Understanding the Personal Data Protection Bill, 2018 and Bracing for Impact

January 11, 2019, 2:36 am

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The Personal Data Protection Bill, 2018 ("PDP Bill") is aimed at securing the rights of data subjects and overhauling completely the present data privacy and protection regime in India or rather the lack of it. The Government of India, constituted a committee of experts to study various issues relating to data protection in India and make specific suggestions on principles to be considered for data protection in India and draft legislation. The committee, formed with the idea to create a powerful data protection law in India, submitted the draft PDP Bill to the Ministry of Electronics and Information Technology on July 27, 2018. The PDP Bill is yet to be passed by the Parliament and is expected to be tabled in the current winter session of the parliament.

The proposed PDP Bill is said to have been modeled along the lines of General Data Protection Regulation (GDPR), which is one of the most complicated and far-reaching pieces of legislation to have emerged from EU Parliament.

Presently, the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 ("IT Rules"), govern protection of personal data in India and are applicable to all body corporates. The PDP Bill is much more than an extension of it as it seeks to address the lacunae's under the IT Rules. The PDP Bill prescribes in detail the manner in which the personal data shall be, amongst other things, collected, processed, used, disclosed, stored and transferred.

It is pertinent to note that, the PDP Bill applies to both government and private entities. The applicability of this law will extend to data controllers/ fiduciaries or data processors not present within the territory of India, if they carry out processing of personal data in connection with:

• Any business carried in India,

• Systematic offering of good and services to data principles (also generally referred to as data subject) in India,

• Any activity which involves profiling of data principals within the territory of India.

Further the term in connection with 'any business carried in India', in relation to exercise of jurisdiction over any data fiduciary or data processor not located within India, is vague in nature and lacks specificity. This implies that the PDP Bill has an extra-territorial application and imposes additional compliance requirements for foreign data fiduciaries and data processors. As it currently stands, the PDP Bill may even be applicable to foreign data fiduciaries and data processors which have insignificant commercial relationships in India.

Key Concepts

Important definitions

The concept of 'data principal' and 'data fiduciary' has been introduced. The natural person whose personal data is collected is referred to as the 'data principal' and the entity that determines the purpose or means of processing this data is referred to as the 'data fiduciary'. Data fiduciaries include the State, corporate entities and individuals.

The definition of 'sensitive personal data' has been widened vis-à-vis the IT Rules to include intersex status, caste, tribe and religious beliefs. In fact, it is wider than the ambit of sensitive personal data under the IT Rules. Therefore, organisations processing sensitive personal data will be subject to additional compliance requirements once the PDP Bill is enacted.

Requirement to give notice and take consent for processing data

The data fiduciary is required to give notice to the data principal before collecting, processing and/or using the personal data of a data principal.

The notice shall, inter-alia, include the purposes for which the personal data is to be processed; the categories of personal data being collected; the details of the data protection officer; the right of the data principal to withdraw such consent, and the procedure for such withdrawal.

Personal data may be processed on the basis of the consent of the data principal. For the consent of the data principal to be valid, it must be free, informed, specific, clear and capable of being withdrawn. Processing of sensitive personal data is based on explicit consent from the data principal.

The PDP Bill focusses largely on compliances and once this law is enacted, in its current form, it may prove to be cumbersome for data fiduciaries. Further, certain obligations such as the requirement of giving notice, obtaining consent, etc., may pose practical and logistical issues for organisations and compliance with the same would mean additional administrative burden and costs. Providing consent in multiple languages may prove to be a major practical challenge for social media platforms, e-commerce companies, etc., which have a wide base of users across locations.

Additionally, in terms of the PDP Bill, exemption to obtaining consent of the data principal for processing their data has been granted for certain employment related matters. However, this ground for processing of personal data can only be invoked if processing of personal data on the basis of consent is not appropriate giving regard to the employer-employee relationship between the data fiduciary and the data principal or would involve a disproportionate effort on the part of the data fiduciary due to the nature of the processing activities.

This requirement of taking consent for processing data is enshrined in the IT Rules, albeit, not in such detail.

Retention of data and audits

The data fiduciary shall retain personal data only as long as may be reasonably necessary to satisfy the purpose for which it is processed, unless required to be retained for a longer period of time, if such retention is explicitly mandated by law.The data fiduciary shall have necessary policies in place and conduct annual compliance audits by an independent data auditor. The data fiduciary shall maintain accurate and up-to-date records.

Similar provisions are encapsulated in the IT Rules as well. The IT Rules prescribe that the body corporate or a person on its behalf who have implemented either IS/ISO/IEC 27001 standard or the codes of best practices for data protection as approved and notified by the Central Government shall be deemed to have complied with reasonable security practices and procedures provided that such standard or the codes of best practices have been certified or audited on an annual basis by entities through independent auditor, duly approved by the Central Government.

Data Protection Officer and the Data Protection Authority

The Data Protection Officer ("DPO") is to be appointed by the data fiduciary. The DPO's eligibility and qualification requirements shall be specified at a later date. The DPO is required to resolve the grievance in an expeditious manner and no later than 30 days from the date of receipt of grievance from a data principal.

Further, the PDP Bill creates a central regulatory and adjudicatory body called the Data Protection Authority ("DPA") to administer and enforce the provisions of the PDP Bill. The DPA also has the power to set standards for the implementation of the provisions of the PDP Bill. The powers granted to the DPA appear to be very wide and discretionary. The DPA is proposed to function as a supervisory body, enforcement agency and an adjudicatory body. Significantly, the DPA has extensive powers including the power to suspend the business or activity of a data fiduciary or a data processor which is in breach of the provisions of the PDP Bill, conducting search and seizures or suspending or discontinuing cross border flow of personal data.

The IT Rules does not provide for a DPO or DPA, however, it provides for appointment of a 'grievance officer' by the body corporate dealing in personal data. Further the body corporate is required to publish the name and contact details of the grievance officer on its website. The prescribed timeline for redressal of grievance by the grievance officer is a maximum of one month from the date of receipt of grievance.

Significant Data Fiduciary

The PDP Bill recognises a class of data controllers called significant data fiduciaries. These data fiduciaries are subject to a registration requirement and certain additional compliances than a data fiduciary. Significant data fiduciaries will be notified by the DPA based on factors such as sensitivity of data, volume of data processed, annual turnover, risk of harm from such processing etc. However, the thresholds for such factors have not been provided in the PDP Bill leaving this concept vague and ambiguous. This concept is absent from the presently operating IT Rules.

Data localisation and cross border transfer of data

The PDP Bill requires data fiduciaries to ensure the storage, on a server or data centre located in India, of at least one copy of personal data to which it applies. It also specifies the conditions under which data transfers outside the territory of India may take place.

Data localisation requirements would entail additional time and cost for setting up/ leasing local servers in India, which may become a cost centre for businesses. This would have to be complied with even when an organisation does not have a presence in India but where the provisions of the PDP Bill are applicable to such foreign entities (which do not have a physical presence in India). With the exception of certain exempted categories of processing under the PDP Bill, all entities irrespective of size or scale of processing, would still need to comply with measures such as privacy by design, security standards – encryption and de-identification, breach notifications and transparency obligations.

Cross border transfer of personal data is permitted in certain instances, such as: (i) transfer is made subject to execution of standard contractual clauses or intra-group schemes approved by the DPA, (ii) where the Central Government in consultation with the Authority, has prescribed that transfer of personal data is permissible to a country, or to a sector within a country or to international organisations (where the personal data is adequately protected), and (iii) the DPA may also approve transfer due to a situation of necessity.

Amongst the various conditions for cross border transfer of personal data, it appears that mostly personal data will be transferred under standard contractual clauses. More so, as there are very few countries in the world that have a robust data protection regime, it appears that personal data would be impeded by non-adequacy of robust data protection laws.

The presently applicable IT Rules do not specifically define cross border transfer of data and data localization. However, it prescribes that a body corporate or any person on its behalf may transfer sensitive personal data, to any other body corporate or a person in India, or located in any other country, that ensures the same level of data protection that is adhered to by the body corporate as provided for under the IT Rules. Further, the transfer may be allowed only if it is necessary for the performance of the lawful contract between the body corporate or any person on its behalf and provider of information or where such person has consented to data transfer.

Stringent penalties

Depending on the nature of contravention, the penalties differ. Penalties are as high as INR 5 Crore to INR 15 Crore, or 2 per cent to 4 per cent of an entity's total worldwide turnover in the preceding financial year, whichever is higher.

The penalties prescribed under the PDP Bill are quite stringent and notably more stringent than the penalties prescribed in the IT Rules. Further, compensation can be sought by a data principal against a data fiduciary and/or a data processor, which will be over and above any penalties imposed.

Key Implications

Once the PDP Bill becomes law, it will have far-reaching consequences and corporates will have to have proper security systems and safeguards in place to comply with the provisions of the PDP Bill. Some key implications and action points will be:

 Practicing a culture of 'privacy by design' in the organisation, focusing on the complete data life cycle, developing internal controls and systems for data mapping, from collection at all data touchpoints, storage, access and use to destruction of personal data.

 Preparing comprehensive privacy policies in line with legal requirements, including formulating data collection, storage, access, retention, data disposal policies and procedures,

 Providing data access i.e. notice to the data principal for collection and use of personal data and obtain consent letters for data collection,

 Appointing a DPO to handle grievances,

 Storing personal data collected in a manner and form compliant with the PDP Bill, ensuring storage in a local server,

 carrying out annual audits by an independent data auditor,

 sensitization of the employer and employee in terms of what rights are available to the employee (like withdrawal of consent) and what are the obligations in terms of the PDP Bill,

 Implementing security measures to protect digital, as well as, physical data; and

 Data minimization, i.e. limiting storage of personal data for legitimate purpose.

While the legalese and nuances should be left to the lawyers, the corporates need to be aware of their obligations and potential liabilities under the PDP Bill. Lack of awareness, often leads to inadvertent non-compliances, which could sooner or later result in unforeseen and severe consequences.

Conclusion

The PDP Bill is heavy on compliance and proposes a stringent penalty scheme to act as a deterrent for non-compliance. To balance this approach with economic and trade interests, the Government of India must also be mindful that the final law should meet the adequacy standards as prescribed by similar legislations of other countries, to enable mutual cross border transfer of data.

Considering that certain provisions of the PDP Bill will only take effect after a period of time, it will allow data fiduciaries to prepare their systems and processes to ensure compliance. The PDP Bill is the most prominent step towards a comprehensive law on personal data protection in India. However, some elements in the PDP Bill should ideally be further clarified and discussed with various stakeholders for effective implementation.

