Amendments to the E-Assessment Scheme 2019

The E-Assessment Scheme 2019 was launched vide notification no. 61/2019 as a move towards digitization. With time, these proceedings required to be modified and thus came forth the Amendment to the E-Assessment Scheme 2020. The aim of this scheme is to make the assessment proceedings more efficient and hassle-free. The new scheme has provided for a new procedure for assessment and has amended the rules related to authentication of an electronic record. There have been changes in the penalty procedure as well. Under the new scheme, the Central Board of Indirect Taxes (CBDT) shall establish new centres and units in order to facilitate such an assessment. The salient features of the new scheme are discussed further as follows:

Salient Features of the Amendment to the E-Assessment Scheme 2019:

  • After the Amendment of the scheme vide Notification no. 61/2020, the name has been changed to “Faceless Assessment Scheme 2019”.
  • Under the new structure, the CBDT will establish – the National e-Assessment Centre (NeAC), Regional e-Assessment Centres, Assessment units, Verification units, Technical units, and Review units.
  • Except the orders in cases assigned to the Central Charges and International Tax Charges, all the assessment orders shall be passed by National e-Assessment Centre as per the Faceless Assessment Scheme, 2019, u/s 119 of the Income-tax Act, 1961.
  • A notice u/s 143(2) shall be provided to the assessee by the NeAC, therein containing the issues for selection for assessment. The assessee shall respond within 15 days of receipt of the notice.
  • Penalty proceedings can now be initiated by any unit of NeAc.
  • The assessee can now seek an extension of time limit or adjournment for filing a response.
  • Procedure for personal video conferencing has been provided.
  • An exception to the “communication exclusively through electronic mode” rule has been provided to the ‘verification units’.
  • Now, apart from a digital signature, authentication of electronic records by “electronic verification code” is also provided.

Will Microsoft-TikTok deal attract withholding tax in India

In the year 2012 Vodafone challenged a demand of USD 2.4 billion as withholding tax pursuant to its acquisition of Hutchison’s operations. In this case, the Supreme Court of India gave us a landmark jurisprudence related to taxation on indirect transfers. The Supreme Court held that Vodafone  had no liability to withhold taxes as the transaction was an ‘outright sale’ of capital assets outside the country between two non-residents having no taxable presence in India. 

The relevant existing law in relation to location of assets is provided in Explanation 5:

For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India” 

Certain conditions now have been brought in the above Explanation 5:

“Provided that nothing contained in this Explanation shall apply to an asset or a capital asset, which is held by a non-resident by way of investment, directly or indirectly, its value substantially from the assets located in India:

Explanation 6.—For the purposes of this clause, it is hereby declared that—

(a) the share or interest, referred to in Explanation 5, shall be deemed to derive its value substantially from the assets (whether tangible or intangible) located in India, if, on the specified date, the value of such assets—

 (i) exceeds the amount of ten crore rupees; and

(ii) represents at least fifty per cent of the value of all the assets owned by the company or entity, as the case may be;

 Thus, in order to attract the indirect tax provision, the above two criterions have to be met with that is either the value exceeds Rs. 10 crore (Approx. USD 13 million) and the 50% of the value of the assets including intangible like number of subscribers etc, owned by the company is located in India. 

Following the announcement by the Trump-led government to ban-TikTok in the USA, there has been news of Microsoft planning to acquire TikTok’s global operations. With TikTok being also banned in India recently due to its ownership being vested with Chinese entities, the acquisition by the USA tech giant might provide the company a new face to win back its subscribers. We are now analysing that if Microsoft were to acquire TikTok in USA, what tax implication, if any, it will attract in India especially in view of the recent above amendment in Indian Tax Law. 

Although TikTok has around 500 million subscriber base in India and is valued at 5-10 billion USD. Whereas, TikTok has been recently valued between 30-50 billion USD. Thus the value of its assets in India does not equate substantially to the value of its entire assets owned by the company. 

Further, Explanation 5 (above), mandates that a company “will be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. This provision thus also cannot be applied in this case 

For further clarity the recently introduced Proviso above also include and defines what is ‘fair market value’: 

“(c)the value of an asset shall be the fair market value as on the specified date, of such asset without reduction of liabilities, if any, in respect of the asset, determined in such manner as may be prescribed;”

Thus, unless the qualifying requisites as introduced recently are met with, the deal will be unlikely to incur, attract or trigger withholding tax in India. This is a reformist amendment in Indian Tax Act and is a qualifier of the earlier controversial amendment which Vodafone had to deal with, wherein the amendment was introduced retrospectively, and companies were taken off guard and burdened with heavy tax. At that time, Vodafone decided not challenge the amendment per se. Thus, the 2012 Amendment still remains ‘retrospectively’, however with certain much needed qualifier in place now. 

For any further information or clarification, please feel free to contact Mr. Rakesh Parikh, Tax Consultant of ROYZZ & CO

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Rakesh Parik

Email id- corporate@royzz.com

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Mahua Roy Chowdhury

Email id- mahua@royzz.com 

Retrospective applicability of the amendment to the Hindu Succession (Amendment) Act, 2005

In a landmark judgement the Supreme Court, on August 12, 2020, ruled that the 2005 amendment of The Hindu Succession Act, 1956 granting daughters an equal right in paternal property will be applicable retrospectively and irrespective of whether the father was alive or not at the time of the amendment. The said amendment further takes care of the discrimination between married and unmarried daughters.

Prior to 2005, The Hindu Succession Act did not recognize daughters as coparceners having equal right over coparcenary properties as the sons. The 2005 amendment substituted Section 6 of the Act, in an attempt to bring forth the constitutional objective of equality, recognized daughters’ equal rights and liabilities in coparcenary properties.

Since the amendment, there had been an ambiguity on whether it was necessary for the father to be alive when the amendment was brought in, for the daughter to be entitled to the property. The ambiguity was birthed when the Supreme Court in Prakash v Phulavati held that the amendment had no retrospective application and it was certainly not applicable if the father coparcener had died prior to the amendment. The decision of the Supreme court in Vineeta Sharma v. Rakesh Sharma, yesterday, pointed out that the interpretation of the Court in Prakash v Phulavati was  and the amended Act will be applicable retrospectively.

The Supreme Court judgement from Tuesday is a giant leap towards equality and upliftment of women’s rights. This judgement realizes the true intent and spirit of the 2005 amendment, which was to bring parity in the rights of daughters and sons. The judgement in Prakash v. Phulavati was right on one account, that is, the female successor must be alive on the date the 2005 amendment came into force in order to claim coparcenary rights. Apart from this, the verdict in this case was overruled by the Court.

In a Joint Hindu Family governed by the Mitakshara law, the property that is inherited or passed down is by way of familial descent. Such inherited property is held jointly, and the 2005 amendment was an attempt to deem the successor’s right to succession to unobstructed heritage. Property in which a person acquires an interest by birth is called unobstructed heritage, the nomenclature is such because the accrual of the right to it is not obstructed by the existence of the owner. It is apparent that unobstructed heritage takes place by birth,and the obstructed heritage takes place after the death of the owner. As the right given under Section 6 is unobstructed heritage, it is not dependent on the father’s death, the right accrues by birth.

By giving retroactive application, the Supreme Court highlighted that the  claims which were settled could not be brought up again and fixed a cut-off date of December 20, 2004, to avoid reopening of any settlement or partition decree prior to this date. But since only a coparcener in Hindu family law has a right to seek partition,  if a daughter seeks partition or a share, the same cannot be denied on the basis of an oral family settlement but only by  a final decree of a court or a registered family settlement. If an oral settlement is to be presented in exceptional circumstances, it mustbe supported by public documents.

With this provision in place, any suit for partition awaiting final decree has to be disposed off in accordance with these norms set out in this judgement. The Supreme Court also lays down the provisions of Limitation Act that is applicable for female successors to claim the benefits from the 2005 amendment and points out that some may already be time barred. Any pending suit on this matter must be disposed off within 6 months following the parameters laid down in this judgement.

The judgement makes an attempt to removes the remnants  of gender bias within the legal system that governs Hindu Succession and aims to provide anequal footing for women. By upholding the rights of daughters to be  treated equal as sons, the court extends women the respect and right due to them. Daughters right over parental property cannot be denied merely because the father died prior to the amendment, this puts a substantial number of people at a disadvantage and takes away what is rightfully theirs over a technicality.

The judgement is indicative of a facelift in women’s rights being recognized and equality as a constitutional and fundamental right  being upheld in gender issues.

A Harmonious Construction of IP and Competition Laws

Anjuri Saxena
Rajiv Gandhi National University of Law, Patiala

Introduction

stem does not favor patent holders excessively.” It is the onus of the registry to be non-partisan and analyse each case with utmost probity. Fourthly, the blanket protection of twenty years to patents should be discarded. Novel categories should be introduced, like Utility Models which provide more benefits to small organisations like MSMEs or Start-ups and save them from hefty patent fees, and are also granted protection for a shorter duration. Lastly, in cases of copyrights, alternative business models like in the case of Netflix, Amazon Prime, Spotify, etc should be used wherein the customers after paying the mandated fees can enjoy the vast amount of content available on them. All things considered, it is the democratisation of innovation and expansive dissemination of knowledge that can curb future monopolies.A Chinese proverb says, “what is earned with hard labour is eaten with pleasure”, but what is the extent of such pleasure in case of intellectual property rights (IPR) is a dilemma which needs to be resolved. The moral justification of IPRs is attributed to the Lockean Theory of Private Property stating, “The Labour of [Man’s] Body and the Work of his Hands, we may say, are properly his.”  In brief words, IPRs are ownership rights that arise out of the intellectual labour of a person’s mind which range from patents, copyrights, trademarks to designs. The basic tenet of IPRs is that it is a negative right, thus works on the premise of exclusion. Therefore, only the owner or the creator has the legitimate right to use that intellectual property (IP) unless provided otherwise, say by way of licenses. Competition Law on the other hand, tries to curb those practices which are anti-competitive in nature. At the forefront it is understood that these two laws work in antithesis with each other. But when we look at them in the context of their objectives, “both the disciplines promote dynamic efficiency: that is, a system of property rights and market rules that create appropriate incentives for invention, innovation and the risks involved in R&D.”  

Interplay of IP and Competition law

The Indian Competition Act is fairly a new entrant when we compare it with its counterpart in countries like the US and UK. The Competition Act was enacted in 2002 in India to fill up the lacunas create by the MRTP Act. When we talk about the interplay of IPR and Competition law, majorly Section 3(5) of the Competition Act comes into the picture. This section lays down that, “the provisions with respect to anticompetitive agreement (section 3) will not be applicable to agreement entered into by any person for restraining any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his or her rights guaranteed under the IPR statutes in India.” Thus it is only with respect to licensing agreements which promote innovation in the market that the blanket exception applies. Apart from this, another important aspect of the interplay of these two laws lies in the cases of Abuse of Dominance (AoD). Though exception is given under section 3, “section 4 of the act provides with sufficient conditions for interfering in intellectual property matters in cases of abuse of dominant positions.” The supreme agency which enforces the intricacies of Competition Law, the Competition Commission of India (CCI) and its power to deal with IPR cases has been iterated in many cases. The Bombay High Court in the case of Aamir Khan Productions Pvt. Ltd. v. Union of India, held that in cases where there is an intersection of IPR and Competition Law, the CCI has jurisdiction to deal with such matters. The Supreme Court asserted the same in the case of Entertainment Network (India) Limited v. Super Cassette Industries Ltd, wherein the court opined that though Copyright holders enjoy monopoly it should be exercised in such a way that it causes turbulence in the functioning of market and is anti-competitive in nature. Furthermore by way of section 27, the CCI has the power to penalize IPR holders acting in contravention to the Competition Law. 

Apart from AoD cases, IPR protection is at crossroads with competition law in various other cases such as, refusal to license and excessive pricing. Even though the objective of IPRs is to promote innovation and advancement of dynamic competition in the market, it so happens that the refusal to license especially in cases of patents leads to a slump in the entry of new players. In the case of Re Independent Service Organizations, the Ninth Circuit bench of US held that anti-trust laws cannot be violated under the garb of intellectual property rights. Not agreeing to grant a license, “refusal to allow access to production facilities (essential facilities), refusal to cooperate in normal industry practices”, all these construe some form of anti-competitive practices. Conclusively, it comes to the point that there needs to be a balance of competition in the market wherein IPRs are not in contravention with competition law but rather create a leveo playing field. 

Another aspect which needs to be looked at from the perspective of these two laws, is the amendment that has been proposed in the Competition Act. The Draft Competition (Amendment) Bill, 2020 proposes the addition of section 4A which just like section 3(5) extends an exception to IP related matters in the case of AoD. Though a bare reading of the proposed amendment only aims to clarify and strengthen the position of IP holders, in practicality it might create some hiccups. The proposed section 4A would act as a further haven for already dominant firms which would use this section to deny any necessary IP right and create unwarranted conditions for new entrants in the market. Therefore, this provision might topple the balance that the courts have been trying to achieve between both the laws.    

