ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA BY FOREIGN NATIONALS, NRI AND PERSON OF INDIAN ORIGIN (PIO)

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The Foreign Exchange Management Act, 1999 (FEMA) empowers the Reserve Bank to frame regulations to prohibit, restrict or regulate the acquisition or transfer of immovable property in India by persons resident outside India.  FEMA also prohibits acquisition or transfer of immovable property in India by citizens of certain countries, it states – “No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan without prior permission of the Reserve Bank shall acquire or transfer immovable property in India, other than lease, not exceeding five years”.

The FEMA regulates the purchase of properties by Non-Resident Indians (NRI), Persons of Indian Origin (PIO), and Foreign Nationals/Citizens.

DEFINITIONS –

  • NON-RESIDENT INDIAN – Non-Resident Indian (NRI) is a citizen of India resident outside India.
  • PERSON OF INDIAN ORIGIN – Person of Indian Origin (PIO) means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who at any time, held an Indian Passport or who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955.
  • FOREIGN NATIONALS – A person is a Foreign National to India, who lives outside the India and not a citizen of India.

 

PURCHASE OF IMMOVABLE PROPERTY IN INDIA BY A FOREIGN NATIONAL OF NON- INDIAN ORIGIN, NRI AND PIO RESIDENT OUTSIDE INDIA –

NRI – An Indian citizen resident outside India does not require any special permission to buy immovable property in India. An NRI can buy or acquire any immovable property in India other than agricultural/plantation/farm house, and transfer any immovable property in India to a person resident in India and to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India.

PIO – A PIO does not require any special permission to buy immovable property other than agricultural land / farm house / plantation property in India.

A PIO can acquire an immovable property other than agricultural land / farm house / plantation property in India, by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India, and by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India.

A PIO can transfer any immovable property in India other than agricultural land/farm house/plantation property, by way of sale to a person resident in India. He/ she can also transfer agricultural land/farm house/ plantation property in India, by way of gift or sale to a person resident in India who is a citizen of India and any residential or commercial property in India and by way of gift to a person resident in India or to a person resident outside India who is a citizen of India or to a person of Indian Origin resident outside India.

FOREIGN NATIONALS – A Foreign National resident outside India cannot buy immovable property in India. Also he cannot acquire any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India. However, he can acquire or transfer immovable property in India, on lease, not exceeding five years without the prior permission of the Reserve Bank.

However, a Foreign National on becoming ‘resident in India’ other than a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, or Bhutan, can purchase immovable property in India without any prior approval from the RBI.

The terms ‘Resident in India’ defined under FEMA, according to that a Foreign National would have to satisfy the conditions given under FEMA to become a resident in India that are :- (a) a person must be residing in India for more than one hundred and eighty-two days (182 days) during the course of the preceding financial year and  (b) a person who has come to or stays in India in the current financial year for the purpose of taking up employment, carrying on business or vocation in India or for any other purpose that would indicate your intention to stay in India for an uncertain period.

Foreign Nationals who have acquired immovable property in India by way of inheritance with the specific approval of the Reserve Bank or have purchased the immovable property with the specific approval of the Reserve Bank cannot transfer such property without the prior permission of the Reserve Bank.

 

Parul

Senior Associate

The Indian Lawyer

BAN! FOREIGNERS COMMISSIONING SURROGACY IN INDIA

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India has been the place for foreigners who look for a child through surrogacy for the past two decade. The shout out for surrogacy in India was such that it led to the growth of several commercial firms and even law firms claiming speciality in surrogacy law and assisting foreigners to have their child in India through a surrogate Indian mother. Several foreign companies too entered India by establishing their own companies to assist nationals from around the world, identify a surrogate mother in India, negotiate the fee to be paid by them to the Indian mother for carrying the child in her womb, navigate the foreigners through the maze of paperwork and even assist the child in obtaining a passport and a visa to leave the country.

All this is set to be history as foreigners may no longer be able to choose a womb for their child in India as the central government has proposed to bar them from commissioning surrogacy in India. The proposal is a part of the newly-drafted Assisted Reproductive Technology (ART) (Regulation) Bill, 2014, which has been put out by the Department of Health Research under the health ministry.

