In this article, Hardeep Singh of Campus Law Centre discusses Legislative Reforms introduced by Atal Bihari Vajpayee during his tenures as the Indian Prime Minister.

“Empowering the individual means empowering the nation, and empowerment is best served through rapid economic growth with rapid social change”.

These lines by Bharat Ratna, Late Atal Bihari Vajpayee clearly reflect the ideology and the nature of reforms brought in by him for development of the country. He did not only improved the economy of India by introducing economic reforms but also introduced social reforms for the upliftment of marginalised sections of the society. His focus was to unlock India’s economic potential and ensuring India’s presence in the global competitive market. He was one of the finest Statesmen of the country and the first non-congress Prime Minister who completed a full five years tenure as the Prime Minister.

Reforms in the Energy Sector

The Indian Power Sector was under monopoly of the State in the early 1990s. The stepping stone for all power sector reforms were laid down by the Vajpayee government by introducing the Electricity Act, 2003 which consolidated the laws relating to generation, transmission, distribution and use of electricity. The Act was aimed at creating a market based regime in the power sector in India by promoting competition. It served the purpose of protecting the interest of consumers and supplying electricity to the whole nation.

With the enforcement of this Act, the Single Buyer model was changed to a Multi Buyer model. Opening up of power sector to private companies provided a tremendous potential for investment in generation, transmission and distribution of electricity resulting in improvement of infrastructure which led to strengthening of the Indian Power Sector.

Creating a market based regime led to an environment where the monopolies enjoyed by the State Electricity Board (SEB’s) for buying/selling power ceased to exist, further leading to a market determined tariff structure.

Introduction of Value Added Tax

Value Added Tax (VAT) was introduced during his tenure as the Prime Minister and came into force a little after his tenure as was agreed by the States. It was an indirect tax which replaced the general sales tax and was comparatively lower than the rate of sales tax. It has been a major source of revenue for all Indian States and Union Territories.

It helped the traders due to its uniform tax rates and also provided for self assessment, which reduced the need for a taxpayer to frequently visit a Tax Department Officer.

The law brought in the concept of Input Tax Credit, which put an halt to the practice of imposing tax over tax, which in return reduced the prices of the goods that the consumers had to pay. It also benefited the government as the traders were conducting self assessments which led to saving of resources, and the revenue department focused more on collection of tax rather than the administrative processes.

Not only did he introduce VAT but also made the first move towards the landmark tax reform of GST. A report was given by a task force constituted by the Vajpayee government suggesting that Central and State levies should be merged into one as Goods and Services Tax (GST).

Reforms in Public Sector Undertaking: Privatisation Policy

During his tenure, he aimed at further enforcing the privatisation policies introduced in 1991. He was an advocate for private businesses in the country and worked towards reducing the government’s involvement in various industries. The government sold its share in 32 companies controlled by the State. The first public company that was fully disinvested in the tenure of Atal Bihari Vajpayee was Lagan Jute Machinery Company Limited (LJMC).

Two Public Sector service providers were privatised in 2000-2001. International long distance business, which was the monopoly of public sector, was opened, de-regularized and unrestricted entry of competitors was permitted in 2002-2003. Further, he formed a separate disinvestment ministry. The most important disinvestments made by the newly established ministry were Bharat Aluminium Company (BALCO), Hindustan Zinc, Indian Petrochemicals Corporation Ltd. and Videsh Sanchaar Nigam Limited (VSNL).

Reforms in Economic Policies

Introduction of Fiscal Responsibility and Budget Management Act, 2003

Around the year 2000, one of the major macroeconomic problems that the country was facing was high fiscal deficit. This problem led to inflation, reduced consumption and raise in unemployment. To curb this problem, the Vajpayee Government introduced a major economic reform, i.e. the enactment of Fiscal Responsibility and Budget Management Act, 2003. The aim of this Act was to institutionalize financial discipline, reduce India’s fiscal deficit, improve macroeconomic management and remove the revenue deficit of the country.

Some of the objectives of FRBM Act are as follows:

1. To bring in a transparent fiscal management systems in the country.
2. To have an equitable and manageable distribution of India’s debt.
3. To give flexibility to the Reserve Bank of India for managing inflation in India.

Due to the introduction of this Act during the Vajpayee government tenure, public sector savings surged from 0.8% of GDP in the year 2000 to 2.3% in the year 2005.

The aim to enact such a law was to keep the fiscal deficit under 3 percent. Even though the successive governments were unable to bring the fiscal deficit down to 3 percent due to international crisis, this Act still brought more responsibility and accountability on part of the government.

Introduction of Prevention of Money Laundering Act, 2002

The Prevention of Money Laundering Act was brought in by the Vajpayee government as well in the year 2002. The Act incorporated the Political Declaration adopted by the Special Session of the UN General Assembly, 1999 in the Indian legal system. The main objectives of this Act are as follows:

1. To prevent and control money laundering in India
2. To confiscate and seize the property obtained from the laundered money
3. To deal with any issue connected with money laundering in India

The purpose for introducing the Act was to set out certain procedures, law and regulations to stop the practice of generating income through illegal actions. For this purpose, a Financial Intelligence Unit was set up by the government responsible for receiving, processing and analyzing information relating to suspected financial transactions.

Infrastructure Reforms

The Vajpayee government launched two projects to improve the infrastructure in India. These projects were Pradhan Mantri Gram Sadak Yojana which was launched in the year 2000 and National Highway Development Project which was initiated in the year 2001. These two projects played an important role in boosting the real estate sector, increased business and commerce and improved rural economy which further led to improvement in the GDP of the nation.

National Highway Development Project

The purpose of this project was to build a Golden Quadrilateral i.e., a network of highways connecting major industrial and agricultural centers of India. It was the largest highway project in India and the first phase of the project consisted of 5,846 km of four/six lane express highways which was completed in 2012.

Pradhan Mantri Gram Sadak Yojana

The purpose of this scheme was to build all weather roads which will connect to all the unconnected villages. 82% of the villages have been already connected by December 2017 and remaining work is in progress and is on track for completion by March 2019.

By introducing new economic reforms, he took India to new heights. Under his tenure, India was able to maintain a GDP rate of 8%, inflation level came down to 4% and foreign exchange reserves increased.

Reforms in Telecom Sector

Vajpayee government, with the introduction of new telecom policy, brought a revolution in the Indian telecom sector. The policy replaced fixed license fees for telecom firms with a revenue sharing arrangement. With this, he paved the way for structural reforms in this sector, which led to an unprecedented growth of mobile subscribers and introduction of competition, followed by the amendment in Telecom Regulatory Authority of India Act, 1999. After the new telecom policy was implemented in 1999, it allowed mobile service company to provide services on revenue share basis instead of fixed fees that the mobile service providers had to pay for providing mobile services.

An Overview of Telecom Regulatory Authority of India (Amendment) Act, 2000  

Before the amendment, TRAI exercised both regulatory and dispute resolution functions. However, the amendment Act established the Telecom Dispute Settlement Appellate Tribunal to deal with the dispute resolution. The amendment act classified TRAI’s functions into four main categories:

1. Make recommendations on various issues relating to telecom sector.
2. Give it general administrative and regulatory powers,
3. Give it the power to fix tariffs and rates for telecom services,
4. Any other functions entrusted by the Central Government.

IT Sector Reforms

He gave great emphasis on the importance of technology in preparing India for the millennium. From 1999 to 2004, he made various attempts to change and facilitate the rise of Indian Information Technology sector. The IT industry in 1999-2000 was unsteady at around $6 billion which is now an industry of more than $150 billion.

Another important reform brought by him was setting up of Special Economic Zones (SEZs). SEZs were intended to provide a comprehensive infrastructure at one place for export production, such as procurement of duty free equipment, raw material, components, etc. This resulted in improving the competitiveness of Indian IT exports.

Conclusion

Late Sh. Atal Bihari Vajpayee bridged the two cliffs of thought i.e., the right wing and the left wing. It was his conciliatory approach that during his second term as the Prime Minister, he ordered nuclear tests in May 1998, which was considered as a strategic masterstroke to blunt Pakistan’s nuclear ambitions. However, we have also witnessed his soft spoken strength when he did not stop his peace talks with Pakistan to resolve the issue of Kashmir. The same conciliatory approach and bold nature of Atal Bihari Vajpayee can be witnessed when he called a special session of Parliament in the middle of the India-China War in 1962.

The post Atal Bihari Vajpayee’s legislative reforms that changed India forever appeared first on iPleaders.

In this article, Neel Vasant of Symbiosis Law School, Pune discusses Restitution of Conjugal Rights Under the Hindu Marriage Act.

Abstract

“We do not create marriage from scratch. Instead, in the elegant language of the marriage ceremony, we ‘enter into the holy estate of matrimony.’[1]

Marriage and family are two strong pillars of the Indian Society. Both these terms are considered as highly sacrosanct. In our country Marriage is a religious institution which is pivotal for the growth of our society and on a larger frame our country. Marriage forms family and thus it can also be said that family is a subset of marriage. We live in a generation where the life is too fast and thus it results in many feuds. All these things have resulted in the lack of harmony among married couples. Following is an interesting observation done by Burgess and Locke.

“Family is a social group of persons united by the ties of persons united by the ties of marriage, interacting and communicating with each other in their respective social roles”[2]

During the last one decade it has also been noted that the rate of Matrimonial Dispute is continuously rising. In earlier times matrimonial disputes weren’t given much of an importance. But with changing times, a new steam of thought has take place where alternative methods are adopted to solve a matrimonial dispute. Owing to these reasons it is very necessary to study and analyse the topic.

This article is an attempt to critically analyse the concept of Restitution of Conjugal Rights, a matrimonial remedy available for the Hindus in the Hindu Marriage Act of 1955. The author will also analyse the cases decided by the apex court relating to the issue of conjugal rights. The author will elucidate upon the same by discussing the object, scope and the extent of applicability of Section 9 of the Hindu Marriage Act, 1955.

Introduction

Marriage as an institution gives rise to a relationship between two partners: The Husband and the wife, which further gives rise to more relations. This relationship also gives birth to different sets rights and obligations. These rights and obligations cumulatively constitute’ Conjugal rights’ and can be termed as essence of the marital union. The term ‘Conjugal Rights’ in literal sense means ‘Right to stay together.’[4]

It is a general accepted norm that each spouse should act as a support to other in hard times, should be there to comfort and love the partner. But if any of the partner leaves the other without any reasonable or sufficient cause, then the aggrieved party can knock the doors of the court to seek justice. Restitution of conjugal rights is the only matrimonial remedy available is restitution of Conjugal Rights.

Section 9 – The Hindu Marriage Act, 1955

Restitution of Conjugal Rights, “When either the husband or the wife has, without reasonable excuse, withdrawn from the society of the other, the aggrieved party may apply, by petition to the district court, for restitution of conjugal rights and the court, on being satisfied of the truth of the statements made in such petition and that there is no legal ground why the application should not be granted, may decree restitution of conjugal rights accordingly.”.[5]

When a spouse is guilty of staying away without any reasonable or a just cause and if the suit of restitution of conjugal rights succeed than the couple would be required to stay together. Thus it can also be inferred that section 9 is the marriage saving clause or section. This remedy was earlier applied in England and later on implemented by the privy council in India, for the first time in a case namely Moonshee Bazloor v. Shamsoonaissa Begum[6]. However, this matrimonial remedy of restitution of conjugal rights has been removed in England way back in 1970.[7]

There are three important requisites to be fulfilled for Section 9[8]

• Spouses must not be staying together.
• Withdrawal of a party from the other must have no reasonable ground for such withdrawal.
• The aggrieved party must apply for restitution of conjugal rights

Constitutional Validity of Section 9

It is to be noted that there arises a contention that restitution of Conjugal Rights clearly violates Right to privacy of the wife. Although the Supreme Court is its judgement of Kharak Singh vs. State of UP[9] has held right to privacy “is an essential ingredient of personal liberty”. In Gobind v. State of M.P.[10] again the court had to encounter the issue raised in the case of Kharak Singh. In this case the honourable Supreme Court came to a conclusion that right to privacy -among other rights is included in right to liberty.

Judicial Approach

In T. Saritha Vengata Subbiah v. State[11], the court had ruled that that S.9 of Hindu Marriage Act relating to restitution of conjugal rights as unconstitutional because this decree clearly snatches the privacy of wife by compelling her to live with her husband against her wish. In Harvinder Kaur v. Harminder Singh[12], the judiciary again went back to its original approach and help Section 9 of Hindu Marriage Act as completely valid. The ratio of this case was upheld by the court in Saroj Rani Vs. S.K. Chadha[13]

Restitution of Conjugal Rights Violates

• Freedom of Association – Article 19 (1) (c)
• Freedom to reside and settle in any part of India – 19(1) (e).
• Freedom to practice any profession – 19 (1) (g)

Infringement of Freedom of Association

In our country every citizens have a fundamental right to associate with anyone according to his/her wish, By the matrimonial remedy of restitution of conjugal rights is freedom is violated as a wife is compelled to have a association against her will, with her husband. In Huhhram Vs Misri Bai[14], the court passed the restitution against the will of the wife. In this case though the wife had clearly stated that she would not wish to live with her husband, still the court went ahead and gave the judgement in favour of the husband. The opposite thing happened in Atma Ram. v. Narbada Dev[15], where the judgement was passed in favour of wife.

Infringement of Freedom to reside and to Practice any Profession

We live in a society where there is complete freedom as to which profession to choose. At times under the restitution of conjugal rights a person is forced to live with the partner with no general wish or interest. And thus, this freedom to freely reside and practice any profession of choice, seems to be violated. Several times in the past courts have tried to give a remedy. The apex court in the case of Harvinder kaur v. State[16] it was said that, “Introduction of the Constitutional Law in the Home is most inappropriate, it is like introducing a bill in a China shop”

Suggestions for Improvement

Restitution of Conjugal Rights is a highly debatable and a controversial subject. Some people feel it is to preserve the marriage while some say that there is no meaning in forcing the other party to stay with the aggrieved party as they are not at all interested. However, there is always a scope of improvement by tweaking something.

The concept of Reconciliation may be tried in place of the rigid conjugal rights.[17] The idea of restitution is very harsh and barbaric, as it forces either of party to compromise. While on the other hand the tone of reconciliation is very mild and requesting. The problem with restitution is that there are high chances that the situation may turn up ugly after both the parties are forced to live together unwillingly. But if the remedy is reconciliation than it may not be offensive to either of the parties and will also clear the air of misunderstanding.

To implement this the judiciary should not be intervened as the function of the Court is to settle disputes not reconciliation. What can be done is a separate committee should be formed and the sole function of this specially formed committee will be to administer and solve the matrimonial disputes. The idea of reconciliation is also very effective as it is fast, effective and practical.

Conclusion

“A Horse can be brought to the water pond but cannot be compelled to drink”[18]

The above-mentioned proverb is very famous and the concept of restitution seems to be akin to the theory of conjugal rights. When a person is separated emotionally from another, then it becomes really difficult to unite them. Thus, restitution of conjugal rights is such a matrimonial remedy, which will force the person to save the marriage but it cannot guarantee its effectiveness. Some section of people also say that it is against the concept of natural law theory.

References

[1] “Matrimony Quotes”, https://www.brainyquote.com/topics/matrimony, Accessed on 22 July 2018.

[2] “Quotes on a family”, http://www.quoteambition.com/inspirational-family-quotes-sayings/, Accessed on 22 July 2018.

[3] A popular English translation from her magnum opus: Simone de Beauvoir. The Second Sex (1949). In so called authentic translation from the French, her original language, statement may be read thus, “…keeping a husband is work; keeping a lover is a kind of vocation.’

[4] “Definition of Conjugal Rights”, https://www.merriam-webster.com/dictionary/conjugal%20rights, Accessed on 22 July 2018.

[5] The Hindu Marriage Act, 1955 sec 9.

[6] Monshee Bazloor v. Shamssonaissa Begum, 1866-67 (11) MIA 551

[7] “Restitution of Conjugal Rights: Meaning & Scope”, http://www.lawvedic.com/blog/restitution-of-conjugal-rights-meaning-and-scope-50, Accessed on 23 July 2018.

[8] “Conjugal Rights in India”, https://www.indianbarassociation.org/restitution-of-conjugal-right-a-comparative-study-among-indian-personal-laws/, Accessed on 23 July, 2018

[9] Kharak Singh v. State of UP, AIR 1963 SC 1295: (1964) 1 SCR 332.

[10] Gobind v. State of M.P, (1975) 2 SCC 148; AIR 1975 SC 1378.

[11] T. Saritha Vengata Subbiah v. State, AIR 1983 AP 356.

[12] Harvinder Kaur Vs Harmander Singh, AIR 1984 Delhi 66

[13] Saroj Rani Vs. S.K. Chadha, AIR 1984 SC 1562.

[14] Huhhram Vs Misri Bai, AIR 1979 MP 144

[15] Atma Ram. v. Narbada Dev, AIR 1980 RAJ 35

[16] Harvinder Kaur v. State (SCC) AIR 1984 Delhi 66.

[17] “Conjugal Rights: New Prospective”, http://www.legalserviceindia.com/articles/abol.htm, Accessed on 23 July 2018.

[18] “Restitution of Conjugal Rights: Constitutional Perspective”, National Digital Library, http://ndl.iitkgp.ac.in/document/ 718w, Accessed on 23 July 2018.

The post Restitution of Conjugal Rights Under the Hindu Marriage Act appeared first on iPleaders.

In this article, Swati Garg, an Advocate and an LL.M. graduate from Gujarat National Law University discusses the commerical reasons for creating a holidng and subsidary company structure, permitted transactions between holding and subsidary companies and layering of subsidaries.

Understanding what a subsidiary and holding company is

Essentially, if one company holds more than 50% of the shares of another or appoints a majority of the other company’s directors, the second company is a subsidiary of the first. The first company is called the holding company.

If the holding company owns 100% of the shares of the subsidiary, the subsidiary is known as a wholly owned subsidiary (WOS).

A private company requires a minimum of two shareholders, so 100% shareholding is technically impossible. The company may give one share to another shareholder (who is friendly or aligned to the holding company). Typically, it is a relative of the promoters who run the company.

5 Commercial reasons for creation of a holding subsidiary structure

1. To segregate the business structure and to create the distinct entities with separate management. For example, FMCG products can be housed under one vertical and consumer durables and electronics can be in another. This enables the value of different businesses to be captured separately. It facilitates buying and selling of an individual business. An investor can directly acquire shares of the company it is interested in. If an investor wants exposure (i.e. stake or benefit) in both segments then it can invest at the parent company level.
2. Holding-subsidiary structure can also be used by companies to create different brands and brand categories for different kinds of products. For example, Vivanta is the budget brand of the Taj Group of Hotels. Companies may prefer to house different brands under different verticals. It enables them to bundle a brand and its intellectual property together in the event of a sale. This planning is typically done beforehand or when the company’s operations expand and they need to be ‘organized’ or ‘restructured’ in a new way.
3. Companies use subsidiary structures to when they do business internationally, where they incorporate a separate subsidiary company in each country. This enables a company to enter and exit from business with respect to a particular country.
4. Sometimes, this form of structuring enables companies to take advantage of lower tax rates in other jurisdictions. For example, many international venture capital funds have structured investments into India through a Mauritius entity to take advantage tax exemptions under India and Mauritius Double Taxation Avoidance Agreements (DTAAs).
5. The structure can be expanded and extrapolated further by adding more layers of subsidiaries. For example, a global company may have a South Asia Holding company which has a parent India subsidiary, and further subsidiaries for different industry segments that the company sells products/ services in.

Subsidiary and holding company under Companies Act

Holding company and subsidiary company is defined under the Companies Act, 2013 (herein referred as Act).

Holding Company

Section 2(46) of the Companies Act, 2013 defines Holding Company. The company is said to be the holding company if that particular company holds/owns at least 50% of the other companies and has the authority to make management decisions, influences and controls the company’s board of directors. A holding company may exist for the sole purpose of controlling and managing subsidiary companies.

Subsidiary Company

Section 2(87) of the Companies Act, 2013 defines the Subsidiary Company. The subsidiary company is the company that is controlled by the holding or parent company. It is defined as a company/body corporate where the holding company controls the composition of the Board of Directors. As per the Companies Amendment Act, 2017, Section 2(87)(ii), if the holding company have control over more than one-half of the voting power of another company, that particular company will be identified as the subsidiary company.

Note: If a holding company owns 100% of the stock of other company, then the other company would be known as whole owned subsidiary of the holding company.

Layers of subsidiaries

The word layer as used in the section 2(87) of the act implies subsidiary or subsidiaries of a holding company. The context in which it is used in the section, it implies it means vertical subsidiaries. Section 186 and proviso to Section 2(87) of the Companies Act restricts the number of layers that holding companies can have. It must be read in conjunction with the Companies (Restriction on Number of Layers) Rules, 2017.

Note that wholly owned subsidiaries have now been excluded from being treated as a separate layer as per the rules above.

The restriction on layered structuring also does not apply when a specific law requires a layer to be created. We have discussed this later.

Step-down subsidiary company

This phrase is not defined anywhere in the Companies Act, 2013. In common parlance, it is used to specify a subsidiary of the subsidiary company.

5 Unique features of transactions between holding and subsidiary companies

1. All transactions qualify as related party transactions and need to comply with the relevant restrictions on related party transactions. These restrictions are of multiple kinds, depending on the type of transaction. They could range from disclosure of interest, abstention from voting or taking approval of a specific majority of shareholders before entering into the transaction. These principles seek to ensure that the transaction does not get influenced merely by the relationship between the parties and is executed on an arm’s length basis.
2. There are certain stamp duty relaxations available on transactions between holding and subsidiary companies, especially if they are wholly owned. Since the holding and subsidiary are different legal entities, their relationship and transactions between them will require various kinds of contracts to be executed, and payment of stamp duty on each contract can be onerous. Hence, stamp duty relaxations are beneficial. These exemptions have been done with a view to facilitate such structuring and organization of a company’s business. These exemptions are made available through separate notifications hence they are not ordinarily visible in the text of the state-level Stamp Act or schedule.
3. From an income tax perspective, arm’s length pricing principles may have to apply especially, if the holding-subsidiary relationship is international. In certain cases, arm’s length pricing applies in domestic situations also under Indian law.
4. Transferring dividend from a level 2 or level 3 subsidiary (where permitted) to the holding company can be cumbersome and have unintended tax implications if the structuring is not done carefully.
5. For loan transactions, one or more holding companies may issue guarantees for the obligations of the subsidiary.

Practical Tip: When you are working on a transaction between a holding and subsidiary company, at the time of checking the stamp duty under the relevant state-level Stamp Act or schedule for the transaction, make sure that you also check whether there is an exemption or relaxation for that transaction if it is undertaken between holding and subsidiary companies.

What are the permitted transactions between subsidiary and holding companies? Are there any transaction which are prohibited? What is the logic behind the prohibition?

Permitted Transactions

1. Any loan made by a holding company to its wholly-owned subsidiary company is permitted if the said loan is used for wholly-owned subsidiaries’ principal business. The loan should not be used for any other investment by the subsidiary company.
2. Holding company can provide guarantee/security for any loan made to its wholly-owned subsidiary company if the said loan is used for wholly-owned subsidiaries’ principal business. The loan should not be used for any other investment by the subsidiary company.
3. Furthermore, holding company can provide guarantee/security for any loan made to its subsidiary company by any bank and financial institution if the said loan is used for wholly-owned subsidiaries’ principal business. The loan should not be used for any other investment by the subsidiary company.

