by Zen Webnet | Jan 15, 2024 | Blog
Article by Sahil Kumar Purvey
‘The Arbitration and Conciliation Act, 1996’ (the Act/the 1996 Act), is the cardinal law on arbitration and aimed to expeditiously dissolve disputes following the principles of party autonomy and minimum judicial interference[1]. Once the arbitral tribunal commences, a party can seek interim relief from the arbitral tribunal under Section 17 of the Act to ensure the prospective arbitral claims of a party are protected in the form of security, guarantees or any other measures. However, in certain cases, the paucity of time makes remedy under Section 17 of the Act inefficacious. Therefore, in urgent matters, the Act allows a party to seek similar interim relief under Section 9 of the Act from the court prior to commencement or during the arbitration proceeding, or at any time after the passing of the award but before it is enforced under Section 36 of the Act.
The 2015 Amendment Act mandates that once the arbitral tribunal has been constituted, the Court shall not entertain an application under Section 9 of the Act. However, the role of Judiciary in granting interim relief under Section 9 of the Act becomes significant prior to commencement of the arbitral proceedings or even after the constitution of arbitral tribunal if the circumstances exists which render the remedy provided under Section 17 inefficacious[2].
One of the remedy under Section 9 is securing the amount in dispute in the arbitration by attaching the property[3]. However, the Act does not laid down criteria for granting relief of attachment of property under Section 9. Therefore, Court relies on CPC while hearing the application under Section 9. Order 38 Rule 5 of the CPC provides the procedure to be followed for attachment of defendant/respondent’ property prior to completion of trial. The Supreme Court had led down three prerequisites for attachment of property under the Order 38 Rule 5 of the CPC[4]. First, the court should be satisfied that the plaintiff has a prima facie case and balance of convenience favors him. Second, Plaintiff has a bonafide case. Third, the plaintiff must also establish that the defendant is attempting to remove or dispose of his assets with the intention of defeating the decree that may be passed. However, Pro-arbitration approach advocates that the aforesaid three requisites is a high threshold for the relief of attachment of property and the Court while hearing the application under Section 9 of the Act should not follow rigors under Order 38 Rule 5 of the CPC. The same has been a judicial quandary. Therefore, this article analyses whether the high bar of Order 38 Rule 5 of the CPC could be waived in the case of Section 9 application or not.
View of High Courts
Various High Courts have given different findings on the question of extent to which the provisions of the CPC would apply to proceedings under Section 9 of the Act. Approach of several high courts could be divided into two parts as follows;
- Inclusive Approach[5]: This approach advocates that proceedings under Section 9 of the Act to be in line with the procedures under Order 38 Rule 5 of the CPC. Therefore, the principles of Order 38 Rule 5 must be followed[6] while granting interim relief under Section 9 of the Act despite CPC is not binding on the arbitral proceeding[7].
- Exclusive Approach[8]: This approach advocates that the technicalities of Order 38 Rule 5 of the CPC will be merely a guideline[9] and need not be mandatorily adhered while granting relief under Section 9 of the Act.
View of Supreme Courts
The Supreme Court in Arvind Constructions v. Kalinga Mining Corporation[10] acknowledge that several High court have diverse opinion on the issue of extent to which the provisions of the CPC would apply to proceedings under Section 9 of the Act. However, Court therein did not settle the issue and left this to be examined in an appropriate case.
On September 14, 2022, in Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited[11], (Essar), a Division Bench of the Apex Court settled the quandary by observing that technicalities under Order 38 Rule 5 of the CPC will not be applicable while granting interim relief of “attachment before judgment” under Section 9 of the Act. The Apex Court observed that the power of the Court while granting interim relief under Section 9 of the Act is wider than the powers under the provisions of the CPC[12] and procedural technicalities of Order 38 Rule 5 of CPC cannot constrain the Court. However, basic principles of procedural law ought not to be ignored. Therefore, if the Applicant establishes a prima facie case and the balance of convenience favours him then court should grant interim relief under Section 9 of the Act. Defendant does not need to establish actual threat to the property required to be attached and a possibility of asset diminution would be sufficient.
