High Court Round UpHigh CourtsLegal RoundUpTribunals/Regulatory Bodies/Commissions Monthly Roundup

Here are our interesting picks from the stories reported this week:

To operate in State of Maharashtra, Uber and other unlicensed aggregators to apply for license before 16th March 2022: Bom HC

The Division Bench of Dipankar Datta, CJ and Vinay Joshi, J., directed UBER and other transport aggregators who have not obtained a license as per Section 93(1) of the Motor Vehicles Act to apply for the license before 16th March 2022 otherwise they shall not be able to operate in the State of Maharashtra.

Read full report, here…

Wife leaves matrimonial home and never returns after several requests and legal notice under S. 9 of HMA, alleges husband of several cruelties without any evidence: Would it amount to desertion and cruelty by wife? Del HC answers

Noting the separation of 12 years between the husband and wife, the Division Bench of Vipin Sanghi and Jasmeet Singh, JJ., found that the wife had subjected the husband to desertion and cruelty, hence decree of divorce be granted.

Read full report, here…

Right of residence under DV Act is exclusive to and isolated from any right that may arise under S. 9 of Hindu Marriage Act, 1955: Del HC

“The existence of the strained relationship between the Petitioner and the Respondent has been well established by the fact that there are more than about 60 criminal and civil cases pending between the parties.”

Read full report, here…

Law on Theft | Daughter-in-law thrown out of matrimonial home and accused of removal of letters from possession of matrimonial home: Whether Del HC will find her guilty under S. 380 IPC or not?

Chandra Dhari Singh, J., noted that instant dispute has arisen out of matrimonial discord between two people which had also, led to the filing of more than 50 criminal and civil cases between not only the husband and the wife but also their family members. It was found that for the sole purpose of harassing the other party such cases were filed by persons with no just cause or reason and substantial ground for allegations.

Read full report, here…

SC-ST Act is prospective or retrospective? Kar HC quashes criminal proceedings for offences committed in the year 1975

“…it has been a settled principle of criminal jurisprudence that when the act complained of is not an offence when committed; a free citizen cannot be brought to book merely because such act is criminalized in a subsequent legislation.”

Read full report, here…

Wife, a banker, misusing her position to get details of in-laws’ bank accounts to show husband evading payment of maintenance: Is wife guilty of criminal breach of trust? Court analyses

Manner of bringing the information before Court of law may not be morally right but it cannot be said by this act of petitioner that, petitioner caused or intended to cause any wrongful loss to petitioners or to cause wrongful gain to herself as merely by disclosing this information, no pecuniary benefit is stated to have been received by petitioner and if any maintenance or any other amount is granted by Court of law, that cannot be termed to be wrongful gain to petitioner.

Read full report, here…

Spanking on back of a woman without her consent, by a man would constitute an offence under Stalking as defined under S. 354D (1)(i) IPC? Court explains

Mere presence is not ground for common intention for proving the prior meeting of minds.

Read full report, here…

7 entities indulged in anti-competitive agreement for supply of signages for branches/offices/ATMs of SBI: E-mails exchanged between parties formed basis for manipulation of bidding process

Noting that in respect of cases concerning cartels that are hidden or secret, there is little or no documentary evidence and may be quite fragmentary, Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members)  imposed penalties on 7 entities and signages for bid-rigging activities and cartelization with respect to the supply of signage for branches, offices and ATMs of State Bank of India.

Read full report, here…

Can SEBI proceed against a Chartered Accountant for lack of his due diligence? SAT analyses

“Lack of due diligence can only lead to professional negligence which would amount to a misconduct which could be taken up only by ICAI.”

Read full report, here…

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal, Mumbai: The Coram of Justice Tarun Agarwala (Presiding Officer) and Justice M.T. Joshi (Judicial Member) while addressing a matter whether a Chartered Accountant could be held guilty by SEBI for lack of due diligence, held that,

Lack of due diligence can only lead to professional negligence which would amount to a misconduct which could be taken up only by ICAI.


An appeal was filed against the order passed by the Whole Time Member of Securities and Exchange Board of India whereby the appellant who was a statutory auditor/chartered accountant had been prohibited from issuing any certificate of audit and had been restrained from rendering any other auditing services to any listed companies and intermediaries for a period of one year.

Factual Matrix

Deccan Chronicle Holdings Limited, its promoters, directors, and Chartered Accountant (appellant) were issued show cause notice after investigation, wherein it was alleged that the company had understated its outstanding loans to the tune of Rs 1339.17 crores in the year 2008-9 and had also wrongly disclosed the difference between the actual and reported outstanding loans for the FYs 2009-10 and 2010-11.

Misleading Financial Information

Further, it was alleged that the company had manipulated its financials and failed to make necessary disclosure and that the promoters of the company wrongly transferred loans on the last day of the FY and reverted it on the first day of the financial year, thus misleading financial information.

In view of the above, show cause notice alleged that the appellant had violated Section 12A(a), (b) and (c) of the Securities and Exchange Board of India Act, 1992 read with Regulation 3(a), (b), (c) and (d) and Regulation 4(1), 4(2)(f), (k) and (r) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.

WTM’s Conclusion

WTM concluded stating that the company had made wrong misleading or inadequate disclosures to the stock exchange and had understated the outstanding loans and interest and financial changes in the annual returns.

Further, it held that the appellant under Sections 224 and 227 of the Companies Act, 1956 owes an obligation towards the shareholders to report true and correct facts about the financials of the company and audit is caused to report correctly and faithfully under Section 227 of the Companies Act.

Additionally, the WTM held that the appellant overlooked the reporting of the outstanding loans and that he was not diligent and cautious and that it was his obligation to check the details of the outstanding loan from the bank and through other independent sources which he failed to do so and thereby did not adhere to the Auditing Assurance Standard (AAS)  and consequently allowed the fudging of the books of accounts by the company which suggested that the appellant colluded with the other notices.

Analysis, Law and Decision

Tribunal held that the impugned order could not be sustained for the following reasons:

In the Bombay High Court decision of Price Waterhouse Co. v. SEBI, WP No. 5249 of 2010, it was held that while exercising the powers under the SEBI Act, it is not open to SEBI to encroach upon the powers vested with the Institute under Chartered Accountant Act, 1949.

