Cyber Security Challenges Of India

The glaring cyber security problems and challenges of India are no more hidden and ignored. Serious cyber security attacks are affecting the critical infrastructure of India. Banks, power infrastructures, satellites, etc are vulnerable to cyber attacks from around the globe.

The national imperatives of securing operational technologies like smart grids, oil and gas, public utilities, etc are too essential to be ignored by Indian government. Today protecting key economic assets like securing financial backbone and stock exchange, payment infrastructures and financial switches is need of the hour. This includes architecting security for new age banking to make them cyber secure. Cyber security of banks in India is still deficient.

The business community must also keep in mind the cyber law due diligence requirements in India. Cyber due diligence for Indian companies is now a statutory obligation and failure to observe cyber due diligence can bring serious legal ramifications. Ensuring business models, technology transformations and channel revolutions in the midst of organised, focused, advanced and persistent cyber threats is not an easy task.

With the growth of enterprise mobility, mobile applications and cloud enablement data driven businesses, techno legal issues have become more prominent. Social networking platforms have further complicated the scenario.

The Internet is truly global in nature and regional and national regulations and efforts cannot bring the desired results. Cyber law and cyber security issues are global in nature. Indian response to international cyber law treaty is not pro active. International cyber law treaty is required to be formulated as soon as possible.

Similarly, cyber security framework must ensure both national responsibility and global accountability. Any cyber diplomacy must congregate both national and international interests to be effective and enforceable. Thus, an international cyber security treaty is required to be formulated as well.

With a growing focus upon electronic delivery (e-delivery) of services in India additional responsibilities of securing technology transformation of governance must be ensured. The e-governance projects of India would bring cyber security challenges for which we need readymade solutions.

           

Similarly, cyber security enablement of growing electronic and mobile commerce would also be required. With the projected increase in volume and growth of commerce and e-commerce in India, cyber security as enabler must be ensured.

Further, civil liberties issues like human rights protection in cyberspace, balancing of national security and civil liberties, balancing of national security and right to information, etc must be kept in mind by India.

The management of consumer rights and business responsibilities in the information age is not an easy task. For instance, the present telemarketing policy of India is anti consumer. Similarly, the telecom dispute resolution process in India is also anti consumer.

The future of cyber security in India is tough to manage. The sooner we start working in this direction on ground level and actual basis the better it would be for the larger interest of India.

Techno Legal Initiatives Of Perry4Law And PTLB

Techno legal issues pose special challenges before all nations. This is so because these issues are complex combination of both technical and legal issues. At Perry4Law and Perry4Law Techno Legal Base (PTLB) we have been spearheading many world renowned techno legal initiatives.

For instance, Perry4Law and PTLB are managing the exclusive techno legal centre of excellence for cyber forensics in India, centre of excellence on cyber security in India, virtual legal education campus in India and techno legal e-learning centre of PTLB, lifelong techno legal education in India, legal enablement of ICT systems in India, etc.

Similarly, on the education, trainings and skills development front as well Perry4Law and PTLB have been managing many initiatives. For instance, the exclusive techno legal e-learning in India is managed by PTLB whereas highly specialised and domain specific trainings and education is managed by Perry4Law techno Legal ICT Training Centre (PTLITC).  

Perry4Law and PTLB are also managing the exclusive techno legal e-courts consultancy and training centre of India, online dispute resolution services in India, e-discovery services in India, e-commerce services in India, cyber forensics services in India, cyber security services in India, LPO and KPO services in India, etc.

We are also discussing important issues pertaining to international ICT policies and strategies. Similarly, techno legal issues are specifically discussed at PTLB blog. We hope these initiatives would prove useful to all stakeholders.

Source: ICTPS Blog

Cyber Security Firms And Companies In India

Cyber security issues in India have attracted the attention of Indian government at last. Indian government has announced taking of many steps that can ensure basic level cyber security in India.

However, highly sophisticated and particularly targeted cyber attacks against India cannot be defended for another five years if the present speed and initiatives are maintained. Further, if the declared cyber security initiatives are not immediately acted upon, cyber security in India cannot be established for another decade or more.

Naturally, cyber security firms, companies and consultants in India must be proactive in their approach. Indian government must also assist them so that they can provide the best cyber security services in India.

The main problem with Indian cyber security initiatives is that they are based on the approach of maximum procurement with minimum application. Mere procurement of hardware and software can never make India a cyber secure nation. We need a skilled cyber security workforce in India as well to successfully use hardware and software.   