On September 30, 2022, in Sanghi Industries Ltd. v. Ravin Cables Ltd.,[13] (Sanghi), another Division bench of the Supreme Court observed that the Court while granting interim relief of “attachment before judgment” under Section 9 of the Act must follow all the requisites of the Order 38 Rule 5 of the CPC. Before passing such relief the Court must satisfy itself that the conduct of defendant would defeat the award that may be passed in the arbitral proceeding.
Way forward
Both the judgments of Apex Court are conflicting. Though, Sanghi was later in time, but cannot be considered as precedent because both the judgment are of a division bench. Therefore, the contrary opinion of the Apex Court causing diverse opinion from different High Courts on the issue that whether the Court while hearing the application under Section 9 of the Act for “attachment before judgment” should follow all the prerequisites under Order 38 Rule 5 of the CPC or not.
On 06.10.2023, the Calcutta High Court in Prathyusha AMR JV vs. Orissa Steel Expressway Private Limited.[14], while following Essar, held that the Court in Section 9 proceeding, should does not compel a party to satisfy the rigours of Order 38 Rule 5 and ask him to substantiate the apprehension on which an order for security is prayed for. Otherwise, the same would result in nullifying the object of Section 9. Whereas on 10.11.2023, the Delhi High Court in Skypower Solar India Private vs. Sterling and Wilson[15], while following Sanghi, held that the Court while exercising powers under Section 9 of the A&C Act cannot disregard of the provisions of the CPC or their underlying principles. Therefore, the 3-judge bench of the Supreme Court have to settle the issue.
The 1996 Act does not contain any provision, which entirely excludes the applicability of the CPC to Section 9 of the Act. Certain provisions of the Act clearly provides where the CPC will be applicable[16] or where it would be excluded[17]. Therefore, even if the rigors of general laws of the CPC is not applicable on the 1996 Act[18], the Court should adhere to the basic principles of CPC while hearing the application under Section 9 of the Act. An interim order granting “attachment before judgment” is a more stringent interim order than other interim relief against defendant. Therefore, threshold of granting such relief should be higher. The Court should follow a middle path of both the extremes i.e. Order 38 Rule 5 of the CPC need not to be followed at all and all rigors of Order 38 Rule 5 of the CPC must be satisfied. Therefore, as held in Essar, the Plaintiff praying for interim relief must have to establish prima facie case, balance of convenience in his favour and demonstrate, and not simply aver, that the conduct of defendant will defeat the purpose of arbitral proceeding. Plaintiff need not establish the actual threat by defendant to the property or the intent of defendant to defeat the purpose of arbitral proceeding. Therefore, the threshold for the relief of attachment of property would be lower than the rigors of Order 38 Rule 5 of the CPC. This approach would be pro-arbitration while balancing the interest of both the parties and will not lead to unnecessary attachment of property of the defendant.
[1] Uttarakhand Purv Sainik Kalyan Nigam Ltd. vs. Northern Coal Field Ltd. (2020) 2 SCC 455
[2] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), Section 9(3); and Arcelor Mittal Nippon Steel India Ltd. Vs. Essar Bulk Terminal Ltd., (2022) 1 SCC 712
[3] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), Section 9(1)(ii)(b)
[4] Raman Tech v. Solanki Traders, (2008) 2 SCC 302
[5] Om Sakthi Renergies Limited vs Megatech Control Limited, MANU/TN/8146/2006; and Anantji Gas Service v. Indian Oil Corporation, MANU/DE/2344/2014
[6] ITI v. Siemens Public Communication, AIR 2002 SC 2308
[7] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), Section 19(2)
[8] National Shipping Company of Saudi Arabia v. Sentrans Industries Ltd, AIR 2004 Bom 136; and Delta Construction Systems Ltd, Hyderabad v. Narmada Cement Company Ltd, Mumbai, (2002) 2 BOMLR 225
[9] Steel Authority of India v. AMCI Pty Ltd, MANU/DE/3413/2011; and Ajay Singh v. Kal Airways Private Limited, MANU/DE/1820/2017
[10] Arvind Constructions v. Kalinga Mining Corporation, AIR 2007 SC 2144
[11] Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited, 2022 SCC Online SC 1219
[12] Jagdish Ahuja & Anr v. Cupino Limited, MANU / MH / 0925 / 2020; and Valentine Maritime Ltd v. Kreuz Subsea Pte Ltd & Anr., MANU/MH/0062/2021
[13] Sanghi Industries Ltd. v. Ravin Cables Ltd., 2022 SCC OnLine SC 1329,
