Recently,
some officers recommended by the Social justice minister were arrested
by the ACB. I wanted to know how many such recommendations were made and
to which departments. When I went to follow up on my application, the
minister’s staff refused to reply, saying his office is not under RTI.
So, neither could I get information, nor could I file the first appeal. I
then filed a complaint with the Commission.”

During the
hearing, the Commission stated, “Offices of ministers have been set up
by government…these perform several duties – receiving files from
various departments, applications from people and complaints from the
public, and correspond with authorities/offices…” “Sizeable staff is
also sanctioned by the government to these offices… They, therefore,
fall under the purview of section 2(h) (d) of the RT I Act, 2005.”

The Social justice minister’s private secretary has been asked to respond to Tupe’s application.

“There
is no doubt that ministers’ offices are public authority. They are
decision-making bodies and all their expenses, including ministers’
salary and perks, are taken care of by the government,” said RT I
activist Bhaskar Prabhu.

Education Minister Vinod Tawde:
The
state education board has rejected a Right to Information (RT I)
request about Education Minister Vinod Tawde’s mark sheets and
certificate because of political pressure, the NCP alleged.

NCP
spokesperson Nawab Malik claimed that Tawde had declared his educational
qualification as BE (electronics) from a bogus institute called
Dnyaneshwar Vidyapeeth. “It is believed that Tawde did not clear his Std
XII and hence an RT I query was made to clear doubts about his 10th and
12th standard education,” Malik alleged.

But the Maharashtra
State Board of Secondary and Higher Secondary Education rejected the
request after pressure from Tawde, Malik added.

Activist Anil Galgali had filed the application. In her reply, public information officer and joint secretary Ranjana Chaskar of the Mumbai Board said that documents such as mark sheets cannot be given to a “third person”.

Galgali appealed against the same, but divisional secretary C.Y. Chandekar also rejected his plea stating the same reason.

Malik said that if Tawde had nothing to hide, he should make public his Std X and XII mark sheets.

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Part B RTI Act, 2005

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The Department of Personnel and Training (DoPT) – the nodal department for implementing The Right to Information Act, 2005 (RT I Act) in the Government of India has uploaded two important documents on its website.

1) The DoPT has issued reasonably detailed guidance for Public Information Officers (PIOs) to help them send better drafted replies to RT I applicants. Every PIO is now required to include in his/her reply- the office number given to the request, name and contact details of the PIO including email address, detailed reasons invoking the relevant provisions of access to information is denied, name and contact details of the appellate authority whom the applicant may approach with a grievance within 30 days of receipt of the reply. This advisory is an outcome of the consultation on the subject that the DoPT launched in March this year.

This guidance also includes instructions as to how certified copies may be issued under the RTI Act by the PIO on request. The PIO will have to endorse the copy as follows: “True copy of the document/record supplied under RTI Act”, sign the copy with date and affix his/her seal containing his name and name of the public authority. If the requestor seeks documents that are numerous, then the certification of the copies may be done by any other junior gazette officer, but the reply must be sent by the PIO.

This communication has been dispatched to all Ministries and Departments, Secretariats of Parliament, President’s Secretariat, Prime Minister’s Office, NITI Ayog, Election Commission, Comptroller and Auditor General and the Chief Secretaries of all States and Union Territories.

It is heartening to note that two issues about which clarity was required have been dealt with officially after 10 years of implementation of the RT I Act. Readers will remember that the issue of certified copies being sought by applicants under the RT I Act was discussed by the Kerala High Court in January 2014 in the John Numpeli (Junior) case. In this case the Court ruled that section 2(j) of the RT I Act does not take away the right of an individual to get certified copies under other laws such as the Indian Evidence Act, 1872 or the Code of Civil Procedure, 1908. Conversely, if an RTI applicant seeks certified copies under the RT I Act then the PIO must attest to the fact that the copies have been issued under the RT I Act.

A “genius” PIO in one of the northern Indian States had used the Kerala HC judgement recently, to deny certified copies to an RT I applicant. When a prominent RT I activist brought this case to my attention, I had sent him a copy of the judgement to help the RT I applicant. This episode reminded me of the saying in my native language crudely translated as follows- “what God proposes the priest disposes as he deems fit” (in Kannada – “devaru vara kottaru, pujari koda”)

Thankfully the DoPT has now issued this communication making it very clear as to how certified copies may be given under the RTI Act. Frankly, there is no conflict between section 76 of the Indian Evidence Act and section 2(j) of the RT I Act. In both laws, any person who has the right to inspect any public document/record, has the right to seek a certified copy from its custodian on payment of the relevant fees. Public authorities resistant to the idea of greater transparency in their working had created much confusion holding that certified copies can be given only under the Indian Evidence Act and not under the RT I Act. PIOs also pointed out that documents certified under the RTI Act could not be used as evidence in Courts. Thankfully, the Kerala High Court’s judgement and now the DoPT’s latest OM have brought closure to this controversy. PIOs henceforth must supply certified copies to RTI applicants on demand if the information is not covered by any exemption under the RTI Act. In my opinion, documents certified under the RTI Act can be used in Courts as evidence/exhibits by litigants.

I hope the General Administration Department in Jammu and Kashmir also takes this step to bring clarity about issuance of certified copies to RTI applicants under the J&K RTI Act, 2009.

2) The DoPT has also uploaded on its website its 2nd Compendium of Best Practices in implementing RT I across the country. There are several interesting initiatives documented in this compendium. I hope the DoPT will bring out a 3rd volume focusing more on how Government Departments and Ministries have brought about changes to their working due to RT I interventions of the citizenry. This is what many of us would like to hear when we celebrate the 10th anniversary of the RT I Act. Readers may go through the documentation of CHRI’s efforts to make transparency a reality at the grassroots level in the Panchayats of Gujarat in this Compendium.

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Ethics and You

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Procedure of Enquiry (Continued) – Part IV

Arjun (A) — Oh My God! This heat is unbearable. And also this humidity.

Shrikrishna —Why don’t you go to some hill station? April must be a ‘cool’ month for you CAs.

A — Kaash, yeh sach hota!

S — Why? Isn’t the work load less now?

A
— Maybe, yes. No deadlines. But bank audits, service tax returns and
whatever nonsense tax assessments are completed in March, we need to
submit appeals, stay applications, and what not!

S — H ow was bank audit experience this year?

A—
T hat is a nightmare. Big branches to be completed in 4 to 5 days; with
just one or two assistants. Bank staff never co-operates. Bhagwaan ka
naam le ke hi sign karna padta hai.

S— I agree. Your profession is difficult.

A—
By the way, you have so far explained to me how a disciplinary case
starts. Apart from complaint, there could be suo moto ‘information’
cases as well. I have also understood upto the stage of ‘Prima facie
opinion’ and the types of punishments for various items of misconduct.

S— T oday, I wish to explain how the actual enquiry is conducted.

A— Y es, yes! I wanted to know that. It must be a dreadful experience.

S—
A ctually, it is not so frightful. It is not a police enquiry. It is a
plain fact finding exercise. No need to be nervous if you have acted
diligently.

A— But there are many mistakes that occur unknowingly. If they are exposed, it could be serious!

S—
Y es. It depends on the nature of offence. It is held in a conference
hall; not like a court where the judges sit on a raised platform.

A— So, it is across the table. Good.

S—
Y es. On one side of the table, the Members of the Board of Discipline
(BOD) or Disciplinary Committee (DC) sit. They are assisted by the
Secretariat. The complainant, his counsel, respondent and his counsel
sit in front of the BOD/DC on the other side of the table.

A— A nd how does it start?

S—
E verything is tape-recorded. Also, there is a stenographer. Everyone
has to speak into a mike. First of all, all parties are required to
identify themselves. Then, Complainant and Respondent are put on oath.

A— A re there witnesses?

S—
See, in the Misconduct Procedure Rules, for First Schedule Offence,
before BOD, there is no provision for witnesses. But for Second Schedule
items before DC, one can call witnesses.

A— Both the parties?

S— Y es. Not only the parties but even the Committee can call its witnesses.

A— Ohh!

S—
A fter this, the complainant is asked to explain his charges. Committee
asks him questions so as to define the exact charges. A— What next? S— R
espondent is asked whether he has understood the charges. He is asked
to state whether he pleads guilty or he wants to defend himself.

A— What is he expected to say?

S—
I f Respondent wants to accept his guilt, well and good. He has to say
so. If he wants to argue or defend, he can say accordingly.

A— T hen what happens?

S—
I f it is to be defended, the Respondent is allowed to speak and
explain his position. His counsel may also speak on his behalf.

A— D o they ask questions?

S—
O f course. Previously, it used to be formal like in a court. There was
examination, cross-examination and so on. However, cross examination is
permitted. Nowadays, they adopt a summary procedure.

A— What about witnesses?

S—
A s I told you, witnesses are called and examined. All parties can
question the witnesses. But one cannot ask leading questions except in a
cross-examination.

A— What about new evidences or new documents?

S—
See, Arjun. One must keep in mind that it is an enquiry into the
conduct of a member of the Institute. It is not a law suit – civil or
criminal. So ordinarily everything is entertained in a fair and
transparent manner. But complainant is not allowed to make a new charge
or allegation. One cannot enlarge the scope of the complaint.

A— What is the value of precedents?

S—
F rankly, in my opinion there is not much value to the precedents. Each
case is unique on its facts. There are so many shades of human
behaviour. Misconduct is to be viewed on the facts and in the
circumstances of each case.

A— I s it advisable to have a lawyer with us?

S—
I t depends. Sometimes, a respondent gets psychologically nervous. Many
times they cannot express themselves clearly and properly. So a
counsel’s presence does help.

A— But who can be a counsel?

S—
N ormally, any other member of your Institute; or a company secretary,
cost accountant or a lawyer is engaged as counsel. But lawyers need to
understand that a very legalistic approach does not help. It is a
fact-finding process.

A— Like what?

S— F or example,
while doing audit, you may take a view in respect of some provision of
company law or income tax. There, you may argue in a legalistic way. But
petty matters of procedures should not be given too much importance.
They allow you every reasonable opportunity to submit any documents,
information, explanation and so on. You are allowed to speak without any
pressure or tension.

A— H ow long does the hearing last?

S— R anging from half-an-hour to even 2 to 3 days! D epending upon the nature of allegation, number of witnesses and so on.

A— I need to know many more things about these proceedings. I will bring my friends also to listen to all this.

S—
R emember that all the proceedings are recorded and you get verbatim
minutes. These are called Notes of Hearing. One has to apply to the
Director Discipline to get these minutes.

Om Shanti !!!

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PART C: Information on & Around

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BMC Loses Rs. 100 Crore:
The BMC may have lost around Rs.100 Crore because developers weren’t being charged extra taxes for water and sewage disposal at under construction sites.

Following an RT I query from a city based activist, municipal commissioner Sitaram Kunte has now ordered an enquiry. Officials began collecting the levy from builders three months ago, but they were supposed to start collections in June, 2012.

For most of the past two years, the BMC didn’t ask builders for these taxes, even though water was supplied for projects, according to responses to activist Anil Galagali’s RT I query. BMC sources said around Rs. 100 crore may have been lost because these taxes weren’t collected. Meanwhile, officials recently began recovering the charges from builders, and in three months have collected Rs.19.6 crore from ongoing projects.

Sheila Dikshit’s appointment as Governor:
Files moved at breakneck speed for the appointment of the former Delhi CM Sheila Dikshit as Kerala governor. In a bid to beat the election code of conduct, sitting Kerala governor Nikhil Kumar resigned, Karnataka governor HR Bharadwaj was handed interim charge and finally Dikshit appointed as Kumar’s successor all in the space of few hours on March 4. The code of conduct was to come into effect a day later.

The information disclosed by the home ministry was in response to an RTI plea filed by activist SC Agarwal. According to the documents made public, home minister Sushil Kumar Shine recommended appointment of Dikshit as Kerala governor following a one line resignation from Kumar. In his letter dated March 4 to President Pranab Mukherjee, Kumar said, “I resign as governor of Kerala with immediate effect.” He did not ascribe any reason for his resignation.

Not only was Kumar’s resignation accepted the same day but in the next few hours, President’s secretary Omita Paul shot off a letter and warrant to Bharadwaj asking him to take additional charge. A few hours later, Paul issued a warrant under the hand and seal of the president and a letter appointing Dikshit as Kerala Governor.

Thane Badlapur CR Stretch has Just two ambulances:
Central Railway (CR) authorities are under the spotlight for failing to provide basic transport facility to ferry the injured to the hospitals. Responding to a Right To Information (RT I) query by city advocate Suyash Pradhan about the availability of ambulance services outside each station on the CR line, the authorities said that private ambulances are parked round-the clock only at Thane and Dombivali stations between the Thane-Badlapur stretch. “At other stations, ambulances are on call basis and the list of private ambulances service providers is circulated to all stations to be summoned as and when required,” said senior divisional commercial manager Narendra Patil. “Commuters between Thane-Kalyan contribute in crores to the CR from the purchase of season tickets and monthly pass. The safety of the commuter should ideally be paramount. In the last one year alone 546 accidents were reported close to Kalyan station. The frequency of the fatalities due to commuters falling off trains between Diva and Thane is scary and there is a direct need to have a 24/7 ambulance outside these stations,” Said Pradhan.

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PART B: RTI Act, 2005

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WESTERN INDIA RTI CONVENTION 2014 DECLARATION:

As citizens and activists committed to building a transparent and accountable democracy we have gathered together from more than 15 States and Union Territories across the country in the city of Mumbai to celebrate our victories, and to discuss and strategies to squarely face current challenges. In this Western India RT I Convention, we pledge our commitment to protect our constitutionally guaranteed fundamental rights and particularly emphasising the freedom of speech and expression which is the bed rock of a free and democratic society in the absence of which our right to information would lose much of its meaning and value. On this day the 8th of June, 2014, we express our solidarity with all RT I users, activists and their families who have suffered attacks on them and resolve to defend our right to access information and express our opinions without fear and pledge in particular to struggle to achieve our collective vision as follows-

WE, TH E PART ICIPANTS OF TH E WESTERN INDIA RT I CONVENTION, HEREBY DECLARE TH AT:

1. E ven after nine years of the enactment of the Right to Information Act (RT I Act), governments have failed to implement this law to our expectations. Governments must take immediate and effective steps to establish a regime of transparency at all levels of the administration.

2. It is a matter of great concern that even after nine years of the enactment of the RT I Act, several states and competent authorities have rules which are contrary to the letter and spirit of the RT I Act and curb people’s right to seek information in many ways. We demand that the governments and competent authorities work towards installing a uniform regime of Rules under the RT I Act across the country.

3. A large number of public authorities have failed in fulfilling their obligation to proactively provide information to people u/s. 4 of the RT I Act. All public authorities must urgently fulfill this responsibility. We demand that the Government of India, all state governments and public authorities immediately implement the guidelines framed by the Task Force on section 4 implementation set up by the DoPT in 2013, including the adoption of all the templates developed by the Task Force.

4. T he government must undertake steps to create awareness about the RT I Act among people, especially amongst the disadvantaged segments of society such as women, dalits, adivasis, all kinds of minorities and differently-abled persons. Even after more than nine years of enactment of the RT I law, awareness levels among people and a functional knowledge of the RT I Act, is low. A Peoples’ Monitoring Study of the RT I Regime In India, undertaken by RAAG, NCPRI and other groups, based on an analysis of 4000 RT I applications filed between 2005 and 2008, has found that only 6% of RTI applications were filed by women. RT I must be introduced in the educational curriculum to spread awareness amongst the youth.

5. A ll six national Political Parties must immediately comply with the June 2013 order of the Central Information Commission, which had declared them ‘public authorities’ under the RT I Act and therefore, must implement the provisions of the RT I Act, including section 4, also appoint public information officers and appellate authorities to dispose RT I applications and appeals received from the people. All other political parties registered with and recognised by the Election Commission of India must proactively take steps to implement the RTI Act within their offices.

6. T he Central and State Governments must ensure that the Whistle Blowers Protection Act (WBP Act), enacted in May 2014, is operationalised immediately. Model WBP Rules for implementing this law must be made in a transparent, consultative and participatory manner, to establish a comprehensive framework for protecting whistleblowers across the country. It is the moral responsibility of the Government to protect RT I activists and users who are attacked, and take swift legal action against those responsible for these attacks. Protection must be provided to their families and adequate compensation must be paid in such cases. It is also the obligation of governments and information commissions to ensure that, whenever an RT I applicant is attacked, the information that was being sought by him or her is put in the public domain on and any pending appeal followed up on a priority basis. All persons demanding transparency in public interest who are attacked must be treated as human rights defenders. Instances of murders, physical attacks on RT I users must be investigated and the accused prosecuted under the law in a timely manner.

7. We demand that Parliament immediately enact an effective grievance redress law which provides a timebound, decentralized and comprehensive framework across the country, for addressing day-to-day complaints of people about the non-delivery of rights and entitlements against public authorities based on best practices developed in various States and Union Territories across the country that are implementing similar laws.

8. In order to move from transparency to accountability, the government must ensure that the rules of the Lokpal and Lokayuktas Act, are framed in a transparent manner and the Lokpal is operationalised to function in an independent and empowered manner to tackle corruption. We also call upon our elected representatives in Parliament to enact all pending anti-corruption Bills in order to make India compliant with the provisions of the United Nations Convention against Corruption (UNCAC).

9. We are deeply concerned about the increasing influence of the corporate sector over governments in decision making processes relating to developmental issues. All public authorities must take immediate steps to ensure transparency in the functioning of private entities that utilise or control public resources or public assets or provide public services. Information about all public-private-partnership projects (PPPs) must be accessible under the RT I Act at every stage of the project. Explanations about cost inflation of PPP projects must be disclosed proactively in terms of section 4(1)(c) of the RT I Act. Further, the government must frame appropriate guidelines and rules to ensure a practical framework for accessing information about the private sector bodies u/s. 2(f) of the RT I Act.

[Out of 21 items, in the Declaration, 9 are reported herein above, balance will be reported in the next month’s article.]

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Company Law

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1. Formation of High Level Committee For Corporate Social Responsibility:
The
Ministry of Corporate Affairs has vide General Circular No 1/2015 dated
3rd February 2015 constituted a High Level Committee to suggest
Measures for improved monitoring and implementation of Corporate Social
responsibility under Shri Anil Baijal.

2. Extension of Time for Filing Form for Appointment of Cost Auditor

The
Ministry of Corporate Affairs has vide General Circular no 2/2015 dated
11th February 2015 extended the time for filing of Notice of
Appointment of the Cost Auditor in Form CRA 2 without late fee till 31st
March 2015.

3. Companies (Indian Accounting Standards) Rules 2015:

The
Ministry of Corporate Affairs has vide Notification dated 16th February
2015 notified that Companies ( Indian Accounting Standards ) Rules 2015
which shall come into force by 1st April 2015 and will be applicable
for Companies specified therein for the year ending 31.03.2016.

4. Companies (Removal of Difficulties) Order, 2015 :

The Ministry of Corporate Affairs has passed the Companies (Removal of Difficulties) Order 2015 on 13th February 2015.

1 Section 2(85) which provides for the definition of “small Company” shall now read”

‘‘small company’’ means a company, other than a public company,—
(i)
paid-up share capital of which does not exceed fifty lakh rupees or
such higher amount as may be prescribed which shall not be more than
five crore rupees; and
(ii) turnover of which as per its last profit
and loss account does not exceed two crore rupees or such higher amount
as may be prescribed which shall not be more than twenty crore rupees:
Provided that nothing in this clause shall apply to— (A) a holding
company or a subsidiary company; (B) a company registered under section
8; or (C) a company or body corporate governed by any Special Act;

2
Section 186 which pertains to Loan and Invest ment by Company, the
following is to be added in sub section (11) in clause (b), after item
(iii):

“(iv) made by a banking company or an insurance company
or a housing finance company, making acquisition of securities in the
ordinary course of its business.

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Company Law

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1. Amendment to Schedule VII of the Companies Act, 2013 pertaining to Activities to be undertaken under Corporate Social Responsibility.

The Ministry of Corporate affairs has vide Notification dated 24th October 2014 made the following amendment to the said Schedule:

(i) In item (i) after the words “and sanitation” the words “including contribution to the Swach Bharat Kosh set up by the Central Government for the promotion of sanitation” is inserted
(ii) In item (iv) after the words ”and water” the words including contribution to the Clean Ganga Fund set up by the Central Govt. for the rejuvenation of river Ganga “ is inserted.

2. Amendment to Companies ( Accounts) Rules 2014

The Ministry of Corporate Affairs has on 14th October 2014 issued a notification to amend the Companies (Accounts) Rules 2014, whereby:

The following proviso is inserted after the existing proviso ” Provided further that nothing in this rule shall apply in respect of the preparation of Consolidated Financial statement by an wholly-owned subsidiary, other than a wholly owned subsidiary whose immediate parent is a Company incorporated outside India.

Provided also that nothing contained in this rule shall, subject to any other law or regulation, apply for the financial year commencing from the 1st day of April 2014 and ending on the 31st March 2015, in case of a company which does not have a subsidiary or subsidiaries but has one or more associate companies or joint ventures or both, for the consolidation of financial statement in respect of associate companies or joint ventures or both, as the case may be.”

3. Clarification on matters relating to the Companies ( Cost Records and Audit ) Rules 2014.

The Ministry of Corporate Affairs has vide General Circular No. 42/2014 dated 12th November 2014 made clarification about Rules 5(1) and 6(2) of the Companies (Cost records and Audit) Rules 2014 pertaining to the maintenance of cost records and filing of the notice of appointment of Cost Auditor in Form CRA-2 since there has been a delay in the availability of the said form. The date of filing of the CRA-2 without penalty/late fee has been extended to 31st January 2015. Further, it is clarified that Companies that have filed the Form 23C for the year 2014-15, need not file the fresh CRA 2 for the financial year 2014-15.

4. Issue of Foreign Currency Convertible Bonds (FCCBs and Foreign Currency Bonds (FCBs) – Clarifications regarding applicability of provisions of Chapter III of the Companies Act, 2013

The Ministry of Corporate Affairs has issued clarifications vide Circular No. 43/2014 dated 13th November,2e 2014, for applicability of provisions of Chapter III of the Companies Act, 2013 (Act) to the issue of Foreign Currency Convertible Bonds (FCCBs) and Foreign Currency Bonds (FCBs) by Indian companies exclusively to persons resident outside India in accordance with applicable sectoral regulatory provisions, in consultation with Ministry of Finance and SEBI.

The issue of FCCBs and FCBs by companies is regulated by the Ministry of Finance’s regulations contained in Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipts Mechanism) Scheme, 1993 (Scheme) and Reserve Bank of India through its various directions/regulations. It is, accordingly, clarified that unless otherwise provided in the said Scheme or the directions/regulations issued by Reserve Bank of lndia, provisions of Chapter III of the Act shall not apply to an issue of a FCCB or FCB made exclusively to persons resident outside India in accordance with the above mentioned regulations.

5. Extension for Company Law Settlement Scheme 2014

The Ministry of Corporate Affairs has issued clarifications vide General Circular No. 44/2014, Dated: 14.11.2014, that it has further extended the COMPANY LAW SETTLEMENT SCHEME, 2014 (CLSS-2014) upto 31st December, 2014.

The Ministry has vide General Circular No. 41/2014, issued clarification u/s. 164(2) of the Companies Act 2013. It has clarified that disqualification of Directors pursuant to Clause 164(2) (a) of the Companies Act, 2013 will be applicable for only prospective defaults in case of Companies who have filed Balance Sheets and Annual Returns on or after 01.04.2014 but before the CLSS -2014 came into force i.e., 15.08.2014

6. Extension of time for holding Annual General Meeting (AGM) u/s. 96(1) of the Companies Act, 2013 – Companies registered in State of Jammu and Kashmir.

The Ministry of Corporate Affairs has issued clarifications vide Circular No. 45/2014 dated 18th November 2014, that in view of the exceptional circumstances, advised the Registrar of Companies Jammu & Kashmir to exercise the powers conferred on him under third proviso to section 96(1) of Companies Act 2013 to grant extension of time upto 31st December 2014 to those companies registered in the state of Jammu and Kashmir who could not hold their AGM’s (other than the first AGM0 within the stipulated time.

7. Right of persons other than retiring directors to stand for directorship – Refund of deposit u/s. 160 of the Companies Act, 2013 in certain cases.

The Ministry of Corporate Affairs has vide General Circular No. 38/2014, dated 14th October 2014 issued the clarification that for Companies registered u/s. 8 of the Companies Act, 2013 (corresponding to section 25 of Companies Act, 1956), the manner in which the amount of deposit of Rs. 1 lakh received by them under sub-section (1) of section 160 of the Companies Act, 2013 (Act) is to be handled if the depositor fails to secure more than 25 % of the total valid votes. Since the law is silent in the matter, the Board of directors of a section 8 company is to decide as to whether the deposit made by or on behalf of the person failing to secure more than 25 % of the valid votes is to be forfeited or refunded

8. Amendment to the Companies( Audit and Auditors) Rules, 2014

The Ministry of Corporate Affairs has vide Notification dated 14th October 2014 amended the Companies (Audit and Auditors) Rules, 2014, by inserting after Rule 10, the following

“10A. For the purposes of Clause (i) of sub-section (3) of section 143, for the financial years commencing on or after 1st April, 2015, the report of the auditor shall state about existence of adequate internal financial controls system and its operating effectiveness: Provided that auditor of a company may voluntarily include the statement referred to in this rule for the financial year commencing on or after 1st April, 2014 and ending on or before 31st March, 2015.”

9. Clarification on matters relating to Consolidated Financial Statement.
The Ministry of Corporate Affairs has vide General Circular No. 39/2014 dated 14th October 2014 issued clarification on matters relating to manner of presentation of notes in Consolidated Financial Statements to be prepared under Schedule III to the Companies Act, 2013 (Act). It is clarified that Schedule III to the Act read with the applicable Accounting Standards does not envisage that a company while preparing its CFS merely repeats the disclosures made by it under stand-alone accounts being consolidated. In the CFS, the company would need to give all disclosures relevant for CFS only.

10. Change of Forms

E-form DIR-3C, replacing e-form DIN-3 has been introduced by MCA for filing. This form is for intimating DIN of Directors to ROCs. Some of the companies were facing issues in filing of the forms due to non-availability of signatory details of the Directors in MCA portal. In this regard, Companies which do not have any of their Directors/Signatory details registered in the MCA21 system and who are desirous of filing DIR-3 Form are advised to get atleast one authorised signatory registered by contacting the concerned Registrar of Companies. ROCs have been requested by the MCA to allow entry of details from their offices also.

b) Form ADT-1 (Information to the Registrar by Company for appointment of Auditor, erstwhile Form 23B) is available for filing w.e.f 20th Oct 2014. ADT-1 should not be filed as attachment to Form GNL-2.

11.    Amendment to Company Law board (Fees on Applications and Petitions) Rules, 1991

 
In exercise of the powers conferred by section 642 read with sub-section (2) of section 637A of the Companies Act, 1956 (1 of 1956) and the removal of difficulty Orders issued by the Central Government u/s. 470 of the Companies Act, 2013, the Central Government has vide notifica- tion dated 3rd November 2014 amended the Company Law Board (Fees on Applications and Petitions) Rules, 1991 whereby in the Company Law Board (Fees on Applications    and    Petitions)    Rules,    1991,    in    the    Schedule,    after serial    number    33    the    following    shall    be    inserted,    namely:

34

2(41) of the

Companies Act, 2013

Allowing
any period other than April to March as financial year.

5,000

35

58 and 59 of the

Companies Act, 2013

 

 

36

73(4) of the

Companies Act, 2013 read with
section 76

Rectification of register
of

members

500

37

74(2) of the

Companies Act, 2013

Directing
the company to pay the sum due or for any loss or damage incurred as a result
of such non-payment.

100

 

74(2) of the

Companies Act, 2013

Allow
further time as considered reasonable to the company to repay the deposit.

5,000


12.    Companies (Central government’s) general Rules and Forms Amendment Rules, 2014

The Ministry of Corporate Affairs has vide Notification dated 7th November, 2014 made an amendment to the Companies (Central Government’s) General Rules and cations and Petitions) Rules, 1991, in the Schedule, after serial number 33 the following shall be inserted, namely:
 
Forms, 1956, whereby in Rule 12A, for the brackets and words “(Accounts) in the Department of Company Affairs”, the words “in the Ministry of Corporate Affairs” are substituted.

PART C: Information on & Around

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Compensation of Rs. 5 lakh:
The Maharashtra State Information Commission (SCIC) has awarded a compensation of a whopping Rs. 5 lakh to a right to information applicant. The compensation is to be paid by Maharashtra State Electricity Distribution Company Limited (MSEDCL) to Ambernath resident, Nitin Desai for the harassment meted out to him while providing information to him. The amount is the highest ever compensation given to an individual in the state as of now.

Earlier, a compensation of Rs. 1 lakh was given to a charitable trust by state chief information commission. In 2013, it became the highest ever compensation to be given till date. The Rs. 5 lakh compensation order was delivered on 30th October by the state information commissioner (konkan beach), Thanksi Thekkekara. The compensation was awarded after the applicant was first denied information and then given misleading information.

Desai had sought information on the transformer installed on his land. Around 300 sq. ft. of land was taken up to install the transformer and it could not be used. Desai sought information about the permission. The information was sought in 2012. However, MSEDCL’s public information officer (PIO) did not provide any information.

During the hearing, the PIO stated that verbal permission was taken from the applicant before using the land. The commissioner stated, as per rules, provision for verbal permission did not exist at all. During the hearing, a show cause notice was served on the PIO asking why a compensation of Rs. 20 lakh should not be provided to the applicant. During the hearing, the commission was of the view that Rs. 5 lakh compensation should be provided by public authority from its expenses and a report of the same should be given to the commission by 1st December, 2014. A fine of Rs. 25, 000 was also imposed on the PIO.

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PART A: Decision Of CIC

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Section 5(4) of the RTI Act- Denial of Information:

[Shri Prithvi M. vs. ICAI, File No. CIC/SS/A/2013/001875/ KY, dated on 27.08.2014]

Decision:
“It would be seen here that the appellant, vide his RTI Application dated 08.02.2013, sought information from the respondents on three issues as contained therein. Respondents vide their response dated 08.03.2013, allegedly provided the required information to the appellant on all issues. Being aggrieved by the aforesaid response, FA was filed by the appellant on 26.03.2013 before the FAA, who vide order dated 25.04.2013, upheld the decision of CPIO. Hence, a Second Appeal before this Commission.

It is pertinent to mention here that the CPIO, vide his response dated 08.03.2013, provided the required information to the appellant against issue no. 1 only. Further, learned FAA, vide his order dated 25.04.2013, disposed of the FA by upholding the views of CPIO. However, it is to be seen here that required information against issues no. 2 & 3 were not provided on the ground of non-availability of the record in respondent’s office.

On being queried by the Commission, as to why the required information was not provided to the appellant against issues no. 2 & 3. On this very aspect, it is submitted by Smt. Seema Gerotra, Deputy Director & PIO, that the records are not available in PIO’s office. However, the relevant information pertaining to issues no. 2 & 3, is available in the office of CBDT.

In view of this, it is clear that the information sought by the appellant, against issue no. 2 & 3, is in existence in the Public Authority of her sister’s Branch i.e. CBDT. For this, PIO of ICAI could have easily invoked section 5(4) of the RTI Act 2005 for obtaining the required information. However, it could not be done by the PIO concerned for reasons best known to her.

The Commission heard the submissions made by respondents at length. The Commission also perused the case-file thoroughly; especially, nature of issues raised by the appellant in his RTI application dated 08.02.2013, respondent’s response dated 08.03.2013, FAA’s order dated 25.04.2013 and also the grounds of memorandum of second appeal.

By virtue of position above and in the circumstances of the case, the Commission is of the considered view that the respondents have failed to provide the required information to the appellant, even after lapse of eighteen months period. Thus, the respondents have, deliberately, defeated the very purpose of the RTI Act 2005 for which it was legislated by Parliament of India. As such, the Commission feels that appellant’s second appeal deserves to be allowed against issues no. 2 & 3 of the RTI application dated 08.02.2013. Therefore, it is allowed accordingly.

In view of the above, the respondents are hereby directed to provide the complete and categorical information, against issue no. 2 & 3 only, to the appellant, within 30 days from the date of receipt of this order under intimation to this Commission. If need be, Section 5(4) of the RTI Act 2005 be also invoked in the matter”.

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PART B: RTI Act, 2005

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PEOPLE’S MONITORING OF THE RTI REGIME IN INDIA 2011-13:

In the last issue of BCAJ I had noted as under:

P.S. RTI Assessment and Advisory Group (RAAG) and Samya Center for Equity studies (SAMYA) have published in October 2014 the work titled “PEOPLE’S MONITORING OF THE RTI REGIME IN INDIA: 2011-13 running into 177 pages. Next issue, we will summarise the same. Look forward to it. Briefly looking into the contents of compilation, running into 177 pages of 11 chapters & 10 annexures, I plan to serialise it and cover 1 or 2 chapters in each issue.

This study is part of an ongoing series of studies on various aspects of the implementation of the RTI regime in India. The current study covers the period 2011-13.

Hereunder is the summary of the KEY FINDINGS and RECOMMENDATIONS before I summarise the chapters.

A. Improving awareness: There is poor awareness about the RTI Act, worse in rural areas than in urban areas. In only 36% of the rural focus group discussions (FGDs) and 38% of urban FGDs, was there even one participant who had heard of the RTI Act in the state headquarters, and in Delhi, 61% of the respondents interviewed through street corner interviews said that they had heard about the RTI Act.

B. Gender concerns: The participation of women in the RTI process, especially as applicants, has been minimal, with a national average of 8%. Many reasons can be attributed for this gender imbalance, but there is no scientific understanding of why so few women file RTI applications. If RTI means of empowerment, then there should be a special focus on ensuring that women are aware of the RTI Act and willing and able to use it.