So we must stress upon techno legal skills development in India that includes skills development in the fields like cyber law, cyber security, cyber forensics, etc. Virtual cyber security campuses in India can greatly help in achieving this task. Further, online cyber security courses in India can also help a lot in this regard.

Another significant aspect is that cyber security firms and companies of India must be techno legal in nature. This means that these cyber security firms and companies of India must not only be capable of managing the technical aspects but also legal aspects as well.

These days we can witness a growth in the numbers of cyber security law firms in India and abroad. Further e-discovery services in India are also increasing although only authorised professionals like Indian advocates can practice the same in India. 

In short, cyber security firms and companies must have multiple qualifications and diverse expertise to manage the contemporary cyberspace challenges. A single discipline approach is not going to be beneficial in the long run.

Implementation Of The Madrid Protocol In India

The Trade Marks Act, 1999 (TMA 1999) and the corresponding Trade Marks Rules, 2002 (TMR 2002) is the law that regulates trademarks registration and protection in India. Similarly, the law also prescribes a procedure for filing of a convention application under Indian trademark law.

At the international level, the international registration of trademarks under Madrid Agreement and Madrid Protocol are also possible. However, India is not a party to Madrid Agreement. This is the reason why the Madrid Protocol becomes important for India.

The Madrid Protocol was adopted to render the Madrid system more flexible and more compatible with the domestic legislations of certain countries which had not been able to accede to the Madrid Agreement. India is one such country that has not acceded to the Madrid Agreement. The two treaties are parallel and independent and States may adhere to either of them or to both.

The Madrid Agreement and Madrid Protocol and their applicability and implementation in India are still missing as India is neither a party to Madrid Agreement nor it has ratified or acceded to Madrid Protocol. Although India has enacted the Trademark (Amendment) Act, 2010 yet the same has not been notified so far. In the absence of the same, the proposed Act has no applicability in India. 

However, some hints have been given by Indian government that Madrid Protocol may be implemented in India. If this is the intention of Indian government, both advantages and disadvantages of Madrid Protocol should be analysed in detail before acceding to the same.

Import Of Mobiles Or Cell Phones In India With Fake IMEI Proposed To Be Banned

We have no dedicated cell phone laws in India or mobile phone laws in India though they are very much required. Similarly, we have no mobile cyber security in India and mobile connections and handsets are vulnerable to cyber attacks and malware infections.

We also do not have any electronic authentication policy of India and many e-surveillance oriented projects like Aadhar project of India are managed in India without any parliamentary oversight and legislative framework. This is definitely violation of privacy rights of Indians. We must also have a national policy for mobile governance and e-authentication in India.

However, Indian government is least bothered to mange these crucial fields. Indian government becomes active in these fields only when its own interests are at stake. For instance, India is getting stricter regarding false IMEI numbers and norms. This is because India is finding it difficult to indulge in e-surveillance with false IMEI capable mobile sets.

Now media reports have suggested that the telecom regulator TRAI is planning to approach the Commerce and Industry Ministry to ban imports of mobile phones carrying unauthentic unique IMEI identification number, which helps authorities track users.

In order to archive this task, TRAI would soon write to the Commerce Ministry to ban such phones. It has been suggested that import of only those cell phones should be allowed which are certified by GSMA and TIA authorised bodies for GSM and CDMA handsets respectively.

Further, the Department of Telecom (Govt of India) (vide reference NO-20-40/2006/BS-III(PT)(VOL.I)/201 dated 3rd September 2009), has directed all cellular mobile service providers not to allow calls to be made from Mobile handsets with invalid IMEI number after 30th Nov 2009. However, during a recent test conducted in a telecom service area, government officials were surprised to see over 18,000 mobile handsets using same IMEI number.

Besides IMEI numbers, Indian government is also serious of regulating pre paid SIM cards so that they may not be misused by criminals and terrorists. However, Indian government must a take a holistic action in this regard and mere piecemeal actions, that also those serving its own interest, would not be in the larger interest of India.

FIPB Postpones Pharmaceuticals Sector FDI Proposals In India

The Foreign Investment Promotion Board (FIPB) of India was planning to consider the FDI proposals for the pharmaceutical sector in India in the last meeting. However, as per media reports, FIPB has postponed all the foreign investment proposals in the pharmaceuticals sector of India. The applications of foreign pharmaceuticals firms cannot be cleared in these circumstances.

