Understand Your Rights. Solve Your Legal Problems
In 2009, the voluntary guidelines on Corporate Social Responsibility (“CSR”) were disseminated by the Ministry of Corporate Affairs (“MCA”). These guidelines were later included in the Companies Bill, 2011, that got promulgated as the Companies Act, 2013 (“Act”), and led towards the implementation of CSR provisions.
CSR has evolved throughout the nation and has gone through many phases in India. Not only the eligible companies, but all other corporates are trying to bring about a change in the current social situation in India in order to have an effective and lasting solution to the social woes. Corporates have been developing partnerships between themselves, not for profit organizations and the Government, in order to combine their expertise, strategic thinking, manpower and money to initiate extensive social change through CSR.
APPLICABILITY AS PER COMPANIES ACT, 2013
Such entities are required to spend, in every financial year, at least two per cent of the average net profits made during the three immediately preceding financial years.
Under the Act, every company and foreign company having a branch and project office in India which meets the following criteria during the immediately preceding financial year is required to comply with the CSR provisions:
Such entities are required to spend, in every financial year, at least two per cent of the average net profits made during the three immediately preceding financial years. Further, they are required to constitute a CSR Committee which shall formulate and recommend to the Board, a CSR Policy indicating the activities to be undertaken.
RECENT AMENDMENT – A MOVE TOWARDS STRICT COMPLIANCE
The Companies Amendment Act, 2019 (“Amendment Act”) has laid down a new crackdown provision revising the existing framework of CSR. The CSR regime is now no longer "comply or explain" but "comply or imprisonment".
Earlier under the Act, if the company did not meet its CSR obligations, the reasons for non-spending the CSR amounts were required to be disclosed in the Boards’ report. No liability was prescribed under the Act on the company or its directors for non-spending of the amounts.
The Government by way of introduction of the Amendment Act, has an intention of bringing effectiveness to the CSR regime.
Now as per the Amendment Act, if the company fails to spend the prescribed amount in accordance with its CSR policy, the Board shall, in its report, specify the reasons for not spending such amount and transfer the unspent amount into a special bank account in the following manner:
The amounts transferred to the special bank account will have to be spent by the company towards the CSR projects in accordance with its CSR policy within three financial years from the date of transfer of the unspent CSR amount. Further, from the completion of the third financial year, the company is required to transfer the unspent amount in the special bank account into the specific funds set up by the Government.
The Amendment Act has also made CSR applicable on start-ups by clarifying that if a company has not completed three years since its incorporation, the amount to be spent on CSR will be equivalent to two per cent of the average net profits made by the company in, during such immediately preceding financial years.
The Amendment Act provides for a stringent penalty on the company and its officer in case of non-compliance of the provisions of the Amendment Act.
The Government by way of introduction of the Amendment Act, has an intention of bringing effectiveness to the CSR regime.
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BACKGROUND TO THE AMENDMENT
The CSR provisions were introduced in the Act by the Government with a view to generating a conducive environment enabling the corporates to conduct them in a socially responsible manner. However, the corporates were failing to spend the required profits on CSR activities. The difficulties in implementation of the CSR provisions led to the approach of developing more stringent provisions for the defaulting corporates.
However, it appears that not all the suggestions made by the HLC have been accepted by the Government.
A high level committee (“HLC”) was set up by the Government to suggest measures for improving and monitoring the implementation of CSR policies. Key recommendations of HLC included:
The recommendations made by the HLC in their report were made with a view to emphasize not treating CSR as a means of resource gap funding for Government schemes, but to focus on strengthening the overall CSR ecosystem and allowing eligible entities to have an advantage in spending part of their profits on CSR activities. Further, the HLC focused on allowing CSR expenditure to be aligned with tax saving as well as widening the scope of activities to be considered in spending the CSR expenditure. However, it appears that not all the suggestions made by the HLC have been accepted by the Government.
Once the CSR provisions are made effective by the Government it is important that the companies watch out and meticulously comply with the CSR requirements.
CONCLUSION
It is too early to assess the exact impact of the amendments in CSR provisions. Many industries have expressed their concerns over the penal provisions being introduced for non-compliance with CSR requirements under the Act and actions are being taken by the Government to further review the CSR provisions introduced by the Amendment Act.
Once the CSR provisions are made effective by the Government it is important that the companies watch out and meticulously comply with the CSR requirements. A substantial picture of compliance requirements will be clear once the corporates adopt the changes introduced in an absolute manner and in true spirit.
With a way to the introduction of provisions relating to carry forward of unspent CSR expenditure under the Amendment Act, reporting Indian entities might face challenges in disclosing the CSR details as may be required under the Act or to be made separately with the MCA under the prescribed forms and formats. It is yet not clear that how the MCA will track the unspent amount of CSR by the corporates in its database; it might come up with clarification to be added as a part of reporting requirements under CSR Rules or provide an amendment to its prescribed formats available for CSR reporting under the Act.
For any clarification or further information, please contact:
Neetika Ahuja
Associate Partner
E: neetika.ahuja@clasislaw.com
Jatin Oberoi
Associate
The firm, Clasis Law is a full service Indian law firm that is international in vision, scope, experience and capability. The core values of the firm include a high degree of legal expertise, commitment to excellence, efficiency, integrity, focus and client care, all of which guide each member of the firm, be it the partners, associates or staff of Clasis Law in their business dealings on a daily basis. With the in-depth expertise and know-how of the partners, together with highly trained teams, the firm is able to provide clients with bespoke solutions and exceptional service.
Expertise within the firm spans a range of practice areas including corporate and commercial transactions, aviation & aerospace, banking & finance, asset & project finance, insurance, infrastructure, real estate, intellectual property, employment law, competition, compliance & auditing, shipping & international trade law, TMT, litigation & dispute resolution and white collar. The firm acts for a diverse domestic and international client base across a number of industrial sectors. Further details on the full spectrum of the firm’s experience and expertise across practice areas and industry sectors can be found on the Clasis Law website.
Investment by Foreign Portfolio Investors (FPI) in Debt
On 25 April 2019, the Reserve Bank of India (“RBI”) issued a circular permitting foreign portfolio investors (“FPI”) to invest in municipal bonds with a view to broaden access of non–resident investors to debt instruments in India. As per the circular, FPI investment in municipal bonds[1] shall be reckoned within the limits set for FPI investment in State Development Loans (SDLs)[2].
Regulation 21 (1) of SEBI (Foreign Portfolio Investors) Regulations, 2014 provides a list of securities in which a foreign portfolio investor can invest.
Further, the investment in municipal bonds will be treated as debt market investments and will be subject to the existing conditions for investments by FPIs in the debt market, which, inter-alia, include the following:
(a) FPIs being permitted to invest in Central Government securities (G-secs), including in Treasury Bills, and State Development Loans (SDLs) without any minimum residual maturity requirement, subject to the condition that short-term investments by an FPI under either category shall not exceed 20% of the total investment of that FPI in that category.
(b) FPIs being permitted to invest in corporate bonds with minimum residual maturity of above one year, subject to the condition that short-term investments in corporate bonds by an FPI shall not exceed 20% of the total investment of that FPI in corporate bonds. These stipulations would not apply to investments in Security Receipts (issued by Asset Reconstruction Companies) by FPIs.
(c) The cap on aggregate FPI investments in any Central Government security is at 30% of the outstanding stock of that security.
