ED not empowered to arrest once Special Court takes cognizance under PMLA
The jurisdiction of Directorate of Enforcement (“ED”) to initiate action under the relevant laws and its power to make arrests has attracted a lot of attention and has been an important topic of discussion in the recent times. The Hon’ble Supreme Court in the case of Tarsem Lal v Directorate of Enforcement2 marked an extremely crucial development in the jurisprudence pertaining to powers of ED to arrest the accused under Prevention of Money Laundering Act, 2002 (“PMLA”). While providing clarity on multiple issues pertaining to arrest and bail provisions, inter alia, the Hon’ble Supreme Court delved with two main questions i.e. first, whether an accused who has not been arrested by ED, and appearing on summons, was required to apply for bail or anticipatory bail apprehending arrest on issuance of summons; and second, the power of ED to make an arrest when the Special Court3 has taken cognizance of the concerned matter. The Court while answering the former question in negative, opined that an accused who has not been taken into custody by ED and is appearing before the court owing to the call by way of a summons, then in that case he shall not be treated as if he is in custody, and it is not at all required for the accused to apply for bail. Regarding the second question, it was held by the Hon’ble Apex Court that once the cognizance of the matter is taken by the Special Court under PMLA, then ED and other authorities named in Section 19 of PMLA cannot exercise the power of arrest on the accused named in the complaint. The present articles tries to shed light, in brief, on the facts and issues involved in the said case, and the highlights of the Supreme Court judgment. The judgment tries to clear the muddle around the cases involving similar situation, and also acts as a beacon to the bar and the bench. Factual Matrix The ruling in the case of Tarsem Lal (supra) is not situated on a peculiar fact scenario involved in a single case, rather the Hon’ble Supreme Court has clubbed all sort of cases where the accused were named in the complaints under section 44(1)(b) of the PMLA and wherein albeit registration of the Enforcement Case Information Report (“ECIR”) the accused were not arrested by ED till the Special Court took cognizance of the respective case. Another crucial fact situation relating to the said cases was that these were the cases where despite being served with summons the appellant did not appear, and thereafter a warrant was issued to ensure their presence. Once the warrants were issued, the accused approached the Special Court while applying for anticipatory bail. Issue Whether officers of ED can exercise power to arrest under Section 19 of PMLA once the Special Court takes cognizance of the offence punishable under Section 4 of PMLA? Decision The pronouncement made by the Apex Court can be classified under various heads: Appearance in pursuance of summons does not amount to custody The Court ruled that any appearance made by an accused pursuant to a summon cannot be equated to the person being in custody. The Court interpreted that the very existence of Section 205 of CrPC highlights the distinction between two situations being a) where the accused is in custody of the authority; and b) where the accused has not been arrested by the authority. As per the court, if a non-arrested accused appears before the Court pursuant to the summons and he is deemed to be in custody, then Section 205 of CrPC dealing with dispensing of the personal attendance would not have been provided for. As it is imperative to note that no occasion arises for a court to dispense with the personal attendance of the accused if he is already under custody. Application for bail not required when accused is appearing in person on summons. The Court observed that if a person is appearing pursuant to summons issued, that means such person is not in custody. Thus, in such a scenario there arises no question of granting bail to such person. Furthermore, the Court elucidated, even when an accused furnishes a bond pursuant to appearance owing to summons under Section 88 of the CrPC, it is nothing but an undertaking on his behalf to appear before the court or else pay the amount mentioned in the bond upon failure to appear. ED cannot exercise its power to arrest the accused once Special Court takes cognizance The Hon’ble Supreme Court ruled that once cognizance of the offence punishable under PMLA based on a complaint under section 44(1)(b) is taken by the Special Court, then ED and other authorities cannot exercise their power to arrest as provided under Section 19 of PMLA. The reason behind it being post cognizance by Special Court, the accused concerned comes under the jurisdiction of the Special Court, thereby, leaving ED and other authorities powerless. Thus, even if ED or such other authorities want the custody of the accused who appears after service of summons for conducting further investigation in the same offence, the ED will be required to seek custody of the accused by applying to the Special Court, only after the concerned court records its satisfaction regarding the need of custodial interrogation of the accused. Hence, in such a case, once the cognizance has been taken by a Special Court there cannot be any apprehension about arrest by ED. The court, however, clarified that the afore observation was only with respect to the situation where the accused was not arrested by the ED by exercising its power under section 19 of PMLA. Complaint under section 44(1)(b) of the PMLA to be governed by relevant sections of Code of Criminal Procedure 1973 (“CrPC”) The Apex Court held that provisions of the CrPC shall apply to the proceedings before a Special Court and once a complaint is filed before the Special Court, the provisions of section 200 to 204 of
Client Proximity: Technology as an Ally in Legal Services
Today, the impact of technology on our daily lives is undeniable. We see it transforming sectors like automotive, medical, food, and finance. The legal field is no exception. Concepts that seemed distant to lawyers just a few years ago, like FINTECH, INSURTECH, and of course, LEGALTECH, have become areas of specialization and development. How Does Technology Impact the Legal Sector? Technological advancements have revolutionized the legal world, providing tools we once only imagined. Technologies such as sentence prediction, AI-assisted document drafting, blockchain for contracts, and big data analysis are some of the innovations already impacting the sector. However, these advancements also bring new challenges, like data protection, cybersecurity, and regulatory compliance in the face of crimes like money laundering, among others. Some voices suggest that technology might replace lawyers, but at Ormuz, we have a different vision: technology won’t replace lawyers; it will enhance their ability to build trust and provide peace of mind to their clients, optimizing the delivery of legal services. The Role of Technology in the Public Sector Imagine an efficient justice system where bureaucratic and judicial processes are resolved with agility, with confidence and transparency. I firmly believe that if governments invested in innovative technology, justice would be more accessible and effective for all citizens. Unfortunately, although more and more technological solutions are being implemented in public administration, many of them do not really respond to the needs of citizen’s needs. The proper use of technology could build trust and attract