Are IPRs Creating Intellectual Monopolies?

It is amply clear that the owner/creator exercises unchartered right over that IP. This leads to the presumption of the existence of a monopoly in the IP market. The possible concoction of IPRs and monopoly practices might baffle one today, but there have been various proponents of it even before. One of them is Adam Smith, who though in a positive connotation, considered patents and copyrights to be monopolies. “Thomas Jefferson was also a proponent of the “monopoly” view.” Even today the debate continues and Professor Lloyd Weinreb of Harvard maintains that “the most that can be said confidently about copyright or patent is that it confers a monopoly” But the opponents vehemently reject this line of thought and assert that to be engaged in any monopolization, there should be a power to influence the price and supply in the market. Thus interplay of IPRs and their monopolization can be in two ways, one in the semantic sense and another in the legal sense.

In practical application when we look at the extent to which IPRs are granted, it becomes blatant that there remain multiple areas that are exposed to monopolization. The most common platform for abuse of dominant position or even monopolization stands to be in the form of patents and copyrights. Copyrights that endow protection to literary and artistic works also include software and computer programmes. The glaring example of monopolization of computer programme is ironically what I am typing this essay on, Microsoft. Looking at monopoly in the semantic i.e. “exclusive ownership through legal privilege, command of supply, or concerted action”, we sense can loosely put Microsoft under this category. For desktops, the Microsoft OS has a share of 77.1% of the global market. With no strong competition from other companies, Microsoft stands to be in a position of price control which it very subtly exerted by way of increasing the price of Windows 10 Home. Thus increased prices and no apt replacement is what probably leads to these programmes being pirated, not that it is a justification of any sorts. In India as well a case was filed by Singhania & Partners LLP, alleging that Microsoft was indulging in anti-competitive behaviour and abusing its dominant position with respect to the sale of Windows and Office 2007. Though such allegations remained unfounded by the CCI and Microsoft was exonerated from any penalty, the CCI failed to investigate deeper into the market conditions which very blatantly showed that Microsoft was the biggest player in market and was in exerting its monopoly under the blanket of IPR protection and licensing policy. The case has now reached the Supreme Court and the decision stands awaited.  

 The next case can be of Google, wherein the EC found them guilty of favouring their own content by way of providing better display/visibility in the search results. Another monopolization of copyrights is textbooks especially college/university books. On top of the already heft college fees, students are made to invest in expensive university course books, which usually have a new edition every year or so, thus inadvertently making defunct the already existing editions.

Moving on, the next blatant platform of monopolization is the patents. “Patent holders are most likely to abuse market power via various practices, such as refusal to license, excessive pricing, unfair or discriminatory licensing, abuse of dominance, and delaying market entry of competitors.” Some global examples include that of Aspen Pharma, which was accused of raising the prices of five cancer drugs. In another case, the AstraZeneca-Losec a pharmaceutical company was found guilty of misleading the patents’ offices and creating unnecessary hurdles in the entry of new entrants, inadvertently creating a monopoly. Proponents of patents emphasise that it is strong protection granted to patents that lead to more innovation. But, “recent studies by Petra Moser and Heidi Williams, among others, find little evidence that patents boost innovation.” Rather such protection acts as a roadblock to further innovation, it hinders sequential innovation and adds up the cost of new technology. Another problem that arises due to patent rights is that it induces rent-seeking. Not only this, but firms also tend to indulge in ‘patent races’, “where too much effort is invested in innovating quickly in order to be the first to get the patent.” Ergo, there lies no doubt that state-sponsored monopolies in the form of patents are open to a plethora of abuses. 

Preventing Monopolies

All of this boils down to the desideratum of a structure that actually solves the dilemma. One has to accept the fact that, the overhauling of the complete system of IPRs would be a huge miscue. There is no doubt that IPRs on their own provide incentive to the creator, if authors are not going to granted rights for their works, novels then they wouldn’t be motivated enough to actually work again. The possible solution for not letting IPRs turn into a monopoly is multi-faceted. Firstly, we need to re-examine our existing laws and remove unnecessary provisions and excessive protection. Not just this, we need to implement those already in place, for instance, every patentee is required “to submit annually, a statement to show the extent to which the patented invention has been commercially worked in India.” If they do not comply with the same, they are prone to compulsory licensing. Secondly, rather than impediments, there should be an environment of positive competition that rolls the dice for innovation and technological diffusion. Furthermore, the government should take up the role of developing R&D through direct funding. Thirdly, it should be ensured that “the litigation sy         

An Analysis of India’s New FDI Policy: Are there any Grey Areas?

Ayushi Upadhyay
National Law University, Delhi

The outbreak of Novel Coronavirus jeopardized not only the life of individuals but also the economy of all the countries. That’s why the governments have been in an effort to control the situation. One such effort on the part of Indian government is contained in the Press Note (3) dated 17 April, 2020, released by the Department for Promotion of Industry and Internal Trade under which the regulatory framework for foreign investments in India has been revised. 

As per the Press note, foreign investment by any entity situated in the countries that share land border with India or if the beneficial owner of the investment, be it entity or citizen is a citizen of such country that shares land border with India, then prior government approval shall be necessary. Also, the transfer of existing or future FDI in an Indian entity, either directly or indirectly which changes the beneficial ownership will also require prior government approval. 

The Press note states that this step has been taken in order to curb the opportunistic takeovers of Indian companies in the backdrop of the economic turbulence round the globe. Now, the automatic route under which only the central bank was needed to be informed after the investment of money, has been blocked for the countries that share land border with India. Though, India shares land border with seven countries, this move seems to be aimed at China only because investment from Pakistan was already subject to scrutiny and the other five countries have not bought Indian assets in the past. Supposedly, Indian government got alarmed by the fact that recently, People’s Bank of China invested in 1.01% shares of HDFC Bank which is India’s biggest mortgage bank. 

However, this change in the FDI Policy did not go uncriticised by China. A statement from Chinese Embassy termed it as violative of WTO principles of non-discrimination and against free and fair trade, general trend of liberalisation and also alleged it to be non-conformative of the consensus of G20 leaders to maintain a free and fair-trade environment.   

But India countered the criticism by stating that the new FDI rules mandating the prior government approval do not deny permission or result in an equity cap or restriction but only provide for an approval process which is formally different and hence, not violative. It also needs to be noted that several countries like Germany and Australia have also tightened their policies relating to FDI in order to ensure the protection of their companies. 

This article is not an attempt to criticise or bring out the bright parts of this new FDI policy, rather it is an attempt to highlight a few grey areas of the new FDI regulations which are a source of ambiguity for the businesspersons and the various start-ups etc., that are running helter-skelter because of the same. 

After the issuance of the Press Note on April 17, Foreign Exchange Management (Non-debt Instruments) Rules, 2019, (FEMA Rules) were amended on April 22, to give effect to the changes. Each stakeholder had waited for the Rules, thinking it would clear the air but FEMA Rules as amended on 22 April did not offer any clarity. 

The first grey area relates to the interpretation of the terms ‘indirectly’, ‘beneficial ownership’ and ‘takeover/acquisition’. The scope of these terms has not been clarified under the new rules. There is yet no clarity in regard to the point that what percentage of shareholding in an investment would amount to beneficial ownership as in case of several Indian tech-companies, ownership of even a single share would constitute beneficial ownership and thus, requiring prior government approval. No distinction has been mentioned in the Press Note in regard to minority control and passive investment, so it seems as if, it is all encompassing. Moreover, it is left unspecified whether the changes apply to certain specific sectors or to all the sectors. 

The root this ambiguity lies also in the fact that there exist two criteria for determining beneficial owners. Currently, there are two ‘beneficial ownership’ tests- one under the Companies Act and the other under Anti-money laundering rules. FEMA Notification does not clarify who would be regarded as a beneficial owner and which test would be used. 

It is also not clear if these amended rules apply to such cases where the global acquisitions by the entities from bordering countries will result in indirect acquisition of Indian subsidiaries. And even if approval is required, who will apply for it, Indian entity or the investing entity. There is also lack of clarity regarding the issue how would an Indian entity which is a subsidiary of a Chinese corporation raise its capital in future because even in the case of disapproval by the government for future fund raising will not change the fact that its parent company is a Chinese corporation. 

Further, the Press Note also does not define the term- ‘takeover/acquisition’. The note construes takeover only by the way of acquisition of shareholding in any entity but it must be noted that takeover or control can be acquired by an investor in many other ways like acquisition of management rights, voting rights and appointment of directors etc. 

The second grey area is concerned with the Special Administrative Regions (SARs) of China. When government had mandated the prior approval from Reserve Bank of India for the Chinese investors for the purpose of acquisition of immovable property, they had specifically mentioned and called out Hong Kong and Macau, which are Chinese SARs but this specific call-out is missing from the Press Note dated 17 April which places restrictions only on China and does not have a mention about the Chinese SARs. This leads to the uncertainty about the requirement of government approval for investments coming from these SARs as they do not share land border with India but still, they are regarded as a part of China and different treatment is provided for different aspects, for instance, the rules for establishment of branch or project office treat Hong Kong and China as different entities but certain trade-related guidelines treat them as the same. 

Moreover, the concerns are not limited only to SARs but also there is another region which though not a SAR, creates ambiguity in regard to these new rules. The region is Taiwan. In recent years, India has witnessed investments from Taiwan in the sectors such as infrastructure and energy. As a WTO member, India has not recognised it as an independent country and has accepted the sovereignty of China over the region but still India has a tax treaty with Taiwan. This creates the confusion if the investments from Taiwan would be requiring a prior government approval under the new FDI rules or not. 

The third ambiguity is about the companies which are already underway the process of incorporation and the incorporation certificates are yet to be issued. It is not clear whether government approval would be required in these cases if the foreign investors are situated in countries mentioned in the Press Note. 

Then the fourth point of lack of clarity is related to Foreign Portfolio Investment (FPI). Rule 6(a) of the FEMA Rules was amended to introduce the new regulations. The amendment to this rule and the Press Note used the term FDI which suggests that the restrictions are only for the investments structured as FDI i.e. investment in the unlisted companies and 10% or more of the post issue paid-up equity capital investment in a listed Indian company. But what about the Foreign Portfolio Investment which is less than 10% in listed Indian company or investment under the FVCI (Foreign Venture Capitalist Investment) Route which are regulated by the SEBI (Securities and Exchange Board of India). There is much confusion about the applicability of these rules to FPI and FVCI. Many corporations have reached out to the government for clarification. If the government wants to stop the neighbouring investors from mopping up the stakes in listed companies, then the change only in FDI Policy is not enough, FPIs also need to be covered in the same way. 

The fifth concern is about the LLPs (Limited Liability Partnerships) as the current reading of the amended rules excludes them and other entities. Many have sought clarification in this regard. It is not clear if these restrictions would be applicable to the “foreign investments” in LLPs that are not FDI as the Press Note has no mention of the same but the term “foreign investment” has been defined under the Rules as any investment made by a person who is a resident outside India on a repatriable basis in equity instruments of an Indian company or to the capital of a LLP. The Press Note describes the changes as a move to curb the opportunistic takeovers of Indian companies but does not make any reference to LLPs and amends Rule 6(a) which only deals with investments in equity instruments of Indian companies under the Schedule I of Rules. 

The sixth subject of uncertainty is the follow-on investments. The Rules do not clarify if the fresh infusion of funds by existing investors i.e. follow-on investment, in the case when there is no change in the shareholding percentage would attract the new approval requirements or not. Also, there is ambiguity regarding the issue whether the existing investors from China, can raise the fund by ways of rights issue or will they have to undergo the approval process, same as that of the other new investors. 

There is another issue which though, not a grey area, needs attention, that is, will this new FDI policy that provides for added scrutiny, be able to curb the opportunistic acquisitions. This seems a bit unlikely given that a large proportion of the FDI into India is routed through multi-layered structures of the low-tax jurisdictions like Hong Kong, Singapore and Mauritius. Also, attempts in past to dig deep into the beneficiaries behind these flows have borne no fruits and instead policymakers had to pull back at the first signal of push-back from the foreign investors. 

Along with all these ambiguities and uncertainties, the new FDI policy creates instability and confusion amongst the businesspersons and hence, for maintaining stability and eliminating confusion out of the business and investment arena in these already difficult times of a pandemic, it becomes very essential for the Government to remove the air of ambiguity around the new FDI policy at the earliest.  

PATENTS, MONOPOLY & IT’S IMPACT ON HEALTHCARE

Shivangi Pandey
UPES, Dehradun

Patents are a kind of intellectual property, which is a broad term used to refer to creations of the mind, including inventions, literary and artistic works, symbols, names, images, designs and trade secrets. The sole purpose of providing protection under Patent Law by any legislation is to provide exclusive rights to the creator. However this provision for protection of exclusive rights of the creator was never meant to create a state of monopoly in the market. The idea is to protect the novelty of the inventions which are new in the market and to give the creator a sense of security and return for his contribution to the society by his invention. 