Pursuant to the RBI circular permitting FPIs to invest in municipal bonds, the Securities and Exchange Board of India (“SEBI”) issued a circular dated 9 May 2019, in accordance with the provisions of Regulation 21 (1) (p) of SEBI (Foreign Portfolio Investors) Regulations, 2014.
Regulation 21 (1) of SEBI (Foreign Portfolio Investors) Regulations, 2014 provides a list of securities in which a foreign portfolio investor can invest. Since the list did not include municipal bonds, the circular was issued so as to include municipal bonds within the permitted securities.
With a view to operationalizing the abovementioned endeavor, SEBI is proposing an “Innovation Sandbox”
Framework for Innovation Sandbox
On 20 May 2019, SEBI issued a circular outlining the concept of innovation sandbox. SEBI believes that encouraging adoption and usage of financial technology (“FinTech”) would have a profound impact on the development of the securities market. FinTech can act as a catalyst to further develop and maintain an efficient, fair and transparent securities market ecosystem and create an ecosystem which promotes innovation in the securities market. SEBI believes that FinTech companies should have access to market-related data, particularly, trading and holding data, which is otherwise not readily available to them, to enable them to test their innovations effectively before the introduction of such innovations in a live environment. With a view to operationalizing the abovementioned endeavor, SEBI is proposing an “Innovation Sandbox”, which would be a testing environment where FinTech firms and entities not regulated by SEBI (herein afterwards referred to as participants/applicants) may use the environment for offline testing of their proposed solutions in isolation from the live market, subject to fulfillment of the eligibility criteria, based on market related data made available by Stock Exchanges, Depositories and Qualified Registrar and Share Transfer Agents (QRTAs).
The components and structure of the Innovation Sandbox can be broadly classified into design, legal and administrative categories as detailed in the circular. Further, the eligibility criteria for inclusion into the Innovation Sandbox are as follows:
(a) Applicability - Conceptually, the Innovation Sandbox framework is applicable to any entity, who intends to innovate on the products, services, and/or solutions for the securities and commodities market in India.
(b) Genuine need to test - The applicant should have a genuine need for testing the solution using resources available in the Innovation Sandbox. The applicant should be able to postulate that the solution cannot be developed properly without testing in the Innovation Sandbox.
(c) Testing readiness of the solution - The applicant should have the necessary resources to support testing in the sandbox. The applicant must show testing plans with clear objectives, parameters and success criteria.
(d) Post-testing strategy - The applicant should be able to postulate their post-testing plan.
(e) Direct benefits to consumers - The solution should offer identifiable benefits (direct or indirect) to consumers and to the capital market and the Indian economy at large.
(f) Secure - The solution shall be validated for cybersecurity parameters. The applicant is required to submit a cyber-security compliance certificate as per SEBI’s Cyber Security guidelines.
On 24 May 2019, SEBI published a report of the working group on "FPI Regulations" and put it up for public comments.
The Securities and Exchange Board of India publishes the report of the working group set up to recommend amendments to the FPI Regulations
On 24 May 2019, SEBI published a report of the working group on "FPI Regulations" and put it up for public comments. The report contains recommendations with respect to FPI registration process, know your client (KYC) and simplification of documentation, investment restrictions and other aspects. Certain key recommendations proposed by the working group are as follows:
(a) Ease of access - fast track on-boarding process for select category II FPIs, review of broad based condition for appropriately regulated entities, pension fund to be considered for category I FPI registration, deemed broad based status for insurance/ reinsurance entities, simplified registration for multiple investment manager (MIM) structures, entities established in the international financial services centre (IFSC) be deemed to have met the jurisdiction criteria for FPIs, etc.
(b) Simplification of documentation - removal of ‘opaque structure” definition, simplified KYC documentation for category III FPI, KYC reliance on the same group regulated entity of custodian for non-PAN documents, etc.
(c) Review of Investment restriction - Liberalized investment cap, harmonization between investment restrictions in FPI regulations and the applicable foreign exchange regulations, reclassification of investment from FPI to FDI, permitting FPIs for off-market transactions, review of restriction on sovereign wealth funds for investment in corporate debt securities etc.
(d) Other aspects - strengthening of clubbing restrictions, alignment between FPI and alternative investment fund (AIF) routes, strengthening of offshore derivative instrument (ODI) framework, etc.
Framework for issuance of differential voting rights shares
The SR shareholder should be a part of the promoter group whose collective net worth does not exceed INR 500 Crores.
On 27 June 2019, SEBI issued a framework to enable issuance and listing of shares with differential voting rights, commonly known as DVRs in India. Such shares have rights disproportionate to their economic ownership. The key proposals approved by SEBI Board are as follows:
(a) Eligibility: A company having superior voting rights shares (SR shares) would be permitted to do an initial public offering (IPO) of only ordinary shares to be listed on the main board, subject to fulfillment of eligibility requirements of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 and the following conditions:
(i) The issuer company is a tech company (as per the definition in Innovators Growth Platform) that is intensive in the use of technology, information technology, intellectual property, data analytics, bio-technology or nano-technology to provide products, services or business platforms with substantial value addition.
(ii) The SR shareholder should be a part of the promoter group whose collective net worth does not exceed INR 500 Crores. While determining the collective net worth, the investment of SR shareholders in the shares of the issuer company shall not be considered.
(iii) The SR shares have been issued only to the promoters/ founders who hold an executive position in the company.
SR shares shall be treated at par with the ordinary equity shares in every respect, including dividends, except in the case of voting on resolutions.
(iv) The issue of these SR shares has been authorized by a special resolution passed at a general meeting of the shareholders.
(v) SR shares have been held for a period of at least 6 months prior to the filing of red herring prospectus (RHP).
(vi) SR shares have voting rights in the ratio of minimum 2:1 to maximum 10:1 compared to ordinary shares.
(b) Listing and Lock-in: SR shares shall also be listed on Stock Exchanges after the issuer company makes a public issue. However, SR shares shall be under lock-in after the IPO until their conversion to ordinary shares. Transfer of SR shares among promoters shall not be permitted. No pledge/ lien shall be allowed on SR shares.
(c) Rights of SR shares: SR shares shall be treated at par with the ordinary equity shares in every respect, including dividends, except in the case of voting on resolutions. The total voting rights of SR shareholders (including ordinary shares), post listing, shall not exceed 74%.
Audit committee shall comprise of only independent directors.
(d) Enhanced corporate governance: Companies having SR shareholders shall be subject to enhanced corporate governance as follows:
(i) At least ½ of the Board and 2/3rd of the committees (excluding audit committee) as prescribed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI LODR Regulations”) shall comprise of independent directors.
(ii) Audit committee shall comprise of only independent directors.
(e) Coat-tail Provisions: Post-IPO, the SR equity shares shall be treated as ordinary equity shares in terms of voting rights (that is one SR share shall have only one vote) in the following circumstances:
(i) Appointment or removal of independent directors and/or auditor;
(ii) In case where promoter is willingly transferring control to another entity;
(iii) Related party transactions in terms of SEBI (LODR) Regulations involving SR shareholder;
(iv) Voluntary winding up of the company;
(v) Changes in the company’s Article of Association or Memorandum of Association - except any changes affecting the SR instrument;
The issue of fractional rights shares by existing listed companies shall not be allowed hereon.
