Corporate Legal Solutions

Introduction

The Insolvency and Bankruptcy Code, 2016 (‘the Code’) has amended and as well as replaced many provisions of other statutes that could have created an overlap of powers and functions with respect to the resolution of insolvency and liquidation of certain entities. Among these statutes, One Person Company [1] (‘OPC’) and Limited Liability Partnership ('LLP') has also been covered in order to give power to National Company Law Tribunal (‘NCLT’) to regulate the insolvency resolution process as well as the liquidation process for the abovementioned entities. [2]

Amendment in Limited Liability Partnership Act, 2008

In the 10th Schedule of the Code, the provisions of winding up of an LLP as mentioned in other statutes [3] were omitted. On the other hand, for OPC, Schedule 8 was enacted for the same purpose. These schedules, when coupled with the overriding power of the Code [4], states, that from the date of enforcement of the Code, all the insolvency and liquidation matters of the entities as mentioned therein [5] will be governed by the Code alone. This is also evident from the provisions which give power to the Code [6] to apply the provisions of the statute on any OPC/LLP. [7] 

Initiation of Insolvency Proceedings

1. Insolvency Proceedings against an OPC and LLP can be initiated by any Financial Creditor [8], Operational Creditor [9], or the entities themselves [10] when there is any debt [11] with respect to any of these creditor(s) [12], and there exists a default of payment [13] with respect to these debts.

2. It must be noted that, in order to initiate a corporate insolvency resolution process (‘CIRP’) against an OPC/LLP, the default of payment must be at least Rs. 1 lakh [14] and falling in the ambit of financial debt [15] or operational debt [16] as mentioned in the Code. 

3. Because of the fact that time is an essential aspect, the whole process of CIRP is to be completed in 180 days [17]. However, if the NCLT is of the opinion that the process will not be able to be completed within such prescribed time-limit, and extension of 90 [18] days can be granted by it. Thus, the total time period for the CIRP to be completed must not exceed a period of 330 days from the date of commencement of insolvency proceedings against the corporate debtor. [19]

Steps after the admission of application for CIRP

1. Once the application for initiation of CIRP is admitted by NCLT, it appoints an Insolvency Resolution Professional (‘IRP’) [20] who takes charge of the management of the firm in order to take necessary steps to help revive the company and pay-off its debts. [21] He can also raise fresh funds [22] to continue the operations of the OPC/LLP and has to make all the endeavors to protect the value of the property of the corporate debtor. [23]

2. During this period, the NCLT also initiates the period of moratorium [24], while the IRP makes a public announcement to call out all the creditors of the firm to claim their debt. [25] 

3. The firm is deemed to be insolvent on the very date when an application for initiating CIRP against the firm is admitted by NCLT. [26]

Committee of Creditors

1. The Creditors give their claims to IRP, and submission of these claims are regulated by the Code. [27]

2. After all the claims are collated by the IRP, he forms a Committee of Creditors (‘CoC’) [28] which contains all the creditors of firm tom whom the debt has not been paid off. The constitution of the CoC also has certain conditions and priorities with respect to the category of creditors. [29]

3. The CoC has the power to appoint IRP as the Resolutions Professional (‘RP’) or appoint any other eligible Insolvency Professional as RP. [30] 

4. The CoC has the power to decide the actions taken by the RP [31] for managing the business of the corporate debtor. 

5. The voting rights of members of the CoC are in proportion to the financial debt owed to them by the corporate debtor. [32]

6. The CoC has to conduct regular meetings to discuss the next steps to be taken for the insolvency resolution of the corporate debtor. These meetings are to be in conformity with the provisions of the Code. [33] 

Preparation of Information Memorandum

When the CoC has appointed an RP, the next step is to create an information memorandum [34] that contains all the relevant information that acts as an aid for the CoC to make better decisions with respect to the situations, which the committee might have made without any analysis. This memorandum is created by the RP. [35] There is a time limit and a manner in which the memorandum has to be submitted by the RP. [36]

Resolution Plan

The Resolution Plan is one of the most important aspects of the whole CIRP. This Resolution Plan is made with the objective of maximizing the value of assets of the corporate debtor. [37] The contents of the Resolution Plan as mentioned by the regulations must adhere to. [38] 

This resolution plan is submitted by a Resolution Applicant [39] and must be in conformity with provisions of the Code [40] in order to be approved by the NCLT for the resolution of the corporate debtor.

