‘FAIR & HANDSOME’ CHANGED TO ‘GLOW & HANDSOME’: INTERIM RELIEF FOR HINDUSTAN UNILEVER LIMITED AGAINST EMAMI

In the Indian context, historically, the word ‘Fair’ in reference to skin colour has been highly coveted by all and sundry. There is hardly a matrimonial advertisement that one will see without a preference for fairness. Brands have played into these stereotypes and reinforced them over and over again through various products. In a recent belated but welcome change, brands selling skin lightening creams took a stand to change this narration and join the global outrage with regard to discrimination against skin colour. However, this too came with its own controversy.

Hindustan Unilever Ltd. recently dropped the word ‘fair’ from their brand ‘fair and handsome’ and replaced the same with ‘glow’. An interim relief to Hindustan Unilever Ltd against Emami Ltd stating that HUL should be given a seven-day prior notice before initiating a legal proceeding on trademark. 

The Court observed after hearing the arguments that it does not appear ‘prima facie’ that HUL is the prior adopter of the mark as it had already filed the trademark application in September 2018 and subsequently in June 25, 2020. However, the court was of the opinion that the statements made by the defendant company Emami Ltd are amounting to a threat whether they are ‘unlawful or groundless’.

As per the application issued by HUL, it launched a fairness cream in 1975 which was gender neutral. HUL also launched ‘Fair & Lovely, Men’ in 2006. HUL stated that it has adopted the trademark of the terms ‘Glow & Lovely’ and “Glow & Handsome’ back in 2018. Nonetheless, HUL officially announced that ‘Fair & Lovely’ shall be rebranded as ‘Glow & Lovely’ on July 2, 2020. It claimed that the company shall no longer be highlighting its skin-lightening cream and dropped the word ‘fair’ from its Rs. 3000 crore brand. The men’s range of products owned by HUL were to be rebranded as ‘Glow & Handsome’. 

The decision to rebrand the skin-lightening product by HUL came after facing criticism for the name ‘Fair & Lovely’ which promoted negative stereotypes towards the darker skin tones promoting racism in its advertisement campaigns.

 The Kolkata based Emami group was shocked by such ‘unfair business practice’ which would damage their brand image. Eventually, Emami gave the press statements threatening a legal action against HUL for violating the rights of Emami’s ‘Glow and Handsome’. The matter is intended for further hearing on July 27, 2020.

SECTION 10A OF IBC SHALL APPLY EVEN TO PENDING CASES WITH RESPECT TO DEFAULTS THAT HAVE ARISEN ON OR AFTER 25 MARCH, 2020

Siemens Gamesa Renewable Power Private Limited v. Ramesh Kymal

The National Company Law Tribunal (NCLT), Chennai by the order dated 9 July, 2020, interpreted the applicability of section 10A of IBC which was promulgated by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 (Ordinance) published on 5 June, 2020.

Background:

  • The Application has been filed by Siemens Gamesa Renewable Power Ltd. after the promulgation of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 on 5 June, 2020.
  • A new section namely section 10A, has been inserted in the Insolvency and Bankruptcy Code, 2016. 
  1. Section 10A bars initiation of corporate insolvency resolution process against a corporate debtor for any default arising on or after 25 March, 2020 for a period of six months which shall not exceed beyond one year. 
  2. The proviso states that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period. 
  • The Operational Creditor made a claim of INR 104.11 crore against the Applicant with the date of alleged default of the claim amount to be 30 April, 2020.

Issue:

  • Whether 30 April, 2020 will fall within the scope of section 10A when the ordinance introducing section 10A was promulgated on 5 June, 2020. 

Respondent submitted:

  • The interpretation should be done for the applications that are filed after 5 June, 2020 in relation to defaults falling on or after 25 March, 2020.
  • There is a distinction between applications already filed and those to be filed. 
  • If there was no financial distress arising out of COVID-19 pandemic, then section 10A protection cannot be sought for. 
  • The Respondent argued using cases such as Chandrasingh Manibhai v. Surjit Lal Ladhamal Chhabda (AIR 1951 SC 199), and Arrowline Organic Products Private Limited v. Rockwell Industries Ltd. (IA/341/2020 in IBA 1031/2019), it can be said that the application of the statute cannot be to suits already pending. 

Applicant submitted:

  • The introductory portion of the Ordinance clearly gives out the objects and reasons for promulgation and it is clear that the executive was concerned about the effect of the COVID-19 pandemic. 
  • It must be noted that the provisions of section 10A shall not apply to defaults that have arisen in relation to a corporate debtor prior to the relevant date of 25 March, 2020 when the nationwide lockdown came into force. 
  • The term ‘ever’ in the proviso to section 10A means to cover both pending applications filed in relation to default occurred on or after 25 March, 2020.
  • As per Anuj Jain v. Axis Bank Limited (2020 SCC Online SC 237), it can be said that the object of IBC is to balance interest of all stakeholders. 

Order:

  • The Ordinance has taken into consideration the extraordinary situation, uncertainty and financial stress created on account of the COVID-19 pandemic. 
  • The suspension should be done as per section 10A irrespective of any default being committed or admitted without prejudice to the contention of the applicant that no default has been committed by the applicant. 
  • The date of the alleged default of the claim amount is stated to be 30 April, 2020 and the section 10A clearly states that proceedings shall be suspended for any default arising on or after 25 March, 2020.
  • The date of 30 April, 2020 is a date posterior to the date on which the Ordinance was promulgated i.e. 5 June, 2020 but it is has retrospective application from 25 March, 2020.
  • The disruptions due to the COVID-19 pandemic may be treated as ‘force majeure’.
  • The proviso to main provision of section 10A makes it clear that the hands of the clock were not required to be temporarily frozen but are required to be permanently interdicted in relation to defaults occurring on or after 25 March, 2020 by using the term ‘no application shall ever be filed’.

CENTRAL GOVERNMENT NOTIFIES DRAFT RULES FOR A NEW LABOUR CODE WITH REGARD TO MINIMUM WAGES AND WORKING HOURS

On 9 July, the Labour and Employment Ministry notified the draft Code on Wages (Central) Rules, 2020 which paves way for an 8 hour working day and one or more intervals of rest not exceeding 1 hour for labourers working in various factories and establishments. This move by the Central Government has been considered in conflict to decisions of State Governments which have increased the working hours to 10-12 hours. 

These rules shall be applicable to a standard working class family which includes a spouse, two children apart from the earning worker. The Code shall fix a national floor for minimum wages based on the minimum standards of living inter alia medical requirement, recreation, expenditure and children’s education should constitute to 25 per cent of the minimum wages. Henceforth, it has classified expenditure limits across different heads on which the minimum wages will be calculated. The Code has also revised the rules for time intervals with regard to dearness allowance to a worker.  

While calculating the minimum wages of a worker, tt is important to consider a consumption intake of 2700 calories and usage of 66 meters of clothing for a standard family. The Central Government has also proposed that employers have to make a prior intimation to an inspector within 10 days in case of deduction in wages of labour for empowerment of workers.

The Code, further, recommends division of the county into 3 geographical categories namely metropolitan area, non-metropolitan area and the rural area for fixing of wages. There shall be a constitution of a technical committee consisting of Chief Labour Commissioner as a Chairperson along with 6 other members, for advising the Central Government on skill categorization. The Code specifies a procedure for the Central Advisory Board which shall consist of persons to be nominated by the Central Government representing employers, employees, independent persons and representatives of the State Government. The rules have been presented in the form of gazette notification and the government has invited suggestions from all people which are likely to be affected within a period of 45 days.

INDIA BANS 59 CHINESE APPS INCLUDING WECHAT, TIKTOK, HELO ETC.

On 29 June 2020, the Ministry of Electronics and Information Technology (MeIT) banned 59 Chinese Apps including Tiktok, WeChat, Helo, Beauty Cam, Shein, Shareit, Clash of Kings, Kwai etc. The ban was imposed on a wide variety of mobile applications which served E-Commerce, News, Video Content, Utility Apps etc. backed by various large Chinese Technology companies. 

It is interesting to note that the Indian Government’s press release does not explicitly mention the term ‘Chinese Apps’ but all the applications so listed are wholly owned by Chinese companies. The ban has been implemented due to tensions between the Indo-China border. Mr. Ravi Shankar Prasad, the Minister for Electronics and Information Technology stated that the ban is called a ‘digital strike’ against China. Press reports suggest that MeIT was concerned regarding the ‘Level of Access’ these Chinese firms and companies have through the apps of an Indian user which results in their violation of privacy. The Indian Government’s major concern was with regard to National Intelligence Law provisions which allowed the Chinese Government to require their companies to collaborate with intelligence services and law enforcement. 