(vi) Initiation of a voluntary resolution plan under the Insolvency and Bankruptcy Code, 2016;
(vii) Utilization of funds for purposes other than business;
(viii) Substantial value transaction based on materiality threshold as prescribed under SEBI (LODR) Regulations;
(ix) Passing of special resolution in respect of delisting or buy-back of shares; and
(x) Any other provisions notified by SEBI in this regard from time to time.
(f) Sunset Clauses: SR shares shall be converted into ordinary shares in following circumstances/ events:
(i) Time Based: The SR shares shall be converted to Ordinary Shares on the 5th anniversary of listing. The validity can be extended once by 5 years through a resolution. SR shareholder would not be permitted to vote on such resolutions.
(ii) Event Based: SR shares shall compulsorily get converted into ordinary shares on occurrence of certain events such as demise, resignation of SR shareholders, merger or acquisition where the control would be no longer with SR shareholder, etc.
(g) Fractional Rights Shares: The issue of fractional rights shares by existing listed companies shall not be allowed hereon. The need for allowing issue of fractional rights shares by listed companies may however be reviewed after gaining enough experience with the use of SR shares.
Risk Management Framework of Liquid Funds and prudential norms
On 27 June 2019, SEBI Board after deliberations approved the risk management framework of liquid funds and prudential norms governing investments in debt and money market instruments. The key proposals approved are as follows:
[1] Municipal bonds are debt obligations issued by States, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways and other projects for the public good. For example, if a municipal corporation establishes a new metro rail link, then it can issue municipal bonds to fund the project.
[2] In terms of the RBI/2018-19/152 A.P. (DIR Series) Circular No. 26 dated 27 March 2019, the revised limit for FPI investment in State Development Loans (SDLs) shall be 2% of outstanding stocks of securities in FY 2019-20.
Vineet Aneja
Managing Partner | Clasis Law
M: +91-9810405782
I am the Managing Partner as well as a founding partner of Clasis Law. My professional journey as a lawyer began more than 20 years ago and I have a plethora of experience across practice areas such as corporate commercial, retail, hospitality, employment, e-commerce, education, healthcare, white collar. I have provided specialized transactional and advisory services across sectors, covering diverse areas including:
The firm, Clasis Law is a full service Indian law firm that is international in vision, scope, experience and capability. The core values of the firm include a high degree of legal expertise, commitment to excellence, efficiency, integrity, focus and client care, all of which guide each member of the firm, be it the partners, associates or staff of Clasis Law in their business dealings on a daily basis. With the in-depth expertise and know-how of the partners, together with highly trained teams, the firm is able to provide clients with bespoke solutions and exceptional service.
Expertise within the firm spans a range of practice areas including corporate and commercial transactions, aviation & aerospace, banking & finance, asset & project finance, insurance, infrastructure, real estate, intellectual property, employment law, competition, compliance & auditing, shipping & international trade law, TMT, litigation & dispute resolution and white collar. The firm acts for a diverse domestic and international client base across a number of industrial sectors. Further details on the full spectrum of the firm’s experience and expertise across practice areas and industry sectors can be found on the Clasis Law website.
What are the current IP trends occurring in your state and how does this relate to the rest of India?
In response to this, it is to be noted that the National IP Policy notified in May 2016 has had very positive impact on the IP scene in India by providing a road map to effectively protect and manage IP. Six of the seven IPRs, barring Plant Variety Protection, are now under the Department for Promotion of Industry and Internal Trade (DPIIT) formerly DIPP, the nodal office for IPR under the Ministry of Commerce, making it easier to administer and address Stakeholder requirements/feedback/complaints/queries. For instance, the revised TM Rules 2017 have dramatically reduced the number of forms in TM filing from 74 to eight.
. It is significant to note that first time IP owners, Startups (under the Startup Initiative), small entities are very aware of IP and are also ensuring enforcement of their IPRs.
The commercialisation of IP, which is also one of the objectives of the National IP Policy, is one area that requires a lot of support and the SKS Law Team is working in our own capacity, as well as with the Confederation of Indian Industries (CII – IP Policy Team), to identify means to help IP owners with valuation of their IP and commercialise their IP. Enforcement is becoming more effective with greater awareness among the Judiciary as well as the Customs and Police officers with regard to modes of infringement, seizure of goods etc. It is significant to note that first time IP owners, Startups (under the Startup Initiative), small entities are very aware of IP and are also ensuring enforcement of their IPRs.
With the “Make In India” and the “Startup India” Initiatives in place, we have noticed an upsurge of innovation across the country.
Are there any trends you predict will occur in the next year, regarding IP in India?
With the “Make In India” and the “Startup India” Initiatives in place, we have noticed an upsurge of innovation across the country. The innovations may not all qualify the patentability criteria but it is clear that there appears to be an upsurge on enquiries on trademarks, industrial designs, copyrights and on domain names. The excitement is palpable. According to WIPO in 2016-17, the number of TM applications surged 134%.
As to date, things have improved and there is no misconception on the enforcement of IPRs.
When advising foreign clients, can you share misconceptions they may have when trying to enforce protection on their IP?
As to date, things have improved and there is no misconception on the enforcement of IPRs. However, since India does not have Trade Secret Law, there are queries on the best means to protect trade secrets and the ways to enforce it before the Courts.
You have been involved in drafting parliamentary bills; can you share more about this? What impact has this made?
The drafting of the parliamentary bills happened by chance. I have often been introduced as a lawyer with a heart. So when a green movement sought to introduce a bill for the protection of Traditional Knowledge, I was invited to be a member of a core group to develop a basic draft bill which was then studied by a team at the National Law School, Bangalore (NLSUI) and was then notified for public comments by the Chairman National Biodiversity Authority.
The second one I worked on was the National Health Bill for the Royal Kingdom of Bhutan in my capacity as Legal Adviser, World Health Organization, which involved collating feedback from all sections of administration including hospitals practicing modern medicine and traditional medicine, to waste management to mental health and spiritual health. A vast exercise under the Ministry of Health of Bhutan, it is now pending. As a Legal Adviser I have also worked on the International Health Regulations and examined about 75 laws in India that would be effective in implementing IHR and a similar exercise In Bhutan.
Ms. Sunita K Sreedharan Advocate
Founder, SKS Law Associates
R10, Flat No 4,
Nehru Enclave,
New Delhi – 110019
India
About Sunita and her Firm
Sunita K Sreedharan, lawyer on spiritual journey: a visionary with a goal for better society with harmonised laws promoting ease of doing business, just enforcement; a scientist with an interest in the science behind the Indian Traditional Knowledge, she is a computer professional with a penchant for systems analysis and a design artist.
A mid-career switch from a manager level computer professional to lawyer following a major personal upheaval brought her back to a junior level lawyer in a leading IP Firm. The challenges were many but they were interesting take on how life can change in moments. She focused on learning the fine nuances of Indian Patent Law which was then undergoing multiple reforms to align it with the TRIPS Agreement. It was also the time that other laws were being notified such as the laws relating to Geographical Indications, Plant Variety protections, Biodiversity & Traditional Knowledge. There was so much happening that working 110 hours a week was not enough to complete all the work allocated.