In the era of globalization where boundaries have been transgressed, millions of people even today do not have access to drugs. Life saving drugs including vaccines for infectious diseases are also a part of this application and protection. The results are hardly acknowledged as it is borne by the under developed strata of the world. Patents are an incentive to the creators and when medical industry is taken into account the objective is to promote the research and development of such life saving drugs. With the world changing and variation of diseases being introduced due to the change in the lifestyle this research and development is essential. But in such due course Patent also gives such creator certain rights. Under such protection the creator or the inventor has the right to control and exclude all others from making or even selling such invention. As well as this right also gives the patentee exclusive right to determine the cost of his invention. He can control the supply of such invention to all nations where such patent protection has been recognized till 20 years. The aim behind Patents was to promote innovation but such powers only direct to creation of a state of Monopoly by such patentees.

The idea of reward to such discoveries as propounded by Adam Smith wherein he states that :

“For if the legislature should appoint pecuniary rewards for the inventors of new machines, etc., they would hardly ever be so precisely proportioned to the merit of the invention as this is. For here, if the invention be good and such as is profitable to mankind, he will probably make a fortune by it; but if it be of no value he also will reap no benefit.”

By this definition as well the idea of rewarding such inventors has been propagated. Even Jeremy Bentham propounded the same ideology about reward.

When discussed about the era of globalization, the earliest case noticed was regarding the Polio vaccine on April 12,1955.John Salk the person behind this effective vaccine refused to patent this vaccine and incur any profits from the vaccine. By 1979 no cases of polio from the wild polio virus were reported nationwide in US. The contribution of the vaccine was felt worldwide. The tentative profit to be incurred from the vaccine was estimated to be in billions. However when asked regarding the patent, John Salk replied “There is no patent. Could you patent the sun?”. His explanation was in itself a depiction of what patent in Medical field meant. Any product meant for the benefit of the humankind has no owner and therefore can’t be given the monopoly provided by the Right of Patents. Even the monetary benefits did not lure him to get the vaccine patent.

MANIPULATION IN RESEARCH :

 But in the case of modern era principles of Capitalism have affected the Patent registration in biomedical sector. Such participation is not limited to individuals, even big Corporations and industries are key players.  The purpose of providing patents were for innovation but the market oriented policies continue to depict different statistics. These policies have started to affects even the fields of research. The arena of research is limited to ones that are capitally beneficial and will provide monetary benefit to the Patentees. Diseases which have limited effects or which are not observed in the higher strata or the developed countries who are not capable of paying the high costs for such medicines are hardly recognized. Results are observed when research programs for diseases like Measles, pneumonia, Dengue, African sleeping sickness which have caused death rates to spike have not been acknowledged.

The Patent system has created a profit making scenario where the sole purpose has transformed into making profits. The Corporations have transformed their R&D teams to focus on the woes of the developed countries. The under developed ones continue to bear the wrath of the non availability of medicines for diseases prevalent in such regions.

STRATEGIES:

When the perspective on the issue of expenses incurred while researching and the returns to be obtained from such profits comes in light it should be noted that the investment done while such research and discovery is usually done under the security of recoup provided by Patents. Usually the research done at a lower strata is recognized and then the investment is funded by Huge Corporations who recognize a chance of such redemption at a huge economically beneficial phase. The expensive stages like the tests and the introduction to the affected which needs huge  funding are borne by the Multinational companies who notice the chances of huge profits. The security provided by Patents helps them to establish their monopoly and prevents any other establishment from inventing the same product and introducing it in the market. The profit incurred in such inventions are double fold. The neglect of poor nations diseases are one of these strategies.

COVID-19 RELATION:

The idea of patents of economically beneficial vaccines and medicines have turned out to be the temptation for R&D Teams across the world. Research, testing for a cure for this virus is in full swing. However the question is the motive. If the motive is as noble as it seems to be? The observation made is very different. The result of Patent given in this Pandemic would give power to the Pharmaceutical Company to determine who is capable of such medicine and who is not. The company would receive monopoly as well as full control over the market. The prices will be set in accordance to the norms of the Company and it can be presumed that only the economically stronger ones would be able to afford it. What will be the situation of the Pandemic then?

The Patents acquired in such sector are required for creating a state of legalized Monopoly which can’t be contested. 20 years in itself is enough for creating the deviant direction of flow of currency. These statistics are reflected in the non availability of the N95 Masks to many health workers as a result of being too expensive. The main reason behind the high prices are the Patent held by the Company 3M. A look into the products of this company reflects the wide range of respirator masks which are under the protection of Patents. The prices for such masks are controlled by the company and even the Government can’t interfere with the prices. Any copy or a cheaper version would lead to Copyright Infringement.3M has complete authority over the production, prices and  transfer even in this pandemic. However this problem is acknowledged only by a few as it is faced only by the HAVE-NOT’S. This is eventually affecting the treatments as well.

When discussed about the medicines, all the medicines which are currently being tested for Coronavirus  have patent protection. Japanese Flu Drug or Favipravir  along with Remdesivir are considered to be one of the most essential elements for Clinical Trials. However both of these medicines are under Patent Production in a variety of nations. Even further applications are pending for approval. These patents are turning out to be Generic barriers for research and development of the different compositions for the same medicine. Even molecules like Chloroquine used for treatment of HIV are also under patent protection. Another combination Lopinavir-Ritonavir which are also under such protection have created a state of confusion.

AMMENDMENTS REQUIRED:

With respect to the pandemic there have been many changes observed in the Patent legislations of many nations. It is finally realized that this pandemic should not be used as a source of income by the Corporations and Pharmaceutical Companies. The provision of Patents provided in the nation where vaccine has been developed will make a state of friction in its admissibility, manufacturing, transfer to other nations. There are certain ratifications acknowledged to ensure rapid supply of such vaccine throughout the world. One of them is the creation of a Pandemic Patent Pool. Patent pools are usually effective in aggregating, administering and licensing patents related to specific areas of technology. Such pools are usually managed by a central agency and the patents which become part of the pool are readily made available for licensing. Such pools will be effective in adequate supply of the vaccine worldwide and not constraint the supply.

Another amendment required is Compulsory Licensing which will be in effect immediately which will restrict Patents on a product which is considered to be essential. This will create a large number of manufacturers worldwide. The patent owners can be provided Royalties however the control over prices as well as the manufacturing should be taken. The procurement of income from Medicine should finally be kept at bay as it should be for patients’ welfare and no one else. This requires cooperation from all International payers, organizations, nations, researchers. Providing maximum benefit to people across the world should be the goal.

Another amendment required is of creation of PPP’s i.e Public Private Partnerships which has already proved to be interdependent in nature for their respective growth. The private industries have relatively advanced technology and other essentials for research and delivery of healthcare services.With such collaboration,such vaccines and medicines developed will have a larger scope of transfers and it will help recover from the repressive effects of Patent system.

CONCLUSION:

Nations like Chile, Ecuador, Israel have realized the destruction created by the legalized monopoly and have taken pre-emptive measures. Chile has allowed Compulsory Licensing in case of medical treatments. Israel issued compulsory licenses for lopinavir and ritonavir, Ecuador approved a resolution that asks the minister of health to issue compulsory licences over all patents related to Covid-19, Canada and Germany amended their patent laws to enable the swift grant of a compulsory licence, and Brazil is in the process of amending its patent law to make compulsory licensing easier.

With context to Indian Patent Law and healthcare services after the 2002 Amendment there were provisions adopted for Compulsory Licenses. This provision clearly establishes for grant of compulsory licenses on notification of the Indian government in circumstances of national emergency or extreme urgency like the breakout of epidemics.  These amendments will slowly create viable methods to avoid the regressive methods to the Healthcare services and smoothen the objective of Healthcare services to all.

CONSUMER PROTECTION ACT, 2019 CAME INTO FORCE ON 20 JULY BRINGING E-COMMERCE IN ITS AMBIT

After almost three decades, the Consumer Protection laws in India has undergone a change, when the Consumer Protection Act 2019 came into force on the 20th of July 2020. The salient features of the new legislation include establishment of the Central Consumer Protection Authority (CCPA) in order to protect and promote the rights of the consumers. The Union Minister for Consumer Affairs, Food and Public Distribution stated that the new act shall empower the consumers to protect their rights through various notified rules, regulations and provisions like Consumer Protection Councils, Consumer Disputes Redressal Commissions, Product Liability, sale or manufacture of products spurious in nature and Mediation.

The authority shall be empowered to conduct investigation in case of violation of consumer rights, institute complaints or prosecution, impose penalties on wrong-doer, unsafe use of goods or services by sellers and discontinuance of unfair trade practices and misleading advertisements.

The Act also consists of necessary rules for the prevention of unfair trade practice by the e-commerce platforms. Every e-commerce entity shall provide information with regard to exchange, warranty, refund, shipment, mode of payment, security of payment methods, country of origin etc. to enable the consumer to make an informed decision before purchasing the product. E-commerce platforms are required to acknowledge the receipt of the consumer complaint within 48 hours and redress the complaint within a period of 1 month from the date of the receipt.

The Act introduces the concept of ‘product liability’ and extends its ambit including the product manufacturer, product seller or a product service provider for any claim of compensation. The Act shall provide a simplified mechanism for consumer disputes adjudication procedure in the consumer forum. An alternate dispute resolution mechanism of mediation has also been provided in the new act. This shall provide a smooth adjudication process as the complaint will be referred by a consumer commission for mediation when a scope for early settlement exists. Further, the act states that there will be no fee for filing a case up to Rs. 5 lakhs. There are provisions for online filing of complaints in the Act. The court shall have the power to suspend any license issued to a person for two years in case of first conviction and cancel the license permanently in subsequent convictions.

Apart from the Act, there are Central Consumer Protection Council Rules, Consumer Disputes Redressal Commission Rules, Appointment of President and Members in State or District Commission Rules, Model Rules, Mediation Rules, E-Commerce Rules, Mediation Regulations, Consumer Commission Procedure Regulations and District Commission Regulations. The Central Consumer Protection Council Rules, in particular are provided to constitute Central Consumer Protection Council which is an advisory body to deal with consumer issues.

‘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.

MAHINDRA LOSES TRADE CASE AGAINST FIAT CHRYSLER FOR COPYING LOOKS OF JEEP WRANGLER

A notice issued on 11 June 2020 by the United States International Trade Commission, Washington D.C. blocked the U.S. import of Roxor manufactured by Mahindra & Mahindra Ltd. after it was proved that it had copied the looks of Fiat Chrysler’s iconic Jeep Wrangler. The commission upheld that Mahindra’s Roxor is a nearly identical copy of Jeep Wrangler. It pointed out that the boxy body shape with flat-appearing vertical sides and a rear body ending at the same height is quite prominent in both the models.

In November, Trade Judge Cameron Elliot stated that Roxor infringed the trade dress of the Jeep and recommended the commission to stop imports of Roxor kits and components. The Judge also pointed that Mahindra has intentionally copied the design so as to evoke the Jeep Image and erode the value of Chrysler’s Jeep Wrangler. However, both sides asked the International Trade Commission to review the decision. Fiat Chrysler admitted that it was pleased with the decision of the Commission but wanted to analyze the decision before giving any substantive comment.

In January, India’s leading sports utility vehicle company Mahindra stated that it has made necessary changes and would make additional styling changes if required by the commission. In its latest filing with the commission, Mahindra stated that the latest models of Roxor 2020 are not in violation and argued that Fait Chrysler is trying to grab a monopoly over the Jeep and Military style manufacturing market in the United States. Mahindra further stated in the statement that its North-American Jeep Roxor does not dilute or violate Wrangler’s trade dress which is no longer produced in the U.S. Market. The Roxor design is refreshed as per 2020 and there shall be further styling and design changes.

Due to pandemic, the sale of off-road vehicles in the United States has stopped in 2020 which is a $ 12 billion market. In April, there was no domestic sale of Mahindra’s Roxor due to the coronavirus pandemic whose components are manufactured in India and assembled at a plant in Michigan. According to Starview Research, the sales are expected to rebound in 2021. It is so because, in 2018, the U.S. Market was responsible for the sale of 60% of the world’s manufacture of off-road vehicles. 

Central Government Proposes to Decriminalise various Minor Financial Offences

The Ministry of Finance has announced to propose the decriminalization of offences like dishonor of cheque under section 138 of the Negotiable Instruments Act and other minor financial offences. The Ministry has decided to make such a move in order to improve the business sentiment and unclog the court processes, in the wake of the economic crisis being faced during the pandemic caused by covid-19.

The criminalization of procedural lapses and minor non-compliances cause a burden on associated businesses and the ministry realizes that it is necessary to re-look at the provisions which are merely procedural in nature and do not impact society at large. However, principles like decreasing the burden on businesses, focusing on economic growth, critically evaluating non-compliance and its habitual nature is essential. Further, actions taken for such decriminalization of minor offences is expected to cause an ease of doing business and reduce the burden of court and prison.

