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Insider Trading in view of the order by SEBI to ban Future group

By: Vatsal Mehrotra

Introduction

Insider trading can be defined as buying or selling of a public company stocks by a person who has non-public and material information about that company or the management decisions to be taken by that company. Depending on when the insider makes the trade, Insider Trading can be categorized as legal or illegal. Material non-public information is defined as any information that could substantially impact an investor’s decision to buy or sell the security that has not been made available to the public yet. This information is largely used in the stock market which engages in trade of shares and securities. The prices for which are subject to fluctuation if there is any important change in the management of the company. Apart from this the fluctuation in the prices of the shares of that company in the stock market, is also visible when important decisions pertaining to mergers, acquisitions or takeovers are undertaken in the company. Knowledge of these changes without the official public announcements is beneficial for the people engaging in such illegal transactions of stocks.

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It is considered one of the most serious crimes in the capital markets as the inside trader has traded undisclosed price sensitive information regarding the shares of that particular company.
However, if the said trade is done towards any regulatory authority or the prescribed authority then the same trade would not amount to any violation of law. In academic circles the idea of insider trading is still debatable as academicians under circumstances feel that insider trading is important for building the trust and confidence of the employees of the company towards the company. Therefore, one must be careful while treating a trade in securities of a company as insider trading. They must consider all the relevant factors like the nature of information, the existence of substantial connection with the company, etc.

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Insider Trading in India

The reason insider trading is considered illegal in law is that it gives a person an unfair advantage and persons not having that advantage cannot trade and will be under loss. Moreover, fair opportunity which shall be granted to everyone trading in the stock market to buy and sell the shares will be lost and the holder of the illegal information shall be creating unfair transactions. To counter such a situation, the legislature passed Securities and Exchange Board of India Act, 1992 (SEBI Act, 1992), in which, under section 15G, for insider trading was provided.

The penalty for such an offence was provided to be not less than ten lakh rupees which may extend to twenty-five crores rupees or three times the profit made on such trading. In fact, the SEBI regulations have been amended from time to time. After Hindustan Lever Ltd v. SEBI, (1998) 18 S.C.L. 311AA, the regulations were for the first time amended in 2002 after which the next set of amendments came in 2019 on the recommendations of the Fair Market Committee (FMC). While the most recent reform came after the meeting of the SEBI on 25th June, 2020, where maintaining a structured database containing the nature of unpublished price sensitive information (UPSI) along with the name of the person sharing such information was incorporated.

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Future Group and Insider Trading ban

SEBI on 3rd February, 2021, banned Kishore Biyani, founder of Future Retail Groups from buying, selling, or dealing in securities of Future Retail for two years. His brother Anil along with several other entities were also banned. This was done in relation to a case filed back in 2017 where enquiry was called in the use of UPSI to trade in Future Retail shares. The SEBI found out that several entities Future Corporate Resources Pvt. Ltd (FCRL), FCRL Employee Welfare Trust, etc., were acting in connivance with the Biyani family for insider trading.

The order stated that the Biyani-family controlled entities were in violation of the regulatory mechanism as they had indulged in insider trading in the shares of group flagship Future Retail Ltd (FRL) prior to an announcement about the consolidation of the group’s offline and online home retail business into a single entity. Following the announcement in April 2017, shares of Future Retail hit a record high. The price of the scrip of FRL increased 4.68% from Rest. 292.60/- per share (closing price on April 19, 2017) to Rs.306.30/- per share (closing price on April 20, 2017).

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The order had also clarified that “When a person who has traded in securities has been in possession of unpublished price sensitive information, his trades would be presumed to have been motivated by the knowledge and awareness of such information in his possession. The reasons for which he trades or the purposes to which he applies the proceeds of the transactions are not intended to be relevant for determining whether a person has violated the regulation. He traded when in possession of unpublished price sensitive information is what would need to be demonstrated at the outset to bring a charge.”

In April, 2017, the Future Retails Group consolidated its home retail business, offline operated by its HomeTown stores while online and ecommerce by Blue eServices which owns and manages fabfurnish. This was done to bring “greater visibility on the performance of the home retail business and e-commerce home retail business”. However, Biyani and other related entities started buying FRL shares from March 10th, 2017 when the decision was internally improved even though this was made public on April 20th, 2017 during market hours.
The funds for purchase of the FRL shares during the UPSI period was done on the written instructions and authorization by Kishore Biyani and Anil Biyani to their stockbroker Indiabulls. SEBI fined them heavily for this holding the entities guilty of the crime of insider trading.

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However, on 6th February, 2021, the ban by the SEBI was challenged and Kishore Biyani moved the Securities Appellate Tribunal (SAT) challenging the ban. In fact, the FRL spokesperson has said “On merits, the SEBI order is untenable since it treats a well-anticipated and publicly well-known impending reorganisation of the home furnishing businesses that the Future Group affected in 2017 to be unpublished information.”

Approach of the Courts in Insider Trading Matter

The juridical approach has always been such that inside traders have been dealt strictly in accordance with law. In Securities Exchange Commission v Rajat Gupta ,747 F.3d 111, the defendant had traded in confidential information worth in billions and he was convicted for a period of two years and fined five million dollars along with returning the profits gained from insider trading.
Gujarat NRE Mineral Resource Limited v. SEBI, (Appeal No. 207 of 2010 decided on 18.11.2011), the main issue was whether investment from one company and selling it to the other company affects the prices of shares. The Appellate Tribunal decided against it as it held that since an investment company’s primary objective is buying and selling of securities, such an act would not amount to price sensitive information. After Hindustan
Hindustan Lever Limited v. SEBI, (1998 SCL 311), the regulations were amended by the SEBI in such a manner that any speculative news published in the newspaper or in electronic media about a company would not amount to publication of price sensitive information.

