Understanding D.U. Copyright Conundrum: What the Court Should Do

[Note: Author and Contributor of this blog post is Risabh A. Gupta, 3rd Year Student, B.B.A. LL.B. (Hons.), National Law University, Odisha]

The on-going litigation between a group of leading publishers and a small photocopying shop attached to Delhi University has all the elements of a legendary 'fair dealing' debate in copyrighted works. This case holds paramount significance in mapping the future of use of copyrighted books and materials for affordable dissemination of knowledge in schools and colleges.

BRIEF FACTS OF THE CASE

A small photocopying shop, Rameshwari photocopy services, attached to Delhi University is entrusted by the university with complying extracts from various copyrighted books and materials. Now, the Oxford and the Cambridge publishing houses have alleged that by photocopying the copyrighted books and materials, the photocopying shop and the Delhi University have violated their copyright. Allegedly, the publishing houses have sued for copyright infringement. 

THE TWO LEGAL QUESTIONS INVOLVED

Generally, matters involving copying materials from copyrighted sources involve two fold tests in order to ascertain whether the copied material is permitted or not.

1.      Is the dealing ‘fair’?

2.      Is the copying done for a permissible purpose?

Copyright law in India and all across the world recognize that sometimes using/reproducing/distributing parts of a copyrightable work, without making payments to the copyright holder, are necessary and permissible. This is the essence of 'fair dealing'.

1.      ‘Fair Dealing’ enshrined in Section 52 of the Indian Copyright Act, 1957

The fair use doctrine is recognized as a valid defense to copyright infringement in most countries including India, where Section 52 of the Copyright Act permits one to “fairly deal” with any copyrighted work for “private or personal use including research”. Section 52 (1) (i) of the Copyright Act, 1957 as amended in 2012 reads as follows-

52. Certain acts not to be infringement of copyright. – (1) the following acts shall not constitute an infringement of copyright, namely:

(i) The reproduction of any work-

i.                    By a teacher or pupil in the course of instruction; or

ii.                  As part of the questions to be answered in an examination

iii.                In answers to such questions;

Now, from the bare reading of the aforesaid provision, it is clear that as far as the reproduction for the purposes defined in point (i) to (iii) above is concerned, the same is  exempted from the purview of infringement. Thus, Section 52 (1) (i) of the Copyright Act would clearly reveal that any such reproduction whatsoever is justifiable as non-infringing work.

2.      Copying done for the permissible purpose

Firstly, it needs to be ascertained as to how much the Delhi University/ photocopying shop has copied. Secondly it also needs to be seen whether the extracts copied is permissible under the Indian copyright law or not?

A very comprehensive and exhaustive analysis done by SPICYIP blog[1] points out that the extracts which have been copied by the Delhi University/photocopying shop comes out to meager 10 % of the entire book/ material. The fact that it is well within the ‘global standard’ of 10% cements up the DU stand.

It is now apt to say that the court ought to declare that extracts copied from copyrighted books/materials constitute as non-infringing given that S.52(1)(h)(i) of the Indian Copyright Act does not lay down any quantitative limit on permissible reproduction. In my opinion, the court should allow for the permissible copying of the copyrighted material up to 20% keeping in mind the socio-economic conditions of India.

LESSONS FROM CANADIAN COPYRIGHT CASE

At this point, it is very imperative to analysis the recent Canadian Supreme Court decision on the issue of ‘fair dealing’ and ‘permissible purpose’ pertaining to copying extracts from the copyrighted books and materials.

Analysis of Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright), 2012 SCC 37] Case-

In this particular, the Canadian Supreme Court has ruled that copying extracts from the copyrighted books/materials do not constitute infringement as it is protected under the aegis of ‘fair dealing’ and ‘permissible purpose’ if the extracts from a part of teaching materials. Now, the relevance of this case in Indian context is discussed.

