The Limited Liability Partnership (Amendment) Bill, 2021 has been the focus of the legal fraternity during the course of the past few weeks. The bill, which was introduced on July 31, 2021, was passed by both the Rajya Sabha and the Lok Sabha by August 9, 2021. Even as the focus of the Parliament was on the recent controversy surrounding the Pegasus spyware leading to protests from the opposition, the bill was introduced and got passed without a lot of hassles.Continue reading
Amazon and Flipkart have found themselves in a spot of bother after the Supreme Court ruled that there would be no stay on an ongoing inquiry against them by the Competition Commission of India (CCI).
History of the Probe
Delhi Vyapar Mahasangh (DVM), a group that represents small and medium business houses in India, filed a complaint at the CCI against Flipkart and Amazon for engaging in anti-competitive conduct. The CCI decided to undertake a probe and the companies then decided to challenge the probe.
The Karnataka High Court decided on the matter and upheld the CCI’s decision. The companies decided to further take it up to the Supreme Court and the apex court ruled that the probe should continue saying that, “Big Corporates like Amazon and Flipkart should be subject to transparency and inquiry.”
What was the probe all about?
DVM, the complainant, alleged that Flipkart and Amazon were entering into anti-competitive agreements and also abusing their dominant position in the market. The aforementioned two situations are prohibited under Section 3 and 4 of the Competition Act, 2002.
What was the first allegation?
With regard to the first allegation of anti-competitive agreements, DVM claimed that the two companies were entering into vertical arrangements with sellers leading to ‘foreclosure of other sellers from the marketplace’ which in this case is online. Deep discounting, preferential listing and exclusive tie-ups were supposedly done with these few sellers. DVM also named these sellers and provided proof as to how agreements were entered into. These were obtained through communication made during the companies’ famous Big Billion Day Sale (Flipkart) and the Great Indian Festival (Amazon). Further, it was claimed that Flipkart brands certain sellers’ products as ‘Assured Seller’ and Amazon brands them as ‘Fulfilled’ without there being a solid explanation or basis on what exactly they are.
What did DVM allege about abuse of dominant position?
The allegations with respect to abuse of dominant position stated that the two companies were limiting the influence and provision of services of MSMEs and other such retailers. So even if products of these companies were listed, they would appear in the final few pages even if they had the same ‘user rating’ as that of the top sellers. The dominance in the market was proved by pointing out the huge market share of the companies as well as their ability to unilaterally terminate agreements. DVM concluded that the entire model of Flipkart and Amazon as e-commerce entities was anti-competitive.
What was the CCI’s verdict?
The CCI then looked at the matter and decided that the arguments made had substance and that there was a prima facie case that needed investigation by the Director General.
What happened after the investigation was ordered?
Flipkart and Amazon refused to cooperate with the investigation that was ordered and decided to file an appeal. A Single-Judge Bench and subsequently a Division Bench at the Karnataka High Court ruled that the companies had to join the investigation process soon. Taking it up finally with the Supreme Court, a bench led by CJI NV Ramana and two more Justices refused to stay the inquiry and gave the companies four weeks’ time to cooperate. The SC criticized the two companies for refusing to join the investigation and stated that the appeals seemed merely like attempts made to ensure that the CCI’s action does not attain ‘finality’.
What next for Flipkart and Amazon?
Flipkart and Amazon now have no choice but to comply with the Supreme Court’s order and cooperate with the investigation. If found guilty of entering into anti-competitive agreements and abusing their dominant position, they will be sanctioned with huge fines and directed to do away with the anti-competitive conduct.
In today’s fast-paced digital world, e-commerce companies like Flipkart and Amazon have become part and parcel of day-to-day life. Even as these companies are growing by the day, they do have an obligation to ensure there is fair competition in the market. Anti-competitive conduct is by no means welcome and DVM was right in bringing the issue up. The CCI, HC and SC orders have all come as a blow to the companies and it remains to be seen how the investigation now unfolds.
By Nevin Clinton
What is the National Green Tribunal?
The National Green Tribunal (NGT) is a body that was set up through the National Green Tribunal Act, 2010 to deal with cases relating to the environment. The NGT is a specialized body that focuses on effectively and quickly dealing with such cases. The Central Government stated that the tribunal would look into cases on “environment protection, conservation of forests and for seeking compensation for damages caused to people or property due to violation of environmental laws or conditions specified while granting permissions.”
While cases that are filed in the usual forums like courts would take years to settle, filing complaints at the NGT would see a resolution in less than 6 months. This is because the NGT is mandated to dispose of cases within 6 months of filing.
What is the NGT’s structure?
The NGT has a chairperson, judicial members and expert members who will be appointed for a five-year term (there won’t be reappointment). The Chairperson will be appointed by the government with the consultation of the Chief Justice of India. The other members will be selected by a specialized committee. The NGT has a total of five places of sitting – New Delhi, Chennai, Kolkata, Pune and Bhopal.
Jurisdiction of the NGT
The NGT has jurisdiction over cases where there is a ‘substantial question’ relating to environmental protection or enforcement of environmental rights involved. Cases under statutes like The Water (Prevention and Control of Pollution) Act, 1974, The Forest (Conservation) Act, 1980. The Air (Prevention and Control of Pollution) Act, 1981. The Environment (Protection) Act, 1986, and The Biological Diversity Act, 2002 can be filed. The NGT can also act as an appellate body when an order is issued under the aforesaid acts. It is noteworthy here that cases under the Wildlife (Protection) Act, 1972 and the Indian Forest Act, 1927 can’t be filed at the tribunal.