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Recommendations to improve regulations against Insider trading

The harmful effects of insider trading is disruptive for the market and certain measures can be taken to prevent such incidents. To prevent such incidents the stock exchanges play a very important role and the proactive approach by them can help by duly monitoring the transactions by the insiders constantly and instantly reporting any suspicious activity by the insider to the SEBI. Furthermore, the regulations can be amended to impose liability on the person who receives the tip for trading in confidential information. Other than that the investors who are contemporaneously trading at the time of insider trading must be given the option to recover the losses suffered from the insider.
Rachana Panguluru, Vamsi Krishna Bodapati, Insider Trading- Comparative study with the UK and India, Manupatra.
This action might refrain the insiders from insider trading because many investors can exercise pressure on the insiders. The companies can also have qualified stock brokers who they make mandatory for all the insiders to purchase stocks only through that particular broker. The qualified broker will check whether the insider purchasing the stock satisfied all the conditions preceding the purchase or not and duly report them to the company.

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Nonetheless, the efforts undertaken by SEBI to prevent insider trading is commendable and has helped India emerge as a top player in the capital market and its insider trading prohibition laws are equally competing with such laws in the developed countries. SEBI time and again constituted committees to have the regulations and laws on the prohibition of insider trading updated. It is constantly on a run in updating all the laws to prevent insider trading. SEBI started observing the markets to get rid of the insider trading activities at the root level itself.

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Racism In Sports: International Laws & Rules From Various Jurisdictions

By: Umang Chaturvedi

 

“Why are all the angels white?

Why ain’t there no black angels?”

                                                        -Muhammad Ali

Abstract

Sports have acted as a medium to connect people beyond language, ethnicity, culture and boundaries. In its pure sense, it is a satisfying activity at the micro-level and nothing less than a war at the macro level. The scale of competition increases with the hierarchy and so does the complexities. Some athletes and sportspersons are revered equivalent to Gods in their respective fraternity by the public. This respect is gained by them because of the magnanimity of sports. The business that goes behind the curtains has resulted in this magnanimity. But these Gods within the ambit of their magnanimity have not been untouched to the social issues which normally go unnoticed. Issues like racism in sports are not done yet from the world let alone the sporting facility. This article elucidates the reasons of racism present in professional sports with an attempt to define the core and genesis of the problem.

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The author explains the legislations/law which helps to counter this problem at global level. Additionally, the author has tried to provide an analysis through the cases of international performers who were subjected to racism in their careers. Certainly, the issue of disparity on the basis of colour begins within the nations. The problems are much more than racism being a ground of discrimination. In a country like India the issues even extend to discrimination on the basis of caste, sub-caste, race, gender, sex, etc.

  1. Introduction

Racism is defined as “a belief that race is the primary determinant of human traits and capacities and that racial differences produce an inherent superiority of a particular race”[1] by the Merriam Webster dictionary. Senseless killings and instances of Eric Garner (2014), AhmaudArbery (February 2020), Breonna Taylor (March, 2020) and George Flyod (May 2020) have witnessed sports community coming together to support the right cause irrespective of differences. Such issues force athletes to speak effectively as they do not want to go unheard for the social cause. LeBron James, Stephen Curry, James Harden, etc. are some of the most vocal NBA players after the recent incidents occurred. Other figures from different sports that have been vocal are Lewis Hamilton, Colin Kaepernick etc. They have supported the cause too.

The problem has not been untouched to the fraternity of sports. Rather it is more rampant. Any act within the territorial boundary of a competitive sport can be disguised as an act in the heat of the momentby the offender. Calm and composure are expected the most out of an athlete and sportsperson. These acts from the coolpeople then cannot be covered under the garb of competition or heat of the moment.

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  1. Core Problem

With cricket being popular as the game of gentlemen, it upsets the fraternity when conflicting views are shared by somebody belonging to the game itself. In late June 2020, West Indies cricket team’s captain Jason Holder said, “it is time for the entire cricketing fraternity to treat racism as seriously as match-fixing or doping and to hand tougher bans on racial offenders.”[2] Such statements point fingers at the authorities and the incapability of sport-specific laws which need to get stricter.

The core of the problem is the chauvinism that a superior country’s men carry with them. Such stereotypes are broken easily when a deprived and dominated wins or creates his/her space in the sport bare minimum. In context, 2013’s Chadwick Boseman starrer sports-drama film, “42”[3] came in light. It highlighted the efforts of an African-American Major League Professional player Jackie Robinson who was subjected to racism in a then all-white baseball league by fellow players and fans. His jersey number was later retired in respect, on which the film’s name was based.To draw a parallel from the same, the core of the issue lies within the people of the sporting fraternity. Everybody associated with it especially the fans.

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  1. Laws, legislations and efforts

Issues raised through acts done by black athletes are certainly to bring into light the adversities they’ve faced over the course of history. These issues are political in nature which overlaps with sports. This overlap has its own interpretation where some define it to be right and other define it to be wrong. “Dissent in sports is usually understood as expressing dissatisfaction against an umpire’s decision. However, in the present context, dissent must be understood as a conscientious protest against a larger problem that has socio-political undertones.”[4] In this sub-heading, the author has tried to analyze various measure and steps taken by the way of local laws of different jurisdictions. The examples considered for study include and are categorized into Australian laws, European laws and initiatives, Conventions of United Nations, laws of USA and Indian laws.

  1. Australia

The provisions of the International Convention on the Elimination of All Forms of Racial Discrimination (“ICERD”)[5] are incorporated under Australian Law through its Racial Discriminations Act of 1975. It is a general legislation extending to sports and related organizations. Australian Football League (AFL) guidelines are strict regarding racism since the introduction of Rule 30 in 1995. Rule 30 is used to tackle racism and religious vilification. Even the laws of Australia are stringent regarding racism in general through Racial Discrimination Act, 1975 and Racial Hatred Act, 1995[6].