REGULATORY BASIS OF BAN

The ban has been imposed and issued as per section 69A of the Information Technology Act, 2000 r/w the Information Technology (Procedure and Safeguards for Blocking of Access of Information by Public) Rules, 2009. Through these provisions, the Government can ban public access to any information which is generated, transmitted, stored or received through any computer resource where it has been satisfied that it is necessary or expedient to do so in interest, inter alia, to maintain the sovereignty and integrity of the nation. Though the Government is not in public domain, it has been issued for safety and sovereignty of Indian cyberspace and safety of crores of Indian mobile and Internet users. The ban has been implemented for the following reasons:

  • Such Apps were prejudicial to India’s public order, sovereignty, integrity, defence and security.
  • Various sources complained regarding stealing or transmission of information in an unauthorized manner.
  • It has been regarded as a matter of deep and immediate concern which requires emergency measures.
  • The Indian Cyber Crime Coordination Centre recommended blocking of such ‘malicious apps’.
  • The Computer Emergency Response Team received issues regarding breach of privacy and security of data causing a negative impact to public order.
  • The raging concerns causing threat to data security and safeguarding the privacy of Indian Citizens.

It is a matter of great importance to ban such apps since India does not have a single law for the protection of personal information. The provisions as per Information Technology (Reasonable security practices and procedures & sensitive personal data or Information) Rules, 2011 are also quite inadequate to address such complex data protection related to such apps. Henceforth, there is a severe gap between the law when it comes to the collection and processing of data by such Chinese applications. This issue shall have a huge impact on businesses and quite specifically, the matters or evidence that the Government has relied on to pass this order. 

The Government has in various occasions expressed its concern towards data protection towards servers outside India. In certain businesses (like payment service providers in respect of payments data and telecom companies with respect to user data), there has been no general obligation on businesses operating in India to maintain data in India itself. With regard to the Personal data protection Bill, 2019, it only proposes the critical personal data to be stored in India itself. However, by downloading these apps, the users grant the information to be stored outside India and the Government’s decision shall have a severe impact on businesses. 

THE AFTERMATH

It is an interim order passed in an emergency and the final order shall be passed in accordance with Information Technology Act, 2000. The Government shall set up an inter-ministerial committee to inquire about the data sharing practices of Chinese Apps. The banned apps shall be given an opportunity to represent and explain themselves on privacy and security issues. TikTok is the only app which has formally denied the media reports and challenged the order. China has strongly condemned the ban on grounds that it runs against fair and transparent procedure, violates national security exceptions and suspects violation of WTO rules and regulations. The United States has also supported this decision of Indian Government stating it as ‘clean-app approach’. There has no specific action from the Chinese Government in such relation and we shall witness how this ‘digital strikes’ such be addressed between the two nations.

AMENDMENTS IN THE INDIAN STAMP ACT, 1899 AND RULES MADE FROM JULY 1, 2020 WITH RESPECT TO SECURITIES MARKET INSTRUMENTS

The Amendments in the Indian Stamp Act, 1899 (“the Stamp Act”) and the Indian Stamp (Collection of Stamp-Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019, brought by the Finance Act 2019 and Rules made thereunder came into effect from 1st July, 2020 vide notifications dated 30th March, 2020.

The present system of collection of stamp duty on securities market transactions resulted in various stamp rates for the same instrument, leading to multiple occurrences of stamp duty and disputes regarding jurisdiction increasing transaction costs. Thus, this move of the Central Government has introduced uniformity in the collection of stamp duty on securities market instruments by enabling states to to collect stamp duty on securities market instruments at one place by one agency (through Stock Exchange or Clearing Corporation authorized by it or by the Depository) on one instrument, thereby facilitating the ease of doing business across States and minimising cost of collection.

A mechanism for appropriate sharing the stamp duty with relevant State Government based on State of domicile of the buying client has also been included. In the extant scenario, stamp duty was payable by both seller and buyer whereas in the new system it is levied only on one side (payable either by the buyer or by the seller but not by both, except in case of certain instrument of exchange where the stamp duty shall be borne by both parties in equal proportion).

Salient Features

  • The stamp-duty on sale, transfer and issue of securities shall be collected on behalf of the State Government by the authorised collecting agents who then shall transfer the collected stamp-duty in the account of the concerned State Government with the Reserve Bank of India or any scheduled commercial bank. The Central Government has also notified the Clearing Corporation of India Limited and the Registrars to Issue and / or Share Transfer Agents to act as collecting agents.
  • The collecting agents shall within three weeks of the end of each month transfer the stamp-duty collected to the State Government where the residence of the buyer is located and in case the buyer is located outside India, to the State Government having the registered office of the trading member or broker of such buyer and in case where there is no such trading member of the buyer, to the State Government having the registered office of the participant.
  • The collecting agent shall transfer the collected stamp-duty in the account of concerned State Government with the Reserve Bank of India or any scheduled commercial bank, as informed to the collecting agent by the Reserve Bank of India or the concerned State Government.
  • The collecting agent may deduct 0.2 per cent of the stamp-duty collected on behalf of the State Government towards facilitation charges before transferring the same to such State Government.
  • For all exchange based secondary market transactions in securities, Stock Exchanges shall collect the stamp duty; and for off-market transactions (which are made for a consideration as disclosed by trading parties) and initial issue of securities happening in demat form, Depositories shall collect the stamp duty.
  • The stamp duty rate is lower for issue and transfer of debentures to aid capital formation and to promote corporate bond market.
  • Secondary market transfer of instruments which are traded with differences in a few basis points, like interest rate / currency derivatives or corporate bonds are being charged at a very lower rate from the existing rates. For the newly introduced ‘repo on corporate bonds’, a very low rate of 0.00001% is specified.
  • With respect to the applicability of stamp duty on redemption of mutual fund units, it is clarified that redemption is not liable to duty as it is neither a transfer nor an issue nor a sale. However, switching in mutual fund would attract stamp duty even though there is no physical consideration paid or transfer of ownership.
  • In order to prevent double incidence of stamp duty, when securities are transferred from the demat accounts of issuer to clearing corporation, member, etc., the stamp duty shall be transferred to the State Government where the residence of the buyer is located.

Bombay High Court: ISKCON receives the status of well-known mark

Bombay High Court

Single bench judge – Justice Burgess P Colabawalla

The trademark ISKCON has been declared a “well-known trademark” by a single bench judge of Justice Burgess P Colabawalla in the Bombay High Court in a commercial intellectual property (IP) suit filed. International Society for Krishna Consciousness has been using the trademark ‘ISKCON’ in India and worldwide in various jurisdictions. The Plaintiff states the term/trademark ISKCON was coined from a combination of the words of the Plaintiff’s name i.e. I from International, S from Society, K from Krishna and Con from Consciousness and not used by any other entity before this. 

ISKCON was founded in New York by 1966 and then spread across into a worldwide confederation of over 600 temples, 65 eco-farm communities, centres, communities, schools, and 110 vegetarian restaurants with some 250,000 devotees. The first ISKCON temple in India was constructed in 1971.

International Society for Krishna Consciousness filed the present suit against an apparel company named Iskcon Apparel Pvt Ltd who were allegedly infringing upon the trademark and selling clothes online under the said trademark.  Advocate for the Plaintiff, Hiren Kamod submitted that the infringement came to light In February and the defendant did not respond to the several summons. The Defendant changed its name to Alcis Sports Pvt Ltd but continued to use the trademark ‘Iskcon’ on their products in the course of trade. 

In March, the Court was pleased to grant ad-interim injunction restraining the defendant from using the impugned trademark. On June 26, 2020 the Court declared the Plaintiff’s trademark to be a well-known trademark under the Trademarks Act, 1999. The Court observed a few salient points: 

  1. The trademark is a coined terms which did not exist prior to the ISKCON’s adoption of the same and deserves the highest degree of protection. 
  2. The trademark ISKCON had acquired immense goodwill and long-standing reputation throughout India and abroad and it is associated with the Plaintiff and none else. 
  3. ISKCON has diligently safeguarded and protected its rights against infringing entities in various forums.
  4. As a well-known trademark ISKCON is no longer restricted to a single class or goods/services and is known in India and abroad. 
  5. ISKCON has wide acceptability as a trademark and the popularity extends not only in India but in other countries as well.

In the past ISKCON attempted to enforce its trademark against several infringing entities, one of which was a real estate development company against construction of Iscon Mega Mall in the vicinity of the ISKCON temple premises.

The Punjab and Haryana High Court Issues Notices on Plea Against The Web Series, “Paatal Lok”

On 15 June 2020, the Punjab and Haryana High Court in the case of Gurdeepinder Singh Dhillon v. Union of India and Ors issued notice to Central and State Governments in a plea asking for regulation of the content in the web series “Paatal Lok” streamed on Amazon Prime.

Order by: Justice Arun Kumar Tyagi. 

