Picture2

The Kathua rape incident resulted in the much awaited enhancement in severity of punishment for rape of minor girls by way of the Criminal Law (Amendment) Ordinance, 2018, promulgated on April 21, 2018. The Ordinance amends the following legislations in the manner as stated below:

AMENDMENTS TO INDIAN PENAL CODE (IPC), 1860:

Enhanced punishment for rape: Section 376 of the IPC, 1860, which deals with the offence of rape was earlier punishable with a rigorous imprisonment of at least seven years up to life imprisonment, along with fine. The Ordinance, 2018 has increased it to rigorous imprisonment of minimum ten years, extending upto life imprisonment, along with fine.

A new clause (3) has been added prescribingthe minimum punishment of twenty years to a person committing rape on a woman under 16 years of age, extending up to life imprisonment, along with fine.

New offences: The Ordinance introduces three new offences relating to rape of minors, and increases the penalty for one:

Section 376 AB: Rape of a girl below the age of 12 years attracts rigorous imprisonment of atleast 20 years extendable to life imprisonment, along with fine to meet medical expenses and rehabilitation cost of the victim, or, with death.

Section 376 DB: Gang rape of a girl below the age of 12 yearshas been made punishable with life imprisonment, along with fine, to meet medical expenses and rehabilitation cost of the victim, or, with death.

Rape of a girl below the age of 16 yearsattracts rigorous imprisonment of atleast 20 years extendable to life imprisonment, along with fine to meet medical expenses and rehabilitation cost of the victim, or, with death. Previously, rape of a girl below the age of 16 years was punishable with imprisonment of ten years extendable to life imprisonment, along with fine.

Section 376 DA: Gang rape of a girl below the age of 16 yearshas been made punishable with life imprisonment, along with fine, to meet medical expenses and rehabilitation cost of victim.

AMENDMENTS TO PROTECTION OF CHILDREN FROM SEXUAL OFFENCES ACT (POCSO), 2012:

ThePOCSO Act, 2012, makes the rape of minors punishable with atleast seven years or life imprisonment, along with a fine. For rape of minors below the age of 12 years or for gang rape of minors, the punishment is rigorous imprisonment of at least ten years or life imprisonment, along with fine. The Ordinance amends the POCSO Act, 2012 to state that for all such offences, the punishment which is higher between the POCSO Act, 2012 and IPC, 1860, shall apply.

AMENDMENTS TO CODE OF CRIMINAL PROCEDURE (CR.P.C.), 1973: 

Time-bound investigation: The Cr.P.C., 1973 under section 173 states that an investigation into rape of a child must be completed within three months. The Ordinance amends the section and reduces the time for completion of investigation from three months to two months extendable to all offences of rape (including rape, gang rape, and rape of minors under the age of 12 years and 16 years).

Appeal: As per the Ordinance, any appeal under section 374 or section 377 of the Cr.P.C., 1973 against a sentence related to rape cases must be disposed of within six months.

Anticipatory Bail: The Cr.P.C., 1973 lists conditions for grant of anticipatory bail. The Ordinance makes the provision of anticipatory bail not applicable to rape and gang rape of minor girls below 12 years and 16 years of age.

AMENDMENTS TO INDIAN EVIDENCE ACT, 1872:

Under the Evidence Act, in determining whether the act was consensual or not and the two-finger test that determines the past sexual experience or character of the victim is disregarded. This provision has been extended to the rape and gang rape of minor girls below 12 years of age and below 16 years of age.

 

All of the above amendments are requisite changes in the legislation for achieving the intended objective, however, the same are not free from flaws.

The Supreme Court of India has posed questions to the Government of India, including one very pertinent question, “Now that the punishment for rape of a minor and that of murder is death, how many of the perpetrators would leave their victims alive?” a question that seems impossible at the outset to be answered.

The Ordinance lacks in its scope in as much as it only relates to punishment for rape of minor girls, and does not cover boys or even males for that matter. There are enough accounts and evidence of sexual abuse inflicted on boys and even men, and the same should have been incorporated by the Ordinance.

Lastly, fast-tracking the investigation and awarding of sentence would certainly result in speedy justice to the victim, but it would also put many innocent lives at risk of death, lest they are implicated in false and fabricated cases.