After RP has verified the Resolution Plan in accordance with the provisions of the Code [41], he has to present the Plan to CoC to obtain its approval. [42] If the Plan is approved by the CoC [43], the Plan is forwarded to NCLT, which decides whether the Plan is fit to be approved or not. [44]

Approval/Rejection of Resolution Plan

The Resolution Plan has to be approved by the CoC [45] as well as the NCLT [46] in order to continue the business of the corporate debtor as a going concern and prevent its liquidation. Thus, there are two situations that can occur if either CoC or NCLT approves or rejects the Resolution Plan.

(a) When Resolution Plan is Rejected/Disqualified

      (i) If the NCLT does not receive a resolution plan [47]

   (ii) If the Resolution Plan is rejected by RP on account of it being in non-conformity with the provisions of the Code. [48] 

     (iii) If the Plan has not been able to obtain at least 66% of the voting share of the CoC, and if there is no other alternative to resort to within the specified period, the NCLT will have no other option except proceeding with the liquidation of the corporate debtor. [49]

(b) When the Resolution Plan is approved

   (i) If the Resolution Plan is approved by at least 66% of the voting share of the CoC and is submitted to the NCLT by the RP within the prescribed time limit. [50] 

Contingent Situations with respect to the Resolution of Insolvency

(a) When insolvency is resolved

If the Resolution Plan is accepted, the corporate debtor will be prevented from liquidation and maximum efforts will be put in order to revive the business and pay off the debts of the creditor of the corporate debtor. It is to be noted that if the approval of the NCLT is obtained, then the period of moratorium ceases to exist. [51]

(b) When insolvency is not resolved

If the Resolution Plan is rejected [52], or if there is a mutual agreement by the members of the CoC to liquidate the business of the corporate debtor [53], then the NCLT has no other option but to give the order to liquidate the business of the corporate debtor. This decision by the CoC to liquidate the business of the corporate debtor must be taken before submitting the resolution plan to the NCLT.

Process of Liquidation

1. After NCLT has passed the order for liquidation, a liquidator is appointed [54] who consolidates [55] and verifies the claims of all the creditors. [56] He has the power to accept or reject the claims [57] provided he give sufficient reason for doing so. Further, he has to determine the value of claims. [58]

2. The assets that can be liquidated in order to satisfy the claims of the debtors are called ‘Liquidation Estate’. Provisions of the Code contain a list of assets of the corporate debtor that can be liquidated.[59]

3. After all the assets are liquidated, they are to be distributed in accordance with the priority of claims as mentioned in the Code. [60] When the proceeds obtained from the liquidation of such assets are distributed, the liquidator has the responsibility to make an application to the NCLT for the dissolution of the Corporate Debtor. [61] 

4. When the application for the dissolution of the corporate debtor is approved by the NCLT, the corporate debtor is dissolved and ceases to exist. [62]

References

[1] Section 2(62), Companies Act, 2013.

[2] Section 2(62), Companies Act, 2013; Section 2(n), Limited Liability Partnership Act, 2008 r/w Section 2(a), Insolvency and Bankruptcy Code, 2016.

[3] Section 64(C), Limited Liability Partnership Act, 2008.