However, the draft Bill proposed to allow surrogacy to overseas citizens of India (OCIs), people of Indian Origin (PIOs), non resident Indians (NRIs) and even to foreigners married to an Indian citizen. But it states that such couples will have to comply with certain conditions for commissioning surrogacy. For an instance, such couples will have to be married and the marriage should have sustained for a considerable period of time. They also have to produce a certificate saying ‘the woman is unable to conceive her own child.’ A foreigner married to an Indian citizen shall have to come on a ‘Medical Visa for surrogacy’. Those seeking surrogacy will also have to appoint a local guardian who shall be legally responsible for taking care of the surrogate during and after the pregnancy.

The National Commission for Women (NCW) has also asked for single women to be allowed to become surrogates. But, the draft Bill is silent on single parents and commissioning of surrogacy by couples in a live-in relationship. As per the draft, if OCI, PIO and a foreigner married to an Indian citizen seeks sperm or egg donation, or surrogacy in India, and a child or children are born as a consequence, the child or children, even though born in India, shall not be an Indian citizen but shall be entitled to Overseas Citizenship of India according to the Citizenship Act, 1955.

The Bill also proposed to make it mandatory for all couples commissioning surrogacy to accept the custody of the child or children irrespective of any abnormality that the child or children may have. Commissioning couple shall submit a certificate indicating that the child/children born in India through surrogacy is/are genetically linked to them and they will not involve the child/children in any kind of pornography or pedophilia.

Legal experts have already begun debating whether the new Bill when it becomes a law, will pass the scrutiny of the courts given the fact that the new law might violate a woman’s right to bear a child, which is a fundamental right of the Constitution of India.

 

Sanchayeeta Das

Legal Associate

The Indian Lawyer

DOWNLOADING, EXHIBITING OR DUPLICATING ONLINE PIRATED FILMS IS A CRIMINAL ACT

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“If you create something and then someone takes it without your permission that is stealing. It may sound harsh, but it is true.” – Artist Mary J. Blige.

 

India has always been a place where you can access torrent websites easily and freely. Last year, the Indian Government took a strict stand against piracy and objectionable activities in the country and banned over 800 pornographic websites that were “found to be spreading anti-social activities” in the country. After backlash from users, the Government had partially lifted the ban from some of those websites a week later.

In the last couple of years Internet Service Providers, probably at the request of Department of Telecommunications, have invested lot more in strengthening the mechanism through which they block websites. Department of Telecommunications too, instead of relying on Internet Service Providers, has started bring into play the big companies like Tata Communications and Airtel that manage a number of internet gateways in India.

Recently this year in August, the Bombay High Court directed Internet Service Providers to block several URLs on a plea by producers of the film Dishoom against piracy and to place an ‘error message’ on the blocked sites as a measure to ensure genuine e-commerce sites are not affected, after that a message started appearing on certain blocked URLs, which stated that viewing, downloading or duplicating copyright content could result in a three-year prison term and a fine of Rs.3 lakhs. The message reads:

“This URL has been blocked under the instructions of the Competent Government Authority or in compliance with the orders of a Court of competent jurisdiction. Viewing, downloading, exhibiting or duplicating an illicit copy of the contents under this URL is punishable as an offence under the laws of India, including but not limited to under Sections 63, 63-A, 65 and 65-A of the Copyright Act, 1957 which prescribe imprisonment for 3 years and also fine of upto Rs. 3,00,000/-. Any person aggrieved by any such blocking of this URL may contact at urlblock@tatacommunications.com who will, within 48 hours, provide you the details of relevant proceedings under which you can approach the relevant High Court or Authority for redressal of your grievance.” 

 

The idea is to inform Internet Viewers that downloading a pirated film is illegal and has legal consequences. However, it seems that Tata Communications slipped while putting an “error massage” that states that Viewing, downloading, exhibiting or duplicating an illicit copy of the contents is an offence as “viewing does not fall within the ambit of a criminal offence.”

 

Multiple reports in media incorrectly suggested that merely visiting these blocked websites would result in the penalty. But recently the Bombay High Court has said it is inaccurate to suggest that merely viewing an illicit copy of a film is a punishable offence under the Copyright Act. Justice Gautam Patel has said that the offence is not in viewing, but in making a prejudicial distribution, a public exhibition or letting for sale or hire without appropriate permission copyright-protected material.

