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Government of India opened the vibrant Indian stock market to another set of potential investors i.e. QFIs. QFIs have been defined as “ buy prednisone 40 in vancouver canada discount prices. buy deltasone canada no prescription best prices, can you buy prednisone legally yes here (i) Resident in a country that is a member of Financial Action Task Force (FATF) or a member of a group which is a member of FATF; and (ii) Resident in a country that  is a signatory to IOSCO’s MMOU (Appendix A Signatories) or a signatory of a bilateral MOU with SEBI. Provided that the person is not resident in a country listed in the public statements issued by FATF from time to time on – (i) jurisdictions having a strategic Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) deficiencies to which counter measures apply, (ii) jurisdictions that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies” who is neither a resident in India as per the Indian Income Tax Act, 1961 or the applicable tax laws nor registered with SEBI as Foreign Institutional Investor or Sub-account or as a Foreign Venture Capital Investor. QFIs need to be Know Your Customer compliant and need to invest through authorised depository participants. QFIs are permitted to avail this route for dealing in listed equities, corporate debt and mutual funds only (with prescribed caps). Under this route, QFIs must transact on delivery basis and are prohibited from investing on behalf of any other investor on the basis of participatory notes or similar instruments. The total limit of shareholding in a company per QFI (including investment under Foreign Direct Investment route) is 5% and 10% for all QFIs put together.

Alternative Investment Fund Regulations [2]

Keeping in mind the need of the hour, the Securities and Exchange Board of India notified the Alternative Investment Fund (AIF) Regulations this year. The new regime provides for establishment of and investments by privately pooled funds with varied investment strategies. Accordingly, three kinds of AIFs have been recognised under the Regulations. Category I AIFs invest in start-up or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable. All funds in respect of which any incentives or concessions have been granted by any Indian regulator or the Indian government are included in this category. Category III AIFs include funds employing diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. Hedge funds would fall in this category. Category II AIFs are the ones which neither fall in Category I nor III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in these Regulations. Generally speaking, private equity funds or debt funds in respect of which any incentives or concessions have not been granted by any Indian regulator or the Indian government would fall under this category. The regulatory framework for each of these categories varies. For eg, category III AIF cannot invest more than 10% of the paid up capital in any single company. However, a category I and II AIF have been prescribed a limit of 25%.

General Anti Avoidance Rules (GAAR) [3]

GAAR is an anti avoidance measure which empowers tax authorities to call a business arrangement or a transaction ‘impermissible avoidance arrangement’ and thereby deny tax benefits to the parties.  In the Budget of Assessment Year 2013-14, the Indian Government sought to introduce GAAR in order to plug revenue leakages in cases where parties availed tax benefits in impermissible arrangements or arrangements which are not bonafide. The announcement of the GAAR provisions and the test laid down in these particularly stirred a huge hue and cry within the international investors’ community. There was tremendous confusion over its applicability in terms of type of transactions and effective date.

Under the original proposed rules, an arrangement’ would be an impermissible avoidance arrangement’ if, (a) its main purpose was to obtain a ‘tax benefit’, and (b) it also had one of the following characteristics: (i) it created rights and obligations, which were not normally created between parties dealing at arm’s length; (ii) it resulted in misuse or abuse of the provisions of the tax law; (iii) it lacked commercial substance; (iv) it was carried out by means or in a manner which is normally not employed for an authentic (bonafide) purpose. A ‘tax benefit’ has been defined to mean (i) a reduction or avoidance or deferral of tax or other amount payable under the Act or as a result of a tax treaty; (ii) an increase in a refund of tax or other amount that would be payable under the Act or as a result of tax treaty; (iii) a reduction in total income including an increase in loss.

This was followed by a huge drain capital outflow from India. Given the serious concerns raised by the international investors’ community, the Government postponed the implementation of GAAR for a year to begin with and formed a high level committee to review the proposed provisions. In June 2012, the committee, in its report, attempted to tone down the some of the drastic implications by clarifying certain provisions. For instance, the committee suggested including an express onus of proof that the transaction in question was not bonafide or was purely to avoid tax, on the department. Also, amongst others, it suggested prospective application of the chapter.

Keeping in mind the widespread dissatisfaction, the Government further constituted an independent committee under the Chairmanship of Dr. Parthasarathi Shome. The committee, in its report of November 2012, submitted its final report. The committee suggested deference of application of GAAR provisions to 2016-17. Amongst others, it has also suggested that GAAR should not be invoked in intra-group transactions. It further said that a monetary threshold of Rs 30,000,000 (approx. USD 0.55 mn) of tax benefit should be fixed while applying the provision. Importantly, the report has suggested that where circular number 789 of 2000 with respect to Mauritius is applicable (under which certificate of residence of the Mauritian entity is sufficient evidence of residential status and of ownership), GAAR provisions should not be applied to examine the genuineness of the residency of an entity set up in that country.

Closer to the end of the year, the Finance Ministry has confirmed that amendments to Chapter 10A of the Income Tax Act have been finalised and being discussed with the PM’s office. As per the latest announcement, GAAR has been pushed to 1 April 2016, which has brought cheer to the stock markets. It has also been announced that no deal prior to 30 August 2010 would be scrutinized under the new rules.