For any clarification or further information, please contact

Priyanka Anand

Associate Partner

E: priyanka.anand@clasislaw.com

Vasudha Luniya

Associate

E: vasudha.luniya@clasislaw.com

About Clasis Law

Clasis Law is a full service Indian law firm with a rich experience of advising international and domestic clients (ranging from individuals to multinational corporations) on various aspects of Indian laws across numerous industry sectors. With several partners recognized as leading experts in their field and acknowledged by industry peers for their in-depth expertise and know-how, 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 such as aviation, banking and finance, competition laws, compliances & audits, corporate governance, corporate & commercial, employment, energy, healthcare, hospitality & leisure, insurance, intellectual property, litigation and dispute resolution, insolvency & bankruptcy, projects and infrastructure, real estate, retail, shipping and technology, media & telecommunications. The core values of the firm are high degree of legal expertise, commitment to excellence, efficiency, integrity, focus and client care, all of which guide each member of the firm. Our commitment to our values enables us to consistently provide high quality, commercially relevant legal advice specific to our clients' needs. We strive to ensure that each and every client receives our best attention and services at all times. We pride ourselves in being a firm that works in accordance with the international standards of quality, timely delivery and transparency of billing. Our lawyers are trained to not only successfully handle but also to go beyond the client expectations. Recognising the growing market need to adhere to strict guidelines and budgets for transactions and other commercial requirements, the firm works closely with clients to ensure they are provided with valueadded, cost-effective solutions at all times, without compromising on quality or dedication. The transparent and clear billing arrangements promoted by Clasis Law build trust and confidence with clients.

Contact

New Delhi Dr Gopal Das Bhawan 14th Floor, 28 Barakhamba Road New Delhi - 110001 Phone : +91 11 4213 0000 Fax : +91 11 4213 0099

Mumbai Bajaj Bhawan 1 st Floor, 226, Nariman Point Mumbai - 400 021 Phone : +91 22 4910 0000 Fax : +91 22 4910 0099

Website : www.clasislaw.com Email : info@clasislaw.com

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National Guidelines For Crèches Set Up Under The Maternity Benefit Act

February 6, 2019, 1:14 am

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The Indian working parents have a lot to cheer about with respect to the national crèche guidelines, although the same might not be true for Indian employers. The Crèche Guidelines are a relief for they do answer some open issues, however, they also raise additional ambiguities and pose added compliance burden for the employers. In terms of the Maternity Benefit Act, 1961 (the "MB Act"), as amended by the Maternity Benefit (Amendment) Act, 2017 (the "Amendment Act"), a new provision was introduced which requires establishments having 50, or more employees to have a crèche facility within the prescribed distance, either separately or along with other common facilities. The Amendment Act, however, did not provide any clarity on aspects pertaining to the crèche facility, more significantly, about how the crèche facilities need to be provided and who bears the cost burden. In the absence of any comprehensive rules or guidelines for the implementation of the crèche facility provision, the Ministry of Labour and Employment vide its notification dated 17^th November 2017, required the State Governments to frame rules regarding the facilities to be provided in the said crèches.

Overall, the State Governments (barring a few) failed to rise to the challenge and issue any rules or guidelines governing crèche facilities. Up till now the employers were drawing guidance from other employment and social welfare legislations which have provisions dealing with crèche facility.

The Ministry of Women and Child Development, Government of India, recognized the need to prescribe a list of minimum standards and norms to standardize the quality of crèche facilities, which could be followed by employers nationwide. The Ministry of Women and Child Development recently, vide its office memorandum dated 2^nd November 2018, issued the "National Minimum Guidelines for Setting up and Running Crèches under Maternity Benefit Act, 2017 (the "Crèche Guidelines"). The Crèche Guidelines are to be used as a source of reference for government offices, companies and all other establishments under the purview of the MB Act.

This article examines the requirements prescribed under Crèche Guidelines and highlights the key areas of compliance from an employer's perspective.

Features of the Crèche Guidelines

Interestingly, the Crèche Guidelines categorize certain norms as non-negotiable while others as preferable norms. Briefly, the salient features are:

Group of Children - The crèche facility is for children of age groups of 6 (six) months to 6 (six) years of all employees including temporary, daily wage, consultant and contractual personnel.

Distance of crèche- It should be located near/at the work place site or in the beneficiaries' neighborhood within 500 (five hundred) metres.

Timings- The crèche timings can be flexible depending on the working hours and timings of the parents which should ideally mean for 8 (eight) to 10 (ten) hours.

Space- The crèche centre should have a minimum space of 10 (ten) to 12 (twelve) sq. ft. per child to ensure that children can play, rest and learn.

Human Resource- There is a recommended adult child ratio with helpers, one crèche in charge and one guard to be employed in a crèche unit of up to 30 (thirty) children.

Records- Requirement of maintaining stock registers and attendance registers for staff and children and certain admission forms to be filled.

Monitoring and supervision- A Crèche Monitoring Committee to be set up comprising of representation from the parents, one crèche in-charge, one crèche worker and one admin/HR person.

Training- Prior to starting work with the children at the crèche, all the workers of the crèche need to undergo a pre service training of 5-6 months.

There is an exhaustive list of norms and standards to be followed in a crèche on matters like crèche environment, equipment, safety and protection, health and nutrition practices, hygiene and sanitation practices and crèche activities.

A key aspect of these guidelines is the formulation of a Child Protection Policy as per the sample policy provided which prescribes the appointment of a Complaints Committee to investigate and address complaints relating to any child abuse.

State Government Rules on Crèche facilities

Amongst the few States that have legislated rules under the MB Act, we have examined the rules prescribed by the States of Haryana and Karnataka and drawn comparison with Crèche Guidelines. Despite certain similarities, the rules depart from Crèche Guidelines on certain parameters. From a compliance perspective, the question arises as to whether an employer shall follow local State rules or the National Crèche Guidelines, which one shall prevail.

HARYANA MATERNITY BENEFIT RULES, 1967

KARNATAKA MATERNITY BENEFIT RULES, 1966

NATIONAL CRECHE GUIDELINES

STATUS

The Haryana Government has framed and notified the rules for providing crèche facilities on August 2, 2018.

The Karnataka Government has framed draft rules for providing crèche facilities on July 21, 2018 but still need to be notified.

The Ministry of Women and Child Development formulated these guidelines under the notified Section 11 A of the Maternity Benefit Act, 2017.

GROUP OF CHILDREN

This crèche facility is for the use of children below the age of 6 (six) years.

This crèche facility is proposed to be extended to children of age groups of 6 (six) months to 6 (six) years.

TIMINGS

The crèche would remain open at all times, both day and night, when employees are working in the establishment.

The working hours of the crèche shall correspond to the working hours of mothers. It shall work in shifts if women are employed in shifts spread over a period not exceeding 8 (eight) hours a day.

The crèche preferably should remain open for 8 (eight) to 10 (ten) hours.

MINIMUM SPACE

The crèche would have a minimum space of 6 (six)-8 (eight) sq. ft. per child.

The crèche would have not less than 5 (five) sq. ft. of floor area for each child.

A crèche centre must have a minimum space of 10 (ten) to 12 (twelve) sq. ft. per child.

BUILDING SPECIFICATION

The height of the rooms in the building would not be less than 12 (twelve) ft. from the floor to the lowest part of the roof.

The height of the rooms shall not be less than 10 (ten) ft. from the floor to the lowest part of the roof.

No such specification has been mentioned in the guidelines.

COMPLAINTS

A register of complaint would be kept in the crèche.

There is no such provision provided in the rules.

A Complaints Committee will be formed for addressing complaints and carrying out the investigation.

STAFF

A female attendant, cook, sweeper and chowkidar to be employed.

A crèche attendant assisted by female ayahs to be employed.

Childcare workers, helpers and one guard to be employed.

CRECHE-IN-CHARGE

A trained crèche-nurse would be appointed crèche-in-charge.

A woman who has Government approved or recognized qualification and training in 'Early Childhood Care and Education' (ECCE) or 'Teachers Course Higher (TCH) or equivalent qualification shall work as crèche-in-charge.

The minimum qualification for a crèche- -in-charge is a graduate.

Key Issues

In furtherance to the Amendment Act, some employers in an effort to comply with the spirit of the law had taken interim measures such as extending crèche allowance to their employees and reimbursing them for third party crèche facilities availed by them. With these Crèche Guidelines in place, employers would definitely need to step up their efforts.

The Crèche Guidelines are silent on several aspects such as who shall bear the cost burden and engagement of third party service providers. The extent to which these guidelines need to be abided by the employers is also uncertain since the nature of these norms is mentioned as a reference resource. Further, the objective of these minimum guidelines is only to provide a helpful start to the employers to guarantee standards of quality care at crèches operating within their premises.

Although the guidelines offer no clarity on costs, other social welfare legislations like the Contract Labour (Regulation and Abolition) Act, 1970, Factories Act, 1948 place the burden of cost of crèche facilities on the employer. In furtherance to the Amendment Act, a Right to Information ("RTI") application was filed on 27^th September 2017, inquiring regarding which party shall bear the cost. In response to the RTI query, the Ministry of Labour and Employment has replied that the cost/expenditure of crèche facilities is to be borne by the employer.

Considering the practical challenges involved, corporates are keen on setting up a crèche run by a third party service provider that builds and manages the on-site or near site day-care centres, however, to what extent would it dilute the employers primary responsibility of compliance with the prescribed norms remains to be seen.

Conclusion

India now has become one of the leading nations surpassing many European and Asian countries in terms of employee maternity benefits. It is crucial for employers to prepare a sound policy for providing crèche facility at workplace and mandate standards in accordance with the Crèche Guidelines. Only time would tell, how successfully employers are able to implement these Crèche Guidelines and with how much vigour the labour authorities choose to enforce them. Although desirable in larger public interest, this of course places additional compliance as well as cost burden on the employers.

For any clarification or further information, please contact

Priyanka Anand

Associate Partner

E: priyanka.anand@clasislaw.com

Harshita Arora

Associate

E: Harshita.arora@clasislaw.com

About Clasis Law

Contact

New Delhi Dr Gopal Das Bhawan 14th Floor, 28 Barakhamba Road New Delhi - 110001 Phone : +91 11 4213 0000 Fax : +91 11 4213 0099

Mumbai Bajaj Bhawan 1 st Floor, 226, Nariman Point Mumbai - 400 021 Phone : +91 22 4910 0000 Fax : +91 22 4910 0099

Website : www.clasislaw.com Email : info@clasislaw.com

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Clarifications On FDI In E-Commerce Sector - The Predicament Of Marketplace Entities In India

March 13, 2019, 10:05 pm

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The e-commerce sector in India has grown exponentially in a relatively short span of time to become an industry worth billions, as on date. It is undeniable that the e-commerce sector is one of the fastest growing ones and continues to lure both strategic and financial foreign investors from across the globe. In fact, the recent acquisition of Flipkart by Wal-Mart has been touted as the world's biggest e-commerce deal and goes to prove the lure that the Indian e-commerce market has globally.