He asked Internet Service Providers to drop the line “viewing, downloading, exhibiting or duplicating’ a particular film is a penal offence” from the error message. The Bombay High Court ordered Internet Service Providers to put up a more generic message along with details of a nodal officer that users can contact to address grievances. The message must include, “Infringing or abetting infringement of copyright-protected content including under this URL is an offence in law. Sections 63, 63-A, 65 and 65-A of the Copyright Act, 1957, read with Section 51, prescribe penalties of a prison term of up to 3 years and a fine of up to Rs 3 lakhs.”

This means that no one can be penalised for merely visiting or viewing pirated movies online on a blocked torrent website.  However there is penal consequence for illegal downloading, exhibiting or duplicating an artistic work without permission.

 

Parul

Senior Associate

The Indian Lawyer

 

MANIPUR – POLITICAL CRISIS

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Manipur, one of the most beautiful north-eastern States, has come to a situation of crisis with shortage of essential commodities, frequent bandhs, clashes and curfews. The normal life of people in Manipur has become paralyzed.

All these started when three controversial Bills were passed by the Okram Ibobi Singh Government in August last year. It prompted violent protests, killing some people and also injuring many others.

The creation of these three Bills started when there was a demand by the Meiteis in the valley to introduce a permit for any outsider wanting to visit the State. It is called the Inner Line Permit and is granted by the State Government. The Inner Line Permit is an official and obligatory travel document issued by the Government of India to allow inward travel of an Indian citizen into a protected area for a limited period. So, anyone residing outside the State who is not a native will need it to enter Manipur. This Permit was introduced to ensure that the hill States were protected. The plan behind this was to prevent non-tribals from settling there and disturbing the fragile demography.

To fulfill this demand, the three Bills were passed.

The first Bill, Manipur People’s Protection Bill, considers Manipuris as those whose names appear in the 1951 Census. The tribals fear losing the land their parents or grandparents left behind just because of unavailability of records. They fear that they would be excluded as most of these areas were inaccessible at that point of time and documentation was very poor.

The second Bill, the Manipur Land Revenue and Land Reforms Bill (Seventh Amendment), is in direct violation of Section 371C of the Indian Constitution which prohibits purchase of tribal land by non-tribals. Their main fear is that if they lose their land, then they will have nothing to hold on to because they are mostly into agriculture.

The third Bill, the Manipur Shops and Establishments (Second Amendment), also is feared as it will allow expansion of business in tribal areas. This will bring in outsiders to establish shops and after a few years, they will be in charge because of their money power.

Though the Bills have been passed by the assembly, the President has not yet given his assent.

 

Sanchayeeta Das

Legal Associate

The Indian Lawyer

IMPORTANCE OF NUCLEAR SUPPLIERS GROUP MEMBERSHIP TO INDIA

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Nuclear power is a large-scale energy-producing technology that can be used for both civil and military purposes. In 1974, India conducted a nuclear weapons test, at Pokhran, Rajasthan, becoming the first ever country outside the member nations of the United Nations Security Council to do so. When other countries opposed to the nuclear test, in 1974 the Nuclear Suppliers Group (NSG) was formed as an export control regime amongst nuclear supplier countries in order to keep a check on the international nuclear proliferation through implementation of two sets of Guidelines, one for nuclear exports and the other for nuclear-related exports. Amongst these, membership of Nuclear Non-Proliferation Treaty (NPT), which puts restrictions on conducting any further nuclear tests, is only a guiding principle and not a mandatory requirement while deciding on a country’s application for membership at NSG. For instance, France, a non-signatory of NPT, was made a member of NSG.

Joining the NSG will give India better access to low-cost, clean and renewable nuclear energy which is essential for its economic growth and for which a unanimous approval of all 48 members is a prerequisite. But India could manage to get support only from countries like USA, UK, Switzerland, Japan and few others whereas other member nations like Turkey, Ireland, Austria and New Zealand have opposed its entry into NSG.