However, in a given case, if there is material against the C.A. to the effect that he was instrumental in preparing false and fabricated accounts in connivance, then SEBI is entitled to pass appropriate orders under Section 11(4) of the SEBI Act in the interest of the investors or securities market and is entitled to take measures as prescribed in the said section.

Further, SAT in its decision of Price Waterhouse Co. v. SEBI, Appeal No. 6 of 2018, found that the scope of the enquiry was only restricted to the charge of professional negligence since the C.A/C.A Firm were not dealing directly in the securities. This Tribunal held that in absence of inducement, fraud was not proved nor there was connivance or collusion by the C.A.s and therefore, the provision of section 12 (A) of SEBI Act and Regulation 3 & 4 of PFUTP Regulations are not applicable.

In the present matter, A.O. found that due diligence was not carried out by the appellant and there was no finding that the appellants were instrumental in preparing false and fabricated accounts or have connived in preparation or falsification of the books of account. Additionally, the Coram found that the appellants had manipulated the books of accounts with knowledge and intention, in the absence of which, there was no deceit or inducement by the appellants.

In the absence of any inducement, the question of fraud committed by the appellants does not arise.

Tribunal found that the appellant as a statutory auditor was not responsible for the preparation and falsification of the books of accounts, the financials of the company and the balance sheet of the company.

Concluding the matter, Coram held that once CA was not found responsible for the preparation of financials of company, merely because he was not cautious will not suggest that he colluded with the promoters and directors of the company.

In view of the above discussion, Tribunal allowed the appeal, and the impugned order did not sustain so far as it concerned the appellant (CA). [Mani Oommen v. SEBI, 2022 SCC OnLine SAT 60, decided on 18-2-2022]

Advocates before the Tribunal:

Mr. Chetan Kapadia, Advocate with Mr. Rahul Sarda, Mr. KRCV Seshachalam, Ms. Sabeena Mahadik, Mr. Aayush Kothari, Mr. Sagar Hate, Advocates i/b. Visesha Law Services for the Appellant.

Mr. Pradeep Sancheti, Senior Advocate with Mr. Abhiraj Arora, Mr. Karthik Narayan, Mr. Harshvardhan Nankani, Mr. Shourya Tanay, Advocates i/b. ELP for the Respondent.

Case BriefsForeign Courts

Supreme court of Sri Lanka: The Full Bench of Justice Vijith K. Malalgoda, PC, Justice S. Thurairaja, PC and Justice E. A. G. R. Amarasekara, JJ., while rejecting the appeal filed by Defendent-Petitioner upheld the statement of preliminary objection raised by Plaintiff- respondent under Rule (2) and Rule (6) of the Supreme Court Rules 1990 with regard to the maintainability of the instant application.

The Plaintiff-Respondent had instituted an action before the District Court of Ratnapura against the Defendant-Petitioner seeking a declaration that the Plaintiff-Respondent is the State land grantee of the land described in the 1st schedule of the Plaint and to eject the Defendant and all under him from the said portion of land and grant damages in a sum of Rs. 50,000 with cost for litigation. The Defendant-Petitioner sought dismissal with a cross claim of Rs. 50,000 with cost for litigation when filing the answer. At the conclusion of the trial, the learned District Judge delivered the Judgment by dismissing the Plaintiff’s action as well as the counter claim by the Defendant-Respondent. In the light of the position taken by the Defendant-Petitioner referred to above, I will now consider the preliminary objection raised by the Plaintiff-Respondent.

When raising the objection on behalf of the Plaintiff-Respondent it was submitted that, material documents have not been annexed with the Application filed before the Supreme Court and as a result, the Defendant-Petitioner has violated Rules (2) and (6) of the Supreme Court Rules 1990, which are mandatory and requires compliance by a petitioner who is invoking the Jurisdiction of the Supreme Court.

The Court while relying upon the judgment of Supreme Court in Priyanthi Chandrika Jinadasa v. Pathma Hemamali, SC (HC) CALA 99/2008 {2011] 1 Sri LR 337 held that “When deciding that an application for Leave to Appeal from the High Court (Civil Appeal) of the Provinces to the Supreme Court should be filed within 42 days from the date of the judgment.” The Court further held that the Defendant-Petitioner had neither reserved any right to file additional documents nor have they adduced any reasons for the default for the failure to exercise due diligence in obtaining such document.

Thus, the Court upheld the preliminary objection raised by the Plaintiff-Respondent and dismissed the application with no costs.[Kombu Mudiyanselage Thanuja Dilhani v. Suriya Arachchige Inoka Udayangani, SC/HCCA/LA 303/2019, decided on- 17-12-2021]

Suchita Shukla, Editorial Assistant has reported this brief.


 Tharanga Edirisinghe with Nilusha Silva for the Defendant-Respondent-Petitioner

Seevali Amitirigala, PC, with Pathum Wijepala for the Plaintiff-Appellant-Respondent

Op EdsOP. ED.

Behind the magic of movie making is a silent, long-drawn legal process that is unavoidable and imperative to be followed. In today’s day and age of remakes, sequels or movie adaptations of novels and plays, understanding the legal aspects of these transactions is necessary.

Imagine you are an author and you have written a novel. Your novel is a best seller and people come up to you praising it and exclaiming how they think your book should be made into a movie. Or imagine you are a person interested in making movies and you find out about a script written by some writer which you think would be a smashing hit if made into a movie. What options do you have? Well, one of the many ways to go about it is through an option agreement.

Typically, an option agreement provides the owner of the rights in a work (which could be a screenplay, a novel or a play) with the “option” to allow a potential film producer the right to purchase the work under negotiated terms. These terms include a time period within which the producer can assess his financial and other responsibilities and make the decision of whether he would like to purchase the rights to the work or not. During such an option period, generally the rights holder is paid an “option fee” by the producer as consideration for the option granted to the producer.

This article covers the essentials that must be encapsulated within your option agreements whether you are the rights holder or you are the producer.

The Absolute Essentials

  1. Option period

The option period is one of the most important clauses in the option agreement especially from the rights holder’s point of view because if such a period is not defined in the agreement, the producer essentially can hold on to the option forever.