[4] Section 238, Insolvency and Bankruptcy Code, 2016.
[5] Section 2, Insolvency and Bankruptcy Code, 2016.
[6] Section 2(a) r/w Section 255, Insolvency and Bankruptcy Code, 2016.
[7] Section 3(7) r/w Section 3(8) and Section 3(23), Insolvency and Bankruptcy Code, 2016.
[8] Section 5(7) r/w Section 7, Insolvency and Bankruptcy Code, 2016.
[9] Section 5(20) r/w Section 8 and Section 9, Insolvency and Bankruptcy Code, 2016.
[10] Section 5(5)(a) r/w Section 10, Insolvency and Bankruptcy Code, 2016.
[11] Section 3(11), Insolvency and Bankruptcy Code, 2016.
[12] Section 3(10), Insolvency and Bankruptcy Code, 2016.
[13] Section 3(12), Insolvency and Bankruptcy Code, 2016.
[14] Section 4, Insolvency and Bankruptcy Code, 2016.
[15] Section 5(8), Insolvency and Bankruptcy Code, 2016.
[16] Section 5(21), Insolvency and Bankruptcy Code, 2016.
[17] Section 5(14) r/w Section 12(1), Insolvency and Bankruptcy Code, 2016.
[18] Section 12(3), Insolvency and Bankruptcy Code, 2016.
[19] First Proviso of Section 12(3), Insolvency and Bankruptcy Code, 2016.
[20] Section 13(c) r/w Section 16, Insolvency and Bankruptcy Code, 2016.
[21] Section 17 and Section 18,  Insolvency and Bankruptcy Code, 2016.
[22] Section 5(15) r/w Section 20(2)(c), Insolvency and Bankruptcy Code, 2016.
[23] Section 20, Insolvency and Bankruptcy Code, 2016
[24] Section 13(a) r/w Section 14, Insolvency and Bankruptcy Code, 2016.
[25] Section 13(b) r/w Section 15, Insolvency and Bankruptcy Code, 2016.
[26] Section 5(12), Insolvency and Bankruptcy Code, 2016.
[27] Section 18(b), Insolvency and Bankruptcy Code, 2016. r/w Regulation 12(1), IBBI (CIRP) Regulations, 2016.
[28] Regulations 12(3), 16, and 17(1), IBBI (CIRP) Regulations, 2016.
[29] Section 21(2) and Section 21(3), Insolvency and Bankruptcy Code, 2016.
[30] Section 22, Insolvency and Bankruptcy Code, 2016.
[31] Section 28, Insolvency and Bankruptcy Code, 2016.
[32] Section 24(6), Insolvency and Bankruptcy Code, 2016.
[33] Section 24, Insolvency and Bankruptcy Code, 2016.
[34] Section 5(10), Insolvency and Bankruptcy Code, 2016.
[35] Section 29(1), Insolvency and Bankruptcy Code, 2016.
[36] Regulation 36, IBBI (CIRP) Regulations, 2016.
[37] Regulation 37, IBBI (CIRP) Regulations, 2016.
[38] Regulation 38, IBBI (CIRP) Regulations, 2016.
[39] Section 5(25), Insolvency and Bankruptcy Code, 2016.
[40] Section 30, Insolvency and Bankruptcy Code, 2016.
[41] Section 30(2), Insolvency and Bankruptcy Code, 2016.
[42] Section 30(3), Insolvency and Bankruptcy Code, 2016. r/w CIRP Regulation 39(2) & 39(3).
[43] Section 30(4), Insolvency and Bankruptcy Code, 2016 r/w Regulation 39(3), IBBI (CIRP) Regulations, 2016.
[44] Section 30(6), Insolvency and Bankruptcy Code, 2016. r/w Regulation 39(4) & 39(5), IBBI (CIRP) Regulations, 2016.
[45] Section 30(4), Insolvency and Bankruptcy Code, 2016. r/w Regulation 39(3), IBBI (CIRP) Regulations, 2016.
[46] Section 31, Insolvency and Bankruptcy Code, 2016.
[47] Section 30(6), Insolvency and Bankruptcy Code, 2016.
[48] Section 30(2), Insolvency and Bankruptcy Code, 2016.
[49] Section 33(1), Insolvency and Bankruptcy Code, 2016.
[50] Section 30(6), Insolvency and Bankruptcy Code, 2016.
[51] Section 31(2), Insolvency and Bankruptcy Code, 2016.
[52] Section 33(1), Insolvency and Bankruptcy Code, 2016.
[53] Section 33(2), Insolvency and Bankruptcy Code, 2016.
[54] Section 34, Insolvency and Bankruptcy Code, 2016.
[55] Section 38, Insolvency and Bankruptcy Code, 2016.
[56] Section 39, Insolvency and Bankruptcy Code, 2016.
[57] Section 40, Insolvency and Bankruptcy Code, 2016.
[58] Section 41, Insolvency and Bankruptcy Code, 2016.
[59] Section 36, Insolvency and Bankruptcy Code, 2016.
[60] Section 53, Insolvency and Bankruptcy Code, 2016.
[61] Section 54, Insolvency and Bankruptcy Code, 2016.
[62] Section 302, Companies Act, 2013.