Until now, the non-renewable process of nuclear power generation involved burning of radioactive heavy metals such as uranium which is not very abundant on earth and burning of fossils, which resulted in emission of greenhouse gases such as carbon dioxide. With the aim to combat climate change, in the year 2014, Bhabha Atomic Research Centre (BARC) came up with a next-generation nuclear reactor which would process the nuclear power in a renewable and environment friendly manner by using thorium-plutonium as its fuel, instead of uranium and fossils. India is rich in thorium reserves but lacks other natural resources such as plutonium which has to be imported. Moreover, the use of nuclear power plants to generate electricity will reduce the use of coal-fired power plants, which will result in reduction of air pollution. But for this, it is essential that India gets recognition at NSG as a member.

NSG membership would provide India the following advantages:

  1. A platform to propose the idea of plutonium trade for its clean and green nuclear energy programme. An early adoption of thorium technology would give India enormous energy independence and security. It will also give India access to technology, know-how, equipments and materials required for setting up of nuclear power plants.
  2. With access to advanced and eco-friendly technology and know-how, India will be in a position to give effect to its Make in India programme by commercializing the manufacture of nuclear power equipments. This will encourage innovation and efficiency in manufacture of high technology and low cost equipments.
  3. While importing the foreign technology and equipments, India could also export its indigenous technology and expertise on peaceful and safe use of nuclear energy to member nations of NSG. This would prove to be beneficial for other nations and revenue generating for India.

 

Harini Daliparthy

Legal Associate

The Indian Lawyer

SUPREME COURT ON CAUVERY DISPUTE

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The issue regarding water distribution from river Cauvery between States of Karnataka and Tamil Nadu (including the Union Territory of Puducherry) was heard in appeal by Supreme Court on 2nd September 2016. After recording the arguments from both sides, the SC on 5-9-2016 held that the Supervisory Committee, constituted under notification dated 22.05.2013, shall pass the final order with regard to whether water shall be released by the State of Karnataka to the State of Tamil Nadu and if it shall, then what quantity of water be released. Until the Committee passes the final order in this regard, the Supreme Court had directed the State of Karnataka to release 15 cusecs of water per day for the sustenance of the ‘samba’ crops and in interest of the farmers in the State of Tamil Nadu and the Union Territory of Puducherry.

Post-5th September, 2016 order of the Supreme Court, agitations were seen across cities of State of Karnataka including Bangalore, Mandya, Mysore and Hassan which had paralysed the daily lives of citizens and destroyed public and private properties causing huge loss of life and money. Therefore, modification of the order dated 5-9-2016 was sought for by the State of Karnataka on 12-9-2016.

In the appeal made to Supreme Court on 12-9-2016, the Court held that agitation can never be the ground for seeking modification of an order. It is the duty if the Executive to maintain law and order in the State and see that the order of the Court is complied with. It is also the duty of the citizens to obey the same. In the event there is any public objection or grievance, they shall take recourse to legal remedies and not take it out on streets.

State of Tamil Nadu claimed that they would be requiring 50 thousand million cubic feet water for the purpose of sustained relief until the Supervisory Committee passes the final order. But releasing such huge quantities of water at one time would leave the State of Karnataka with scarcity of drinking water and water for irrigation. Therefore, it held that the State of Karnataka shall release 12000 cusecs of water per day and the said direction, shall remain in force till 20th September, 2016.

Though the matter was directed to be listed on 16th September, 2016, but as there is difficulty, the matter has been listed on 20th September, 2016 at 2.00 p.m.

 

Harini Daliparthy

Legal Associate

The Indian Lawyer

DEBENTURE TRUSTEES’ ROLE UNDER SARFAESI AMENDMENT ACT, 2016

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Recently, the Parliament has received the assent of the President for the Enforcement of Security Interest and Recovery of Debt Laws and Miscellaneous Provisions (Amendment) Act, 2016 (The Act). The Act has introduced several amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDDBFI Act) and other incidental laws. While the Bankruptcy Code provides for collective action of creditors, the Amendments to the SARFAESI Act and other Acts seek to streamline the processes of creditors individually taking action against the defaulting debtor.

 

THE KEY POINTS OF THE AMENDMENT ACT ARE:

 

  1. The Act provides registration of creation, modification and satisfaction of security interest by all secured creditors and provision for integration of registration systems under different laws relating to property rights with the Central Registry so as to create Central database of security interest on property rights.

 

  1. The Act provides for the creation of two new Central Registries/Databases to help quickly and efficiently cross-checking the various properties against a debtor’s name at the time of a default. One Registry maintains a record of all transactions involving secured loans. The other Central Database maintains a record of all property registered under different systems in the Country (immoveable, moveable, intangible).