Parties:

  • The petition was filed by Gurdeepinder Singh Dhillon, represented by Advocate R.S. Randhawa. 
  • The petitioner has approached the HC under Article 226 and Article 227 of the Constitution to seeking a writ of mandamus for the regulation of content of web series “Paatal Lok” being broadcasted by Respondent No. 7 OTT Platform i.e. Amazon Prime Videos.

Arguments by Petitioner:

  • The Petitioner has argued that the content is “illegal, anti-social, vulgar, abusive, minority oppressive and anti-national” and is being broadcasted without the approval of any Government authority.
  • The content being aired on such platforms should get prior government approval or authentication before being aired. 
  • The petitioner has also sought a direction to the State Government to register First Information Report (FIR) against the makers of Paatal Lok. 
  • This would include the producer of Paatal Lok, Anushka Sharma.
  • The broadcaster of Paatal Lok, Amazon Prime Videos, who is currently broadcasting the show on their platform.

    The allegations made by the petitioner were:
  • The third episode namely, “History of Violence” was intentionally made to augment communal tension.
  • Caste based clashes were emphasized portraying two particular castes in a bad light. 
  •  An episode set in Punjab also used caste-based abusive language which leads to animosity between the people belonging to those two castes.
  • In an episode, members of the Sikh community referred to a boy as ‘Manjaar’, which as a portrayal was not only criminal but also defamatory. 
  • The members of the Sikh community were also portrayed as oppressors of society in general and women in particular. 

    The Petitioner has argued that broadcasting this content amounts to a violation of the following:
  • IPC- Section 295A (Deliberate and malicious acts, intended to outrage religious feelings of any class by insulting its religion or religious beliefs)
  • IT Act 2000 – Section 67 (Punishment for publishing or transmitting obscene material in electronic form), 
  • IT Act 2000 – Section 67A (Punishment for publishing or transmitting of material containing sexually explicit act, etc., in electronic form),
  • IT Act 2000 – Section 67B (Punishment for publishing or transmitting of material depicting children in sexually explicit act, etc. in electronic form,
  • Indecent Representation of Women (Prohibition) Act 1986- Section 4 read with Section 6 (Prohibition of publication or sending by post of books, pamphlets, etc., containing indecent representation of women).

Court’s Order dated 15 June, 2020

  • The Court issued notices to all the respondents viz. Central and State Governments, along with the Producers, Directors, Writers and Broadcasters of the content.
  • The Court has asked the Union of India to file their reply.
  • The matter has been adjourned to hearing on 2 July 2020.

ISRO’s Patent on Temperature regulating Suit

Indian Space Research Organization (ISRO) has received a grant for its patent application no. 201641004369 titled ‘A LIQUID COOLING AND HEATING GARMENT’ on June 19, 2020. As the title suggests the patent relates to a garment equipped with means to regulate the temperature. The inventors for this patent are Srirangam Siripothu, Reshmi Balachandran, Saraswathi Kesava Pillai Manu, and Gurumurthy Chandrasekaran. The garment is fabricated with a biocompatible material coated with an antimicrobial agent and it also consists of different part to provide a comfortable temperature inside the suit, said parts also aids in removal of sweat. Apart from being used by astronauts this garment can also be used by fire-fighters and industry workers.

Heat transmission efficiency of garment is quite commendable and it also allows the person to maintain proper temperature which is comfortable for the wearer of the suit. Tubes carrying heat transfer liquid, partitions the outer and inner layer of the garment. The outer layer is made up of polymeric fabric net and inner layer is polymeric fabric tricot which is in contact with the skin of the wearer.  The heat transfer fluid is water; wherein cooling is achieved by circulating chilled water and heating is achieved by circulating hot water. The tubes are arranged without any overlap and do a good work in removing the heat from the suit. ISRO is currently working on a project named “Gaganyaan” which will send three astronauts in outer space. The patented technology will prove useful for the upcoming project.

MADRAS HIGH COURT HELD THAT THE INDIAN FOOD INDUSTRY CANNOT CLAIM MONOPOLY OVER COMMON TERMS ‘MAGIC’ AND ‘MASALA’

A seven-year-old dispute between ITC Limited and Nestle finally concluded and settled by the Madras High Court. On 10th June 2020,  Justice C. Saravanan of the Madras High Court dismissed a suit filed by ITC Limited claiming a restraint on Nestle India Ltd. from usage of phrases like ‘Magic Masala’ and/or ‘Magical Masala’ with respect to their noodle product ‘Maggi Xtra – delicious Magical Masala’ launched in 2013. 

ITC had launched a product ‘Sunfeast Yippee! Noodles’ in 2010, which was available in two flavours namely – ‘Classic Masala’ and ‘Magic Masala’. The product was a big hit and fetched about 12.5% of the market share in the instant noodle division within a period of just three years. ITC alleged that Nestle, by adopting a similar expression ‘Magical Masala’  for it’s newly launched product ‘Maggi Xtra – delicious’ in 2013 had committed an act of passing off, as ITC has a monopolistic right over the term ‘Magic Masala’. 

While replying to the arguments submitted by Plaintiff, the Madras High Court stated that the terms ‘magic’ and ‘masala’ are quite common to the trade and generic in Indian Culinary and Food Industry. Therefore, no one can claim a monopoly over the same. Justice C. Saravanan observed that the words ‘Magic Masala’ are presented in a laudatory sense and the word ‘Masala’ is a common term used to signify mixture of different spices in the Indian household and therefore these terms are incapable of being appropriated. As a result their adoption and use by Nestle cannot be termed as ‘mala fide’

Moreover, the Hon’ble Court established that the expression ‘Magic Masala’ could have become a distinctive mark and might have been entitled for protection and monopoly by ITC, but Nestle had already intervened by then and ITC failed to establish the expression as a distinctive term. The Bench also observed that the said expression has already been adopted and used by other brands for their products like Lay’s Magic Masala, Balaji Magic Masala, Samrudhi Kitchen Magic Masala, Bindaas Masala Magic, Nissin Cup Noddles Mast Masala, Walmart’s Instant Noodles Mast Masala etc. before ITC launched its product in 2010.

With regard to trademark, the Hon’ble Court was of the opinion that ITC never intended to use the phrase ‘Magic Masala’ as a trademark or a sub-brand, since no trademark application has been filed by them for the phrase individually. The company has merely intended to call ‘Magic Masala’ a flavour or a variant to help consumers distinguish between different flavours of it’s brand ‘Sunfeast Yippee!’. On comparing the packaging of both the products, the Hon’ble Court found no visual similarity or scope of confusion and was of the view that though adaptation of the expression by Nestle has been inspired by ITC’s noodle brand,  it would not amount to passing off in view of the reasons recorded by the Court.

THE SCOPE OF AMENDMENT IN A SECTION 34 PETITION IS NARROW

Case Name: Prakash Industries Limited Vs Bengal Energy Limited & Anr.

Court: Calcutta High Court dated 11th June 2020

(Coram: Justice Moushumi Bhattacharya)

Citation: G.A 394 of 2020 with A.P 684 of 2017

Background of the case:

The present application stems out from a Section 34 petition that was filed by the Petitioner in the year 2017 against an arbitral award. The application preferred by the Petitioner now is an amendment application that is seeking to introduce new grounds of defence by the new advocate who came on record adding to the existing grounds of defence on the footing that the same were left out earlier and that the new grounds are not changing the nature and character of the 34 petition and are only an amplification to the existing grounds of defence taken earlier by the Petitioner. In support of his contentions the senior counsel has relied on various judgements Fiza Developers and Inter-Trade Private Limited Vs. AMCI (India) Private Limited reported in (2009) 17 SCC 796, Venture Global Engineering Vs. Satyam Computer Services Ltd. reported in (2010) 8 SCC 660, Emkay Global Financial Services Limited Vs. Girdhar Sondhi reported in (2018) 9 SCC 49 and State of Maharashtra Vs. Hindustan Construction Company Limited WWW.LIVELAW.IN 3 reported in (2010) 4 SCC 518, as instances where the court in Section 34 applications, allowed the grounds to be amended after taking into account all relevant considerations. 

The amendment was opposed by the senior counsel of the Respondent/award holder on the grounds that the amendment brings in absolutely new grounds of defence and will change the entire nature of the 34 petition and allowing the amendment application would allow all litigants to defeat the timelines as prescribed by the legislature to file a section 34 petition as they would then be allowed to amend their petition later. Counsel relies on Bijendra Nath Srivastava (Dead) Vs. Mayank Srivastava reported in (1994) 6 SCC 117 and Vastu Invest & Holdings Pvt. Ltd, Mumbai Vs. Gujarat Lease Financing Ltd., Mumbai reported in (2001) 2 Mah LJ 565/ (2001) 2 Arb LR 315 to show that amendments for introducing new grounds will not be permitted in a section 34 application.