[14] Prathyusha AMR JV vs. Orissa Steel Expressway Private Limited, MANU/WB/2128/2023
[15] Skypower Solar India Private vs. Sterling and Wilson, 2020 SCC OnLine Del 7240
[16] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), Section 36
[17] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), Section 45
[18] Union of India v. Popular Construction Co., (2001) 8 SCC 470
by Zen Webnet | Jan 14, 2024 | Blog
Article by Vidhi Agarwal
Introduction
The issue of whether a court should consider the adequacy of stamp duty paid on an arbitration agreement during a Section 9 application under the Arbitration and Conciliation Act, 1996 (hereinafter ‘ACA‘) has been a topic of diverse judicial opinions. A notable juncture in the legal landscape was reached with the Constitutional bench’s pronouncement in N.N. Global Mercantile Private Limited v. Indo Unique Flame Limited[1], wherein, while dealing with Application under Section 11 of the ACA, the Hon’ble Supreme Court confirmed that the non-payment of stamp duty renders an arbitration agreement unenforceable. However, with respect to Section 9, the Court expressly stated – “We make it clear that we have not pronounced on the matter with reference to Section 9 of the Act.”
In the wake of pronouncement of the Constitutional Bench decision, the Bombay High Court (hereinafter ‘Bombay HC’), in its judgment in L&T Finance v. Diamond Projects[2], meticulously analyzed the effect of unstamped documents drawing on a trajectory of prior cases and statutory provisions. This decision navigates the delicate balance between evidentiary and non-evidentiary stages, especially concerning the admissibility of unstamped documents at the stage of Section 9 applications.
This decision of the Bombay HC has been tacitly affirmed through the recent 7-judge Bench Supreme Court (hereinafter ‘SC’) judgment In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899,[3] a decision which has caused a seismic shift in the juridical terrain, conclusively settling the legal question on stamping of arbitration agreements.
Scope of Section 9 of the Act
Section 9 of the ACA allows parties to seek interim remedies from the court before, during, or after commencement of arbitral proceedings but before enforcement of the arbitral award. These measures act as vital protective mechanisms in the ACA, aimed at securing claims through securities, guarantees, or other court determined measures.
Understanding the scope of section 9 is essential as the Bombay HC’s reasoning hinges on the distinct scope of sections 9 and 11 and the varied treatment of applications under these sections. Given the urgent nature of interim reliefs resorted to before the courts, they would require immediate intervention by the judiciary to further the intention of the legislature, which would not be to denude the powers of a court, as has been highlighted in Arcelor Mittal Nippon Steel India Ltd. v Essar Bulk Terminal Ltd.,[4]
Position of Section 9 applications prior to N.N. Global
Before the 7-judge bench decision became part of the larger picture, it would have been a risk to presume a conclusive determination of the validity of unstamped agreements in relation to a request for interim reliefs under the ACA. While stamping vis-à-vis section 11 had been the subject matter of a catena of judgments, the same could not have been said about section 9.
As an attempt to bridge this gap in jurisprudence, a chronological account of adjudications by the Indian courts has been relied on by the Bombay HC, illustrating the different spheres in which the two sections operate.
The outset of these decisions can be traced to a Full Bench decision of the Bombay HC in Gautam Landscapes v. Shailesh S. Shah,[5] where the court placed section 9 and 11 on the same pedestal holding that the legislative intent behind enactment of the Act would be conflicted if an issue raised under the Stamp Act is awaited till its conclusion in either of the provisions. This decision, however, went on to be partially overruled with the pronouncement of Garware Wall Ropes v. Coastal Marine Constructions & Engineering[6], in terms of an application under section 11.
This issue was further deliberated upon by the Bombay HC in Saifee Developers v. Shanklesha Constructions[7], where the court distinguished Garware Wall Ropes (Supra), saying that a decision has not been rendered on the legal status of an unstamped agreement at the stage of a section 9 application and is only in terms of a Section 11 application. As a result, Gautam Landscapes (Supra) was granted a partial approval to the extent of validity of an interim relief application under section 9.