 

  1. The Act gives powers to the Reserve Bank of India (RBI) to regulate and monitor the activities of Asset Reconstruction Companies (ARC’s) in a changing business environment. The RBI may carry out audits and inspections in ARC’s, and even penalise them in cases of non-conformance with RBI guidelines.

 

  1. The Act removes the stamp duty on assignment of loans by banks and financial institutions in favour of Asset Reconstruction Companies (ARC’s) as long as the asset/property is being transferred for the purpose of securitisation or reconstruction.

 

  1. The Act enables non-institutional investors to invest in security receipts.

 

  1. The Act gives specific timeline for taking possession of secured assets against which a loan had been provided, upon a default in repayment with the assistance of the District Magistrate. The Act provides that this process will have to be completed within 30 days by the District Magistrate.

 

  1. The Act gives priority to secured creditors, after registration of security interest with the Central Registry, in repayment of debts.

 

  1. The Act empowers the District Magistrate to assist the banks to convert their outstanding debt into equity shares and hold a stake of 51% or more in the company, thereby taking over the management of a company in case of default of the company to repay its loans.

 

  1. The Act allows the Debt Recovery Tribunal (DRT) to restore a secured asset or management of a business to the borrower, after examining facts related to the case.

 

  1. The Act includes Debenture Trustee in the definition of secured creditors.

 

DEBENTURE TRUSTEE – A debenture trustee is a person or entity that serves as the holder of debenture stock for the benefit of another party.

DEBENTURE TRUSTEE AS SECURED CREDITORS – Definition of secured creditor under the Amended SARFAESI Act:

Section 2(1) (zd) defines – “secured creditor” means—

  • any bank or financial institution or any consortium or group of banks or financial institutions holding any right, title or interest upon any tangible asset or intangible asset as specified in clause (l);
  • Debenture Trustee appointed by any bank or financial institution; or
  • an asset reconstruction company whether acting as such or managing a trust set up by such asset reconstruction company for the securitisation or reconstruction, as the case may be; or
  • Debenture Trustee registered with the Board appointed by any company for secured debt securities; or
  • any other trustee holding securities on behalf of a bank or financial institution,

 

in whose favour security interest is created by any borrower for due repayment of any financial assistance.

Since the definition of “secured creditor”, as amended, includes a Debenture Trustee for debt securities, the enforcement will be carried out by the Debenture Trustee. In case of secured debentures, the Debenture Trustee is the holder of security interests, which he holds in trust for the debenture holders.

Under this Amended Act, If there is a default in repayment and the debt is qualified as non-performing asset in nature. The Debenture Trustee being a secured creditor can take enforcement action under section 13(2) of the SARFAESI Act.

The Amended SARFAESI Act introduces a proviso to section 13(2) is as follows:

“Provided that—

  • the requirement of classification of secured debt as non-performing asset under this sub-section shall not apply to a borrower who has raised funds through issue of debt securities; and

 

  • in the event of default, the Debenture Trustee shall be entitled to enforce security interest in the same manner as provided under this section with such modifications as may be necessary and in accordance with the terms and conditions of security documents executed in favour of the Debenture Trustee.

 

In case of debt securities, If the debentures issued or invested are not in the books of the trustee at all. Therefore, the question of such debentures or debt securities being an Non-Performing Asset in the books of the trustee does not arise. It is in the light the proviso of sub-section (2) provides that the classification as an Non-Performing Asset in the books of the secured creditor will not be applicable. The Debenture Trustee can take action as provided under the security documents.

 

DEFAULT – The Amendment Act inserted Sub-clause (ii) in the definition of default as follows:

Section 2 (1) (j) “default” means—

  • non-payment of any debt or any other amount payable by the borrower to any secured creditor consequent upon which the account of such borrower is classified as non-performing asset in the books of account of the secured creditor; or

 

  • non-payment of any debt or any other amount payable by the borrower with respect to debt securities after notice of ninety days demanding payment of dues served upon such borrower by the Debenture Trustee or any other authority in whose favour security interest is created for the benefit of holders of such debt securities;

 

ENFORCEMENT OF SECURITY INTEREST BY DEBENTURE TRUSTEE

 

A Debenture Trustee has to send two notices for the enforcement of security interest, one for constituting default under Section 2(1)(j)  and the other for demanding payment in terms of section 13(2) under the SARFAESI Act. The steps, for enforcement of security interest by a Debenture Trustee, are:

 

  1. There has to be a default as defined under Section 2(1)(j) on scheduled payment, as per the terms of issue of the debentures.

