Case Review: Columbia Sportswear Company vs. Director of Income Tax, Bangalore AIR 2012 SC 3038

Coram: Kapadia, CJ. , Patnaik, J. and Swatanter Kumar, J.

Background

In the era of globalization and free trade, each country wants to rule at the international stage. The race to attract investment has made countries like India adopt various measures to ensure that investment in done in a smooth and confident manner by investors. The tax laws of any country can be complex and efforts are continuously made to simplify them. The Authority for Advance Ruling (“AAR”) is a step in this direction and was constituted by the Indian Government in 1993 with a view to help the foreign investors entering India determine and plan their tax liabilities in advance. Chapter XIX-B of the Income Tax Act, 1961 (“the Act”) provides for the AAR and it allows non-residents and certain category of residents to apply to the AAR. In order to provide certainty in determining taxes, Section 245S was enacted and it provides that the rulings of the AAR are binding on the income tax department and the applicant for that transaction. However, it was seen that a lot of cases were being filed before various courts against the ruling of the AAR. It came up before the Supreme Court (“SC”) in this case and various important decisions were made by the court regarding appeals from rulings of AAR and other incidental matters.

Decision of the Court

 The petitioner company approached the SC against the order of the AAR. On the preliminary inquiry, the court dwelled into if the rulings of the AAR can be challenged under Articles 226,227 to the High Court (“HC”) or under Article 136 to the SC. The court observed that the HC has powers under Article 226 to control the proceedings of a body like tribunal acting judicially and issue writs. Also, under Article 227 it has powers of superintendence over all courts and tribunals within its jurisdiction. Similarly, the SC has powers under Article 136 to grant special leave to appeal from orders of any court, tribunal etc. The issue thus before the court was whether the AAR can be held to be a tribunal within the meanings of the Articles. The test followed by the court in this case was the following:

“Whether a body or tribunal has judicial power of the State by any law to pronounce upon rights or liabilities arising out of some special law”.[1]

The court held that the AAR fulfilled the above test and would come under the definition of tribunals within Articles 226,227,136. The conclusion with regard to this was reached by looking into Section 245N (a) of the Act which provides the definition of “advance ruling”. It was observed by the court that a plain reading of the provision makes it clear that the authority makes a determination on a transaction and it is also empowered to take decisions on queries of computation, facts and law. Also, using Section 245S of the Act, the court held that the determination by the AAR is binding and it acts in a judicial capacity while determining the tax liabilities of parties. The court ruled that the fact that the rulings of the AAR are binding does not ouster the jurisdiction of the court and a statute cannot limit the powers vested to the courts under these Articles by the Constitution. Therefore, it was laid down that Section 245S (1) does not bar the jurisdiction of the HC and the SC under Articles 226,227,136 to admit an appeal against the advance ruling by the AAR. Also, it was held that the limited binding nature of the AAR rulings and for other transactions, a ruling would be only persuasive.

Rejecting the contention that the rulings should be appealed directly to the SC due to possibility of delays in the HC, the court observed that doing this would amount to violation of the basic structure of the Constitution as the powers of HC to exert superintendence over decisions of court and tribunals under its jurisdiction is a part of the basic structure. Agreeing with the fact that the appeals to the HC may suffer from delay, the court ruled that all challenges made against the order of the AAR should be heard by a division bench of the HC and should be decided expeditiously. Further, holding that the SC under Article 136 has wide discretion to grant special leave, it was held that only in cases where substantial questions of general importance arise or there are similar matters pending, should the court allow for persons to approach the SC directly. Therefore, the SLP was dismissed by the court and a liberty was given to the petitioners to approach the HC.

Impact of the Judgment

This judgment has been hotly debated in the recent times. There are allegations that the SC has defeated the very purpose of the body by this interpretation. Before looking into the reasons for supporting the judgment, it would be better to highlight some of the problems caused by the judgment.

