SEPTEMBER 2017
KEY HIGHLIGHTS OF THE CONSOLIDATED POLICY ON FOREIGN DIRECT INVESTMENT, 2017
By way of Press Note No. 1 of 2017, the Department of Industrial Policy and Promotion (the "DIPP"), on August 28, 2017, released the consolidated foreign direct investment policy circular for 2017 (the "2017 FDI Policy"), effective from August 28, 2017.
With the 2017 FDI Policy, the DIPP has integrated all the changes introduced by it with respect to foreign direct investment ("FDI") in India, between June 2016 and August 2017, and has introduced certain other changes, which are highlighted below.
AUGUST 2017
UNION CABINET APPROVES THE WAGE CODE
The Second National Labour Commission in 2002, recommended the division of labour laws into four or five broad groups concerning wages, social security, safety, industrial relations, welfare and working conditions.
In 2015, the Union Ministry of Labour and Employment introduced the draft Labour Code on Industrial Relations Bill (the "Industrial Relations Code") and the draft Labour Code on Wages Bill (the "Wage Code").
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JULY 2017
SEBI TEMPORARILY SUSPENDS MASALA BONDS AND FLAGS CORPORATE DEBT LIMITS TO FPIs
Suggesting that the Indian corporate bond market’s exposure to foreign investors may be overheating, the Securities Exchange Board of India (“SEBI”) issued a circular on 20 July 2017 (the “Circular”)[1] temporarily suspending the overseas issue of Rupee denominated debt in a cautionary measure to stem Indian corporate debt exposure to foreign investors, which is fast approaching a legal limit.
THE NEW LAW ON DISABILITY: WHAT DOES IT MEAN FOR INDIAN CORPORATES?
The Rights of Persons with Disabilities Act, 2016 (the “Act”) and the Rights of Persons with Disabilities Rules, 2016 (the “Rules”) came into effect on April 19, 2017 and June 15, 2017, respectively (together, the “Disability Law”). The Disability Law replaces the old Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995, and the rules made thereunder.
NEW REQUIREMENTS FOR PACKAGED COMMODITIES
The Legal Metrology Act, 2009 was enacted to establish and enforce standards of weights and measures and regulate trade and commerce in weights, measures and other goods that are sold or distributed by weight, measure or number. The Legal Metrology (Packaged Commodities) Rules, 2011 (the “PC Rules”) framed thereunder regulate labelling and packaging for sale and distribution of pre-packaged commodities.
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THE NEW REGIME FOR PROCESSING FDI PROPOSALS
On June 29, 2017, the Department of Industrial Policy and Promotion (the “DIPP”) released a standard operating procedure (the “SOP”)[1] setting out the process for filing and processing of Foreign Direct Investment (“FDI”) proposals, time limits and internal mechanisms for monitoring FDI proposals in sectors requiring government approval (the “Approval Route”).
AVOIDING THE COMBINATION TRAP: LESSONS FROM THE G.E. DEBACLE
The Ministry of Corporate Affairs (the “MCA”) has, through its notification dated June 29, 2017[1] (the “Notification”), amended the timeline in relation to the requirement for filing a notice of any combination with the Competition Commission of India (the “CCI”).
INFOLEX NEWSLETTER – IP
This Newsletter brings to you the IP updates in the second quarter of this year. In the second quarter, the Office of the Controller General of Patents, Design and Trademarks issued guidelines for determining well-known trademarks, pursuant to the Trade Marks Rules, 2017.
JUNE 2017
NEW GUIDELINES FOR DETERMINING WELL-KNOWN TRADEMARKS IN INDIA
The Office of the Controller General of Patents, Designs and Trademarks (the “CG Office”) recently notified and issued guidelines for setting out a procedure for determination of well-known trademarks in India (the “New Guidelines”). The New Guidelines have been issued pursuant to Rule 124 of the Trade Marks Rules, 2017 (the “Rules of 2017”) that provides for determination of well-known trademarks by the Registrar of Trademarks (the “Registrar”).
CCI PENALIZES HYUNDAI FOR CURBING DEALER DISCOUNTS
The Competition Commission of India (the “CCI”), through its order dated June 14, 2017, has imposed a penalty of INR 870 million (Indian Rupees Eighty-Seven Crores) (approximately USD 13.4 million) on Hyundai Motor India Limited (“HMIL”) for indulging in anti-competitive practices in violation of Section 3(1) of the Competition Act, 2002 (the “Act”) by indulging in practices of maintaining resale prices of its dealers and entering into tie-in arrangements in violation of Section 3(4) of the Act, which sets out anti-competitive arrangements across vertical markets.
