How to get property with a clear and marketable title

During the process of acquisition of property, taking a legal opinion is an important constituent of the due diligence exercise. Legal opinion is the opinion given by a legal expert on the property transaction. The knowledge of individuals on the nitty gritties involved in the property acquisition is limited. Property acquisition is a complicated process. There are number of laws, rules and regulations covering property transactions. An ideal and reliable source of legal opinion is an advocate who specializes in property matters.

Getting the legal opinion is all the more important in case you are planning to purchase an old property, that is a property from an existing owner rather than a property developer or builder. There may be many issues. The property may be held jointly, or the seller may not have proper title or authority to sell the property. The property may have already been sold by the seller or it may be encumbered, that is a charge already created on the property.

It is difficult for an individual purchaser to check out on all these areas. As such, it is better to take the services of an expert in the matter. Although a purchaser can do an initial review of the documents checked by legal expert.

Scanning through property documents is a complex process. Land records are generally in a local language. The purchaser needs to go through a number of documents to trace the ownership of the property. The legal experts are better placed to review and give their opinion on the status of the property.They can be asked to prepare a search report.

The search report traces the history of the property, that is who the original owners of the property were and how it has been transferred over time before reaching the present seller. It also traces out any charges or encumbrances created on the property and the present status, That is whether the charges have been paid and the property released or if there are some charges pending. This search on the title of the property is for a period of the past 30 years.

A seller should annex a copy of this report to the ‘agreement for sale’ with the intended purchaser of the property. It would state whether or not there is any existing mortgage, litigation, condition or claim, which is likely to affect the title of the buyer adversely.

A legal opinion covers details regarding the status of the property, such as who the legal owner of the property is, what has been the chain of holding and transfer of property, whether the property is free from encumbrances, whether the property has been already offered as a security for loan, is there any dispute on the ownership of the property, whether the seller has complied with all the requirements for getting the ownership of the property, whether the seller is competent to transfer the property etc.

In case you want to avail a housing loan, the title of the property should be clear and marketable, that is the seller should be the genuine and actual owner of the property. Also, the property should not be under any dispute or litigation.

A search report and title certificate can be obtained from an advocate who will conduct a survey of the title of the property by visiting the office of registrar. A legal opinion reduces the chances of getting into disputes at later stage. It acts as a safety device for purchasers.

In case you are getting the property purchase financed by bank, generally the bank will obtain a legal opinion before sanctioning the loan. The bank will have its own legal experts who specialize in this field. The cost is nominal and is built up in the processing and administration charges applicable for sanctioning and disbursing the loan.

Source:,http://www.indianrealestateforum.com/buying/t-how-to-get-property-with-a-clear-and-marketable-title-752.html

Trademark Infringement And Passing Off

Trademark is the identification mark of any company or organization. A customer relates any trademark with the quality of products and reputation of the company that is using it. It is a distinctive name, word, phrase, symbol, logo, design, image, or a combination of these elements that identifies a product, service or firm that has been legally registered as the property of the firm. Trademarks grant the owner the right to prevent competitors from using similar marks in selling or advertising.

There are few important functions of trademark:

A trademark can be used for identifying and distinguishing a particular seller’s goods from others. Trademark also shows the origin of the goods i.e. a customer can identify the manufacturer and also assume about the quality of goods that all goods bearing the particular trademark are of a particular quality desired by the customers. Trademarks are widely used for the advertisement purposes also which helps to customers in associating any good with the quality, reputation and goodwill of any company. So it is very important for any organization to take precautions while allowing any one to use its trademark because the name and reputation of the company is directly associated with the trademark.

Various new concepts have been emerged in relation to trademark due to the technological revolution in the communication, media and other areas and due to the increased knowledge and perception of individuals, business enterprises are showing more interest in registering non conventional marks such as colour marks, shape marks, smell marks, sound marks, advertisement slogans, trade dress etc. to capture the market.

How it can cause damage to a Company:

If any organization is using the registered trademark of another company without permission, that means it is not only committing a crime but also causing damage to the business of the company and damaging the brand name of that company. The organization might be using others trademark to use its market reputation and market stake to enhance its own business without extra efforts. But such companies are not using the exact trademark of other company but they generally go for use of similar marks and here the problem came in to existence. These kinds of activities mainly fall under two heads Infringement and Passing Off.

Infringement:

Section 29 of the Trademark Act-1999 talks about various aspects related to infringement as given in S.29(1) that a registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade, a mark which is identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered and in such manner as to render the use of the mark likely to be taken as being used as a trade mark.

Other subsections describe that in course of the use of the trademark it is said to be infringing the rights of other company due to use of similar or identical trademark using for marketing of similar kind of goods and services or use of identical or deceptively similar trademark for any other kind of goods and services. It is further given in the Sub Section (9) of this section that the infringement can also be done by the spoken use of those words as well as by their visual representation.

Passing Off:

The specific description of passing off is not given in the trademark act but the courts have drawn its meaning from common law that if the infringement of trademark done in such a manner where the mark is not only deceptively similar to the trademark of other company but also creating confusion for the customers, which ultimately results in damage for business of the company.

Differences between Passing Off and Infringement:

They are slightly different to each other:

· Statutory remedy is available for infringement whereas the action for passing off is a common law remedy.

· For infringement it is necessary only to establish that the infringing mark is identical or deceptively similar to the registered mark but in the case of a passing off action, the need is to prove that the marks are identical or deceptively similar which is likely to deceive or cause confusion and damage to the business of the company.