Issues:

  1. What is the permissible range of an amendment and whether the present application can pass the muster under the relevant provisions of the CPC. 
  1. Whether the amendment can be comfortably fitted into the schematic arrangement of the tiers of challenge under section 34 of the 1996 Act.

Held :

The court after hearing the arguments of both sides held as under:

The test whether an amendment is permissible or not, as held in the decisions cited by counsels, is whether the proposed amendments would warrant a fresh application under Section 34. This means that the grounds which are sought to be brought in by way of an amendment would necessarily be new and independent grounds without having a foundation in the original Section 34 application. This also means that each case must be decided on the nature of the amendments whether they are only amplification to the existing grounds or would they be changing the nature of the petition.

The Court also noted that, while section 34 of the Act curtails the scope of judicial intervention by prefacing the grounds with the use of the words “……….may be made only by…………..”, “…………only if…………..”, etc., the section also allows sufficient breadth of interpretation under the ground of public policy of India. The judgment also surveys various precedents on this subject. While dismissing the application seeking amendment, the court said:

“ It should be reiterated that although Hindustan Construction spoke in favour of an expansive view of amendments in the interest of justice, the proposed amendments in that decision were ultimately disallowed since they were found to constitute new grounds which did not have a foundation in the original application. In the present case, the grounds relating to the Sale of Goods Act cannot be traced to the existing grounds and would therefore constitute new grounds in that sense (as opposed to Venture Global, where subsequent facts, disclosed after the passing of the Award, were allowed as having a causative link with the facts, constituting the Award). In the considered view of this court, the test for allowing or rejecting an amendment to existing grounds in an Arbitration Petition is whether the proposed grounds would necessitate filing of a fresh application for setting aside of the Award. As several of the new grounds also do not have a foundational basis in the existing petition, the petitioner cannot enter through the ‘amplification’ route as has been contended and if the amplification recourse fails, the petitioner has no other statutory cushion to fall back on under the existing law.”  

With the said observation the Hon’ble Court was pleased to dismiss the said amendment application.

Medical Devices Amendment Rules

Indian medical device market is growing and it is expected to reach a valuation of INR 794.29 billion by 2023. Key growth factors for the development of medical device market in India are combined efforts of the Government and private sectors to improvise healthcare industries and change in India’s Foreign Direct Investment policy. There were no medical device regulations in India prior to 2005. However, today the Government regulates certain medical devices under the Medical Device Rules. 

On February 11, 2020 Central Government notified that all medical devices will be treated as ‘drugs’. This notification will be effective from April 1, 2020.  The quality and safety standards of all medical devices are regulated under ‘Drugs and Cosmetics Act’. The Government notified the Medical Device (Amendement) Rules, 2020 and new definition of medical devices under it is reproduced below:

“All devices including an instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including a software or an accessory, intended by its manufacturer to be used specially for human beings or animals which does not achieve the primary intended action in or on human body or animals by any pharmacological or immunological or metabolic means, but which may assist in its intended function by such means for one or more of the specific purposes of ― (i) diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder; (ii) diagnosis, monitoring, treatment, alleviation or assistance for, any injury or disability; (iii) investigation, replacement or modification or support of the anatomy or of a physiological process; (iv) supporting or sustaining life; (v) disinfection of medical devices; and (vi) control of conception”

The Medical Device Rules (hereinafter ‘The Rules’) have been framed under the Drugs and Cosmetics Act, 1940 (hereinafter ‘The Act’). Until February 11, 2020 only 37 notified medical devices were regulated by the Government. However, after the notification  on February 11, 2020 all the medical devices described by the above definition, will be regulated under the Act. The Government has moved a step forward in the direction of implementing quality standards requirement. All the medical devices imported or manufactured in India should be compliant with ISO 13485 standards and registration for these devices has to be obtained from Central Drugs Standard Control Organisation (CDSCO) through a dedicated online portal ‘Online Systems for Medical Devices’. ISO 13485 is a standard laid down by International Organization for Standardization for companies or organizations which are engaged in design, installation, production and servicing of medical devices However, the 37 categories of already regulated medical devices are exempted from obtaining the registration. Even though the 37 categories of notified medical devices are exempted from registration the importers, manufacturers, distributors, whole sellers and retailers will have to obtain licenses from appropriate licensing authority.

Medical devices are classified under for categories as mentioned below:

  • Class A – Low Risk (For e.g.: Stethoscope)
  • Class B – Low-moderate Risk (for e.g.  Hypodermic needles)
  • Class C – Moderate-high risk (For e.g.: Bone fixation)
  • Class D – High Risk (For e.g.: Stents)

Government has laid down different deadlines for compliance with the licensing and registration requirements for different classes of medical devices, the deadlines are as follows:

  • All unregulated medical devices must be registered by the respective importers or manufacturers before October 1, 2021. 
  • All stakeholders involved in import, production, distribution, and sale of presently unregulated Class A and Class B medical devices must obtain a license from appropriate licensing authority before August 11, 2022.
  • All stakeholders involved in import, production, distribution, and sale of presently unregulated Class C and Class D medical devices must obtain a license from appropriate licensing authority before August 11, 2023.

The Government has provided the above mentioned window so that the manufacturers and importers get enough time to get their facilities certified as compliant with ISO-13485. 

It is important to note the difference between obtaining a registration and obtaining a license. Notified medical devices are exempted from obtaining a registration; however they are not exempted from obtaining a license. Importers, manufacturers, distributors, whole sellers and retailers of presently unregulated Class A (low-risk) and Class B (medium-risk) medical devices sold in India will have to compulsorily obtain a license from appropriate licensing authority. A registration of medical device is done by the Central Drugs Standard Control Organisation (CDSCO) whereas a license is issued by state licensing authority or central licensing authority depending upon the class of medical device for which license is sought. In order to obtain a registration the medical device should be ISO 13485 compliant. Licenses are to be obtained for sale of notified medical devices. However, as per latest guidelines supply chain of registered (ISO 13485 compliant) medical devices will not need licenses.

Regulating medical devices under the Drugs and Cosmetics Act is being criticised by many stakeholders. However, in our view it is an effective step towards ensuring quality and safety medical devices being used in the industry. Further, the Government has provided appropriate time to all the stakeholders to adapt to new regulations. Compliance to ISO 13485 standards will ensure supply and production of good quality medical devices. 

DELHI HIGH COURT: FORCE MAJEURE NOT AN EXCUSE FOR BREACH OF CONTRACT DURING THE PANDEMIC

On 29 May 2020, The Delhi High Court rejected a plea to restrain the invoke of bank guarantees on the event of Force Majeure clause being adduced due to the COVID-19 pandemic. The judgment decided by Justice Prathiba M. Singh was filed by M/s Halliburton Offshore Services Inc. under Section 9 of the Arbitration and Conciliation Act, 1996 in order to seek to restrain in the invocation of bank guarantees, five of which were set to expire on 30th June 2020 and remaining three on 24th November 2020. 

After studying the facts of the case, the Court was of an opinion that the non-performance of the contract cannot be simply excused on the ground of ‘force majeure’ due to the pandemic. It further stated that the force majeure event will depend on facts and circumstances of the case, which is not applicable in the case of non-performance of a contract. Every breach of contract cannot be construed as an event of force-majeure condition. For better decision making in such events, the Court stated that it has to duly examine on the basis of the access with regard to the conduct of the parties prior to the outbreak, the deadlines of the contract, the steps taken for prevention of contract, various compliances required to be made and scrutinize whether the parties genuinely prevented the same to justify the non-performance of the contract. Further, it stated that it is a settled position in law that the force majeure clause is to interpreted in a narrow, not broad context. It is essential that parties adhere to contractual terms and conditions and not excuse for non-performance of the contract (which is only permissible in exceptional circumstances). 

In the present case, the contractor can not be condoned due to pandemic in March 2020, since the breach of contract was since September 2019. Opportunities were given to the contractor to cure the contract in various instances. The bench further clarified that the claims and counterclaims should be adjudicated duly before the Arbitral Tribunal in accordance with the law and prima facie should not bind the arbitral proceedings in any manner whatsoever. 

With regard to bank guarantees, the Court noted that the contractor has clearly defaulted in its performance despite the repetitive opportunities. The Bank Guarantees in the present case are unconditional and irrevocable. Also, all the bank guarantees are valid in nature as the language of the financial performance of the Bank Guarantees makes it quite evident that simply on-demand, the bank has to make the payment. Additionally, on the issue of advanced bank guarantees, the Court noted that the Advance Bank Guarantees should be invoked and encashed in a separate ‘joint account’ to be held jointly by the contractor and the companies. The ‘joint account’ should be opened within the duration of 3 days and the amounts of the Advance Bank Guarantees should be directly deposited on the said account. The reconciliation procedure should be completed in two weeks. Nonetheless, the ad-interim order passed on 20th April 2020 stands vacated by the Delhi High Court.