Interestingly, a department of industrial policy and promotion (DIPP) representative told FIPB that commerce minister Anand Sharma is also in agreement with postponing of the FDI proposals.  This has taken the applicants for a surprise as the guidelines were finalised with DIPP's consent and FDI proposals in the pharmaceuticals sector are being cleared by FIPB, as sought by DIPP. The new guidelines are now awaiting approval of the Prime Minister's Office.

It has been suggested by the panel that conditions such as commitment by the buyer to manufacture and make available essential drugs post acquisition for five years and also to increase research and development (R&D) expenditure by 5% for diseases prevalent in India must be imposed to allow foreign firms buy Indian companies. It left it to DIPP to decide if the riders be imposed for acquisition of more than 49% of management control.

The consolidated FDI policy of India 2012 by DIPP is proactive on many counts and it covers vast areas of public importance. One such area pertains to FDI in pharmaceuticals sector of India. India has been taking special interest in FDI in pharmaceutical companies producing life saving drugs in India. This is more so when the mergers and acquisitions (M&A) and foreign direct investments (FDI) in pharmaceutical sector of India are on hot list.

India is also planning to reduce prices of expensive patented drugs to make medicines affordable to its predominantly poor population. In fact, a committee has already finalised a proposal in this regard and it will put it out in the public domain in a month or so. There could be reference pricing system (for patented drugs) or fixed-pricing, but a final decision has not been taken.

These steps have been taken in addition to India’s stand to provide medicines at a more affordable price after it announced earlier this month that it would implement a $5.4 billion plan to provide free generic medicines to its people.

Internationally, a system of reference pricing for medicines exists across developed markets such as the United States and Europe as well as in emerging markets.

Patents Registration In India

Patents registration in India is a complicated process that requires thorough knowledge of Indian Patent Act and other legal formalities. Once registered, patents confer tremendous tangible and intangible benefits. It is always required to get your inventions patented as soon as possible without public disclosure of the same.

The starting point for the same is to file a patent application at the concerned patent office of your jurisdiction. After filing of the patent application, a request for examination is required to be made by the applicant or by third party and thereafter it is taken up for examination by the patent office.

Usually, the first examination report is issued and the applicant is given an opportunity to correct the deficiencies in order to meet the objections raised in the said report. The applicant must comply with the requirements within the prescribed time otherwise his application would be treated as deemed to have been abandoned. 

When all the requirements are met, the patent is granted and notified in the patent office journal. However before the grant of patent and after the publication of application, any person can make a representation for pre-grant opposition.

Once a patent is granted, a patentee enjoys exclusive right to prevent a third party from an unauthorised act of making, using, offering for sale, selling or importing the patented product or process within the country during the term of the patent. A patented invention becomes free for public use after expiry of the term of the patent or when the patent ceases to have effect on account of non-payment of renewal fee.

New FDI Norms And Regulations For Pharmaceutical Sector Of India 2012

The consolidated FDI policy of India 2012 by DIPP is proactive on many counts and it covers vast areas of public importance. One such area pertains to FDI in pharmaceuticals sector of India.

Recently, India has been taking special interest in FDI in pharmaceutical companies producing life saving drugs in India. This is also somewhat controversial and complicated in nature. Many FDI proposals in this category are still pending to be cleared by Indian government and its agencies.

In order to expedite the pending FDI proposals for pharmaceutical industry of India, the Indian government is planning to announce fresh norms and rules in this regard next week.

The Foreign Investment Promotion Board (FIPB) in its meeting on July 20 is planning to consider FDI proposals for the pharmaceutical sector. It is also expected that the Department of Industrial Policy and Promotion (DIPP) would notify the new rules soon as the inter-ministerial group (IMG) has finalised its recommendations.

IMG has addressed concerns of the health ministry and recommended stiff riders defining the quantity of generic drugs that foreign companies manufacture in India. Further, it has prescribed norms for higher investment in research and development activities by such companies. It has also suggested doing away with the mandatory clause of technology transfer by the foreign company in brownfield investment.

In a significant and parallel development, Unites States has accused India of WTO rules violations. The accusation arose out of the activities of Hyderabad-based Natco Pharma that is making generic version of cancer drug Nexavar.

India government has invoked the compulsory licensing provision that allowed Natco to sell Nexavar at a price not exceeding Rs 8,880 for a pack of 120 tablets required for a month's treatment as compared to a whopping Rs 2.80 lakh per month charged by Bayer for its patented Nexavar drug. India has also defended its stand and claims that its decision does not violate any WTO norms.

