Doing business in India

A Q&A guide to doing business in India.

This Q&A gives an overview of key recent developments affecting doing business in India as well as an introduction to the legal system; foreign investment, including restrictions, currency regulations and incentives; and business vehicles and their relevant restrictions and liabilities. The article also summarises the laws regulating employment relationships, including redundancies and mass layoffs, and provides short overviews on competition law; data protection; and product liability and safety. In addition, there are comprehensive summaries on taxation and tax residency; and intellectual property rights over patents, trade marks, registered and unregistered designs.

To compare answers across multiple jurisdictions, visit the Doing business in... Country Q&A Tool.

This article is part of the PLC global guide to doing business worldwide. For a full list of contents, please visit www.practicallaw.com/dbi-guide.

Ravi Singhania and Prem Rajani Rajani, Singhania & Partners
Contents

Overview

1. What are the key recent developments affecting doing business in your jurisdiction?

Some of the recent developments that are likely to affect doing business in India are:

  • Initiatives taken by the Department of Industrial Policy and Promotion (DIPP).

  • The Companies (Amendment) Act 2015 has been passed to remove requirements of minimum paid-up capital and common seal for companies. It also simplifies a number of other regulatory requirements. The effective date for the Companies (Amendment) Act, 2015 has not yet been notified.

  • "Make in India" approach of the Government of India.

  • Notification has been issued on 12 March 2015 by the Directorate General of Foreign Trade (DGFT) to limit the number of documents required for export and import to three.

  • The process of applying for Industrial Licence (IL) and Industrial Entrepreneur Memorandum (IEM) is now online.

  • Relaxation in the validity period for an industrial licence.

  • The hardship of licencees to get their industrial licence extended even though they have started production has been removed.

  • The National Industrial Classification (NIC) Code 2008 has been adopted to make businesses part of globally recognised classifications that will facilitate smooth approvals or registration.

  • A checklist with specific time-lines has been developed for processing all applications filed by foreign investors in cases relating to retail and foreign investments. This has been placed on the DIPP website.

  • Single window clearance through the Foreign Investment Promotion Board, to the businesses coming under the approval route, as per the recent FDI Policy of 2015.

  • The process of obtaining environmental clearances is now online.

  • Various subsidies introduced for several kinds of business under different jurisdictions.

Goods and Services Tax

The Goods and Services Tax (GST) that will amalgamate several central and state taxes and give the same rate of duty all over India is expected to be approved by parliament in the next session.

The Companies Act 2013

The Companies Act 2013, of which most of the provisions have been made effective from 1 April 2014, has introduced some positive changes from the perspective of doing business in India, such as:

  • One person company.

  • Enabling cross border mergers (not enforced yet).

  • Providing legal sanctity to the shareholders' agreement as binding amongst the shareholders and the companies.

 

Legal system

2. What is the legal system based on (for example, civil law, common law or a mixture of both)?

The Constitution of India is the basic framework with which all other laws must be consistent. The Constitution provides for the legislature, executive and independent judiciary, which are supreme in their respective spheres. The constitution also contains a chapter on fundamental rights that guarantees certain basic freedoms and liberties to citizens. The judiciary comprises of:

  • The Supreme Court, which is the apex court and the highest court of appeal.

  • The High Court for each state.

India has a federal constitution in which the parliament and the respective state legislature and sovereign legislative bodies and can frame laws as per the respective list of subjects assigned to them under the Constitution of India.

The legal system is based on the statutes and laws passed by parliament and state legislatures and also has elements of common law principles. As a legacy of the British rule in India, India inherited common law principles. For example, the principles of ratio decidendi and stare decisis are an integral part of the Indian legal system. These are also a part of the Indian legal jurisprudence.

The courts interpret and apply the written law as provided under the statutes. The Supreme Court and High Courts are courts of records (courts of records means their decisions are binding on the subordinate courts). For example, the decision of the Supreme Court is binding on the High Courts and other subordinate courts or tribunals.

In civil disputes between parties, the courts adjudicate the disputes under the Civil Law as laid down in statutes (such as Contract Act and Sale of Goods Act) and pass Decrees or Orders that are subject to appeal. Decrees or orders are passed by the civil courts.

The principles of ratio decidendi and stare decisisare followed, which means that passed decisions in previous cases are applied to identical facts and are deemed to be binding on the subordinate authorities or courts.

 

Foreign investment

3. Are there any restrictions on foreign investment (including authorisations required by central or local government)?

Foreign direct investment (FDI) can be done under two routes:

  • Automatic, for which no approval is required.

  • Approval or government route, for which approval is required for investment.

As per the foreign direct investment policy of India, investment in most of the sectors is allowed up to 100% under the automatic route, while for some sectors there may be a cap or investment limits under the automatic and the approval route.

There are certain sectors where FDI can be done only to a limited extent including:

  • Broadcasting.

  • Print media.

  • Multi-brand retail.

  • Banking.

  • Finance.

  • Telecommunication.

  • Insurance.

The FDI Policy completely prohibits foreign investment in certain sectors including:

  • Business of chit fund.

  • Nidhi company (that is, mutual benefit companies).

  • Agricultural or plantation activities.

  • Real estate business, or the construction of farm houses.

  • Trading in transferable development rights (TDRs).

  • Lottery business including government or private lotteries and online lotteries.

  • Gambling and betting including casinos.

  • Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.

  • Activities/sectors that are not open to private investments, such as railway operations (other than permitted activities under the consolidated FDI Policy of 2015) and atomic energy.

  • Foreign technology collaboration in any form, including licensing for franchise, trademark, brand name, management contract, for lottery, gambling and betting activities.

 
4. Are there any restrictions on doing business with certain countries or jurisdictions?

General provisions regarding imports and exports

Exports and imports of goods must be free except when regulated by way of "prohibition", "restriction" or "exclusive trading through State Trading Enterprises (STEs)" as provided in the Indian Trade Classification (Harmonised System) (ITC (HS)) of exports and imports. The list of prohibited, restricted and STE items can be viewed by clicking on "Downloads" at http://dgft.gov.in. In addition, there are certain items, which are free for import and export, subject to the fulfilment of some conditions, as provided in other Acts or laws.

With trade with Russia under debt repayment under a debt-agreement, the DGFT may issue instructions or frame schemes as required, and anything contained in Foreign Trade Policy, in so far as it is inconsistent with such instructions or schemes, will not apply.

Foreign Exchange Management Act, 1999

Prohibition against establishing a branch or office in India by citizens of certain countries. A person who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran China, Hong Kong or Macau, cannot establish a branch or a liaison office or a project office or any other place of business in India, without the prior permission of the Reserve Bank of India.

Prohibition on the acquisition or transfer of immovable property in India by citizens of certain countries. A person who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau or Hong Kong cannot acquire or transfer immovable property in India, without the prior permission of the Reserve Bank (other than by way of lease not exceeding five years).

Permission for purchase of shares by certain persons resident outside of India. A person or entity registered in Bangladesh and Pakistan are entitled to invest in India, under the FDI Scheme, under the government approval route.

Prohibition on import and export of arms and related material from or to Iraq. The import/export of arms and related material from or to Iraq is prohibited, aside from the policy of Arms and related materials in Chapter 93 of ITC (HS). However, the export of arms and related material to the Government of Iraq will be permitted subject to a "No Objection Certificate" from the Department of Defence Production.