Interestingly, the HC interpreted Garware Wall Ropes (Supra) to be a binding precedent on them in terms of letting a Section 9 petition continue, even though no legal principle in a positive sense had been enunciated to that effect.
Reference to N.N. Global
The three-judge bench in M/s.N.N.Global Mercantile v. M/s.Indo Unique Flame[8] upset the prevailing position of law relying on the Doctrine of Separability of an Arbitration Agreement to hold that non-payment of stamp duty, being a curable defect, would not render it unenforceable, since the agreement has its independent existence from the commercial contract in question.
As far as providing interim relief under section 9 is concerned, it was categorically held that when a Contract/Instrument is unstamped, the Court may grant ad-interim relief to safeguard the subject matter of the arbitration, while directing the parties to take necessary steps for payment of requisite stamp duty within a time-bound manner.
This issue was further considered by a Constitutional Bench in the same case, only to overturn the decision and the reasoning of the three-judge bench by a 3:2 majority. It was propounded that “even an arbitration agreement on its own may be required to be stamped”. This inevitably leads to the conclusion that on consideration of provisions under the Contract Act, Stamp Act and Arbitration Act, any arbitration agreement which is unstamped would have a non-existent legal status and hence would not be open to the courts to adjudicate upon in terms of a petition under section 11.
However, a careful reflection is needed on the concluding remarks of the court where it specifically mentions that adjudication has been made on the scope of section 11 and not on section 9, something which is outside the present scope of consideration before the court.
Ruling of the Bombay HC
Justice Bharati Dangre’s extensive analysis, considering the effect of unstamped documents through a trajectory of previously decided cases and provisions of the Maharashtra Stamp Act, its corresponding provisions in the Indian Stamp Act, 1899 along with relevant sections from the ACA, provides a nuanced perspective.
The reasoning on which Justice Dangre places reliance majorly emanates from admissibility of documents and the stage at which that is necessary to be done. Justice Dangre agrees with the argument that the Stamp Act itself, particularly, section 33 read with section 34 contemplates a difference in evidentiary and non-evidentiary stages, talking about the authority who is authorized to receive and admit in evidence, such unstamped document.
When the validity of a document under section 11 is under question, the line of cases starting with SMS Tea Estates v. Chandmari Tea[9] do not inspect the defect of unstamping as a curable one. Consequently, if the instrument is found to be not duly stamped, it would be “stillborn” and the arbitration clause therein will not kick-in. The Court shall then impound the document and follow the procedure until the stamping as per the provisions of the Stamp Act is done, and only then can the document be admitted before the court, for any purpose.
Per contra, the same principle will not be applicable to section 9 wherein petitions for interim relief are inherently applications which are required to be disposed of on expeditious basis as they act in aid of final relief.[10] Entertaining a section 9 application has three limbs to it, namely, a prima facie case, balance of convenience in favour of the interim relief and irreparable injury or loss if such relief in not granted, which clearly demonstrates the court’s duty to protect the minor and the subject matter of the arbitration under section 9(1).
The Bombay HC decision vis-à-vis the 7-bench verdict
Leaning on principles from the Contract Act and ACA, the Court highlighted the difference between inadmissibility and voidness, and its interplay with the Stamp Act, a violation of which would lead the agreement to be inadmissible and not void, that too with the defect being ‘curable’. Moreover, as a fiscal measure, the legislative intent behind the Stamp Act is to secure revenue for the State on certain classes of instruments. It is not enacted to arm a litigant with ‘a weapon of technicality’ and impede the process of judicial determination of rights.
The Hon’ble Supreme Court has revived the reasoning of the three-judge bench judgment bringing up fundamental postulates such as minimal judicial interference, separability of the arbitration agreement, and kompetenz-kompetenz to justify the harmonious construction of the provision of the statutes in question. According to the court, Section 8 and 11 of the ACA and the principles behind them will gain a certain precedence over the other statutes, the Act being a special statute.
The SC talked about Section 9 as a stage where a limited judicial intervention over the substantive dispute is stipulated in the Act. However, the court placed reliance on the same principles as other provisions making it evident that courts are not required to deal with the issue of stamping at the stage of granting interim measures under Section 9, and hence, granting acceptance to the reasoning and conclusions arrived at by the Bombay HC.