Other than above, transactions between holding companies and subsidiary companies are classified as related-party transactions under section 2(76). For these transactions, consent of Board of directors should be given by a resolution at a Board meeting. Moreover, if these transactions are not entered by the holding or subsidiary company in its ordinary course of business, they have to make sure that they have followed arm’s length principle. Thereafter, holding company and subsidiary company can enter into a contract or an arrangement for the following things:

• Sale, purchase or supply of any goods or materials;
• Selling or otherwise disposing of, or buying, property of any kind;
• Leasing of property of any kind;
• Availing or rendering of any service;
• Appointment of any agent for purchase or sale of goods, materials, service or property;
• Appointment of related party to any office or place of profit in the company, or its subsidiary or associate company;
• underwriting the subscription of any securities or derivatives thereof, of the company.

To further govern these related party transactions, central government came up with The Companies (Meetings of Board and its Powers) Rules, 2014.

Prohibited Transactions

As can be seen above, permitted transactions have been specified in the act. One thing we need to remember is that if the proper procedure has not been followed to conduct permitted transactions, it will be in contravention of the act and will result into penalty for the company.

However other than that, the act also specifies various prohibited transactions between subsidiary and holding company. The rationale behind is that to ensure that the directors are not utilising the companies’ funds for their own benefit. Prohibited transactions are:

1. A subsidiary cannot have an shares in its holding company. Thus, cross-holdings are not permitted between holding subsidiary companies. Holding company can not allot or transfer its shares to any of its subsidiary company. If you see the holding structure of the Tata group there are numerous cross-holdings between companies (i.e. Company A will have some shares in Company B and Company B will also have some shares in Company A). That is possible if the two companies are not holding and subsidiary companies (i.e. mutual shareholding in each other should be less than 50%).
2. Any loan made by a holding company to the subsidiary company is not permitted under the act.
3. Any loan/guarantee/security made by the subsidiary company to the director of the holding company is not permitted.

What kind of layering is permitted under the Companies Act and rules and what layering is not permitted? Is the situation different in the case of foreign holding company or foreign subsidiary company?

As explained above, layering under the act means subsidiary or subsidiaries of the holding companies. As given under the proviso of section 2(87), there is a prohibition on the holding company to not have more layers as prescribed under the act. Section 186(1) of the act specifies that a company should not invest in more than two layers of investment companies. Keeping in mind the proviso of section 2(87) of the act, on 20th September 2017, the Central Government enacted “the Companies (Restriction on Number of Layers) Rules, 2017. These rules specify that no companies shall have more than two layers of subsidiaries. This restriction is for vertical subsidiaries not for horizontal subsidiaries.

Before going into the details of layering, let’s first understand why there is a need for restricting layers of the company which is as follows:

1. To reduce the illicit fund flows.
2. To curb diversion of funds.
3. To keep a check on the multiple layers of subsidiaries.
4. To stop companies to reduce shell companies for diversion of funds.
5. To prevent the company from money laundering, the illegal way of obtaining money.
6. To enable the authorities to identify the beneficiaries of corporate structures.

Restrictions on Layering under the Companies (Restriction on Number of Layers) Rules, 2017

Now, let’s take a look at the provisions of these rules.

1. A company shall not have more than two layers of subsidiaries.
2. A wholly owned subsidiary company would not be taken in account as a separate layer.
3. Following classes of companies are outside the scope of these rules:
   1. A banking company;
   2. A non-banking financial company;
   3. An insurance company;
   4. A government company.
   5. A company acquiring a company incorporated outside India having more than two layers of subsidiaries provided it is in accordance with law of that country.
   6. A subsidiary company who is required to have an investment subsidiary under any law or rules.
4. These rules are prospective in nature. Therefore, any company who had more than two layers of subsidiaries on or before these rules came into force, they are required to
   1. file a return in Form CRL-1 to Registrar within 150 days of publication of these rules.
   2. shall not add more layers of subsidiaries.
   3. If the layers are reduced after these rules came into force, shall not increase their number of layers beyond two.
5. A maximum fine of Rs. 10,000 will be imposed on the companies and every officer of the company which is in contravention of these rules. If the contravention is a continuing one, then a maximum fine of Rs. 1,000 every day will be imposed.

Illustration 1: Layering – Distinction between subsidiary and step-down subsidiary

Here Company A is the holding Company.

Company B, F, G and H are the horizontal subsidiaries of the holding company where the restrictions are not applicable. They can have as many horizontal subsidiaries.

Company F, G and H can have step down/layer subsidiaries just like company B.

Company B, C, D and E as the vertical subsidiaries company of the holding company A. Here, we have to test the restrictions.

As company B is wholly owned subsidiary of company A, it will not be considered separately as a layer. Therefore, it can be said that in the given illustration, holding company A has 3 step down subsidiaries or layer companies i.e. company C, D and E.

As the rules specifies, any holding company can have only two layers, therefore company C and D are well within laws. However, company A can’t have company E as its subsidiary.

Illustration 2: Layering: Single and Two-Level Subsidiaries (with exceptions)

Illustration 3: Layering in International Context

Here in the illustration, in India, a parent company C can have two layers of subsidiary but if it has to acquire an offshore company and the offshore company has more than two layers of subsidiaries which is permitted as per the jurisdiction of the offshore company, it will be exempted under Indian law.

The post Holding and Subsidiary Companies – Provisions under the Companies Act appeared first on iPleaders.

In this article, Swati Garg, an Advocate and an LL.M. graduate from Gujarat National Law University discusses How approvals for government route investments is obtained in post Foreign Investment Promotion Board era.

In India, Foreign Direct Investments (FDI) can be made through Automatic Route or Government-Approval Route. By automatic route, it simply implies that the investor is not required to take permission from the government whereas in government-approval route, as the name suggests, there is a need to take permission from government. Till 2017, Foreign Investment Promotion Board (FIPB) was a nodal agency for 25 years for processing FDI applications for government-approval route. However, in May 2017, an office memorandum was issued which abolished FIPB and it gave the authority to the concerned departments. The important point to remember here is that the concerned department has to take a decision in consonance with the Department of Industrial Policy and Promotion (DIPP).

Important Points to Remember

The link here gives a comprehensive list of competent authorities for the government approval route FDI.

Competent authority/ministry/departments for sectors/activities requiring government approval route.

A list of sector/activities where foreign investment can be made automatically up to a certain extent but there after, if anyone needs to invest more than that, government approval is required.

If there is some sector/activity which is not mentioned in the list, the concerned Ministry/Department will be the competent authority. If still there is a confusion left, DIPP will identify the competent authority.

These authorities will also be responsible for monitoring the compliances of FDI regulations by these companies.

For foreign investment more than Rs. 5000 crore, the competent authority has to place the proposal before Cabinet Committee on Economic Affairs (CCEA) for their consideration. Ministry can also refer the proposals to CCEA for consideration.

Any rejection of the proposal has to be done by competent authority in consultation with DIPP.

Central government in consultation with Ministry of Corporate Affairs and DIPP has published Standard Operation Procedure for filing proposals for FDI which can be accessed here:

http://dipp.nic.in/sites/default/files/Standard%20Operation%20Procedure%20%28SOP%29%20for%20Processing%20FDI%20Proposals.pdf

Procedure for filing proposals for FDI

Government has tried to make the FDI procedure less complex and expeditious by making the whole procedure online, even clarifying all confusions over e-mail and by fixing the time period to process the proposal.

1. All the proposals for foreign investment requiring government approval has to be filed on Foreign Investment Facilitation Portal at http://www.fifp.gov.in/. There is no fees to file the proposal.

Mandatory documents which has to be attached with the proposal are:

1. Certificate of Incorporation of the Investee & Investor Companies/Entities
2. Memorandum of Association (MOA) of the Investee & Investor Companies/Entities
3. Board Resolution of the Investee & Investor Companies/Entities
4. Audited  Financial  Statement of  Last Financial  Year of the Investee  & Investor Companies/Entities
5. Article of Association of the Investee & Investor Companies/Entities
6. List of Names and addresses of all foreign collaborators along with Passport Copy/ Identification Proof of the Investor Company/Entity
7. Diagrammatic representation of the flow and funds from the original investor to the investee company and Pre and Post shareholding pattern of the Investee Company
8. Affidavit stating that all  information provided in hard copy  and online are the same and correct

Moreover, the format of approval letter and list of other documents which has to be attached can be found by visiting this link.

2. After filing, DIPP has to identify the right competent authority and e-transfer the proposal.

3. If the proposal is not digitally signed, one need to file physical signed copies of the proposal only after intimation by DIPP.

4. Other than the competent authority, DIPP has to forward the proposal to the following authorities within 2 days:

All these comments have to be send directly to competent authority/ministry. If comments has to be required from any other ministry, reasons has to be mentioned.

Security clearance from Ministry of Home Affairs is required in the following cases:

• Investments in Broadcasting, Telecommunication, Satellites – establishment  and operation;
• Investments in Private Security Agencies, Defence, Civil Aviation;
• Investments in Mining & mineral separation of titanium bearing minerals and  ores, its value addition and integrated activities; and
• Investments from Pakistan and Bangladesh.

5. If competent authority/ministry needs some clarification as to the FDI policy, they can ask for comments from DIPP. DIPP has to reply within two weeks.

6. After receiving all the comments, competent authority has to scrutinise and ask for clarifications from applicant, if any, by email. Applicant should reply within a week.

7. Once all the above aspects are covered, competent authority/ministry should process the proposal within two weeks and convey the same to applicant.

8. If it is the case of foreign investment more than 5000 crore, competent authority/ministry should send the proposal to CCEA for consideration and after their reply, competent authority/ministry should convey the decision within one week to the applicant.

9. Total expected time period for processing the proposal is 8 weeks and 10 weeks in case if security clearance is required.

10. If the proposal has to be rejected, DIPP must be consulted and that consultation may take an extra two weeks time.

The post How are approvals for government route investments obtained in post Foreign Investment Promotion Board era appeared first on iPleaders.

In this article, Swati Garg, an Advocate and an LL.M. graduate from Gujarat National Law University discusses FDI in single brand, multi-brand retail and e-commerce.

Single Brand Retail Trading

Single brand retail trading means selling different products under one brand name. For example, Starbucks sells beverages and food items under the brand of Starbucks. It also sells cups under the same brand name. Other examples could be Ikea, Nike, Adidas etc.

As per the latest policy issued by Department of Industrial Policy and Promotion (DIPP), 100% foreign direct investment (FDI) is allowed in case of single brand retail through automatic route. Only those products that are branded during manufacturing and also sold under the same brand in other countries will be covered under this.

However, where the FDI is more than 51%, at least 30% of the value of goods should be sourced from India. This was in view to promote domestic sectors in India i.e. micro, small and medium enterprises, village and cottage industries, artisans and craftsmen. As a relief to the companies, in the initial five years, this requirement has to be made as an average of total value of goods purchased in the five years. After that, every year 30% requirement has to be completed.

E-commerce stores of single brand retailers

The policy also allows a single brand retail entity which is operating through brick and mortar stores, to trade through e-commerce. Indian entity has to make sure that all the compliances has been fulfilled whereas the investing entity will be responsible to file the evidence with RBI to prove the effective compliance.

Multi Brand Retail Trading

Multi-brand retail trading is selling products of different brands under one roof. For example, Big Bazar, Reliance, Shopper Stop etc. These establishments sell products of different brands at one establishment. With regards to multi brand retail trading, the central government has just framed an enabling policy specifying the maximum FDI which is allowed and the procedure. States/Union Territories’ governments have been given the ultimate authority to allow or reject this policy. Till date, 12 States/Union Territories have agreed to the central government policy.

As per the central government, only 51% FDI is allowed and for that also, one needs permission from government unlike in the case of single brand retail trading where only compliances has to be proved; no permission from any governmental authority is required. There are certain conditions over 51% cap which are explained as below:

1. A minimum amount of US $ 100 million i.e. approx 700 crores INR has to be invested in India. They can only open their establishments/stores in an area having minimum 10 lakhs population.
2. 50% of total FDI has to be invested in ‘back-end infrastructure’ within three years. Back- end infrastructure as defined in the policy will include capital expenditure on all activities, excluding that on front-end units. Back-end infrastructure will include processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc.
3. 30% of the goods should at least be procured from Indian domestic sector especially in micro, small and medium enterprises, agricultural co-operatives and farmers co-operatives. Even if an enterprise during the course of sourcing the goods stops being micro, small or medium enterprises, they will still be considered as small enterprises. Process of determination is same as in single-brand retail.
4. Unlike single-brand retail trading, multi-brand retail traders are in no way allowed to trade by means of e-commerce.
5. Fresh agricultural and meat produce sold at these multi-brand retail shops can be unbranded.

To what extent did liberalization of FDI in multi-brand retail enable foreign players to enter India (if at all)?

As stated above, FDI in multi-brand retail is limited by various aspects. First of all, the particular State/UT has allowed the FDI in multi-brand retail trading. Secondly, only 51% FDI is allowed that too only after the approval of the government. Thirdly, there is a requirement of the investment of minimum US $100 million where 30% of the products has to be sourced from India. Moreover, they are not permitted to enter into e-commerce space. This situation has limited foreign brands to enter Indian market.

Another route which can be adopted to overcome this issue is Foreign Portfolio Investment (FPI). FPI is different from FDI. IN FPI, a foreign investor invests in the company’s stocks, bonds or securities. They do not have any control on the management and they can be liquidated in a shorter time frame than FDI.

Why the difference between FDI in single brand retail and multi-brand retail?

Indian marketplace is dominated with many small shops and business. If foreign investment in multi-brand retail is to be permitted, then the business of these small shop owners will be in danger. Consumers will be spoilt with choices and due to high competitions, prices will go down, thus these multi-brand retail establishment will be able attract consumers at a large scale.

However, in case of single-brand retail shops, they usually bring premium or luxury goods in the market so as such they are not in direct conflict with Indian small business.

FDI in e-commerce sector – Is it the same as multi-brand retail?

E-commerce retail trading is buying and selling of products and services online. There is no brick and mortar establishment. For example, Flipkart, Amazon, Tatacliq, etc.

Earlier, FDI in e-commerce would attract the norms on multi-brand retail, and so corporate lawyers started using a different kind of corporate structure for the transaction. They separated the technology and the trading company, and took investment in the technology company, and argued that there has been no investment in the retail sector.

Over time, RBI has separated the treatment of multi-brand brick and mortar stores and multi-brand e-commerce stores.

FDI in e-commerce retail trading is 100% through automatic route. That is just like in the case of single-brand retail trading, no permission from any governmental authority is required to invest in e-commerce retail trade whereas in multi-brand retail, as explained above, foreign investment can be done through government approval route only and that to upto 51%.

For example: If Walmart, which is a multi-brand retail store, was to open a store in India, it will need government approval and it can only invest up to 51%. Instead, if it invests in Flipkart under the regime for e-commerce companies, it can acquire up to 100% of it under the automatic route (provided that the structuring of Flipkart is in accordance with the FDI provision). Accordingly, it has acquired more than 75%.

How to structure an e-commerce venture to take foreign investment

100% foreign investment is allowed in marketplace model of e-commerce which is basically providing a platform online where a buyer can buy stuff from a seller. However, in case of inventory based model i.e. where e-commerce entity owns the products and services and directly sell to consumers, in this case FDI is not permitted.

Note: In case of FDI in wholesale business and single brand retail trading, they can use the digital platform to sell their products and services, implying they can have an inventory based model, provided they have a brick and mortar establishment. It is important to note down here that where FDI is in multi-brand retail traders, they are not allowed to to trade by means of e-commerce.

An e-commerce company needs to comply with the following conditions to receive FDI

1. FDI in trading platform and technology services (including support services)

Foreign investors invest either in providing the trading platform or in technology services. For example, Amazon provides a trading platform for sellers to use to sell their goods to buy, with packaging, payment collection and logistics services. The platform cannot own any inventory of its own. An example for investment in technology services can be Walmart investing in Flipkart.

2. FDI in a B2B entity

In this case, a foreign investor invests in a B2B company which takes order from different B2C companies, totally unrelated to it. Even in case of sudden large orders, these B2B will be able to handle it more efficiently as they will have more resources to manage the trading and marketing of goods and services.

Other conditions under FDI Policy for receiving FDI in e-commerce

1. Other than providing a platform to sell services and products, providing support services to sellers which can vary from, logistics, warehousing, to delivery, payment collection, call centre and other services is also permitted.
2. More than 25% sale of a financial year from one particular vendor or its group of companies is also not permitted. For instance, till this regulation came into picture, on Flipkart, approximately 40% of revenue came from one particular vendor WS Retail. Similarly, on Amazon, its maximum revenue comes from Cloudtail. Now as per the policy, the revenue should not cross 25%.
3. E-commerce entity can not exercise ownership over the products sold through its website as it will make it an inventory based model.
4. Details of the seller has to be clearly provided on the website. And all the post selling customer satisfaction, guarantee/warranty of the product or services will be the responsibility of the seller.
5. E-commerce entity should not influence the price of goods and services.
6. All the payments made online has to be in conformity with the RBI guidelines.

Structure of Flipkart

Let’s take an example of Flipkart to understand how they are allowing FDI in their company’s model.

Flipkart Private Limited (FPL) is the holding company registered and incorporated in Singapore. Flipkart Payments Private Limited, Flipkart Marketplace Private Limited and Flipkart Logistics Private Limited are subsidiaries of FPL, also registered in Singapore. The last five companies are Indian companies in which subsidiaries of FPL invest.

As FDI is allowed in wholesale cash and carry, so there is Flipkart India Private Limited for the same. As FDI is allowed in providing technology platform, for that a Flipkart Internet Private Limited was established. Similarly for other things also. In this way flipkart is providing all the services by establishing different entities so that they can receive different FDIs.

Now let’s take a look at relation between Flipkart and WS RetaiL

The post Foreign Direct Investment in single brand, multi-brand retail and e-commerce appeared first on iPleaders.

When I decided to study law, back in 2005, and shared the news with my father, he was very disappointed. He had a hard time accepting that his son will be a lawyer. It was almost as if he felt that I was throwing my life away.

I got similar reactions from my teachers too.

I was a good boy, did well in school. I was studying in the science stream after 10th standard, and should attempt to become a doctor. Or an engineer at least. Law was not an acceptable option.

It took me many months of convincing my father and mother to be able to study law.

From there, in 2018 when I am writing this, perception of law as a career has completely changed. It is now considered a very good option. Everyone has heard the stories that corporate lawyers can earn in crores. Litigators can earn even more.

Engineering used to be the big favourite of average Indian parent. In recent years, engineering colleges are shutting down, and some of them even turned into ghost towns due to lack of students. Many MBA colleges have met the same fate, as jobs are hard to come by after doing MBA or engineering. In this context, law is becoming a favourite of many Indian parents. Unlike before, parents have began to push their kids towards studying law.

There are a lot of new legal career options opening up regularly, while the traditional work for lawyers have also stayed strong and only increased in demand. Everyone is well aware of the trend, but not quite about the details of where those opportunities are arising and how to capitalize on them.

As Indian economy continue to grow strongly, the demand for skilled lawyers is only going up. However, at the same time, it is a paradox that a large number of law graduates remain unemployed or struggle to find work.

This can happen for two reasons. One is that these law graduates are not adequately trained. Many of them have theoretical knowledge of law, but are not employable and cannot serve real clients as they do not have practical skills.

This is why, choosing the right law school where the administration has a vision and understanding of where the legal market is headed is very important. Always check before joining, does your preferred law school have a method in place to provide practical training to the students? Are the students graduating with jobs or are they able to find well paid work on their own?

For example, from a distance, Jindal Global Law School seems to be doing a decent job towards this.

That is the critical question to ask and then it is even more important find the right answer.

Most law schools will claim that they give practical training. Most even have some name sake courses and classes where they supposedly teach skills like contract drafting, petition drafting etc. However, usually these classes are ineffective. They do not have any proper faculty or material to teach such skills.

This is why, at iPleaders and LawSikho.com, we have began helping some universities and law schools to provide this kind of training to their students. These colleges and universities acknowledge the problem, and seek outside help to address it.

Actively learn about the career opportunities that are arising in new areas of legal work, such as M&A, banking, media law, technology and cyber law, transfer pricing, corporate litigation, energy law, regulatory litigation, arbitration and so on. See which ones appeal to you. Then decide which one you want to focus on, and what skills are necessary to succeed in that job.

Then you have to go ahead and actually build those skills. That is hard work. There is no shortcut for that.

However, if you college also helps you in that, that is wonderful. Otherwise, it is counter-productive to struggle on your own as your valuable resources, time and money, goes into the wrong direction as far as college in concerned.

To sum up, there are ample opportunities after studying law to have a fantastic career. However, one has to be careful. This is an applied area of work, not of theoretical knowledge. You must develop your skills in practical legal work one way or another.

If your college does not help you to develop practical skills, please check out lawsikho.com, and take up a course that will help you to acquire those practical skills that are valued by recruiters, and will help you to be gainfully employed or build your very own law practice with paying clients.

We know the exact problems you will face when you are trying to find internships, when you are trying to impress a potential employer during that internship, or what you will face in job interviews. We will train you to succeed in each of those stages. We will even help you to get the internships and interviews if you perform well in our course.

We know the challenges you will face when you begin your job, or when you will begin to build your own practice. We will train you for success if you are our student.

In any case, whether you come to us or not, prepare your strategy as to how you are going to get the dream job or start your own practice and find the clients. Don’t leave it until it is too late.

All the best!

The post Is law a good career in India? appeared first on iPleaders.

Inspired by the story written by Ramanuj Mukherjee titled ‘How I Blew My Interview With Amarchand Mangaldas’, we came up with an idea to do a How I Blew My Interview Series, while sipping a cup of tea and discussing work on Tuesday evening at office.

Here is our team member Mohona Thakur’s account of how she blew her interview with Star India.

If you’ve been following my writings by now you’d be aware that I have always dreamt of working in the FMCG or media space as an in-house counsel. So, naturally, in my final year of law school, I applied to a lot of media companies – from Disney India to Viacom 18 to the Times Group.

Star India was obviously one amongst them. I had heard from various sources that they are big on hiring and training freshers, the CTC packages were pretty much close to what top-tier law firms offered to their freshers, it was the fully owned subsidiary of 21st Century Fox, and do I really need to say much about the brand? It was my first choice.

This was one of the first companies I applied to. After a number of follow ups through five months, I finally got a call from the HR, right in between my final semester exams. In the excitement, although I had enough brains to push the interview date after the exams, I only pushed it to the very next day after the final exams got over. It was an HR interview, I thought. How wrong could it go? I had the choice of choosing a date, any date after exams got over, but I didn’t want butterflies in my stomach, so I chose the first possible day for the interview. The blunders began right here.

Soon, the back-to-back 100 mark final semester exams got over. For those of you who have studied under the University of Pune, you’d know how archaic the examination system is. We spend four to five days giving 100 mark law papers for subjects as vast as CrPc, Companies Law, Banking and Tax in our final semester. Students survive on excess food and red bull to keep themselves awake to revise the syllabus overnight to go give the papers the next day.

I do not think the magnanimity of the situation hit me till I realised that the HR interview was the very next day and to top it off, this was my very first interview for a job, ever.

As any prudent student would, I did what was required for the HR rounds. I prepared a list of probable questions that could be asked to me, soft questions like “Tell me about yourself.”, “Why law?”, “Why do you want to work with Star India?”, “What’s the CTC you’re expecting?” and the likes. I went the extra mile and did some quick research on the interviewer, read up about the recent developments of the company. In the limited time, I revised my resume. I focused on reading up my research notes from my internships that were media laws oriented. I knew I wasn’t a hundred percent ready, but I knew I was prepared enough for the HR rounds.