Through an options agreement, the producer does not exclusively own/acquire all rights, title and interest in the works but through an option the producer holds exclusive rights, title and interest in the works for a limited purpose of activity i.e., pre-sale activity, developing of show bible, approaching the platform and such other allied activities for a limited period which is called as “option period”. The producer uses the option period to commercially exploit the works with platforms and if the same materialises, then the producer will pay the full purchase price and acquire all rights, title and interest in the works for perpetuity. However, if the option period lapses before the producer can exercise his option, the producer’s right to purchase the rights also lapses, subsequent to which the author/owner of the work can exploit the work with any other person or company.

If the producer wishes to extend/renew the option period, he/she may do so by paying an additional option fee for such an extended term, as mutually agreed by and between the parties. The length of the option period varies and depends on the medium of exhibition of the works. It is usually suggested to the rights holders to limit the option period for one year with one or maximum two renewals of 6 months each, which should be enough time for the producer to raise finance. However, the option period can be further negotiated considering unavoidable and unforeseen situations like pandemic, natural disaster, etc. In Hollywood, generally the option period lasts for around 18 months which is renewable for an equal period. European option agreements have an option period for 12 months with a renewal period lasting for 6 months – 1 year (or two 6-month renewal periods).[1]

Before assigning extensions to the option period, it is not unusual for the rights holders to ask for proof pertaining to the progress made by the producer during the initial option period. In this case, the producer must ensure that the option agreement clearly defines what “progress” means and specifies realistic targets thereby limiting the right holder’s right of termination.

  1. Option fee

As consideration for granting the purchase option to the producer, the rights holder, by virtue of holding the intellectual property rights in the work, negotiates the option fee to their benefit. Option fee is what the rights holder gets as a reward for giving the producer the exclusive right to purchase the intellectual property rights in the works.  Typically, the option fee is around 10% of the purchase price but these are commercial terms that vary on a deal-to-deal basis depending on how the transactions have been negotiated. These negotiations depend on either the fame of the rights holder and/or his works or the producer’s or his proposed talent’s goodwill and popularity.

It is important to mention here that the payment of the first option fee towards the initial option period is effectively an advance payment of the purchase price which shall be payable to the rights holder if the producer chooses to exercise his options. Thus, the initial option fees would be adjusted against the purchase price paid. So technically the rights holder gets paid a percentage of the purchase price and not just an amount over and above it. This is one of the biggest advantages why the producer uses the options route. Instead of purchasing the rights at an exorbitant amount and then going through the drill of convening resources required to produce the film (which in itself is an expensive affair), through an option agreement the producer can, at a limited risk, work towards raising further funds and engage with actors and other important crew members without having to spend too much money at the initial stage.

However, the second and subsequent option fees for the extended periods are one-time payments that are non-adjustable against the purchase price. Thus, this has to be carefully negotiated by the producers. Note that if the producer does not exercise the option, the initial option fee shall not be refunded to the producer.

  1. Purchase price

If during the option period the producer has procured the necessary finances, recruited the essential talents and is now ready to seal the deal with the rights holder, he may do so by paying the purchase price. Considering the fact that usually option fees is a percentage of the purchase price, a fixed purchase price is negotiated by the parties. Producers may try to negotiate this price depending on their budget for their production. However, the purchase price need not always be a fixed amount. If the parties are unable to agree on the purchase price at the time of executing the options agreement, the parties may sometimes negotiate the same to be in terms of a “floors” and “ceilings” figure thereby postponing the discussion to a further date albeit setting an outline for such negotiations. Generally, the payment for this happens before the start of the shooting of the film.

  1. The rights

One of the most important clauses in this agreement, the option agreement helps the producer negotiate and thereby legalise the rights that the producer shall be granted by the rights holder. A blanket clause covering “all rights in the universe” may not be acceptable to the rights holder. Therefore, it becomes necessary that the rights are specified to avoid any disputes over the interpretation of such a clause. The producer may purchase the rights for exploiting the project into a cinematographic film, web series, television series, documentary or even through modes, mediums and formats that have not been developed at the time of entering the deal. The rights holder, through the agreement shall agree to assigning their rights in the works along with waivers of rights that are available to the rights holders within the copyright laws of India. For example, it is a common practice for producers to require from the rights holders to waive the moral rights available to them under Section 57 of the Copyright Act, 1957[2]. It is also a general practice to procure from the rights holders all the derivative rights in the works which includes without being limited to the rights to make prequel, sequel, adaptation or remakes of the works. Furthermore, there could be “holdback” clauses. Essentially these are restrictions on the producers limiting them from procuring certain rights. For example, the rights holders could restrict the producer from obtaining the rights to exploit the works as a television series or the rights holders could restrict the producer from distributing the films and could retain the rights to itself. Negotiating the rights clause in the agreement is very critical for both parties as this is the crux of the options agreement.

  1. Contingent payments

Certain options agreements may include clauses that ensure that the rights holders are paid a percentage of the net profits earned from the film. Here, the producers will have to decide whether they are willing to share their profits with the right holders and they shall then have to negotiate accordingly. Sometimes the right holders may even let go of some portion of option fee in return of the producer’s commitment to share the profits should the project be successful.

  1. Credits

It is a common practice to provide the “based on the story by …” credits to the rights holder in a film, should the producer exercise his option rights and thereby purchase the rights in the story of the rights holder. Here too the rights holder may negotiate as per their requirements and may demand other credit expectations. They may want to be actively involved in the film making process in an “executive producer” capacity thereby needing the credits for such participation. It is however for the producer to decide if they are willing to have the rights holder on board with regards to such active participation especially in cases where the right holder has little or no experience in filmmaking, or if the intention is only to base the project very loosely on the right holder’s work.

  1. Other standard clauses

The rest of the clauses in these kinds of agreements are standard and depends entirely on how they are negotiated. Therefore, whether it is the termination rights, the indemnity or the confidentiality clauses, these completely depend on how the parties mutually decide to safeguard their individual rights. Usually, the termination rights are also accompanied by the consequences of such termination and the same must be drafted carefully leaving no room for ambiguity. Similarly, the indemnity clause too is very important from a litigation point of view. Since frivolous lawsuits are fairly common in the media and entertainment industry, it is important that the same be negotiated properly.