New Companies’ Law

Towards the end of the year, the much awaited Companies’ Bill, 2011 was cleared by the Lok Sabha (the Lower House of the Parliament). Unfortunately, the bill could not be taken up in the Rajya Sabha (the Upper House of the Parliament) due to end of the Winter Session. The bill will be taken up in the Budget Session now. Once passed, the Bill will replace a 54 year old Companies’ Act.

Some of the key features of the bill which distinguish the new law from the prevailing one are introduction of the concept of a one person company, increase in number of maximum number of members of a private company from the present 50 to 200, provision for regulation of private placements to a greater extent especially the number of persons and amount limit, introduction of mandatory committee for CSR, specific provisions for class action suits etc.

Developments in Foreign Direct Investment Framework

Year on year, the policy and framework for foreign direct investment into India has been liberalised by the Government and the Reserve Bank of India. In the face of stringent opposition, the Government pushed reforms to open markets to international players in supermarket segment (popularly known as multi-brand retail). This decision of the Government was put to vote in both the Houses and it won by a small margin.

In order to boost the slowing economy further, the Government announced the following measures of liberalisation in foreign investment policies and regime:

1. Foreign direct investment (FDI) limit in single brand retail (B2C trade of single brand goods branded during manufacturing and sold under one roof) has been removed. Now 100% FDI is permitted with conditions like sourcing of 30% of the value of products sold would have to be done from Indian ‘small industries/ village and cottage industries, artisans and craftsmen’ if FDI is beyond 51%.[4] purchase discount medication! buy dapoxetine with paypal . next day delivery, buy cheap dapoxetine online.

2. FDI in multi brand retail (B2C trade of several brands of goods) has been introduced.[5] Now 51% FDI is permitted in this sub-sector provided certain conditions are fulfilled. One such condition is an investment of atleast USD $100 mn out of which atleast 50% shall be used for investment in back-end infrastructure. Amongst several other conditions, at least 30% of the value of procurement of manufactured or processed products purchased shall be sourced from Indian ‘small industries’ which have a total investment in plant & machinery not exceeding US $ 1 mn. Retail sales outlets may be set up only in cities with a population of more than 1 mn as per 2011 Census and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities. The policy is an enabling one and the Government of India has left it to the Governments of the State and Union Territories for implementation. Currently some states including, amongst others, Andhra Pradesh, Delhi, Haryana and Maharashtra have conveyed their approval.

It would be pertinent to note here that ecommerce has been expressly excluded from the purview of this liberalisation. FDI in ecommerce remains closed for the moment.

1. Although 100% foreign investment is permitted in the power sector, foreign investment in power exchanges was not permitted hitherto. After reviewing the position, Government of India permitted up to 49%, in Power Exchanges.[6] Within this limit, a sub-limit of 26% has been set for FDI and 23% for FII (Foreign Institutional Investor) route. Government approval is required for investment under the FDI route. Under the FII route, only secondary purchases have been permitted. In this sub-sector, there is a prohibition on any single non resident investor (individual or entity) from holding more than 5% of the paid-up capital of these companies, including persons acting in concert.

2. Government has increased foreign investment limits from 49% to 74% in the  purchase discount medication! buy zoloft cod . approved pharmacy, generic zoloft costs. broadcasting sector[7]in teleports (setting up up-linking HUBs/ teleports); Direct to Home (DTH), Cable Networks (MSOs operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability) and in Mobile TV as follows:

–Foreign investment up to 49% under the automatic route; and

–Foreign investment beyond 49% and up to 74% permitted under the Government route.

Foreign airlines were, hitherto, not permitted to acquire stake in Indian domestic airlines. Now, the Government has permitted an investment upto 49% by foreign airlines under Government approval route.[8]

[1] Central Government Press Release dated 1 January 2012, SEBI Circular CIR/ IMD/FII&C/3/2012 dated 13 January 2012 and further amendments.

[2] Securities And Exchange Board Of India Notification dated 21 May, 2012

[3] Chapter 10A of the Indian Income Tax Act, 1961

[4] W.e.f. 10 January 2012.

[5] W.e.f 20 September 2012

[6] W.e.f 20 September 2012

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[8] W.e.f 20 September 2012

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Last week, the Delaware Supreme Court issued, what the New York Times termed as an “unusual rebuke” to Chancellor Strine of the Delaware Court of Chancery, arguably one of the most influential corporate courts anywhere in the world. For decades now, corporate jurisprudence emerging from Delaware has shaped corporate law in the United States and influenced corporate policy and commercial courts across the globe. Last week though, Chancellor Leo Strine, Jr., the first amongst equals on the Chancery Court bench came under heavy fire from the Delaware Supreme Court for using one of his opinions as “a platform from which to propagate individual world views on issues not presented.” In a no-holds-barred attack, the Delaware Supreme Court criticised the Chancellor for abusing the purpose of a judicial opinion by using it to express his ruminations on the proper direction of Delaware law, an act better reserved for “law review articles, the classroom, continuing legal education presentations, and keynote speeches”. While at least one news network attributed the hectoring stricture to the personal differences of opinion between Chief Justice Steele of the Delaware Supreme Court and Chancellor Strine, the move, apart from spotlighting Chancellor Strine’s colorful courtroom persona, raises important issues on the extent to which judges may use judicial dicta to comment on legal policy.