Prohibition on direct or indirect import and export from or to the Democratic People's Republic of Korea (DPRK). The direct or indirect export and import of various items, (whether or not originating in the DPRK) to or from the DPRK is prohibited. The items include materials, equipment, goods and technology as provided under the Foreign Trade Policy of 2015-2020.

Prohibition on direct or indirect import and export from or to Iran. Direct or indirect export and import of all items, materials, equipment, goods and technology that could contribute to Iran's reprocessing, water related activities, or to the development of nuclear weapon delivery systems (whether or not originating in Iran) to or from Iran, is prohibited.

Prohibition on the import of charcoal from Somalia. Direct or indirect import of charcoal is prohibited from Somalia, irrespective of whether or not the charcoal has originated in Somalia, in view of United Nations Security Council Resolution 2036 (2012). Importers of charcoal must submit a declaration to customs that the consignment has not originated in Somalia.

 
5. Are there any exchange control or currency regulations?

The foreign exchange policy of India is governed by the Foreign Exchange Management Act, 1999(FEMA). Foreign exchange related transactions must be carried out through a bank (Authorised Dealers), and are categorised into current account transactions and capital account transactions, which are regulated by the Reserve Bank of India (RBI). The FEMA predicts that RBI will control the management of foreign exchange transactions and related violations. RBI permits "authorised persons" to deal in foreign exchange as per directions issued by RBI. The RBI plays a key role in the management of foreign exchange transactions.

The main functions of the RBI under FEMA are as follows:

  • Exercising control over dealings in foreign exchange by giving special or general permission for dealing in foreign exchange.

  • RBI cannot impose any restrictions on current account transactions. These can only be imposed by the Central Government in consultation with the RBI. In certain cases, prior approval of the RBI is required for current account transactions as provided in the FEMA.

  • The RBI specifies conditions for payment in respect of capital account transactions.

  • The RBI regulates the transfer or issue of foreign security to residents in India and Indian security to non–residents. The RBI also manages the export/import of currency or currency notes, oversees the transfer of immovable property outside India and is also tasked with giving guarantee or surety where a foreign exchange transaction is involved.

  • Regulates the period and manner in which foreign exchange due from the export of goods and services must be received.

  • Grants exemption from realisation and repatriation in cases with regard to possession of foreign currency, foreign currency accounts, and foreign exchange acquired from employment, business, trade and services.

  • Granting authorisation to "authorised person" to deal in foreign exchange, to give instruction to them and to inspect them. FEMA authorises RBI to give directions to the "authorised person".

 
6. What grants or incentives are available to investors?

Incentives are generally in the nature of tax concessions which are available to all investors investing in certain industries like power, ultra mega power projects, petroleum sector or investors investing in certain geographical regions of India like Himachal Pradesh,Uttarakhand. However, there is no specific incentive to foreign investors as such because the incentives become applicable only when they establish a business in India, for carrying out manufacturing facilities through a subsidiary or a joint venture entity. Further, direct tax exemptions on profits on units located in Special Economic Zones are also available to the Investors.

 

Business vehicles

7. What are the most common forms of business vehicle used in your jurisdiction?

Foreign investors have multiple entry options. Foreign companies can opt for any of the following forms of business vehicles:

  • Joint venture.

  • Wholly owned subsidiary (by incorporating a company in India).

  • Limited liability partnership (LLP).

Foreign companies can also explore options to incorporate the following types of entities based on the nature of work to be undertaken:

  • Liaison office.

  • Branch office.

  • Project office.

A private limited company is the most common business vehicle that is used in India. This is because it is a separate legal entity apart from its members and so is preferable for completely held businesses and taxed as a domestic company under the provisions of Income Tax Act 1961. However, it depends on the facts and circumstances of each case as to which form would be preferable for the concerned business.

 
8. In relation to the most common form of corporate business vehicle used by foreign companies in your jurisdiction, what are the main registration and reporting requirements?

Registration and formation

The foreign company will be required to seek registration with the Registrar of Company (ROC) of the relevant state where such foreign company will establish its registered office. The broad steps required to incorporate a company is:

  • Directors must obtain a digital signature certificate (DSC).

  • Directors must obtain a director identification number (DIN).

  • Application for the reservation of name with the Registrar of Companies. One of the promoters must sign and submit a prescribed form online with the official website of the Ministry of Corporate Affairs.

  • Filing for incorporation with ROC, which includes filing for registration of the:

    • memorandum and articles of association;

    • registered office address of the company; and

    • first directors of the company.

The applications and filings with the ROC are done through the website of the Ministry of Corporate Affairs, Government of India (http://mca.gov.in), which includes detailed information about the requirements and the filings. There is no fixed statutory time period provided for registering a company. However, given the availability of all the information and documents required by the ROC, it generally takes about 30 days to incorporate the company.

Reporting requirements

At the time of investment into India, the company will be required to file Form FC-GPR with the authorised dealer where the details relating to the investment made by the Foreign Company will need to be submitted.

In addition, a company incorporated in India will be required to submit its returns under various statues including the Foreign Exchange Management Act 1999 and the Companies Act 2013/ 1956.

Share capital

A company's paid-up capital (under normal circumstances) represents the shareholders' total exposure to liability associated with the company. The minimum paid-up capital required for a private limited is INR100,000. However, the requirement will be relaxed in terms of the provisions of the Companies Amendment Act 2015, which has now come into force.

Non-cash consideration

The shares of a private limited company can be issued for consideration other than cash in accordance with the provisions of the Companies Act 2013 and the Foreign Exchange Management Act 1999. Instances of issuance of shares for consideration other than cash are the:

  • Issuance of sweat equity shares.

  • Issuance of shares as consideration in case of merger or demerger.

  • Conversion of external commercial borrowing (ECB).

  • Conversion of royalty, lump sum, technical know-how fee due for payment, import of capital goods by units in special economic zones (SEZ).

  • Capitalisation of import payables.

Rights attaching to shares

The share capital of a company limited by shares can be split into three types (section 43, Companies Act 2013):

  • Equity share capital with voting rights.

  • Equity share capital with differential rights as to dividends, voting or otherwise in accordance with such rules as may be prescribed.

  • Preference share capital.

Generally, preference shareholders do not have any voting rights. However, they can vote on matters directly relating to the rights attached to the preference share capital. Any resolution for winding up of the company or for the reduction or repayment of the share capital is considered to affect directly the rights attached to preference shares. The Companies Act 2013 also provides for certain circumstances under which a preference shareholder will be entitled to all rights which are available to the equity shareholders.

Automatic rights attaching to shares. Every member of a company limited by shares holding equity shares can vote in proportion to his shareholding in the company. However, a member's voting rights can be revoked if:

  • That member does not make payment of calls or other sums due against him.

  • Where the company has exercised the right of lien on his shares.

 
9. In relation to the most common form of corporate business vehicle used by foreign companies in your jurisdiction, outline the management structure and key liability issues.

Management structure

The management structure of a private limited company is that it:

  • Must have a minimum of two directors.

  • Must have at least one resident Indian director (a director that has stayed in India for at least 182 days in the last calendar year) (Companies Act 2013).

Management restrictions

A person resident outside India cannot be appointed as a managing director, whole time director or a manager of an Indian company.

Directors' and officers' liability

The rights and duties of directors are covered in the Companies Act 2013. The provisions are aimed at directing the conduct and behaviour of directors of companies towards ethical standards, transparency and accountability.

