Regulations
Beyond Section 66A: Draconian Laws & Their Implementation Need Review
Section 66A, is only one of many ways in which the State and its entities can unjustly curtail individual freedom. Here is one more example—of SEBI
 
The social media erupted in jubilation over the Supreme Court (SC) of India’s judgement scrapping Section 66A of the Information Technology Act (IT Act). The elation is well warranted. After all, the 2008 amendment to Section 66A allowed the police, and everyone who could influence them, to arrest, victimise and terrorise us, based on the most specious interpretation of “grossly offensive or menacing messages.” 
 
Unfortunately, this celebration ignores the fact that a nasty government has many more such weapons in its arsenal. Also, many people with power—netas, babus, cops, regulators, investigation agencies, journalists and corporate houses—will ruthlessly curtail the liberty and freedom of ordinary persons, if they can get away with it.
 
One of the many cases against Section 66A before the SC was filed by www.mouthshut.com, a popular site which allows individuals to post frank reviews of brands, products and services. Its founder, Faisal Farooquie, was forced to approach the apex court to put an end to threats, defamation notices and over 800 ‘takedown orders’ to remove negative content. Many notices demanded the IP addresses of reviewers. Mr Farooquie says, “We were forced to remove content; else we risked exposing our reviewers to potential arrest.” The threats were from businesses whose CEOs usually present a benign face while their legal teams play dirty. Following the SC judgement, courts will determine the content that must be removed. 
 
The Section 66A judgement has, indeed, overturned one of the worst curbs on freedom of expression; but it is just the first step towards undoing the many damages caused by the UPA (United Progressive Alliance) government.
 
Two other orders, in March 2015, demonstrate the dangerous portends of empowering the Securities & Exchange Board of India (SEBI) with draconian powers to jail individuals, or to destroy companies and shareholder wealth, through capricious actions. Worse, SEBI’s badly conceived actions have probably let off two sets of entities that deserve severe punitive action.
 
Let’s start with DLF Ltd, where the Securities Appellate Tribunal (SAT) overturned SEBI’s order barring the company and its chairman, KP Singh, and key directors from the capital market for three years. As I have pointed out earlier, SEBI’s investigation dragged on for seven years, when DLF was perceived to be close to the UPA high-command. Once the Modi government came to power, SEBI got cracking on a complaint about misstatements in DLF’s initial public offering (IPO) prospectus of 2007. Its October 2014 ban on DLF was geared to cripple the company at a time when the realty market was saddled with unsold inventories and banks were trying to recover over Rs20,000 crore from DLF. The stock crashed 28% on SEBI’s order. 
 
We have no sympathy for DLF’s arrogant promoters and their attempts to short-change investors. But that is precisely why one expects the regulator to ensure that its enforcement actions stand the scrutiny of legal appeals. 
 
Instead, SEBI repeatedly misled investors by being soft on DLF, even supporting its obfuscation of facts in court. The SAT order, correctly, says that SEBI “cannot suddenly be allowed to take a somersault after 7 years and come to a contrary view,” particularly, at the instance of a complainant who had his own vested interest in the matter and is not even an investor. SAT has also noted the losses caused to investors after the SEBI order and called it a ‘grave miscarriage of justice’. Ironically, it will be a grave miscarriage of justice if DLF promoters get away with their shenanigans and SEBI’s top brass is not held accountable for dragging its feet and its multiple somersaults. 
 
It is pertinent to note that even when Indian courts strike down controversial, or vindictive, orders of regulators or investigation agencies, they rarely pin accountability on specific officials, or question the process of supervision and governance. Payment of costs and damages to those affected by such actions are  niggardly, usually. On the other hand, the regulator uses taxpayers’ money to hire the best legal firepower (often a solicitor general or attorney general) and can choose to appeal, or drop cases, without serious accountability.
 
This is best exemplified by how SEBI exercised its newly acquired power to arrest and jail. This power was granted through a hasty amendment of the SEBI Act at the end of the UPA government’s term. On 18 December 2014, 58-year old Vinod Hingorani, non-executive chairman of Adam Comsoft and Kolar Biotech, was sent to jail for failing to pay a Rs1.10-crore penalty. 
 
The case pertains to three companies that indulged in outrageous market manipulation and cheated investors; these were: Kolar Biotech, Adam Comsoft India and Soundcraft. This is probably why there was no comment or support from industry chambers and law firms over about the manner in which SEBI exercised its powers. All three companies are connected to Raj Kumar Basantani. After a slow, dragging investigation, SEBI ordered a penalty of Rs1.10 crore for fraudulent activities which was not paid for over four years. So, SEBI went after Vinod Hingorani to recover the money (Mr Hingorani is the brother of Raj Basantani’s wife, but claims that he was only an employee). 
 