The next morning, I was ready logistically. I had requested my roommate to allow the room to myself for two hours, the wifi was smooth, I had a decent background with enough light. The only thing that felt anything contrary to ready was my stomach that was growling in nervousness. It was only when the interview started that I started to finally breathe.

Ms. Vibha Bhosale was across the screen, over Skype, quite ready to interview me. She introduced herself as the HR Business Partner to the legal team. The interview was going as expected. From “Tell me about yourself.” to “Why law?” to “Why Star India?”, until the dreaded “I see that you haven’t interned with any law firm, is there any specific reason for it? Or was it purely out of choice?”

This was a question the answer to which would lead to the next question: “Why do you want to work with a company as a fresher? Why not a law firm?” To be absolutely honest, I knew the answer to both these questions. But I decided that my honesty may cost me a job if what I said next made the HR feel that I wasn’t up for hard-work which was absolutely in contradiction to my personality. There is no way you want the HR to feel that you do not have it in you to put in the work. And this was a deciding factor.

Instead of saying what I have always believed to be a driving force behind the decision to be working in-house, I gave a standard and half-true answer: “I believe I have both legal and managerial skills, and companies would be the best place to put both of them to use and grow.” She didn’t buy it. She repeated the question again. I stuck to my answer, thinking this was a test to see if I crack under pressure and change my answer – to figure out if I was fickle minded about my decision to join companies and the reason behind it.

By the fourth time I was asked the very same question by Ms. Bhosale, I knew she wasn’t convinced at all. She could see through me, but I was in a position from where I could not return. And definitely, changing the answer wasn’t anymore an option. I knew that my chances of getting this dream job at a company that not only encourages young talent but also trains them (which is a gem to find in the legal industry) was almost gone.

So, I was more than glad when she moved on to my resume and began asking questions from there. I must say, I was impressed. You do not expect HR personnels to have any legal knowledge as such about the laws, but here Ms. Bhosale knew what she was speaking about. I was grilled on my resume as though it was a technical round. From questions regarding my post graduate diploma in media laws from NALSAR to my internship with Hindustan Times in my second year of law school, I was grilled on anything that remotely pointed to the Telecom, Media and Technology sector.

If you think that HR rounds are easy, treat this right here as a reality check. Most HRs, especially in companies with as much resources as Star India are nothing, if not well-trained. I had merely brushed through the technical parts in the resume, so I relied purely on my memory to give the right answers. It went great until I was asked about a telecom policy I had worked on in my last internship.

“What work did you partake while formulating the policy for the telecom sector? What exactly was the policy about?” I answered rather reluctantly, stammered a bit, and said, “Since the Act that the policy was made for has not been passed by the Delhi Government, I can’t specifically give you details, but it was to do with regulation of telecom towers. I was given to review the entire Act and prepare a report on where the statute lacked and what could be the possible solutions.” I would call this an evasive answer, while I did answer the question somewhat, I made it very clear that I didn’t know enough. My memory definitely did fail me here.

Every interview has those moments – when you know whether you’ve made it to the next round, or not. While I had already lost the trust of the HR by bluffing about why I wanted to work with companies with a predominant fear that I would be misunderstood, not knowing a crucial piece of work I had worked on not six months ago showed poor preparation.

The interview lasted for about 45 minutes, and Ms. Bhosale bid her goodbye saying the usual – “The next round will be taken by Mr. Deepak Jacob. Our team will let you know if there is a next round.”

This was my very first interview for a job. Ever. And I screwed it up. In fact, I was so sure that I wasn’t making it that after the two-week mark, I didn’t even bother following up.

Two years down the line, today when I look back how I blew up that first interview, I can point out a few blunders:

Blunder #1: Stupidity

When I was called for the interview, instead of taking time and thinking a date through, I made the quick decision of doing the HR round right after my final semester exams got over. I didn’t even think of giving myself a breather after the exams. In spite of knowing that Pune University exams are physically tiring and most students are sleep deprived by the end of the exams, I made a choice in hurry rather than buying time – due to the fear of losing an opportunity.

This is nothing but career defining decisions made in haste. Yes, I had been following up with the company for months, but rather than jumping at the one opportunity I got for an interview, I should have thought it through, asked for a couple of hours, maybe even a day and gotten back with a calm mind.

Blunder #2: Lies

HR personnel are trained to hire people. They can see through your lies, even if you are the best at keeping a poker face. It is best to be honest with them, and frame your answers in a way that would convince them of who you really are rather than portray a picture of you who you’d want them to hire. They can see through it all, I believe so.

When I was asked about why I wanted to work with a company and not a law firm right out of law school, I freezed. There was a time in my fourth year while interning for Godfrey Phillips India, when the Senior Manager there had asked me the same question but in the context of internships – “Why do you intern with companies only? Why haven’t you interned with law firms yet?” I had very honestly answered her question back then. “Because I believe that companies give you stability, work-life balance, financial resources and a great amount of work. Everything I could ask for as a lawyer.” In reply to this, I was asked, “Are you sure this is the reason? Or is this your easy way out, of putting in hard work and hours?” I was offended, but then that also gave me glimpse into how a number of lawyers themselves look at in-house jobs.

Working with companies to the middle class has always been equivalent to stability. And, why not? You have steady flow of income every month, you have provisions for House Rent Allowance and a PF and Gratuity account that takes care of you post retirement. To a lot of us lawyers, most of them on the top of the pyramid, after having worked days and nights for years moving in-house means work-life balance resulting out of a stark difference in terms of the quantity of workload.

I wanted this very stability and work-life balance from the beginning of my career. I didn’t want to make the switch from law-firms to in-house after I was exhausted of the law firm life. It was a conscious choice that I was making. And there is no shame in admitting it. Is it a crime to want a work-life balance? Does working in-house mean you’re having it easy in the legal field?

Instead of saying the truth, I gave a half-baked answer presuming my answer would be construed against who I really am.

Blunder #3: Undermining HR Rounds

Right from the moment I was told that it would be an HR round to my preparation for the interview, I didn’t pay two heeds to preparing for the technical side of my resume in and out. I brushed through it, barely enough to recall what I had done in various internships, diplomas and publications.

The HR rounds may be presumed to be a test of your character, zeal, potential to fit in the company, but it is as important as to know your stuff while you sit for this round. Knowing your resume thoroughly, whether it is the HR round or the technical round is mandatory. And in case you do not know the answer to a question, have the ability to say you don’t know or don’t remember. Do not give ambiguous answers to dodge the question.

A lot of lawyers, more often than not, and especially freshers think of the HR interviews to be “just a formality”. This is a reality check for all of you.

I screwed up the first and the most important interview I had bagged in spite of having a more-than-decent resume because I was under prepared, sleep deprived and clearly not thinking straight enough to admit truths while being interviewed and it showed. As rightly pointed out by Ramanuj in his story, blunders genuinely do not begin in the room where you are being interviewed but much beforehand. Mine began from the moment I got the call for the interview.

We are writing our stories in an attempt to bring awareness about where one could go wrong during interviews. We hope there’s some take away and you gain from these attempts. As a small part of our attempts, we have made a course on how you can excel at internships and crack PPOs and interviews. You can check it out here.

In case you have your own stories to share with us, do reply to this in comments or write to us at mohona@ipleaders.in with your own story on #HowIBlewMyInterview. We would love to hear from you and even publish some of your stories.

The post How I Blew My Interview With Star India appeared first on iPleaders.

This article is written by Aditi Singh of Symbiosis Law School, Pune. The article discusses the key highlights of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2018.

ABSTRACT

Foreign Direct Investment is advantageous for the economy of a country to develop but if it becomes limitless it can be equally disadvantageous. The Indian Government has been reluctant to remove restrictions for boosting the foreign direct investment in the country, but the Central Government in 2018 has liberalized the important sectors of the Indian economy to attract the foreign investors to invest in India by enacting the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2018 which aims towards enhancement of foreign direct investment, by relaxing the stringent and complex procedure under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017.

The paper interrogates the determinants of FDI in civil aviation sector, the Real Estate Sector, Single Brand Product Retail Trading, Power Exchange Sector, purchase and sale of capital instruments and other sectors by comparing the Principal Regulations of 2017 with the Amendment Regulations of 2018. The author has critically analyzed the intention of the Central government behind liberalizing the important sectors of the Indian economy and aims to understand the complexities involved in relaxing the procedures. The study has referred secondary sources of data collected mostly through the notifications of Reserve Bank of India.

Introduction

Central Government has been implementing favorable policies to enhance the Foreign Direct Investment in India. Passing of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2018 (hereinafter referred as Amendment Regulations 2018) is one such step. The Reserve Bank of India (“RBI”) under its ‘power to make regulations’[1] has brought the amendment regulations to the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2017 (hereinafter referred to as the Principal Regulations) to liberalize the important sectors of the Indian Economy. The RBI on March 26, 2018 notified the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulation, 2018. The significant changes brought by the Amendment Regulations 2018 with respect to sector-specific policy for Total Foreign Investment are as follows:

1. Foreign Investment In Non-Banking Financial Company

The first amendment that has been brought by the Amendment Regulations 2018, deletes the word “Indian Company” from sub-regulation 5 under Regulation 16.B of the Principal Regulations, and states that foreign investment in investing companies which are Non Banking Financial Companies, and are not registered with the Reserve Bank[2] engaged in the capital investment in other Indian entities will require prior approval of the government in addition to compliance with the regulatory framework under the Reserve Bank of India Act, 1934 and Regulations framed thereunder while Non- Banking Financial Companies which are registered with Reserve Bank will be under 100% automatic route unlike in the Principal Regulations 2017.

• Provisions with respect to the core investment companies still remains same.

Analysis of the Amendment Regulation

Non-banking financial companies are financial institutions that are engaged in the business of providing banking services without obtaining banking license. NBFCs are registered under the companies Act 2013, engaged in providing loan and purchase of bonds/stocks/shares/securities issued by Government, hire purchase, leasing, chit business.[3] NBFCs have been playing major role in the development of the Indian economy by providing almost similar services as banks. The procedure followed by the banks is more stringent and time taking in comparison to NBFCs and therefore, the Regulation has been amended to enhance the foreign Direct Investment by relaxing the procedure in the principal regulation. Investment through Automatic Route allows a foreign entity to invest in Indian entity without obtaining prior approval of the government or complying with the regulatory framework under the Reserve Bank of India Act [4]

Allowing Investment in Non-Banking Financial Company (registered with RBI) through automatic route up to 100% has removed the complexity of obtaining permission of the government which has relaxed the procedure and will attract the foreign entities to invest in the NBFCs (registered) in India. On one hand Investing Companies will feel secured because the NBFCs are registered with the RBI and on the other hand it will reduce the time taken in receiving approval by the government and complying with the frameworks under the RBI Act.

2. Joint Audit of The Indian Investee Company

The Amendment Regulations 2018 have inserted sub-regulation 8 to the regulation 16.B of the Principal Regulation, which now states that the auditioning of an investee company in India needs to be carried out as joint audit. The auditioning needs to be carried out by the auditor/auditing firm specified by the person who has invested in the investee company of India and by an independent auditor who is not associated with the audit/auditor firm specified by the person.

Analysis of the Amendment Regulation

Joint audit is where the auditioning of an entity is carried by two or more auditors. The principal Regulation is unclear about the appointment of auditors by the Indian Entity. The amendment ensures that the auditioning is just not carried by the auditors specified by the foreign investors but also by an auditor which is not a part of the international network making it a joint audit of the Indian Investee Company. The essence of the amendment lies in the fact that it will give an opportunity to the small and medium size audit firms in India. The Foreign Investors have always preferred the auditioning by the top international audit firms but the amendment will surely promote the role of domestic firms in case of joint auditioning. The amendment will further result in the interaction of domestic audit firms with the firms having international network.

It is to be also noted that the amendment regulation states that “wherein one of the auditors is not part of the same network”[5] which can also result in the auditioning by two international network auditioning firm which can defeat the purpose of the Amendment Regulation. The step of the central government has been brought up to enhance transparency, accountability and the promotion of good governance in India. It will be interesting to observe the consequence of such an amendment in near future.

3. Foreign Investment – Civil Aviation Sector

The regulations 2018 have amended existing SL. No 9.3(a) of regulation 16.B of the Foreign Investment.

Analysis of the Amendment Regulation

The Principal Regulations, 2017 allowed Foreign Investment in Air Transport Services up to 49% through automatic route. Anything beyond 49% was restricted under the regulations. The Amendment Regulations 2018, allowed 100% Foreign Investment in domestic airlines out of which, up to 49% through automatic route and beyond 49% through government route. After, relaxing the FDI norm 100% foreign investment is allowed in Domestic Scheduled Passenger Airlines, Non-Scheduled Air Transport Services, and helicopter and seaplane services.

However, it is to be noted foreign airlines are allowed to invest in the capital of Indian companies, operating scheduled and non-scheduled air transport, services up to the limit of 49 percent through government approval route.[6] The restriction ensures that the foreign airlines, which are in a position to fully own Indian airlines, do not control the management of Indian airlines. The amendment aims to boost foreign Investment to ease the process of doing business in India and also, ensures the involvement of the government to keep a check in case the investment is beyond 49%.

4. Foreign Investment In M/S Air India Ltd.

The Regulations, 2018 deletes Note 3 from SL.No 9.5 of regulation 16.B which stated that the policy mentioned at 9.5(c) above is not applicable to M/s Air India Limited.[7] The regulation 2018 permits the foreign investment in M/s Air India and inserted clause (d) in SL.No 9.5, after clause (c). The regulation lays down certain conditions with respect to investment in M/s Air India which are as follows-

• Foreign investment in M/s Air India Ltd., including that of foreign airline(s) shall not exceed 49% either directly or indirectly.
• Substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian Nationals.[8]

Analysis of the Amendment Regulation

M/s Air India is the national Carrier of India which has always received preferential treatment. There have been various reasons like regulation of price, security standards, public interest which has always refrained government from privatizing Air India. It is to be noted that United Kingdom and Australia have been successful after privatizing their national carrier. The amendment seeks to privatize M/s Air India so that it can enable from the debts of crores of rupees. Since, Note 3 from SL. No. 9.5 has been removed; the added clause (d) is subject to the conditions laid down in clause (c) and allows the Indian Nationals to have substantial ownership of Air India so that the risk to lose the management of the National Carrier is avoided.

The use of the word “Directly and indirectly” ensures that the foreign investment does not exceed the limit of 49% either by investing directly in M/s Air India or by indirectly investing in an entity which invests in M/s Air India. Foreign investors and foreign Airlines are permitted to invest in Air India but the amendment ensures that the effective control still remains with Indian Nationals to avoid any kind of future conflict of interest and also its smooth functioning. The essence of the amendment is to attract foreign investment in Air India but foreign entities usually refrain from investing in a sector where the government has a role to play.

5. Foreign Investment – Real Estate Broking Services

The Principal Regulations through SL. No. 10.2 of regulation 16.B stated the “other conditions” with respect to foreign investment in Construction Development: Townships, Housing, Built-up infrastructure. The Amendment Regulations, 2018 inserts Note 7 in SL. No. 10.2. Foreign investment is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights.[9] Real Estate Business has been defined under the Principal Regulation as

“dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships”[10]

Analysis of the Amendment Regulation

In India Foreign Investment is not permitted to invest in an entity investing in the Real Estate business. The restriction is imposed to avoid all such risks which can result in the control of Land of Indian Territory by an outsider. No country in the world can allow foreign entity to control its land. The amendment also, avoids the risk of prize escalation of land which can be one of the consequences of FDI in an entity investing in Real Estate Sector (Land). The regulation 2018 excludes Real Estate Broking services om the “Real Estate Sector” and permits Foreign Direct Investment up to 100% in the Real Estate Broking Sector through the Automatic route. Real Estate Broking Service is where a company or an individual is engaged in buying and selling of an immovably property.

The relaxation granted to the Real Estate Broking Sector is to boost the Real Estate sector. Broking services are different from Real Estate Business therefore the risk of controlling the Indian Territory by the outsiders remains out of the picture. It will further result in the registration of property brokers in India under RERA 2016.

6. Foreign Investment- Single Brand Product Retail Trading

(E-Commerce)

• As per the SL. No. 15.3 of the Principal Regulations 16.B, allows FDI up to 49% through automatic route and beyond 49% and up to 100% is permitted through government route. The Amendment Regulations 2018, amends the provision by substituting “Automatic up to 49%; Government route beyond 49%” with “Automatic”.

Analysis of the amendment Regulation

Single Brand Retail trading is to sell goods to the customers with the same brand name. Removal of investment through government route will also increase the competition among Indian entity and will attract the investment in production and marketing area. The amendment will provide more options to the customers in India. Participation of foreign players will boom the Real Estate Sector of India.

• L.No. 15.3.1 of 16.B of the Principal Regulation states other conditions with respect to Single Brand Product Retail Trading. Clause (d) of the SL. No. 15.3.1 has been amended and now, it excludes the requirement of license agreement between the investor company and the brand owner.

Analysis of the amendment Regulation

The amendment has relaxed the procedure by removing the requirement of “The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/ franchise/ sub-licence agreement, specifically indicating compliance with the above condition. The requisite evidence should be filed with the RBI for the automatic route and the Government for cases involving approval.”[11] The removal of the specified requirement implies that now, there is no need to file evidences with RBI for the investment through Automatic Route; the foreign entities can directly invest through automatic route. This definitely has eased out the procedure of doing business.

• In SL. No. 15.3.1 clause (g) and clause (h) which dealt with the requirement of application seeking permission of the government for foreign investment exceeding 49% and the requirement to process the said application by the Department of Industrial Policy has been deleted and a new clause (i) has been inserted. The new clause states that for the initial five years, incremental sourcing by overseas companies, including their group companies for the specific brand will count towards the mandatory 30% local sourcing commitment.

Analysis of the amendment Regulation

The amendment has changed the scenario of local sourcing requirement. Incremental sourcing is outsourcing from the other country, in the beginning a small part is outsourced and with the time the outsourcing increments. The principal regulation mandated the requirement of 30% local outsourcing from India for the foreign brands to invest from the beginning. The amendment has relaxed the procedure and it states that for initial 5 years incremental sourcing will count towards the requirement of 30% local outsourcing from India. The removal of the stringent regulation has been demanded by the foreign entities from a long time. The removal of the requirement will surely boost the investment in single brand retail trading in India.

• The Amendment Regulations 2018 also deletes Note 2 and Note 3 from SL. No. 15.3.1 and added Note 5 in Principal Regulations. The deleted Note 2 stated that the Indian manufacturer is permitted to sell its own branded products and Note 3 which mandated that Indian manufacturer would be the investee company, which is the owner of the Indian brand and which manufactures in India, in terms of value, at least 70 percent of its products in house, and sources, at most 30 percentfrom Indian manufacturers.

Analysis of the amendment Regulation

Under the principal regulation to qualify as the Indian Manufacture an entity has to manufacture 70 percent of its products in house, and sources, at most 30 percent from Indian manufacturers.[12] The amended regulation has removed this requirement from the Principal Regulations 2017. The amendment will allow foreign investment in case the Indian Manufacture could not meet the requirement stated in Note 3 of Principal Regulation. Now, the Indian Manufacturer can obtain FDI and wholesale, retail, including through e-commerce platforms.

The Amendment Regulations 2018 through the addition of Note 5 requires a committee to relax the procedure where the local sourcing is not possible which will enhance the foreign investment by allowing foreign investment without meeting the criteria of local sourcing and will bring wide options for the customers in India. It is definitely a great step by the Indian government to boost the Retail Industry. Note 5 also state the composition of the committee to be formed under the Chairmanship of Secretary, DIPP, with representatives from NITI Aayog, concerned Administrative Ministry and independent technical expert(s).[13] The amendment ensures that foreign brands could easily incorporate wholly owned subsidiariesIndia to undertake SBRT, without tying up with any local Indian partner.

7. Significance of The Word ‘Disability’

The Regulation 2018 replaces the word ‘handicap’ with ‘disability’ in SL. No. 16.3 in Note 2, in clause (a) and in sub-clause (ab) of clause 16.B of the Principal Regulations. Disability represents diversity and is a politically correct and respectable word to be used by the Indian Legislature. Handicap is never considered a positive word while the use of the word disability gives importance to an individual who is disabled.

8. Foreign Investment – Pharmaceutical Sector

SL.No. 16.3 deletes the Note 3 which stated that the definition of “medical device” is subject to the Drugs and Cosmetic Act.The amendment has widened the definition of medical devices which will lead to the increase of investment in pharmaceutical department. The amendment implies that the definition stated in the Principal regulation is complete and making it subject to Drugs and Cosmetic Act will restrict the scope of the definition of medical device.

9. Foreign Investment- Power Exchange

The Amendment Regulations 2018 deleted clause (a) from F.6.1 of schedule 1, which stated that Foreign Portfolio Investor can only invest through Secondary Market Route which implies that FPI can also invest through Primary Market.

Analysis of the amendment Regulation

Foreign Portfolio investment is a short term investment without aiming to control the business by the non resident of India unlike the aim of the FDI which is to establish long interest in the economy. FPI aims investment in shares, government bonds, and corporate bonds. FPI were restricted, to invest only through secondary market but after the amendment the restriction has been relaxed.

Investment through primary market means to invest directly in the stocks, bonds, shares of a company while investment through secondary market is investing, after the company had sold out all its bonds, stocks and shares through primary market. Initially to avoid any circumstance of direct control by the foreign investors in the Indian entity government restricted FPI only through secondary but now, to ease mobilization of funds and welcome better technology, restriction from primary market has been relaxed.

10. Purchase/ Sale of Capital Instruments of an Indian Company by a Person Resident Outside India

• The Regulation 2018, deleted Para 1 (6) from schedule of the Principal Regulation and has amended Para 1 (4) which allows an Indian entity to issue a capital instrument as a consideration through automatic route and through government route. The entity is supposed to comply with the conditions prescribed by the government and /or RBI. In case of government route, its mandatory for the entity to receive permission of the government. The amendment allows an Indian entity to issue capital instruments against:

1. Swap of capital instruments; or
2. Import of capital goods/ machinery/ equipment (excluding second-hand machinery); or
3. Pre-operative/ pre-incorporation expenses (including payments of rent etc.).

Analysis of the amendment Regulation

Schedule 1 of the Principal Regulations dealt with the Purchase/ Sale of capital instruments of an Indian company by a person resident outside India. As peer principal regulation an Indian Entity could issue securities against swap of Capital Instrument engaged in an automatic route sector. While the issue of security by an entity engaged in government route required prior permission of the government and it could be issued against Swap of capital instruments, Import of capital goods/ machinery/ equipment (excluding second-hand machinery) or Pre-operative/ pre-incorporation expenses. The amendment aims to issue of security by the Indian entity against Swap of capital market which is the exchange of financial instruments or against import of goods/machinery/equipment from foreign suppliers or against Pre-operative/ pre-incorporation expenses which is the expense incurred by the company before its incorporation/ expense incurred before it became operative by an entity engaged wither in automatic route or government route provided that the entity engaged in the government route should obtain prior permission of government.

In the principal regulation Indian entity issuing capital instrument engaged in government route could have issued against swap of capital instrument and Import of capital goods/ machinery/ equipment (excluding second-hand machinery) or swap of capital instrument and Pre-operative/ pre-incorporation expensesbut in the amendment regulation it can be issued against Swap of capital instruments; or Import of capital goods/ machinery/ equipment (excluding second-hand machinery); or Pre-operative/ pre-incorporation expenses (including payments of rent etc.).