C. The rural-urban divide: Only 14% of the applicants were from rural areas, even though over 70% of India’s population lives in rural areas. Though the sample might have a bias in favour of urban areas, even after adjusting for such a bias, the proportion is too small. Awareness levels about the RTI also seem low in rural areas.

D. Grievance redress mechanism: 80% of respondents in rural FGDs, and 95% in urban FGDs, said that they wanted to use the RTI Act in order to seek redress of their grievances. Analysis of RTI applications showed that at least 16% of the applicants were seeking information that was aimed at getting action on a complaint, getting a response from a public authority, or getting redress for a grievance.

E. Ineffectual first appellate process: Except for first appeals filed with the central government or Delhi government, there is less than 4% chance of getting any information by filing a first appeal.

F. Threats to applicants: Applicants, especially from the weaker segments of society, are often intimidated, threatened and even physically attacked when they go to submit an RTI application, or as a consequence of their submitting such an application.

G. Reducing the need to file RTI applications: Certain public authorities, especially those with extensive public dealing (like municipalities, land and building departments, police departments, etc.) receive a disproportionate share of RTI applications compared to other public authorities. In some cases, there is resentment among PIOs as they have to deal with a large number of RTI applications in addition to their normal work.

H. Proactive disclosure: Despite a very strong provision for proactive (suo motu) disclosure u/s. 4 of the RTI Act, there is poor compliance by public authorities. This forces applicants to file applications for information that should be available to them proactively, and consequently creates extra work for themselves, for the concerned public authorities, and for information commissions. 65% of the PA premises inspected did not have a board with the required proactive disclosures and 59% did not have any publications or other material available in their office which the public could inspect in order to access the information that should be proactively available.

I. Record Management: One major constraint faced by PIOs in providing information in a timely manner is the poor state of record management in most public authorities.

J. Training of PIOs: Nearly 45% of the PIOs have not received any training on the RTI Act. In fact, the PIOs interviewed identified lack of training as their number one constraint. A much larger proportion of non-PIO civil servants, who have to provide information to the PIOs or function as first appellate authorities, have not been oriented and trained towards facilitating the right to information.

K. Delays and pendency: There are huge and growing delays in the disposal of cases in many of the information commissions, with pendency of cases growing every month. At the current levels of pendency and rate of disposal, an appeal filed today with the Madhya Pradesh SIC would be taken up for consideration only after 6 years, while the West Bengal SIC would come to it after nearly 17 years! The main reasons behind the delays seem to be the paucity of commissioners in some of the commissions and the low productivity of some of the other commissioners, mainly due to inadequate support. The additional fact that there is no legally prescribed time limit for disposing second appeals not only allows ICs to be indifferent about delays but also prevents appellants from approaching the high court.

L. Enforcing orders: Often, orders of information commissions are not heeded to by the concerned public authority and even penalties that are imposed are not recovered. Many commissions do not have workable methods of monitoring whether their orders have been complied with; leave alone for ensuring that they are complied with.

M. Imposing penalties: A very small proportion of the penalties imposable under the RTI Act (less than 3.7% on the basis of our current estimate) are actually imposed by commissions. Though further research needs to be done on this aspect, preliminary data suggests that there is a correlation between the number of penalties imposed and both the willingness of PIOs to make information available, and the number of appeals and complaints that land up with information commissions.

N. Practicing transparency: Unfortunately, many of the information commissions do not themselves follow the requirements of section 4 of the RTI act. Most of their websites are outdated with very sparse details and much of the required information missing.

O. Independence of commissions: Many information commissioners feel that their dependence on the government for budgets, sanctions and staff seriously undermines their independence and autonomy, and inhabits their functioning.

P. Composition of commissions: The composition of information commissions across the country has a bias towards retired government servants. It is desirable to have a more balanced composition so that diverse expertise is represented in the commission.

Q.    Rationalising rules:
All states and union territory governments (a total of 34), all the high courts (23) and legislative assemblies (29), the central government, the Supreme Court and both houses of Parliament have a right to make their own rules. This can result in 90 different sets of rules in the country. In addition, the 28 information commissions also have their own procedures, as formulated by the appropriate governments, resulting in a total of 118 sets of rules relating to the RTI in India! Consequently, an applicant is confronted with the often insurmountable problem of first finding out the relevant rules and then attempting to comply with the application form, identity proof, or mode of fee payment requirement, which differ from state to state and are often virtually impossible to comply with.

R.    Monitoring and advisory body: The mechanisms for monitoring the implantation of the RTI Act, and for receiving and assimilating feedback, are almost non- existent.

S.    Information publication scheme:
There is an Information Publication Scheme provided for in the statute in Australia and later adopted by UK too. In this scheme the Information Commission asks each agency to publish its own information on its functioning. The Commission guides the agency and approves the publication scheme.

T.    Political parties and the RTI: Nepal has included the functioning of a political party and only NGO with full/part government funding in the agencies whose information can be accessed.

U.    Selecting information commissioners:
Process of appointment of information commissioners is comparatively more participatory and open in Canada and Scotland. Both countries go through a series of approvals by the Parliament of candidates who are com- petitively short-listed. The transparent process helps in legitimising the position to a much greater degree than appointments that are seen to come through de- liberations of the Prime Minister or government alone.

V.    Implementing IC orders: The orders of the Information Commission are binding on the agency in UK. If necessary, it can issue what are known as enforcement notices which, if not implanted, are treated as contempt of court for the purpose of punishment.

W.    Accountability to Parliament: Information Commissions in Canada and UK submit detailed annual reports of their activities to the Parliament. This makes them accountable to the Parliament and also helps in making their activities transparent and available for public scrutiny.

Above are 23 Key Findings. On each finding, the publica- tion gives their recommendations, which are not reproduced here. If any reader desires to have them, a soft copy would be forwarded to him/her.

    Report of The Committee To evolve Model Format for RTI Replies:

The Committee constituted vide DoPT O/M/No. 10/1/2013-IR dated 16th October, 2014 to evolve a model format for giving information under the RTI Act, held its meeting on 29th October, 2014 at 11:30 a.m. After ex- amining in detail the provisions of the RTI Act, the ex- isting generally followed by the CPIOs in  replying  to RTI applications, the Committee has made the following observations:

X.    There is neither any provision in the RTI Act or RTI Rules for a model/standard format of RTI applica- tion nor any provision for a model/standard format for reply to the RTI applications.

II.    Presently, neither any standard practice nor any standard format is being used by the CPIOs in reply to the RTI applications.

In view of the above observations, the Committee has made the following recommendations:

a)    There should not be a model/standard format for reply to the RTI application, as there is no such provision in the RTI Act or the RTI rules.

b)    Moreover, keeping in view that there is no standard format for RTI applications, there could not be a standard format for their reply.

c)    However, the following points can be uniformly ad- opted by the CPIOs while replying to the RTI applications:

i.    The name, designation, official telephone no. and email id of the CPIOs should be clearly mentioned.

ii.    In case the information requested for is denied, rea- sons for denial quoting the relevant sections of the RTI Act should be clearly mentioned.

iii.    In case the information pertains to other public author- ity and the application is transferred u/s. 6(3) of the RTI Act, details of the public authority to whom the ap- plication is transferred should be given.

iv.    In the concluding Para of the reply, it should be clearly mentioned that the First appellate Authority will reply within 30 days of receipt of reply of CPIO.

v.    The name, designation, address, official telephone no. and e-mail id of the First Appellate Authority should also be clearly mentioned.

vi.    Wherever the applicant has requested for certified copies of the documents or records, the CPIO should certify the documents or records by putting a seal of his name, designation and signing with date. Above the seal, the remarks that “documents/records pro- vided under the RTI Act” should be endorsed.

Part C Information on & Around

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Education Cess:
I had filed an RTI application on the subject of Education cess. Surprisingly, I received two replies – one: CPIO and under secretary; two: CPIO and Sr. Account Officer (LCS). Both give different figures

I am following it by writing to both of them to find out how the figures differ.

RTI quarrel between Arvind Kejriwal and Prashant Bhushan/ Yogendra Yadav:
One of the five conditions put forth by Prashant Bhushan and Yogendra Yadav before Arvind Kejriwal was the adoption of RTI. While Kejriwal said he had agreed to this demand, questions have been raised about why it had to be made at all as AAP has always been a vociferous advocate for all political parties to be brought under the ambit of the RTI Act.

Kejriwal, who made a mark as an RTI Activist before floating the party, asked Yadav why he made this demand as he had failed to implement it in Haryana for over a year while he had been the state convener.

“At this point it is also imperative for the party to do some soul searching. It cannot be denied that after making such a big deal about the CIC order in 2013, which said the six major national parties should be brought under RTI, AAP failed to implement it on itself,” said a party member.

Heart Attacks:
Data given out by BMC in response to an RTI query showed that 29,393 deaths due to heart attacks were registered in the city between March 2014 and March 2015. In the corresponding period of the previous year, 24, 603 Mumbaikars had succumbed to heart attacks.

The seriousness of the problem can be gauged from the fact that heart attacks account for a third of annual deaths in the city. For instance, 31% of the 93, 254 deaths recorded in Mumbai in 2014-15 were due to heart attacks. The other big killers are TB (19 each day) and cancer (18 a day).

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Part B RTI Act, 2005

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PMO not disclosing foreign travel expenses: CIC panel

New Delhi, May 24 (Agencies): The PMO not disclosing information about expenses incurred on foreign visits of the Prime Minister notwithstanding, a CIC-constituted committee has recommended not only putting out such details proactively by all ministries but regular updating as well.

The committee of former Chief Information Commissioner A N Tiwari and Information Commissioner M. N. Ansari, constituted by the CIC gave its report on “Transparency Audit: Towards An Open and Accountable Government”.

It referred to the circular issued by the ministry dated September 11, 2012 where it asked all departments to proactively disclose expenses incurred on the foreign and domestic visits of their respective ministers.

“These disclosures should be updated once every quarter”, the committee said in its report asking the government to also disclose other details such as places visited and the institutions/individual interacted, period, number and the names of the members in the official delegation, mode of conveyance, travel expenses and source of funding and outcome of the visit.

It said a democratic government keen on empowering the people and delivering to them goods and services speedily and efficiently, cannot allow walls of secrecy to separate them from the very people they serve.

“Transparency brings the government closer to its people –a closeness which underpins good governance. In spite of repeated directions to the public authorities, the results on account of voluntary disclosures have been below par,” the committee observed.

It said quite large numbers of wholly avoidable RTI petitions by citizens for information, which should even otherwise be openly available, are still being filed.

“One cardinal aspect of the RTI i. e. Timely furnishing of quality information to the citizen, became difficult to be adhered to, while the cost for disclosing information, at well levels, kept increasing,” it said.

The Prime Minister’s Office has been refusing to disclose information related to expenses incurred on the abroad visits of Prime Minister Narendra Modi citing various excuses such as the records sought for being “vague”.

These refusals to part with the information are being made even though Central Information Commission, in an order,, had directed the Cabinet Secretariat to make public expenses incurred on the travel of ministers and VVIPs because of large public interest in the matter.

“We have been noticing a lot of public interest in the visit of such high dignitaries as the President, the Vice-President and the Prime Minister of India. Quite often, one comes across RTI applications seeking similar information about these visits,” Chief Information Commissioner Satyananda Mishra had said.

Following the orders of the CIC, the then Prime Minister Manmohan Singh had started the practice of making public on the official website details of expenses incurred on his visits as well as on the visits undertaken by the Ministers.

Even DoPT had issued the circular asking all ministries to proactively disclose these details.

Complying with the mandatory provisions of sou-motu disclosure under the transparency law, the PMO under Manmohan Singh has placed in public that a sum of over Rs. 642 crore was incurred on his air travels abroad between 2004 and 2013.

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Part A Decision of High Court

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Disclosure of Income Tax Returns

Issue before the Hon. Court was whether income-tax returns of Ajit Pawar can be disclosed to the Petitioner, Mr. Shailesh Gandhi.

Mr. Gandhi’s attempt to get such IT return and balance sheets had failed before PIO, FAA & Central Information Commission (CIC), even though he pleaded for it stating:

“There is a larger public interest in disclosing this information to compare his affidavit given to the Election with his Income Tax returns”.

CIC referred to the judgement of the Apex court in Girish Ramchandra Deshpande’s case (see “Right o Information – a route to good Governance” published by PCGT and BCAS Foundation, Page 241) (2013, 1 Supreme Court Cases 212) holding that the details disclosed by a person in his Income Tax Returns is personal information which has been exempted from disclosure under clause (j) of section 8(1) of the said Act, unless it involved a larger public interest and the CPIO and or State Public Information Officer or the Appellate Authority is satisfied that the larger public interest justifies the disclosure of such information. The Central Information Commissioner had observed that in the present Appeal the Petitioner has not been able to prove any larger public interest with corroborative evidence and therefore upheld the decisions of the Central Public Information Officer and the First Appellate Authority and disposed of the said Second Appeal.

Mr. Gandhi’s counsel made numerous submissions to justify as to why such disclosure is not to be denied. The same included:

a) That the Judgement in Girish Ramchandra Deshpande’s case (supra) does not lay down any preposition of law and therefore cannot be applied.

b) That the disclosure of the information sought for by the Applicant would be in larger public interest which outweighs the breach of privacy if any of the Respondent No. 3.

c) That a Division Bench of this court in the case of Surup Singh Naik vs. State of Maharashtra had dealt with the proviso to Section 8(1) (j) and has held in the said case that the information which cannot be denied to the Parliament or the State Legislature cannot be denied to the citizen.

d) That the disclosure of the information is in larger public interest has been demonstrated by the Petitioner by making out a case in the Appeal namely that the same would amount to reducing corruption and increasing the faith in the elected representatives.

e) That it has been held in the matter of PUCL vs. Union of India as also in the matter of R. Rajgopal alias R. R. Gopal & Anr. vs. State of T. N. & Anr. and in case of ADR vs. PUCL that the public interest element involved in divulging information relating to public servants, MP’s and Ministers outweighs the right to privacy.

“Since the right to privacy has been recognized as a fundamental right to which a citizen is entitled to, therefore unless the condition mentioned in Section 8(1) (j) is justified, the information cannot be provided. Hence the burden on the Applicant is much more onerous than may be in a routine case. As indicated in the earlier part of this judgement the reason mentioned in the original application as supplemented by the grounds in the First Appeal hardly make out a case of public interest. Hence in the instant case, the said burden cannot said to have been discharged by the Petitioner. Hence, the finding of the First Appellate Authority as well as the CIC that the Petitioner has not made out any case for disclosure of the information on the ground of public interest cannot be faulted with.”

The Petitioner had sought to place reliance on the proviso to section 8(1) (j) of the said Act and had sought to contend that the authorities below have not considered the application of the Petitioner on the touchstone of the said Proviso.

The Court noted:
“In my view therefore, the proviso cannot be sought to be interpreted in the manner which the Learned Counsel for the Petitioner seeks to do. There is also a basic fallacy in the contention raised on behalf of the Petitioner. The Petitioner wants to proceed on the hypothesis that the information sought by him cannot be denied to the Parliament. In so far as the Parliament is concerned, the Parliament has its own rules of business and it therefore cannot be presumed that the information in respect of Income Tax Returns of a Member of Legislature would be sought. The same would undoubtedly be in the discretion of the Honorable Speaker. In the said context, it is also relevant to refer to section 75A of the Representation of the People Act under which every elected candidate for a House of Parliament has to furnish information relating to the movable and immovable property, his liabilities to any public financial institution, his liabilities to the Central Government or the State Government to the Chairman of the Council of States or the Speaker of the House of the People i.e. Loksabha or the Chairman of the Council of the State i.e. Rajyasabha. Hence there are adequate provisions in the Representation of the People Act under which the information sought is to be provided to the Parliament to the extent mentioned in the said provisions and therefore reliance cannot be placed on the proviso to section 8(1) (j) to contend that the exemption provided in the said section would not operate.”

For the reasons afore stated, the court held that the impugned order dated 15-5-2013 passed by the Central Information Commissioner, confirming the orders passed by the First Appellate Authority and the CPIO did not suffer from any illegality or infirmity.

Mr. Shailesh Gandhi’s reaction to above judgement:

” Key points which I feel the judgement has not addressed:

1. There is a proviso to the exemption in section 8(1) (j) which states: “Provided that the information, which cannot be denied to the Parliament or a State Legislature, shall not be denied to any person.” This proviso was accepted by a division bench of Bombay High Court in the Surup Singh Naik case where I had said that there is a perception that powerful people escape prison and spend their prison term in Hospital. The Court ordered the medical records should be given. In the Ajit Pawar case I had said: “There is a general belief that politicians and elected representatives are corrupt and amass wealth at the expense of the public. There is also a common belief that Income Tax authorities do not check that IT returns of those who are elected and their affidavits filed at the time of standing for elections. If this is true, citizens will act as monitors and help correct such practices. On the other hand if citizens’ apprehensions are not true, it would enhance the trust and respect for the elected representative, which is necessary for a healthy democracy. Besides it would also improve the Citizen’s trust in the Income Tax department.’ This has not been held to be in the larger public interest and the proviso has been treated as if it is irrelevant.

In the ADR-PUCL judgement, the Supreme Court has ordered that those who want to be public servants, – get elected, – must declare their wealth. If the affidavits match the IT returns what harm would come to them? The citizen’s right to know about his elected representative cannot become less after he has become a public servant.
2. In the Rajgopal judgement the Supreme Court has said that for matters of public record there can be no claim for privacy and the claim for privacy of a public servant is still lower.
3. Filing an ITR is a statutory duty and hence it is a public activity.
4. Since the ratio of the ADR-PUCL and Rajgopal judgement has not been dealt with in Girish Ramchandra Deshpande judgement, it is per incuriam.
5. The SC in Girish Deshpande judgement mentions section 8(1) (j) without the proviso.
6.    I have given an explanation of the larger public interest and hence this would fulfill the conditions of the Deshpande order.
7.    No reasoning has been given for the comments in the Deshpande order and it does not become precedent. It only says that the Court agrees with the CIC. The CIC order again refers to an earlier five member’s order in which the issue did not even concern a public servant.”

He further notes:

“I had felt that the Girish Ramchandra Deshpande judgement by the Supreme Court had constricted RTI  by expanding the scope of Section 8(1) (j) far beyond  the law. As expected it was rejected by the PIO, FAA and the CIC. I then approached Bombay High Court  in  a writ. I expected just a 5% chance of my contentions being accepted by the Court. The Court has dismissed my petition yesterday. I am thinking of challenging this decision before the Supreme Court.

The Girish Deshpande judgement is being used everywhere to deny most information regarding public servants which could expose wrongdoing, arbitrariness or corruption.

Yes, I feel the pain of not being able to reverse the Girish Ramchandra Deshpande judgement of the Supreme Court. I think the High Court has not given reasons for not accepting most of my contentions; they are just statements that it does not agree with me.”

[Shailesh Gandhi vs. CIC, CPIO and Shri Ajit Pawar: Writ Petition No. 8753 of 2013, judgement pronounced on 11.06.2015].

Ethics and You

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Procedure of Enquiry (Continued) – Part VI

Shrikrishna (S) —
Arjun, you are looking tired today. Actually, your deadline for
tax-returns is postponed to 31st August. Isn’t it?

Arjun (A) —Yes.

S — Then you should be relaxing. The CAs don’t take any tensions except at the11th hour!

A — Bhagawan, I am tired of these rains. It came after a long wait. And it is not stopping at all!.

S
— Ha!Ha!Ha! These are the blessings of Lord Varuna. You CAs are
expected to plan and phase out your work over the available period. But
you also accumulate and do it in only few days; And then complain of
pressure!

A — What you say is true. Anyway, you were to explain to me the final part of disciplinary proceedings.

S — Yes. Upto where we had come?

A
— A separate order is passed awarding the punishment. That is on a
fresh hearing given after the first report holding you guilty is issued.

S — Right! You are a brilliant ‘shishya’; and hence so dear to me.

A — Now tell me, once the order is received – say for one month’s suspension, do we have any remedy? Or it is final?

S — No, it is not final. You can prefer an appeal.

A — To the court?

S — There is an Appellate Authority constituted under your CA Act. It is presided over by a High Court judge.

A — Is he the single judge?

S — No, there are four other members. Two ex-Central Council Members and two Government nominees.

A — But how to go about it?

S
— There is a prescribed form. One has to pay a fee of Rs. 5,500/-.
Remember, it is to be submitted within 90 days from the date of receipt
of the order.

A — How do they decide?

S — The
proceedings are like that of your Income Tax Appellate Tribunal. Just as
in ITAT, even the IT Department is represented by a counsel, and here
also, there is a counsel from the side of Disciplinary Directorate.

A — Oh, my God! And what do they argue?

S
— See, the Respondent will try to plead ‘Not guilty’ or to lessen the
punishment. On the other hand, the DD will try to defend the order of
the BOD or DC.

A — That is alright. But can DD also prefer an appeal?

S — Yes. Section 22G states that the member aggrieved by the order of BOD/DC; or the DD can prefer an appeal.

A — And what about the complainant?

S — The section is silent about it. It is like prosecution of a criminal matter where the Government pursues the matter.

A — And where is the Appellate Authority located?

S
— Strictly, it is located at Delhi – in your ICAI’s Headquarters. But
occasionally, the hearings are held in cities like Mumbai.

A — And if AA’s verdict goes against us, what to do? Can we approach the High Court?

S — The CA Act does not contain any provision permitting you to approach the High Court; unlike in the Incometax Act.

A — That means, the AA is the end of it!

S — In a sense, yes. But you can always go in for a writ if you are so aggrieved.

A — OK. Now tell me, once such order is passed, the punishment is immediately effective?

S
— Not necessarily. Once the order of BOD/DC is received or the order of
AA is received, the DD after a few weeks may formally write to you
about reprimand or suspension.

A — And if it comes exactly around the time we sign maximum number of audits, then we are doomed!

S — Yes. And your name is published in your CA journal. That is a stigma.

A — After the suspension period is over, what is our status?

S
— You have to apply afresh for restoration of membership. And then your
seniority is lost. It is as if you were a new member. Back to square
one!

A — That means, it will matter in terms of getting bank audits, training articles and so on.

S
— But the real punishment is the mental agony and stress that you have
to carry from the date of receiving the complaint till the conclusion of
the proceedings.

A — But why do they disqualify us for bank and government audit even before we are held finally guilty? That is unjust.

S
— Actually, that is not your Council’s rule. It is the policy of C
& AG and RBI that they don’t want to allot audits to someone who is
held prima facie guilty.

A — Oh! And depriving of audit
assignments for so many years is also a punishment. I agree; that rather
than the prescribed punishments, the other consequences are much more
grave.

S — So, prevention is better than cure. Follow the code
scrupulously. Don’t resort to short-cuts, cultivate discipline and
professional habits.

A — He Bhagawan, please bless me so that I am not caught in this trap of disciplinary proceedings.

S — You are always Blessed, Arjun! Om shanti !!!!

Note:
This dialogue is based on the procedural rules contained in Chartered
Accountants (Procedure of Investigations of Professional and other
misconduct and conduct of cases) Rules, 2007 published in official
Gazette of India dated 28th February, 2007 (‘Enquiry Rules’).

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Ethics and u

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(This is one more example of alleged negligence or lack of due diligence)

Shrikrishna (S) — Yes, My dear Partha, what happened to those digital signatures misplaced in your office?

Arjun (A) — Oh Lord, you are Great and kind hearted. I realised that you were testing my devotion towards you, my Lord. I had very anxious moments; but thanks to your mercy, those small pen-drives were located in some working files! God saved me!

S — But then, did you take precautions that we discussed?

A — Of course, yes. Immediately, I obtained necessary letters from all clients who left their tokens with us. I returned most of them to the respective clients. I don’t want any more headache!

S — Good. But then, why are you again looking so tense?

A — Hey Bhagwan! It’s another true story that has frightened me.

S — What is that?

A — My friend is a company secretary. Earlier, he was in a corporate job; but now on his own. He is in deep trouble!

S — Why? What happened to him?

A — He had a client. A small private limited company. The promoters-directors were only a couple. Husband & wife.

S — It is very common. I have seen it in many CAs. But they are not aware that this may be a serious misconduct in terms of clause (11) of First Schedule.

A — Yes. We had discussed it once. But here, they were lay-persons; not CAs or CS’s. Otherwise, I know that it would amount to engaging in other business without seeking permission from the Council.

S — Ok. Then what next?

A — They inducted one more person as a director who promised them to bring some business from abroad.

S — Good. Then?

A — He remained a director for a couple of years; but nothing materialised as promised by him.

S — Then there must be unpleasantness.

A — Yes. The company spent a sizeable amount on exploring the potentials as advised by him. He was drawing a remuneration too!

S — Wasteful!

A — The company had engaged a company secretary as an adviser. He was not involved in the company’s activities on a day-to-day basis. One fine morning, the couple informed him that the third director had tendered his resignation.

S — As expected!

A — Yes. And the CS was asked to complete the formalities of ROC. He advised them that a board meeting should be held. Now that the only continuing directors were husband and wife – staying together (!) – he showed the meeting of the same date and uploaded form No.32 – recording the resignation of the third director.

S — Very normal. But in the so called Board meeting, was that third director invited?

A — No. According to the CS, there was no need. He had resigned and it was pointless calling him. It was a formality that the other directors accept his resignation. Relations were not smooth; but the reality was obvious that he did not contribute anything to the business.

S — You mean that the resignation was a natural consequence of the situation.

A — Exactly. But now that third director has turned around and says that he had not resigned! The signature on the letter is not his! He alleges that it was forged.

S — Oh! The CS had obviously not attempted to verify the signature.

A — True. In practice, we have to proceed in good faith. Everytime we cannot afford to be suspicious. We never consider it necessary to verify signatures of our clients – like a banker does.

S — So now, it is a lesson! But tell me, was the signature at least similar to that in the company’s records?

A — That’s the unfortunate part. There is a variation. But all this is revealed now. At that point of time, when a respectable business-couple produces a letter, and asks to complete the formalities, should the company secretary disbelieve them?

S — True. But this is ‘kaliyug’! Good faith has no place in today’s era. And, from a professional, expectations are more. It is perhaps the ‘professional scepticism’ that gives credibility to a professional’s work.

A — Agreed. Our CAs are also uploading company law forms. This is an eye-opener to all of us.

NOTE:
The above dialogue between Shri Krishna and Arjun is based on Clause (7) of Part I of Second Schedule which is reproduced below.

Clause (7)     of Part I of Second Schedule states that a CA in practice shall be deemed to be guilty of professional misconduct, if he – “does not exercise due diligence, or is grossly negligent in the conduct of his professional duties”.

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PART C: Information on & Around

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Information on Sheila Dikshit:
The CIC has directed the Delhi government to make public a 2008 Lokayukta order that indicted former chief minister Sheila Dikshit on charges of misuse of public funds. Lokayukta Manmohan Sarin’s order had charged Dikshit with using funds for publicity and printing photos on loan forms for Delhi Swarojgar Yojna. Sarin had sought then President Pratibha Patil’ permission to recover Rs. 11 crore for the misuse of funds, which was rejected. The CIC order came after activist S C Agarwal sought information on the issue.

Robert Vadra’s land deal in Haryana:
Gurgaon resident Dharamvir Yadav filed an RTI application in 2013, which revealed that separate building plans for both plots in May field Garden (N29 owned by Vadra and N30 by a private company) were approved in November 2010. But work on a single structure–the guesthouse– straddling both plots commenced in 2011. Yadav claims the building was completed by March 2014. After this, Satpal Thakran, another resident of the same township, filed an RT I query in May this year seeking more details on the plots, but these got stonewalled by authorities who cited Vadra’s request not to disclose details. The TO I is now in possession of correspondence between the Haryana Urban Development Authority, Municipal Corporation of Gurgaon and District Town Planner over Change of Land Use permissions and occupation certificates, which show how rules were bent at every stage.

The Times of India had reported on how RT I pleas to uncover details of a plot registered in the name of Vadra were stonewalled. ToI now has documents which prove that not only was a single structure built on two plots of land ( one owned by Vadra, the other private company), but also that a change of land permission from residential to commercial was sought only after the building was completed, both of which are in gross violation of the law.

Maharashtra State Police Transfer rules:
Under the state police transfer rules, officers cannot be transferred before they complete two years in one post unless under exceptional circumstances. But an RT I query shows that 147 of the 150 transfers this year, from January to September, were under “exceptional” circumstances. This was revealed following a query filed under RTI Act by former central information commissioner Shailesh Gandhi, who asked for information on the number of deputy superintendents of police and officers above being transferred before their tenure was over this year. The data provided showed that only three out of 150 transfers were according to the law.

The transfers have raised questions about political interference in state policing with senior officers often found queuing up at politicians’ offices to choose postings. Some of the “exceptional reasons” cited are health problems and the distance between home and work place.

The data provided by the state police headquarters under RTI Act shows that 33 officers were transferred in February and 91 in June, just two months after the Parliament elections. On 23rd August, more officers were shifted, and all fell under the “exceptional” category.

Papers on First chief CIC’s resignation:
The Central Information Commission, entrusted with monitoring of record-keeping in government bodies, has lost the records relating to the resignation of the first Chief Information Commissioner Wajahat Habibullah who headed the institution for nearly five years. In an RTI response, the transparency panel said the lost files related to Habibullah’s resignation are not readily traceable, raising questions about record-keeping in the CIC. “The concerned file containing the communication relating to then Chief Information Commissioner Wajahat Habibullah regarding his resignation are not readily traceable though efforts have been made. The information will be provided as an when available,” Sushil Kumar, Deputy Secretary at the CIC, said in response to RTI application filed by Commodore (retd) Lokesh Batra. Batra told PTI that around 20th October, 2009 Habibullah had resigned to join as Chief Information Commissioner of Jammu and Kashmir.

Ajit Pawar makes RTI application:
NCP leader Ajit Pawar made use of the Right to Information (RTI) Act to scrutinise a large number of files that former chief minister Prithviraj Chavan had cleared in just 15 days.

Pawar, who was Chavan’s deputy in the Congress-NCP government, said that he had already filed RTI queries over the files from the urban development department. “Files stuck for a long time were suddenly cleared in the past 15 days. What suddenly happened?” he said. “As an ordinary citizen, I have sought information about the decisions taken in the urban development department.” [Source – news items published in The Times of India]

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PART B: RTI Act, 2005

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On 12-09-2014, RTI Foundation day, very interesting statistics are compiled by RTI Assessment & Analysis Group (RAAG) and National Concern for Peoples’ Right to Infor mation (NCPRI). Here under, I report some of them:

RTI Rules:
India has one Right to Information (RTI) Act but 118 separate sets of rules formulated independently by states, courts, information commissioners, Parliament and state assemblies that run a maze around the legislation.

The rules dictate varied fees, application format, number of words, type of identity proof required and mode of payment making the process of seeking information a complex one.

For instance, 34 states and union territories have prescribed application fee of Rs. 10. But cost of pursuing an RTI application could range between Rs. 50 to Rs. 100 excluding cost of information. Haryana charges Rs. 50 for all RTI applications while Arunachal Pradesh charges Rs. 50 for most applications but Rs. 500 for information related to bids, tenders or business contracts.

Only Andhra Pradesh has cut down on the fees—Rs. 10 for cities, free of cost for village level and Rs. 5 for subdistrict level. Sikkim charges Rs. 100 for both first and second appeal, while filing a first appeal in Madhya Pradesh costs Rs. 50 and a second appeal Rs. 100. While the central government has mandated Rs. 2 per photocopy, Chhatisgarh has limited the number to 50 pages while Arunachal charges Rs. 10.

To complicate things further, inspection of documents is allowed free of cost by some states for the first hour and then charges of Rs. 5 are levied in Tamil Nadu, Tripura, Sikkim and Uttarakhand. The cost of inspection of documents in Daman and Diu is Rs. 100 a day for a maximum of 3 hours and if the information sought is older by a decade or more, the public authority can charge an additional Rs. 25 an hour. States have also placed odd restrictions on the format of the application. In Karnataka, Bihar, Chhattisgarh and Maharashtra the length of the RTI application cannot exceed more than 150 words while the Centre has mandated a 500 word limit.

There are similar inconsistencies in rules related to proof of identity required by public authorities. While the RTI act does not mandate any proof of identity section 3 does say that only Indian citizens can use the law. This has led to states like Goa, Gujarat, Odisha, Sikkim insisting on identity proof of the applicant.

RTI users & where do they live:
Maharashtra Government’s notification:


On 17th October, the Maharashtra Government issued a notice directing all government departments not to part with information unless it is in “public interest.” “The notification violates the RTI Act and seems to be designed to promote corruption,”

(Author’s Note: Compare this with the judgement reported under part A in this issue. I believe that the notification is against the spirit of the RTI Act and is also illegal)

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Part C Information on & Around

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Sushma Swaraj:
Documents procured under the RTI Act revealed
that the Shivraj Singh Chouhan government in Madhya Pradesh appointed
foreign minister Sushma Swaraj’s husband and daughter as government
lawyers.

“The government should make a clear policy for
appointment of counsels. It clearly reflects that the VIPs and their kin
are being benefited,” alleged Ajay Dubey of Transparency International,
which procured the documents.

Chargesheet in Mahatma’s killing:
The
Central Information Commission (CIC) has directed the home ministry to
make public the FIR and chargesheet filed by Delhi police on the
assassination of Mahatma Gandhi on 30th January, 1948.