· When a trademark is registered, registration is given only with regard to a particular category of goods and hence protection can be given only to these goods and action of infringement would be taken but in a passing off action, the defendant’s goods need not be the same, they may be related or even different.

Judicial Response:

Courts have given several judgements in these kinds of disputes where the infringement and passing off of trademark were in question. Few of them I am discussing in this paper where courts have dealt with these questions and formulated several concepts related to them.

Cases of Infringement;

No one can use the trademark which is deceptively similar to the trademark of other company. As in the case of Glaxo Smith Kline Pharmaceuticals Ltd. v. Unitech Pharmaceuticals Pvt. Ltd. [1] the plaintiff claimed that defendants are selling products under the trademark FEXIM that is deceptively similar to the plaintiff’s mark PHEXIN, which is used for pharmaceutical preparations. The defendants are selling anti-biotic tablets with the trademark `FEXIM' with the packing material deceptively similarly to that of the plaintiff, whereby intending not only to infringe the trademark but also to pass off the goods as that of the plaintiff as the two marks are also phonetically similar. The Court restrained the defendant from using the trademark `FEXIM' or any trademark deceptively similar to the trademark of the plaintiff `PHEXIN', any label/packaging material deceptively similar and containing the same pattern as that of the plaintiff.

If a party using the deceptively similar name only for a single shop and not spreading its business by use of that particular name then also that party could be stopped from using the trade name of other company. This is given in M/s Bikanervala v. M/s AggarwalBikanerwala [2] where the respondent was running a sweet shop in with the name of AGGARWAL BIKANERVALA and the plaintiff was using the name BIKANERVALA from 1981 and also got registered it in the year 1992. Hence they applied for permanent injunction over the use of the name AGGARWAL BIKANERWALA for the sweet shop by the defendant. Court held in favour of the plaintiff and stopped defendant from manufacturing, selling, offering for sale, advertising, directly or indirectly dealing in food articles for human consumption under the impugned trade mark/trade name/infringing artistic label 'AGGARWAL BIKANER WALA' or from using any trade mark/trade name/infringing artistic work containing the name/mark 'BIKANER WALA/BIKANERVALA' or any other name/mark/artistic work which is identical or deceptively similar to the plaintiff's trademark 'BIKANERVALA'.

If the trademark is not registered by any party but one party started using it before the other then first one would have the legal authority on that particular mark. As in the case ofDhariwal Industries Ltd. and Anr. v. M.S.S. Food Products [3] where appellants were using the brand name MALIKCHAND for their product and the respondents were using the name MANIKCHAND which is similar to the previous one and both parties have not registered their trademarks. Court held in this matter that even though plaintiff have not registered their trademark they are using it from long time back and hence court granted perpetual injunction against the respondents.

Even if a company is not doing business in country, but it is a well known company or well known goods, then also it would be entitled to get authority over its trademark. As given in case of N.R. Dongare v. Whirlpool Corp. Ltd. [4] where the defendants have failed to renew their trademark ‘WHIRLPOOL’ and in the mean time the plaintiffs have got registration of the same. In this case court said that though there was no sale in India, the reputation of the plaintiff company was traveling trans border to India as well through commercial publicity made in magazines which are available in or brought in India.

The “WHIRLPOOL” has acquired reputation and goodwill in this country and the same has become associated in the minds of the public. Even advertisement of trade mark without existence of goods in the mark is also to be considered as use of the trade mark. The magazines which contain the advertisement do have a circulation in the higher and upper middle income strata of Indian society. Therefore, the plaintiff acquired transborder reputation in respect of the trade mark “WHIRLPOOL” and has a right to protect the invasion thereof.

Cases of Passing Off;

Even if the goods are not same or similar to each other, then also no one can use the registered trademark of a company for any kind of goods which may result in the harm to the business and reputation of the company which is the owner of the trademark. In Honda Motors Co. Ltd. v. Mr. Charanjit Singh and Ors [5] defendant Company was using the trade name HONDA for ‘Pressure Cookers’ which they are manufacturing in India and even when their application for registration of this trademark had been rejected by the registrar they continued using it and again applied for registration and hence plaintiff has brought this plaint. Plaintiff is the well known company having presence all over the world in the field of Motor Cars, Motorcycles, Generators and other electronic appliances. They are doing business in India in association with the Siddharth Shriram Group with the name Honda Siel Cars India Ltd. Plaintiff has established that his business or goods has acquired the reputation and his trade name has become distinctive of his goods and the purchasing public at large associates the plaintiff's name with them. The use of trademark HONDA by respondents is creating deception or confusion in the minds of the public at large and such confusion is causing damage or injury to the business, reputation, goodwill and fair name of the plaintiff. Hence court has restricted the defendants from using the trademark HONDA in respect of pressure cookers or any goods or any other trade mark/marks, which are identical with and deceptively similar to the trade mark HONDA of the plaintiff and to do anything which amounts to passing off to the goods of the plaintiff.

In the case of Smithkline Beecham v. V.R. Bumtaria [6] the plaintiff applied for permanent injunction to restrain the defendant from infringing the trademark, passing off, damages, delivery etc. of its registered trademark ARIFLO, used in respect of the pharmaceutical preparations. Defendants were using the similar name ACIFLO for their product of the same drug in India. Plaintiffs were not doing business in India for the particular product and argued that since their advertisements are been published in medical journals hence they have a transborder reputation and defendants should be stopped to use the similar trademark which creating deception in customers.

