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Impact of the Companies (Amendment) Acts on Corporate Compliance

1. Introduction

The Indian corporate regulatory landscape has significantly transformed as a result of a series of amendments to the Companies Act of 2013. These amendments, encapsulated in the Companies (Amendment) Acts, have introduced a range of crucial reforms designed to bolster corporate governance, streamline the business process, and improve compliance efficiency across the board.

Key changes have emerged in various areas, including financial disclosures, which now require greater transparency and accuracy; director liabilities, which have been clarified to enhance accountability; corporate social responsibility (CSR) initiatives, which mandate more structured and impactful contributions to societal well-being; and the penalties imposed for non-compliance, which have become more stringent to deter violations.

This article delves deeply into the ramifications of these amendments on corporate compliance, providing an in-depth analysis of their legal implications and how they have been interpreted in judicial contexts. Additionally, we will explore the comparative legal perspectives that offer insights into how India’s reforms stack up against global standards. The article will also highlight the challenges faced by companies in adapting to these new regulations, including the complexities of implementation and the potential for increased corporate scrutiny. Finally, it will present thoughtful recommendations for future reforms in corporate governance to ensure that India’s corporate framework remains robust and responsive to the evolving business environment.

2. Historical Background and Legal Context

The Companies Act of 2013 replaced the Companies Act of 1956, introducing modern corporate governance standards aligned with global best practices. However, due to industry demands and regulatory challenges, several amendments have been enacted to enhance compliance mechanisms.

Key amendments include:

  • Companies (Amendment) Act, 2015 – Focused on simplifying corporate procedures and eliminating redundant requirements.
  • Companies (Amendment) Act, 2017 – Strengthened governance by tightening CSR norms and independent director provisions.
  • Companies (Amendment) Act, 2019 & 2020 – Decriminalized minor offences and eased compliance burdens.
  • Companies (Amendment) Act, 2023 – Enhanced digital compliance frameworks and corporate disclosure standards.

These amendments reflect India’s commitment to fostering a business-friendly environment while maintaining corporate accountability.

3. Relevant Laws and Regulations

The Companies (Amendment) Acts primarily amend the Companies Act, 2013, but they also align with various other regulations, including:

  • Securities and Exchange Board of India (SEBI) Regulations – Governing listed companies’ disclosures and governance standards.
  • Insolvency and Bankruptcy Code (IBC), 2016 – Influencing corporate compliance in financial distress scenarios.
  • Foreign Exchange Management Act (FEMA), 1999 – Governing foreign investment compliance.
  • Income Tax Act, 1961 – Affecting CSR spending and corporate taxation policies.

Each amendment aims to balance compliance obligations with the need for business growth and investor protection.

4. Key Judicial Precedents

Indian courts have played a crucial role in interpreting corporate compliance obligations. Notable judicial precedents include:

  • ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta (2018) – Addressed compliance with insolvency laws and director responsibilities under IBC.
  • Tech Mahindra Ltd. v. SEBI (2020) – Clarified disclosure requirements under SEBI regulations in light of Companies Act amendments.
  • MCA v. Union of India (2019) – Examined the interplay between CSR obligations and corporate accountability.
  • Reliance Industries Ltd. v. SEBI (2021) – Emphasized the necessity of transparent corporate disclosures.

These judgments have reinforced corporate compliance obligations, setting important precedents for future regulatory developments.

5. Legal Interpretation and Analysis

The Companies (Amendment) Acts have introduced significant legal changes impacting corporate compliance:

  • Decriminalization of Minor Offences – The 2019 and 2020 amendments reduced criminal penalties for technical and procedural lapses, shifting towards monetary penalties.
  • Enhanced CSR Framework – The 2019 amendment made CSR spending mandatory with penal consequences for non-compliance.
  • Changes in Corporate Governance Norms – Increased scrutiny on independent directors, related-party transactions, and financial disclosures.
  • Ease of Doing Business Initiatives – Simplified reporting requirements and introduced digital compliance mechanisms, such as online filings.

These amendments aim to make compliance more practical while maintaining accountability.

6. Comparative Legal Perspectives

India’s corporate compliance framework has been evolving to align with global best practices. A comparative analysis with other jurisdictions highlights:

  • United States (Sarbanes-Oxley Act, 2002) – Focuses on stringent financial disclosures and director accountability, similar to India’s enhanced governance provisions.
  • United Kingdom (Companies Act, 2006) – Encourages corporate governance flexibility, akin to India’s recent decriminalization measures.
  • Singapore – Balances corporate compliance with pro-business policies, influencing India’s approach towards reducing procedural burdens.

While India’s framework incorporates elements from these systems, it retains a distinct regulatory structure suited to its corporate ecosystem.

7. Practical Implications and Challenges

Despite the positive intent of these amendments, companies face several challenges in ensuring compliance:

  • Increased Compliance Costs – Stricter regulations require investment in legal and financial expertise.
  • Ambiguities in Implementation – Vague provisions in CSR and governance norms often lead to confusion.
  • Regulatory Overlap – Companies must navigate multiple regulations from SEBI, MCA, and RBI, leading to complexity.
  • Digital Compliance Challenges – While digital filings streamline processes, smaller firms struggle with technological adaptation.

Addressing these challenges requires clearer regulatory guidelines and better compliance infrastructure.

8. Recent Developments and Trends

The latest trends in corporate compliance include:

  • Use of Artificial Intelligence (AI) and Blockchain – Companies are adopting AI-driven compliance solutions for regulatory reporting.
  • ESG (Environmental, Social, and Governance) Compliance – Growing emphasis on sustainability and ESG reporting in line with global trends.
  • Increased Regulatory Scrutiny – Authorities are enhancing oversight, especially in financial disclosures and corporate fraud cases.
  • Start-up Compliance Reforms – Recent amendments aim to simplify compliance for start-ups and MSMEs.

These trends indicate a shift towards more technology-driven and sustainable compliance models.

9. Recommendations and Future Outlook

To enhance corporate compliance effectiveness, the following recommendations are crucial:

  • Clearer Regulatory Guidelines – Address ambiguities in compliance requirements through detailed clarifications.
  • Technology Integration – Encourage AI-driven compliance tracking and automation.
  • Harmonization of Laws – Reduce regulatory overlaps by integrating various corporate laws.
  • Stronger Training Programs – Conduct training for corporate professionals on compliance best practices.
  • Periodic Review of Laws – Establish a dynamic legal framework that evolves with business and technological advancements.

In the future, corporate compliance in India is likely to become more streamlined and digital, with a focus on sustainable business practices.

10. Conclusion 

The Companies (Amendment) Acts have brought about significant changes to the corporate compliance landscape in India, reshaping how businesses navigate their regulatory obligations. These amendments have eased compliance requirements in certain areas, making it more manageable for companies to fulfill their obligations. However, they have simultaneously introduced more stringent governance measures in other aspects, aiming to enhance accountability and transparency within the corporate sector.

As the legal and judicial interpretations of these amendments evolve, they play a pivotal role in determining how companies maintain their obligations and uphold ethical standards. This ongoing development emphasizes the importance of adapting to a dynamic regulatory environment.

As India seeks to cultivate a more business-friendly atmosphere, it becomes essential for companies to proactively adjust to the shifting compliance landscape. By leveraging strategic legal planning and embracing technological advancements, businesses can better navigate these changes. Finding a harmonious balance between regulatory requirements and the pursuit of business growth will be vital for achieving lasting success in this competitive market.

Also Read:
Rights of undertrial prisoners in India
How To Send A Legal Notice In India

 

Law and Morality: A Discourse

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INTRODUCTION

The world we live in is made up of countless values, ideals, beliefs, rules and norms which further forms the basis of our behavior in the society. Hence, it becomes necessary to understand the differences so that one could avoid the ambiguity. There are two such concepts which are often talked together: Law and Morality.

‘Laws’ are basically formal rules which specifically define an individual’s behavior in a society. Laws are implemented by the state and judiciary in order to have certain kind of standard behavior by the individuals in a given society, particularly, aiming at the welfare of the society. While the concept of ‘morality’ refers to an informal framework which includes values, principles, customs, traditions and beliefs. Morals are not legally enforceable rather it is based upon societal norms.

Through the ages the concepts of law and morality has been studied in the light of Hart-Fuller conflict but it’s found that the basic concept of law and morality dwells in the social systems of the contemporary times. When we look at the primordial civilization, we find that there existed no variance as far as law and morality are concerned rather, they had similar origin; for example; custom used to go with hands clasped. But now after deeply observing the circumstances; we find, that there is a huge difference between the two. There are contradictions that prevail between the two concepts as the primitive idea was to enforce morality by way of law which will create an ideal and peaceful society which do not seem to coincide with modern times as the idea of law and morality diverge at many places.

Law is primarily an enactment put together by the State and supported by pressures and constraints where breach of these set of rules and regulations would result in penalizing by the courts which reflect the state’s will. If we closely observe, we find, that law traverses the boundaries and builds a bridge across the society whether it’s political, social and economic which further narrows down the divide and aids the government in its functions. Thus, law depicts the sociological needs of the society whereas morality is about the moral attitudes and rules of conduct which are analogous to certain psychological and social attributes and it governs the human behavior invariably within the community or class.

In the prehistoric era it is believed that this code of conduct was relegated by the divine himself. Hence, it can be understood that law basically revolves around the ‘individual’ and the individual has a ‘free will’ but as far as morality is concerned there is only one will that is ‘will towards the good’. Law is based on the external conduct and it has no relationship with the intention or faith of an individual while morals are not based on external conduct of the person. So, we draw an idea from this, that on the one hand, state has the authority to validate law while on the other hand, the authority to validate morality rests with the society.

The Philosophy of Law

Jurisprudence studies the nature of law and it’s interplay with other fields of inquiries. The jurists have been examining and observing this issue in number of ways. They have applied various approaches so as to draw a parallel with what exactly jurisprudence and its concepts stand for. Predominantly, all the methods and techniques are collectively referred as ‘schools of jurisprudence’ and it serves as a legal guide for the students of natural law institution. On the one hand, according to history, ‘law is the product of the past’ while, on the other hand, according to the sociological school, ‘law is the fact in the world’. The realists believe that the courts decisions determine the laws.

It was Sir John Austin who penetrated the barriers of ethics, politics, history, and sociology to construct a coherent picture of how law works judiciously. Sir John Austin had the courage to say that law was the creation of individuals for themselves. So, this also proves that the state is more powerful than the church. Despite its truthfulness, Austin’s theory was not considered perfect by Salmond because it has discerned that civil law is a product of the state and it entails the state’s physical authority to be extant by way of judicial courts. It implies that, there can be no civil law in existence if the state does not apply a physical force to govern a community. Paton Austin1 is of the opinion that a fully developed legal system has a state-like legal order but it is difficult to say that there could be any law without the state.

Prof. Julius Stone2 concurs and says that the analytical approach is apathetic towards justice and social truths. If the law is analysed, synthesised and classified, it is perceived as an exception from rest of the world.

The positivists do not concede law as law, as they do not incorporate morals in their perspective. Prof. Hart opposes the theory of command. This is indicative of the fact that he believes that law does not apply to gun owners. The command should not be given by someone who employs force. Furthermore, Savigny, the founder of the historical school, holds that law cannot be designed or modified by the politicians. According to Savigny, law is not influenced by reason, order or will of the Sovereign rather it is the outcome of internal pressures that have been working clandestinely.

People believe in law because it is primarily based on the common belief system, practices, and the traditions. In fact, law is living thing like language which changes with time. Prof. Dias believes that Volk Geist has some authenticity because there is an outflux of progression and practice, but maintaining the same in entirety is quite challenging. Hence, Savigny believed that it was something which could be unearthed as people have different approaches even in a small group and ‘The Spirit Does Not Exist’.

Some legal scholars have different perspectives on the law. The analytical jurists contemplated law in terms of its source, which was the sovereign’s order. The historical school referred to this as ‘continuity of law from custom’. They contend that the law has made headway overtime as a result of how people have been conducting themselves. Law is produced by abiding by it not merely by contemplating about it. Law prevails over legislation. The Sociological jurists apply social engineering to scrutinize how legislation could be used to balance the conflicting interests with the minimal resistance. Realists are of the opinion that the judges have the authority to reiterate the law which implies that legislation has no relevance upon law. The law is what the judges say which is also inferred as ‘dog’s law’ by some. Due to this, we can see that every judge addressed a different legal issue.

The Concept of Morality

Morality implies principles that govern the distinction between right and wrong or good and bad behavior. Morality is primarily a collection of values that authorizes people to live together in communities. The concept of value marks the beginning of morality. The rational human nature is the basic norm of morality. Besides, morality forms the basis of transmuting the known order of values. Thus, if we put it precisely, morality is nothing beyond the adherence to the rules which modulate the human life, for example, the power of reason.

Morality as the Basis of Law

History does not show any clear distinction between law and morality. As there is lack of distinction all the laws find their origin from something that was considered morally correct by the society at the given point of time. In the due course, the state chose what was morally right and framed it as laws, rules and regulations. It is due to this; we find a lot of similarity between these two concepts. For example; rape and murder are morally wrong and this value is also a kind of law. Hence, even if morality has been separated from law, it continues to be an integral part of legal development. Law intrinsically involves some basic principles like fairness and equality and these principles are taken from ethics.