investments, tourism, and international collaborations. In this sense, governments must pay attention to their citizens expectations to strengthen their leadership and ensure economic and social growth. I believe that it’s time for the government to analyze technological and process trends to optimize its management and provide greater certainty to citizens. Ormuz and the Use of Technology in the Private Sector At Ormuz Legal Solutions, we believe that technology should be a strategic ally for lawyers, allowing them to streamline processes and offer quality, trustworthy services to their clients. We know that legal procedures can be lengthy and tedious, and uncertainty about deadlines and results is an inconstant for both lawyers and clients. or this reason, we developed a web app that allows our clients to track the exact status of their legal services at any time. From receiving a request to the notification of the resolution, our clients receive updates via email, SMS, or WhatsApp, ensuring transparency and peace of mind. They can also access the required documents and additional costs involved in their case, with the option to later on evaluate the provided service This approach has allowed us to innovate in our processes and focus on customer satisfaction. At Ormuz, we strive to democratize access to justice for small and medium-sized businesses, by offering them accessible and reliable legal solutions we are now helping prevent problems before they become obstacles. Lawyers and the Future with Technology Today, being a successful lawyer is not just about mastering the law and staying updated; it’s about creating value and building trust with our clients. At Ormuz, implementing technology has been a constant learning, process testing different solutions and refining processes. But the goal has always been clear: to provide an innovative, high-quality, accessible, and transparent legal service. An Invitation to Innovate Technology is already an integral part of the present and future of law. My invitation to other lawyers is to dare to incorporate technology into their daily practice, considering the following aspects: Strategic vision of the lawyer or firm: What kind of relationship do you want to have with your clients? Identification of repetitive tasks that could be optimized with technology. Administrative activities such as billing, fee collection, or report generation that can be automated, leading people’s efforts to focus on practicing law. Understanding and listening to your target market is vital to offer the service they expect and also to improve your processes or service offerings accordingly. Conducting this analysis will help you identify areas requiring innovation, creating a more efficient legal practice with technological processes aligned with your firm’s vision and goals Towards a Scalable Model At Ormuz, we understand that technology is not an end in itself but a tool to create a relationship of trust with clients. By offering scalable and accessible solutions, we are moving closer to our goal: democratizing access to justice. Law should not be an exclusive service but a tool available to everyone to protect their interests and support businesses in their growth.
Enhancing vigilance in insolvency cases: The imperative for scrutinizing preferential, undervalued, fraudulent & extortionate transactions & empowering stakeholders
The Insolvency and Bankruptcy Code, 2016 (“IBC or the Code”) was enacted with the primary objective of facilitating a resolution of insolvency for companies. The code aims to provide a well-defined, time-bound, and efficient process for resolving insolvency and bankruptcy of corporates in a transparent and accountable manner. Its overarching goal is to ensure the preservation and maximization of the value of the debtor’s assets, while also seeking to balance the interests of all stakeholders, including creditors, debtors, and employees. Additionally, the Code places significant importance on fostering entrepreneurship, taking risks & innovating within the business environment, with the aim of facilitating a resurgence in the event of unsuccessful endeavors. Moreover, the Code is designed to prevent the premature collapse of viable businesses, thereby protecting the interests of various stakeholders associated with the corporate entity. It is acknowledged that many corporates experience insolvency as a result of fraudulent activities perpetrated by the company’s promoters. These activities encompass a range of transactions, such as preferential dealings with parties closely connected to the directors, undervalued transactions with close associates or relatives, fraudulent transactions, and extortionate dealings. These transactions collectively fall under the umbrella of avoidance or preferential transactions, as covered by Sections 43, 45, 50, and 66 of the IBC. This includes Preferential, Undervalued, Fraudulent, and Extortionate (PUFE) transactions, each with specific legal provisions aimed at addressing and rectifying such malpractices within the corporate insolvency framework. The Code stipulates that all transactions of this kind must be recognized by the Resolution Professional. If the Resolution Professional believes that the Corporate Debtor engaged in avoidance transactions during the relevant period, he/she must request appropriate orders from the adjudicating authority under Section 44 for preferential transactions, Section 48 for undervaluation transactions, Section 51 for extortionate transactions, and Section 67 for fraudulent trading or fraudulent transactions. It is important to note that only the Resolution Professional is authorized to apply to the Adjudicating Authority for appropriate orders under these sections, if it is believed that these transactions occurred during the relevant time. The law therefore places a significant responsibility on the Resolution Professional to identify and take action on such transactions. The primary objective of initiating proceedings under PUFE transaction provisions is to reclaim the money or assets owned by the corporate debtor that may have been misappropriated or fraudulently transferred, with the intention of defrauding the creditors or for other fraudulent purposes. For instance, Section 66 of the IBC Code states as follows: “If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor has to be carried on with intent to defraud creditors of corporate debtor or any fraudulent purpose, the adjudicating authority may on application of Resolution Professional pass an order that any persons who were knowingly parties who were carrying on business in such manner shall be liable to make contributions to the assets of the corporate debtor as it may deem fit.” Thus, it becomes the exclusive responsibility of the Resolution Professional to identify any such transactions, assess their value for the purpose of recovery, and submit an application to the Adjudicating Authority for necessary orders. The capability of every Resolution Professional to effectively identify and assess transactions is a critical consideration. This is due to the fact that an individual can qualify as a Resolution Professional if they are a Chartered Accountant, Company Secretary, Cost Accountant, or an Advocate who has passed the Insolvency Examination and has a minimum of 10 years of experience, and is registered with associations such as Bar Council of India or States or Institute of Chartered Accountants of India. Furthermore, any graduate from a recognized university who has passed the Limited Insolvency Examination and possesses 15 years