Explained: Law on holding an ‘Office of Profit’

Constitution

Explained: Law on holding an ‘Office of Profit’

Vibhor Relhan - February 22, 2018 Comments

Following the recommendation of the Election Commission (EC), the President disqualified 20 MLAs of the Delhi Legislative Assembly last month for holding an ‘office of profit’. The legislators in question were appointed as parliamentary secretaries to various ministries in the Delhi government. The Delhi High Court is currently hearing a petition filed by the disqualified MLAs against the EC’s recommendation. There have been reports of parliamentary secretaries being appointed in 20 states in the past with court judgments striking down these appointments in several cases. In this context, we discuss the law on holding an ‘office of profit’.

What is the concept of ‘office of profit’?

MPs and MLAs, as members of the legislature, hold the government accountable for its work. The essence of disqualification under the office of profit law is if legislators holds an ‘office of profit’ under the government, they might be susceptible to government influence, and may not discharge their constitutional mandate fairly. The intent is that there should be no conflict between the duties and interests of an elected member. Hence, the office of profit law simply seeks to enforce a basic feature of the Constitution- the principle of separation of power between the legislature and the executive.

According to the definition, what constitutes an ‘office of profit’?

The law does not clearly define what constitutes an office of profit but the definition has evolved over the years with interpretations made in various court judgments. An office of profit has been interpreted to be a position that brings to the office-holder some financial gain, or advantage, or benefit. The amount of such profit is immaterial.

In 1964, the Supreme Court ruled that the test for determining whether a person holds an office of profit is the test of appointment. Several factors are considered in this determination including factors such as: (i) whether the government is the appointing authority, (ii) whether the government has the power to terminate the appointment, (iii) whether the government determines the remuneration, (iv) what is the source of remuneration, and (v) the power that comes with the position.

What does the Constitution say about holding an ‘office of profit’? Can exemptions be granted under the law?

Under the provisions of Article 102 (1) and Article 191 (1) of the Constitution, an MP or an MLA (or an MLC) is barred from holding any office of profit under the central or state government. The articles clarify that “a person shall not be deemed to hold an office of profit under the government of India or the government of any state by reason only that he is a minister”. The Constitution specifies that the number of ministers including the Chief Minister has to be within 15% of the total number of members of the assembly (10% in the case of Delhi, which is a union territory with legislature).

Provisions of Articles 102 and 191 also protect a legislator occupying a government position if the office in question has been made immune to disqualification by law. In the recent past, several state legislatures have enacted laws exempting certain offices from the purview of office of profit. Parliament has also enacted the Parliament (Prevention of Disqualification) Act, 1959, which has been amended several times to expand the exempted list.

Is there a bar on how many offices can be exempted from the purview of the law?

There is no bar on how many offices can be exempted from the purview of the law.

It was reported in 2015 that all 60 MLAs of the Nagaland Assembly had joined the ruling alliance. The Nagaland Chief Minister appointed 26 legislators as parliamentary secretaries in July 2017. Goa, an assembly of 40 MLAs, exempted more than 50 offices by means of an ordinance issued in June last year. Puducherry, an assembly of 33 MLAs, exempted more than 60 offices by passing an amendment bill in 2009. In Delhi, the 21 parliamentary secretaries added to the seven ministerial posts would constitute 40% of the 70-member legislature. In all, 20 states have similar provisions.

This raises an important concern. If a large number of legislators are appointed to such offices, their role in scrutinising the work of the government may be impaired. Thus, this could contravene the spirit of Articles 102 and 191 of the Constitution.

What is the debate around making appointments to the office of parliamentary secretaries?

Interestingly, the appointment of legislators as parliamentary secretaries, in spite of the office being exempted from purview of the office of profit law, has been struck down by courts in several states.

Why has the appointment as a parliamentary secretary been struck down while other offices are allowed to be exempt from the purview of the law? If legislators can be accommodated in positions other than ‘parliamentary secretary’, why do state governments continue to appoint legislators as parliamentary secretaries instead of appointing them to other offices?

These questions have been answered in a Calcutta High Court judgment in 2015 which held that since the position may confer the rank of a junior minister on the legislator, the appointment of MLAs as parliamentary secretaries was an attempt by state governments to bypass the constitutional ceiling on the number of ministers. In 2009, the Bombay High Court also held that appointing parliamentary secretaries of the rank and status of a Cabinet Minister is in violation of Article 164 (1A) of the Constitution. The Article specifies that the number of ministers including the Chief Minister should not exceed 15% of the total number of members in the assembly.