100% FDI PERMITTED IN INSURANCE INTERMEDIARIES

On April 27, 2020, a series of amendments were introduced which permitted 100% foreign investment into insurance intermediaries and removed the requirement of control by Indian citizens only.

BACKGROUND

  • The government amended the FDI norms in 2015. The new law introduced was called Insurance Laws (Amendment) Act, 2015 and the Indian Insurance Companies (Foreign Investment) Rules, 2015. It raised the threshold for the foreign investment from 26% to 49% of the paid-up share capital and required for the control of insurance companies to be with Indian Companies.
  • Since the introduction of amendments, there has been a demand to expand the foreign investment limits and to remove the ‘resident owned and controlled’ requirement. For insurance intermediaries, per se, the industry has been requesting the foreign investments caps and control to be removed by Indian citizens considering that they do not have a strategic importance and pose any systemic risk.
  • The Government considered these suggestions during framework of Budget for the Financial year 2019-2020. Later, the Department for the Promotion of Industry and Internal Trade in a Press Note released on February 21, 2020 amended the consolidated FDI Policy of 2017 to permit 100% FDI in insurance intermediaries. The Note removed the requirement of control by Indian citizens and required FEMA (Non-debt instruments) Rules, 2019 (also known as ‘ND Rules’) to be amended which later incorporated on April 27, 2020. 

AMENDEMENTS AND ANALYSIS

  1. Diverging Insurance Sector from an Exchange Control Outlook: 
  • The insurance sector has now been divided into 2 categories:
  1. Insurance companies and
  2.  Insurance intermediaries (includes Corporate Agents, Insurance Brokers and 3rd part administrators).
  • The expansion of the foreign investment limit in insurance intermediary sector has always been considered as easy administered and palatable since intermediaries as such do not have any policyholders’ fund and do not pose any systematic risk. 
  1. Liberalisation of Foreign Investment:
  • Foreign Investors shall be permitted to set up ‘wholly owned subsidiaries’ registered as insurance intermediaries, however, they are still required to comply with IRDAI Regulations, which require the prior approval of IRDAI for transfer or issuance of shares above a certain threshold. 
  • The insurance intermediaries had devised innovative structures so as to attract foreign investment. Thus, they can raise foreign investment up to 49% from foreign investors and additional foreign investment at the holding company level from unrelated foreign investors. 
  • Restructuring to permit investors in the holding company to swap their shares in the insurance intermediary directly would:
  1. Require IRDAI approval
  2. May be a taxable event, since the swap would entail a higher value
  1. Conditions for majority foreign shareholding:

The following conditions were provided in ND Amendment and the Press Note for an insurance intermediary to have a majority foreign shareholding:

  • Incorporation of limited company under Companies Act, 2013: Majority of the insurance intermediaries are to be formed as companies, especially since limited liability partnerships (LLPs) or partnerships in the insurance sectors were not permitted to raise foreign investment.
  • Chairman of the Board of Directors, CEO, Principle Officer or Managing Director of the Insurance Intermediary shall be resident Indian citizen: There shall be an Indian Resident who is overall responsible for the affairs of the intermediary. Inclusion of the principle officer seems to dilute the condition, considering the requirements and training required by a principle officer. 
  • Take prior permission to the Authority for repatriating dividend: It is the intention of IRDAI to ensure that there is no cash extraction by the insurance intermediaries. However, most of these intermediaries deploy majority of revenue for expansion instead of repatriating dividend
  • Bring the latest technological, managerial and other skills: IRDAI has indicated in the past that the foreign players shall bring enhancement in the form of technology, managerial or others skills. Such intimation has to be provided while filling an approval by IRDAI, which becomes complicated in cases where multiple investors invest such that the aggregate foreign investment exceeds 50%. In such scenarios, the last investor has to satisfy such condition.
  • Not make payments to foreign group, promoter, subsidiary, interconnected or associate entities: It is necessary to make disclosures in the format to be specified by the authority for all payments made to groups, promoters etc. The subsidiaries shall keep reporting the payments and keep the same on track since the insurance intermediary must not extract cash to other entities without the approval of IRDAI.
  • Composition of the Board of Directors and key management persons shall be as specified by the concerned regulators: IRDAI is expected to issue guidelines from time to time for composition of key management persons to ensure independence and operational expertise with regard to governance of intermediaries. 

Patents and COVID-19

COVID-19 more commonly known as the Corona Virus Disease, 2019 has taken the world by storm. It is an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). First identified in late 2019 in the capital city of Hubia, Wuhan, China and has spread globally which lead the World Health Organization to classify COVID-19 as a pandemic on March 11, 2020 and declared the outbreak as a “public health emergency” of international concern. This forced the governments of various countries, including India to take emergency measures and imposing lock downs of all social, commercial, industrial activities. 

Scientists are laboriously working towards finding a cure for this pernicious and ostensibly incurable disease. WHO claims that a vaccine for this virus would be available publicly by 2021 (18 months). This long period is due to critical factors like determining the characteristic of the current virus, pre-clinical testing of the potential vaccines and other factors like mutation of the virus for production of vaccines. 

Importance of Intellectual Property in relation to Public Health

From a Public health standpoint, the most relevant form of Intellectual property is Patents. The Public Health, Innovation and Intellectual Property (PHI) Team, incorporated by WHO is responsible for promoting innovation in the discovery, development, production and delivery of essential health technologies. Hence, IP plays an important role in facilitating and promoting R&D. As we all are aware the process of registration and grant of patents for medicines and medical processes are tedious and long running, but once granted, the applicant enjoys the rights and royalties for over 20 years from the date of application. One of the major concerns of the Government is the availability and access of such patented essential drugs to the public at large which usually aren’t pocket friendly. The question also arises that can the Government revoke a Patent to supply such medications during the time national emergency such as a pandemic? At the time of crisis or an emergency, like the one world is facing right now, the most obvious viewpoint would be to do away with patent rights related to life saving innovations. The Patent Act, 1970 (hereinafter referred to as the Act) have adopted and formulated certain section pertaining to such circumstances in India which we shall discuss. 

Drugs for treatment of COVID-19

Remdesivir and Favipiravir are the two prominent drugs which are being evaluated for possible treatment of COVID-19. US based Gilead Sciences Inc. has patented Remdesivir and have also received a grant in the US as well as In India. Remdesivir is believed to be the most promising drug which can be used for treatment against COVID 19 and USFDA has given Emergency Use Authorization to Remdesivir. Though there is no efficacy of this drug against Ebola, lab and animal studies have of Remdesivir has shown its efficacy against SARS and MERS which are the two known respiratory illnesses brought on by coronavirus infection. Few pharmaceutical companies in India namely Cipla, Hetero Labs, Jubilant Life sciences and Dutch firm Mylan have signed licensing agreements with Gilead to manufacture generic versions of Remdesivir. The licensing agreements will allow the companies to receive technology transfer of the manufacturing process for Remdesivir from Gilead which will aid them to scale up production more quickly. 

Remdesivir being a patented product is facing some criticism in India. Recently, a Mumbai-based civil society organisation Cancer Patent Aid Association (CPAA) had written to the government demanding the revocation of the patents on Remdesivir, citing that it does not meet the novelty and inventive step criteria as per Indian standards. The experimental drug, however, has a couple of undisputed patents also in India.

Favipiravir was developed by the Fujifilm Toyama Chemical Corporation, and it is being manufactured by Zhejiang Hisun Pharmaceuticals as per a licensing agreement with Fujifilm. Favipiravir can reportedly treat RNA viruses, like SARS-CoV-2. However, the drug shows less efficacy in patients with severe symptoms. China has used Favipiravir for treating patients in Shenzhen who had tested positive for COVID-19 and have found positive results. Glenmark Pharmaceuticals Limited is the first company in India which has entered phase 3 of the clinical trials of Favipiravir. Glenmark is evaluating safety and efficacy of the Favipiravir in Covid-19 patients in India. Favipiravir, if commercialized, will be marketed under the brand name ‘FabiFlu®’ in India. Drug prepared by Glenmark is a generic version of Avigan of Fujifilm Toyama Chemical Co. Ltd., Japan, a subsidiary of Fujifilm Corporation. Clinical trials have commenced and over 10 leading government & private hospitals in India are being enrolled for the study. Glenmark is estimating that the study will be completed by July/ August 2020.

Global Scenario: Patents

The German government has enacted few amendments to the German Act on the Prevention and Control of Infectious Diseases in Humans in wake of the rise of Covid-19, which may have an impact on patents as well. As per the changes in the law, the federal ministry, in an ‘epidemic situation’ would be authorized to use an invention relating to medicines, narcotics, active substances, starting and auxiliary materials, medical devices, laboratory diagnostics, aids, items of personal protective equipment and products for disinfection in the interest of public welfare or in the interest of the security of the Federal Republic of Germany as per section 13 (1) of the German Patent Act. 