Court said that mere publication of an advertisement in a journal cannot establish a trans-border reputation. Such reputation if any is confined to a particular class of people, i.e., the person subscribing to the said specialized journals and the same can’t be said to be extended to the general consumers. Thus any adverse effect on the firm in such a case can’t be amounted to the offence of “passing off”.

Though the dispute resulted in compromise where the defendant agreed and accepted the plaintiffs’ exclusive right on the use of mark i.e. ARIFLO in India and abroad and further agreed to not to manufacture pharmaceutical preparations under the mark ACIFLO or any other mark identical or similar to ARIFLO.

Trade Dress:

The literal meaning of Trade Dress is - the overall image of a product used in its marketing or sales that is composed of the nonfunctional elements of its design, packaging, or labeling (as colors, package shape, or symbols). That means there is a specific way of writing any product name, its unique background and other remarkable signs. The concept of trade dress has much importance in a country like India where one third of the population is still illiterate. Trade dress helps the illiterate people who cannot read the trademark on the product as well as the manufacturers to reach the people easily.

Delhi H.C. had dealt with this concept in a detailed manner in the case of Colgate Palmolive Company and Anr. v. Anchor Health and Beauty Care Pvt. Ltd. [7] where the plaintiffs have filed the case for the ‘passing off’ of trademark and the dispute was on the colour scheme and combination of colours in a significant manner. Colgate Company was the plaintiff and questioning the use of a mark on dental product which is the combination of ‘red’ and ‘white’ in proportion of 1/3:2/3 respectively and the way of writing the name of product was also in dispute. Plaintiffs were using the mark of particular fashion from 1951 and the respondents started using it in 1996. Plaintiffs have filed the application to stop the respondents from using the particular mark.

The plaintiffs showed to the court that the look of trade dress of the two articles, one manufactured by the plaintiff and another by the defendant from the point of view of not only unwary, illiterate customer/servants of the household but semi-literate also as the trademarks "Colgate" and "Anchor" are written in English language cannot be distinguished by ordinary customer. There is every likelihood of confusion as to the source on account of the similarity of substantial portion of the container having particular colour combination and also shape of the container. Such an action on the part of infringing party also has an element of unfair competition.

Court said in this matter that may be, no party can have monopoly over a particular colour but if there is substantial reproduction of the colour combination in the similar order either on the container or packing which over a period has been imprinted upon the minds of customers it certainly is liable to cause not only confusion but also dilution of distinctiveness of colour combination. Colour combination, get up, lay out and size of container is sort of trade dress which involves overall image of the product's features. There is a wide protection against imitation or deceptive similarities of trade dress as trade dress is the soul for identification of the goods as to its source and origin and as such is liable to cause confusion in the minds of unwary customers particularly those who have been using the product over a long period.

If a product having distinctive colour combination, style, shape and texture has been in the market for decades it got attached with the reputation and goodwill of the company which could be earned at huge cost.

In the present dispute if an illiterate servant or village folk goes to the shop with the instruction to bring Colgate Tooth Power having a container of particular shop with trade dress of colour combination of Red and White in 1/3 and 2/3 proportion he will not be in position to distinguish if he is handed over "Anchor" Tooth Powder contained in a container having the identical trade dress and colour combination of "Red and White” in that order and proportion. Confusion is much large as to source and origin as the difference in name will not make any difference to such a customer and the goods of the defendant can easily be passed off as goods of the plaintiff.

Court said that significance of trade dress and colour combination is so immense that in some cases even single colour has been taken to be a trademark to be protected from passing off action. Except where the colour cannot be protected as the blue colour is for the Ink and red colour is for the lipstick or similar cases. Court said that it is been established that the defendants are using the trade dress of plaintiffs for their containers and hence Court had allowed the application of plaintiffs and restrained defendants from using the colour combination of red and white in the disputed order on the container/packaging of its goods.

Conclusion:

By this discussion we can draw following inferences:

· Registered trademark is the property of the holding company and it is directly associated with the name, reputation, goodwill and quality of products of a company.

· A company can not use the trademark of another company.

· No one can use even the similar trademark which is creating deception or confusion for the customers.

· No one can use the trademark of a company, which is well known and having a transborder reputation, even if it is not registered in India.

· Mere advertisement in a particular journal does not create transborder reputation.

· Trade dress is also a part of trade mark and no one can use the specific writing style, definite colour combination and identifiable background for packaging and labeling a product.

· Mere a single colour can also be treated as a trade dress for a specific product.

Source : ,http://www.legalserviceindia.com/article/l226-Trademark-Infringement-&-Passing-Off.htm

Way to protect sick industrial undertaking

The alternative legal route to meet the above objectives i.e. revival/rehabilitation of the sick units or the liquidation of the company are incidental to industrialisation. Time has come that an institutional network and procedures must be evolved for the revival/rehabilitation of sick and potentially sick industries. In Bangladesh we do not have similar act as are in vogue in India, Pakistan and other SAARC countries. Since there exists multiplicity of laws which resulted in delays and as a consequences the desired assistance whether financial or otherwise could not reach the sick unit in time. Because the major problem was lack of coordination amongst the different agencies involved in the rehabilitation process of the unit. This created sufficient grounds to enact a suitable legislation in 'public-interest' to provide for:

Timely detection of sickness.

Expeditious determination by body of experts of the preventive, ameliorative, remedial and other measures which would need to be adopted with respect to such sick and potentially sick industries.