One of the major criticisms of the judgment is that it is against the very object of AAR. Allowing appeals from the rulings of the AAR will defeat the twin purposes of certainty and expeditious decision. A person applying to the AAR will not be able to tell certainly if the tax assessment by the AAR would be the final determination and therefore it will be difficult for him to plan his taxes. Also, the right to appeal to the HC or the SC would consume a lot of time and the purpose behind the 6 month time bound decision making requirement would be lost. This criticism relates directly to the core reason of instilling investor confidence. An investor who is not sure about his taxes would not feel comfortable approaching the AAR if he knows that the binding decision can be challenged before the courts which could possibly take a huge amount of time. In the present day world, it is impractical and inefficient. Therefore, it can be assumed that this decision has far reaching impact on the policy of streamlining processes by establishing AAR so as to promote investment in the country.

Validity of the Judgment

Apart from the general concern over the negative effects of the judgment, I believe that the judgment is well established on legal principles, precedents and addresses an important point of appeal in an appropriate manner.

The judgment has correctly held that the AAR acts in a judicial nature when it decides on applications and gives a ruling. As such, it falls within the definition of a tribunal which would be under the scrutiny of the HC and SC. The provisions of the Chapter on AAR by their plain meaning, purpose and effect stipulate a body that makes decisions which are judicial in nature and therefore the court correctly applied the test and came to the conclusion that AAR was a body dispensing judicial functions of the state. By acknowledging the constitutionally given right to appeal to the HC and the SC, the court in this case has provided a forum which would be able to correct any infirmity in any orders of the AAR. There could be many cases where such judicial determination might be defective and going to higher courts against such order ensures that the process of law is followed and no injustice is caused. Since the ruling by the AAR can include a ruling on an issue of law, it is imperative that higher courts, who are the final interpreters of law, have jurisdiction to accept appeals in disputed cases. Another practical use of allowing appeals is that people who know that the decisions of the AAR are final would be reluctant to be bound by such decisions and exhaust their right to alternate remedies under other laws if they follow normal procedure[2].

Further, I think that the court addressed the issue of the jurisdiction of the HC in the correct manner. The inherent jurisdiction of the HC cannot be ousted. Although the court tried to allay the fear of delay by holding that the appeals from the AAR should be heard by a division bench, it could have given a time frame for such benches to decide a case to ensure that the object of the AAR can be furthered in these court processes.

Conclusion

This decision of the court has certainly changed some schematics of the AAR. However, I feel that the change is to ensure that justice is effectively done on every application. In the long run, it is the sustainable method to determine the tax liability of people. One of the pressing needs is to increase the number of the members of the AAR and help them give better and quicker rulings. However, it needs to be seen how the decision affects the AAR in practice.

Dev Chaudhary

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[1] Para 7

[2] Ranjan Vohra, Should courts entertain appeals against AAR Rulings?, Taxsutra.Com, April 3, 2012 at < http://www.taxsutra.com/node/282>

Standing Orders vs. Employment Contracts: Which Should Prevail?

Introduction

The Industrial Employment (Standing Orders) Act, 1948 (“the Act”) was passed against a backdrop of worsening conditions for workmen in industries. The workers were an oppressed group of people who were unaware about the conditions of service that affected them. There was no method of them knowing what were their rights and duties. There was no bargaining power for them and they were paid low wages. In this light, it was felt necessary for workers in industries to be aware of the terms and conditions of their service. The Act was one of the plethora of industrial laws to be passed around that time and it has played a role in the overall evolution of industrial harmony and regulation of industrial sector in the country. The Act requires certain types of employers to publish Standing Orders after getting them certified by the authorities. The schedule of the Act has listed down several heads for which the employer has to frame Standing Orders. These include matters like shifts, holidays, working hours, removal from employment etc. Once the Standing Orders are certified by the Certifying Officer, they are statutorily imposed and are binding.

The problem arises when these Standing Orders are in conflict with another means of governing working conditions of workmen, which are their employment contracts. Most of the workmen sign a personal employment contract which lists down their terms of employment and other conditions that are agreed between them and the employer. This paper in an attempt to react to the tussle between these employment contracts and standing orders. Both of these can be useful and harmful for employees in a variety of cases and it is important to figure out which of these two must be given preference in case there is contradiction. The present paper highlights the logical, legal and ethical reactions to the issues and proposes a model which would further the ultimate aim of labour welfare.