Section 13(1) of the German Patent Act is a provision which has apparently never been used after 1945 and which in its current form reads as follows: “The patent shall have no effect in a case where the Federal Government orders that the invention is to be used in the interest of public welfare. Further, it shall not extend to a use of the invention which is ordered in the interest of the security of the Federal Republic of Germany by the competent highest federal authority or by subordinate authority acting on its instructions”.

Recently it was reported that Swiss multinational Roche, world’s leading diagnostic kit maker, was accused by the politicians in the UK and Netherlands of withholding the chemical formulae for a reagent, a buffer used in its polymerase chain reaction-based test for COVID-19. Roche was blamed for its inability to supply sufficient volumes of this reagent as one of the reasons for delay in the scaling up coronavirus tests in their respective countries. However, it was apparent that the politicians wanted Roche to share the chemical formula so that it can be produced locally.

The Executive Director of developing world centric think tank South Centre, Carlos Correa, has appealed to global organisations like World Health Organisation (WHO), World Trade Organization (WTO) and World Intellectual Property Organisation (WIPO) that they  should support WTO member countries, which are planning on invoking the ‘security exception’ under Article 73 of the Agreement on Trade-related Intellectual Property Rights (TRIPS) Agreement, in order to take necessary actions for the protection of its essential public interests in the wake of COVID-19.  He has also pointed out that the use of this exception will be fully justified to procure medical products and devices or to use the technologies to manufacture them as necessary to address the current health emergency. In an open letter to the heads of WHO, WTO and WIPO, Correa appealed that the executives in their official capacities, should support developing and other countries, as they may need, to make use of Article 73(b) of the TRIPS Agreement to suspend the enforcement of any intellectual property right that may pose an obstacle to the procurement or local manufacturing of the products and devices necessary to protect their public health. Article 73 of the TRIPS agreement relates to Security Exceptions and it read as follows:

“Nothing in this Agreement shall be construed:

(a)  to require a Member to furnish any information the disclosure of which it considers contrary to its essential security interests; or

(b)  to prevent a Member from taking any action which it considers necessary for the protection of its essential security interests;

(i)  relating to fissionable materials or the materials from which they are derived;

(ii)  relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;

(iii)  taken in time of war or other emergency in international relations; or
 

(c)  to prevent a Member from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.”

Evidently, Article 73(b) authorizes member countries to take appropriate measures with respect to Intellectual property right with a view to safeguard public health.

In order to remove the patent barriers, a few countries like Israel and Chile have issued compulsory licenses to a generic company to manufacture or utilize patented medicine/invention without the permission of the patent holder. As mentioned earlier, Germany even amended its patent law to facilitate the quick issuance of compulsory licenses, while Canada is on its way to do the same. Further, a resolution was passed by the national assembly of Ecuador which empowers the health minister to issue these licenses.

Revocation of a Patent

In India Section 66 of the Indian Patent Act, 1970 empowers the Central Government, to revoke any patent granted by the Indian Patent Office if the said patent is prejudicial to public interest. Section 66 reads as “Where the Central Government is of opinion that a patent or the mode in which it is exercised is mischievous to the State or generally prejudicial to the public, it may, after giving the patentee an opportunity to be heard, make a declaration to that effect in the Official Gazette and thereupon the patent shall be deemed to be revoked.” 

Though the Central Government has the power to revoke a patent for national emergencies subject to public interest, it has used its power only in two cases so far for the following cases

  1. Agracetus’s Patent 

Agracetus was a US based company which through its US patent application number 919 Cal 87 filed an application in India under the number 168950 titled “A method of producing transformed Cotton Cells by tissue culture”. The government observed that the patent would affect the farmers and the cotton industry which would eventually result in negative ramifications on the Indian Economy and thus the patent was revoked by invoking provisions under Section 66 of the Act.

  1. Avesthagen’s Patent 

Avesthagen, an Indian company had obtained a Patent on alleged traditional knowledge titled “synergistic ayurvedic/ functional food bioactive composition” with application no. 1076/CHE/2007. The patented invention was used for the treatment of diabetes, composed of 3 herbal composition jamun, lavangpatti and chundun. The patent was initially filed in the EPO (status to which was objected) which was challenged by TKDL, but Indian equivalent was not opposed. Subsequently, the Ministry of Commerce and Industry through TKLD revoked the patent under Section 66 via its notification of November 7, 2012. 

In both situations the Government made sure that such revocation was for the interest of public at large and the same is not endangered due to grant of such patents. No cases of revoking a patent by the government during national emergency for drugs and medicines have been filed but there are other provisions in which the Government may utilise, manufacture and use such patents. A reference of the same is made below. 

  1. Conditional grant of patent [Section 47]: This empowers the Government to import, make, use or distribute any patent with respect to any medicine or drug for its own purpose or for public health distribution.
  2. Grant of compulsory licence [Sections 82 to 94]: Chapter XVI deals with the general principles and circumstances for grant of compulsory licences in order to protect public interest particularly public health and nutrition. These provisions check the abuse of patent rights. They can be invoked if the reasonable requirements of the public with respect to patented inventions have not been satisfied, and the patented invention is not available for public at a reasonably affordable price, and if the patented invention is not worked in the territory of India. Section 92 provides for action in case of national emergency, extreme urgency and public non-commercial use, and can be invoked without the grace period of 3 years from grant of patent. In India, the first compulsory license was granted to Natco Pharma on March 2012 for drug named Nexavar used for the treatment of Liver and Kidney Cancer patented by the German Drug maker Bayer AG.
  3. Use of invention for the purpose of Government [Sections 99-101]: These complements Section 47.
  4. Acquisition of invention and patent for public purpose [Section 102]: This empowers the Government to acquire a patent to meet national requirements.
  5. Bolar provision [Section 107 (A) (a)]: This facilitates production and marketing of patented products immediately after expiry of term of patent protection by permitting preparatory action by non-patentees during life of patent.
  6. Parallel import [Section 107(A) (b)]: This provides for import so that patented product can become available at the lowest international price.

Conclusion 

Although the Act confers the power on the Government of India to invoke above discussed provisions during national emergencies, it fails to specify the scope and ambit of such powers exercised by the Authorities. The modes of revocation or detailed factors amounting to revocation are not specified in the Act which may lead to judicial conflict or confusion. Further, Compulsory Licensing having requirement of public non-commercial use, lacks to interpret whether it is inclusive of national emergencies or is an individual criterion. In India, by taking advantage of the provisions under the Patent Act and TRIPS agreement, the government will be able to take proper measure to safeguard public health by utilizing lifesaving patent protected medicines, without the fear of facing international pressure to enforce patent rights.

COVID-19 AND ITS IMPACT ON LISTED COMPANIES

The coronavirus disease 2019 (COVID – 19) has brought with it a wave of slowdown for the economy of mostly all the countries across the globe. The listed companies should be aware of few additional compliance requirements as per the Securities and Exchange Board of India (SEBI).

Leeway in Disclosures

  • Under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (Regulations) there have to be periodic disclosures by listed entities of any event that might materially affect the company. 
  • Besides, there are also disclosures with respect to financial results, annual reports and shareholding structure. 
  • The SEBI has permitted an extension in timeline for submission of such information through its circular dated 12 May 2020. 
  • There has also been leeway provided for requirements for fund-raising and notice for board meetings to stock exchange.
  • Listed entities which are banking or insurance companies including ones with banks or insurance companies as subsidiaries may submit consolidated financial results under regulation 33(3)(b) for the quarter ending 30 June 2020 voluntarily. 
  • They shall continue to submit the standalone financial results are required under regulation 33(3)(a) of the Regulations. The listed entities should give reason if they want to submit only standalone financial results and not consolidated ones. 

Meetings via Video-Conferencing

  • There has also been permission to conduct board meetings online until 30 June 2020.
  • Shareholder meeting if required before 30 June 2020 can be conducted online too.
  • The companies are also advised to adopt a work from home policy during this emergency situation. 
  • Listed companies should also have committee of the board to take decisions for the board in response to the pandemic. 
  • Also, the Regulations mandate the listed companies to have a succession plan for board and the management. 
  • Regulation 44(4) mandate sending of proxy forms to holders of securities in all cases and members may vote for or against a resolution. 
  • However, this has been done away with temporarily when meetings are conducted electronically. 
  • This relaxation is given to listed companies that may conduct their annual general meetings thorough electronic mode till 31 December 2020.

Closure of Trading Window

  • The trading window in relation to declaration of results for financial year ended by 31 March 2020 and this would have opened again within forty eight (48) hours after 30 May 2020 but since the last date of submission has been extended to 30 June 2020, the trading window shall also stand extended. 