 

  1. The Debenture Trustee has to serve a notice demanding payment. This is a 90-days’ notice, required in terms of section 2(1)(j) to constitute a case of default.

 

  1. If, after 90 days of abovementioned notice, the demanded payment is not settled by the issuer/borrower then the Debenture Trustee may serve a notice in terms of section 13(2), demanding payment within 60 days of the notice. This notice has to satisfy all the requirements of Section 13(2), including the details of the secured asset, etc.

 

  1. If, after service of the second notice under section 13 (2), the issuer/borrower does not pay the amount demanded in the notice, the Debenture Trustee may take the measures mentioned in section 13 (4).

 

The Amendment to the SARFAESI Act gives Debenture Trustees a strong right on the enforcement possibilities and widens the scope the role as Debenture Trustees hold the security interest for and on behalf of the debenture holders. Now after the Amendments the Debenture Trustees will play a significant role in enforcement of security interests which goes beyond identifying such stress situations which may jeopardise the security interests they hold and taking timely and appropriate action in that regard.

 

Parul

Senior Associate

The Indian Lawyer

 

 

 

RESISTING ARREST

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When we imagine a person resisting arrest, the mental image that comes to mind is that of a person violently thrashing around and physically resisting an officer who is simply attempting to handcuff him or her.

Resisting arrest is a criminal charge against an individual who has committed, depending on the jurisdiction, at least one of the following acts:

  • Fleeing a police officer while being arrested.
  • Threatening a police officer with physical violence while being arrested.
  • Physically struggling to free oneself from being restrained (handcuffed or put into the police vehicle).
  • Attacking a police officer while being arrested.
  • Providing an officer with false identification (either verbally or by presentation of a false official document, i.e. a fake ID).

 

But it is to be kept in mind that not all arrests are lawful and based upon probable cause. However, an attempt at resisting arrest can lead to additional charges including criminal charges.

In most cases, resisting arrest heads on to other add-on charges. After all, legal administration had to have a reason to arrest the suspect in the first place that caused him or her to resist. In many states, these charges may be called “resisting officer with violence” and “resisting arrest without violence” or similar terminology.

In many jurisdictions, resisting arrest is considered a criminal act. This is usually punishable by upto a year in jail along with added penalties such as fines, community service and probation. These penalties are in addition to the charges that the defendant may face due to the original charges for which the person was being arrested.

A resisting arrest charge is very subjective in nature. It generally relies on the law enforcement officer’s determination that the defendant is resisting being arrested.

In order to avoid being charged with a resisting arrest, the suspect may make an effort to act peacefully and respectfully so that there is no room for charges of this nature to arise. A criminal defense lawyer may be able to challenge an unlawful arrest without putting the defendant’s freedom at stake with resisting arrest charges.

However, in some cases, a person may face resisting arrest charges due to unclear language. The individual may not understand what the law enforcement officer is saying or may not ever be aware that the law enforcement officer is talking to him or her. Individuals who know that they are innocent may resist arrest because they know that that they are innocent. A person may believe that the law enforcement officer has made a mistake or has the wrong person. He or she may believe that the cop is discriminating against him or her. In some jurisdictions, if the arrest is considered to be unlawful then the resisting arrest charges will be dismissed.

Individuals who face resisting arrest officers should seek immediate legal assistance from a criminal defense lawyer. A lawyer may be able to assess the situation and raise all defenses to show that the defendant was in fact not resisting arrest as accused. Rather than fighting criminal charges based on resisting, a lawyer may be able to fight for the defendant’s rights due to an unlawful arrest.

 

Sanchayeeta Das

Legal Associate

The Indian Lawyer

 

 

LIBERALIZATION OF INDIAN LEGAL SERVICES SECTOR

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India has been putting in efforts to liberalize its legal services sector in order to allow foreign law firms and lawyers the right to operate in India. The global integration in the legal profession would also help India in increasing its share in the global services trade. Few Indian firms have set up their branches across other jurisdictions like UK and US, likewise, post-liberalization, the foreign firms and lawyers will be allowed to set up their branches in India and employ Indian lawyers or enter into partnerships with Indian firms, provide legal advice on foreign law, etc.