The Merits Of Employment Contracts Over Standing Orders

Precise and Comprehensive

The Preamble to the Act gives an important declaration of why the Act was enacted. The Preamble of the Act states that the Act was enacted to made employers to define the conditions of employment with precision. Also, the Preamble talks about the legislative intent of making the workmen know their conditions of employment. There are two things that are clear from the Preamble of the Act. One is that the conditions of the employment of workmen should be precise and detailed. The second is that the workmen should be made aware of these conditions. A private employment contract between a workmen and an employer fulfills both of these conditions. A private employment contract is a binding contract between the workmen and the employer and they negotiate it before the workmen is employed. In this employment contract, the worker agrees on the conditions of his service which includes things like the salary, reporting time, working hours, code of conduct, leaves, holidays etc. It is a lengthy document that has all the important information which could affect the workmen at his employment. Also, these conditions agreed upon are fairly precise and comprehensive. They are tailor-made for the particular workman. Since the workmen also signs and enters into the contract willfully, he is also aware of his rights and duties. Therefore, it can be reasonably argued that the private employment contracts fulfill the objects that the Standing Orders Act seeks to achieve.

Flexible and Modifiable

Apart from this, the Standing Orders issued under the Act majorly deal with the matters listed out in the schedule. These matters might not include all the conditions of service for the workmen and they are limited only to the matters listed out in the schedule. [1] However, there is no such restriction in case of private employment contracts and they can include any number of conditions of service for the workmen. The employment contracts are more flexible than the Standing Orders and therefore are more beneficial to the workmen.

The Standing Orders are not practical in another aspect as well. Industries usually have different types of workers who possess different skill sets and can have a special skill which other workers don’t possess. These special workers might also have a very limited or a major role in the industry which would require them to be either present in the factory for a very less time or for a lot of time. In such cases, having only one set of Standing Orders applicable to everyone can be very impractical. This is where employment contracts would prove to be useful. An employer can have different conditions of service for different workmen and all the changes can be done in the contracts. For someone who has special skill set, the employer can draft the conditions of service keeping in mind the worker’s skills and requirements. For Example- The schedule to the Act requires the employer to make Standing Orders with respect to attendance and late coming. If there is an employee who has a special knowledge about the working of a machine and he is hired for only that purpose, he will be required to work only when the machine is in use. If the machine is used only for half an hour a day, he would be required for only that period. In this case, if a Standing Order provides that attendance would be taken at 9:00 am, then for a worker whose job starts at 3:00 pm, it would be unworkable. On the other hand, his employment contract could mention that his attendance would be taken at 3:00 pm, whereas the employment contract for all other workers could state that the attendance would be taken at 9:00 am. This would be a more beneficial way for modifying the conditions of service for different workers.

One of the arguments in favour of Standing Orders is that it has the force of law as it is statutorily backed. This can be true in the case of private employment contracts as well. A contract also has the force of law and it is binding over the parties. There is no way in which a contract is of a lesser legal standing than a Standing Order. Also, it is an accepted position that in cases where there is a general law and a specific law governing the same subject, the specific law prevails. This is because specificity provides with more clarity and clarity and certainty are desired to avoid disputes.

Therefore, a first reaction to the dispute is that there is enough logic and reasoning for private employment contracts to prevail over standing orders due to the above-mentioned reasons. However, in order to have a holistic view about the subject, it is important to also look into the use of standing orders and if there are important justifications to allow them to prevail over employment contracts.

Reasons For Having Standing Orders Over Employment Contracts

Uniformity in application

The Act was a major step in the direction of promoting clarity and awareness of conditions of employment. One of the major reasons for the enactment of Standing Orders Act which is not expressly stated in the preamble of the Act is that of uniformity. All the employees of the industry have to uniformly abide by the Standing Orders and there are no exceptions. This is particularly useful in industries where there was a lot of discrimination and the cries of unfair treatment by workers went unheard. Some of the workers had different conditions of service and all of this depended on the bargaining power of the worker. It is common knowledge that the workers have been traditionally an oppressed community and they have little or no bargaining power at the table when it comes to negotiating the conditions of their service. In this regard, the Standing Orders are a welcome step because they take care of the weakest of the worker who is not able to negotiate his employment conditions efficiently. The application of the conditions is uniform and without any prejudice to any worker.