The NGT can provide remedies like restitution, compensation, penalties like imprisonment and fines etc. The tribunal’s decision can be appealed at the Supreme Court within 90 days of the communication of the order.
Now, in a recent development, the question as to whether the NGT can take suo moto cognizance of a case without the filing of an application has arisen. The Supreme Court is set to decide on the matter very soon
Filing an offline complaint at the NGT
The process to file an offline complaint at the NGT is fairly simple. One has to just visit a tribunal office and fill in the application form for a complaint. Petitions in the form of written letters are also accepted. If one is filing a case which is not seeking compensation, Rs. 1000 must be paid as a fee. If the case involves compensation, one percent of the same (or a minimum of Rs. 1000) must be paid.
How to file a complaint online at the NGT?
The steps to file a complaint online at the NGT are as follows
- Go to the online portal of the NGT (https://ngtonline.nic.in/efiling/mainPage.drt).
- Click on ‘Applicant Corner’.
- Sign up as an individual/advocate/institution or sign in if you’re already a user.
- You will require a document as ID Proof that you must upload as a picture or PDF.
- After signing in is done and you’ve agreed to all terms, go to ‘petition filing’ and fill up your details following which a reference number will be given.
- Then details on yourself and the respondent will be required.
- Finally you must fill in details about the complaint and you will be required to submit documents to prove your point.
- Once you fill them up, you will get a preview of your application which you will have to confirm.
- Finally, you will be directed to the payment section where payment can be done online.
- Once the complaint is filed, you will also be able to track your complaint’s status through the ‘Track Complaint’ option.
The NGT is a body that is of paramount importance as it helps in quick disposal of cases in what is a hugely crucial area of law – environmental protection. While there are a few challenges that face the tribunal, the NGT has been instrumental in passing key orders and its role will only continue to become more and more marked as time goes on. Therefore, the general public must be given maximum awareness of the existence of such a body as well as the procedures involved in filing a complaint – both offline and online.
By Nevin Clinton
What is a prospectus?
A prospectus is a document issued by a company that has important information on the investments that investors can make. The document offers (or must offer) a transparent look at the company, its securities in the market, and so on. The prospectus is among the first documents that is usually referred to when an individual contemplates making investments.
Section 2(70) of the Companies Act, 2013 defines a prospectus as “a document that invites offers from the public for the subscription or purchase of the securities of a company.” Also, Section 28(2) of the Act states that just about any document that offers sale of shares will be considered to be a prospectus.
Need for a clear and transparent prospectus
A prospectus is of paramount importance to both companies and investors as it offers a clear view on the securities offered. The document helps in both the companies and investors identifying the right match. Therefore, a prospectus must always be clear, transparent and true. Even if there are future predictions or projections that are mentioned in the prospectus, they must be reasonable.
Will inaccurate future projections fall under ‘misrepresentation’?
Misrepresentations in prospectuses warrant punishment and the Companies Act has provisions for the same. Now, blatant false statements in the document can be easily deemed to be misrepresentation and be punished.
But, the situation gets tricky when there are future projections made. The question arises as to when future projections will be deemed to be misrepresentation. It is obvious that not all future projections will be accurate. Therefore, the issuer of a prospectus will not be held responsible for every minor error. Rather, he will be held liable when false statements are not made in good faith. The basis and materiality of the statement will be examined to determine the same as has been laid down by the National Company Law Tribunal (NCLT) in various cases.
Liability in case of misrepresentations
The liability for misrepresentations in a prospectus can be either civil or criminal or both. Civil liability will occur when an individual has suffered damage because of buying shares on the basis of misrepresentations in the prospectus. Here, a lawsuit under Section 37 of the Companies Act can be filed and the issuers of the prospectus will be punished under Section 447. The aggrieved property can also call for rescission of contracts and other relationships with the company.
Criminal liability will also arise in case of misrepresentation as all individuals who authorize the misstatement in the prospectus will be liable for fraud. Punishments will include imprisonment for a minimum of six months and a maximum of ten years along with a fine. It is noteworthy here that apart from civil or criminal liability, action can also be taken under the Indian Contracts Act, 1872 which defines misrepresentation under Section 18. So if misrepresentation is proved, all the contracts that are signed with regard to the prospectus will become voidable at the option of the investor. Also, compensation can be claimed under Section 75 of the Contracts Act.
Who can be held liable for misrepresentations in the prospectus?
Every person who has given consent to the prospectus by signing will be held liable in case of misrepresentations. This could be all those concerned with the management of the company like directors, managers, secretaries, etc.
Exceptions from liability
An individual or the issuer of a prospectus can escape liability for misrepresentation in a prospectus if he can prove materiality in his statements and that he had ‘reasonable grounds to believe that the statement was true or the inclusion or omission was necessary and believed in it at the time of issue of the prospectus’. Similarly, if he can prove that the prospectus and the statement was made without his authority, consent or knowledge, liability can be escaped from.
It is necessary for every company to understand that the prospectus is a crucial document in which misrepresentations will only cause harm rather than good. Complete transparency will lead to getting the perfect investor while also ensuring smoothness in how the company runs and therefore, great care must be taken while drafting it.
Arbitration is gaining importance in India as the court system is overwhelmed with enormous pending litigation.Continue reading