Basically, legal services in India cover activities such as counseling done by solicitors, drafting and pleading done by advocates and notarial activities done by public notaries under Advocates Act 1961; advisory and arbitration. The legal service, like many other professional services, is a sector where regulatory barriers are rather high. But the NDA led government has relaxed the foreign direct investment (FDI) norms in many sectors such as defence, banking, railways, civil aviation, broadcasting, construction and medical devices, so if the FDI norms in the legal service sector are also relaxed, the liberalization of this sector would act as an accelerator for international investment in India.

But liberalizing the legal services market will have its own pros and cons in the following areas:

Costing:

  • Pros- Although both the foreign firms and Indian firms may charge similar fees from their respective clients and may pay similar salaries to their respective employees, but the expenses involved in travel, building the infrastructure, etc of the foreign firms can be avoided by the Indian firms. As a result the overall cost incurred by Indian firms would be comparatively lesser.
  • Cons- But when it comes to specialized advisory services like legal services for 3G licensing etc. foreign law firms may charge a premium price.

 

Quality:

  • Pros– With entry of foreign firms and lawyers into Indian legal services market, the Indian firms will strive to become more competent by expanding the range of services they provide, employ more and best talent which may include partnerships with foreign legal professionals and provide better quality services to clients.
  • Cons- With the potential growth in competition, Indian firms might need to make their presence more prominent in   the Indian market. But the Advocates Act 1961 does not permit Indian firms to advertise or solicit their work     in any form of media unlike foreign firms which are allowed to advertise in an extensive and flexible manner. As a result, it will create a non-level playing field unless the Bar Council of India (BCI) amends its rules.Moreover, the probability of Indian firms expanding their range of services by getting into partnerships with foreign firms and lawyers would be less because the foreign entrants may not always prefer to use the services of Indian lawyers alone and they would want to bring in experts from different places.

 

Areas of Interest:

  • Pros– It has been observed that foreign law firms and lawyers mostly engage in providing services with regard to corporate documentation, mergers and acquisitions, advisory work on public and private international law, and all other kinds of non-litigation work. Whereas, a majority of Indian legal professionals and firms engage in litigation work. So their areas of interest won’t clash with each other
  • Cons- To permit the foreign firms and lawyers to provide services in their area of interest in India, the lawyer has to be admitted by BCI as an advocate as per the Advocates Act 1961. However, due to the prevailing law which disallows foreign lawyers to practice in India liberalizing the legal service sector will have obstacles for the Government.

 

The US and the UK have been pushing India to open up the legal services sector to foreign firms. But if this sector is made open to one country then it has to open up to other member countries of World Trade Organization (WTO) because the “most favored nation” clause of the General Agreement on Trade in Services (GATS) does not allow favoring any country. As a result there would be ease of access for lawyers coming from different member states, with different backgrounds and training, which could lead to deterioration in the quality of legal services provided in India and it might also undermine the authority of the BCI. Currently the entire question of liberalizing this legal sector is uncertain and only time will tell whether the Indian legal sector will accept the advent of foreign legal professionals and law firms in India.

 

Harini Daliparthy

Legal Associate

The Indian Lawyer

 

ESTABLISHING A FOREIGN ENTITY IN INDIA

foreign-company

India is the fastest growing economy in the world with a target market of over 1.25 billion population which is the second highest in the world thus, making it desirable for lots of foreign entities to explore, enter and develop their businesses. The Government has also made it easier for foreign entities by developing proactive policies in Foreign Direct Investment. The Government has made changes in the Foreign Exchange Management Act (FEMA), Reserve Bank of India Rules and the Companies Act 2013. All changes have been made with the sole intention of making India a good investment destination and purpose of ease of doing business in India.

A foreign entity can establish its business in any of the following options:

Joint Venture (JV): Creating joint ventures is the most preferred practice among foreign entities to establish business in India. In a joint venture both the parties exercise control over the new enterprise and share revenues, expenses and assets. It can be done with any of the business units available in India. The end result is a new enterprise where two or more units come together to achieve a commercial objective. The joint venture is done for a specific business purpose and for a limited time period. To undertake business activities in India, a foreign company can invest equity in an existing Indian company through a joint venture agreement.