Being aware of the significance of transactional aspect of IP, Sunita a became member of the Licensing Executing Group and attending all LES International meetings. This exposure led her to the George Washington University Law School to earn an LL.M studying IP Licensing and Intellectual Asset Management on a year’s sabbatical. A year after sabbatical, she decided to start her own law practice, SKS Law Associates, with a focus to create strong IP Portfolio for clients, manage them and commercialise them. In these 12 years (in September 2019), SKS Law has helped clients protect and acquire interesting IP portfolios, protect their trade secrets, conducted IP Audits and saved money, offered significant advise on valuation, provided competitive intelligence, prepared patent landscapes, trained scientists and patent examiners, worked to harmonise laws especially in biodiversity related matters by providing inputs to the Ministry of AYUSH, Ministry of Environment (MoEF&CC), the Niti Aayog, the Ministry of Commerce etc. They successfully represented Rediff.com Ltd in the one and only case on business method patents (Yahoo Inc v. Controller of Patents & Ors). Meanwhile the SKS Law Team has very successfully continued with the drafting, filing and prosecution of patents, trademarks, copyrights, GI and industrial designs.
What has been your biggest challenge that you overcame in this sector?
The legal requirements which include approvals from the appropriate regulators, procedural challenges, lack of clarity in certain laws and the various compliances, are the biggest challenges that I have faced in the realm of M&A. Even though, the legal challenges are sector specific, one thing which is uniform across all sectors is the quantum of time consumed to get certain regulatory approvals. Although, the Government has introduced reforms such as the single window clearance and reduced timelines involved in procuring licenses and approvals, there is scope for more to be done. I have tried to overcome this challenge by ensuring that my team conducts foolproof legal due diligence on the target company so as to identify issues upfront and reduce cost and concerns that may arise at a later stage. While there is increased focus on transparency and ethics, the regulations have become stricter increasing the need to be compliant and abide by the law. Having said that, it has become essential to prioritise the concerns and issues raised through the due diligence process. The key is to analyse the critical parameters of a deal and stay focussed in achieving them without being distracted with issues that can be negotiated.
Foreign acquisitions valued at USD 39 billion were struck last year, and for the second time in a decade, India drew more inbound investments than China.
Can you share the current M&A scene in India?
The financial year 2018-19 has been quite a vigorous year for the Indian M&A landscape. Deal making has reached new heights with some of the key acquisitions being UltraTech Cement Ltd’s acquisition of Binani Cement, Walmart Inc.’s USD 16 billion acquisition of Flipkart, and Hindustan Unilever’s acquisition of the health drink brands of GlaxoSmithKline Consumer Healthcare Limited. Foreign acquisitions valued at USD 39 billion were struck last year, and for the second time in a decade, India drew more inbound investments than China. With the recent liquidity crisis in the non-banking financial company (NBFC) sector and the focus of the National Company Law Tribunal (NCLT) to put stressed assets on sale, there has been a continual growth in the M&A sector which is likely to carry forward to the financial year 2019-20, alongside the coming into effect of the new law on bankruptcy - the Insolvency and Bankruptcy Code. In recent times, companies that are unable to repay their loans are being declared insolvent or bankrupt, as a result of which, the assets of such companies are up for grabs. A case in point being Arcelor Mittal bidding for Essar Steel India, which is in the midst of insolvency proceedings, becoming one of the largest cross-border transactions. Lastly, Narendra Modi led government winning the general elections, that too with the ruling party having a majority on its own, is expected to have a positive impact on the deal environment.
India has become the prime location for investment of pools of global capital from strategic to financial sponsors.
What sectors are flourishing in relation to investment and M&A? Why is this the case?
India has become the prime location for investment of pools of global capital from strategic to financial sponsors. M&A transactions are booming in the Indian e-commerce industry which witnessed the USD 16 billion Walmart-Flipkart deal, making it the world's largest e-commerce deal ever. E-commerce is a capital-intensive industry and companies like Flipkart and Amazon have invested billions of dollars in marketing and establishing infrastructure like warehouses and logistic chains. This market is here to stay and grow.
The key driver is to make sound financial and management decisions to increase future cash flow and earnings and bring the level of uncertainty down.
Further, in the healthcare sector, pro-industry government policies, boost to healthcare R&D initiatives, strong market fundamentals and mounting awareness for new-age healthcare products and services has emerged to drive growth in this area. India's drug sector recorded deals worth over USD 2.1 billion in 2018, as was seen in Aurobindo Pharma acquiring the dermatology business and three manufacturing units of Sandoz for USD 1 billion, becoming the largest outbound deal by an Indian drug firm. In fact, the deal activity in January 2019 has been led by pharma, healthcare and biotech sectors driven by Radiant-Max Healthcare deal valued at USD 1.3 billion. The banking sector is likely to see more M&A, as seen in recent times, with the merger of two nationalised banks - Dena Bank and Vijaya Bank into Bank of Baroda which was approved by the Cabinet in February 2019. From recent trends, it is expected that consolidation in the banking sector will happen at a faster pace in the coming year.
Another key driver would be to widen the base among different customers.
What are the key drivers to M&A?
The key driver is to make sound financial and management decisions to increase future cash flow and earnings and bring the level of uncertainty down. Any company that wishes to one day exit the market by selling their business through M&A transactions should aim to maximise the value of their company. Further, achieving synergies is also a key driver and the principal objective of an M&A deal. Synergies mean the combination of the overall benefits of the two businesses which in turn enhances the efficiency and boosts the performance of the new combined entity achieved through the sharing of resources which the individual entities lacked before the M&A.
Another key driver would be to widen the base among different customers. This is because the more concentrated the company is with a single customer or just a group of customers, the risk factor for the acquirer is higher. In this scenario, losing just one major customer could considerably impact the financial position of the company.
What do you think investors should be keeping their eye out for in the next year, in terms of M&A development?
Factors such as the on-going trade turbulence, the liquidity crisis in the banking sector and the depreciating rupee, the sector specific regulatory concerns and the ever evolving foreign exchange laws (for cross-border deals) should be considered by investors prior to structuring an M&A deal.
Vineet Aneja
Managing Partner | Clasis Law
M: +91-9810405782
I am the Managing Partner as well as a founding partner of Clasis Law. My professional journey as a lawyer began more than 20 years ago and I have a plethora of experience across practice areas such as corporate commercial, retail, hospitality, employment, e-commerce, education, healthcare, white collar. I have provided specialized transactional and advisory services across sectors, covering diverse areas including:
The firm, Clasis Law is a full service Indian law firm that is international in vision, scope, experience and capability. The core values of the firm include a high degree of legal expertise, commitment to excellence, efficiency, integrity, focus and client care, all of which guide each member of the firm, be it the partners, associates or staff of Clasis Law in their business dealings on a daily basis. With the in-depth expertise and know-how of the partners, together with highly trained teams, the firm is able to provide clients with bespoke solutions and exceptional service.
Expertise within the firm spans a range of practice areas including corporate and commercial transactions, aviation & aerospace, banking & finance, asset & project finance, insurance, infrastructure, real estate, intellectual property, employment law, competition, compliance & auditing, shipping & international trade law, TMT, litigation & dispute resolution and white collar. The firm acts for a diverse domestic and international client base across a number of industrial sectors. Further details on the full spectrum of the firm’s experience and expertise across practice areas and industry sectors can be found on the Clasis Law website.
With India being an upcoming country appealing to business people and investors, Manisha speaks about how robust the IP legal landscape is in her jurisdiction, where there is room for improvement and what businesses should do if their IP is being infringed.
What challenges arise when trying to assert IP assets in India?