The various important offences proposed to be decriminalized include:

  1. Section 138 and 143(1) of the Negotiable Instruments Act, 1881: Section 138 states with regard to dishonor of cheque for insufficiency of funds in account and also states the required penalty in such a case. In addition, Section 143(1) states the power of the court to try cases with regard to all offences as contained in Code of Criminal Procedure, 1973.
  2. Section 12 and 103 of Insurance Act, 1938: The penalties are stated under the section if balance sheet, P & L Account, and Revenue Account, if not audited annually by the auditor. Further, if a person carries a business of insurance without obtaining a certificate of registration, he shall be liable to penalties.
  3. Section 29 of SARFAESI Act, 2002: If any person intervenes, contravenes or abets the provision of the Act, he/she shall be liable for punishment which includes imprisonment for a term not exceeding 1 year.
  4. Section 16(7) and 32 (1) of Pension Fund Regulatory and Development Authority Act, 2013: A person shall be liable for punishment if he fails without reasonable cause or refuses to produce an investing authority, denies to furnish any relevant information for his duty and to appear before the investing authority. He shall also be punishable if he contravenes, intervenes and abets the provision of the Act.
  5. Section 58 B (1), (4A), (5) and 5(A) of Reserve Bank of India Act, 1934: Section 58 B briefly elucidates various penalties under the Act. It includes if a person in any application, declaration, statement, information or return furnishes a false information, he shall be punishable with an imprisonment for a term which may extend to 3 years. Moreover, it states penalties with regard to requirement of registration as per Section 45 I-A of the Act, persons who fail to comply with the Act and contravenes with any provision of Section 45 S (Deposits not to be accepted in certain cases) shall be liable.
  6. Section 26(1) and 26(4) of Payment and Settlement Systems Act, 2007: The Section states with regard to imprisonment of a person failing to comply with the Act.
  7. Section 56 (1) of the NABARD Act, 1981: A person who willfully makes a false statement in any return, balance sheet or other document shall be liable for fine and imprisonment.
  8. Section 49 of the National House Banking Act, 1987: This section states penalty with regard to a person furnishing false statement in documents, balance sheet or returns, failing to produce any book or other document, fails to comply with directions as stated by the auditor or authorized officer and contravenes with the policies of the Act.
  9. Section 42 (1) and 42(2) of the State Financial Corporations Act, 1951: Whoever furnishes a false statement in any bill of lading, warehouse receipt or other document of the financial corporation shall be punishable with imprisonment and fine. In addition to this, if anyone uses the name of a financial corporation without a written consent of the such institution, it shall be liable for the same.
  10. Section 23(1) of the Credit Information Companies (Regulation) Act, 2005: A person shall be liable he/she furnishes a false information in any return or document.
  11. Section 23 of the Factoring Regulation Act, 2011: A person shall be liable if he/she intervenes or fails to comply with the provisions of the Act.
  12. Section 37, 38(2) and 40(2) of the Actuaries Act, 2006: Any person who is not a member of the institute represents himself as a member, uses the designation of actuary or practices the profession or being a member does not have a certificate of practice and represents that he is in practice shall be liable for penalties. Further, if a person contravenes with the policy of the Act shall be liable.
  13. Section 36 AD (2) and 46 of Banking Regulation Act, 1949: A person shall be liable if he/she contravenes with the provisions and furnishes a false statement for any return, balance-sheet or other document.
  14. Section 30 of the General Insurance Business (Nationalization) Act, 1972: If any person willfully withholds or fails to deliver required information to Indian Insurance Company with regard to any property, book or document which he is in possession of, he/she shall be held liable for punishment under the Act.
  15. Section 40 of LIC Act, 1956: If any person willfully withholds or fails to deliver required information to Corporation with regard to any property, book or document which he is in possession of, he/she shall be held liable for punishment under the Act.
  16. Section 21(1), 21(2), 21(3), 22, 23 and 24 of the Banning of Unregulated Deposit Schemes Act, 2019: Chapter VI of the Act states with regard to various offences and punishments with regard to contravention of section 3, 4 and 5. Section 24 states the punishment for repeat offenders.
  17. Section 76 (1), 76(3) and 77 of the Chit Funds Act, 1982: The sections states that a person shall be liable if he/she contravenes or abets the provisions of the act or furnishes false statement. Section 77 states provision for repeat offenders.
  18. Section 47(1) of Deposit Insurance and Credit Guarantee Corporation Act, 1961: The section states that whoever in any return, document or balance sheer furnishes any false information shall be liable for a punishment under the Act.
  19. Section 4, 5 and 12 (5) of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978: The section 4 suggests that whoever intervenes with the provision of section 3 of the Act shall be liable for penalties. Section 5 provides penalty for offences in connection with prize chits or money circulation schemes and section 12(5) states with regard to failing to comply with the provisions of the Act shall be liable.

The government has further stated that the stakeholders may propose and submit the comments or suggestion regarding decriminalization of a particular act or section of an act along with a rationale. The suggestions should be submitted to the department’s e-mail address (bo2@nic.in) by June 23, 2020. The comment/feedback shall include necessary details like name of the institution or organization or member of the public, correspondence address and category (State/UT/Civil Society/Private Sector/Public Sector/Multilateral Institution/Member of the public/Academic/NGO).

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. 

ANALYSIS OF THE SEAMAC JUDGEMENT VIS-A-VIS SETTLED PRINCIPLES OF LAW

In a number of judgements passed by the Hon’ble Supreme Court and various High Courts they have refused to interfere with an Arbitral Award unless it shocks the conscience of the court. An arbitral award would be against justice and morality if it shocks the conscience of the Court. Or when a decision is perverse, based on no evidence or ignores vital evidence in arriving at the decision. That has been the standard set adopted by the Supreme Court for interfering with arbitral awards.

It has been held that even if there is a plausible explanation  to the Arbitration Award, the same would be upheld.

The scope under Section 34 and 37 of the Arbitration Act, 1996 is very limited and are summary in nature. The scope of enquiry in any proceedings under Section 34 of the Act has been limited to consider whether any of the grounds mentioned in Section 34(2) or Section 13(5) or Section 16(6) are made out to set aside the award, the grounds for which are specific. In a recent decision passed by the Hon’ble Supreme Court in Canara Nidhi Ltd Vs M Shashikala , it was held that under Section 34 of the Act, cases should be decided only with reference to pleadings and evidence adduced before the arbitral tribunal and the superior court cannot enter into fresh evidence.

South East Asia Marine Engineering & Construction (SEAMEC) Ltd. v. Oil India Ltd. (“OIL”) is yet another instance when the Supreme Court intervened and set aside an award, although it was conscious of the limited scope of review and also cautioned that domestic awards should not be interfered with in a casual and cavalier manner under Section 34 of the Arbitration & Conciliation Act, 1996 (the ‘A&C Act’).  Interference was justified only where some perversity of the award went to the root of the matter and no possible alternative interpretation was available that could sustain the award.

In SEAMEC, the Supreme Court agreed with the Guwahati High Court, which (in an appeal against a judgment upholding the award) had set aside the award as it was passed overlooking the terms and conditions of the contract. While doing so, the Court weighed into detailed provisions of the relevant contract, ruling that its interpretation by the Arbitral Tribunal was simply not a possible one.

Factual Aspects

OIL awarded a contract (effective from June 5, 1996) to SEAMEC for drilling oil wells and auxiliary operations (the “Contract”).  During its subsistence, the price of High-Speed Diesel (“HSD”), an essential material for carrying out drilling operations, increased, and SEAMEC raised a claim on OIL for reimbursement of the excess cost.  SEAMEC contended that the increase in HSD price, by virtue of a circular issued by the Ministry of Petroleum & Natural Gas, Government of India, triggered the ‘change in law’ clause under the Contract, such that the additional cost to SEAMEC must be reimbursed by OIL. OIL rejected the claim, leading to disputes and an arbitration between the parties.

The relevant Clause 23 is reproduced below:

Subsequent to the date of price of Bid Opening, if there is a change or enactment of any law or interpretation of existing law, which results in additional cost/reduction in cost to Contractor on account of the operation under the Contract, the Company/Contractor shall reimburse/pay Contractor/Company for such additional/reduced cost actually incurred.

The Award as passed by the Arbitral Tribunal:

The arbitral tribunal, through a majority award, held that an increase in HSD price by virtue of the Ministry’s circular was not a ‘law’ in the literal sense, but on a liberal and harmonious construction of the Contract, the circular had the ‘force of law’.  It thus amounted to a ‘change in law’, that fell within the ambit of Clause 23 and accordingly, OIL was liable to reimburse to SEAMEC, the additional costs incurred. On the other hand, the minority differed and held that the circular was an executive order, which would not amount to ‘law’ and accordingly, SEAMEC was not entitled to reimbursement.

The District court ruling:

The District Court upheld the Award and noted that it did not warrant judicial interference as there is no perversity in the award or and the scope of interference in a section 34 petition is very narrow. It further held that the findings of the tribunal were not without basis or against the public policy of India or patently illegal and did not warrant judicial interference.

On the other hand, in an appeal (under Section 37 of A&C Act), the High Court set aside the Award, on the basis that it was passed overlooking the terms and conditions of the contract and therefore erroneous and contrary to the public policy of India.  Surprisingly, the Court added additional grounds to the reasoning of the arbitral tribunal, interpreting Clause 23 as being akin to a force majeure provision.  Going further, it also declared that it was pari materia to the “doctrine of frustration and supervening impossibility”, which would apply to Clause 23. The matter was then taken up to the Hon’ble Supreme Court.

Issues for consideration before the Supreme Court

The main grounds of challenge before the Supreme Court were:

a) that interpretation of contractual terms falls within the domain of the arbitral tribunal to decide and the High Court is conferred with only a supervisory role which cannot impart its own view;

b) as there exists no patent illegality in the award, the questions of law decided by the arbitral tribunal were beyond the judicial review of the High Court under Section 34 of the

The key issue before the Supreme Court was the scope and ambit of the
Court’s jurisdiction to scrutinize the award on matters of interpretation.

The Supreme Court referred to and relied upon its earlier judgment in Dyna Technologies Pvt. Ltd. v. Crompton Greaves Limited wherein it was held that if there are two plausible interpretations on fact and terms of contract, the court should defer to the view taken by the arbitral tribunal, unless such view portrays perversity which is ‘unpardonable’.

In light of the judgment in Dyna Technologies (supra), the Supreme Court set out to determine “Whether the interpretation provided to the contract in the award of the tribunal was reasonable and fair, so that the same passes muster under Section 34 of the Act?”

Supreme Court held:

The Supreme Court delved into the reasons offered by both the arbitral tribunal and the High Court. It did not subscribe to either and offered its own reasoning to uphold the setting aside of the award.

The Supreme Court observed that the interpretation of Clause 23 by the arbitral tribunal is contrary to the thumb rule of interpretation of contract i.e., a written contract should be read as a whole and so far as possible as mutually explanatory.

On examining the terms of the Letter of Intent and other clauses of the contract, the Court reached the conclusion that as the contract was based on a fixed price, the appellant had taken into account the risk of price variations before entering the tender process. Therefore, the purpose of the tender being to mitigate the risk of price variations, the interpretation of the arbitral tribunal that change in price of HSD is akin to change in law cannot be said to be a possible interpretation of Clause 23.

The Court also observed that the provision of change in law in Clause 23 cannot be stretched so far so as to include price fluctuations, which if intended by the parties, would have been specifically included in the contract.

The Supreme Court also laid emphasis on certain terms of the contract which specifically provided that

a) rates, terms and conditions under the contract were to continue in force until the completion and abandonment of the contract;

b) ‘Consolidated Statement of Equipment and Services furnished by the Contractor’ which specified that fuel was to be supplied by the contractor at his expense.

Such clauses, the Court observed, clearly indicated that the prices stipulated in the contract were not open for modification and the interpretation of Clause 23 given by the arbitral tribunal was not possible. Hence, it was well within the scope of Section 34 of the Act to set aside the award.

Conclusion:

It is settled law that matters of construction of contract primarily fall within the domain of the arbitrator and an error in interpretation does not warrant interference with the award, as elucidated in various judgements in Associate Builders vs. Delhi Development Authority and McDermott International Inc. vs. Burn Standard Co. Ltd..

The SEAMEC judgment does not deviate from that settled position, however itis an example where the Court, as a matter of exception, intervenes when the error of interpretation in the award is unpardonable and perverse on the face of it.

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.

Patents and COVID-19

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.

Royzz & Co

Drone Laws In 2020

Website Launched To Permit Aerial Photography and Remote Sensing Survey

  • On 6 January 2020, the Minister of Defence launched the Ministry of Defence, No Objection Certificate web portal namely www.modnoc.ncog.gov.in to facilitate aerial surveys with the final permission from the Directorate General of Civil Aviation.
  • This portal can be used by various vendors engaged by state government, public sector undertakings and autonomous bodies to seek Non Objection Certificate from the Ministry of Defence. 
  • Purpose:
  • This initiative would enable a speedier issuance of the Non Objection Certificate.
  • It will also ensure expeditious disposal of applications to carry out aerial photography and remote sensing survey. 