In 2008, Indian spinner (cricketer) Harbhajan Singh was penalized for allegedly expressing racial views on an Australian cricketer Andrew Symonds when the former called him ‘monkey’ during a test match in Australia. This embarrassing event was a confusing one. It was deliberated if the act was racial or not because the remark clearly did not qualify for the alleged violation but it was still derogatory. Eventually Justice John Hansen of Australian Appeal Court absolved the cricketer of liability and cleared the charges. What adds to the problem is that a spectator cannot be banned or fined for comments because that is the major revenue generation source for clubs. Australian local football has seen various instances where boys aged 12-14 who come from other countries to make their career face racism at a vulnerable stage.[7]

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  1. Europe

Europe has been the center stage for football with record breaking viewership every year. Multiple local leagues are supported due to interest and large fan base. As a cherry on the top, UEFA Europa League and UEFA Champions League have dominated global football in all terms. There are multiple organizations and legislations which help in tackling the problem in Europe. FARE (Football Against Racism in Europe) Network is one such organization which has received backing from governing bodies like UEFA, FIFA and European Commission for the common objective of eradicating the social issue. Headquartered in London, it was set up in the year 1999 at Vienna (Austria). It gained relevance in the contemporary scenario when it began to work as a network of enthusiasts, players, associations, etc. as members to stand strong against the discrimination.

A similar initiative as a 3 day campaign was launched in 2006 by the Romanian Football Federation in association with National Council for Combating Discrimination (a society-institute based in Romania). It was named Racism Breaks the Game which was organized to combat discrimination against the Romani minority and to promote fair play in football. Even UEFA DR Article 14[8] prohibits racism of any form and prescribes ways to tackle it through guidelines. Article 165 of Treaty on the Functioning of the European Union (TFEU) also acts in the same regard. It deals with all such issues arising out of sports. Lisbon Treaty though allows the Union for minimal interference but acts strictly through courts for cases arising out of racism.

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  1. United Nations and United States of America (USA)

United Nations has time and again used sports as a mode to end racism at global level. It was reiterated by then Secretary-General Ban Ki-moon that, “Sport is a universal activity that can reaffirm our fundamental human rights.”[9]He urged to “use the power of sport to end the blight of racism” as it marked the annual International Day for the Elimination of Racial Discrimination in 2013.Additionally, The Durban Programme of Action 2001 in paragraph 128, 129 and 218 urges international and national sports bodies to tackle racism effectively. Inter-American Convention against Racism, Racial Discrimination and Related Forms of Intolerance, 2013[10] is another internationally signed document.

In USA, the Patsy Mink Equal Opportunity in Education Federal Act, 1972 complements the Civil Rights Act, 1964 “in the area of public education and federally assisted programmes (enacted to end discrimination in various fields)”[11]. The legislation has ensured equal access to sports for all active programmes that receive federal funding in USA[12]. Even after attaining peak of success in sports, public and spectators disregard such facts and direct racist comments in NBA, Pro Baseball and NFL. In early 2019 Oklahoma’s basketball star Russell Westbrook faced racist remarks in an away game at Utah.

  1. India

India is a home to multiple sports and professional leagues like IPL, ISL, IHL, Pro-Kabaddi etc. The country is more special due to its diversity. Additionally the essence of regional representation varies. There are sub-divisions and regions within regions. Even a whole north-east is described into 7 sisters further. South, in itself is divided in historical kingdoms now states. This division is interesting but when people from different backgrounds face each other in state/national camps, there are conflicts of opinions, likes, dislikes which might be detrimental in the longer run for a team representing at the international level.

The best example can be drawn from 2007’s Indian film Chak De! India. Shah Rukh Khan embodied the role of hockey coach Maharaj Krishan Kaushik mixed with the background of Indian player Mir Ranjan Negi. The film was based on a real story where Indian Women’s Hockey Team won 2002 Commonwealth Games. It showed the reality of internal conflicts (due to colour, region, state, racial and religious bigotry[13] etc.) between players during the camp.

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India introduced the Anti-Discrimination and Equality Bill 2016 (ADE Bill) in the Lok Sabha to tackle any form of discrimination. Other than broad discussions under Article 14, 15, 16 of the Constitution of India, federations are entrusted with the duty to handle all issues relating to sports. Additionally, Section 153A of the Indian Penal Code, 1860 deals with the punitive measure related to racist acts or comments.

  1. Conclusion – Solution and Criticism

In all, the issue of racism has proven to be detrimental to the development of some athletes but there are many amazingly great sportspersons who have defeated all odds and reached the top in their respective sports. The problem is deep rooted in the social system which comprises of humans, which is a much broader aspect than society. It includes athletes, sportspersons and all other people related to the fraternity of sports in one way or other. To eradicate the issue of racism from sports, the primary need is to make people realise that there are no differences in reality, they are essentially in the mind of individuals and their beliefs, which is prima facie incorrect.

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Until the mentality of important organizations like IOC does not change, no substantial change can be found. The controversial Rule 50 of the Olympic Charter prohibits any “kind of demonstration or political, religious or racial propaganda…in any Olympic sites, venues or other areas”. It was clarified by the authorities in January 2020 in preparation of scheduled Olympics that any gesture or kneeling (like past incidents of Gwen Berry’s fist on podium and Colin Kaepernick’s kneeling) will not be entertained at the events.

Until IOC resolves issues like these where the anti-racist demonstration are looked at from a perspective of political overlap, there won’t be a solution. The international sports guidelines in context with racism are soft but strict. Still there is a requirement for spectators, fellow players and organizations to be careful specifically around the young representatives of respective sports. A negative impression is made for a second inside the court/field which stays and impacts a vulnerable young player for his whole life. Sports should be used as a medium for the primary purpose of leisure and shall only be associated with the efforts, hard-work, dedication and sweet success involved.

[1]Racism, Merriam-Webster Dictionary (Jan. 23, 2009).

[2]Sportstar, Jason Holder: Racism Should be Treated as Seriously as Match-Fixing and Doping, (June 28, 2020), https://sportstar.thehindu.com/cricket/england-vs-west-indies-racism-sammy-jason-holder-gayle-icc-ipl/article31 937748.ece.

[3]History.com, Jackie Robinson Breaks Color Barrier, (April 13, 2020), https://www.history.com/this-day-in-history/jackie-robinson-breaks-colorbarrier#:~:text=On%20April%2015%2C%201947%2C%20Jackie,for%20more% 20than%2050%20years.