The Indian IP legal landscape and jurisprudential framework is robust and the courts in India, especially the High Courts of Delhi, Bombay, Calcutta and Madras are highly IP savvy. These High Courts have commercial courts and the judges presiding over IP matters in these courts are specialised in adjudicating IP disputes in an efficient and speedy manner and are sensitive to the IP rights of rights holders. However, most of the lower courts and district courts of other states in India are not as familiar, experienced and sensitive in handling IPR cases and in providing adequate remedies in a timely manner, which is a challenge for rights holders, especially when the jurisdiction of the case in question falls in such a state or territory.
When taking criminal action against infringers and counterfeiters through the police system in respect of unregistered trademarks and copyrights, it may be difficult to convince them to take cognizance of the IPR violation in order to move the system without a registration certificate in hand. Obtaining a remedy through criminal action may be difficult due to lack of experience and awareness, and the ignorance of the enforcement agencies as to the intellectual property of right holders.
Moreover, it is a requirement under the Trade Marks Act, 1999 that a police officer, before making any search or seizure without warrant, shall first have to obtain the opinion of the Registrar of Trade Marks on facts involved in the offence and shall abide by that opinion. This may cause a substantial delay and hindrance in obtaining a speedy remedy in cases of trademark violations.
Patent and IP laws are taken seriously in India
From the above, can you share effective ways companies can assert their IP assets?
(i) Issuing cease & desist/warning notices to the infringers/notice of pull down to the E-commerce websites and intermediaries;
(ii) Filing complaints with the local or specialized Police Stations for raid action against the counterfeiters including search, seizure and arrest;
(iii) Filing a complaint in the Magistrate’s court seeking directions for the Police to register a criminal case and investigate against the counterfeiters, cause search & seizure of counterfeit goods and arrest of counterfeiters, and assisting the public prosecutors on trial of the offenders;
(iv) Filing and prosecution of a civil suit before the concerned District Court or High Court to seek preliminary and permanent injunction, delivery-up of infringing goods for destruction and recovery of damages. Also obtaining Anton Pillar type of orders in civil actions for conducting a civil search of the defendants’ business premises and seizure operations by a court appointed Commissioner;
(v) The right holders and proprietors must register their IP rights with the relevant authority/office/registry viz. the Patent Office, Designs Office, Copyright Office and/or the Trademarks Registry. A registration in hand is a prima facie evidence of ownership and it not only helps in convincing the police to register a case and start with the investigation, search and seizure operations but in trademark infringement cases, the same is also particularly useful in bringing the jurisdiction of the case to the place where the plaintiff/right holder resides or carries on business or works for gain. The same can be employed to bring the case before the highly IP savvy High Courts.
(vi) Recordation of IP rights with the Indian Customs and notifying and liaising with the Indian Customs authorities to interdict/suspend suspected shipment carrying infringing goods and conducting proceedings before the Customs authorities for determination of infringement and destruction of infringing goods.
There are also provisions for the arrest and imprisonment of persons involved in the infringement and especially, an enhanced term of imprisonment for habitual or repeat offenders along with fine.
Are patent and IP laws taken seriously in India? What are the repercussions of infringement?
Yes, patent and IP laws are taken seriously in India. As stated above, the High Courts of India (especially Delhi, Bombay, Calcutta and Madras) render speedy dispensation of justice to right holders in IPR matters. Generally, the repercussions of infringement are permanent injunction or restraint to continue with the infringing use of the IP in question together with recovery of damages or an account of profits, and delivery-up of infringing goods for destruction.
The courts in India have judiciously, yet befittingly, time and again awarded both compensatory as well as punitive damages, to right holders depending on the facts and circumstances of the case. Also, the costs of proceedings are awarded in favour of the right holder and against the infringer on a case to case basis. Where there has been absolute flagrancy of infringement over a sustained period of time and/or the defendant has been proved to be a habitual infringer, the Courts have not shied away in awarding adequate quantum of punitive or exemplary damages to the right holders. Recently, the Delhi High Court has awarded punitive damages totalling up to a sum of INR 3.85 Crores (USD 541,983) collectively against a group of infringers who had been willfully and incorrigibly infringing the reputed trademark of the plaintiff for more than 25 years. In patent infringement cases as well, the courts have awarded heavy punitive damages in favour of right holders depending on the intention and flagrancy of the defendants’ conduct.
There are also provisions for the arrest and imprisonment of persons involved in the infringement and especially, an enhanced term of imprisonment for habitual or repeat offenders along with fine.
A strong and continuous market vigil, which includes market surveys and investigations both offline and online, is imperative to tackle the menace of counterfeiting in India
What should be a company’s first course of action when they believe their IP asset is being infringed?
Depending on the size and past behaviour of the infringing party and other factors, right holders may resort to either directly filing cases in the court or first approaching the other party to refrain from continuing with the wrongful acts by sending a cease and desist notice. In most civil cases, it is imperative for the right holder to seek an order of temporary ad-interim injunction from the court so that until the trial is concluded, the defendant is restrained from pursuing its alleged infringing activities till a decision is reached or final order of permanent injunction is passed.
What do you think can be done to tackle counterfeit goods in this field?
A strong and continuous market vigil, which includes market surveys and investigations both offline and online, is imperative to tackle the menace of counterfeiting in India and once the counterfeiters are identified, strong and deterrent actions both under civil and criminal justice systems need to be taken wherever necessary, as stated above.
I am one of the co-founders and the Managing Partner at LexOrbis. LexOrbis is a premier and amongst the fastest growing IP firms in India having offices at 3 strategic locations i.e. Delhi, Mumbai and Bengaluru. With a team of over 75 highly reputed lawyers, engineers and scientists the Firm acts as a one stop shop and provide practical solutions and services on all Intellectual Property and legal issues faced by technology companies, research institutions, universities, broadcasters, content developers and brand owners. Its services include Indian and global IP (patents/designs/trademark/copyright/GI/plant varieties) portfolio development and management, advisory and documentation services on IP transactions/technology-content transfers and IP enforcement and dispute resolutions at all forums across India. The Firm has a Global reach with trusted partners and associate firms.
I overview and supervise all practice groups at the Firm. Starting my career at the time when Indian IP laws and practices were undergoing substantial changes pursuant to India’s obligations to comply with the TRIPS agreement, I have been involved regularly in advising and apprising Indian policy and law makers on global standards associated with IP administrative and enforcement systems. I am a prolific writer and speaker and have authored over 500 articles and papers on contemporary IP and Legal issues in India. I work closely with IP administrative authorities and have been deeply involved in bringing transparency, speed and efficiency in the Indian IP administration.
India has now vowed to diplomatically and economically isolate Pakistan. Could India assemble a coalition to impose effective economic sanctions on Pakistan? Kartik Mittal, a Senior Solicitor at Zaiwalla & Co, explains for Lawyer Monthly.
The latest escalation in tensions came on 14 February 2019, when a terrorist suicide attack killed 46 Indian security personnel in Kashmir. India squarely held Pakistan responsible. It is alleged by India that the Pulwama attack was carried out by a local suicide bomber, who claimed allegiance to Pakistan-based terror group Jaish-e-Mohammed (JeM). India says that JeM has links to the Pakistani intelligence services.
Frustrated at a lack of action by Pakistan against JeM, on 26 February 2019 India launched an air attack inside Pakistani territory on JeM training camps (which Pakistan denies). Two days later, Pakistan announced that it had shot down one Indian fighter plane over Kashmir, prompting fears of an escalation to all-out war.