In this business milieu when online commerce is successfully taking over market share bit by bit from brick and mortar stores, the Department of Industrial Policy and Promotion ("DIPP") issued press note 2 of 2018 dated December 26, 2018 ("Press Note 2018") wherein it revised, and issued clarifications on, the foreign direct investment policy ("FDI Policy") in the e-commerce sector. The e-commerce sector was earlier regulated by press note 3 of 2016 dated March 29, 2016 ("Press Note 2016"), incorporated in the FDI policy of 2017, which now stands superseded by the Press Note 2018. The provisions of Press Note 2018 have come into effect recently, from February 1, 2019. Despite recommendations from stakeholders to extend the deadline for implementation of Press Note 2018, the DIPP issued a press release to implement the revised e-commerce policy from February 1, 2019.

This article seeks to analyse the effect of the proposed changes in the FDI Policy by the Press Note 2018 in light of the already existing and established e-commerce practices.

A. Drawing parallels between Press Note 2016 and Press Note 2018.

Foreign investment is permitted up to 100% through the automatic route in the e-commerce sector. In terms of Press Note 2016 and Press Note 2018 e-commerce is defined as buying and selling of goods and services (including digital products) over digital and electronic network. The Press Note 2018, as is the case with Press Note 2016, recognizes the following two categories of business models:

Inventory based Model - wherein, any inventory of goods and services is owned by the e-commerce entity and thus sold directly to the consumer.

Marketplace based Model - wherein the entity only provides an information technology platform on digital or electronic network to act as a facilitator between the buyer and the seller.

It is pertinent to note that the FDI under automatic route in the e-commerce sector is permitted so long as the entity operates through the marketplace based model and not inventory based model. The entity undertaking e-commerce activities must enter into transactions with sellers on a business to business ("B2B") basis only.

Ownership and control over inventory – Press Note 2016 prohibited an entity offering a marketplace to exercise ownership over the inventory. It further provided that such ownership of the inventory will render the business into inventory based model. Additionally, in terms of Press Note 2016, an e-commerce entity was not permitted to allow more than 25% of the sales on its marketplace through one vendor or its group companies. Press Note 2018, takes it a step further, by disallowing an e-commerce entity from exercising ownership or control over any inventory that is to be sold on such entity's platform as that will convert the business from market place model to the inventory model. The Press Note provides that inventory of seller will be deemed to be controlled by the e-commerce marketplace entity if more than 25% of purchases of such seller are from the marketplace entity or its group companies. The term 'Group company' is defined in the FDI Policy as "two or more enterprises which directly or indirectly, are in a position to exercise 26% or more of voting rights in other enterprise; or appoint more than 50% of members of board of directors in other enterprise".

Prohibition on equity participation - The DIPP has inserted a new restriction through Press Note 2018 which expressly prohibits an entity having equity participation by an e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, from selling its products on the platform run by such marketplace entity. Therefore, all seller entities that are using the platform for selling their goods and services would not be allowed to sell on the platform if the e-commerce entity or its group companies hold equity or have control on the inventory of such a seller entity. This insertion appears to have a deeper impact on the U.S. giants operating in India such as Amazon and Flipkart (which is owned by Walmart) as they are known to be functioning through selected sellers in whom they have equity participation. Therefore, as per news reports, post Press Note 2018, Amazon India has restructured its business model by offloading the equity held by it in its vendor Cloudtail (which was earlier a part of Amazon group) so as to comply with the Press Note 2018.

Services provided by Entity - The Press Note 2016 allowed marketplace entities to provide support services including warehousing, logistics, payment collection, order fulfillment, call centre and other services to sellers on their platform. However, an e-commerce marketplace entity was prevented from, directly or indirectly, influencing the sale price of the concerned goods and services being sold on its platform. In terms of Press Note 2018, an e-commerce marketplace entity shall continue to ensure that it does not, directly or indirectly, influence the sale price of goods and services and maintain a level playing field at all times. Therefore, services by the e-commerce marketplace entity or its group company to sellers where they have direct or indirect equity participation or common control shall be provided at arm's length basis. For the purpose of this provision, all sellers on the platform have to be placed equally and provided or offered to be provided services by the e-commerce marketplace entity in a manner which is not unfair or discriminatory. This provision in Press Note 2018 clarifies that the provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory. This might result in lesser discounts and cashbacks which are offered by the sellers.

In short, e-commerce entities are required to provide the same suite of services or facilities to all sellers under "similar circumstances". While the stated objective of enabling a level playing field is laudable, this requirement will be difficult to comply with. The interpretation of the term "similar circumstances" remains to be seen.

Interestingly, the Press Note 2018 appears to recognize an existing practice of providing 'cash-backs' to customers as long as they are fair and non-discriminatory.

B.New insertions in Press Note 2018.

Exclusivity - Among the new conditions introduced by Press Note 2018, it is expressly provided that the e-commerce marketplace entity shall not mandate any seller to sell their products exclusively on a single entity's platform alone. However, while many are interpreting this as an end to exclusivity arrangements between brands and the e-commerce entity to sell on the platform exclusively, it is pertinent to note that the provision only limits the entity from mandating any seller to sell exclusively on the platform. Therefore, if a seller so desires, it can choose to partner exclusively with any one entity. However, the seller may also have to ensure that it is making sales through their own website and other brick and mortar stores. As a result of this condition the e-commerce marketplace entities would need to revisit the contractual arrangements with their exclusive sellers and amend such contracts to comply.

Filing requirements - Unlike before, every entity is now required to submit a compliance certificate and a report of statutory auditors to the Reserve Bank of India to certify their compliance with the guidelines and requirements laid down in the Press Note 2018 by September 30, every year, for the preceding year.

C. Predicament of Entities

The Press Note 2018 has created quite a stir in the e-commerce sector and the board rooms of major entities occupying a large market share in this sphere. The clarifications introduced by the Press Note 2018 have brought about a tectonic change in the manner of doing business by the e-commerce marketplace entities. The e-commerce marketplace entities have to re-evaluate their business models and make changes to comply with the Press Note 2018. We have tried to hereinafter discuss a few issues that are coming to light in terms of the provisions of Press Note 2018:

(i) Entities like Flipkart and Amazon India control a sizable chunk of their inventory, via local vendors. This policy puts restrictions on such tactics by capping the inventory that vendors purchase from their group/ parent companies. It may be noted that there is a cap of 25% on sellers who buy products from Amazon or Flipkart's wholesale companies this means that sellers will now have to source 75% of their products from other sources, which is likely to increase their cost and it might become difficult for such sellers to offer discounts in the future.

(ii) The clarification issued by DIPP on Press Note 2018 dated January 3, 2019 states that the current policy does not restrict the nature of products that can be sold on an e-commerce marketplace – which would include private labels – however, it is currently unclear if this means that private labels owned by e-commerce entities can also be sold on their marketplaces.

(iii) The Press Note requires that an "e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only". This restriction is expected to adversely impact exclusive arrangements between e-commerce marketplaces and telecom or white goods manufacturing companies, to sell products exclusively on their online platforms (e.g. OnePlus sells its popular smartphones only via Amazon India and not any other marketplace).

(iv) There is no guidance on how enforcing authorities would determine if a seller has been "mandated" to sell its products exclusively on an e-commerce platform, or if the seller is choosing to do so voluntarily. For instance, some brands with limited sales in India have made a conscious decision to have an online presence only, to be able to better control costs and reduce logistical challenges around a pan-India offline distribution network. For them, it might make business sense to tie-up with one e-commerce platform.

(v) Entities like Flipkart and Amazon India functioned by purchasing branded goods in bulk from the manufacturers at reduced prices and sell them on their platform through their selected sellers at discounted prices, often offering cash-backs. However, now these selected sellers would not be allowed to sell on the entity's platform owing to the restriction on equity participation.

Comment

The bringing about of Press Note 2018 could seemingly affect the retail sector by levelling the online competition significantly and creating an equal opportunity for homegrown e-commerce businesses and brick and mortar stores. Though the Press Note 2018 has been a pacifier for the Indian trading community, it would be intriguing to see how the Press Note 2018 would be enforced by the Government and if it would in any way affect the e-commerce policy which is being pondered over by the Government of India.

For any clarification or further information, please contact

Priyanka Anand

Associate Partner

E: priyanka.anand@clasislaw.com

About Clasis Law

Contact

New Delhi
Dr Gopal Das Bhawan 14th Floor, 28 Barakhamba Road New Delhi - 110001 Phone : +91 11 4213 0000 Fax : +91 11 4213 0099

Mumbai
Bajaj Bhawan 1 st Floor, 226, Nariman Point Mumbai - 400 021
Phone : +91 22 4910 0000 Fax : +91 22 4910 0099
Website: www.clasislaw.com
Email : info@clasislaw.com

↧

Naik Naik & Co Enhances Equity Stake For 2 Partners, Makes 2 Equity Partners

April 1, 2019, 4:50 am

≫ Next: Fate Of The Accounts Covered Under The February 2018 Circular Post-Supreme Court Judgment

≪ Previous: Clarifications On FDI In E-Commerce Sector - The Predicament Of Marketplace Entities In India

Naik Naik & Company has enhanced the Equity stake of their present Equity Partners Abhishek Kale and Madhu Gadodia in recognition of their impeccable service delivery and robust commitment towards the growth of the firm. The firm has also promoted Associate Partners Abha Shah and Radhika Iyer as Equity Partners in the Firm. At the Associate Partner level, the firm has promoted Principal Associate Deepak Deshmukh and has on-boarded Vasundhara Kuthiala, former Head (Legal & Content), DoIT Talent Ventures (India) Pvt. Ltd.

Abha Shah has been at the forefront of the Media & Entertainment practice of the Firm; and is the focal point of all non-contentious work in this sector. Her work area also covers the entire horizon of the Intellectual Property practice. Radhika Iyer, on the other hand, joined the Firm in 2016 to spearhead the General Corporate & Commercial Advisory practice at the Firm. She has added a gamut of offerings in commercial laws and corporate advisory including mergers & acquisitions, private equity and all cross-border transactional work, bringing gravitas to the corporate practice at the Firm.

Newly promoted Associate Partner Deepak Deshmukh has played a pivotal role in handling litigation and International Arbitration matters. The Firm also welcomes Vasundhara Kuthiala as an Associate Partner. Having managed legal contract and allied solution services suite for the media and entertainment domain at Bimal Parekh & Co.; and with experience of working as in-house counsel at DoIT Talent Ventures (India) Private Limited and KWAN, she will add a new dimension to the Media & Entertainment practice.

Ameet Naik, Founding & Managing Partner of Naik Naik & Co. shares, "I am a staunch believer in an 'inclusive growth model', acknowledging the contribution of my Partners & team members, and empowering them to take up leadership roles in the Firm. We are a collaborative force and we will continue be the flag-bearers of innovation in the legal space."