[4]Shivam Singh, When Sports Align With Dissent, The Indian Express, (June 26, 2020), https://indianexpress.com/article/opinion/black-lives-matter-when-sports-aligns-with-dissent-6477907/.

[5]Australian Human Rights and Equal Opportunity Commission, What’s the Score?A Survey of Cultural Diversity and Racism in Australian Sport, (2006), p. 8, https://www.humanrights.gov.au/publications/whats-score.

[6]Id.

[7]Sophie Kesteven, Kids are Being Subjected to Racist Abuse at Junior Sports Games, ABC Radio National, (Nov 1, 2019), https://www.abc.net.au/news/2019-11-01/racism-in-junior-sport-australia-talks/11636174.

[8]UEFA Disciplinary Regulation, 2019 Edition, https://editorial.uefa.com/resources/0257-0ddf58550d23-3b55809 3983e-1000/disciplinary_regs.pdf.

[9]UN News, No Place for Racism in Sports, UN Declares on International Day, (March 21, 2013), https://news.un.org/en/story/2013/03/435072-no-place-racism-sports-un-declares-international-day.

[10]Organisation of American States, Inter-American Convention Against Racism, Racial Discrimination an Related Forms of Intolerance, http://www.oas.org/en/sla/dil/inter_american_treaties_A-68_racism.asp.

[11]ACLU, Gender Equity in Education, https://www.aclu.org/title-ix-gender-equity-education.

[12]U.N. GAOR, 69th Sess., A/69/340, Combating Racism, Racial Discrimination, Xenophobia and related intolerance, (Aug. 22, 2014), https://www.ohchr.org/Documents/Issues/Racism/A-69-340.pdf.

[13]Jaspreet Pandohar, Chak De India! BBC, (August 1, 2007), http://www.bbc.co.uk/films/2007/08/06/chak_ de_india_2007_review.shtml.

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Separation of Powers Between the Organs of the Government in India

“When the legislative and executive powers are united in the same person, or in the same body of magistrates, there can be no liberty, because apprehensions may arise, lest the same monarch or senate should enact tyrannical laws, and execute them in a tyrannical manner.” – Montesquieu

Introduction
The division of power is based on two methods, i.e., either territorial where the power is divided between the central government and different regional governments; or functional as the work of the government has become so extensive that in the interest of efficiency and effectiveness it is deemed necessary to entrust the work of the government to different and specialized organs. Government powers have traditionally been classified as legislative (law-making), executive (law-enforcement) and judiciary (interpretation of laws and adjudication). In modern political thinkers it was Bodin who first advocated the idea of separation of executive and judicial powers in the interest of better administration of justice. Locke also advocated the separation of powers and recognized the importance of judicial function to be just and impartial. However, ideas of these great thinkers were developed and formulated into a coherent theory by the French philosopher Montesquieu who gave the doctrine of tripartite division of governmental functions with mutual checks and balances. He was of the opinion that it is not the machinery of government or political institutions which make the people free. It is the spirit or the manner in which the government organs function that secure freedom or liberties of people. Montesquieu was deeply impressed by the individual freedom and liberty present in the English society and while analyzing the English Legal system he observed that the stability and liberties enjoyed was derived from their adherence to the principle of separation of powers. The doctrine of separation of power as laid down by Montesquieu was to safeguard individual liberty.

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Moreover, there is no liberty if the power of the judiciary is not separated from the legislature and executive. Had judiciary been joined with the legislative then the life and liberty of the individual would be subject to arbitrary control because the judge would then be the legislature; had it been clubbed with the executive then the judge might behave with violence and oppression. Montesquieu vehemently opposed the concentration of government powers, legislative, executive and judicial, in the hand of one person or in the same body of person which would be dangerous to individual liberty. There could be no protection of the individual freedom as the legislature, the prosecutor and the judge all would be same and hence there can be no check against abuse of executive authority, legislative tyranny or judicial misbehavior. He therefore, advocated that the three functions of the government should be entrusted to three different departments, each separately and independently performing its own distinct function.

 

Application of Doctrine of Separation of Powers under Indian Political System

In the Indian Constitution, which provide for parliamentary form of government strict separation of the Legislature and the Executive is not possible as the Cabinet consist of persons who are Members of Parliament. Under the Indian Political System there is no rigid separation of powers. The Indian Constitution had the privilege to see the working and taking advantage of other democratic constitutions with their operations.

Under Articles Articles 53(1) and 154(1), the Constitution of India has vested the executive power in the Union and the State with the President and the Governor. However, there is no explicit provision of vesting the legislature and judicial powers in a particular organ. In fact, the power to amend the Constitution is regarded as part of the constituent power conferred on Parliament.

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In Kesavananda Bharati v. Union of India the Supreme Court of India considered the question whether the Parliament’s power to amend the Constitution was unlimited so as to permit amendment or repeal of any provision of the Constitution. A Bench of 13 Judges declared that the power to “amend” does not include the power to abrogate the Constitution or to damage or destroy the basic structure of the Constitution. Some of the Judges mentioned a few basic features by way of illustration: Supremacy of the Constitution, Democratic Republican form of government, Secular character of the Constitution, separation of powers among the legislature, the executive and judiciary, the federal character of the Constitution, rule of law, equality of status and of opportunity.

Subsequently, power of judicial review has been declared as a basic feature of the Constitution in L. Chandra Kumar v. Union of India. The Supreme Court has since struck down quite a few amendments to the Constitution, made by Parliament as violative of the basic structure of the Constitution. Therefore, the Judiciary is independent in its field and there can be no interference either by the executive or the legislature. The judges of the Supreme Court are appointed by the President in consultation with the CJI and judges of the Supreme Court the Supreme Court has power to make Rules for efficient conduction of business. In fact, it is noteworthy that Article 50 of the Constitution puts an obligation over the state to separate the judiciary from the executive. However, since Article is a Directive Principle of State Policy (DPSP) it cannot be enforced in a court of law and has mere persuasive value.

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Similarly, there are certain provisions in the constitution which provides for powers, privileges and immunities to the Members of Parliament from judicial scrutiny into the proceedings of the house. Such provisions are thereby making legislature independent, in a way.