Conclusion and Analysis
The legal trajectory surrounding the adequacy of stamp duty paid on arbitration agreements during Section 9 applications has clarified significantly. The Constitutional bench’s ruling in N.N. Global Mercantile set a precedent, deeming non-payment of stamp duty as rendering arbitration agreements unenforceable. Subsequent to this, the Bombay High Court’s nuanced analysis in L&T Finance v. Diamond Projects and the 7-judge Bench Supreme Court decision clarified that the stamping issue need not be addressed at the Section 9 stage. The emphasis on minimal judicial interference, the urgency of interim reliefs, and the protection of the subject matter of arbitration provides a clearer perspective on this complex legal question. The consensus now favors addressing stamping concerns in a subsequent stage of the arbitration process, offering clarity and coherence to the legal framework.
[1] N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1.
[2] L&T Finance Limited v. Diamond Projects Limited & Ors; Comm. Arbitration Petition No. 1430 of 2019.
[3] In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899; Curative Petition No, 44 0f 2023.
[4] Arcelor Mittal Nippon Steel India Ltd v. Essar Bulk Terminal Ltd; Civil Appeal No. 5700 of 2021 (Supreme Court of India).
[5] Gautam Landscapes Pvt. Ltd. v. Shailesh S. Shah, 2019 SCC OnLine Bom 563; gave approval to Universals Enterprises v. Deluxe Laboratories Pvt. Ltd. 2017(2) ALLMR 779.
[6] Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209.
[7] Saifee Developers (P) Ltd. v. Shanklesha Constructions, 2019 SCC OnLine Bom 13047.
[8] M/s.N.N.Global Mercantile (P) Limited Vs. M/s.Indo Unique Flame Ltd. & Ors2021(4) SCC 379
[9] SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66.
[10] Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd., (2007) 7 SCC 125
by Zen Webnet | Jan 13, 2024 | Blog
Article By Jyoti Lakhoria
INTRODUCTION
An Honest Concurrent use of a Trademark is when two different entities have coexisted for a considerable amount of time while truthfully using the same or a strikingly similar depiction of the same registered name or mark, this is known as an Honest Concurrent Use of a Trademark.
The Trademarks Act of 1999 permits the registration of marks and/or names that are identical or strikingly similar to one another, as long as the registrar is satisfied that the infringement is the consequence of a unique circumstance rather than a regular case. This is made possible by the concept of honest concurrent use, which serves as a barrier of protection for those entities that have been using such marks and/or names honestly.
EXISTENCE OF SIMILAR MARKS LEADS TO CONFUSION
Every time a product resembles another or similar to the one already in the market, there’s a chance that it may cause confusion among consumers. Therefore, it might raise the chances of confusion amongst the public at large. Nonetheless, there are other situations in which confusing similarities between trademarks cause this kind of misunderstanding. Consequently, the Registrar is required to ascertain whether a particular Trademark is likely to cause confusion or deception based on the circumstances of the case.
DEFENCE OF HONEST CONCURRENT USER
A trademark must be registered with the Registrar of Trademarks to receive protection under the Trademarks Act, 1999. Upon filing an application for registration, the Registrar may object the said application on the bases of Absolute Grounds or Relative Grounds. While Section 11 of the Act establishes relative grounds for trademark registration refusal, Section 9 of the Act controls absolute grounds for registration refusal.
In essence, Section 11 forbids the registration of a marks that are identical to one that has already been registered. The applicant may raise several defences if the registration is challenged under Section 11 of the Act. As stated in Section 12 [1] of the Trademarks Act, 1999 the applicant may raise one of the defences listed therein to avoid being embroiled in a dispute over trademark infringement.
Concurrent use is when similar mark is applied for the similar goods and non-similar goods. The applicant must demonstrate either that he has been using the mark in good faith or that he was unaware of the prior registered trademark to establish honest concurrent use. Additionally, it is the applicant’s responsibility to demonstrate that relevant customers connect their mark to their good or service.
EVIDENCE OF CONCURRENT USE
Additionally, the clause states that the Registrar of Trademarks is under no obligation to register a particular trademark; rather, registration of such a mark is at the Registrar’s subjective discretion. Below are the documents which are requires to prove concurrent use:
- Proof of the mark’s term of usage if it is already in use.