Bithika Anand, Founder & CEO, of Legal League Consulting, and Nipun Bhatia, VP – Strategic Management & Process Redesigning, helped the firm in Partnership Structuring and Compensation Modelling.

↧

Fate Of The Accounts Covered Under The February 2018 Circular Post-Supreme Court Judgment

April 5, 2019, 8:59 pm

≫ Next: Active Company Tagging Identities and Verification

≪ Previous: Naik Naik & Co Enhances Equity Stake For 2 Partners, Makes 2 Equity Partners

The Supreme Court of India in the matter of Dharani Sugars & Chemical Ltd Vs. Union of India

^[1] struck down Circular dated 12th February 2018 issued by RBI as ultra vires of section 35AA of the Banking Regulation Act, 1949 ("BR Act"). The RBI Circular mandated banks and financial institutions to initiate resolution against defaulting companies with exposure of more than Rs. 2000 crores. If the account is not resolved with a period 180 days of such reference, then banks and financial institutions have to initiate proceeding against these companies under the Insolvency and Bankruptcy Code 2016 ("IBC").

The bone of contention of the matter was whether RBI has power to issue such direction to banks and financial institutions. The Supreme Court analyzed the scope of power of RBI under Section 35 AA of the BR Act and held that RBI can direct banking and financial institutions to move under the IBC, if two conditions precedent are specified: (i) the Central Government should authorize RBI to issue direction; and (ii) it should be in respect of specific default. Hence, only Central Government has the power to authorize RBI to issue direction to banking and financial intuitions when it comes to initiate proceeding under IBC in respect of specific defaulters. Therefore, without authorization of the Central Government, the RBI cannot issue such directions.

In view of the above, the Court held that "the impugned circular is ultra vires, and has no effect in law. Consequently, all actions taken under the said circular, including actions by which the Code has been triggered must fall along with the said circular. As a result, all cases where debtors have been proceeded against by financial creditors under section 7 of the Code, only because of the operation of the impugned circular, are non-est."

This RBI Circular estimated to impact a total debt due of Rs. 3.8 lakh crore across 70 large borrowers of which majority are in power sector. Since the Supreme Court on one stroke invalidated the RBI Circular, uncertainty looms over the fate of IBC proceedings initiated against these borrowers. There are debates that all these proceedings will be dismissed and banks have to initiate the proceeding ab initio.

However, in our opinion the Supreme Court order does not change the status quo at least in respect of the pending proceeding. Instead, the order puts the ball squarely on the court of the banks to decide whether to continue with the proceeding. The order says the Circular is ultra vires and hence, all the IBC proceeding initiated only because of the Circular is non-existent under law. In reality, the Circular is only direction to banks and financial intuitions, and their right to initiate action against these borrowers does not arise from the Circular. Such right arises under the provision of IBC; and as financial creditors, they are entitled to proceed against the defaulters by them selves, even if there was no such direction from RBI. Hence, banks can plead before NCLT that they have initiated action against a particular defaulter under IBC not merely because of the Circular, but by their own account exercising their right under IBC as financial creditors due to default on the part of particular borrower. Further, format for application for initiation of proceeding under IBC does not require applicant to disclose whether application has been filed in pursuance of RBI Circular.

The real impact of the Judgment will be felt upon RBI, as it significantly narrows its power to proceed against stressed accounts and leave such power completely to the control of Central Government. Ideally, the Government should be giving a general direction and RBI, being the financial regulator, should be allowed to take a call on specific accounts to initiate IBC proceeding. The judgment puts RBI completely at the mercy of the Government as it can only act against the cases specified by Government.

[1] Transferred Case (Civil) No. 66 of 2018 in Transfer Petition (Civil) No. 1399 of 2018 with several Writ Petitions, Transferred Cases and SLP

About IndiaLaw

IndiaLaw LLP is a Pan-India law firm, headquartered in Mumbai with branches in Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Ahmedabad, Cochin, Pune and Navi Mumbai. The Firm focuses on the following practice areas:

Corporate & Commercial Litigations

Arbitration

Insolvency & Bankruptcy

Merger & Acquisition

Banking & Finance

Real Estate

Intellectual Property Rights

The Firm has a large client base including several major national and multinational corporates from divergent sectors such as banking, finance, automobile, engineering, information technology, FMCG, retail, hospitality, oil& energy, telecoms, infrastructure, realty, pharma, insurance, logistics etc.

For more information visit www.indialaw.in; or email at contact@indialaw.in

↧

Active Company Tagging Identities and Verification

April 12, 2019, 6:47 am

≫ Next: "Mumbai Centre For International Arbitration (MCIA) Has Unveiled The Latest Steering Committee For Its Young Practitioners Group

≪ Previous: Fate Of The Accounts Covered Under The February 2018 Circular Post-Supreme Court Judgment

Ministry of Corporate Affairs ("MCA") vide its notification dated February 21, 2019 issued the Companies (Incorporation) Amendment Rules, 2019 ("Rules") further amending the Companies (Incorporation) Rules, 2014 ("Principal Rules"). A new rule 25A has been inserted in the Principal Rules pertaining to Active Company Tagging Identities and Verification (ACTIVE). Additionally, e-form ACTIVE (INC-22A) has been inserted in the Principal Rules after e-form INC -22.

The Rules came into effect from February 25, 2019. Every company incorporated on or before December 31, 2017 is required to file the particulars of the company and its registered office with the MCA in e-form ACTIVE on or before April 25, 2019.

Consequences of non-filing of e-form ACTIVE

If a company does not intimate the particulars to the MCA within the prescribed time period the following actions will be taken by the MCA:

the status of the company will be marked as "ACTIVE-non-compliant" by the MCA on or after April 26, 2019.

the concerned Registrar of Companies within whose jurisdiction the registered office of a company is situated will note take on record the following event based information/changes:

SH-07 (Change in Authorized Capital);

PAS-03 (Change in Paid-up Capital);

DIR-12 (Changes in Director except cessation);

INC-22 (Change in Registered Office);

INC-28 (Amalgamation, de-merger).

Registrar of Companies is empowered to cause physical verification of the registered office of such companies and even initiate action for removal of the name of such companies from the register of Registrar of Companies.

a fee of INR 10,000 to be paid by the company for filing e-form ACTIVE on or after April 26, 2019.

Exempted categories of companies

companies which have been struck off or are in the process of striking off.

under liquidation companies.

amalgamated companies.

dissolved companies.

Requirements

The e-form ACTIVE is majorly a pre-filled form where the details of a company as available with the MCA gets populated automatically based on the filings made by the company with the Registrar of Companies. Therefore, a company first needs to ensure that all its filings with the MCA are complete and proper only then the e-form ACTIVE can be duly submitted. In fact, any company which has not filed its financial statement or the annual return or both would not be able to file the e-form ACTIVE unless such company is under management dispute and the Registrar of Companies within whose jurisdiction the registered office of a company is situated has recorded the same on the register.

Along with the e-form ACTIVE the following photographs are required to be attached:

One photograph of the registered office showing external building; and

One photograph of the inside office showing therein at least one director or key managerial personnel sitting (whose digital signatures will be affixed to the form).

The objective of MCA is to geo-tag the registered office details of companies through the latitude and longitude details which means attaching data to the exact location of the office.

While it has just been a few days since the introduction of e-form ACTIVE, the stakeholders have come across some practical issues in trying to complete and submit the e-form such as:

the details of the annual filings made for the financial year ending March 31, 2018 are only being recognized by the system and if a company follows a different financial year other than March 31 which had been changed in accordance with the requirements of the Companies Act, 2013, the system does not tag the last filings made with the MCA for such companies.

The details of statutory auditors gets prefilled from the information in e-form ADT-1 filed by a company for the appointment of its auditors and does not take into account the filings made by the company intimating the appointment of statutory auditor in e-form GNL 2 during the transition period.

Basis the concerns raised by the users, MCA is looking into it and coming up with appropriate solutions to resolve these issues so that the filings can be done smoothly.

Conclusion

Since the financial year 2017-18, there has been a drive to crackdown the shell companies and the companies that are non-compliant. Initially, MCA struck off from the register of Registrar of Companies, those companies which defaulted in annual filing for a continuous period of two or more financial years. This was followed by the disqualification of directors of defaulting companies. Subsequently, the individuals who had been allotted director identification number in India, were required to provide details and complete their KYC with the MCA.

In a similar manner, the registered office of a company is meant to be the premises where its statutory records and registers are maintained as well as its recorded address where the government authorities or any other stakeholders can communicate. Whereas as per the trend noticed in past investigations into shell companies, either the exact address of the registered office of a company does not exist or there are too many companies registered on the same address. There is no doubt that e-form ACTIVE will help the MCA to locate the exact location of a registered office and to a great extent, it will help in depreciating the use of false addresses by shell companies. The expected outcome of these initiatives is to create a transparent and compliant India Inc. and to make it trustworthy for public as well as to the global market.

Views are personal only.

For any clarification or further information, please contact.

Neetika Ahuja
Associate Partner
E: neetika.ahuja@clasislaw.com

Sweta Sinha
Associate
E: sweta.sinha@clasislaw.com

About Clasis Law

Contact

New Delhi

Dr Gopal Das Bhawan 14th Floor, 28 Barakhamba Road New Delhi - 110001 Phone : +91 11 4213 0000 Fax : +91 11 4213 0099

Mumbai

Bajaj Bhawan 1 st Floor, 226, Nariman Point Mumbai - 400 021 Phone : +91 22 4910 0000 Fax : +91 22 4910 0099

Website: www.clasislaw.com Email : info@clasislaw.com

↧

"Mumbai Centre For International Arbitration (MCIA) Has Unveiled The Latest Steering Committee For Its Young Practitioners Group

April 21, 2019, 11:11 pm

≫ Next: Shardul Amarchand Mangaldas Advised NIIT Technologies Limited In The Acquisition Of Whishworks IT Consulting Private Limited

≪ Previous: Active Company Tagging Identities and Verification

The Young MCIA steering committee will be chaired by Sheila Ahuja of Allen & Overy (Singapore office) and Rishab Gupta of Shardul Amarchand Mangaldas (Mumbai office).

The committee, which focuses on international arbitration related initiatives for the under-40s, will now comprise of 19 members. Nearly half of those members are based in India. The remaining members are leading young arbitration practitioners at international law firms in Singapore, Seoul, Tokyo, London, Geneva and New York City.

MCIA Registrar & Secretary General Neeti Sachdeva welcomed the new committee noting that: "YMCIA community of young energetic and motivated arbitration practitioners has been steadily growing since it was launched in 2017. We are confident that under the leadership of Rishab Gupta and Sheila Ahuja it will grow further and provide an excellent networking and training platform for young practitioners to hone their skills".