FDI In Pharmaceutical Companies Producing Life Saving Drugs In India

Mergers and acquisitions (M&A) and foreign direct investments (FDI) in pharmaceutical sector of India are on hot list. Even the consolidated FDI policy of India 2012 has liberalised many concepts regarding these areas. However, with these flexibilities and permissions, India must take care of all anti competitive and anti national activities as well.

For instance, it has been anticipated that multinational companies may slow down production of essential medicines after they acquire Indian pharmaceuticals companies. This may affect the national interest of India in general and public health in particular. Now Indian government has decided to build stringent safeguards to ensure availability of life-saving drugs even after such acquisition.

An inter-ministerial group set up by the finance ministry to consider new norms for clearing foreign direct investment (FDI) proposals in the 60,000-crore pharmaceutical sector has recommended incorporation of a stringent clause that mandates that the Indian companies shall continue to make and sell the essential drugs in India even after they are acquired by a foreign company.

The current policy allows 100% FDI in the pharmaceutical sector, but after a spate of acquisitions in the sector that raised fears of MNCs neglecting Indian interests, the government has decided to put brownfield investments in the sector on the automatic route.

Till now foreign investment promotion board (FIPB) of India is only empowered to examine proposal from the stand point of the Foreign Exchange Management Act and the FDI policy. The new guidelines will help it scrutinise foreign investments in existing companies from a public health perspective.

There is a chance that the government could also require that FIPB continue to look at the FDI proposals in the sector even after the oversight on mergers and acquisitions in the sector passes over to the Competition Commission of India.

HIPAA Compliances in India: A Techno Legal Perspective

Health Insurance Portability and Accountability Act of 1996 (HIPAA) is one of the most important health related legislations of United States (US). HIPPA ensures health care coverage, privacy protection, electronic information security, and fraud prevention regarding health care related issues.

Although we have no dedicated laws like HIPPA in India yet many outsourcing related services and assignments are still sent to India. Outsourcing of healthcare services to India, such as medical transcription, medical billing medical coding and medico-legal services involves the transfer and maintenance of important data are some of the areas that are managed by Indian BPO/LPO/KPO service providers of India.

However, HIPPA outsourcing services have also brought many techno legal risks that BPO/LPO/KPO service providers must take care of. Further, privacy, data security and cyber security issues have also made the scenario complicated.

Perry4Law firmly believes that these techno legal risks and compliances must be taken seriously by all stakeholders. We also believe that Indian government must pay more attention to areas like privacy, data security, data protection, cyber security, etc.

HIPPA compliance in India cannot be achieved till professionals are provided techno legal trainings regarding HIPPA. Perry4Law Techno Legal Base (PTLB) has been providing various techno legal trainings in India and abroad that include HIPPA trainings in India as well.

HIPPA compliance in India would also be required to be ensured by pharmaceutical e-commerce providers of India. Besides fulfilling the legal requirements for starting e-commerce business in India, medicines and drugs e-commerce providers of India must also comply with the requirements pertaining to websites opening in India. Cyber law due diligence in India is also required to be fulfilled by HIPAA stakeholders of India.

We hope all stakeholders would ensure HIPPA compliances in India in true letter and spirit.

Draft Payment System Vision Document 2012-15 Of RBI

Reserve Bank of India (RBI) is trying really hard to streamline the payment system of India. This is more so regarding the online payment system that needs urgent reforms in India. For instance, RBI has issued guidelines pertaining to national electronic funds transfer (NEFT) system of India but banks in India are not providing positive confirmations of NEFT transactions.  

Similarly Internet banking guidelines in India by RBI have also been issued. However, by and large, cyber security for banking industry of India is not taken seriously in India. Even RBI has warned Indian banks for inadequate cyber security adoption.

Another area that requires urgent attention pertains to mobile banking security. Mobile banking cyber security in India is still an ignored world. In such circumstances adoption of mobile banking in India is a risky policy decision.

Recently, a report of RBI working group on securing card present transaction was also released. Now RBI has released the draft Payment System Vision Document 2012-15 for public consultation. Comments can be sent by email by 31 July, 2012.

The Payments System Vision Document 2012-15 envisages by ways and means of ensuring that “payment and settlement systems in the country are safe, efficient, interoperable, authorised, accessible, inclusive and compliant with international standards”. Accordingly, it proposes to “proactively encourage electronic payment systems for ushering in a less-cash society in India” as its Vision.

The Reserve Bank had earlier published a Vision Document outlining the course of action that would be undertaken in the field of payment and settlement systems over a three year period. The tasks laid out in the above document have been completed to a large extent. The new Vision Document intends to take the Mission further to meet the growing payment needs of the nation.

