Plea Bargaining -- A Mission That Would Fail

(By V.K. Babu Prakash, Judicial First Class Magistrate, Kollam)

“Twenty seven million cases are pending in lower courts in the country of which fifteen million are criminal cases at the end of 2006”.

Union Law Minister in Parliament

Justice Malimath Committee appointed by the Central Government to revamp the criminal justice system submitted its report in April, 2003. The Committee addressed the huge arrears of criminal cases, the inordinate delay in disposal and the low rate of convictions. Among the various measures suggested by the Committee, the different and distinct one was the Plea Bargaining System which was hither to unknown to the criminal justice delivery system in India. Parliament accepted the proposal and later introduced the concept of plea bargaining in the criminal judicial system by the Criminal Law (Amendment ) Act 2005. A new Chapter XXIA was introduced in the Code of Criminal Procedure. The concept of plea bargaining is used in the criminal cases where the maximum imprisonment is below 7 years. Plea bargaining is not allowed in case the crime is committed against a woman or the victim is aged under 14 or the crime is likely to affect the socio economic conditions of the country. The Committee felt that plea bargaining would become a fruitful system which would play a significant role in the criminal justice system. It would pave the way for the accused to come up before the court at a pre trial stage and voluntarily plea for guilty and thereby get bargaining of the plea and walk away with a lessor punishment. Ultimately the mission of plea bargaining would reduce the pendency of criminal cases in the coming years in India.

Will the plea bargaining mission would become successful in the present scene of Indian Criminal Justice Delivery System? To have an answer, one needs a close look at certain things. Our criminal justice system is based on Anglo Saxon jurisprudence. It’s common law relic is the adversarial system of trial in criminal cases. Burden of proving the case beyond reasonable doubt against the accused is on the prosecution which is the touch stone of the system upon which entire evidence is swished on. The accused has a right to silence and cannot be questioned or compelled to be a witness against himself. In most of the western countries which do not follow Anglo Saxon Principles, it is the inquisitorial trial system followed. In such system the accused is presumed to be guilty and it is for him to prove that he is innocent. In that system the concept of plea bargaining is there which inclines the mind of the accused to look forward to plea bargaining . This is because if the trial goes and if he cannot establish his innocence, he would get severe punishment, whereas if he goes for pretrial plea bargaining he would get lessor punishment. This is the real logic behind plea bargaining.

However in adversarial system accused will never look forward to plea bargaining because the law says that he is innocent, unless otherwise proved by the prosecution beyond reasonable doubt. To seek the benefit of plea bargaining the accused has to file an application in the court under Section 265B (1) Cr.P.C. The application shall be accompanied by an affidavit of the accused. In the affidavit he should swear that he has come forward to plea bargaining voluntarily, that he admits the guilt etc. As majority of the accused in the country are illiterate, naturally they will seek the assistance of a lawyer. A lawyer who knows the fact that adversarial trial is the system followed in Indian Courts, will never advice the accused to go for plea bargaining. The is because he knows that prosecution will have to prove the accusations beyond reasonable doubt thereby he would advice the accused that he is innocent until proved guilty by the prosecution. The other side is that if plea bargaining is pursued the case will finish before the trial. A lawyer will always consider only his professional interest first, therefore he will never advise to finish the case in the first rung. As plea bargaining has to come from the accused voluntarily the court cannot interfere and advice the accused to go for plea bargaining than trial. 

Moreover in the present system the statements of the witnesses are recorded under Section 161 Cr.P.C. by the police, which do not give any guarantee that the witnesses would support the prosecution case in the court in trial. Therefore, a clever lawyer will always go for a trial than plea bargaining , since adversarial system is the golden goose which would lay fortune eggs into his pocket. Another anathema of the concept of plea bargaining is that it would cast the stigma of guilt on the accused. He has to admit the guilt and go for plea bargaining which would be disadvantageous to his social position. So ultimately plea bargaining though is a noble concept which has a vision to curb and curtail alarming rate of pendency of criminal cases, in the present system of adversarial trial, it would be a mission failed.

PARABLE 

An archer may

       Keenly aim at his target. 

Yet, the arrow

          Shot from his bow 

may not reach the target

                                                                            - Zen Proverb 

India Considers Partnership With Limited Liability

(By Devan Ramachandran, Advocate, High Court of Kerala)

A desideratum, recommended by several expert Committees and Groups, for providing Limited Personal Liability for the partners of a partnership firm, which is in apparent dissonance with the very concept of Partnership, became the leaven for a new legislation to actualize a regime of Limited Liability Partnerships in India.

In India, businesses and services mainly operate as companies, sole proprietorships and partnerships. Out of these, proprietorships and partnerships are generally unregulated and Limited Liability Companies are regulated by the Companies Act.