The order
came after Odisha-based Hemanta Panda sought the information under the
RTI Act. Panda wanted a copy of the FIR and chargesheet among other
pieces of information including whether any autopsy was done as per law.
The ministry had forwarded the application to the National Archives of
India, director of Gandhi Smriti, where Gandhi spent his last days and
was assassinated. Gandhi Smriti and Darshan Samiti told him that “no
post mortem examination was performed as per the wishes of the family”.
Panda was also informed by Gandhi Smriti and Darshan Samiti that they
did not have any information related to the FIR and the subsequent
charge-sheet filed in relation to the assassination.

Lalit Modi Passport:
The
external affairs ministry has refused to answer an RTI application
containing seven questions about scandaltainted former IPL boss Lalit
Modi’s passport.

The first three questions included why External
Affairs Minister Sushma Swaraj did not advise Modi to apply for a
temporary travel document to the Indian High Commission in London; why
the minister did not insist on Modi’s return to India as a condition;
and who decided not to file an appeal in the Supreme Court against Delhi
High Court’s ruling setting aside cancellation of Modi’s passport and
whether the Enforcement Directorate (ED) at whose instance the passport
was cancelled, was consulted. Questions four to seven included a query
on whether the government has lodged any objections to UK for granting
residency permit to Modi; what steps the government has taken since the
issuance of fresh passport to him to enforce the ED summons; and the
government’s response to Modi’s “wild charge that his life will be in
danger if he returned to India.”

The RTI query, filed by one
Rayo from Haryana, was received by the ministry on 19th June when the
opposition was piling up pressure on Swaraj on the Lalitgate row. In its
26th June reply, the MEA said questions one to three do “not seem to
fall under the purview” of the RTI Act. About queries four to seven, the
ministry said that “no information is available with EAM’s office.”

The
External Affairs Ministry (EAM), however, said the application has been
“transferred” to its consular, passport and visa division as well as to
the finance and home ministries.

The EAM’s action drew stinging
criticism from the opposition, with the Congress calling it against the
“spirit” of RTI Act and the CPI (M) alleging the transparency law has
been “sabotaged” by the Modi government. “This is against the spirit of
the RTI ACT,” said senior Congress leader P. C. Chacko.

“In
fact, any private information need not be disclosed but there is a case
which is affecting even the security of the country also and person is
fugitive, who is an absconder, against whom there is an inquiry going
on…and when information is sought on that, it simply cannot be treated
as a private matter,” Chacko added.

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Part B RTI Act, 2005

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Appeals against SIC orders:
The State Information Commission’s order has been upheld only in one out of the 84 appeals filed in the last decade by agencies whose documents were sought to be made public.

A query under the Right to Information (RTI ) Act has revealed that of the 84 appeals filed in the Bombay High Court and the Supreme Court between 2006 and so far in 2015, the SIC order was upheld only in one case.

RTI Activist Galgali had made the plea to find out what happens to orders once passed by the information chief for disclosure of documents. “Appeals against replies filed by the SIC have resulted in low success rate for the Commission in the last 10 years,” Galgali told ToI. Most matters went to the HC, while three are pending in the Supreme Court.

The agencies, which approached the Courts against SIC’s orders included the state home department, Mumbai University, Reliance Energy, BMC, and police department, said the activist.

Galgali had filed an RTI query with the Maharashtra State Information Commission seeking information about the cases in which agencies had gone to Court against orders seeking disclosure of documents or information. The SIC refused the information on the grounds that there was no such data available with it. The shocking reply prompted Galgali to file an appeal under RTI. Following his appeal, the SIC informed him that between 2006 and 2015, 84 cases went to Court and the SIC’s order was upheld only in one case. The other 83 either had the SIC order overturned or the matters are still pending.

Galgali said his query also revealed that in many cases, the SIC appeared not to take “much interest” in the court cases. So, the SIC’s orders were not properly defended.

Inspection of documents:
In a progressive move, Municipal Commissioner Ajoy Mehta has issued a circular on the implementation of the Right to Information Act that aims at reducing red tape in the civic body.

The circular points out that citizens applying for information under the RTI Act are often summoned by civic officials to inspect documents, even when they have not asked for an inspection or when the information they have asked for is not voluminous. The circular has discouraged the practice, and has asked public information officers (PIOs) to supply copies of documents after counting the number of pages requested and charging the applicant per page.

“In cases where the applicant has applied for inspection of the documents or the information he has requested is voluminous, an index of all the documents should be prepared before he is called for an inspection. Each page in the file must be numbered. Three dates & timings should be intimated to the applicant before he is called. If these dates are not convenient to the applicant, he should be asked to get in touch with the PIO” says the circular.

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Part A Decision of High Court

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Supreme Court on disclosure of medical expenses of Judges
The Supreme Court has dismissed the CIC-verdict allowing disclosure of medical-expenses of individual judges. Significantly, it was specifically mentioned in the referred RTI petition that only consolidated annual amount of total medical expenses of an individual judge was required without any supporting documents like medical-bills which directly or indirectly could reveal the disease of the concerned judge. The Supreme Court verdict will have far-reaching consequence when other public authorities will also cite the Supreme Court verdict for not providing similar information about others.

It is noteworthy that an RTI response had revealed medical allowance claimed by a member of fourth Delhi Legislative Assembly Vipin Sharma till October 2013 was of Rs. 1,31,93,055. There are reports of large-scale misuse of medical-reimbursement by those entitled to claim from public-exchequers. In a country where commoners do not have even basic medical facilities, rules should be amended so that entitled ones may get free medical-facilities only in government hospitals and dispensaries may be at priority level. Another alternative can be government providing free medical facilities to entitled ones if they wish treatment at private institutions. It will prevent frauds in medical claims because insurance companies pass medical claims.

In the meanwhile, it is suggested that Union Government should immediately legislate for compulsorily putting all annual medical-reimbursements of individuals from public-exchequers on website. However, it may be made clear that only medical expenses may be in public domain without giving any right to citizens to ask for supporting documents of any kind. Earlier resistance was there even in disclosing travel-details as ‘personal’ details. But ultimately it had to be done through a circular from the Department of Personnel & Training (DoPT).

Note: The Supreme Court recently underscored the need to bring accountability and transparency in the functioning of political parties. The Supreme Court sought a response from the Centre and Election Commission on why they should not be brought within the ambit of Right to Information Act. A bench of Chief Justice H. L. Dattu and Justices Arun Mishra and Amitava Roy also issued notice to all six national parties – BJP, Congress, BSP, CPI, CPM and NCP – seeking their stand on why they should not be declared public authorities to be amenable to the transparency law. It granted them six weeks to file their replies.

However, when it comes to itself, the Supreme Court ruled that it is outside purview of RTI and exempted from providing information.

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PART C: Information on & Around

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The PMO to Seek Modi’s Nod To Disclose ‘Riot’ Letters To Vajpayee:
The Prime Minister’s Office will take the nod of Gujarat government and chief minister Narendra Modi for releasing the correspondence exchanged with the then Prime Minister Atal Bihari Vajpayee after the post – Godhra Riots in 2002.

The information was earlier denied by the central public information officer of the PMO citing section 8 (1) (h) of the Right to Information Act, without giving any reasons, which exempts information that would impede the process of investigation or apprehension or prosecution of offenders.

The decision was overturned during the appeal before his senior Krishan Kumar, director Prime Minister’s Office, where the applicant had objected to the response of the CPIO saying he failed to give germane reasons behind denial of information.

The applicant had also underlined that the correspondence was 11 years old and was not likely to have an impact on the investigation, apprehension and prosecution of offenders. Upholding the reasons given by the applicant, the appellate authority directed the CPIO to provide additional details with regards to the case.

“As regards contention that the grounds for exemption claimed under section 8 (1) (h) are not tenable, CPIO is directed to obtain fresh inputs in this regards and provide the same to the applicant within 15 working days”, Krisnan Kumar, director and appellate authority had decided. In the last response to six and a half month old RTI application, Rizwi said after the appeal decision that the matter was referred to the office for fresh inputs.

“It is informed that third party (Gujarat Government and Modi in the present case) consultation under Section 11 (1) of the RTI Act is underway on a similar request and response regarding disclosure of information in this regard will be provided to you after due process as envisaged in section 11 of the Act is completed ,” he said.

Gadkari and I.T Department:

BJP has called an RTI reply from the income tax department, which said no investigation was pending against former party president Nitin Gadkari, as a “clean chit” to the leader.

The I.T. department, however, says its investigation in the matter of Purti Sugar and Power Ltd. is actually over and the matter is now at the stage of assessment.

Sources in the I.T. department said Gadkari was never the focus of investigation as he had a minority stake in the company. “The investigation was against Purti group which had received dubious investments through shell companies. Gadkari came in the limelight as he is the founder – promoter of the company”, said an I.T. officer. The RTI query, filed by one Sumit Dalal in February, asked the department,” Is any inquiry/investigation pending against Mr. Nitin Gadkari?” After initially refusing to reply, the Nagpur I.T. department, following an appeal, replied in April that no inquiry was pending against Gadkari in its Department.

Citing the RTI reply, BJP is called the case a political conspiracy to frame Gadkari at a time when he is about to be elected president of the party for a second term.

Spice jet Lies

1. Advertising professional Anil D’Souza writes “I was booked on Spice jet flight SG – 109 from Delhi to Mumbai on May 23 last year, which was scheduled for departure at 10:10 am. On reaching the airport at 8 am, a few of us were told that the flight had been advanced by five hours and that SMSes had been sent to the passengers informing the changes”.
“I was told by the airline staff that they couldn’t find my mobile phone number or e mail ID. I flew to Delhi on a Spice jet flight and received the information/updates through SMSes and e mails. Did they lose my contact details all of a sudden?” he asked.

2. D’Souza spent around Rs. 9,000 on an Indigo ticket to return to Mumbai. (The Spice jet flight costed him around Rs. 6,000) he was refunded Rs. 8,269.80 by the airline two months later. After the airline rejected his claim of additional compensation, he filed a query under the RTI Act and demanded to know the status of the flight in question from the DGCA.

3. ”Replying to the RTI query, the DGCA said that the flight SG – 109 had been cancelled on May 23. I was shocked at the airline’s blatant bluff and have initiated action in the consumer court. I will also initiate criminal proceedings against Spice jet”’ he said.

A senior Spice jet official said that the flight had indeed been advanced by five hours. “It was operated under a different flight number. Nevertheless, we will probe the matter,” the official said. D’Souza, however, insists that the airline had been lying to him for the past 10 months. “I wrote to Spice jet demanding an explanation and got a reply from the airline’s customer relations executive, who wrote that the flight in question had been rescheduled due to ‘operational reasons.’ He further said that as per the airline records, only travel agency/portal landline number were updated as flyers’ primary numbers”, D’Souza said. Determined to make the airline pay for the ‘lapse’, he said, “I will make sure the airline submits the proof of having contacted all the passengers booked on that flight. It is obvious that the flight didn’t take off.

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PART B: RTI Act , 2005

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Hunt For The Mole

An RTI activist got a shock of his life after he received a call soon after he submitted an application under the RTI Act. The activist had sought information in connection with the MLA Funds. The activist was removed from the organisation. Undeterred by the reprisal, the activist has approached Chief Information Commissioner Ratnakar Gaikwad to demand action against the information officer who disclosed his identity. It is not the first time that the identity of people seeking information under RTI Act has been revealed to a rival party. From the time an RTI activist submits an application to secure information on a new project; he receives threatening calls from the builder. In several cases the builder uses illegal means to ensure that the RTI application is not processed or delayed indefinitely. It’s high time that the Chief Information Commissioner issues fresh instructions on the secrecy, said Pune based RTI activist Vijay Kumbhar.

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PART A: ORDERS OF CIC & the court

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Section 6 (1) of the RTI ACT:
The appellant submitted an RTI application dated 28th December 2012 before the CPIO, Health Department. UT Chandigarh seeking copies of his Casual Leave Applications w.e.f 1/1/2007 – 28/12/2012 along with Annexures. Appellant also sought Casual Leave Applications of Shri Harbans Singh for the same period.

Decision Notice:

“After hearing both the parties, Commission directs the CPIO, Malaria Wing (Health Department) to obtain the requested information from the holder of the information namely CPIO, Civil Dispensary, Sector – 38 where the appellant was previously posted and also from all the other Public Authorities where the appellant was during the period 2005 – 2010 pertaining to his C.L. record and to provide the same to the appellant within three weeks of receipt of the order.

Commission accepts the explanation of the CMO, In charge, Govt. Civil Block Hospital regarding the delay in providing information pertaining to the fourth C.L. application of the appellant and condones the same. Commission draws the attention of the CPIOs and the appellant to the observations of the Apex Court in the matter of Central Board of Secondary Education and Anr. vs. Aditya Bandopadhyay and Ors. (Civil Appeal No. 6454 of 2011 dated 9.8.2011, [RTIR III (2011)242 (SC)] where in it has been observed that:

“37. The right to information is a cherished right. Information and right to information are intended to be formidable tools in the hands of responsible citizens to fight corruption and to bring in transparency and accountability. The provisions of RTI Act should be enforced strictly and all efforts should be made to bring to light the necessary information under Clause (b) of Section 4 (1) of the act which relates to securing transparency and accountability in the working of public authorities and in discouraging corruption. But in regard to other information, (that is information other than those enumerated in section 4 (1) (b) and (c) of the Act), equal importance and emphasis are given to other public interests (like confidentiality of sensitive information, fidelity and fiduciary relationships, efficient operation of governments, etc.). Indiscriminate and impractical demands or directions under RTI Act for disclosure of all and sundry information (unrelated to transparency and accountability in the functioning of public authorities and eradication of corruption) would be counter – productive as it will adversely affect the efficiency of the administration and result in the executive getting bogged down with the non – productive work of collecting and furnishing information. The act should not be allowed to be misused or abused, to become a tool to obstruct the national development and integration, or to destroy the peace, tranquility and harmony among its citizens. Nor should it be converted into a tool of oppression or intimidation of honest officials striving to do their duty. The nation does not want a scenario where 75%of the staff of public authorities spends 75% of their time in collecting and furnishing information to applicants instead of discharging their regular duties. The threat of penalties under the RTI Act and the pressure of the authorities under the RTI Act should not lead to employees of a public authorities prioritizing ‘information furnishing’, at the cost of their normal and regular duties.”

Appellant was directed to desist from misusing the cherished right given to him under the transparency Act in future.

Appellant/Complainant: Ramesh Kumar vs. Health Department (Malaria), UT Chandigarh; appeal no: CIC/ DS/A/2013/000927 decided on: 11.12.2013: citation: RTIRI (2014) 49 (CIC)]

Section 19 (8) (a) of the RTI ACT:

Vishwas Bhamburkar the applicant had filed an application on14.5.2011 with the PIO in the Ministry of Tourism, PSW Division, seeking an authenticated photo copy along with the file nothings of the Project Report for Development of Ayurvedic Health Resort and Herbal Garden at Vgamon, which was submitted by the Department of Tourism, Government of Kerala in December, 2005 and was bearing file number 426/D(CN) dated 20.02.2006.

The PIO in his reply informed the applicant that the said project report had not been received in the Ministry of Tourism. Being dissatisfied with the reply furnished by the PIO, the respondent preferred an appeal before the First Appellate Authority. The following was the order passed by the First Appellate Authority:

“The noting initials on the cover page of the Project Report produced by Shri Bhamburkar suggest that the Report was received in MOT. However since it is only a photo copy, its authenticity cannot be taken for granted. CPIO& Asstt. DG (PSW) is directed to make thorough search for the said Project Report and records pertaining to its receipt and movement in the Ministry. If the report is traced, its authenticated copy will be supplied by the CPIO to the applicant. If the Report is not traceable, but records are found which confirm that the Report was received in the MOT, a report may be lodged with the Police regarding the missing documents. An intimation to this effect may then be conveyed to the applicant by the CPIO. In case neither the Project Report nor any records of its receipt in Ministry are available, the applicant may be so informed by the CPIO. Action has to be taken within 15 days”.

Being dissatisfied the applicant filed second appeal before the Central Information Commission.

In this regard, the Commission observed that either the PIO or some other officer could be hiding the information or the report being submitted could be forged or it could be a conspiracy by which the report and all associated papers were taken away from the Government. Being aggrieved from the order of the Commission, the Union of India is before the High Court of Delhi by way of the writ petition.

The order of the High Court of Delhi is summarised as under:

“The learned counsel for the petitioner assailed the order of the Commission primarily on the ground that the Right to Information Act does not authorize the Commission to direct an inquiry of this nature by department concerned though the Commission itself can make such an inquiry as it deems appropriate. Reference in this regard is made to the provisions contained in Section 19 (8) of the Act. A careful perusal of sub section (8) of Section 19 would show that the Commission has the power to require the public authority to take any such steps as may be necessary to secure compliance with the provisions of the Act. Such steps could include the steps specified in clause (i) to (iv) but the sub – section does not exclude any other step which the Commission may deem necessary to secure compliance with the provisions of the Act. In other words, the steps enumerated in clause (i) to (iv) are inclusive and not exhaustive of the powers of the Commission in this regard.”

“The Right to Information Act is a progressive legislation aimed at providing, to the citizens, access to the information which before the said Act came into force could not be claimed as a matter of right. The intent behind enactment of the Act is to disclose the information to the maximum extent possible subject of course to certain safeguards and exemptions. Therefore, while interpreting the provisions of the Act, the Court needs to take a view which would advance the objectives behind enactment of the Act, instead of taking a restricted and hyper – technical approach which would obstruct the flow of information to the citizens.”

“This  can  hardly  be  disputed  that  if  certain  information is available with the public authority, that information must necessarily be shared with the  applicant  under the act unless such information is exempted from disclosure under one or more provisions of the act. it is not uncommon in the government departments to evade disclosure of the information taking the standard plea that the information sought by the applicant is not available. ordinarily, the information which at some point of time or the other was available in the records of the government, should continue to be available with the concerned department unless it has been destroyed in accordance with the rules framed by that department for destruction of old record. therefore, whenever an information is sought and it is not readily available a thorough attempt needs to be made to search and locate the information wherever it may be available. it is only in a case where despite a thorough search and inquiry made by the responsible officer, it is concluded that the information sought by the applicant cannot be traced or was never available with the government or has been destroyed in accordance with the rules of the concerned department that the PIO would be justified in expressing his inability to provide the desired information. even in the case where it is found that the desired information though available in the record of the government at some point of time, cannot be traced despite best efforts made in this regard, the department concerned must necessary fix the responsibility for the loss of the record and take appropriate departmental action against the officers/officials responsible for loss of record. unless such course of action is adopted, it would be possible for department/office, to deny the information which otherwise is not exempted from disclosure, wherever the said department/office finds it inconvenient to bring such information into public domain, and that in turn, would necessarily defeat the very objective behind enactment of the right to information act.”

“Since the Commission has the power to direct disclosure of information provided, it is not exempted from such disclosure, it would also have the jurisdiction to direct   an inquiry into the matter wherever it is claimed by the PIO that the information sought by the applicant is not traceable/readily traceable/currently traceable.  Even  in a case where the PIO takes a plea that the information sought by the applicant was never available with the government but, the Commission on the basis of the material available to it forms a prima facie opinion that the said information was in fact available with the government, it would be justified in directing an inquiry by a responsible officer of the department/office concerned, to again look into the matter rather deeply and verify whether  such  an information was actually available in the records of the government at some point of time or not. after all,     it is quite possible that the required information may be located if a thorough search is made in which event, it could  be  possible  to  supply  it  to  the  applicant.  fear  of disciplinary action, against the person responsible for loss of the information, will also work as deterrence against the willful suppression of the information, by vested interests. it would also be open to the Commission, to make an inquiry itself instead of directing an inquiry by the department/office concerned. Whether in a particular case, an inquiry ought to be made by the Commission or by the officer of the department/office concerned is a matter to be decided by the Commission in the facts and circumstances of each such case.

In the case before the High Court of Delhi, the PIO, who appeared before the Commission admitted that the photo copy of the report made available to the Commission was signed by the concerned Joint Secretary and director at the relevant time. Prima facie, they would have signed the documents only if they had received either the original report or its copy. the endorsement made on the cover of the documents would show that the report /copy on which endorsement was made was signed by the Secretary, Tourism, Government of Kerala. Had a thorough inquiry been made by inquiring from the concerned officer to find out as to where, when and in what circumstances they had signed the documents, it could have been possible to locate the report in the records of the government.”

For the reasons stated hereinabove, the court found no merit in the writ petition and the same was dismissed.    it is directed that a thorough and meaningful inquiry in terms of provisions of the directions of the Commission be carried out by an officer not below the rank of a Joint Secretary to the Government within eight weeks from today and a copy each of the said report to be provided to the Commission as well as to the respondent before the Court.

The  petitioners  were  directed  to  circulate  a  copy  of the order to all the CPIOs /PIOs of the Government of India and other Public Authorities, within four weeks for information and guidance.

Company Law

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1. Companies (incorporation) amendment rules, 2015

The Ministry of Corporate Affairs has vide Notification dated 1st May 2015, amended the Companies (Incorporation) Rules 2013. The Ministry has introduced eForm INC-29 – an integrated Incorporation form that deals with :
a) application for reservation of name (only 1 name is allowed),
b) incorporation of a new company and/or
c) application for allotment of DIN
d) application for PAN
e) application for TAN f) application for ESIC
in a single form. Along with the form, as attachments the following supporting documents are required:

1. Details of Directors & Subscribers,
2. Memorandum and Articles of Association

Once the eForm is processed and found complete, company would be registered and CIN would be allocated. Also DINs gets issued to the proposed Directors who do not have a valid DIN. This process allows upto three Directors to avail Din through the common application form while incorporating a company. Section-8 Company i.e. non-profit organisation cannot be incorporated through the eForm INC 29. Companies have option to go by route of e-form INC-29 or earlier route INC-1, INC-7, DIR-12 and INC-22. Filing Fees for the Form is Rs. 2000/-. Full text of the Rules can be accessed at http://www.mca.gov. in/Ministry/pdf/AmendmentRules_01052015.pdf

2. Secretarial standards notified
The Central Government has vide letter no. 1/3/2014/ CL/I dated April 10, 2015 approved the following standards specified by the Institute of Company Secretaries of India. The Standards become applicable from 1st July 2015. Adherence to the standards is mandatory as per the provisions of Companies Act, 2013

a) Standard on Meetings of the Board of Directors – SS-1 – It contains a list of General Business items and Specific items which can be passed by the Board only at a meeting and not passed by circulation.

b) Secretarial Standard on General Meetings – SS-2 – It contains a list of business which shall be passed only by postal ballot.

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Company Law

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Companies (accounts) amendment rules, 2015

The Ministry of Corporate Affairs has vide Notification dated 16th January, 2015 amended the Companies (Accounts) Rules, 2014 with the Companies (Accounts) Amendment Rules, 2015. The following changes have been made:
i) A fter Rule 2 the following is inserted “2A. Notice of address at which books of account are to be maintained.—For the purposes of the first proviso to sub-section (1) of section 128, the notice regarding address at which books of account may be kept shall be in Form AOC-5” and

ii) in Rule 6, after the third proviso, the following proviso shall be inserted

“Provided also that nothing in this rule shall apply in respect of consolidation of financial statement by a company having subsidiary or subsidiaries incorporated outside India only for the financial year commencing on or after 1st April, 2014.”

Form AOC-5 is similar to eForm 23AA as per section 209(1) of the Companies Act, 1956 and if required to be filed when the Board of Directors decides by passing the resolution to keep all or any of the books of account at any other place in India besides the registered office then, the company shall, within seven days of passing the Board Resolution, file this form giving full address of that other place in form AOC-5.

2. Companies (cost records and audit) amendment rules 2014

The Ministry of Corporate Affairs has vide Notification dated 31st December, 2014 made the Companies (Cost Records and Audit) Amendment Rules, 2014 to amend the Companies (Cost Records and Audit) Rules, 2014.

It has inserted in Rule 2 (aa) a clarification that “Central Excise Tariff Act Heading” means the heading as referred to in Additional notes in First Schedule to Central Excise Tariff Act, 1985.

Accordingly, Companies are required to maintain Cost Records if turnover exceeds Rs. 35 crore or more during immediately preceding Financial Year in respect of the products and services specified;

Applicability of Cost Records: The Rules have categorised the entities into Regulated Sector (namely Telecommunication services; Power generation, Transmission, Distribution and Supply; Petroleum products; Drugs and Pharmaceuticals; Fertilisers; Sugar and Industrial alcohol) and Unregulated Sectors (i.e., steel, minerals oil, electrical, education services, health services, textiles, milk powder, medical devices etc businesses);

Applicability of Cost Audit: It will be applicable for entities under the Regulated sectors having overall annual turnover of Rs. 50 crore or more and the aggregate turnover of the individual products or services of Rs. 25 crore whereas Unregulated Sector Audit of Cost Records will be applicable for annual turnover of Rs. 100 crore or more and the aggregate turnover of the individual products or services of Rs. 35 crore or more have to get their Cost Records Audited; for financial years commencing from 01-04-2015.

Exemptions are provided to Companies whose revenue from exports, in foreign exchange, exceeds 75% of total revenue and Companies operating from Special Economic Zones.

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Part C Information on & Around

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CDR Cell:
Corporate Debt Restructuring Cell has refused to the RTI query about its operations saying RTI , transparency law, does not apply to it.

CDR is a self-empowered body, which provides broad guidelines and policies to be followed by itself and the administrative, operating and other costs of CDR cell is shared by all financial institutions and Banks.

Based on this, Shailesh Gandhi, former Central Information

Commissioner holds the view that RTI Act applies to them. However, CDR Cell holds the view that it is neither owned, controlled or substantially financed directly or indirectly by funds provided by the appropriate government. Hence, CDR Cell is not a public authority as defined u/s. 2(h) of the RTI Act.

In the first Appeal before FAA, he also ruled that “CDR Cell is not a public authority under the RTI Act, and hence, we are unable to entertain application under the RTI Act”.

Matter would now go to the Central Information Commission.

Information on Netaji Subhash Chandra Bose:

In Jan. 15 issue in Part C this item was carried. Now Mr. S. C. Agrawal, the RTI appellant has reacted on it and has said:

“According to section 8(2), Public interest definitely overweighs the protected as several committees have been formed by the Union government to probe the mystery behind Netaji’s death. The Central Public Information Officer did not even name the country with which relations are likely to be prejudicially affected”.

BCAS RTI Clinic:
Reproducing one letter received by me from one visitor, at BCAS RTI Clinic Aurobindo Das:

I approached your office in January 2014 to seek guidance regarding inflated water bills charged by P/S Ward, Goregaon West, BMC Water Department, for nearly two years to our housing society. The Asst. Engineer, Water Works refused to give us the information about the basis on which and the methods followed by the billing department. Adv. Anilkumar K. Asher has guided me since then till the hearing stage of my 2nd appeal. He accompanied me to the office of the MSIC on 24.09.2014. And I am pleased to inform you that the Order of the appeal was in my favour. Enclosed please find the copy of the Order.

Sir, I am personally grateful and thankful to all of you for the help & guidance that have been accorded to me”.

 Note: Copy of the Order received in Marathi is not reproduced here. Many visitors get such positive results by acting on our advice but do not write on their success.

RTI & CPA :
There were conflicting judgements of the National Commission as to whether an applicant seeking information under the RTI Act would be a consumer or not. Certain two member benches had held that an RTI applicant who pays fees for the information would be a consumer, while other benches had held a consumer complaint would not be maintainable since the RTI Act provides its own channel of appeals.

Hence, a three-member bench was constituted to settle the law. The national commission addressed to two issuesfirstly, whether a person seeking information under RTI Act can be said to be a consumer and if it is held that he is a consumer, can a complaint to file under the Consumer Protection Act, or would this remedy be barred by the RTI Act provisions.

The national commission observed that it is a settled legal proposition that when a right is created by a statue which also provides for an adequate and satisfactory remedy to enforce that right, a person must avail of the mechanism available under the relevant act. The Public information officer is actually discharging a statutory function and not rendering any services. Besides, Section 23 of the RTI Act bars the jurisdiction of courts.

By its order of January 8, the national commission concluded that it is not permissible to have two parallel machineries for enforcement of the same rights created by the RTI Act, which a special statute. If a consumer complaint is permitted, it would defeat the purpose of providing a special mechanism under the RTI Act.

An RTI applicant is not entitled to file a consumer complaint for deficiency in service. He must follow the appeal procedure prescribed under the RTI Act.

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Part B RTI act, 2005

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In the last two issues of BCAJ, I had briefly summarised chapters 1 & 2 of “PEOPLES’ MONITORIN G OF THE RTI REGIME IN INDIA 2011-13”. Same is being serialised. However, I am postponing it to the next issue to continue on the same. This issue covers report on online RTI facility.

Maharashtra’s launch of facility for filing RTI Application online.

Earlier Central Government had prescribed online facility www.centralrtionline.gov.in.

That of Maharashtra is www.rtionline.maharashtra. gov.in .

Facility has started from 01.01.2015.

http://www.rtionline.maharashtra.gov.in/request/ request.php?lan=E is the site that is in Marathi and English, has the facility for filing application and for first appeal. It also has an option to know the status of one’s application. The mode of payment (RTI application fees) is internet banking, ATM cum debit card and credit card (Master/Visa).

Thirty one of the 37 departments in Mantralaya are shown on the site. All the departments within Mantralaya would be covered first. The facility would be expanded to other public authorities later. Once an application is filed, the applicant will be given a registration number through SMS and email.

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Part A DECISION OF H.C. & CIC

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Right of appeal Complaint u/s. 18(1) of the RTI Act :

In January 2015, in part A, I had referred to the Delhi High Court’s order and instead of analysing it, had reproduced an Analysis of that order by Mr. Venkatesh Nayak, Programme Co-coordinator of CHRI. Now I summarise the said HC’s order dated 05.12.2014.

The petitioner, R. K. Jain, inter alia, impugned an order dated 14.02.2014 passed by respondent no. 3 – Central Public Information Officer & Administrative Officer, Income Tax Settlement Commission, denying the information, which was earlier directed to be supplied to the petitioner under the provisions of the Right to Information Act, 2005.

The impugned order indicated that the order dated 26.09.2013 passed by PIO pursuant to an application filed by the petitioner under the RTI Act; and the order dated 21.10.2013 passed by FAA in an appeal preferred by the petitioner against the order dated 26.09.2013, were set aside as being void ab-initio by the Chairman, IT settlement Commission as an administrative head of the Income Tax Settlement Commission.

The principal Controversy to be addressed is whether, respondent no. 1 could declare by an administrative order, the orders passed by respondent nos. 2 (PIO) & 4 (FAA ) as being void ab-initio.

The petitioner had filed RTI application seeking information, inter alia, with respect to disposal and pendency of matters before the Income Tax Settlement Commission. In response to this application, CPIO and Joint Commissioner of Income Tax, the Income Tax Settlement Commission passed an order dated 26.9.2013 furnishing certain information to the petitioner. However, by the said order certain other information as sought for was denied. The petitioner preferred an appeal before the First Appellate Authority. The said appeal was partly allowed by an order dated 21.10.2013.

On response to the reminder letters to PIO by Mr. Jain, received the order from PIO in which he referred to an administrative order passed by the respondent no. 1; the extract of which as quoted in the impugned order reads as under:

“As there has been total no-compliance by the JDIT-II and DIT (Inv) of the provisions of the RTI Act, 2005 and notification by the Chairman, ITSC, New Delhi order no. C-26016/1/05/SC-RTI /1178 dated 29/31-07-2013, the orders of even numbers dated 26.09.2013 and 21.10.2013 passed by the JDIT and DIT (Inv) are ab initio void and are annulled. The RTI application will be disposed of in accordance with the provisions of the RTI Act, 2005 and notification by the Chairman, ITSC, New Delhi order no. C-26016/1/05/SC-RTI /1178 dated 29/31-07-2013 by the Administrative Officer, (CPIO), ITSC, Principal Bench, New Delhi at the earliest.”

The Judge, Hon. Vibhu Bakhru then wrote:

“I am unable to accept that such orders passed in exercise of statutory powers could be declared as a nullity or void by an administrative order without recourse to the hierarchy of authorities as specified in the statute – the RTI Act. In the event, the respondent no. 1 was of the view that the orders passed by PIO & FAA were without authority of law, the proper and the only course would be to file an appeal before the Central Information Commission (hereafter the ‘CIC’) or any other competent judicial forum. However, the said orders could not be nullified by an administrative order”.

“The learned counsel appearing for the respondents further submits that the present writ petition ought not to be entertained as the petitioner would have an alternative remedy to approach the CIC by way of a complaint u/s. 18(1) of the RTI Act”.

 “Undoubtedly, the CIC would have the power to enquire into any complaint in respect of matters relating to access of information under the RTI Act. However, it is apparent, in the present, case that respondent no. 1 has acted without authority of law in nullifying orders passed under the RTI Act; thus, interference with the impugned order is warranted in these proceedings”.

The court then ruled:

“In view of the above, the impugned order is set aside. However, it will also be open for the respondents to approach the CIC to assail the orders dated 26.09.2013 and 21.10.2013 passed by PIO & FAA . Needless to mention that if an appeal is filed before the CIC by the public authority (the Income Tax Settlement Commission); the same would be considered in accordance with law”.

[R. K. Jain vs. Chairman, Income Tax Settlement Commission & Ors. in W.P. (C) 2939/2014, in HC of Delhi dated 05.12.2014]

Section 18 of the RTI Act :
The Complainant Raghubir Singh through his RTI application dated 25.09.2013 had sought for information on 2 Points, viz i) Which of the Government Secondary Schools in Delhi under the Directorate of Education, have introduced Punjabi teaching as a third language for the first time afresh in class VI in the academic year 2010- 2014; ii) the number of such students enrolled in Class VI, School-wise. The RTI application of the Complainant was returned to him stating that the Indian Postal Order (IPO) was not in order. Claiming non-furnishing of the information sought, the Complainant has approached the Commission u/s. 18 of RTI Act.