SEBI first attached his demat and bank account but found just Rs5,160 there. Then, he was issued two quick show-cause notices, on 21 November 2014 and 10 December 2014, asking why he should not be jailed for failing to pay. His passport had already been impounded. After rejecting several other pleas by Mr Hingorani, including one for legal representation, SEBI decided to detain him in its office on 27th December until he submitted a proposal to pay.  On 28th December, it sent him to jail when he failed to come up with a payment plan. SEBI’s speed of action would have been highly commendable, only if it had shown the good sense to follow the tax-recovery rules (under which it exercises power of arrest and imprisonment), because it is playing with the life and liberty of an individual.
 
Mr Hingorani approached the Bombay High Court (HC) which first decided on the jurisdiction issue and then ruled that SEBI had exercised “the power of arrest in total contravention of the provisions” and that the order was “arbitrary, illegal and void.” The HC also noted that SEBI had failed to show that Mr Hingorani had concealed, transferred or removed his property. In a stinging indictment, the HC said, “Rule 73 does not confer power on the Tax Recovery Officer to arrest and detain the defaulter for not giving a proposal for payment of dues. Ordering arrest and detention for not giving a proposal of repayment is a sheer abuse of power. Similarly, in the absence of the finding that the petitioner had means to pay, the mere non-payment of dues does not constitute neglect or refusal to pay.” 
 
Ironically enough, nobody has any sympathy for Raj Kumar Basantani and his fraudulent companies that have cheated a large number of investors. He surely needs to face punitive action. But why did the regulator act with such obscene haste, chase the wrong target and damage a perfectly good case, when thousands of others (such as the Reliance insider-trading case) are allowed to drag for decades? Isn’t it commonsense that you exercise utmost caution while using the power to arrest for the first time? Especially when the law prescribes an elaborate procedure to ensure that the power of arrest is not applied recklessly and vindictively. Unfortunately, such arrogance had become a norm with the UPA government, its regulators and investigation agencies.
 
Nowhere in the world are regulators allowed to arrest people without intervention from courts. SEBI’s hasty action shows that India, too, needs to put in place some checks & balances to ensure that the regulator exercises its powers in an accountable manner and after following due process. Will the Modi sarkar work to scrap these draconian amendments, or, as in the case of Section 66A, go along with the mess that the UPA-2 has left us in? 
 

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COMMENTS

Shri Gopal Soni

2 years ago

Organisations,in India, have learnt the fine art of legal jugglary.
The writ petition is basically a protection of law to a citizen whose fundamental rights are affected by order of a Government agency/state. However,consequent to the 29.4.2008 directions of Central Vigilance Commission "to ensure that no harassment is caused to
complainant" I am slapped with two stay orders from two different high courts filed on
behalf of an agency of state to deny fundamental rights to an honest citizen. https://twitter.com/revribhav

MG Warrier

2 years ago

Exactly. Section 66A and its dropping attracted attention because of the ‘social media’ implications. There are several pieces of obsolete laws being ‘selectively’ used/abused from time to time. Apex Court or the Law Ministry should cause a review of laws applicable to each sector. The purpose will be served only if the review is comprehensive, focused and done by experts who do not have ‘constituency’ interests.

SuchindranathAiyerS

2 years ago

All of Indian law is "theoretical", contradicting itself, constructed to prevent the crimes portrayed on Film Theater and TV screens by a bunch of Ball Beaters, Bollywoodies and Criminals. The laws were constructed since inception of the Indian Republic to make the ruling scum wealthy have lots at the expense of the haves and have nots while suppressing and oppressing them. The laws are used as and when convenient to maintain this tradition. India has achieved the impossible and transported an entire nation back across time and space to medieval Europe! That said, create a fit for purpose Judiciary Police Force and enforce equality under law and rule of law without exception to proactivey eliminate the thousand rebellions that thrive across India. But that may never happen for a century after introducing universal primary and secondary education AND doing away with reservations and extortion (aka corruption)

S Hariharan

2 years ago

We're concerned that the Aadhaar project itself may curtail the civil liberty. Besides, doubts have been raised on the feasibility of such a huge project. Supreme Court too has put down heavily that it cannot be mandatory. UID is criticised as an infringement of civil liberties. The UK government cited higher costs, impracticality and ungovernable breaches of privacy as reasons for the cancellation of the National ID project.