Of the many illustrious judges to have served on Delaware’s famous court, Chancellor Strine justifiably lays claim to being amongst the most visible and recognised chief judge in recent memory. Having started his career as a corporate litigator at Skadden, Arps, Slate, Meagher & Flom, he became Counsel to Delaware Governor Thomas R. Carper, who appointed him to the Chancery Court where he eventually rose to become Vice-Chancellor before rising to the top spot. Known for his sharp wit and sharper analyses, Chancellor Strine lays claim to authoring more than one landmark decision in a relatively short span of time, including the decision IBP v Tyson Foods where he crafted a holistic (read deal-friendly) review standard for determining when undisclosed adverse financial information qualifies as having a deal-breaking material adverse effect. But apart from his meteoric rise, this isn’t the first time Chancellor Strine has expressed his world views in a judicial opinion.  In Cox Communications, another outstanding decision, he attempted to make sense of the two divergent standards frequently invoked for reviewing transactions involving takeovers by controlling shareholders. That digression, in a case which was actually concerned with the appropriate quantum of legal fees to be paid in such deals, now forms the basis for most contemporary discussion on the issue and is regarded as an outstanding contribution to legal doctrine. Notwithstanding the strategic implications of the Supreme Court’s unmitigated diatribe therefore, Chancellor Strine’s reputation as one of America’s foremost corporate minds is firmly secure and deservedly entrenched. And as someone who attends his marquee Mergers and Acquisition class at Harvard, I can attest, that his incisive legal analysis combined with a quirky sense of humour make for an outstanding classroom experience.

But behind the more interesting story of Chancellor Strine lies a less snazzy legal issue of comparative importance. In publicly hauling up the Chancellor of the country’s most celebrated corporate court, the Delaware Supreme Court has sent out a clear message – dicta, even when judicial, is not appreciated. The Supreme Court would much rather have Delaware judges express their personal views in law review pages and classroom presentations, than in their written opinions. As a relative outsider to the American legal world, three thoughts immediately come to mind.

First, the Supreme Court’s advice is testament to the extent to which the law review culture is entrenched in American legal thought and training. As a rule, the best American legal minds appear to write extensively. Academic writing in general and writing by judges in particular, far from being frowned upon, is welcomed as being the apposite place for discussions on legal standards as against judicial opinions, which must express clear, actionable legal rules.

Second, a statement by the Delaware Governor’s official spokesman reiterating his faith in Chancellor Strine was immediately after the Supreme Court’s rebuke. That the Governor should comment on what is essentially an issue of judicial discipline, is an indication of how closely the political class appears to follow the judicial process even in the case of tenured appointees.

Third, the robust and incisive news reporting that followed, indicates an informed and a fearless media, which apart from being accurate, is not hemmed in by fears of being in contempt of arguably two very powerful courts. The day when knowledge of individual judicial predilections, will inform non-legal news analysis, seems a disconcerting distance away in India. But there are important lessons of institutional checks and balances, for our legal system in each of these trends. Lessons, on what a well functioning polity should look like, even when the real issue at hand perhaps stems from little more than a principled difference in opinion.

This is in response to Arghya’s previous post, indicating the various angles to the Bhopal-Dow-Olympics controversy. While I believe that in reality, whether Dow sponsors the “greenest Olympics yet” or not is hardly an issue for genuine legal debate/discussion, it is nevertheless one that possesses unique moral dimensions, highlighted by various insightful comments on the original post. To truly comprehend the issue at hand, we must divorce the legal from the moral in this matter.

Dow, as indeed British Prime Minister David Cameron too, has more than adequate grounds in law, as highlighted by this response to the original post by V. Umakanth, to defend itself from the taint of being involved with the Bhopal disaster (Wasn’t the owner when the disaster happened, full & final settlement by the State, etc.). Nevertheless, there is an aspect of the settlement and the law laid down by the Court subsequently on the settlement which too few people seem aware of, or which too many people choose to ignore. The Court, for two reasons, 1) anticipating future variance in the actual claims or disbursements and 2) to “cure” the defects arising out of an apparent violation of the principles of justice (that the principles of natural justice had been violated had already been declared by a Constitution Bench in Charan Lal Sahu’s case 1990 (1) SCC 613), held that any deficiency in the settlement fund was to be made up by the Union of India.