Both the parties made their submissions. The Complainant, Shri Raghubir Singh is a senior citizen of 75-years old and a law teacher who is associated with the making of the RTI Act before its enactment by the Government. The Commission heard him on the telephone as desired by him. He complained that the Directorate of Education had harassed him by raising meaningless technical issues. They returned the Indian Postal Order of Rs. 10/- saying that it is not properly drawn, when he claims to have rightly drawn in favour of the Accounts Officer. The Complainant objected to the returning of the Postal Order by PIO by speed post, for which he had to spend more than Rs. 25. He complained that the Directorate has not updated its web-site and appropriate against whom the Postal Order should be drawn or fee to be paid was not given.

The Commission then reproduced Full Bench Decision of CIC in S. C. Aggrawal vs. Ministry of Home Affairs dated 27.08.2013. Said decision is “a landmark”, very well written in the spirit of the RTI Act. I am posting it on BCAS website www.bcasoline.org and PCGT’s web www.rtiforyou.info . You may also go on CIC’s website to read it.

After the above, the Commission ruled:

The Commission directs the PIOs to check up whether every school has properly replied to the RTI application, if not fulfill the deficiencies. The Commission also directs them to contact the Complainant on the telephone number 011-23363510, given by him, and provide the complete information within 15 days from the date of receipt of this order. ? T he Commission directs the respondents, their PIOs and in charge officers to immediately update their official website as desired by the Complainant and compliance report be sent to the Commission, with a copy to the Complainant, within ten days from the date of receipt of this order.

The Commission directs all the PIOs of Directorate of Education, all other officers concerned, to accept the IPO without raising technical objections and follow all the directions issued in the above referred full bench order of CIC. They should not spend any amount instead of encashing the IPO for Rs. 10 as prescribed-fee.

The Commission directs all the PIOs of Public Authority to submit separate reports to this Commission explaining how many IPOs they have rejected so far and what are the grounds of rejection, from January 2014 to December 10, 2014. Within 15 days from the date of receipt of this order.

    The Commission directs all the PIOs of Public Authority to submit separate reports to this Commission explaining how many IPOs they have rejected so far and what are the grounds of rejection, from January 2014 to December 10, 2014. Within 15 days from the date of receipt of this order.

    The Commission issues a show cause notice to PIO who refused and returned the IPO of appellant, why maximum penalty cannot be imposed against the spirit of RTI and harassing the applicant and for not updating the official website.

[Shri Raghubir Singh vs. Director of Education: CIC/ SA/C/2014/000038 dated 12.12.2014]

Notes:

I am happy to note that Mr. Raghubir Singh, senior citizen made this appeal to CIC. He was associated with the making of the RTI Act before its enactment. That put some more pressure on CIC to pass such favourable order. Same would improve the performance on matters related to RTI by Public Authorities. This judgement and the one referred to in this order need to be circulated widely.

Based on above decision,  DOPT (www.persmin.gov.in ) has issued a circular dated 14.01.2015 on the subject “introduction of postal stamps as rti fee/cost – seeking comments from public regarding”. Comments were to be sent latest by 07.02.2015 through email only to Shri. R. K. Girdhar, under Secretary (RTI), at usrti-dopt@nic.in. this issue would reach the readers after that date. May be the date gets extended or DOPT may still accept late communication from you.

Ethics and U

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Procedure of Enquiry

Arjun (A) — Hey Shrikrishna! Hey Shrikrishna! Arey, where are you?

Shrikrishna (S) — Yes, yes, my dear. Why are you so panicky? I am here only.

A — Good Lord! Usually, you always arrive at the meeting place before me. Today, you were not to be seen.

S — I am omnipresent, present everywhere. I appear whenever a true devotee remembers me sincerely. Tell me, what is the matter?.

A — Y ou have so far explained to me many items of misconduct. I shared it with my friends. But today, my very close friend received a notice from the Institute. He was asking how to go about it.

S — T hen did you not refer the books?

A — I looked for the procedure in the CA Act as well as Regulations. But couldn’t get the detailed procedure.

S — Which Act you saw? That of 1949?

A — N o. I saw 2006 Act only. That much I know!

S — Good! Many of you may not have referred the CA Act and other books on Ethics ever since you guys passed your CA.

A — What you say is right. When we studied, it was Code of Conduct. Now, it is Code of Ethics. What really is the difference?

S — See, conduct is a generic term. Conduct may be good or bad; but ‘ethics’ denotes something positive. In the context of professionals, ‘ethics’ was thought to be a better word.

A — Y ou mean, the conduct may be ethical or unethical.

S — You are right. And remember; one is either ethical or not ethical. There is no in between stage! One cannot be contented that one is ‘by and large’ ethical!

A — Leave aside the philosophy. Tell me the procedure.

S — F or procedure, you must refer to Chartered Accountants (Procedure of Investigations of Professional and other misconduct and conduct of cases) Rules, 2007 published in the official Gazette of India dated February 28, 2007.

A — Baap re! Such a long name! Better call it misconduct rules?

S — Y es. But before going to these rules, you should know that there are basically four authorities stated in the Act of 2006.

A — What are those?

S — F irstly, the Director Discipline. Then the Board of Discipline and Disciplinary Committee. And thereafter, the Appellate Authority.

A — T ell me the functions of all these.

S — You see, if somebody files a complaint ………..

A — H ow does one do so?

S — I f somebody is not happy with a CA’s work or other behaviour, he has to fill up a very simple form – called Form I. It is to be accompanied by a fee of 2,500/- rupees.

A — But who usually complains?

S — A nybody! Complaint can come from a variety of people and agencies.

A — Such as?

S — R egulators – Tax authorities, ROC, MCA authorities, SEBI, RBI, Registrar of Co-operative societies, then bankers, financial institutions, clients, other members of the Institute.

A — Who else?

S — F urther, even your staff, articles, partners, relatives, friends ………

A — But should he be connected with your work?

S — Not necessarily. Even an altogether stranger can file a complaint. These are quasi –criminal proceedings. Locus standi of complainant is not relevant.

A — Surprising! So anybody under the sun can file a complaint against a member.

S — Y es. There are even professional blackmailers. Beware of them. A — O h God!

S — M oreover, the Council can take suo moto cognisance of any misconduct, based on the information received by it. Information can be received even from public domain and media. So, always be cautious.

A — Y ou were telling me about the functions of those authorities.

S — D isciplinary Directorate, basically receives the complaints; The Director Discipline (DD) acts as a Secretary to the Board of Discipline (BOD) as well as to the Disciplinary Committee (DC). People working in the Directorate are bureaucrats.

A — Oh! S — T hey receive the complaint and forward it to the Respondent. The Respondent is required to submit his explanation. That explanation is sent back to the complainant. He is asked to write his views on the explanation in the form of a rejoinder.

A — T ill that time, they don’t process anything?

S — N ot really. It is only after these three documents are received, that they scrutinise the case. Thereafter, the DD forms a ‘prima facie opinion’ as to whether the Respondent is guilty or not guilty.

A — T hen what happens? It is only a prima facie opinion. Not final. Right?

S — N ow, if it is an item of misconduct stated in the First Schedule, the BOD has jurisdiction. On the other hand, if it is a Second Schedule item, it is within the scope of DC.

A — A nd a mixed one?

S — T hen the DC’s jurisdiction. The prima facie opinion is placed before the BOD or DC as the case may be. BOD or DC may concur with and endorse the views of the DD; or they may disagree. If BOD/DC feel that there is no prima facie guilt, the fact is communicated to both the parties and file is closed.

A — And if they find him prima facie guilty, what next?

S — T hen they direct that a detailed enquiry be conducted. This is the point of time when the disciplinary proceedings are deemed to be commenced.

A — Bhagwan, excuse me. Let me first digest all that you told me just now. We will meet some other time as I wish to understand the whole process. Just now, I am in a little bit of a hurry.

S — Sure. But your friend has to send his explanation in 21 days.

A — See. We CAs never do anything well in time. Can he get extension of time?

S — I was sure, you would ask this question If there is a valid reason, you can get extra time; but not more than 30 additional days.

A — O h! Then I must hurry up. We will meet soon. Bye, Bye. ….. (To be continued)

Note:
This dialogue is based on the procedural rules contained in Chartered Accountants (Procedure of Investigations of Professional and other misconduct and conduct of cases) Rules, 2007 published in official Gazette of India dated 28th February, 2007 (‘Enquiry Rules’).

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Ethics and u

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Shrikrishna (S) — Arjun, you are looking worried today.

Arjun (A) — Yes. This is September. Virtually a killing month for all CAs.

S — This is every year’s ‘crying’. Why don’t you plan well in advance?.

A — Very easy to say so. But in reality, every month there is some compliance or the other. And consequences of defaults are very harsh. You have to be on your toes constantly.

S — But the tax-audit date has been extended? Isn’t it?

A — T rue; but I am not sure whether the deadlines for filing returns will be extended. Then what is the use? I wonder why the Government does not clarify things well in time.

S — A ll CAs are sailing in the same boat. Granted that it worries you. But you are rather tensed up today. What is the matter?

A — A ctually, nowadays all the returns and other forms are to be submitted on-line. They are to be uploaded.

S — So what?

A — F or this, all the clients are keeping their digital signatures in our custody only.

S — Why?

A — Because all the returns are completed only in the last two days only. And when we are slogging, the clients are enjoying themselves abroad or at hill-stations.

S — Oh, I see. So you take all their tokens of digital signatures in your custody and use them! Is it not?

A — Exactly. And just now, my office informs me that two such signatures are misplaced. Not traceable!

S — O h! It is very risky. But why do you take such a risk? Is there any documentation for keeping it with you? Do you have any written instructions to use them? Otherwise, under the IT Act, it is an offence.

A — I didn’t come across any such provision in Income Tax Act. Is it in DTC?

S — N o Arjun. IT means Information Technology Act, 2000.

A — I have never read it.

S — Actually, using another person’s digital signature in his absence and without his specific consent is a serious offence. It is like a forgery. See section 42 of Information Technology Act. It says that the digital signature can be used only by the subscriber or person authorised by him to affix it.

A — O h, my God! Then what should we do?

S — E very time, you should take a letter from the client that he is handing over the token or the CD of digital signature to you. And there should be a specific instruction authorising you to use it. And when you return it, take his acknowledgement. It may be misused or wrongly used and the blame may come on you.

A — But now what should I do? Their returns are to be filed now. Fortunately, there is no proof that they have handed over to my office.

S — I t is embarrassing. Actually, you should have not only proper documentation but all signs should be kept under lock and key; under the control of a very responsible person.

A — What are the consequences under that Information Technology Act?

S — Penalty is in the form of compensation upto Rs. 25,000 to be paid to the affected person.

A — Baap Re!

S — N ot only that. But it amounts to negligence or lack of due diligence in discharging your duties.

A — I t is a double jeopardy.

S — Y es. And the tension that the misplaced digital signature may be misused is all the more disturbing.

A — I wonder how I will tell those clients that their digital signatures are not traceable! It is a question of my reputation.

S — That’s right. In Bhagavad Geeta also I told you the same thing. Loss of reputation is more harmful than even death. Now it is high time that you focus on systems in your office.

A — It is an eye-opener. Small lapses lead to heavy damage. Usually after our tax audits, we relax, and wake up only next year. But this year, I should change this. I must focus on housekeeping and get better organised. I am convinced that this is a serious professional misconduct and if I were in the client’s position, I would be very much upset.

S — Good. This is a lesson which should change your functioning. All the best to you.

Note: The above dialogue between Shri Krishna and Arjun is based on Clause (7) of Part I of Second Schedule which is reproduced below. This dialogue aims at bringing out those small things that we take for granted. Such small things and lack of documentation can lead to big problems in future. It thus becomes very important to inculcate a habit of documentation not only within us but also amongst our office staff.

Clause (7) of Part I of Second Schedule states that a CA in practice shall be deemed to be guilty of professional misconduct, if he –

“does not exercise due diligence, or is grossly negligent in the conduct of his professional duties”. Be very cautious and see to it that nothing is done in ‘good faith’ without proper documentation/safeguards.

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PART C: Information on & Around

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Govt. to challenge SCIC order against CP Rakesh Maria :
The state government has decided to challenge Chief Information Commissioner Ratnakar Gaikwad’s order to institute a judicial probe against Police Commissioner Rakesh Maria for providing misleading information to the widow of a police officer gunned down by Pakistani terrorists in the November, 2008 attacks.

The CIC’s order against Maria had accepted slain officer Ashok Kamte’s wife, Vinita Kamte’s allegations, that there were discrepancies between two copies of call logs of wireless conversation between the control room and Kamte’s van, in which he was shot down by terrorists along with the then Maharashtra ATS chief Hemant Karkare and encounter specialist Vijay Salaskar.

She had charged that there was a delay in sending help to her injured husband and his colleagues and that the call logs were tampered with to hide this. She had also alleged that information about who directed her husband and his colleagues to follow the terrorists into the Cama Hospital lane, where they were ambushed, was denied to her.

RTI activist Anil Galgali said the CIC had exceeded its brief in ordering the judicial inquiry.”Gaikwad has been appointed by the state government to give information and thereby give justice. But he has no powers to order an inquiry. The job of the State Information Commission is to provide information. They have failed in that,” he said.

No plan to strip Saif of Padma Shri:
The home ministry denied any move to strip actor Saif Ali Khan of his Padma Shri award, conferred on him in 2010, in the wake of a Mumbai court framing charges against him for assaulting an NRI businessman at a city hotel.

“The home ministry’s reply to the RTI filed by SC Agarwal to know the status of his own complaint, stating that the matter is under examination, is a routine response to any query that relates to a pending complaint. The home ministry has to call for necessary records from the state government or the court to validate the charges made in the complaint… this takes time and the merits of the complaints are finally decided on the basis to be under examination,” a senior home ministry official said.

Above was in reply to SC Agarwals RTI application to the home ministry

Gifts to PM Manmohan Singh:
From a fancy Bose music system to a glittering Piaget ladies wrist watch, former PM Manmohan Singh took home some 101 unique pieces of gift items that were given to him by heads of states whose countries he visited in his official capacity, an RTI query has revealed. But the government has refused to share details of Singh’s pay and perks, his parting comments or names of countries that gave the presents. Singh is permitted to retain gifts under the Foreign Contribution (Acceptance or Retention of Gifts or Presentations) Regulations, 1978 and its Rules, 2012.

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PART B: RTI Act, 2005

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RTI & Political Parties: On 3rd June 2013 full bench of CIC passed a detailed Order (53 pages) holding that 6 political parties:
1) Indian National Congress/ All IndiaCongress Committee (AICC)
2) Bhartiya Janata Party (BJP)
3) Communist Party of India (Marxist) (CPM)
4) Communist Party of India (CPI)
5) Nationalist Congress Party (NCP) and
6) Bahujan Samaj Party (BSP)

are covered as “public authority” under the RTI Act (Covered in my article of July 2013). Last para of the order reads as under:

93. The Presidents, General/Secretaries of these Political Parties are hereby directed to designate CPIOs and the Appellate Authorities as their headquarters in 06 weeks time. The CPIOs so appointed will respond to the RTI applications extracted in this order in 4 weeks time. Besides, the Presidents, General/Secretaries of the above mentioned Political Parties are also directed to comply with the provision of section 4(1) (b) of the RTI Act by the way of making voluntary disclosures on the subjects mentioned in the said clause.

It appears that none of the said 6 parties acted on the above direction.

The Commission had issued notices on 7th February and 25th March, to these parties seeking their detailed comments on the complaint by Agarwal that they had not complied with the orders of the CIC. The notice had been sent to the chiefs of Congress, BJP, BSP and NCP and to the general secretaries of CPI and CPI-M.

In what could spell trouble for Congress president Sonia Gandhi, the Delhi HC in August, 2014 issued direction on a petition accusing her failure to abide by a Central Information Commission directive.

HC directed the CIC to decide in six months a complaint against Gandhi that she hasn’t implemented the transparency panel’s direction making political parties answerable under the RTI Act. The court acted on a petition filed by RTI activist R. K. Jain who had earlier approached the Commission with his complaint against Gandhi saying that party had returned his RTI application without furnishing details that were asked.

Now in the month of September 2014, The Central Information Commission (CIC) has issued showcause notices to BJP President Amit Shah and Congress chief Sonia Gandhi, along with the heads of four other political parties, asking why an inquiry should not be instituted for non-compliance of its order to implement the RTI Act.

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PART A: Decision Of CIC & High Court

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In this article, I cover a few decisions of CIC and one of H.C, basically to inform briefly the views of CIC/H.C on the subjects covered.

Section 2(f) – Information:
The Hon’ble Delhi High Court in WP(C) No. 7265/2007 dated 25th September 2009 has observed as follows:

“Information as defined in section 2(f) means details or material available with the public authority. The later portion of section 2(f) expands the definition to include details or material which can be accessed under any other law from others. The two definitions have to be read harmoniously. The term held by or under the control of any public authority in section 2(j) of the RTI Act has to be read in a manner that it effectuates and is in harmony with the definition of the term information in section 2(f) of the RTI Act. It is well settled that an interpretation which renders another provision or part thereof redundant or superfluous should be avoided. Information as defined in section 2 (f) of the RTI Act includes in its ambit, the information relating to any private body which can be accessed by any public authority under any law for the time being in force. Therefore, if a public authority has a right and is entitled to access information from a private body, under any other law, it is information as defined in section 2(f) of the RTI Act.”

[WP (C) No. 7265/2007 dated 25th September 2009]

Section 2(f) – Information:
After hearing both the parties and on perusal of documents, the Commission observes that as deserving as the appellant might be for the post of Social Worker, he cannot ask interrogative questions from a public authority under the Act. The public authority is not bound to answer queries like whether he would be considered for the post since he has crossed the age limit or whether he will be granted any age relaxation and whether his merit will be considered or not. Interrogative queries viz. “How/Why/ When” do not come under the ambit of the RTI Act.

In Dr. Celsa Pinto vs. Goa State Information Commission (W.P.No. 419 of 2007), the High Court of Bombay, in its order dated 03.04.2008, held:

“The definition (of information) cannot include within its fold answers to the question “why” which would be the same thing as asking the reason for a justification for a particular thing. The Public Information Authorities cannot expect to communicate to the citizen the reason why a certain things was done or not done in the sense of a justification because the citizen makes a requisition about information. Justifications are matter within the domain of adjudicating authorities and cannot properly be classified as information.”

[G. Senthil Kumar vs. Dr. Raman, DoH, Directorate of Health & Family Welfare Services, Puducherry – File No. CIC/SS/A/2013/000838-YA: Decided: 28.05.2014]

Section 6(1) &7(1) of the RTI Act:
This matter pertains to an RTI application dated 03-05- 2012 filed by the Appellant, seeking information on twelve points. The CPIO responded on 04-06-2012 and asked the Appellant to deposit photocopying charges, amounting to Rs. 48, to obtain the information running into 24 pages. The CPIO also asked the Appellant to deposit postal charges of Rs. 25.

We note that no further action pending on this RTI application on the part of the Respondents. We also note that the CPIO erred in asking for postal charge of Rs. 25. Accordingly, we direct the CPIO that in case the Appellant deposits the amount of Rs. 48, the information running into 24 pages should be provided to him, within 15 days of deposit of the above amount by him.

[Navneet Singhania vs. CPIO, Oriental Bank of Commerce, Regional Office: Ranjeet Avenue, Amritsar – File No. CIC/VS/A/2012/000711/SH: Decided 05-05-2014]

Section 7(1) of the RTI Act:
The Appellant stated that the FAA had not given him a personal hearing despite his request to that effect. In this context, we advice the FAA that in the interest of natural justice, he should give a personal hearing, in case requested by a person filing an appeal to him on an RTI matter.

The Appellant has drawn our attention to the fact that the CPIO has not been mentioning his name in his replies to RTI applications. In this context, we inform the Respondents the decision of the Commission that the CPIOs and FAAs should mention their name, address, telephone and fax number in all correspondence on RTI matters. The CPIO is directed to ensure compliance with the above decision of the Commission.

[Chayan Ghosh Chowdhury vs. CPIO, Union Bank of India, Lucknow – File No. CIC/VS/A/2013/001508/SH: decided on 23-05-2014]

If readers appreciate this kind of my write ups, I shall continue whenever any landmark decision is not available.

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PART C: Information on & Around

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PM’s wife files an RTI application:
Jashodaben, wife of Prime Minister Narendra Modi, kicked up a storm by filing an RTI application seeking information about her security protocol and on whose order she was being provided armed guards.

She filed the application before the Mehsana Superintendent of Police, complaining that her guards have refused to share with her the official order directing them to protect her.

Her application seeks information about “all protocol and facilities, especially security details that is the right of a prime minister’s wife”.

Apart from the fact that the guards do not carry any official orders with them, there are two other points which the RTI application reveals that Jashodaben is miffed about:

While she travels by public transport, her guards tail her in air-conditioned cars.

The guards demand to be treated like family’s guests. Jashodaben has also sought to know what other privileges she is entitled to as the wife of the Prime Minister of India. “I am the wife of the Prime Minister of India and have been extended security as per protocol. What other service can be extended to me under the protocol? Please give me detailed description of the protocol,” her application reads.

Information on Netaji Subhash Chandra Bose:
The Prime Minister’s Office in a recent RTI reply accepted that there were 41 files related to Bose, of which two had been declassified, but refused to disclose them, taking a position similar to that of the erstwhile Congress-led UPA government.

“Disclosure of documents contained in these files would prejudicially affect relations with foreign countries. As such, these files are exempted from disclosure u/s. 8(1) (a) read with Section 8(2) of the Right to Information Act,” the PMO said in this reply to RTI activist Subhash Agrawal.

Vasectomy & Tubectomy:
Tubectomy is a permanent birth control surgical procedure. Fallopian tubes are blocked to prevent fertilised eggs from reaching the uterus and embedding there; it also prevents sperms from reaching the egg.

Vasectomy is a minimal invasive procedure from permanent birth control. The two tubes that carry sperms from testicles to urinary tract are surgically severed and sealed. Post surgery, sperms cannot pass through to fertilise a woman’s egg.

The RTI data accessed by activist Chetan Kothari bares the trend of teenage girls going for Tubectomy till five years ago. In 2002-03, 119 girls aged 15 to 19 underwent the procedure, with the instances dipping to 10 or 15 a year. In 2007, the minimum age for Tubectomy was raised to 22 years. A near double incentive for those opting for vasectomy has also failed to lure many men. The number temporarily rose to 4,661 in 2008-09 and 3,927 between 2008 and 2010, only to dip drives dwindled. Since then, it has been a steady downfall with Tubectomy again dominating family planning centers.

Black Money:
The government has denied disclosure of information under RTI on how many requests it has made to other countries with which India has Double Tax Avoidance Agreement (DTAA ) or a Tax Information Exchange Agreement, citing national interest and confidentiality.

CHRI’s Venkatesh Nayak had sought information on the subject from 2011 to October 2014.

However, in response to RTIs, the finance ministry said that it could not disclose the information citing section 8(1) (a) and 8(1) (f) of the Act.

The sections forbid disclosure if the information is against national interest or if the information has been given b a foreign government on condition of confidentiality.

Pointing out this anomaly, Nayak said the bar in the confidentiality clause in DTAAs was only about person-specific information and not for numbers, adding that the government had already made this information public in an international forum.
But when a citizen asks for the number of requests it has made to other countries and shows what is the public interest in disclosing such information, they invoke section 8(1)(a) and (f). So just like in the Ram Jethmalani case, the government thinks it is more loyally bound to foreign countries under its DTAA s and not to even the court or its own citizens in terms of transparency. These DTAA s are not ratified or even placed before Parliament,” Nayak said. Recently the SC ordered the government to hand over the names of accountholders who have stashed black money abroad.

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Company Law

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The Central Government has on 27th February, 2014 notified the Companies (Corporate Social Responsibility Policy) Rules 2014 which shall come into force on 1st April, 2014. Corporate Social Responsibility Clause is applicable to every company having net worth of Rs. 500 crore or more, or turnover of Rs. 1,000 crore or more or a net profit of Rs. 5 crore or more.

The Ministry of Corporate Affairs has amended Schedule VII to the Companies Act. The Schedule contains activities which may be included by Companies in their Corporate Social Responsibility Policies. In Schedule VII for items (i) to (x) and entries relating thereto, the following items and entries shall be substituted:

i. Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water;

ii. Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects;

iii. Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centers and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;
iv. Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air & water;

v. Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art, setting up public libraries, promotion and development of traditional arts and handicrafts;

vi. Measures for the benefit of armed forces veterans, war widows and their dependants;

vii. Training to promote rural sports, nationally recognised sports, Paralympic sports and Olympic sports

viii. Contribution to the Prime Minister’s National relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, Other Backward Classes and minorities and Women;

ix. Contributions or funds provided to technology incubators located with academic institutions which are approved by the Central Government;

x. Rural development projects.

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PART C: Information on & Around

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Professional Information seekers:

In
a bid to ward off the alleged menace of “professional RTI
complainants”, four assistant commissioners of the BMC have adopted a
strategy. These officers, posted guards and got CCTV cameras installed
at various ward offices to check their entry into the premises.

These professional complainants have lodged their grievances on building violations at least 200 times in more than four wards.

Assistant
commissioners termed this as a moneymaking venture. “This has become a
business for them (professionals). They lodge complaints and extort
money from people. They try to create an atmosphere of fear by either
threatening the civic officials or the people.”

An advocate,
named and shamed in a list of “professional RTI complainant
(extortionist)”, prepared by the Brihanmumbai Municipal Corporation, has
been vindicated after the civic body apologised, saying that his name
had been wrongly included in the list.

“It is humiliating for me
to be branded as a professional complainant. I complained about this to
the BMC chief and the state’s chief information commissioner,” said
advocate, Pankaj Pande.

The BMC then gave a clean chit to Pande stating that his name was included in the list by mistake.

RTI Activists not dead:

AAP
Chief Arvind Kejriwal’s obituary reference to four RTI activists at a
large public gathering in Ahmadabad left his supporters red-faced as
three of them are alive.

He said the four were killed for asking
awkward questions and hailed them as martyrs for the cause of society.
Kejriwal got the first victim’s name right, Amit Jethava, who was killed
outside the high court, the other three- Bhagu Dewani (Porbandar),
Minakshi Goswami (south Gujarat) and M Bhambhani (Diu)-in fact survived
attacks provoked by their activism.

Sanjay Dutt’s parole:

The
Yerwada jail authorities have refused to disclose details of Sanjay
Dutt’s parole to an RTI applicant, saying the actor had requested that
the reasons supplied in his application for parole be kept private.

Oshiwara
resident, Ramesh Patil, had made an RTI application to the jail in
October last year, asking to know the specific illness for which Dutt
was granted a 14-day furlough in September, which was extended by
another two weeks.

The jail’s reply to Patil also said that Dutt
was a “third person” and that Patil had nothing to do with the actor,
and had no locus standi to ask for details of the actor’s parole.

This
forced Patil to move the Appellate Officer for RTI at the jail;
expressing his objection to the unsatisfactory reply he was given.

Following
this, Patil was called for an RTI hearing on 11th February at Yerwada
jail. At the hearing, the authorities merely repeated what they had
communicated to him earlier. According to Patil, he was also shown a
letter allegedly written by Dutt requesting that his personal details be
kept private from unknown persons.

“Dutt is not a third person
but a convicted criminal undergoing punishment in jail; how can the jail
authorities say he is a ‘third person’? On 21st March, when Dutt is due
to return to Yerawada Central Jail, he would have spent 118 of his 305
days of imprisonment-almost 40% of the time he is supposed to serve
either on furlough for the treatment of his leg pain, or on parole
sought citing his wife Manyata’s illness. This clearly means any convict
can now write a letter and can escape from imprisonment, and if this is
the law, then I think it needs to be amended immediately,” Patil said.

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PART B: RTI Act , 2005

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RTI & CPA:

A City consumer forum has ruled that Complaints on RTI cannot be entertained under the Consumer Protection Act.

RTI & Political Parfies:

Political Parties, including the Congress and BJP, have ignored a four-week deadline set by the Central Information Commission (CIC) and could be liable for Rs. 25,000 fine or even de-registration.

The Commission had issued a showcause notice on 7th February to six national political parties – Congress, BJP, NCP, BSP, CPI and CPM – seeking an explanation on why they had not complied with its 3rd June order which mandated that the six parties came under the Information Act and must appoint public information officers to respond to RTI queries.

A full bench of the Commission had declared that the six political parties were substantially funded indirectly by the Central Government and they had the character of public authority under the RTI Act as they performed public functions.

The Commission had given them six weeks to comply with the RTI Act but so far none of the parties has followed the direction, prompting RTI activist Subhash Agrawal, who was one of the petitioners in the case, to file three non-compliance complaints before it.

Agrawal said the Commission should hold an early hearing and recommend stringent action, including deregistration of the parties, by the Election Commission.

The CIC can also fine the parties up to Rs. 25,000. The CIC inaction has been preceded by the government bringing a bill to exclude political parties from the ambit of RTI Act. Though the bill was tabled in Lok Sabha and received support from a House panel, it was finally not taken up.

The stringent opposition to “weakening” the Act and the message that political parties were against transparency led to the bill being put on hold. However, the CIC has dragged its feet in taking any action against parties clearly in violation its own order. (Courtesy: Times of India dated 10-03-2014)

Congress Manifesto:

Congress will release its election manifesto on 21st March; a document that the party believes will win it votes in the tough battle. Sonia Gandhi is scheduled to release the manifesto in the company of her son, Rahul.

One key issue is of reservation in the private sector, a poll promise from Congress in UPA-2. Congress also wants to hammer home its rights based approach like RTI, NREGA, etc., by promising those on health, pension and sanitation.

Maharashtra Information Commission:

With the appointment of new IC, Maharashtra now has 7 IC as under:

Maharashtra Information Commissioners

1. Ratnakar Gaikwad – Chief Commissioner, Mumbai
2. Ravindra Jadhav – Amravati
3. D. B. Deshpande – Aurangabad
4. Ms. T. F. Thekekara – Konkan
5. Ajitkumar Jain – Greater Mumbai
6. P. W. Patil – Nasik
7. M. H. Shah – Pune

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PART B: RTI Act, 2005

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PEOPLES ’ MONITORING OF THE RTI REGIME IN INDIA 2011-13 RTI Assessment and Advisory Group (RAAG) Samya Center for Equity studies (SAMYA ) have published in October 2014 the work titled “PEOPLES’ MONITORING OF THE RTI REGIME IN INDIA: 2011-13.

Briefly looking into the contents of the above work, running into 177 pages of 11 chapters & 10 annexures, as noted in BCAJ December issue, I plan to serialise it and cover 1 & 2 chapters in each issue. In the last issue, chapter 1 was summarised. Hereunder is a summary of chapter 2:

METHODOLOGY:
Data Collection:

• Primary data collection through individual inter views:
A s a part of the Peoples’ RTI assessment 2011- 13, a total of 2,279 persons were individually interviewed across four states and the National Capital Region of Delhi.

• Primary data collection through street corner interviews:
2,000 people were individually interviewed in the capitals of the four sample states, and in Delhi.

• Primary data collection through focus group discussion:
In addition, a total of 95 focus group discussions (FSGs) were also organised.

• Primary data collection through focus public hearings:
A s part of the nationwide assessment on the implementation of the RTI Act, public hearings (PHs) were organized in the four sample states and in Delhi to documents peoples’ experience of using the RTI Act. The PHs were organised in collaboration with the state partners.

• Primary data collection through inspections:
Across the country, 69 public authorities and offices were inspected as a part of this assessment.

• Primary data collection through filing RTI applications:
Specifically, 462 RTI applications were filed and followed up with PIOs to get basic information from various public authorities across the country.

Data Analysis:

• Analysis of replies received to RTI applications:

Copies of 2,743 RTI applications were received from four states, the union territory of Delhi, and the Central Government, in response to the earlier mentioned RTI application filed with various public authorities.

• Analysis of published material:
Relevant papers, articles, studies and assessments on India and about other countries were identified and assessed for possible inputs into the design of methodology and process for this assessment. These have also been used to develop national and international contexts in which the findings of this assessment can be located.

• Analysis of the official websites of all ICs:
An analysis of the official websites of all ICs was undertaken with a view to ascertain whether the websites provide relevant and updated information on the functioning of the ICs, including number of commissioners in each commission, orders passed by the commissions, and their annual reports.

• Analysis of the official websites of PAs:
T o check compliance with provisions of proactive disclosure, the websites of 30 public authorities were analysed.

Specially, the Peoples’ RTI Assessment 2011-13 sought to survey and otherwise access information from the following key RTI stakeholders:
Citizens
Applicants and appellants
Public Information Officers
Public Authorities

Scope and Sampling:
• States: T he assessment covered four states across the country, and the National Capital Region of Delhi. In each state, the state capital and two districts were surveyed.

• Public Authority:
A total of 69 public authorities (PAs) were surveyed across the country, by visiting them. Of these, 10 were from the Central Government, and four each from each of three states and one UT, and three from Bihar (total 19 – as permission to survey Bihar HQ police was not granted). In addition, in four states and one UT, four PAs were surveyed in each of the two sample district. This made it a total 40 PAs in ten district headquarters.

• Applicants:
A total of 192 applicants were interviewed as a part of this assessment. Of these, 12 were from rural areas and the remaining 180 were from urban areas. The rural applicants were identified by the rural field teams during their visits to the sample villages especially through the focus group discussions, and all the applicants identified, available and willing to talk to the team, were interviewed, irrespective of which PA they had applied to for information.

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PART A: Decision Of CIC & High Court

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Right of appeal to whom?
On 5th December, 2014, the Delhi High Court passed an order in a writ petition: R.K. Jain vs. Chairman, Income Tax Settlement Commission (ITSC) & others. The issue was whether ITSC, a Public Authority, has right to appeal to Information Commission.