One-time opportunity for voluntary disclosure of non-complaint drones

  • On 13 January 2020, the Ministry of Civil Aviation issued a public notice to ensure a one-time voluntary disclosure opportunity for non-complaint drones being operated in the Indian airspace.
  • Opportunity for Disclosure: 
  • The Directorate General of Civil Aviation had issued the Civil Aviation Requirements (CAR), Section 3 – Air Transport Series X, Part I, Issue I, dated 27 August 2018.
  • These regulations provide for obtaining Unique Identification Number, Unmanned Aircraft Operation Permit and other operational requirements for the identification of drones and their operators.
  • In case, there has been a non-disclosure, i.e. a CAR violation, the public notice dated 13 January 2020 would be giving an opportunity for one-time voluntary disclosure to the non-compliant drone owners.
  • No strict compliance with the No Permission – No Takeoff conditions: 
  • There need not be mandatory compliance with the No Permission – No Takeoff conditions as envisaged in CAR.
  • E-Portal: 
  • The persons in possession of non-complaint drones are required to submit the information to the Government.
  • The persons in possession of the non-complaint drones can submit the information disclosed through the Digital Sky portal available at https://digitalsky.dgca.gov.in/.
  • Procedure: 
  • On uploading the drone owner’s information, the owner will receive an online issued Ownership Acknowledgement Number (OAN).
  • Using this OAN, the owner can upload the information about the drone and receive an online issued Drone Acknowledgement Number (DAN).
  • The OAN and the DAN will help in validation of operations of drones in India. 
  • Additional Rules:
  • There shall be fresh enlistment of every drone.
  • The same OAN can be used to enlist all the drones owned by the same person.
  • A separate DAN shall be issued for every drone.  
  • The OAN and DAN do not confer right to operate drones in India.
  • There has to be additional compliance with the provisions given in the CAR.
  • Penalty: 
  • Owning drones in India without a valid DAN or OAN number shall lead to penal consequences as per applicable laws.
  • Deadline:
  • The deadline for voluntary disclosure was 5:00 pm on 31 January 2020.

Regulatory Updates: Company Amendment Rules, 2020

Companies (Registration Offices and Fees) Amendment Rules, 2020

  • On 18 February, 2020, the Ministry of Corporate Affairs (MCA) notified the Companies (Registration Offices and Fees) Amendment Rules, 2020. 
  • These rules amend the Companies (Registration Offices and Fees) Amendment Rules, 2014. 
  • The powers is conferred by sections 396, 398, 399, 403 and 404 read with 469(1) and 469(2) of the Companies Act, 2013. 
  • The Form GNL – 2 has been substituted with a revised Form GNL – 2. 
  • Form GNL – 2 (revised) is the e-form that is to be filed for submission of documents with the Registrar of Companies for which there is no e-form prescribed. 

Companies (Incorporation) Amendment Rules, 2020

  • On 18 February 2020, the MCA notified the Companies (Incorporation) Amendment Rules, 2020.
  • These rules amend the Companies (Incorporation) Rules, 2014.
  • The previous e-form INC – 32 (SPICe) has been replaced with a revised form INC – 32 (SPICe+).
  • SPICe+ is an integrated web form providing various services such as name reservation, incorporation, and mandatory issue of PAN etc. 
  • This can be offered from three different ministries i.e. the MCA, Ministry of Labour and Ministry of Finance. 
  • The form RUN (Reserve Unique Name) which was earlier used to reserve names for companies, for both existing and yet to be incorporated, has been amended to be applicable only for requesting a change in existing names of companies. 
  • Fees for the same shall be as per Companies (Registration Offices and Fees) Rules, 2014.
  • This may be approved or rejected by the Registrar, Central Registration Centre.
  • This can be done after a re-submission of such web form within 15 (fifteen) days for rectification 
  • The e-form INC – 35 (AGILE) has been replaced by INC – 35 (AGILEPRO). 
  • This will also enable professional tax registration and opening of bank accounts. 
  • The form INC – 9 has been replaced with e-form INC – 9. 
  • The earlier form was offline and needed an execution manually by the concerned director. 
  • The new form is an e-form and requires verification by the concerned director by affixing his-her digital signature certificate.
  • The notification shall into force with effect from 23 February 2020.

Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2020

  • On 29 April 2020, the MCA notified the Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2020.
  • These shall modify the Companies (Appointment and Qualification of Directors) Rules, 2014.
  • In rule 6, in sub-rule (1), in clause (a), the words “five months” would be replaced by “seven months”.
  • This would mean that the time provided to individuals appointed as independent director to apply for inclusion of his/her name in the databank of list of independent directors shall be extended to a period of seven months.

The Ministry of Corporate Affairs issued a clarification dated 2 March 2020 on prosecutions filed or internal adjudication proceedings initiated against Independent Directors

  • The term “officer in default” has been defined under section 2(60) of the Companies Act, 2013 (“the Act”). 
  • In the ordinary course, a whole-time director (WTD) and a key managerial personnel (KMP) will be liable for defaults committed by the company. 
  • In the absence of such KMP, the director(s) who have given their consent to incur liability, as per e-form GNL-3 filed with the Registrar, shall be liable. 
  • However, when the penal provisions of the act hold a specific director or officer liable, then action shall be initiated only against that person. For instance, disclosure of interest by directors under section 184 of the Act.
  • As per section 149(12) of the Act, an independent director (ID) or a non-executive director (NED), not being a promoter or a KMP:
  • Shall be liable only with respect to those acts of omission or commission by a company which had occurred with his/her knowledge, attributable through Board processes, and with his/her consent or connivance or where he/she had not acted diligently. 
  • This means that there should not criminal or civil proceedings against IDs and NEDs unless the above criterion is met. 
  • Instances of filing information/records with the registry, maintenance of statutory registers or minutes of the meetings, or compliance with the orders issued by statutory authorities, including National Company Law Tribunal (NCLT) under the Act:
  • Shall not be the responsibility of the IDs or the NEDs.
  • It shall be contrary to the aforesaid only when there are specific requirements provided in the Act. 
  • This generally happens when there are no WTDs and KMPs.
  • When the notice is being served to the company:
  • There should be proper inquiry and investigation to ensure that necessary documents are sought for to ascertain the involvement of the concerned officer in the company.
  • In case the lapses are attributable to the decisions taken by the Board or its Committees, then care has to be taken to ensure that civil or criminal proceedings shall not be initiated against the IDs and the NEDs.
  • It shall be contrary to the aforesaid only when sufficient evidence exists.
  • The records available in the office of the Registrar should also be examined:
  • This shall include e-forms DIR-11 and DIR-12, along with the copies of annual returns or financial statements. 
  • This will help ascertain whether a particular director or the KMP was serving in the company as on the date of default.
  • When there is a doubt with respect to the liability of any person:
  • Guidance may be sought from the Ministry of Corporate Affairs (Ministry) through the office of Director General of Corporate Affairs. 
  • Thus, after receiving due sanction from the Ministry, the proceedings shall be initiated by the Registrar.
  • The circular directs all Registrars to follow the above mentioned Standard Operating Procedure immediately and scrupulously.
  • In cases where prosecution may have already been filed without satisfying the above criteria, the same may be submitted to the Ministry for necessary examination and further directions. 

Changes brought about by the Consumer Protection Act, 2019 repealing the Consumer Protection Act, 1986

  • Definitions:
  • The definition of “consumer” under the Consumer Protection Act, 2019 (CP Act) includes online purchasers.
  • The definition of “complainant” shall include parents or legal guardians of a consumer who is a minor. 
  • The definition of “goods” has been amended to include “food” as defined in Food Safety and Security Act, 2006.
  • “Telecom” has been included within the definition of “services” in the CP Act to include telecom service providers. 
  • The definition of “unfair trade practices” has been introduced to include misleading electronic advertising or refusal to withdraw defective services. The consideration shall be returned within the stipulated person and within 30 (thirty) days if there is no such stipulation. Disclosing confidential personal information collected during transactions shall be an offence.
  • Product liability:
  • “Product Liability” has been included to discourage manufacturers and service providers from delivering deficient or defectives service. 
  • The manufacturer or the service provider will have to compensate the consumer for the harm caused.
  • Central Consumer Protection Authority:
  • A Central Consumer Protection Authority (Authority) shall be set up to regulate issues related to violation of rights of the consumers which could thereby affect the interest of the consumers.
  • There shall be an investigation wing to conduct inquiry.
  • The Authority shall have powers including inquiring suo moto on a complaint or do so on order from the Central Government, file complaints or intervene in matters before the National, State or District Commissions, refer the matter to for further investigation or to a regulator, recall good or seek for withdrawal of services which are unsafe or dangerous, order penalties against misleading advertisements. 
  • Complaint filing
  • The complaint can be filed in a Commission within the local limits of the place where the complainant resides or works for gain.
  • Filing shall be permitted electronically too.
  • Hearing of matters can be done via video conferencing.
  • A complaint shall be deemed to be admitted if its admissibility is not decided within 21 (twenty-one) days.
  • Pecuniary Jurisdiction
  • The pecuniary jurisdiction for District Commission shall not exceed goods and services of value INR 1 (one) crore, the pecuniary jurisdiction for State Commission shall not exceed goods and services of value INR 10 (ten) crore, pecuniary jurisdiction for National Commission shall include the goods and services of value exceeding INR 10 (ten) crore.
  • Consumer Mediation Mechanism:
  • The CP Act allows for setting up of Consumer Mediation Cells at District, State and National Commission level.
  • The Commission shall direct parties to opt for mediation when there is a possibility to settle the matter through mediation.
  • The results of such mediation shall be recorded and in case it fails, there shall be hearing of the matter by the Commission.
  • Judicial Review:
  • The Commission shall review its own decision and a matter shall go from State Commission to National Commission only when there is a substantial question of law. 
  • Appeals shall lie from the National Commission to the Apex Court only when the complaint originated in the National Commission.

The MCA notified section 230 (11) and 230 (12) of Companies Act, 2013 giving majority shareholders further

  • On 3 February 2020, the Central Government notified sections 230(11) and section 230(12) of Companies Act, 2013. 
  • The provisions permit taking over of a company by a scheme of arrangements or to raise grievances in this regard. This is after there is an application by the National Company Law Tribunal (NCLT).
  • Thus the Companies (Compromise, Arrangements and Amalgamations) Amendment Rules, 2020 (“Amendment Rules”) have been notified. These amend the Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 (“Rules”). 
  • The Amendment Rules state that the application for arrangement can be made under section 230(11) of the Companies Act, 2013. This arrangement is to make takeover offers for companies. 
  • This can be made by any member with other members not holding less than 3/4th or 75% shares of the shares in the company, where the application has been filed to acquire all or part of the remaining shares.
  • The shares for the aforesaid would be equity shares of the company with voting rights. This would include securities like depository receipts and this entitles the holder to exercise voting rights.
  • Thus the focus of the Amendment Rules is to have ownership of securities along with voting rights as opposed to ‘issued equity share capital’ as in section 236 of Companies Act, 2013. Thus with the Amendment Rules, there is focus upon gaining control over the company by the majority shareholders rather than merely acquiring the shares.
  • A report of the registered valuer detailing the valuation of shares will also be attached. This has to take into consideration the following factors:
  1. The highest price paid for acquisition of shares in the past 12 (twelve) months. 
  2. Return on the net worth
  3. Book values of shares
  4. Earning per shares
  5. Price earning multiple vis-à-vis the industry average
  6. Other factors customary in valuation 
  • There also has to be details of a separately opened bank account with half the total consideration of the takeover offer deposited in it.
  • It will not be applicable when there is transfer or transmission through contract, arrangement and succession or any other transfer made due to a statute or regulation.
  • The MCA has also notified the National Company Law Tribunal (Amendment) Rules, 2020. These state that an application can be made under section 230(12) in Form NCLT-1. 
  • This can be done by an aggrieved party when there is a grievance as far as takeover offer of unlisted companies is concerned. In case there is takeover of listed then the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 shall apply.
  • Also, as per section 230(11) and section 230(12) of the Companies Act, 2013, the majority of shareholders have a choice beyond the already available options of section 66 of Companies Act, 2013 for reduction of share capital and purchase of minority shareholders as under section 236 of the Companies Act, 2013 to facilitate exit of minorities. 
  • Thus the Amendment Rules help the majority shareholders to bypass the complex procedure of section 66 of Companies Act, 2013 and merely requires filing of application before the NCLT with supporting documents.