Directors of a company can be held liable for violations under various laws. Some of the instances of liabilities of directors are as follows:

  • Companies Act 2013. Directors are responsible for various defaults and non-compliances under the 2013 Act and are included under the category of "officer in default" under the 2013 Act for such contraventions.

  • Foreign Exchange Management Act 1999. Where there is contravention of foreign exchange laws, every person (including a director) who is in charge and responsible to the company for the conduct of the business of the company is deemed guilty and is liable to prosecution.

  • Negotiable Instruments Act. Vicarious liability is placed on directors of a company that are prosecuted for dishonouring a cheque (section 141, Negotiable Instruments Act).

  • Information Technology Act. This also places criminal liability on the directors of the company for contravention of the Act.

  • Income Tax Act. The liability of directors of a private company in liquidation for the payment of tax due from the company is made joint and several if tax cannot be recovered from the company. However, this provision allows a director to establish that the non-recovery of tax is not attributable to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of a company to avoid such a liability. The burden to establish this rests on the director concerned and only if the burden is discharged can that director can be exempted from the tax liability of a company that is imposed on him.

Parent company liability

The liability of a parent company is limited to the extent of the unpaid share capital.

 

Employment

Laws, contracts and permits

10. What are the main laws regulating employment relationships?

There are two categories of employees: workmen and employees other than workmen. The term "workman" means any person including an apprentice employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward. The terms of employment can be express or implied and for the purposes of any proceeding in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include the following:

  • Persons subject to the Air Force Act 1950, the Army Act 1950, or the Navy Act 1957.

  • Persons employed in the police service or as an officer or an employee of a prison.

  • Persons employed mainly in a managerial or administrative capacity.

  • Persons employed in a supervisory capacity, who receive wages in excess of IPR1,600 per month, or whose role is mainly of a managerial nature.

In order to decide whether a person is a workman or otherwise, the nature of work and duties performed by the person will be important, as well as wages.

Employees other than workmen are governed by Shops and Establishment Acts of various states.

There are several legislations that regulate the conditions of employment, work environment and other welfare requirements of various industries for workmen category. The most relevant legislations on working conditions of workmen are the:

  • Industrial Disputes Act 1948.

  • Factories Act 1948.

  • Shops and Establishment Acts of various states.

There are also various social welfare legislations that regulate the employment sector in India, for example:

  • Employees' Provident Funds and Miscellaneous Provisions Act 1952.

  • Payment of Gratuity Act 1972.

  • Employees State Insurance Act 1948.

  • Trade Unions Act 1926.

  • Industrial Employment (Standing Orders) Act 1946.

These laws apply to all the individuals working in India.

Foreign nationals working in India are also obliged to contribute towards the provident fund systems unless they fall within the category of an "excluded employee". However, an international worker coming from a country that India has a Social Security Agreement (SSA) with and where the worker is contributing to India's social security, as a citizen or resident, is excluded from the above requirement, provided he obtains the certificate of coverage from their home country.

India has entered into SSAs with various countries including:

  • Belgium.

  • Germany.

  • Luxembourg.

  • France.

  • Denmark.

  • Korea.

  • Netherlands.

  • Switzerland.

 
11. Is a written contract of employment required? If so, what main terms must be included in it? Do any implied terms and/or collective agreements apply to the employment relationship?

An employment contract does not necessarily have to be in writing to be legally valid. Like any other contract, the terms of the employment contract can also be:

  • Oral.

  • Written.

  • Implied.

They can flow from various documents such as the:

  • Offer letter.

  • Written contract.

  • Employee handbooks.

  • Company policies in force.

However, the main terms that must be included in an employment contract are the:

  • Name of parties.

  • Nature of the work.

  • Location of the work.

  • Term of employment (fixed or temporary).

  • Salary compensation and statutory benefits, if any.

  • Leave entitlements.

  • Conditions on termination by employee and employer.

  • Restrictive covenants, if any.

Where the agreed terms and conditions of employment are more beneficial to the employee than the statutory provisions, then the contractual terms will prevail.

Collective agreements though not expressly covered by any statute, are often read by the courts as incorporated in the language of various statutory provisions and are therefore, recognised. These are considered as an essential instrument while bargaining the conditions of employment of workmen such as:

  • Fixing of wages.

  • Determination of the rights, liabilities and immunities of the workmen.

  • Relationship between management and employees.

 
12. Do foreign employees require work permits and/or residency permits?

Foreign employees coming to India for work will need an employment visa. Foreign nationals, who are coming to India for employment purposes can apply for an employment visa subject to fulfilling certain conditions:

  • Being sponsored for an employment visa by their employer.

  • Receiving a salary in excess of US$25,000 per annum.

  • The employment visa is not granted for routine, ordinary or secretarial/clerical jobs.

Employment visas are usually granted for one year or the term of the contract. However, further extensions can be granted by the state governments.

Foreign nationals, including their family members, that intend to stay in India for more than 180 days have to register with the Foreign Regional Registration Office (FRRO) within two weeks of arriving in India. For the purposes of registration, the individual must make an application in the prescribed form and be present in person at the time of registration. There is no registration fee charged for registration by FRRO.

Termination and redundancy

 
13. Are employees entitled to management representation and/or to be consulted in relation to corporate transactions (such as redundancies and disposals)?

Generally, employees do not have a right to be represented at management level or be consulted in relation to any corporate transactions.

 
14. How is the termination of individual employment contracts regulated?

Termination of employment is mainly governed by the terms contained in the contract of employment along with the provisions of the Industrial Disputes Act 1947 (IDA) and the relevant Shops and Establishments Act. IDA applies to employees who are workmen within the definition prescribed under the Act. Certain states exclude the application of the Shops and Establishment Acts on managerial and supervisory level employees and in these cases, the terms and conditions in the employment contracts apply. The Industrial Employment (Standing Orders) Act, 1946 (IESA) also regulates the termination of employment on the grounds specified in the standing orders of the company or as prescribed by the Act. These grounds include acts of indiscipline and lead to dismissal of employee after proper enquiry is held. It applies to all industrial establishments employing 100 workmen or more. Both IDA and IESA exclude:

  • Managerial and administrative employees.

  • Those in supervisory positions earning more than a specified statutory amount.

  • Members of the Air Force, Army and Police services, who are covered by specific legislation.

The Industrial Dispute Act applies only to a "workman" and only a workman can be entitled to its benefits. To determine the status of an employee as a "workman", the terms of his contract, the nature of duties assigned to him and the work performed by him also needs to be considered. The termination of a workman for any reason whatsoever is defined as retrenchment under the IDA. The conditions to be followed for retrenchment under the IDA differ on the basis of the total number of employees in the company on a given day and the tenure of employment of the workman. Termination for any reason whatsoever, unless on grounds of misconduct, of every "workman" that has been continuously employed by the company for at least one year requires the employer comply with certain requirements such as:

  • One month's notice.

  • Payment of retrenchment compensation (at the rate of 15 days' average pay for every completed year of continuous service).

  • Notice to the central government.

Most of the state Shops and Establishments Acts prescribe for a notice period or payment in lieu of notice to be given to the employee on termination.

The IDA lays down a number of circumstances that can amount to unfair dismissal of an employee. As per the IDA, any discharge or dismissal by the employer on grounds such as the following is considered unfair and unjust:

  • By way of victimisation that can include complaints by the employee against the employer on race, colour, sex, marital status, pregnancy, religion, political opinion or social origin.