Another purpose served with the Act is that there is very less confusion and discrimination. It is absolutely desired that there is minimum confusion of part of the workers about their conditions of service. The Standing Orders Act requires the posting of the certified Standing Orders and it ensures that there is no confusion in the minds of the workers about what conditions govern them.[2]I think having different employment contracts governing different employees would mean that the whole system is marred by confusion and uncertainty. People at the same position might have different employment terms in their employment contracts. For industries where it might not be possible for each employee to understand his/her employment contract fully and where there might be confusions regarding the same, having a uniform rule for everyone would promote compliance, understanding and harmony. Employers would have no complaints of discrimination and this uniform application can then serve multiple purposes. Clarity and equal treatment promotes cordial relations between employers and workmen and it leads to better efficiency and output.

Transparency/ Disclosure

Incidental to the above point about uniformity and clarity, Standing Orders promote a culture of transparency and accountability. Victimization was quite common and this was majorly because the workers were not entitled to know what their conditions of service were and how they were expected to work. Without being aware of the terms and conditions of their service, workmen would be never sure as to what should they do and what not. In such a situation, their outputs were diminished because they were never sure. The Standing Orders promote transparency. The various requirements of letting workmen know their conditions of service ensure that the workman knows all his duties and rights. This feature of Standing Orders does not figure in the case of employment contracts. Employment contracts are between parties only and there is no requirement to publish these contracts. Also, the disclosure requirements ensure that there is some accountability on part of the employers. If employment contracts are allowed to prevail over the standing orders in different cases, this purpose of transparency will be defeated and this would hamper the growth and harmony in industrial relations.

Legal Force Of Standing Orders

It was mentioned above that employment contracts have the force of law. However, the difference between the legal sanctity of an employment contract and Standing Orders is that employment contracts are private laws. A contract between two parties is a private arrangement between them and is a private legal document. However, the Standing Orders under this Act have a legal backing of a statute enacted by the state. The Act has been enacted keeping in mind the overall welfare of employees and it is a better legal alternative to private employment contracts. It is very difficult to litigate disputes in contract law. However, Standing Orders are pre-determined rules that have backing and application of mind by authorities. The Certifying Officers are entrusted the task of looking into the fairness and reasonableness of the draft standing orders and it ensures that these orders are in conformity with the standards moral and legal standards. This assessment of conditions of service is not possible in employment contracts and therefore there may be a lot of cases where such conditions are unjust on the workmen.

Apart from the reasons mentioned above, it is important to note that the Standing Orders are a method to provide for collective bargaining power of the workmen. It was observed in the case of Western India Match Company Ltd. vs. Workmen that there used to be two parties on the negotiating table before the passing of the Act but this Act has now ensured that there is a third party, the State, which is representing the interest of the society at the table.[3] Therefore, it cannot be ignored that the Standing Orders Act is a very forceful alternative to having personal employment contracts and it has many uses over the private employment contracts.

Future: Fusion Of Both?

My initial reaction of thinking that employment contracts should be given preference over Standing Orders was changed when I put thought into the uses and aims of having Standing Orders. On a whole, both of these methods are good in their own way. I feel that while deciding which of the two should prevail, the best qualities of the two should be taken into consideration. The Standing Orders play a very important function of laying down uniform rules having a legal backing. Therefore, in my opinion, these Standing Orders should be treated as a baseline for the conditions of service. These should serve as the basic conditions of service that apply to everyone. In addition to these, in certain cases, if there is need to interpret further, then the employment contracts should be looked into. They should not be utterly disregarded and should serve as a tool to interpret conditions of service where they is a worker with special skills or job profile who needs certain conditions in addition to the ones mentioned in the Standing Orders. In case there is a need for difference in employment conditions from Standing Orders for particular employees, it should be allowed via employment contracts by evolving a mechanism where such cases are assessed on case to case basis by the Certifying Officer. These models are a very basic proposal of what needs to be done. The proper form and working of such model needs to be determined to ensure that the welfare of labour is given paramount importance. A fusion of both might be able to provide a system which is dynamic as well as rigid.