Supreme Court Permits Trading in cryptocurrency and quashed Reserve Bank of India Ban

Internet and Mobile Association of India v. Reserve Bank of India

Supreme Court in its judgement dated 4 March 2020 allowed dealing in virtual currence including cryptocurrencies and quashed the Reserve Bank of India (RBI) circular dated 6 April 2018 that banned trade of cryptocurrencies thus restricting lenders from facilitating transactions for cryptocurrency traders. Firms that were dealing in cryptocurrency were earlier told to wind up within 3(three) months and this led to the shutting down of many start-ups. Thus the decision permitting trading and banking transactions in cryptocurrencies is welcome by the cryptocurrency exchanges.

Judges: The case was decided by a three judge bench of Justice Rohinton Nariman, Justice Aniruddha Bose and Justice V Ramasubramanian.

Respondent Arguments

  • RBI had said that cryptocurrencies raised concerns of consumer protection, market integrity and money laundering.
  • RBI contended that it would be risky to deal with such virtual currencies and thus there would be a ban to avoid any harm to the financial system. Government declared cryptocurrencies as not legal tenders
  • The Government of India through a draft bill, Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019, stated that trading in cryptocurrency would lead to fine and imprisonment up to ten (10) years. The fine recommended could reach up to INR 25 (twenty five) crore. In January 2018, the Finance Minister held that cryptocurrency would not be deemed to be a legal tender.
  • The government highlighted the person risk in dealing with cryptocurrencies.
  • This move by the government severely affected several cryptocurrency exchanges across the country.
  • There was a ban for two years since April 2018.

Petitioner arguments

  • This was a petition by the Internet and Mobile Association of India challenging the circular dated 6 April 2018 which banned such trading.
  • It was submitted that India should also follow other nations where not only trading is permitted in cryptocurrency but also those countries have their own virtual currency.
  • The ban was challenged on grounds of proportionality thus arguing that cryptocurrencies could be referred to as medium of exchange.
  • The petitioners submitted that trading in cryptocurrencies would be a legitimate business activity.
  • The circular violated the petitioners right under Article 19(1)(g) of the Constitution to carry on their trade, occupation and business.
  • The RBI had also acted arbitrarily beyond their scope.
  • The circular restricted petitioner to access their own money to trade which was legal.

Judgement

  • The Supreme Court held that the impugned measures were not proportional and the RBI circular dated 6 April 2018 was held to be unconstitutional.

The Apex Court upholds that Land Belonging to Scheduled Tribes being Transferred by an Exchange Deed is Void

Additional Commissioner Revenue v. Akhalaq Hussain and Another

(CIVIL APPEAL NO.7346 OF 2010)

The Supreme Court in this judgement dated 3 March 2020 allowed the appeal and held that
the order of the High Court was contrary to law because it violated the provisions of UP
Zamindari Abolition and Land Reform Act, 1950 (U.P. ZA & LR Act).
Appeal from High Court:
This case is an appeal from a judgement of Uttarakhand High Court dated 18 September 2008
whereby the order of the Additional Commissioner, Revenue was set aside.
Judge:
 This case was decided by Justice R. Banumathi.
Facts:
 Respondents, Akhalaq Hussain and Saqir Hussain, entered into an exchange deed
with Mangal Singh. Mangal Singh was a member of the Scheduled Tribe but the
respondents were not.
 The respondents claimed to have constructed a hotel with the name “Zara Resort” on
that land.
Arguments for the Transfer of Land to non-Scheduled Tribe person:
 There was no violation of the U.P. ZA & LR Act because the statute that would apply
here is the Transfer of Property Act, 1882.
 The exchange of land was via mutual consent.
 High Court accepted the contention of the respondents that the provision of section
161 of U.P. ZA & LR Act does not apply when the exchange is being made by
exchange deed.
 It was held by the High Court that the provision of section 157-B does not bar making
exchange of the land by Scheduled Tribe persons because they are also getting land in
exchange.

 Thus as per the High Court, there was no violation in case of exchange of the land as
is made by executing the document and the stamp duty as has been provided is paid as
per Article 31 of Schedule 1-B of Indian Stamp Act, 1899 which is duly registered.
 The proceedings are also barred by limitation.
Arguments against the Transfer of Land to non-Scheduled Tribe person:
 The Assistant Collector said that the exchange is violates section 161(1) of the U.P.
ZA & LR Act whereby a bhumidhar can exchange their land only with another
bhumidhar.
 The land falls under the category of “transferable land” which falls under the category
of “agricultural land” under section 3(14) of the U.P. ZA & LR Act. Thus there was
also a requirement of obtaining prior permission from the Assistant Collector.
 As per section 153-B, no bhumidhar shall have the right to transfer by way of sale,
gift, mortgage or lease or otherwise any land to any person not belonging to the
Scheduled Tribe. Thus there is a complete bar.
 Mere payment of stamp duty will not wipe down the statutory and mandatory bar
under sections 157-B and section 161 of the Act.
 Limitation will not be relevant in a void transfer made in contravention of the U.P.
ZA & LR Act.
Judgement:
 The transfer is void and is liable to be set aside. The land is liable to be vested in the
State Government.

DREAM11 defended its trademark from deceptive copies

Sporta Technologies Private Limited and Another v. Edream 11 Skill Power Private Limited

In the case of Sporta Technologies Private Limited and Another v. Edream 11 Skill Power Private Limited (I.A. 9986/2019), dated 27 February 2020, before the Delhi High Court, Sporta Technologies (Plaintiff) won the suit for permanent injunction against Edream 11 Skill Power (Defendant). It was decided by Justice Prateek Jalan. 

The Plaintiff is a well-known online fantasy sports platform whereas the Defendant is a Jaipur based entity which used the trademark ‘EDREAM 11’ to conduct an online fantasy cricket league. The Plaintiff launched its online gaming portal ‘www.dream11.com’ in 2012. They also claim to have arrangements in place with International Cricket Council (ICC), Board of Control for Cricket in India (BCCI), including for Indian Premier League (IPL). The Plaintiff also submitted to power the ‘IPL Season Long Fantasy’ which is owned by the BCCI.

The Plaintiff submitted that they were the registered trademark holders of the mark ‘DREAM 11’, its variant thereof and also the domain of ‘www.dream11.com’. The word mark ‘DREAM 11 CHAMPIONS’ is also registered by the Plaintiffs. The Plaintiff had also entered into a central sponsorship programme with BCCI for IPL, 2019 and the Plaintiff was designated as the ‘official fantasy sports provider’ by ICC for all its tournaments. 

The Plaintiff submitted that the Defendant merely added the alphabet ‘E’ to the registered trademark ‘DREAM 11’. The Defendant was then providing identical services via its website ‘www.edream11.com’ and also its mobile application. The Defendant also accepted payments for the same and the ‘Add Money to your Wallet’ option proved that the activities were commercial in nature. The Defendant also had various social media accounts with the impugned mark. 

The Plaintiff provided screenshots of email dated 4 July 2019 received by the Plaintiff which informed the Plaintiff about the infringement activities carried out by the Defendant. The Plaintiff also provided screenshots of the impugned website to show that there was violation of intellectual property rights of the Plaintiff. Thus there was a violation of the Trademark Act, 1999 and the Plaintiff alleged that the Defendant was passing off their offering as that of Plaintiff.

The court held that the Plaintiff has given enough evidence from the defendant’s website and social media pages (Facebook and Twitter) to show that there was infringement by the Defendant and passing off the Plaintiff’s registered mark, ‘DREAM 11’. The mark by the Defendants was phonetically, structurally and visually similar to the one of the Plaintiff. Also, the Defendant did not appear before the court despite multiple summons.

Reliance was placed on Satya Infrastructure Ltd. & Ors. vs. Satya Infra & Estates Pvt. Ltd., [2013 (54) PTC 419 (Del)], CS(OS) 1213/2011, decided on 07.02.2013, by the Delhi High Court. It was held that when there is an uncontested suit of this nature, it is not mandatory for the Plaintiff to lead evidence. Thus a summary disposal of the suit would be permissible on the basis of the contents of the plaint supported by statement of truth and declaration under the Commercial Courts Act, 2015. 

The court therefore passed an ex-parte injunction favouring the Plaintiff thereby restraining the Defendant from using the similar mark and also the domain. Thus the Plaintiff succeeded in establishing the claim for a permanent injunction against the defendant, both on the grounds of infringement of their registered trademarks and passing off.

NCLT ordered insolvency proceedings against a financial service provider

Apeejay Trust v. Aviva Life Insurance Co. India Ltd

In Apeejay Trust v. Aviva Life Insurance Co. India Ltd., dated 4 November 2019, The National Company Law Tribunal (NCLT) ordered initiation of proceedings against Aviva Life Insurance Co. India Ltd. (Aviva) in a case filed by Apeejay Trust (Apeejay). The petition was filed under section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). It was decided by a two-member bench of NCLT, Delhi. This comprised of Justice R D Khare, the judicial member and Sumita Purkayastha, the technical member. 

In the judgement, the petitioner, Apeejay and the respondent, Aviva, entered into a Lease and License Agreement for office premises and other services situated in Vashi, Mumbai. The respondent, despite repeated requests defaulted in making payments towards license fees, car parking, maintenance/service charges and service tax. This was a total sum of INR 27,67,203/- Aviva had made its payment last in 5 October 2017 and then onwards, all dues were pending. Also, vide reply dated 27 May 2019, the respondent denied all liabilities and stated that there was no such dues payable to Apeejay.

Thus, the petitioner as the operational creditor prayed for initiation of corporate insolvency resolution against the respondent, the corporate debtor.  The respondent argued that they were financial service providers as per section 3(17) of IBC and thus they are to be exempt from the purview of IBC.  The respondents said that there is an absolute bar under IBC for initiation of any proceeding against insurance company like a corporate debtor and thus the petition should have been dismissed. 

However, the NCLT admitted the case. The rationale of NCLT to admit the case was that Aviva had defaulted on its landlord, Apeejay and Aviva didn’t give any financial assistance or insurance cover to Apeejay. Thus the claim was with respect to the outstanding license fee and service tax amount as opposed to financial services provided by an insurance company. Therefore the contract was not a financial service in the nature of an insurance contract as required under section 3(16) of IBC. Since it didn’t fall under the category of financial service provider, it cannot be exempted from IBC. Thus, Aviva could not claim benefits of exemption for financial service providers under the IBC using the blanket cover to claim exclusions from IBC on grounds of being a financial service provider. 

Thus the plea against Aviva was allowed and a moratorium was also declared under section 14 of IBC to protect the company from its lenders during the resolution process. Also, an interim resolution professional was appointed who would then file a report before the Adjudicating Authority. 

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, he 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.

Supreme Court Permits Trading in cryptocurrency and quashed Reserve Bank of India Ban

Internet and Mobile Association of India v. Reserve Bank of India

Writ Petition (Civil) No.528 of 2018

Supreme Court in its judgement dated 4 March 2020 allowed dealing in virtual currency including cryptocurrencies and quashed the Reserve Bank of India (RBI) circular dated 6 April 2018 that banned trade of cryptocurrencies thus restricting lenders from facilitating transactions for cryptocurrency traders. Firms that were dealing in cryptocurrency were earlier told to wind up within 3(three) months and this led to the shutting down of many start-ups. Thus the decision permitting trading and banking transactions in cryptocurrencies is welcome by the cryptocurrency exchanges.

Judges:

  • The case was decided by a three judge bench of Justice Rohinton Nariman, Justice Aniruddha Bose and Justice V Ramasubramanian.

Respondent Argument:

  • RBI had said that cryptocurrencies raised concerns of consumer protection, market integrity and money laundering.
  • RBI contended that it would be risky to deal with such virtual currencies and thus there would be a ban to avoid any harm to the financial system.

Government declared cryptocurrencies as not legal tenders:

  • The Government of India through a draft bill, Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019, stated that trading in cryptocurrency would lead to fine and imprisonment up to ten (10) years. The fine recommended could reach up to INR 25 (twenty five) crore. In January 2018, the Finance Minister held that cryptocurrency would not be deemed to be a legal tender. 
  • The government highlighted the person risk in dealing with cryptocurrencies.
  • This move by the government severely affected several cryptocurrency exchanges across the country.
  • There was a ban for two years since April 2018.

Petitioner arguments:

  • This was a petition by the Internet and Mobile Association of Indiachallenging the circular dated 6 April 2018 which banned such trading.
  • It was submitted that India should also follow other nations where not only trading is permitted in cryptocurrency but also those countries have their own virtual currency.
  • The ban was challenged on grounds of proportionality thus arguing that cryptocurrencies could be referred to as medium of exchange.
  • The petitioners submitted that trading in cryptocurrencies would be a legitimate business activity.
  • The circular violated the petitioners right under Article 19(1)(g) of the Constitution to carry on their trade, occupation and business.
  • The RBI had also acted arbitrarily beyond their scope.
  • The circular restricted petitioner to access their own money to trade which was legal.

Judgement:

  • Thus the Apex Court held that the impugned measures were not proportional and the RBI circular dated 6 April 2018 was held to be unconstitutional.

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. 

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.