Trademark is the name, symbol, logo, sound, etc. which identifies the basis and the origin of the goods and the services basically it shows the value and goodwill of the good. Trademark is the distinguishing factor that actually differentiates one firm from another by the means of their name, symbol, etc. without a trademark, it would be very difficult for the consumer to identify products. In the economic term, the trademark gives the power of “monopoly” that can be used only by himself. No one can use either the same trademark or branding attached to his products for raising margins if someone tries to use the trademark of others that would be called trademark infringement i.e violation of exclusive rights attaching to a trademark without the authorization of the trademark owner or any license. Trademark gives a boon to the company in the sense that it works as an incentive, by the means of it helps a company to expand its business to other commodities. umbrella branding (brand extension) which means that a company uses its trademark which is famous by selling one product enters into another type of market. An example of such a market is RELIANCE which works in retail marketing, entertainment industry, telecommunication, restaurants, etc. by the means of such brand extension, it gives a legitimate competition with other companies present in the market. Indian trademark law provides protection to trademark statutorily under trademark act 1999 and also under the common law remedy of passing off. 

Passing Off is a common law tort that can be used to enforce unregistered rights. The tort of passing off protects the goodwill of a trader from a misrepresentation. Statutory protection of a trademark is administered by the controller general of patents, designs, and trademark, a government agency which reports to the department of industrial policy and promotion (DIPP), under the ministry of commerce and industry.  

Definition

According to section 2(zb) of the trademark act 1999 “trademark means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include the shape of goods, their packaging, and combination of colors.” a mark can include a device, brand heading, label, ticket name, signature, word, letter, numeral, shape of goods, packaging or combination of colors or any such combination.   In India, the term of registration of a trademark is 10 years from the date of Registration, which can be renewed for a further 10  years before the expiration date by paying the prescribed fees. There are various types of benefits if someone registered their brand name as a trademark, firstly it gives the uniqueness to the product, the faith of the public is also raised as compared to the other competitors present in the market, protects the name of the product from its duplicity, trademark gives long term security to the business.   

Various Types Of Trademarks Can Be Identified as Follows:

(a) Trademark as Property: Trademarks are generally not considered as a property as normal people understand the property to be of two types i.e. movable and immovable but as we know that there is another type of property which is IP and it is a special kind of property which can intangible or tangible as per the preference of the owner. 

(b) Trademark and Patent: Although the trademark and patent look very similar, there are some key differences that disguise both. Trademarks are a protection to a mark with which the company differentiates the product from other products in the market whereas the patent is a protection to the idea which has turned into reality.

(c) Trademark and Copyright: Both the trademark, as well as copyright, provide a right to ownership whereas copyright gives protection to the author’s publication, in other words, copyright helps to protect original content.

(d) Trademark and Geographical Indications: Trademark is actually a mark which shows that the authenticity of the product is on the top-notch and the product is made only by the concerning authority who actually has the right but on the other hand if we talk about Geographical Indication it is the right which is given to the manufacturer of some type of goods which can only be made at a particular region or state if somebody else indulges in such type of activity outside that region he is committing an offense.

(e) Trademark and Brands: Trademark is a mark that legally represents something and a brand name is a name that a  business uses for its product. A brand specifies and identifies a particular type of product.

(f) The Shape of Goods as a Trademark: Any shape of goods or its packaging or any three-dimensional object which can be represented graphically can be used as a trademark.

(g) Smell Trademark: Smell as a trademark can be registered as long as it can represent graphically and can be distinctive as a good. The link which connects smell trademark to the customer is olfactory. The smell is a very powerful & distinctive feature in which any consumer can actually judge and differentiate a good from one merchant to others.  Ex: Chanel was the first company which registered its fragrance. In India, it is not been registered under intellectual property rights. 