Delhi High Court held as under:

The impugned order is set aside. However, it will also be open for the respondent (ITSC) to approach the CIC to assail the orders dated 26-09-2013 and 21-10-2013 passed by respondent no. 2(PIO) and respondent no. 4 (FAA ) respectively. Needless to mention that if an appeal is filed before the CIC by the public authority (the Income Tax Settlement Commission), the same would be considered is accordance with law.

[R. K. Jain vs. Chairman, Income Tax Settlement Commission & ors. in W.P. (C) 2939/2014, Delhi High Court Single Judge]

My Note: RTI activists are divided on the correctness of this order. One view is that Public Authority has no right to appeal to CIC [just like IT department (Assessing (AO) or CIT) has no right to appeal against the order of AO].

This view is held by Venkatesh Nayak, Programme coordinator of Commonwealth Human Rights Commission. His detailed analysis is as given below:

An Analysis of the Delhi high court order

1. Basic Facts:
1.1 In 2013, Mr. R. K. Jain, the Petitioner, sought some information under the Right to Information Act, 2005 (RTI Act) from the Income Tax Settlement Commission (Respondent #1) established under the Government of India. The information was in respect of disposal and pendency of matters before that public authority.

1.2 In September 2013, the Central Public Information Officer (CPIO) and Joint Commissioner of Income Tax passed an order furnishing the Petitioner, some of the requested information while denying other categories of information.

1.3 Aggrieved by the PIO’s refusal to furnish all the information sought in the RTI Application, the Petitioner submitted a first appeal under the RTI Act. The First Appellate Authority (FAA ) issued an order in October, 2013 partially allowing disclosure of some information which had been denied by the CPIO.

1.4 The Petitioner sent a letter to the Public Authority, two days later, demanding compliance with the FAA ’s order. Later in March 2014, he sent another reminder demanding that the information be disclosed as per the FAA ’s order. Less than a week later, the Petitioner received a communication from an officer of the public authority informing him that Respondent #1 had passed an order setting aside the order of the FAA and the CPIO on grounds of non compliance. The Petitioner challenged this action of Respondent #1 of passing an administrative order annulling the orders of the CPIO and the FAA , before the Delhi High Court through the instant Writ Petition.

2. J udgement of the Hon’ble Delhi High Court with Reasons:

2.1 T he Hon’ble Delhi High Court ruled that orders such as those passed by the CPIO and the FAA in exercise of their statutory powers cannot be declared as a nullity or void through an administrative order. The Court cited a couple of judgements to hold that even if an order is a nullity, it would continue to be effective unless set aside by a competent body or Court. It held that the Respondent was not authorised under the RTI Act to interfere with the orders passed under the RTI Act. The order issued by Respondent #1 was set aside.

2.2 The Court however left it open to Respondent #1 to approach the Central Information Commission (CIC) to assail the orders of the CPIO and the FAA . The Court held as follows:

“13. … Needless to mention that is an appeal is filed before the CIC by the public authority (the Income Tax Settlement Commission), the same would be considered in accordance with law.”

3. A Critical Analysis of the Decision and the Reasoning:

3.1 The Court’s decision to set aside the administrative order issued by the Respondent holding the orders of the CPIO and the FAA a nullity on account of non compliance is to be welcomed. Henceforth, any officer of a public authority having no statutory authority under the RTI Act will not be able to interfere with the process furnishing information under the RTI Act after a matter has been decided by the CPIO or the FAA .

3.2 H owever, it is respectfully submitted that the Court’s direction to the Respondent to approach the CIC amounts to creating a right of appeal which is contrary to the scheme of appeals provided for in Section 19(1) of the RTI Act. Before putting forth our detailed reasons for arriving at this opinion, it is necessary to point to a similar order of the Hon’ble Andhra Pradesh High Court (APHC) which seeks to create a right of appeal for the public authority under the RTI Act.

3.3 In the matter of Public Information Officer, Under RTI Act, Syndicate Bank, Regional Office, Mugulrajapuram, Vijayawada vs. Central Information Commission under Right to Information Act, New Delhi Etc., [2012 (2) ALT 348], the APHC ruled as follows:

“7. … in the opinion of this Court, the Public Information Officer cannot dawn [sic] the role of the Officer of the Public Authority in relation to orders passed by the appellate authorities against orders passed by him. If his order is reversed by the appellate authority, he cannot be treated as aggrieved party giving rise to a cause of action for him to question such Orders. It is only either the public authority, against whom the directions are given, or any other party, who feels application at hand. Aggrieved by such directions, that can question the orders passed by the appellate authorities.” [emphasis supplied]

3.4 The effect of the two judgments cited above is that a right of appeal is created for a public authority to challenge a decision of its own PIO or FAA before the CIC (or by logical extension before any other State Information Commission that may have jurisdiction in a given case).

3.5 In our humble opinion, Parliament had never intended for the appeals scheme to be used by other officers of a public authority to challenge the orders of their own PIO and FAA. Our detailed reasons are given below:

(I) Reason I, in our opinion, the two stage appeal process is created u/s. 19 of the RTI Act for the use of an aggrieved RTI applicant or any person who may be treated as a third party to an RTI application/ appeal. The relevant provisions are reproduced below:

“19. (1) Any person who, does not receive a decision within the time specified in sub section (1) or clause (a) of sub-section (3) of section 7, or is aggrieved by a decision of the Central Public Information Officer or State Public Information Officer, as the case may be, may within thirty days from the expiry of such period or from the receipt of such a decision prefer an appeal to such officer who is senior in rank to the Central Public Information Officer or State Public Information Officer as the case may be, in each public authority: …

(2) Where an appeal is preferred against an order made by a Central Public Information Officer or a State Public Information Officer, as the case may be, u/s. 11 to disclose third party information, the appeal by the concerned third party shall be made within thirty days from the date of the order.

(3) A second appeal against the decision u/s/s. (1) shall lie within ninety days from the date on which the decision should have been made or was actually received, with the Central Information Commission or the State Information Commission: …”

The scheme of section 19 is crystal clear leaving no room for ambiguity. Only two categories of persons may challenge the decision of a PIO a) an aggrieved RTI applicant and b) a third party who is aggrieved by a PIO’s decision to disclose information pertaining to he/she/ it which is treated as being confidential by that third party.  the  PIO  is  statutorily  empowered  u/s.  5(4)  read with section 5(5) of the RTI act to seek the assistance of any other officer of the public authority to perform his/ her appointed functions under the act. So, any reservations or reasons that other officers of that public authority might have against disclosure of the information sought by an RTI applicant must be placed before the Pio to arrive at a reasoned decision. Such reservations and reasons against disclosure are not binding on the Pio who is required to make a decision by applying his/her own mind to the RTI application at hand.

Further, section 19(1) only permits an aggrieved RTI applicant to submit a first appeal to an FAA on two grounds only, i.e., if no decision has been received from the Pio or if he is aggrieved by a decision of the Pio, namely, rejection of the request or partial disclosure. a third party to an RTI application may also submit a first appeal to the FAA u/s. 19(2). So, in our opinion, the scheme of the first appeal process does not contemplate any other right of appeal vesting in any other person including any other officer of the public authority.

Further, the opening line of section 19(3) is crystal clear it refers to a second appeal and not a fresh appeal against a decision made u/s. 19(1). in other words, an appeal that may be submitted against the faa’s order by the aggrieved RTI applicant or an aggrieved third party. It is not open for any other person including any officer of the public authority such as the concerned Pio to approach the concerned information Commission challenging the order of the faa. So in our opinion, a public authority does not have any right of appeal at the first or second appeal stage u/s.19 of the rti act.

(ii)    Reason ii, the PIO is a serving officer of a public authority designated to perform the statutory duties of receiving an rti application and making a decision whether or not to disclose any or all of the requested information. Next, the FAA is an officer senior in rank designated by the said public authority to examine the correctness and validity of an order passed by the Pio. in effect, both officers are acting on behalf of the concerned public authority, even though they may be performing administrative or quasi judicial functions while making a decision on an rti application or appeal. in a complaint or second appeal submitted to the relevant information Commission, the PIO and the FAA appear as representatives of the public  authority  which  appointed  them.  the  RTI  rules, 2012 notified by the Government of India do permit any other officer to represent the public authority in a second appeal proceeding along with or in lieu of the PIO or the FAA. 4 however nothing in the RTI act or the RTI rules, 2012 recognize the right of any other officer or the public authority itself to challenge a decision of its own Pio or faa through the appeals process. The only course of action available to a public authority to demand the setting aside of an order of the CIC is the route of judicial review by invoking the writ jurisdiction of the concerned high Court under article 226 of the Constitution. to hold that the public authority or any of its officers may challenge an order of their own Pio or faa amounts to acknowledging that the statutory authorities under the RTI act were not provided the required assistance at the application/first appeal stage for the Pio or the faa as the case may be to arrive at a reasoned decision. The failure of the public authority cannot be used as a ground for creating a right of appeal which was not originally contemplated by Parliament when it enacted the RTI Act.

(iii)    Reason iii, there is authority to support the above opinion expressed by us. in the matter of Chief Information Commr. And Another vs. State of Manipur and Another [(2011) 15 SCC 1], the hon’ble Supreme Court of india explained the scheme of appeals provided for in the RTI Act in the following words:

“35.     Section 19 is an appellate procedure and a person who is aggrieved by refusal in receiving the information which he has sought for can only seek redress in the manner provided in the statute, namely, by following the procedure under Section 19. This Court is, therefore, of the opinion that Section 7 read with Section 19 provides a complete statutory mechanism to a person who is aggrieved by refusal to receive information. …

42.    Apart from that the procedure under Section 19 of the Act, when compared to Section 18, has several safeguards for protecting the interest of the person who has been refused the information he has sought. Section 19(5), in this connection, may be referred to. Section 19(5) puts the onus to justify the denial of request on the information officer. Therefore, it is for the officer to justify the denial. …

43.    There is another aspect also. The procedure under Section 19 is an appellate procedure. a right of appeal is always a creature of statute. A right of appeal is a right of entering a superior forum for invoking its aid and interposition to correct errors of the inferior forum. It is a very valuable right. Therefore, when the statute confers such a right of appeal that must be exercised by a person who is aggrieved by reason of refusal to be furnished with the information.” [emphasis supplied]

Nowhere in its detailed explanation of the scheme of section 19 does the Hon’ble Supreme Court recognise the right of a public authority to any of its officers to challenge a decision of their PIO or FAA made under the RTI Act.

(iv)    Reason iv, the manner of recognition of the right of a public authority or any of its officers to appeal against a decision of the designated PIO or FAA amounts to recognising a right that the public authority or its public officers may have in the information sought by the RTI applicant (except where the information is personal information of the concerned officers whose disclosure may cause unwarranted invasion of their privacy). In the matter of Union of India vs. Namit Sharma [(2013) 10 SCC 389] the Supreme Court explained the nature of an RTI-related dispute in the following words:

“21. In the judgment under review, this Court after ex- amining the provisions of the act, however, has held that there is a lis to be decided by the information Commission inasmuch as the request of a party seeking information is to be allowed or to be disallowed and hence requires a judicial mind. But we find that the lis that the information Commission has to decide was only with regard to the information in possession of a public authority and the information Commission was required to decide whether the information could be given to the person asking for it or should be with held in public interest or any other interest protected by the provisions of the Act. The information Commission, therefore, while deciding this lis does not really perform a judicial function, but performs an administrative function in accordance with the provisions of the act.” [emphasis supplied]

In deciding an appeal under the RTI act neither the FAA nor the information Commission is making a determination about the right that a public authority orany of its officers may have (except personal information of an officer whose disclosure may cause unwarranted invasion of his/ her privacy) in the information sought. A public authority is only a custodian of the information that it holds in material form which is an extension of its legally appointed role as the custodian of the public interest. All that the public authority is permitted to do is to put forth arguments regarding the public interest that must be protected by keeping the information confidential. This too must be done in the course of the first appeal or second appeal submitted by an aggrieved RTI applicant. The RTI act does not recognise any special right of either the public authority or any of its officers with regard to the information under dispute (except when it is personal information whose disclosure will cause unwarranted invasion of the privacy of an individual) which can be protected by invoking the appeals procedure provided u/s. 19.

4.    Conclusion:
in light of the foregoing critical analysis it is respectfully submitted that there is a strong case for challenging through appropriate proceedings, the directive of the Delhi High Court as well as the Andhra Pradesh High Court regarding the right of a public authority or any of its officers to invoke the appeals process against an order of disclosure of information made by their PIO or FAA under the  RTI Act.

Against the said analysis and view, many other RTI activists hold the view that Public authority has a right to appeal to the Central information Commission.

Let us see when ITSC appeals to CIC, what view CIC holds or when R.K. Jain files appeal against the above delhi high Court order what the Supreme Court rules.


Ethics and u

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Shrikrishna (S) — Arjun, you are looking relaxed and seem to be enjoying the chilled climate. Arjun (A) — Yes. At long last, we could upload all tax returns by midnight of 30th November. We paid advance taxes of all clients by 15th of December.
S — N ow, what is going on?
A — U sual running about for scrutiny assessments!
S — But tell me. You got so much of additional time for tax audit. Could you do it properly?
A — Please don’t ask me that! I know how we managed it. It is always a nightmare.
S — A re your audit papers organised properly? A — Who is going to see it now?
S — T hat’s the trouble with all of you. You have learnt many times that work should not only be done, but it should be seen that is done.
A — O f course, we have so many papers generated. But where to keep them? We don’t have space to keep all that record. We have to either scrap it or give back to the client!
S — T his is the folly. You somehow sign the audits. That too, backdated! And say that you don’t have working papers. I told you so many instances of complaints for misconduct.
A — But how to overcome this problem?
S — See, I cannot tell you the whole list of documents that you need to maintain. That you know better. Do you have at least the appointment letters of all audits?
A — N o. Only for companies we have started taking. It is compulsory to upload to ROC – with 23B. All these years we never did it.
S — I know, you people do it only when you have no option. That too, at the 11th hour.
A — A ll queries are also there. Now we send the queries on e-mail. So automatically, there is a record.
S — But when did you send the queries on mail?
 A — Continuously during the last two to three months.
S — A nd when did you sign the audits?
A — Company audits in the beginning of September. And tax audits in November.
S — I had told you that a partner of even a large and reputed CA firm was held guilty since there were queries sent after the date of the audit.
A — O h! I need to see that. I don’t know what my assistants have done.
S — M oreover, there may be many queries raised. But have you put remarks as to how each one was resolved?
A — See. We just instruct our juniors to do the vouching etc. Some of the queries are solved. Some remain just hanging.
S — A nd you sign the balance sheet even when queries are unresolved. There are many cases where queries were not discussed at all. Obviously, it is a gross negligence. What about MRL?
A — T hat we rarely take. Everything is oral and in good faith.
S — I have told you how ‘good faith’ is the most dangerous thing in your profession. If you sign in good faith, why should there be an audit by qualified person like you?
A — I agree. But in practice, it is difficult.
S — No. Not very difficult. You lack will-power. And once you develop that habit among the clients, they take you for granted. Thereafter, it is difficult to insist on these things.
A — What you say is right.
S — A ctually, it is very wrong that you relax immediately after the deadline. The real work should be done at this stage. Organise the records, audit files, connect all loose ends. Your staff will be available. Do the right things when everything is fresh in the mind. Who will remember after four or five years? Where will you trace the records?
A — Y ou are frightening me. I have understood. But somehow, it does not happen. I tell you, a couple of audits I have given many adverse remarks. In fact, there are annexure containing adverse observations.
S — That is alright. But what is your final audit opinion?
A — T hat is a standard one – ‘subject to this ……. It is true and fair!’
S — T hat itself is highly objectionable. On the one hand, you give serious qualifications; and at the same time, you say it is true and fair. How do you reconcile these two things? There is a clear direction in SA 700. You either give a disclaimer or say it does not give true and fair view.
A — Y es. That’s a point. See, every time we discuss these ethics, we invariably refer to some live case, some actual story. Today it was general.
S — Y es. But your negligence like this will give rise to many stories! And remember, now the misconduct means not only ‘gross negligence’ but also ‘lack of due diligence’. And again, now you cannot take shelter from ‘watch-dog’, ‘blood-hound’ theory.
A — Good that you told me all this. I was wondering how I should keep all articles occupied after the tax-returns. I will make them arrange all papers properly.
S — Y es. It will also help you in peer review. This is a wake-up call for you, dear!

Note: The above dialogue between Shri Krishna and Arjun is based on clause (8) of Part I of Second Schedule which is reproduced below.

Clause (8) of Part I of Second Schedule states that a CA in practice shall be deemed to be guilty of professional misconduct, if he – ‘Fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion.

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Ethics and You

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Procedure of Enquiry (Continued) – Part V

Arjun (A) — Procedure of Investigations of Professional and other misconduct and conduct of cases – Rules, 2007 ….. (repeats 3 – 4 times)

Shrikrishna —Arey, Arey, Arjun. Why are you repeating the same name again and again?

A — The name of the Rules is so long! I am trying to memorise it –by heart!

S — Ha! Ha! Ha! You can always make it short – as Misconduct Enquiry Rules.

A — I know, but I was just killing time until you came. Last time you told me that once the hearing is concluded, one can get the minutes – verbatim, Notes of hearing.

S — Yes – Not only when concluded; but even in between if it is adjourned for further evidence or any other reason. And you need to apply for it.

A— Good. If there is a long gap between two hearings, one may lose track of what has transpired earlier.

S — Sometimes, after the hearing is half-done and adjourned, the Committee may undergo a change. Usually, every February, your Council Committee changes.

A — Oh! Then what happens?

S — The new Committee gives you an option whether you want a de novo hearing; or it can continue from where it ended last.

A — What is the implication?

S — See, sometimes, for strategic reasons, it would be worthwhile to have a fresh hearing. After all, there is always an element of subjectivity in any judicial proceedings. All are human beings!

A — That’s true. If an Assessing Officer or CIT is changed, it makes lot of difference; either way. But tell me, what precaution one should take during the hearing?

S — After all, you should always project yourself as a decent professional. Approach should be polite and co-operative. Handling of papers should reflect your preparedness. Temper should be cool. No agony, no irritation, no nervousness.

A — It is easy to advise. But very difficult when you are sitting there!

S — I agree. That is where an experienced Counsel can help. You should not get excited or argumentative. If there is a mistake that occurrs, it is appreciated if you candidly admit it. Remember, the panel consists of CA professionals. So you can’t fool them.

A — Yes. One should not act too smart. That’s what you mean. How many times can one seek adjournment?

S — In practice, there is no limit if there is a valid reason. They don’t tolerate dilatory tactics. Already they give you a lot of time.

A — Once the enquiry concludes, what happens?

S — They declare it as concluded. You are given fullest opportunity to plead your case. Even after conclusion, at your request or on its own, the Committee may direct you to place on record any document or submission within 8 to 10 days of time.Of course, that cannot be a new evidence. Otherwise, the other party can object.

A — What happens if the complainant does not remain present?

S — Even then, the Council proceeds with the enquiry. The Administration steps into the shoes of the complainant. There is no automatic escape for the respondent.

A — Do they declare the result immediately?

S — No! No! It takes more than 8 to 10 months for the Committee to release its report. It is a very detailed report with reasons. The conclusion is stated as to whether a respondent is guilty or not in respect of each charge or allegation.

A — And punishment?

S — For punishment, there is one more hearing before the BOD or DC – as the case may be, But in that hearing, the respondent has to appear alone, without any counsel. There, he can plead why the punishment should be less harsh! Usually, they orally inform the punishment there itself. A formal communication is sent after a few days. That is called the ‘order’. The first one, holding you guilty, is a ‘Report’.

A — Oh My God! It is a long procedure. How long all this takes?

S — After the enquiry is initiated ………….

A — (interrupts) That means, prima facie opinion?

S — Yes. Right. After that, there may be a period of even two to three years until you actually receive the order!

A — Is that the end of it?

S — No. There are many points. But we will discuss them when we meet next. Om shanti !!!!

Note:
This dialogue is based on the procedural rules contained in Chartered Accountants (Procedure of Investigations of Professional and other misconduct and conduct of cases) Rules, 2007 published in official Gazette of India dated February 28, 2007 (‘Enquiry Rules’).

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PART C: Information on & Around

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BMC’s reluctance to provide information:

A classic case of efforts by Brihanmumbai Municipal Corporation (BMC) officials to dissuade citizens from seeking details under the Right to Information (RTI) Act has come to light.

On 3rd September, Aftab Siddique, prominent activist from Khar, sent an RTI request to the municipal commissioner, seeking information about the number of Ganpati mandal permissions this year.

The commissioner’s office replied on 10th September, directing her to apply to the deputy commissioners. The deputy commissioner (removal of encroachment) and deputy commissioner Zone II.

Accordingly, she applied to both the deputy commissioners. The deputy commissioner (removal of encroachment) Anand Wagralkar informed her on November 8 that, as per a circular issued by the BMC, the information can be had only from the deputy commissioner Zone II, Kishore Kshirsagar.

Kshirsagar is the nodal officer for all matters related to Ganesh mandals.

Instead of collating the necessary information from the ward officers and providing it to Siddique, Kshirsagar gave copies of her application to all the 24 ward officers of Greater Mumbai. Siddique was shocked when 10 of the ward officers called her the same day – on 27th November.

“How am I supposed to be present at 10 ward offices the same day? This is nothing but an effort to sabotage my RTI, Kshirsagar has failed in his duty to obtain the information and pass it on to me,” she added.

Kshirsagar was unavailable for comment. His office said he was busy on a tour of the wards in zone II. Siddique said she wanted the information since several illegal Ganesh pandals were put up.

The spirit of the RTI Act is destroyed by such hostile attitude. Even though Kshirsagar may not be the primary Public Information Officer (PIO) under the law, he could have easily parted with the information, which must have been with him in his capacity as the nodal officer for Ganesh mandals.” she observed

Section 8 (1) (h) of the RTI Act:

The Prime Minister’s Office has refused to disclose communication exchanged between former Prime Minister Atal Bihari Vajpayee and Gujarat Chief Minister Narendra Modi during the 2002 Gujarat riots even after 11 years.

Responding to an RTI application, the PMO cited section 8(1) (h) of the RTI Act, which exempts information that would impede the process of investigation or apprehension or prosecution of offenders.

The PMO did not give any reasons as to how disclosure of the information would attract section 8(1) (h) of the RTI Act even though the Delhi High Court has made it clear that cogent reasons must be given while denying information under the clause.

Section 2(h) of the RTI Act:

The Supreme Court has admitted ADAG Relianceled power distribution companies’ appeals seeking quashing of the Orissa High Court order that declared them as ‘public authorities’, thus bringing them under the purview of the RTI Act.

Reliance Infrastructure owned three discoms, engaged in the distribution and retail supply of Electricity in 23 districts of Orissa since 1999, had challenged the order arguing they are exclusively private bodies, and not public authorities within the meaning of section 2 (h) of the RTI Act, 2005.

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PART B: RTI Act, 2005

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Withdrawals of the Orders of CSIC:

State information commissioner Ratnakar Gaikwad on 4th December withdrew an order issued last month that imposed certain qualifications on obtaining building plans approved by the BMC under the Right to Information (RTI) Act.

Gaikwad said the latest decision was taken “with a view to avoid confusion and practical difficulties in securing information about building plans”. Nonetheless, he urged that caution be exercised when demands for the plans of public utilities or buildings are made. “The authorities must consider if there may be some danger to national security or public safety if these plans are given.” If the answer is yes, the requests in such cases “should be declined as per the provisions of the RTI Act”.

This was the second time Gaikwad withdrew an order on the issue. Following criticism, an order dated 26th September was cancelled on 21st November and a new one issued. But that too met with disapproval. “The language and structure of both the orders perhaps made them look like blanket ban on disclosure of information relating to building plans, which was never the intention of the Commission and the Commission expresses regrets for it,” said Gaikwad.

While explaining the rationale behind the September order, Gaikwad said it was not taken suo motu. “Subhash Desai (Shiv Sena MLA) wrote to the Commission pointing out serious lapses committed by PIOs while furnishing information about building plans and violations of sections 8(a,d), 9 and 11 of the Act, which were dangerous for the country’s security.”

Desai enclosed news items that described how Maoists, through proxies, obtained information under RTI in Jharkhand and misused it for extortion, leading in some cases to the killing of contractors. The MLA requested the Commission not to provide information on public buildings. “Since the Commission was of the same opinion, an order was issued on 26th September.”

• Ms. Sushma Singh is appointed as chief central Information Commissioner w.e.f. 19-12-2013 Now the strength of the Commission is 9 memberschief CIC and 8 Information Commissioners as under:

• Shri Rajiv Mathur
• Shri Vijai Sharma
• Shri Basant Seth
• Shri Yasovardhan Azad
• Shri Sharat Sabharwal
• Mrs. Manjula Prasher
• Shri. M. A. Khan Yusufi
• Prof Madabhushanam Sridhar Acharyulu.

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PART C: Information on & Around

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Travel on Delhi Buses:

Data accessed through RTI has revealed that around 600 drivers of Delhi Buses are reportedly colour blind but are in service with the help of fake medical certificates. The issue has been highlighted by Information Commissioner M. Sridhar Acharyulu to Delhi CM Arvind Kejariwal.

RTI extortionists

The Brihanmumbai Municipal Corporation (BMC) has prepared a list of 77 regular complainants who file bulk applications under the Right to Information (RTI) Act, seeking details of building plans to allegedly extort money from property owners.

The P-North Malad ward office has compiled a list of individuals who send RTI applications seeking details of under-construction or existing buildings and shops. Ward officials have received complaints from shop-owners that these applicants then demand money from them or threaten them with action.

“Minor irregularities such as putting up a grill or extension of a shop’s entrance by a few feet can be demolished by the BMC or regularized after paying a penalty. But these professional complainants extort money in exchange of a promise that no BMC action will be initiated on the structure,” said a civic official from the ward.

Worse, in case ward officials initiate action against the structures, these very complainants write to politicians and municipal commissioners against their initiative.

He added that while RTI is a useful tool, several individuals have started misusing it. “We conducted this exercise since it is getting difficult for us to differentiate between genuine RTI applications and frivolous ones. After the list was prepared, these 77 people have stopped sending in their application.”

Pay Rs. 55.43 lakh to get information!

Two senior regional transport officials in Thane face disciplinary action for demanding a “fee” of Rs. 55.43 lakh for providing information that is supposed to be given out free of cost under the Right to Information Act.

The complainant, Anil Mahadik, filed an RTI application at the regional transport office, seeking details of the number of autos and permit-holders in Thane. All it required for Public Information Officer I S Muzumdar, who is the Assistant Commissioner and Deputy Commissioner Sanjay Dole was to take a printout of the details-73,993 autos of which 36,887 had permits-which were readily stored in their computers, and hand them over to Mahadik. Instead, the two officials chose to harass the RTI applicant and demanded Rs 55.43 lakh from him as a fee for the information that they promised to compile in a CD.

After being apprised of the incident, Chief Information Commissioner Ratnakar Gaikwad rebuked Muzumdar and Dole for “irresponsible behaviour and ignorance of law” while disposing the RTI application by Mahadik. He directed transport commissioner V N More to initiate disciplinary proceedings against the two RTO officials and inform his office of the action by next month. Also ruling that the information should be provided to Mahadik free of cost and that all RTOs should display details of vehicles in their areas on their websites. Gaikwad told More to comply with the orders and submit a compliance report to his office.

(From the Times of India dated 24.01.2014)

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PART B: RTI Act, 2005

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Area Appeals Pending Complaints Pending
HQ 140 148
Greater Mumbai 5,394 550
Konkan 3,741 107
Pune 5,937 220
Aurangabad 3,262 493
Nashik 4,803 62
Nagpur 1,591 582
Amravati 4,184 1,256
Total 29,052 3,418
Above sad state of pendency worries all, specially, those who have to wait as long as two years to get hearing in one’s appeals or complaint. Chief information commissioner, Mr. Ratnakar Gaikwad has written to the Governor to prod the government to appoint Information Commissioners in five pending vacancies.

Public Concern for Government Trust has public interest litigation pending since more than a year in Bombay High Court in this connection.

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Company Law

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Full version of the Circular/Notification can be accessed at http://www.mca.gov.in

1. Clarification on Rules relating to Appointment and Qualification of Independent Directors.

The Ministry of Corporate Affairs vide General Circular No 14/2014 dated 9th June, 2014 has issued Clarifications regarding –
a)
Pecuniary relationship of Independent Directors – in view of the
provisions of section 188 of Companies Act, 2013 (“the Act”),
transactions in the ordinary course of business at arm’s length price
are not to be considered under pecuniary relationship.
b) R eceipt
of remuneration by Independent Director – clarified after consultation
with SEBI that ‘pecuniary relationship’ u/s. 149(6)(c ) of the Act, does
not include receipt of remuneration from one or more companies, by way
of fee provided u/s. 197 (5) of the Act for reimbursement of expenses
for participation in the Board and other meetings and profit related
commission approved by the members.
c) It is clarified that any
tenure of an Independent Directors on the date of commencement of the
Act shall not be counted for his appointment/holding of office of
Director under the Act. In view of the transitional period of one year
it is necessary that if it is intended to appoint Independent Directors
under the new Act, it must expressly be made u/s. 149(10)/(11) read with
Schedule IV of the Act, within one year from 01-04-2014.
d) A
ppointment of Independent Director for less than five years: The
appointment of an Independent Director is for a term ‘upto five years’
and hence for shorter periods is permissible. However, terms of lesser
periods would be treated as ‘term’ and an independent Director cannot be
appointed for more than ‘two consecutive terms.’
e) A ppointments of Existing Independent Directors would also need to be formalised by a letter of appointment.

2. Clarification regarding Register of Loans/Guarantee/ Security/making acquisition in the new format u/s. 186(9).

With
regard to the Register of Loans/Guarantee/Security/ making acquisition
to be maintained u/s. 186(9), read with Rule 12 of the Companies
(Meeting of Board and its Powers), the Ministry of Corporate Affairs
vide General Circular No. 15/2014 dated 9th June, 2014 has clarified
that the register maintained u/s. 372A of the Companies Act, 1956 would
remain and the new format would be applicable w.e.f 01-04-2014.

3. Clarification regarding PAN of Foreign Nationals.

The
Ministry of Corporate Affairs vide General Circular dated 10th June,
2014 No 16/2014, has further to the Circular No. 12/2014, clarified that
the circular for the Pan No. of Foreign Nationals was applicable to
subscriber/ promoter at the time of incorporation of the Company. In
absence of PAN, he shall furnish an undertakingin the prescribed format
attached to the circular, as an attachment to Form INC7.

4. Clarification regarding Filing of Form MGT-10.

The
Ministry of Corporate Affairs has vide General Circular No. 17/2014
dated 11th June, 2014 has informed stakeholders to fill Form MGT 10
physically, signed/certified by a professional and file it alongwith
required attachments in GNL-2 as a temporary arrangement till the Form
MGT-10 is made available.

5. Clarification for Filing of Form
INC-27 – for Conversion of Company from public to Private under the
provisions of Companies Act, 2013.

The Ministry of Corporate
Affairs vide General Circular No. 18/2014 dated 11th June, 2014, has
clarified that since section 14 (1) and 14(2) of Companies Act, 2013
have not been notified, the relevant section 31(2A) shall remain in
force and the delegated powers shall continue to remain with the ROC’s.
Thus applications have to be filed and disposed as per the earlier
provisions.

6. Clarification regarding matters relating to Share capital and debentures under Companies Act, 2013.

The Ministry of Corporate Affairs vide General Circular No. 19/2014 dated 12th June, 2014 has clarified that:

a)
S hare transfer forms executed before 01-04-2014 – Form SH-4 is now to
be used as the new share Transfer Form w.e.f 01-04-2014 in place of
earlier 7B. It is clarified that where Form 7B is submitted to the
company within the period prescribed, it has to accept the registration
of transfers. In case of delay, the Company can decide to not accept the
transfer form and convey reasons for the nonacceptance as per
provisions of section 56(4) of the Act.
b) D elegation of powers by
Board under Rule 6(2)(a) – The Ministry has clarified that as per
section 179 and 180 and Regulation 71 of Table F of Schedule 1, for the
issue of duplicate share certificates can be delegated to a Committee of
Directors subject to regulations imposed by the Board.

7. Clarification with regard to voting through electronic means.

The
Ministry of Corporate Affairs vide General Circular No. 20/2014 dated
17th June, 2014 has decided not to treat the relevant provisions of
section 108 of Companies Act, 2013 read with Rule 20 of Companies
(Management and Administration) Rules 2014 dealing with the exercise of
vote by members by electronic means as not mandatory till 31st December,
20I4 as compliance with procedural requirements, engagement of
Depository Agencies and the need for clarity on matter like demand for
poll/ postal ballot etc., will take some more time. The e-voting
procedure, clarifications on issues by stakeholders are provided in the
Annexure to the Circular.