India is not alone in accusing Pakistan of taking a soft line on terror groups. The Paris-based watchdog the Financial Action Task Force, suggested that Pakistan could shortly be placed on its blacklist if specific steps to clamp down on the financing of JeM and other groups were not taken by May.
India is unfortunately no stranger to terror attacks on its soil. The 2008 Mumbai attacks left 166 dead. That attack was also widely blamed on Pakistani militants. The former Pakistani Prime Minister Nawaz Sharif was recently reported as saying, “Militant organisations are active. Call them non-state actors, should we allow them to cross the border and kill 150 people in Mumbai? Explain it to me. Why can't we complete the trial?"
India has promised to isolate Pakistan as a result of the Pulwama attack. Yet Nawaz Sharif recently said that Pakistan’s failure to contain terror groups means that, “we have isolated ourselves”. Osama Bin Laden, famously, was also found in Pakistan in 2011, having lived there for five years, in a conspicuous compound.
It seems Pakistan is belatedly feeling the weight of international disapproval at how terror groups have been able to use the country as a safe haven. It has recently promised to do more to disrupt such groups. On 5 March 2019, it said it had arrested key figures responsible for the Pulwama attack. However, many in India will fear that this is merely window dressing, and that little of substance will change.
Against this complex and murky background, India must decide how to best combat terrorism. In the wake of the latest attack, India again called for the UN Security Council to impose sanctions against Masood Azhar, the JeM chief. However, these efforts were blocked by China.
Sanctions regimes imposed on named terrorist organisations have often had a minimal impact, especially where they operate in a country that shelters their activities. A well-crafted sanctions regime against Pakistan may be the best approach to stop it sheltering terror groups.
India has confirmed that it will go it alone on economic sanctions. It has revoked Pakistan’s “most favoured nation” trading status. However, Pakistan-India trade only amounts to around US2 billion. The balance of trade is also titled heavily in favour of Pakistan. For sanctions to have a significant effect, India will need to persuade powerful economic actors to join such an effort.
Sanctions are most effective when a number of countries work collectively. The ideal scenario would be for sanctions to be imposed through a resolution passed by the United Nations Security Council. This seems unlikely, given China’s evident unwillingness to act. It is most likely that a group of willing countries will have to collectively impose sanctions.
The US has declared its “strong support” for India in the wake of the Pulwama attack. It has repeatedly shown frustration at Pakistan’s harbouring of terror groups. President Trump even began 2018 with a tweet saying that the US "has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies & deceit, thinking of our leaders as fools. They give safe haven to the terrorists we hunt in Afghanistan, with little help. No more!" Last year, the US cut $300 million in military aid to Pakistan, and $1.66 billion in security assistance.
The EU is Pakistan's biggest trading partner, purchasing 23.7% of Pakistan's total exports in 2015. Even the threat of EU sanctions could persuade Pakistan to act. The EU recently called for Pakistan to implement “clear and sustained actions targeting not only all UN-listed transnational terrorist groups but also individuals claiming responsibility for such attacks.”
India has a long and noble tradition of non-violent action. If India can muster an international coalition in favour of economic sanctions, it could peacefully persuade Pakistan to - at long last - clamp down on the terror groups operating on its soil.
Aliff Fazelbhoy was not the typical grade A student. After getting mediocre marks in his graduate studies, Aliff paved a path into the legal sector. But how did he do it? With the legal industry being highly competitive, Aliff shares how self-belief mixed with sheer determination made him conquer the legal sphere.
What inspired and motivated you to take up law as a profession and what keeps you motivated?
Call it destiny or fate or chance. I am a great believer that destiny has a few things planned for all of us, but these plans need to be put into action and that is up to each individual.
As a 19 year old commerce graduate with rather poor marks, I had no clue what I would do in life other than join our family business and sell auto spare parts. A friend, also from a business family casually mentioned to me that he was enrolling in law as his dad told him it may help in the business. I had read a few books on high profile legal cases and business law was one of the few subjects during my graduate studies where I did well… That’s how I ended studying law at the Government Law College (GLC) in Mumbai.
That decision changed my life. Within the first month of attending law college, I knew I had found my calling and that there was no looking back.
My late grandfather was my inspiration. He was by all accounts a super solicitor who rarely lost a case. Unfortunately, he died a year before I was born. On a lighter note, my late mother was delighted when I took up law as she believed I was her father’s double to follow in his footsteps.
In September this year, I will complete 30 years as a lawyer and there has not been a day that I have been bored at work. The varied nature of work I do ensures this. That, and the simple “thank you” or “job well done” note that I often get from clients after a matter or a deal is closed to their satisfaction is what keeps me motivated on a daily basis.
You are a gold medalist from the Mumbai University. What challenges have you faced during your education? How did you overcome them?
Being an albino by birth, I have low vision being about 10-15 of normal sight. This was my biggest struggle in school as I could not read the blackboard and being white and rather skinny and small at the time, had to face a lot of teasing; unfortunately, my grades throughout school and graduation were also nothing to write home about.
My mother, also an albino, was a great social worker and did tremendous work for the blind and multiple sclerosis in her life time. Deep down I knew I could achieve something. At GLC, we only had morning lectures and so simultaneously with studying law at GLC, I worked at a small law firm run by two brothers. My senior Munir Visram was my biggest mentor. He gave me so much self belief and confidence in my abilities. In my final year LLB exams, I stood first in the entire Mumbai University and was awarded three gold medals. I followed that up with a first rank in the Solicitors exam, getting top marks in all five subjects and earning a full scholarship to do my LLM at Cambridge University.
What challenges have you faced during your career? How did you overcome them?
Initially, I always wanted to be a litigator and argue my own cases but soon realised that I would not be able to do full justice to this, due to my low vision. In those days during the 1980s and early into the 90s, computers were scarce and we had to make do with manual typewriters and standard small fonts and bad ink. Books were also in small print and while studying with the help of a magnifying glass and similar aids was manageable, reading big briefs with bad printouts and arguing in courts having to refer to these was very difficult. Thus, though I did successfully handle many litigations during my early career, and I have some quite fascinating anecdotes, once again destiny played a role and I moved into becoming a corporate and tax lawyer.
Once I completed my masters in Cambridge, I worked in a city firm in London for a few months. They then introduced me to Mr. Bijesh Thakker of Thakker & Thakker (T&T) who offered me a job a year later. I thus moved from a litigation and arbitration practice to corporate and tax law. Bijesh was my second mentor who trained me to service large multinational clients and handle the most complex of deals.
With the growth of technology, reading and working on documents became much easier and being a corporate lawyer was much more manageable and very satisfying for me.
How do you measure success and what skills are vital in setting up a successful legal practice?
To me success means many things of which making a decent amount of money (not necessary millions) only plays a small part. I measure my success more by my reputation as a thorough and honest professional who always has their client’s interest at heart before my own, the respect I have among my peers and my juniors, and the ability to have a reasonable work life balance.
You need a lot of dedication and hard work to build a successful practice. There are no shortcuts. In the initial years of my career, I had to put in long hours, do whatever it took to learn and absorb the art of ‘lawyering’ from my seniors and peers and then find my own niche practice areas.
One of the primary skills that I think is vital in building up a successful practice and to keep a client happy is the ability to understand what the client needs. Once you understand that, finding the answers, both legal and practical becomes much easier.