(h) Touch Trademark: Under the observation of German supreme court touch trademarks are the non-conventional trademark. Signs which are suitable to distinguish .the goods or services of a specific enterprise from others are eligible for trademark protection the principal function of the mark is to ensure that the customer identifies the original product with the label or mark. A sign which is perceptible via the sense of touch can also be a trademark. In India, a touch trademark is also recognized and can be registered as a trademark. Examples of such trademarks are raw silk, raw cotton, raw or treated wool. 

(i) Slogan Trademark: Slogans can also be registered as a trademark, slogans show the motto as well as the brand name of the product. The public reacts to slogans more quickly than normal branding does. For the registration of a slogan, it should be creative and distinctive. Mere, not every slogan can be registered as a trademark, there should not be a slogan with different meaning like as help me! For NGOs and other volunteer groups.
(j) Sound Trademark: A sound mark is a non-conventional trademark where the sound is used to perform the trademark function of uniquely identifying the commercial origin of the products or services. In today’s market, ‘sounds’ are being increasingly used as a popular means of identification of products in the marketplace.
(k) Collective Trademark: A collective trademark, collective trademark, or collective mark is a trademark owned by an organization, used by its members to identify themselves with a level of quality or accuracy, geographical origin, or other characteristics set by the organization.
(l) Service Trademark: A service mark is a trademark used in the United States and several other countries to identify a service rather than a product. 

Trademark Classification in India

Trademark in India is classified in about 45 different classes, which includes chemical substances used in industry, paints, lubricants machine, machine tools, medical and surgical, instruments, stationery, lather, household, furniture, textiles, games, beverages preparatory material, sanitary material, and hand tools, other scientific and educational products. Goods were classified in 1-34 classes, and services were classified in 35-45. These are again further subdivided, the main objective of trademark classification is to group together the similar nature of goods and services. 

Registration of a Trademark in India

STEP 1: Selecting a different and unique brand name 

STEP 2: Making the trademark application  

STEP 3: filling the brand name application  

STEP 4: examining the brand name registration application   

STEP 5: Issuance of the trademark registration certificate. Registration of a trademark confers the owner has the exclusive right by showing a symbol of ® or (™) in the goods and services.  

Remedies Available To The Owner of a Trademark in Case of Infringement

There are two types of remedies available in case of infringement by the third party.

(a) Action for infringement in case of a registered trademark

(b) Action for passing off in case of an unregistered trademark 

In both, the usage of the case of someone trademark is an illegal act for which the owner can file a suit against a third party who does such a thing. The first remedy which is an action for infringement is a statutory remedy which is basically codified in nature and the second remedy is a common-law action. In both cases court grant relief of injunction, monetary compensation for the damages incurred to the business of the owner, and government confiscate/destroy the infringing labels and tags, etc. In India, the punishment for selling and providing services by using fake tags or trademark is a minimum of six-month imprisonment which may extend to three years, with a  minimum fine of rupees fifty thousand which may extend to rupees two lakhs. 

Some Recent Case Judgments

(a) Feast over Choco Feast; Unilever’s Sweet Win

Unilever PLC, a well-known FMCG, filed a suit seeking a permanent injunction against Hyderabad based Masqati Dairy Products for infringing Unilever’s registered trademark FEAST by using the deceptively similar mark CHOCO FEAST for ice-creams. The High Court of Bombay instructed Masqati to pay INR 5 lakh as damages to Unilever. However, Unilever requested the amount be donated to the ‘AWARE Foundation’, an organization that takes care of animals found in a sick and injured condition on the streets. The Court passed a permanent injunction in favor of Unilever. Interestingly, the Court also ordered the infringing goods seized by the Court Receiver, to be distributed amongst the poor children and the seized wrappers to be destroyed by the Parties.  