Regulation relating to doorstep delivery of medicines

In the wake of the 21-day lockdown, the Union Health Ministry on March 26, 2020 allowed for essential medicines to be delivered to one’s doorstep. This was done in an effort to restrict people’s movement and ensure that the nationwide lockdown is a success without curbing access to essential supplies. In light of the widespread pandemic, it seemed necessary for the government to issue such an order taking into account the greater public interest. Such a measure is bound to regulate the distribution of medicines and ensure that the demand is adequately met even at such desperate hours. The notification issued by the Health Ministry allows for medical retailers to deliver medicines at people’s doorsteps. The order came into force on the day of its publication in the official gazette and it read,

“The central government is satisfied that retail sale of drugs to the doorstep of consumers is essential to meet the requirements of emergency arising due to COVID-19 and in the public interest, it is necessary and expedient to regulate the sale and distribution of drugs for their delivery to consumers.”

The notification further read that the licensee shall present an e-mail ID for registration with the licensing authority if prescriptions are to be received via email. Further, the prescription shall only be dispensed with if it is presented to the licensee within 30 days of its issue and in severe or critical cases, the prescription shall only be dispensed with if it is presented to the licensee within a week of its issue. Also as per the notification, the bill shall only be sent through the return email and records of all such transactions shall be maintained by the licensee. By allowing the availability of essential medicines, the government ensured that there is no reason to panic and advised the population to avoid all unnecessary travel and outdoor activities. Such proactive initiates and measures will assure the citizens of India that their safety and protection are of utmost importance.

The order issued by the Union Health Ministry is commendable on various fronts and is a reflection of the staunch leadership of the Indian Government which is navigating the path for its citizens through the murky waters that have engulfed the country for the past month.

Suspension of limitation period during COVID-19

Following the World Health Organization (WHO) directive that classified the Coronovirus outbreak (‘COVID-19’) outbreak as a global pandemic, a lot of anxiety and concern stirred across the globe leading governments to take measures to “flatten the curve” and ensure utmost protection to its citizens. This period reflects a point in history when the entire world economies are grappling to stand upright and tackle this menace of COVID-19 that has consumed both lives and resources while governments and state machineries are working hand in hand to contain the pandemic and show light to its citizens. The Indian Government and its state machineries are no exception to this.

In view of these unprecedented circumstances the Indian Government declared a complete lockdown for 21 days on March 24, 2020 which severely curtailed the mobility of its citizens and adversely affected the functioning off the state machineries, including the various courts and tribunals.

In light of these circumstances, on March 23, 2020 Supreme Court of India directed the suspension of the limitation period under both general and special laws with effect from March 15, 2020. This was done in furtherance of their plenary powers under Article 142 read with Article 141 the Indian Constitution. The bench comprised of Chief Justice S A Bobde and Justices L N Rao and Surya Kant who stated that the Court had taken sou motu cognizance of the current situation which had made it difficult for litigants and lawyers to approach the respective courts and complete the filings within the period of limitation. In this regard, the order passed by the three- Judge Bench reads,

“To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings.”

The Supreme Court further notified that this order was to be brought to the attention of all the High Courts, subordinate Courts and Tribunal. The decision by the Supreme Court is noteworthy and laudable and is bound to assure its citizens that justice is not uncertain at point of time where the entire country is battling this global pandemic.

Ready Recknor on filing Trademarks under the new 2017 Rules

Note prepared by Ms. Mahua Roy Chowdhury, Advocate. She can be contacted at mahua[at]royzz[dot]com.

TRADE MARK FILING READY RECKONER – 2017 RULES
Trademark Registration is a process that takes around 1-2 years to obtain registration in a case, without any objections or oppositions. However, the time period can be longer if an opposition has been filed by a third party.

SEARCH

Look for classification of goods and services at the WIPO website (NICE Classification). (Rule 20).
In order to avoid a third party opposition, it is pertinent to conduct a ‘public search’ in the online Trade Mark Registry at http://www.ipindia.nic.in/ by providing the trademark name and class to find out if similar marks have already been registered or filed.

WHAT CANNOT BE TRADEMARKED

Marks which do not have a distinctive character.
Marks which are descriptive. Meaning which describe the goods or service in terms of the quality, quantity, shape or geographic indication.
Marks that have become customary in the language or region.
Well Known marks. Well known marks are marks which a substantial portion of the population relates to particular goods or services and the use of the mark in relation to any other goods or services would cause confusion in the minds of the people. Ex. ‘BAJAJ’, ‘BATA’, ‘BENZ’, etc.
Marks which are deceptive, hurt religious sentiments, Gods/Godesses, surnames, obscene.

SELECTION OF TM OFFICE

There are five Trade Mark Offices (TMO) distributed in accordance with Geographical Zones in India viz. New Delhi (North), Mumbai (West), Chennai (South), Kolkata (East), Ahmedabad (States of Gujarat, Rajasthan, and Union Territory of Diu Daman, Dadra & Nagar Haveli).

Depending on the location of your office, if any, in India or your authorized agent’s office if there are no offices in India, please select the appropriate Trademark Registrar Office.

FORMS AND FEES

TM-A

For application for registration of a Trade mark other than a collective or a certificate mark. Physical filing: 5,000 (Fees for Individuals, Small Enterprise, Startup) 10,000/- (In all Other Cases)
E-filing: 4,500 (Fees for Individuals, Small Enterprise, Startup) 9,000 (In all Other Cases).
For application from any Convention Country other than a collective or a certification mark.
Physical filing:  5,000 (Fees for Individuals, Small Enterprise, Startup) 10,000 (In all Other Cases)
E-filing: 4,500 (Fees for Individuals, Small Enterprise, Startup) 9,000 (In all Other Cases)
Application for registration of trademark as series for specification of goods or services included in one or more than one classes.

Physical filing:  5,000 (Fees for Individuals, Small Enterprise, Startup) 10,000 (In all Other Cases)
E-filing: 4,500 (Fees for Individuals, Small Enterprise, Startup) 9,000 (In all Other Cases)

TM-M

On application for expedited process of an application for the registration of a trademark.
Physical filing:  Not allowed.

E-filing: 20,000 (Fees for Individuals, Small Enterprise, Startup) 40,000 (In all Other Cases)
On application for: Extension of time, or certified copy, or Amendment of trademark application, or inspection of document.
Physical filing:  1,000. E-filing: 900.

TM-O

On a notice opposition or application for rectification of register.
Physical filing:  3,000/-. E-filing: 2,000/-

TM-R

Application of Renewal of a Trademarks.
Physical filing:  10,000.
E-filing: 9,000.

REQUISITES OF TRADEMARK FILING

A trademark registration application must contain the following information:
Logo or the Trademark (in colour if the logo has been designed in any specific colour);
Name and address of the applicant;
If the applicant is a partnership firm, the names of all the partners. Also mention whether any minor is a partner;
If the applicant is a company, the country or state of incorporation;
If the mark contains or consists of non-English words, a translation of those words into English is required;
Address for service of communication;
Select Classification or Category of goods or services;
Date from which Trademark is proposed to be used or has been in use;
Description of the goods or services for which registration is required;
Power of attorney in the format as prescribed in Form 48, simply signed by the applicant (no legalization or notarization is required). Indian applicants should execute the same in a Rs.100 stamp paper.

TRADEMARK REGISTRATION PROCESS

Upon filling the application, the TMO will issue an official receipt with the filing date along with a reference number to the application.
The application is then formally examined, that is whether it is inherent registrable and if any similarity, including phonetically and visually with existing marks. Accordingly, an official examination report is issued indicating either “acceptance” or “objection”, as the case maybe.
In the event of objection on the examination report, it is necessary to file a response within a month of receipt of such objection the failure of which will result in instant abandonment but in most cases, a show cause hearing with the examiner is poste.
Pursuant to a hearing if the argument is accepted, below step3 & 4 follows.
In the event the mark is accepted as it, a letter of acceptance is issued, pursuant to which the mark is advertised in the Trade Marks Journal.

If there are no third-party oppositions are received within 4 months from the date of advertisement in the Trade Marks Journal, then the trademark registration certificate is issued.

Once the certificate is issued, the mark needs to be renewed every 10 years.
In the event of any third-party opposition, after due hearing of the applicant and consequential refusal of application, then either a review or the remedy in step 9 is available to the applicant.
Instead if the application is refused, or abandoned by the examiner with reasons, then a right to appeal to the Intellectual Property Appellate Board (IPAB) shall vest with the applicant.

SEBI Circulars cannot be challenged in SAT: Rules Supreme Court of India

By Mr. Audip Ghosh, Senior Associate Partner at ROYZZ & CO. He can be contacted at audip[at]royzz[dot]com.
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Experts CornerROYZZ & CO.
Published on April 7, 2017By Prachi

Supreme Court:

The Court has ruled that administrative circulars issued by the Securities and Exchange Board of India (SEBI) cannot be challenged before the Securities and Appellate Tribunal (SAT).
The Supreme Court passed this judgment when it was hearing an appeal filed by SEBI against a SAT order in a case relating to National Securities Depository Ltd. (NSDL).

Background

NDSL and SEBI were at odds over an administrative circular captioned ‘review of dematerialization charges’ issued in 2005, debarring the depository from levying fees/charges on rendering service to the investors who hold Demat accounts with the depository.  The grievance of the appellant (NDSL) was that it is a company and the law permits it to make profits and distribute the dividend to its shareholders. SEBI, without any justification, interfered with its functioning, NSDL had argued.

SAT in September 2006 had ruled that the term “order” in SEBI Act is extremely wide, and can be applied in all three types of orders— administrative orders, legislative orders, and quasi-judicial orders. Thus, it ruled in favour of NSDL.

Verdict

SEBI challenged SAT’s verdict in the Supreme Court and secured a reversal. The Supreme Court, in the order passed on March 7, said that only “quasi-judicial” orders and decisions are a “subject of SAT”.
“Administrative orders such as circulars issued under the SEBI Act are obviously outside the appellate jurisdiction of the tribunal,” said the SC order.

Conclusion

The clarification and restriction to the scope of SAT will clearly bring down the number of cases before the Tribunal. One cannot approach SAT cause the same will now have jurisdiction only over orders passed by SEBI in a quasi-judicial capacity. [National Securities Depository Ltd. v. SEBI, 2017 SCC OnLine SC 256, decided on 07.03.2017]

Essar Steel India v. RBI†: A case comment

By Shriniket Deshpande, Senior Associate, Royzz & Co.
Experts CornerROYZZ & CO.
Published on September 19, 2017By Saba

Introduction

Essar Group is an Indian conglomerate into manufacturing, services and retails sectors. The group has operational presence across 29 countries having 45,000 employees across the world.  The Group’s core interest lies in steel and energy sector, Essar Steel being the flagship company of this group.

Reserve Bank of India (RBI) vide their press note dated 13-6-2017 had directed banks to initiate insolvency proceedings before National Company Law Tribunal (NCLT) under Section 9 of the Insolvency and Bankruptcy Code, 2016 against 12 companies including Essar Steel India Ltd. (Essar) and accordingly proceedings were initiated by consortium of banks led by State Bank of India (SBI) which is leading the consortium.

Background

Essar challenged the aforementioned press note by filing a writ petition† before Gujarat High Court Bench at Ahmedabad, citing failure of the consortium of banks to accept the package of debt restructuring, proposed and approved by the Board of Directors of Essar. Essar further challenged authority of RBI to issue directions to NCLT, as interpretation of last line of Para 5 implied that NCLT is a subordinate authority to RBI, which is constitutionally wrong.  Para 5 of the Circular read as below:

The Reserve Bank, based on the recommendations of the IAC, will accordingly be issuing directions to banks to file for insolvency proceedings under the IBC in respect of the identified accounts. Such cases will be accorded priority by the National Company Law Tribunal (NCLT).

RBI apologised to the Court for such poor drafting and they have issued a corrigendum dated 3-7-2017 correcting this mistake by deleting last line of Para 5.

Essar accused that RBI has blindly followed a process to shortlist companies based on classification, which is in contravention of Articles 14 and 19 of the Constitution of India. It was accused that the classification on the basis of total outstanding amount being more than Rs 5000 crores and percentage of classified NPAs to be more than 60% is arbitrary and irrational.

RBI in response submitted that Essar account was a non-performing account (NPA) even prior to 31-3-2016 with total outstanding amount to the tune of Rs 31,671 crores and the RBI directives are reasonable which make classification valid under Article 14, because the press release and the directives to banks issued by RBI were for giving effect to the economic policy contained in the IBC i.e. Insolvency and Bankruptcy Code as well as the Ordinance and the order.

RBI further submitted that the  focus was on cases which have the twin criteria of being the largest and longest standing NPAs. Such classification is based on an intelligible differentia i.e. both quantum (Rs 5000 crores and 60% NPA) as well as length of outstanding (at least fifteen months i.e. from 31-3-2016).