of management experience is also eligible for enrolment as a Resolution Professional. Chartered Accountants and, to a lesser extent, Cost Accountants possess comprehensive expertise in accounts, finance, costing, and banking, which enables them to recognize such transactions effectively within a corporate setting. Conversely, Company Secretaries and Advocates have comparatively less exposure to accounts, finance, and banking, with Advocates and graduates lacking in-depth knowledge of important financial and accounting aspects. Additionally, even accounting professionals require at least a limited understanding of forensic accounting to effectively identify, form an opinion, and ascertain PUFE transactions, with or without the assistance of a forensic auditor, and quantify the same. In a recent case, the total claims accepted by the Resolution Professional of Power Max India Pvt Ltd amounted to INR 48.36 Crores, and the liquidation value of the Corporate Debtor was determined to be INR 4.08 Crores. An application was submitted for the approval of a Resolution Plan with a value of INR 4.01 Crores, resulting in a significant reduction of about 92%. The Resolution Professional engaged a transactional auditor to conduct an audit for two financial years, concluding that no avoidance transactions had occurred, and hence no applications were submitted under PUFE. The Hon’ble National Company Law Tribunal of Kolkata comprising of Smt. Bidisha Banerjee (J) and Shri. D. Arvind (T), while approving the Resolution Plan that catered to only 8% of the total admitted claims, emphasized the significant responsibility placed on the Resolution Professional by the Insolvency and Bankruptcy Code 2016, regarding avoidance transactions under Sections 43, 45, 50, and 66 during the Corporate Insolvency Resolution Process of the Corporate Debtor. The Tribunal members further noted that the committee of creditors involved in the Corporate Insolvency Resolution Process of the Corporate Debtor lacked the capacity to dedicate full-time attention or form an opinion to identify the avoidance transactions in a corporate debtor. The Bench further emphasized that the Resolution Professional’s failure to form an opinion on avoidance transactions and to file an application before the Adjudicating Authority would result in the inability to retrieve diverted funds for the insolvency resolution of the corporate debtor. They stressed the Resolution Professional’s duty to bring to the Committee of Creditors’ attention the whereabouts of the borrowed funds, particularly in cases such as
The Critical Role of Technology Investment in Law Firms: A Path to Enhanced Service and Client Communication
In today’s fast-paced and digitally driven world, the legal industry faces unprecedented challenges and opportunities. As client expectations evolve, law firms must adapt to deliver services more efficiently, transparently, and collaboratively. The importance of investing in and developing technological tools has never been more critical for law firms. By embracing innovation, law firms can enhance their service offerings, streamline client communication, and ensure they remain competitive in an increasingly digital landscape. The Changing Landscape of Legal Services The legal profession is traditionally known for its reliance on human expertise, personal interaction, and established procedures. However, with the rapid development of digital technologies, law firms are facing a paradigm shift. Clients now expect quick, reliable, and seamless services that go beyond traditional face-to-face meetings and paper-based processes. This shift has prompted firms to explore new ways of operating through technology. Many legal services can be enhanced by adopting technology, from document management to case analysis, legal research and cases follow up and administration. By investing in technological tools, law firms can reduce time-consuming manual tasks, allowing lawyers to focus on high-value strategic work. Automation, artificial intelligence (AI), and machine learning are becoming essential components of modern legal practice. Enhancing Client Communication and Transparency Effective communication is the cornerstone of a successful client-attorney relationship. Today’s clients expect continuous updates on the progress of their cases and transparency in billing practices. By investing in communication technologies, law firms can foster stronger client relationships and build trust. Client Portals and Mobile Apps: Many law firms now offer secure client portals where clients can access case updates, communicate with their attorneys, and review documents. Mobile apps can also facilitate instant communication, allowing clients to ask questions and receive responses without the need for constant in-person meetings or emails. Project Management Tools: Law firms can use project management software to keep clients informed about key milestones, timelines, and deliverables. These tools allow clients to understand the progression of their legal matters in real-time, increasing transparency and reducing uncertainty. Billing Transparency and Automation: One of the most sensitive issues for clients is billing. Law firms can use automated billing systems to ensure that clients receive detailed and accurate billing statements, reducing disputes and fostering trust. Staying Ahead of the Competition In a market where competition is fierce, law firms that fail to embrace technology risk falling behind. Technology not only streamlines operations but also positions law firms as innovators, capable of attracting tech-savvy clients and top-tier talent. Firms that adopt cutting-edge legal technology distinguish themselves in the marketplace, gaining a competitive advantage over those that stick to traditional methods. Moreover, younger generations of lawyers and clients are drawn to firms that offer modern, efficient tools that enhance the practice of law and the client experience. Client Expectations: Tech-savvy clients, particularly corporate clients, expect their legal service providers to be knowledgeable in the latest tools and platforms. Investing in technology demonstrates that a firm is committed to meeting modern demands and can offer superior, faster, and more cost-effective legal solutions. Attracting Talent: Younger lawyers, who have grown up in the digital age, are likely to be more comfortable working in environments where technology is integrated into daily practice. Law firms that provide innovative tools can attract top talent, ensuring the firm stays competitive and relevant in a rapidly changing industry. The Challenges of Technology Adoption While the benefits of technology adoption are clear, law firms also face challenges when implementing new tools. Costs, training, and integration with existing systems are common barriers to entry. Cost: The initial investment in technology can be significant, especially for small and midsized law firms. However, the long-term benefits often outweigh the costs, with improvements in efficiency, service quality, and client satisfaction. Training: Another significant challenge is ensuring that attorneys and staff are properly trained to use new tools. Ongoing training and support are critical for the successful integration of technology into daily workflows. Data Security: As law firms handle sensitive client information, ensuring that digital tools comply with stringent data protection laws is paramount. Firms must invest in secure platforms and cybersecurity measures to protect client data and maintain confidentiality. Our Law