Surabhi Aggarwal

Senior Associate

The Indian Lawyer

Tags :

Picture1

The Union Cabinet chaired by Prime Minister Shri Narendra Modi on Wednesday approved the Arbitration and Conciliation (Amendment) Bill, 2018 for introduction in the Parliament. The Amendment is intended to facilitate achieving the goal of improving the process of arbitration mechanism in a cost effective and time bound manner.

The Arbitration and Conciliation Act, 1996, as amended by the Arbitration and Conciliation (Amendment) Act, 2015 in order to make arbitration process user-friendly, cost-effective and ensure speedy disposal and neutrality of arbitrators. However, to give a boost to institutional, arbitration and to remove some practical difficulties in applicability of the Arbitration and Conciliation (Amendment) Act, 2015, a High Level
Committee (HLC) under the Chairmanship of Justice B. H. Srikrishna, Retired Judge, Supreme Court of India, was constituted by the Central Government.

The HLC submitted its Report on 30th July 2017 and has recommended for amendments in the Arbitration and Conciliation (Amendment) Act, 2015. The proposed amendments are as per the recommendations of the High-Level Committee.

Characteristics:-

  1. To facilitate speedy appointment of arbitrators through designated arbitral institutions by the Supreme Court or the High Court, without having any requirement to approach the court in this regard. It is envisaged that parties may directly approach arbitral institutions designated by the Supreme Court for International Commercial arbitration and in other cases the concerned High Courts.
  1. The amendment provides for creation of an independent body namely the Arbitration Council of India (ACI) which will grade arbitral institution and accredit arbitrators by laying down norms and take all such steps as may be necessary to promote and encourage arbitration, conciliation, mediation and other ADR Mechanism and for that purpose evolve policy and guidelines for the establishment., operation and maintenance of uniform professional standards in respect of all matters relating to arbitration and ADR mechanism. The Council shall also maintain an electronic depositor of all arbitral awards.
  1. The ACI shall be a body corporate.  The Chairperson of ACI shall be a person who has been a Judge of the Supreme Court or Chief Justice or Judge of any High Court or any eminent person. Further, the other Members would include an eminent academician etc. besides other Government nominees.
  1. It is proposed to amend  sub section (1) of section  29A by excluding International Arbitration from the bounds of timeline and further to provide that the time limit for arbitral award in other arbitrations shall be within 12 months from the completion of the pleadings of the parties.
  1. A new section 42A is proposed to be inserted to provide that the arbitrator and the arbitral institutions shall keep confidentiality of all arbitral proceedings except the award. Further, a new section 42B protects an Arbitrator from suit or other legal proceedings for any action or omission done in good faith in the course of arbitration proceedings.
  1. A new Section 87 has been proposed to be inserted to clarify that unless the parties agree otherwise the Amendment Act 2015 shall not apply to (a) Arbitral proceedings which have commenced before the commencement of the Amendment Act of 2015 (b) Court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Amendment Act of 2015 and shall apply only to Arbitral proceedings commenced on or after the commencement of the Amendment Act of 2015 and to court proceedings arising out of or in relation to such Arbitral proceedings.

 

IMAAD M. KHAN

Associate

Tags :

Picture2

The United States of America (US) Government had published the Countering America’s Adversaries Through Sanctions Act (CAATSA) (Law) in August 2017 which authorizes the US President to impose sanctions with respect to a person which engages in a significant transaction with a person that is part of, or operates for or on behalf of, the defense or intelligence sectors of the Government of the Russian Federation, including the Main Intelligence Agency of the General Staff of the Armed Forces of the Russian Federation or the Federal Security Service of the Russian Federation. But the Law also allows the President to waive such sanctions in certain cases.

This Law was introduced owing to the rising tension between US and Russia including the alleged Russian interference in the 2016 U.S. Presidential Election, alleged Russian involvement in the Syrian civil war, etc.

India and other US allies, having trade relations with Russia, seem to have been adversely affected by the Law. Indian military uses Russian parts, hardware, supplies, maintenance help and other defence items, in particular state-of-the-art S-400 air missile defence system, for their ships, planes, etc. Moreover, India is currently in the advance stages of negotiations with Russia for five S-400 defence systems worth $ 4.5 billion (approximately). It is feared that India could face sanctions from US if it continues its defence ties and arms trade with Russia.