The Indian Copyright Act provides as follows:

(1) The following acts shall not constitute an infringement of copyright, namely: 

      (a) A fair dealing with any work, not being a computer programme, for the purposes of- 

 (i) Private and personal use, including research; 

 (ii) Criticism or review, whether of that work or of any other work;

Similar exceptions are also found in the section 29 of the Canadian Copyright statute. Thus, in this particular Canadian case, the Supreme Court of Canada ruled that copying extracts for teaching purposes does not constitute infringement.

Now, we may refer to Sec. 52 (1) (a) of the Indian Copyright Act which provides for ‘fair dealing’ together with the recent Canadian decision to aptly examine the scope in the Indian copyright act.

Sec. 52(1) (a) (i) particularly refers to ‘private use’ whereas the Canadian statute uses the term ‘private study’. The Canadian decision held that the interpretation of the word ‘private study’ should not mean that users should view the copyrighted works in utmost isolation. Thus the Canadian case basically says that whether the study is done alone or in group, copying extracts for teaching purposes would clearly fall within the ‘permissible limits’ and hence non-infringing per se. Therefore, similar line of argument could also be taken by the DU/photocopying shop to defend their stance.

Unfortunately, in the backdrop of the pertinent arguments advanced, the Delhi High Court has granted an interlocutory order restraining the photocopying shop and the university from further copying and circulating the course packages or the extracts compiled from the books. Thus, it is highly desirable upon the Hon’ble Court that it should allow the photocopying of extracts from the books/materials and vividly lay down a sound foundation for a ‘fair dealing’ and ‘permissible purpose’ in copyrighted books/materials.

---

[1] http://spicyipindia.blogspot.in/2012/09/delhi-university-must-defend.html; last visited on 19/07/2013 at 11:50 pm

Institution of a suit under Section 20, Code of Civil Procedure, 1908

Section 20 of the Code of Civil Procedure, 1908 (“CPC”) provides that a Court, under certain circumstances, can entertain a suit. It primarily focuses on the location of defendant and cause of action. Section 20 has been designed to secure that justice might be brought as near as possible to every man's hearthstone and that the defendant should not be put to the trouble and expense of travelling long distances in order to defend himself.[1]In other words, the principle behind the provisions of clauses (a) and (b) of Section 20 is that the suit be instituted at a place where the defendant is able to defend the suit without undue trouble.[2]

Phrase “cause of action” means every fact, which, if traversed, would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court.[3]That is, it means the bundle of facts which gives rise to a right or liability.[4] The elements of a cause of action are: first, the breach of duty owing by one person to another and; second, the damage resulting to the other from the breach, or the fact or combination of facts which gives rise to a right to sue.[5]

The expression “voluntarily resides”, as provided in clause (a) and (b) of Section 20, necessarily refers to natural persons and not to legal entities. Further, the expressions “carries on business” or “personally works for gain” do not refer to functions carried on by the Union of India is discharge of its executive powers conferred by Article 298 of the Constitution.[6]The Code of Civil Procedure uses the expression “corporation” as meaning a legal person and includes a company registered under the Indian Companies Act, and there is nothing in the CPC which can show that a corporation referred to under Order 20 means only a statutory corporation and not a company registered under the Indian Companies Act.[7]

Application of doctrine of dominus litus is confined only to the cause of action which would fall within Sections 15 to 18 of the Code of Civil Procedure, and it cannot be applied where Section 20 of CPC is sought to be invoked.[8]

Moving further, the Explanation to Section 20 is actually an explanation to clause (a). It is in the nature of a clarification on the scope of clause (a) viz. as to where the corporation can be said to carry on business.[9]Focusing on the interpretation of explanation to Section 20, Supreme Court, in New Moga Transport Co. v. United India Insurance Co. Ltd.,[10] held that:

                                  “On a plain reading of the Explanation to Section 20 CPC it is clear that the Explanation consists of two parts: (i) before the word “or” appearing between the words “office in India” and the words “in respect of”, and (ii) the other thereafter. The Explanation applies to a defendant which is a corporation, which term would include even a company. The first part of the Explanation applies only to such corporation which has its sole or principal office at a particular place. In that event, the court within whose jurisdiction the sole or principal office of the company is situate will also have jurisdiction inasmuch as even if the defendant may not actually be carrying on business at that place, it will be deemed to carry on business at that place because of the fiction created by the Explanation. The latter part of the Explanation takes care of a case where the defendant does not have a sole office but has a principal office at one place and has also a subordinate office at another place. The expression “at such place” appearing in the Explanation and the word “or” which is disjunctive clearly suggest that if the case falls within the latter part of the Explanation it is not the court within whose jurisdiction the principal office of the defendant is situate but the court within whose jurisdiction it has a subordinate office which alone has the jurisdiction “in respect of any cause of action arising at any place where it has also a subordinate office”.”

The section only tries to lay down certain principles for the institution of suit. This is to ensure that one does not misuse the judicial system for harassing a defendant. Interestingly, the decisions of the Supreme Court rendered on interpretation of Section 20(c) CPC shall apply to the writ proceedings also.[11]From above, one can get a brief overview of the important elements of Section 20.

---

[1] Laxman Prasad v. Prodigy Electronics Ltd., (2008) 1 SCC 618, 627

[2] Union of India v. Ladulal Jain, (1964) 3 SCR 624: AIR 1963 SC 1681; Hanil Era Textiles Ltd. v. Puromatic Filters (P) Ltd., (2004) 4 SCC 671, 675

[3] Bloom Dekor Ltd. v. Subhash Himatlal Desai, (1994) 6 SCC 322, 328

[4] Sonic Surgical v. National Insurance Co. Ltd., (2010) 1 SCC 135, 137

[5] SBI v. Ranjan Chemicals Ltd., (2007) 1 SCC 97, 102

[6] Baktawar Singh Bal Kishan v. Union of India, (1988) 2 SCC 293, 296

[7] Hakam Singh v. Gammon (India) Ltd., (1971) 1 SCC 286, 289

[8] Mohannakumaran Nair v. Vijayakumaran Nair, (2007) 14 SCC 426

[9] Patel Roadways Ltd. v. Prasad Trading Co., (1991) 4 SCC 270, 277

[10] New Moga Transport Co. v. United India Insurance Co. Ltd., (2004) 4 SCC 677, 681

[11] Ambica Industries v. CCE, (2007) 6 SCC 769, 784

Supreme Court and Environmental Jurisprudence: Part II [“Sustainable Development”]

With an ever increasing population and corresponding requirement of economic growth, a certain amount of compromise with environment is inevitable. However, this compromise should not be so extensive that it overrides the protection of environment altogether. It is at this juncture that the concept of ‘Sustainable Development’ comes into picture. Sustainable development is essentially a policy and strategy for continued economic and social development without detriment to the environment and natural resources on the quality of which continued activity and further development depend.[1] Sustainable development means what type or extent of development can take place which can be sustained by nature/ecology with or without mitigation.[2]

The United Nations Conference on Environment and Development, held in Rio de Janeiro in 1992, provided the fundamental principles and the programme of action for achieving sustainable development.As defined by the Brundtland Report, sustainable development means “Development that meets the needs of the present without compromising the ability of the future generations to meet their own needs”.[3]

[Source: Urban Times Magazine]

Treating ‘Sustainable Development’ as a part of Article 21, Constitution of India, 1950, Supreme Court, in N.D. Jayal v. Union of India,[4] held that:

"Therefore, the adherence to sustainable development principle is a sine qua non for the maintenance of the symbiotic balance between the rights to environment and development. Right to environment is a fundamental right. On the other hand, right to development is also one. Here the right to “sustainable development” cannot be singled out. Therefore, the concept of “sustainable development” is to be treated as an integral part of “life” under Article 21."