FIPB Rejected Telenor’s Joint Venture Proposal Being Pre Mature

Norwegian telecom major Telenor is looking forward to new telecom partner in India. However, till now Telenor has not disclosed the name of its potential partner(s), directors, key personnel, etc. Even in its application to Foreign Investment Promotion Board (FIPB), Telenor has not disclosed the name of its partners and other crucial details.

As a result the Home Ministry blocked Telenor’s security clearance before FIPB. Further, it is also clear that the Foreign Investment Promotion Board (FIPB) under the FDI Policy of India 2012 is required to consider many factors before any approval is granted in this regard. Telenor application is not satisfying those conditions and criteria.

Under the consolidated FDI policy of India 2012 by DIPP, there is a set procedure to allow FDI in telecom services, ISPs and telecom infrastructure providing sectors of India. Among other, the FDI in telecom sector of India and national security issues are of primary importance.

For instance, while approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities. Further, telecom service providers, ISPs and telecom infrastructure providers must comply with licensing and security requirements notified by the Department of Telecommunications for all services in order to make FDI in India.

The Chief Officer In-charge of technical network operations and the Chief Security Officer should be a resident Indian citizen. The officers/officials of the licensee companies dealing with the lawful interception of messages will be resident Indian citizens. The majority Directors on the Board of the company shall be Indian citizens. FDI shall be subject to laws of India and not the laws of the foreign country/countries.

The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In case something adverse is found during the security vetting, the direction of MHA shall be binding on the licensee.

It seems Telenor failed to satisfy many of these requirements. As a result, its application to establish a new joint venture was rejected by FIPB labeling it as pre mature. FIPB believes that the said proposal is pre-mature as crucial details pertaining to the investee company; specific Telenor entity through which FDI would be routed; details of the Indian partner; the quantum of FDI envisaged, etc are missing. FIPB would not process the application till all missing information and details are provided by Telenor.

FDI In Pharmaceuticals Sector Of India Under Consolidated FDI Policy Of India 2012

This is in continuance of our series on Consolidated FDI Policy of India 2012 by DIPP. In this article Perry4Law and Perry4Law Techno Legal Base (PTLB) would discuss the FDI in Pharmaceuticals sector of India under the consolidated FDI policy of India 2012.

FDI in Greenfield is allowed up to 100% through automatic route. FDI in Existing Companies is allowed up to 100% through government approval route.

FDI In Non-Banking Finance Companies (NBFC) Sector Of India Under Consolidated FDI Policy Of India 2012

This is in continuance of our series on Consolidated FDI Policy of India 2012 by DIPP. In this article Perry4Law and Perry4Law Techno Legal Base (PTLB) would discuss the FDI in Non-Banking Finance Companies (NBFC) sector of India under the consolidated FDI policy of India 2012.

FDI in Non-Banking Finance Companies (NBFC) is allowed up to 100% under the automatic route in only the following activities:

(i) Merchant Banking

(ii) Under Writing

(iii) Portfolio Management Services

(iv) Investment Advisory Services

(v) Financial Consultancy

(vi) Stock Broking

(vii) Asset Management

(viii) Venture Capital

(ix) Custodian Services

(x) Factoring

(xi) Credit Rating Agencies

(xii) Leasing & Finance

(xiii) Housing Finance

(xiv) Forex Broking

(xv) Credit Card Business

(xvi) Money Changing Business

(xvii) Micro Credit

(xviii) Rural Credit

The other conditions in this regard are:

(1) Investment would be subject to the following minimum capitalisation norms:

(i) US $0.5 million for foreign capital up to 51% to be brought upfront

(ii) US $ 5 million for foreign capital more than 51% and up to 75% to be brought upfront

(iii) US $ 50 million for foreign capital more than 75% out of which US$ 7.5 million to be brought upfront and the balance in 24 months.

(iv) 100% foreign owned NBFCs with a minimum capitalisation of US$ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition shall not apply to downstream subsidiaries.

(v) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vi) below.

(vi) Non- Fund based activities : US $0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition:

It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating company.

The following activities would be classified as Non-Fund Based activities:

(a) Investment Advisory Services

(b) Financial Consultancy

(c) Forex Broking

(d) Money Changing Business

(e) Credit Rating Agencies

(vii) This will be subject to compliance with the guidelines of RBI.

(i) Credit Card business includes issuance, sales, marketing and design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart card, value added cards etc.