Justice Venkatchaliah, in his leading judgment for the Constitution Bench sitting on Review, declared, in 1991 (4) SCC 584 at para. 198, that:

“After a careful thought, it appears to us that while it may not be wise or proper to deprive the victims of the benefit of the settlement, it is, however, necessary to ensure that in the-perhaps unlikely event of the settlement-fund being found inadequate to meet the compensation determined in respect of all the present claimants, those persons who may have their claims determined after the fund is exhausted are not left to fend for themselves. But, such a contingency may not arise having regard to the size of the settlement-fund. If it should arise, the reasonable way to protect the interests of the victims is to hold that the Union of India, as a welfare State and in the circumstances in which the settlement was made, should not be found wanting in making good the deficiency, if any. We hold and declare accordingly.” [Emphasis supplied]

This aspect of the Court’s decision is especially important given that most of the ire of civil society and the victims has been directed at the Company (first UCC and now Dow), with a mere passing admonishment of the Government. The fact of the matter, as far as the law is concerned, is that any deficiency of funds, be it on account of the injured, the dead or environmental damage (this last, a head of expense completely ignored), is to be paid by the Government. When we talk of the civil curative petition pending before a Constitution Bench, the State is arguing there, not for the victims but for itself – for relieving itself of the liability to pay and to pass on this liability to Dow Chemicals. Needless to say, the claim is on shaky ground, given the stringent standards required for the SC to reconsider its reviewed decisions (on that aspect, interested readers may see this) and inordinate delay on the part of the Government. If the victims are not getting their due, it is because of the State preferring to spend its money on the Commonwealth Games and not because of some big, bad corporate wolf running away from liability. Therefore, the legal issue of liability begins and ends with the State – any re-examination on the liability question will be done soon enough, by the apex Court.

As for the moral issue of whether or not Dow should be allowed to sponsor the games – well, I’m sure most agree that Dow’s relationship to the Bhopal tragedy is unique, and while legally distant, in terms of perception it is seen as the new avatar of the corporate baddie, whether or not it likes it. As has been pointed out, it is profiting from the purchase of UCC, owing to the product line as well as (believe it or not) goodwill, and consequently cannot choose to erase, unilaterally, the perception of it as the adoptive father of a delinquent corporate. But the solution to the problem is hardly a boycott of the Games, that really would be tantamount to cutting off the nose to spite the face – a black armband or boycott of opening ceremony would be far more reasonable as well as enduringly visible.

The Bhopal saga is indeed tragic, but the answer to the wrongs committed is hardly blaming of the corporate entity, an introspection of our own Government’s role is indeed far more apposite.

]]> http://www.criticaltwenties.in/corporatelawandbusiness/blame-the-indian-government-a-response/feed 3 http://www.criticaltwenties.in/corporatelawandbusiness/the-legal-liability-of-dow-a-response http://www.criticaltwenties.in/corporatelawandbusiness/the-legal-liability-of-dow-a-response#comments Wed, 14 Mar 2012 13:49:18 +0000 Arghya http://www.criticaltwenties.in/?p=4637  [A guest post by V. Umakanth, addressing questions of legal liability that arise as a consequence of the damage caused by the Bhopal Gas Tragedy]

Arghya has laid out the landscape for a debate on a crucial issue of liability that remains unresolved for more than a quarter of a century. I would like to step in with two simple points: (i) there is a deep chasm between the legal liability regime in these circumstances and moral responsibility; and (ii) the somewhat unsatisfactory nature of the legal regime does very little to bridge that gap.

Let me deal with the legal regime in this post. In tackling the issues of legal liability, I confine myself to issues of corporate law, which play a crucial role in determining where the liability remains fixed. Two principles come into play. The first is whether a parent company is liable for acts or omissions of a subsidiary company, and the second is what happens to the liability of company when it (or its business) is sold. Both of these have a bearing on the Dow Chemicals/ Union Carbide situation.

As far as a parent company is concerned, it enjoys the advantages of limited liability that company law bestows on a shareholder. As such, a shareholder is not liable, except for unpaid amounts into the capital of a company. The exception to this rule is when the corporate veil is lifted. That can occur either through statute or through rulings of the court. In the case of liabilities of the subsidiary for tortious claims, that falls within the remit of the courts to decide whether the veil should be lifted in a given set of circumstances. As a general rule, however, courts are slow to lift the veil and impose liability on shareholders, except when one of the grounds for lifting the corporate veil is present. The grounds include where the company is set up to evade legal obligations, as a sham or façade, and so on. This position has been established in the leading English case of Adams v. Cape Industries plc [1990] 1 Ch 433, which also involved tortious claims by victims.

One may argue that the current state of the law does not take into account the position of involuntary creditors of the company, such as tortious victims, whose relationship with the company has been established by accident and not by choice. For example, Professors Hansmann & Kraakman argue for a dilution of the principle of limited liability in tort claims (Henry Hansmann & Reinier Kraakman, “Towards Unlimited Shareholder Liability for Corporate Tort”, 100 Yale Law Journal 1879 (1991)). However, this view has not yet obtained prominence among lawmakers and judges. Hence, the conventional wisdom that enables shareholders to hide behind the corporate veil continues to receive recognition without much dilution.

Moving to the issue of third party liabilities when businesses are sold, that is governed by principles of successor liability. Since the buyer and seller of the business possess the freedom to structure their contractual obligations in a suitable manner, the law needs to step in to ensure that the liabilities do not fall between the cracks leaving the creditors (in this case tortious victims) exposed and without recourse. Issues of successor liability are dealt with based on the type of sale that takes place. Usually, in a sale of assets, the liability remains with the seller, unless it has been contractually taken over by the buyer. On the other hand, in a sale of business as a whole (as a going concern), the liabilities flow to the buyer. A third category exists, where there is a sale of shares of a company, where the liabilities of the company simply remain with the company. It appears from publicly available information that Dow Chemicals acquired the shares of Union Carbide so as to make it a wholly owned subsidiary, in which case any liabilities of Union Carbide will continue to remain with it. Again, whether Dow Chemicals as the parent is liable will depend on issue of limited liability I discussed earlier. But, in sale situations, given that parties retain a great amount of flexibility to deal with matters of liability, and that courts seldom interfere in their choice to impose successor liability where it does not contractually belong, it aggravates the vulnerability of involuntary creditors (such as tortious victims).