The other very important vital skill in running a successful practice is the ability to earn the respect of your juniors and peers and keep your organisation motivated to deliver a great work product to your client. There is no magic formula for this; no one is perfect. Each firm and each individual is different and they each have their strong and weak points. You have to learn to respect that and see more of the good qualities and focus on these rather than the weaknesses.
The ability to mentor your juniors and have a high level of loyalty are also key to building up a successful practice.
As a professional on the matter, what would you say is the biggest tax issue that businesses in India face today?
While there are many, many tax issues that all businesses face, the uncertainty in the law and fear of the unknown is perhaps the biggest challenge in structuring your business or a deal.
Things were far simpler in the late 1990s and early 2000s as there was more certainty in the law, and despite the relatively higher tax rate, in general people at least knew where they stood.
Today, the government wants to tax anything and everything and even when the Supreme Court rules in favour of a tax payer, the Government cannot stomach a loss and they change laws retrospectively.
While the government says they will simplify laws, they actually over complicate it. Look at the new provisions on things such as anti avoidance, indirect transfers, transfer pricing, place of effective management and deemed transfers, just to name a few. The concepts are fine and generally accepted world over, but the drafting of the law in India is so complicated that no one really knows how these provisions will be interoperated by the taxman, the courts and then the legislature, who will change it again. Things get more chaotic when high courts in different states pass conflicting judgments on the same issue and then the Supreme Court takes its own time in clarifying that. One of the prime examples of this being the characterisation of payments for use of software. The controversy has been going on for at least two decades and the matter has been pending in the Supreme Court for over 5 years with no clarity on the subject.
Is there anything that you would like to add – any advice to young and aspiring lawyers?
The world is a much tougher place now and you have to work that much harder to rise – do not go for short term gain or by glamour, patience is a virtue and keep realistic goals and expectations. Most importantly, have self belief.
Aliff Fazelbhoy
Senior Partner
Tel: +91 22 4001 0000
Fax: +91 22 4001 0001
Mob +91 9820001203
Aliff is recognised as one of the leading lawyers in his chosen fields of practice being M&A, tax and employment law. Aliff has consistently been recognised as a leading lawyer by various publications in all these fields. Besides his strong M&A and private equity practice, Aliff has been instrumental in recent years in building up the Firm’s tax and employment practice
ALMT Legal is a dynamic and progressive full service Indian law firm that provides high quality Indian expertise with an international capability. With approximately 70 lawyers and 20 partners across offices in strategic commercial centres like Mumbai and Bangalore, ALMT has an established reputation as one of India’s top bracket full service firms.
Media is rife that Nirav Modi, an Indian billionaire jeweller, has fled India and is now seeking political asylum in the UK, following allegations of a gigantic fraud. Below Rahul Batra of Hudson McKenzie explains how this has led to a chain of similar cases and developed a form of ‘Quit India Movement’ with a whole new meaning.
The Indian jeweller went missing in February earlier this year after allegations emerged that he defrauded Punjab National Bank, India’s second-largest state-run bank of $2 billion. Mr. Modi is now in London fearing ‘political persecution’.
Based upon the extradition treaty between India and the UK, the Indian government is now pushing for his extradition, which thus far has not happened.
As we know, India is already seeking extradition of Vijay Mallya, a liquor and aviation tycoon, over unpaid loans to his defunct Kingfisher Airlines after the businessman and co-owner of the Formula One Force India team moved to Britain in March last year.
With Mallya and Lalit Modi (another rich Indian businessman and former Chairman of the Indian Premier League), fleeing to the UK in the past fearing political persecution, we are now witnessing another rich insolent ‘joining the bandwagon’.
Therefore, it may be questioned; is the UK progressively becoming a playground for the ‘rich and famous’, who can come here and live happily ever after, once they’ve been pulled up for their ill deeds in their own countries?
The fact that Nirav Modi allegedly holds dual-citizenship doesn’t make things any easier for the Indian Government. Whilst the government is making frantic efforts to extradite him back to India, he is seen prancing around in Switzerland and reportedly ‘holed up’ in a hotel in New York.
India, as we know, tops the list among countries whose citizens acquire foreign nationality, and with several nations liked Cyprus, Malta, Austria, St Kitts & Nevis offering citizenship programmes in lieu of making investments/buying properties in these countries, is making their lives easier.
Whilst, the countries offering citizenship and residence programmes are doing so, for a bona fide reason, that is to attract investment in their respective countries for economic growth, such delinquent individuals are literally abusing the process and making amusement of the system.
Is the international law so weak? Is our judicial system so flawed so to favour asylum seekers based upon their net-worth rather than the situation? In my opinion, it deteriorates the importance of asylum seeking status for those in actual danger (like fleeing war in Syria) especially as such people have much less money, or for that matter, no money compared to political asylum seekers who could be billionaires like Modi.
It seems these people misunderstood their history lessons and have taken ‘Quit India movement’ in the wrong sense, and to another level.
By Ramni Taneja, Advocate, Supreme Court of India, New Delhi, India
India is a country with an advanced and sophisticated legal and judicial system. Important legal issues arising under private international law, including the recognition and enforcement of foreign judgments and foreign awards have been judicially considered by the Supreme Court of India, which is India’s highest court of appeal, and which is also considered as one of the finest constitutional courts in the world.
The concept of recognition of foreign judgments is found in Section 13 of the Code of Civil Procedure, 1908. This Section is quoted hereafter:
“13. When foreign judgment not conclusive – A foreign judgment shall not be conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title except –
(a) where it has not been pronounced by a Court of competent jurisdiction;
(b) where it has not been given on the merits of the case;
(c) where it appears on the face of the proceedings to be founded on an incorrect view of the international law or a refusal to recognise the law of India in cases in which such law is applicable;
(d) where the proceedings in which the judgment is obtained are opposed to natural justice;
(e) where it has been obtained by fraud;
(f) where it sustains a claim founded on breach of any law in force in India.”
Section 44A of the Code of Civil Procedure, 1908 sets out provisions concerning the execution of decrees passed by Courts in a reciprocating territory.
A foreign judgment which is conclusive under Section 13 of the Code of Civil Procedure, 1908, can be enforced in India:
A suit on a foreign judgment must be filed within a period of three years from the date of the judgment.[1]
The Supreme Court of India has pronounced many significant judgments in the field of private international law including the present subject, i.e. recognition and enforcement of foreign judgments. While it is beyond the scope of this article to summarise each of these judgments, some of the important principles that have been enunciated by the Supreme Court of India are briefly considered hereafter.
The most recent judgment of this Court is Alcon Electronics Private Limited vs Celem SA and another 2017 2 SCC 253, in which the Supreme Court of India has ruled that the Order of the English Court [which was being enforced in India] is a judgment on the merits of the case. In the words of the Supreme Court of India: “The principles of comity of nation demand us to respect the order of English Court. Even in regard to an interlocutory order, Indian Courts have to give due weight to such order unless if falls under any of the exceptions under Section 13 CPC.” The Supreme Court has ruled that the Judgment of the English Court is a conclusive one. It has also ruled that the Order passed by the English Court is executable in India under Section 44A Code of Civil Procedure, and that England is a reciprocating territory within the meaning of Section 44A mentioned above. In this decision, the Supreme Court of India has, relied on the ratio of the judgment of this Court in International Woollen Mills vs Standard Wool (UK) Ltd. 2001 5 SCC 265.