Dev Chaudhary

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[1] Rohtak Hisar District Electricity Supply Co. Ltd. vs. State of U.P. 1966 AIR 1471   [The Court in this case had held that it is not for the employer to go outside the matters set out in the schedule and form Standing Orders with respect to them. Only the Appropriate Government has the power to include any matter in the Schedule on its discretion.]

[2] Section 9 requires the certified standing orders to be posted prominently by the employer in English and in the language which is understood by most of the workers in the industry.

[3] 1973 AIR 2650

Role of Central Bank in a country

Introduction

Banking plays an integral role in countries all over the World today. Based on the underlying principle of trust amongst people and institutions, banking plays a vital purpose in the everyday functioning of people, businesses and governments. The starting of banks can be traced to the Venice, where the first regular institution resembling what we may call a Bank, was established nearly seven hundred years ago.[1] The early banks were primarily engaged in the limited function of money changing. Over the next century or two, other banking functions evolved. Banks began to receive objects of entrustment, the “depositor” of the object expecting its return on demand. In addition, banks began to grant credit, often to merchants, for a share of a venture’s profits. Further, because of the increase in foreign commerce, bankers began to establish agents in various locations.[2] The rapidly increasing role of banks in the economy and life of people prompted the need for the regulation of this industry. The massive importance that the banking industry was gaining made the government step in to make laws in relation to banking.

Central banking is a relatively recent concept whereby certain banks were given special privileges. The first central banks originated from the banks of issue, founded because of an urgent need by the governments for credit and domestic control over monetary matters.[3] However, the forerunners of modern central banks were not born of the need for monetary services or a lender of last choice.[4] Wars and revolutions of independence create financial turmoil for governments and the founding of central banks has commonly followed on heels of such events.[5] In fact, all such central banks in existence before 1850 were chartered in the context of war. For banks chartered after a war the context was usually very high inflation generated by governments’ overissue of paper currency to meet wartime expenditures.[6]

The importance of a central bank was further articulated at the International Financial Conference in Brussels in 1920, where it was suggested that a central bank was necessary for a state to fulfill its economic potential.[7] The majority of the modern day countries have already established central banks or similar statutory authorities. During the initial phases, the central banks were majorly given the power to issue currency. Later, many other monitoring and controlling powers were given to the central banks. They were given the charge to regulate the domestic monetary market and were made the single authority that played a key role in the development of any nation. The everyday changing nature of banking is also changing the role and functions of the central banks. These banks are in the driver’s seat in the major economies of the World and are taking proactive role in shaping the global economy.

Role of Central Banks

Central Banks around the World are the primary institutions to control economic growth, control inflation and provide fiscal stability in the State. These banks are statutory bodies that play a pro-active role in the economy and their decisions have a vital impact in the financial markets. Although it must be noted that the creation of central banks is no guarantee against financial crisis, their quick and committed fulfillment of their powers and functions should have an important impact on financial markets, with resulting benefits for customer bankruptcies and commercial failures and limits.[8] Although many ancillary roles are played by the central banks, the following can be characterized as the major roles that majority of the central banks play throughout the Globe:

Ensuring Financial Stability:

It can be argued that banking depends upon trust. Trust is so essential to the banking industry that once the inter-related trust amongst the people and banks/institutions is broken, the entire financial system collapses. An example highlighting the importance of trust could be that of a bank run. Simply put, bank run is when due to the instability created in the system, people loose the trust that the bank in which they have deposited their money would get bankrupt and they rush to the banks to get their money out of it. Bank runs are dreaded in any financial system as it could lead to the collapse of a bank, which in turn could lead to failure of the whole system.