The amendment has relaxed the procedure for an Indian entity to issue capital instrument engaged in both automatic route and government route. Import of second hand – machinery has been excluded in order to promote the reuse of machinery in the country for being green and clean.

• All the amendments mentioned above have been included in the Principal Regulations brought up by the RBI on 6^th of April 2018 by the Notification No. FEMA 20(R)/2017-RB. It is yet to be seen, the impact of the amendments in the future but the step to liberalize the various sectors of the Indian Economy is a great step taken by the Indian Government. The essence of all these amendments lies in the fact that the control of Indian Nationals over the important sectors still remains intact.

References

[1] The Foreign Exchange Management Act 1999, s 47

[2] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations 2018, reg 2(i)

[3]‘Frequently Asked Questions; All you wanted to know about NBFCs’ (Reserve Bank India, 10 January 2017). https://www.rbi.org.in/Scripts/FAQView.aspx?Id=92 accessed 13 June 2018

[4] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16 (A) (1)

[5]Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations 2018, reg (2) (iii)

[6] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL.No.9.5, cl (c)

[7]Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL.No.9.5, Note 3

[8]Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations 2018, reg (2) (xii)

[9] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL.No.10.2, Note 1

[10] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL No. 10.2, Note 6

[11] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL.No.15.3.1 cl (d)

[12] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL.No.15.3.1, Note 3

[13] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations 2018, reg (2) (xii)

The post Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2018 – Key Highlights appeared first on iPleaders.

This article is written by Kashish Khattar, a 4^th Year B.A., LL.B. (Hons.) student at Amity Law School in New Delhi. The article is a discussion about the Dodd-Frank Reforms, their effects and the recent rollback of certain provisions of the Dodd-Frank under the Trump Administration.

Introduction

The Dodd-Frank Act (or the Dodd-Frank Wall Street Reform and Consumer Protection Act) (“DFA”) is a United States Federal Law that places regulation of the financial industry in the hands of the government. This was passed under the Obama Administration in effect to the aftermath of the Great Recession of 2008. Named after U.S. Senator Christopher J. Dodd and U.S. Representative Barney Frank, the Act is expected to reduce various risks in the U.S. financial system. Enacted in July 2010, it creates financial regulatory processes to limit risk by enforcing transparency and accountability. The 2300 paged financial reform creates a number of new government agencies, like the Financial Stability Oversight Council and the Consumer Financial Protection Bureau etc.

Let us also try to understand the concept of “Too Big to Fail” institutions in the economy, the business has become so large and influences so many spheres of the economy that the government will have to step in and help bail it out of financial troubles. However, this kind of a bailout would only make sense to the government if the cost of bailout is less than the ripple effects that would be created if the business fails. The DFA is an action plan of the US Government to avoid Future Bailouts. A part of the act requires the financial institutions to create living wills explaining how they would liquidate assets if they have they have to file for bankruptcy.

Main Features of the DFA

Basically, this law puts strict regulations on lenders and banks in an effort to protect consumers and prevent the economy from an all-out recession. Dodd Frank creates several new agencies to oversee the regulatory process and implement certain changes. It has 16 major reforms ranging from the Insurance sector to the Corporate Governance sector. The main provisions are as following:

1. Consumer Safeguards – The Act creates a new Consumer Financial Protection Bureau (“CFPB”) under the Federal Reserve. The CFPB is responsible for consumer financial education, creating financial curriculum and making it available to the public. It is mainly made to protect the public from scams, and to ensure that quality services are being provided to the general public.
2. Volcker Rule –  Named after Paul Volcker, he was the chairman of the Federal Reserve under President Carter and President Reagan, and chairman of the Economic Recovery Advisory Board under President Obama. The Volcker Rule is clearly a push in the direction of the Glass-Steagall Act of 1933 which had recognized the dangers of the entities extending commercial and investment banking services at the same time. The Volcker Rule mainly prohibits the banks from making risky short-term trading of securities, derivatives and commodity futures for their own benefit and it also prohibits banks from investing in private equity and hedge funds from their own accounts. Further, it also prohibits banks from converting their charter to avoid enforcement actions by the authorities.
3. Federal Reserve Reforms – The DFA restricts the emergency lending authority of the Federal Reserve by the following provisions: a. Prohibiting lending to an individual; b. Prohibiting lending to insolvent firms; c. Requiring approval of lending by the Secretary of Treasury; and d. Requiring sufficient collateral for all and any loans protecting taxpayers from losses. Further, the DFA imposes greater transparency on the Federal Reserve by requiring it to disclose all terms and conditions of an emergency lending situation on a regular basis. The DFA also directs an audit of all emergency lending administered by the Reserve at the time of the Crisis of 2008.
4. Every bank who has more than $50 billion of assets must take an annual stress test given by the Federal Reserve, which will help determine if that institution can survive a financial crisis in the future.
5. The Financial Stability Oversight Council (“FSOC”) is created to mainly oversee banks and financial firms like hedge funds whose failure could impact the whole financial system of the country. The main goal of the FSOC is to build a better future and rule out the option of any future government bailout. It is typically an early warning system, which will identify the threats looming the economy and try to respond to them through various reforms. The FSOC reforms can range from (i) breaking up banks that are considered too large; (ii) reducing their lending and investing capacities to requiring banks to provide contingency plans for a quick; (iii) orderly wind up of their business if they become insolvent; and (iv) providing for restructuring of banking companies which are not doing so well.
6. The Consumer Financial Protection Bureau (CFPB) protects consumers from the corrupt business practices of banks. This agency works with bank regulators to stop risky lending and other practices that could hurt American consumers. It also oversees credit and debit agencies as well as certain payday and consumer loans.
7. The DFA also implements a series of mortgage reforms to protect the customers. The DFA has a provision which talks of regulating derivatives such as credit default swaps which are deemed to be the culprit in the recent financial crisis of the country. The problem with these credit default swaps is that they are traded over the counter, with little to no regulation. This makes it practically impossible to know what kind of a market do these swaps have and hard to predict the risks involved in this specific market. The DFA sets up a centralized exchange for swap trades to reduce the risky nature of the counterparty default and also requires greater disclosure of the information related to the trade.
8. The Office of Credit Ratings ensures that agencies provide reliable credit ratings to those they evaluate. The DFA established an SEC Office of Credit Ratings as credit rating agencies were accused of giving misleadingly favourable investment ratings which contributed to the financial crisis of 2008. The office now has the job of ensuring that agencies will improve the accuracy of their ratings and maintain a standard and reliable method in the credit ratings business.
9. A whistle-blowing provision in the law promotes any person to come up with information about violations to report it to the government for a financial reward. The DFA mainly expanded the existing whistleblower program promulgated by the Sarbanes-Oxley Act (SOX). This Act focused on (i)  establishing a mandatory bounty program where the whistleblowers can receive about 10-30% of the proceeds from a litigation settlement; (ii) broadened the scope of a covered employee by extending the ambit of definition of the employee and including employees of the company, its subsidiaries and affiliates; and (iii) extending the statute of limitation where a whistleblower can now bring forward a claim against his employer in 90-180 days after the discovery of such violation.

Critical Analysis

It is also believed that the act takes away the competitiveness of the US Firms relative to their foreign counterparts. The compliance requirements are huge even in the case of smaller financial institutions and banks even when they had no role to play in the 2008 crisis. The institutions may be safer, but the constraints made up by the DFA has made a more illiquid market. The reserve requirement as established by the DFA is high, which typically means banks have to keep a higher percentage of their assets in cash which in turn affects their investments in the marketable securities. The critics believed that the DFA will ultimately hurt economic growth. It is also said to be a highly expensive regulation because of the compliance burden and the new regulators it creates.

Was the Dodd-Frank Act successful?

The Dodd-Frank was unsuccessful in a lot of avenues. The banks are still believed to be gambling with the FDIC-insured money. There has been no change in casino speculation of the Wall Street banks. There is still no curb in derivatives trading, which was the key loophole which leads to the financial crisis. Nobody has gone to jail. There have been so many examples of criminal behaviour during the meltdown, but not one megabank executive has gone to jail. Reform of the credit rating agencies is still a long way home. Fannie Mae and Freddie Mac have not been fixed, even one can be sure that they had a part to play in the crisis. It has to be evaluated considering both the sides of the situation. The US economy needed a law like Dodd-Frank to be risk-averse towards the next financial crisis. It did make the Wall Street more cautious about taking risks. The Volcker rule for small banks was seen as a regulatory burden towards them.

Partial Roll Back of the DFA

On 24 May 2018, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (“Act”) into law which reforms a lot of provisions of the DFA. As a result, only 10 biggest US banks have to now comply with the DFA. The changes executed through this Act mostly affect the small banks and not the large banking institutions of the country. The changes can be explained under the following heads:

1. Exemption of Small Banks from the Volcker Rule: Banks with less than $10 billion in assets that have total trading assets and trading liabilities accounting for 5% or less of the total assets and affiliates of such banks will be exempted from the Volcker Rule, which would help decrease the compliance requirement put up on these banks. Further, the Act removes a Volcker Rule limitation that prohibits a bank-affiliated investment advisor from using its name on hedge funds and private equity funds.
2. Reduction of Regulatory Burdens for all banking institutions: The Act rules out the need for banking companies with less than $250 billion in assets to comply with most aspects of “enhanced prudential standards” as defined in the DFA. The limit defined by the DFA was $50 billion in assets which was deemed to be too low by the standards of too big to fail institutions.
3. The other features of the Act include easing up mortgage loan data reporting requirements for the majority of banks, add safeguards for student loan borrowers and also include credit reporting companies to provide free credit monitoring services.

What are the expected long-term implications of the partial roll back of the Dodd-Frank Act?

The long-term implications of such a massive rollback of the DFA is clear. The Congress took away the teeth of the regulation and left it to monitor just the 10-12 big Banking institutions of the United States. It relaxed rules for around 25 banking institutions of the 38 biggest banking institutions that control 1/6th of the assets of the United States. The law loosens up on a lot of regulations that are important for stability, such as living wills, enhanced capital requirements and the stress test. There are a couple of loopholes in the law which will primarily help the largest players in the sector and also U.S. subsidiaries of foreign banks in the way forward. The limit could have been around $75 billion to $125 billion, but the $250 billion mark can be seen as really aggressive. The popular opinion that the community banks will get a lot of relief is untrue, they have been quite unprofitable in the present times. Their disappearance can be attributed towards their consolidation in medium or lower sized banks. The law dilutes most of the stringent regulations imposed, it makes things simpler for small and medium U.S. banks. It basically makes them more profitable and eases regulations for them to do business. The law only regulates bank which has assets amounting to $250 billion or more. The long-term implications can be dangerous because the banks with assets between $50 billion to $250 billion had a role to play in the crisis of 2008, as stated by the communications director of a non-profit coalition of organisations advocating for financial regulation. At the moment, it is too soon to figure out the long-term implications of this roll back can benefit the customers.

China’s very own Dodd-Frank

The Chinese regulators have introduced a new major regulation which is being termed as Beijing’s Dodd-Frank Act. This Act mainly tries to limit the shadow banking activities in light of President Xi Jinping’s call to reduce financial risks in the country. It is expected that around $15 Trillion or 100 trillion yuan will fall under the purview of this regulation. The regulation has been jointly drafted by the People’s Bank of China and China’s banking, securities and insurance regulators. The new regulations are a ministerial-level set of rules but they are expected to have a lasting impact on China’s financial world, drawing a parallel to the Dodd-Frank Act and its impact on the US Economy.

The draft legislation can put an end to China’s extraordinary financial market by restricting what the financial institutions can offer and what all can be bought by the investor in this market. A qualified investor is expected to have 5 mn yuan in family financial assets or should have earned more than 400,000 yuan a year for three consecutive years. The financial institutions will not any promises on returns and have to set aside 10% of their fee as risk reserves. The regulations are mainly expected to affect wealth management products which are offered online. The new rules aim to handle excessive leveraging in China’s non-financial banking sector with individual leverage limits to be set on asset management products. The rules are expected to cap the total assets to net assets ratio to 140% for mutual funds and 200% for private funds.

India’s take on the Dodd-Frank reforms

RBI decided to adopt the global best practices related to banking and came up with their own Framework for Dealing with Domestic Systemically Important Banks. (“D-SIBs”). There are only three banks that have been listed under this category. They are SBI, ICICI Bank and the HDFC Bank. SIBs are basically perceived as banks that are ‘Too Big to Fail’. This creates an expectation of government support at the time of distress. India, at present, has 3 too big to fails banks, they are mainly subject to a greater scrutiny than their peers and will always need to set aside a higher capital because the inclusion in this kind of a list gives them a premium status with regard to the other banks. It is perceived that these banks have direct support from the regulator and the government. Typically, the government will always throw them a lifeboat if ever such a need arises. There is enough evidence that the RBI and the Government never allow a bank to wind down irrespective of the hardships it is facing. The most recent example can be the Recapitalisation of Public Sector banks by the government. The government has already started thinking of consolidation of public sector banks, it is expected that despite these banks being hit by bad loans the lenders will be merged instead of being wound down.

Conclusion

The financial crisis was mainly due to the low regulation and trusting the large firm’s banks in the country who were too big to fail. The Dodd-Frank Wall Street Reform Act was the most comprehensive financial reform since the Glass-Steagall Act. The main objective of the Dodd-Frank Act was to regulate these large banks and firms who could have a major impact on the economy in a more stringent manner. President Trump approach towards easing the regulation of the DFA was clear, he will do whatever the business wants. He was a supporter of the real economy, which built things. President Trump had promised in his campaign trail, the revival of the Glass-Steagall Rule which separates investment banking from commercial banking. Nothing has been done of the sort, till now. The DFA roll back also concentrated on the provisions regarding the small banks and nothing which relates to the big banking institutions of the country.

Quoting from a Vox Article – “And the nature of bank regulation is that even when it’s done really, really poorly, the odds are overwhelming that on any given day, nothing bad is going to happen. As long as the economy is growing and asset prices are generally rising, a poorly supervised banking sector is just as good as a well-supervised one. But when the music stops, and it always does, a poorly supervised banking sector can turn into a huge disaster. It’s only a question of when.”

Only the time will tell, how this presidency will reform the banking regulation to make it more resilient towards a financial crisis.

The post Dodd-Frank Wall Street Reform Explained appeared first on iPleaders.

This article is a discussion about cancelled Cheque and the various questions surrounding the issue. Kashish Khattar is a 4^th Year B.A.LL.B. (Hons.) student at Amity Law School in New Delhi.

What is a cancelled Cheque?

A cancelled cheque is a cheque bearing the account holder’s name, account number and has CANCELLED inscribed across it.

A lot of times employers, banks or various establishments may have asked you for a cancelled cheque.

Why do they ask for it? What’s the purpose?

If you are a curious fellow like me you must have wondered about this at some point. Let’s address this.

Should you sign a cancelled cheque?

You just have to cancel cheque by drawing two parallel lines over it and writing “cancelled” in between the lines. You should NEVER sign on a cancelled cheque. You should ABSOLUTELY make sure that the person or institution to whom you are handing over this cancelled cheque of yours is highly reliable.

Details given out by such a Cheque

1. MICR CODE – MICR or Magnetic ink character recognition, it is a  9 digit code which has the name of the bank, the specific branch and the area code it is situated in.
2. IFSC CODE –  Indian financial system code, better known as IFSC, is 11 characters alphanumeric code mentioned on the cheque which assists the bank in providing services like the NEFT or RTGS.
3. The name of the Account Holder, Account Number and the Name of the Bank.

Where is it needed?

Following are some areas in our life where the cancelled cheque would be needed:

1. Bank account opening – When you open a savings or current account with a bank, you would have to submit a cancelled cheque to complete the account opening process.
2. KYC – Know your customer (KYC) is very essential for a lot of investments these days. KYC is needed for mutual funds, stock investments, etc.
3. ECS – Electronic clearing service (ECS), which is used for deducting money from your accounts every month also require a cancelled cheque.
4. EMIs – Different types of loans have EMI (Easy Monthly Installments) payments. EMIs are also applicable to purchase of mobiles, televisions, or any kind of tangible property for that matter. To complete the process of assigning EMIs, the bank or the company financing the EMI likes to ask for a cancelled cheque.
5. EPF withdrawal – Withdrawal from Employee Provident Fund (EPF) account would require a form and a cancelled cheque. These need to be submitted to the EPFO or the organisation you are currently you are employed in. This basically helps in validating your account details.
6. Insurance policy – When you purchase an insurance policy like term, endowment, money back, health, etc, you need to submit a cancelled cheque to the organization or agent.
7. Demat account – A demat account is needed for any person who wants to trade or invest in stocks. A cancelled cheque needs to be submitted to the stock brokerage along with the account opening form, ID proof, address proof, etc.

These are the alternatives to cancelled blank cheques for confirming MICR and IFSC for an account

1. Photocopy of the first page of the Passbook.
2. Copy of your account statement.
3. Many organization accept the photocopy of a cheque. Alternatively, you can scan a copy of one cancelled cheque and use it again and again whenever the need arises.

When should you refuse to give a cancelled cheque?

It depends upon the policy of the organisation, as to accept the cancelled cheque in what form. You should always ask for a letter or an email of their demand for this cancelled cheque. This is done for your own safety as this letter or email can be used as evidence in the court of law if such need arises.

In what ways could your cancelled cheque be misused?

A cancelled cheque has no monetary value, there have been reports of its misuse. Therefore, before handing over a cancelled cheque you should inquire if a photocopy or scanned copy of the cheque, or the first page of the passbook is acceptable as it is only required for your verification.

Does the picture of a cancelled cheque suffice for KYC in some cases?

It mainly depends upon the policy of the respective organisation you are submitting and can only be answered by them. Most of them should agree to accept a picture of a cancelled cheque because after all it is just needed for the purpose of verification.

Conclusion

A cancelled cheque does not require your signature at any point. Fraud relating to these cancelled cheques are not unheard of. Hence, the authority you are handing over this cheque should be extremely trustworthy and it should make sure that it would not fall into the wrong hands.

Cancelled Cheque

The post 7 Most Commonly Asked Questions on Cancelled Cheques appeared first on iPleaders.

I have been applying for jobs since my graduation in 2013! I have lost count of how many jobs and internships I have applied to. I literally have lost count. I did not have any marketable skills like drafting skills when I graduated.Thanks to the convenience of job portals and email options, I must have applied to numerous jobs. There have been countless rejections, most went without any response whatsoever. I don’t know which one bothered me more; the outright automated rejection or, the silence spreading over weeks before the realisation sets in.

The point is, being an avid job applicant (maybe this could go under my hobbies section some day), I have gone through a lot of job profiles prior to applying for them. With the passing years, the requirements have changed and become more specific. For instance, if the role is for a corporate law firm, they are generally looking for a specialist in M&A, PE, VC, etc. If it is for a TMT or Banking role, they are looking for significant experience in the industry.

This makes sense to an extent. Why not hire someone who already knows the role and the industry, rather than investing time to train them?

But apart from the varying specifics, there are some constant requirements too. These are the skill-sets like drafting, understanding litigation, advisory, etc. And amongst them, drafting undoubtedly remains the most common skill set.

Imagine, what if law schools taught us drafting in a more detailed manner? Considering that it is the most sought after skill set, maybe we should have started learning it from day one at law schools. But most of us did not, did we?

So why is drafting the most sought after skill set?

Drafting is an essential skill set for lawyers and law students alike. Lawyers have to draft plaints, petitions, applications, opinions, variety of contracts, etc. The language of such documents has to be simple, precise and on point. Most people including the laymen, cannot comprehend the legal jargon at all. Therefore, their only resort are lawyers.

The lawyers are trained to comprehend not only the laws, but all legal documents, like complaints, contracts, plaints, etc. The knowledge of law coupled with the ability to understand complex documents is a much desired skill set.  

But if law schools are not teaching drafting skills like litigation related drafting or contract drafting, then what should law students do? There are sample drafts available on the internet or one may do a contract drafting course to learn the practical aspects of the subject matter.

Drafting skills make a huge impact in the formative years for a lawyer. It is literally the bread and butter of all lawyers. The nature of drafting may vary but the impact is huge in any case.

# Supplementary income

The freshers or relatively new lawyers, usually in litigation, face financial uncertainty. Unless one comes from a legal background, it is difficult to sustain in the legal profession. This is where a lawyer’s resourcefulness and perseverance comes in handy. As a junior lawyer, I used to make negligible money compared to my counterparts in corporate or in-house roles. There were a lot of matters and running from courts to conferences and back was involved, but the money was only trickling through.

The practice in Indian legal scenario is mostly of the junior advocates having the privilege of assisting the seasoned lawyers, in lieu of their services. The newer lawyers have to be trained for years by the seniors, therefore to some it may seem a fair trade-off. But the reality of a situation is that money is needed for recurring expenses of the junior lawyers. Unless you have a generous senior, chances are you have to get creative to supplement your income.

This is where drafting skills of a lawyer can help them out. Most of my peers used to draft affidavits, applications, legal notices, complaints, etc. in their initial days, before moving on to plaints, petitions, etc. They used to also draft employment agreement, sale deeds, non-disclosure agreements, leave and license agreement, rent agreement, etc. to make extra income.

# Building practise through repeat clientele

In litigation or corporate law firms, clients are the most important factor as they bring in the business. Without clients, lawyers will literally be jobless. But how do you build a clientele? In my limited experience, I have seen how small acts add to a the bigger picture.

Recently, I had the opportunity to advise a startup duo on their business model. We met due to my younger brother. They started talking about their product to me as soon as my brother mentioned that I was a lawyer. They wanted to know how to best protect their interests. We had a detailed conversation about their possible options and then we all moved on.

A week later, one of them contacted me saying they are going for a soft trial launch with an institute and would like me to draft a suitable agreement to protect their product. I read up on it as I did not have much hands-on experience. After a week of consulting other experts, I drew an agreement and gave them. Then I forgot all about them. After about three weeks or so, I got another call saying they want me to help them register their company! I advised them regarding the kind of company they should register themselves as and connected them to the right people for the task.

What started as an off-hand conversation and discussion led to a favour and the client kept coming back for their legal needs. Once the trust is developed, even from a timely advice or drafting, usually the client will come back to you for the related work. So don’t underestimate the power of drafting. It can set you up with repeat clientele and more from word of mouth. You can build your reputation and business on the back of solid drafting skills. Just learn what you must and get on with it.

# Acquiring marketable skill sets

Check out any job profile for a lawyer on any website or job portal. You will find drafting skills as one of the top-most desired skill set. If you ensure that you learn litigation drafting or contract drafting, you can build an enviable practise.

In litigation, the drafting varies from other kinds of drafting. But there is never a dearth of clients looking for an affidavit, opinion, advise, application, or complaint. Sometimes there are dispute resolutions, settlements, and arbitrations that arise out of the said drafting.

Also in case of contract drafting, two more skill sets are interlinked: negotiation and dispute resolution. These skill sets are well desired in corporate or in-house lawyers as well. The one who is drafting the contract, is generally the one negotiating the same for their clients. They have to literally fight tooth and nail, to get their clients what they want or best need.

The lawyer who has drafted the contract, is also the one to whom the clients will go in case of a dispute. The lawyers insert the dispute resolution mechanism in a contract for potential disputes. Therefore, when it comes to resolving the said disputes, they are the first ones to be sought out by the clients.