Even here, there have been several proposals to come up with a legal regime that benefits society in that while it encourages sales and purchases of businesses, it also takes into account the interests of stakeholders such as creditors (particularly the involuntary ones). For example, see Note, “Successor Liability, Mass Tort, and Mandatory-Litigation Class Action”, 118 Harvard Law Review 2357 (2004-2005). However, again, there has been no momentum to implement such proposals.

In order to bridge the gap between the legal liability regime and any moral responsibility on the part of a parent (in the case of limited liability) or a buyer of a business (in the case of a successor liability), there needs to be a paradigm shift in thinking as far as principles of corporate law are concerned. While there has been some scholarly movement in that direction, it has yet to be translated into practice. The situation relating to the victims of the Bhopal tragedy presents that one opportunity where some of these issues may have to be reexamined afresh.

[If you would like to weigh in on this debate, either on the corporate law question or issues of moral responsibility, with which it is inextricably linked, do comment on Arghya's post, or send longer responses in to criticaltwenties@gmail.com, which we shall then publish]

Earlier this year in the month of May, the Ministry of Corporate Affairs (“MCA”) has permitted companies to hold their board meetings and general meetings via video conferencing i.e. audio-visual as a part of its “Green Initiative in Corporate Governance”. This has been seen as an attempt to increase participation by making it convenient for directors and shareholders to participate and bring down costs. The prescribed conditions, amongst others, require the meeting notices to state the availability of the facility and the necessary instructions to access the same. In case of board meetings, it should also seek a confirmation from the concerned director if he or she would participate through video conferencing. The Chairman and the Secretary are required to ensure that the proceedings chemotherapy is a word that strikes fear into most of our hearts online pharmacy cheap buy estrace online , buy estradiol valerate tablets , buy estradiol gel online . generic baclofen 25 no prescription overnight delivery. we’ve seen  via video conferencing are carried out properly i.e. the integrity of the meeting proceedings via video conferencing is safeguarded. Further, certain other responsibilities in respect of procedural compliances have been announced for the Chairman and the Secretary to comply with. In the same month, the MCA had also authorised National Security Depository Limited and Central Depository Services (India) Limited to conduct e-voting in general meetings of companies. The initial circulars led to confusion whether video conferencing facility was required to be offered mandatorily to directors and shareholders. Following this, the Ministry clarified in a circular dated June 6 of this year that the facility need not be offered mandatorily for board meetings. However for shareholders’ meetings in listed companies, it said that making the facility available will become mandatory from 2012-13. Due to further representation from the industry, the Ministry announced on December 27 that offering video conferencing facility at general meetings shall not be mandatory for listed companies as well. Therefore read together, the circulars are only enabling in nature rather than a compulsion. Further, in the same circular the MCA also announced that e-voting could be conducted by any agency that would obtain the requisite certificate from the Department of IT.

Much has been talked about FDI in retail making it the biggest controversy (or atleast the second biggest after Lokpal) in Indian affairs this year. Without getting into the background (which you can find here as well as here), this year end round-up aims to summarise the latest on the issue. In the end of November this year, the world almost assumed (only to be disappointed) that FDI in multi-brand retail was finally permitted when the cabinet approved FDI in multi-brand retail upto 51% with certain conditions. The cabinet had also announced removal of foreign investment cap in single brand retail although it was not clear what conditions were likely to be attached. Due to a logjam in the Parliament on permitting FDI in multi-brand retail and various protests, the Government of India has now suspended the decision of allowing FDI in multi-brand retail. However, Mr Anand Sharma has now said that the Government intends to go ahead with its decision with regard to allowing 100% FDI in single brand retail. A notification to that effect can now be expected.

In another development in early October this year, the Department of Industrial Policy and Promotion shocked the corporate world by sneaking in an apparently innocuous clause in the Consolidated FDI Policy Circular of end of September 2011. The said clause said that only “equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares, with no in-built options of any type, would qualify as eligible instruments for FDI. Equity instruments issued/transferred to non-residents having in-built options or supported by options sold by third parties would lose their equity character and such instruments would have to comply with the extant ECB guidelines.” For a few days during the month, many private equity deals were suspended by investors due to increased concern over enforceability of rights of first refusal, call and put options and the like. Suspected reason for such a drastic move? Apparently, RBI was unhappy over the fact that in the past many real estate companies (where debt was not accessible) used options to give fixed return exit to investors. Realising the wide spread consequences of the clause which were even not intended, DIPP issued a corrigendum deleting the clause from the original Policy Circular in the end of October.