Firm’s Commitment to Technological Advancement As partners at Millán, Ortiz, Dueñes, Sánchez de Pablo y Asociados, we have set a clear goal: to be among the Mexican law firms at the forefront of technological development in the provision of legal services. For over three years, we have been investing in proprietary technological tools. Unlike many other firms, our focus has been on enhancing the quality of service specifically in the litigation area. The tool we developed aims to improve both the quality and efficiency of case management. Given that a significant portion of our portfolio focuses on debt recovery for banks, especially in mortgage and commercial products, it became essential to create a platform that allows us to view the real-time status of our cases. To achieve this, we integrated our software with both federal and local court systems. Every morning, the system automatically retrieves court resolutions related to our cases. This feature saves countless hours of manual work, as our team no longer needs to search through court publications for updates. Instead, before even stepping into court, they already know which cases need attention, allowing them to review, move forward, manage, and, ultimately, litigate more effectively before judicial authorities. Additionally, the system organizes all court publications chronologically, creating a digital file identical to the one accessible in court. Our clients have access to this information through user accounts with pre-determined permissions, enabling them to track the real-time progress of their cases. From a business management perspective, our tool also provides insights into the performance of each lawyer. It generates performance graphs, tracks progress, pending tasks, and more. This data allows us to objectively measure performance and, for instance, to more accurately allocate bonuses based on measurable results. Furthermore, the system manages our firm’s billing and collections. A dedicated section enables our administrative and finance teams to know the
Emotional Intelligence in the practice of the Law
Emotional intelligence (A.K.A. “EI” or “EQ” for emotional quotient) is the ability to perceive, interpret, demonstrate, control, evaluate, and use emotions to communicate with and relate to others effectively and constructively. EQ is one of the most important skills that you should possess in (and outside) the workplace and, in my opinion, arguably more essential than IQ. Lawyers with high emotional intelligence are more likely to stay calm under pressure, resolve conflict effectively, and respond to colleagues with empathy. Consequently, a lack of emotional intelligence skills often results in workplace conflicts and misunderstandings. Unlike IQ, which is largely genetic – it changes little from childhood, the skills of emotional intelligence can be learnt at any age. While this is not easy, and growing your EQ takes practice and commitment, the payoffs are well worth the investment. Some examples and signs of EQ are: An ability to identify and describe what people are feeling, i.e. your ability to read the room and be perceptive about the other person’s emotions. An awareness of personal strengths and limitations. A strong sense of curiosity, particularly about other people. Feelings of empathy and concern for others and showing sensitivity Be proactive rather than reactive and pre-empting how a situation may unfold. Emotional intelligence is a basic requirement no matter where you are in your legal career – especially if you occupy a leadership position. The technical skills that helped secure your promotion might not guarantee your next. In my opinion, using one’s emotional intelligence is closely linked to be an all-round successful lawyer. As a legal practitioner, one has to deal with numerous individuals and stakeholders as part of work – i.e. if you are an in-house counsel, you have to work with numerous stakeholders within the organization, outside the organization, within your legal team, etc. Similarly, if you are an advocate practicing in litigation, you have opposing counsel, your seniors, juniors, clients and last but not the least, the judge! These are all human beings at the end of the day and each one is fighting a battle that you know nothing of. Having an overall perception of what could affect the counterparty’s behavior and even pre-empting certain things will immensely benefit a lawyer with good EQ – circumstances and emotions are big driving factors. A colleague that just lost their parent, a reporting manager who just delivered a baby, a stressed-out client who has a lot to lose if the case does not go in his favour, an overworked and under slept junior associate, are all cases that would warrant a different response from a lawyer working with any of these individuals. The intuition of a lawyer would aid him / her greatly by sensing when something is not favorable – i.e. if your client seems upset about something, you may want to tweak your tone or try and address why they are upset. It has been more than a decade since research first linked aspects of emotional intelligence to business results. The late David McClelland, a noted Harvard university psychologist, found that leaders with strengths in a critical mass of six or more emotional intelligence competencies were far more effective than peers who lacked such strengths. For instance, when he analyzed the performance of division heads at a global food and beverage company, he found that among leaders with this critical mass of competence, 87% placed in the top third for annual salary bonuses based on their business performance. More telling, their divisions on average outperformed yearly revenue targets by 15% to 20%. Those executives who lacked emotional intelligence were rarely rated as outstanding in their annual performance reviews, and their divisions underperformed by an average of almost 2%. How does a lawyer motivate direct reports? Manage change initiatives? Handle crises? How does a lawyer rate in terms of self-control and social skills? Does a lawyer show high or low levels of empathy? It is pertinent to note that each lawyer’s immediate sphere of influence will determine the “climate” for such lawyer. You have the power and you set the tone. Your EQ will influence your law firm / legal department’s working environment: its flexibility – that is, how free other lawyers feel to innovate unencumbered by red tape; their sense of responsibility to your law firm / legal department; the level of standards that people set; the sense of accuracy about performance feedback and aptness of rewards; the clarity people have about mission and values; and finally, the level of commitment to a common purpose. Emotional intelligence is the ability to manage ourselves and our relationships effectively. The legal profession is a very multifaceted one – in view of the technical knowledge that one is required to possess and apply as well as all the complexities involved in the practice of the law. In conclusion, while emotional intelligence is not a new concept, I believe it is more helpful and interesting to consider how crucial it is for effective performance as a lawyer. A person’s ability to perceive, identify and manage emotion provides the basis for the kinds of social and emotional competencies that are important for success in the legal field. Additionally, as the pace of change increases and the legal world makes even greater demands on a lawyer’s cognitive, emotional and physical resources, this particular set of abilities will become increasingly important.