In view of the accentuating role of services sector in the economy, the wide range of domains in which such services can be offered and the growing number of professionals, a need for a new corporate composition has been long felt which will enable professional expertise to organise and provide a range of services to the corporate sector in a comprehensive and efficient manner. 

On 15th December 2006, the Limited Liability Partnership Bill, Bill No.CXI/2006 (LLP Bill), was presented before the Rajya Sabha by Sri.Prem Chand Gupta, Hon’ble Minister for Company Affairs. The Limited Liability Partnership (LLP) is proposed to be a form of general partnership, created under a law, in which partners are statutorily relieved of all or part of their personal liability for partnership liabilities, debts and obligations.

The Indian LLP Bill is broadly based on the LLP Acts in the United Kingdom and Singapore and seeks to offer limited personal liability to the partners of the LLP. The Act proposes LLP as a Body Corporate, different from a Company registered under the Companies Act, with a separate juristic entity, distinct from its partners. 

The most salient and prominent feature of a LLP, in contradistinction from a Partnership, is that it offers limited personal liability to the partners of the LLP. The quintessence is that in most situations the debts and obligations of the LLP are not the personal liability or responsibility of the partners. In other words, the debts and obligations of the LLP can be paid from the assets and income of the LLP and a partner would, in such situations loose only the amount of his or her investment in the LLP along with the equity, if any, built up in the business. No partner thus risks the loss of his or her assets and income.

The proposed LLP Act presents great opportunity and would be most suitable to lawyers and legal practitioners in this age of international competition, GATTS etc. to provide a large range of legal services, even globally.

The proposed LLP Act provides for a Limited Liability Partnership, which ingenuously combines the best of the elements of Partnerships and a Corporation. Though called a Partnership it is specifically provided in the LLP Bill that the Indian Partnership Act does not apply to a LLP. However since various elements and features of a company are provided under the LLP Bill, the relevant provisions of the Companies Act, 1956, may be made applicable to LLPs at any time by notification by the Central Government with appropriate charges and modifications.

The Indian Partnership Act defines a Partnership as an Association of persons for carrying on the business of partnership and in law, the firm name merely being a compendious method of describing the partners. The Partnership Act statutorily declares every partner to be an agent of the firm for the business of the firm and provides that any act of a partner, which is done to carry on, in the usual way, the business of the firm, binds the firm. The unlimited liability for partners is the singular cause for concern in any firm especially when a claim exceeds the sum of the total assets of the firm. It is this concern, which prevents firms of professionals from growing in size to meet international competition.

It is here that the proposed LLP Act provides the opportunity. An LLP is proposed under the LLP Act to be a Body Corporate and is formed by incorporation. As with a company, the LLP will also have a registered office. It has perpetual succession and various corporate actions like mergers, winding up, amalgamation and dissolution are provided statutorily. In fact the proposed Act defines a “Body Corporate” inclusively to take in Limited Liability Partnership under the proposed Act, along with a Company as defined under the Companies Act.

The LLP Act provides for a LLP formed by a process of incorporation with at least two partners. The internal structure and working of the LLP can be organised based on an agreement called the LLP agreement. The proposed Act also pragmatically provides for existing partnerships to elect the benefits of LLP status, by converting the existing firm into a LLP. For this it is not always necessary to create a new partnership or to enter into a new partnership agreement. The Second Schedule of the proposed Act caters to the statutory prescriptions for such conversions. The internal organisation of the LLP would, therefore, be flexible as per the wishes of the Partners and the requirement of the business engaged by the LLP.

While the LLP would be a separate legal utility, liable to the full extent of its assets, the liability of individual partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or unauthorized actions of other partners, thus granting a statutory shield to individual partners from the joint liability created by another partner’s wrongful business decisions or misconduct. Enforcement will be taken against the LLP as a legal entity on its own right.

Internationally, the LLP regime has emerged as the most favoured form of organizational structure for businesses and professional services. In the United Kingdom, LLPs are governed by the Limited Liability Partnerships Act, 2000. In the Unites States of America, Texas enacted the first LLP statute in 1991. LLP legislation was enacted in Louisiana in 1992; Delaware, North Carolina and Washington, D.C. in 1993, and numerous other states in 1994 and 1995. It is important to note that the LLP statutes are not uniform and have important variations in, among other things, the types of businesses that may use LLPs, the level of personal involvement that will cause a partner to bear personal liability for another person’s negligence etc. Notwithstanding these variations, the general theme of LLP legislation is uniform: LLPs provide partners with statutory protection from some or all partnership debts, obligations and liabilities.

In Conclusion:

In addition to being an alternative business structure, LLPs would foster the growth of the services sector. The regime of Limited Liability Partnership will provide a platform to small and medium enterprises and professional firms of Advocates, Company Secretaries, Chartered Accountants etc. to conduct their profession / business efficiently which would in turn increase their competitiveness. This is ideal since an LLP would provide the required internal organisational flexibility, suited to its requirements of the services offered by it, without having to be piqued about detailed legal and procedural requirements like in a Company. The Corporate Status of an LLP would also no doubt inspire added credibility among its clients and customers. The LLP Bill and the proposed LLP Act is therefore in the right direction.