Owing to the fear of US sanctions, various Indian banks have recently blocked payments worth over $15 Million to Russia. As a result the entire arms trade of India with Russia has come to a halt.

Various experts have expressed concern over this move of the US and its adverse affects on India stating that India may seek waiver or exemption from these sanctions on the ground that India is reducing its dependence on Russian arms and hardware. According to a top defence official, it is also feared that the sanctions imposed on India may have a negative impact on the India-US arms trade and defence relations. Various officials and ex-officials of the US Government have commented in this regard stating that seventy per cent of the US military hardware is also Russian in origin and so US would not want to weaken its trade ties with India. But the Indian Government is yet to make any public statement in this regard.

 

Harini Daliparthy

Senior Legal Associate

Tags :

Picture1

Of late, India and USA have been having disputes relating to trade barriers that they alleged to have imposed on each other, thereby hampering their trade and commerce business.

As per the USA Generalized System of Preferences (GSP), USA would grant trading opportunities, preferential market access, tariff advantages, and preferential duty free export of around 4800 products into the country from designated beneficiary countries.

India has been the largest beneficiary of the GSP among developing countries with around 3,500 products getting access to the USA market at low or no duty.

But in 2017, the Office of United States Trade Representative (USTR) announced a new process to assess beneficiary country eligibility based on revised criteria. For instance, to qualify for GSP, a beneficiary country must meet 15 eligibility criteria established by Congress, including respecting arbitral awards in favor of U.S. citizens or corporations, combating child labor, respecting internationally recognized worker rights, providing adequate and effective intellectual property protection, reducing barriers to services trade and investment, and providing the United States with equitable and reasonable market access. 

Thereafter, in 2018, the USTR announced that it is reviewing the eligibility of India in the GSP based on concerns related to its compliance with the GSP market access criterion and that it has also accepted two petitions filed by the U.S. dairy industry and the U.S. medical device industry requesting a review of India’s GSP benefits on the grounds of Indian trade barriers affecting U.S. exports in those sectors. According to them, India has implemented certain trade barriers that create serious negative effects on U.S. commerce. For instance, India requires that import of dairy products can only be done if they have been derived from animals which have never consumed any feeds containing internal organs, or blood meal, etc.

USA had earlier dragged India to World Trade Organization (WTO) challenging the various export subsidy programmes of India that are creating an uneven playing field and are adversely affecting the US businesses at the global level. The export subsidy programmes provide financial help to the domestic businesses in India. As a result of which prices of the products are lowered and the domestic businesses offer tough competition to foreign businesses.

Further, India claims that USA has hiked the import duties on steel and aluminium, thereby hampering the exports of these goods by India and other countries to USA.

Thus, various experts from India have commented on the trade disputes between India and USA stating that India should approach the WTO in case USA denies it preferential benefits in retaliation for the allegations of trade barriers that USA claims its exports face in India.

Harini Daliparthy

Senior Legal Associate

Tags :

a

During Prime Minister Narendra Modi’s five day visit to the United Kingdom (UK) to for Commonwealth Heads of Government Meeting, 2018, Prime Minister Narendra Modi and Prime Minister of the UK, Theresa May, in their bilateral meeting, agreed to establish UK-India Tech Alliance to provide access routes to markets for British and Indian entrepreneurs and small and medium enterprises.

On 18th April 2018 the leading trade organisations- National Association of Software & Services Companies (NASSCOM), India and TechUK of the United Kingdom agreed on a memorandum of understanding (MoU) which will pave the way for hi-tech companies to create investment and export opportunities and to further enhance the skills of the technology workforce in both the countries.

The two trade associations have come together for the creation of UK-India Tech Alliance with a vision to promote the growth of skills required for technology innovation in the areas such as artificial intelligence (Al), machine learning, big data analytics and cyber-security.

Ms. Baroness Fairhead, Minister in the UK Department for International Trade (DIT) said that “Tech is at the heart of this new relationship between our two countries and we welcome TechUK and NASSCOM’s (National Association of Software & Services Companies) commitment to working together to strengthen the skills base in both countries that will be key to driving economic growth, development and prosperity,”.

Mr. Debjani Ghosh, President, NASSCOM said, “This landmark MoU between NASSCOM and TechUK will equip people with cutting-edge skills in emerging technology fields such as AI and robotics. We are delighted that NASSCOM’s FutureSkills initiative will be the basis for improved collaboration between our IT industries.”