The Analogy of the Company Brain
Today there is no doubt that a company’s operational and financial performance are significantly optimized by the efficacy of its Board of Directors. This has been consistently validated through my 20+ years working with and advising boards and is supported by numerous studies published in peer-reviewed journals. The concept of a Board of Directors, which first emerged in the early 20th century, was founded to represent the shareholders of the company in carrying the compass to direct the company in its business journey. The board carries the responsibility for its decisions to all stakeholders, playing a critical role in promoting corporate governance and the resilience of the company. For this to occur, the board must be conscious of its obligations. Unfortunately, few directors have the awareness and the willingness to grasp this notion. In this article, I illustrate the analogy of the company brain. In the wake of the global financial crisis, there has been a substantial proliferation in the corporate governance dialogue around the world. This has become a central focus following the crisis, particularly due to the financial upheavals that affected developed economies and the corporate ruins that underscored serious governance flaws. The significance of good governance was accentuated by events such as the collapse of Lehman Brothers and scandals involving major corporations like Enron. A notable issue has been ill boards that led to lack of transparency and manipulation of financial statements, glitches that were not widely anticipated in developed economies until recent years. Experts argue that strengthening corporate governance boosts shareholder confidence in the oversight exercised by company boards. Even prior to the crisis, scholars acknowledged the impact of good governance and the paramount role of the Board of Directors in enhancing the company’s value and enriching shareholder wealth. First, let’s agree on what corporate governance truly means. It is defined in various ways, but one of the simplest, yet most powerful, and widely accepted definitions was introduced by Sir Adrian Cadbury, who described it as “the system by which companies are directed and controlled”. So, three words; system, direction, and control. The OECD later provided a complementary definition, describing governance as the relationship and interaction between three-line segments of a triangle; the shareholders, the board, and the management of a company. Corporate governance is regarded as indispensable in the modern business landscape, as it enables the realization of corporate objectives, safeguards shareholder rights, and ensures compliance with internal company policies and regulatory requirements. Strong governance frameworks are widely believed to boost investor confidence, providing shareholders with assurance that their investments are protected through sound governance systems, I often call it the investor seatbelt. In any organizational setting, be it medium or large in size, family-owned or corporate, effective governance is seen as a key driver of sustainability, growth, and profitability. The growing prominence of governance, both nationally and internationally, is driven by the evolving competitive landscape of global business. A robust corporate governance framework is essential to ensure that management, under the board oversight, acts in the best interests of the company and its shareholders. When suitably implemented, such a framework can improve access to capital and lead to optimized decision-making processes. This framework follows a methodology that is internationally recognized and adopted globally by institutional investors and major development financial institutions. It is designed to ensure a company’s sustainability and long-term success by fostering transparency, accountability, and effectual oversight. It underlines six parameters. A strong ‘commitment to governance’, with clear policies that address the pledge from the shareholders, board of directors, and management to instill good governance practices. The ‘board of directors’ plays the pivotal role in this framework and is comprised of competent directors with a diversity of skills and adequately structured to oversee the strategy, management, and performance of the company. The ‘internal controls’ where internal audit, risk, and compliance functions are robust to ensure the effectiveness of operations, accuracy in reporting, and compliance with policies, procedures, laws, and regulations. ‘Disclosure and transparency’ are integral, ensuring both financial and non-financial information are relevant, faithful, and timely represent material events to shareholders. ‘Equitable shareholder practices’ where all shareholders are treated evenly, minority shareholders’ rights are not abused, and in the case of a family-owned business, family policies are followed to safeguard the sustainability of the business for future generations. ‘Stakeholder engagement’ mechanisms are in place to address inquiries and grievances, fostering open communication and reinforcing trust within impacted communities. Together, these parameters construct a governance system that promotes sustainability, growth, and shareholder confidence. Now let’s dive into the analogy of the brain. The human brain sits at the top of the human body and functions by receiving input from the five senses – sight, sound, touch, taste, and smell. It processes this information and then makes a decision, sending signals to the appropriate body part for action. Simple decisions, such as standing, sitting, or breathing, are processed in nanoseconds, while more complex decisions, like changing jobs or buying a new house, require extended processing time, often taking days, weeks, or months to reach a decision. The brain does not directly execute actions; instead, it monitors the performance of the body’s organs. If an organ encounters issues, such as impaired vision, the brain does not intervene directly and performs the eyes’ job but instead determines that the body should seek professional help, such as visiting an optometrist. In a business context, the board serves as the brain of the company, positioned at the top of the hierarchy to receive information, directors meet together to deliberate and scrutinize, and then make decisions that are to be executed by the company organs. Like the human brain, the company brain (the board) holds ultimate authority, with the power to request and access any data or information needed. The board is responsible for directing the company, setting its strategy, providing stewardship, oversight, and control, ensuring proper transparency and disclosure, and safeguarding shareholder rights. Hence the board is fundamental in overseeing the other five attributes of governance mentioned above, it plays a principal role in governing the company and impacting
Generative and Legal AI and Legal Implications: A Global and Indian Perspective
Generative AI, a subset of artificial intelligence capable of producing new content, poses unique legal challenges that are compelling lawmakers worldwide to rethink existing regulations. With AI-generated content rapidly infiltrating industries like art, literature, coding, and decision-making processes, several legal questions arise, particularly concerning authorship, intellectual property, liability, and data privacy. This article explores these implications globally and delves into the specific legal landscape in United States, United Kingdom, European Union & India. Intellectual Property (IP) and Copyright Law One of the most contentious areas of concern is Intellectual property (IP). Since AI-generated works may not involve direct human intervention, many legal systems grapple with whether such content can be copyrighted. Traditional IP laws typically recognize human authorship as the foundation for rights ownership. However, generative AI creates content autonomously, blurring the lines of authorship. United States In the U.S., the Copyright Office currently only grants protection to works created by humans. For instance, in Thaler v. Perlmutter, the court rejected an AI-generated image’s copyright, emphasizing that “authorship requires human involvement.” European