In 1996, India enacted the Arbitration and Conciliation Act, 1996. This law is based on what is popularly known as the UNCITRAL model[2]. With foreign direct investment flowing into India, international commercial arbitration with an India-centric focus has gained momentum. In this context, the question of the enforcement of foreign awards has formed the subject of comprehensive judgments by the Supreme Court of India. The Indian Legislature in its wisdom has statutorily incorporated international covenants into domestic law. These are contained in Part II of the Arbitration and Conciliation Act, 1996 and include Chapter I being the New York Convention Awards and Chapter II being the Geneva Convention Awards.
As India is poised as a major leader in the global commercial world, the wealth of jurisprudence contributed by the Supreme Court of India in the field of private international law is both valuable and timely. It is hoped that this rich jurisprudence continues to blossom and bloom in the years to come.
Pull from previous articles (Nov 2017)
[1]Article 101 of the Limitation Act, 1963
[2] The United Nations Commission on International Trade Law (UNCITRAL) adopted in 1985 the Model Law on International Commercial Arbitration
Vineet Aneja divides his time between managing his practice as well as steering the overall management of his firm.
“With the nature of corporate practice being sector neutral, my team and I are regularly called upon to address matters relating to corporate law by sector specialist teams.”
Having said that, leading a firm is a full-time job: “The bulk of my time is spent on forging strategic partnerships with global firms, considering business expansion and growth, managing client relationships, laying the roadmap for the firm, staffing needs, being available for my lawyers and clients whenever they need me and at times taking certain hard decisions.”
Regardless of how pressured Vineet may be, he still has taken the time to share interesting insights into the investment scope in India. We ask: should we invest in India? Vineet shares his thoughts with us below.
When working with foreign organisations, what is a common misconception when it comes to working in India?
There is a very strong perception that statutory approvals and processes take a long time in India and that the system inherently slows down the entire process of setting up a business or doing an acquisition. In our experience, the foreign clients are also very apprehensive about the general compliance burden and more specifically labour and employment, as well as corporate compliances that a company is expected to adhere to.
While it is true that foreign organisations do find the regulatory environment in India to be one of the most difficult to navigate, in my view, this is partly because of the certain inherent challenges in the system and partly due to the fact that the foreign companies often tend to compare it to their jurisdictions, where things are largely streamlined.
I won’t deny that India is a complex jurisdiction with overlapping laws due to its federal structure, however, the right kind of legal adviser can help the companies tide over the systemic inefficiencies. The initial process of doing business in India requires patience and once the business is set up, India is a great place to do business.
How are you hoping the M&A sphere will change in 2018 which will shape the country’s future in investment?
The M&A opportunities in 2018 would remain robust riding on the back of a large number of stressed assets with several big ticket projects referred to the NCLT (National Company Law Tribunal) under the Insolvency and Bankruptcy Code, which are likely to see change in promoters. Given that these stressed assets would be on offer at tempting valuations, an uptick in the M&A deal activity is expected. Additionally, this government’s continued thrust on economic, regulatory and fiscal reforms with the abolition of FIPB, liberalisation of FDI in single brand retail, pharma and real estate services, introduction of Insolvency and Bankruptcy Code and GST are likely to catalyse more M&A deals. The government’s efforts to improve the overall business ecosystem will also go a long way in incentivising investments in India.
How do you ensure that legal requirements are met, alongside the commercial needs?
Not meeting legal requirements sufficiently for commercial considerations is never an option. Therefore, we as commercial lawyers have to constantly strive to maintain that delicate balance between legal compliance and commercial prudence. While advising on any transaction, we ensure that the commercial structure falls within the four corners of the applicable legal framework and that the commercial interests of the clients are largely protected through contractual covenants. We offer our clients holistic advice and ensure that we diligently evaluate and foresee issues under various laws and regulations so that clients’ commercial needs are addressed in complete compliance with the applicable laws.
What challenges do you often face when trying to accommodate both legal and commercial demands and how do you overcome this?
The key challenge that we face is when at times clients approach a structure initially from a financial and commercial perspective and later assess its legal validity. In our experience it is always advisable to have the lawyers and financial advisers on board simultaneously so that a legally viable structure could be achieved at the very outset.
In terms of accommodating legal and commercial demands, I would say that in this day and age clients do not need to be told the law because they know it already. They need commercially sound legal advice that fits into their vision for their business. It is imperative for us to understand the nuances and challenges of the client’s business so that the advice offered is so done with the background of the business environment that the client operates in. The role of a legal adviser is no more that of an external adviser, sermonising on law, but that of a business partner who walks with the client, toe to toe, to help it achieve harmony between law and business goals in the best possible manner.
You have been awarded for your corporate advisory expertise; can you share some expertise that you think accounts towards this award?
Well, it is always good to be recognised for one’s professional expertise. If I look back I would say that I have been fortunate to witness the evolution of laws impacting trade, business and investments in India. In fact, my career in law has coincided with major developments in commercial laws that India has seen, be it economic liberalisation in 1991; introduction of Foreign Exchange Management Act in 1999; industrial delicensing; de-regulation of the industrial sector; public sector policy; abolition of MRTP Act; introduction of the new Companies Act in 2013; the passage of Real Estate Regulation Act 2016, and more. Having advised the clients from a period that saw volatility in regulations, barriers in trade, heavy foreign exchange regulation, to now, when the focus is to improve investor sentiment and remove business barriers, I have come a long way and have witnessed the changing needs and demands of the clients. My experience has given me a deep and invaluable insight into the philosophical underpinnings of each business regulation which has helped me in advising my clients in a holistic manner, that has delivered them the desired results; because the ultimate litmus test of a lawyer is the result he can achieve for his clients. An important factor in advising a client is to understand the business of the client and its objectives.
Is there anything else you would like to add?
India is witnessing another surge of change in laws, regulations and policies with the advent of Insolvency and Bankruptcy Code, GST, development of bond market, availability of long-term funding, increase in government spending and launch of large infrastructure projects. The government is committed on hard selling India as a viable investment destination through a slew of trade and economic measures to attract foreign investment. This is an opportune time for companies to develop their outlook on India, but at the same time this is also the time of evolving regulations with newer notifications being issued at frequent intervals, creating an air of confusion and uncertainty; therefore, it is in order for foreign companies to commission experienced legal, financial and tax advisers well in advance, to guide them through the Indian regulatory landscape.
Vineet Aneja
Managing Partner, Clasis Law
Email ID: vineet.aneja@clasislaw.com
M: +91-9810405782 (India)
Vineet Aneja is the Managing Partner and Head of the Corporate Practice at Clasis Law. He is also a Founding Partner of the firm. Clasis Law is a full service Indian law firm with offices in New Delhi and Mumbai that provides advice on matters relating to Indian law and jurisdiction. On account of the confidence built with the clients, clients have also entrusted them with transactions relating to other jurisdictions including UAE, Finland, Nepal, Bangladesh, Pakistan, UK, USA.
Expertise within the firm spans a range of practice areas including corporate and commercial, aviation & aerospace, banking & finance, insurance, retail, hospitality, infrastructure, real estate, intellectual property, employment law, competition, compliance & auditing, shipping & international trade law, TMT, litigation & dispute resolution. The firm acts for a diverse Indian and international client base across a number of sectors.