These skills sets of drafting, negotiation, and dispute resolution are much desired by lawyers, in order to acquire marketable skill sets. These skill sets help to build one’s career with solid foundation. You know as a lawyer that drafting skills are quintessential towards building a solid career in litigation or as corporate or in-house lawyer.

All the other skill sets of arguing a case, negotiating a contract, dispute resolution – all come from the drafting. If the legal document is lacking in any way or form, the related skill sets will have to work in overdrive to salvage the same. But with good drafting skills, half the battle is won.

Therefore, learning drafting skills in the formative years is essential, towards building a lasting legal career. You may opt for contract drafting course to learn more about the variety of contracts, their drafting, negotiation, dispute resolution, or go the longer route and do it on your own. But don’t stop developing this skill set for it is necessary for the entirety of your legal career.

Good luck!

The post Why Drafting Skills Make A Huge Difference in The Early Years of Your Career appeared first on iPleaders.

In this article, Kashish Khattar of Amity Law School, Delhi discusses the RBI’s Guidelines related to Payment Banks.

Introduction

Payment Banks (“PB”) are to be registered as public limited companies under the Companies Act, 2013 and are to be licensed under Sec 22 of the Banking Regulation Act, 1949. PBs are to be given the status of scheduled banks under the section 42 (6) (a) of the Reserve Bank of India Act, 1934. However, the words “Payments Bank” have to be used by the companies in their name in order to differentiate it from other banks.

They will be governed by the provisions of the Banking Regulation Act, 1949; Reserve Bank of India Act, 1934; Foreign Exchange Management Act, 1999; Payment and Settlement Systems Act, 2007; Deposit Insurance and Credit Guarantee Corporation Act, 1961; and other relevant Statutes and directives. The guidelines will be reviewed by the RBI regularly. RBI’s main aim to push for payments bank is to serve the need of different banking activities in the rural areas. This has both micro and macroeconomic benefits and serves the general public at large.

History of Payment Banks

RBI on 23rd September 2013 constituted a committee on Comprehensive Financial Services for Small businesses and Low-Income Households that was headed by Nachiket Mor. The committee submitted its report on 7th January 2014 and also recommended the formation of a new category (Payment Banks) among its other recommendations.

Draft guidelines for the license of Payment Banks and their list were released by RBI in February 2015. The license applications were evaluated by External Advisory Committee headed by Nachiket Mor who submitted its report on 6th July 2015 after examining the financial track record as well as governance issue on applicant entities.

On 19th August 2015, RBI gave the in-principle license to 11 entities to launch Payment Banks. The In-Principle License is valid for a period of 18 months and the concerned entities are required to fulfil entities are required to fulfil all the requirements within this period. They are not allowed to engage in Banking activities in this period. After the fulfilment of all the conditions which are required to set up a Payment Bank, RBI will grant licenses under S. 22 of the BR Act, 1949.

The advantage of Payment Banks over Traditional Banks

1. Interest Rates: The interest rate for a commercial bank is between 3.5 and 6 per cent. Payment banks are offering a really good deal in the case of interest rate with the highest being a 7.25%. Payment banks have a statutory limit of Rs. 1L per account from individuals and small businesses.
2. Zero balance account: Payment banks offer a zero balance account or a no minimum balance account without any extra or hidden charge, unlike a commercial bank who levy charges if the customer doesn’t hold a minimum balance in their account.

Small Banks v. Payment Banks

Guidelines for Licensing

Let us now analyse the guidelines for licensing of PBs issued by the RBI to govern the PBs.

The scope of Activities

1. Acceptance of demand deposits: A maximum balance of Rs. 1L per customer is allowed.
2. Issuance of ATM/debit cards. Cannot issue credit cards.
3. Payments and remittance services through various channels.
4. PBs can act as Business Correspondents (“BCs”) of another bank, subject to the Reserve Bank guidelines on BCs.
5. Distribution of non-risk sharing simple financial products like mutual fund units and insurance products, etc.
6. Internet Banking: RBI is open to PBs offering Internet Banking services, they are required to comply with RBI instructions on internet banking and all the other related guidelines.
7. PBs can undertake utility bill payments etc. on behalf of its customers and the general public.

Deployment of Funds

1. PBs cannot undertake lending activities.
2. Apart from amounts maintained as Cash Reserve Ratio (CRR) with the RBI on its outside demand and time liabilities. PBs are also required to invest minimum 75 per cent of its “demand deposit balances” in Statutory Liquidity Ratio (SLR) eligible Government securities/treasury bills with maturity up to one year and hold maximum 25 per cent in current and time/fixed deposits with other scheduled commercial banks for operational purposes and liquidity management.

Capital requirement 

1. The minimum paid-up equity capital for payments banks shall be Rs. 100 crore.
2. The payments bank will have a leverage ratio of not less than 3%  which basically mean that its outside liabilities should not exceed 33.33 times its net worth (paid-up capital and reserves).

Promoter’s contribution

The promoter’s minimum initial contribution to the paid-up equity capital of the payment bank has to be at least 40% for the first five years after the commencement of business.

Foreign shareholding

It will be according to the FDI Policy for private sector banks which is notified from time to time. The permitted limit right now is 74% out of which 49% can be through the automatic route and the remaining 25% beyond 49% will be through the government route.

Other Conditions

Operations have to be technology and network driven from Day I. Conforming to generally acceptable standards is a given.

PBs should have a Customer Grievances Cell which is able to handle the customer complaints.

Procedure for Application

Applications should be in conformity with Rule 11 of the BR (Companies) Rules, 1949. They should be in the format as given in Form III and should be submitted to the Chief General Manager, Department of Banking Regulation, Reserve Bank of India, 13th Floor, Central Office Building, Mumbai – 400 001.

Procedure for RBI Decisions

1. An External Advisory Committee (EAC) which will consist of eminent professionals like bankers, chartered accountants, finance professionals, etc., will evaluate the applications.
2. The decision to issue an in-principle approval for setting up a PB will be taken by the RBI. The RBI’s decision in this regard will be final.
3. The validity of the in-principle approval issued by the RBI will be 18 months.
4. The names of applicants for bank licences will be placed on the RBI’s website.

Stringent KYC Norms

The RBI has updated the Operating Guidelines for PBs with respect to KYC in the wake of  Airtel Payments Bank rerouting of subsidies by creating Payments Bank accounts for subscribers validating mobile phone numbers.

The updated guidelines stand as follows

“For the purpose of verifying the identity of customers at the time of commencement of an account-based relationship, Regulated Entities (“RE”), shall at their option, rely on customer due diligence done by a third party, subject to the following conditions:

1. Necessary information on such customers’ due diligence carried out by the third party is immediately obtained by REs.
2. Adequate steps are taken by REs to satisfy themselves that copies of identification data and other relevant documentation relating to the customer due diligence requirements shall be made available from the third party upon request without delay.
3. The third party is regulated, supervised or monitored for, and has measures in place for, compliance with customer due diligence and record-keeping requirements in line with the requirements and obligations under the PML Act.
4. The third party shall not be based in a country or jurisdiction assessed as high risk.
5. The ultimate responsibility for customer due diligence and undertaking enhanced due diligence measures, as applicable, will be with the RE.”

This is Section 14 of the Master Directions on KYC from Feb 25, 2016, by RBI which will now be used to regulate the PBs.

The previous operating guidelines for PBs allowed them to utilise the same KYC details as “of the same quality as prescribed for a banking company.” However, the PBs have to follow the RBI Master Direction of KYC, and any amendments made to the same. This update has been mainly done to prevent the piggybacking that was seen in the case of Airtel Payments Bank accounts being opened with no discretion given to the customer. This was done by interpreting the previous guidelines that allowed the reuse of the authentication done by telecom companies by the associated Payments Bank with an intention to simplify account opening.

List of Payment Banks in India

1. Aditya Birla Nuvo
2. Airtel M Commerce Services
3. Cholamandalam Distribution Services
4. Department of Posts
5. FINO PayTech
6. National Securities Depository
7. Reliance Industries
8. Sun Pharmaceuticals
9. Paytm
10. Tech Mahindra
11. Vodafone M-Pesa
12. India Post ( Starts operation by 21 Aug )

*Cholamandalam Distribution Services, Sun Pharmaceuticals and Tech Mahindra have surrendered their licenses.

Conclusion

The primary objective of setting up payments banks was to “further financial inclusion by providing small savings accounts and payments/remittance services to migrant labour workforce, low-income households, small businesses, other unorganized sector entities and other users, by enabling high volume-low value transactions in deposits and payments/remittance services in a secured technology-driven environment.”

Payment banks, which were supposed to be the next big thing, sadly have not lived up to the hype so far. The jury is still out on whether the PBs will ever succeed in the country, but one thing is clear: it won’t be easy for them to survive.

The post All You Need To Know About Payment Banks appeared first on iPleaders.

Take 2 Minutes and Help Divya Sugand by Participating in This Survey – Qualities Recruiters Want to See in Every Single Candidate

I have recently completed my BA.LLB (Hons.) in July 2018. Like any other law student, I have also been active on various online law portals. These portals are designed to share information between like-minded people and offer career advice to help early career professionals and students shape into better law professionals in future. In this article, I would like to present a different opinion on what is offered by these platforms. My views are particularly related to the popular webinar series hosted by Mr Ramanuj Mukherjee and Mr. Abhyuday Agarwal named ‘An Hour With Law Sikho’.

Everybody being in a rat race, very few people take time and read a full-length article or participate in public discussions on career advice. In fact, I think we are a generation of trending podcasts and videos, where we find learning by listening and watching more convenient. Consequently, I found ‘LawSikho’ very interesting and began watching quite a lot of online webinars organized by them. I observed a common advice given by different guest speakers. It can be summed up as follows.

Your CV must reflect your area of specialisation

For hiring a law professional, a recruiter thoroughly looks at the candidate’s curriculum vitae (CV) to discern how much of a relevant experience that candidate has. By the term ‘relevant experience’ they mean, the experience gained in that particular field for which the job is posted. Therefore, a law student should do their internships and other extracurricular activities in the field he/she wants to get his/her job into. For example: If I want to get into a law firm which has its expertise in criminal law, then my prior experience in criminal law would be considered as the relevant experience for it.

However, I would like to say that, many law students/recent law graduates, like me, are going to be the first generation future lawyers, many of us come from challenging family situations/backgrounds, many of us lack confidence, undecided, in dilemma about our career-choices especially during the initial years. Even if we are able to put a confident front, many of us are then devoid of a proper network in this field, unclear about our approach to secure a job/internship until we enter into the real professional world. In such a scenario, the only option left to explore our area of interest during academic training is through internships. Also in the light of stringent attendance policies in law schools, what most students can manage is, three to four months of internship in a year, which is also often difficult than said. And I think, not only law students but students of other fields too, face such issues in their early career period.

After all, this, even if a student manages to secure an internship, we should realize that he/she first requires some time to understand the ethics of that workplace, get along with new colleagues and understand the nature of work. Considerable time also goes into writing academic reports about the internship experience. Consequently, the given limitation of time gives them a very little chance to explore whether it is their area of interest.

I consider myself decently fortunate in terms of my own performance and the supervision that I have received in the field of law. Unsurprisingly, my journey has not been straight but driven by several transitions. As a school student, I changed my stream from science to commerce with maths, not once but twice. Even as a law student, I tried different internships in different areas of law. I tried courts’ internship, law firm’s internship, judicial clerkship, research-based internship, both nationally as well as internationally. I also organized and participated in different types of events & competitions (not limited to moot courts) and tried getting involved in multifarious self-improvement programs. This is because I thought and still think that one can make a judicious choice only when he/she experience himself/herself all the diverse possibilities that his/her field has to offer. I thus wanted to leave no stone unturned. I wanted to decide only after opening all the major doors of career options. I basically did not want myself in a position where I regret my decision at the later stage of life because sometimes, there is no turning back. And believe me, it took me five whole years to figure it out. There are a lot of students who may decide early because of their family background in law or right mentorship support or sufficient exposure but there are also those who may take much longer than their degree period. And this is very normal in any profession.

Therefore, in view of recruiter’s expectations and our varied struggles, as discussed above, I want to raise a question, as a student/early career professional would you like to ask:

1. Why does the career experts suggest students to do internships only in their field of interest when the students themselves don’t know what their specific interest is? Why don’t they instead encourage them to try different alternatives and then make a legible informed choice?
2. Why recruiters see specific expertise in the young applicants’ CVs instead of looking at their overall experience, exposure, creativity and the resultant overall development from it?
3. Isn’t the probation period/short-term internships not enough before recruiting a person to a certain job, to judge whether the applicant has the capabilities to match the job description?

I am keen to know your opinion and would thus like to request you all to comment the same below.

Also, if you too faced suchlike situation (as a recruiter/applicant) then do vote your preference on https://doodle.com/poll/dgekrtbwqqzynm66. The more people will vote, the more accurate will be the result. I will certainly share the poll statistics and voters’ suggestions in my next article.

You can also share this post and spread it to an even larger audience, if you find any rationale in my view.

The post Take 2 Minutes and Help Divya Sugand by Participating in This Survey – Qualities Recruiters Want to See in Every Single Candidate appeared first on iPleaders.

This article is written by Mohona Thakur, Marketing Manager at iPleaders.

Over the weekend, I have been reflecting on the past two months or so since I was rammed into by a bike while walking to office. I had, in January, shifted to Goa after having left a job at a litigation law firm in Delhi (that went ahead and featured on Vahura’s Best Law Firm Rankings this year). I was only wondering, what would have been the possibilities during the recovery period of the LCL tear on my right knee in case I was still working at the courts.

I came up with two options. I would have probably had to take three-to-four months off possibly without pay or quit the law firm. In addition, bear all medical costs since my medical insurance lapsed. This got me thinking, there are so many considerations that we lawyers and law students have to keep in mind while choosing a job. And quitting a job, but we’ll get to that later.

Let us look at the statistics. I did a simple google keyword search that read as “recruitment stats NLSIU Bangalore 2018” and this is what I found:

I believe the recruitment statistics for arguably the top most law school in India is self explanatory and I needn’t say more. You will find similar search results for other law schools. Don’t believe me? Try it for yourself.

Looking at these numbers, I did some quick research, sent out the word on LinkedIn and found some interesting opinions on why law students prefer working with law firms over pursuing a career in litigation.

Here are five reasons and varying perceptions as to why law students prefer jobs with law firms over pursuing litigation:

The Money is Good

What would you choose? A job that pays better or a job that pays less?

The numbers are always one of the major deciding factor, if given a choice. The mass recruiters or the Big 6 that the top law firms in India are often referred as pay in six to seven digit figures annually, to their freshers. These numbers keep changing, but the digits remain the same. You can give this article, which discusses the Top 10 Law Firms That Pay The Highest Salary In India, a read to get a clearer idea of the pay-scale and work at the top 10 law firms in India.

Naturally, when law students as well as lawyers see the immediate benefit that you derive in terms of money and the financial stability that it come with, they start looking out for opportunities that pay them. However, this is only one aspect.

Let us look at the fee structure at law schools. For instance, the five year B.A. LL.B at NLSIU Bangalore costs over 2 Lakh Rupees annually which would mean over 10 Lakh Rupees spent in 5 years of education. Similarly, Symbiosis Law School at Pune charges 2 Lakh 85 Thousand as fee in the first year. You can do the rest of the math, I’m sure. There are two ways of looking at this; one is that the job that you land must make up for the time and money that is spent towards legal education – five years and ten to fifteen lakhs spent on education is not a joke. And the second in all probability is to pay off student loans.

Majority law students end up deciding to give a shot at Harvey Specter over Alan Shore, looking at the money.

Law Firms Set a Better Platform

Nivedita Tayade, Senior Attorney at Mindcrest had a very interesting take on why law students may choose law firms. “A job on the hand is more like “you know what you want” kind of a situation. The firm is already at par and practicing in areas that you develop an interest in or are interested in. It’s a set platform for you where one just has to excel.”

Of course, law firms are often segregated into various teams such as IPR, M&A and PE, General Corporate, Real Estate, Infrastructure, Baking & Finance, Technology Media and Telecom, and not to forget Litigation. As rightly pointed out by Aman Parekh, Associate at India Law Alliance, “There are law firms who do litigation too; there is often a misconception amongst students that law firms only deal with corporate and company laws.”

The very fact that these law firms have been in existence for a while give you a set platform to indulge in and excel. In addition, the job that one partakes at a law firm may give them a better platform to move on to another law firm. It isn’t new to be using law firm experience to move on to another law firm or even in-house. So, it’s not just a platform where one can perform and excel, but also from where one can move on to better opportunities.

Devashish Jagirdar, a practising lawyer at the Bombay High Court, in response to my query on LinkedIn replied saying the exact same thing, “If your aim is to go independent eventually, or open your law firm for that matter, working with a law firm gives you contacts, and gives you the experience needed of how to be a counsel and what to expect from your attorney.”

Vast Exposure In Terms of Clientele

Both Devashish Jagirdar and Narendran Thyagarajan, practising advocates, admit that working with law firms gives you a bigger playground in terms of clientele. It is a common notion amongst students in law school that law firms have abundant clients, plethora of matters, hence humongous experience and never-ending learning.

This holds a hundred percent true. Law firms gain their business from companies. Whether it’s an acquisition, a legal opinion, or litigation, companies do require support from outside counsels. And they believe in going with firms as compared to individuals simply because they have more man-power, and relevant experience. Unlike in-house legal jobs where your business is your client, law firms deal with multiple clients daily and this gives them exposure in abundance. That exposure isn’t just limited to the number of clientele, but also to the quantity of work that comes in.

By the looks of it, it seems to be a win-win situation for a law student to be working with law firms as they have abundant work and clientele. However, in order to ace your way through law firms that have major corporate clients, you may want to stay ahead of your own game and take up a course on business laws.

This Job is Steady

Like I’d previously mentioned that with money comes in stability, working with law firms also ensure that the job is steady, the money keeps coming in every month and there is a balance. Litigation, more often than not, is not a steady job. One may see themselves running around the corridors of the court minutes before their matter is about to be called out looking for a case law that was asked last minute. And god forbid if you have to be in two different courts at the same time, yes that’s possible.

A lot of people call litigation thrilling as every day at work is a new day, with new possibilities and well, new lessons to learn. It is anything but steady and if you’re not satisfied, you’d be hopping from one advocate or firm to another. And this is exactly why, on a rather lighter note, Narendran Thyagarajan says working with law firms may bring you better marriage prospects than litigation, because not many understand what it is or what it takes to survive there.

Interest Driven Choice

A lot of law students choose to work with law firms purely because their interest lies in the kind of work that the law firms have to offer. For example, a batchmate of mine chose to work for Desai and Diwanji in Bombay right after law school because he always wanted to work on the commercial side of laws. You can watch the webcast where he spoke about the challenges faced by a corporate lawyer here.

There are very many students who end up choosing to work with law firms because they are driven by their passion or interest in business laws, mergers and acquisitions, intellectual property laws, corporate laws, real estate laws, and the likes. And these students are in abundance. Not only do they need to genuinely develop their interest but also show enough skills to be able to ultimately make it to law firms. In fact, anyone who wishes to work for law firms needs to be at the top of their game. You can check out courses at lawsikho.com that prepare you for it, in case you’re interested in that law firm job!

The reasons to why law students do choose law firms over litigation can be perceived in many ways and is multi-faceted. There can be multiple reasons, combinations of reasons why law firms are the top choice. We’ve tried to cover the major reasons here, but do drop by your point of views in the comment section, it would be much-appreciated.

The post 5 Reasons Why Law Students Are Choosing Law Firms Over Litigation appeared first on iPleaders.

This article is written by Shreesh Chadha.

The Companies Act 2013 does not define a “director” per se, except as – “a person that occupies the position of a director”[1] which does little to explain the responsibilities of a director. A better definition for this purpose would be-

“ Directors have sometimes been called trustees, or commercial trustees, and sometimes they have been called managing partners, it does not matter what you call them so long as you understand what their true position is, which is that they are really commercial men managing a trading concern  for the benefit of themselves and of all other shareholders in it.” [2]

AS AN AGENT

It is also hereby established that the role, and responsibilities of a director are equated with those of an Agent in the eyes of the law.

“The company has no person: it can only act through directors and the case is, as regards those directors, merely the ordinary case of principal and agent.”[3]

Therefore, as Agents, directors are not liable to anyone, as they are representing the company in it’s transactions, and is such a case, the company is liable.[4]

AS A TRUSTEE

However, a director is also a trustee of the company. It is established that-

“The directors of a company are trustees for the company, and with reference to their power of applying funds of the company and for the misuse of the power they could be rendered liable as trustees, and on their death, their legal representatives.”[5]

However, as regards to their liabilities as trustees, the principle was laid down stating that the directors are trustees of a company only and not of individual shareholders.[6]

Therefore, the above left a lacuna as to the need of disclosure of personal profits from activities such as amalgamation of companies to individual shareholders where their shares were involved. It was later cured as it was established that the directors are trustees of any profit for the benefit of the shareholders. The same has been enshrined in the Companies Act, 2013 as disclosing any profit from amalgamation and other such profits that could have been covered under the earlier Act,1956 .[7] Therefore, in their actions involving the shareholders, the directors are also liable to them as trustees.

This concept of duty of directors towards shareholders, when their interest is involved has cemented its presence through Reliance Natural Resources Limited vs. Reliance Industries Limited[8]. In this case, the relevant factum for our purpose is that a segregation between Reliance Industries Limited ( hereinafter RIL) was decided by way of Memorandum Of Understanding (hereinafter MoU) which was to be included in the company scheme of RIL. Mr. Anil Ambani, the to-be benefactor of the KG Basin Crude Oil Reserve wanted this move to be done without the consent of the shareholders. The Board of Directors of RIL objected to the same, stating that the MoU cannot be binding, as the consent of the shareholders was not given. The Hon’ble Supreme Court held the MoU to not be binding, as the most interested party in such an event would be the shareholders. They upheld the apprehension of the Board of Directors of not having the consent of the owners of the company, the shareholders.

There was an argument afforded by the Appellant of “Doctrine of Identification” which essentially meant that the actions of one or two persons can be attributed as being actions of the rest of the company, in this case the assent of Mukesh Ambani, to be attributed to the whole of RIL, including the shareholders. However, the Hon’ble Supreme Court rejected the same in the case of companies such as RIL which have over 2 million shareholders and held the happening of such a doctrine as holding the shares and preferences of only a group of shareholders ( the Ambani family) over the rest, which is not permissible, as was rightly objected to by the board of Directors, thereby accepting the superiority of the shareholders consideration in the actions of the Directors in the running of a company.

PROVISIONS UNDER THE COMPANIES ACT, 2013

There has been a shift in the duties imposed on Directors as well. In the Companies Act, 1956, there were no specific provisions for laying down the duties of the Director, and their scope could only be viewed with respect to the general power of the Board of Directors.[9]

However, with the advent of S. 166 of Companies Act,2013 the duties of directors has been listed. Even though in principle such provisions of case, good faith, diligence etc. were held to be applicable to directors in the past, S. 166 brought with it a wind of certainty and enforceability. Under the earlier system, Directors of a Company were liable to the company and its shareholders as agents and trustees respectively. However, the new Act,2013 the directors are also to be held liable as “officers” of a company. There is a scheme of “officers in default” which exists to make sure that some liability can be attached to someone when the company is in contravention of the Companies Act, 2013. The scope of such scheme is very wide and includes all whole-time directors, Key Managerial Personnel (hereinafter KMP), persons acting on behalf or on advice from the Board of Directors or KMP, or any director who is aware of any default in terms of the provisions of the Companies Act,2013. However, the Companies Act,2013 even in regards of treating directors as officers of the company is advanced as it makes a distinction between Whole Time Directors, Independent Directors and Non-Executive Directors. It holds Independent Directors and Non-Executive Directors (not KMP) to be liable only is an act or illegality was happening with their knowledge or with their consent.