- Proof of the advertisements of the mark and documentation of the money used for the advertisements.
- Additionally, books of accounts displaying the annual sales data for the goods and services provided under the mark may be submitted by the applicant.
In Kores India Ltd. v. M/s Khoday Eshwarsa and Son[2], the rule governing “honest concurrent use” was initially established in respect to Section 12 Clause 3 of the Trade and Merchandise Marks Act 1958. It was decided that to qualify a trademark for registration under the provision, the following information must be considered:
- The sincerity of the simultaneous usage
- The extent to which the applicant has used the trademark concurrently, considering the items in question, the volume, area, and length of trade.
- The likelihood of confusion arising from the resemblance trademarks, as a gauge of public discomfort or interest.
CONCLUSION
In conclusion, either the applicant or the defendant must present convincing proof to support their assertions of widespread, truthful, and concurrent use of the mark following the receipt of an opposition or similarity objection. Due to the conceptual resemblance of the marks, extensive, truthful, and concurrent use of the contested mark reduces rather than eliminates the possibility of customer confusion.
A trademark’s main function is to serve as a source finder. If two marks that are identical or confusingly similar may coexist without causing confusion for the public, the mark may be registered, at the registrar’s discretion.
[1] Registration in the case of honest concurrent use, etc.—In the case of honest concurrent use or of other special circumstances which in the opinion of the Registrar, make it proper so to do, he may permit the registration by more than one proprietor of the trade marks which are identical or similar (whether any such trade mark is already registered or not) in respect of the same or similar goods or services, subject to such conditions and limitations, if any, as the Registrar may think fit to impose.
[2] 1985 (1) BomCR 423
by Zen Webnet | Jan 12, 2024 | Blog
Article by Khushboo Jain & Harsh Mawar
The tax landscape for many industries has seen major shifts since the introduction of (GST) in 2017. While the technology has eased out the compliance and reporting, the frequent changes for some sectors in compliances have been challenging. Further, we have seen in recent times that the taxability of certain services has also led to tussle between authorities and assesses. One such sector which has seen multiple changes in its taxability and is constantly under the radar of the GST authorities is that of food aggregators.
The investigative wing of GST i.e., DGGI has recently taken online food delivery giants Swiggy and Zomato under their scrutiny, by issuing GST demand notices of combined Rs. 750 crores over unpaid dues on online delivery fees charged by them from the customers on behalf of the delivery partners.
The taxability of these food aggregators has seen significant changes through 6 years of GST regime. Earlier these platforms were mandated to collect and deposit GST on behalf of the restaurants for the sales made through these platforms. From January 1, 2022, the Government included restaurant services and cloud kitchens under Section 9(5) of the CGST Act, 2017 which resulted in entities like Swiggy and Zomato paying 5% GST on ‘restaurant services’ provided through their platform. However, no clarity was provided on the taxability of the delivery fee collected by these platforms even after knowing the fact that these platforms are collecting delivery charges on behalf of the delivery partner and the same will directly go to them.
Now the DGGI has raked up another taxability issue for these food aggregators wherein department is demanding GST on delivery charges charged by these food aggregators on behalf of the gig workers treating the same as income for these food aggregators. The Department’s case is that both the companies operate as a service provider, therefore, the food aggregators are liable to pay GST@18% on the delivery fee collected by them. Whereas the food aggregators are of the view that the delivery charges are directly passed on to the delivery partners and thus, the delivery fee so collected is not recognized as revenue by the food aggregators. Further, another line of argument is that the food aggregators are just acting as an intermediary and thus, not liable to pay GST on the delivery charges collected on behalf of the delivery partners.
From the annual report of one of these companies it has been observed that the food aggregators categorize delivery charges into two groups based on their revenue recognition policies:
- Where the food aggregator is merely a technology platform provider for delivery partners, (not providing or taking responsibility of the said services), the food aggregator has recorded net delivery charges as expenses. For the service provided by the food aggregator to the delivery partners, the food aggregator charges a platform fee from the delivery partners.
- Where the food aggregator is responsible for delivery of food to the end users, the delivery fees received from the end user is recognized as revenue, as the food aggregator considers itself as a principal in arrangement with delivery partners.