Since its launch in 2017, the Young MCIA membership base has grown steadily to become a global network of over 650 young lawyers from within various cities in India as well as a wide range of jurisdictions internationally.

Young MCIA Committee Members

Sheila Ahuja, Allen & Overy (Singapore) – Co Chair
Rishab Gupta, Shardul Amarchand Mangaldas (Mumbai) – Co Chair
Harshavardhan Kotla, Advocate (New Delhi)
Mumtaz Bhalla, Luthra & Luthra (New Delhi)
Suruchi Suri, Suri and Company (New Delhi)
Montek Mayal, FTI Consulting (New Delhi)
Alipak Banerjee, Nishith Desai Associates (New Delhi)
Karan Bhosle, Advocate (Mumbai)
Manavendra Mishra, Khaitan & Co. (Mumbai)
Anirudh Krishnan, AK Law Chambers (Chennai)
Eva Kalnina, Lévy Kaufmann-Kohler (Geneva)
Kritika Venugopal, Herbert Smith Freehills LLP (Singapore)
Yuet Min Foo, Drew & Napier (Singapore)
Matthew Brown, Clifford Chance Pte. Ltd. (Singapore)
Jae Ha Kwon, Kim & Chang (Korea)
Deepa Somasunderam, Mishcon de Reya (London)
Manish Aggarwal, Three Crowns LLP (London)
Kabir Duggal, Arnold & Porter (New York)
Taeko Suzuki, Nishimura & Asahi (Japan)""

↧

Shardul Amarchand Mangaldas Advised NIIT Technologies Limited In The Acquisition Of Whishworks IT Consulting Private Limited

April 23, 2019, 9:57 pm

≫ Next: JSA Acted On Business Transfer And Franchising By PepsiCo To VBL

≪ Previous: "Mumbai Centre For International Arbitration (MCIA) Has Unveiled The Latest Steering Committee For Its Young Practitioners Group

Shardul Amarchand Mangaldas & Co (SAM & Co) advised NIIT Technologies Limited in the acquisition of Whishworks IT Consulting Private Limited with an initial acquisition of 100% stake in three tranches and the sale of 88.99% shareholding in ESRI India Technologies Ltd (formerly NIIT GIS Ltd) to Environmental Systems Research Institute Inc (ESRI US).

The transaction in the acquisition of Whishworks IT Consulting Private Limited involved the sale of the entire share capital of Whishworks IT Consulting Private Limited to NIIT Technologies Limited by the Promoters in multiple tranches, with an initial acquisition of 53% stake and the remaining equity to be acquired in terms of the transaction documents.

The Merger & Acquisition practice team at SAM & Co acted as the transaction counsel of both deals for NIIT Technologies Limited. In the acquisition of Whishworks IT Consulting Private Limited, SAM & Co advised on structuring of the transaction, conducting a legal due diligence and preparing an issues list and drafting and negotiating of all transaction documents.

The transaction team from SAM & Co in acquisition of Whishworks IT Consulting Private Limited included Mr. Inder Mohan Singh, Partner; Mr. Mohammed Abid Hussain Principal Associate; Ms. Diya Das, Senior Associate; Mr. Ankur Verma, Associate; and Mr. Asish Ghosh, Manager- Compliance.

The transaction team from SAM & Co in the sale of shareholding in ESRI India Technologies Ltd included Mr. Inder Mohan Singh, Partner; Ms. Sadia Khan, Partner, Mohammed Abid Hussain Principal Associate; Mr. Ankit Goel, Senior Associate and Ms. Diya Das, Senior Associate.

Other parties involved in the acquisition of Whishworks IT Consulting Private Limited are AZB & Partners who acted as the transaction counsel for the Sellers, Equirus Capital who acted as financial advisors to the Sellers, Pi Capital Advisors who acted as financial advisors to NIIT Technologies Limited and Ernst and Young India acted a tax advisors to NIIT Technologies Limited.

Baker & Mckenzie acted as the legal counsel for Environmental Systems Research Institute, Inc in the sale of shareholding in ESRI India Technologies Ltd.

The total deal value in acquisition of Whishworks IT Consulting Private Limited is INR 286.7 crore.

The total deal value in sale of shareholding in ESRI India Technologies Ltd is INR 89.7 crore

The definitive agreement for the both the transactions were signed on 6^th April 2019.

About Shardul Amarchand Mangaldas & Co

Shardul Amarchand Mangaldas & Co (SAM & Co), founded on a century of legal achievements, is one of India's leading full-service law firms. The Firm's mission is to enable business by providing solutions as trusted advisers through excellence, responsiveness, innovation and collaboration. SAM & Co is known globally for its exceptional practices in mergers & acquisitions, private equity, competition law, insolvency & bankruptcy, dispute resolution, capital markets, banking & finance and projects & infrastructure.

The Firm has a pan-India presence and has been at the helm of major headline transactions and litigations in all sectors, besides advising major multinational corporates on their entry into the Indian market and their business strategy. Currently, the Firm has over 550 lawyers including 111 Partners, offering legal services through its offices at New Delhi, Mumbai, Gurugram, Ahmedabad, Kolkata, Bengaluru and Chennai.

For further information, please contact –

Vimarsh Bajpai

M: +91 9971687647

Email: vimarsh.bajpai@AMSShardul.com

Urvashi Datwani

M: +91 9820122102

Email: urvashi.datwani@AMSShardul.com

Yohima Bhawta

M: +918375057521

Email: ybhawta@webershandwick.com

↧

JSA Acted On Business Transfer And Franchising By PepsiCo To VBL

May 9, 2019, 2:07 am

≫ Next: The Legality And Admissibility Of Electronic Signatures In The Modern World– A Look At The Laws In India

≪ Previous: Shardul Amarchand Mangaldas Advised NIIT Technologies Limited In The Acquisition Of Whishworks IT Consulting Private Limited

J. Sagar Associates (JSA) advised and assisted PepsiCo India Holdings Private Limited ("PepsiCo") in relation to the sale of its company-owned bottling operations for its carbonated drinks business in seven states and five union territories in Western and Southern India region to Varun Beverages Limited ("VBL"), PepsiCo's the largest bottler in India and the flagship company of the R. K. Jaipuria Group. VBL is now a franchise of PepsiCo beverages business across 27 States and 7 Union Territories of India.

The business being transferred to VBL comprise of nine manufacturing and bottling facilities, entire sales & distribution network along with the franchise rights therein. Transfer process of a substantial number of manufacturing facilities is completed and the remaining facilities will get transferred in due course.

JSA team comprised Partners – Upendra Nath Sharma, Kartik Jain and Associates – Astha Srivastava, Ayushi Pandey.

Jyoti Sagar, Founder and Chairman, provided strategic inputs, from time to time.

↧

The Legality And Admissibility Of Electronic Signatures In The Modern World– A Look At The Laws In India

May 9, 2019, 9:40 pm

≫ Next: Karanjawala & Co. Promotes 6 Senior Associates And 10 Associates

≪ Previous: JSA Acted On Business Transfer And Franchising By PepsiCo To VBL

The Government's increased efforts on ease of doing business, streamlining the storage of records, and improving the safety, security and cost-effectiveness of records, has resulted in promotion of the use of digital technologies by individuals and companies. One of such technology relates to the electronic signing of agreements, documents and contracts.

Given that Indian law recognizes electronic signatures or e-signatures, there has been an increase in the usage of e-signatures in recent times. This, in part, is due to the Government's decision to focus on enabling electronic transactions using Aadhaar, the unique identification number issued by the Indian Government to all Indian residents.

Indian law treats electronic signatures as equivalent to physical signatures, subject to a few exceptions, and generally allows documents to be signed using e-signatures. However, the e-signatures must satisfy a number of conditions and certain checks must be done before it can be relied upon. This article provides an overview of the law relating to e-signatures in India including its viability and admissibility.

E-signatures under the IT Act

Under Indian law, a written signature/signature in manuscript is not necessarily required for a valid contract. Validity of a contract is determined basis the legal capacity/competency of the parties to enter into a contract, the subject matter of the contract (i.e., the contract must be for a lawful purpose) and acceptance of the offer by the parties.

The Information Technology Act, 2000 ("IT Act") identifies e-signatures and deals with the legality of such signatures. The IT Act was amended by the Information Technology Amendment Act, 2008 ("IT Amendment Act") to permit the use of electronic signatures. The amendment (by way of Section 3A of the IT Amendment Act) provides the procedure for authentication of any electronic record by electronic signature. Such amendment provides that such electronic signature should be reliable and which may be specified by the Central government in the second schedule to the IT Amendment Act.

Further, the Central Government vide the Electronic Signature or Electronic Authentication Technique and Procedure Rules, 2015 has incorporated guidelines with respect to e-authentication technique using Aadhaar e-KYC services in the Second Schedule of the IT Act.

These rules recognise e-authentication technique using Aadhaar e-KYC services as valid authentication of an electronic record. Authentication of an electronic record via e-authentication method is similar to authentication of a digital signature based on public/private key infrastructure.

The IT Act, which provides for the adoption of electronic signatures, read with the relevant rules and regulations acknowledges the following forms of electronic signatures:

Aadhaar ID method - Electronic signatures using the Aadhaar ID (Aadhaar is a unique identification number issued to all residents of India and contain personal and biometric information of the individual) along with an electronic Know-Your-Customer (e-KYC) method authenticates signatures through information from the Aadhaar and e-KYC method (such as a one-time passcode). Through this method the identity of the subscriber is identified through the Aadhaar authentication process of the Government by using the biometrics or a one-time passcode. This process is managed by accredited service providers; and

Digital signatures method – Through this method digital signatures are created by an "asymmetric crypto-system and hash function" where is signer is issued a long term (usually 1 – 2 years) certificate based digital identity stored on a USB token which is used along with a personal identification number to sign a document.

Authenticity and legality of e-signatures

The relevant provisions of the IT Act specify that an electronic record can be authenticated by an electronic signature or electronic authentication technique which is considered reliable and is specified in the second schedule of the IT Act.

Further, the IT Act provides that an electronic signature or electronic authentication technique shall be considered reliable if:

the signature creation data or the authentication data are, within the context in which they are used, linked to the signatory or, as the case may be, the authenticator and to no other person;

the signature creation data or the authentication data were, at the time of signing, under the control of the signatory or, as the case may be, the authenticator and of no other person;

any alteration to the electronic signature made after affixing such signature is detectable;

any alteration to the information made after its authentication by electronic signature is detectable; and

it fulfils such other conditions which may be prescribed.

Having said that, an e-signature / digital signature cannot be used for executing the following documents or transactions:

a negotiable instrument (other than a cheque),

a power of attorney,

a trust deed,

a will (including any other testamentary disposition by whatever name called), and/or

any contract for the sale or conveyance of immovable property or any interest in such property.