Union EU law, especially under the Directive on Copyright in the Digital Single Market (2019), still insists on human creativity as the basis of copyright. However, discussions are underway about how AI could fit into this framework, especially with AI tools becoming more powerful. United Kingdom UK law is more flawless. Under the UK Copyright, Designs and Patents Act of 1988, computer-generated works are eligible for copyright, with authorship attributed to the “person making the arrangements.” This provides a legal precedent for AI-generated content to be protected under specific conditions. India India’s Copyright Act, 1957 and amendments thereon does not explicitly address AI-generated works. Currently, the law requires a human author for copyright protection. However, as AI-generated content becomes more prevalent, there is growing discourse on how to adapt Indian IP laws. Legal experts in India are advocating for amendments that recognize AI as a tool rather than an author, thereby attributing authorship to the individuals or entities that design, train, or deploy the AI systems. Additionally, the Intellectual Property Appellate Board (IPAB) has been monitoring global trends to recommend necessary legal reforms. Data Privacy and Protection With generative AI systems heavily reliant on vast datasets to generate new content, concerns about Data Privacy loom large. This issue has triggered legislative responses worldwide. European Union (GDPR) The General Data Protection Regulation (GDPR) enforces strict rules on how personal data can be processed. Generative AI tools that use sensitive personal data for training can potentially violate GDPR, particularly the rules around consent and the right to be forgotten. Article 22 of the GDPR restricts automated decision-making unless specific conditions are met to ensure that individuals are not subject to AI decisions without human intervention. California (CCPA) In the U.S., the California Consumer Privacy Act (CCPA) provides data protection rights, including the ability to know, delete, or opt out of the sale of personal data. As generative AI expands its data processing capabilities, companies deploying AI systems must comply with CCPA regulations to avoid penalties. India India overhauled its data protection framework by introducing the Personal Data Protection Act 2023 (PDPA), which aims to provide comprehensive data privacy regulations. Under the PDPA, generative AI systems that process personal data needs to comply with stringent data protection standards, including obtaining explicit consent and ensuring data minimization. Additionally, the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011, govern data protection in India. These rules mandate organizations to implement reasonable security practices to protect sensitive personal data, which would extend to AI systems handling such data. Liability and Accountability in AI Determining liability when generative AI tools produce harmful or erroneous outputs is a significant legal challenge. For instance, if an AI-generated report provides faulty advice or a self-driving AI vehicle malfunctions, the question arises: who is accountable? European Union The AI Liability Directive and Product Liability Directive are set to address AI-generated harm by shifting the burden of proof onto developers, manufacturers, and businesses deploying AI systems. The directive aims to clarify who is responsible for damages caused by AI-based decisions. United States The National Artificial Intelligence Initiative Act mandates agencies to explore liability frameworks for AI-related harm. However, the debate continues over whether liability should rest with the developer, the user, or the AI system itself. India India currently does not have specific legislation addressing AI liability. Instead, existing laws under the Indian Penal Code (IPC) and the Civil Code are applied. However, these laws are often inadequate for addressing the complexities introduced by AI. Legal scholars in India are calling for the introduction of specialized AI liability frameworks that clearly define the responsibilities of AI developers, deployers, and users. There is also a push towards incorporating principles of strict liability for AI-related harms, especially in high-stakes applications like healthcare and autonomous vehicles. Ethical and Human Rights Considerations Ethical concerns around AI decision-making are rising, especially in areas like autonomous vehicles, healthcare, and law enforcement, where human rights violations could occur. United Nations The UNESCO Recommendation on the Ethics of AI (2021) outlines global standards for ethical AI, including non-discrimination and transparency in AI decision-making processes. It encourages states to ensure that AI does not infringe on human rights. European Union AI Act The EU has developed the AI Act which came into force on August 1, 2024, classifies AI systems into risk categories, placing stricter regulatory requirements on high-risk systems that could affect fundamental rights or public safety. The AI Act aims to promote the responsible development and use of artificial intelligence in the EU. India India has been proactive in addressing the ethical implications of AI. The NITI Aayog, India’s policy think tank, released the National Strategy for Artificial Intelligence (NSAI), which emphasizes the ethical use of AI. The strategy highlights principles such as transparency, accountability, and fairness. Additionally, India’s Personal Data Protection Act includes provisions that align with ethical AI use, ensuring that AI systems do not perpetuate biases or
AI Strategy & Governance
How to think strategically and understand how #AI can be used to create fair #algorithms, increase #datasecurity, and help us remain in compliance with related #laws and #regulations. I would like to share some of what I learned to spread #knowledge and #awareness on this topic, and link it with the legal field, since it is a subject still not well understood specially by all workers in this field. AI systems leverage intelligent algorithms that classify, analyze, and make predictions from large amounts of #data. These algorithms are trained using large #datasets (i.e. “training data”) so that they can identify patterns in data, make predictions, and recommend actions. #artificialintelligence and #machinelearning (ML) are common phrases nowadays, and very few people are still unaware of them. However, any time a new idea launches, people are pretty reluctant to accept it. Lawyers and legal professionals are no exception. Having concerns about AI taking your place? Even with widespread adoption of AI, attorneys will still be vitally important. AI can’t make a convincing presentation to a jury. Technology can’t fully weigh the factors that go into the many strategic decisions, large and small, that get made over the course of any litigation matter. It can’t replace the human element of relationships with clients. And a computer can’t play a leadership role in motivating a team of attorneys to produce their best work. In short, it would be a mistake to use the extraordinary advances of AI to minimize the importance of the human element in the practice of law. But it would be just as big a mistake to dismiss the role of AI, which will fundamentally reshape the landscape for both providers and users of legal services. Let’s explore a few impactful ways that law firms, in-house legal teams, and the public sector are using AI and ML: “Smart data management \ Automatic reminders \ Contract review and analysis \ Ease of Legal research \ Elimination of time-consuming tasks \ Accurate result prediction \ Accurate risk assessment \ etc.” Among the #risks that cause anxiety for AI users are #cyberthreats and #privacy. According to recent research conducted by a malpractice insurer, cyberattacks affected 22% of legal firms. All in all, Do you want to develop your legal firm? Start with a change management strategy. What will be the method of presenting technology to lawyers and clients? How will you motivate and encourage adoption both internally and externally? How will AI technology work with the lawyer’s existing systems and processes? What AI will you use to track how technology is used?