Enforcement of the measures considered appropriate:

The government of India and the Reserve Bank of India have initiated a number of measures to keep the sickness under control. The Reserve Bank of India had been issuing direction to various commercial banks the guidelines over the past as follows: 

The banks have been asked to adopt an approach of single window for lending under Consortium arrangements both for the sick and weak units in respect of the disbursements of working capital and the term-loans (Rehabilational term-loans).

They have been asked to tone-up their organisational machinery to detect the sickness in time so that there is possibility of revival of the unit.

SEBI has been set up in 1992 to protect the interest of the investors and promote the development of the capital market in India. It will serve dual purpose. It would help entrepreneurs to raise desired capital from the public and also infuse confidence in the investors.

In August 1991, the Government issued a directive to all the Stock Exchanges to ensure transparency in the transaction of the securities for the benefit of investing public and stricter regulations in the specified group of shares, timely settlement of the transactions and broad-basing the governing bodies of the Stock Exchanges.

Revised guidelines for good and bad delivery of shares have been issued by SEBI. 

The listing agreement has been modified to provide for greater disclosure for the investor's protection and to provide half yearly results.

A scheme has been worked out by the Stock Exchanges for the purpose of market makers. 

All the restrictions on interest rates on public sector bonds other than, tax-free bonds were removed in august 1991. it was felt that the interest rates should be governed by the market forces but the companies are required to take credit rating before floating such instruments. The ratings would be optional for the public sector bonds and NCD's upto Rs. 5 crores for private placements and convertible debentures into equity shares within 18 months of allotment.

In respect of units of industrial groups becoming sick, banks have been asked to impress upon the group to come forward with concrete proposals to assist the units where the sickness is on account of internal factors. In such cases infusion of additional resources should be insisted upon by the healthy units of group.

It was re-emphasized that the banks will also participate in the rehabilitation package. This has been made a mandatory requirement.

If on account of any reason the bank is not able to 'discount' its debt within the RBI laid parameters the bank will be required to take up its share. If any member bank is not able to take up its share the bank's consortium would reserve the right to refer the repayment of dues to it under the package.

The Indian parliament, therefore, enacted the Sick Industrial Companies (Special Provisions) Act, 1985. This piece of legislation marks the beginning of a new era in resolving the industrial sickness by providing remedial measures for sick companies as well as for potentially viable sick companies.

To come with the definition of the term "industrial company" it is necessary that the company shall have 50 or more workers are engaged where the company could not establish that 50 or more workers are engaged it would not be an 'industrial company" within the meaning of the Act.

However where a reference has been made to BIFR and subsequently the number of employees has fallen below 50, the reference cannot be struck down on the ground that the sick company is not longer an 'industrial company'.

Sickness as per Act prior to Amendment Act, 1993.

Prior to the amendments made by the Sick Industrial Companies (Special Provisions) Amendment Act, 1993 (w.e.f. 1-2-1994) a unit could be declared sick:

if it was registered for 7 years.

If it had accumulated losses which were equal to the net worth of the company, and ;

If it had incurred cash losses during the financial year in which the reference to Board was made and the year proceeding the financial year. Thus the occurrence of cash loss i.e. loss after deducting depreciation had to be for 2 years.

Suggestions for enactment:

A. The long-term success of Bangladesh economic reform process depends upon sustained growth in industrial out put and investment. Without this there cannot be a genuinely competitive industrial base from where we can launch an export drive to systematically reduce its debt service obligations over time.

The focus should now be on rapid industrial sector reform. This is not just eliminating licensing other barriers to entry. It requires giving signals to potential entrepreneurs about the scope for operational flexibility in the choice of out put, of markets and in the use of labour and capital industrial restructuring involves commercially reorganising ailing but economically viable companies facilitating the withdrawal of unviable ones. It is obvious that the presence of various barriers to industrial and cooperate restructuring serve no economic goal. There are mainly two reasons for restructuring. First, except for occasional scale effects there is no basic difference in economic, commercial and legal principles between reorganizing the affairs of a private sector firms and a public sector company. The distinction lies in political will particularly the ability to create a consensus that shapes and will. Secondly, industrial sickness and the need for restructuring, reorganisation and strategic withdrawal of financial penalty clauses will help ensure GDP growth and unemployment reduction.

B. Sick Industry Definition :

A company which is registered for a period not less than 5 years, whose accumulated losses are equal to the sum of paid up capital and free reserve. Incur cash losses for two consecutive years including the current year and have cumulative losses that wipe out its net worth may fall under this category.

C. Cause of Sickness : Industrial sickness arises out of bad financial structure and/or chronically inefficient use of factors of production and/or poor market positioning. Its out come is the locking up scarce investible fund in sub-optional activities. 

Giving this outcome an appropriate way looking at sickness is to examine the amount of out standing credit locked up in sick industrial units.

D. Preparation of Reorganization Schemes : Financial reconstruction of the sick industrial company provided this is economically flexible and commercially viable. 

Interest on term loans to be reduced.

All penalties e.g penal interest and damages for non-repayment must be waived. 

Unrealized normal interest may be waived to the extent of at least 75% to 50% on case to case basis and the balance interest can be funded or capitalised at a subsidised rate subject to review from time to time. The total interest rate can be 2% higher than financial institutions cost of fund rate in exceptional cases. The normal repayment of funded interest should be 5 to 6 years extendable up to 7 years. 

The irregular component of a firm's cash flow other than unadjusted interest which is funded must be converted in to a working capital. On this subsidized interest may be charged. 

Cash losses of a company consists not only of irregularities in cash credit account but also of non-payment of workers and other statutory dues and over dues to creditors. The latter liabilities are supposed to be shared between the participating banks and the institutions on a 50-50 basis. Anticipating cash losses during the rehabilitation period are to be borne by the financial institutions who are also supposed to provide the margin money for additional working capital.