(b) Reliance Jio Dials Down Trademark Infringement

Reliance Industries, the Indian conglomerate, filed a suit before the Mumbai High Court seeking a permanent injunction against Dhananjay Dinkarrao Khairnar for using the trademarks JIOFIT, JOIFER, JIO-4G and JIO-4EVER.  Reliance claims these marks are deceptively similar to its registered trademark JIO. The Court issued a permanent injunction and instructed Dhananjay to return all goods bearing impugned trademarks to Reliance. A court receiver has also been appointed to take charge of the disputed goods and remove contents in the packing material and hand it over to Reliance for destruction.  

(c) Swarovski’s Shining Trademark Win

Swarovski Aktiengesellschaft, a well-known crystal jewelry maker filed a suit seeking a permanent injunction against Durgesh Kumar Patwa, proprietor of M/s. Bajrang Beads for infringing their registered trademark “SWAROVSKI” and logo. Durgesh was engaged in selling, manufacturing, soliciting and trading jewelry, gemstones, artificial stones, or allied products using the mark/label SWARAWSKI, SWAROVSKI, and its logo and its variants having artistic features, getup, layout and lettering style similar to that of Swarovski. On the basis of the documents filed and the evidence, the Delhi High Court noted that Swarovski is the registered owner of the trademark SWAROVSKI and its logo and the trademark have acquired distinct features due to the long and continuous use. The Court further, awarded damages of INR 25,000 to be paid to Swarovski.

(i) Directors (or their relatives);
(ii) Key managerial personnel (or their relatives);
(iii) Subsidiaries;
(iv) Holding companies; and
(v) Associate companies.

Introduction

In developing countries like India where the problem of unemployment is great, there is a chance of exploitation of labourers being poor and having no bargaining capacity. In such circumstances, the employer may offer the labourer wages even below the subsistence level resulting thereby into starvation of labour, Therefore, the legislature thought fit to control the unfair practices of the employer of paying wages below the subsistence level to the employees. As per the Minimum Wages Act, 1948 every employer is bound to pay the minimum wages to his employees. These wages are said to be statutory wages. Even public works ostensibly initiated by the government for the sole purpose of providing employment are subject to this Act.

The Validity of the Act

In the case of Shamrao v. State of Bombay, the constitutionality of the Act was challenged by the employers to be violative of fundamental freedom under Article 19(1)(g) of the Constitution of India. But the Supreme Court held that the Act is constitutional as per the provisions of Directive Principle of State Policy embodied under Article 43 of the Constitution of India. The same was held in the V. Unichonoy v. State of Kerala, and Golmohammad Tatyasaheb v. State of Bombay. 

It was argued that this Act is violative of Article 14 as the provision in question, that is, section 3(3)(iv) of this Act was not in contravention to the equal protection clause of the constitution. This was decided in the case of Bhikusa Yamasa Kshatriya v. Sangamner Akola Bidi Kamgar Union.

In the case of N.M. Wadia Charitable Hospital v. State of Maharashtra, it was held that fixing different minimum wages for different localities is permitted under the constitution and under the labour laws. 

Object and Scope

To provide for fixing minimum rates of wages in certain employments. The employments are those which are included in the schedule and are referred to as ‘Scheduled Employments’. The Act extends to the whole of India.

Purports to achieve is to prevent exploitation of labour and for that purpose empowers the appropriate Government to take steps to prescribe minimum rates of wages in the scheduled industries.  In an underdeveloped country which faces the problem of unemployment on a very large scale, it is not unlikely that labour may offer to work even on starvation wages. 

The policy of the Act is to prevent the employment of such sweated labour in the interest of the general public and so in prescribing the minimum rates, the capacity of the employer need not be considered. 

What is being prescribed is minimum wage rates which a welfare State assumes every employer must pay before he employs labour. This Act aims to ensure not only bare physical subsistence but also maintenance of health and decency.

It ensures and secures adequate living wages to the labourer in the interest of the general public. To keep the family of the labourer living and to add to his efficiency and ensure a decent standard of life and full of employment of leisure and social and cultural opportunities.

What are Wages?

The meaning of the term ‘wages’ is defined under Section 2(h) of the Act. It means all remunerations capable of being expressed in terms of money, which would, if the terms of the contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes house rent allowance.