Queen vs. Dudley and Stephen’s Case3:

In this case, the court held that one person cannot sacrifice another person’s life to save his or her own. On the basis of these facts, there was no evidence of any necessity that could justify the prisoners in killing the boy and they were guilty of murder. It becomes very much clear by the decision in this case that what appeared to be morally right from the eyes of the defendants was considered as a crime in the eyes of law.

Oppenheimer vs. Cattermole4:

This is the judicial decision of English Courts which discussed whether the English law should not acknowledge the laws of Nazi era which related to the appropriation of Jewish property. The courts contemplated the question as to whether the Nazi law was so immoral that it should decline to concede it as law. This raised the ‘connection between law and morality’.5

In this case, with regard to the issue of double taxation relief, The Nazi decree of 1941, deprived the German taxpayer of his nationality but he was still liable to pay taxes under German law 1913. It was held, that the English law, was bound to acknowledge the German decree of 1941 as effective and so from that day onwards the German national would acquire the British nationality.

In the House of Lords, Lord Cross of Chelsea famously held: ‘a law of this sort constitutes so grave an infringement of human rights that the courts of this country ought to refuse it as a law at all.’

Morality As a Test of Law

The main purpose behind the existence of laws is to guarantee justice in society and do what is in the best interest of people. The principle of justice falls in the confines of morality, a number of jurists believe that both are supplementary to each other rather than being contradictory to each other. The laws which are not in consonance with the moral standards should be removed and it should be evaluated with moral values of the society.

Morality As Ends of Law

As discussed above, the primary aim of enacting the laws is to have a society which is based on principles of justice, fairness and equality. The main idea is to avoid conflicts. The jurists believe that morals and laws go hand in hand; one cannot be ignored at the cost of other. This is because if any law is in conflict with the pre-existing moral and values, people may not conform to it, leading to further conflict in the society.

The Concept of Law and Morality

There has been a huge divide among scholars and legal experts as far as the interrelationship between these two concepts of law and morality is concerned. One school of thought opines that law and morality are in contrast with each other while on the other hand, another school of thought varies from the said idea as they believe that both are closely intertwined. Conventionally, morality has been held as an indispensable part of all human enterprises. It is for the reason that the sense of morality is a kind of spontaneous process that guides us to choose one thing over another. Morals basically are the mechanical forces that guide us to select the right or wrong or to behave in a certain way. Thus, morality is a sort of power that evolves from within and engages the entire value system of a person.

Bentham has referred to the term ‘social punishments’. Social punishments are imposed on individuals when they fail to follow laws and principles. ‘Social Penalties’ refers to those situations that arise when there is a failure on the part of society with respect to the standard and values. The quintessential moral code’s laws, such as, God’s law’s, the norms, are everlasting. However, the society at large does not follow such ideas. They follow the universal rule of happiness or sadness. These universal principles are called as ‘positive law’. The concept of ‘positive morality’ touches upon the concepts that the community once thought to be best to press upon the human conscience as compulsory at a given point of time. Morals vary from one place to another and so the individuals might have differing opinion on similar moral issue.

The concept of positive morality encompasses the natural law principles as well as religious convictions of what is virtuous and what is not. It is due to the general opprobrium that individuals are driven to do good. On the contrary, the moral norms are backed by the inner principles and values that every individual possesses. Every community has a set pattern of functioning wherein there is a correlation between social justice and the way other instruments perform their task in the legal system. From this, it can be concluded, that law and morality can never be completely detached with each other in a civilised society. The society has transformed; it has become more vociferous and collocated which has made the role of law more essential in order to establish social morality.

Therefore, any legal theory that claims law as a set of rules which might be executed must take into account this aspect of the association. The positivist theorists such as Kelson and Austin have advanced that the law and legal order do not rest on moral principles rather they believe that ‘the meta legal foundation’ is the mainstay of law and the legal system. There has always been an enormous confusion between law and morality but they are very different with each other. The rule of law is premised on the basis of government’s assessment of what is best for its people. This infers that public policies should be based on health concepts that the population believes to be pertinent at the given time and place. In the present set up of democracy, the basis of laws is public opinion.

HART-FULLER DEBATE ON LAW AND MORALITY

The Hart-Fuller debate is one of the finest exchanges of ideas and opinions on the concept of law and morality. This was published in the Harvard Law Review in 1958 and it highlighted the differences in the opinions in the positivist and natural law philosophy. In order to understand the ideas of these Ideologists, it is necessary that we analyse their thoughts and reasoning behind them separately.

H.L.A HART6

Hart being a positivist believes that there is an intricate bond between law and morality; though both are not in consanguinity. Hart does believe the fact that morals prevailing in the society have influenced the laws. Besides, he says that there should be a clear distinction between what law should be and what it ought to be. This brought in the ambiguity. On this Fuller opposed his theory and opined that there are certain circumstances where the law is not clear, the judges give decisions based on morality primarily on the basis of what ought to be. Hart retaliated to Fuller’s idea and said that in order to ascertain what ought to be must be understood from a legal sense and not from the moral point of view. The explanation of law should not come from outside the legal arena.

The law has both primary rules and secondary rules. Primary rules are those that impose some kind of regulations on the individuals while secondary rules aim at providing power to the state to frame and implement the laws. This clarifies that laws don’t have to associate themselves with moral standards. But despite making such clear differences between law and morality, he is of the opinion that the two are bound to cut across the same point.

LON FULLER7

Fuller being a naturalist believes that there is a very strong connection between the law and morals. He further believes that, all legal norms are premised on moral norms. Besides, the law cannot be valid if it does not get through the test of morality which is based on ethical ideas that people strongly believe.

According to Fuller, morality can be divided into two categories: ‘morality of aspiration’ and ‘morality of duty’. The former is concerned with the moral norms that a person follows for their best interest. The latter on the other hand seems more pertinent to the effective operation of society by prescribing standards meant to be followed by all. Fuller also spoke about two other concepts; known as ‘Internal morality of law’ and ‘External morality of law’. Internal morality implies framing of laws while the external morality talks about the essence of law that we use to make decisions.

An Analysis of Hart-Fuller Debate:

Both the philosophers aimed at attaining justice but they differed in their ways of achieving the same. Their ideologies could be best understood with the help of real-life examples. Let’s take the example of a situation where it is prohibited to park a vehicle in a particular place. Now the point is parking the vehicle in that place is not wrong morally, but is still against the law. This implies that the existence of law could be exclusive of moral obligation of interference or dependence which is the core idea that Hart has established.

In yet another example, let’s take a look at the Nazi regime when the laws enacted by Hitler completely lacked morals and values. It is a general view that the Nazi regime was unfair and cruel to humanity, and the result of that was not justice. Fuller’s idea fits in here that when the laws were not in conformity with morals, it led to injustice.

After carefully examining both the legal philosophers we can draw an idea that their ideas strike a bargain. Morality and law can intersect and overlap at many places. However, the legal world might rest on rationality because morality is subjective.

The Relationship Between Law And Morality8

The precise areas of relationship between law and morality could be stated in the following manner:

  1. Law is interlinked with morality in enunciating those virtues that are related to the common good. This does not imply that the positive human laws should interdict all evil-doing nor command all the virtues rather it aims to forbid the gross failings of human beings which imperil the very existence of society and commands those values which could be laid down by human means to the common good.
  2. Law is linked with morality by the moral obligation imposed which infers by the necessity of an act which is in relation to the necessary end because law as a commandment of practical reason essentially implies an obligation. Thus, the obligation proceeds through the necessary conviction of law as an compelling dictum of practical reason, i.e., an interrelationship of some necessity between the act that is directed and the end for which that act is directed. However, the positive human laws’ obligation is not in that same manner as morality’s obligation.
  3. The law is intertwined with morality because both have their origin in the same source known as practical reason and prudence.
  4. Law is connected to morality because law is subject to and cannot refute the moral principles.
  5. Law is fastened with morality because justice is not only a legal concept but a moral concept as well. Justice outside the domain of morals and values is meaningless. This is because the essence of justice lies in the creation of equality.
  6. There is a very close link between law and morality as far as Indian laws are concerned. As a matter of fact, the Constitution of India has given a crystal-clear example with respect to this. The Fundamental Rights; i.e., Part III of the Constitution (Articles 12-35); Directive Principles of State Policy (Articles 36-51), all these are based upon morality and these moral values have been moulded into laws and they are followed by each and every citizen of India.
  7. Since the formation of Indian Penal Code, morality has been given a special place in laws as it is a latent ingredient of almost every section. There are two basic essentials that are needed to establish a criminal liability called as ‘mens rea’ and ‘actus reus’. ‘Mens rea’ means wrong or the mala fide intention or the guilty mind and intention implies the conscious exercise of a person’s mental faculties to perform an act. The legal maxim here means that if an act is done without the mala fide intention then it is not an offence. Here, we find, that the chain of law is interlinked with morality as wrongful intention would definitely denote a thought of an immoral task. Other provisions from IPC could be illustrated here, such as, Section 34 which talks about ‘common intention’ and ‘wrongful act’; Section 52 defines ‘Good Faith’ which means an act done with bona fide motive wherein the person is believed to have a good moral character.

Hence, we see that morality is not only strongly related with the Indian Penal Code but it also forms an integral part of Indian legal scenario. It is the situation where it becomes crystal clear that morality plays an important role as it influences the law to an extreme level by providing a reasonable basis to prove the whole gamut of immoral actions as illegal.

Divergence of Law and Morality9

Both law and morality have a numerous reasons to have different perspectives but one thing they certainly have in common that both affect our lives at some point. Law and morality both keep evolving with the changing times. Recently, the entire thought process of the society went through a sea-change because the idea of morality varies from person to person. This infers that morality has become subjective; what is morally right for one might be morally wrong for another.

Morality has transformed into a dynamic concept of late so it has become very difficult for the lawmakers to base laws on morals on the contrary, there is a huge clash between these two concepts and there are number of issues where these two concepts should not be overlapping. The new laws should be based on the pre-existing legal framework. There is need for a progressive framework, which may not be completely in line with the modern world and ideas but there is a need to enact such laws which are not only morally upright but they ensure justice as well.

Likewise, there have been number of issues where law and morality have diverged where the rules are not considered moral but the laws are framed and implemented. Some examples to justify the facts are as follows:

Homosexuality laws:

The concept of law and morality are ever changing which keep evolving with time. According to the sociological jurisprudence, the law ought to evolve in order to meet the needs of society. There are many states who have been following this principle and coming with new laws which are progressive in nature. Sometimes, morals have to be overlooked if it acts as a hurdle for progressive laws. The landmark judgement of Navtej Singh Johar vs. Union of India,10 confirmed the rights of the homosexuals, stating that love is love itself. Prior to this, the homosexuals were the marginalised sections of society and they were left in narrow tunnels.

The coveted Indian Penal Code, drafted in 1860, under Section 377 had set down that whoever had carnal intercourse voluntarily with any man, woman, or animal, which is against the order of nature, shall be punishable. IPC Section 377 criminalized any penetrative sex that was unnatural and didn’t lead to reproduction, hence, the sexual expressions by the homosexuals, bisexuals, etc. would be considered as criminal offences. But due to the whole lot of pressure created by the LGBTQ community for their rights in the year 2006, the Supreme Court of India, directed the High Court to examine the constitutional validity of Section 377. Many organizations came forward together such as Naz Foundation and NACO (National Aids Control Organization) called upon for scrapping of Section377. Besides, 172nd report of the Law Commission of India, urged for the decriminalization of homosexuality. Eventually, on 6th September, 2018, a 5-judge constitutional bench of Supreme Court of India invalidated some parts of Section 377 of IPC.

Thus, from this landmark judgement, it becomes quite visible, that the line of morality has faded because the mindsets have advanced over the years and has overpowered the traditional moral standards to give way to more progressive laws.

Legalization of Abortion:

Abortion means an intentional termination of pregnancy to destroy the foetus or embryo before it is capable of living outside the womb. This issue has been much condemned by almost all the religions throughout the history. Here, we see a huge clash of laws and morals and it has been heavily criticized as far as giving right to the females to give or not give birth to a child is concerned. If we observe the global perspective, the Bible strictly opposes and condemns the practice of abortion and it opines it as an abhorrent idea. The Roman Catholic believes that abortion, severely rebuts the moral values. In addition to this, the oldest religion of the world, Hinduism refers to abortion as cruel, and so it also denounces this practice. Thus, for most of the religions across the globe, abortion is a serious ethical issue.

But there is another aspect to this debate. The issue of abortion when adjudged from the standpoint of logic and fairness through the rights of the mother gives another view on this. The exponents of this aspect strongly support the rights of a woman and her body, which should be based on her own will. This right of a woman is viewed with respect to her Right to Freedom and Right to Privacy. In the landmark judgement of Roe vs. Wade11; it was held that the Right of Abortion is a part of Right to Privacy and so it cannot be called as wrong in a limited manner. A similar approach is held by law in India as well. The law in India allows the termination of pregnancy within 24 weeks in exceptional cases such as Rape etc. Abortion cannot be totally abolished but despite the morals, law has made little space and addressed the issue.

There are numerous examples such as prostitution, passive euthanasia, etc. through which we find the moral principles are overlooked in order to formulate laws and due to this there is a kind of divergence in the paths of law and morality at certain points.