Conditions of use for e-signatures using Aadhaar model

For an e-signature, using Aadhaar e-KYC based model, the service provider needs to be either of the following:

(a) a Central/ State Government Ministry / Department or an undertaking owned and managed by Central / State Government,

(b) an authority constituted under a Central / State Act, or

(d) a bank / financial institution / telecom company, or

(e) a legal entity registered in India.

Accordingly, as a first step the service provider providing e-signature facilities to its clients is required to fall in one of the above categories. Further, an application service provider (ASP) (that is the company / organization providing the e-signature service), is required to be empaneled (by signing an agreement) with an authorized certifying authority licensed by the Controller of Certifying Authorities. A list of the certifying authorities, as on date, is as follows:

(a) eMudhra Ltd.,

(b) C-DAC (Centre for Development of Advanced Computed),

(d) NSDL e-Governance Infrastructure Ltd., and

(e) Capricorn Identity Services Pvt. Ltd.

Accordingly, only in the event an ASP is empaneled with an authorized certifying agency can it offer e-signature facilities/services to its clients. Thus, it becomes imperative to check for fulfillment of the aforementioned conditions, prior to choosing a service provider to tie up with, in order to be compliant with the applicable law.

Admissibility of e-signatures under Evidence Act

The Indian Evidence Act, 1872 ("Evidence Act") has been amended from time to time, especially to provide for the admissibility of electronic records along with paper based documents as evidence in the Indian courts. Perhaps the most important amendment to the Evidence Act has been the introduction of sections 65A and 65B under the second schedule of the IT Act, which provides for special provisions as to evidence in relation to electronic records and the admissibility of electronic records, respectively.

Section 65B of the Evidence Act, is the guiding law in terms of admissibility of electronic record and provides that, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record (whether it be the contents of a document or communication printed on a paper, or stored, recorded, copied in optical or magnetic media produced by a computer), is deemed to be a document and is admissible in evidence without further proof of the production of the original, provided the conditions set out in section 65B for the admissibility of evidence are satisfied, which have been set out as under:

(a) At the time of creation of the electronic record, the computer output containing the information was produced from a computer that was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer,

(b) During the period, the kind of information contained in the electronic record was regularly fed in to the computer in the ordinary course of the activities,

(c) Throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and

(d) The information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities.

As regards admissibility of documents which have been signed electronically, the Evidence Act provides that these will be admissible as evidence, subject to the authenticity and integrity of the electronic/digital signature being proved in the court by the signer. Further the Evidence Act provides for the presumption as to the authenticity of electronic records and electronic signatures. However, such presumption would only be with respect to a secure electronic record or a secure electronic signature.

Conclusion

E-signatures are increasingly becoming popular and useful especially in cases where the parties are in different cities/countries. It helps an individual to gain identity in the digital world. By being digital in nature and made by cryptographic technology it cannot be validated by ordinary authentication procedures. Thus, the chances of tampering with it are minimal.

However, like with every technology, it does have its own limitations and challenges, such as risk of identity theft and publication or creation of false signatures.

Combating such issues become important while using e-signatures. Thus, it is imperative for the person electronically signing documents to keep his/her e-signatures in a safe place, not share it with any third party and verify the contents of the documents being signed prior to electronically signing it.

For any clarification or further information, please contact

Gaurav Wahie
Partner
E: gaurav.wahie@clasislaw.com

Vasudha Luniya
Associate
E: vasudha.luniya@clasislaw.com

About Clasis Law

Contact

New Delhi

Dr Gopal Das Bhawan 14th Floor, 28 Barakhamba Road New Delhi - 110001 Phone : +91 11 4213 0000 Fax : +91 11 4213 0099

Mumbai

Bajaj Bhawan 1 st Floor, 226, Nariman Point Mumbai - 400 021 Phone : +91 22 4910 0000 Fax : +91 22 4910 0099

Website : www.clasislaw.com

Email : info@clasislaw.com

↧

Karanjawala & Co. Promotes 6 Senior Associates And 10 Associates

May 11, 2019, 1:21 am

≫ Next: Naik Naik & Company Act On Eberspaecher's Indian Joint Venture With Sharda Motor Industries Limited

≪ Previous: The Legality And Admissibility Of Electronic Signatures In The Modern World– A Look At The Laws In India

Karanjawala & Co. recently promoted 6 Senior Associates to the designation of Principal Associates.

Here is the list of promotees:

Tahira Karanjawala [alumnus of Amity Law School, affiliated with IP University (LLB) and Columbia Law School (LLM)].
Vikas Gogne (alumnus of Campus Law Centre, Faculty of Law, Delhi University)
Saurabh Seth (alumnus of Vivekananda Institute of Professional Studies)
Natasha Sahrawat (alumnus of Campus Law Centre, Faculty of Law, Delhi University)
Yojna Goyal (alumnus of Symbiosis Law School, Pune)
Vivek Suri (alumnus of Vivekananda Institute of Professional Studies)

The Firm also promoted 10 Associates to the designation of Senior Associates.

Here is the list of promotees:

Saloni Aggarwal (alumnus of I.L.S Law College, Pune University)
Mridul Yadav (alumnus of Amity Law School, Noida)
Aashneet Singh Anand (alumnus of Amity Law School, Noida)
Bonita Singh (alumnus of Government Law College, Mumbai)
Gudipati G. Kashyap (alumnus of Chaudhary Charan Singh University)
Arjun Sharma (alumnus of Campus Law Centre, Faculty of Law, Delhi University)
Dheeraj P. Deo (alumnus of Campus Law Centre, Faculty of Law, Delhi University)
Yashvardhan Bandi (alumnus of National Law Institute Bhopal)
Neha Khandelwal (alumnus of Faculty of Law, Banaras Hindu University, Varanasi)
Apoorva Pandey (alumnus of University School of Law and Legal Studies, GGSIPU)

Founding partner Mr. Raian Karanjawala commented, "We are now a team of approximately 100 lawyers and most of the promoted principal associates and senior associates are our home-grown resources having an experience of more than 5 years. Their contribution and many years of service has resulted in them being accorded this distinction. I welcome them all for their new role and extend my best wishes."

Author:

Karanjawala & Company is an exclusive full-service litigation firm founded in the year 1983 by Mr. Raian Karanjawala and Mrs. Manik Karanjawala. The Firm presently operates out of three offices in New Delhi with 9 partners and approximately 100 advocates.

The firm has over the years come to dominate the litigation landscape in India and has serviced a wide variety of diverse clients from Prime Ministers to Captains of industry to the biggest corporate houses and the largest media companies. It is equally at ease handling the day to day cases of the ordinary litigant as it is handling the legal disputes of royal families.

Though historically its practice began with a predominant Supreme Court and High Court emphasis, it has today expanded in a manner which ensures that it has a presence in all the subordinate courts and tribunals in the National Capital Region (NCR) and its services are often enlisted to handle litigation on a pan–India basis. The Firm features in over 450 reported judgments of the Supreme Court and has filed and dealt with approximately 23,500 plus matters till date. It has till date been recognized as the No. 1 Litigating firm with over 150 awards.

Contact Information:

Priyan Garg. Associate in Charge- Knowledge Resource

Mobile: +91 9582144377 | Email: priyan.garg@karanjawala.in

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Naik Naik & Company Act On Eberspaecher's Indian Joint Venture With Sharda Motor Industries Limited

May 15, 2019, 5:57 am

≫ Next: Why & Who To Apologize?

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Recently Sharda Motor, the leading local exhaust after treatment system manufacturer in India, and Eberspaecher, the global technology leader in emission control technologies for commercial vehicles entered into a 50:50 joint venture in India.

Starting mid- 2020, exhaust after-treatment technology in India is required to meet the new emission standard Bharat Stage VI. It represents a major technological leap from the previous Bharat Stage IV standard and requires far more complex emission control solutions. The joint venture plans to set up plants in Pune and northern India for the initial production.

The team at Naik Naik and Company, led by Founder & Managing Partner Mr. Ameet B. Naik and Partner Ms. Radhika Iyer, to advise Eberspaecher on the joint venture and technology collaboration.

In August 2018, the Esslingen-based supplier set up another joint venture company in China in order to meet the growing demand for effective emission control systems and ensure environmentally friendly mobility. With approximately 10,000 employees at 80 locations worldwide, the Eberspaecher Group is one of the automotive industry's leading system developers and suppliers. The family business, headquartered in Esslingen am Neckar, stands for innovative solutions in exhaust technology, automotive electronics and thermal management for a broad range of vehicle types.

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Why & Who To Apologize?

May 18, 2019, 5:07 am

≫ Next: Cyril Amarchand Mangaldas Appoints Richa Roy As Partner In Its IBC And Policy Practice

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A very unfortunate episode, showing the arbitrary conduct of the West-Bengal Government towards the sacrosanct right to expression was partially ended with an un-called and forced apology by the accused- Priyanka Sharma, who was arrested and sent to the 14 days judicial custody, for just "sharing" a photo in which Mamta Banerjee`s face was morphed on the form of actress Priyanka Chopra, who is representing India globally, in the field of entertainment. She was picked up by the Police from her home on 10^th May and was sent to two weeks Judicial Custody, for a complaint lodged by one local leader of TMC, Mr. Vibhas Hazra. She was charged with defamation, a bailable offence, punishable under Section 500 of Indian Penal Code, 1860 ("IPC") and was further charged under Section 66-A of the Information Technology Act, 2000 ("IT Act"). On, 13^th May, a habeas corpus petition was filed by her brother and Sr. Adv. N.K Kaul mentioned the matter before the vacation bench of the Hon`ble Supreme Court, for it to be listed on 14^th May. The Supreme Court was pleased and the matter was listed on 14^th May, where the court ordered the West-Bengal Government to immediately release her and further ordered that she shalltender an apology for sharing thepicture complained of on herfacebook account. The Court further stated that this order only relates to the facts and circumstances of the present case and shall not be used as precedent.

WHY TO APOLOGISE

The law machinery cannot be used to set up the personal scores and any such abuse will be an abuse on the whole criminal justice system. Legally, with utmost respect to the Hon`ble Court, there was no occasion to direct for an apology at the time of release. The reason for the same is that both, Section 500 IPC and Section 66A of IT Act is not applicable in the present case as the allegations, if taken on their face value, does not disclose any offence whatsoever, for the reasons:

The basic requirement for the compliance of Section 500 IPC (Defamation) is subject to the fulfillment of Section 191(1) of the Code of Criminal Procedure, 1973 ("CrPC"). The FIR was not lodged by a "person aggrieved", but by one of the local leaders of TMC. Section 199 CrPC mandated that the Magistrate can take cognizance of the offence only upon receiving a complaint by a person who is aggrieved. This limitation on the cognizance power is to discourage frivolous complaints. In the present facts and circumstances of the present case, the complainant, not being Mamta Banerjee herself, in no case qualify the statutory requirement of an "aggrieved person" and therefore, Section 500 IPC (Defamation) is not applicable.