  • Not in good faith, but in the exercise of the employer's rights.

  • By falsely implicating a workman in a criminal case on false evidence or on concocted evidence.

  • For patently false reasons.

  • On untrue or trumped up allegations of absence without leave.

  • In utter disregard of the principles of natural justice in the conduct of domestic enquiry or with undue haste.

  • For misconduct of a minor or technical character, without having any regard to the nature of the particular misconduct or the past record or service of the workman thereby leading to a disproportionate punishment.

Dismissal can also be considered unfair if it is for reasons related to trade union membership or activity.

The relief available to a workmen wrongfully dismissed is reinstatement. To do this, a reference can be made to the labour court and if it is satisfied that the discharge was in bad faith or unfair, the court is competent to set aside the order of dismissal and give directions for reinstatement of the individual.

The requirement for the notice or severance period is given under both IDA and the state Shops and Establishments Acts, depending on whether the outgoing individual is a workman or employee. In most cases, a one month notice period or salary in lieu of the notice. However, this period varies from state to state and also on the basis of the number of employees in an establishment in the case of workmen. The employer is also required to give all severance benefits due to the employee, whether under the employment contract or applicable labour legislation, at the time of termination.

 
15. Are redundancies and mass layoffs regulated?

The Industrial Disputes Act 1947 (IDA) regulates the procedure for mass layoffs and redundancies. The IDA provides that every employee that has been in continuous service of the establishment employing 50 or more workmen can be laid off by the employer on payment of compensation equal to 50% of the total of basic wages and dearness allowance that would be due to him had he not been laid off.

For establishments employing more than 100 workmen, prior permission of the government must also be obtained by the employer. Such applications must be made 60 days before the date on which the employer intends to commence the lay-off.

An employer can close down an undertaking with more than 50 workmen by serving a 60 days' advance notice to the government stating the reasons for the intended closure. Every workman that has been in continuous service of one year is entitled to notice and compensation as is payable in case of retrenchment (see Question 14). For closing down an establishment employing more than 100 workmen, prior permission has to be obtained from the government at least 90 days before the intended date of closure.

Where the undertaking is closed due to circumstances beyond the control of the employer, the compensation to be paid must not exceed his average pay for three months.

 

Tax

Taxes on employment

16. In what circumstances is an employee taxed in your jurisdiction and what criteria are used?

A person is subject to tax in India if he is a resident in India. For income tax purposes, residential status of a person in India is determined as follows:

  • They were in India for at least 182 days during the previous tax year (1 April to 31 March).

  • They were in India for at least 60 days during the previous tax year and for at least 365 days during the preceding four years.

Residents are divided into two categories:

  • Resident but not ordinarily resident. This applies to an individual that has been a non-resident in India for nine out of the ten previous years or has been in India for no more than 729 days during the preceding seven years.

  • Resident and ordinarily resident. This applies to individuals to whom the two conditions above do not apply.

The types of income on which an individual can be taxed depends on their residential status:

  • Individuals that are resident and ordinarily resident are liable to pay tax on all income received or accrued in India and outside India, as well as from any other sources.

  • Individuals that are resident but not ordinarily resident are liable to pay tax on all income received or accrued in India and outside India (but not on that from other sources).

  • Individuals that are non-residents are liable to pay tax on all income received or accrued in India (but not on income accrued outside India or from any other source).

The tax deduction rate for Indian and international employees is the same if the income received as "salary" (section 192, Income Tax Act 1961) is under the employer-employee relationship notwithstanding residential status.

Foreign residents working in India may be liable to pay tax in their country of residence. This depends on:

  • Their residence status.

  • The tax laws in their own country.

  • Whether the country has a double taxation agreement with India.

Certain states in India such as Maharashtra, West Bengal, also levy a professional tax on employees working in entities' offices in the respective state(s).

 
17. What income tax and social security contributions must be paid by the employee and the employer during the employment relationship?

Tax resident employees

Employers must deduct income tax on the amount payable as salary to the tax resident employees at the applicable rate in the relevant financial year (section 192, Income Tax Act 1961).Currently the rate ranges from 0 to 30%, depending on the annual income of the individual.

Employees are also subject to social security contributions such as to the Employees Provident Fund (EPF). It applies to all employees drawing monthly wages of less than INR15,000. The rate of contribution of EPF at present is 10% or 12% for certain establishments notified by the government.

Non-tax resident employees

Non-tax residents are subject to tax on income received or accrued in India during the relevant year. However, remuneration received by foreign expatriates working in India is assessable generally under "salaries" and is deemed to have been earned in India. Income payable for a leave period that is preceded and succeeded by services rendered in India and that forms part of the service contract is also regarded as income earned in India. Therefore, irrespective of the residence status of an expatriate employee, the salary paid for services rendered in India is liable to tax in India. There are no special exemptions or deductions available to foreign nationals working in India. The rates of income tax are similar to that of tax residents and range from 0 to 30%.

However, a foreign national that comes to India on short-term business visits can claim an exemption under the domestic tax law or a relevant tax treaty. Where salary is payable in a foreign currency, the salary income must be converted to Indian rupees. For this purpose, the rate of conversion to be applied is the telegraphic transfer-buying rate as adopted by the State Bank of India on the last day of the month immediately preceding the month in which the salary is due or paid. However, if tax is to be withheld on such an amount, the tax withheld is calculated after converting the salary payable into Indian rupees at the rate applicable on the date that tax was required to be withheld.

India has also entered into Double Taxation Avoidance Agreements (DTAAs) with various countries. Accordingly, in relation to an assessee to whom any DTAA applies, income tax only applies to the extent they are more beneficial to the assessee. The provisions of the DTAAs prevail over the statutory provisions.

Employers

Employers are required to deduct income tax on the amount payable as salary to the tax resident employees at the rate as may be applicable in the relevant financial year..

For social security contributions, the employer must pay both the contribution payable by himself and that payable on behalf of the employee. The EPF and pension contribution payable by the employer is equal to the contribution payable by the employee.

The employer is also required to pay every employee that has completed five years in continuous service, gratuity at the rate of 15 days' wages last drawn by the employee, for every completed year of service. Gratuity becomes payable on termination of employment due to:

  • Superannuation.

  • Retirement or resignation.

  • On death or disablement due to accident or disease.

The completion of five years of continuous service is not required in the case of death or disablement of employee.

Business vehicles

18. When is a business vehicle subject to tax in your jurisdiction?

Tax resident business

Foreign-held entities registered as an Indian company under the Companies Act 1956 and Companies Act, 2013 or the Limited Liability Partnership are taxed as domestic entities and are accordingly liable to income tax (excluding surcharge and excess) at the rate of 30%. A foreign company or a place of business of a foreign company not registered as an independent legal entity are generally liable for income tax at the rate of 40%.

Non-tax resident business

Non-tax resident businesses are subject to tax for the income:

  • That accrues or arises in India.

  • Is deemed to accrue or arise in India.

  • Is received or deemed to be received in India.

Nevertheless, liability of a non-resident entity to pay tax in India is to be determined taking into consideration the Double Taxation Avoidance Agreements (DTAA), if any, that may have been entered into between India and the country of residence of the concerned entity. With DTAAs, the profits of an entity doing business in India through a PE are taxable to the extent of the profit earned that is attributable to the business operations of the PE in India.