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US uses 'Intel Inside' model to push GM crops
The 'Intel Inside' model has become the template for deploying agricultural biotechnology from American publicly-funded research institutions and private corporations to farmers in developing countries.
 
Just as the combination of Microsoft's Windows software and Intel's assurance of ever-increasing computing power drove the growth of the personal computer industry, genetically-modified disease, insect and stress tolerant traits developed for philanthropy or profit in the United States are being tailored for regional requirements by national partners for cultivation by farmers, says Vijay K. Vijayaraghavan, chairman of the Hyderabad-based Sathguru Management Consultants.
 
Sathguru is the South Asia coordinator for Agricultural Biotechnology Support Programme - II, a US government-funded initiative led by Cornell University to popularise GM crops. (ABSP II delicately calls itself an effort to enable farmers and consumers worldwide to make informed choices about bio-engineered products!).
 
In the case of insect-resistant Bt brinjal, whose release in India for commercial cultivation was stalled five years ago by then environment minister Jairam Ramesh, the gene, toxic to the fruit and shoot borer, was licensed by Monsanto, the US crop science company (2014 sales $15.85 billion) to Maharashtra Hybrid Seeds Company (Mahyco).
 
What was not heard in the din created by those opposed to the technology was that Mahyco had allowed Tamil Nadu Agriculture University, Varanasi's Indian Vegetable Research Institute and the University of Agricultural Sciences, Dharwad, to incorporate the gene in open pollinating varieties of brinjal, whose seed farmers could save and use for free. Mahyco reserved the right to sell hybrid seeds.
 
While India spurned the offer, the Bangladesh Agriculture Research institute (BARI), went ahead and released the Bt varieties in October 2013 under the same arrangement with Mahyco as in India.
 
Those opposing Bt cotton, the only GM crop approved in India, cite as a reason the high cost of hybrids which cannot be re-used (without loss of vigour). The seed is under price control; a packet of 450 grams cannot be sold for more than Rs 930 ($15). Farmers do not seem to mind as 95 percent of India's cotton acreage is now planted with the insect-resistant hybrids. They are possibly compensated by savings from reduction in pesticide sprays and crop damage.
 
Bt brinjal is being grown by 108 farmers in Bangladesh and the crop is now being harvested. Farmers have reported good gains from savings in pesticide sprays and higher prices as the fruits are unlikely to be damaged from inside.
 
Bharat Char, who leads biotechnology research at Mahyco, says savings can be as high as Rs.16,000 an acre.
 
Similarly, for late blight resistance in potatoes, the gene has been provided by the University of Wisconsin and Venganza, a private company. The potato incorporates modified bits of the late blight's own gene, through a technique called gene silencing, which enters the disease-causing microorganisms when they attack potatoes, causing them to self-destruct.
 
Venganza is Spanish for revenge. Local varieties incorporating the gene are being developed by the Central Potato Research Institute, Shimla, BARI and Icabiograd, Indonesia's institute for research in agricultural biotechnology.
 
Navigating the thicket of patents can be tricky. Vijayaraghavan explains in an article in the Journal of Intellectual Property Rights that scientists at Cornell University had found a naturally-occurring sugar called trehalose which helps plants cope with and recover from extreme stress. The university had patented a method to put the trait into rice varieties, but could not transfer it outside the US, as an MNC had secured protection for a similar technology.
 
A way out of the tangle was found by getting Greengene Biotech, a co-developer and co-patent applicant with Cornell, in South Korea (where the MNC did not have the patent) to make the technology available to India, with Sathguru securing the MNC's consent. The technology was transferred to Bangladesh by fulfilling the material transfer agreement guidelines and licensing obligations.
 
Evaluation of the transgenic seeds was done by the Directorate of Rice Research, Hyderabad, and Delhi's ICGEB, a non-profit research organization set up by Unido, a UN agency. The testing was undertaken by the Central Soil Salinity Research Institute, Karnal.
 
The Intel Inside model has been emulated by the Indo-Swiss Collaboration in Biotechnology to craft transgenic chickpea which is resistant to the pod borer and cowpea aphids. An agreement has been reached between Assam Agricultural University, Kolkata's Bose Institute and Swiss research organizations for the development of technologies, adherence to milestones, acquisition of relevant new skills and the regulation of intellectual property rights.
 
Based on the highest bid, the technology was transferred to Mahyco on a non-exclusive basis for development of pest resistant hybrids and conduct of biosafety trials.
 
Eight traits in 17 crops are being evaluated for safety by 32 institutions in the country. Field trials are allowed in only four states. The centre is coy about allowing commercial cultivation of GM crops. Intel Inside seems unable to overcome the opposition outside.

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