The right to sustainable development has been declared by the UN General Assembly to be an inalienable human right (Declaration on the Right to Development) (1986).[5]The doctrine, under the guise of development, does not allow the environmental degradation.[6] However, if without degrading the environment or minimising adverse effects thereupon by applying stringent safeguards, it is possible to carry on development activity applying the principles of sustainable development, then such activity can be carried out.[7]It should also be noted that, while applying the concept of “sustainable development”, one has to keep in mind the “principle of proportionality” based on the concept of balance.[8]

The concept is required to be implemented taking a pragmatic view and not on ipse dixit of the court.[9] Court should follow the principle of sustainable development and find a balance between the developmental needs and environmental degradation.[10] Adherence to the principle of sustainable development is now a constitutional requirement.[11]

Supreme Court, in Karnataka Industrial Areas Development Board v. C. Kenchappa,[12]while considering the need to maintain environment during land acquisition, held that: [The concept of ‘sustainable development’ was extensively discussed in this case]

“.....before acquisition of lands for development, the consequence and adverse impact of development on environment must be properly comprehended and the lands be acquired for development that they do not gravely impair the ecology and environment.”

The much discussed ‘precautionary principle’ and ‘polluter pays principle’ are part of sustainable development.[13]The concept of ‘Sustainable Development’, which also emerges as a fundamental duty from Article 51-A of the Constitution, dictates the expansion of population being kept within reasonable bounds.[14]

                                             

From above, one can understand the view of the Supreme Court in relation to Sustainable Development. To some extent, the recent tragedy in the State of Uttarakhand was considered to be man-made. If steps are not taken, similar incidents can again occur. Hence, in future, a cautious approach has to be taken; otherwise, we will have to face the disastrous consequences of such activities. 

Click here for Environmental Jurisprudence and the Supreme Court: Part I [“Precautionary Principle” and "Polluter Pays Principle"]

---

[1] T.N. Godavarman Thirumulpad v. Union of India, (2002) 10 SCC 606, 630

[2] Narmada Bachao Andolan v. Union of India, (2000) 10 SCC 664, 727

[3] 1987 report of the World Commission on Environment and Development (Brundtland Report) [Report of the Commission  chaired by the then Prime Minister of Norway, Ms G.H. Brundtland]; Vellore Citizens' Welfare Forum v. Union of India, (1996) 5 SCC 647, 657

[4] N.D. Jayal v. Union of India, (2004) 9 SCC 362; Also see Atma Linga Reddy v. Union of India, (2008) 7 SCC 788; Glanrock Estate (P) Ltd. v. State of T.N., (2010) 10 SCC 96; Tirupur Dyeing Factory Owners Assn. v. Noyyal River Ayacutdars Protection Assn., (2009) 9 SCC 737

[5] A.P. Pollution Control Board Ii Vs.  Prof. M.V. Nayudu (Retd.) and Ors., (2001) 2 SCC 62

[6] Amarnath Shrine, In re, (2013) 3 SCC 247, 260

[7] M.C. Mehta v. Union of India, (2004) 12 SCC 118

[8] Research Foundation for Science Technology & Natural Resource Policy v. Union of India, (2007) 15 SCC 193

[9] Susetha v. State of T.N., (2006) 6 SCC 543

[10] Intellectuals Forum v. State of A.P., (2006) 3 SCC 549, 574; Bombay Dyeing & Mfg. Co. Ltd. (3) v. Bombay Environmental Action Group, (2006) 3 SCC 434; H.P. v. Ganesh Wood Products, (1995) 6 SCC 363 at page 389

[11] T.N. Godavarman Thirumulpad (104) v. Union of India, (2008) 2 SCC 222

[12] Karnataka Industrial Areas Development Board v. C. Kenchappa, (2006) 6 SCC 371

[13] Delhi Transport Deptt., Re, (1998) 9 SCC 250, 251; Research Foundation for Science Technology National Resource Policy v. Union of India, (2005) 10 SCC 510, 518; M.C. Mehta (Taj Trapezium Matter) v. Union of India, (1997) 2 SCC 353; M.C. Mehta v. Union of India, (2002) 4 SCC 356; Tirupur Dyeing Factory Owners Assn. v. Noyyal River Ayacutdars Protection Assn., (2009) 9 SCC 737