Therefore, the approach to duties of a director is more dynamic under Companies Act, 2013. Another shift that can be seen in this duty cast upon directors is actually derived from the UK Companies Act, 2006[10]. It is a more general duty that exists even towards non shareholders.

“It is a means of enhancing shareholder value over a long term”.[11]

The above essentially implies to the corporate governance and the fiduciary responsibilities that can be shown as adhered to, to increase the extent of enriching shareholders over a long period of time. This was applied through S. 166 (2), Companies Act,2013 which imposes a duty on the directors to treat even non-shareholders as means to an end. Not only does it encompass members of the company, but also employees and the entire community at large.

The object of S. 166 (2) lies in the good faith principle, which has been defined as-

“The good faith would require that all the endeavours of the directors must be directed to the benefit of the company.” [12]

So much so, that under the Companies Act,2013 it has been interpreted by the Hon’ble High Court of Delhi at a more advanced level, it has been held that even if a director is doing something to promote the objects of the company, in the best interests of the company, its employees and shareholders, there should be no personal interest in the same activity, and if there is then the provisions of S. 166 (7), Companies Act,2013 which is a penal provision will be attracted.[13]

In conclusion, the duty cast upon directors has evolved since the advent of the new Act, 2013 to not only the caretakers, or gatekeepers of the company affairs, but also the representatives and those held accountable in all regards to all involved in the company.

[1] S. 2 (13), Companies Act, 2013

[2] Cola Mining Co,re, (1878) 10 Ch D 450,451-52: 40 LT 287

[3] Ferguson v. Wilson (1866) LR 2 Ch App : 36 LJ Ch 67

[4] Kuriakose V. PKV Group Industries (2002) 111 Comp Cas 826: (2002) 1 KLJ 630

[5] Ramaswamy Iyer v. Brahmayya & Co. (1966) 1 Comp LJ 107

[6] Percival v. Wright (1902) 2 Ch 421

[7] S. 30-32, Companies Act, 2013

[8]  CIVIL APPEAL NO. 4273 OF 2010 (Arising out of S.L.P. (C) Nos. 14997 of 2009)

[9] S. 291, Companies Act, 1956.

[10] Mihir Naniwadekar, Umakanth Varottil “The Stakeholder Approach Towards Directors’ Duties

Under Indian Company Law: A Comparative Analysis” NUS Working Paper 2016/006 ,NUS Centre for Law & Business Working Paper 16/03 (August,2016)

[11] Ibid.

[12] Bank of Poona Ltd v. Narayandas , AIR 1961 Bom 252 at 253

[13] Rajeev Saumitra vs Neetu Singh & Ors CS(OS) No.2528/2015

The post Duties of a Director under the Companies Act appeared first on iPleaders.

This article is written by Ranojoy Mukherjee of Lloyd Law College. The article discusses the findings of the Lodha  Committee.

Cricket in our nation has always been the sport which predominantly dwells in the heart of countrymen regardless of the fact whether the particular one is a cricket fanatic or not. But in return, such amount of love and passions often encounter an unfortunate deformity emanated from the administrative cells of the Board of Control for Cricket in India (BCCI). Such kinds of malpractices within its inner cell can be traced back from the indulgence of their administrative heads into the realms of never-ending controversies. It is pertinent to notice how BCCI every now and then continues to be involved in controversies followed by their large political interference, corruption, match-fixing or betting etc. So far, there have been innumerable debates seething in the favors and against the functioning of the BCCI due to the Indian Premier League ( broadly known as IPL) scam which literally undermined the national pride relating to sporting performance severely.

How it all started

In a very unprecedented move, the Supreme court got involved in the functioning of BCCI in the case of BCCI vs. Lodha Committee. The inception of such a move by the apex court can be sensed to be the backwash of the IPL betting scam which shook the foundation of belief in the sanctity of the sport. In the abovementioned case, three cricketers, S. Sreesanth, Ajit Chandila and Ankeet Chavan, who represented Rajasthan Royal in 2013 Indian Premier League, were involved and also arrested by the Delhi Police on charges of spot-fixing. Upon further investigation, few other renowned names like Vindu Dara Singh and BCCI President N. Sreenivasan’s Son-in-law Gurunath Meiyappan came in front as the backbone of such execution resulting which all of them were arrested by the Mumbai Crime Branch. In addition to that the apex court ensuring the fairness of the investigation also suggested the N. Srinivasan to step down from his position as BCCI president else, there could have been a verdict asking him to step down.

But the investigations were still on over the allegations of spot-fixing and betting in IPL. Therefore, considering the intricacies of this matter the apex court appointed a three-member committee, which was known as Mudgal Committee, headed by Justice Mukul Mudgal. The other two members were Additional Solicitor General of India L. Nageswara Rao and former cricket umpire Nilay Dutta. Followed by a stretch of inspection, the Mudgal committee unearthed the discrepancies performed by BCCI chief Srinivasan for being reluctant enough to act upon the accused of betting, IPL COO Sudar Raman, Chennai Super Kings’ owner Meiyappan and Rajasthan Royal’s owner Kundra, despite having the cognizance of the violation. The Supreme Court did agree with the Mudgal committee report but partly acceded to all its recommendations. Due to this fact, the Court felt the exigency of more stringent regulations and thus paved the path for another committee under the supervision of CJI, Justice R.M Lodha.

Lodha Committee

With the advent of Lodha committee, it mainly focused on three major tasks; punishing those who have been found guilty by the Mudgal committee, scrutinizing the role of COO Sundar Raman in the IPL spot-fixing scam and providing more transparency in the functioning of BCCI to avoid further stings. Going by this agenda this committee did impose a lifetime ban on Meiyappan and Kundra and suspended the IPL franchises, Chennai Super Kings and Rajasthan Royals for two years. But the players associated with these franchises were given the liberty to be auctioned for other franchise.

The Lodha Committee further stressing on the issue of providing transparency in the functioning of BCCI, framed questionnaires on exhaustive set of topics such as the role of BCCI’s stakeholders in the board’s election processes, the basis and formation of its various committees, player welfare, conflict of interest and transparency in the IPL’s functioning. With the help of their sent questionnaires, this committee shook the very foundation of BCCI just by introducing its revolutionary reforms within the power structure and functioning of BCCI.  And in addition to that, the functioning of the same had been highly applauded by the Supreme Court resulting which the BCCI had strictly been given an ultimatum to work adhering to the Lodha panel’s recommendations for the overhaul of Indian cricket.

All about Lodha Committee Recommendations

The report laid down by the Lodha panel had its two integral parts. The first part of the report entails its objectives only and the second part of the report titled as ‘Getting off the mark’, critically analyses the gaps in the functioning of BCCI and state volumes about the prevalent corruption, lack of transparency, conflict of interest and such other difficulties. To address these issues, the Lodha Committee came up with following recommendations:

1. BCCI office-bearer can work for not more than two continuous terms: This recommendation is accompanied by fixing the retirement age at 70, in order to avoid the management of the sport by elderly who could barely speak, which indeed is the current trend. Also, those administrators who are declared as insolvent, or of unsound mind or charged with criminal charges, or who hold any office or post in a sport or athletic association or federation apart from cricket are to be eliminated.
2. President of the BCCI cannot hold his post for more than two years.
3. There is a proposition of one vote per state and no proxy voting: This recommendation would take away the monopoly of the suppressing states like Maharashtra, which currently exercises multiple votes owing to multiple associations.
4. Separate governing body for IPL with a certain level of sovereignty to be made available to IPL as a governing body. The committee has also suggested forming a players association and has called for a “steering committee”. The intention behind the same is to enforce grass root level change in the structure of BCCI.
5. Legalizations of betting have also been an integral part of such a proposition. It has also recommended that BCCI Officials shall disclose their assets to the boards so that they could be certain about the non-involvement of BCCI officials in betting.

Critical Overview

The board has always been reluctant to show any sort of excitement towards implementing those reforms as it would affect the working of the board to a great extent. The board did accept and promise to take up the reforms but at the same time, they miserably faltered in keeping their promise and implementing these measures. Hon’ble Supreme Court on the other end continues to force the board to implement these recommendations. In a complete resistance to what Supreme Court has stated, BCCI continuously rejected several recommendations of the panel, as in the opinion of the Board such recommendations don’t deem fit and they are subject to criticism.

The committee also recommended a one state-one vote system which cannot properly be implemented in India. The cause of such denials reflects from the instances where some politically stronger states would dominate over the weaker states which with time encourages corruption. Reliance can be placed on one country-one vote system which was adopted by FIFA that led to 2015 FIFA corruption scam in which countries had very little or no football activities were accused of taking the bribe from FIFA officials and countries with more football activity, to vote in a specified pattern. In this way, votes of politically weak states can be tampered by stronger states resulting in an undesirable situation. In the context of India, the votes for politically weak states such as North Eastern states can be tampered by politically strong states such as Gujarat and Maharashtra. Therefore, one state-one vote cannot be implemented in a country like India.  

Among all, the most important recommendation proposed by the committee was to legalize betting in India. Legalizing betting might fetch a lot of revenues to the government and will pull up the GDP of our nation but it will also significantly increase match-fixing in the game of cricket. Even if the government has not legalized betting, it is still prevalent in the nation. As per the recent survey, betting money involved in IPL-7 and IPL-8 were around 7000 crores and 12000 crores, respectively. Hence it is very much evident how the black money earned through illegalization of betting led to flow in the economy.

Furthermore, the exigency of having the Controller and Auditor General (CAG) as a nominee in the managing committee of the society was also felt by the committee. But that proposition, later on, had been termed as contradictory to the constitution of BCCI which does not permit a non-member to be involved in the managing committee meeting of the society. Also, in accordance with the rules of ICC if the governmental representatives are included as a full-time member of the Board then ICC holds the power of derecognizing such domestic cricket board of a country and at a global level, ICC will treat CAG representation as a governmental interference.

The committee also strongly recommended to curb down the frequency as well as the number of advertisement shown on a television during a cricket match live telecast. According to Lodha panel, the advertisement should be telecast only during the drinks break session and unnecessary advertisement after every over and fall of wicket should be avoided. But in reciprocal to that recommendation BCCI was of the view that minimizing the frequency would affect the income of board which would lead to heavy losses. The BCCI being a self-funded organization does not depend on the government for any source of revenue and such an act would hamper its earnings. The revenue earned from such advertisements directly gets invested by BCCI in conducting their various training programs in small towns and villages to search for talented players. Therefore, this recommendation of the committee will restrict the funding of the board and it would be difficult for the board to perform its function.

The Board did not even welcome the proposals of the committee regarding the capping of the age limit to 70 years for the officers of Board. As per the Board, an office-bearer gets elected through a democratic format hence such proposal would give birth to the criticism. In board’s view, if a member attains the age of 70 years that doesn’t make him inefficient to perform the given task by any stretch of an assumption. Therefore implementing such recommendation would lead them to a situation where very few people with good experience will be left in the committee which will further hamper the working of the committee.

Many news agencies, NGOs, and social groups have demanded to include BCCI under the purview of RTI but the board always had the ways to deal with it. The same was also recommended by the Lodha committee in order to make BCCI publicly accountable and also to build public trust in the working of the board. However, the BCCI was of opinion that mere performing public function would not be a sufficient cause to make RTI applicable on it. The board stated that it is a society registered in Tamil Nadu and did not receive any funding from the government.

Suggestive Measures

In view of the misconducts executed by BCCI, Indian Judiciary already took the initiative to curb down the monopolistic approach of the Board by strengthening the recommendations put forth by Lodha panel. Apart from the same, there are few suggestions in the following which can be considered in line with Lodha committee’s recommendation to help in improvising BCCI’s working:

1. In terms of legalization of betting in our nation, there must be a threshold limit for a person to limit the amount of betting. Only the registered individuals through their authorized online accounts can have the access to such practices but at the same time, proper rules should be drafted considering the same. Betting shall be legalized except for players, BCCI officials or administrators covered under BCCI and IPL regulations.
2. The nomination of CAG as the managing committee member of the society can be made without affecting any international obligations if no voting rights are assigned to CAG. By this way, CAG can become a member of the Board to ensure that proper books of accounts are being maintained and also India will not violate any international agreement.
3. The advertisements during a live telecast of cricket match shall be allowed after every five overs, fall of the wicket, drinks or lunch, instead of ad breaks given after an over is finished.
4. Apart from it, all the sports bodies which enjoy the right to use ‘India’ as the team’s name should come under the purview of RTI. It is performing a public function of selecting the national and international team to represent the nation on a global front. It regulates cricket in India of all forms at all levels. The decision of Zee Telefilms v. Union of India, (2005) 4 SCC 649 requires some reconsideration on the ground that it performs the public function involving millions of funds and arbitrary using its power in recent past. Therefore, it should be considered State under Article 12 of the Indian Constitution.
5. In terms of managing the affairs of IPL, there should be a separate body which needs to be constituted by a completely different set of rules. And this new committee for IPL should include the members from CAG which will keep the check and balances on the financial transactions.
6. The women must have a representation in BCCI. Also in terms of promoting women empowerment and their participation in BCCI on a larger scale, there must be few seats reserved for women.
7. The board must introduce an increased funding plan for promoting women cricket team and providing them with the proper infrastructure, equipment and experienced coaches for the training. The women team has always been subjected to ignorances which resulted in failing to draw the attention of mass media. The training programs and talent hunts in smaller towns for women cricket team should be encouraged.
8. There must be a ceiling limit for all the members of BCCI whoever are holding the post for multiple terms and various occasions. A stipulated tenure must be framed in order to give chances to the other members. The board must set a complete list of qualification and disqualification for a person to be a member and its removal.

Supreme Court’s observation on the recommendations

Recently on the very date of August 9, the Supreme Court cropped up with its latest iteration in its verdicts on the affairs of the Board of Control for Cricket in India [BCCI]. On a disappointed note, the judgment, delivered by a bench comprising Chief Justice Dipak Misra and Justices DY Chandrachud and AM Khanwilkar, scraped off a few of the more path-breaking recommendations proposed by the Lodha Committee, which the court itself had endorsed in July 2016 and at the same time did endorse few of them. Let’s start with a with the ones which have already been scraped off by the apex court.

One-State-One-Vote

Among other pronouncements, the court has now scrapped the one-state-one-vote policy that the committee had seen as the backbone for a new constitution of the BCCI. In its place, the court has confirmed the voting power of not only all the existing associations in Maharashtra and Gujarat that are the Maharashtra, Mumbai and Vidarbha cricket associations and the Gujarat, Baroda and Saurashtra cricket associations but has also affirmed the votes available to the government bodies, the Services Sports Control Board, the Railway Sports Promotion Board and the Association of Indian Universities.

“To utilize territoriality as a basis of exclusion is problematic because it ignores history and the contributions made by such associations to the development of cricket and its popularity,” Justice D.Y. Chandrachud, who wrote the judgment, reasoned.

Undergo a cooling-off period

Perhaps even more significantly, though, the court has watered down the much-lauded cooling-off period suggested in the draft constitution that the Committee of Administrators appointed by the court had drawn-up. This clause was included at the behest of the Lodha Panel, which had recommended that the tenure of each term for office bearers of the BCCI and the various state associations should be three years and that there should be a mandatory “cooling off period” after each term; that is, an office-bearer who holds a post for three consecutive years would be disentitled from contesting a succeeding election to any post either within the BCCI or within any of the various state associations.

The judgment, authored by Justice Chandrachud, now makes it clear that while the term of office shall be as suggested in the draft constitution, the cooling off period of three years shall apply only when an individual has held the post of an office bearer for two consecutive terms either in a state association or in the BCCI or in a combination of both.

Modifies the number of selectors from 3 to 5

The court introduced a modification in the very number of selectors which has now following such been recommended to be 5 instead of current 3. These 5 numbers of selectors came into being with the realization that a “board based selection committee” was required to push the prodigious talent pool spread across the country.

“The vast territory of the nation, the extent of cricket being played both at the national and international level, the need for selectors to travel extensively to spot talent from the pool of cricketers and the need to encourage both domestic and international cricket, are considerations which persuade us to accept the plea for modification in regard to the number of selectors to five,” Justice Chandrachud observed.

As similar as these changes which can be reckoned as an undermining of the Lodha Panel’s suggestions, we can at the same time stress upon the suggestions proposed by the committee that has been approved by the apex court.

Disqualification of persons from being an office bearer

The Supreme Court has kept alive key clauses suggested by the panel towards disqualification of persons from being an office bearer or a member of the governing council or any other committee, or as a representative to the International Cricket Council.

This now means that persons above the age of 70 years, ministers, government servants and others holding public office, persons serving as office bearers of other sports federations, and persons charged by a court of law of having committed any criminal offence are all disqualified from contesting for any post within the BCCI or any of its state associations. Also disqualified are persons who have served terms as an office bearer of the BCCI or any of the state associations for a cumulative period of nine years. These requirements, the court has held, serve as important safeguards against the development of vested personal interests and against the concentration of power in a few hands, encouraging thereby a “dispersal of authority,” and the creation of a “wider body of experienced administrators.”

• Even before the verdict of August 9 ruling, many of the other suggestions of the Lodha Panel had already been finally approved by the court itself. These incorporate, for instance, recommendations towards the establishment of an apex council of nine members comprising three independent persons, with two from a newly constituted “players association,” and, at least, one woman—overseen by a reputable chief executive officer—to conduct the day-to-day administration of cricket in the country; the creation of a sound set of principles to remove conflicts of interest that had hitherto plagued the sport, including a reduction in the participation of those entrenched in politics; and, crucially, the introduction of a wall divorcing the management of the IPL from the BCCI.

Ending Note

Cricket can no longer be termed as the gentleman’s game as the essence of the gentleman has however been eroded. The existence of IPL might have given fame, success, and money to many upcoming players but it has also introduced avenues for gambling, spot-fixing, and underworld activities in the country. To overcome such problems, Indian judiciary has made several attempts to develop sports law in the nation and one of such attempt was the appointment of Lodha committee. Lodha committee has come up with tremendous recommendations which will not only put checks and balances on the working of the board but will also change its performance. Still, the legality of some recommendations can be challenged and the demand for reconsideration is to be served in order to introduce a better law in the nation.

Opposing the said recommendation is obviously not a viable option for the Board’s point of view instead, they must adopt the necessary modifications for the betterment of cricket in India. The disputes between Lodha committee and BCCI must be addressed by putting emphasis on reforming cricket by removing some necessary evils such as poor governance, match fixing, etc. The report is just a beginning step in reforming the sports and if accepted then will set a benchmark for reforms in other sports.

The post Lodha Committee on BCCI Reforms- All you need to know! appeared first on iPleaders.

This article is written by Mohona Thakur, Team iPleaders

Off late, I started watching the critically acclaimed CBS legal and political drama series called The Good Wife, for the second time around after possibly half a decade. All hail Netflix! I was first introduced to this series by my aunt during my summer vacation in twelfth grade; I’d forgotten how much I loved the series and the role it played in my inclination towards litigation.

The episode I was watching last night showed the firm Stern Lockhart and Gardner going through tough times during recession and showing over half the firm the pink slips. This reminded me of what I saw in an episode from Suits where almost all employees at Pearson Spectre Litt left after Mike Ross took the plea bargain. Such stark contrast.

And this got me thinking. When is it that lawyers start looking out for other jobs? What is the trigger to the ultimate decision of quitting the coveted law firm job? The job-hopping? More importantly, why isn’t attrition ever spoken about? Think about it.

You will definitely find top reasons for law students and lawyers aiming for the law firm job, the statistics on the number of top law firms and their hires every year. In fact, I wrote an article just yesterday about it, you can take a look at it here. However, you will not find material online about attrition and reasons why a number of talented lawyers quit the big law. So, let’s talk about the unwritten today.

Let’s talk about why lawyers quit the fancy, well-paying, stable law firm jobs. Here is what my quick research on LinkedIn could come up with:

• Following the Herd, Instead of Their Passion

Shamnad Basheer, the Founder and Managing Trustee of IDIA, believes that “a number of lawyers end up at law firms because they follow the herd instead of their heart and passion.” Not everyone is cut out for the corporate of law firm job. And yet, it is quite true that most of them are sucked into the cycle due to lure of the money. When there is no passion for the work, one tends to quit sooner rather than later.

We have an in-house example of the very same, actually. Both our co-founders are NUJS, Kolkata graduates who worked with Trilegal for a year before they quit their job and started working at building iPleaders and LawSikho. They were always passionate about legal education and taking it to the masses. Trilegal was definitely not their calling.

As a matter of fact, one of the primary reasons I never wanted to work with law firms (apart from the work-life imbalance) was the fact that everyone seemed to want to work for a law firm, without really knowing what to expect. It was like the domino effect, only with law students here in place of a falling row of dominoes.

Do I know of lawyers who have quit in a year or so? Yes, in fact I do. I had a mentor back in law school, or so I considered, who was possibly the very first lawyer I had come across. He took up a very lucrative offer from one of the Big 6 right out of NLS Bangalore and quit within a year. I still remember how he used to joke about the money he was making, but ultimately his heart was elsewhere. Today, if I’m not wrong, he works in the US in public policy.

• Work – Life Imbalance

Work-life imbalance seems to be one of the primary causes of attrition at law firms. Soumya Shekhar, an independent legal research consultant, agrees with me, “I know people who are happy working in a law firm, people who are sticking it out just to pay their bills and people who swear they will never go back to one. Attrition happens primarily due to work-life imbalance.”

Zero personal life, more often than not leads to dissatisfaction amongst lawyers working long hours daily. And how many years before you finally have your body speak for you with all the exhaustion?

Ahmad Shazeb, a legal consultant, says that the biggest casualty of a law firm job is the lack of personal time that affects one’s own sanity. Unless you have a sorted personal schedule with place activities that don’t include work as such, you are doomed. Pent up frustration eventually start taking a toll and then leads to one giving up.

It is no surprise that working hours at law firms are generally over 12 hours in a day. This is quite obvious due to the number of clients that these law firms cater to. With the work hours that drastically drain lawyers, stress taking over your body and no scope of personal development thanks to paucity of time, lawyers decide to part ways with the job.

I don’t think anyone put it better than Shayonee Dasgupta, who has previously worked with Shardul Amarchand Mangaldas, “You cannot be passionate about your work if you only get to sleep for less than 3 hours a day and expected to put in a 22 hour work day. Slowly, the job becomes a liability that you carry forward because you have other obligations to fulfill. This sense of not having a fulfilling career drives most of us to quit. Paychecks and big bonuses come with an expiry date. The charm slowly fades away leaving you completely drained. Sometimes, your health goes for a toss while you spend all your waking hours to meet unrealistic deadlines set up by people who either have zero experience or do it because of ‘historical oppression’ (i.e. since I have suffered, so will you). Ultimately, a career in law firm, contrary to popular belief, is only one of the career options once you graduate. If you are not passionate about that kind of drudgery, you are bound to quit, sooner or later.”

• Dissatisfaction

Dissatisfaction could arise out of ungodly working hours, from the kind of work that one is doing or for some even from the fact that one is not appreciated enough by the reporting partners.

Abhijeet Shinde, Principal Associate at Cyril Amarchand Mangaldas, says that one of the many reason of attrition at law firms arise out of dissatisfaction amongst associates as they do not like their reporting partners.