This new partnership will ensure to encourage innovation and productivity by helping businesses in the UK and India collaborate on emerging technologies and develop digital skills in both countries.

Taruna Verma

Senior Associate

Tags :

sc

On Friday, 13th April 2018 the Supreme Court of India took suo motu cognizance of a horrendous case of abduction, brutal rape and murder of an eight year old girl child in Rasana Village in District Kathua, Jammu and Kashmir in January 2018.

When the charges were filed in April some groups including lawyers staged protests against the arrests of the eight accused. Though the charge sheet was submitted the support for eight accused continues and this has led to widespread social outrage.

The three Judge Bench comprising of Chief Justice Dipak Misra, Justices A. M. Khanwilkar and D. Y. Chandrachud held in the Order that no lawyer can be prevented from appearing on behalf of the victim’s family and such a prevention amounts to obstruction of justice.

The Supreme Court further held that It is settled in law that a lawyer who appears for a victim or accused cannot be prevented by any Bar Association or group of lawyers, for it is the duty of a lawyer to appear in support of his client, once he accepts the brief. If a lawyer who is engaged, is obstructed from appearing in the court or if his client is deprived of being represented in the court when he is entitled to do so in a lawful manner, that affects the dispensation of justice and would amount to obstruction of access to justice and interference with the administration of justice.”

The Bench has issued notice to Bar Council of India, State Bar Council of Jammu and Kashmir, High Court Bar Association at Jammu and the Kathua District Court Bar Association noting that “obstruction of delivery of justice and process of law, and that too by lawyers cannot be condoned”.

It also held in the Order that it is a settled law that a lawyer who appears for a victim or accused cannot be prevented by any Bar Association or group of lawyers, “for it is the duty of a lawyer to appear in support of his client, once he accepts the brief”.

The Order was concluded by the Bench with hope and trust that “members of the Bar Associations shall conduct themselves and would not obstruct the smooth functioning of the justice delivery system which includes the presence of the persons aggrieved or accused in court or for that matter the presence of investigating agency and the witnesses.”

Taruna Verma

Senior Associate

 

Tags :

Picture1

There are always speculations in high profile and celebrity cases that the justice delivery system may be conducted in an unfair and unjust manner and to the prejudice of the common man. Furthermore, it is assumed that the judicial system may be partial towards celebrities and may, also, prioritize powerful and influential litigants over the common man. It is, therefore, widely assumed that in such cases the courts may give biased judgments resulting in injustice to the common man.

Time and again, the courts have, in various instances, proved that such assumptions and speculations are groundless and unfounded.

For instance, the Supreme Court in State of Karnataka vs. Selvi J Jayalalitha and others (2017) 6 SCC 263 had convicted Late Ms. Jayalalitha, the then Chief Minister of the State of Tamil Nadu, for committing criminal misconduct, and criminal conspiracy with the object of acquiring and possessing pecuniary resources and assets beyond the known sources of her income under the Indian Penal Code 1860 and the Prevention of Corruption Act 1988.

In the light of the recent events, the Jodhpur Magistrate Court has recently convicted one of the most popular Indian personalities and celebrity film star, Salman Khan. On 05.04.2018, the Chief Judicial Magistrate, Jodhpur had passed a judgment in State of Rajasthan vs. Salman Khan and others whereby it convicted and held Salman Khan guilty of poaching two blackbucks, which are categorized as protected species under the Wildlife (Protection) Act 1972. The Court further held that while fixing the quantum of punishment, it would not take into consideration the social and charity work undertaken by the Actor, as he is a habitual offender. The Actor was, therefore, sentenced to five years of imprisonment and a fine of Rs. 10,000/-.

Salman Khan was earlier convicted by the Trial Court in Rajasthan for poaching three chinkaras, nearly extinct breed, in Jodhpur but later was acquitted by the Rajasthan High Court. The appeal by the State against the High Court judgment has been made and is pending before the Supreme Court.

The Bishnoi Community, who had filed a case against Salman Khan and others sometime in 1998 in Jodhpur, welcomed this decision of the Jodhpur Magistrate Court with a sense of justice having being delivered.

In the present case, the District and Sessions Judge has granted bail to Salman Khan on 07.04.2018 and has directed him to appear before its Court on 07.05.2018.