Additional assistance for working capital is on commercial rates, which may be reduced as per Government decision. The cost of rationalising the creditors is met by financial institutions and banks on a 50-50 basis.

Waiver of compound interest rate on entire amount of working capital and term loan amount. 

Income tax relief for the period of rehabilitation.

On a study of the Business Guide to the Uruguay Round published by International Trade Centre of UNCTAD/WTO and in response to unfair trade practices: rules on the use of countervailing and anti-dumping duties. Bangladesh Government is permitted to levy such anti-dumping duties on such products which are being produced in Bangladesh. 

The GATT rules deal with two types of "unfair" trade practices, which distort conditions of competition. First, the competition may be unfair if the exported goods benefit from subsidies. Second, the conditions of competition may be distorted if the exported goods are dumped in foreign markets.

In common parlance, it is usual to designate all low-cost imports as dumped imports. The Agreement on Anti-dumping Practices (ADP), however, lays down strict criteria for determining when "a product is to be considered as being dumped". In general, a product is considered to be dumped if the export price is less than the price charged for the like product in the exporting country. A product is also considered to be dumped if it is sold for less than its cost of production.

The Agreement on Anti-dumping Practices and on Subsidies and Countervailing Measures (SCM) authorise countries to levy compensatory duties on imports of products that are benefiting from unfair trade practices. However, an importing country can levy countervailing duties on subsidised imports and anti-dumping duties on dumped imports only if it is established on the basis of investigations carried out by it that such imports are causing "material injury" to a domestic industry. Investigations for the imposition of such duties should ordinarily be initiated on the basis of a petition made by or on behalf of an industry, alleging that imports are causing it injury.

The two Agreements lay down similar criteria for determining injury. The producers for carrying out investigations of petitions for the levy of anti-dumping and countervailing duties are likewise similar.

The government of Bangladesh can take safeguarding measures to restrict imports in order to assist the domestic industries, which is being injured by a sudden and sharp increase in import.

Experience shows that the traders who are also importers continue to import similar items which are being produced by the local industries of Bangladesh. These local industries are therefore facing stiff competition from the imported goods dumped in the country.

It is most respectfully suggested to study the following aspects of GATT LAW.

1. The concept of dumping as embodied in GATT Law;

2. The rules and procedures that countries must follow in levying anti-dumping and countervailing duties.

Source: http://nation.ittefaq.com/issues/2008/07/02/news0333.htn

Winding Up of a Company - A different Legal Perspective

Meaning & Kinds: “Winding-up” in literal sense, means to bring to a conclusion or an end by putting in order.[1] It is defined as the process by which the life of a company is ended and its property is administered for the benefit of its members and creditors[2]. Winding-up is different from insolvency and dissolution[3]. The Act provides for three kinds of winding up:

1. The winding-up by the Tribunal. [(Sec 433) of Companies Act, 1956]

· If the company has, by special resolution, resolved that the company may be wound-up by the tribunal;

· If default is made in delivering the statutory report to the registrar or in holding the statutory meeting;

· If the company does not commence its business within a year from its incorporation, or suspends its business for whole of a year;

· If the number of members are reduced then their required number;

· If the company is unable to pay its debts (specified in Sec 434)

· If the tribunal is of the opinion that it is just and equitable that the company should be wound –up;

· If the company is in default in filing up with the Registrar its balance sheet and profit and loss account for five consecutive financial years[4];

· If the company has acted against the interests of the sovereignty and integrity of India or security of any state, friendly relation with foreign States, public order, decency and morality;

· If the tribunal is under the opinion that the company should be wound up under the circumstances specified under the Sec. 424G.

2. Voluntary winding-up, which itself is of two kinds, namely,

· Members voluntary winding-up,

· Creditors voluntary winding-up.

A company may be wound up voluntarily at any time after passing a special resolution. But where the articles provide for a period on expiry, which the company is to be wound up and that period has expired, or for a contingency on the happening of which the company is to be dissolved and that contingency has happened, winding up may be commenced with an ordinary resolution [Sec 484]. Within 14 days the resolution should be advertised in the Official Gazette and in a newspaper circulating in the district of the registered office of the company [Sec 485]. Winding up commences from the date of resolution [Sec 486]. The corporate status and power of the company shall continue till the company is completely dissolved, but it shall stop its business, except so far as may be necessary for beneficial winding up [Sec 488]. If a declaration of solvency is made in accordance with the provisions of the Act, it will be members’ winding up. If the directors are not able to pay the debts within the specified period, the liquidator shall call a meeting of the creditors and it then becomes the creditor’s winding up [sec.495&Sec.498].

Is winding up possible during the pendency of a civil suit?

Section 433 of the Act provides for the circumstances in which a company may be wound up by court. [5] Here arises a question that if there are parallel proceedings for the same subject matter i.e., for the recovery of debt, where one is a civil suit and the other is for winding up of the company, should they be allowed to subsist together?

The act nowhere prohibits that the proceedings under the act shall or could not lie, where civil suits are pending or they subsequently be filed. There is no provision in the Act to oust the jurisdiction of the court and decide the winding up proceedings. There would have been a provision to that effect in the Act if the legislature had intended to that effect. Since the winding up proceeding is not merely for the benefit of the petitioner but of all its shareholders, creditors or contributories [6]. The pendency of a civil suit is not a bar to the admission of winding up petition based on same debt.[7] The proceeding for winding up will not be invalidated if a suit is filed by the petitioner by way of abundant caution to save the claim getting barred by limitation[8].