A landmark decision in this regard was the case of Keshav Singh, which was a special reference case, where he was committed to incarceration on the behest of contempt of the Uttar Pradesh State Legislative Assembly. A petition was filed and the Legislative Assembly took a serious view of the matter and passed a resolution that Keshav Singh, his Advocate who moved the High Court and the two Judges who entertained the petition and granted bail had committed contempt of the Assembly and all of them should be produced before it in custody. Subsequently when the matter reached the Supreme Court, where they clarified that once a court is satisfied about the existence and the extent of privilege and its breach it should decline to interfere with the privileges of the House. However, the two judges in this case were not guilty of contempt.

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The Constitution provides for the conferral of executive power on the President. The powers and functions of the President have been powers enumerated in the Constitution itself. The President and the Governor are immune of civil and criminal liabilities. Generally, the legislature is the repository of the legislative power but, under some specified circumstances the President is also empowered to exercise legislative functions. For instance, while issuing an ordinance, framing rules and regulations relating to Public service matters, formulating law while proclamation of emergency is in force. These were some instances of the executive head becoming the repository of legislative functioning. President performs judicial functions also while assenting to death sentences.

On the other hand, the parliament performs certain judicial functions as well. It can decide the question of breach of its privilege, and in case of impeaching the President; both the houses take active participation and decide the charges. Judiciary, in India, too can be seen exercising administrative functions when it supervises all the subordinate courts below. The power of judicial review exercised by the Judiciary also prevents legislative transgression in powers of different organs of the government. The National Judicial Appointment Commission (NJAC) judgement is one such case where the judiciary declared the law of the parliament to be void as it undermined Judicial Independence and Judicial Primacy in the appointment of judges.

Conclusion
In India, we follow the principle of separation of functions and not of powers. And hence, we do not abide by the principle rigidly. An example of it can be seen in the exercise of functions by the Cabinet ministers, who exercise both legislative and executive functions. Article 74(1) gives the Cabinet an upper hand over the executive by making their support and guidance mandatory for the formal head. The executive, thus, is derived from the legislature and is dependent on it, for its legitimacy.

This was the observation made by the Supreme Court in Ram Jawahar v. Punjab. Indian system is developed on the concept of ‘checks and balances’ and the same is consistent with the Montesquieu who had recognized that an absolute separation of powers would lead to state of repose and inaction. Therefore, none of the three organs can dispel the essential functions of the organs, which constitute a part of ‘basic structure’ doctrine. Some of these instances of checks and balances are legislative review of the functioning of the executive by deliberations and discussion in the Parliament; executive appointment of judges (President appoints them); The President can set aside a law passed by the legislative or any guidance provided by the Union Council of Ministers when the same is not in alignment with the Constitution of India. In case, the president assents to the law passed duly by the legislative, it can be repealed by the Supreme Court after a fair trial if it is against the Basic structure of the Constitution. Thereby, it would not be wrong to say that separation of powers in itself is not foundation of liberty. It is the system of checks and balances which allows individual liberty to exist. In fact, in words of Lord Acton: – ‘Power corrupts and absolute Power tends to corrupt absolutely. Conferment of power in a single body leads to absolutism. But, even after distinguishing the functions, when an authority wields public power, then providing absolute and sole discretion to the body in the matters regarding its sphere of influence may also cause abuse of such power. Therefore, the doctrine of separation of powers is a theoretical concept and is impracticable to follow it absolutely.’

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Comparative Study of Drugs and Cosmetics Law In U.K., U.S.A And Germany

By: Vanshika Tewari

ABSTRACT

Human culture is formulated on the basis of ethical society, honesty, integrity, respect, pursuit of excellence, civic duty, accountability and loyalty. Since the dawn of civilization , by trial or error, it has been established that a society and more so it’s medical profession, can survive and thrive only by observance and practice  of certain rules of conduct guided by ethical, moral, legal and social values of land. Medicine has been a field of utmost diligence and even though so many centuries have passed, this profession still holds its merit and authenticity. Further, the need for certain rules and legislative statutes governing the establishment and working of hospitals and its manpower was aggrieved at the time of the colonial regime and the World War scenario. Presently,  there are various other laws pertaining to the governing of hospitals, practitioners/ other employees, sale and storage of the drugs, license and permissions , public and environmental health ,etc.

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Every nation has certain laws that help them in maintaining the standard quality of its drugs and cosmetics and as well as regulates its manufacturing, labelling, export,etc.

In this report we shall further talk about how countries like USA, Germany and United Kingdom regulate their medicines and also compare the methodology they have applied in maintaining and meeting the global health standards for their own produced drugs and cosmetics.

BRIEF OVERVIEW OF THE PREVALENT DRUGS AND COSMETICS LAWS IN THE U.K., U.S.A AND GERMANY

  • UNITED KINGDOM

In spite of the fact that planned to happen from March 29, 2019, the Brexit has now deferred to October 31, 2019. The choice is expected to give more opportunity to the United Kingdom (UK) and the European Union (EU) to concur upon the provisions of the UK leaving the EU.

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Up to this point, the EU guidelines straightforwardly influenced the restorative items that are appropriated in the UK. In any case, with the Brexit in situation, they are not, at this point expected to be appropriate in the UK locale as the UK is required to be treated as a third nation. In basic words, the UK won’t need to conform to the guidelines pertinent to the EU part states. Consequently, to line up with the Brexit changes, for Cosmetic items, some new laws have been laid before the UK parliament.[1]

United Kingdom has for ages been a part of the European Union and therefore the gudlines laid down by the EU for the working and regulation of this sector was to be followed and obligated too but earlier in 2019 after the BREXIT happened U.K. has given up with the E.U’s guidelines and framing their own laws pertaining to this, like –

The UK Cosmetic Regulations Draft, The Cosmetic, Toiletry and Perfumery Association (CTPA) has proposed the UK Cosmetic Products Statutory Instrument to the UK parliament to guarantee that post the Brexit just safe corrective items are circulated in the UK. The new draft will be in accordance with that of the EU’s including the rundown of prohibited and confined fixings.