As a matter of fact, although it took the Court almost twenty years to convict Salman Khan, it has been proved yet again that no human being, celebrity or otherwise, is over and above the law. Every person is treated equally in the eyes of law and based on facts, evidences and circumstances of the case, the courts convict the guilty, irrespective of whether he/she is an iconic personality or a common man. This is because the paramount endeavor and lookout of the judicial system is to render fair and reasonable justice to the innocent and aggrieved who have been adversely affected by the reckless, irresponsible and unlawful acts or omissions of others.

 

Harini Daliparthy

Senior Legal Associate

Tags :

India’s-FDI-Policy-for-2017-Startups-among-Beneficiaries

As per Foreign Exchange Management Act, 1999 (FEMA), the onus of compliance with the various foreign investment limits rests on the Indian company. In order to facilitate the listed Indian companies to ensure compliance with the various foreign investment limits, Securities and Exchange Board of India (SEBI) in consultation with Reserve Bank of India (RBI) has decided to put in place the framework to help companies to ensure compliance with various foreign investment limits.

As per the SEBI circular issued, the guidelines for monitoring foreign investment limits in listed Indian companies shall be effective from 1st May 2018.

The monitoring of the foreign investment limits shall be based on the paid-up equity capital of the company on a fully diluted basis which means the total number of shares that would be outstanding if all possible sources of conversion are exercised, to ensure that all foreign investments are in compliance with the foreign investment limit.

The new guidelines for monitoring the foreign investment limits in listed Indian companies shall be implemented and housed at the depositories- National Securities Depository Limited (NSDL) and Central Depository Securities Limited (CDSL). NSDL and CDSL are both Government registered depositories which are used to hold various securities like stocks, shares, money, property etc. in an electronic form. NSDL works for National Stock Exchange (NSE), whereas CDSL works for Bombay Stock Exchange (BSE).

A company will have to appoint any one depository as its Designated Depository for monitoring the foreign investment limits.

The stock exchanges [BSE, NSE and Metropolitan Stock Exchange of India Ltd.  (MSEI)] shall provide the data on the paid-up equity capital of an Indian company to its Designated Depository.

The depositories need to provide an interface wherein a firm will have to give information including Company Identification Number (CIN), applicable sector, applicable sectoral cap, permissible aggregate limit for investment by Foreign Portfolio Investors (FPIs), Non-Resident Indians (NRIs) and other foreign investors, details of shares held by FPIs, NRIs and other foreign investors, on repatriable basis, in demat as well as in physical form, details of indirect foreign investment which are held in both demat and physical form, details of demat accounts of Indian companies making indirect foreign investment in the capital of the company and details of the downstream investment in other Indian companies

In the event of any change in any of the details pertaining to the company, such as increase/decrease of the aggregate FPI/NRI limits or the sectoral cap or a change of the sector of the company, etc. the company shall inform such changes along with the supporting documentation to its Designated Depository.

A red flag shall be activated whenever the foreign investment within 3% or less than 3% of the aggregate FPI/NRI limits or the sectoral cap.

The depositories shall inform the exchanges about the activation of the red flag for the identified scrip. The exchanges shall issue the necessary circulars/public notifications on their respective websites. Once a red flag has been activated for a given scrip, the foreign investors shall take a conscious decision to trade in the shares of the scrip, with a clear understanding that in the event of a breach of the aggregate FPI/NRI limits or the sectoral cap, the foreign investors shall be liable to disinvest the excess holding within five trading days from the date of settlement of the trades and if the FPIs have failed to disinvest within five trading days, then necessary action shall be taken by SEBI against the FPIs.

Thus, the depositories shall issue the necessary circulars and guidelines for collecting data on foreign investment from listed companies. The companies shall provide the necessary data to the depositories latest by 30th April, 2018.