8. Clarifications with regard to provisions of Corporate Social Responsibility u/s. 135 of the Companies Act, 2013.

The
Ministry of Corporate Affairs, vide Circular No. 21/2014, dated 18th
June. 2014, issued clarifications with regard to provisions of Corporate
Social Responsibility u/s. 135 of the Companies Act, 2013. The
following is clarified for CSR:

i. T he statutory provision and
provisions of CSR Rules, 2014, is to ensure that while activities
undertaken in pursuance of the CSR policy must be relatable to Schedule
VII of the Companies Act 2013, the entries in the said Schedule VII must
be interpreted liberally so as to capture the essence of the subjects
enumerated in the said Schedule. The items enlisted in the amended
Schedule VII of the Act, are broad-based and are intended to cover a
wide range of activities as illustratively mentioned in the Annexure.

ii.
It is further clarified that CSR activities should be undertaken by the
companies in project/programme mode [as referred in Rule 4 (1) of
Companies CSR Rules, 2014]. One-off events such as
marathons/awards/charitable contribution/advertisement/ sponsorships of
TV programmes etc., would not be qualified as part of CSR expenditure.

iii.
Expenses incurred by companies for the fulfillment of any Act/Statute
of regulations (such as Labour Laws, Land Acquisition Act etc.) would
not count as CSR expenditure under the Companies Act.

iv. S
alaries paid by the companies to regular CSR staff as well as to
volunteers of thecompanies (in proportion to company’s time/hours spent
specifically on CSR) can be factored into CSR project cost as part of
the CSR expenditure.

v. “Any financial year” referred under s/s.
(1) of section 135 of the Act read with Rule 3(2) of Companies CSR
Rule, 2014, implies ‘any of the three preceding financial years.’

vi.
E xpenditure incurred by Foreign Holding Company for CSR activities in
India will qualify as CSR spend of the Indian subsidiary if, the CSR
expenditures are routed through Indian subsidiaries and if the Indian
subsidiary is required to do so as per section 135 of the Act.

viii.    Contribution to Corpus of a trust/society/section 8 companies etc., will qualify as Csr expenditure as long as (a) the trust/ society/section 8 companies etc., is created exclusively for undertaking Csr activities or (b) where the corpus is created exclusively for a purpose directly relatable to a subject covered in schedule Vii of the act.

9.    Notification    for    Companies    (Acceptance    of deposits) Amendment Rules, 2014.

The ministry of Corporate affairs has on 6th june, 2014 has amended the Companies (acceptance of deposits) rules 2014, by insertion of proviso to rule 5(5) namely “Provided that the Companies may accept deposits without deposit insurance contract till 31st march, 2015.”

10.    Notification of section 74(3) and 74(2) relating  to repayment of deposits etc., accepted before commencement of the Act

The  ministry  of  Corporate  affairs  has  vide  Notification dated 6th June, 2014 notified that the provisions relating to s/s. 2 and 3 of section 74 of Companies act, 2013 are in force from 6th june, 2014.

11.    Amendment to Companies (Meetings and Powers of board) Rules, 2014.

The ministry of Corporate affairs has vide Notification dated 12th june. 2014 amended the Companies (meetings and Powers of Board) rules, 2014, by inserting rule 6 after explanation as follows:

“Provided that public companies covered under this rule which were not required to constitute audit Committee u/s. 292a of the Companies act, 1956 (1 of 1956) shall constitute their audit Committee within one year from the commencement of these rules or appointment of independent directors by them, whichever is earlier:

Provided further that, public companies covered under this rule shall constitute, their nomination and remuneration Committee within one year from the commencement of these rules or appointment of independent directors by them, whichever is earlier.”

12.    Amendment to Companies (declaration and Payment of dividend) Rules, 2014.

The  ministry  of  Corporate  affairs  has  vide  Notification dated 12th june, 2014 amended the Companies (declaration and Payment of dividend) rules, 2014 to substitute rule 3(5) as follows:

“3(5) no Company shall declare dividend unless  carried over previous losses and depreciation not provided in previous year or years are set off against profit of the Company of the current year.”

13.    Clarification with regard to format of annual return applicable for Financial year 2013-14 and fees to be charged by companies for allowing inspection of records
.

As per the provisions of section 92 of the act, 2013 it is required for very company to submit the annual return in format as given in form MGT-7 containing the particulars as they stood on the close of the financial year where- as as per section 159 of the Companies act, 1956, the annual return gave the position from the date of last annual general meeting till the date of current annual general meeting.

To clear the confusion, the Ministry has now clarified that the  format  of  annual  return  under  act,  2013  (form  – MGT-7) shall not be applicable to the Companies whose financial year ended on or before 1st April, 2014, i.e., the Companies are to file the Annual Return as per the old format (schedule V) as per act, 1956 within 60 days from the date of agm in form 20B. Fees for inspection of records and other documents.

Companies have also sought clarity on fees for allowing free of cost inspection of records under rule 14(2) and rule 16 of the Companies (management and administration) Rules, 2014. The ministry has clarified that until the requisite fee is specified by companies, inspections could be allowed without levy of fee.

14.    Clarification relating to incorporation of a Com- pany, i.e., Company incorporated outside india.

The ministry of Corporate affairs has vide Circular dated 25th june, 2014 informed that as per sections 2(68), 2(71) and 2(87) of the Companies act, 2013 there is no bar in the new act for a company incorporated outside india to incorporate a subsidiary either as a public company or a private company. an existing company, being a subsidiary of a company incorporated outside india, registered under the Companies act, 1956, either as private company or a public company by virtue of section 4(7) of that act, will continue as a private company or public company, as the case may be, without any change in the incorporation status of such company.

15.    Clarification with regard to holding shares in a fiduciary capacity by associate Company u/s. 2(6) of Companies Act, 2013.

The ministry of Corporate affairs has vide Circular dated 25-06-2013, in continuation of the general Circular no. 20/2013 dated 27-12-2013 clarified that the shares held by a company in another company in ‘fiduciary capacity’ shall not be counted for the purpose of determining the relationship of ‘associate company’ u/s. 2(6) of the Companies act, 2013. u/s. 2(6) “associate company,” in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company. Explanation — For the purposes of this clause, “significant influence” means control of at least 20% of total share capital, or of business decisions under an agreement.

16.    Clarification on applicability of residency requirements for resident director.

As per section 149(3) of the Companies act, 2013 every company must have at least one director who has stayed in india for a total period of not less than 182 days in the previous calendar year. The Ministry has clarified vide Circular dated 26th june, 2014 that the ‘residency requirement’ would be reckoned from the date of commencement of section 149 of the act, i.e., 1st april, 2014. The first ‘previous calendar year’ for compliance with these provisions would, therefore, be calendar year 2014. The period to be taken into account for compliance with these provisions will be the remaining period of calendar year 2014 (i.e., 1st april to 31st december). Therefore, on a proportionate basis, the number of days for which the director(s) would need to be resident in india, during calendar year 2014, shall exceed 136 days.

Regarding newly incorporated companies it is clarified that companies incorporated between 01-04-2014 to 30-09-2014 should have a resident director either at the incorporation stage itself or within six months of their incorporation. Companies incorporated after 30-09-2014 needs to have the resident director from the date of incorporation itself.

17.    Clarification with regard to use of the words’ Commodity Exchange” in the Company registration.

The ministry of Corporate affairs vide Circular dated 27th June, 2014, has clarified that the words Commodity Exchange’ in the name of the Company can only be allowed when a “No Objection Certificate” from the Forward Markets Commission (fmC) is furnished by the applicant. Also clarified that the NOC would also be required in cases of Companies registered with the words ‘Commodity exchange’ before the issue of this circular.

18.    Extension for filing of Form DPT 4 under Companies Act, 2013.

The ministry of Corporate affairs has granted extension of time for the period of two months, i.e., upto 31-08-2014 for filing of the Statement regarding deposits existing on the date of commencement of the Companies act, 2013 in form dPt 4 as per provisions 74(1) (a) under the act and Companies (acceptance of deposits) rules, 2014.

19.    Clarification on Form MGT 14 through STP mode.

The ministry of Corporate affairs vide Circular dated 9th july, 2014 has tried to simplify procedures for timely disposal of e-forms by taking the form MGT-14 on record using the straight through Process mode in all cases except in cases of change of name, objects clause, resolution for further issue of capital and conversion of companies.

20.    Registration of Names of Companies must be in Consonance with the Provisions of the Emblems and Names (Prevention of improper Use) Act, 1950.

The ministry of Corporate affairs vide circular dated 11th july, 2014, has directed ROC’s that when allotting names to Companies/LLP’s they must ensure that names of Companies must be in consonance with the Provisions of the emblems and names (Prevention of improper use) act 1950.

21.    Clarification on matters relating to related party.

The ministry of Corporate affairs has vide Circular dated 17th July, 2014 clarified the following in relation to related parties:

i.    For the second proviso of section 188(1), related party that cannot vote refers to the related party with reference only to the contract or arrangement for which the special resolution is being passed.

ii.    U/s. 188 – it is clarified that the requirements of section 188 will not be attracted for transactions arising out of Compromises, arrangements and amalgamations, dealt with under specific provisions of Companies act, 1956 or 2013.

iii.    Contracts already entered into  by  the  Company u/s. 297 of Companies act, 1956 before the commencement of section 188 of the Companies act, 2013, i.e., before 01-04-2014 will not require fresh approvals till the expiry of the original term unless any modification thereto is made.

22.    Extension of Validity of reserved Names.

The  ministry  of  Corporate  affairs  has  vide  Circular  no. 31/2014 dated 19-07-2014 intimated with respect to extension of time for the validity of reserved names made in form inC-1 under the Companies act, 2013 for which the service provider of mCa-21 has brought to the notice of ministry that there are numerous cases in this respect which allows the applicants to use the name approved within 60 days but that is at variance with the implementation at MCA thereby causing inconvenience to the stakeholders. Out of these cases, 1930 cases were those whose time limit expired on or before 19-07-2014, therefore it has been decided to extend the timeline upto 18th august, 2014. Further, those cases in which the names have been reserved but they are yet to be issued, the time period as indicated in the letters of intimation is allowed.

23.    Clarification on transitional period resolution passed under Companies Act, 1956.

The ministry has vide general Circular no. 32/2014 dated 23rd July, 2014 clarified that resolutions approved or passed by companies under relevant applicable provisions of the old act during the period from 1st september, 2013 to 31st march, 2014, can be implemented, in accordance with provisions of the old act, notwithstanding the repeal of the relevant provision subject to the conditions (a) that the implementation of the resolution actually commenced before 1st april, 2014 and (b) that this transitional arrangement will be available upto expiry of one year from the passing of the resolution or six months from the commencement of the corresponding provision in New Act whichever is later. It is also clarified that any amendment of the resolution must be in accordance with the relevant provision of the new act.

24.    Applicability of Second Proviso to section 203(1).

The  Central  government  vide  Notification  dated  25th July, 2014, has notified that for the purposes of applicability of second proviso to section 203 (1) of Companies act 2013 pertaining to individuals not be appointed or reappointed as the chairperson of the company, in pursuance of the articles of the company, as well as the managing directoror Chief Executive Officer of the company at the same time.
The following Class of companies:
•    Public companies with paid up capital of Rs. 100 core or more; and
•    With annual turnover of Rs. 1,000 crore or more (both as per the latest audited Balance Sheet); and
•    engaged in multiple businesses; and
•    have appointed Chief Executive Officer for each business shall be exempt.

25.    Cost Records and Cost Audit.

The ministry of Corporate affairs has on 2nd july issued notification relating to the Companies (Cost Records and Audit) rules, 2014 u/s. 148 of the Companies act, 2013. the new rules specify four classes of companies, i.e.:
i.    Companies engaged in the production of specified goods in strategic sectors,

ii.    Companies engaged in an industry regulated by a sectoral regulator or a ministry or department of Central government,

iii.    Companies operating in areas involving public interest,

iv.    Companies (including foreign companies other than those having only liaison offices) engaged in the production, import and supply or trading of fol- lowing medical devices….

Which shall be required to maintain cost records and who will be subject to cost audit. relevant e-forms would be made available on the MCA portal shortly.

26.    Amendment to the Companies (Prospectus and Allotment of Securities) Rules, 2014.

the ministry of Corporate affairs has vide Notification dat- ed 30th june, 2014 amended the Companies (Prospec- tus and allotment of securities) rules, 2014 whereby in rule 14, in sub-rule (2), in Clause (a), after the second proviso, the following proviso shall be inserted, namely:—

“Provided also that in case of an offer or invitation for non-con- vertible debentures referred to in the second proviso, made within a period of six months from the date of commencement of these rules, the special resolution referred to in the second proviso may be passed within the said period of six months from the date of commencement of these rules.”

27.    Amendment to the Companies (Miscellaneous) Rules, 2014.

The ministry of Corporate affairs vide Notification dated 17th  july,  2014,  has  amended  the  Companies  (miscellaneous) rules, 2014, by inserting

“11. applications or forms pending before Central gov- ernment,  regional  director  or  registrar  of  companies.- Any application or form filed with the Central Government or regional director or registrar (hereinafter referred to as `the authority’) prior to the commencement of these rules but not disposed of by such authority for want of any information or document shall, on its submission, to the satisfaction of the authority, be disposed of in accordance with the rules made  under  the  Companies  act,  1956 (1 of 1956).”

28. Companies (Specification of definitions details) Amendment Rules 2014.

the ministry of Corporate affairs has vide Notification dated 17th July, 2014 specified that in Rule 3 to the Companies (Specification of Definitions Detail) Rules, 2014 after the words ‘a director’ the words ‘other than an independent director’ shall be inserted.

30.  Amendment  to    the Companies (Management and Administration) Rules, 2014

the  ministry  of  Corporate  affairs  has  vide  Notification dated  24th  july,  2014  has  amended  the  Companies (management and administration) rules, 2014. in rule 9, after sub-rule (3), the following proviso shall be inserted, namely:-
“Provided that nothing contained in this rule shall ap- ply in relation to a trust which is created, to set up a mutual  fund  or  Venture  Capital  fund  or  such  other fund as may be approved by the securities and exchange Board of india.”

In rule 13,- (a) the words “either value or volume of the shares” shall be omitted;
(b)    The explanation shall be omitted.

In rule 23, in sub-rule (1), for the words “not less than five lakh rupees,” the words “not more than five lakh ru- pees” shall be substituted;

In rule 27, in sub-rule (1) and in the explanation, for the word “shall,” the word “may” shall be substituted.

Ethics and u

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Shrikrishna (S) — Arey Arjun, we are meeting after a gap of four months. Where were you?

Arjun (A) — I was on a vacation. Now the war of audit and tax returns has started. So I resumed.

S — T hat may not be the only reason. You are looking quite disturbed.

A — Y es, very much. I am very unhappy with you.

S — O h! Why? What have I done?

A — A fter Mahabharata, you said you are introducing Kaliyug. That is the era of evil.

S — Y es. That was the plan of Brahma – the Creator. I am also bound by that.

A — But it is rather too much! Things are unbearable.

S — I t was bound to happen. It was predicted thousands of years ago.

A — Y es. But my friend is having such a nightmarish experience! I have lost my sleep. Henceforth, I will not trust anyone and will not help anyone! Not even close relatives.

S — But we had discussed the hazards of ‘good faith’ many times in the past. As a professional, one should have some skepticism.

A — T rue. But one of my CA friends had earlier helped his cousin out of the way. The cousin was like a vagabond, never settled in life.

S — Quite normal. Then?

A — O nce this cousin came to my friend and said he would start some big venture. He said some financier was willing to finance 90% of cost if he showed that he had 10% of his own.

S — T his is also normal. What next?

A — S o he requested my friend to give him a cheque of about 40 lakhs so that he could show it to the financer.

S — A nd your friend in good faith must have obliged him!

A — Y es! And now he is in deep trouble!

S — I can guess!

A — He wandered for four to five months from one financer to the other. And after five months, before the validity expired, he simply put it into his bank.

S — S o, your friend lost 40 lakh.

A — N o! What has happened is even worse than that!

S — O h! The cheque bounced?

A — Yes. And the cousin filed a suit under section 138 of Negotiable Instruments Act.

S — But he has to prove why the cheque was given.

A — H e fabricated a story that my friend had agreed to employ him on a salary of Rupees two lakh – per month; and he never paid for about two years! Now he paid it and the cheque bounced!

S — But, he has to prove it.

A — I n fact, my friend told the court that he was a low profile practitioner and would never even dream of employing any person on such a high salary! He had a CA working for him at about 40000 rupees whereas his cousin was not even qualified!

S — T hen wasn’t the Magistrate convinced?

A — That is the Kaliyug! It is difficult to prove a truth! S — I agree. It is difficult. But ultimately, truth alone will triumph.

A — That is alright. But for that, one has to sacrifice one’s life. He is convicted with six months’ imprisonment!

S — H as he not contested it?

A — H e has. But God alone knows when he will get justice. And on top of it, our Institute has initiated disciplinary proceedings against him!

S — Oh! Adding fuel to the fire! Poor fellow.

A — N ow we don’t know what view the Institute will take. While issuing the cheque, obviously there was no balance in my friend’s account.

S — I t is a big lesson for all of us. One needs to be ultracautious!

A — But, I want to ask you, if you are God, then this is your ‘Leela’ only. Why do you do such things? What pleasure you get out of it?

S — M aybe, in his earlier birth, your friend might have ditched someone. I need to see the records!

A — But now, you are also my cousin!!

S — H a! Ha!! Ha!!!

Note: The above dialogue between Sri Krishna and Arjuna describes one of those instances where a simple act, done by Members in good faith, can prove fatal. This act, though done out of innocence, may be regarded as a misconduct under Clause(2) Part IV Schedule I by the Institute, i.e., bringing disrepute to the profession. Hence, one needs to be very cautious and see to it that nothing is done in ‘good faith’ without proper documentation/safeguards

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PART C: Information on & Around

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Pending RTI Appeals & Complaints at Information Commission:

It is reported by Commonwealth Human Rights Initiative (CHRI) that huge pendency continues in various Commissions. The top two being:

Maharashtra – 34,158 as on 30-05-2014
Central – 21,946 as on 30-05-2014

Former Delhi CM Sheila Dikshit:

CM once had said: “If you cannot afford the electricity bill, then cut down your consumption.” Yet when it came to her electricity consumption, it was beyond imagination: She was using:
31 Air Conditioners
15 Desert Coolers
16 Air Purifiers
25 Heaters
12 Geysers

The above information was obtained by RTI query filed by RTI activist Mr. S.C. Agrawal. In reply the Central Public Works Department said that an expense of Rs. 16.81 lakh was incurred on the electrical renovation of the bungalow to customise it according to the needs of the then chief minister.

Sophisticated and Normal Weapons For Mumbai Police:

RTI activist, Chetan Kothari, procured following details in response to RTI query.

Sophisticated weapons acquired by state government for city cops, post 26/11:

40mm under barrel grenade launcher 391
Corner shot weapon system 15
Projector grenade 73
Rocket launcher 14
Automatic grenade launcher 50
Sniper rifle 8
51mm mortar 44
Cord detonating explosives (Meters) 475

Normal Arms and Ammunition procured after 26/11:
7.62 SLR Rifle 29,373
Glock pistols 1,277
AK-47 Rifle 3,975
9mm pistols 1,000
Stun Gun (N / E) 2,000
Tear Gas Gun 94
5.56 Insas Rifle 3,916
Machine gun (MP5, A3/%, SD6, KN) 2,061
9mm automatic pistols 1,029
Bullet Proof Jackets 4,500
5.56 Insas LMG 532

Reply also stated: These sophisticated weapons have been mainly procured from the US and Germany.

Mumbai police spokesperson DCP Mahesh Patil said the department has been using sophisticated weapons post 26/11. “These weapons provide the force with an added edge to combat any terror like situation. Experts from companies that deliver these weapons train the force in using them.

Deaths In 3 Civic Hospitals:
Right to Information query into the deaths in Mumbai’s civic – run hospitals threw up disturbing statistics – over the past 13 years one lakh patients died in Sion hospital, Ghatkopar’s Rajawadi Hospital and Mumbai Central’s BYL Nair Hospital.

RTI activists Anand Pargaonkar’s query was directed to all public hospitals in the city, but authorities of only three hospitals provided him with statistics of their mortality rate. Between 2001 to 2013, at Rajawadi hospital, 16,014 out of the 55 lakh patients (including out patients) died. At Nair hospital 29,650 out of 33 lakh admitted patients passed away. Most shockingly, 63,313 out of 1.94 crore patients admitted at Sion hospital died in this period. On an average, eight patients died in these hospitals every day.

Unit Trust of India:
In response to my RTI application, UTI provided me the information sought but also wrote:

 In this connection, we wish to inform you that Hon’ble Bombay High Court has granted stay on the order dated 6th August 2008 passed by the Central Information Commission on applicability of the Right to Information Act, 2005 (RTI Act, 2005), on UTI Mutual Fund, UTI Asset Management Company Ltd and UTI Trustee Company Ltd. pursuant to a Writ Petition filed by these entities. As such the matter is sub-judice and the RTI Act, 2005 is not applicable on all the above entities.

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PART B: RTI Act, 2005

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Note: out of 21 items of Western India RTI Convention 2014 Declaration, 1 to 9 were reported in July ’14 issue of BCAJ. 10 to 21 are reported here under:

As
citizens and activists committed to building a transparent and
accountable democracy we have gathered together from more than 15 States
and Union Territories across the country in the city of Mumbai to
celebrate our victories, and to discuss and strategies to squarely face
current challenges. In this Western India RTI Convention, we pledge our
commitment to protect our constitutionally guaranteed fundamental rights
and particularly emphasising the freedom of speech and expression which
is the bedrock of a free and democratic society in the absence of which
our right to information would lose much of its meaning and value. On
this day the 8th of June, 2014, we express our solidarity with all RTI
users, activists and their families who have suffered attacks on them
and resolve to defend our right to access information and express our
opinions without fear and pledge in particular to struggle to achieve
our collective vision as follows-

10. S everal serious problems
are plaguing the functioning of Information Commissions across the
country which must be urgently addressed by the appropriate authorities.
The Supreme Court’s direction in the Namit Sharma case which requires a
fair and transparent process for the appointment of information
commissioners from diverse fields of experience and expertise, must be
immediately implemented and shortlisted candidates be subject to
credible public scrutiny about their track record of supporting the
regime of transparency. The minutes of the selection committees must be
disclosed proactively. The number of Information Commissioners must be
determined through an assessment of the workload in each Information
Commission as the pendency is reaching alarming levels denying people
their fundamental right to information.

11. A ll Information
Commissions must set up a mechanism to monitor compliance with its
decisions and in particular with its orders imposing penalty on Public
Information Officers and recommendations for taking disciplinary action
against those who are violating the provisions of the Act persistently.
We express our deep concern over some pronouncements of High Courts
denying the appellant or complainant the opportunity to participate in
penalty proceedings before the Information Commissions. Appellants and
complainants must have the opportunity of participating and presenting
their views in all penalty proceedings which they have caused to be
launched and copies of all replies of the PIOs and deemed PIOs must be
shared with them in person as well displayed on the websites of
Information Commissions and the concerned public authorities.

12.
We are deeply concerned about several judgements of the Supreme Court
that are resulting in the curtailment of the scope of people’s right to
information and the express and implied powers of Information
Commissions. RTI users and activists in particular and the people in
general, must discuss and debate the implications of these judgements to
form a strong public opinion in favour of defending and expanding the
mechanism and processes of transparency established by the RTI Act.

13.
A s the exemptions u/s. 8 of the RTI Act are adequate for protecting
important public interests, all security and intelligence organisations
notified by the Central and State Governments u/s. 24 must be reviewed
immediately and such notifications should be withdrawn.

14. We
demand that all laws enacted by Parliament and the State Legislatures
conform to the regime of transparency established by the RTI Act. We
demand the immediate withdrawal of provisions that curtail the scope of
the people’s right to information in other laws and Rules such as the
Collection of Statistics Act, 2008, The National Investigation Agency
Act, 2008, The Foreign Contribution Regulation Act, 2010, and the
Information Technology Rules, 2009. All authorities must ensure that no
Bill, Act, rule, regulation, or executive order curtails people’s
fundamental right to information as guaranteed by the Constitution.

15.
We appreciate the Central Government’s recently instituted policy on
pre-legislative consultation and demand that all Governments immediately
adopt a legally mandated process for formulating any law or policy
through widespread consultation with and effective participation of the
people. All draft MOUs and leases that the governments propose to sign
must be proactively disclosed to the people to enable them to give their
suggestions for change. 16. We demand that appropriate constitutional
mechanisms be put in place requiring the Central Government to place all
international treaties it signs before ratification before Parliament.
After signing treaties, they should be put out in the public domain,
subject to the exemptions provided under section 8 of the RTI Act.

17.
We demand that information about the finances, expenditure and working
of all societies, trusts, trade unions, cooperative societies, religious
and charitable institutions be made accessible to people under the RTI
Act.

18. We believe that WE THE PEOPLE, are the rightful owners
of our country’s natural resources. We demand equity and people’s
participation in decision making combined with complete transparency,
accountability in the management and use of all natural resources.

19.
We demand transparency in the ownership and the source and manner of
funding of all mass media agencies. Methods of enforcing accountability
of the media sector to the people must be explored, while protecting the
right to freedom of expression and the freedom of the press guaranteed
by the Constitution.

20. We are deeply concerned about the
attacks on the attempts to curb people’s right to free speech and
expression, especially those who voice political dissent or raise issues
of public concern in a democratic and constitutional manner. We are
also anguished by recent targeted attacks on academics for publishing
their research. We protest against all attempts at criminalising the
legitimate expression of dissent under Section 66A of the Information
Technology Act and demand withdrawal of all actions launched against
persons with the motive of punishing them for exercising their right to
free speech and expression.

21. We affirm all resolutions passed
at the workshops (annexed to this Declaration) held at the Western
India RTI Convention 2014.

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PART A: Decision Of CIC

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Section 8 (1) (i) of the RTI Act:
Facts:
Vide
RTI application dated 14-05-2013, the appellant sought copies of
documents including a copy of the cabinet decision in respect of certain
recommendation relating to pension of ex-servicemen and civilians.

CPIO/under secretary (pension policy) declined to provide the copies of documents sought as the same were graded as ‘secret’.

Before
the Commission, CPIO submitted that the Cabinet Secretary has made
certain recommendations dated 17-08-2012 relating to pension of ex –
servicemen and civilians, which was graded as ‘secret’. Orders accepting
these recommendations were issued on 17-01-13. However, as the document
was graded ‘Secret’ and the process of downgrading is pending, the
information sought was denied. Appellant submitted that there is no
secrecy involved and he should have been provided the information
sought.

Decision:
“Section 8 (1) (i) of the RTI Act
states that notwithstanding anything contained in this Act, there shall
be no obligation to give any citizen, Cabinet papers including records
of deliberations of the Council of Ministers, Secretaries and other
officers, provided that the discussions of Council of Ministers, the
reasons thereof and the material on the basis of which the discussions
were taken, shall be made public after the decisions have been taken and
the matter is complete.”

“In the instant case, the
recommendations of the Committee have been accepted and formal orders
issued on17-01- 13. As such, the matter is complete as per the
provisions of section 8 (1) (i) and denial of information not tenable.”

The
Commission directed the CPIO to provide the information sought to the
appellant within two weeks from date of receipt of the order.

[P.K.
Bhargavan Pillai vs. Ministry of Defence, (Dept. of Ex Servicemen
Welfare (Pension Policy), New Delhi, File No. CIC/SS/A/2013/002508/RM,
Decided on: 24.04.2014, Citation: RTIR II (2014) 242(CIC)].

Substantially Financed
Vide
Clause 5 of the Finance (No. 2) Bill, 2014 certain amendment in section
10 of the Income- tax Act has been made which shall be effective from
the first day of April 2015. Relevant item therein is Clause (23 C) of
section 10.

Said Clause 5 (a) reads as under:
(a) In Clause (23C), –
(i) after sub-Clause (iiiac), the following Explanation shall be inserted, namely –

“Explanation,
– For the purposes of sub Clauses (iiiab) and (iiiac), any university
or other educational institution, hospital or other institution referred
therein, shall be considered as being substantially financed* by the
Government for any previous year, if the Government grant to such
university or other educational institution, hospital or other
institution exceeds such percentage of the total receipts including any
voluntary contributions, as may be prescribed, of such university or
other educational institution, hospital or other institution, as the
case maybe, during the relevant previous year”.

Section 2(h) of the RTI Act, defines the term “public authority”. Relevant provisions read as under:
(h) “public authority” means any authority or body or institution of self – government established or constituted-
(a)……..
(b)……..
(c)……..
(d) By notification issued or order made by the appropriate Government, and includes any –
(i) body owned, controlled or substantially financed*;
(ii) non – Government organisation substantially financed*,
directly or indirectly by funds provided by the appropriate Government;

Recently,
CIC in the case of Madan Mohan Priva vs. Jan Kalyan Shiksha
Samiti/Samkalp has opined on sub Clause (d) of section 2 (h). I
reproduce some relevant paragraphs from the order:

“As per the
above definition before an NGO can be held to be Public Authority u/s.
2(h) (d) (ii), it has to satisfy the condition that it is “Substantially Financed.”

The Hon’ble Delhi High Court in Indian Olympic Association vs. Veeresh Malik and Ors (2010) IL R 4 Delhi 1] with regard to substantial financing has observed that the term “substantially financed” has not been defined.

*Highlighted by the author
According to the Legal Glossary – 1992 (published by the Govt. of India) the term means: finance:

1. the pecuniary resources of a government or a company.

2.
to provide with necessary funds. Oxford’s Shorter English Dictionary
defines the term “substantial” as follows: S ubstantial…. An adjective…

3. Of ample or considerable amount or size; sizeable, fairly large.

4. Having solid worth or value, of real significance; solid, weighty; important, worthwhile…

The
term “substantial” denotes something of consequence, and contrary to
something that is insignificant or trivial. It implies a matter of some
degree of seriousness. The question is whether the term itself suggests,
in the context of “substantial financing” a predominant or overwhelming
financing. In other words, does “substantial” read with “financing”
mean that the major funding should from the relevant source, i.e., state
or governmental source”.

The Hon’ble Supreme Court in
Thalappalam Ser. Coop Bank Ltd & Ors. vs. State of Kerala [2013 (12)
SCALE 527] as to what is “substantial financing” has observed that:

“36.
The words “substantially financed” have been used in sections
2(h)(d)(i) and (ii), while defining the expression public authority as
well as section 2(a) of the Act, while defining the expression
“appropriate Government”. A body can be substantially financed, directly
or indirectly by funds provided by the appropriate Government. The
expression “substantially financed”, as such, has not been defined under
the Act. “Substantial” means “in a substantial manner so as to be
substantial”. In Palser vs. Grimling (1948) 1 All ER 1, 1 (HL), while
interpreting the provisions of Section 10(1) of the Rent and Mortgage
Interest Restriction Act, 1923, the House of Lords held that
“substantial” is not the same as “not substantial” i.e. just enough to
avoid the de minimis principle. The word “substantial” literally means
solid, massive etc. Legislature has used the expression “substantially
financed” in sections 2(h)(d)(i) and (ii) indicating that the degree of
financing must be actual, existing, positive and real to a substantial
extent, not moderate, ordinary, tolerable etc.

38. Merely
providing subsidiaries, grants, exemptions, privileges etc., as such,
cannot be said to be providing funding to a substantial extent, unless
the record shows that the funding is so substantial to the body which
practically runs by such funding and but for such funding, it would
struggle to exist.
The state may also float many schemes generally
for the betterment and welfare of the co operative sector like deposit
guarantee scheme, scheme of assistance from NABARD etc., but those
facilities or assistance cannot be termed as “substantially financed” by
the State Government to bring the body within the fold of “public
authority” under section 2(h)(d)(i) of the Act. But, there are
instances, where private educational institutions getting 95% grant – in
– aid from the appropriate government, may answer the definition of
public authority under section 2(h)(d)(i).”

[Madan Mohan Priva
vs. Jan Kalyan Shiksha Samiti/Samkalp, File No.: CIC/AD/A/2013/000269 –
SA, Decided on: 30-05-2014, citation RTIR II (2014) 262 (CIC), Order
delivered by M. Sridhar Acharyulu, Central Information Commissioner].

[Ch. Rama Krishna Rao vs. Naval Ship Yard, Port Blair, (third Party: shri r. ajit Kumar) decided by the full bench on 05-05-2014. file no. CiC/Ls/a/2012/002430/rm.]

Ethics and u

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Arjun (A) — Prabho! I am sorry, I could not meet you during Diwali; nor could I return your calls. I was so busy!

Shrikrishna (S) — What kept you so busy – even after your extended tax-deadline? I thought, you would be relaxing during Diwali.

A — Actually, I have a few assignments of transfer pricing. Most meaningless exercise! Nothing but deceiving oneself.

S — It may be true. But having accepted the work, one should do justice to it.

A — That is manageable. Actually, my main engrossment was our Institute’s elections.

S — Are you contesting? Nobody told me.

A — No, no… that’s not my cup of tea. I would prefer to remain away from politics. I have many other worthwhile things to do.

S — Good. But then what are you busy with? Where are you running?

A — My friend is standing for Central Council. Poor fellow, he lost his deposit last time even in WIRC elections. Why is he attempting Central Council – God alone knows.

S — But didn’t you advise him?

A — They don’t listen to such advice. I think, even there, there is some dirty politics or some ulterior motive which I will never be able to understand. And he is insisting that I should run along with him everywhere! Including outstation. I have to do it out of courtesy.

S — He must be spending quite a lot! Printing of brochures, posting them, etc. – a massive exercise. And expensive too!

A — Most important is, it is wasteful. And about our members – so called voters – the less said the better!

S — Why? Are they not interested?

A — Interested? Most indifferent. As good as illiterate.

S — Don’t tell me! Very strange!

A — Many of them don’t even know what is Central Council and what is Regional Council. They don’t even know what is the term of the Council. Many believe that the election is directly for the post of President.

S — Do they at least know who is the President?

A — I am doubtful about that also. You will be shocked that during the last election, the percentage of invalid votes was also high.

S — That means they don’t even know how to vote. But you circulate all instructions. Don’t you?

A — Of course, yes. But who bothers? They just throw all such letters into dust-bins! Many in industry are least concerned about Institute. They don’t even take membership.

S — What do these Council members gain?

A — Very few are sincere and dedicated. They don’t have personal agenda. But many of them do it just for publicity, position, public relations. The fact is that they have time and money to spend.

S — That means there is not much difference between our public body elections and your professional elections!
 
A — You said it! Many candidates spend so lavishly on publicity. Real talented people cannot afford it. They either remain away from the whole activity; or very few good people win it purely on merit. But the situation is worsening.