Conclusion:

In my opinion, law and morality cannot be completely divorced because they will continue to impact and influence each other. Even in the modern times where new thought processes have evolved which are annulling the pre-existing ideas, morality cannot be overlooked as law could be the voice of masses which might at times seek validation through social acceptance. But law has a lot of energy to make or break the way people perceive the things and it must be used in a right way. What is important here is that both the concepts despite the conflicts and confrontations are complementary and supplementary to each other. Hence, both law and morality have to join hands for the development of the legal world in the most productive manner.

References:

  1. George White Cross Paton, A Text Book of Jurisprudence, Oxford University Press., 1964
  2. Stone Julius, The Province & Function of Law, Maitland Publication, 1961.
  3. 14QBD 273 DC
  4. Oppenheimer v Cattermole [1975] AC 249 at 278
  5. Meyerson, Denise, Essential Jurisprudence, Routledge, Cavendish, 2006
  6. Hart H.L.A, Positivism and The Separation of Law and Morals, 1965, p.12
  7. Fuller L.L, The Morality of Laws, p. 33.
  8. https://www.politicalsciencenotes.com/articles/relationship-and-difference-between-law-and-morality/290
  9. Sharma G. S., “The Paradox of Law and Morality and Its Reflections in Contemporary India, Jaipur Law Journal, p. 15.
  10. [2018] SC 746
  11. 410 U.S.113 (1973)

The Role of Social Media in Shaping Public Opinion

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The Role of Social Media in Shaping Public Opinion and Democracy in India

The use of social media has redefined political communication, engagement in political debate, and concrete participation in the democratic process in India. The use of platforms such as Facebook, Twitter, Instagram, and WhatsApp has penetrated to millions of active accounts-but several recognizes that digital space is the new battlegrounds of political discourse in the country. It is widely acclaimed social media playing a vital role in public opinion formation and sowing grounds for protests and elections in India, an enabler and disabler to any political voice, greater or smaller, to be heard. Despite its power in empowering a citizen’s political awakening, social media has also widened avenues that lead to misinformation, polarization, and manipulation of public sentiment-good and bad, put together a complicated impact of social media in Indian democracy. Here we will assess the positive and negative aspects of the phenomenon of social media in light of its impact on democracy in India.

The Rise of Social Media in India

India has one of the biggest internet subscriber bases in the world, with over 800 million people having access to the internet. The rise in penetration, combined with the affordably available smartphones and data plans, has opened access to the surfboard even in rural pockets. As per the recent statistics:

  • India has over 400 million WhatsApp users, making it the largest market for the messaging platform.
  • Facebook has around 300 million users in the country.
  • Twitter, though smaller in user base, is highly influential in political and media circles.
  • Instagram, YouTube, and regional platforms like ShareChat also play a significant role in shaping opinions.

The growth in penetration makes social media an important tool for political parties, activists, and common citizens alike to engage in discussions and spread their messages.

How Social Media Shapes Public Opinion

1. A Platform for Political Awareness and Engagement

In India, Social Media has completely revolutionized political communication. Earlier, people used to be dependent on newspapers, television, and radio for political news, but now they get instant updates on social media. Politicians use these platforms to directly communicate with citizens, bypassing traditional media filters.

  • Now speeches, policy announcements, and debates are streamed live.
  • Citizens can interact with leaders during Q&A sessions on Twitter Spaces and Facebook Lives.
  • Political parties also run digital campaigns to reach a certain target audience, especially during elections.

2. Mobilizing Public Movements and Protests

  • It has also been observed in India that some of the most notable movements, like the one against corruption, the anti-gender-violence movement, CAA, and the Farmers’ protests, heavily relied on digital platforms:
  • The anti-corruption movement led by Anna Hazare in 2011, a massive upsurge of discontent and protest against corruption, organising massive protests around this cause-almost completely run through social media, with lots of youth participation.
  • The Nirbhaya movement in 2012-Probably was probably amplified through social media concerning protests against gender violence.
  • The CAA protests in 2019-2020 would not have gained so much traction if not for platforms like Twitter and Instagram to build awareness and coordinate protests.
  • The Farmers’ Protest from 2020 to 2021-Farmers used social media to counter the government narratives and acquire international support.

These suggest that social media is very powerful in bringing activism to life, voicing marginalized groups, and creating awareness about social and political issues.

3. The Spread of Fake News and Misinformation

  • One of social media’s principal challenges is the dissemination of misinformation and fake news.
  • False narratives, doctored videos, and propaganda pieces spread like wildfire, oftentimes driving public opinion and prompting violence.
  • Fake news about candidates during elections lies on a bed of voter ignorance.
  • There had been mob lynching incidents and community violence thanks to WhatsApp rumors.
  • Misleading information concerning COVID-19 and other health matters created disarray and panic among the people.

To resolve these situations, platforms such as Facebook, Twitter, and WhatsApp have incorporated fact-checking features into their system, though it still doesn’t solve the ongoing crisis that is fueled by the sheer volume of unverified posts shared daily.

4. The Role of Political Propaganda and Manipulation

Political parties in India put a lot of money into digital campaigns to appease the voters. Some are campaign-focused, while others promote certain themes and questions:

  • Troll armies and bot accounts spread propaganda;
  • various personalized attacks against opponents to instill an impression in people’s minds;
  • Or why not just set a trending topic on Twitter with hashtag campaigns?

The Cambridge Analytica scandal exposed the nature of the data from social media that can be used for manipulating elections, therefore raising questions of digital ethics in politics. In India itself, there are many settings of social media manipulation in elections: political parties use IT cells to control the narrative.

The Impact of Social Media on Indian Democracy

1. Positive Impacts

  • Increased Political Awareness -Social media educated citizens on political issues, policies, and governance.
  • Direct Interaction with Leaders- With little or no media interference, politicians can speak to their constituencies.
  • Amplifying Marginalized Voices -Social media offers an opportunity to minorities and activists, and even independent journalists, to have their voices heard
  • Transparency and Accountability in government action are thus scrutinized in real-time nowadays, which helps in making such political figures more accountable.

2. Negative Impacts

  • The spread of Misinformation news and rumors actively sways public opinion.
  • Echo Chambers and Polarization- Social media algorithms are designed to further reinforce already entrenched biases, widening gulfs between rival political factions.
  • Hate Speech and Online Harassment – Politically motivated trolling has spiked the aggressiveness of online environments.
  • Threats to National Security -Social media is deployed to incite radical change within and to distribute extremist ideologies.

Regulating Social Media: Challenges and the Way Forward

That makes regulation of social media quite difficult, a valid concern, given its pervasive influence. The Indian government has introduced the IT Rules 2021, which:

  • Require platforms to take down unlawful content within a prescribed timeline.
  • Mandate traceability of origin for viral messages, particularly on WhatsApp.
  • Make social media companies responsible for harmful content.

While these measures are intended to control misinformation and cybercrimes, critics contend that these could be used to stifle free speech. In a nutshell, the challenge that lies in balancing freedom of expression vis-a-vis regulation is a very tricky issue in the landscape of India’s digital world.

Conclusion

This was how social media reshaped democracy in India, offering an inclusive and dynamic platform for political participation. With it came the empowerment of citizens, awareness, and mobilization for social causes. But with these nice things come several challenges: misinformation, propaganda, and online toxicity. For social media to ensure the strengthening of democracy rather than damage it, there is a need for digital literacy, stricter fact-checking mechanisms, and notice of responsible use while using the social platform. The future of democracy in India will largely depend on how well citizens, governments, and tech companies maneuver through the challenges presented by the digital age.

What do you think about the role of social media in shaping India’s democracy? Let me know in the comments below.

Also Read:
Rights of undertrial prisoners in India
How To Send A Legal Notice In India

Oppression and Mismanagement: Remedies Under the Companies Act

INTRODUCTION

CORPORATE GOVERNANCE

Corporate governance refers to the framework, rules and practices by which a company is directed and managed. This ensures transparency, accountability and fairness during management of the company and at the same time balances the interests of various stakeholders like shareholders, employees, etc.

The corporate governance system helps in preventing fraud, mismanagement and at the same time and maintains responsibility and transparency on the side of the company.

SHAREHOLDER RIGHTS

Shareholders are the owners of the company who have specific legal rights that allow them to influence the decisions made by the corporate decisions. These rights include the right to vote on key matters, the right to information about the financial reports and other critical company documents, the right to receive dividends and the right to sue for mismanagement or oppression if company affairs are done in a manner that pis prejudicial to their interests.

In cases where corporate governance fails due to misgovernance and oppression, legal remedies under the Companies Act,2013 to protect shareholder rights and restore corporate fairness.

The legal remedies offer protection to the minority shareholders, prevent mismanagement, enhance investor confidence, ensure compliance with corporate governance standards and promote long-term corporate stability.

DEFINITION OF OPPRESSION AND MISMANAGEMENT

OPPRESSION

In the corporate context, oppression refers to the actions taken by the majority shareholder or the management that unfairly prejudice the rights and interests of the minority shareholders. These acts are harsh and wrongful and lead to an unfair disadvantage for certain shareholders.

Some examples of oppression within the company can be withholding the dividends unfairly, denying shareholders access to the company information and unjustified removal of minority shareholders from decision making.

Under Section 241 of the Companies Act, a stakeholder who has been wronged can seek relief from the National Company Law Tribunal (NCLT) if the company’s affairs are conducted in an oppressive or prejudicial manner.

MISMANGEMENT

Mismanagement refers to the situation where the affairs of the company are mismanaged or handled recklessly, which leads to instability or harm to the stakeholders. It occurs when the top officials fail in their duties, which results to poor governance, corruption and financial mismanagement.

Some examples of mismanagement can be the misuse of company funds for personal gain, fraudulent transactions or reckless business decisions.

A shareholder can file a petition under section 241 of the Companies Act 2013 if the company is being mismanaged, which harms the interests of the stakeholders.

DIFFERENCE BETWEEN OPPRESSION AND MISMANGEMENT

Oppression refers to the unfair treatment of minority shareholders while mismanagement refers to the misconduct or poor governance harming the company.

Oppression protects the shareholder rights; on the other hand, mismanagement endangers the proper management of the company.

Oppression affects the minority shareholders, and mismanagement affects the company, shareholders, both major and minor.

STATUTORY PROVISIONS ON OPPRESSION AND  MISMANAGEMENT

The Companies Act of 201 provides legal remedies through sections 241 and 245.

1. SECTION 241

This section deals with the ‘Application for relief in cases of oppression and Mismanagement’

A complaint regarding oppression and mismanagement can be made by

  • Members (Shareholders) of the company

If the company’s affairs are being conducted in a prejudicial manner to the company’s or stakeholders’ interests.

There has been a substantial change in management or control of the company, which is against the interests of the stakeholders.s

  • If the central government believes that the company’s affairs are being conducted in a prejudicial manner to the public interest.

2. SECTION 242-

This section deals with the power of the National Company Law Tribunal (NCLT) to provide relief if it is satisfied :

It can grant relief by regulating the company’s affairs, the purchase of shares by majority or minority shareholders, restricting share transfers, the appointment of directors and the winding up of the company.

3. SECTION 243

This section deals with the effect of the tribunal’s order

If the NCLT orders the removal of a director or managerial mismanagement or oppression, then that person cannot be reappointed in the company for 5 years until approved by the tribunal, and any action taken by the company against this order will be considered void.

4. SECTION 244

This section deals with the eligibility criteria for filing a petition.

This provision is included to prevent frivolous complaints under section 241

For companies with share capital- at least 100 member , 10% of the total members or members holding at least 10% of the paid-up share

For companies without share capital, at least 1/5th (20%) of the members must apply.

5. SECTION 245

This section allows a group of shareholders, depositors, or members to file a class action suit against the company or its directors if they engage in fraudulent or unlawful conduct, false statements in financial reports or prospectus or breach of fiduciary duties

REMEDIES AVAILABLE UNDER THE COMPANIES ACT 2013

When a company’s affairs are conducted oppressively and mismanaged manner, the affected parties can seek remedies under sections 241 to 245. The following are the remedies:

  1. CORRECTIVE MEASURES ORDERED BY THE NCLT

  • Under Section 242, the tribunal finds that oppression or mismanagement can pass corrective orders, including:

Regulation of future conduct of affairs-  the tribunal can issue directions on how the company should be managed, which can include changing company policies, etc.

  • Removal of directors or key managerial personnel

if the directors or executives are charged with accusation of mismanagement and oppression, then the tribunal can remove them from their office and also bar the, from reappointment

  • Appointment of Independent Directors or Administrators

To restore confidence in the management, the tribunal can appoint independent directors or administrators to oversee the company’s affairs. This, in turn,helps withh being in neutral and professional oversight.

  • Restrictions on Share Transfers

If shares have been transferred fraudulently in a way that harms the minority shareholders, then the tribunal can restrict such transfers, preventing dilution of ownership or unfair exclusion of certain shareholders.

  • Cancellation or Modification of Agreements

The tribunal can declare contracts, resolutions, or agreements invalid if they are made in a fraudulent manner or against the interest of the shareholders.

This avoids oppressive or prejudicial transactions by nullifying them.

2. FINANCIAL REMEDIES FOR AGGRIEVED SHAREHOLDERS

If oppression has been suffered by the minority stakeholders, then the tribunal may order the majority shareholders to buy the minority shareholders at a fair value. This prevents forced exclusion of minority investors by ensuring that they get fair compensation.