MASALA BONDS: ISSUING RUPEE DENOMINATED DEBT OVERSEAS
Earlier this month, the Reserve Bank of India (the “RBI”) published certain norms relating to the issuance of rupee denominated bonds (also commonly known as ‘masala’ bonds) in the overseas market (“Rupee Bonds”), pursuant to a circular dated June 7, 2017 (the “Circular”).
The Circular essentially tightens the commercial terms of issuance for Rupee Bonds. The RBI had prior to the Circular, issued a series of circulars allowing eligible resident corporates and/or body corporates (including multilateral and regional financial institutions where India is a member country) to issue Rupee Bonds under India’s external commercial borrowing policy (the “ECB Policy”).[1]
TDS ON RENT FOR INDIVIDUALS AND HINDU UNDIVIDED FAMILES
The Finance Bill, 2017 had proposed a new Section 194IB to the Income Tax Act, 1961 (the "Act"), to provide that individuals and Hindu Undivided Families ("HUFs") paying rent of INR 50,000 (Indian Rupees fifty thousand) or more per month to a resident, will now have to deduct 5% (five per cent) tax at source ("TDS"). This change will be effective from June 1, 2017.
MAY 2017
IS SERVICE OF SUMMONS BY WHATSAPP PROPER SERVICE?
In a recent order of the Bombay High Court, service of summons by WhatsApp was considered as an acceptable mode of service based on the facts of that case. This was followed by another order in April 2017 by the Financial Commissioner Court of Haryana, which ordered summons to be served through WhatsApp in order to reduce the delay in serving summons in the absence of a proper address.
SUPREME COURT WEIGHS IN ON 'RELEVANT TURNOVER' FOR DETERMINING PENALTIES
The Supreme Court of India (the "Supreme Court") on May 8, 2017[1] held that the 'relevant turnover' and not the total turnover should be the basis for determination of penalties under the Competition Act, 2002 (the "Act").
The matter in question related to an allegation of anti-competitive agreement entered into between United Phosphorous Limited ("UPL"), Sandhya Organic Chemicals Private Limited ("SOCL") and Excel Crop Care Limited ("ECCL") (the "Entities") whereby the Entities were allegedly engaged in collusive bid rigging and quoting of identical prices for Aluminium Phosphide Tablets ("ALP").
CLOUD SERVICES: GUIDELINES FOR GOVERNMENT PROCUREMENT
The Ministry of Electronics and Information Technology, Government of India (the "Ministry") has announced the "MeghRaj Policy" (the "Policy") providing directions for adoption of cloud services by various government departments (including central, states and municipalities). The Policy comprises the objectives and aims of the Government of India towards procuring and leveraging cloud services offered by cloud service providers.
ABUSE OF DOMINANT POSITION: INQUIRY ORDERED AGAINST ROCHE
The Competition Commission of India (the "CCI"), in the matter of Biocon Limited ("Biocon"), Mylan Pharmaceuticals ("Mylan"), F. Hoffman La-Roche AG, Genetech Inc and Roche Products (India) Private Limited (collectively the "Roche Group") (the "CCI Order")[1] has held the Roche Group to be prima facie in contravention of section 4(2)(c) of the Competition Act, 2002 (the "Act").
AMENDMENTS TO THE MATERNITY BENEFIT ACT, 1961
The Maternity Benefit Act, 1961 (the "Act") has been recently subject to certain significant amendments. Women employees are now entitled to additional maternity leave and employers with a certain number of employees are required to provide crèche facilities.
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AWARD FOR DAMAGES DOES NOT BREACH SHARE PRICE VALUATION GUIDELINES: DELHI HIGH COURT REJECTS RBI INTERVENTION OVER ENFORCEMENT OF ARBITRAL AWARD
Recently, the Delhi High Court (the "Court") passed a landmark judgment while deciding a petition seeking enforcement of a foreign arbitral award.
In a dispute between Tata Sons Limited ("Tata") and NTT Docomo Inc. ("Docomo"), an arbitral tribunal in London passed an award against Tata, awarding the sale price contemplated under an agreement between the parties, in addition to costs and interest.
The arbitral tribunal rejected Tata’s argument that an award of damages would result in a violation of the Foreign Exchange Management Act, 1999 ("FEMA") and held that no special permission was required from the Reserve Bank of India (the "RBI").
APRIL 2017
CONTROL AND INVESTOR PROTECTION RIGHTS UNDER THE SEBI TAKEOVER REGULATIONS
The Securities Exchange Board of India ("SEBI"), in a recent order dated March 31, 2017, in the matter of Kamat Hotels (India) Limited (the "SEBI Order") has clarified that protective covenants or rights in favor of an investor in the company are in the nature of checks and controls rather than formulating policies to run the company.