Each bank is of systemic importance in any nation and to prevent this kind of failure, the central banks step in and act as the lender of last resort. This means that in emergency conditions, the central bank brings out the bank that is on the verge of bankruptcy to save the entire system so that the trust of people is maintained in the financial system. It does this by using reserves of cash and marketable securities to meet the resulting demand.[9] One of the famous examples of recent times was the case of Lehman Brothers in 2008.[10] It is important to note that this does not mean that the central banks seek to protect individual organizations. The goal of this policy is to protect the stability of the whole financial system, through particular players if need be. In addition to being the lender of last resort, to support financial stability, bankers do macroeconomic surveillance, prudential regulation and supervision.[11]

Regulating Monetary Policy:

Central banks also play a major role in managing the money and controlling inflation. According to Semler, earlier the role of central banks in controlling monetary policy was limited as long as the exchange rates were fixed. After the suspension of global gold standard and collapse of the Bretton Woods system of pegged exchange rates, the role of central banks in this sphere has increased.[12] Thus, it can be seen that in the present day World, central banks play a leading role in money management and trying to stabilize the currency.

To manage the monetary policy, the central banks use various tools such as having reserve requirements for other banks, increasing or decreasing the interest rates etc. For example- if the central bank feels the need to supply more money in the market, it decreases the CRR (credit reserve ration) and the banks have more cash with them to loan further and if they want to decrease the supply of cash, the central bank increases the CRR for banks and they are left with less cash. Similarly, in the short term, by increasing the interest rates, the central bank ensures that people spend less and thus inflation is checked and by reducing the interest rates it is ensured that people have more money which leads to increase in inflation. Central banks all over are constantly entangled in the inverse relationship of inflation and interest rates. It can be seen that the monetary policy has a great effect on the market as well as the day-to-day life of the people and it is one of the most important tasks which are assigned to central banks.

Acting as Banker’s Bank

Apart from other regulatory and supervisory jurisdiction that most of the central banks have over other commercial banks in the country, they also act as the banker to these other banks. This means that all the banks in the country are required to have their accounts in the central bank and then the central bank acts as their banker by providing them short term loans and other credit facilities. All their reserve requirements are also deposited in their accounts with the central bank.

 Through this, the central bank has powers to influence liquidity and interest rates discussed in the above section. In addition to this, the central banks also act as clearing agents to other banks. As the custodian of the cash reserves of the profit-making banks, the central bank acts as the clearinghouse for these banks. Since all banks have their accounts with the central bank, the central bank can easily settle the claims of various banks against each other with least use of cash.[13]

Government’s Banker

In addition to the other banks in the country, the central banks also usually cater to the banking needs of the governments. The central banks has accounts of the government and it advances loan to the governments as any other bank does to the customer. Further, it collects and has deposits of the taxes collected from various State or Central governments. The central banks also serve the purpose of advising the governments on matters relating to the financial policy etc.

Sole Issuer of Currency

One of the first roles assigned to the central banks was that of being the sole issuers of currency notes. The central banks throughout the World are given monopoly rights to issue bank notes and this was the distinctive feature that separated these banks from other banks. Private banks are not allowed to issue notes. The simple reason behind this is that if private banks were allowed to issue their respective notes, there would be multiplicity of notes that would be cumbersome and not best suited for regulation.[14]

It can be seen that the central bank performs many important functions that are vital to the functioning of the financial markets. Central banks are made independent and powerful and one of the major reasons for doing this is to maintain the public confidence in the system. This highlights the importance that trust has in banking, which is further discussed in the next section.

Trust in banking

Colombo, in his article says, the economy and the world as we know it simply could not function without a certain degree of trust.[15] Trust is the scope to which one party is willing to depend on somebody, or something, in a given situation with a feeling of relative security, even though negative consequences are possible.[16] This general definition tends to point that ‘trust’ and ‘risk’ might be related. Taking cue, it can be said that the banks are in the business of risk taking. The every day transactions that bank do have certain degree of risk in them. Banks try to mitigate these risks by various means in different situations. For example, while giving a loan, the bank is taking a risk of default by the borrower and it tries to mitigate the risk by taking security from the borrower. The bank always has the possibility of default but it still provides credit to the borrower based on the trust that he will be giving back the loan (this trust is increased by the presence of security). If the banks had no trust in the ability of the borrower to pay back the money, they would have not been able to extend loan to anyone and therefore no commercial business would be transacted. Similarly, from the other side, the depositor trusts that the bank will give his money back to him when he demands and then he submits the money. Thus the nature of banking business can be said to have its roots in the presence of mutual faith. 