The winding up proceedings can be continued in a company court once it has come to the conclusion that it has not been a case of bona fide and tenable defence is made out [9]. While dismissing the petition for winding up the following principals have to be relied upon by the Court:

1) The defence of the company is in good faith and one of substance.

2) The defence is likely to succeed in point of law.

3) The company adduces prima facie proof of the facts on which the defence depends.

4) Where the debt is undisputed, the Court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular amount and.

5) Where, the company owes the creditor a debt entitling him to a winding up order. But the exact amount of the debt is disputed; the Court will make the winding up order without requiring the creditor to quantify the debt precisely [10].

The following points have to be considered while dealing with winding-up:

1) A petition presented ostensibly for a winding-up order; but really to exercise pressure will be dismissed, and under the circumstances, may be stigmatized as a scandalous abuse of the process of the Court The modern practice has been to dismiss such petitions. If the debt is not disputed on some substantial ground, the Court may decide it on the petition and make the order. [11]

2) The company may be wound up even if it has large assets. The crux is to see if it is unable to meet its current demands i.e., if the current liabilities are more than the current assets. If the company is financially sound and in a position to pay its liability, it cannot be ordered to be wound up under Section 433(e) of the Companies Act. But the company should establish that it is capable of discharging its existing liabilities. There is presumption of inability [12].

3) Although a winding up petition is an appropriate remedy and a mode of execution against a company unable to pay its debt, it is not an alternative to the ordinary procedure for realization of the debts due from the company. Since, the creditor had already resorted to the civil suit; the court in its discretion can dismiss the petition [13].

4) It has been observed that the pendency of a civil suit as such is not merely a ground to oppose a winding up petition [14].

Conclusion

After analyzing and observing various legal propositions and situations, it is found that the right to apply for winding up is the creature of statute and not of contract, d the winding up orders passed by the court are not judgments in rem. In the absence of any prohibited provisions in the Act winding up proceedings u/s 433(e), 434,439 can be allowed even if a civil suit is already pending against the debtor company. But it should be marked that the winding up proceeding are greatly affected by the facts and circumstances of a particular case. The machinery of winding-up cannot be used as a pressure tactics, where a suit has already been instituted for recovery of debt, under such circumstances, the proceeding are in the nature of parallel proceedings in respect of the same cause of action. As a result, such course should not be considered by the court more so to avoid conflict of jurisdiction of findings by two parallel courts of competent jurisdiction. Thus at last it can be said that a genuine case has to be made out rejecting the malafide contention, in the interest of good faith and justice.

http://www.legalserviceindia.com/article/l62-Winding-Up-of-a-Company---A-different-Legal-Perspective..html

Legal Issues in Offshore Outsourcing to India

With the rise in outsourcing and with more and more global organizations outsourcing business processes and IT services to India, there has been a number of legal issues in outsourcing. Companies outsourcing to India have to face some complex legal issues with outsourcing. If your organization is outsourcing to India, make sure that your organization is aware of the intellectual property protection and the data privacy and protection in India. Before outsourcing to India, also make sure that your organization knows about compliance with applicable Indian laws, enforcing contractual/legal rights in India and dispute resolution procedures.

There are several legal issues in offshore outsourcing and dealing with them effectively can help the organization who wishes to outsource and the outsourcing service provider, to face the legal issues of outsourcing. The following are some tips on efficiently dealing with the legal issues of offshore outsourcing.

1. Taxation

Offshore outsourcing is often influenced by several international and local issues. The taxation policy of India also has a big effect on the offshore outsourcing decision. Before outsourcing, find out about the tax implications that you have to deal with. This is an important legal aspect to deal with, because different countries have different tax laws. You can meet your outsourcing provider in India and decide about which tax provision would be appropriate in the legal contract.

2. Legal Systems that are Heterogeneous

When you outsource to India or any other country, you will discover that the rules of governance are different in different countries. In outsourcing, you and your outsourcing provider have to make sure to include two different legal systems. This heterogeneity in the legal system is an important legal issue with outsourcing that companies have to deal with. This problem exists, because there is no legal system which can be used globally. Different countries even have different intellectual property laws. Since there are no standard legal rules and regulations to follow, it is best to meet your outsourcing provider and make sure that you adhere to both the legal systems. This will help you to sort out any legal issues of outsourcing.

3. The Influence of Local Laws

Some countries have strict data protection and privacy laws, which might be a hindrance in outsourcing. In such cases, the outsourcing provider and the customer would be legally bound and share equal legal responsibilities. This might increase the liability of the customer and in some cases can become a legal issue in outsourcing. Outsourcing service providers also have to protect their business from civil penalties. Conduct some research on the country that you want to outsource to and if the local laws of that country are a hindrance, find another outsourcing service provider. The influence of local laws is another major legal issue in outsourcing.

4. Dispute Settlement

Dispute settlement is yet another legal issue with outsourcing. If a customer from U.S wants to sue an outsourcing provider in China, there would be plenty of disputes. The Chinese outsourcing provider would not want to go to the U.S and the U.S customer would not want to come to China. There is also the legal issue of where the case will be filed, as the case has to be fought in the country where the case is filed. These two countries would also have two different legal systems. When making a settlement contract with your outsourcing provider, ensure that you mention the system of dispute settlement. Clarifying the legal aspects in outsourcing and dealing with the problem of dispute settlement can avoid future problems.