  1. Due diligence

One of the important things that a producer must ensure before entering into an options deal is to make sure that the rights holder has a completely clear chain of title. This means that the rights holder has a series of legal documents/agreements/assurances that establish that the rights holder indeed holds the rights in the work which is to be optioned to the producer. This also ensures that there are no known obstacles for the producer preventing him from purchasing the rights. Verification of these documents, with the help of a lawyer, will assist producers in avoiding any legal hassles in the future. Further, it is advisable to give a public notice and link one of the payments tranche subject to successful clearance of public notice and no claims received from any party whatsoever.


From a producer’s point of view, an options agreement allows them the freedom to hold on to a story/script/works, the rights for which is held by another person, for an extended period of time without having to spend a fortune while trying to get the project rolling. If the producer is unable to get things organised in time i.e., at the very least start the development of the film, the producer does not end up making heavy losses. On the other hand, the rights holder too receives a heavy paycheck as option money as a reward for his hard work. If the producer is unable to purchase the rights of the film, the rights go back to its holder and he still walks away with the option fee. Safe to say it is a win-win for both. However, the option agreement needs to be drafted and negotiated such that nobody is at a loss and everyone takes a piece of the cake.

Associate, Naik Naik & Company

[1] Rights, Camera, Action!: IP Rights and the Film-Making Process – Booklet No. 2- World Intellectual Property Organization (WIPO), <https://www.wipo.int/edocs/pubdocs/en/copyright/869/wipo_pub_869.pdf>.

[2] <http://www.scconline.com/DocumentLink/L6l9i233>.

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Exchange Board of India (SEBI): G Mahalingam, (Whole Time Member) while revising the recommendations made by the Designated Authority (DA) considering the serious lapses of the Noticee (Book Running Lead Manager) in regards with carrying out due diligence, were taken note of. Resultantly, Noticee is prohibited from accepting any new clients for a period of three months.

The present matter was brought out from an investigation carried out by SEBI into the IPO of Sudar Industries Ltd. (SIL), for which Ashika Capital Limited (Noticee) was the Book Running Lead Manager (BRLM), in which certain lapses were found on account of BRLM. In the instant case the Delegated Authority had observed that the issuer company did not disclose the transactions of Addon Exports, A R Fabrics, Elim Traders, RJ Traders and Shalom Fashion, which were proprietorship firms of employees of SIL and persons connected to it, in the related party transaction. The Noticee contended that there was nothing on record that could have raised an iota of suspicion that the proprietorships in question were connected with the employees and there were no standard guidelines for the due diligence process.

Issues raised were:

  1. Non-disclosure of Independent director’s involvement in key strategic and financial decisions
  2. Heavy dependence on few buyers/suppliers and non-disclosure of the buyers and suppliers being related to the promoters and the promoter group
  3. Wrong disclosures made in the offer document regarding KMPs
  4. Non – Disclosure of Related Party Transactions

The enquiry report indicated clearly that SIL was very much dependent on its clients for around 80% of its revenues and further established a cogent pecuniary relationship.

It was thus held, “…It was further noted that the Noticee had merely relied on an undertaking and information given by the issuer company instead of independently verifying the facts by examination of documents. Thus, the merchant banker in the present case has mechanically disclosed the information provided by the issuer without exercising reasonable diligence to ensure adequate, true and fair disclosures in the prospectus. The Noticee by not independtly exercising adequate diligence has deprived the investors of material information to enable them to make a balanced and well informed decision, which clearly breached the obligations imposed…”.

While stressing on the need for diligence, a landmark judgment of the Supreme Court was referred to, Chander Kanta Bansal V. Rajinder Singh Anand (2008) 5 SCC 117 “…According to Oxford Dictionary (Edn. 2006),the word “diligence” means careful and persistent application or effort. “Diligent” means careful and steady in application to one’s work and duties, showing care and effort. As per Black’s law Dictionary (18thEdn), “Due Diligence” means the diligence reasonably expected from, and ordinarily exercised by, a person who seeks to satisfy a legal requirement or to discharge an obligation. According to Words and Pharses by Drain-Dyspnea (PermanentEdn.13-A)“due diligence”, in law, means doing everything reasonable, not everything possible.“ Due Diligence” means reasonable diligence. It means such diligence as a prudent man would exercise in the conduct of his own affairs…”.

Further stated that, “…I find that the recommendation is not commensurate with the gravity of the lapses/acts of negligence attributable to the Noticee. Hence, I am inclined to appropriately revise the recommendation and pass suitable directions…”.

[Sudar Industries Limited, In re, 2021 SCC OnLine SEBI 62, decided on 17-03-2021]

Op EdsOP. ED.


Technological advancements in law practice have assisted the legal professionals in many ways. Current law practice cannot be imagined without legal technology. Previously, when the legal search engines and databases were unavailable, it would have taken much more time in legal research for case laws. One would have gone to different libraries for research and finally would have found some relevant information. At present, information is merely a click away. With technological advancement AI, machine learning, natural language processing (NLP) have also entered legal field. Artificial intelligence or AI is the capability of machines to emulate human intelligent behaviour.[1] AI can perform complex tasks by applying human intellectual characteristics. Machine learning is the mechanism through which a machine or a computer can improvise its performance by analysing new information and patterns.[2] Algorithm development is one such example of machine learning. Natural language processing deals with human and machine interaction.[3] If computers and humans have alike language then it would be very convenient for the legal professionals to develop software for assistance. With development of these AI technologies lawyers can have ease of work but there is a fear that with the advent of AI the employment might be affected. Benefits might come with certain disadvantage.

Anxiety pertaining to technology

 There is a general misconception that technological advancements will always bring unemployment, however it is pertinent to note that technology as a discipline is in itself a field where workers and professionals are required which in turn might increase the employment rate. At present the anxiety that AI will take over jobs of lawyers is far-fetched. That era is yet to arrive when works of AI would be credible enough without human intervention. Lawyers are often concerned about new technology, probably due to inability to understand it or may be due to the apprehension that the technology might make their jobs obsolete.[4] However more a person understands the new technology, more likely it is to get over with the fear. Prima facie, AI has an impression of something as robots with human deception conquering over the jobs of human and having an ability to develop dominion over the human race. We are oblivious of the fact that these technologies have been developed by humans in first place. Further, AI does not only mean robots, it is a science of computers having the ability to perform certain tasks with human intelligence. AI and other technological advancements have positively transformed the law practice by making research and other tasks convenient and easily accessible. Human intelligence used in the review of documents, proofreading, due diligence, etc. cannot be replaced, though mere assistance of AI can be used. It is pertinent to note that AI will create jobs in the field of technology which in turn would increase employment. AI cannot interact with clients by understanding the issues or argue in court of law. Credibility of an individual is more than AI as AI is the creation of humans ultimately. Though the next generation lawyers should have certain technical skills as well.