(ii) Leasing & Finance covers only financial leases and not operating leases.

(2) The NBFC will have to comply with the guidelines of the relevant regulator/ s, as applicable.

FDI In Insurance Sector Of India Under Consolidated FDI Policy Of India 2012

This is in continuance of our series on Consolidated FDI Policy of India 2012 by DIPP. In this article Perry4Law and Perry4Law Techno Legal Base (PTLB) would discuss the FDI in the insurance sector of India under the consolidated FDI policy of India 2012.

FDI in Insurance sector is allowed up to 26% through automatic route. The following conditions must also be fulfilled in this regard:

(1) FDI in the Insurance sector, as prescribed in the Insurance Act, 1938, is allowed under the automatic route.

(2) This will be subject to the condition that Companies bringing in FDI shall obtain necessary license from the Insurance Regulatory and Development Authority for undertaking insurance activities.

FDI In Infrastructure Company In The Securities Market Of India Under Consolidated FDI Policy Of India 2012

This is in continuance of our series on Consolidated FDI Policy of India 2012 by DIPP. In this article Perry4Law and Perry4Law Techno Legal Base (PTLB) would discuss the FDI in infrastructure company in the securities market sector of India under the consolidated FDI policy of India 2012.

FDI in Infrastructure Company in the Securities Market, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations, is allowed up to 49% (FDI & FII) [FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital] through government approval route.

Further, FII can invest only through purchases in the secondary market.

FDI In Credit Information Companies (CIC) Of India Under Consolidated FDI Policy Of India 2012

This is in continuance of our series on Consolidated FDI Policy of India 2012 by DIPP. In this article Perry4Law and Perry4Law Techno Legal Base (PTLB) would discuss the FDI in credit information companies (CIC) sector of India under the consolidated FDI policy of India 2012.

FDI in Credit Information Companies (CIC) is allowed up to 49% (FDI and FII) through government approval route.

The other conditions in this regard are:

(1) Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005.

(2) Foreign investment is permitted under the Government route, subject to regulatory clearance from RBI.

(3) Investment by a registered FII under the Portfolio Investment Scheme would be permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall limit of 49% for foreign investment.

(4) Such FII investment would be permitted subject to the conditions that:

(a) No single entity should directly or indirectly hold more than 10% equity.

(b) Any acquisition in excess of 1% will have to be reported to RBI as a mandatory requirement; and

(c) FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding.

FDI In Commodity Exchanges Sector Of India Under Consolidated FDI Policy Of India 2012

This is in continuance of our series on Consolidated FDI Policy of India 2012 by DIPP. In this article Perry4Law and Perry4Law Techno Legal Base (PTLB) would discuss the FDI in commodity exchanges sector of India under the consolidated FDI policy of India 2012.

(1) Futures trading in commodities are regulated under the Forward Contracts (Regulation) Act, 1952. Commodity Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures market. With a view to infuse globally acceptable best practices, modern management skills and latest technology, it was decided to allow foreign investment in Commodity Exchanges.

(2) For the purposes of this chapter/article,

(i) Commodity Exchange is a recognised association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exchange platform for trading in forward contracts in commodities.

(ii) Recognised association means an association to which recognition for the time being has been granted by the Central Government under Section 6 of the Forward Contracts (Regulation) Act, 1952

(iii) Association means any body of individuals, whether incorporated or not, constituted for the purposes of regulating and controlling the business of the sale or purchase of any goods and commodity derivative.

(iv) Forward contract means a contract for the delivery of goods and which is not a ready delivery contract.

(v) Commodity derivative means-

(a) A contract for delivery of goods, which is not a ready delivery contract; or

(b) A contract for differences which derives its value from prices or indices of prices of such underlying goods or activities, services, rights, interests and events, as may be notified in consultation with the Forward Markets Commission by the Central Government, but does not include securities.

FDI in commodity exchanges is allowed up to 49% (FDI & FII) [Investment by Registered FII under Portfolio Investment Scheme (PIS) will be limited to 23% and Investment under FDI Scheme limited to 26% ] through government approval route (FDI).

The other conditions in this regard are as follow:

(i) FII purchases shall be restricted to secondary market only and

(ii) No non-resident investor/ entity, including persons acting in concert, will hold more than 5% of the equity in these companies.

FDI In Banking Sector Of India Under Consolidated FDI Policy Of India 2012

This is in continuance of our series on Consolidated FDI Policy of India 2012 by DIPP. In this article Perry4Law and Perry4Law Techno Legal Base (PTLB) would discuss the FDI in banking sector of India under the consolidated FDI policy of India 2012.