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To enter the UK beautifiers showcase, organizations will be required to delegate a UK-based Responsible Person (RP), who is relied upon to tell the item to the capable position. To ensure the notice procedure smoothed out, the CTPA is by all accounts during the time spent structure the necessary item notice entrance for the UK like that of the Cosmetic Product Notification Portal (CPNP) of the EU.[2]

Once Brexit happens, all the corrective items told to the EU through CPNP are required to be informed to the UK notice framework inside ninety (90) days. Following are the pre-necessities for informing an item in the UK-

The name and category of the cosmetic product

The name and address of the responsible person

The content and ingredients of the product

What more! – the name of a restorative item should likewise bear the name and address of the Responsible Person. Post Brexit, restorative items marked with an EU-27 location and consistent with the EU naming guideline will be viewed as agreeable for a long time in the UK. If there should be an occurrence of imports additionally, the UK should consent to the import guidelines of the EU.

But still the restorative guidelines of both the districts are as of now muddled!

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  • UNITED STATES OF AMERICA

In the United States, all drugs and cosmetics are regulated by the Food and Drug Administration (FDA) under authority granted by the Federal Food, Drug, and Cosmetic Act of 1938.

The extent of FDA’s administrative authority is wide. FDA’s duties are firmly identified with those of a few other government organizations. Regularly disappointing and mistaking for customers is deciding the proper administrative organization to contact.

As a rule, FDA controls:[3]

  • Medications,

Including: doctor prescribed medications (both brand-name and conventional) ,non-solution (over-the-counter) drugs ,Biologics, including:  immunizations for people ,blood and blood items ,cell and quality treatment items tissue ,and tissue items allergenics

  • Clinical Devices,

Including:  basic things like tongue depressors and chamber pots  complex advances, for example, heart pacemakers dental gadgets ,careful inserts and prosthetics.

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FDA’s legitimate authority over makeup is not the same as our position over different items we manage, for example, drugs, biologics, and clinical gadgets. Under the law, corrective items and fixings needn’t bother with FDA premarket endorsement, except for shading added substances. In any case, FDA can seek after implementation activity against items available that are not in consistence with the law, or against firms or people who abuse the law.

FDA has reliably exhorted makers to utilize whatever testing is important to guarantee the security of their items and fixings. Firms may prove security in various manners. FDA has expressed that “the security of an item can be enough validated through (a) dependence on effectively accessible toxicological test information on singular fixings and on item plans that are comparable in structure to the specific corrective, and (b) execution of any extra toxicological and different tests that are proper considering such existing information and data.”[4]

FDA may make administrative move in the event that we have solid data demonstrating that a restorative is tainted or misbranded. For instance, FDA can seek after activity through the Department of Justice in the government court framework to expel defiled and misbranded beautifying agents from the market. To forestall further shipment of a defiled or misbranded item, FDA may demand a government area court to give a limiting request against the producer or merchant of the violative restorative. Beautifying agents that are not in consistence with the law might be dependent upon seizure. “Seizure” implies that the administration claims property from somebody who has disregarded the law, or is associated with doing as such. FDA additionally may start criminal activity against an individual abusing the law.

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  • GERMANY (EU)

Germany is an integral part of the European Union and this is why the medical manufacturing sector here is ruled by the guidelines laid by the EU itself, following are some of the guidelines being put to use so far-

  • Corrective/Cosmetics/Drugstore items are dependent upon EU wide wellbeing guidelines. They should not be obligated to make harm human wellbeing, when applied under ordinary states of utilization or under sensibly predictable states of utilization.
  • It is a criminal offense to flexibly restorative items which don’t consent to the guidelines or neglect to agree to other related prerequisites.
  • All organizations managing in beautifying agents, including retailers, wholesalers, shippers and producers, are dependent upon the guidelines,etc.

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The guidelines place various commitments relying upon whether you are a ‘merchant’ (which incorporates retailers and wholesalers) or you import items from outside the EU / Germany and makers.

On the off chance that you are a maker in the EU, or you import products into the EU from a third nation, at that point you are considered to be a mindful individual and more prominent obligations will concern you. A maker outside the EU may assign somebody inside the EU as a mindful individual.

Organizations managing in skin lighteners, and certain germicidal cleanser items, ought to be especially cautious as there are loads of illicit variants of these items. Further direction on these is accessible.

Primary lawful prerequisites

Corrective items must follow point by point compositional and naming prerequisites.

You should track where you acquired your beautifying agents from and, in the event that you offer them to different organizations, who you provided them as well. These must be accessible for review for a long time from when you were provided with them or, if material, when you provided them

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Distributors must act with due consideration including guaranteeing items are not obsolete. Specifically, you should watch that beautifying agents are named with;

o The name and address of a responsible person in the EU

o A batch or manufacture reference number

o An ingredients list. This must be headed ‘ingredients’

More than 1,300 substances are precluded from being utilized in corrective items. For instance, chlorine, cyanides, iodine, mercury and mercury mixes, for example, mercuric iodide. Note that skin helping creams contain hydroquinone are likewise illicit.

Any items with Corticosteroid substances like Clobetasol Propionate, Bethamethasone or Bethamethosone Dipropionate must not be at a bargain in corrective shops. Flexibly of such items may likewise be an offense under medications enactment.

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COMPARATIVE CONCLUSION

The guidelines pertaining to the drugs and cosmetics regulations in these three different countries appear to be quite similar but however, there were discrepancies for certain recommendations relating to the labelling, circulation, offender liability, permitted chemicals, etc.

Updates for these guidelines are being worked upon in almost all these countries , although United Kingdom would be framing its own and new set of medicinal guidelines and acts ,it can be said that all these countries are primary contributors in the field of medicine and as of now they all have strong legislations to backbone their Drugs and Cosmetic standards and regulation but there is enough evidence that may lead them to stronger statutes and will enable the future guidelines to become even more concordant. As with the intensive research done and developments being made , a slight moderation of the acts maybe needed.[5]

At the end we can say that these three countries have almost similar provisions for the regulation of drugs within their territory but unlike Germany (EU), U.S.A. may be a step behind as it is majorly functioning on only one statute ,whereas there should be different acts dealing with the different sections of the drugs and cosmetics field. It will in a way improve the efficiency in terms of the proper vigilance that this sector needs.