Similarly, in central banking, trust plays even a major role. On the first place, the citizens are ensured that an independent, powerful institution that is specialized in taking care of the financial affairs governs them. It is always better that these increasingly complex matters are not taken care of by the politicians and therefore the confidence of the public in the financial system improves. The citizens of any country would feel safe in using the banking facilities only if they have faith in the whole system. They will not approach the banks if they are not sure if their money would be returned to them. In case the bank fails, the depositors have the belief that the central bank would insure them against their risk and their money would be returned back to them.

More so, in central banking, the essential role of credibility and reputation of central banks for the conduct of monetary policy can be emphasized. It is seen that discretionary monetary policy leads to an inflationary bias. That is to say that the inflation rate will be higher than the one that is socially desirable. As credibility and trust are closely connected, it is difficult to disentangle them.[17] More so, in the case on central banking, all the other commercial banks in any country have trust that their interests are protected against any new comer, as there would be no chance for the new comer to have any extra benefits in presence of the central bank. Further, as discussed earlier, the presence of central bank also prevents situations like bank runs.

Conclusion

Central banks have been at the centre of economic affairs in countries since the pas few decades. However, with growth of new avenues of trade and commerce, it is proving to be difficult for central banks to regulate financial markets. Instead of bank notes, people are relying more and more on e-transactions. In this scenario, only a multi-national approach towards the problem can prove to be effective. Various central banks have shown co-ordination in their conduct to tackle global problems and it is to be seen what steps are taken in future to further the co-operative efforts.[18] Interestingly, the most important issue here will also be that of the trust between various central banks of the World.

Dev Chaudhary

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[1] Richard Hildreth, The History Of Banks 9 (Augustus M. Kelley Publishers, 3^rd ed. 1971) (1837) [http://mises.org/books/History_of_Banks_Hildreth.pdf].

[2] Edward L. Symons Jr., The “Business Of Banking” In Historical Perspective, 51 Geo. Wash. L. Rev. 676 1982-83.

[3] Dwight Semler, Focus: The Politics Of Central Banking, 3 E. Eur. Const. Rev. 48 1994.

[4] J. Lawrence Broz, The Origins Of Central Banking: Solutions To The Free Rider Problem 7 (December 1969), dss.ucsd.edu/~jlbroz/origins_CBs_IO.pdf‎

[5] Semler, supra note 3, at 10.

[6] Broz, supra note 4, at 7.

[7] Sheri Berman & Kathleen R. McNamara, Bank On Democracy: Why Central Banks Need Public Oversight, 78 Foreign Aff. 2 1999.

[8] Bernard Bekink & Christo Botha, The Role Of A Modern Central Bank In Managing Consumer Bankruptcies And Corporate Failures: A South African Public-Law Angle Of Incidence 21 S. Afr. Mercantile L.J. 74 2009.

[9] Douglas W. Arner & Michael A. Panton & Paul Lejot, Central Banks And Central Bank Cooperation In The Global Financial System 23 Pac. McGeorge Bus. & Dev. L.J. 1 2010-11.

[10] Lenders Of Last Resort, Too Big To Fail, available at http://lenderoflastresort.weebly.com/too-big-to-fail.html.

[11] Arner & Panton & Lejot, supra note 8 at 22.

[12] Semler, supra note 3, at 23.

[13] Aparijita Sinha, What Are The Functions Of Central Bank?, available at http://www.preservearticles.com/201012281868/functions-of-central-bank.html.

[14] Cheques can be issued by different banks on their own but it is important to note that the Cheques are only issued on the name of the beneficiary which is not so in bank notes. The bank notes are payable to the bearer of the note.

[15] Ronald J. Colombo, The Role Of Trust In Financial Regulation 55 Vill. L. Rev. 577 2010.

[16] Audun Josang & Stephane Lo Presti, Analyzing The Relationship Between Risk And Trust 1 (2004), http://eprints.soton.ac.uk/258769/1/risktrust.pdf.

[17] Dirk Bursian & Sven Furth, Trust Me! I Am A European Central Banker 5 (2011), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1932638.

[18] Jon Hilsenrath & Jeffrey Sparshott, Central Banks Move To Calm Fears, Wall St. J., Dec. 1, 2011.