S — A nd what about their preferences? Do they vote judiciously?

A — Ha! Ha! Ha! – They go by caste, community, language and all such factors that exist in general polls.

S — Oh! That’s very sad.

A — I ndeed, disgusting. All those who have never met you before, suddenly develop so much affection! And they abuse the electronic media – cell-phones, whatsapp, facebook, email! One gets mad. And in that process, even good communications of genuine candidates are overlooked.

S — There should be greater regulation and close monitoring. Printing and stationery is a national waste! I think, we should discuss issues of ethics pertaining to such candidates and representatives.

A — I agree. But now it is too late! We will do it later. Bye. I need to go on my friend’s campaign. Remember, his serial number is 25. Do tell your devotees who are CAs. Please!

Om shanti !!!!!

Note

The above dialogue is intended to reflect the harsh reality of our Institute’s elections. It’s high time that we, particularly the voters, rethink about the whole process of election.

Part C Information on & Around

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Mumbai VC Rajan Welukar spent without sanction:
Rajan Welukar has used over Rs. 12 lakh of Mumbai University’s funds to pay lawyers defending his appointment as the varsity’s vice-chancellor in the Bombay High Court, a Right to Information (RTI) request has revealed. Activist Anil Galgali, who obtained the details, alleged that Welukar has roped in lawyers who were not part of the university-approved panel of legal experts, and used varsity funds to pay their fees without official sanction.

“The university’s funds are meant to be used for the benefit of students. In fact, there are so many issues that require financial consideration,” Senate member Sudhakar Tamboli said. “The case against Rajan Welukar questions his appointment as the vice-chancellor, and not the decisions he has taken. Why is the university then bearing his legal expenses?”

Registrar Khan, however, said that the varsity was also a party to the legal challenge. “The case is also against the University of Mumbai. We have taken the management council’s approval for legal expenses,” he said.

An RTI enquiry revealed 165 pilots were found to have high blood alcohol levels between Jan 2009 and Feb 2014:

According to a Right to Information (RTI) enquiry filed by a serving Jet Airways pilot, between January 2009 and February 2014, 165 pilots in the country were found to have high blood alcohol levels.

“It is important to take post-flight breath analyser test because a pilot will be considered as having tested positive on skipping the test. It will not be possible to explain that the test was missed inadvertently,” the Jet Airways pilot said. He added that the airlines was currently hiring additional doctors to carryout the checks.

Twelve crew members of an Air India flight from London to Mumbai have been sent on compulsory leave for 15 days as punishment for not undergoing post-flight alcohol check implemented by Directorate General of Civil Aviation (DGCA) recently.

As required under tougher rules for alcohol tests with effect from July 2014, the 12 crew members, including six air hostesses, fails to report for the post-flight breath analyser checks on their return to Mumbai from London last month. Not reporting for tests as per the modified rules is considered as being alcohol-positive.

Centre spent Rs. 320 cr on R-Day last year:
Ever wondered how much the Republic Day ceremony at Rajpath, with all its smart marches, colorful tableaus and performing artists, costs to put together? A query under the RTI Act has elicited a response from the Central Public Works Department (CPWD) that says the Centre spent Rs. 320 crore in the four-hour parade in 2014.

Over the years, the expenses on Republic Day celebrations have risen quite substantially. In 2001, the expenditure was Rs. 145 crore.

The Rs. 145 crore that was incurred by the Centre in the financial year 2000-01 rose to Rs. 226 crore in 2003-04. For the next three years, though, expenditure decreased somewhat, in step with a not-so-healthy economy. In 2006- 07, the government spent Rs. 149 crore on the celebrations.

The budget for the R-day function was then increased by 34.16% in 2007-08, and the Centre spent Rs. 227 crore that year. In 2009-10, it went up to Rs 285 crore.

There were slight decrease in the budget in 2011 and 2013, but the Centre ended up spending robust Rs. 320 crore in 2014. In comparison to the amount spent in 2001, the budget for the parade last year shot up by 54.51%.

Man refuses to stay standing, arrested:
The Tamil Nadu State Information Commission (TNSIC) had an RTI applicant arrested for taking a chair in front of a two-member bench hearing his appeal. There is no rule preventing an RTI applicant from sitting during an appeal.

Chief information commissioner K. S. Sripathi and commissioner S. F. Akbar had NGO Legal Panchayat Movement president Siva Elango arrested as he sat even as they refused to accede to his request for a chair during the hearing of his appeal against rejection of an RTI application.

Elango was booked under IPC Section 353 (preventing a government servant from discharging his duty), 294 (b) (obscenity) and 506 (1) (criminal intimidation).

Police presented Elango before a magistrate, which remanded him in judicial custody for 15 days.

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Part A DECISION OF H.C. & CIC

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Information, Section (2):
The Appellant, Shri Ramesh Kumar, submitted RTI application dated 20th September 2012 before the Central Public Information Officer (CPIO), Punjab National Bank, Lucknow; seeking information regarding challans through which Income Tax had been deducted from his salary and was deposited with the Income-Tax Department through wrong PAN number etc., through a total of 5 points.

The appellant preferred an appeal dated 10th November 2012 to the first appellate authority (FAA) when he did not receive any information from the CPIO concerned within stipulated time period. Vide reply dated 27th November 2012, CPIO furnished information on point no. 1 and informed on point nos. 2 to 5 that the requested information was 5 to 6 years old, due to which they were facing problems in retrieving the same, and they will furnish the same one they retrieve it. Vide order dated 17th December 2012, FAA held that CPIO has already furnished the information vide letter dated 27-11-2012 and also upheld the CPIO’s decision.

The appellant submitted that he is an ex-employee of the public authority and he retired on 31-3-2012. The Incometax Department had contacted the appellant information him that the public authority had failed to deposit his Income-tax for the years 2006-2011, as they had quoted wrong PAN number in the Form 16 of the appellant. Hence, he sought information under the RTI Act, about the details of the income tax deductions and deposit challan copy for the years 2006-2011. However, the CPIO had only provided information pertaining to years 2009-2011. The information for the year 2006-2009 had not been provided. The appellant submitted that the information would help in settling up the tax issues with the Income Tax Department.

In the second appeal before CIC, the appellant did not inform the bank about the wrong PAN number when the matter came to their notice they corrected the PAN number and submitted revised I.T. return. The tax deducted was not deposited on an individual basis but in consolidated manner (branch wise) by the public authority, hence information sought is not held by the office in the format sought in the RTI application. The copies of month wise bank certificates can be provided to the appellant for the years 2006-2011. They have provided all Form 16 asked for by the appellant. The challan copies for depositing the tax were not available so they provided the copies of acknowledgement for that period.

The CPIO’s submissions are accepted by the Commission that information as held has been provided. However, the CPIO is directed to provide additional information to the appellant regarding the copies of month wise certificate of Income-Tax deducted for the years 2006-2011 within one week of the receipt of the order of the Commission.

[Shri Ramesh Kumar vs. Punjab National Bank, Lucknow & Ors. in CIC/VS/A/2013/001377/MP, in CIC of Delhi dated 23rd July 2014]

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Ethics and U

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Procedure of Enquiry (Continued) Arjun

(A) — Where is this Lord Shrikrishna gone? He says he is omnipresent. But often makes me wait! Shrikrishna

(S) — Arey, Arjun. You have already reached! Sorry, I was held up.

A — Don’t worry. We are quite used to such waiting in the tax department. Anyway, you were explaining to me the procedure for enquiry of disciplinary cases.

S — Yes. Your friend was to apply for extension of time to send a reply. Did he do that?

A — Yes, he did. But there is no response from the Institute.

S — That does not mean that he should just wait for reply and do nothing till then. Usually, they do grant additional time of 15 to 20 days.

A — Ok. He has prepared some reply. He is alleging that the complainant himself is a bad person and the complaint is frivolous.

S — Y our friend must be feeling that he had helped the complainant in the past, and now the complainant is acting vindictively! Right?

A — Yes, precisely. How can he complain when he is himself a defaulter? One should come with clean hands before the Court for justice.

S — You are right. But that is in general jurisprudence. Here, your Council has no jurisdiction over nonmember.

A — So, anybody can complain? The Council cannot do anything to outsiders? They will catch hold of only the members?

S — Unfortunately, yes. There are other fora where you can seek justice by retaliating. But your Council is concerned only with the good behaviour of members.

A — Why so?

S — Because the Council has to uphold the reputation of the whole profession. Misconduct of any member adversely affects the image of the profession and it is harmful to all other members.

A — I appreciate what you mean. Then what should my friend do?

S — He should write a proper reply to the point. Each and every point alleged by the complainant should be tackled systematically. One should write objectively and not emotionally. All paragraphs should be serially numbered.

A — So, a counter-attack on the complainant will not help?

S — Exactly. You may point out in a decent language as to how the complainant himself is a wrong-doer. But emphasise that you have acted properly. That is what the Council wants to see.

A — So his errors do not justify mine, right?

S — Obviously. Otherwise, how will the profession have credibility?

A — OK. What happens after he sends the explanation?

S — That explanation is simply forwarded to the complainant. He gets an opportunity to send a rejoinder.

A — Why? Even if my reply is convincing, it has to go to him?

S — Yes. They cannot close it merely on your explanation.

A — Ok. Then to his rejoinder, I can send sur-rejoinder? S — N o. You have no second inning.

A — Ah! This is unfair.

S — Under the new system, you have no further opportunity at this stage. Once these three documents are received, that is, the complaint, your reply and rejoinder, then only the Directorate examines the case.

A — Oh. Nothing till then!

S — But while scrutinising, if they want any further information or document, they will write to either party and get it.

A — After examining the case, they give the final verdict?

S — No. The Director forms what is called as a prima facie opinion; as to whether you are ‘prima facie’ guilty; or not guilty.

A — So, it is the Director who decides this? That means, the justice is left to the bureaucrats?

S — No. The Director has to present the prima facie opinion before the Board of Discipline if it is Schedule I offence.

A — And to Disciplinary Committee if it is 2nd Schedule. Correct?

S — Yes. And if mixed one, then also to DC. BOD or DC may concur or not concur with the prima facie opinion. Or even partly agree or disagree on certain items.

A — What I have understood at this stage is that your first reply itself should be as exhaustive as possible.

S — It should be supported by documentary evidence also.

A — Then what?

S — If you are not prima facie guilty, you receive an intimation that your case is closed. Otherwise, they inform you that there will be a detailed enquiry.

A — I think, this much is enough for the time being. I will explain to my friend all that you have told me. But I need to know more. Next time, you please explain to me how the enquiry is conducted. But please give your blessings to my friend so that he will not be held even prima facie guilty.
S — Tathaastu!

Note: This dialogue is based on the procedural rules contained in Chartered Accountants (Procedure of Investigations of Professional and other misconduct and conduct of cases) Rules, 2007 published in official Gazette of India dated February 28, 2007 (‘Enquiry Rules’).

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Ethics and u

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Negligence – Failure to disclose a material fact

Arjuna (A) – Hey Bhagwan, last so many occasions you have been telling me the instances of negligence of a chartered accountant. Surely, it is a misconduct.

Shrikrishna (S) – Yes. That is clause (7) of Part I of Second Schedule. But remember that it covers not only gross negligence, but also the lack of due diligence.

A – I understood. But I am now tired of listening to the stories of negligence. Tell me something else today.

S – Actually, although this is one of the most serious misconduct, this clause rarely operates alone. Quite often, alongwith this clause 7, one or both of the other two items are invoked.

A – What are they?

S – First is clause (5); and then (8). These are invoked simultaneously although the net result is clause (7).

A – Tell me one by one. Don’t confuse me by explaining all of them together.

S – OK. Let us start with clause (5). It says that if the auditor is aware of a material fact which is not disclosed in a financial statement; but disclosure of it is necessary, then it is a misconduct. In short, it is a failure in performing his duty.

A – But the primary duty of disclosure is that of Management. Our Council specifically makes us write such a remark in our audit report.

S – Agreed. But that does not absolve the Auditor of his duty to comment on such deficiencies. That is the very job of an auditor. Otherwise, on what basis can you say that the accounts give true and fair view?

A – But you know, many times, clients do not tell us the full facts. Or they pressurise us not to mention certain things.

S – If you start accepting such requests from the management, then you are not fit to be an auditor. Moreover, it is also your duty to ask for information.

A – We do ask; but often, we do not insist on it. And if we report certain things, we feel the client would be in deep trouble.

S – That is a mistake. Heavens are not going to fall if you report certain discrepancies.

A – I can tell you, in many companies, fixed assets register is never maintained properly. In fact, it is not maintained at all!

S – Yet, you write a standard remark in CARO report.

A – Yes. But tell me of some other instances.

S – I must have told you of a case of an auditor of an educational trust. A very prominent educational institution had schools and colleges at multiple locations. Highly placed people were on its governing body.

A – Then what happened?

S – It had opened many bank accounts required from time to time. Sometimes, accounts were opened for temporary purpose of receiving some grants; or for particular projects which were then completed.

A – Yes. It is quite normal.

S – One junior professional was their auditor. They told him that out of some 16 bank accounts, statement of 5 accounts were not available despite follow-up with respective banks.

A – That is a common difficulty. Accounts must have been inoperative.

S – They told him that there were hardly any transactions except perhaps a few internal transfers. He believed them and did not put any remark.

A – We also avoid putting any qualification in such cases. We feel shy of doing so!

S – That’s the trouble. In the subsequent year, there was some other auditor. He found the bank statements and noticed that there was an impact of about Rs. 30,000/-. Remember, the total collection of that Trust was more than Rs. 8 crore!

A – Oh. Then the impact was negligible!

S – Subsequent year’s auditor adjusted it in the Trust Fund in the next year and again did not put any remark. The adjustment was shown in the balance sheet without any explanation.

A – Actually, for educational trusts, there is no revenue impact. Who complained in this case?

S – Surprisingly, the Income Tax department complained! This again was not revealed in scrutiny assessment; but while processing the application for renewal of section 80 G certificate, the Director of Income Tax noticed it!

A – But why is the tax department bothered about such trivial things?

S – That’s your fate! Many times, even big blunders go unnoticed; and a small thing proves fatal. I also told you long back that whether any person’s interests are adversely affected or not is not material. Council wants to ensure that its member performed his duty diligently!

A – That is all right; but why small people are victimised? So in this case, what happened?

S – Unfortunately, auditors for both the years were held guilty of professional misconduct.

A – Oh my God! The first auditor should have mentioned the fact that bank statements were not made available. He should have stated a disclaimer to that effect.

S – Yes. Thus, it is a failure to disclose a material fact. Its impact on quantum may not be material; but in principle, it is a lapse when statements of 5 out of 16 banks accounts are not available.

A – Had he taken Management Representation Letter?

S – Yes, he had obtained MRL. But his ‘stars’ were unfavourable.

A – How then, are other clauses attracted?

S – Clause (8) talks about failure to obtain sufficient information which is necessary for expression of an opinion. The negligence or lack of due diligence is the resultant failure. One has to take care of all these clauses.

A – Yes. We often consider only ‘gross negligence’ as a misconduct.

S – Important point is when a punishment is awarded; it may be for each such clause. Thus, if one’s membership is suspended, it may be one or two months for each of these clauses!

A – Then I should be more vigilant and should write the report without any such psychological inhibitions. Without fear or favour!

S – For small lapse, consequences may be too harsh!

A – God, only you can save the audit profession!

Om Shanti!
NOTE :

The above dialogue between Shrikrishna and Arjun deals with the Clause (5) and (8) of Part 1 of the Second Schedule which are often invoked alongwith Clause (7):

Clause (5): fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity.

Clause (8): fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion

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Ethics and u

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Certification of projections:

Arjuna (A) – Oh God! I am really fed up. I feel I should not sign any document at all.

Shrikrishna (S) – What happened? You have been signing so many things – reports, certificates and what not!

A – Yes. But that is inviting trouble for myself.

S – If you sign diligently and carefully, why should there be any trouble. That is your very profession. That is your bread and butter.

A – I know. But people expect us to sign anything and everything under the sun! Regulators, Bankers make us sign any kind of certificate.

S – If you are not comfortable, don’t sign it. Who is forcing you to do so?

A – The relationship, Bhagwan, our relationship with client creates pressure on us.

S – Don’t make general statements. What exactly is your worry?

A – Now see, many of our clients apply for bank loans. They submit project reports. Quite often, it is prepared by us only.

S – Nothing wrong about it. Then?

A – Bankers insist that we should sign the projections.

S – How can you certify the projections? You should refuse.

A – That’s the difficulty. We CAs have not been taught to say ‘No’ at all. We try to help the client anyhow.

S – True. But client also should appreciate your difficulty.

A – That does not happen. It is a one-way traffic. They always expect us to compromise and oblige.

S – But they never reciprocate! Is it not?

A – You said it! The client sits on our head because he is impatient for the loan. The Banker also pressurises us. And many of us succumb to it.

S – Client takes the loan and in due course, becomes an NPA. Right?

A – Yes. And then the first scapegoat is the chartered accountant! Banks routinely file complaint to our Institute. We are trapped!

S – So clients emotionally blackmail you that they are not getting the loan because of your unwillingness to sign. In such a case, you should clearly tell them that your Institute does not permit you to sign any projections.

A – But I don’t understand why bankers insist on our doing irregular things?

S – Because that helps them save their skin. If anything goes wrong, they can pass the blame on you people.

A – But why can’t we sign the projections?

S – You are asking an elementary question. Paarth, you can certify only what is factual. That is the very meaning of ‘certificate’. Projections are essentially based on assumptions; and are always uncertain. If you venture to do that, you will be a ‘fortuneteller’ and not a chartered accountant.

A – Tell me, is there is no way out at all? Because if I refuse to sign, client says he can obtain signature from hundreds of other CAs.

S – You people lack unity. That is why people take you for a ride. The quacks bring disrepute to your profession. They can sign anything.

A – And that spoils our relationship with the client. He feels unhappy with us!

S – You should read and understand AAS-35 – now SAE 3400. It does permit you to sign projections if you fulfil certain conditions.

A – What are those conditions?

S – I can’t explain all the details. But broadly, the assumptions should be realistic and reasonable. They should be clearly stated. Even hypothetical assumptions should be consistent with the purpose of the information.

A – What other things should we see?

S – If any study or survey is done by some agency, you should obtain the report. You should also study the track record and history of the entity. Moreover, projections should be restricted to a reasonable time period in future. Further, you should also judge the management’s competence to prepare proper projections.

A – I think I should also read that SAE 3400 and show it to the client.

S – Most important, you should ensure a clear engagement letter and also insist that all the representations of the management are in writing and signed by them.

A – My friends at district level areas find it all the more difficult to tackle such situations. They have very limited work opportunities and have to compromise on many things.

S – And there is often an unhealthy rivalry.

A – I feel the Council or its Committee should take up the matter with the managements of the Banks and ask them not to insist on such things.

S – Yes. And your local associations and study circles also can make representations to the Banks.

A – There is yet another problem. One bank asked a CA to give a certificate that all statutory dues have been paid. How can one certify that? In our country, there are hundreds of laws. It is impossible to visualise all of them.

S – Very true. In such cases, you should specify the various laws that are commonly applicable to such entities and restrict your certificate to only those statutes. There cannot be a generalised certificate. Even under CARO, only specific laws are covered.

A – But tell me. If one gives such certificate, who is going to see that? Banks say it is just for their record.

S – So long as everything is smooth, there is no problem. But once the unit starts defaulting in servicing the loans, banks will take out all these certificates. And it is a serious misconduct. It is gross negligence as well as lack of due diligence. Many disciplinary cases are coming up on this count! And not following the accounting and auditing standards is clearly a misconduct.

A – I will take up this issue in our study circle and do something concrete to save our fellow-members.

S – Good. That is why you are so dear to me!

Om Shanti!


NOTE :

The above dialogue between Shrikrishna and Arjun deals with the Clause (3) of Part 1 of the Second Schedule which are often invoked alongwith Clause (7). It states that:

A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he-

Clause (3): permits his name or the name of his firm to be used in connection with an estimate of earnings contingents upon future transactions in a manner which may lead to the belief that he vouches for the accuracy of the forecast.

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Allied Laws

14. 
Duty to Court – Advocates not to cite wrong judgments & mislead the
Court – No excuse for lawyers for not cross-checking status of judgments – Task
of an advocate is perhaps more onerous – Duty to the court, duty of fidelity to
the law, if anything, it is higher now. [Principles of Law, Code of Ethics for
Professionals]

Heena Nikhil Dharia vs. Kokilaben Kirtikumar Nayak NOTICE
OF MOTION (L) NO. 3117 of 2016 (Bom) (HC) (unreported)

The learned judge has cited several instances where the
learned counsel appearing for one of the parties cited judgements as being
binding authority even though the said judgements had been overruled.

The learned Judge records with “profound sadness” that before
pronouncing the judgement, he specifically asked the counsel whether he still
maintained that the judgements cited by him were good law and that the counsel
confirmed that he did and that both are binding precedents. “It was clear that
Mr. Shah was completely unaware of the appeal court orders, and, too, the
subsequent orders in Sajanbir Singh Anand,”

As Lord Denning MR in Randel vs. W. (1996) 3 All E. R. 657
observed:

“The Code which obligates the Advocate to disregard the instructions
of his client, if they conflict with his duty to the Court, is not a code of
law — it is a code of honour. If he breaks it, he is offending against the
rules of the profession and is subject to its discipline.”

The Judge made it clear that whatever may have been the
position in the past, there is today no excuse for the casual and careless
approach of Advocates given the fact that all judgements are available in
online databases.

Conveying the message that, Don’t make the Court lose its
way, the Court stated :

“Judges need the Bar and look to it for a dispassionate
guidance through the law’s thickets. When we are encouraged instead to lose our
way, that need is fatally imperilled,”

15. 
Family – Does not include mother of unmarried deceased employee – Entire
pension to be payable to widow of employee – However, the assets may be
distributed amongst mother and widow, if employee died intestate [Employees
Provident Fund and Miscellaneous Provisions Act, 1952; Section 6A – Family
Pension Scheme, 1964; Cl. 4(ii)].

Nitu vs. Sheela Rani And Ors AIR 2016 SUPREME COURT 4552

The learned counsel appearing for the appellant-widow
submitted that the appellant-widow is the only person who is entitled to the
pension as per the provisions of the Family Pension Scheme. It was also
submitted that pension is paid in pursuance of the afore-stated Scheme and
therefore, pension cannot be treated as other assets of the deceased and
according to the provisions of the Scheme, only the appellant-widow is entitled
to the pension.

On the other hand, the learned counsel appearing for the
respondent-mother submitted that she being a class-I heir of a Hindu of the
deceased who died intestate, she is entitled to one-half share of the
properties of the deceased, as he was survived by his widow and the mother.

The learned counsel appearing for the State supported the
case of the appellant-widow and submitted that in the Scheme, the term “family”
has been defined and in the instant case, the widow of the deceased is the only
person who is entitled to pension and therefore, the impugned order deserves to
be quashed and set aside so that the entire amount of pension can be paid to
the appellant.

Clause 4(ii) of the Scheme defines the term “family”, which
reads as under :-

4(ii). “Family” for the purpose of this scheme includes the
following relatives of the officer:-

    wife, in the case of a male officer;

    husband, in the case of a female officer;

    minor sons;

    unmarried minor daughters;

    widowed/legally divorced daughters; and the
parents of an unmarried officer.”

So far as the respondent mother is concerned, she has not
been included in the definition of the term “family” for the reason that as per
the provisions of sub-clause (f), parents of an unmarried officer would be a
part of the family and therefore, the respondent mother would not be included
in the family of deceased as he was married.

So far as the provisions of the Hindu Succession Act, 1956,
are concerned, it is true that the properties of a Hindu, who dies intestate
would first of all go to the persons enumerated in class I of the schedule as
per the provisions of Section 8 of the said Act and therefore, so far as the
properties of the deceased are concerned, they would be divided among the
respondent mother and the appellant wife, provided there is no other family
member of late Shri Yash Pal alive, who would fall within class 1 heirs, but
the position in this case, with regard to pension, is different.

16. 
Legal Practitioners – Publicity for Judges and Legal Practitioners must
not be encouraged – Amounts to breach of Professional Ethics and Professional
Conduct – Only the name of High Court should be used by Print Media and not the
names of Judges or the legal Practitioners. [Constitution of India – Art 217,
Advocates Act, 1961, Section 35; Law Reports Act, 1875, S.4]

S. Baskar Mathuram vs. The State of Tamil Nadu and Ors.
AIR 2016 MADRAS 178

The whole basis for seeking extravagant reliefs through
filing a Writ Petition appears to be an act of obtaining gaining popularity and
publicity, so that the law practitioner filing such a writ, could attract more
number of clients.

Such a practice would amount to an unethical practice of
soliciting one’s work. If the code of conduct prescribed by the Bar Counsel is
not adhered to, whether directly or indirectly, it must attract corrective actions.

Hence, the Registrar was directed to initiate necessary
action for breach of Code of Ethics and Professional Behaviour.

The court also directed the Registrar (Administration) to
request the Print, Electronic and Media House, not to publish the individual
names of the Judges, unless it is so essentially required. The reason being,
every Judge of the High Court is carrying on with his work sitting in a
particular division/roster as assigned by the Hon’ble Chief Justice. The Judges
do perform their duties dispassionately and to the extent possible by not
allowing their individual notions and philosophies to be a guiding factor in
deciding the causes brought before them. Therefore, we feel that the names of
the Judges should not be published and on the other hand, the name of the High Court alone should be published.

17. 
Limitation on filing suit – Suit instituted within 3 years of attaining
majority – Not barred by limitation – Plaintiffs even though majors were not
managers/karta of Joint
family – Not capable of discharging without concurrence of other members of the
family [Hindu Minority and Guardianship Act, 1956; Section 8, Limitation Act,
1963; Section 7, Constitution – Article 60, 109, 110, 113]

Narayan vs. Babasaheb and Ors. AIR 2016 SUPREME COURT 1666

The Hon’ble Court was of the considered opinion that a quondam
minor
Plaintiff challenging the transfer of an immovable property made by
his guardian in contravention of section 8(1)(2) of the Hindu Minority and
Guardianship Act 1956 which states the powers of a natural guardian, and who
seeks possession of property can file the Suit only within the limitation
prescribed under Article 60 of the Limitation Act and Articles 109, 110 or 113
of the Limitation Act are not applicable to the facts of the case.

In view of the above discussion, the limitation to file the
present Suit is governed by Article 60 of the Limitation Act and the limitation
is 3 years from the date of attaining majority. When once the Court arrives at
a conclusion that Article 60 of the Act applies and the limitation is 3 years,
the crucial question is, when there are several Plaintiffs, what is the
reckoning date of limitation?

A reading of section 7 of the Limitation Act, 1963, makes it
clear that when one of several persons who are jointly entitled to institute a
suit or make an application for the execution of the decree and a discharge can
be given without the concurrence of such person, time will run against all of
them but when no such discharge can be given, time will not run against all of
them until one of them becomes capable of giving discharge.

In the case on hand, the 1st Plaintiff was 20
years old, the 2nd Defendant was still a minor and the Plaintiffs 3,
4 and 5, who are married daughters, were aged 29, 27 and 25 respectively on the
date of institution of the Suit in the year 1989. As per Explanation 2 of
section 7 of the Limitation Act, 1963, the manager of a Hindu undivided family
governed by Mithakshara law shall be deemed to be capable of giving a
discharge without concurrence of other members of family only if he is in
management of the joint family property. In this case, Plaintiffs 3 to 5 though
major as on the date of institution of Suit will not fall under Explanation 2
of Section 7 of the Limitation Act as they are not the manager or Karta
of the joint family.

The 1st Plaintiff was 20 years old as on the date
of institution of the Suit and there is no evidence forthcoming to arrive at a
different conclusion with regard to the age of the 1st Plaintiff. In
that view of the matter, the Suit was instituted well within three years of
limitation from the date of attaining majority as envisaged under Article 60 of
the Limitation Act.

Hence, in view of the above discussion, the Court held that
the appeal was devoid of merits and it deemed it appropriate to dismiss the
appeal.

18. 
Registered Document – Operates from date of its execution – Not from the
date of its Registration  [Registration
Act, 1908; Section 47]

Principal Secretary, Government of Karnataka and Ors. vs. Ragini Narayan and Ors. AIR 2016 Supreme Court 4545

One of the Disputes which arose was with respect to the date
from which the document is said to start to operate when the document
registration was on a date subsequent to date of execution.

It was contended that the
Deed of Nomination dated 16.01.1995 was not a valid document. It was pointed
out that the amended deed based on Resolution dated 10.12.1994 was not
registered, by the date 16.01.1995 as the registration is said to have been
done only on 30.01.1995. As such, delegation of power in favour of the
Plaintiff on 16.01.1995 is not valid. It was vehemently argued that since the
amendment registered on 30.01.1995 was a non-starter as such the same was non-effective.

Section 47 of Registration Act, 1908 reads as under:

Time from which registered document operates. – A registered
document shall operate from the time at which it would have commenced to
operate if no registration thereof had been required or made, and not from the
time of its registration.

In view of the above provision of law, the
Hon’ble Court held that if there is a document registered on a subsequent date,
it starts to operate from the date of execution and not from the date of
registration.

RBI /FEMA

Given below are the highlights of certain RBI Circulars &
Notifications

53.  A. P. (DIR Series)
Circular No.  6 dated October 20, 2016

Review of sectoral caps and simplification of Foreign Direct
Investment (FDI) Policy

This circular highlights the salient features of various
amendments made to the Consolidated FDI Policy by the Central Government from
time to time. The effect of these changes to the Consolidated FDI Policy, on
Notification No. FEMA. 20/2000-RB dated 3rd May 2000 – Foreign
Exchange Management (Transfer or Issue of Security by a Person Resident outside
India) Regulations, 2000, have been notified by RBI vide the following 3
Notifications: –

1.  Notification No.
FEMA.354/2015-RB dated October 30, 2015, (c.f. G.S.R No.823 (E) dated October
30, 2015).

2.  Notification No. FEMA
361/2016-RB dated February 15, 2016 (c.f. G.S.R No 165(E) dated February 15,
2016).

3.  Notification No. FEMA
362/2016-RB dated February 15, 2016, (c.f. G.S.R No. 166 (E) dated February 15,
2016).

54.  A. P. (DIR Series)
Circular No.  7 dated October 20, 2016

Notification No. FEMA 363/2016-RB dated April 28, 2016 

Investment by a Foreign Venture Capital Investor (FVCI) registered
under SEBI (FVCI) Regulations, 2000

This circular states that Schedule 6 of Notification No. FEMA.
20/2000-RB dated 3rd May 2000 – Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside India) Regulations,
2000, dealing with Investment in India by SEBI registered Foreign Venture Capital
Investors (FVCI) has been amended.

The amendments provide that SEBI registered FVCI: –

1.  Will not have to obtain
RBI permission for making investments under this Schedule.

2.  Can invest in equity or
equity linked instruments or debt instruments issued by an Indian company whose
shares are not listed on a recognised stock exchange at the time of issue of
the said securities / instruments provided the Company is engaged in any of the
following sectors: –

i)
Biotechnology

ii)
IT related to hardware and software
development

iii)
Nanotechnology

iv)
Seed research and development

v)
Research and development of new chemical
entities in pharmaceutical sector

vi)
Dairy industry

vii)
Poultry industry

viii)
Production of bio-fuels

ix)
Hotel-cum-convention centres with seating capacity of more than three thousand

x)
Infrastructure sector.

3.  Can invest in equity or
equity linked instruments or debt instruments issued by an Indian ‘startup’
irrespective of the sector in which the startup is engaged.

4.  Can invest in units of a
Venture Capital Fund (VCF) or of a Category I Alternative Investment Fund
(Cat-I AIF) (registered under the SEBI (AIF) Regulations, 2012) or units of a
Scheme or of a fund set up by a VCF or by a Cat-I AIF. However, the VCF or
Cat-I AIF, which has received investment from FVCI, will have to comply with
the provisions for downstream investment as laid down in Schedule 11.

5.  Can open a foreign
currency account and / or a rupee account with a designated bank branch for the
purpose of making transactions only and exclusively under this Schedule.

6.  Must pay for all
investments out of inward remittance from abroad through normal banking
channels or out of sale / maturity proceeds of or income generated from
investment already made as per details mentioned above.

7.  Can, without restriction,
transfer any security / instrument held by it to any person resident in or
outside India.

The entity receiving investment directly from a registered FVCI
must report the investment in form FCGPR.

55.  A. P. (DIR Series)
Circular No.  8 dated October 20, 2016

Notification No. FEMA 375/2016-RB dated September 9, 2016

DIPP Press Note No. 6 (2016
Series) dated October 25, 2016

Foreign investment in Other
Financial
Services

Para 5.2.26 – “Non-Banking Financial Companies” – of the
Consolidated FDI Policy for 2016 has been replaced as under: –

Sector/Activity

% of Equity/

FDI cap

Entry Route

Other Financial Services

Financial Services
activities regulated by financial sector regulators, viz., RBI, SEBI, IRDA,
PFRDA, NHB or any other financial sector regulator as may be notified by the
Government of India.

100%

Automatic

Other Conditions

i.   Foreign investment in ‘Other Financial Services’ activities
shall be subject to conditionalities, including minimum capitalization norms,
as specified by the concerned Regulator/Government Agency.

ii.   ‘Other Financial Services’ activities need to be regulated by
one of the Financial Sector Regulators. In all such financial services
activity which are not regulated by any Financial Sector Regulator or where
only part of the financial services activity is regulated or where there is
doubt regarding the regulatory oversight, foreign investment up to 100% will
be allowed under Government approval route subject to conditions including
minimum capitalization requirement, as may be decided by the Government.

iii.  Any activity which is specifically regulated by an Act, the
foreign investment limits will be restricted to those levels/limit that may
be specified in that Act, if so mentioned.

iv.  Downstream investments by any of these entities engaged in
“Other Financial Services’  will
be subject to the extant sectoral regulations and provisions of Foreign
Exchange Management (Transfer or Issue of Security by a Person Resident
outside India) Regulations, 2000, as amended from time to time

56.  A. P. (DIR Series)
Circular No.  9 dated October 20, 2016

Rupee Drawing Arrangement – Trade related remittance limit

This circular states that the maximum value per trade transaction
under the Rupee Drawing Arrangement cannot be more than Rs. 15 lakh.