SUPREME COURT RULING AGAINST COMPENSATORY TARIFFS FOR POWER PROJECTS
Earlier this month, the Supreme Court of India in Energy Watchdog & Ors. v/s. Central Electricity Regulatory Commission set aside the orders passed by the Appellate Tribunal for Electricity ("APTEL") dated 7 April 2016 (the "APTEL Order") and the Central Electricity Regulatory Commission ("CERC") dated 6 December 2016 (the "CERC Order") relating to compensatory tariff awards granted to certain power generating companies, mitigating an increase in costs incurred by such companies where tariffs have been determined through a process of competitive bidding.
JAPAN NEWSLETTER
The IndusLaw 日本のニュースレター brings you the key regulatory and legal developments in various sectors in India.
INFOLEX NEWSLETTER - IP
This Newsletter brings to you the IP updates during the first quarter of this year. The first quarter saw remarkable changes in trademark practice and procedure in India. With substantial changes in fees and with the introduction of a new register to record well known trade marks, the new Trade Marks Rules are in place and give hope for trademark registrations to happen at a much faster pace.
INTERNAL COMPLAINTS COMMITTEES: REQUIREMENTS FOR COMPLAINTS RELATING TO SEXUAL HARASSMENT
The Delhi High Court on February 16, 2017, in the matter of Ashok Kumar Singh v. University of Delhi & Ors pronounced on the nature of inquiry reports of internal complaints committees ("ICCs") required under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (the "Act").
COMBINATIONS UNDER COMPETITION LAW: DE-MINIMIS EXEMPTIONS
The Ministry of Corporate Affairs (the "MCA") has clarified the scope of the de-minimis exemptions, which exempt certain enterprises from the applicability of section 5 of the Competition Act, 2002 (the "Act"), by issuing notification numbers. S.O. 988 (E) (the "2017 Notification") and S.O. 989 (E) (the "Repeal Notification"), both dated March 27, 2017.
MARCH 2017
FINANCE BILL MERGES QUASI JUDICIAL BODIES
The Lok Sabha on March 22, 2017, passed the Finance Bill, 2017 (the "Finance Bill"), introducing several key amendments to different laws relating to issues not previously presented in the Union Budget for this financial year.
RISK MANAGEMENT AND INTER-BANK DEALINGS: OPERATIONAL FLEXIBILITY FOR INDIAN SUBSIDIARIES OF NON-RESIDENT COMPANIES
Pursuant to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000, (the “Regulations”) the Reserve Bank of India (the “RBI”) has framed regulations to promote the orderly development and maintenance of the foreign exchange market in India.
These Regulations have over a period of time effectively governed foreign exchange contracts in India. Now, the RBI has released a circular to provide flexibility to multinational entities and their Indian subsidiaries to effectively hedge the currency risk arising out of current account transactions in India (the “Amendment Regulations”).
CAIRN LOSES TAX CASE BEFORE INDIAN APPELLATE TRIBUNAL
The Income Tax Appellate Tribunal (the "ITAT") has upheld a capital gains tax levy of INR 10,247 Crore (approximately USD 1.56 billion) against Cairn U.K Holdings Limited, a wholly owned subsidiary of UK based Cairn Energy PLC, in an order dated 9 March 2017. The controversy surrounding this decision is that the demand of the Income Tax Department was raised using the infamous retrospective tax legislation introduced in 2012 to tax a transaction that took place back in 2006.
NEW TRADE MARKS RULES IN INDIA
The Government of India has notified[1] the Trade Marks Rules, 2017 (the “New Rules”) under the Trade Marks Act, 1999 (the “Trade Marks Act”) on 6th March 2017. The New Rules have replaced the Trade Marks Rules, 2002, which were earlier in force.
The New Rules have brought in significant changes in the trademark practice and procedures in India. The key reforms under the New Rules are highlighted below.
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THE RESURRECTION OF SAFE HARBOURS FOR INTERNET INTERMEDIARIES IN INDIA
In its recent judgment in the matter of MySpace Inc. v. Super Cassettes Industries Ltd., a division bench of the Delhi High Court (the “Court”) comprising of S. Ravindra Bhat and Deepa Sharma, JJ., overturned a single judge’s order in the matter of Super Cassettes Industries Ltd. v. MySpace Inc.