 
19. What are the main taxes that potentially apply to a business vehicle subject to tax in your jurisdiction (including tax rates)?

The main taxes that business vehicles are subject to are:

  • Income tax (30% for domestic companies and 40% for foreign companies).

  • Dividend distribution tax (15%).

  • Minimum alternate tax (18.5%).

  • Service tax (14%).

  • Value added tax on intra-state sales (rate varies from 4% to 12% depending on the nature of goods).

  • Central sales tax on inter-state sales (2%).

The liability of an entity for paying income tax is determined considering the factors that include their jurisdiction or residency as well as the source of income. Under the Income Tax Act 1961, worldwide income of a person resident in India is taxable, while for non-resident entities, generally income is taxable if it:

  • Accrues or arises in India.

  • Is deemed to accrue or arise in India.

  • Is received or deemed to be received in India.

Dividends, interest and IP royalties

20. How are the following taxed:
  • Dividends paid to foreign corporate shareholders?

  • Dividends received from foreign companies?

  • Interest paid to foreign corporate shareholders?

  • Intellectual property (IP) royalties paid to foreign corporate shareholders?

Dividends paid

Dividends paid to foreign corporate shareholders are taxed as dividend distribution tax.

Dividends received

Dividends received from foreign companies is taxable as income.

Interest paid

Income of non-residents by way of interest payable by an Indian concern on moneys borrowed or debt incurred by the Indian concern in foreign currency (except for long-term bonds or infrastructure debt fund) is liable to deduction of tax at source at the rate of 20%.

IP royalties paid

With a foreign company, royalty received from the government or an Indian concern in pursuance of an Indian concern after 31 March 1961 but before 1 April1976and which agreement has been approved by the government is liable to be taxed at 50% and all other income are liable to be taxed at 40%.

Groups, affiliates and related parties

21. Are there any thin capitalisation rules (restrictions on loans from foreign affiliates)?

Currently, the concept of thin capitalisation is not recognised in India. However, restrictions have been imposed whenever a loan is raised from a foreign entity or affiliates. The Foreign Exchange Management Act 1999 (FEMA) together with the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations 2000, as amended, provides for a broad framework governing the manner of raising loans by residents in India from person(s) resident outside of India in whatever form. In this regard, "external commercial borrowings and trade credits" is the most popular form of borrowing in India. The Reserve Bank of India (RBI) notifies a "Master Circular" each year consolidating all the circulars and notifications issued in relation to external commercial borrowings and trade credits. The circular is divided into two parts:

  • External commercial borrowings.

  • Trade credit for imports into India.

It sets out the manner of raising loans under the automatic route and under the approval route with a minimum average maturity of three years (including the maximum amount of borrowing allowed for different categories of borrowers along with certain end use restrictions).

 
22. Must the profits of a foreign subsidiary be imputed to a parent company that is tax resident in your jurisdiction (controlled foreign company rules)?

The profits of a foreign subsidiary resident in India must be imputed to a foreign parent company only if the subsidiary is a permanent establishment (PE) of the parent company. The profits of a PE are required to be attributed to the parent company in relation to the terms of the double taxation avoidance agreement in each case.

 
23. Are there any transfer pricing rules?

The Income Tax Act 1961 contains specific provisions (Chapter-X, Special Provisions relating to Avoidance of Tax) regarding the transfer pricing provisions dealing with transactions entered into between two or more enterprises belonging to the same multi-national group. These provisions are aimed at insuring that profits that should have been earned in India are not moved to other jurisdiction either by reducing the income or inflating the expenditure in transactions between various entities belonging to a multi-national group. The object is to determine the likely profits that would have been earned in India if the transaction between independent entities was at an arm's length price. The government has also framed Rules 10A to 10E that are applicable to transfer pricing cases and these provide five methods for determining an arm's length price and the most appropriate method to be selected based on the factors set out in these rules. The rules also now refer to specified domestic transactions that may be subject to the transfer pricing rules.

Customs duties

24. How are imports and exports taxed?

The import and export of goods is regulated by the provisions in the Custom Act 1962. Section 12 of the Custom Act provides that the duties of custom will be levied at rates specified under the provisions of the Customs Tariff Act 1975, on goods imported or exported from India. The Custom Act and Customs Tariff Act must be read with other rules and regulations relating to customs, as notified by the Central Government.

Imports of goods into India are liable to pay customs duties. The most common kind of custom duties are as follows:

  • A basic customs duty which can have two rates, as per the First Schedule of the Customs Tariff Act (that is standard rates and preferential rates).

  • Additional customs duty to be levied at the rate equivalent to the excise duty levied on similar products manufactured in India.

  • Special additional duty levied to set off the effects of sales tax, VAT, local tax or any other charges that are levied on its sale, purchase or transportation in India.

However, the Customs Tariff Act 1975 provides certain lower rates or exempted rates of duty that are concessional duties, extended to specific products or sectors or under export promotion schemes, as envisaged under the Foreign Trade Policy. The importer of the goods is required to comply with the necessary requirements including the presentation of the Bill of Entry, which is subject to the verification by the Proper Office of the Customs. The duty is collected, at the time of clearance for home consumption.

The custom duty, to be levied on the export of goods, is subject to the tariff provided under Schedule II of the Customs Tariff Act 1975. The valuation of the goods is required to be done in accordance with the valuation rules, as notified by the Central Government.

Double tax treaties

25. Is there a wide network of double tax treaties?

The Central Government of India can enter into an agreement with the government of any country outside India for certain purposes (Chapter IX, Income Tax Act 1961). These purposes include:

  • Relief from double taxation.

  • Avoidance of double taxation of income.

  • Exchange of information for the prevention of evasion or avoidance of income tax.

  • For recovery of income tax under this Act.

India has entered into only 90 Double Taxation Avoidance Agreements (DTAAs) with various countries, including the US, the UK, Mauritius, Singapore, Australia and The Netherlands. The statutory provisions clearly provide that the benefit of the DTAAs is to be applied to the transactions that involve income tax liability under the Income Tax Act in India and the option or treatment that is more beneficial to the tax payer can be chosen by the assessee.

 

Competition

26. Are restrictive agreements and practices regulated by competition law? Is unilateral (or single-firm) conduct regulated by competition law?

Competition authority

The statutory jurisdictional authority regulating competition in India is the Competition Commission of India (the Commission) (www.cci.gov.in). The object of the Competition Act 2002 is:

  • The establishment of a commission to prevent practices having adverse effect on competition.

  • Promoting and sustaining competition in markets.

  • Protecting the interests of consumers.

  • Ensuring freedom of trade carried on by other participants in markets, in India.

The website covers the Competition Act and the related rules and regulations.

The Act can also apply to the foreign entities doing business in India or that have their assets or ramifications in India. There are defined circumstances where the Commission can inquire about the anti-competitive agreement, abuse of dominant position or combination (section 32, Competition Act), notwithstanding the fact that:

  • The agreement has taken place outside India.

  • Any party to such agreement is outside India.

  • Any enterprise abusing the dominant position is outside India.

  • A combination has taken place outside India.

  • Any party to combination is outside India.

  • Any other matter, practice or action arising out of such agreement or dominant position or combination is outside India.