If a shareholder or the company has suffered financial loss due to mismanagement, the tribunal can award compensation, which may include refunds, penalties or repayment of misused company funds.

3. STRUCTURAL CHANGES IN THE COMPANY MANAGEMENT.

The tribunal can modify the Articles of Association (AoA) or Memorandum of Association (MoA) to prevent further oppression and mismanagement, and this further ensures structural protection for the shareholder.s

In extreme cases the tribunal can order a merger, demerger or corporate restructuring to ensure proper management and protect stakeholder interests. This is useful in reviving financially unstable companies.

4. WINDING UP OF THE COMPANY

If the tribunal does not find another remedy or no other remedy, then as a last resort is sufficient it may order for the winding up of the company to avoid harm to public interest, shareholders or creditors.

5. CLASS ACTION SUITS

According to Section 245, the affected stakeholders, like shareholders, depositors, or members, can file a section suit against the company and its various administrators if their actions are fraudulent, illegal, or misleading.

The tribunal can direct compensation, penalty or rectification of any mistakes.

CHALLENGES IN ENFORCEMENT AND PRACTICAL LIMITATIONS

  • Shareholders alleging the company with oppression and mismanagement must provide concrete evidence, and gathering official records and internal documents is challenging; hence, many cases fail because the petitioner cannot establish a clear statement.
  • The prolonged and delayed legal proceedings and backlog reduce the effectiveness of immediate justice, which in turn allows mismanagement to continue.
  • Minority shareholders often lack the adequate financial means to engage in lengthy battles against the company and its powerful and resource-backed management. The legal costs and fees discourage the shareholders from filing petitions.
  • Even if the NCLT passes an order, enforcing the order against promoters and directors can be challenging, as there is no automatic mechanism to monitor compliance, which leads to difficulty in execution.
  • Under section 244 of the Companies Act 2013 minority shareholders can only file petitions if they meet the minimum shareholding requirement (at least 10% of paid-up capital or 100 members)

CONCLUSION

The Companies Act, 2013, provides a strong framework to protect shareholders and ensure corporate governance through remedial provisions that address oppression and mismanagement. Sections 241 to 246  empower minority shareholders to seek remedies such as removal of directors, financial compensation, share buyouts, etc, to maintain fairness, transparency and accountability.

Though, practical enforcement still remains a challenge due to factors like financial constraints or high burden of proof. To strengthened the enforcement of such laws reforms should be made within NCLT justice expediting system, stricter compliance mechanisms and increased shareholder awareness to provide a more effective relief to the affected stakeholders and ensure that the companies operate in a more equitable and just manner.

Also Read:
Rights of undertrial prisoners in India
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Privacy Breach and Artificial Intelligence

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Introduction

The term ‘AI’ is a wide phenomenon and it encompasses wide range of technologies. AI basically refers to the evolution of computer systems that would do the given tasks which is unique characteristic of human intelligence like problem-solving, decision-making, language understanding, and perception.

This is very well put by an eminent Professor of Law Ryan Calo and he very nicely says: “There is no straightforward, consensus definition of artificial intelligence. AI is best understood as a set of techniques aimed at approximating some aspect of human or animal cognition using machines.”[1]

Thus, AI though taken as a misleading term for machine learning, it appears that the train seems to have left the station and now there is no turning back. AI has become the magic buzzword in the present times. Mere use of the term ‘AI’ opens new vistas which attracts the investors, money, excitement and attention. Hence, in the tech industry the use of AI has become inevitable and it is being slammed on almost every piece of code. Therefore, it has become very difficult to identify what really falls or does not fall in the category of AI. AI is actually both a term and a metaphor. Metaphors are like a lens through which we see and interpret things, making a juxtaposition that shape our understanding and processes. As Ryan Calo insightfully observes, “Every metaphor is, in its own way, an argument.”[2]

Metaphors have the dual capability to both clarify and distort our perception. However, though the metaphors may give technology human-like qualities, it also strips it of its human essence. Yet the human element is an integral part of technology.

It was further observed by Kate Crawford and he remarked that human involvement is deeply embedded in AI at almost every stage.[3] The data used to train AI algorithms originates from human activities, thoughts, and conversations, and it is often curated by humans too. Humans are instrumental in designing and training algorithmic models.[4]

As Eric Siegel observed, the most effective machine learning is “supervised machine learning” which involves training data that is labelled. The algorithm “learns” from the labels and can confirm it is getting something right or wrong. It is humans who label this data. AI, while seemingly ethereal, is profoundly physical, rooted in intense human labor—often arduous and taxing—and reliant on substantial energy and material resources.[5]

In short, Artificial intelligence is basically intelligence displayed by machines, primarily the computer systems. It is an area of research in computer science which evolves and examines the methods and softwares that aid the machines to understand the ecosystem and use learning and intelligence to take actions that multiplies their prospects of achieving the targets. Those machines could be called as AI.

Some of the renowned applications of AI are: advanced web search engines for example., Google Search; recommendation systems which is used by You Tube, Amazon, and Netflix; interacting via human speech such as, Google Assistant, Siri, and Alexa; autonomous vehicles like Waymo; generative and creative tools like Chat GPT and AI art. However, many AI applications are not perceived as AI: “A lot of cutting edge AI has filtered into general applications, often without being called AI because once something becomes useful enough and common enough it’s not labelled AI anymore.”[6]

The other subfields of AI research revolve around certain goals and the use of explicit tools. The classical goals of AI research comprise of reasoning, knowledge representation, planning, learning, natural language processing, perception, and support for robotics. In order to attain these goals, AI researchers have refashioned and consolidated an expansive range of techniques, including search and mathematical programming, symbolic logic, simulated neural networks, and the methods which are based on statistics, operations research, and economics.[7]

Artificial intelligence was founded as an academic discipline in 1956,[8] and the purported field went through multiple cycles of optimism,[9] which was followed by spells of failures and losses of funding, known as AI winter.[10] There has been an upsurge in funding and interest since 2012 when the concept of deep learning evolved and surpassed the existing AI techniques.[11] After this, in the year 2017, the growth advanced with the transformer architecture,[12] and there has been a great shift by early 2020s hundreds of billions of dollars were being invested in AI also called as the “AI boom”. The extensive use of AI in the 21st century led to numerous unintended repercussions and detrimental effects both in the present and in the future, which gave to a new topic of discussion with respect to the regulatory policies and benefit that would ensure the safety and benefits of the technology.

Privacy vis-à-vis Data Protection

Privacy is a right of the individuals to take their voluntary decisions, calculate their behaviour in the given environment and be prudent in their social interplay. Governments have contended that in some conditions, like prisons, any assumption of privacy is not valid, but in many circumstances, the presupposition of privacy is required to be curtailed. The control of Government on privacy has been taken as a method of preventing the crime; still it is seen more as a means to ‘control’. The idea of limiting the privacy provides the government with such informations about which the people living in a society ought to be controlled. In the Supreme Court of United States privacy has often been considered as a function of context in which the physical environment of the person is the determining factor of what privacy they should be expecting. But there are other considerations as well which includes person’s age and his mental capacity.

Data Privacy and Data Protection

Both the terms are often used interchangeably as they seem very similar but in reality, they are different as far as their meanings are concerned as it depends on their usage. Despite the differences they are closely interconnected and complement each other in the actual process.

Data privacy means the proper handling of data, determining whether or what data is to be shared with third parties by the organization. It basically implies an authorized access. For example, a Bank keeping the customer’s account details, their monetary transactions as private in order to keep customer’s identity safe and protected as much as possible by minimizing any kind of external risks. The Personal Health Information (PHI) and Personally Identifiable Information (PII), the financial information, medical records, social security or ID numbers, names, birth dates, and contact information are covered under the data privacy laws.

The EU General Data Protection Regulation (GDPR) defines personal data as: any information relating to an identified or identifiable natural person (‘data subject’); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person.[13] Other countries also broadly define personal data. For example, under South Korea’s Personal Information Protection Act, personal information means “information pertaining to any living person that makes it possible to identify such individual by their name and resident registration number, image, etc.,” and specifically includes “information which, if not by itself, makes it possible to identify any specific individual if combined with other information.”[14] The Economist wrote in 2015, “the ability to compare databases threatens to make a mockery of [data] protections.”[15] Hence, data protection, means keeping the important data safe i.e.; protecting data against unauthorised access of all kinds of data whether it is personal or organizational data. For example; bank protecting all the records self-bank records as well as customer information from unauthorized accesses to keep everything safe and to ensure everything is under the control of bank administration. Data protection is basically the process taken to ensure the privacy, availability, and integrity of sensitive data, and is frequently used interchangeably with the word ‘data security’. These security measures are essential for organizations that gather, handle, or retain sensitive data. They work to avoid data corruption, loss, or harm. At a time when data collection and storage are growing at an unprecedented rate, a strong data protection strategy is critical. The major purpose of data protection is not just to preserve sensitive information, but also to keep it accessible and trustworthy, hence maintaining confidence and compliance in data-driven processes. There are certain Principles of Data Protection such as Data Availability; Data Lifecycle Management; Information Lifecycle Management.

The Digital Era and Privacy

Since the advent of the digital era, personal data has become a prized possession. Following this an enormous amount of data is generated and it is shared online on a regular basis thus enabling businesses, governments, and organisations to arrive at better decisions. Nonetheless, this data might be classified and people may not be willing to share. This is the point where the concept of privacy shows up. It’s a well known fact that privacy implies the right to keep the personal information undisclosed and unshackled from unaccredited access. Privacy is also seen in the light of human rights and it is considered an essential right that would ensure an individual’s control over their personal data and its usage.

In the present times, the importance of privacy has risen than ever before. In fact, the amount of personal data being collected and scrutinized continues to go upwards. In the context of AI, privacy is essential to ensure that AI systems are not used to manipulate individuals or discriminate against them based on their personal data. AI systems that rely on personal data to make decisions must be transparent and accountable to ensure that they are not making unfair or biased decisions. Hence, privacy is a fundamental right which is essential for human existence and it is granted to the citizens by the Constitution of India.

Privacy Challenges in the Age of AI

AI presents a challenge to the privacy of individuals and organisations because of the complexity of the algorithms used in AI systems. As AI becomes more advanced, it can make decisions based on subtle patterns in data that are difficult for humans to discern. This means that individuals may not even be aware that their personal data is being used to make decisions that affect them.

The Violation of Privacy

The development of technology always has been a sword with two sharp edges. So on the one hand AI provides with certain potential benefits while, on the other hand, it throws us with significant challenges. For example; the biggest challenge is the violation of privacy which could be followed by the idea of getting into the wrong hands and being misused causing identity theft or cyberbullying.

Bias and Discrimination

The next potential threat posed by AI technology is of bias and discrimination. The AI systems are based on training so there are chances of bias as they can be unbiased only in the case where they are trained which results in the system also functioning the same way. This could be disadvantageous and affect number of factors. Therefore, it becomes mandatory that the AI systems are trained on various data and are regularly audited in order to prevent bias. If we see this situation initially we are unable to find a link between bias and discrimination in AI and privacy as it is not apparent but the reality is that they are very closely interlinked. To understand this situation better we can take an imaginary situation wherein a company uses the AI system to screen the job applications. Here if the system is biased against a gender, say for example women or people of specific race it may very unfairly exclude them from the process of selection. This will harm the applicants and would perpetuate systemic inequalities.

Job Displacements for Workers

Another crucial issue related to AI is the employment issue and economic disturbance. This is because AI systems are very advance and they are capable of performing tasks that were previously done by individuals which has led to the job displacement in few sectors. This economic disturbance has escalated the financial insecurity of people. This is the situation which might compel the individuals to abdicate their privacy to make ends meet. For example, there is a worker who has lost his job as a result of automation. They are trapped in a very bad situation where they are struggling to survive and thus are forced to take the option of gig economy to make money. Here in order to get the job they are required to provide personal information to the platforms which would include their location, work history, and ratings from the previous clients. Though this may be essential to get the job, it is a serious issue of concern as far as privacy is concerned because this data might be shared with third parties or might as well be used for targeting ads. This is the sad reality of every sector where the job applicants may not be aware about their data being collected from them and used in this way. Thus, we see how privacy is at stake in the era of AI technology.

The Data Abuse Practices

One of the most significant challenges posed by AI technology is of the potential threat of misuse by bad actors. This implies the ability of AI to create the fake images and videos which could be used to spread false information or even maneuver public opinion. Besides, AI could be used to design extremely polished phishing attacks, which can deceive people to disclose the confidential information by clicking on benign links. This kind of dispersion of fake images and videos causes serious damage to an individual’s privacy. The AI technology has been growing immensely in present times and poses new challenges which needs to be addressed in order to ensure that it is used in an ethical way. The reason behind the challenges are that it should be used ethically and responsibly. The AI software is an ever evolving subject which should be used with great precaution and care so that the privacy of individuals is not affected.

Underlying Privacy Issues in the Age of AI

Privacy of late has become a complex phenomenon especially after the advent of AI. The huge amount of data that is being amassed and assessed by various companies and the governments puts the individual’s exclusive particulars at a substantial risk than ever before. Among these are intrusive surveillance which in a way destroys an individual’s liberty and complicates the authority leading to imbalance in the system; and then there is unaccredited data collection which again makes the individuals prone to cyber-attacks. These issues are mostly constituted of the power of big organisations which have extensive quantity of data for chucking out and considerable supremacy over how that data is assembled, assessed and used. There are some implications of each of these problems which are as follows:

The Power of Big Tech on Data

The Big organisations have become very powerful institutions in the world in the recent times with a huge impact over the global economy and the society at large. Since the rise of AI and a shift in metaverse their power is only going to increase further. With the rise of AI and the impending shift to the metaverse, their power is only set to increase even further.