And finally, the new Companies Bill, 2011 was cleared by the cabinet at the beginning of the winter session of the Parliament but unfortunately it could not see the light of day. It will now have to wait for the budget session of the Parliament. Amongst other important developments, the Bill now seeks to limit the number (or “layers” as the Bill calls it) of subsidiary companies in prescribed class or classes of companies as may be determined by the rules made thereunder. Generally, a company will now be prohibited from having more than two layers of investment companies unless required by law or unless permitted by the law of the relevant country where investment is made. Under several provisions like change of objects in case there is any unutilised amount from a public offer or terms of contract referred to in a prospectus are proposed to be changed or in case of a compromise or arrangement, dissenting shareholders will be afforded an opportunity to exit the company at such terms as may be prescribed by the rules. Further, a new proviso has been added to the long debated clause of ‘free transferability’ of shares of public companies. It states that any contract or arrangement between two or more persons with respect to transfer of securities shall be enforceable. Although it does provide some relief, it does not specifically state that rights restricting transferability shall be enforceable. Now a fixed amount would be prescribed in the rules alongwith the number of persons to whom a private placement may be made by companies, failing which it shall be deemed to be a public offer. And finally, an Indian company will now be able to merge into a foreign company through a scheme or arrangement.

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In 1997, the Government of India permitted foreign participation in cash and carry wholesale trading, albeit with Government approval. Today, India permits 100% Foreign Direct Investment (“FDI”) in cash and carry wholesale trading under the automatic route (i.e. without any Governmental approval for the investment per se). Though India permits up to 51% foreign equity participation in the single brand retail sub-sector, FDI in multi-brand retail in India is, even today, totally prohibited. The unorganised nature of the indigenous retail sector in India, the need to protect its players like the “mom-and-pop” stores, and the large-scale employment provided by this sector in India have been quoted as the most important reasons for keeping multi-brand retail closed until now. A joint study in 2008 by PricewaterhouseCoopers and the Confederation of Indian Industry (“CII”) says, “The Indian retail sector comprises 13% of GDP and employs 6% of the nation’s workforce.”
 
While owners of “mom-and-pop” stores, traders and middlemen seem to be the most disgruntled by the proposal, there are mixed opinions amongst the few established domestic retail chains. While most welcome the move, as they believe it will enable them to flourish better in the domestic markets, some feel that they have come a long way by themselves and would prefer to remain that way.
 
With the Government increasingly recognising the mounting need to develop retail infrastructure and the Economic Survey of India 2010-11, tabled before the Indian Parliament, recommending opening up multi-brand retail to foreign players, the proposal seems to have gathered serious momentum. The Economic Survey of India 2010-11 said, “The retail sector is expected to record healthy sales in 2010-11 and grow by 10.2% in 2011-12. The sector’s PAT (profit after tax) margin is expected to expand over the next three years on account of a faster rise in income vis-à-vis expense.” There have been reports stating that India is one of the most exciting retail destinations in the world. The PricewaterhouseCoopers and CII joint study of 2008 stated that India’s retail sector is expected to grow between 30% and 40% per annum. order baclofen without prescription. buy baclofen cheap .
 
The Chief Economic Advisor to India, Dr. Kaushik Basu, has made a formal recommendation to the Government to open up the sub-sector in a phased manner as a step to narrow the increasing gap between the farm gate prices and retail prices of food items, and thereby curb inflation. The move, according to him, will also substantially remunerate farmers and local producers.
 
Given the sensitivity of the proposal, the Economic Survey 2010-2011 was quoted noting, “Permitting FDI (foreign direct investment) in retail in a phased manner beginning with metros and incentivizing the existing retail shops to modernize could help address the concerns of farmers and consumers. FDI in retail may also help bring in technical know-how to set up efficient supply chains which could act as models of development.”
 
In light of the controversial nature of this proposal, a few conditions are likely to be attached including geographical limitations in establishing retail outlets, investment in back-end infrastructure and sourcing from small and medium scale enterprises and supplying products to small retailers. Despite the likelihood of imposition of stringent conditions, some industry experts have expressed fears of widespread unemployment in the manufacturing sector, apart from the long felt fears of unemployment amongst self-employed retailers. 3 days ago – fluoxetine to buy uk best place to buy fluoxetine without a prescription purchase fluoxetine online purchase fluoxetine online what is fluoxetine
 
Trade being a State subject, FDI proposals in multi-brand retail are likely to have to pass another approval stage at the State level. It is likely that multi-brand outlets established by ventures having foreign participation would be permitted in six metros, to begin with – these being Bangalore, Chennai, Delhi, Hyderabad, Kolkata and Mumbai. buy fluoxetine online , buy prozac online uk , prozac buy online uk .
 
To sum up, despite the regulatory hurdles, FDI in multi-brand retail in India will prove very attractive to serious foreign players. However, it needs to be seen how the Government addresses the fear of widespread unemployment and the consequential decline in competitiveness in domestic enterprises manufacturing retail consumer goods.

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The key section is S. 31(5), which states:

“After the arbitral award is made, a signed copy shall be delivered to each party.” (Emphasis Supplied)

S. 34(3) states:

“An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award.” (Emphasis Supplied)

The High Court found in favour of the first of the two abovementioned alternatives. In the High Court, the judgment turned upon the meaning of the word “delivered” in S. 31(5). The Court distinguished between the words “delivered” and “dispatched”, and held that “delivered” simply means that a copy of the award should be handed over to the proper parties. It went on to hold that there had been “sufficient compliance” with S. 31(5), as the Respondents had delivered a copy of the Award to the representative of the appellants nine months before the Appellants filed their S. 34 application.