The Act also provides for criminal sanctions on account of contravention of orders of the commission of up to three years or a fine up to INR250 million or both as the Chief Metropolitan Magistrate deems fit (section 42, Competition Act). The contravention of the Order of Appellate Tribunal also attracts penalty, in the form of imprisonment for a term up to three years or a fine up to INR1 million or both as the Chief Metropolitan Magistrate deems fit (section 53Q, Competition Act).

Restrictive agreements and practices

There is a general prohibition on entering into any kind of agreement for the production, supply, distribution, storage, acquisition or control of goods or provision of services that causes, or is likely to cause, appreciable adverse effect on competition in India (section 3(1), Competition Act).

Any agreement entered into between enterprises, associations of enterprises, persons, associations of persons, between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services (section 3(3), Competition Act)are presumed to have an appreciable adverse effect on competition if it:

  • Directly or indirectly determines purchase or sale prices.

  • Limits or controls production, supply, markets, technical development, investment or provision of services.

  • Shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way.

  • Directly or indirectly results in bid rigging or collusive bidding.

An agreement will be in contravention of section 3(1) of the Competition Act if it causes or is likely to cause an appreciable adverse effect on competition in India. The agreement must be amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, (section 3(4), Competition Act) including:

  • Tie-in arrangement.

  • Exclusive supply agreement.

  • Exclusive distribution agreement.

  • Refusal to deal.

  • Resale price maintenance.

Unilateral conduct

The unilateral conduct of the enterprise can also sometimes be covered under the Competition Act.

For example, if an enterprise enjoys a dominant position in the relevant market and benefits from the same and imposes certain unfair or discriminatory conditions on the purchase or sale of goods or services on its customers, this is an abuse of dominant position and is therefore governed by the provisions of the Act.

 
27. Are mergers and acquisitions subject to merger control?

Sections 5 (Combination) and 6 (Regulation of Combinations) of the Competition Act covers combination that includes:

  • Merger.

  • Acquisition.

  • Demerger.

  • Amalgamation.

Mergers and acquisitions taking place in the Indian jurisdiction or that have their assets or ramifications in India (section 32, Competition Act) are subject to the provisions of the Act provided they are breaching the threshold limits of such combination, acquisition or merger, as given under the Act and are not covered under any of the exemption under the Act and the Regulations.

A target-based exemption has been provided for a period of five years through a notification dated 4 March 2011 where, if the target enterprise has either Indian assets of less than INR2.5 billion or Indian turnover of less than INR7.5 billion, they are exempted from the requirement of notifying to the High Commission. 

To calculate the assets and turnover of an entity, a group exercising voting rights of less than 50% in an entity can take the benefit of the exemption. This group-based exemption lasts for five years through a notification dated 4 March 2011, so that a group exercising less than 50% of the voting rights in other enterprise is exempt from the provision of section 5 of the Competition Act.

Banking Companies are also exempted for five years (via a notification dated 8 January 2013) from the application of section 5 and 6 of the Competition Act.

In view of section 32 of the Competition Act, foreign-to-foreign acquisitions are subject to the competition law regime only if such combination causes, or is likely to cause, appreciable adverse effect on competition within the relevant market in India or if the parties to the combination has its assets or ramifications in India.

The High Commission provides for certain exemptions from the provision of section 5 of the Competition Act, such as:

  • Share subscription.

  • Financing facility.

  • Any acquisition by a public financial institution, foreign institutional investor or venture capital fund.

But they must file details of acquisition with the High Commission within seven days (section 6, Competition Act). In addition, Schedule 1 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations 2011 provides a list of combinations exempted from notifying the Commission that can be accessed from the website of the Commission.

 

Intellectual property

28. Outline the main IP rights in your jurisdiction.

Patents

Definition and legal requirements. Patent law is governed by the Indian Patent Act 1970

A patent is an exclusive right granted by the state for an invention that is:

  • Novel.

  • Involves an inventive step.

  • Capable of industrial application.

A patent owner is given an exclusive right to prevent others from making, using, selling, offering for sale or importing a product for which the patent has been granted.

Types of patent application:

  • Ordinary application, which is an application that has been filed directly in the Indian Patent Office.

  • Convention application.

  • Patent co-operation treaty (PCT) application.

  • Divisional application that can result from division of a patent application.

  • Patent of addition that can be filed subsequent to the filing of an application for a patent, for an improvement or modification.

Registration. The authority responsible for registering patent in India is the Controller General of Patents and Designs.

Guidance on the application procedure is available at its website(www.ipindia.nic.in/eLearning/PatentOfficeProcedures_26December2014.pdf).

Enforcement and remedies. A suit for infringement must be filed in a District Court or High Court (depending upon pecuniary jurisdiction) within whose territorial jurisdiction the cause of action has arisen. However, as soon as a counter claim for revocation of a patent is filed against the suit for infringement of patent, only the High Court has the jurisdiction to hear the matter and the matter must be transferred to the High Court for a decision. The period of limitation for filing the suit is three years from the date of infringement.

Two basic remedies exist for patent infringement:

  • Injunctive relief.

  • Damages.

Length of protection. The term of a patent is for 20 years from the date of filing of the application.

Trade marks

Definition and legal requirements. Trademark registration and protection is governed by the Trade Marks Act 1999.

A trademark is a name, device, mark or logo that is capable of distinguishing the goods or services of one person from those of others.

The legal requirements to register a trade mark under the Trade Marks Act are:

  • The selected mark must be capable of being represented graphically (that is in the paper form).

  • It must be capable of distinguishing the goods or services of one undertaking from those of others.

It must be used, or proposed to be used, as a mark in relation to goods or services for the purpose of indicating, or so as to indicate, a connection in the course of trade between the goods or services and some person with the right to use the mark with or without the identity of that person.

Protection. The authority responsible for registering trade marks in India is the Office of the Registrar of Trade Marks.

The application procedure is available at its website (www.ipindia.nic.in/eLearning/Trademark_Registration_India_26December2014.pdf).

A common law remedy is available for unregistered trademarks. An action of passing-off lies for infringement of unregistered trademarks.

Enforcement and remedies. Under the law, statutory protection is available to both registered marks as well as unregistered marks. A suit for infringement of a trademark has to be filed in a District Court or High Court (depending upon pecuniary jurisdiction) within whose territorial jurisdiction the cause of action has arisen. The period of limitation for filing the suit is three years from the date of infringement.

For trademarks, the law provides for administrative remedies and both civil as well as criminal remedies override an action against any infringement of a trademark.

The administrative remedy before the Trade Mark Registry is as follows:

  • Opposition (before the Registrar of Trade Marks)can only be done after publication of the trademark and within four months of the date of publication in the Trade Mark Journal.

  • Cancellation (before the Registrar of Trade Marks as well as the Appellate Board) for non-use of a mark for five years.

The civil remedy and criminal remedy before the courts is covered under common law. The proprietor of a trade mark, whether registered or unregistered, can sue for passing off of any trade mark used by the defendant that is identical with, or deceptively similar to, his trade mark. The registered proprietor has the remedy to take infringement action:

  • Injunction ex parte or permanent.

  • Damages.

  • Anton Piller order.

  • Seizure of goods.

  • Rendition of accounts.

Besides the civil remedies, the registered proprietor of the trademark also has the option to initiate criminal prosecution against the infringer. The following acts have been recognised as offences against which a criminal complaint can be registered:

  • Falsifying a trade mark.

  • Falsely applying a trade mark.