There are some exceptions to this definition. The term wages under this Act does not include:

The act recognizes Scheduled Employment. The meaning of the term ‘scheduled employment’ is defined under Section 2(g) of the Act. It means employment specified in the Schedule or any process or branch of work forming part of such employment. The schedule is divided into two parts namely, Part I and Part II. When originally enacted Part I of Schedule had 12 entries. Part II relates to employment in agriculture. It was realized that it would be necessary to fix minimum wages in many more employments to be identified in the course of time. Accordingly, powers were given to the appropriate Government to add employments to the Schedule by following the procedure laid down in Section 21 of the Act. The State Government and Central Government have made several additions to the Schedule and it differs from State to State.

Who is an Employee?

The meaning of the term ‘employee’ is defined under Section 2(i) of the Act. It means any person who is employed for hire or rewards to do any work, skilled or unskilled, manual or clerical in scheduled employment in respect of which minimum rates of wages have been fixed; and includes an outworker to whom any articles or materials are given out by another person to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale purpose of the trade or business of that other person where the process is to be carried out either in the home of the out-worker or in some other premises, not being premises under the control and management of that person; and also includes an employee declared to be an employee by the appropriate Government. 

The definition does not include any member of the Armed Forces of the Union.

Who is an Employer?

The meaning of the term ‘employer’ is defined under Section 2(e) of the Act. It means any person who employs, whether directly or through another person, or whether on behalf of himself or any other person, one or more employees in any scheduled employment in respect of which minimum rates of wages have been fixed under this Act and includes:

Offences and Penalties

The offences and penalties recognized by this Act have been dealt with under Section 22. They are listed as below:

The government under the Minimum Wages Act, 1948 has made it mandatory to provide the workers working in a factory with minimum wages. Therefore, Section 3(1)(a) of this act states the Fixation of Minimum Rates of Wages. This will help the employees to get their hard-work paid appropriately.

Any minimum rate of wages fixed or revised may consist of:

The Dearness Allowance (DA) is a cost of living adjustment allowance paid to Government employees, Public sector employees (PSE) and pensioners. It is payable to monthly, daily and piece-rate earners. The respective State Governments issue the Cost of Living Index number every six months for each and every scheduled employment.

For calculation, DA is divided into two separate categories: Industrial Dearness Allowance and Variable Dearness Allowance.

Industrial Dearness Allowance (IDA) applies to the Public sector employees of the Central Government. The Industrial Dearness Allowance for public sector employees undergoes quarterly revision depending on the Consumer Price Index to help offset the impact of rising levels of inflation.

Variable Dearness Allowance (VDA) applies to the employees of the Central Government. It is revised every six months according to the Consumer Price Index to help offset the impact of rising levels of inflation. VDA in itself is dependent on three different components as given below.

Dearness Allowance% = (Average of AICPIN for the past 12 months – 261.4) * 100 / 261.4

Dearness Allowance% = (Average of AICPIN for the past 3 months – 126.33) * 100 / 126.33

AICPIN stands for the All India Consumer Price Index. Dearness allowance is calculated from the AICPIN value, once the AICPI(IW) for a particular month is published by the Government. AICPIN is issued by the Ministry of Labour and Employment, which are revised periodically.

The dearness allowances are revised by the government twice a year. It was increased by the Central Government from 15% to 17% when was revised in July 2019.

The minimum rates of wages include the basic rates and Variable Dearness Allowance. The revised rates of Variable Dearness Allowance on the basis of the average Consumer Price Index for Industrial Workers.

The most significant element of domestic as well as international arbitration is the constitution of an impartial, independent, and neutral tribunal. The perception of justice and the administration of justice itself depends upon these elements. An independent arbitrator has no stake or apparent conflict with the parties or the sum involved in the proceedings, an impartial arbitrator means that the arbitrator allows the equal chance of hearing to both the parties to plead. An arbitrator is considered neutral if the nationality of such arbitrator is different from that of the parties, which is of utmost relevance in the international commercial arbitration.