The Court, while setting aside the single judge’s order, re-affirmed and re-established some important legal principles regarding internet intermediary liabilities in the case of claims of copyright infringement under the Copyright Act, 1957 (the “Copyright Act”), the scope of safe harbour immunities available to intermediaries under the Information Technology Act, 2002 (the “IT Act”) and injunctions.
FEBRUARY 2017
WHERE CAN A FOREIGN REGISTERED PROPRIETOR SUE IN INDIA FOR INFRINGEMENT OF ITS TRADEMARK?
A Division Bench of the High Court of Delhi (the "Court"), in its recent judgment in the matter of P.K. Sen vs. Exxon Mobile Corporation and Anr.[1], reversed the decision of a single judge of the Court and held that a foreign registered proprietor[2]who does not have an office or a principal place in India, cannot file and maintain a suit of trademark infringement and passing off on the basis of the location of the trademark’s permitted user.[3]
ISSUANCE OF RUPEE DENOMINATED BONDS OVERSEAS: MULTILATERAL AND REGIONAL FINANCIAL INSTITUTIONS AS INVESTORS
Eligible resident corporates and/or body corporates[1] had earlier been permitted to issue rupee denominated bonds (also commonly known as the 'masala' bonds) in the overseas market ("Rupee Bonds") under India’s external commercial borrowing policy pursuant to the terms of A.P. (DIR Series) Circular No.17 dated September 29, 2015 (the "Original Circular").[2]
EMPLOYEE ENROLLMENT CAMPAIGN
The Government has amended the Provident Fund Scheme, 1952, launching the 'Employees Enrollment Campaign, 2017' (the "Campaign").
UNION BUDGET 2017-2018: HIGHLIGHTS
India’s Finance Minister presented the Union Budget 2017-2018 (the "Budget") before Parliament on February 1, 2017, with promises to boost rural spending and cut taxes for the lower middle classes and small to medium business enterprises.
On the whole, with elections looming in 5 (five) key battleground states and the unorganized sector of the economy still recovering from the impact of demonitisation, it was inevitable that the Budget was tailored towards increasing government expenditure for the masses, leaving corporate India somewhat in the shadows.
CLARIFICATION ON GRANDFATHERING OF COMPULSORILY CONVERTIBLE INSTRUMENTS UNDER GAAR
The Central Board of Direct Taxes (the "CBDT") released a circular on January 27, 2017 (the "CBDT Circular") providing certain clarifications on queries received by the CBDT on the implementation of the General Anti-Avoidance Rules (the "GAAR").
The CBDT Circular, inter alia, provides a clarification on the applicability of the GAAR to income arising from the transfer of investments acquired prior to April 1, 2017.
Specifically, it clarifies whether the term 'investments' includes shares issued by way of bonus issuance and shares resulting from the conversion of instruments compulsorily convertible from one form to another (the "Clarification on Convertible Instruments").
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The IndusLaw 日本のニュースレター brings you the key regulatory and legal developments in various sectors in India.
RENEWABLE ENERGY ALERT
Our Renewable Energy Alert is a monthly update designed to keep you up-to-date with the latest legal developments that could potentially impact your business. We set out below a brief summary of some of the key legal developments impacting the sector during January 2017.
JANUARY 2017
BOOST TO FUNDING STARTUPS: THE ISSUE OF CONVERTIBLE NOTES TO FOREIGN INVESTORS
The Reserve Bank of India has amended theForeign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (the "TISPRO Regulations"), on January 10, 2017 (the "TISPRO Amendment"), to provide for the issuance of ‘convertible notes’ to foreign investors by start-up companies.
REVISED WAGE LIMIT UNDER THE EMPLOYEES’ STATE INSURANCE ACT, 1948
The Employees’ State Insurance (Central) Rules, 1950 ("Rules") has been recently amended and the wage limit for coverage of an employee under the Employees’ State Insurance Act, 1948 stands revised.
GUIDELINES ON CROSS BORDER TRADE OF ELECTRICITY
In an effort to harmonise municipal laws, rules and regulations governing the trade of electricity, the Ministry of Power (the "MoP") issued on 5 December, 2016 guidelines for cross border trade of electricity (the "Guidelines").
Currently, bilateral memoranda of understanding or power trade agreements govern the cross- border trade of electricity between India and its neighbours.
BRIEFING NOTES – KEY LEGAL DEVELOPMENTS 2016
This time last year, few would have been optimistic that parliament would be able to push through much needed legislation to trigger sweeping changes to India’s indirect taxation system and the resolution of bankruptcy and insolvency.
INFOLEX NEWSLETTER - IP
As we take you through the advancements in the field of IP in the last quarter of 2016, we take this opportunity to wish you all a very happy and prosperous 2017 ahead!