[14] Javed v. State of Haryana, (2003) 8 SCC 369, 389

Strengthening Corporate Governance vis-à-vis Companies Bill, 2012

[Note: Author and Contributor of this blog post is Risabh A. Gupta, 3rd Year Student, B.B.A. LL.B. (Hons.), National Law University, Odisha]

I.                   INTRODUCTION

Corporate governance basically means an entire system of rights, processes and controls which are established internally and externally over the management of a business entity. Its prime objective is to protect the interests of the stakeholders. This is achieved by the process of auditing, proper functioning of the board of directors and apt regulatory and legal framework. Before moving on, it is pertinent to briefly discuss the infamous Satyam scam and the recent Reebok scam in order to aptly comprehend the flaws currently prevailing concerning corporate governance. 

II.                THE SAYTAM AND THE REEBOK SCAM

The Satyam fraud in 2009 had perfectly exposed the inadequacies in India’s legal and regulatory systems to tackle corporate wrongdoing of such unprecedented dimensions. There was confirmed falsification of books of accounts and inflation of the company’s financial position to the extent of over Rs.5, 000-6,000 crore.

Recently, Reebok Scam to the tune of Rs 870 crore has once again portrayed the flimsy legal and regulatory regime concerning corporate governance. The subsequent audit carried out had found fake transactions with unauthorized customers, allegedly concocted to exaggerate the company’s revenue. Thus, it calls for a closer look at the current legal and regulatory regime prevailing in India and what needs to be done in order to plug in the loopholes.

III.             ROLE OF DIRECTORS  & FAILURE TO REGULATE

In the Satyam scam, the Satyam board, including its five independent directors, had approved the acquisition of Maytas Infra and Maytas Properties given the fact that acquisition was on a totally unrelated business. The fact that independent directors are quite often friends or associates of the management or controlling shareholders has become one of the major weakness of corporate governance in India.

The Directors have to be nominated to the Board. This is done de jure by the shareholders but in reality it is done by other Directors. The shareholders merely confirm the nomination, thereby, making it possible for people who are known to the Directors to get elected. Therefore, the independence of the directors and shareholders’ interest gets diluted.

IV.             THE INDEPENDENCE OF THE DIRECTORS & THE BOARD UNDER COMPANIES BILL, 2012

The new Companies Bill, 2012 tries to bring in various correctives measures. Concept of Independent directors has been introduced for the first time in Company Law. All listed companies are mandatorily required to appoint independent directors. Atleast 1/3 of the Board should comprise of independent directors. Term of an independent director shall be 5 years, with a further extension of 5 years. After two consecutive terms, an independent director shall not be eligible for reappointment for 3 years. An independent director is not entitled to any remuneration other than sitting fee, reimbursement of expenses for participation in the meeting. An Independent director is not entitled for any stock options. Thus, these provisions would aid immensely in keeping the independence of the board.

Further, the new bill also mandates constitution of Stakeholders’ Relationship Committee where the combined membership of the shareholders, debenture holders and other security holders exceeds 1000 at any time during the financial year with the chairman of the committee being a non-executive director to aptly take rational decisions considering all the stakeholders.

V.                FAILURE TO REGULATE AUDITORS & AUDITS

The Satyam Scam posed serious questions about systematic regulatory efficacy, predominantly pertaining to auditing and audit firm oversight. The statutory auditor of Satyam, Price Waterhouse, one of the ‘big four’ international accounting firms failed to check the auditing fraud for 8 consecutive years. Even months after Satyam boss R. Raju had confessed to fudging the accounts, the institute was still to take action against the two auditors who had signed the Satyam accounts. Further, there are instances where the statutory auditors have been the de facto internal auditors as well.

VI.             REGULATING AUDITORS & AUDITS UNDER THE COMPANIES BILL, 2012

The new Companies Bill, 2012 tries to plug in the loopholes and streamlines the auditing process of the companies.

It mandates compulsory rotation of individual auditors in every 5 years and of audit firm every 10 years in every listed company. Rotation of auditing partner and his team at specific interval could be done by the members of the company. Auditing standards have been made mandatory in addition to accounting standards and an auditor is liable to be disqualified if he has indebtedness to holding/subsidiary company. Further, a person cannot be appointed as an auditor for more than 20 companies.