Section 66A of the IT Act is also not applicable as the same has been held to be unconstitutional by the Hon`ble Supreme Court in Shreya Singhal v. Union of India [(2015) 5 SCC 1], being against Article 19(1) (a) of the Constitution of India.

Further, it came from the bench to the counsel of the petitioner that an apology is just for the purpose, that if sharing a picture has hurt someone, then apology should be there. Sharing a picture is protected under Article 19(1)(a) [Fundamental right to express] and hurt is not a "reasonable restriction" on the fundamental right to expression. It has been held again and again by the Hon`ble Supreme Court that notions of social morality are inherently subjective and the criminal law cannot be used as a means to unduly interfere with the domain of personal autonomy. The threshold of placing the reasonable restriction of the "freedom of speech and expression" is indeed very high and "Hurt" in no way qualifies that.

From the above, it is crystal clear that there is no ground to apologize for the reason that prima-facie Section 500 IPC and 66A IT Act is not applicable to the facts and circumstance of the present case and further, "Hurt", for which the apology was asked does not qualify the standard of reasonable restriction under Article 19 of the Constitution.

If there is no statutory breach of any provision involved in the present case, then Why to apologize? It is a settled legal position that sympathy and sentiments have to be kept aside while passing a judicial order as they are dangerous to take as a guide in the search for legal principles. The Hon`ble Supreme Court in Teri Oat Estates (P) Ltd. v. U.T., Chandigarh [(2004) 2 SCC 130 at p. 144], clearly stated that [w]e have no doubt in our mind that sympathy or sentiment by itself cannot be a ground for passing an order. To the authors, the Hon`ble Supreme Court`s direction to apologize is not based on the legal principles but is purely a result of sympathy and sentiments.

WHO TO APOLOGISE

The order states "the Detenue shall tender an apology for sharing the picture complained of on her Facebook account". The order is bit not clear as to whom, the apology should be tendered- Is it to the Complainant, who is not a "person aggrieved" 'OR' to Ms. Mamta Banerjee, who has not even complained. Whose sentiments are "Hurt"- the complainant or Ms. Mamta Banerjee.

The complainant in the present has no locus to file this complaint and has no legal standing of being a complainant, hence no apology is required towards him. Ms. Mamta Banerjee, on the other hand, has not even filed a complaint and is not a party in the present case, hence, no question of apology, even to her.

Now the basic question is Who to apologize? It is also settled position in law, that in cases like the present case, there should be a presumption in the favor of the accused (Ref: S. Khushboo v. Kanniammal [(2010) 5 SCC 600 at p. 619]). The Hon`ble Supreme Court`s presumption that someone is hurt but the detenue, is itself a wrong presumption. In the present case, if someone owes an apology, it is the West-Bengal Government, who must tender an apology to Priyanka Sharma, who just shared a widely circulated meme created by someone else on her Facebook account, exercising her fundamental right to express, which ought not have to be unreasonably restricted by forcing her to apologize.

Mr. Manik Sethi & Ms. Muskan Gupta are the Advocates practicing in Delhi & founders of M&M Partners.

[The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of LiveLaw and LiveLaw does not assume any responsibility or liability for the same]

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Cyril Amarchand Mangaldas Appoints Richa Roy As Partner In Its IBC And Policy Practice

May 19, 2019, 10:57 pm

≫ Next: Cyril Amarchand Mangaldas Advises On Rights Issue Of INR 25,000 Cr By Vodafone Idea Limited

≪ Previous: Why & Who To Apologize?

Ms. Richa Roy has joined one of the India's leading law firms Cyril Amarchand Mangaldas (CAM) as a Partner in the IBC and Policy Practice. She comes with an experience of over 12 years in Banking and Finance, Debt Restructuring and Bankruptcy, Public Policy, Microfinance and Social Enterprises, Private Equity, Funds. She has served on and contributed to multiple financial sector reform committees of the Ministry of Finance, Ministry of Corporate Affairs and RBI.

Under the aegis of the Bankruptcy Law Reform Committee, she was instrumental in drafting the corporate insolvency provisions of the Insolvency and Bankruptcy Code, 2016 and the CIRP Regulations. She is a 2005 NLSIU Bangalore graduate, a 2017 Oxford (MPP) graduate and will be based out of Mumbai

Welcoming Richa on board, Mr. Cyril Shroff, Managing Partner, Cyril Amarchand Mangaldas said, "With Richa joining us, we are looking forward to strengthening our IBC Practice. She comes with vast experience and that will help us in expanding the scope of our Practice by serving our existing and potential clients even better. We are delighted to welcome her."

Talking about her new role, Richa Roy, Partner, Cyril Amarchand Mangaldas said, "I have always admired CAM's values and purpose (in particular the emphasis on producing the finest lawyers for a just world) as well as the depth and breadth of CAM's Finance practice. I am thrilled to be complementing the stellar work of the team and the Firm with my background in Finance and Public Policy to reach ever greater heights."

In the past, Richa has worked with ICICI Bank where she was Group Head of the International Banking legal team. She later moved to AZB & Partners where she worked for over eight years before attending University of Oxford to get her Master's degree in Public Policy, following which she worked on a range of public policy projects in trade policy and banking regulation.

As an expert, Richa's views are often quoted in the media and she has also authored various articles, which have been published in legal journals and publications.

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Cyril Amarchand Mangaldas Advises On Rights Issue Of INR 25,000 Cr By Vodafone Idea Limited

May 21, 2019, 6:13 am

≫ Next: L&L Partners Advised Inteva Products For A Global Deal Value Of US$ 755 Million

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Cyril Amarchand Mangaldas (CAM), advised in relation to the INR 25,000 crore Rights Issue of Vodafone Idea. CAM acted as the India legal counsel to the Lead Managers - Kotak Mahindra, DSP Merrill Lynch, Morgan Stanley and HDFC Bank on the transaction. The Vodafone Idea Right Issue is the largest rights issue to date in India, and was the first capital raising undertaken by the Vodafone Idea post the merger of Vodafone India into Idea Cellular in August 2018.

The Capital Markets Team of Cyril Amarchand Mangaldas advised the Lead Managers on various securities that could be considered for a rights issue, regulatory approvals required for the transaction including the foreign investment approval from the Department of Telecommunications (DoT) and the Cabinet Committee on Economic Affairs, approvals from the Reserve Bank of India and exemption in relation to minimum public shareholding and participation by foreign shareholders. The Transaction team was led by Yash Ashar, Partner; and Abhinav Kumar, Partner; with support from S Vivek, Principal Associate; Shruti Sarkar, Consultant; Tania Chourasia, Associate; Siddhant Sattur, Associate; Saee Athalye, Associate; and Priyattama Bhanj, Associate.

As a part of the Transaction, Vodafone offered 2,000 crore (approx.) equity shares at a price of INR 12.50 per equity share aggregating to a total of INR 25,000 crore. The issue was oversubscribed nearly by 1.08 times.

The other parties involved in the Transaction were Sidley Austin LLP (International counsel to the Lead Managers) and S&R Associates (Domestic counsel to Vodafone India).

The Date of filing the Offer Document was March 22^nd, 2019 and the Transaction closed on May 4^th 2019.

Cyril Amarchand Mangaldas (CAM) acted as Indian legal counsel to Lead Managers - Kotak Mahindra, DSP Merrill Lynch, Morgan Stanley and HDFC Bank

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L&L Partners Advised Inteva Products For A Global Deal Value Of US$ 755 Million

May 21, 2019, 7:02 am

≫ Next: Use Of Experts In Arbitrations – The Time Has Come

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L&L Partners [formerly Luthra & Luthra Law Offices] acted for and advised Inteva Products, LLC (Inteva) on the sale of Inteva's Roof Systems Business to CIE Automotive for a global deal value of US$ 755 million.

L&L acted for and advised Inteva on India elements of the sale of Inteva's Roof Systems Business (design and production line of roofs systems and components for automobiles) to CIE. The Firm assisted Inteva with reverse due diligence, structuring and implementation of the pre-transaction carve-out of the Roof Systems Business into a new special purpose subsidiary in India, and, the subsequent transfer and sale to CIE. This included advising Inteva extensively on both pre-closing and closing steps. L&L also advised on structuring issues covering Indian foreign direct investment and exchange control laws as also direct and indirect tax laws. This was in addition to ubiquitous M&A matters, including Indian company law, contract law, IP, employment and real estate aspects.

Other jurisdictions linked with steps in India included France, Germany, The Netherlands, Slovakia and the U.S. The Firm worked in close collaboration with Inteva's global and Indian leadership, legal, tax and compliance divisions as also other international and Indian advisors and consultants, including Cadwalader, Wickersham & Taft, E&Y, PwC and Citibank.

L&L team comprised of Partner - Vikrant Kumar, Associates - Bissheesh Roy and Anina D'Cunha.

Partner - Gunjan Mishra advised on the Indirect tax aspects, and Partner - Lokesh Shah, Managing Associate - Mayank Aggarwal and Senior Associate -Arzoo Batta advised on the Direct tax aspects of the transaction.

Partner - Nirupam Lodha and Managing Associate - Reshma Vaidya advised on the Intellectual Property aspects of the transaction.

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Use Of Experts In Arbitrations – The Time Has Come

May 22, 2019, 12:04 am

≫ Next: Netflix Appoints Ms. Priyanka Chaudhari As The Director And Senior Counsel – Intellectual Property (India)

≪ Previous: L&L Partners Advised Inteva Products For A Global Deal Value Of US$ 755 Million

The Arbitration and Conciliation Act, 1996 (Arbitration Act) was significantly amended in 2015 to usher in a new and dynamic dispute resolution mechanism and improving some of the major bottlenecks that were making arbitrations less efficacious for resolution of disputes. The government's intent was to ensure that it became a more preferred and efficient mechanism for resolving disputes at par with global standards. The changes made intended to boost the ease of business rankings and ensure that commercial disputes and matters had a more efficacious resolution involving minimal court interference, both pre-arbitration as well as subsequent to the arbitration proceedings. One of the many changes that were introduced in the Arbitration Act was the obligation to ensure timely completion of the arbitration process and the law actually clarified that arbitration must be completed in a 12-month period and only a 6-month extension will be possible with the mutual agreement of the parties.