Ban on cryptocurrencies: Understanding the proposed legislation

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Anurag Vaishnav - September 5, 2019 Comments

In July, a Committee set up by the Ministry of Finance to study issues related to virtual currencies, submitted its report. The Committee recommended that all private cryptocurrencies should be banned in India. Correspondingly, the Committee proposed a draft Bill banning cryptocurrency in the country. In this blog, we explain cryptocurrencies and how they are used, recommendations of the Committee with respect to cryptocurrencies and the regulatory framework for cryptocurrencies in India and other countries.

What are virtual currencies and what is their use?

Virtual currency is a digitally tradable form of value, which can be used as a medium of exchange, or a stored value which can be utilised later. It does not have the status of a legal tender. A legal tender is guaranteed by the central government and all parties are legally bound to accept it as a mode of payment.

Cryptocurrency is a specific type of virtual currency, which is decentralised and protected by cryptographic encryption techniques. Bitcoin, Ethereum, Ripple are a few notable examples of cryptocurrencies. Decentralisation implies that there is no central authority where records of transactions are maintained. Instead, anyone can create a transaction. This transaction data is recorded and shared across multiple distributor networks, through independent computers as shown in Figure 1. This technology is known as Distributed Ledger Technology.

Figure 1: Distributed Ledger Technology

The Committee noted that there are two principal ways in which cryptocurrencies are raising money. First, through Initial Coin Offerings, where digital tokens are issued in exchange for other currencies. Second, through using it as a means of exchange or a payment system. As of February 2019, there were more than 2,000 cryptocurrencies across the world, with a market capitalisation of approximately USD 120 billion.

Why has the Committee recommended banning of cryptocurrencies?

The Committee noted various regulatory concerns around virtual currencies, and cryptocurrencies in particular. These include:

Fluctuation in prices: Cryptocurrencies are subjected to market fluctuations and the lack of a centralised authority makes it difficult to regulate them. For instance, in December 2017, the value of Bitcoin cryptocurrency was around USD 20,000 per coin, which reduced to USD 3,800 per coin by November 2018. The Ministry of Finance, in a press statement, noted that the price of virtual currencies is a matter of mere speculation resulting in spurt and volatility in their prices.

Risk to consumers: The Committee also noted that there are several vulnerabilities in the design of cryptocurrencies which leave consumers open to risk of fraud. These include phishing cyber-attacks and ponzi schemes. For instance, a Rs 2,000 crore ponzi scheme was unveiled in April 2018. Further, cryptocurrency transactions are irreversible, which means once a transaction is done, there is no way to remedy it.

Impact on power consumption: The Committee also observed that cryptocurrencies can have unfavourable consequences on India’s energy demand. Validating transactions in a distributed network involves high electricity consumption and requires high computation power. The Committee noted a study which estimated that 19 households in USA can be powered for one day by the electricity consumed in a single transaction of bitcoin cryptocurrency.

Potential use for criminal activity: The Financial Action Task Force, an intergovernmental organisation to combat money laundering, in its report (2014) observed that virtual currencies provide greater anonymity than traditional payment methods. This makes them more vulnerable to money-laundering and illicit funding for terror financing. The Committee noted that the decentralised nature and the anonymity which cryptocurrencies provide makes it difficult for law enforcement authorities to track down people involved in illicit activities.

Is there any country which has permitted use of cryptocurrencies?

Different countries have adopted different regulatory frameworks with respect to cryptocurrencies. Some countries have permitted the use of cryptocurrencies as a payment system while there is a complete ban on cryptocurrencies in some others. Note that no country has allowed use of any virtual currency as legal tender.

Table 1: Regulatory framework for cryptocurrencies in different countries

Country	Regulatory Framework
Canada	Permitted as a payment system and as a form of investment, income from it is taxed
Switzerland	Permitted as a payment system (including consumer to government transactions) and as a form of investment
Japan	Permitted and regulated as a payment system
China	Use of cryptocurrency is banned for all purposes

What are the present regulations in India with respect to cryptocurrencies?

In the last few years, the Reserve Bank of India (RBI) has notified the potential financial, operational, legal and security risks related to cryptocurrencies on multiple occasions (December 2013, February 2017 and December 2017). In December 2017, the Ministry of Finance issued a statement which clarified that virtual currencies are not legal tender and do not have any regulatory permission or protection in India. Further, the investors and participants dealing with them are doing so entirely at their risk and should best avoid participating. In the 2018-19 budget speech, the Finance Minister announced that the government does not consider cryptocurrencies as legal tender and will take all measures to eliminate their use in financing illegitimate activities or as a part of payment system. In April 2018, RBI notified that entities regulated by it should not deal in virtual currencies or provide services for facilitating any person or entity in dealing with or settling virtual currencies.

How does the draft Bill proposed by the Committee change these regulations?