Legal Issues in Outsourcing to India

1. Effective Changes in Indian Laws

India is the most ideal place to outsource to. When you outsource to India, you need not face many legal issues in offshore outsourcing. There are many global organizations which have been outsourcing to India and these organizations have not faced any hindrance with the legal issues of outsourcing to India. Indian laws are always going through amendments and they are often changed to effectively meet the requirements of today and to be in unison with the latest international laws. India complies to the “agreement on trade related intellectual property right”. India also accepted the “world trade organization agreement” even when outsourcing was just starting. The Indian government has brought about many effective changes in patents, copyrights, designs, trademarks to meet the requirements of today. Such effective changes have transformed India’s intellectual property laws.

2. The Proper Law of Contract in India

When a legal contract has to be made between two countries, the legal regime of any single country becomes insufficient to deal with the situation. Outsourcing brings about two legal systems into the picture and this is where the private international law comes into place. Before you sign a legal contract with your outsourcing provider, make sure that you decide about which law would govern the legal contract. In India, the outsourcing service providers ensure that the “Proper Law of contract is applied, before a legal contract is signed.

3. Choice of Law is endorsed by Indian courts

The courts in India have always endorsed the choice of proper law. If you have expressed the choice of law in the legal contract, you can be sure that it will be supported in the Indian courts.

4. Freedom of choice to choose any law

When you outsource to India, you can choose the law that would govern the legal aspects of the contract. You can also decide which court would conduct the jurisdiction. The sections 13, 15 and 44A of the Indian Civil Procedure Code and Section 41 of the Indian Evidence Act, govern the conclusiveness and enforcement of foreign judgments made in India.

Guidelines to help you deal with the legal issues in offshore outsourcing to India

ü     If you choose arbitration as the means of dispute resolution, ensure that the place of arbitration and other important aspects are well defined in the legal contract

ü     If you choose the Indian law and if you want Indian judgment to be used in your country, then make sure that your country has a similar law as the Section 44A of the Indian Civil Procedure Code.

ü     In case, you sign the legal contract in a country, which is different from the country whose law you have chosen, make certain that the formal requirements of that place of contract are fulfilled.

ü     Make sure that the country whose law you choose supports the proper law for enforcement.

ü     Ensure that there is a choice of law which governs the legal contract. 

http://www.outsource2india.com/why_india/articles/legal_aspects_outsourcing.asp
 

Is India Geared Up For Business Method Patent

Introduction

Today technology is changing expeditiously. New technical inventions are taking place in huge number. These new inventions open new field of subject-matter for protection under Intellectual Property Law. Intellectual Property law gives an umbrella protection to new inventors. Patent provide protection for those line of process, products which are novel and are capable of proving that it involves an inventive step. USPTO grants maximum patents in a year. The paper written here advocates the invalidity of Business Method patent in Indian scenario. Business method today is capable of IP protection in countries like USA, Australia, Japan and New Zealand. India is against granting of protection to Business Method.

Definition: Business Method Patent

Business Patents are those patents which are given to business methods or business systems or like. A business method may be defined as "a method of operating any aspect of an economic enterprise". Business method patents are part of a larger family of patents known as utility patents, which protect inventions, chemical formulas, processes, and other discoveries. A business method is classified as a process, because it is not a physical object like a mechanical invention or chemical composition.

Background To Business Method Patents

Business Method Patents were not considered as a subject matter for protection under Patent Law. Earlier Business Method was considered as an abstract idea and was thus not falling under the purview of Patents. But by a decision by a Federal Court even Business Method have been granted patent protection. Section 101 of US Patent Act defines Inventions which are capable of Patent protection

A combine reading of Sections 101, 102, 103 and 112 will lead to following construction:
• Any process, machine or composition of matter may be patented if;
• It is new (Novelty Section 102), Non-obvious (Section 103) and is capable of adequate description and invention (Section 112).

Protection Under TRIPS

TRIPS also provide subject matter for patent protection. Article 27 paragraph 1 of the agreement on Trade-Related Aspects of Intellectual Rights (TRIPS) provides that "patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application..."

Further, Article 27 paragraph 2 of the TRIPS agreement permits Members to "exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect order public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law."

Cases In Which Business Method Was Upheld

Concept of Business method patent is now a decade old. State Street case is an important decision in this regard. Further developments have taken place after this judgment.

Business Method was considered as an exception to Patent protection until 1998. The first case of this kind was filed in the year 1908. In Hotel Security case the question was whether business methods can be said to be patentable. Here the case rejected the argument of it being capable of protection and created a per se exception to business methods. It was until year 1998 that this position was accepted.

1. State Street Bank v. Signature Financial Group, Inc.

In the present case the District Court had rejected application for Business Method Patent on the said process of “hub and space”. But Later the Federal Circuit confirmed that there is no rule which prohibits the patentability of "business methods." The Court stated “The judicially-created business method exception to patentability is . . . an unwarranted encumbrance to the definition of statutory subject matter in section 101 that should be discarded as error-prone, redundant, and obsolete. It merits retirement from the glossary of section 101. Patentability does not turn on whether the claimed method does "business" instead of something else, but on whether the method, viewed as a whole, meets the requirements of patentability as set forth in Sections 102, 103, and 112 of the Patent Act.

Federal Court further clarified that it was never intended that business methods should be kept out of the subject matter. Rather in earlier few cases claim was rejected due to incapability of those methods to be taken as inventions. Thus, State Street confirmed that business methods can be patented if they meet the statutory requirements of utility, novelty and non-obviousness.