Contemporary fields of AI usage

AI is being used for various purposes by the lawyers, due diligence being one of them. Other purposes include automation, legal analytics and prediction technology. Paper would be dealing with due diligence part in an elaborated manner.

  1. Automation

Automation is the technology that uses specific rules to carry out tasks on the basis of decision trees that has a pattern which is followed as per the query.[5] This technology is used in advice systems in cross-border acquisitions and financing guide that can give precise overview of legal and financial development in any country. The guides can quickly provide answer to specific queries.[6] Automation technology can also assist in developing drafting systems saving time and cost. However, document creation is considered as general source of livelihood for lawyers. Automated documentation can certainly reduce costs but can affect the employment opportunities. Though automated documents will require a proof read, still it can encroach on many jobs.

  1. Legal analytics

Legal research is the skill that is a prerequisite for a successful lawyer. Very general principal methodology is identifying the relevant statutes and the provisions and applying the case law. The analytics technology will be based on software that involves advanced predictive technology like natural language processing and machine learning and it can analyse data from many case documents.[7] Previously, for such information, the research was very time consuming and there was human dependence for prediction of behaviours of particular Judge or Bench for the deciding a case.

  1. Due diligence

One of the major tasks of lawyer is to review the documents, fact and exercise appropriate care in carrying out task related to advisory, investments, mergers and acquisitions, real estate work. AI can ease the work related to e-discovery, contract review and background research. Usually, these tasks take a lot of time that can lead to issues of deadlines.

Kira systems is one such company that provides for the AI solutions to the law firms.[8] It automatically extracts and analyse important points from a contract which can be helpful in carrying out due diligence. Apart from due diligence, AI solutions pertaining to compliance, finance, lease abstraction is also provided.

AI in M&A due diligence

The main issue of AI in due diligence is that of its impact on lawyers, whether it will positively impact or not. In due diligence certain steps are essential like background search regarding any pending litigation or financial liabilities and identification of potential risk due to merger.

The main aim of due diligence in M&A is to detect the potential issues that may come up in any transaction. The company acquiring will be requiring certain disclosures form the target company to identify and allocate the risks involved before acquiring the business. Parties to the transaction sign the confidentiality agreement and then the target company provides the relevant documents. Gathering the relevant documents can be a difficult task as there can be different offices or locations from where the document is to be collected. This could also lead to missing out of an important document. Acquirer then sends a list of the documents that are required to be uploaded in the virtual data room, for this target company has to digitise the documents. After the documents have been uploaded, the counsel of the acquiring company reviews the documents and analyse the risks related to pre-existing liabilities and consequences. If the parties have consensus then they sign the letter of intent.

Due to large amount of electronically stored information, background search has significantly changed. Now the information can be searched online, for example regarding pending litigation, the court’s website can be searched and other information about the company can be obtained through the Ministry of Corporate Affairs’ website. Despite information being electronically stored due diligence can be a time consuming and lengthy process. Previously lawyers had to go through thousands of paper documents but at present ESI (electronically stored information) management system can conveniently perform the tasks.[9] This technology can be used in M&A due diligence process as well for disclosure which can be then used in risk allocation and establish further steps.[10] A study conducted by one of the makers of AI due diligence technology, LawGeex stated that AI can be better in finding errors and analysing risk in non-disclosure agreements.[11] Further, it was found in that study that it took about 92 minutes for an average lawyer to review five agreements with 85% accuracy whereas AI reviewed all five agreements in 23 seconds with 94% accuracy.[12] Automation technologies, reflective random indexing can assist in M&A due diligence. In reflective random indexing a system learns to deduce on the basis of previous works.[13] AI and machine learning process can prioritise, classify, organise and identify documents that are to be disclosed according to the business agreement with an increased efficiency and less cost.[14] Major amount of lawyer’s fees is generated due to the investment of expensive hours in document review.[15]

Concerns regarding AI in due diligence

There are two aspects attached to the use of AI technology in due diligence. First, that an individual will be more credible than a machine. Machine is created by humans so in case of error an AI system cannot be held liable. Second important aspect to note is that a human can err in performing tasks but a machine does what it is programmed to do, it can carry out tasks more efficiently so chances of error due exhaustion is very minimal. Ultimately, AI cannot in itself perform tasks in isolation, it is made to assist human not replace them. The client company might have an opinion or a preference regarding the lawyers using or not using AI. Some might prefer AI equipped technology as there is less chance of error and increased efficiency, others on the other hand might go for the regular mechanism that does not include AI.

Software failure and lack of proper training of AI can also lead to missing of vital information and it should be noted that a software being made liable for an error is highly questionable.[16] Further, the sensitive confidential information might be exposed due to the threat of cyber attack and viruses. Furthermore, the question of attorney client privilege might be questioned in certain jurisdiction. Firms opting for AI technology must not be willing to invest only on AI technology but also on appropriate human resource to train such software or else it might backfire the purpose for which it was established. AI can certainly be used as a tool of assistance but cannot replace lawyers.


AI in due diligence and law practice is a field yet to be discovered. There can be different opinion regarding AI in legal profession that it can be cost effective and convenient or will invite unemployment. It is pertinent to note that AI ultimately develops from human mind so the idea of AI replacing human is still a mystery. The technology in the field of law aims to assist the lawyers and not replace them with robots. In medical science, the operation, even of conducted through robotics technology, even then the machine is operated under the supervision of the qualified doctor. Further, even if AI technology affects employment, not all jobs of lawyers can be replaced in near future. Uniform governing law might be required in future for governing AI technology. We are still a long way from robot lawyering era. There are many questions regarding the equal access to the essential technology required for lawyers. The education system for a law degree has to be uniform and technology must be taught to them to cope with the progressive technologies.

Pursuing BA LLB (Hons.), 8th semester, Institute of Law, Nirma University.

[1] Intelligence, Merriam Webster Dictionary.

[2] Machine Learning, Merriam Webster Dictionary.