57.  A. P. (DIR Series)
Circular No.  10 dated October 20, 2016

External Commercial Borrowings (ECB) –
Extension and conversion

Presently, banks are permitted to approve changes in repayment
schedule of ECB prior to its maturity only if the average maturity and
all-in-cost are in conformity with applicable ceilings / norms.

This circular provides that banks can, subject to applicable
guidelines, also (a) grant extension and (b) permit conversion into equity – of
matured but unpaid ECB if: –

i.  No additional cost is incurred.

ii. Lender’s
consent is available.

iii.
Reporting requirements are fulfilled.

58.  A. P. (DIR Series)
Circular No.  11 [(1)/14(R)] dated
October 20, 2016

Foreign Exchange Management (Manner of
receipt and payment) Regulations, 2016

This circular highlights the changes made to the Foreign Exchange
Management (Manner of receipt and payment) Regulations, 2016 which have been
notified vide Notification No. FEMA 14 (R)/2016-RB dated May 02, 2016.

The changes pertain to: –

1.  Manner of receipt in
foreign exchange from: –

a.  Members of the Asian
Clearing Union (ACU).

b.  All other countries.

2.  Manner of payment in
foreign exchange from: –

a.  Members of the Asian
Clearing Union (ACU).

b.  All other countries.

59.  A. P. (DIR Series)
Circular No. 13 dated October 27, 2016

External Commercial Borrowings (ECB) by Startups

This circular contains the framework for raising ECB by Startups
recognised as such by the Central Government. The main highlights of the
framework are: –

Maturity: Minimum average maturity period must be 3 years.

Recognised lender: Lender / investor must be a
resident of a country who is either a member of Financial Action Task Force
(FATF) or a member of a FATF-Style Regional Bodies. However, the lender /
investor must not be: –

1.  From a country identified
in the public statement of the FATF as: –

i.   A jurisdiction having a
strategic Anti-Money Laundering or Combating the Financing of Terrorism
deficiencies to which counter measures apply; or

ii.  A jurisdiction that has
not made sufficient progress in addressing the deficiencies or has not
committed to an action plan developed with the Financial Action Task Force to
address the deficiencies.

2.  An Overseas branch /
subsidiary of an Indian bank and / or overseas wholly owned subsidiary / joint
venture of an Indian company.

Forms of Borrowing: Borrowing can be in the form of
loans or non-convertible, optionally convertible or partially convertible
preference shares. Also, the funds must come from a country which qualifies as
a Recognised Lender as mentioned above.

Currency: The borrowing must be denominated in any freely convertible
currency or in Indian Rupees (INR) or a combination of both. In case of
borrowing in INR, the non-resident lender, is required to mobilize INR through
swaps / outright sale undertaken through a bank in India.

Amount: Borrowing per Startup is limited to US $ 3 million or equivalent
per financial year either in INR or any convertible foreign currency or a
combination of both. However, provisions on leverage ratio and ECB liability:
Equity ratio will not be applicable.

All-in-cost: Must be mutually agreed between the borrower
and the lender.

Permitted End-uses: For any expenditure in connection
with the business of the borrower.

Conversion into equity: Subject to applicable Regulations
for foreign investment in Startups, conversion into equity is freely permitted.

Security: The choice of security to be provided to the lender is left to
the borrowing entity. Security can be in the nature of movable, immovable,
intangible assets (including patents, intellectual property rights), financial
securities, etc., and shall comply with foreign direct investment / foreign
portfolio investment / or any other norms applicable for foreign lenders /
entities holding such securities.

Corporate and personal guarantee: Issuance of corporate or
personal guarantee is allowed. Guarantee issued by non-resident(s) is allowed
only if such parties qualify as recognised lender(s) as mentioned above. However,
issuance of guarantee, standby letter of credit, letter of undertaking or
letter of comfort by Indian banks, all India Financial Institutions and NBFC is
not permitted.

Hedging: Where ECB is in INR the overseas lender can hedge its INR
exposure through permitted derivative products with banks in India. The lender
can also access the domestic market through branches / subsidiaries of Indian
banks abroad or branches of foreign bank with Indian presence on a back to back
basis.

Conversion rate: In case of borrowing in INR, the
foreign currency – INR conversion must be at the market rate on the date of
agreement.

Other provisions: The Startup will have to comply
with existing provisions like parking of ECB proceeds, reporting arrangements,
powers delegated to banks, borrowing by entities under investigation, etc.

60.  Circular No.
FMRD.DIRD.10/14.03.01/2016-17 dated October 28, 2016

Money Market Futures

Presently, only futures based on the 91-day Treasury Bill, which
is a money market instrument are permitted.

This circular now permits futures based on any money market
instrument or money market interest rate. Notification regarding the same is
enclosed with this Circular.

61.  A. P. (DIR Series)
Circular No. 14 dated November 03, 2016

Issuance of Rupee denominated bonds overseas by Indian banks

This circular now permits Indian banks, subject to certain
conditions and within the overall limit for foreign investment in corporate
bonds of Rs. 244,323 crore, to issue: –

i.   Perpetual Debt
Instruments (PDI) qualifying for inclusion as Additional Tier 1 capital and
debt capital instruments qualifying for inclusion as Tier 2 capital, by way of
Rupee Denominated Bonds overseas; and

ii.  Long term Rupee
Denominated Bonds overseas for financing infrastructure and affordable housing.

62.  A. P. (DIR Series)
Circular No. 15 dated November 07, 2016

External Commercial Borrowings (ECB) – Clarifications on hedging

This circular, with respect to hedging of ECB, clarifies as under:

i. Coverage: Wherever hedging has been mandated by the RBI,
the ECB borrower will be required to cover principal as well as coupon through
financial hedges. The financial hedge for all exposures on account of ECB
should start from the time of each such exposure (i.e. the day liability is
created in the books of the borrower).

ii. Tenor and rollover: A minimum tenor of one year of
financial hedge would be required with periodic rollover duly ensuring that the
exposure on account of ECB is not unhedged at any point during the currency of
ECB.

iii. Natural Hedge: Natural hedge, in lieu of financial hedge, will be considered only to
the extent of offsetting projected cash flows / revenues in matching currency,
net of all other projected outflows. For this purpose, an ECB may be considered
naturally hedged if the offsetting exposure has the maturity/cash flow within
the same accounting year. Any other arrangements/ structures, where revenues
are indexed to foreign currency will not be considered as natural hedge.

Further, it will be the banks responsibility to verify that 100%
hedging requirement is complied with.

63.  A. P. (DIR Series)
Circular No. 16 dated November 09, 2016

Government of India Notification published in the Gazette of India
vide S.O.3408(E) dated November 08, 2016

Withdrawal of the legal tender character of the existing and any
older series banknotes in the denominations of ? 500 and ? 1000

This circular provides that older series banknotes in the
denominations of ? 500 and ? 1000 will continue to be legal tender until
November 11, 2016 to the extent of transactions specified below: –

(i) At international airports, for arriving and departing
passengers, who possess specified bank notes, the value of which does not
exceed ? 5,000 to exchange them for notes which are legal tender; and

(ii) For foreign tourists to exchange foreign
currency or specified bank notes, the value of which does not exceed ? 5,000,
to exchange them for notes which are legal tender.

64.  A. P. (DIR Series)
Circular No. 17 dated November 11, 2016

Issue of Pre-Paid Instruments to foreign tourists

This circular permits Authorized Persons may
issue Pre-paid instruments to foreign tourists in terms of the instructions
issued by Department of Payments and Settlement System, Reserve Bank of India,
in exchange of foreign exchange tendered. Passport of the foreign tourist will
be a valid document for issuance of the said instruments.

65.  A. P. (DIR New Series)
Circular No. 18 [(1)/12 (R)]dated November 17, 2016

Notification No. FEMA. 12(R)/2015-RB dated December 29, 2015

Foreign Exchange Management (Insurance) Regulations, 2015

This Notification repeals and replaces the earlier Notification
No. FEMA 12/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management
(Insurance) Regulations, 2000.

Annexed to this circular are: –

a.  Memorandum of Foreign
Exchange Management Regulations relating to General/Health Insurance (GIM) in
India.

b.  Memorandum of Foreign
Exchange Management Regulations relating to Life Insurance (LIM) in India.

66.  A. P. (DIR Series) Circular No. 19 dated
November 17, 2016

Notification No. FEMA 374/2016-RB dated October 24, 2016

Investment by Foreign Portfolio
Investors (FPI) in corporate debt securities

This circular permits FPI to invest
in the following additional instruments: –

1.  Unlisted corporate debt
securities in the form of non-convertible debentures/bonds issued by public or
private companies subject to minimum residual maturity of three years and end
use-restriction on investment in real estate business, capital market and
purchase of land.

2.  Securitised debt
instruments as under: –

(a) any certificate or instrument
issued by a special purpose vehicle (SPV) set up for securitisation of asset/s
where banks, FIs or NBFCs are originators; and/or

(b) any certificate or instrument
issued and listed in terms of the SEBI Regulations on Public Offer and Listing
of Securitised Debt Instruments, 2008.

However, investment by FPI in the
unlisted corporate debt securities and securitised debt instruments must not
exceed Rs. 35,000 crore and must be within the extant investment limits
prescribed for corporate bond – the present limit is Rs. 2,44,323 crore.
Further, investment in securitised debt instruments will not be subject to the
minimum 3-year residual maturity requirement. _

Ethics And U

Shrikrishna (S) — Arey Arjun, I am waiting here for you since long.  You were to come at 5.  It is already 5.45.
 
Arjun (A) — Very sorry, Bhagwan.  Got held up in income tax office.

S — Why?  Now all scrutiny assessments must be over. April is a relaxing month.  Isn’t it?

A — For CAs, there is no relaxation at all.  We have to work like     donkeys.  There is so much harassment for recovery of tax.Clients’ accounts are attached, prosecution notices are being issued like a child’s play.
.
S — Is it?  Why prosecution? 

A — The less said the better. I.T. authorities have innovative brains. They are always searching for new avenues to harass the assessees.  And the entire burden falls on CAs – with no fees!

S — Anyway!  That’s a permanent headache of our country.

A — I feel, bureaucracy does not want transparency.  They don’t want discipline and digitalisation.

S —  Why?  That will reduce their workload.

A — But they may be having vested interests in allowing the state of confusion to continue. They may be interested in manual intervention, for reasons best known to them!

S — That’s an endless subject.  Last time, we discussed the preliminaries of NFRA.

A — Yes.  I remember.  Now I am worried about bank audits. Days are very bad for CAs.

S — I agree.  CAs are projected to be main culprits in all financial frauds.  That’s unfortunate.  But sometimes, you CAs also behave very loosely.

A — What do you mean?  We work round the clock – with no family life.  And we are the most underpaid profession.

S — May be!  But you don’t follow even simple systems.  First and foremost is the time discipline.  You people are never on time!

A — It is partly true.  But we are always at the mercy of others!

S — You have made yourselves vulnerable; always a soft target.  You have allowed yourselves to be taken for granted.

A — What to do?  Business community is so dominant!  We can’t afford  to say ‘no’ to them.  They simply go away and catch hold of another CA.

S — That’s the pity.  You lack unity.  You come together for academic discussions; but never for collective action!  And you have developed a habit of ‘managing’ everything.

A — Yes.  Even CPE hours we try to ‘manage’.  But the recent episode of bank frauds has caused turmoil in the profession.  I wonder whether I should do any bank audit at all!

S — If you act methodically, you should have nothing to fear from.

A — But they don’t allow us to work systematically. There are strict timelines.  A big branch to be audited in barely 3 to 4 days.  And no one co-operates.  Poor branch manager alone has to face the music.

S — But what prevents you from keeping your own papers right?  Tell me, do you write to previous auditor?

A — Why should we write?  Appointment is made by RBI or the Board of a nationalised bank.

S — My dear, Arjun.  There is no exception to clause (8).  Whosever appoints you, whatever be the organisation, and whatever be the type of audit, writing to previous auditor is a must.

A — But then how can we meet the deadline if we wait for his reply?

S — In this particular context, you need not wait; but writing you cannot avoid.

A — I must keep this in mind.

S — Moreover, you don’t keep working papers.  You know that the work should not only be done; but it should be seen to be done.  And while doing audit, you should always have professional  skepticism.

A — What is that?  You mean we should suspect everything?

S — No.  Not that way.  But you cannot afford to accept everything in good faith and at face value.

A — But when reputed organisations produce documents before us, how can we disbelieve that?

S — But you should learn to verify independently the truth of every statement of a client.  He should get a feeling that you verify every document, it has a psychological impact.  And when there is  slightest of suspicion, you should take it to its logical end.

A — What you say is right.  Very often, we just leave it like that. We avoid to escalate the matter.

S — Do you ensure that your assistants are properly trained?  Tell me, have you ever read the Standards on Auditing?

A — You mean SAs?

S— Yes.  I believe, most of you carry out the audit just by common sense, without studying the relevant material properly.  You never make efforts to upgrade yourselves.  Do read SA 200 and SA 240 before you do any audit now.

A — But we really slog.  We do the work sincerely.  And there is no time for documentation and correspondence.

S — That is precisely where you lack.  Documentation is a must.

A — I know.  There are many big firms. They do not really do much indepth audit; but merely compile thick files of working papers.They command fat fees.  All these laws and ethics, I feel, apply only to small people like us.  After all, might is right.

S — Don’t say so.

A — I have a few friends who have affiliations with some foreign firms and they enjoy the brand, they do advertising under the corporate shield, they do anything they like.  Nobody is going to ask them in our country.

S — Arjun, I understand your grievance.  But don’t worry.  Now Supreme Court has taken serious cognizance of all these activities of Multinational firms.

A — Oh!  When was that?  Good, Good.  Tell me some details.

S — Supreme Court delivered its decision on 23rd February, 2018. Very detailed discussion.  I suggest you read it yourself.  But don’t read it just for fun.  Learn something from it and try to implement the basic principles of ethics.

A — O Lord!  I always obey your commands!

!!OM Shanti!!

Note:
This dialogue is in the context of recent scandal of PNB, ensuing bank audits and also the Hon’ble Supreme Court decision in respect of Multinational Accounting Firms (MAFs). – Civil Appeal No. 2422 of 2018 [Arising out of Special Leave Petition (civil) no. 1808 of 2016].

Corporate Law Corner

1. Yenugu Krishna Murthy vs. UOI

W.P. Nos. 7819, 7820/2018 and 7821/2018 (GM-RES)

Date of Order: 26th February, 2018

 

Section 164(2) read with section 167 of the
Companies Act, 2013 – The said section is constitutionally valid – Validity of
provision of law cannot be questioned merely because it operates a little
harshly on the directors of defaulting company

 

FACTS

Y was a director under the
Companies Act, 2013. His DIN status appeared as “disqualified” on the website
of Ministry of Corporate Affairs. The reason for the same in brief was
“Violated Section 164(2)(a)”. Y admittedly, did not seek a copy of
the order from the Registrar Of Companies (“ROC”). Further neither had he approached
ROC nor was he served any show cause notice or adjudication order u/s. 164(2)
of Companies Act, 2013 (“the Act”). 

 

Before the High Court, it
was urged that directors were put in a very piquant and irreparable situation
and even if, disqualification on account of non-filing of financial statements
and Annual Returns in one company does take place for which they may not be
personally liable, they incur the ‘disqualification’ u/s. 164(2)(a) of the Act
and they are deemed to have vacated the office of the director in other such
companies also as per section 167 of the Act.

 

HELD

The High Court held that
the writ petitions in the instant case were premature as the directors did not
even try to approach the appropriate authority under the Act, namely, the ROC,
seeking even a copy of the order u/s.164(2)(a) of the Act, which might have
been passed by it. In absence of adequate facts the High Court could not
conclude whether Y was at fault or not; whether he had brought the relevant
facts to the notice of the ROC or not.

If Y had approached the ROC
with the relevant facts, it would be duty bound to pass a reasoned and speaking
order. ROC has the quasi-judicial powers and an obligation under the Act to
pass such appropriate orders in the matter.

 

As far as constitutional
validity of sections were concerned, the High Court observed that provisions
could not be held to be illegal, unconstitutional or ultra vires merely
because they may operate harshly against the Directors of the defaulting
company. It observed that the academic questions or the legislative wisdom is
not the subject matter to be decided by the Courts of law unless such questions
are raised in properly instituted cases, based on proper factual foundation of
the case.

 

Accordingly, the writ
petitions were dismissed by the Court.

 

2. Dr. Reddy’s Research Foundation vs. Ministry of Corporate
Affairs

[2018] 142 CLA 351 (AP HC)                                        

Date of Order: 6th October, 2017

 

Rule 14 of the Companies (Appointment and Qualification of
Directors) Rules, 2014 – There is a lacuna in the procedure that is required to
be followed by the Companies, which are defaulted in filing their annual
returns and the consequent disqualification of the Directors to rectify the
defect.

 

FACTS

D Co had failed to furnish
annual returns for the years 2011-12 to 2015-16 and financial statements for
the years 2012-13 to 2015-16. Consequently, the directors of the company were
disqualified to act as directors under the provisions of Companies Act, 2013.

Rule 14 of the Companies (Appointment
and Qualification of Directors) Rules, 2014, prima facie provides for
rectifying the defect by enabling the defaulting companies to file their
returns. The company will have to act through its Directors in order to do so.
However, as the directors are disqualified, they are not able to file these
returns because the e-platform through which this is required to be done cannot
be accessed owing to the disqualification.

D Co thus, approached the
High Court seeking remedy for the inherent inconsistency.

 

HELD

The High Court observed
that there is a lacuna in the procedure that is required to be followed by the
Companies, which are defaulted in filing their annual returns and the
consequent disqualification of the Directors to rectify the defect.

 

Taking a note of the
anomalous situation, the High Court directed that the DIN of the directors be
restored in respect of D Co so that they are able to submit the returns in
accordance with Rule 14.

 

3. Power Grid Corporation of India Ltd. vs. Jyoti Structures Ltd.

[2018] 142 CLA 285 (Del HC)                                        

Date of Order: 11th December, 2017

 

Section 14 of the Insolvency & Bankruptcy Code, 2016 read with
section 34 of Arbitration And Conciliation Act, 1996 – Proceedings u/s. 34 of
Arbitration Act which are in favour of corporate debtor would not be stayed
even though a moratorium has been granted to such corporate debtor.

 

FACTS

Arbitral tribunal had given
an award dated 20.05.2016 which was in the nature of pure money decree in
favour of J Co. Counter claim of P Co had been rejected by the Arbitrator and
claim of J Co was upheld. During the pendency of these proceedings u/s. 34 of
the Arbitration And Conciliation Act, 1996, (“Arbitration Act”) an application
u/s. 7 of the Insolvency and Bankruptcy Code, 2016 (“the Code”) was filed by a
financial creditor against J Co. Through an order dated 04.07.2017 the National
Company Law Tribunal (“NCLT”) admitted the application and declared a
moratorium in terms of section 14 of the Code.

 

P Co filed a petition u/s.
34 of the Arbitration Act claiming that proceedings under said section be kept
in abeyance in terms of embargo contained under section 14(1)(a) of the Code.

 

HELD

The High Court having read
the provisions of section 14(1) of the Code observed that the term ‘proceedings’
as is mentioned in section 14(1)(a) of the Code is not preceded by the word
‘all’ to indicate the moratorium provisions would apply to all the proceedings
against the corporate debtor. The High Court relied on the report of the
Bankruptcy Law Reforms Committee which demonstrated that moratorium is to apply
to recovery actions and filing of new claims against the corporate debtor and
the purpose behind moratorium is that there should be no additional stress on
the assets of the corporate debtor.

 

It was argued that once the
moratorium comes into effect, no proceedings against the corporate debtor may
continue. However, the High Court held that it was important to consider the
nature of these proceedings.  Stay of
proceedings against an award in favour of the corporate debtor would rather be
stalking the debtor’s effort to recover its money and hence would not fall in
the embargo of section 14(1)(a) of the Code.

 

It was held that
proceedings would not be hit by section 14 of the Code due to following
reasons:

 

(a)  “ ‘proceedings’ do not mean ‘all proceedings’;

 

(b)  moratorium under section 14(1)(a) of the Code
is intended to prohibit debt recovery actions against the assets of corporate
debtor;

 

(c)  continuation of proceedings under section 34
of the Arbitration Act which do not result in endangering, diminishing,
dissipating or adversely impacting the assets of corporate debtor are not
prohibited under section 14(1)(a) of the Code;

 

(d)  the term ‘including’ is clarificatory of the
scope and ambit of the term ‘proceedings’;

 

(e)  the term ‘proceeding’ would be restricted to
the nature of action that follows it i.e. debt recovery action against assets
of the corporate debtor;

 

(f)   the use of narrower term “against the
corporate debtor” in section 14(1)(a) as opposed to the wider phase
“by or against the corporate debtor” used in section 33(5) of the
Code further makes it evident that section 14(1)(a) is intended to have
restrictive meaning and applicability;

 

(g)  the Arbitration Act draws a distinction
between proceedings under section 34 (i.e. objections to the award) and under
section 36 (i.e. the enforceability and execution of the award). The
proceedings under section 34 are a step prior to the execution of an award.
Only after determination of objections under section 34, the party may move a
step forward to execute such award and in case the objections are settled
against the corporate debtor, its enforceability against the corporate debtor
then certainly shall be covered by moratorium of section 14(1)(a).”

 

Once the
moratorium is declared the decision to continue with the objections need to be
taken only by the Resolution Professional. The High Court observed that in the
peculiar circumstances of this case where a counter claims was preferred by the
objector, though rejected, it would be appropriate if the interim resolution
profession be made aware of the proceedings and he consents to its
continuation.
 

 

Allied Laws

1.      
Naina Kala Sharma and Ors. vs.
Deepak Kumar Rai AIR 2018 (NOC) 4 (SIK.)

 

Hindu Law – Coparcenary – Suit for
Partition – Cannot demand share in Father’s property when self acquired. [Hindu
Succession Act, 1956 S.6]

 

The case of the Appellants is that the
Appellant No. 1 was married to the Respondent in the year 1993 and Appellants
No. 2 and 3 were born from the wedlock. A property(suit land) was gifted to
Appellant no. 1 by her father.

 

The issue was whether the Appellants no. 2
and 3 have any right, title or interest over the Suit land and the building
constructed thereon?

 

It was argued that the Mitakshara concept of
coparcenary is based on the notion of the birthright of son, son’s son and
son’s son’s son.

 

It was observed by the Court that the
daughter has also been made coparcener by virtue of Hindu Succession
(Amendment) Act, 2005.

 

It was held that the Law laid down in
Mitakshara in regard to father’s right of disposition of his self acquired
property, held that the father of a joint Hindu family governed by Mitakshara
law has full and uncontrolled powers of disposition over his self-acquired immovable
property and his male issue could not interfere with these rights in any way.

 

Hence, no rights were conferred to
Appellants No. 2 and 3 for partition, in view of the property being the self
acquired property of the Respondent.

 

2.      
Naveen Kumar vs. Vijay Kumar
And Ors Civil Appeal No. 1427 of 2018 (Arising out of SLP (C) No.18943 of 2016)
(SC)

 

Owner – As appearing on records – Liable to
pay compensation. [Motor Vehicles Act, 1988, S.2(30)]

 

In the present case, an accident had taken
place where the Tribunal had granted an award holding the first
respondent(original owner/first owner) responsible together with the driver. It
was contended that there were a series of transfers which took place, however,
the name in the records were not changed/altered.

 

It was observed by the apex court that the
expression ‘Owner’ in section 2(30), it is the person in whose name the motor
vehicle stands registered who, for the purposes of the Act, would be treated as
the ‘owner’. However, where a person is a minor, the guardian of the minor
would be treated as the owner. In a situation such as the present where the
registered owner has purported to transfer the vehicle but continues to be
reflected in the records of the registering authority as the owner of the
vehicle, he would not stand absolved of liability.

 

The principle underlying the provisions of
section 2(30) is that the victim of a motor accident or, in the case of a
death, the legal heirs of the deceased victim should not be left in a state of
uncertainty. A claimant for compensation ought not to be burdened with
following a trail of successive transfers, which are not registered with the
registering authority. To hold otherwise would be to defeat the salutary object
and purpose of the Act. Hence, the interpretation to be placed must facilitate
the fulfilment of the object of the law.

 

It was held that since in the present case,
the First respondent was the ‘owner’ of the vehicle involved in the accident
within the meaning of section 2(30), the liability to pay compensation stands
fastened upon him.

 

3.      
Gurbax Singh vs. Harminderjit
Singh AIR 2018 (NOC) 136 (P. & H.)

 

Registration – Period of Lease –
Admissibility. [Transfer Of Property Act, 1882, S.106, 107]

 

It was contended that since the lease
agreement was not specifically shown to be for a period of more than one year,
it was therefore not required to be compulsorily registered.

 

It was observed that a perusal of section
107 of the T. P. Act shows that any instrument by which a lease of immovable
property is created, either from year to year, or for any term exceeding one
year, or by which a yearly rent is reserved, must only be a registered
instrument.

 

Any other lease may either be by way of a
registered instrument or even by oral agreement accompanied by delivery of
possession. The proviso to section 107 does stipulate that the State Government
may by notification in the official gazette direct that leases of immovable
property other than leases from year to year or even for any term exceeding one
year or reserving an yearly rent, may be made by unregistered instrument, or
orally, even without delivery of possession. However, no notification issued by
the Government of Punjab has been brought to the notice of this Court by
learned counsel for the appellant, by which any lease as is required to be
registered u/s. 107, is exempted from being so registered.

 

In the facts of the case, since there was a
rent increase every 15 years by 3%, it was deemed that the lease agreement was
executed for a term exceeding 1 year and hence was supposed to be compulsorily
registered.

 

4.      
The State of Jharkhand and Ors.
vs. Lalita Devi Kejriwal and Ors. AIR 2018 JHARKHAND 7

 

Registration – Where properties are
situated. [Registration Act, 1908 (S.30)]

 

It was held that the registration of
properties in Mumbai, which were situated in Ranchi, was in utter violation of
section 30 of the Indian Registration Act 1908 as amended by Bihar Amended Act,
1991. By virtue of this amendment in Indian Registration Act, 1908, the
documents of sale or transfer of the properties must be registered at the place
where the immovable property is situated.

 

5.      
The State of Jharkhand and Ors.
vs. Lalita Devi Kejriwal and Ors. AIR 2018 JHARKHAND 7

 

Sale – Late mutation of name – Non-joinder
of co-sharer – Unregistered Letter – Invalid [Transfer of Property  Act, 1882, S.47]

 

It was observed that mutation of the names
after registration did not take place for as long as a period of 5 years.
Further, a letter written by the owner of the plots in question was also relied
upon, of which no evidence was provided. Neither the co-sharers joined as
parties to the suit. After taking into consideration the factual matrix as
above, it was held that the sale deed was not valid.


Part c Iinformation on & Around

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6,000 RTI cases pending in Assam
A total of 6,220 cases of RT I complaints and appeals are pending in the office of the Assam Information Commission where the post of information commissioner remains vacant.

The Assam Information Commission has three sanctioned posts – a chief information commissioner and two information commissioners. However, one post of information commissioner has been lying vacant since the tenure of Mohan Chandra Malakar, a retired principal chief conservator of forests (wildlife), expired in March 2014, he added.

Das, a retired additional chief secretary in the Assam government, had assumed charge on December 1, 2014. His post had been lying vacant since January 2011, when his predecessor D.N. Dutt’s term expired. When Das took charge, both the posts of information commissioners were vacant, following the expiry of the tenures of the previous incumbents, and more than 6,000 cases were pending. .

265 officers fined over Rs 22 lakh for refusing information under the RTI Act
As many as 265 public information officers across Karnataka have been penalised for a total of Rs 22,44,500 during the last 10 months for denying information under the RT I Act. As per the RT I Act 2005, public information officers have to provide information u/s. 7(1) within 30 days. RT I Commissioner Shankar R. Patil has recommended disciplinary action against the officers, including many senior officers of urban development, revenue and education departments, BBMP, BDA, AC’s, Additional Deputy Commissioners and tahsildars for their failure to provide information without any valid reason. .

Delhi HC imposes costs on RTI applicant for filing vague and irrelevant RTI queries

The Delhi High Court, in Shail Sahni vs. Valsa Sara Mathew, took an RTI applicant to task for filing vague and irrelevant RT I queries. Justice Man Mohan of Delhi High Court imposed costs of Rs. 25,000 on the applicant who approached had High Court seeking compensation of Rs. 4 lakh. The RT I applicant had approached the High Court challenging the CIC order refusing to intervene in denial of RT I replies to the queries she posed to Ministry of Defence. He submitted that CIC has committed an error in holding that Commission’s interference is not required in the matter. The Court, after perusing the applications filed by him, opined that that they are general, wide, ambiguous and vague. The Court also observed that the petitioner-applicant had approached High Court earlier too, in which the Court had dismissed his petition and observed that the “misuse of the RTI Act has to be appropriately dealt with, otherwise the public would lose faith and confidence in this “sunshine Act”. A beneficent statute, when made a tool for mischief and abuse must be checked in accordance with law”. Despite the aforesaid judgment, the petitioner continued to file filing general, irrelevant and vague queries, which was dismissed by the court with costs of Rs.25,000 to be paid by the petitioner to the Lok Nayak Hospital, New Delhi within a period of three weeks, Justice Manmohan said. However, the Court also observed that if the petitioner-applicant were to file a fresh application with the PIO prioritising his requirement and identifying the precise information, the same shall be supplied.

Mumbai University offers a sixmonth PG certificate course in Right to Information (RTI) Act.
The Department of Civic and Politics, which is designing the course content and identifying the subjects in the curriculum will hold classes for this academic session from 16th January 2016. To mark this occasion, the University had organised an inaugural function in its Kalina Campus which was attended by RT I activist Nikil Dey, former Central Information Commissioner Shailesh Gandhi and Chief Information Commissioner Ratnakar Gaikwad. Vice-chancellor Sanjay Deshmukh. Admission process for the course has already begun and university is targeting social activists, PIOs, journalists, bureaucrats and members of civil society to ensure more effective use of the RT I. Information activist who doled out lakhs as RT I fee was felicitated.

Arunachal RT I Activist Forum (ART IAF) felicitated Mr. Nabam Pali for his effort to reduce the RT I application fee from Rs. 10 to 2 in the state, in Itanagar, Arunachal Press Club (APC) President Chopa Cheda while felicitating Nabam Pali in a simple yet impressive function congratulated him for achieving the feat.

Part A Decision of Supreme Court

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RBI Directed To Disclose Information under Right to Information Act

The Supreme Court, in a landmark decision (Reserve Bank of India vs. Jayantilal Mistry) ruled that the RBI does not place itself in a fiduciary relationship with the financial institutions because, the reports of the inspections, statements of the bank and other information related to the banks’ business do not fall under the purview of the term confidence or trust. Whilst delivering the judgment for the bench, Justice M.Y. Eqbal, explaining the nature of functions of the banking sector regulator, said: “the RBI is supposed to uphold public interest and not the interest of individual banks. The RBI is clearly not in any fiduciary relationship with any bank. RBI has no legal duty to maximise the benefit of any public sector or private sector bank, and thus there is no relationship of ‘trust’ between them. The RBI has a statutory duty to uphold the interest of the public at large, the depositors, the country’s economy and the banking sector. Thus, RBI ought to act with transparency and not hide information that might embarrass individual banks”.

Contentions by The RBI: RBI declined to disclose the information such as unpaid loans, top defaulters of the public sector banks, fines imposed by it on other banks etc., on the ground of being exempted under Section 8(1)(a), (d) and (e) of the RT I Act. The refusal to reply to the RT I queries was based on the premise of protecting economic interest, commercial confidence, and fiduciary relationship of RBI with other banks. RBI further contended that RT I Act was a general law and it could not override the confidentiality provisions under the specific legislations such as Banking Regulation Act, 1949, the Reserve Bank of India Act, 1934 and the Credit Information Companies (Regulation) Act, 2005.

Court’s Findings: The Apex Court rejected the arguments made by the RBI and upheld the order of the CIC. It observed that RBI does not place itself in fiduciary relationship with other banks as information received from other financial institutions is not received under pretext of trust or confidence but under the ambit of RBI’s statutory duty to oversee the functioning of the banks and the country’s banking sector. Therefore, RBI is duty bound to comply with the provisions of the RT I Act and disclose the information sought in the instant case.

The RBI’s contention that disclosure of information would prejudicially affect the economic interest of the State and may lead to a crisis of financial stability if information sought is sensitive, was also rejected by the Court as being baseless and it was held that the disclosure in question would serve public interest.

The Court further observed that the right to information regarding the functioning of public institutions is a fundamental right enshrined in Article 19 of the Constitution, and the RT I Act being a later legislation aimed to bring transparency, overrides all earlier laws and practices except in case of specific exemptions enumerated u/s. 8 of the RT I Act.

Publicised as a landmark win, this judgement has been welcomed by the RT I activists. The implications of this judgement may indeed be far reaching, paving the way for greater accountability and transparency in the financial market.

NOTE:
1 Section 8 of the RTI Act mentions “exemption from disclosure of information.—
(1) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen,—
(a) information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence;
(d) information including commercial confidence, trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party, unless the competent authority is satisfied that larger public interest warrants the disclosure of such information;
(e) Information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information.”