  • Making or possessing instruments for falsifying a trade mark.

  • Applying false trade description.

  • Applying false indication of country of origin.

  • Tampering with an indication of origin already applied to goods.

  • Selling goods or possessing or exposing for sale of goods falsely marked.

  • Falsely representing a trade mark as registered.

  • Improperly describing a place of business as connected with the Trade Marks' Office.

  • Falsification of entries in the register.

Length of protection and renewability. A trademark is valid for ten years from the date of filing of the application, and renewed every ten years.

Registered designs

Definition. Essential requirements for the design to be registered are that:

  • The design is new or original, not previously published or used in any country before the date of application for registration.

  • The design must relate to features of shape, configuration, pattern or ornamentation applied or applicable to an article. Therefore, designs of industrial plans, layouts and installations cannot be registered under the Designs Act. The design can be two-dimensional or three-dimensional or in both forms.

  • The design must be applied or applicable to any article by any industrial process. Normally, designs of an artistic nature such as paintings and sculptures that are not produced in bulk by any industrial process are excluded from registration under the Designs Act.

  • The features of the design in the finished article should appeal to and are judged solely by the eye. This implies that the design must appear and should be visible on the finished article for which it is meant. Therefore, any design in the inside arrangement of a box, money purse or almirah may not be considered for showing such articles in the open state, as those articles are generally put in the market in the closed state.

  • Any mode or principle of construction or operation or anything that is in substance a mere mechanical device, cannot be registered as a design. For example, a key having its novelty only in the shape of its corrugation or bend at the portion intended to engage with levers inside the lock associated with it, cannot be registered as a design under the Designs Act. However, when any design suggests any mode or principle of construction or mechanical or other action of a mechanism, a suitable disclaimer in respect of this is required to be inserted on its representation, provided there are other registrable features in the design.

  • The design should not include any trade mark or property mark or artistic works as defined under the Copyright Act 1957.

Registration. The authority responsible for registering design in India is the Controller General of Patents and Designs.

The application procedure is available on the website (www.ipindia.nic.in/eLearning/Design.pdf).

Enforcement and remedies. A registered proprietor can enforce his right over his registered design. He can institute a suit in a court not below the District Court, for an injunction or recovery of damages against any person engaged in the piracy of a registered design.

The period of limitation for filing the suit is three years from the date of infringement.

Two alternative remedies are available against the piracy of registered design under the Designs Act:

  • Any person involved in piracy of a registered design is liable to pay the registered proprietor a sum not exceeding INR25,000 for every contravention recoverable as a contract debt. However, the total sum recoverable in respect of any one design cannot exceed INR50,000.

  • The proprietor can file a suit for the recovery of damages for any such contravention and for an injunction against the repetition. If he succeeds, he is entitled to recover such damages as may be awarded by the court and restrain the defendant as per the terms of the injunction granted by the court.

A suit or proceeding for piracy cannot be instituted for piracy of the design committed between the date on which the design ceased to have effect and the date of restoration of the design.

Length of protection and renewability. The duration of the registration of a design is initially ten years from the date of registration, but where a claim to priority has been allowed, the duration is ten years from the priority date. This initial period of registration can be extended by a further period of five years.

Unregistered designs

Definition and legal requirements. In some countries like the UK, unregistered design right comes into existence automatically when an original design is created. However, in India, designs are statutory rights and the statute prescribes registration as condition precedent for protection

Enforcement and remedies. The Design Act does not expressly provide for remedy against passing off as is provided in the Trade Marks Act 1999.

Length of protection. Not applicable.

Copyright

Definition and legal requirements. Copyright is a right given by the law to creators of literary, dramatic, musical and artistic works and producers of cinematograph films and sound recordings. In fact, it is a bundle of rights including, inter alia:

  • Rights of reproduction.

  • Communication to the public.

  • Adaptation and translation of the work.

There could be slight variations in the composition of the rights depending on the work.

Copyright comes into existence as soon as a work is created and no formality is required to be completed for acquiring copyright protection.

India is a member of the Berne Convention for the Protection of Literary and Artistic Works and the Universal Copyright Conventions. The Government has passed the International Copyright Order 1958. According to this Order, any work first published in any country that is a member of any of the above conventions is granted the same treatment as if it was first published in India.

Protection. Any individual that is the author or rightful owner, or his assignee or legal heir, can file an application for the registration of copyright of a work with the Copyright Office of the Department of Education.

Enforcement and remedies. Any individual that is the author or rightful owner, or his assignee or legal heir, can take civil, criminal or administrative action against any person infringing his copyright.

A suit or other civil proceedings relating to infringement of copyright can be filed in the District Court or High Court within whose jurisdiction either:

  • The plaintiff resides or carries on business.

  • The cause of action arose irrespective of the place of residence or place of business of the defendant.

The period of limitation for filing the suit is three years from the date of infringement.

There are three kinds of remedies against infringement of copyright:

  • Civil remedies. These include injunction, damages or accounts of profit, delivery of infringing copy and damages for conversion.

  • Criminal remedies. These include imprisonment of the accused or an imposition of a fine or both and the seizure of infringing copies

  • Administrative remedies. These include requesting the Registrar of Copyrights bans the import of infringing copies into India when the infringement is by way of such importation and the delivery of the confiscated infringing copies to the owner of the copyright and seeking the delivery.

Length of protection and renewability. With original literary, dramatic, musical and artistic works other than photographs, copyright extends through the lifetime of the author and an additional 60 years from the year following the death of the author.

If the work has not been published, performed or offered for sale or broadcast during the lifetime of the author, copyright protection continues for a period of 60 years from the end of the year in which any of these acts were done relating to the work.

For cinematograph films, photographs, and computer programs, copyright protection subsists for a period of 60 years from the year in which the work is made available to the public with the consent of the owner, or, failing that, for 60 years from the end of the year in which the work is made.

Sound recordings are protected for 60 years from the end of the year in which the recording is first published.

Other

Other types of IP are covered by the:

  • Geographical Indications of Goods (Registration and Protection) Act 1999.

  • Semiconductor Integrated Circuits Layout Design Act 2000.

  • The Protection of Plant and Varieties and Farmers Rights Act 2001.

  • The Biological Diversity Act 2002.

 

Marketing agreements

29. Are marketing agreements regulated?

Marketing agreements come under the Competition Act (see Question 26).

Other than the Competition Act, marketing agreements are regulated by various statutory enactments, namely the:

  • Exchange Control Regulations.

  • Companies Act 2013.

  • Contract Act 1872.

Agency

Agency agreements are covered by the Competition Act (see Question 26).

Distribution

Distribution agreements fall under the Competition Act (see Question 26).

An exclusive distribution agreement is expressly covered under section 3(4) of the Competition Act. Exclusive distribution agreements includes any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods. To render them void, such agreements must cause, or be likely to cause, appreciable adverse effect on competition.

Franchising

Franchisee agreements are also covered by the Competition Act (see Question 26).

 

E-commerce

30. Are there any laws regulating e-commerce (such as electronic signatures and distance selling)?

Although there are no specific provisions or rules regulating solely to the e-commerce industry, the Competition Act applies to the e-commerce industry in the same way that it would apply to any other business industry.