The success of any arbitration proceedings is contingent on many differing factors starting with the complexity of the case in hand, the facts in question, the type and experience of the arbitrators, the conduct of the parties and the manner in which the proceedings are undertaken. Whilst the increased complexity in business dealings and transactions do add additional layers of difficulty in the arbitration proceedings, experts in the subject area involved can play a crucial role as many a times the nature of dispute could largely be technical or on an area where lawyers may not necessarily be as conversant as desirable for the proceedings to be efficient and in turn may not necessarily do justice to the task at hand. In particular, the experience in dealing with governmental body related matters involving municipal corporations or agencies undertaking civil and urban infrastructure work has been mixed. This article touches upon the experience in dealing with disputes arising from contracts awarded by government agencies such as municipal corporations to private parties to undertake civil and urban infrastructure work under the Public Private Partnership model.

In terms of Section 26 of the Arbitration Act, unless the parties otherwise agree, an arbitral tribunal may, at its option, appoint experts to report to it on specific issues as may be determined by the tribunal. The tribunal may also require a party to furnish relevant information to the expert so pointed or otherwise make available information that may be relevant for consideration by the tribunal. The expert may also be required to give oral evidence and maybe cross-examined by the parties.

With the advent of the new arbitration regime and the more complex and technical issues involved in disputes, the time has come for increased involvement and reliance of external experts by government agencies and the arbitral tribunals. Under the Arbitration Act, disputing parties are allowed to involve subject matter experts as is the tribunal. While the disputing parties would tend to engage experts or their technical team, an arbitral tribunal has the option to appoint experts unless the parties otherwise agree. Given cost considerations, internal procedural requirements and general decision-making process in governmental agencies and the overarching post-decision review mechanism, the experience also has been that government agencies find it difficult to agree to tribunals appointing external experts.

Some of the factors that merit consideration especially in respect of arbitrations/disputes involving governmental agencies on civil and urban infrastructure contracts are briefly discussed below. These become even more significant following the recent decision of the Hon'ble Supreme Court in Ssangyong Engineering & Construction Co. Ltd. Vs. National Highways Authority of India Limited [CA No. 4779 of 2019, dated 8.5.2019 where the Supreme Court examined the scope of Section 34 of the Arbitration Act, which sets out the grounds on which an arbitral award may be set aside. While exhaustively dealing with the scope of Section 34, the Hon'ble Supreme Court underpinned the importance of sanctity of arbitration awards and reaffirmed the principle that Courts have limited scope to review and set aside an arbitral award. While dealing with public policy of India, a ground on which an arbitral award may be set aside, the Court observed that under Section 34, public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law. It went on to observe:

Therefore, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.

Secondly, it is also made clear that re-appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.

Given the clear directions of the Hon'ble Supreme that arbitral awards may only be set aside in very limited circumstances and evidence would not ordinarily be re-appreciated, the onus of ensuring that unimpeachable evidence is led during the arbitral proceedings is on the parties with greater force now. Consequently, in arbitrations involving technicalities, it is only advisable that government agencies regularly involved in these types of arbitrations should rethink their strategy and reconsider the approach towards expert involvement, both during and pre-arbitral proceedings, failing which they would start at a disadvantage when faced with private parties who would more likely have the ability to involve subject matter experts with significant experience in such proceedings.

Another factor that needs to be borne in mind is that the new arbitration regime has specifically dealt with costs and emphasized the well-established concept that the losing party should bear the costs of the proceedings. Section 31-A has been introduced to clarify the discretion of the arbitral tribunal to decide the party which should bear the costs and goes on to clarify that it applies notwithstanding anything contained in the Code of Civil Procedure, 1908, which has a restricted regime for attribution of costs of parties. Costs would include costs of the arbitral tribunal and witnesses. This aspect should also be taken into account by government agencies to ensure that should the award go against them they would also run the risk of bearing the costs of experts used by the adverse parties. Conversely, should they prevail in the arbitral proceedings, they would have the chance to recover the costs incurred by them in the proceedings. Secondly, the benefit of expert evidence would help in ensuring the finality of awards and act as a mitigating factor when the award comes up for challenge.

Pre-Dispute

Typically, grant of contracts for undertaking civil and urban infrastructure works are standard form granted post a two-stage tender process. The negotiations during the bid process tend to be driven not by external lawyers but largely by the engineering and technical teams of the governmental agencies given their requirements. External lawyers get involved once a dispute arises and at that stage, the usual expectation is for the lawyers to on the internal technical and engineering teams of the governmental body or those of an approved panel of technical experts and outside experts are generally not involved. On the other hand, private parties would typically involve external subject area experts from different fields who are generally more sophisticated, experienced and specialists in assisting on disputes.

These contracts also tend to have a pre-dispute settlement process which could involve good faith, without prejudice, discussions or even a reference to some kind of dispute adjudicating board. Consequently, given the overarching technical nature of disputes involved, involvement of subject area experts at an early stage becomes critical. Whilst private parties tend to involve them at such stage, the governmental agencies lag behind.

Technical member in an arbitral tribunal?

The composition of an arbitral tribunal may involve each of the claimant(s) and the respondent(s) appointing one member each while the two so appointed, nominate the presiding arbitrator. In such a situation, government agencies could consider nominating a technical member on the arbitral tribunal so that the tribunal is not required to seek external expert assistance on matters of technicalities. However, there are inherent limitations and challenges to this option. For one, the nature of dispute and the technicalities involved would be varied and consequently, it may not always be possible to identify an expert who could be considered qualified and suited for all such technical issues that may arise during the proceedings. In any event, at the time of the constitution of the tribunal, it may not be possible to anticipate the types of disputes that may arise. For example, in a road construction contract for a Municipal Corporation, if the dispute arises on the specifications of the materials used and the chemical composition, whether cement concrete or bituminous, the subject matter expert would be different than if the same dispute involves issues relating to topographical conditions leading to change in scope or measurements.

It must be noted that the use of assessors is recognized in several common law jurisdictions to provide Judges expert advice on technical issues or customs and practices. There is no good reason why this model should not be followed in arbitrations.

However, the obvious challenge that would arise under this option would be that a technical expert would be limited to dealing and commenting only on certain types of technical aspects and not be conversant with contractual arrangements, interpretation of contracts and the principles applied by courts while dealing with contractual disputes. Thus, a combination of legal and technical expertise would be desirable.

Reforms in decision-making and review

In the longer term, institutional reforms are perhaps the more substantive way to sufficiently address issues around the reluctance of governmental agencies involved in public infrastructure works and appointing contractors to undertake construction works in agreeing to involvement of third-party experts in disputes.

One of the aspects in the new arbitration regime discussed above that would help is the stricter focus on award of costs by the arbitral tribunal. In other words, if arbitral tribunals remain predisposed to award costs to the party which has been successful in line with the norm in international arbitrations (under with Section 31-A of the Arbitration Act), then gradually one may start seeing more disputes being resolved prior to arbitration and as part of a pre-arbitral resolution mechanism involving ground for discussions or reference to a dispute adjudication board contemplated by the underlying contracts. This would also encourage government agencies to start relying on external specialists and experts at an earlier stage of a dispute as well as during the dispute resolution process to de-risk themselves from losing as well as bearing the costs of the prevailing party. In fact, in the context of Section 26 of the Arbitration Act, the importance of such expert evidence has been recognized in Ssangyong (supra). Challenges to awards that have had the benefit of expert evidence may also be reduced, particularly as there is and can be no ground to question determinations of fact.

Conclusion

The reforms, outlined above, would necessarily need to focus on the decision-making process which creates a more robust system, where officers are encouraged to take commercially sound decisions on a case to case basis rather than a set precedent to mechanically submit to arbitration even when the case is noticeably weak. The system would be such that commercial decisions taken are not questioned merely because they went wrong. That said, given the public interest and concerns around nepotism and corruption, it is not always easy to strike a balance.

Malvika Trivedi is practising as an arguing counsel before various Courts and Tribunals in Delhi including the Supreme Court. Author's Views are Personal

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Netflix Appoints Ms. Priyanka Chaudhari As The Director And Senior Counsel – Intellectual Property (India)

May 22, 2019, 2:43 am

≫ Next: Cyril Amarchand Mangaldas Advises On USD 300 Million Bond Issue By GMR Hyderabad International Airport

≪ Previous: Use Of Experts In Arbitrations – The Time Has Come

Former Balaji Telefilms Limited Vice President and Senior Counsel- Legal Ms. Priyanka Chaudhari has joined Netflix Entertainment Services India LLP as the Director and Senior Counsel- Intellectual Property for the Indian territory.

In her current role at Netflix she will be the first content IP lawyer in India for Netflix to be responsible to take the lead in India and collaborate with the creative, business and legal affairs and other teams to acquire and develop intellectual property and guide them through production and distribution; serve as an internal, cross-functional expert on all areas of IP law in India; manage claims of IP infringement at pre-litigation stage; create and implement production clearance strategies for Indian content and advice on complex rights acquisitions and grants.

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Cyril Amarchand Mangaldas Advises On USD 300 Million Bond Issue By GMR Hyderabad International Airport

May 22, 2019, 3:23 am

≫ Next: BULexConvo Series II, Conference At Bennett University, Greater Noida

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Cyril Amarchand Mangaldas (CAM), advised in relation to the USD 300 million fundraising by GMR Hyderabad International Airport Limited (GHIAL). CAM acted as the Indian legal advisors to the Joint Global Coordinators and to Initial Purchasers consisting of Citigroup Global Markets Inc., HSBC Limited, Axis Bank Limited, Merrill Lynch (Singapore) Pte. Ltd., J.P. Morgan Securities plc and YES Bank Limited

The Financing and Capital Markets Practices of Cyril Amarchand Mangaldas advised the Joint Global Coordinators and to Initial Purchasers on the Transaction. The team was led by Ajay Sawhney, Partner; Pranav Sharma, Partner; Anjana Menon, Senior Associate, Mallika Chawla, Associate.

As a part of the Transaction, GHIAL has raised funds by way issue of 5.375% senior secured notes (Notes) aggregating to USD 300 million which will be due in 2024. The Notes have been be listed on Singapore Exchange Securities Trading Limited (SGX-ST).

The other and advisors involved in the Transaction included Citi Group (Joint Global Coordinator); The Hongkong and Shanghai Banking Corporation Limited (Joint Global Coordinator); Milbank LLP (International legal counsel to the Joint Global Coordinators); and Shearman & Sterling LLP (International legal counsel to the Issuer).

The Offering Memorandum was signed on April 03, 2019 and the deal closed on April 10, 2019.

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BULexConvo Series II, Conference At Bennett University, Greater Noida

April 15, 2019, 10:41 pm

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BULexConvo Series II National Conference on Law, Development and Social Inclusion to be held on 20th April 2019. The second conference in the series aims to discuss and deliberate on how law impacts development and social inclusion and the role played by social sciences in achieving the multi-faceted outcomes of law.

Theme

Stigmatization and Marginalisation- Diverse perspectives
Inclusionary Policies in Developing Economies
Rights as an inclusion mechanism.

Awards

Certificate of Participation would be given to all registered participants.

Registration

To register click here

To Access Concept Note click here

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