The Arbitration and Conciliation Act of 1996- Pre Amendment Situation

Section 11 of the Act provided for the appointment of the arbitrators by the parties. Further Section 12 [1] of the Act specified the grounds for challenging an arbitrator. It simply laid down that an arbitrator shall disclose any circumstances to the parties which shall give rise to doubts as to his independence and impartiality before and after the appointment. Further, it specified that any appointment may be challenged only if doubtful circumstances exist as to his independence or impartiality; or if he does not possess the qualifications as agreed between the parties after the appointment has been made.

Shortcomings

(a) Arbitrator's relationship with the parties or counsel (14 grounds);
(b) Relationship of the arbitrator to the dispute (2 grounds);
(c) Arbitrator's direct or indirect interest in the dispute (3 grounds).

(ii) It is immaterial whether, for the doing of such an illegal act, the agent employed is given the wider powers or authority of the "pucca adatia", or, as the High Court had held, he is clothed with the powers of an ordinary commission agent only."

(iii) Court did not concern itself with the concept of apprehension of bias or suitability or respectability of the arbitrator while coming to its decision but strictly limited itself to the question of authority and power of the ineligible named arbitrator.

Financial Creditor

A financial creditor is defined under Section 5(7) of the IBC to mean "a person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred". In order to ascertain whether a person is a financial creditor, the debt owed to such a person must fall within the ambit a 'Financial Debt' as under Section 5(8) of the IBC. Financial debt is defined under Section 5(8) of the IBC to mean: "a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes:

Homebuyers are also considered to be the financial creditors [1] provided only if 10% or 100 homebuyers (whichever is less) or moe debenture holders agree to move the application for insolvency. [2] Furthermore, it has also been held that dissenting financial creditors cannot be allowed to scramble CIRP. [3] Also, the commercial freedom of individual financial creditors is non-justiciable, [4] while the dissenting financial creditors should not be discriminated against. [5] The dispute with the financial creditor is not relevant for deciding the admission of insolvency resolutions process.[6] A notice is required to be given to the corporate debtor for the initiation of CIRP. [7]

Operational Creditor

An operational creditor is defined under Section 5(20) of the IBC to mean "any person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred".

In order to ascertain whether a person would fall within the definition of an operational creditor, the debt owed to such a person must fall within the definition of an operational debt as defined under Section 5(21) of the IBC.

An operational debt is defined under section 5(21) of the IBC to mean: "a claim in respect of the provisions of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority". 

Furthermore, statutory dues (income tax, sales tax, VAT) are also treated as operational debt.[8] Passing an arbitral award and steps taken to challenge the arbitral award constitutes a valid dispute with regard to operational debt as well as a pending appeal under Arbitration and Conciliation Act. [9] The demand notice of unpaid operational debt can be issued by a lawyer on behalf of the operational creditor. [10]

The distinction between Financial and Operational Creditor

The distinction between a financial creditor and an operational creditor has been drawn by the Bankruptcy Law Reforms Committee in para 5.2.1 of its final report [11]. It states: "Here, the Code differentiates between financial creditors and operational creditors. Financial creditors are those whose relationship with the entity is a pure financial contract, such as a loan or debt security. Operational creditors are those whose liabilities from the entity come from a transaction on operations...The Code also provides for cases where a creditor has both a solely financial transaction as well as an operational transaction with the entity. In such a case, the creditor can be considered a financial creditor to the extent of the financial debt and an operational creditor to the extent of the operational debt."

The Hon'ble Tribunal while deciding the question of whether a flat purchaser could be considered an operation creditor [12] considered the observations of the Bankruptcy Law Reforms Committee in paragraph no. 5.2.1 of the Final Report [13]:

"Operational Creditors are those whose liability from the entity comes from a transaction on operations. Thus, the wholesale vendor of spare parts whose spark plugs are kept in inventory by car mechanics and who gets paid only after the spark plugs are sold is an operational creditor. Similarly, the lessor that the entity rents out space from is an operational creditor to whom the entity owes monthly rent on a three-year lease."

From the case law discussed above, it is evident that the Tribunals are stringent in construing the definition of 'Operational Creditor' under the IBC and are refraining from entertaining applications wherein the applicants are not strictly falling within the scope of the IBC and have alternate effective remedies available. The Hon'ble Tribunal has also in subsequent cases before it passed similar orders [14].
References