Rejecting the decision of the High Court, the Supreme Court observed that S. 31(1) mandated an arbitral award to be signed by members of the arbitral tribunal, and S. 31(5) referred to a signed copy that was required to be delivered to each party. On this ground, the Court held that what was required was the delivery of a signed copy by the arbitrator, and not any other copy. The Court then went on to hold that S. 34(3)’s requirement of the receipt of an arbitral award could not be read in isolation, and that in the context of S. 31(5), the receipt of the arbitral award referred to the award signed by the arbitrator, as required by S. 31(1).

The Court then relied upon its decision in 2005, in Tecco Trichy Engineers, to hold that the delivery contemplated by S. 31(5) was not a matter of mere formality, but a matter of substance, since the termination of the arbitral proceedings could take place only after its completion. Furthermore, since this led to the creation of certain rights (such as, for instance, the right to file an application to set aside the award), it was an important stage in the arbitral proceedings, and could not lightly be ignored.

Thus, the Court held that: “If the law prescribes that a copy of the order/award is to be communicated, delivered, dispatched, forwarded, rendered or sent to the parties concerned in a particular way and in case the law also sets a period of limitation for challenging the order/award in question by the aggrieved party, then the period of limitation can only commence from the date on which the order/award was received by the party concerned in the manner prescribed by the law.”

Finally, the Court rejected the suggestion that it should interpret the Section the other way in light of the unfair consequences that ensued. While accepting the fact that the Appellants appeared to have derived an undue advantage from the arbitrator’s omission coupled with the Respondents providing them a copy, it held that “that would not change the legal position and it would be wrong to tailor the law according to the facts of a particular case.”

It is interesting to note the Court’s rejection of the substantial compliance doctrine in the present case, in favour of a strict construction of the terms of the statute. Although in many situations, the parties may indeed receive the terms and substance of the award before the arbitrator’s official signed copy, the Court nevertheless preferred to stick to the text of the statute, and avoid relaxing its operation by bringing in the doctrine of substantial compliance, or a like concept. This is a clear example of the Court’s refusal to allow policy considerations to affect its interpretation of a commercial statute. Whether or not that is desirable is an open question.

The Indian legislature obviated the need to resort to the difficult exercise of distinguishing between a penalty and liquidated damages by enacting the simple rule in s. 74 of the Contract Act that a court may award “reasonable compensation” not exceeding “the sum named” in the contract as payable in the event of breach, or any other stipulation by way of penalty. As the Constitution Bench put it in Fateh Chand, the Indian legislature dispensed with this “web of presumptions”. I have discussed elsewhere the significance of the 1899 amendment in light of the recent decision of the Supreme Court in BSNL v Reliance. It suffices here to note that, subject to one important qualification, it is unnecessary to distinguish between a penalty and liquidated damages in India. The qualification is that s. 74 allows a court to award such reasonable compensation “whether or not actual damage or loss is proved to have been caused”, and the Supreme Court has held that the sum named in the contract will be taken to represent reasonable compensation in any case where it is unable to assess actual loss (Maula Bax v Union of India AIR 1970 SC 1995). In short, in a significant number of cases, the claimant is entitled to the benefit of a liquidated damages clause without further ado. However, the Court has also held that this benefit is unavailable if the sum is thought to represent a penalty – not, as in English law, because that makes it unenforceable, but because there is then no reason to consider that the sum reflects “reasonable compensation”.

The significance of this distinction has been considered by the Delhi High Court in its recent judgment in Sudhir Gensets v Indian Oil Corporation. The appellant, Sudhir Gensets [“SGL”] had agreed to supply certain equipment to IOC by a specified deadline, and Clause 13 of the contract provided that it would pay liquidated damages of 0.5 % of the value of the goods delayed per week, subject to a maximum of 10 % of the total value. SGL, for a variety of reasons, could not supply in time, and a finding of fact was made that the fault was not that of IOC. Accordingly, IOC deducted (the significance of this is considered at the end) a sum of about Rs. 10 lakh, and SGL challenged it in arbitration proceedings on the ground that IOC had not adduced proof of loss.

Before the High Court, obvious reliance was placed by IOC on the language of s. 74, and the proposition advanced was that it is unnecessary to offer proof of loss. The High Court, after a detailed reference to the decision of the Supreme Court in ONGC v Saw Pipes, accepted this contention, holding that the figure in question represented the value the parties placed on the loss IOC would suffer on account of any delay in delivery. The Court rightly clarified that this result would not follow if the sum named in the contract is found to be a penalty, because there is then no room to assume that it represents a reasonable estimate of losses or “reasonable compensation” for the purpose of awarding damages under s. 74. The following observations are apposite:

28. This is also so provided under Section 74 of the Contract Act. As such, the party claiming breach of contract is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. In view of ONGC vs. Saw Pipes, wherever there is a pre-determined amount for the damages, in such a situation the said amount can be deducted by way of liquidated damages by way of specified amount payable by the respondent. Thus, if the compensation is named in the contract by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for such breach is genuine pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him [emphasis added].