2. Amazon.com Inc. v. Barnsandnoble.com

In this case one-click patent to Amazon.com was criticized by few writers on the ground of it being “unplanned mutation”. Here an injunction was granted to Barnes & Noble for not using the said feature. This case clearly reflects drawbacks that can arise in case a business patent is protected in countries which are still developing their technologies. Later part of my paper deals with disadvantage that granting a business method patent can have.

Amendments Brought After State Street Case

Now that the situation is clear with respect to business method patents in US laws, it can be said that business method are capable of granting patent protection. But in order that no ambiguity remains the USPTO publicly announced that in terms of granting protection sufficient prior art search should be undertaken.

Class 705

A new classification (Class 705) was introduced for the filing of business method patents under the more generic utility patent applications: "Data processing: financial, business practice, management or cost/price determination.” Specifically, Class 705 includes sub-categories for industries such as health care, insurance, electronic shopping, inventory management, accounting, and finance.

Amendment In Title 35

Section 100 Title 35, United States Code, was amended to provide for improvements in the quality of patents on certain inventions. Thus, ‘Business Method Patent Improvement Act of 2000’’was passed. The term business method patent has been defined under the Act. What is surprising is the fact that under the definition any “technique used in Athletics” can also be qualified as a Business Method Patent.

Interim Guidelines

For providing better uniformity in the system Interim Guidelines were published for Examination of Patent Applications for Patent Subject Matter Eligibility on October 26, 2005

Lacunas Prevalent In Method Adopted At USPTO

It has been observed that the method of granting patent in USPTO is without a substantial base. Patents at USPTO are granted not on a quality basis, rather on quantity basis. The following are serious lacunas which should be given a serious thought:-

1. In USPTO examiners are not properly trained to search prior art. Prior art search is scattered and hence proper care is required while doing a prior art search. But since the examiners are not provided with enough resources quality somewhere lacks while granting a Patent

2. Further it has been observed that in USPTO examiners get bonuses on allowing a patent rather than rejecting it. Hence the result can be seen more the acceptance by examiners, more the bonus. The process should change and bonus should be given only while rejecting a patent.

3. Once a patent is granted USPTO doesn’t conduct a review or quality control.

4. Mostly claims use ambiguous language which leads to more confusion in mind of patent examiner. Thus affecting the quality of specific invention.

Disadvantage Of Granting A Business Method Patent

1. Once a patent is granted for an invention it is capable of securing the rights of patentee for a period of 20 years. Thus it can be well understood that if patent is granted for a business method then it would obstruct new technological research for the next 20 years to come.

2. Granting a patent on business method would create a monopolistic situation which would hinder growth. It would mean an unhealthy competition.

Advantage Of Granting A Business Method Patent:

1. Copyright protection is insufficient to protect Business method. All Research and Development that is done requires that something more that Copyright protection should be given in order to reward Business ideas.

2.  Start-ups should be encouraged. New companies would benefit with a concept of such kind. Initially patent protection to such starting groups would definitely benefit them in order to have a strong stand in front of powerful companies. Business method patents create the artificial scarcity needed to preserve market power and restore the incentive to innovate.

Solution For A Business Method Protection

1.The paper here accepts granting of business patents but not at the cost of technological or economical growth. Thus in order to benefit both inventor and other co-inventors in line it would be better to grant patent protection only for a limited period of 3 years for Business method Patents. Thus law should help in sustaining a collaborative effort.

2. Change in the Patent System at USPTO is also required. The one sentence rule should    be eliminated so as to faciltitate clearer language. Thus, it would help patent examiners and also leave less scope for manuplation by patent lawyers. Also person applying should disclose his computer code to the patent examiner.

3. Salary of Patent examiners should be increased. Also USPTO should give bonuses on rejecting a patent application rather than on accepting it as earlier mentioned in paper.

Should Patent Be Granted On Business Method In India

India is a developing economy. We are still unable to cope up with many threats like poverty, unemployment and population. In global market India is considered as a growing economy. Our youths are taking India to greater heights. All this reflect that we require a technological and economical boom. It needs to be mentioned that countries which have granted business method patents are developed countries. Conformance with TRIPS is particularly slow in developing countries, notably Argentina, Brazil, India and Egypt. Further I believe that granting a business method patent in India would impede technological growth in our country. Hence I am of opinion that business method patent should not be granted in India.

Conclusion
With boom in intellect ideas in corporate world it is required that these should be protected and respected. But fortification of these ideas by means of patent might not be profitable at this stage in developing countries. Grant of business method patent in US saw mixed reactions from experts of law. Moot problem was the modus operandi for granting of business method patent at USPTO. US have also drafted an Act called Business Method Patent Improvement Act of 2000 with respect to protection of business methods ironically athletic techniques are also within the purview of Business methods.

Patent over a particular invention protects it for a period of twenty years. Thus a patentee acquires an exclusive right over it (subject to Patent Act) and thus has right to prevent infringement of it during the said period. Thus in case of protection to business method the patentee would be in a position to stop the claimant of patent for a period of 20 years. Thus it would imply that business related methods/ideas would be retarded for such a long period. It can be thus concluded that Business method may be granted but it should be granted for a lesser duration of time and preference should be given to new companies. Thus Indian Patent system may move a step ahead for grant of Business method patent in future but not at present. It would be beneficial that there is no amendment in Section 2(k) of Indian Patent Act, 1970 for the next five years.

http://www.lawyersclubindia.com/articles/Is-India-Geared-Up-For-Business-Method-Patent-185.asp#.UitR1X_9WZM