SBI i.e. Respondent 2 in response submitted in the court that they have a statutory right to proceed against any corporate debtor with or without directions from RBI if they qualify requirements under Section 7 of the IBC. SBI denied that appointment of IRPs would hamper working of the petitioner since company is managed by executives and not their Board of Directors. SBI lead Consortium Bank denied that they had accepted any proposal from Essar and alleged that Essar has approached the court with unclean hands.

Standard Chartered Bank (SCB) i.e. Respondent 3 in response submitted that they are a company incorporated in the United Kingdom and are governed by the prudential regulatory authority of United Kingdom hence, it is not a banking company under Sections 5(c) and  (d) of the Banking Regulation Act, 1949. SCB further contented that it is not a member of JLF (Joint Lenders’ Forum) and they had statutory rights to proceed against petitioners and did not need RBI’s directions.

Verdict

The Court refused to grant any relief to Essar with respect to their prayers to quash the said proceedings filed under Section 9 of the IBC and said that NCLT may be directed to set aside all the proceedings. The Court also observed that NCLT, Respondent 4 cannot be directed to restrain from proceedings against Essar, as such writ of prohibition may be issued only in the rarest of rare cases or when inferior court exceeds its jurisdiction, or proceeds under a law which is itself ultra vires or unconstitutional. Since IBC is not unconstitutional, this prayer was also rejected by the court.

Conclusion

This High Court decision is a major relief for financial institutions who got wary of the prospects of recovery from twelve biggest loan defaulters of India. This decision also establishes statutory right of banks to initiate proceedings against loan defaulters before appropriate forum with or without guidelines from RBI.
† Essar Steel India Ltd. v. RBI, 2017 SCC OnLine Guj 995, decided on 31-07-2017.

OPINION : REDEFINING ELECTORAL POLITICS

The Supreme Court verdict dated January 2, 2017 over the misuse of religion, race, caste,  community or language for the  contestants in the election will not only improve the electoral  system of the country but also the  quality of  our political life

Sanjay Kumar Visen

The Supreme Court of India has recently in Abhiram Singh’s Case (2017) dealt with an issue and concern affecting the electoral process and its integrity. The Hon’ble Court has barred the misuse of religion, race, caste, community or language for the contestants in the elections.  It has underlined the gravity of the deeper malaise in the electoral process and has mandated to stem the rot by invoking the available legal remedies.

The Constituent Assembly had clear understanding of multi-lingual and religious identities of the people of the country which is very much reflective in the preamble of our Constitution as ‘Sovereign Democratic Republic’. Later on vide the Forty-second Amendment of Our Constitution the ‘Socialist Secular’ words and concepts were given effect to from January 3, 1977 and the Preamble now reads as ‘Sovereign Socialist Secular Democratic Republic’.

Our Constitution stands for a secular state. It has no official religion and the Constitution not only guarantees a person’s freedom of religion and conscience, but also ensures freedom for one who has no religion and it restrains the state from making any discrimination on grounds of religion. The Hon’ble Supreme Court  of India has also declared  in the year 1994 that Secularism is a basic feature of the Constitution and has maintained the same through subsequent judgments with the passage of time.

However during the last 70 years of electoral process, the Country has witnessed the widespread misuse of religion, race, caste, community and language by the candidates contesting elections. This malaise in the electoral process has eroded the credibility in the free and fair electoral system. The people at large developed apathy towards the same. The recent Constitution Bench majority judgment in Abhiram’s Case (2017) is relevant as it declares the law that seeking votes in the name of religion, caste, race, community or language by a candidate contesting the election, his agent or anyone with his consent would be a corrupt electoral practice rendering the person open to disqualification. The bare reading of the said judgment goes to uphold and fortifies that now the future law makers of the country also cannot misuse the name of religion, caste, race, community or language and are duty bound to maintain the secular and plural character of the state.

Going to the roots of this declaration by the majority judgment of Hon’ble Supreme Court it is seen that the amendment of the Section 123(3) of the Representation of the People Act,1951  deleted the word “systematic” before the word appeal. The effect of this is that even a single appeal by a candidate or his agent or by any other person with the consent of a candidate or his election agent to vote or refrain from voting for any person on the ground of his religion, race, caste, community or language for the furtherance of the prospects of the election of that candidate or for prejudicially affecting the election of any candidate would be deemed to be a corrupt practice for the purpose of the said Act. This amendment and now the declaration will surely curb the sectarian interests or passion, communal or linguistic affiliation of the candidate. The majority decision in this judgment interpreted the law by also relying on the words of Justice HR Khanna in the year 1974 that says, “As in life so in law things are not static. Fresh vistas and horizons may reveal themselves as a result of the impact of new ideas and developments in different fields of life. Law, if it has to satisfy human needs and to meet the problems of life, must adapt itself to cope with new situations.  Nobody is so gifted with foresight that he can divine all possible human events in advance and prescribe proper rules for each of them. There are, however certain verities which are of the essence of the rule of law and no law can afford to do away with them. At the same time it has to be recognised that there is a continuing process of the growth of law and one can retard it only at the risk of alienating law from life itself…” The majority also took note of the view reaffirmed by the Hon’ble Supreme Court in 2014 for the need to shape law as per the  changing needs of the times and  circumstances.

However, this laudable judgment leaves some areas where one can doubt about its full fledge applicability, as many parties in India seek votes in the name of religion, caste and language. Is the judgment enough to stop the corrupt practices of political parties?  The silence is also there on the question when any religious leader or a linguistic leader appeals to voters to support a candidate without the consent of the candidate in the elections. As held, it is matter of evidence for determining whether an appeal has at all been made to an elector and whether the appeal if made amounts to corrupt practice will be difficult to prove in a time bound manner and will give rise to many election petitions before the courts. This judgment has empowered the people of the country to come forward with their conviction before the Hon’ble Courts wherever candidates contesting the elections violate the provisions of law governing the electoral process of the country. It will have far reaching consequences in cleaning electoral process and restoring its original fairness and purity. No candidates would dare to indulge in misusing the religious, regional and linguistic sentiments of the people for their electoral gains. By this pronouncement, the secularism the very spirit of our Constitution and aspirations of the people of the country shall be a reality and will improve not only the electoral system of the country but also the quality of our political life.

(The writer is Advocate-On-Record, Supreme Court) 

OPINION: LAW & EMOTIONS

Ultimately, he has been released! But before that the Younger offender, the deadliest among the accused of the Nirbhaya case or call it Delhi Braveheart case had raised the issue of conviction of the Juveniles or child- offenders and their punishment to the higher degree for the serious and heinous offences. The cries of the public, media and specially the petition by the NGOs and Delhi Commission for Women reaching up to the Supreme Court against his release gave renewed impetus to me to go into question “What the Laws is and What the Law ought to be?” on the Juveniles or child-offenders at the time when offences are committed.

Understanding in common language in the jurisprudence of constitutional law, Our Constitution through article 20(1) says that no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. It is trite law that the sentence impossible on the date of commission of the offence has to determine the sentence impossible on completion of trial. Under article 20(1) of the Constitution of Bharat what is prohibited is the conviction and sentence in criminal proceedings under ex post facto law as is evident from the plain reading of the said article and upheld by the Hon’ble Supreme Court in Ravinder Singh Vs. State of Himachal Pradesh reported in AIR 2010 SC 199.

Coming to the issue on child rights, the General Assembly of the United Nations has adopted the Convention on the Right of the Child on November 20, 1989. The Government of Bharat ratified the Convention on December 11, 1992. The Convention on the Rights of the child has prescribed a set of standards to adhere to by all States parties in securing the best interests of the child. The clause (3) of Article 15 providing power to State to make special provision for women and children, clauses (e) & (f) of Article 39, Article 45 and 47 of the Constitution of Bharat in totality impose on the State a primary responsibility of ensuring that all need of children are met and that their basic human rights are fully protected. With this aim and objective and above mandate, the Juvenile Justice (Care and Protection of Children) Act, 2000 popularly known as “JJ Act” was passed on 30th December, 2000. In Kallu Vs. State of Haryana reported AIR 2012 SC3212, the Hon’ble Supreme Court held that the Juvenile Act is intended to protect the juvenile from the rigours of a trial by a Criminal Court. It prohibits sentencing of a juvenile and committing him to prison. As its preamble suggests it seeks to adopt a child-friendly approach in the adjudication and disposition of matters in the interest of children and for their ultimate rehabilitation. The “JJ Act” in the year, 2006 (w.e.f.22.08.2006) underwent massive and important amendments and in Section 2(k) it defines “juvenile” or “child” a person who has not completed eighteenth year of age. For the purpose of our discussion on the topic, the relevant definition is in Section 2(l) which says “juvenile in conflict with law” means juvenile who is alleged to have committed an offence and has not completed eighteenth year of age as on the date of commission of such offence. The Hon’ble Supreme Court had settled the law that in case, exact assessment of the age cannot be done, then the Court, for reason to be recorded, may, if considered necessary give the benefit to the child or juvenile by considering his or her age on lower side within the margin of one year and also the “JJ Act” gives right to an accused to raise question of juvenility at any point of time and if such an issue is raised, the Court is under an obligation to make an inquiry and deal with the question. The section 15 gives power about order that may be passed regarding juvenile and section 16 provides about order that may not be passed against juvenile by the Juvenile Justice Board. Section 15(1) says that where the Board is satisfied on inquiry that a juvenile has committed an offence, then notwithstanding anything to the contrary in any other law for the time being in force, the Board may if it so thinks fit, apart from other directions envisaged, direct the juvenile to be released on probation of good conduct and placed under the care of any fit institution for the good behaviour and well being of the juvenile for any period not exceeding three years; make an order directing the juvenile to be sent to a special home for a period of three years; provided that the Board may, if it is satisfied that having regard to the nature of the offence and the circumstances of the case, it is expedient so to do, for reasons to be recorded, reduce the period of stay to such period as it thinks fit. The section 16(1) says that notwithstanding anything to the contrary contained in any other law for the time being in force, no juvenile in conflict with law shall be sentenced to death or imprisonment for any term which may extend to life imprisonment for life, or committed to prison in default of fine or in default of furnishing security; provided that where a juvenile who has attained the age of Sixteen years has committed an offence and the Board is satisfied that the offence committed is so serious in nature or that his conduct and behaviour have been such that it would not be in his interest or in the interest of other juvenile in a special home to send him to such special home and that none of the other measures provided under this Act is suitable or sufficient, the Board may order the juvenile in conflict with law to be kept in such place of safety and in such manner as it thinks fit and shall report the case for the order of the State Government. As per section 16(2), on receipt of report from a Board under sub-section (1), the State Government may make such arrangement in respect of the juvenile as it deems proper and may order such juvenile to be kept under protective custody at such place and on such conditions as it thinks fit, provided that the period of detention so ordered shall not exceed in any case the maximum period i.e. 3 years, provided under section 15 of this Act. Under the Act, no juvenile can be charged with or tried for any offence together with a person who is not a juvenile.
Any deviation from the above settled position in law is against the legislative mandate, at present the “JJ Act”, is not permissible and the juvenile in conflict with law is entitled to be released after the expiry of maximum 3 years from the date of his detention. The Hon’ble Supreme Court, very aptly and correctly declined to block the release of the youngest offender in the December 16 Delhi Gang rape case, saying laws framed by Parliament do not permit further detention despite growing calls for harsher penalties for juvenile 
criminals.

Law being an instrument of social change and certainly, dealing with juvenile criminals, had led to passing of the Juvenile Justice (Care and Protection of Children) Bill, 2014 by both houses of the Parliament as on today, which includes amendments to allow 16-18 years old to be tried as adults and What the Law ought to be? The JJ Bill 2014 says that the juveniles aged 16-18 who commit heinous offences like rape or murder shall be punishable with 7 years or more. However, there will be no death penalty. The Juvenile Justice Board, after conducting an inquiry, will determine whether a juvenile offender will be sent for rehabilitation or tried as an adult. These amendments bring the law in Bharat at par with the US and UK, where Juvenile Justice Courts have been given the flexibility to waive their jurisdiction in favour of adult courts for heinous crimes. The Rajya Sabha (Upper House) very appropriately and timely heard the growing calls for harsher penalties for juvenile criminals and the observations of the Hon’ble Supreme Court, the editorials of the Hindustan Times and Times of India by title “Emotion cannot cloud the law” and “Take a Call” respectively 

and finally passed the Bill on December 22, 2015. Conclusively, we can say that now, after getting the Rajya Sabha nod of the JJ Bill 2014, ‘What the law ought to be?’ now become a step closer towards ‘What the law is?’ Now the law will be able to contain the juvenile crimes, the fastest segment of growing crime and the focus should be more on to take remedial measures to check this rising menace to the Society and also becoming a world phenomenon. Personally, I feel that to curb the rising Juvenile crimes or crimes against women Our Government should take steps to introduce compulsory military training from School level to graduation which will inculcate a national character by increasing self-defence and patriotism. Then our girls will be bold enough to fight out themselves till the police or government agencies reach them in distress for help.

Sanjay Kumar Visen (The writer is Advocate-On-Record, Supreme Court)