If we look at the global scenario, the Big Tech companies such as Google, Amazon, and Meta have an access to the large amounts of data which gives them extraordinary power to have an impact over the customer’s psychology and shaping the global economy. These companies are also taking part in politics more than ever as they have the capacity to exert influence on public opinion and even determine the government policy.

As we are moving towards the metaverse, where individuals will be living, working and interacting in a virtual environment, it will be adding to the dominance of these Big Tech companies. The metaverse would be generating the data usage by over twenty times which is more than internet at present, giving a much better opportunity to the Big Tech companies to have an anchorage over their data and influence as well.

These Big Tech companies are now set to create a new kind of virtual ecosystems wherein they will have more authority over the buyer behaviour and this will provide the companies capitalize on their platforms and have a bigger impact on society. However, with these developments these companies also have the responsibility of collection and data usage in a righteous manner. Besides, they should make the various platforms all-inclusive and handy to all rather than being commanded by a few influential leaders.

AI and Surveillance

The most contentious usage of AI technology happens to be in the area of surveillance. The AI-based surveillance system has the prospects of transforming the legal system and the defence system but at the same time it poses a serious threat to privacy and civil liberties. The critics have been arguing that due to these aspects it raises concerns as it can be used to track and control people at the cost of their right to privacy and liberties. The AI systems are not always transparent. Mostly, they don’t let the individuals have any idea of being observed and what are the underlying factors for being checked in this manner. This lack of transparency would ruin the credence of people in the agencies whether it is law enforcement or security agency. It will rather make them edgy and apprehensive. Hence, in order to account for the concerns, there is a need to regulate the AI systems. For this, there is a need to develop lucid blueprint and strategies for the application of these systems as well as the setting up of unconstrained supervision and evaluations.

So, we derive from the above discussions that the hackers are always on a look out for new mechanisms and AI needs to be pliant and ready to learn from various methods of frauds. This means there is a need for adaptability. In addition to this, the banks have acquired a good knowledge and have set their AI systems to curb different kinds of frauds at the same time they are also trying not to make their customers unhappy. Then, there is healthcare system that is gravely affected as AI is also applied to track the health records of patients. In fact, both the examples of banking and healthcare exemplify how AI is plausibly most functional to the firms that utilize it in terms of supplementing and building up their procedures for the purpose of safeguarding and shielding their data. In the recent times, the collection of personal data has become very easy with the advent of some important technologies which includes smartphones, surveillance cameras and the most crucial thing which has taken everything under its wings is the omnipresence of “The Internet”. This has made possible to track every step an individual takes whether he visits the clubs, restaurants, workplace or anything else. People feverishly collect the data as a process of selfoptimisation and also as an attempt to change their lives for better. They upload most of these data to cloud computers which significantly increases the possibility to track the private informations of the individuals. The individuals most often deliberately ignore the fact that by uploading their private data they happen to transfer the copyright of those data to the providers and owners of the given platform. The platforms such as Facebook and others not only own the data but they also tend to use it and even sell the same to others. The most important factors that led to the success of Google in collection of the personal information is that people are unable to hide their interest while searching for informations online. This is because one cannot search for any information on Google without entering the key words in the search box.

The self-driving cars or the robotic cars consistently apprise via “telemetry data” as to how the car’s performance has been which aids these companies to anthologize the reports with respect to the specific car with respect to the safety perspective of the car. For example, Tesla gathers a report quarterly about how many kilometres its vehicles drove and how much it engaged the auto pilot or did not engage him at all.

The Inadvertent Usage of Private Data

The availability of the private data gives the AI systems an edge in performing good but there are some major threats associated with it. One of the major problems is the usage of data for the non-intended purposes. The users mostly have a little or no idea about their data being treated, employed or auctioned off. The programmatic advertisement has been quite a success and it denotes how the personal data could be used for making the individuals buy goods. This kind of marketing gained acceptance from the individuals in the society and they have thus formed a certain kind of mechanisms for their protection. We all know somewhere in our minds that we cannot trust the advertisements completely but we lack that kind of evaluative awareness towards AI.

Of all the things, there is a severe threat from the privacy perspective, that happens to be the ability of AI to imitate people is fraught with danger. In the year 2016, Adobe came up with its VoCo system which could copy the voice of anybody after having listened to it for almost 20minutes. It didn’t stop here. The videos began to be manipulated such as exchange of faces became a very crucial issue which took the problem to another level. It began to be used for taking revenge mostly in making porns. The vengeful ex-partners now could mount the face of their old flame onto the actors of the porn movies and later share them on the internet. These “deep fakes” tend to use the neural networks for the purpose of manipulating the videos. Apart from this, another issue is of the people entering into the contracts for different online services. The terms and conditions of these services on social networks are not an easy read but their consequences cannot be underestimated.

Another issue is of “Auto Insurance Discrimination”. Here the lack of privacy and the amount of data gathered might lead to different set of rules to be applied to various groups. For example, the insurance companies value the existing data for the purpose of predicting the monetary value of the policy and thereafter assigning the premiums. The Auto insurance companies assess the behaviour of drivers and then assigns them the risks classes. The AI usage could lead to bias and discrimination here.

The Future Perspective

The idea of Artificial Intelligence is unique and it as a matter of fact holds a great deal for the future generation. Despite the vast study of approximately fifty years a lot is yet to be discovered and learnt in this field. I believe that everyone who shares some space in the field of science should have the basic knowledge of the theories of AI as everyone has his specific role to play in the formation of safe and secure future of intelligent technology. There are numerous movies of science fiction such as Wars, I Robots, Knight Rider, The Matrix, The Terminator, With Folded Hands, Transformers, Ghost in the Shell, Blade Runner and so on which might provide the base for arguments, issues and learnings.

Conclusion

The paper talks about the crucial role of AI and its efforts to implement data privacy and security. AI has become an important artillery for fighting against the cyber-attacks. Furthermore, in this paper we have studied and observed the implications of AI across different sectors such as banking and healthcare which shows the versatility and efficacy of its functionalities. Hence, we see that AI has a significant role in alleviating the challenges with respect to data privacy and security. So, AI will have a big role in securing the digital assets as there is a huge dynamism in cyber offences like cyber threats and the business data footprints which increase by way of pattern-based identification of the forthcoming danger. Despite the advantages of AI in various fields like healthcare, banking there remains a little gap where more attention towards careful stewardship is required. Besides, with the escalation and submergence of the digital era in the present times we can be hopeful to see a better advancement of technologies and their increasing bond with policies and ethical standards so that AI stands true in its affirmations with respect to the data privacy and security while maintaining unassailable coherence.

Footnotes

1 Ryan Calo, Artificial Intelligence Policy: A Primer and Roadmap, 51 U.C. Davis L. Rev. 399, 404 (2017)

2 Ryan Calo, Robots as Legal Metaphors, 30 Harv. J. L. & Tech. 209, 211 (2016)

3 KATE CRAWFORD, ATLAS OF AI: POWER, POLITICS, AND THE PLANETARY COSTS OF ARTIFICIAL INTELLIGENCE (2021); Rebecca Croot of, Margot E. Kaminski & W. Nicholson Price II, Humans in the Loop, 76 Vand. L. Rev. 429 (2023)

4 Margot E. Kaminski, Binary Governance: Lessons from the GDPR’s Approach to Algorithmic Accountability, 92 S. Cal. L. Rev. 1529, 1538-39 (2019)

5 CRAWFORD, ATLAS OF AI, supra note X, at 53-87; IVANABARTOLETTI, AN ARTIFICIALREVOLUTION: ON POWER, POLITICS, AND AI 81-93 (2020)

6 AI set to exceed human brain power Archived 2008-02-19 at the Wayback Machine CNN.com (July 26, 2006)

7 Russell & Norvig (2021), Luger & Stubblefield (2004), Poole, Mackworth & Goebel (1998) and Nilsson (1998)

8 Dartmouth Workshop: Russell & Norvig (2021, p. 18), McCorduck (2004, pp. 111–136), NRC (1999, pp. 200–201) The proposal: McCarthy et al. (1955)

9 Successful programs the 1960s: McCorduck (2004, pp. 243–252), Crevier (1993, pp. 52–107), Moravec (1988, p. 9), Russell & Norvig (2021, pp. 19–21)

10 AI Winter, Lighthill report, Mansfield Amendment: Crevier (1993, pp. 115–117), Russell & Norvig (2021, pp. 21–22), NRC (1999, pp. 212–213), Howe (1994), Newquist (1994, pp. 189–201)

11 Deep learning revolution, AlexNet: Goldman (2022), Russell & Norvig (2021, p. 26), McKinsey (2018)

12 Toews, Rob (3 September 2023). “Transformers Revolutionized AI. What Will Replace Them?”. Forbes. Archived from the original on 8 December 2023. Retrieved 8 December 2023.

13 GDPR, supra article 4(1) (emphasis added)

14 Article 2(1) South Korea Personal Information Protection Act. Official English translation available at http://law.go.kr/engLsSc.do?menuId=0&subMenu=5&query=%EA%B0%9C%EC%9D%B8%EC%A0%95%EB%B3%B4%EB%B3%B4%ED%98%B8%EB%B2%95#.

15 “We’ll See You, Anon,” The Economist (13 Aug. 2015), available at https://www.economist.com/science-and-technology/2015/08/13/well-see-you-anon.

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Winding Up of Companies: Procedures and Legal Implications

1. Introduction

Winding up a company is a comprehensive legal process that marks the end of a company’s existence, effectively bringing its operations to a close. Under the provisions of the Indian Companies Act of 2013, this process involves several key steps. First, the company’s assets are liquidated, meaning they are sold off or converted into cash, allowing the firm to settle any outstanding debts it owes to creditors. After all liabilities have been addressed, any remaining assets are distributed among shareholders according to their respective ownership stakes.

The Indian Companies Act, 2013 provides a detailed framework for conducting this procedure. It highlights the importance of ensuring that the winding-up process is fair and transparent, prioritizing the rights and interests of all stakeholders involved, including employees, creditors, and investors. By following the guidelines outlined in the Act, the companies can navigate the complexities of dissolution while safeguarding the interests of everyone impacted by the decision to wind up.

2. Historical Background and Legal Context

The concept of winding up has undergone remarkable evolution throughout its history. Before the introduction of the Companies Act of 2013, the process of winding up was primarily governed by the Companies Act of 1956. This earlier legislation relied heavily on court-driven mechanisms, which often resulted in protracted and inefficient proceedings that burden both companies and their creditors.

In contrast, the Companies Act of 2013 was designed to modernize and streamline these procedures, making them more efficient and aligned with contemporary insolvency practices. This reform brought about significant changes that aimed to facilitate quicker resolution times and reduce the complexities involved in winding up a company.

Moreover, the enactment of the Insolvency and Bankruptcy Code (IBC) in 2016 marked a watershed moment in the landscape of corporate insolvency in India. The IBC introduced a robust and time-bound resolution framework specifically for insolvent companies, which not only minimized delays but also enhanced the potential outcomes for all stakeholders involved, including creditors, employees, and shareholders. This comprehensive approach has transformed the way insolvency is managed, ensuring a more equitable and efficient process for all parties.

3. Relevant Laws and Regulations

The primary legal framework governing winding up includes:

  • Companies Act, 2013 (Sections 270-365) – Specifies procedures for compulsory and voluntary winding up.
  • Insolvency and Bankruptcy Code, 2016 – Establishes a comprehensive insolvency resolution framework.
  • Securities and Exchange Board of India (SEBI) Regulations – Regulate listed companies’ compliance during winding-up proceedings.
  • National Company Law Tribunal (NCLT) Rules – Outline procedural rules for cases presented before the Tribunal.

4. Key Judicial Precedents

Several judicial rulings have shaped the interpretation of winding-up laws:

  • M/S Forech India Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2019): The Supreme Court ruled that NCLT has jurisdiction to oversee winding-up petitions under both the Companies Act, 2013 and the IBC, 2016, ensuring seamless legal interpretation.
  • Swiss Ribbons Pvt. Ltd. v. Union of India (2019): This landmark judgment upheld the constitutional validity of the IBC, strengthening India’s insolvency framework and affirming NCLT’s role in managing corporate dissolution.
  • Innoventive Industries Ltd. v. ICICI Bank (2017): This ruling emphasized that the IBC overrides other insolvency laws to ensure speedy resolution.

5. Legal Interpretation and Analysis

The winding-up framework under the Companies Act, 2013 emphasizes the following principles:

  • Creditor Protection: Creditors, especially secured creditors, have priority in asset distribution.
  • Stakeholder Balance: Ensures fair treatment of shareholders, creditors, and employees during the winding-up process.
  • Efficiency and Timeliness: Provisions like fast-track corporate insolvency resolution processes aim to prevent prolonged litigation.