Taruna Verma

Senior Associate

Tags :

Picture2

The Supreme Court has recently passed a judgment in Board of Control for Cricket in India v Kochi Cricket Pvt. Ltd. and etc on 15.03.2018. The Appellant herein had filed Chamber Summons in December 2015 before a Single Judge Bench of the Supreme Court for dismissal of Execution Applications moved by the Respondent on the ground that the filing of Section 34 Application under the Arbitration and Conciliation Act 1996 (the Act), which provides for setting aside of arbitral award, resulted in an automatic stay of Execution of the Awards under Section 36 of the Act. But the Single Judge dismissed the Chamber Summons and held that Section 36 of the Act as amended in 2015 (the Amended Act) would be applicable in the facts of this case. Thus, the Respondent was not barred from proceeding with the Execution Applications. The Appellant, therefore, filed an appeal against the aforesaid judgment before the Division Bench of the Supreme Court, which made the following observations:

The Supreme Court referred to this Court’s judgment in National Aluminum Co. Ltd. v. Pressteel & Fabrications, (2004) 1 SCC 540 and the 246th Law Commission Report 2014, where it was discussed that pendency of Section 34 application under the Act rendered an arbitral award unenforceable. This automatic suspension of execution of award with the filing of Section 34 application left no discretion with the court to put the parties to terms and that it became impermissible for the court to pass any order directing the losing party to deposit the award amount, wholly or substantially, into the court.

The Supreme Court further discussed the Objects of the Act stating that the Act was enacted to provide for speedy disposal of cases relating to arbitration with least court intervention. But it was observed that there was an increase in the intervention of courts in arbitration matters as stated above, which resulted in delay of disposal of arbitration proceedings. As a consequence, it defeated the very objective of the alternate dispute resolution system to which arbitration belongs.

Thus, the Law Commission suggested in its Report certain amendments to the Act including Section 36, which provides that the award will not become unenforceable merely upon the making of an application under Section 34. These amendments would facilitate settlement of disputes in a more user-friendly, cost effective and expeditious manner.

The Supreme Court further held that applications under Section 34 cannot be considered as an appeal against the arbitral award and that court proceedings in relation to arbitral proceedings, being independent from arbitral proceedings, would not be viewed as a continuation of arbitral proceedings, but would be viewed separately.

Further, execution proceedings are matters of procedure and in case there is a change in law during the pendency of such matter, the appellate court is bound to take notice of the change in law.

Thus, in view of the aforesaid observations, the Supreme Court herein held that:

Section 36 of the Amended Act is applicable to court proceedings commenced on or after 23.10.2015;

Section 36 of the Amended Act is also applicable to applications filed under Section 34 of the Act pending on the date of commencement of the Amended Act, i.e. 23.10.2015;

Arbitration and Conciliation (Amendment) Act 2015, as a whole, is prospective in nature.

 

Harini Daliparthy

Senior Legal Associate

Tags :

Cross-Border-Mergers

The Reserve Bank of India (RBI) has framed new rules for mergers, amalgamation and arrangement between Indian and foreign companies under Foreign Exchange Management Act (FEMA), 1999. The Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (“RBI Cross Border Merger Regulations”), will cover both inbound and outbound investments. The Regulations come into effect to encourage foreign direct investments into the country to allow cross-border mergers and amalgamation.

The Ministry of Corporate Affairs had already amended Section 234 of the Companies Act, 2013 set to ease the way for merger and amalgamation (M & A) of a foreign company with an Indian company and vice-versa.

As per the Cross Border Merger Regulations in the case of inbound merger, the rules allow the resultant company to issue or transfer any security to a person resident outside India subject to pricing and sectoral foreign investment conditions and FEMA Rules and in case of outbound merger, the rules allow resident Indian entities to acquire or hold securities of the resultant company in accordance with FEMA Regulations. Further, any compensation to the shareholders by the resultant Indian company or foreign company may be paid in accordance with the scheme sanctioned by the National Company Law Tribunal (NCLT).

RBI as per the Cross Border Merger Regulations allow the Indian company outside India to hold the assets and anything which is not permitted to be acquired or held has to be disposed off within a period of two years from NCLT’s sanction date. RBI with a purpose to enhance the cross-border M&A activity, set the rules which will allow Indian companies to merge their foreign businesses with their domestic companies while foreign companies will no longer be required to maintain an Indian company after a merger and instead fold it up into a single entity.

Key features of the RBI Cross Border Merger Regulations are as under:

Particulars Inbound Merger Outbound Merger
Mechanics A merger or amalgamation of foreign company with an Indian company; A merger or amalgamation of Indian company with a foreign company;
Issue / Acquisition of securities pursuant to cross-border merger Issuance/ transfer of shares to person resident outside India should comply with the pricing guidelines, entry routes, sectoral caps, attendant conditions and reporting requirements as laid down in Foreign Exchange Management (Transfer and issue of Security by a person Resident outside India) Regulations, 2017.