[3] Dr Michael J. Garbade, A Simple Introduction to Natural Language Processing, Becoming Human,  (13-6- 2020, 10:02 a.m.), <https://becominghuman.ai/a-simple-introduction-to-natural-language-processing-ea66a1747b32>.

[4] Brandy Jo Lea and Prof. Kevin P. Lee, Artificial Intelligence in the Legal Profession, Campbell Uni. J. (December 2018).

[5] Thought Leadership, Artificial Intelligence and the Future for Legal Services (13-6-2020, 01:05 p.m.), <https://www.cliffordchance.com/content/dam/cliffordchance/briefings/2017/11/artificial-intelligence-and-the-future-for-legal-services.pdf> at p. 4.

[6] Id.

 [7]Supra Note 4.

[8] Kira (14-6-2020, 11:05 a.m.)  <https://kirasystems.com/>.

[9] Ben Klaber, Artificial Intelligence and Transactional Law: Automated M&A Due Diligence, UMIACS (14-6-2020, 2:00 p.m.), <http://users.umiacs.umd.edu/~oard/desi5/additional/Klaber.pdf> p. 1.

[10] Id.

[11] Joe Dysart, AI Removes the Drudgery from Legal Due Diligence, ACM News (14-6-2020, 5:10 p.m.), <https://cacm.acm.org/news/233886-ai-removes-the-drudgery-from-legal-due-diligence/fulltext>.

[12] Id.

[13] Trevor Cohen, Roger Schvaneveldt and Dominic Widdows, Reflective Random Indexing and indirect inference: A scalable method for discovery of implicit connections, Journal of Biomedical Informatics 43 (2010) 240-56, <http://users.umiacs.umd.edu/~oard/desi5/additional/Klaber.pdf>.

[14] Supra Note 9.

[15] Justin Evans, Use of Artificial Intelligence During Due Diligence Creates a Global View of a Target Company, Intellectually Jay (14-6-2020, 8:35 a.m.), <https://www.intellectuallyjay.com/2018/02/use-artificial-intelligence-due-diligence-creates-global-view-target-company/conclusion>.

[16] Javier Tortuero, Artificial Intelligence and M&A Due Diligence Current Trends, NYSBA (14-6-2020, 10:46 a.m.), <https://nysba.org/NYSBA/Sections/International/Events/2017/Corporate%20Wedding%20Bells%20CrossBorder%20Mergers%20and%20Acquisitions/Coursebook/Panel%202/Artificial%20Intelligence%20and%20Mergers%20and%20Acquisitions%20Due%20Diligence.pdf> p. 3.

Kerala High Court
Case BriefsHigh Courts

Kerala High Court: R. Narayana Pisharadi, J., while allowing the instant petition, set aside the order of trial Court, thereby allowing the amendment of the plaint contrary to the provisions of Code of Civil Procedure.

In the present case, respondent instituted a suit before trial Court for obtaining a decree of declaration that respondent has got the absolute title, ownership and possession over the property described in the plaint, schedule C and also a decree of prohibitory injunction restraining the appellant from trespassing into that property. After commencement of the examination of witnesses in the suit, the respondent filed an application (Ext.P5) under Order VI Rule 17 of the Code of Civil Procedure, 1908 for amendment of the plaint, which was allowed by the trial Court.

The impugned order of the Trial Court was challenged in the instant petition. One of the main contentions raised by the petitioner was that the application for amendment of plaint cannot be allowed since it was filed by the respondent after the commencement of the trial of the suit.

While ascertaining the date of trial the Court reiterated its decision in Sasidharan v. Sudarsanan, 2020 SCC OnLine Ker 4540, wherein it was held that, “the trial in a suit commences on the date on which the affidavit in lieu of examination-in-chief of a party or his witness is filed for the purpose of recording evidence.” The Court further relied on Vidyabai v. Padmalatha, (2009) 2 SCC 409, where it was held by the Supreme Court that,

 “Order 6 Rule 17 CPC is couched in a mandatory form. Unless the jurisdictional fact, as envisaged in the proviso to Order 6 Rule 17 CPC is found to be existing, the Court will have no jurisdiction at all to allow the amendment of the plaint.”

The Court observed that the trial court has not considered whether the objections raised by the respondent are legally sustainable or not. Hence, the Court set aside the impugned order with the directions that the application is remanded to the trial court for fresh consideration and disposal. The trial court was directed to consider all relevant contentions raised by both parties and dispose of the application in accordance with law by a speaking order, within a period of one month from the date of production of a certified copy of this judgment. [T.V. Sasikala v. C.P. Joseph, 2020 SCC OnLine Ker 7702, decided on 21-12-2020]

New releasesNews


Hemant K. Batra is a Strategist Business, Corporate, Commercial, and Policy Lawyer for nearly 3 decades. He is the elected vice-president of SAARCLAW and is associated with various projects of UN, UNDP, UNAIDS, UN-ESCAP, and ADB. He is chair of the South Asia Committee of Indian National Bar Association. He is a mentor at several prestigious schools of business and a lifetime member of the General Assembly of the Union of International Association, Brussels. He also holds prestigious positions in several international organizations of repute and has been a guest speaker at more than 150 international conferences, etc. He has written and lectured widely. He is a well-acclaimed writer with 5 books to his credit. He was awarded the prestigious Mahatma Gandhi Seva Medal by the Gandhi Global Foundation.

Diligence means carefulness or thoroughness in relation to any task and activity. Due diligence is necessary for any commercial transaction that may involve an asset acquisition, equity or stock purchase, joint-venture, amalgamation, licensing, takeover or merger.  In fact, it may be critical before signing any contract or agreement.

The work has relevance for every corporate house, corporate law firm, business analysts, and the like.

The work consists of 6 chapters: 

Chapter 1: Understanding the Meaning of the Simple Dual or Combo Word named “Due Diligence”.

Chapter 2: Why Do Due Diligence?

Chapter 3: Who Needs Due Diligence?

Chapter 4: Findings of Due Diligence.

Chapter 5: Practicing Due Diligence.

Chapter 6: Due Diligence Review and Result Reporting

Even though this is a legal book, it is written in a style that is easy to understand for even a layman. … A must-read for any professional looking to be a part of India’s vibrant M&A industry.