Currently, only the entities regulated by the central bank are prohibited from dealing in, or providing services for dealing in virtual currencies. The draft Bill prohibits any form of mining (creating cryptocurrency), issuing, buying, holding, selling or dealing in cryptocurrency in the country. Further, it provides that cryptocurrency should not be used as legal tender or currency in India. The Bill allows for the use of technology or processes underlying cryptocurrency for the purpose of experiment, research or teaching.

The Bill also provides for offences and punishments for the contravention of its provisions. For instance, it states that mining, holding, selling, issuing or using cryptocurrency is punishable with a fine, or imprisonment up to 10 years, or both. For individuals who might be in possession of cryptocurrencies, the Bill provides for a transition period of 90 days from the commencement of the Act, during which a person may dispose of any cryptocurrency in their possession, as per the notified rules.

Are there any areas where the Committee recommended use of cryptocurrencies?

According to the Committee, while cryptocurrencies or virtual currencies do not offer any advantages, the underlying technology behind them (Distributed Ledger Technology, DLT) has many potential applications, both in finance and non-finance sectors. Some of these are listed in Table 2. The Committee observed that DLT makes it easier to identify duplicate transactions, and therefore can be utilised for fraud-detection, processing KYC requirements, and claim management for insurance. Further, it can be helpful for removing errors and frauds in land markets, if used for maintaining land records. The Committee was also of the view that the idea of an official digital currency in India can be explored further, and that the government may setup a group to examine and develop an appropriate model of digital currency in India.

Table 2: Applications of Distributed Ledger Technology

Sector	Possible uses of DLT
Payments	Faster and cheaper cross-border payments Reduced transaction cost for micro-payments
Identification	Storing personal records such as birth, marriage or death certificates Removing duplicates in identification platforms such as KYC
Insurance	Fraud detection and risk prevention Claims prevention and management
Ownership registries	Removing errors and frauds in land markets Administrative ease of maintaining land records
Trade Financing	Reduced operational complexity and transaction costs

Explaining the draft Bill on violence against healthcare professionals and clinical establishments

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Gayatri Mann - September 3, 2019 Comments

Yesterday, the Ministry of Health and Family Welfare released a draft Bill to address incidences of violence against healthcare professionals and damage to the property of clinical establishments. Public comments on the draft Bill are invited till the end of September. In this context, we discuss key provisions of the draft Bill below.

What does the draft Bill seek to do?

The draft Bill prohibits any acts of violence committed against healthcare service personnel including doctors, nurses, para medical workers, medical students, and ambulance drivers, among others. It also prohibits any damage caused to hospitals, clinics, and ambulances.

Under the draft Bill, violence means any act which may cause: (i) harm, injury or danger to the life of a healthcare service personnel, while discharging their duty, (ii) obstruction or hindrance to healthcare service personnel, while discharging their duty, and (ii) loss or damage to any property or documents in a clinical establishment.

What are the penalties for committing such acts of violence?

Currently, the Indian Penal Code, 1860 provides for penalties for any harm caused to an individual or any damage caused to property. Further, the Code prescribes penalties for causing grievous hurt i.e., permanent damage to another individual. The draft Bill additionally specifies penalties for similar offences caused to healthcare professionals and clinical establishments.

Under the draft Bill, any person who commits violence, or abets such violence may be punished with imprisonment between six months to five years, along with a fine of up to five lakh rupees. However, if any person causes grievous hurt to a healthcare service professional, he will be imprisoned for a period between three years to ten years, along with a fine between two lakh rupees and Rs 10 lakh. Note that, currently under the Indian Penal Code, 1860, an individual who commits grievous hurt is punishable with imprisonment of up to seven years, along with a fine.

In addition to the punishment for offences committed under the draft Bill, the convicted person will also be liable to pay compensation to the affected parties. This includes: (i) payment of twice the amount of the market value of the damaged property, (ii) one lakh rupees for causing hurt to healthcare service personnel, and (iii) five lakh rupees for causing grievous hurt to healthcare service personnel. In case of non-payment of compensation, the amount may be recovered under the Revenue Recovery Act, 1890. The Act provides for recovering certain public arrears by attaching the property of an individual.

How will these cases of violence be investigated?

All offences under the draft Bill will be cognizable (i.e., a police officer can arrest without a warrant) and non-bailable. An aggrieved healthcare service professional can write a request to the person-in-charge of the clinical establishment to inform the police of an offence committed under the draft Bill. Further, any case registered under this Bill will be investigated by a police officer not below the rank of Deputy Superintendent of Police.

This Bill is currently in the draft stage and has been released for comments by stakeholders and experts in the field. The draft will be revised to incorporate such suggestions. Note that, comments can be emailed to the Ministry of Health and Family Welfare at us-ms-mohfwnic.in by the end of September.

Explained: Law on holding an ‘Office of Profit’

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