The Global Impact of GDPR: Transformation of the Data Privacy Laws Worldwide
The advent of the European Union’s General Data Protection Regulation (GDPR) on May 25, 2018, marked a watershed moment in the realm of data privacy. As one of the most comprehensive and stringent data protection regulations ever conceived, GDPR’s impact has transcended the borders of the European Union, reverberating across the globe and prompting a wave of legislative reforms. Countries worldwide have found themselves compelled to reassess and fortify their own data protection frameworks to align with the high standards set by GDPR. This sweeping influence has established GDPR as the de facto global benchmark for data privacy, significantly shaping the policies and practices of organizations far beyond Europe. The GDPR’s broad scope and extraterritorial application mean that it governs not only EU-based organizations but also any entity that processes the personal data of EU residents, irrespective of geographic location. This comprehensive reach has forced companies around the world to adapt to GDPR’s stringent requirements concerning user consent, data minimization, and robust data protection mechanisms. Consequently, GDPR has redefined the global standards for safeguarding personal information, compelling businesses to prioritize data privacy in unprecedented ways. In the wake of GDPR’s implementation, several high-profile data breaches have underscored the urgent need for robust data protection laws. Incidents such as the Alibaba data breach in China, the Benesse data leak in Japan, the Interpark breach in South Korea, Facebook’s controversial data practices in Australia, the Equifax breach in the United States, and the Desjardins breach in Canada have catalyzed significant legal reforms in these nations. Each of these cases has highlighted critical vulnerabilities in existing data protection frameworks, prompting legislative bodies to adopt GDPR-inspired measures to enhance their data privacy regulations. This article explores the profound impact of GDPR on data privacy laws across China, Japan, South Korea, Australia, the USA, and Canada. It delves into specific articles and clauses from these countries’ laws that have been influenced by GDPR, examines real cases that necessitated these changes, and discusses how companies have been compelled to implement these new legal requirements. Additionally, the article provides insights into what the future holds for data privacy, offering predictions for the next decade as the global landscape continues to evolve under the enduring influence of GDPR. The Global Impact of GDPR on Data Privacy Laws When the European Union’s General Data Protection Regulation (GDPR) came into effect on May 25, 2018, it marked a pivotal moment in the world of data privacy. As one of the most comprehensive and stringent data protection regulations, GDPR didn’t just influence the EU; it sent ripples across the globe, prompting countries to rethink and revamp their own privacy laws. The GDPR’s influence extended far beyond European borders, becoming a global standard in data protection. The GDPR’s broad scope meant that it applied not only to organizations within the EU but also to those outside it that processed the personal data of EU residents. This extraterritorial reach compelled companies worldwide to comply with GDPR if they handled data belonging to EU citizens. The regulation introduced stringent requirements on user consent, data minimization, robust data protection mechanisms, redefining global standards for safeguarding personal information. Real Cases and Their Impact China: PIPL and the Alibaba Fine China’s introduction of the Personal Information Protection Law (PIPL) on November 1, 2021, was heavily influenced by GDPR. The need for such a law became evident after the Alibaba data breach in 2019, where the company faced severe scrutiny for its data handling practices. The breach highlighted significant gaps in China’s data protection framework, prompting the enactment of PIPL. Under this new law, companies like Alibaba had to overhaul their data processing activities, ensuring stricter compliance with consent mechanisms, data minimization practices, and enhanced security measures to protect personal data. Articles such as 13, 14, 45, and 49 of PIPL, which focus on lawful grounds for processing, conditions for consent, the right to deletion, and breach notification obligations, closely mirror GDPR’s stringent requirements. Japan: APPI Amendments and the Benesse Data Leak In Japan, the Act on the Protection of Personal Information (APPI) was amended in 2020 to align more closely with GDPR. This move was partly in response to the Benesse data leak in 2014, where the personal information of millions of customers was compromised. The incident underscored the urgent need for stronger data protection laws. Following the amendments, companies in Japan had to significantly enhance their data handling processes, ensuring compliance with new requirements for data transfers, breach notifications, and individual rights to access and correct their data. Key articles from APPI, such as 15, 16, 18, and 22, now include principles of data processing, conditions for data collection and use, rights to access and correct data, and data breach notification requirements, reflecting GDPR’s comprehensive framework. South Korea: PIPA and the Interpark Breach South Korea’s Personal Information Protection Act (PIPA) was further strengthened following the Interpark data breach in 2016, which exposed the personal information of over 10 million users. This breach demonstrated the need for stricter data protection measures, leading South Korea to align PIPA more closely with GDPR. Organizations were required to adopt stringent data protection measures, including obtaining explicit consent for data processing and implementing robust security protocols. Articles 3, 17 and 36 of PIPA, which address principles of data processing, conditions for obtaining consent, rights to correction and deletion, and breach notification obligations, were enhanced to reflect GDPR’s stringent standards. Australia: Privacy Act Review and Facebook’s Data Practices Australia’s Privacy Act 1988 is currently under review to enhance its alignment with GDPR. This review was influenced by various incidents, including Facebook’s controversial data practices that came to light following the Cambridge Analytica scandal. The Australian government recognized the need for stronger data protection laws. Proposed changes to the Privacy Act include introducing a right to erasure and enhancing penalties for non-compliance. Companies in Australia will need to update their privacy policies, strengthen consent mechanisms, and ensure robust data security measures. Relevant principles from the Privacy Act, such as Australian Privacy Principle