However, if the foreign company is joint venture (“JV”)/ wholly owned subsidiary (“WOS”) of Indian company then conditions prescribed under Foreign Exchange Management (Transfer or issue of any foreign security) Regulations, 2004 shall need to be complied by Indian company.

Further, in case the merger of the JV/ WOS results into acquisition of step down subsidiary of JV/ WOS of the Indian party, then Regulation 6 and 7 of Foreign Exchange Management (Transfer or issue of any foreign security) Regulations, 2004 shall need to be complied with;

A person resident in India may acquire or hold securities of the foreign Company pursuant to the outbound merger in accordance with current regulations pertaining to investment in Joint Venture / Wholly Owned Subsidiary abroad or the Liberalized Remittance Scheme (“LRS”), as applicable.

 

Office outside/ in India An office outside India of the foreign company, pursuant to the sanction of the Scheme shall be deemed to be the branch/office outside India of the resultant Indian company in accordance with Foreign Exchange Management (Foreign Currency Account by a person resident in India), Regulations, 2015. Accordingly, the resultant Indian company may undertake any transaction as permitted to a branch/ office under the aforesaid Regulations; An office in India of the Indian company, pursuant to sanction of the Scheme of cross border merger, may be deemed to be a branch office in India of the foreign company in accordance with the Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business), Regulations, 2016. Accordingly, the foreign company may undertake any transaction as permitted to a branch office under the aforesaid Regulations;
Conditionalities on Borrowings Any borrowing or guarantees of the foreign Company from overseas source which becomes the borrowing of the Indian company pursuant to inbound merger shall conform with the External Commercial Borrowing norms or Trade Credit norms or other foreign borrowings norms within a period of two years.

In the initial two years, the Indian company will not be able to make remittance for repayment of the foreign liability.

Further, end use restrictions for such borrowings shall not apply;

Foreign Company shall be liable to repay outstanding borrowings or guarantees as per the Scheme sanctioned by National Company Law Tribunal (“NCLT”) in terms of the Companies (Compromise, Arrangement or Amalgamation) Rules, 2016 pursuant to the outbound merger.

However, the resultant foreign company shall not acquire liability payable to lender in India if the same is not in conformity with Foreign Exchange Management Act, 1999 (“Act”), rules or regulations framed by the RBI.

Further, no-objection certificate to this effect shall need to be obtained from the lenders in India of the Indian company;

Acquisition / Holding of assets or securities An Indian company may acquire and hold any assets/securities outside India pursuant to the inbound merger, which an Indian Company is permitted to acquire under the current provisions of the Act, rules or regulations framed by the RBI; Foreign Company may acquire and hold any assets/securities in India pursuant to the outbound merger which Foreign Company is permitted to acquire under the provisions of the Act, rules or regulations framed by the RBI;
Transfer of assets / securities not permitted to be acquired / held In a situation where an Indian company is not permitted to acquire or hold any assets/securities outside India which is forming part of the foreign Company under inbound merger, such assets/securities need be transferred by the Indian company within a period of two years from the date of sanction of the Scheme and sale proceeds shall be repatriated to India immediately through banking channels.

Any liabilities not permitted to be held by the Indian company, the same may be extinguished from the sale proceeds of such overseas assets within a period of two years;

In a situation where foreign company is not permitted to acquire or hold any assets/securities in India which is forming part of an Indian Company under outbound merger, such assets/securities can be transferred by the foreign company within a period of two years from the date of sanction of the Scheme and sale proceeds shall be repatriated outside India immediately through banking channels.

Repayment of Indian liabilities from sale proceeds of such assets/securities within a period of two years shall be permissible;

Bank accounts Pursuant to the Scheme of inbound merger, the resultant Indian company may open a bank account overseas, in foreign currency for a maximum period of two years from the date of sanction of Scheme; Pursuant to the scheme of outbound merger, the resultant foreign company may open Special Non-resident Rupee (“SNRR”) account in India in accordance with Foreign Exchange Management (Deposits) Regulations, 2016 for a maximum period of two years from the date of sanction of Scheme;

 

Taruna Verma

Senior Associate

Tags :