 

Advertising

31. Outline the regulation of advertising in your jurisdiction.

Currently, there is no specific legislation regulating the advertising industry in India. The Indian advertising market as a whole is regulated and controlled by a non-statutory body, the Advertising Standards Council of India (ASCI). ASCI is a voluntary self-regulatory council established in 1985 to promote responsible advertising and to enhance public confidence in advertisements. To regulate advertisement in India, ASCI has adopted a Code for Self-Regulation in Advertising (ASCI Code) which applies to all involved in the commissioning, creation, placement, or publishing of advertisements. Indian laws governing specific media, specific populations, and specific goods and services complement the ASCI code.

The most significant of these laws are the following:

  • Laws governing media:

    • The Press Council Act 1978;

    • Cable Television Network Rules 1994;

    • Code for Commercial Advertising on Doordarshan and All India Radio;

    • Electronic Media Monitoring Centre (EMMC);

    • Norms for Journalist Conduct issued by the Press Council of India; and

    • Code of Conduct of the News Broadcasters Association.

  • Laws protecting society and the consumer:

    • Emblems and Names (Prevention of Improper Use) Act 1950;

    • Young Persons (Harmful Publications) Act 1956;

    • Companies Act 1956;

    • Standards of Weight & Measures Act 1976;

    • Indecent Representation of Women (Prohibition) Act 1986;

    • Consumer Protection Act 1986; and

    • Laws related to intellectual property rights.

  • Industry-specific laws:

    • The Drugs and Cosmetic Act 1940;

    • The Transplantation of Human Organs Act 1994;

    • The Drugs and Magical Remedies (Objectionable Advertisements) Act 1954;

    • The Prenatal Diagnostic Techniques (Regulation and Prevention of Misuse) Act 1994;

    • Advocates Act 1961;

    • Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act 1992;

    • Securities and Exchange Board of India Act 1992;

    • The Prize Chits and Money Circulation Schemes (Banning) Act 1978;

    • Cigarettes and other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act 2003;

    • Gaming Acts (including Public Gambling Act 1867, the Lotteries (Regulation) Act 1998 and the Prize Competitions Act 1955);

    • Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002; and

    • The Food Safety & Standards Act 2006.

 

Data protection

32. Are there specific statutory data protection laws? If not, are there laws providing equivalent protection?

There are no specific laws dealing with data protection and provisions relating to privacy and protection are scattered across a number of different laws. Data protection is achieved through the enforcement of privacy and property rights. Privacy rights are enforced under the Indian Constitution and the Information Technology Act 2000, whereas the Indian Contract Act 1872, the Copyright Act 1957 and the Indian Penal Code 1860, protect property rights.

The expression "data" is very wide in ambit and scope. It covers not only personal aspects of individuals but also the commercial aspects. The former is protected in the form of privacy rights whereas later is protected under Article 21 of the Constitution of India. Similarly, proprietary rights are protected under both the Constitution of India and under various statutes like the Indian Copyright Act 1957 and the IT Act 2000.

 

Product liability

33. How is product liability and product safety regulated?

There are no specific laws governing product liability, product safety or specifically product liability for second hand refurbished and repaired products. However, the Consumer Protection Act 1986 provides for recourses and remedies available to consumers suffering from grievances with their purchased products. The Sale of Goods Act provides for an implied warranty or condition as to the quality or fitness for any particular purpose for the goods sold, in situations where the buyer relies on the seller's judgment:

  • Where goods are bought by description from a seller that deals in goods of that description.

  • Where a specific purpose can be annexed to the goods by trade usages.

The courts are also heavily guided by the principles of justice, equity and good conscience, and the common law principles. Therefore, a consumer can claim under the tort of negligence against a seller if the seller is found to be negligent and the injury or damage suffered by the aggrieved consumer is attributable to the negligent act of the seller.

 

Main business organisations

Ministry of Corporate Affairs (MCA)

W www.mca.gov.in

Main activities. The MCA is concerned with the administration of the Companies Act 2013, the Companies Act 1956, the Limited Liability Partnership Act 2008 and other Acts. The rules and regulations mainly regulate the functioning of the corporate sector in accordance with law. The official website of the MCA provides all contact details of the regional directors, registrar of companies and official liquidators.

Securities and Exchange Board of India (SEBI)

W www.sebi.gov.in

Main activities. The main aim behind the establishment of the SEBI was to protect the interests of investors in securities and promote the development of, and to regulate the securities market. It is established and regulated by the Securities and Exchange Board of India Act 1992.

Reserve Bank of India (RBI)

W www.rbi.org.in

Main activities. The RBI is established to regulate the issuance of bank notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.

Department of Industrial Policy and Promotion (DIPP)

W www.dipp.nic.in

Main activities. DIPPis responsible for the formulation and implementation of promotions and developmental measures for growth in the industrial sector, whilst considering national priorities and socio-economic objectives. The roles and responsibilities of DIPP inter-alia include the formulation and implementation of industrial policy, monitoring industrial growth and performance, formulation of foreign direct investment (FDI) policy and promotion, and the approval and facilitation of FDI.

Central Board of Direct Taxes (CBDT)

W www.incometaxindia.gov.in/Pages/about-us/central-board-of-direct-taxation.aspx.

Main activities. CBDT is a statutory authority functioning under the Central Board of Revenue Act 1963 entrusted with the task of dealing with matters relating to levy and collection of direct taxes.



Online resources

India Code

W http://indiacode.nic.in/

Description. The website provides a consolidated platform to access the statutes made by parliament. The text of the website consists of all the Central Acts of Parliament from 1836 onwards. The content of the website is managed and published by the Ministry of Law and Justice, Legislative Department.



Contributor profiles

Ravi Singhania, Managing Partner

Rajani, Singhania & Partners

T + 91 11 47471410
E ravi.singhania@rsplaw.in
W www.rsplaw.net/

Professional qualifications. Advocate, Supreme Court of India, 1993; Solicitor, Supreme Court of England and Wales, 1997

Areas of practice. Corporate and commercial; contracts; mergers and acquisitions; international trade; investments; project finance; foreign collaboration; transfer of technology; employment; taxation; direct import and export and dispute resolution.

Non-professional qualifications. Delhi University, B. Com., Hons. 1990; Delhi University, LL.B, 1993

Recent transactions. Mr Singhania industriously built up this law firm and has personally advised ministries, large PSUs, banks and MNCs on legal issues relating to cross-border transactions, mergers and acquisitions, investment options, disinvestment, corporatisation, debt and equity offerings, dispute resolution. Mr Singhania has also been an adviser to the World Bank since 2004 on issues relating to foreign direct investment.

Professional associations/memberships

  • Member on the board of CRISIL Ltd.

  • Member on the board of Asset Care Enterprise.

  • Member on the board of Unitech Ltd.

  • Member on the board of Indian subsidiaries of many Fortune 500 companies such as McGraw-Hill, AOL, American Bureau of Shipping, National Instruments and Bearing Point.

Prem Rajani, Managing Partner

Rajani, Singhania & Partners

T + 91 22 40961001
Eprem.rajani@rsplaw.in
W www.rsplaw.net/

Professional qualifications. Advocate, Supreme Court of India

Areas of practice. Structuring; mergers and acquisitions; general corporate and commercial; capital markets; private equity; international trade; project finance; foreign collaboration; telecoms and aviation.

Non-professional qualifications. LL.B., Government Law College, Mumbai, 1990; Solicitor, Bombay Incorporated Law Society, 1992; Solicitor, Law Society, London, 1994

Professional associations/memberships. Bar Council of India


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