Traversing Latest Developments in Media Law in India
1. In recent years, media law in India has witnessed significant developments, reflecting the evolving landscape of communication, technology, and governance. These developments encompass a wide range of issues from freedom of speech to regulation of digital platforms, impacting both traditional media outlets and new-age digital media. Constitutional Backdrop 2. Freedom of speech and expression is enshrined as a fundamental right guaranteed by the Indian Constitution under Article 19(1)(a). However, this right is not absolute and is subject to restrictions under Article 19(2) such as public order, defamation, morality, and security of the state. Recent judicial pronouncements have continued to balance this right with competing interests, particularly in cases involving hate speech, misinformation, and regulation of content on digital platforms. 3. A landmark case in this regard is the case of Shreya Singhal v. Union of India (2015)[1], where the Supreme Court had the occasion to deal with the constitutional validity of Section 66A of the Information Technology Act, 2000, in a case involving the arrest of two women under the Information Technology Act, 2000 for posting allegedly offensive and objectionable comments on Facebook. The Supreme Court, while striking down Section 66A, held the provision as being vague and overbroad, and noted that Section 66A could limit all forms of internet communications as it made no distinction “between mere discussion or advocacy of a particular point of view, which may be annoying or inconvenient or grossly offensive to some and incitement by which such words lead to an imminent causal connection with public disorder, security of State etc.” Regulation of Digital Platforms 4. The rise of digital media platforms has brought forth new challenges in regulation in the arena of Media law. In 2021, the Government of India introduced the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, (amended later in 2022 and 2023). These Rules seek to regulate digital news media and OTT (Over-the-Top) platforms, and amongst other directives, mandate such platforms to adhere to a code of ethics, appoint grievance officers, and provide mechanisms for self-regulation and oversight by the government. The regulations impose stringent obligations on social media intermediaries, including requirements to remove any news related to the “business of the Central Government” that the Union Government’s fact-checking unit (FCU) deems “fake, false, or misleading.” Failure to comply to such removal requests have far reaching consequences including the loss of safe harbour immunity, which protects intermediaries from legal liability for user-generated content. 5. While the government justifies the Rules as necessary to curb the spread of misinformation and harmful content; the Rules have come under staunch and severe criticism from critics who argue that the rules could lead to overreach and stifle free speech. The Rules are already subject to several legal challenges by entities such as the Press Trust of India, WhatsApp, and other interested parties, before the Delhi High Court[2] the Bombay High Court[3], and the Karnataka High Court[4] and have sparked debates regarding their implications for freedom of speech and expression, as well as concerns about potential government overreach in monitoring digital content. Press Freedom and Journalistic Ethics 6. Press freedom remains a crucial aspect of media law in India. Recent incidents of journalists facing legal action, being targeted under various laws, including sedition and defamation, highlight ongoing concerns about the environment for independent journalism in India, and such acts are often seen as attempts to stifle the press and have underscored the challenge faced by a free and fair press. This is also reflected in the concerning drop in India’s World Press Freedom Index over the years[5]. It is due to such circumstances and instances which highlights the vital role that the judiciary has played and continues to play, in upholding press freedoms through landmark judgments that safeguard journalists’ rights to report fearlessly and protect their sources. Challenges for the Future 7. As India’s media landscape evolves with time, future developments in media law are likely to focus on balancing regulatory frameworks with the protection of fundamental rights. Key areas for reform include enhancing transparency in media ownership, ensuring equitable access to information, while addressing emerging issues such as fake news, digital privacy, especially in the age of artificial intelligence and the potential misuse of deep-fakes. As this landscape evolves, the role of self-regulatory bodies, ethical guidelines for journalists, and the responsibilities of digital platforms in curbing harmful content will continue to be subjects of debate and reform. 8. In conclusion, while India has a robust legal framework for media, recent developments reflect ongoing efforts to adapt to technological advancements and societal changes. The challenge lies in maintaining a balance between freedom of expression and the need for responsible media practices in a rapidly transforming media landscape. As these issues unfold, stakeholders both on the side of policymakers, as also media professionals, the civil society, and most importantly, the judiciary, will play crucial roles in the delicate balance required to balance state interests and the rights to freedom of speech and expression, and it is precisely how this balance is maintained, that will shape the future of media law in India.