FDI in private banking sector of India is allowed up to 74% where FDI up to 49% is allowed through automatic route and FDI beyond 49% but up to 74% is allowed through government approval route.

These conditions must also be satisfied in this regard:

(1) This 74% limit will include investment under the Portfolio Investment Scheme (PIS) by FIIs, NRIs and shares acquired prior to September 16, 2003 by erstwhile OCBs, and continue to include IPOs, Private placements, GDR/ADRs and acquisition of shares from existing shareholders.

(2) The aggregate foreign investment in a private bank from all sources will be allowed up to a maximum of 74 per cent of the paid up capital of the Bank. At all times, at least 26 per cent of the paid up capital will have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank.

(3) The stipulations as above will be applicable to all investments in existing private sector banks also.

(4) The permissible limits under portfolio investment schemes through stock exchanges for FIIs and NRIs will be as follows:

(i) In the case of FIIs, as hitherto, individual FII holding is restricted to 10 per cent of the total paid-up capital, aggregate limit for all FIIs cannot exceed 24 per cent of the total paid-up capital, which can be raised to 49 per cent of the total paid-up capital by the bank concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body.

(a) Thus, the FII investment limit will continue to be within 49 per cent of the total paid-up capital.

(b) In the case of NRIs, as hitherto, individual holding is restricted to 5 per cent of the total paid-up capital both on repatriation and non-repatriation basis and aggregate limit cannot exceed 10 per cent of the total paid-up capital both on repatriation and non-repatriation basis. However, NRI holding can be allowed up to 24 per cent of the total paid-up capital both on repatriation and non-repatriation basis provided the banking company passes a special resolution to that effect in the General Body.

(c) Applications for foreign direct investment in private banks having joint venture/subsidiary in insurance sector may be addressed to the Reserve Bank of India (RBI) for consideration in consultation with the Insurance Regulatory and Development Authority (IRDA) in order to ensure that the 26 per cent limit of foreign shareholding applicable for the insurance sector is not being breached.

(d) Transfer of shares under FDI from residents to non-residents will continue to require approval of RBI and Government as per para 3.6.2 above as applicable.

(e) The policies and procedures prescribed from time to time by RBI and other institutions such as SEBI, D/o Company Affairs and IRDA on these matters will continue to apply.

(f) RBI guidelines relating to acquisition by purchase or otherwise of shares of a private bank, if such acquisition results in any person owning or controlling 5 per cent or more of the paid up capital of the private bank will apply to non-resident investors as well.

(ii) Setting up of a subsidiary by foreign banks

(a) Foreign banks will be permitted to either have branches or subsidiaries but not both.

(b) Foreign banks regulated by banking supervisory authority in the home country and meeting Reserve Bank‘s licensing criteria will be allowed to hold 100 per cent paid up capital to enable them to set up a wholly-owned subsidiary in India.

(c) A foreign bank may operate in India through only one of the three channels viz., (i) branches (ii) a wholly-owned subsidiary and (iii) a subsidiary with aggregate foreign investment up to a maximum of 74 per cent in a private bank.

(d) A foreign bank will be permitted to establish a wholly-owned subsidiary either through conversion of existing branches into a subsidiary or through a fresh banking license. A foreign bank will be permitted to establish a subsidiary through acquisition of shares of an existing private sector bank provided at least 26 per cent of the paid capital of the private sector bank is held by residents at all times consistent with para (i) (b) above.

(e) A subsidiary of a foreign bank will be subject to the licensing requirements and conditions broadly consistent with those for new private sector banks.

(f) Guidelines for setting up a wholly-owned subsidiary of a foreign bank will be issued separately by RBI.

(g) All applications by a foreign bank for setting up a subsidiary or for conversion of their existing branches to subsidiary in India will have to be made to the RBI.

(iii) At present there is a limit of ten per cent on voting rights in respect of banking companies, and this should be noted by potential investor. Any change in the ceiling can be brought about only after final policy decisions and appropriate Parliamentary approvals.

FDI in public banking sector of India is allowed up to 20% (FDI and Portfolio Investment) through government approval route subject to Banking Companies (Acquisition and Transfer of Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India and its associate Banks.

FDI In Asset Reconstruction Companies Of India Under Consolidated FDI Policy Of India 2012

This is in continuance of our series on Consolidated FDI Policy of India 2012 by DIPP. In this article Perry4Law and Perry4Law Techno Legal Base (PTLB) would discuss the FDI in asset reconstruction companies of India under the consolidated FDI policy of India 2012.