Vivek Law, Senior Business Journalist;

Founder and Editor in Chief, The MoneyMile

… Numerous real-life examples helpfully illustrate many of the issues and pitfalls awaiting the unwary. A sample due diligence checklist provides a useful starting point.

Toby Greenbury, Director, Wilderness Capital Partners Limited;

Former Partner, D.J. Freeman;

Former Partner, Mishcon de Reya

The book is organised very systematically with the opening chapter devoting considerable time and space to arriving at a definition, understanding the meaning and importance of due diligence (Chapters 1 to 2), for whom and how to conduct a due diligence (Chapters 3 and 4), explaining the practical aspects of due diligence process (Chapter 5), reviewing the findings and reporting them in a structured manner, so that the user can make sense out of a detailed study (Chapter 6). …The book is replete with cases, judgments and stories that make it even more interesting.

K.R. Sekhar, Managing Director, Bayer Group Company

An outstanding handbook or operating manual for those engaging in due diligence relating to business or asset acquisitions. Highly recommended.

Fayez Al-Doasri, Senior Partner, Adel Abdulhadi; Al Oula Former Legal Adviser, Kuwait Fund for Economic Development

This primer edition “Due Diligence” by Mr Hemant Batra, Lawyer and Policy Expert, lucidly discusses the manifestation and path of due diligence from a legal and business perspective.

–Prof. (Dr) Ranbir Singh, Vice-Chancellor, NLU, Delhi;

Member, Board of Management,

International Association of Universities (IAU), Paris

Ready to get a Copy?

Please have a look at the link below-

Case BriefsHigh Courts

Allahabad High Court: Yogendra Kumar Srivastava, J. dismissed the revision petition on the ground that the revisionist was not able to show material error or irregularity in the order passed by the courts.

A revision petition was filed against the order of Additional District Judge where the amendment sought by the revisionist-defendant in the written statement was rejected.

Sanjay Maurya and Deepak Kumar Jaiswal, counsels for the revisionist submitted that under Order 6 Rule 17 of the Code of Civil Procedure, 1908 the court may at any stage of proceeding allow the amendment of the pleading which was rejected by the trial court without recording any finding to arrive at the conclusion that in spite of due diligence the defendant could not have sought the amendment before the commencement of the trial.

Counsel for the respondent submitted that in this case after framing of issues dates were fixed for evidence of the parties and amendment was sought by the defendant tenant only as a dilatory tactic so as to delay the proceedings.

The lower court while rejecting the amendment application had referred to the proviso in Order 6 Rule 17 of CPC in terms of which no application for amendment was to be allowed after the trial had commenced unless the court comes to the conclusion that in spite of the due diligence the parties could not have raised the matter before the commencement of trial. The reason assigned by the defendant-tenant in his application to support his prayer for the amendment was the engagement of a new counsel which was held by the court below to be insufficient. Reliance was placed upon the case of Revajeetu Builders and Developers v. Narayanaswami and Sons.

The Court discussed the “due diligence” which was added by the Amendment Act, 2002 and opined thatthe term “due diligence” has been specifically used so as to provide a test for determining whether to exercise the discretion in situations where amendment is being sought after the commencement of the trial.”

The Court held that “court below has come to the conclusion that the amendment which was being sought was not imperative for determining the real question in controversy between the parties, and also that the same was barred by the proviso to Order 6 Rule 17 CPC which curtails the discretion to allow amendment of pleadings after the trial has commenced, and introduces the “due diligence” test in terms whereof the burden is on the person seeking the amendment after commencement of trial to show that in spite of “due diligence” such an amendment could not have been sought earlier, and as such the order passed by the trial court cannot be faulted with”. Another judgment which was noted by the court was that of Mundri Lal v. Sushila Rani, (2007) 8 SCC 609 in which it was held that “There are very limited grounds on which there can be interference in exercise of jurisdiction under Section 25 of Provincial Small Cause Courts Act, 1887; they are, when (i) findings are perverse or (ii) based on no material or (iii) findings have been arrived at upon taking into consideration the inadmissible evidence or (iv) findings have been arrived at without consideration of relevant evidence.”

The Court thus held that the revisionist was not able to point out the material error or irregularity in the order passed by the courts below so as to warrant the interference in exercise of revisional jurisdiction under Section 25 of the Provisional Small Cause Court Act, 1887.  Thus, the revision petition was dismissed.[Hari Narayana v. Shanti Devi, 2019 SCC OnLine All 2380, decided on 28-05-2019]

Punjab and Haryana High Court
Case BriefsHigh Courts

Punjab and Haryana High Court: Amit Rawal J., dismissed the second appeal petition on the ground that there was no substantial question for determination.

The regular second appeal was preferred at the instance of the appellant/defendant against the decretal suit against the injunction order to her to not to interfere in the subject land.

The respondent-plaintiff alleged that plaintiff and defendant had joint land which was purchased by the plaintiff for Rs 1 lakh for the purpose of passage. The defendants were extending threats for construction on the land including 1 biswa and perpetually requested but resulted into celandra under Section 107(151) of Code of Criminal Procedure, 1973.

Sanjiv Gupta, counsel for the appellant/defendant submitted that suit for the injunction prima facie as per the record of local commissioner reflecting the possession of 1 biswa more than her ownership, was not maintainable. In the absence of relief of mandatory injunction, decree qua relief of possession could not be moulded under the provisions of Order 7 Rule 7 of Code of Civil Procedure, 1908.

The defendant opposed the suit and denied the averments and stated that she was the owner of the land measuring six biswa as per the registered sale deed.

Court opined that “litigants are required to exercise the due diligence in the pursuing the remedy particularly when the appellant had assailed the judgment and decree of the trial Court before the Lower Appellate Court. There is no equity on the person who has been found to be in alleged encroachment” Thus, the petition was dismissed.[Sabri v. Gulzar Ahmed, 2019 SCC OnLine P&H 708, decided on 24-05-2019]

Patna High Court
Case BriefsHigh Courts

Patna High Court: The Bench of Prabhat Kumar Jha, J. dismissed a petition filed against an order allowing production of additional documents.

Petitioner herein filed an eviction suit against one Rajendra Mistri, which was decreed in his favour. Respondents herein (who are widow and sons of Rajendra Mistri) filed an appeal against the said decree along with an application under Order 41 Rule 27 of the Code of Civil Procedure, 1908 for bringing additional documents on record. The said application was allowed by the learned District Judge. Aggrieved thereby, the instant petition was filed.