6. Comparative Legal Perspectives

The Indian framework shares similarities with global insolvency models but has distinct features:

  • United Kingdom: The UK Insolvency Act of 1986, allows companies to opt for administration or liquidation. The Indian IBC integrates similar features while ensuring time-bound resolutions.
  • United States: The US Bankruptcy Code emphasizes debtor-in-possession models. India’s system provides a creditor-driven approach that aligns with its legal framework and economic environment.
  • Singapore: Singapore’s insolvency laws combine elements from UK and US frameworks while emphasizing rehabilitation over liquidation.

7. Practical Implications and Challenges

Despite improved legal mechanisms, winding up presents practical challenges:

  • Time-Consuming Process: Prolonged litigation often delays creditor recovery and asset liquidation.
  • Creditor Prioritization: Balancing the claims of secured creditors, unsecured creditors, and employees remains a complex issue.
  • Compliance Burden: Smaller companies often struggle with extensive regulatory requirements during liquidation.

8. Recent Developments and Trends

Recent legal reforms have streamlined the winding-up process:

  • IBC Amendments: The IBC has introduced pre-pack insolvency mechanisms for MSMEs to expedite resolutions.
  • Digital Reforms: The NCLT’s introduction of e-filing and virtual hearings has improved procedural efficiency.
  • Cross-Border Insolvency Proposals: India’s proposed cross-border insolvency framework aims to align with the United Nations Commission on International Trade Law (UNCITRAL) Model Law, enhancing foreign creditor participation.

9. Recommendations and Future Outlook

  • Improved NCLT Infrastructure: Increasing NCLT benches and deploying dedicated insolvency professionals can reduce case backlogs.
  • Streamlined Processes for Small Businesses: Tailoring winding-up processes for micro and small enterprises will reduce costs and timelines.
  • Enhanced Stakeholder Awareness: Conducting awareness programs for directors, shareholders, and creditors will ensure informed decision-making during winding up.

10. Conclusion 

The Companies Act of 2013 establishes a comprehensive and organized framework for the winding-up process of companies, serving to enhance transparency, safeguard stakeholder interests, and ensure an orderly dissolution of business entities. This Act also incorporates the Insolvency and Bankruptcy Code (IBC), which has significantly transformed the resolution landscape by minimizing delays and improving the recovery rates for creditors.

Understanding this legal framework is essential for companies, creditors, and investors alike, as it helps them navigate the intricate challenges that can arise during the winding-up procedure. By strictly following the established statutory procedures, the winding-up process facilitates a just and equitable distribution of assets among creditors and stakeholders. Additionally, it ensures that the company’s operations are concluded in compliance with legal requirements, paving the way for a systematic closure that respects the rights of all parties involved.

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Cyber Law and Social Media in India

Cyber Law and Social Media in India: A Comprehensive Analysis

Social media has today become an integral part of daily life in India, as in many other places of the world, in the digital age. Social media platforms such as Facebook, Instagram, Twitter (now X), WhatsApp, and YouTube have become crucial modes of communication, entertainment, and even business. Nevertheless, along with the ever-growing influence of social media, a lot of other challenges are there, such as misinformation, cyberbullying, data breaches, and online harassment. To tackle the issues raised by such platforms, India has introduced various cyber laws that govern the use of social media while ensuring digital security and protection for users. This blog looks at the framework for the law governing social media in India, its performance, the concerns surrounding it, and the things that are coming next.

Legal Framework Governing Social Media in India

Several types of regulation in cyberspace, such as IT Act, 2000; and other rules framed by the government, mainly dealing with social media and online activities are governed by the India Penal Code of 1860. IT Act, 2000; Indian Penal Code, 1860; and some sector-specific regulations framed by the government deal with social media and online activities.

1. Information Technology (IT) Act, 2000

The Information Technology Act, of 2000 is the main legal pillar for the whole of India’s cyber laws. This encompasses all kinds of activities that range from social media to online transactions to cybersafety. There are few provisions of the IT Act that have direct relevance to social media, such as:

  •  Section 66A (Struck down in 2015): Previously considered as criminal for sending an offensive message via online medium. However, the Supreme Court of India declared it unconstitutional in Shreya Winghal v. Union of India (2015), stating the provision infringed upon the right to free speech.
  •  Section 67: This section prescribes punishment for publishing or transmitting obscene or sexually explicit material in electronic form.
  • Section 69A: It gives the government the right to block public access to any online content in the name of national security, public order, or sovereignty
  • Section 72: punishment for breach of privacy or confidentiality by unauthorized disclosure of information.

2. Intermediary Guidelines and Digital Media Ethics Code, 2021

The Intermediary Guidelines, 2021, enforce a lot of obligations on social media platforms that work in India. The classification of intermediaries is of two kinds:

  • Social Media Intermediaries (SMIs)
  • Significant Social Media Intermediaries (SSMIs) (Platforms having more than 5 million users)

Key provisions include:

  • Grievance redressal mechanisms to be put in place and be made mandatory by grievance officers:
  • These platforms must appoint grievance officers dealing with user complaints.Traceability of messages:
  • It would be required for WhatsApp and alike to identify the first originator of a message when it comes to fake news or unlawful content removal.Content removal:
  • Platforms to remove illegal content within 36 hours of receiving any order from the government or court.

3. Indian Penal Code (IPC) and Other Relevant Laws

  • Section 153A IPC: Punishable for promoting enmity between different groups through online content.
  • Section 499 & 500 IPC: Concerned with defamatory acts, also covers online defamatory posts and punishes the same.
  • Section 354D IPC: Punishment for online stalking and harassment of women.
  • Protection of Children from Sexual Offences (POCSO) Act, 2012: Prohibits Child Sexual Abuse Material (CSAM) on social media.

Social Media Challenges and Cyber Threats in India

Despite having a legal framework, India faces several challenges in regulating social media effectively.

1. Misinformation and Fake News

Fake news gains traction so rapidly in apps such as WhatsApp and Facebook, achieving the ability to influence public opinion and occasionally escalate into violence. The 2018 WhatsApp lynching incidents served as a vivid and painful reminder of the verifiable dangers of false information. Although some platforms began labeling messages being forwarded, misinformationes still remain an urgent calamity.

2. Online Harassment and Cyberbullying

Harassment on the media, especially against women and minorities, is rampant nowadays; cyberbullying, stalking, and threatening often become inconspicuous due to the anonymity guaranteed by the internet. Various laws, like the Section 354D IPC, do exist, but the real problem lies in enforcement.

3. Data Privacy and Security Concerns

Rising digital activity has surged instances of data breaches and violations of privacy. The Personal Data Protection Bill, or the PDP of 2019, has been pending and designed to strengthen user privacy. The ban on apps like TikTok was also partly due to data security issues.

4. Censorship and Freedom of Speech Debate

The exercise of power by the government to prevent access to certain contents under Section 69A of the IT Act is open to debate as a measure of censorship. Although national security is sacrosanct, it is suggested that such powers may be employed to stifle dissenting voices. The tussle between regulation and free speech would continue to remain contentious.

5. Influence of Social Media on Elections

Social media is undoubtedly a great political tool in India. During elections, there are thousands of political advertisements, propaganda, and targeted misinformation campaigns on these platforms. Some guidelines have been imposed by the Election Commission of India to govern its use; however, enforcement has been erratic.

Evaluating the Effectiveness of Cyber Laws in India

Strengths of India’s Cyber Law Framework

  • There seems to be ample legal backing from the IT Act, IPC, and the new intermediary guidelines to legalize whatever they want to do.
  •  There are also Section 69A provisions for removing content the government believes to be dangerous, thus helping protect national security.
  • There are new rules that would make social media companies accountable for any harmful content.

Weaknesses and Challenges

  • Some of the problems now being faced are bad enforcement; although there are laws, they are not adequately enforced. Most cyber crimes go unreported or unresolved.
  •  Government overreach; certain concerns about censorship arise on account of strong content moderation powers.
  • The delayed, inexcusably slow processes of justice; it takes years for cybercrime cases to be resolved, treading through slow legal process.

Future of Cyber Laws in India: The Way Forward

To ensure a safer digital environment, India must focus on the following areas:

1. Strengthening Data Protection Laws

The DPDP Act, 2023, holds out great hope for securing data better. It will be important to be provided under it properly to protect users’ personal data.

2. Improving Law Enforcement Mechanisms

Global cyber police need better training, swifter resolution of complaints about cybercrime, and larger budgets for cybersecurity.

3. Striking a Balance Between Regulation and Free Speech

Meanwhie, while some rules are warranted, there should be no misuse of laws that impinge upon freedom of speech.A transparent and independent oversight mechanism should be set up that would look at the cases of blocked content.

4. Promoting Digital Literacy

Campaigns must be run to make the users aware of how they should use the social media, how to identify the fake news, and how to report a cybercrime.

5. Collaboration with Tech Companies

The government authorities should work closely with the social media sites to create AI solutions, so as to take on misinformation, hate speech, and cyber threats, effectively.

Conclusion

Indian cyber laws have adapted to respond to the issues that will occur with social media, in a very different circumstance than previously existed. Even as these laws endeavor to protect both citizens and assets from online violence and abuse, the overall strength of these laws will ultimately depend on high levels of enforcement, awareness and knowledge, and a successful balance of technological governance in daily activities. As India advances in its digital supremacy, the partnership among the government, technology companies, and users would provide the foundation for organization toward a safer, transparent, and inclusive digital realm. Ensuring that social media is used responsibly with strict, but responsible digital, OEM mechanisms controllable by the users, will allow this untamed space to continue serving users as the platform for unbounded innovation and vocalization, thus allowing more legitimate development overall.

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Indemnity And Guarantee: Rights and Liabilities of Parties

INDEMNITY

The word “indemnity” comes from the Latin term “indemnity” which means “free from loss” or “unharmed”. Indemnity is governed by Section 124 of the Indian Contract Act,1872 and acts as a fundamental principle in contract law which acts as a protective tool for managing risk and ensuring that on experience of loss by a party they can recover compensation from the other party responsible.

Section 124 of ICA defines indemnity as “A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person, is called a contract of indemnity.”

The contract of indemnity is an agreement between two parties, wherein one party (indemnifier) takes responsibility to compensate the other party (indemnified) for any loss caused due to the conduct of himself i.e., indemnifier or the conduct of a third party. Herein, the indemnified is compensated by the indemnifier only if the losses have arisen from a specified cause and obligation arises only when a loss occurs not when no actual loss is suffered.

RIGHTS OF INDEMNIFIED PARTY

In a contract of indemnity, the person receiving the indemnity or the indemnified party is entitled to certain rights that protect from any losses they might incur and maintain their full compensation. These rights are crucial as are designed to provide financial protection against risks and damages.

Many of these rights are not explicitly mentioned in the list of rights but have been developed through judicial precedents.

  1. Right to Recover Losses

The party indemnified has the right to claim reimbursement for any loss suffered that is covered under the indemnity agreement. This included monetary losses, damages or damages.

2. Right To Recover Costs Incurred in Legal Proceedings

Under a circumstance where the indemnified party faces a lawsuit/ legal proceeding and has to spend money on legal expenses, they then have a right to recover such cost from the indemnifier.

However, these costs must be related to the indemnity contracts and provisions under it and at the same time should be incurred with the indemnifier’s consent.

3. Rights to Recover Sums Paid Under Compulsion

If the indemnified is compelled to pay money because of legal liability, they have the right to recover this amount from the indemnifier.

This is applied only when the payment is essential and is related to the provisions of the indemnity agreement..

4. Right to Seek Indemnity Before Actual Payment

This particular right is ruled by the courts , traditionally, the indemnity claims could be made only after a actual loss occurs ,but courts have ruled that the right of the indemnified party is clear and absolute and hence they can seek indemnity even before making the actual payment.

Some agreements also cover indirect or consequential losses and the indemnified party has the right to recover indirect losses if the contract explicitly mentions it.

5. Right To Enforce Indemnity Contract Against Indemnifier

If the indemnifier refuses to uphold the provisions of the indemnity agreement then the indemnity holder has the right to sue for enforcement of the contract.

In this situation, courts may order the indemnifier to fulfil their obligations as per the terms of the contract.

LIABILITIES OF INDEMNIFIER

In a contract of indemnity, the indemnifier takes the responsibility of compensating the indemnified party for losses related to the provisions under the contract. At the same time, the indemnified is subjected to certain liabilities according to the terms of the contract.

  1. Liability to compensate for losses incurred

The indemnifier is liable to compensate the indemnified party for the losses if they have resulted from any event or risk that was already mutually agreed upon or falls within the scope of the indemnity agreement.

The liability arises only upon the loss suffered by the indemnified party.

2. Liability for Legal Costs and Expenses

Under a circumstance wherein the indemnified party is involved in legal proceedings, the indemnifier is liable to pay the legal cost incurred.

However, the legal cost must be reasonable and should be in good faith.

3. Liability for Payments Made Under Legal Compulsion

If in any case, the indemnified party is forced to make a payment due to any legal obligation, the indemnifier should reimburse for the same. This applies even if the indemnified party has not suffered actual damages.

4. Liability to compensate even without indemnified prior payment.

Earlier an indemnified was liable only after the indemnified has paid for the damages but with current judicial views the court now recognizes that the indemnifier’s liability can arise before the indemnified party actually pays if the liability is clear and absolute.

5. Liability for Indirect or Consequential Losses

Usually the indemnifier is responsible for the direct losses only . however, if the contract explicitly mentions includes indirect compensation then the indemnifier must compensate for the same.

This can include loss of profit, reputational damage etc.