Wholly Owned Subsidiary Company (WoS): wholly owned subsidiary is a company in which a foreign entity makes 100% direct investment in India through automatic route. This is considered as the easiest and the preferred route by the foreign entities for establishment of their business in India. A wholly owned subsidiary company can be formed as a private limited or public limited company. A wholly owned company has more flexibility to conduct business in India as compared to liaison office or branch office. In these companies funding can be done via equity, debt and internal accruals. Indian transfer pricing regulations apply on such transactions.

Liaison Office: Liaison office means a business office which acts as a channel of communication between the head office (outside India) and parties in India. A liaison office can not undertake any commercial activities and cannot earn any income in India. The expense of this office is entirely met by its parent company through inward remittances received in convertible foreign exchanges. The main role of such offices is limited to collecting information about possible market opportunities and providing information about the company and its products to the Indian customers, promoting import export from/to India. The liaison offices are setup under the jurisdiction of RBI. The companies seeking to establish liaison office in India are not allowed to acquire immovable property in India however they can take any property on lease for a period not exceeding five years. The permission for establishment of a liaison office is given for three years initially and it can be renewed thereafter. These offices are not permitted to involve into activities such as entering into any contracts with Indian residents, borrowing funds, trading, etc.

Project Office: Project offices are temporary project or site offices which are setup by foreign companies to execute specific projects in India. Project offices can be setup by the foreign companies which are awarded any contract by an Indian company. They are setup by the permission of RBI on specified conditions. Project offices are not allowed to undertake any work other than the work related to the project for which they are established. There are certain conditions prescribed by RBI which are required to be fulfilled for setting up of project offices. These are:

  1. The project should be funded directly by inward remittance from abroad.
  2. The project is funded by bilateral or multilateral international financing agency.
  • The project should be cleared by appropriate authority.
  1. The company in India awarding the contract has been granted a term loan by a public financial institution or a bank in India for the project.

If any of the above conditions are not met, then in such case the foreign company has to approach RBI for approval. The project office can repatriate profits earned by it after completing the project once it clears all the payment of taxes in India and fulfills all other conditions. A project office is treated as an extension of a foreign company in India and taxed at the rate applicable to foreign companies.

Branch Office: Branch office is an extension of a foreign company involved in business of trading or manufacturing. Any company incorporated outside India engaged in business of trading or manufacturing is permitted to open a branch office in India on basis of specific approval from RBI. There are several activities which a branch office is permitted to do, they are:

  1. Export or import of goods.
  2. Providing professional or consultancy services.
  • Researching in the areas in which its parent company is engaged.
  1. Promoting technical and financial collaborations between Indian companies and its parent company or overseas group company.
  2. Acting as buying/selling agent of its parent company in India.
  3. Providing technical support for the products supplied by its foreign company.
  • Rendering services in developing software and information technology in India.

There are some activities which branch offices are not allowed to undertake like, retail trading activities of any nature, manufacturing activities whether directly or indirectly. However foreign companies are given permission by RBI to undertake manufacturing and service activities through branch offices in India’s Special Economic Zones (SEZs). A branch office is considered suitable for foreign companies which are interested in setup of temporary office in India and do not have long term plans for operation in India.

Limited Liability Partnerships (LLPs): Limited Liability Partnerships have been allowed 100 percent FDI through automatic route in the recent reforms of FDI making it easier for foreign entities to develop their business in India. Prior to changes in FDI policies the investment in LLPs required government approval which made LLP incorporation by foreign entities a long, difficult and expensive process which therefore was not considered as a good option for establishing business in India but after the latest relaxations in the FDI rules any foreign national or entity can easily register and establish a small business in India.

In conclusion a foreign entity can establish its business by joint ventures, wholly owned subsidiaries and LLPs in the forms of creating a new entity in India can setup its business; whereas liaison, branch and project offices are the means through which an already setup brand can establish itself in India. All the reforms made by the Indian Government target ease of doing business in India.

Mayank Singh Raghuvanshi.

Senior Associate

The Indian Lawyer and Allied Services