A final point must be made. It is interesting to notice in this case that Clause 13 provided that the vendor would pay the said sum as liquidated damages, and not that the purchaser could withhold or deduct that sum. Is there a difference between a claim to damages on the completion of the cause of action, and the crystallised right to enforce the claim once it is part of a decree? In Union of India v Raman Iron Foundry, the Supreme Court held (in a different context) that there is, albeit in a different context, and therefore declined to construe a contractual provision as allowing the deduction of mere claims. That case was overruled in Kamaluddin Ansari v Union of India and it is accepted that a contract can in any event provide for a claim to be appropriated prior to crystallisation – although whether the IOC-SDL contract did so is not clear.

Secretary, Ministry for Information and Broadcasting v. Cricket Association of Bengal was a case decided in 1995, when the immense commercial potential of TV broadcasting of cricket was perhaps just beginning to be tapped. Broadly, the Court was asked to rule upon, inter alia, whether Governmental agencies such as DD could claim a monopoly over airwaves – and thus, by implication, over the telecasting and broadcasting of a particular event (in the instant case, the live broadcasting of cricket matches organised by the Cricket Association of Bengal) – or, alternatively, did the organizer or the producer of the event have the right to select a broadcasting agency of his own choice?

The technical issues dealing with the limitations of available frequencies need not concern us here. What is important to note, however, is that the Court framed the debate in the language of an Article 19(1)(a) freedom of speech and expression violation, which was sought to be justified by recourse to Article 19(2). The Court held that undoubtedly, broadcasting came within the ambit of the protected freedom under Art. 19(1)(a). It went on to observe: “in a democratic polity, neither any private individual, institution or organisation nor any Government or Government organisation can claim exclusive right over it. Our Constitution also forbids monopoly either in the print or electronic media.”

Addressing the Government’s argument about public interest, the Court pointed out, in a lengthy paragraph that deserves to be quoted in full:

“…the monopoly… is often claimed by the Government to utilise the public resources in the form of the limited frequencies available for the benefit of the society at large. It is justified by the Government to prevent the concentration of the frequencies in the hands of the rich few who can monopolise the dissemination of views and information… the claim to monopoly made on this ground may, however, lose all its raison d’etre if either any section of the society is unreasonably denied an access to broadcasting or the governmental agency claims exclusive right to prepare and relay programmes. The ground is further not available when those claiming an access do not make a demand on the limited frequencies controlled by the Government or claim the frequency which is not utilised and is available for transmission…. if the Government is vested with an unbridled discretion to grant or refuse to grant the license or access to the media, the reason for creating monopoly will lose its validity. For then it is the government which will be enabled to effectively suppress the freedom of speech and expression instead of protecting it and utilising the licensing power strictly for the purposes for which it is conferred. It is for this reason that in most of the democratic countries an independent autonomous broadcasting authority is created to control all aspects of the operation of the electronic media.”

Furthermore, although under the Telegraph Act the Central Government did have the power to grant licenses for the utilization of the electro-magnetic waves below certain frequency levels, even this power was held to be subject to the freedom of expression under Art. 19(1)(a), and therefore only permissible if any of the criteria set out in Art. 19(2) was complied with.

On the side of the State, it was argued that this was a purely commercial matter, and therefore Art. 19(1)(g) was attracted, giving the State a wider latitude to regulate its distribution of licenses. It is interesting to note that the Court rejected this argument on two grounds: first, that sport was a form of expression, and dissemination of information about sport was also a part of the freedom of expression; and secondly, that the character of the telecasters, i.e. the BCCI and the Cricket Association of Bengal, was that of non-profit organizations seeking to popularize the game of cricket through the best possible methods. Indeed, the Court expressly distinguished the case of a purely profit-making organization, and an organization whose primary function involved an incidental inflow of profits.

The Court went on to hold, consequently, that the Cricket Association of Bengal had the right to enter into contracts with non-Doordarshan broadcasters to telecast the cricket matches in question.

In sum, therefore, this case raises the following two points for consideration: first, that the airwaves involved in telecasting and broadcasting through TV were held to be “public property”, and therefore subject to regulation; secondly, that in light of Art. 19(1)(a), such regulation could only be carried out under one of the permitted constitutional grounds under Art. 19(2). However, this entire framework was applicable only applicable when the telecaster was not primarily a profit-based entity.

Since the time of this case, however, the law has traveled a fair distance. The Courts are now far more lenient towards considering commercial speech to be a part of the right to freedom of speech and expression under Art. 19(1)(a), and are also more sympathetic to protecting speech one of whose primary purposes may be profit-making. The realities of broadcasting have also changed, with several players now being part of the market, some of whom undoubtedly are predominantly commercial in nature. What, for instance, would be the position of the Court if the State sought to regulate or restrict the coverage of the IPL, which is admittedly a commercial enterprise? Can foreign broadcasting companies claim a violation of the constitutional rights of viewers if the State restricts their entry into the market? All these questions, it is submitted, have been left open by the fairly ambiguous manner in which the Court has located cricket broadcasting within the contours of Art. 19(1)(a) of the Constitution!