This may not be entirely wrong. Ever since I started working for iPleaders, I’ve had to manage a number of employees reporting directly into me. I wouldn’t hesitate to state that I have come across employees who require to be continuously motivated and appreciated constantly for the work that they put in. When that doesn’t happen, they tend to feel dissatisfied and often even question themselves. I can only imagine that the same is expected not only from startups but also law firms.

Dissatisfaction, as I previously mentioned can also arise out of repetitive work. Imagine drafting similar contracts every other hour or drafting the same old SLP every weekend for a filing on Monday morning. When you keep doing one thing for a very long time, irrespective of whether you initially felt that you loved doing it, one would start feeling stagnation and not feel the potential to grow. It is almost like there is no challenge. Very few not only enjoy the work, but don’t mind repetitively doing it.

• Better Opportunities

Now comes the lot that genuinely do want to work with law firms and like the culture. Abhijeet Shinde, Principal Associate at Cyril Amarchand Mangaldass, rates this as the top most reason for why lawyers quit law firms – to hop on to better opportunities. “Good law firms choose very good resources from select law schools. Students from these law schools have become aware that they are in demand and can get jobs as per will. That makes them choosy and they try out different places before they settle.”

A lot of lawyers shift from law firm to law firm in search of better opportunities, better packages or even better profiles. In fact a number of people on my research conducted on LinkedIn said that there is lack of avenues at the senior level or at leadership roles. So basically, as you climb up the corporate ladder, the opportunities seem to decrease. This theory may not be entirely wrong. Take a look at major job portals in India for that matter – maximum vacancies are for associates; you won’t find too many people looking for principal associates or salaried partners or equity partners as often as you would see firms looking out for associates.

However, the way I look at it, these very young-blooded lawyers may actually face a lot of competition looking at the top most jobs with better pay or work profile. Or for that matter work with a reputed partner. They themselves would require to up their skills in relevant areas of law to make it to their desired law firms, maybe even opt for a foreign law firm. They need to not only know the sector and the work, be abreast with laws and the latest developments, but also continuously reinvent themselves. Online courses may be one such way to prepare yourself for a tougher neck to neck competition.

 CLICK HERE

Devashish Jagirdar, practising advocate at the Bombay High Court, added to the discussion on LinkedIn and emphasised on the fact that the growth graph of a lawyer at law firms is a major reason for them quitting law firms. Promotions as well as appraisals depend on the size of the firm. He argued that smaller law firms are closely held law firms, and do not see lawyers quitting very early.

• The Grass is Always Greener on the Other Side

Yes, this is undoubtedly a reason. You could call it a culmination of following the herd mentality, work-life imbalance, the stress of the job, dissatisfaction and the fact that a lot of the lawyers who end up working at law firms do it to gain the financial stability to move on to their passions. Of course, with enough savings in their bank accounts.

After a few years of earning enough money, lawyers tend to look forward to and explore what they are truly passionate about. In fact, today’s digital economy provides for lawyers with not just law firms as a career option, but it has also opened up so many new avenues to jump into. If you are still confused, look at the success of entrepreneurs that started Law School Tutorial (LST) here, legal journalism through LiveLaw, online blogging through iPleaders, legal recruitment through Vahura. Lawyers today aren’t just associates at law firms, they are omnipresent.

Ramanuj and Abhyuday left their law firm job to find their passion in legal education and built some commendable courses that can be found at lawsikho.com, my mentor went ahead and built a career in public policy, I left the law firm job and decided to help law students in need of guidance and information by regularly blogging about issues.

These five reasons that I have mentioned above are not the only reasons that lawyers quit the law firm job. It is far from exhaustive. These are more or less the reasons that lie at the heart of the issue of attrition. If you would like to add to the reasons, please feel free to drop it in the comments section.

We are all humans and we have expectations and standards. Whether we believe it or not, a lot of our actions are driven by these very expectations from ourselves and from what others expect from us.

We all do fight a war with ourselves every day. The reasons differ, that’s all. 

The post Why Do Lawyers Quit Their Law Firm Jobs appeared first on iPleaders.

We decided to do a series of 5 blog posts which explains in detail, the five most important contracts an IP lawyer must know. Here is the first article of the series. In this article, Varshita Dogra of VIPS discusses IP Licensing Agreements.

The job of an IP lawyer is to assist clients in safeguarding and protecting their interests with respect to their Intellectual Property. Part of the job would be to draft numerous agreements such as selling, licensing, assigning or transferring of said intellectual property. It is a necessary skill for working as an IP lawyer to be able to create well structured intellectual property agreements that best protect the business interests of the owners of such intellectual property.

Although, plethora of sample agreements are found on the internet, it is important to realise that these templates are to be taken as a loose guideline and not copy them verbatim. It is advisable to format the agreement in a way which makes sense for the specific interest of your client to avoid any discrepancy.

What are IP rights?

Intellectual property rights are the rights given to persons over the creations of their minds [1]. There are different kinds of intellectual property, which includes Copyright, Trademark, Patent, Industrial Design, Trade Secrets, Know-How, etc. governed by different statues in India. These laws provides different rights associated with these IPs; where some rights are specific to those with registered IPs, some are available to all owners of IP. These rights with respect to IP are, in simple terms, a way to exploit the IP in terms of its different uses, modifications, enhancements, etc.

In absence of a written agreement, IP rights remain with the creator of the IP, even if you have been paid by another party to create the IP. There is a minor exception to this in case of work for hire in copyright. In case of joint inventions where there is no agreement to cooperate, both the parties can license the IP independently.

In this article, we’ll be discussing the different contracts that an IP lawyer has to commonly draft and various clauses pertaining to these specific contracts.

IP Licensing Agreements

An IP license agreement is entered into between an owner of an IP and a third party to authorise the third party (licensee) to access, use or enjoy certain rights associated with the intellectual property, in exchange for certain consideration or co-licensing of IPs. Such an agreement outlines the ways in which the licensee may or may not use the property owned by the licensor. As an IP lawyer, you must keep in mind to ensure a balance of interests between the licensee and the licensor.

IP licensing can occur only when at least one of the parties owns valuable intellectual property. Owning an IP includes the right of owner to prevent others from using that IP for commercial purposes. Licensing is beneficial for IP owners as it allows them to generate revenue out of their property by making it available to others for a consideration without affecting their ownership over it. Licensing is also beneficial for licensees, as it helps them save resources being spent on research and development and eliminate risks associated with the same.

Specific Clauses to be kept in mind while drafting an IP licensing agreement

Apart from the general clauses of any commercial contract, certain clauses to be kept in mind while drafting an IP license agreement are as follows:

• Scope of grant of license and conditions, if any, for exercising the rights so licensed

The scope of grant of license depends on the nature of the intellectual property being licensed. It is essential to define the intellectual property which is being licensed in the agreement. A licensor can only grant rights which he himself possesses under the law. All or any of the rights that the licensor possesses, can be licensed by him. The scope of license must also be specified in terms of the field and territory of use of the license.

If grant of license includes right to ‘sublicensing’, the same must be specified in the agreement. The right to sub-license can be for all or some of the rights being licensed. For example : A license may be granted for using, copying and modifying a source code and to sell the resultant software with the right to sub-license only the right to sell the resultant software (through distribution channels). The two key definitions which must be present in every IP licensing agreement are :

‘Licensed Product’ – which defines the intellectual property being licensed

‘Use’ – which would define the scope of usage of the licensed IP by the licensee

• Nature of exclusivity or non-exclusivity

Exclusive License

An exclusive license restricts the licensor’s freedom to use the intellectual property and also to do business with other licensees. An exclusive license can be granted for a particular territory or the whole world depending upon the negotiations between the parties. When an  exclusive license is limited by field of use or territory, it is important to carefully state the extent to which the license is permitted to enforce the intellectual property rights. A territory exclusive license is usually granted by foreign companies to Indian companies in order to avoid the risk of entering into a new market themselves but at the same time exploiting it.

An exclusive license is risky for the licensor as the only commercial use of the IP would be by the licensee. In order to cover the risks associated with exclusive license, the licensor can add certain provisions to the license agreement such as a minimum royalty provision. According to the ‘minimum royalty provision’, the licensor may require the licensee to commercialise the IP within the first year or a specific time period. The licensee may also be required to reach a minimum amount of royalty within a time period. If they do not meet the royalty expectations, they could be asked to make up the difference with their own money. The agreement can also provide that if the goal is not reached, the exclusive patent license could be terminated.

click here

Sole License

A sole license is granted when the licensor wants to enjoy his rights with respect to the intellectual property but also licenses it to only one licensee for a particular territory or the whole world. In such a case, the licensor cannot license his intellectual property to any other licensees.

Non-Exclusive license

A non-exclusive license grants to the licensee, the right to use the intellectual property, and does not prevent the licensor from licensing his intellectual property to others. The licensor is free to exploit his own intellectual property and license it to other licensees as well. Commercial softwares are licensed on a non-exclusive basis. Where license is non-exclusive, it is likely that the licensor will prohibit sub-licensing.

• Enforcement of Rights created under the agreement

The rights created can be enforced by indicating which party would be responsible for maintenance of the registered IP, and which, for the payment of all the fees associated with the registration. Enforcement of rights can involve various contractual remedies like monetary damages, injunction and other equitable remedies, or specific method of dispute resolution (arbitration clause).

• The term for which the license has been granted

As with any type of commercial agreement, an IP license agreement must contain a clause stating the definite term of the agreement. Such a clause must also specify the provisions which will remain enforceable, even after the term of the agreement is over such as confidentiality clause. The term clause must also specify about the terms for renewal of the contract after expiration, such as by giving a notice few months prior to the expiration.

• Obligations of the parties involved

The obligations should be clear and unambiguous. The consequences of “non-fulfilment” of obligations should also be specified to ensure that termination due to the default of one party of its obligations does not lead to liability for the other party.

Positive obligations

Positive obligations are the obligations which secure effective enjoyment of rights so created. On part of the licensor, this would include obligation to disclose; assist in form of training, consulting, or technical support and on part of the licensee would include duty to report infringement; covenant to exploit

Negative obligations

Negative obligations are the obligations refraining the parties from doing an act, which would include duty not to compete with the licensor, not to disclose confidential information to unauthorised persons. It would also include duty not to modify the product in case such a right has not been granted under the license.

• Treatment of improvements, enhancements and modifications

Any further development in the usability, functionality, performance, efficiency or other characteristics of the licensed intellectual property made either by the licensor or the licensee can be said to be an improvement.

As far as their treatment goes, improvements can either be automatically included in the definition of the licensed intellectual property, made available to the licensee on payment of a specific fee, or in any other way negotiated between the parties. Usually for improvements made by the licensee, the licensor would require full disclosure and promptness. Although in cases where the licensee modifies the licensed intellectual property for its own customised usage, the parties could also agree on the licensee retaining the modified intellectual property without interference.

A proper definition for the terms ‘licensed technology’, ‘improvement’, ‘enhancement’ and ‘modification’ and who would own such improvements and all IP that vests, in the same, in order to avoid ambiguity as to their treatment under the Agreement.

• Contract Termination and effects of such termination

There are basically two types of terminations – termination for convenience and termination for cause.

A party with right to termination for convenience usually is allowed to terminate the agreement at any point of time, provided that adequate notice is given to the other party. A licensee typically would not want the licensor to have such a right as it could lead to huge losses.

The clause for termination of agreement for cause may include the following events:

1. Material breach by other party of the terms of agreement
2. Failure of other party to conduct business in the ordinary course
3. Bankruptcy or insolvency of the other party
4. Licensee can have right to terminate in case the intellectual property is found to be invalid or if he is sued by a third party for infringement, particularly, if he does not have recourse of indemnity from the licensor

The agreement must also provide for the consequences of termination of rights and obligations of each of the parties in order to avoid further disputes. Usually the consequence is that the licensor takes over the inventory of the licensee, seeks return or destruction of all confidential information and all material that contains or reflects licensed know-how. It is extremely important to specify the clauses which would survive the termination and for how long they will survive, (Example: confidential information, representation and warranties, indemnity provisions).

• Indemnity Clause

An indemnity clause is included in an agreement to prevent loss or to compensate for a loss which may occur as a result of a specified event. Generally, it is treated as a boilerplate provision, which should not be the case in an IP licensing agreement, as it can have far reaching consequences for either parties. The licensees usually insist on adding an indemnity clause requiring the licensor to indemnify the licensees against risks such as that of infringement, product liability, insurance and more, or atleast over which the licensor has control. This is because the licensor is the one providing the intellectual property and also making money from the transaction. An indemnity clause can also be used by the licensor to cover the risk of damages caused due to acts of the licensee, disclosure of confidential information to third parties or even misuse of the product. Some risks must be indemnified even after the expiry or termination of the contract, which must be provided for under the indemnity clause or the term and termination clause.

• Royalty

The licensor may require fixed or variable fee payments to be paid on a periodical basis called ‘royalties’ which provide a continuous stream of revenue to him. Although the determination of royalty depends upon negotiations between the parties, there must be some reasonable basis for determining the same. The Competition Commission of India has pronounced multiple decisions on determination of royalty rates in order to prevent abuse by licensor due to his dominant position in the market. One such decision of the CCI can be seen here.

• Transferability or Assignment of License

Generally, a licensee’s rights are not assignable unless the license agreement expressly permits assignment or the licensor otherwise consents. A licensor typically opposes free transferability of license rights by licensees as it would lead to diminished control of the licensor on who gets rights to his intellectual property and could also lead to the intellectual property ending up in the hands of his competitor. Every IP license agreement must specify that the license is not assignable at the hands of the licensee, unless otherwise agreed between the parties.

Important considerations while drafting different types of licensing agreements

1. The most common and basic mistake that some IP lawyers commit while drafting licensing agreements is the terminology that they use. While referring to the rights being licensed, the term that should be used is ‘grant of right(s)’ and not ‘assigning the right’. Such a small mistake can lead to litigation wherein the licensee could claim assignment even if the agreement was for licensing of the intellectual property. In order to avoid such a confusion, the agreement must also specifically state everywhere that it is a licensing agreement.
2. Care must be exercised by the licensor that the grant clause does not grant “all rights, title and interests in and to the intellectual property” to the licensee. Such a clause would constitute an “assignment” of the intellectual property rights making the purported licensee the new owner of these rights, even to the exclusion of the purported licensor.[2]
3. It is a common practice in a licensing agreement which includes the grant of right to sub-license, to have a provision allowing the licensor to approve the terms and conditions of the sub-license or, at the very least, to require that the sublicense be on terms and conditions that are substantially similar to those set forth in the licensing agreement. Such a right to the licensor is extremely essential when the IP being licensed includes trademarks, so that the licensor  can ensure that quality standards are imposed on products or services bearing the licensed marks.
4. For a licensing agreement granting rights to use trademark, there must be a provision for quality control to protect the distinctiveness and reputation of the trademark. Such a provision is necessary as, without it, there is possibility that the quality of two products sold under the same mark may vary. It is also important to make such a provision enforceable.
5. Where there are more than two parties involved in a licensing agreement, or especially in the case of cross-licensing, it is advised to avoid using the terms “licensee” and “licensor”, or atleast give proper definition for these terms in the definition clause to avoid any confusion.
6. In case, where there is a family or series of patents being licensed, it is advisable to make a list of all the patents being licensed and specify them in a ‘Schedule’ to the agreement to avoid confusion.

CLICK HERE

SAMPLE IP LICENSE AGREEMENT

This License Agreement (this “Agreement” of this “License Agreement”) is made and effective as of [DATE] (the “Commencement Date”) by and between:

[LICENSOR.Company], a company organized and existing in [LICENSOR.Country], with a registered address at [LICENSOR.Address] (“Licensor”)

and

[LICENSEE.Company], a company organized and existing in [LICENSEE.Country], with a registered address at [LICENSEE.Address] (“Licensee”).

WHEREAS:

1. Wishes to obtain a license to use [DESCRIPTION OF PRODUCT] (hereinafter, the “Asset”), and
2. Licensor is willing to grant to the Licensee a non-exclusive, non-transferable License to use the Asset for the term and specific purpose set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing, and of the mutual promises and undertakings contained herein, and other good and valuable consideration, the parties agree as follows:

1. DEFINITIONS

1.1 “Agreement” means this License Agreement including the attached Schedule.

1.2 “Confidential Information” means information that:

1. is by its nature confidential;
2. is designated in writing by Licensor as confidential;
3. the Licensee knows or reasonably ought to know is confidential;
4. Information comprised in or relating to any Intellectual Property Rights of Licensor;

1.3 “Asset” means the Asset provided by Licensor as specified in Item 6 of the Schedule in the form as stated in Item 7 of the Schedule.

1.4 “Intellectual Property Rights” means all rights in and to any copyright, trademark, trading name, design, patent, know how (trade secrets) and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic field and any application or right to apply for registration of any of these rights and any right to protect or enforce any of these rights, as further specified in clause 5.

1.5 “Party” means a person or business entity who has executed this Agreement; details of the Parties are specified in Item 2 of the Schedule.

1.6 “Term” means the term of this Agreement commencing on the Commencement Date as specified in Item 4 of the Schedule and expiring on the Expiry Date specified in Item 5 of the Schedule.

2. LICENSE GRANT

2.1 Licensor grants to the Licensee a non-exclusive, non-transferable license for the Term to use the Asset for the specific purpose specified in this Agreement, subject to the terms and conditions set out in this Agreement.

3. CHARGES

3.1 In consideration of the Licensor providing the license under clause 2 of this License Agreement, the Licensee agrees to pay Licensor the amount of the License Charge as specified in Item 9 of the Schedule.

4. LICENSEE’S OBLIGATIONS

4.1 The Licensee cannot use the Asset, for purposes other than as specified in this Agreement and in Item 8 of the Schedule.

4.2 The Licensee may permit its employees to use the Asset for the purposes described in Item 8, provided that the Licensee takes all necessary steps and imposes the necessary conditions to ensure that all employees using the Asset do not commercialize or disclose the contents of it to any third person, or use it other than in accordance with the terms of this Agreement.

4.3 The Licensee will not distribute, sell, license or sub-license, let, trade or expose for sale the Asset to a third party.

4.4 No copies of the Asset are to be made other than as expressly approved by Licensor.

4.5 No changes to the Asset or its content may be made by Licensee.

4.6 The Licensee will provide technological and security measures to ensure that the Asset which the Licensee is responsible for is physically and electronically secure from unauthorized use or access.

4.7 Licensee shall ensure that the Asset retains all Licensor copyright notices and other proprietary legends and all trademarks or service marks of Licensor.

5. INTELLECTUAL PROPERTY RIGHTS

5.1 All Intellectual Property Rights over and in respect of the Asset are owned by Licensor. The Licensee does not acquire any rights of ownership in the Asset.

6. LIMITATION OF LIABILITY

6.1 The Licensee acknowledges and agrees that neither Licensor nor its board members, officers, employees or agents, will be liable for any loss or damage arising out of or resulting from Licensor’s provision of the Asset under this Agreement, or any use of the Asset by the Licensee or its employees; and Licensee hereby releases Licensor to the fullest extent from any such liability, loss, damage or claim.

7. CONFIDENTIALITY

7.1 Neither Party may use, disclose or make available to any third party the other Party’s Confidential Information, unless such use or disclosure is done in accordance with the terms of this Agreement.

7.2 Each Party must hold the other Party’s Confidential Information secure and in confidence, except to the extent that such Confidential Information:

1. is required to be disclosed according to the requirements of any law, judicial or legislative body or government agency; or
2. was approved for release in writing by the other Party, but only to the extent of and subject to such conditions as may be imposed in such written authorization.

7.3 This clause 7 will survive termination of this Agreement.

8. DISCLAIMERS & RELEASE

8.1 To the extent permitted by law, Licensor will in no way be liable to the Licensee or any third party for any loss or damage, however caused (including through negligence) which may be directly or indirectly suffered in connection with any use of the Asset.

8.2 The Asset is provided by Licensor on an “as is” basis.

8.3 Licensor will not be held liable by the Licensee in any way, for any loss, damage or injury suffered by the Licensee or by any other person related to any use of the Asset or any part thereof.

8.4 Notwithstanding anything contained in this Agreement, in no event shall Licensor be liable for any claims, damages or loss which may arise from the modification, combination, operation or use of the Asset with Licensee computer programs.

8.5 Licensor does not warrant that the Asset will function in any environment.

8.6 The Licensee acknowledges that:

1. The  Asset has  not been prepared  to meet any specific  requirements of any party, including any requirements of Licensee; and
2. it is therefore the responsibility of the Licensee to ensure that the Asset meets its own individual requirements.

8.7 To the extent permitted by law, no express or implied warranty, term, condition or undertaking is given or assumed by Licensor, including any implied warranty of merchantability or fitness for a particular purpose.

9. INDEMNITY

9.1 The Licensee must indemnify, defend and hold harmless Licensor, its board members, officers, employees and agents from and against any and all claims (including third party claims), demands, actions, suits, expenses (including attorney’s fees) and damages (including indirect or consequential loss) resulting in any way from:

1. Licensee’s and Licensee’s employee’s use or reliance on the Asset,
2. any breach of the terms of this License Agreement by the Licensee or any Licensee employee, and
3. any other act of Licensee.

9.2 This clause 9 will survive termination of this Agreement.

10. WAIVER

10.1 Any failure or delay by either Party to exercise any right, power or privilege hereunder or to insist upon observance or performance by the other of the provisions of this License Agreement shall not operate or be construed as a waiver thereof.

11. GOVERNING LAW

11.1 This Agreement will be construed by and governed in accordance with the laws of [COUNTRY]. The Parties submit to exclusive jurisdiction of the courts of [COUNTRY].

12. TERMINATION

12.1 This Agreement and the license granted herein commences upon the Commencement Date and is granted for the Term, unless otherwise terminated by Licensor in the event of any of the following:

1. if the Licensee is in breach of any term of this License Agreement and has not corrected such breach to Licensor’s reasonable satisfaction within 7 days of Licensor’s notice of the same;
2. if the Licensee becomes insolvent, or institutes (or there is instituted against it) proceedings in bankruptcy, insolvency, reorganization or dissolution, or makes an assignment for the benefit of creditors; or
3. the Licensee is in breach of clause 5 or 7 of this Agreement.

12.2 Termination under this clause shall not affect any other rights or remedies Licensor may have.

13. LICENSE FEE

13.1 In consideration for the license grant described in this License Agreement, Licensee shall pay the yearly license fee as stated in Item 9 of the Schedule immediately upon execution of this Agreement and upon each anniversary date of this Agreement.

13.2 The license fee and any other amounts payable by the Licensee to the Licensor, under this Agreement, are exclusive of any and all foreign and domestic taxes, which if found to be applicable, will be invoiced to Licensee and paid by Licensee within 30 days of such invoice.

14. ASSIGNMENT

14.1 Licensee shall not assign any rights of this License Agreement, without the prior written consent of Licensor.

15. NOTICES

15.1 All notices required under this Agreement shall be in writing and shall be deemed given (i) when delivered personally; (ii) five (5) days after mailing, when sent certified mail, return receipt requested and postage prepaid; or (iii) one (1) business day after dispatch, when sent via a commercial overnight carrier, fees prepaid.  All notices given by either Party must be sent to the address of the other as first written above (unless otherwise changed by written notice).

16. COUNTERPARTS

16.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one instrument.