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Presently, United Kingdom is witnessing its post- BREXIT era and therefore trying to not really comply with the European Union guidelines it is laying down its own provisions. As the Brexit happened in 2019, it would not really be this quick and easy to formulate strong medicinal laws, therefore no comparison can be drawn with regards to U.K. but it is sure that the U.K.  Parliament will soon frame a law which would meet all the perimeters  required for a stronger Medical (Drugs and Cosmetics) regulating sector.

[1] https://www.freyrsolutions.com/blog/uks-new-cosmetic-regulations-in-the-light-of-brexit

[2] https://www.freyrsolutions.com/blog/uks-new-cosmetic-regulations-in-the-light-of-brexit

[3] https://www.fda.gov/cosmetics/cosmetics-laws-regulations/fda-authority-over-cosmetics-how-cosmetics-are-not-fda-approved-are-fda-regulated

[4] The Safety and Regulatory Status of Food, Drug and Cosmetics Colour Additives Exempt from Certification

  1. B. HALLAGAN*, D. C. ALLEN* and J. F. BORZELLECAt

*International Association of Color Manufacturers, 1620 1 Street, NW, Suite 925, Washington, DC 20006, 10 January 1995

[5] APA Koes, Bart W., PhD*; van Tulder, Maurits W., PhD†; Ostelo, Raymond, MSc‡; Kim Burton, A., PhD, DO§; Waddell, Gordon, DSc, MD, FRCS∥ Clinical Guidelines for the Management of Low Back Pain in Primary Care: An International Comparison, Spine: November 15, 2001 – Volume 26 – Issue 22 – p 2504-2513

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Trademark and Competition Law

By: Ishika Gautam

COMPETITION LAW
The Indian Government in pursuit of increasing the economic efficiency of our country acknowledged the Liberalization, Privatization, and globalization era by liberalizing the country’s economy and reducing governmental control. Currently, the Indian economy is facing aggressive competition in every field. Fair competition has proven to be an effective mechanism which enhances the efficiency of the economy. Therefore the primary purpose of implementing the competition law was to control monopolies and encourage competition.
The objective behind the formulation of competition law, Intellectual property laws is to protect the research and development inventions which are carried out by the inventor firm from being used by other companies producing the same kind of products and making a profit from the same. Therefore, on the one hand, IP laws work towards creating monopolistic rights, whereas, on the other hand, competition law battles with it. From this, there seems to be a clash between the objectives of both these laws.
The competition laws involve the formulation of policies that promote competition in the local markets and aim to prevent anti-competitive business practices and unwanted interference of Government. The competition law seeks to eliminate monopolization of the production process so that new firms can enter the market. The maximization of consumer welfare and increased production value are a few primary objectives of competition law. On the other hand, IP Laws are monopolistic legal rights granted to owners resulting from human intellectual creativity.

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Case law-
Arun Chopra v. Kaka-Ka Dhaba Pvt. Ltd. and Ors.
The famous restaurant named Kake Da Hotel has now attained it’s secured rights in its name and trademarks against another Nashik-based food outlets namely ‘Kaka-ka Dhaba’, ‘Kaka-Ka Restaurant ‘Kaka-Ka Garden’. The Court has observed that even though there isn’t a doubt that the user is long and extensive. The question arises whether the word ‘Kaka’ or ‘Kake’ can be a monopoly of any party and could be adjudicated on trial. Till now, the interim order is granted in favour of the plaintiff and the defendants are prohibited from using words ‘Kaka-ka’ with any new outlet during the period, it has allowed that the defendants can continue to use the names Kaka-ka Dhaba’, ‘Kaka-Ka Restaurant’ and ‘Kaka-Ka Garden’.

Under the Competition law of IPR, the market’s unavailability can establish some dominance in markets. Similarly, the comparison of market shares between a dominant firm and its competitors is advantageous in determining the power and monopoly. It seems complicated to decide on the minimum percentage of market share that could attain dominance or monopoly of a particular firm in the market. Various judgments dominance cannot establish a minimum rate that points to the firm’s authority.

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The anti-competition laws to tackle the monopolies of IPR often include two measures: compulsory licensing and parallel imports. The compulsory license is when the state has authorized an IPR holder to surrender their exclusive rights over intellectual property, under article 31 of Trade-Related aspects of Intellectual Property Rights. The compulsory licenses are granted only under specific circumstance such as the interest of public health, in national emergencies, in nil or inadequate exploitation of any patent in any country, and also for the overall national interest. On the other hand, Parallel imports include all goods brought in the country without authorization of an appropriate IP holder and are placed legitimately into the market.

In addition to all these provisions, provisions like Section 3 of the new Competition Act, 2002, deals with more anti-competitive agreements that cannot be used by the IPR holders as they conflict with competition policies. Firstly, the patent pooling is a restrictive practice where the firms of particular manufacturing industry decide, to pool their patents and then agree to not grant the licenses to third parties, then simultaneously fix quotas and prices. Secondly, one more clause that restricts the competition concerning research and development or prohibits a licensee from using other rival technology is considered to be anti-competitive under this law. Thirdly, the licensor under this law is not permitted to fix the price at which the licensee would sell his goods.

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The above examples are not exhaustive, but a few examples demonstrate the anti-competitive provisions applicable to the IPR under this Act. Moreover, under Section 27 of this Act, India’s Competition Commission had the authority to penalize the IPR holders who abuse their dominant position. Furthermore, under Section 4 of this Act, the Commission is authorized to punish the parties of an anti-competitive agreement, it is in the contradiction of this section.

TRADEMARK LAW
Search
To search for a mark before filling the application is the most fundamental part of applying for a trademark. Even though it is not a procedural pre-requisite for the application, it finds its utmost importance in the fact that acceptance of a mark for registration as a trade mark relies on the vividness of the mark. It is a crucial step to carry a detailed search in the Trade Marks Registry, to check for the mark’s uniqueness and deduct all possibilities of duplication. It also needs to be checked that the proposed mark is not the same or even similar to any other existing mark registered or pending for registration. A detailed prior search is also a proof of honesty and good faith in accepting the mark, during opposition and the infringement proceedings.