Accordingly, where the food aggregator is just providing the platform to the delivery partner, to claim exemption on the ground that it is acting as a “pass through” between the customer and the delivery partner, the onus would lie on such food aggregator to prove its case. However, wherein the food aggregator is responsible for delivery of goods, the food aggregator would be liable to pay GST on the delivery charges as the same is part of its revenue.
It is interesting to note that the Government has never provided any clarity on the taxability of the delivery charges that have been collected by these food aggregators since the inception of their businesses and left such an important issue open-ended till date. Also, the food aggregators have never sought any clarification on the taxability of the delivery charges keeping in view that these delivery charges are being collected by them through their platform. Further, another important point adding complexity to the entire issue is the fact that the gig workers who operate on per-delivery basis and fall below INR 20 Lakhs threshold.
This scenario clearly shows that there are loopholes for taxing the gig workers and the same is required to be addressed at the earliest. It is not a clear cut case of malafide tax evasion as claimed by DGGI. Further, it is also a reminder for the businesses to proactively keep clear communication with the regulatory bodies to avoid such litigation that may have huge impact on the business.
The notices from DGGI demanding tax on delivery charges is unfair keeping in view that these delivery charges are actually income of the gig workers and food aggregators are being asked to pay taxes on such income. Thus, it is important that the Government issues a suitable clarification to address the ambiguity and avoid long-drawn litigation that has arisen with these pre-consultation notices issued to Swiggy and Zomato. The clarification will not only lay rest to this issue but will also provide clarity to other online delivery platforms which includes online grocery, medicines delivery firms etc. which are highly dependent on fleet of contractual delivery workers.
by Zen Webnet | Jan 11, 2024 | Blog
Article by Navantak Agrawal
With the spike in the usage of internet amongst the youth, the brands have adopted a paradigm shift in their methodology of advertisement. One such infamous way to transmit the brand presence is through meme marketing. Memes are basically a piece of work inculcated in photos and videos which incorporates a creative expression in a form of satirical or humorous context possessing a great capability of resurfacing over the internet. Brands actively advocate subterfuge by participating in meme trends to showcase their presence amongst the users. However, meme marketing and copyright does not go hand in hand, as the usage of a copyrighted material may attract a suit. One such example for the same is Grumpy cat suit over the unauthorized use of a copyrighted material, which ended up receiving a payout of $710,000 as damages.
The prominent question that arises here is to find out the usage of the portion of the work which is substantially reproduced. If the fundamental part of the craftsman’s unique vision is duplicated, the same falls under copyright infringement. Generally, memes get protection under the ambit of “artistic works” under section 2(c) of the Copyrights Act, 1957. However, an infringement occurs when the same has been shared without the prior consent of the copyright holder which falls as an “infringing copy” under Section 2(m)(i) of the Copyright Act, 1957. In certain cases, it is difficult to trace the original owner of the work. However, in instances where the creator has created an original artistic work without borrowing any material, in such a case sharing that particular meme would not lead to copyright infringement because that would be his original content.
To secure protection from copyright infringement, the doctrine of fair use comes into play. The Copyright Act under Section 52(1)(a) enlists certain parameters to determine the use as fair. The Delhi High Court in India TV v Yashraj Films[1] reiterated the four factors to determine fair use, namely- (i) the purpose and the character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes; (ii) the nature of the copyrighted work; (iii) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (iv) the effect of the use upon the potential market for or value of the copyrighted work.
It is pertinent to mention that the owner of the original copyrighted work may file an infringement lawsuit against the meme creator, if the same is used for the commercial aspect. However, if a company makes a meme without stealing any original artistic creations, then third parties’ distribution of that meme even for the sake of profit, does not deemed to violate anyone’s copyright. However, to maintain the protection of personal rights of a person amounting to defamation, various countries have enacted stringent laws over the same. To safeguard the same, India has enacted The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021” which empowers the intermediaries such as Facebook, Instagram etc., to block the access of any unlawful information within 36 hours upon an order from the court, or the government.
Axiomatically, owners of copyrighted content are permitted to file claims against users who create memes for the commercial purpose, the nuances of the issue will continue to be debated because there are no prior rulings on this subject in Indian courts. Hence, the brands are vested with great responsibilities to take due diligence before indulging into this grey area.
[1] 2013 (53) PTC 586 (Del)