17. SEVERABILITY

17.1 The Parties recognize the uncertainty of the law with respect to certain provisions of this Agreement and expressly stipulate that this Agreement will be construed in a manner that renders its provisions valid and enforceable to the maximum extent possible under applicable law. To the extent that any provisions of this Agreement are determined by a court of competent jurisdiction to be invalid or unenforceable, such provisions will be deleted from this Agreement or modified so as to make them enforceable and the validity and enforceability of the remainder of such provisions and of this Agreement will be unaffected.

18. ENTIRE AGREEMENT

18.1 This Agreement contains the entire agreement between the Parties and supersedes any previous understanding, commitments or agreements, oral or written.  Further, this Agreement may not be modified, changed, or otherwise altered in any respect except by a written agreement signed by both Parties.

IN WITNESS WHEREOF, this Agreement, including the attached Schedule, was signed by the Parties under the hands of their duly authorized representatives and made effective as of the Commencement Date.

[LICENSOR.Company]

[LICENSOR.FirstName] [LICENSOR.LastName]

[LICENSOR.Title]

[LICENSEE.Company]

[LICENSEE.FirstName] [LICENSEE.LastName]

[LICENSEE.Title]

SCHEDULE

Item 1 – License Agreement

THE LICENSE AGREEMENT OF WHICH THIS SCHEDULE FORMS A PART IS DATED AS OF [DATE] AND IS BY AND BETWEEN THE PARTIES REFERENCED IN ITEM 2 BELOW.

Item 2 – Name and Address of Licensor and Licensee

Licensor: [LICENSOR.Company], a company organized and existing in [LICENSOR.Country], with a registered address at [LICENSOR.Address].

Licensee: [LICENSEE.Company], a company organized and existing in [LICENSEE.Country], with a registered address at [LICENSEE.Address].

Item 3 – Other License Terms

Item 4 – Commencement Date

Item 5 – Expiry Date

Item 6 – Description of Asset

Item 7 – Format of Asset

Item 8 – Approved Purpose

Item 9 – License Fee

The post IP Licensing Agreements – The First in The Series of 5 Important IP Contracts appeared first on iPleaders.

Here is the second article of the series, 5 Important IP Contracts.  In this article, Varshita Dogra of VIPS discusses Assignment or Transfer Contracts.

Part 1 of the series can be visited by clicking the link below.

IP Licensing Agreements – The First in The Series of 5 Important IP Contracts

Assignment or Transfer Contracts

An Assignment Agreement is a contract that transfers the whole or part of intellectual property rights by the owner of such IP to the assignee, who acquires ownership over such IP including the right to prevent others from exploiting the rights so assigned. In simple terms, assignment of IP means sale of IP. If the assignor, after assigning the IP uses it, such use will be considered an infringement.

An assignment agreement must be in conformity with the Indian Contract Act, 1872 and if required, must be duly stamped, when required, as per the provisions of the Indian Stamp Act, 1899. Specific laws governing specific forms of IP provide in detail about when, how and to what extent assignment of rights is permitted under the law. Registration of assignment of IP depends on whether the IP is registered or not.

Assignment can either be complete or partial in nature. Partial assignment of Copyright is also possible, as specified in Section 18 of Indian Copyright Act. Assignment can be limited in terms of use or territory as well. The only difference between license and assignment would be that the ownership of the right does not transfer in a license, whereas the ownership changes in an assignment.

Intellectual property created by students in a University Research and Development (R&D) programme can be assigned by the student in the absence of an agreement, as the student is the owner of the intellectual property created. Most universities, however, have policies requiring students to sign pre-invention agreements regarding the same. [3]

Types of assignment:

1. Legal Assignment – An assignment of an existing registered intellectual property is a legal assignment, where the assignee would become the owner of the intellectual property and would acquire all or partial rights with respect to the property.
2. Equitable Assignment – A grant of right before the IP is registered is an equitable assignment, which gives the assignee the right to call upon the assignor when the IP is granted, to assign the same to the assignee. An equitable assignee cannot have his name entered in the register as proprietor of the IP, but he may have notice of his interest in the IP entered in the register.
3. Mortgage – A mortgage is an agreement in which the intellectual property is wholly or partially transferred to assignee in return for a sum of money. Once the assignor repays the sum to the assignee, the rights with respect to the property are restored with the assignor. The person in whose favour a mortgage is made is not entitled to be the owner, but will be called the mortgagee. [4]

CLICK here

Key Points to remember while drafting an Assignment Contract

• Scope and Object of the Agreement

The first task at hand is to analyse the scope of the assignment, identification of the rights assigned and the extent of the assignment. While defining the scope of the assignment of an IP, it is also important to define the status of the accompanying IP as well. For example, in a patent assignment, the know-how associated with the patent would be the accompanying IP. It is important to remember that only an existing and future right in copyright is capable of assignment. The agreement shall specifically define the ‘intellectual property’ which is being assigned under the agreement.

• The Clause stating the actual assignment of IP

A specific clause stating the conveyance of ownership of the IP must be included in the agreement. This is the defining clause for the scope of the assignment. The right to sue for infringement of IP before the assignment is made, can also be transferred when the IP is assigned perpetually. If any approvals are to be obtained by the assignor, the effect of not being able to obtain such approval must be specified in the agreement.

• Term of Assignment

An assignment can be perpetual in nature or for a fixed definite period of time. The same must be specified in the agreement assigning IP to the assignee. In case the parties have agreed for a process to renew the term of the agreement, the same should be specified in the agreement. In case the assignment is for a fixed period of time, the agreement must also specify the consequences on expiration of such fixed term. For example, who would have the right to sue for infringement for the duration of the agreement. In absence of a term specified in the assignment agreement, the term will be deemed to be the duration of the period under which the intellectual property rights may be enforced under the laws of India.

• Territory of Assignment

The territory for which the assignee has acquired the rights in an intellectual property as an owner is to be clearly specified to avoid confusion. As assignment is transfer of ownership, the assignor will not be the owner of the IP in the particular territory till the end of term of the agreement.

• Future Transfers

Generally, when ownership of IP is transferred, it would mean that the right to make any future transfer is also included. But in case of assignment for a fixed term, the agreement can provide for a restriction on the right of the assignee to make future transfers during the term of the agreement. A future transfer can be made only to the extent of the right, that the assignee has acquired in the IP. It is only effective to the extent it is within the scope of any earlier transfer, under which access to or use of the intellectual property was acquired or authorized.

• Warranties

An assignment agreement must include warranties from the IP owner stating the following 

1. The assignor is the only owner of the IP assigned, and that he has the authority and capacity to assign the IP
2. The IP has not been licensed; or no right, title or interest has been created in the property towards any third party
3. The IP is free from any burdens, such as infringement of third party rights
4. There are no other obligations to any third party that are inconsistent with the rights and obligations set out in the agreement

Such a clause is important for the assignee to safeguard his interests and protect him from future litigation.

Apart from these provisions, most of the provisions used in an IP License agreement can be used in an assignment contract by careful consideration of the same beforehand and making them fit for an assignment contract.

Difference between an IP License Agreement and IP Assignment

The major difference between assignment and license is that the owner retains the ownership over the intellectual property when he grants a license for the same, whereas when an owner of an intellectual property assigns a right or bundle of rights to another person, he himself loses those rights. As assignment transfer the whole interest in the copyright itself, while a license merely grants the permission to do something and not the ownership of the copyright. Usually the difficulty arises, when the question with respect to whether there has been partial assignment or an exclusive license of the right has been granted arises in the Court.

The Hon’ble Supreme Court analysed the difference between assignment and licensing of Copyright in the case of Deshmukh and Co. (Publishers) Pvt. Ltd. v. Avinash Vishnu Khandekar and Others [2006 (32) PTC 358 (Bom)]. It was held as follows :

“ 1. To determine whether a document is an assignment or merely confers a licence, regard must be given to the substance and not to the form of words used. The question usually arises in the context of whether there has been a partial assignment or an exclusive license of the right in question. The distinction is a slender but an important one.

2. Two proposition in respect of commercial contracts are well recognised. Firstly, that there is no presumption in favour of permanence of an agreement. Secondly, if a contract involved mutual trust and confidence in its fulfilment. Normally, courts would not interpret its term to employ permanence.

3. If the consideration consists of payment of royalties or a share of profits instead of a downright payment, then the copyright is not assigned. It would a license to publish and sell. In this case, payment of royalty instead of a sum of money paid down will also weigh heavily against partial assignment.”

Difference between a License Contract and an Assignment Agreement

In some cases, it is mandatory to enter into an Assignment Agreement such as when the employee is making inventions for the employer. Inventions made in the course of employment are by default owned by the employer, however a contract to this effect can save employer from vexatious litigation. The concept of royalties work better with license instead of assignment. This is because, an assignment being a conveyance of title that is irrevocable, as assignee that fails to pay royalties does not have to deal with the risk of loss of right in the IP, since the assignee owns it unconditionally. An assignment may be appropriate where the IP owner prefers to receive a lump sum price, at the time of the assignment, rather than collecting royalties [5].

Technology Transfer and Licensing Agreements

Technology transfer and licensing agreements are entered into for improving own product by using rights owned by others in the form of patent, utility model, or know-how protected by a trade secret [6]. A detailed analysis on drafting such agreements can be found here.

CLICK HERE

ASSIGNMENT AND TRANSFER AGREEMENT – SAMPLE TEMPLATE

This Assignment and Transfer Agreement (“Agreement”) is made as of _________ __, 20__ (“Effective Date”) between ________________. (“Assignee”), and ________________ (“Assignor”). In consideration of the mutual promises and covenants contained in this Agreement, the parties agree as follows:

1. Definitions

1.1 “Assigned Property” means the property listed in Exhibit A and all Intellectual Property and Intellectual Property Rights forming a part of, embodied, in or necessary for use of the property.

1.2 “Intellectual Property” means all technology and intellectual property, regardless of form, including without limitation: published and unpublished works of authorship, including without limitation audiovisual works, collective works, computer programs, compilations, databases, derivative works, literary works, maskworks, and sound recordings (“Works of Authorship”); inventions and discoveries, including without limitation articles of manufacture, business methods, compositions of matter, improvements, machines, methods, and processes and new uses for any of the preceding items (“Inventions”); words, names, symbols, devices, designs, and other designations, and combinations of the preceding items, used to identify or distinguish a business, good, group, product, or service or to indicate a form of certification, including without limitation logos, product designs, and product features (“Trademarks”); and information that is not generally known or readily ascertainable through proper means, whether tangible or intangible, including without limitation algorithms, customer lists, ideas, designs, formulas, know-how, methods, processes, programs, prototypes, systems, and techniques (“Confidential Information”).

1.3 “Intellectual Property Rights” means all rights in, arising out of, or associated with Intellectual Property in any jurisdiction, including without limitation: rights in, arising out of, or associated with Works of Authorship, including without limitation rights in maskworks and databases and rights granted under the Copyright Act (“Copyrights”); rights in, arising out of, or associated with Inventions, including without limitation rights granted under the Patent Act (“Patent Rights”); rights in, arising out of, or associated with Trademarks, including without limitation rights granted under the Lanham Act (“Trademark Rights”); rights in, arising out of, or associated with Confidential Information, including without limitation rights granted under the Uniform Trade Secrets Act (“Trade Secret Rights”); rights in, arising out of, or associated with a person’s name, voice, signature, photograph, or likeness, including without limitation rights of personality, privacy, and publicity (“Personality Rights”); rights of attribution and integrity and other moral rights of an author (“Moral Rights”); and rights in, arising out of, or associated with domain names (“Domain Name Rights”).

2. Assignment. Assignor hereby perpetually, irrevocably, and unconditionally assigns, transfers, and conveys to Assignee and its successors and assigns, all of Assignor’s right, title, and interest in and to the Assigned Property. Assignor further perpetually, irrevocably, and unconditionally assigns, transfers, and conveys to Assignee and its successors and assigns all claims for past, present and future infringement or misappropriation of the Intellectual Property Rights included in the Assigned Property, including all rights to sue for and to receive and recover all profits and damages accruing from an infringement misappropriation prior to the Effective Date as well as the right to grant releases for past infringements. Assignor hereby waives and agrees not to enforce all Moral Rights and all Personality Rights that Assignor may have in the Assigned Property.
3. Consideration. In consideration for assignments made by Assignor under this Agreement, Assignee will pay Assignor $________ dollars.
4. Confidentiality. Assignor must not use any Confidential Information assigned as part of the Assigned Property except for the benefit of Assignee. Assignor must not disclose such Confidential Information to third parties. Assignor must take reasonable steps to maintain the confidentiality and secrecy of such Confidential Information and to prevent the unauthorized use or disclosure of such Confidential Information. Any breach of these restrictions will cause irreparable harm to Assignee and will entitle Assignee to injunctive relief in addition to all applicable legal remedies.
5. Representations and Warranties. Assignor represents and warrants to Assignee that: Assignor exclusively owns all right, title, and interest in and to the Assigned Property; Assignor has not granted and will not grant any licenses or other rights to the Assigned Property to any third party; the Assigned Property is free of any liens, encumbrances, security interests, and restrictions on transfer; to Assignor’s knowledge, the Intellectual Property that is assigned as part of the Assigned Property does not infringe Intellectual Property Rights of any third party; and there are no legal actions, investigations, claims, or proceedings pending or threatened relating to the Assigned Property.
6. Indemnification. Assignor will defend, indemnify, and hold harmless Assignee, and Assignee’s officers, directors, shareholders, successors, and assigns, from and against all losses, liabilities, and costs including, without limitation, reasonable attorneys’ fees, expenses, penalties, judgments, claims and demands of every kind and character that Assignee, its officers, directors, shareholders, successors, and assigns may incur, suffer, or be required to pay arising out of, based upon, or by reason of: the breach by Assignor of any of the representations or warranties made by Assignor under this Agreement; Assignor’s use of the Assigned Property prior to the date of this Agreement; or Assignor’s failure to perform its obligations under this Agreement.
7. Further Assurances

7.1 Assistance. Assignor will take all action and execute all documents as Assignee may reasonably request to effectuate the transfer of the Assigned Property and the vesting of complete and exclusive ownership of the Assigned Property in Assignee. In addition, Assignor will, at the request and sole cost and expense of Assignee, but without additional compensation, promptly sign, execute, make, and do all such deeds, documents, acts, and things as Assignee may reasonably require:

(a) to apply for, obtain, register, maintain and vest in the name of Assignee alone (unless Assignee otherwise directs) Intellectual Property Rights protection relating to any or all of the Assigned Property in any country throughout the world, and when so obtained or vested, to renew and restore the same;

(b) to defend any judicial, opposition, or other proceedings in respect of such applications and any judicial, opposition, or other proceedings or petitions or applications for revocation of such Intellectual Property Rights; and

(c) to assist Assignee with the defense and enforcement of its rights in any registrations issuing from such applications and in all Intellectual Property Rights protection in the Intellectual Property.

7.2 Power of Attorney. If at any time Assignee is unable, for any reason, to secure Assignor’s signature on any letters patent, copyright, or trademark assignments or applications for registrations, or other documents or filings pertaining to any or all of the Assigned Property, whether because of Assignor’s unwillingness, or for any other reason whatsoever, Assignor hereby irrevocably designates and appoints Assignee and its duly authorized officers and agents as its agents and attorneys-in-fact, to act for and on its behalf and stead to execute and file any and all such applications, registrations, and other documents and to do all other lawfully permitted acts to further the prosecution thereon with the same legal force and effect as if executed by Assignor.

8. Miscellaneous

8.1 Injunctive Relief. A breach of this Agreement may result in irreparable harm to Assignee and a remedy at law for any such breach will be inadequate, and in recognition thereof, Assignee will be entitled to injunctive and other equitable relief to prevent any breach or the threat of any breach of this Agreement by Assignor without showing or proving actual damages.

8.2 Binding on Successors. This Agreement will inure to the benefit of, and be binding upon, the parties, together with their respective representatives, successors, and assigns, except that Assignor may not assign this Agreement without the consent of Assignee.Assignee may assign this Agreement in its discretion.

8.3 Governing Law and Jurisdiction. This Agreement will be governed by, and construed in accordance with, the laws of the State of New York without reference to its conflict of laws provisions.With respect to any dispute arising out of or related to this Agreement, the parties consent to the exclusive jurisdiction of, and venue in, the federal and state courts located in New York County, New York.

8.4 Amendment and Waiver. This Agreement may not be amended or modified unless mutually agreed upon in writing by the parties and no waiver will be effective unless signed by the party from whom such waiver is sought. The waiver by any party of a breach of any provision of this Agreement will not operate or be construed as a waiver of any subsequent breach.

8.5 Severability. If any provision of this Agreement is held invalid by any court of competent jurisdiction, such invalidity will not affect the validity or operation of any other provision, and the invalid provision will be deemed severed from this Agreement.

8.6 Entire Agreement. This Agreement is the entire agreement concerning the subject matter hereof. It supersedes all prior and contemporaneous agreements, assurances, representations, and communications between the parties.

[Assignor] [Assignee]

By:_________________________ By:____________________________

Title:_______________________ Title:__________________________

EXHIBIT A

PROPERTY

References

[3] “Importance of Assignment Agreements under Intellectual Property Laws in India” written by Sindhura Chakravarty; published in the Journal of Intellectual Property Rights, Vol 14, November 2009, pp 513-522

[4] Article on “To License or to Assign a Patent?” published with PSA legal in issue XV, September 2010

[5] ibid

[6] Article on “Technology License Agreement” by WIPO

The post Assignment or Transfer Contracts – The Second in The Series of 5 Important IP Contracts appeared first on iPleaders.

“The only certainty in life is uncertainty.”

When I was much younger, before law school and life happened, I had a 10 year life plan all chalked out for me. The plan was simple – five years of law school, five years of litigation and then become the best thing to happen to the legal industry after Mr. Jethmalani!

I was going to be the Robinhood of the lawyers, giving free legal aid to the poor and educating the common people about their rights.

Over ambitious and naive, huh? I know better now.

I tried to stay the course, but did not last a year on my plan. I attribute it to my unplanned self and lack of real-world knowledge. I took the first job I thought will lead me towards my goal. I was not cut-out for it. Then I planned to work in-house so I interned with a company for about four months. After that, I got a job offer in a media and entertainment company and I worked there for about four years, and simultaneously helped in running my family business. Then I quit that job to work with a legal education startup as a writer!

The point I am trying to make here is that the only thing constant for me has been change and uncertainty. I have come to accept that even with the worst plan in my first year, or a good plan, thereafter, lie some uncertainties. The best thing I have learnt is to adapt and make the best of whatever life throws at me.

This is not true for everyone. I know a lot of people who had a plan and stuck to it until they achieved it. But I also know of several others, who have struggled to get what they want. Some have persisted, while others did not. It does not make their journeys any less significant. It just makes you realise that ‘the plan’ must have enough room for you to adapt to the present situation. It also makes you realise things like, what you really want, your abilities, the importance of financial stability in your life, etc. I have had bare minimum and stable income as well. But then sometimes the job was simply worth doing, so the money did not matter. Other times, money was the only reason for doing a job!

# Show me the money!

I had almost romanticised my vision of legal services as a law student. I felt that since I live an extremely simple life, I could live off my meagre salary. That was only briefly true. But then free legal service is not really as the name suggests. You have to get paperwork done, filings, etc. You can probably waive of your own fees. But there are still expenses to be borne by the clients.

Just like starving artists, first generation lawyers without a solid plan, often have their rose tinted glasses snatched off too soon. The realisation hits that the income has to be supplemented. When this happens, there are only a handful options left.  You can either try and work your way into the law firms or companies, or you can sit for judicial or civil services examinations or, pursue further studies as well. Those who want to stay in litigation may also do a contract drafting course, and start drafting contracts to supplement their income as well as increase their client base. To know more about it read here. A sustainable income is necessary and deserved at this point.

CLICK HERE TO GET FREE MATERIALS!

# To be, or not to be

By the time you have realised how to sustain an income, you may come to the crossroads of what to do with your career in the long term. For many like me, the first year is mostly to find our footing in the legal industry. It is the time to decide whether I am suited for the dream job and can pursue it to the end or not.

As I have mentioned earlier, my ten year plan did not work out at all for me. So then the huge realisation smacked me in the face: what to do? Was I ready to hang my boots or change my dreams? The reality was way different than my expectations of the profession. Mind you, this was the time when I did not know about the online courses which could have helped me with all my troubles. But being ignorant is no excuse in my book. Neither was the being indecisive.

Miraculously, something happened in my personal life, which helped me decide that I want to work for a company. But I had no corporate experience. So I reached out to my contacts and found an internship with a company. It was a great learning opportunity and while the company did not hire me, I got my next job based on the work I did for them. So one thing kind of led to the other.

The takeaway is that, you will come to a crossroad at some point in your legal career where you have to decide: Where do I see myself in the next five years? Then, you make it happen and get there! If that does not work out? Then go to the next plan. But don’t give up. Something will turn the tide in your favour.

# Burden of Choices

I somewhat pride myself on taking the necessary call in my career when I did. It was horrible to shelve my dreams and accept the fact that I had failed. But the thing about failure is that you have to dust yourself and get up. Failing shows that you tried. Could I have tried some more? Perhaps. I did not wait around to find out after I’d made up my mind.

The choices we make, good or bad have consequences. But you know that only once you have taken the risk and made that choice. We all have choices to make. What to do pursue as a lawyer: M&A law, media laws, cyber laws, business laws, labour laws, company laws? There are so many industries and alternatives. We are spoil for choice. But then we do not know how to gain specialised knowledge sometimes. There are online courses to help with that. But you have to make the choice first!

This realisation is what I like to think of as the turning point. This is where we decide to make the change that is necessary. The effect of this choice is usually a little long term. Whatever you choose will shape up your career. You will become an expert in that particular industry or field. This one is a big decision.

CLICK HERE TO PLAN YOUR CAREER!

# Chasing your passion

Once you figure out what you want to do, try and sit with it for a while. Like my boss recently said to me, “You cannot just get good at something. You have to invest time, energy and focus on the job at hand. Only with perseverance and hard work will you succeed.”

It is true. I stayed at my second job for about four years and learnt all that I could. There were no shortcuts. Everyday you learn something new. I also learnt the ropes of my family business when I had almost given up. The key to finding your passion is to do things that you want to, and some more! What you do is only part of the goal. You have to figure out what drives you and where your passion lies, in the course of doing the job at hand.

My dreams have changed since I’d started. I made some tough calls. But I tried remaining on the course long enough to figure out where I want to be. It was not at my previous job. I had learnt all I could and there was no more it could offer me. So I kept at learning as much I could. I did some courses and wrote some articles. All in attempt to figure out what I want to do next.

I realise that there are people who work in the same organisation for years, and I commend them for following their passion. But since my dreams have changed, I know what I want to do. I want to learn as much as possible. Things apart from laws. I want to learn about sales, marketing, writing and more. The crux of my dream remains the same: I want to help people learn about laws, so that they are armed with knowledge.

I have taken a lot of radical decisions in my life, which I was vehemently advised against. But it brought me a step closer to my goal without me realising so. If I had not made the conscious call to leave my first job and move in-house, I would not have landed my first major job. That job inadvertently helped me pursue my passion for writing and learning. I now work with an organisation which has the same goal as me – legal education. Did I make a lot of mistakes on the way to here? Of course, I did. But I also learnt that even if our dream changes with time and reality checks, the important thing is to keep moving forward.

The only way to keep moving forward is to keep learning and improving yourself. If you don’t understand, ask for help. Dreams may change with time, but goals are constant. Figure out your passion, set goals for yourself. Learn what you need to in order to pursue your refreshed dreams and go for it!

The post 4 Life-Changing Realisations In Your Legal Career appeared first on iPleaders.