VII.          INADEQUATE POWER GIVEN TO SFIO (SERIOUS FRAUDS INVESTIGATION OFFICE)

Serious Frauds Investigation Office (SFIO) is the investigative arm of Ministry of Corporate Affairs which is primarily concerned with investigation of corporate scams. But in reality, SFIO has been an utmost failure. 

Since its inception in the year 2003, the SFIO still hasn’t made much success. Contrast to this, its counterparts in UK and US have successfully convicted multiple corporate scams and frauds with much wider success.

Lacunae in SFIO

The biggest drawback with the SFIO is that it operates within the Companies Act, 1956 and is just an investigative arm of the Ministry of Corporate Affairs. The only statutory powers SFIO enjoys are under the Companies Act, 1956, even though the frauds investigated by it were criminal offences. There is absence of clearly defined criteria for referring cases to the SFIO in statute. Rather, the charter for SFIO provides that it shall take up cases that have complexity, inter-departmental and multi-disciplinary ramifications, or has substantial involvement of public interest in terms of monetary misappropriation.

Comparison with UK SFO (Serious Fraud Office)

Contrary to this, UK SFO (Serious Frauds Office) has the power to investigate and prosecute and can independently summon people and conduct raids. It has also clearly defined criteria for speedy and timely investigation. In addition to this, SFO functioning is governed by the Criminal Justice Act, 1987. Thus in all essence, any case like Satyam in UK would most certainly be referred to SFO. But in the absence of any such powers in India, the SFIO had to wait for its turn to interrogate Raju brothers and seize documents. Further, all it can do is to file a compliant with local police and the minister-in-charge has the discretion to accept or reject the SFIO’s final report.

Overlapping of investigating agencies & absence of a Nodal agency

The recent Reebok scam and the Satyam Scam has aptly demonstrated that several other regulators and investigating agencies, including SEBI, the ROC, Income Tax and the CID often leads to multiplicity of regulators (sometimes operating at cross-purposes) which almost never produce optimal results. Pertaining to the Reebok Scam, investigation by both the Gurgaon Police and the SFIO has clearly created a very messy situation. Further in Satyam case:-

a.       SEBI was initially only investigating insider trading charges.

b.      RoC’s investigation covered only violation of Companies Act, Section 372A in particular.

c.       The Income Tax department had to send the report to the Central Board of Direct Taxes.

This multiplicity of agencies leads to coordination problems, which results in delaying the case and confusing issues. Thus, a single regulator and a nodal agency will result in a unified approach.

VIII.       STRENGTHENING OF SFIO IN COMPANIES BILL, 2012

The bill has accorded the statutory recognition to the SFIO, in line with the UK SFO. The SFIO will have the power to carry out arrests under Section 212(8). It also bars investigation by any other agency if the case has been assigned to SFIO under Section 212(2) thus creating a single nodal agency for investigation.  It will also have the power to arrest in respect of certain offences of the Bill which attract the punishment for fraud. These offences shall be cognisable and the persons accused of any such offence shall be released on bail subject to certain conditions provided in the relevant clause in the Bill.

Drawbacks in Companies Bill, 2012 concerning SFIO

Notwithstanding the substantial steps taken by the Companies Bill, 2012 to give significant powers to SFIO, still it fails to address the two issues of immense importance. Firstly, the bill still doesn’t give the search and seizure power without the prior approval of the Judicial Magistrate or as the case may be. Contrary to this, other investigating agencies like Enforcement Directorate, Income Tax authorities have all been accorded with search & seizure.

Secondly, the SFIO cannot take a case suo mottu. It needs to get prior approval of the Central govt. in order to start investigation.

Lastly, while the Companies Bill, 2012 has been passed in Lok Sabha, it is still languishing in Raj Sabha. It is expected that the bill would be passed in this monsoon session at the earliest. Further, the new Companies Bill, 2012 is a very welcome step concerning strengthening of corporate governance and making India more conducive to all the stakeholders concerned.