GUARANTEE

The contract of indemnity is an agreement wherein one party ( the surety or guarantor) takes responsibility for the obligation of another party (the principal debtor) if they fail to fulfil it. The guarantee gives security and assurance to the creditor.

Section 126 of the ICA 1872 defines guarantee as “A contract of guarantee is a contract to perform the promise, or discharge the liability, of a third person in case of his default.”

The contract of guarantee includes three parties: principal debtor, the person who takes a loan or incurs obligation; creditor, the person to whom the obligation or debt owed; surety (guarantor), the person who promises to pay if the debtor defaults.

In this single agreement, three separate contracts exists , between principal debtor and creditor, between surety and creditor, between surety and principal debtor.

The guarantee is supported by consideration and the guarantee can be oral or written.

RIGHTS OF THE PARTIES

The contract of guarantee involves three and hence each party has specific rights and obligations.

1. RIGHTS OF THE CREDITOR

The creditor provides a loan or credit to the principal debtor and holds the guarantee from the surety.

  • The creditor has the right to sue the principal debtor and surety if the debtor fails to fulfil their obligations. Herein, the surety’s liability is cco-existing with that of the debtor.
  • The creditor has the right to demand immediate payment from surety upon default.
  • The creditor has the right to benefit from securities held against the debtor if the creditor holds collateral or security from the debtor and the same time has the right to enforce guarantee even without principal debtor’s consent.

2. RIGHTS OF THE SURETY (GUARANTOR)

A surety is a person who promises to fulfil the obligations of the debtor if they fail to do so.

  • The surety has the right to be indemnified by the principal debtor if they have to pay on behalf of the debtor and hence have the right to recover the amount from the debtor.
  • The surety has the right to benefit from the creditor’s securities if the creditor holds the security given by the debtor and is entitled to take it back after paying the debt.
  • The surety has the right to be released or discharged from liability if the contract is materially altered without the surety’s consent if the creditor gives additional time to the or  if the creditor releases the debtor from liability or if the creditor loses or releases security.
  • T.he surety has the right to demand a hare in payments or profits recovered from the debtor.

3. RIGHTS OF THE PRINCIPAL DEBTOR

The principal debtor is a primary party in the contract

  • The principal debtor has the right to receive money, goods, loans or benefits as per the  contract
  • They have the right to be sued if the contract specifies

LIABILITIES

the contract of guarantee involves three and hence each party has specific liabilities under the Indian Contract Act, of 1872

1. LIABILITIES OF THE PRINCIPAL DEBTOR

  • The primary liability is to pay the debt as they are the first responsible responsible for fulfilling the obligation under the contract
  • The principal debtor has the liability to indemnify the surety if the surety has already paid the debt on his behalf. At the same time,e they can be sued by the surety to recover the amount paid.
  • They have the liability to provide security or collateral to secure the loan if the debtor defaults and creditor uses the security.

2. LIABILITIES OF SURETY

  • The liability of the surety is secondary but immediate as the surety’s liability is co-existence with the principal debtor.
  • The liability exists if the debtor goes bankrupt and insolvent , the surety must stil pay the creditor. The liabilty continue If the surety dies, their legal heirs may still be responsible unless the contract states otherwise.
  • The liability may be limited by contract and can be discharged under certain conditions as per the provisions.

3. LIABILITIES OF THE CREDITOR

  • The creditor has the liability of the duty to demand payment from the principal debtor first in some cases if the contract specifies.
  • The creditor has the liability to not unfairly release the debtor and not to alter the contract without the surety’s consent.
  • The creditor also has the liability of the duty to preserve the security given by the debtor and to an in good faith.

COMPARISON BETWEEN INDEMNITY AND GUARANTEE

Basis of Comparison Indemnity Guarantee
Number of Parties Two partiesIndemnifier (promisor) and Indemnified (promisee). Three partiesPrincipal Debtor, Creditor, and Surety (Guarantor).
Nature of Liability Primary liability – The indemnifier is directly liable for any loss incurred. Secondary liability – The surety’s liability arises only if the principal debtor defaults.
Obligation to Pay The indemnifier must pay for actual loss or damage suffered by the indemnified party. The surety must pay only if the principal debtor fails to fulfil their obligation.
Trigger of Liability Liability arises when a loss occurs to the indemnified party. Liability arises only on the default of the principal debtor.
Continuing Obligation The indemnifier’s liability ends once the loss is compensated. A guarantee can be continued if it covers multiple transactions over time.
CONCLUSION

Indemnity and guarantee are both important tools that help in risk management but serve different purposes.

A contract of indemnity aims to protect a party from future loss which may occur sue to an uncertain event and hence make the indemnifier liable for compensation . This is most commonly used in insurance contracts.

On the other hand, a contract of guarantee ensures that a third party fulfils their obligations with the surety having the second liability in case of any default by the principal debtor. This is a commonly used bank guarantees

Difference lies in the liability and the number of parties involved: Indemnity involves two parties and direct compensation while the guarantee involves three parties and a conditional liability.

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Shareholders’ Rights and Protection Mechanisms Under the Companies Act

1. Introduction

The protection of shareholders’ rights forms a cornerstone of effective corporate governance in India. As providers of risk capital without guaranteed returns, shareholders require robust legal safeguards to protect their investments against potential managerial opportunism and majority shareholder abuse. The Companies Act, 2013, which replaced the Companies Act, 1956, represents a watershed moment in Indian corporate law, introducing enhanced protection mechanisms and remedies for shareholders while seeking to balance corporate flexibility and investor protection.

This article examines the multifaceted shareholder rights framework under the Indian Companies Act, 2013, analyzing its historical evolution, key provisions, judicial interpretations, and practical challenges. The legislation reflects India’s recognition that robust shareholder protection is essential for developing vibrant capital markets and attracting both domestic and international investment, while acknowledging India’s unique corporate landscape characterized by concentrated ownership patterns and promoter-controlled entities.

2. Historical Background and Legal Context

The development of shareholders’ rights in India has been an evolutionary process shaped by colonial influences, post-independence economic policies, and global corporate governance standards. The first comprehensive legislation on companies in India, the Indian Companies Act, 1866, was based on the English Companies Act of 1862. Subsequently, the Companies Act, 1913, incorporated certain provisions for shareholder protection.

Post-independence, the Companies Act, 1956 governed corporate entities for over five decades. While it provided certain protections for shareholders, it was primarily designed for an era of state-controlled economic development and offered limited remedies for minority shareholders. The landmark case of Foss v. Harbottle (1843), a common law principle adopted in India, established the “proper plaintiff” and “majority rule” principles, significantly restricting shareholders’ ability to bring actions for corporate wrongs.

The liberalization of the Indian economy in 1991 marked a turning point, necessitating stronger investor protections to attract capital. The J.J. Irani Committee Report (2005) highlighted the need for better shareholder protection mechanisms, leading to comprehensive reforms in the Companies Act, 2013. This legislation introduced enhanced disclosure requirements, class action suits, increased shareholder participation, and stricter requirements for related party transactions, reflecting India’s alignment with global corporate governance standards while addressing domestic realities.

3. Relevant Laws and Regulations

The shareholder protection framework in India encompasses several interconnected legislative and regulatory sources:

3.1 Companies Act, 2013

The Companies Act, 2013 serves as the primary legislation governing shareholder rights in India, with several key provisions:

  • Section 241-246: Remedies against oppression and mismanagement, allowing shareholders to approach the National Company Law Tribunal (NCLT)
  • Section 245: Introduction of class action suits, enabling groups of shareholders to collectively seek remedies
  • Section 230-232: Provisions related to arrangements and amalgamations, requiring shareholder approval and court sanction
  • Section 166: Codification of directors’ duties, including the duty to act in good faith and in the best interests of the company, shareholders, and other stakeholders
  • Section 188: Stringent provisions for related party transactions, requiring shareholder approval in specified cases
  • Section 151: Provision for appointment of a director elected by small shareholders
  • Section 108: Mandatory e-voting for listed companies to enhance shareholder participation
  • Section 236: Provision for squeeze-out of minority shareholders
  • Section 235: Provision for compulsory acquisition in case of transfer of shares
  • Section 100-102: Rights regarding requisitioning and conducting general meetings
  • Section 47: Voting rights of shareholders
  • Section 62: Protection of pre-emptive rights in further share issuances

3.2 SEBI Regulations

For listed companies, the Securities and Exchange Board of India (SEBI) provides additional layers of shareholder protection:

  • SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015: Mandates enhanced disclosures, corporate governance requirements, and shareholder approval for material transactions
  • SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011: Ensures fair treatment of minority shareholders during change in control
  • SEBI (Prohibition of Insider Trading) Regulations, 2015: Protects shareholders from unfair trading practices by insiders

3.3 Other Relevant Regulations

  • National Company Law Tribunal Rules, 2016: Procedural framework for shareholder remedies
  • Companies (Management and Administration) Rules, 2014: Operational details regarding meetings and shareholder voting
  • Indian Accounting Standards: Ensures transparent financial reporting to shareholders

4. Key Judicial Precedents

Indian courts have played a crucial role in interpreting and developing shareholder protection jurisprudence:

4.1 Oppression and Mismanagement

  • Shanti Prasad Jain v. Kalinga Tubes Ltd. (1965 AIR 1535): The Supreme Court established that for oppression to be established, the conduct must be “harsh, burdensome and wrongful,” setting a high threshold for intervention.
  • Rajahmundry Electric Supply Corporation Ltd. v. A. Nageswara Rao (AIR 1956 SC 213): The Supreme Court clarified that the actions complained of must affect the petitioner in their capacity as a shareholder, not in any other role.
  • Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. (1981 SCC (3) 333): The Court recognized that oppression could occur through legitimate corporate actions if they unfairly prejudice minority shareholders.
  • V.S. Krishnan v. Westfort Hi-Tech Hospital Ltd. (2008 142 Comp Cas 235 Ker): The Kerala High Court held that exclusion of a shareholder from management contrary to legitimate expectations could constitute oppression.

4.2 Corporate Democracy and Shareholder Rights

  • Life Insurance Corporation of India v. Escorts Ltd. (1986 AIR 1370): The Supreme Court upheld shareholders’ right to vote according to their own interests, recognizing voting rights as a form of property.
  • Mohta Bros. (P) Ltd. v. Calcutta Landing & Shipping Co. Ltd. (1970 40 Comp Cas 119 Cal): The Calcutta High Court affirmed the right of shareholders to inspect corporate books as an incident of ownership.
  • Kilpest Pvt. Ltd. v. Shekhar Mehra (1996 87 Comp Cas 746): The Court emphasized the protection of legitimate expectations in closely-held companies.

4.3 Corporate Governance and Directors’ Duties

  • Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan (2005 124 Comp Cas 161 (SC)): The Supreme Court emphasized directors’ fiduciary duties to act in good faith for the benefit of the company.
  • Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad (2005 (11) SCC 314): The Court recognized the principle that directors must act in the best interest of the company as a whole, not just majority shareholders.
  • Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co. (2004 9 SCC 750): The Supreme Court emphasized the importance of corporate governance principles in protecting shareholder interests.

5. Legal Interpretation and Analysis

5.1 Evolving Standards of Minority Protection

The judicial interpretation of shareholder protection provisions in India reveals a subtle yet significant shift from the traditional common law principles toward greater recognition of minority rights. While the courts continue to respect the principle of majority rule, established in Foss v. Harbottle, the threshold for judicial intervention has gradually lowered, particularly in cases of closely-held companies with characteristics similar to partnerships.

The Supreme Court in Hanuman Prasad Bagri v. Bagress Cereals Pvt. Ltd. (2001 4 SCC 420) observed: “The courts have wide powers to grant appropriate relief as may be necessary in the facts and circumstances of each case… to bring to an end the oppressive conduct and to place the shareholders on an equal footing as far as possible.”

5.2 The Just, Equitable, and Non-Discrimination Standard

Section 241 of the Companies Act, 2013 employs the terms “prejudicial,” “oppressive,” and “unfairly discriminatory” as the standards for intervention. Courts have interpreted these terms contextually, recognizing that what constitutes oppression depends on:

  1. The nature of the company (public, private, closely-held)
  2. The legitimate expectations of shareholders
  3. The conduct’s impact on shareholders’ rights
  4. The proportionality of the actions taken

In Cyrus Investments Pvt. Ltd. & Anr. v. Tata Sons Ltd. & Ors. (NCLAT, 2019), the National Company Law Appellate Tribunal emphasized that the conduct must be examined not just for legal compliance but also for fairness, especially in companies with concentrated ownership.

5.3 Corporate Governance Implications

The Companies Act, 2013 has significantly strengthened the corporate governance framework, emphasizing transparency, accountability, and independent oversight. Section 166 codifies directors’ duties, explicitly requiring them to act in good faith, in the best interests of the company, shareholders, employees, and the community, and with due regard to the environment.

This stakeholder-oriented approach represents a departure from the shareholder primacy model, reflecting India’s socio-economic context. However, as noted by the Supreme Court in Vodafone International Holdings B.V. v. Union of India (2012 6 SCC 613), the protection of shareholder rights remains fundamental to corporate governance.