E-Commerce Taxation

(By Benoy Sasi, Advocate, High Court of Kerala)

The emergence of internet, the newest mode of technology changed the pattern and style of commerce. Shortly e-commerce means the whole gamut of commercial activities taking place in the cyber medium. The desired balance between the interest of the government and the tax payers has challenged the fundamental concepts of direct and indirect taxation.

In e-commerce geographical boundaries are irrelevant. The various issues of taxation raised by e-commerce is based on cross border transaction. The issues raised by e-commerce taxation are complete and the subject is also controversial in nature because it has created a serious conflict of interest between the developed and the developing nations. The Government of India is focusing to create a balance between economic growth and the generation of revenue in the Info Tech global environment.

It is a time to raise a question that, whether our Income Tax Act, 1961, is ready to take the challenge of taxing non-resident players of cross-border e-commerce?

Though the residence of a person and source of income are the two fundamental principles which confer territorial jurisdiction upon a taxing authority to impose income tax, e-commerce taxation in the environment of cross-border commerce, the application of the aforesaid principles may lead to double taxation of a person. For instance, a Web-site, based in a country, say USA, can do its entire business of trading in goods or securities on render services in a country say, India, without any physical presence in India. Banks, retailers, wholesalers brokers and even professionals such as doctors, lawyers and architects based in USA, are free to do their regular business or professional activities as the case may be in India, without any physical presence here.

A resident is taxable on his global income whereas a non-resident is taxable on income sourced in India. Since cross border transactions lead to double taxation, based on the principles of ‘residence’ and ‘source’ as aforesaid, the mechanism of Double Taxation Avoidance Agreements (DTAAs) has been evolved as principle of International taxation. DTAA's are governed by S.90 of the Income Tax Act.

It is one of the opinion, that the words 'accrue' and 'arise' in S.5 of the Income Tax Act are wide enough to tax enterprises operating web -sites from foreign lands, for the purpose of sale of goods or rendering services to consumers in India. S.9 of the Income Tax Act states the incomes which are deemed to accrue or arise in India.

In the case of professional connection, Supreme Court held in Barendra Prasad Ray & Ors v. Income Tax Officer (1981, 2 SCC 693) where the foreign counsel appeared with the Indian counsel, engaged by the Indian solicitors and argued the case on behalf of the client, Supreme Court that there was an indirect professional connection between the Indian solicitors and the non-resident counsel which could be said to be a “business connection” and thus the counsel had earned income for the work done in India within the meaning of S.9 of the Income Tax Act. 

The system of taxation need to be equitable between all countries. When taking the two aspects on the basis of source based taxation and residence based taxation in e-commerce, it is easier to administer the residence based taxation than the source based taxation. But, if the residence-based tax principles are applied to e-commerce, developing countries stand to lose revenue because few of the high technology companies of developed nation will engage in e-commerce activities in developing countries while being a resident there. They will conduct business activities in developing countries while being permanently resident in developed world, with the medium of the internet facilities.

Considering the question, whether the conventional transaction can be used as the basis in the case of e-transactions, then the determination of an arm’s length price involving product previously distributed as tangibles and now as e-deliverables in the e-commerce environment, is a significant issue. Suppose a publisher in the US sold books electronically to the Indian consumer, directly through a website that is connected to a server in a low-tax jurisdiction. Here if it is a regular transaction, it may be possible to determine an arm’s length price for the product purchased by virtual distribution operation ie. server for resale in the importing country, based on the price previously paid by the independent distributors.

Generally, the payment received by the commercial provider of the limited duration digital product would be characterized as business profits. Fees for technical services, such as online technical documentation, trouble shooting information etc. would be in nature of tax deduction at source (TDS). Payment for web-based advertisement has been characterized as business profits. Income in the hands of professionals such as lawyers, doctors etc. providing advice to client via e-mail, video conferencing etc. would be in the nature of business profits.

Income from search and retrieval facilities of general online information and data has also been characterized as business profits. If a web-site hosts electronic catalogues of several merchants on its server, which enables cyber consumers to place online order, in consideration of a commission from merchants, such commission would be in the nature of business profits.

Income from search and retrieval facilities of general online information and data has also been characterized as business profits. If a web-site hosts electronic catalogues of several merchants on its server which enable cyber consumers to place online orders, in consideration of a commission from merchants, such commission would be in the nature of business profits. In the case of online auction, the web site operator displays many items for purchase by auction. The user purchased these items directly from the owner thereof. The seller compensates the website operator with a percentage of the sales price or a flat fee. Such revenue is also characterized as business profits.