Classification
The application for the trademark needs to be specified by the appropriate class or classes of the goods or services, concerning which the application is filed. The applicant for trademark needs to be extremely careful in ascertaining the type of goods or services in their application as the tester needs to be convinced about the proper use of goods and services from a particular class or across all classes to the application, and a broad declaration can also prolong the process of the examination.

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Selection
The selection of a mark is an important part of any application. The mark selected needs to meet the qualifications that are enlisted in the Trade Mark Act, and it has to fall within the parameters of its presence as a device, brand, a heading, label, a ticket, name, signature, word, letter, a numeral, shape of goods, packaging or any combination of colours, or any combination of these distinct elements that are capable of being ‘graphically represented’ and indicates a trade connection with the proprietor. Now, it essentially needs to have a proper distinctive character capable of constructively distinguishing all the applicant’s goods and services from others. The denial of the presence of uniqueness of the mark may result in the refusal of the application.

Filing of Application
The application for the mark can be filed by a person or his respective IP Lawyer or any other person who is authorized in this respect at the designated Head office (at Mumbai) or any branch offices (at Ahmedabad, Chennai, Delhi, Kolkata) of Registry by a delivery at the front office either personally or by post, it can also be submitted electronically through the gateway being provided at ipindia.nic.in. The application for this has to be generally filed at the office which is within the territorial jurisdiction of the principal place of business of that applicant in India is situated. There are many applications which need to be filed directly at Head Office.
Special care needs to be taken of the fees, and as non-payment results in regarding the application as not-filed.

Numbering and Examination of Application
On receipt of the application, it is appropriately dated and numbered. A copy of it is returned to the applicant/attorney—a number assigned to the mark, which is the registration number post-registration. The proprietor is only allowed to use the trademark symbol after their application has been completed and numbered. The application is adequately examined for accuracy of the class in which the mark has been filed, all the necessary documents that need to be attached depending on the type of application- registration of the mark for goods or services being included in one class/different classes/with priority claim etc., details of the applicant and the proprietor.

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Hearing
After the proper completion of the examination, the Trademarks Registry sends an “Official Examination Report” to that applicant. The applicant may sometimes be required to reply to the objections raised by the Examiner under Section 9 and Section 11 of Trade Marks Act and the clarifications regarding the content of the application. The reply being insufficient to satisfy the Examiner, the applicant is then granted a hearing to overcome his objections.

Publication in the Trade Mark Journal
The mark’s application is then published in the “Trade Marks Journal,” after a proper post-examination hearing with the applicant. The journal is also published by the Trademarks Registry and is a publication by the Government of India. The application is then granted registration if it stands being unopposed after the proper publication in the journal for a stipulated period of four months.
If the publication is challenged in any case, then the opposition proceedings commence, and the registration is granted freely only if the proceedings conclude in favour of the applicant.

Opposition Proceedings
Anyone can file a notice of opposition against any application published in the journal, within that period of four months from the date of that mark being published in the journal. Any supporting evidence can accompany the notice for the opposition.
An application can then be opposed to the primary grounds that are provided in the Trade Mark Act. This is the Registrar’s task to serve a copy of the opposition to the applicant, inside two months of receipt of resistance. The applicant must then reply within two months; failure to do so will result in the applicant’s application being treated as abandoned. The counter-statement is given to the opponent, and usually, the parties are being heard along with the consideration of proper evidence provided by both parties.
The Registrar is given the authority to decide the acceptance of trademark application based on the hearing’s judgment. The aggrieved party is given the right to challenge the ruling by filing an appeal in front of the Intellectual Property Appellate Board.

Registration
The mark’s application is registered if it has been accepted and not opposed, or opposed but has been decided in favour of the applicant. The applicant is also issued the Certificate of Registration and is further allowed to use the symbol R and the registered trademark. The registered trademark given is valid for the next ten years from the date of that application is received for the mark.

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Renewal
A registered trademark can be renewed after every ten years for an unlimited period on payment of that particular renewal fee. The renewal request should ideally be filed in the Trade Marks Registry within only six months before the expiry of the trademark. The application can also be filed up to six months after the trademark expiry, with the payment of the late renewal fees being prescribed.

Litigation
1) To obtain John Doe Orders and ex parte injunctions.
2) To accept search and seizure orders.
3) To conduct market raids.
4) To check for the accounts of the infringer.
5) To medicate for amicable settlement of disputes.
6) Do Arbitration and also Conciliation.

Enforcement through constructions
The Customs Act of 1962, enables Commissioner of Customs, on behalf of Central Government, prohibits importing the goods on absolute or conditional terms, used for the protection of patents, trademarks, and copyrights. In contrast to this, the authorities came up with Intellectual Property Rights (Imported Goods) Enforcement Rules in 2007 which correctly specifies the process of protection of these intellectual property rights (Copyright, Trade Mark, Patent, Design and Geographical Indication) from getting violated in the course of these import into the country.

Licensing of Trademarks
The trademark’s license is an agreement between a registered proprietor of the trademark (licenser) and another person (licensee), giving authority to the licensee to use the trademark in the course of trade, against a particular payment of royalty to the licenser. The word here used “license” is not mentioned anywhere in the Trade Marks Act, 1999. The Act says about the words “registered user” and “permitted use.”

Revocation of Trade Mark
An application for the cancellation or rectification of a trademark registration can be made only by the aggrieved person. Such type of application must be filed with Registrar of Trade Marks or the Appellate Board.
Some of the grounds on which the registration can be removed or cancelled:
The trademark being registered was done without any bona fide intention, and there was no bona fide use of the trademark for the time up to date of three months before the date of the application for removal.
Three months before the application for removal, a regular period of five years from the date on which the trademark has entered on the register or longer has elapsed during which brand was registered and in which no bona fide use.
Trademark was registered without any sufficient cause.

 

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