6. Comparative Legal Perspectives

6.1 Indian Approach vs. Anglo-American Model

The Indian shareholder protection framework has evolved from its British colonial roots but now incorporates elements from both the Anglo-American shareholder-focused model and the continental European stakeholder-oriented approach. The Companies Act, 2013 reflects this hybrid approach:

  • Like the UK Companies Act 2006, it codifies directors’ duties and provides for derivative actions
  • Similar to the US Sarbanes-Oxley Act, it enhances disclosure requirements and audit standards
  • Reflecting continental European approaches, it recognizes multiple stakeholder interests

However, India’s framework is distinctive in addressing the concentrated ownership patterns prevalent in Indian companies, with provisions specifically targeting abuses by controlling shareholders, unlike jurisdictions where dispersed ownership is the norm.

6.2 Distinctions from Other Asian Jurisdictions

Compared to other major Asian economies:

  • Unlike China, which emphasizes administrative regulation, India relies more heavily on judicial remedies and private enforcement
  • Unlike Japan’s relationship-based governance system, India has moved toward a more rules-based approach
  • Similar to Singapore, India has strengthened class action mechanisms, but with broader standing requirements

6.3 Convergence and Divergence Trends

As observed in Sahara India Real Estate Corporation Ltd. v. SEBI (2013 1 SCC 1), Indian corporate law increasingly recognizes global governance standards. However, the Supreme Court has also emphasized the need for contextual application of these principles to India’s unique economic and social environment.

7. Practical Implications and Challenges

7.1 Procedural Hurdles

Despite enhanced statutory protections, shareholders face practical challenges in exercising their rights:

  • High Litigation Costs: The expense of approaching the NCLT creates barriers, particularly for small shareholders
  • Procedural Delays: As noted in Tata Consultancy Services Ltd. v. Cyrus Investments Pvt. Ltd. (2021 SC), corporate litigation can be protracted
  • Jurisdictional Complexities: The division of regulatory oversight between SEBI, NCLT, and other bodies creates coordination challenges
  • Evidentiary Burdens: Proving oppression or mismanagement often requires access to corporate information that minority shareholders may struggle to obtain

7.2 Concentrated Ownership Challenges

India’s corporate landscape is characterized by promoter-controlled companies and business groups, presenting unique challenges:

  • Related Party Transactions: Despite Section 188’s requirements, monitoring and enforcement remain challenging
  • Tunneling Concerns: Complex group structures facilitate the extraction of private benefits by controlling shareholders
  • Shadow Directors: Informal influence by promoters may circumvent formal governance mechanisms

7.3 Enforcement Gaps

As highlighted in the 2020 Report of the Committee on Corporate Governance (SEBI), enforcement remains a significant challenge:

  • Inadequate detection mechanisms for violations
  • Limited resources of regulatory bodies
  • Insufficient deterrence in penalty structures
  • Informational asymmetries between insiders and outside shareholders

7.4 Institutional Investor Dynamics

The growing presence of institutional investors in India has introduced new dynamics:

  • Proxy Advisory Firms: Their increasing influence shapes voting patterns but raises questions about accountability
  • Investor Activism: As seen in cases like Unilever’s Acquisition of Hindustan Unilever (2013), institutional investors can influence corporate actions
  • Stewardship Responsibilities: SEBI’s Stewardship Code encourages institutional investors to actively monitor investee companies

8. Recent Developments and Trends

8.1 Technology-Enabled Shareholder Participation

Recent developments have leveraged technology to enhance shareholder engagement:

  • Mandatory e-voting for listed companies under Section 108
  • Virtual shareholder meetings, especially following COVID-19
  • Streamlined dividend distribution through electronic modes
  • Enhanced disclosure platforms through integrated BSE and NSE filing systems

8.2 ESG Considerations

The integration of Environmental, Social, and Governance (ESG) factors into corporate reporting and decision-making is reshaping shareholder rights:

  • Business Responsibility and Sustainability Reporting: SEBI’s 2021 circular mandating enhanced ESG disclosures
  • Social Responsibility Committee: Section 135 requirements for CSR oversight
  • Enhanced Environmental Disclosures: Growing investor demands for climate-related financial reporting

8.3 Judicial and Regulatory Developments

Recent landmark cases and regulatory changes include:

  • Tata-Mistry Dispute (Supreme Court, 2021): Clarified the scope of oppression remedies and the business judgment rule in the Indian context
  • SEBI’s Amended Related Party Transaction Requirements (2021): Expanded the definition and disclosure requirements for related party transactions
  • NCLT’s Expanding Jurisprudence: Growing body of specialized tribunal decisions addressing shareholder disputes

8.4 Special Purpose Acquisition Companies (SPACs)

The Companies (Amendment) Bill, 2021 discussions have included possible frameworks for SPACs in India, which would introduce new considerations for shareholder protection.

9. Recommendations and Future Outlook

9.1 Legislative Refinements

Several potential improvements to the legislative framework merit consideration:

  • Streamlining Class Action Procedures: Reducing thresholds and simplifying procedures under Section 245
  • Enhancing Derivative Action Framework: Clearer provisions on cost allocation and procedural requirements
  • Proportionate Remedies: Expanding the NCLT’s toolkit to include less drastic remedies than currently available
  • Appraisal Rights: Introducing explicit shareholder appraisal rights in major corporate transactions

9.2 Regulatory Enhancements

Regulatory mechanisms could be strengthened through:

  • Integrated Regulatory Framework: Better coordination between SEBI, NCLT, MCA, and RBI
  • Pre-emptive Monitoring: Enhanced surveillance systems to detect patterns of minority exploitation
  • Proportionate Enforcement: Calibrating penalties to create sufficient deterrence
  • Shareholder Education Initiatives: Improving awareness of rights and remedies

9.3 Institutional Reforms

Broader institutional reforms could include:

  • Specialized NCLT Benches: Dedicated to shareholder disputes for faster resolution
  • Ombudsman Mechanism: Intermediate dispute resolution system for shareholder grievances
  • Shareholder Advocacy Groups: Supporting collective action by retail investors
  • Corporate Governance Rating Systems: Market-based mechanisms to incentivize better practices

9.4 Technological Solutions

Technology offers promising avenues for enhancing shareholder protection:

  • Blockchain-Based Voting: Ensuring transparent and tamper-proof voting mechanisms
  • AI-Powered Compliance Monitoring: Detecting patterns of potential abuse
  • Digital Platforms for Collective Action: Facilitating coordination among dispersed shareholders
  • Data Analytics for Regulatory Oversight: Improving detection of governance anomalies

10. Conclusion and References

The evolution of shareholders’ rights and protection mechanisms under Indian law reflects a progressive recognition of the need to balance corporate efficiency with investor protection. The Companies Act, 2013, represents a significant advancement over its predecessor, incorporating global best practices while addressing India’s specific corporate governance challenges.

However, the effectiveness of these protections depends not merely on statutory provisions but on robust enforcement, judicial interpretation, and institutional capacity. As India continues its journey toward becoming a global economic power, strengthening shareholder protection remains essential for developing deep and liquid capital markets, attracting foreign investment, and ensuring sustainable corporate growth.

The ongoing refinement of shareholder protection mechanisms must address both conventional governance challenges and emerging issues in areas such as technology, sustainability, and global integration. Through this process, Indian corporate law can continue to evolve a distinctive approach that balances shareholder rights, stakeholder interests, and national development objectives.

References

Statutes and Regulations

  • The Companies Act, 2013
  • The Companies Act, 1956 (relevant provisions still in force)
  • SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
  • SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
  • SEBI (Prohibition of Insider Trading) Regulations, 2015
  • National Company Law Tribunal Rules, 2016
  • Companies (Management and Administration) Rules, 2014

Judicial Decisions

  • Foss v. Harbottle (1843) 2 Hare 461
  • Shanti Prasad Jain v. Kalinga Tubes Ltd. (1965 AIR 1535)
  • Rajahmundry Electric Supply Corporation Ltd. v. A. Nageswara Rao (AIR 1956 SC 213)
  • Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. (1981 SCC (3) 333)
  • V.S. Krishnan v. Westfort Hi-Tech Hospital Ltd. (2008 142 Comp Cas 235 Ker)
  • Life Insurance Corporation of India v. Escorts Ltd. (1986 AIR 1370)
  • Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan (2005 124 Comp Cas 161 (SC))
  • Cyrus Investments Pvt. Ltd. & Anr. v. Tata Sons Ltd. & Ors. (NCLAT, 2019)
  • Tata Consultancy Services Ltd. v. Cyrus Investments Pvt. Ltd. (2021 SC)

Reports and Secondary Sources

  • Report of the J.J. Irani Committee on Company Law, 2005
  • SEBI Committee on Corporate Governance Report, 2020
  • SEBI Stewardship Code for Institutional Investors, 2019
  • Ministry of Corporate Affairs, “Report of the Companies Law Committee,” 2016
  • Kumar, Pushpa, “Shareholders’ Rights and Protection under Companies Act,” 2021
  • Varottil, Umakanth, “Corporate Governance in India: The Transition from Code to Statute,” 2017
  • Chakrabarti, Rajesh, “Corporate Governance in India – Evolution and Challenges,” 2015

Also Read:
Rights of undertrial prisoners in India
How To Send A Legal Notice In India

MoA vs. AoA: Key Differences & CSR Under Companies Act, 2013

Memorandum of Association (MoA) and Articles of Association (AoA)

Several legal formalities primarily accompany company formation. Among these, the Memorandum of Association (MoA) and the Articles of Association (AoA) hold paramount importance. These documents provide the legal foundation for the establishment of a company, and they outline its nature, formation, and functioning. Besides, companies also have ethical duties to fulfil, most notably, Corporate Social Responsibility (CSR) guidance laid down under the Companies Act, 2013 in India. The present blog discusses the relevance and distinctions between MoA and AoA; finally, it elaborates on the parameters of the CSR regulations within the confines of Indian corporate law. 

Importance and Difference

1. Memorandum of Association (MoA): Definition and Importance

The Memorandum of Association (MoA) is a legal document that defines a company’s constitution and objectives. It is the charter of the company, specifying its purpose and the scope of its activities. The Companies Act, 2013 makes it mandatory for every company to have an MoA at the time of incorporation.

Importance of MoA

  • Defines the Company’s Scope: It states the company’s purpose, ensuring that it does not engage in activities beyond its scope.
  • Legal Identity: The MoA establishes the company as a separate legal entity.
  • Acts as a Public Document: It is accessible to investors, creditors, and stakeholders to understand the company’s activities.
  • Protects Shareholders’ Interests: It prevents the company from engaging in unauthorized business activities.

Contents of MoA

The MoA contains six key clauses:

  • Name Clause – Specifies the name of the company.
    Registered Office Clause – Indicates the official address of the company.
  • Object Clause – Defines the objectives of the company.
  • Liability Clause – Specifies the liability of members.
  • Capital Clause – Declares the company’s authorized share capital.
  • Association Clause – Lists the initial subscribers to the MoA.

2. Articles of Association (AoA): Definition and Importance

The Articles of Association (AoA) is a legally binding document that prescribes management rules for the internal operations of the company. MoA defines external limitations for the company; AoA prescribes rules for internal workings of the company.

Importance of AoA

  • Regulates its Internal Affairs: Attaching procedures to board meetings, distribution of dividends, and the resolution of disputes.
  • Has Eases Functioning: While providing lucid guidelines for decision-making, it also secures transparency within the organization.
  • De jure: Their Articles of Association have legal power and bind all members under the regulations outlined therein.

Contents of AoA
The AoA generally includes:

  • Rules for Share Capital Management – Regulations regarding the issue and transfer of shares.
  • Board of Directors Powers and Responsibilities – Defines directors’ duties, rights, and liabilities.
  • Meetings and Decision-Making Processes – Covers annual general meetings (AGMs) and voting procedures.
  • Dividend Distribution and Financial Policies – Rules for declaring dividends and handling company profits.
  • Winding-Up Procedures – Guidelines for dissolving the company.

3. Key Differences Between MoA and AoA

Purpose & Function

MoA: Acts as the company’s charter, outlining its fundamental objectives and scope. It defines what a company can and cannot do.

AoA: Serves as the company’s rulebook, dictating how it should be managed and governed internally.

Legal Standing & Scope

MoA: A public document that defines the company’s legal existence. It cannot be easily altered once established.

AoA: Primarily for internal use, guiding daily operations and management. It is more flexible and can be amended through a special resolution.

Binding Nature

MoA: Binds the company to external stakeholders, including creditors, shareholders, and regulatory bodies.

AoA: Governs the relationship between the company and its members, including directors, employees, and shareholders.

Regulation of Activities

MoA: Determines the permissible business activities. Any activity beyond the MoA is considered ultra vires (beyond power) and is invalid.

AoA: Governs how the company conducts its approved activities, covering board meetings, voting rights, and dividend distribution.

Amendment Procedure

MoA: Requires approval from regulatory authorities (like the Registrar of Companies) and a special resolution by shareholders to make changes.

AoA: This can be easily modified by passing a special resolution in a general meeting.

Hierarchical Relationship

MoA: Supreme legal document of the company—no rule in the AoA can override the MoA.

AoA: Subordinate to the MoA—must be aligned with the MoA and cannot contradict it.

Final Thought

In simpler terms, one may comprehend MoA as the foundation, but it lays the groundwork for the emergence of the structure, while the AoA forms the blueprint that dictates how separate sections work and form parts of the building. Both documents serve as the underpinning of the company, establishing its legal and operational frame; each guarantees compliance and governance for seamless operations.