Payment of Dividend

  • ‘Payable at par’ warrants or cheques will be issued if it is not possible to make payments electronically. 
  • If the amount of dividend exceeds INR 1500/-, then the ‘payable at par’ warrant or cheque can be sent via speed post. 
  • If the email address of the shareholders are available, then the listed entities shall endeavour to obtain their bank account details and make the payments electronically.

Relaxation from Publication in Newspapers

  • SEBI vide circular no. SEBI/HO/CFD/CMD1/CIR/P/2020/48 dated 26 March 2020 had exempted  publication  of  advertisements  in  newspapers,  for  all  events  scheduled  till  15 May 2020. 
  • This is because most newspapers have stopped their print versions due to the pandemic. 
  • Due to the continuation of the lockdown, this has been extended for all events scheduled till 30 June 2020.

Enforcement Directorate Arrested and Filed Chargesheet against Rana Kapoor of Yes Bank for a Fresh Money Laundering Case


The Enforcement Directorate on 17 March 2020 filed fresh money laundering charges against Rana Kapoor, promoter Yes Bank and his wife, Bindu Kapoor for obtaining INR 307 crore bribe from a realty firm, Avantha Realty, via the purchase of 1.2 acre-bungalow in Amrita Shergill Marg, Lutyens’, Delhi at half the market value of the property. 

Illegal gratifications: 

  • The Kapoors in return facilitated loans worth over INR 1900 crore from Yes Bank to Avantha Realty and also postponed recovery. 
  • The Enforcement Directorate believed that Rana Kapoor extended further loans to Avantha Realty during his tenure at the bank. 

Manner in which the gratification took place: 

  • This illegal mutual gratification was carried on by the purchase of the property by Bliss Abode Private Limited, one of the directors of which was Bindu Kapoor, at half the market value from Avantha Realty and Yes Bank in return not realising the over INR 1900 crore loans from Yes Bank to Gautam Thapar, the promoter of Avantha Realty. 

Proofs against the Kapoors:

  • The Enforcement Directorate also gathered several financial documents pertaining to ownership, sale and mortgage of the property. 
  • The bungalow was bought at INR 378 crore by paying through Bliss Abode and there was simultaneous mortgage to Indiabulls Housing Finance Limited for a loan of INR 685 crore. This was INR 307 crore less than the market value.
  • Also, the Additional Solicitor General informed the court that before acquiring the property, Bliss Abode had also borrowed INR 90 crore loan from Indiabulls against the same property. 
  • The property was later bought by Rana Kapoor from Yes Bank through Bliss Abode. The property was initially mortgaged with ICICI Bank and then with Yes Bank. Around INR 400 crore were lent from the bank and paid to ICICI Bank for the loan taken on the property. 
  • This would be the second complaint against him under the Prevention of Money Laundering Act, 2002. 
  • The money laundering probe began against the Kapoors after the Reserve Bank imposed moratorium on Yes Bank because of its financial crisis restricting withdrawals to INR 50,000 per depositor. 
  • The Central Bureau of Investigation (CBI) also conducted searches at the residence and office of Rana Kapoor, Bindu Kapoor, Bliss Abode and Avantha Realty.
  • Thereafter Rana Kapoor was arrested by the Enforcement Directorate on 8 March 2020 and Gautam Thapar, promoter Avantha Group, was summoned for further questioning. 
  • The CBI had also issued fresh cases against Rana Kapoor, Gautam Thapar and Bindu Kapoor amongst others for this deal. 
  • The cases were registered under section 120B and 420 of Indian Penal Code, 1860 and also section 7, 11 and 12 of the Prevention of Corruption Act, 1988.

Reasons for chargesheet against Rana Kapoor:

  • Further, on 6 May 2020, the Enforcement Directorate filed chargesheet against Rana Kapoor who was arrested on money laundering charges on 8 March 2020 under the Prevention of Money Laundering Act, 2002. 
  • He was accused of sanctioning loans to certain firms in return for illegal gratifications. 
  • The CBI also investigated INR 600 crore received by a company controlled by Rana Kapoor, Bindu Kapoor and their three daughters. They obtained it from an entity connected to the Dewan Housing Finance Limited which is itself hit by a scam. 
  • They also got benefits worth INR 4,300 crore through companies controlled by them in lieu of the loans sanctioned by them. 
  • Thereafter, they also went easy and delayed recovery of loans given to big corporate groups which had in turn gotten converted into non-performing assets. 

Bank Guarantee: Hedging the Shock Waves of a Pandemic


Speaker: Mr. Prashanto Chandra Sen
Designated Senior Counsel of the High Court of Delhi and is an alumnus of the University of Oxford (1996).  

Mr. Sen practices in Supreme Court, Delhi High Court and Tribunals in New Delhi with a focus on commercial, competition, mining, environmental, electricity, infrastructural and public law matters.  


He has been on the panel of Senior Advocates representing the Competition Commission of India (CCI) as well. He has represented CCI in issues relating to cartelization, abuse of dominance, and procedures of investigation to be followed. He began his practice in 1998 assisting Dr.A.M. Singhvi, Senior Advocate and former Additional Solicitor General of India.

He has been part of the team which procured landmark judgements such as the BALCO, that dealt with the distinction between seat and venue in arbitration proceedings in the Supreme Court. He was also part of the widely discussed Competition Commission of India v Bharti Airtel Ltd.

He is presently appearing before the Constitution Bench on the issue of the abrogation of Article 370.


Speaker: Mahua Roy Chowdhury
Principal Partner, ROYZZ & CO

Mahua has extensive experience in contractual disputes and has advised various clients including a leading infrastructure company and also in Insolvency proceedings against enforcement of bank guarantee.

She has also been involved in several cross border disputes for IT companies and had the opportunity to advise and rely on alternative to bank guarantee, a way forward for doing business in the future.



Date: May 23, 2020 | 6:00 PM (IST)

What are Patents? Substantive law and Cases

Our first session was focused on basic fundamentals of Patent rights. Now that we have learned the basics it is time to dig deep into the substantive law which governs filing, prosecution and grant of a patent. In this session our focus will be to teach various important provisions under the Indian Patent Act, 1970 and important case studies related to these provisions.  

Date: May 26, 2020
Time: 05:30 PM(IST)

FOREIGN AWARD AGAINST PUBLIC POLICY NOT ENFORCEABLE IN INDIA

The Supreme Court on Wednesday held the international arbitral award of 1989 by Federation of Oil, Seeds and Fats Associations Ltd (FOSFA) against India’s agency, NAFED as “unenforceable” because it was in direct conflict with the public policy of India. The award was rendered after NAFED failed to supply the entire contracted quantity of 5,000 metric tonnes of groundnut to the foreign firm, Alimenta S.A in 1979-80.

During the contracted period, on account of the Government directives, NAFED was unable to export the entire quantity of groundnuts to Alimenta S.A and had to default in respect of its contractual obligations. On account of the arbitration clause that had existed between the parties, Alimenta S.A invoked arbitration against NAFED before the Federation of Oil Seeds and Fats Associations Ltd., London (“FOSFA”). Consequently, on 15.11.1989, FOSFA passed a foreign award directing NAFED to pay a total sum of USD 4,681,000 with interest @10.5% p.a. to Alimenta S.A.

Pursuant to the Award passed by FOSFA, an appeal was filed before the Board of Appeal by NAFED challenging the Foreign Award, however, the Board of appeal upheld the award against NAFED. Owing to its success before the Board of Appeal, Alimenta applied for enforcement of the foreign award before the Delhi High Court. After a series of proceedings and appeals, the High Court eventually held that the award was enforceable and converted it into a decree of the court as required under the old arbitration regime. The order was appealed to the Supreme Court of India by NAFED, which was ultimately successful.

Re-Conceptualizing Patent Rights amidst pandemic

The World Health Organization (WHO) issued a directive that classified the Coronavirus disease (hereinafter ‘COVID-19’) outbreak as a global pandemic, subsequent to this many questions have emerged regarding the patent rights around the medicines, vaccines, technology that are used in laboratory tests for COVID-19. This raises the question, what is the importance of patent rights in the health sector and how does it affect the interest of the public during a pandemic? The patent system was introduced to promote and encourage innovation in the respective field by assuring the developers’ exclusive rights over their innovation. In the context of the health sector, development of new drugs and technology requires long term research, expensive clinical trials, and other regulatory procedures and by ensuring exclusive rights over their innovation it serves as an incentive to make the initial investments.  