When the web site operator pays a content provider for the right to display his copy righted material, the income accruing to the content provider is in the nature of royalty. Subscriptions paid for availing services by the web access digital content including information, music albums, video games etc. for which the registered user pays a fixed periodic fee for access to the interaction site, is treated as business income. When the service provider offers space on its server for hosting the web sites, such a service provider does not obtain any right in the copy-right created by the developer of the content of the web site and the payment made for renting space on the server is considered as business income.

In the case of application hosting, a user who owns a perpetual license to use a software product, enters into a contract with a host entity and this entity loads the software in servers owned and operated by it. Here the charges incurred by this technical support is treated as business profit.

The internet allows free flow of digital products from anywhere to any where, which in this information age constitutes a large chunk of cross border e-commerce. Several countries realizing the inherent and practical difficulties of the task and accepting the power of the internet, on the negative side, online smuggling however, would be very tempting and easy due to the very nature of the internet and only a minimal effort of organizing payments from illegal channels is required.

Because of the explosion of the internet, companies are discovering that instead of spending millions of dollars and years installing complex software programs on their own computers to help automate their operations, they can pay companies to do it for them as a service. Customers then use the software with nothing more than a secure web browser and password. The trend is big, gaining momentum and large companies are embracing it ever rapidly.

To sum up, characterization of e-commerce payments and Indian position on intangibles have been a debatable subject. 

Criminal Case and Advocate’s Robes

(By Barrister M.P.R. Nair, Bar-at-Law, Sr. Advocate, Cochin)

Justice K.T.Sankaran in a recent decision, Haridas P.Nair v. State of Kerala reported in 2007 (2) KLT 635, commenting on the action of the police in taking the robes of the Advocate petitioner as material objects said: “Normally, it was not at all necessary to take the robes of the Advocate as material objects in the case. The proof or otherwise of the allegations in the case does not rest on the availability of the robes of the petitioner advocate. The offence would not be proved by the presence of the robes in the custody of the police nor would the absence of the robes as material objects disprove the allegation.”

In the above case, the learned Judge was considering an application filed by an advocate by name Haridas Nair for bail. The advocate was arrested on 13-4-2007 and was ordered to be detained in custody for helping an accused to escape while in police custody. His application for bail moved at the same time when he was produced before the learned Judicial Magistrate of the First Class, Chittur was heard on 16-4-2007 and dismissed on 17-4-2007. He moved an application for bail before the Court of Session, Palghat on 18-4-2007, which stood adjourned to 19-4-2007 and then to 20-4-2007. Thereafter he moved the High Court for bail. Hon'ble Mr.Justice K.T. Sankaran who heard the matter, granted bail by order dated 19-4-2007.

The case against the advocate was built on curious facts. The case was registered on the basis of a statement written by the Head Constable, Chittur Police Station, wherein it was stated that the petitioner was involved in the escape of the third accused in Crime No.3 of 2007. Surprisingly enough, no case had been registered against the police constable or police constables who were in charge of the custody of the said accused. It appears that when the said accused was contacted over the mobile phone of the advocate, he said that it was at the instance of the advocate (advocate petitioner) that he escaped.

Hon'ble Mr.Justice K.T. Sankaran held that on the facts placed before him “the learned Magistrate was not justified in refusing bail to the petitioner”. The advocates are on a warpath demanding action against the Magistrate for illegally detaining the advocate.

As noted by the High Court, an advocate is an officer of the court and unless there are clinching circumstances to show that the petitioner advocate was involved in the alleged offence, the learned Magistrate ought not to have refused bail to the petitioner. In State of Rajasthan v. Balchand (AIR 1977 SC 2447) the Supreme Court has held: "The basic rule may perhaps be put as “bail not jail”, except when there are circumstances suggestive of fleeing from justice or creating other troubles in the shape of repeating offences or intimidating witnesses and the like by the petitioner who seeks enlargement on bail from the court”. Applying the law laid down by the Supreme Court, it goes without saying that the detention of the advocate and rejecting his bail application was clearly illegal and a mala fide exercise of power on the part of the learned Magistrate.

Nothing seems to be more ridiculous than the action of the police in taking the robes of the advocate into custody as a material object. Scant regard had been paid to the robes. “An advocate’s robe is steeped in tradition and has a class of distinction. It is worn when one practices as an advocate, not before he is borne in that profession or after he ceases to practise. It is not a casual wear. It is for serious occasion. Outside court, it has no place; it shall have none. Inside Court, it represents a cause; the cause of the client.” See Muraleedharan Nair v. N.J.Antony (1985 KLT 1). Not merely the advocate, but the entire legal profession suffered insult by the action of the police in taking the advocate’s robes into custody as material object in the case on hand.

Let it be noted that lawyers are the necessary link between the Court and the people. They too play a pivotal and vital role in dispensation of justice.