The Court noted that respondents were not aware of the pendency of the eviction suit filed by the petitioner. Rajendra Mistri, who was contesting the suit, became traceless in the middle of hearing, and the suit was decided without allowing the defendant to produce any documentary evidence as the fact of him being traceless could not be brought to the knowledge of the court. When the suit was decreed, his legal heirs got knowledge about this fact and filed an appeal along with a petition stating that they had no knowledge about the pendency of the suit. They also filed an application for adducing additional documents which had a bearing on merits of the case. On consideration of these facts, the learned District Judge allowed their petition for adducing additional evidence

Order 41 Rule 27(1)(b) of CPC clearly envisages that party seeking to produce additional evidence, must establish that notwithstanding the exercise of due diligence, such evidence was not within his knowledge or could not, after the exercise of due diligence, be produced by him at the time when the decree appealed against was passed. It was held that respondents’ case clearly fell within the purview of said provision and thus there was no infirmity in the impugned order.[Vijay Kumar Singh v. Soni Kuer, 2018 SCC OnLine Pat 2292, Order dated 06-12-2018]

Case BriefsHigh Courts

Delhi High Court: A Division Bench comprising of Rajendra Menon, CJ and V. Kameswar Rao, J. allowed a letters patent appeal against the judgment of the writ court whereby the appellants petition for compensation of his son was dismissed.

On the fateful day, the appellant and his 14-years old son had gone to Sanjay Park maintained by Respondent 1 — East Delhi Municipal Corporation, where while playing cricket the son came in contact with an electric wire lying there and was electrocuted which resulted in his death. In the action brought for compensation by the appellant, the respondents started to shift the liability on each-other, Respondent 2 being BSES, the company responsible to maintain the electricity system in the said park. The writ court dismissed the action holding that there was a dispute as to who was responsible and such a question could only be looked into by the trial court.

The High Court was of the view that approach of the writ court was not right. The Court was of the view that the negligence on the part of respondents was writ large in the improper manner of maintaining the electricity system. It was of the view that the death of deceased was caused due to negligence of the respondents. In such situation, according to the High Court, the writ court ought not to dismiss the valid claim for compensation brought by the appellant. Holding thus, the only question left was of assessing the amount of compensation to be awarded to the appellant for the death of his 14-years old son. After applying the proper formula, the Court assessed the amount of compensation at Rs 27,38,607.81 along with interest. At first, both the respondents shall each pay 50% of the amount and thereafter they could work a settlement amongst themselves. The appeal was disposed of in the manner above. [Rajeev Singhal v. MCD, 2018 SCC OnLine Del 11518, dated 27-09-2018]

Case BriefsHigh Courts

Himachal Pradesh High Court: A petition filed under Article 227 of the Constitution against the order of the Additional District Judge whereby he allowed respondents’ application for adducing additional evidence, was allowed by a Single Judge Bench comprising of Tarlok Singh Chauhan, J.

The matter related to a Will and mutation of certain properties. The parties were contending a suit in regard to the same in the lower courts. In the said suit, the respondents filed an application before the Additional District Judge for adducing additional evidence under Order 41 Rule 27 CPC which was allowed. Aggrieved by the same, the petitioners preferred the instant petition.

The High Court perused the record and found that earlier the respondents had filed an application before the trial judge for producing the mutation under Order 8 Rule 1-A of CPC which was dismissed. Hence, the same applied as res judicata against the similar relief sought in subsequent application as the order of trial court was never assailed by the respondents. Further, the documents sought to be produced now were already in the knowledge of the respondents being public documents as asserted by the respondents themselves. The Court held that for seeking relief under Order 41 Rule 27, it was necessary for the party seeking such relief to have exercised due diligence in not having faulted to produce documents at an earlier stage. Duly diligent efforts are the requirement for a party seeking to use the adjudicatory mechanism to attain an anticipated relief. However, in the instant case, as noted above, the respondents were not diligent in producing the documents at the appropriate stage even when it could have been done. Thus, the Court found that it was not a case where benefit under Order 41 Rule 27 ought to have been granted to the respondents. Hence, the petition was allowed and the impugned order was set aside. [Rattan Chand v. Duni Chand, 2018 SCC OnLine HP 613, dated 21-5-2018]

Supreme Court

Supreme Court: The Bench comprising of Anil R. Dave, Vikramajit Sen and U.U. Lalit, JJ., held that the Medical Council of India (MCI) and the Central Government must show due diligence right from the day when the applications preferred in respect of Medical Colleges are received. The MCI and the Central Government have been vested with monitoring powers under Section 10A of the Indian Medical Council Act, 1956 and the Regulations framed under the Act. It is expected of these authorities to discharge their functions well within the statutory confines as well as in conformity with the Schedule to the Regulations. If there is inaction on their part or non-observance of the time Schedule, it is bound to have adverse effect on all concerned.

The Court while clubbing a bunch of petitions emanating out of disapproval of applications (relating to  increase in number of seats in existing institutions, institutions which were sought to be established for the first time and institutions seeking renewal of permission) preferred in respect of Medical Colleges for the academic year 2014-2015 issued by the Central Government, basing on the reason that the MCI, after scrutiny, had found infirmities or inadequacies in the infrastructure, facilities and faculty in the said colleges, though the respective applicants Colleges  claimed to have rectified the shortcomings and asked for compliance verification which was subsequently refused by the Central Government and/or the MCI refused for want of adequate time.

The Supreme Court slammed the Central Government and MCI by referring to the delay, as it not only caused loss of opportunity to the students’ community but at the same time caused loss to the society in terms of less number of doctors being available. Therefore, they must show due diligence as stated above. The schedule giving various stages and time limits must accommodate every possible eventuality and at the same time must comply with the requirements of observance of natural justice at various levels. Moreover the court directed them to discharge their functions in accord with the concerned Regulations and the Statute in keeping the observations made by the court. It also said that the central government had been empowered to make minor adjustments in the schedule for inspection and grant of permission to medical colleges. However, the bench clarified that the September 30 deadline to complete admissions to all MBBS seats must be scrupulously adhered to. Royal Medical Trust v. Union of India,  2015 SCC OnLine SC 740Decided on 20.08.2015