The challenge that arises with such exclusivity is to find an optimal balance between the rights of the patent owners and public welfare.  In a recent article, co-authored by the Nobel Laureate in economics, Joseph E Stiglitz stated that “With the arrival of COVID-19, it is now painfully obvious that such monopolization comes at the cost of human lives. Monopoly control over the technology used in testing for the virus has hampered the rapid roll-out of more testing kits, just as 3M’s 441 patents mentioning “respirator” or “N95” have made it more difficult for new producers to manufacture medical-grade face masks at scale. Worse, multiple patents are in force in most of the world for three of the most promising treatments for COVID-19 — remdesivir, favipiravir, and lopinavir/ritonavir. Already, these patents are preventing competition and threatening both the affordability and the supply of new drugs.” This captures the detrimental effect of patent rights and monopolization in the health sector on the greater public good.

For the longest time in the history of patent rights, there has been an on-going debate between public health advocates and pro- IP practitioners about the implications of patent rights and monopolization of the health sector. Though patent protection drives innovations and research, it simultaneously culls competitions and democratization of new drugs and technologies. For years, pharmaceutical companies have commercialized the health sector and hoarded knowledge through countless patents over life-saving drugs. Such actions are often ignored in our day to day life, however, when the world comes to a standstill by a pandemic, we are forced to revisit these protections and privileges that may further deny us the technologies we need at this hour. 

The need to democratize health sector in the face of a pandemic

It is unfortunate to note with the arrival of COVID- 19, that monopolization comes at the cost of human lives wherein many of the drugs that were meant to cater to the needs of the public are kept beyond their reach and affordability. However, over the past months, we have witnessed several strategies being spurred to action in order to ensure the increased availability of patented drugs. Costa Rica’s government recently called on the WHO to establish a voluntary pool of IP rights for COVID-19 treatments, which would allow multiple manufacturers to supply new drugs and diagnostics at more affordable prices to the public. Such patent pools, prize funds, and other similar alternatives fall within the broader program of increasing the accessibility of life-saving drugs at crucial hours such as the pandemic we are currently battling. Many countries, including Germany and Israel, are seen to be acting on their feet by suspending patent rights over the drugs that are required to battle this pandemic. It is imperative for the governments to formulate policies and measures to ensure that patent protections do not hinder access to medicines, technologies, and other necessities. Further, governments can permit compulsory licensing or government use of products that are protected by patents in the face of such unprecedented times. All these initiatives will help further the goal to replace a monopoly-driven system with one based on cooperation and shared knowledge which will inevitably preserve the rights and wellbeing of the public. 

The cost of such openness? 

Though openness may be called on for at such uncertain times, protecting the rights of the developers to ensure they reap the benefits of their efforts may be the only way forward to ensure ground-breaking innovations in the health sector. In the past we have witnessed governments intervening to remove such barriers to safeguard the public interest; in 2001, US Congress and the Administration were reported to have considered intervening Bayer’s patent on Cipro in order to hoard the drug against a potential anthrax attack. In the Cipro case, the Government used the threat of breaking the patent to negotiate a long-term contract with Bayer at an unusually low price. This approach might be termed ‘bending’ the patent. Admittedly, the governments more often than not are tempted to break patents covering important drugs or treatments that may help assuage a crisis. Furthermore, in light of the recent pandemic, Israel issued a compulsory license over AbbVie’s Kaletra which has resulted in AbbVie dropping its patent rights over the medicine worldwide. It is highly likely that we will soon see a surge in the use of compulsory licenses issued by governments to tackle experimental treatments of COVID-19, especially if the companies are not willing to disclose their research. However, will the efforts by the governments and policymakers result in an unintended consequence of discouraging efforts to innovate during crisis situations? Further, will it disincentivize innovators from developing crisis specific treatments? It is understandable that lawmakers are concerned about the greater good of the public and to keep them at bay but will these measures counter the very object of its implementation? These empirical question ought to be etched at the back of the government while issuing such directives because it would be unfortunate to see that the directions intended to protect the wellbeing and the health of the public has been the very reason for its demise. 

Conclusion 

Though the proactive measures and efforts by the governments are laudable and noteworthy, we need to determine whether they are a step forward in the right direction or two steps backward. The predicament that the policymakers have found themselves in this crisis is a murky and unclear one, where a step to assuage the crisis has the potential to substantially and detrimentally affect the domain of patent and copyright laws. At this juncture, it is necessary to not compromise the welfare of the public nor squander the spirit of innovation, but create a delicate balance of the two to navigate through this crisis. Though compulsory licensing may appear to be the apt solution at this fork on the road, what will its impact be on the innovators once we come out of this crisis? Or will the most valuable drugs and technologies not be catered for crisis situations such as these? Successfully navigating through this labyrinth of hurdles and uncertainty will lead to a more sophisticated and efficient regime for patent protection in the health sector for the future. 

Companies Fresh Start Scheme

The world at present is undergoing one of the worst pandemics in its history and this has forced countries to shut their economies and patiently wait for this unprecedented time to pass by. While on one hand, governments are issuing orders to ensure the safety and protection of its citizens, on the other hand, they are introducing schemes and policies to stabilize the economy and safeguard their trade and commerce. One such measure is the Companies Fresh Start Scheme, 2020 (hereinafter, ‘CFSS’) which was introduced by the Ministry of Corporate Affairs of India (hereinafter ‘MCA’). It was passed on March 24, 2020, vide circular no. 12/2020 and on March 30, 2020, vide circular no. 13/2020 under Section 460 of the Companies Act, 2013 (hereinafter, ‘Act’) read with Section 403. This was done after taking into account various representations made by the stakeholders who were requesting for an extension to enable them to complete their pending compliances by filing necessary documents in the MCA-21 registry. This included annual filings without being subject to pay higher additional fees on account of any delay. Hence, CFSS aims to condone the delays of filing certain pertinent documents with Registrar as mentioned above and also relates to the waiver of additional fees and also granting of immunity from proceedings to impose a penalty on account of delay associated with these flings.

This Scheme shall be applicable to any “Defaulting Company” and shall commence from April 01, 2020, to September 30, 2020. According to the Companies Act, 2013, “Defaulting Company” means a company which has made a default in filing of any of the documents, statement, returns, etc. including annual statutory documents (AOC-4 & MGT- 7) in the MCA-21 registry as per the due time. The basic rule of the Scheme is that “immunity will be provided to defaulting companies only in case of belated filings by waiving off additional fees however where proceedings involving the interest of any shareholder or its director, or key managerial person or any other person belonging to the company than immunity shall not be provided”. 

It is of pertinent consideration to note that CFSS shall not have any retrospective effect.  Further, companies that are “inactive” will not be eligible to benefit from the Scheme. Accordingly, “Inactive Company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years. The Ministry has also uploaded the list of 76 “Eligible Forms” in the public domain which waives off additional fees for belated filings which comprises of e-forms under the Companies Act 2013, Companies Act 1956 and LLP’s. All these pro-active measures by our Government are laudable and noteworthy and continue to reinforce our faith and belief in the system at these troubled times.

COVID-19 expense of Companies to be counted as CSR expenditure

On 23rd March 2020 the Ministry of Corporate Affairs (hereinafter, ‘MCA’) announced that expenditure for measures taken to tackle the COVID-19 outbreak will be included in the corporate social responsibility (hereinafter, ‘CSR’) activity of the respective companies. The CSR rules make it mandatory for large firms to set aside at least 2% of their average net profit to contribute to socially responsible activities. The rules are applicable to firms with at least rupees five crore net profit or rupees thousand crore turnover or rupees five hundred crores net worth. Further, the government also announced that all donations made to the PM- CARS Fund will be eligible for a 100% tax reduction under the Indian laws.

In light of this the notification issued by the MCA reads, “keeping in view of the spread of novel Coronavirus (hereinafter, ‘COVID-19’) in India, its declaration as a pandemic by the World Health Organisation, and, the decision of the Government of India to treat this as a notified disaster, it is hereby clarified that spending of CSR funds for COVID-19 is eligible CSR activity.” This was done with the intention of inviting more support and funds from the public since there are various ways in which a company can use its CSR funds to help the country fight COVID-19.

The MCA stated that the funds spent on the promotion of healthcare, including preventive healthcare, sanitation, and disaster management would squarely fall within the definition of a company’s CSR obligations and responsibilities. Some of the expenditures that are considered as CSR include, contributions made to state disaster management authority to fight against COVID-19, expenditure on COVID-19 related activities like sanitation and any ex-gratia payment made to temporary/part-time workers which is over and above their daily wages. However, the ministry was particular to clarify that daily wages to workers are part of the contractual obligation of employers which cannot be side-lined and thus cannot be considered as a CSR expenditure.

The circular also pointed out that the broad terms as per Schedule 7 of the CSR policy, which deals with the activities that constitute CSR activity, may be interpreted liberally for this purpose. This seems to be a blessing for the Government who was struggling to find funds to tackle COVID-19, while at the same time ensuring that as many hands as possible are on board to help fight against COVID-19.