Foreign investment in other financial services, other than those discussed in the present and subsequent articles would require prior approval of the Government. For the purposes of FDI, Asset Reconstruction Company (ARC) means a company registered with the Reserve Bank of India (RBI) under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

FDI in ARC is allowed up to 49% of paid-up capital of ARC through government approval route.

The following other conditions must be satisfied in this regard:

(i) Persons resident outside India, other than Foreign Institutional Investors (FIIs), can invest in the capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank only under the Government Route. Such investments have to be strictly in the nature of FDI. Investments by FIIs are not permitted in the equity capital of ARCs.

(ii) However, FIIs registered with SEBI can invest in the Security Receipts (SRs) issued by ARCs registered with Reserve Bank. FIIs can invest up to 49 per cent of each tranche of scheme of SRs, subject to the condition that investment by a single FII in each tranche of SRs shall not exceed 10 per cent of the issue.

(iii) Any individual investment of more than 10% would be subject to provisions of section 3(3) (f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Google Facing Conflict Of Laws Problems With US And India

Conflicts of laws, Indian cyberspace and Google have become synonymous these days. Further, the position of US companies, India, conflict of laws and criminal liabilities has also become clear these days. This is so as of late many civil and criminal cases have been filed against foreign companies and social media websites.

However, this is just the beginning as cyber litigations and disputes that are going to increase in India. With this cases of overlapping jurisdictions would also arise. Take the example of recent case where the Gmail id of an Indian was involved. While the US court allowed access to the same yet Indian court granted an inunctions against disclosure of its password and information stored in the account.

The Plaintiff in this case argued that as an India citizen he had a right to privacy under the Indian Constitution and that the defendants could not violate his right. The order was passed ex-parte against an American law firm and Google’s e-mail id that sent the communication pertaining to US court’s order.

Interestingly, the litigation before the US/California court pertains to a dispute between two other parties and it appears that Plaintiff’s Gmail id may hold evidence relevant to resolve dispute between these parties. The normal practice to seek evidence in these cases is to issue “letters rogatory”, under the Hague Convention on Taking of Evidence Abroad in Civil or Commercial Matters requesting the India to assist in the collection of evidence. Such letters rogatory can be enforced, in India, only by High Courts, as per the Code of Civil Procedure, 1908.

It seems the US court did not consider it necessary to adopt that procedure. This may be so because Google is a US based company over which US courts have primary jurisdiction. In fact, the terms of service of Google clearly stipulates that all Gmail users consent to be governed by the laws of the U.S. Google’s operation is global in nature and it is required to comply with the laws of various jurisdictions, including India.

To confer jurisdiction upon Indian courts, the Plaintiff argued that the cause of action in the present suit arose in India when the Plaintiff created his Gmail id account in Vishakhapatnam and also when he received the legal notice in Vishakhapatnam. Let us see how the case would proceed in this regard.

FDI In Wholesale Trading And E-Commerce Sectors Of India Under Consolidated FDI Policy Of India 2012

This is in continuance of our series on consolidated FDI policy of India 2012 by DIPP. The previous articles in this regard are:

(1) Consolidated FDI policy of India 2012 by DIPP: objectives,

(2) Consolidated FDI policy of India 2012 by DIPP: definitions,

(3) Consolidated FDI policy of India 2012 by DIPP: general provisions,

(4) FDI in limited liability partnerships (LLPs) in India 2012,

(5) Permissible direct and indirect foreign investment in an Indian company,

(6) Foreign investment promotion board (FIPB) and FDI policy of India 2012,

(7) Prohibited sectors under the consolidated FDI policy of India 2012,

(8)  FDI in agriculture and animal husbandry under consolidated FDI policy of India 2012, 

(9) FDI in mining sector of India under consolidated FDI policy of India 2012,

(10) FDI in petroleum and natural gas sector of India under consolidated FDI policy of India 2012

(11) FDI in micro and small enterprises (MSEs) sector of India under consolidated FDI policy of India 2012

(12) FDI in defence sector of India under consolidated FDI policy of India 2012

(13) FDI in broadcasting sector of India under consolidated FDI policy of India 2012

(14) FDI in print media sector of India under consolidated FDI policy of India 2012

(15) FDI in civil aviation sector of India under consolidated FDI policy Of India 2012

(16) FDI in courier services sector of India under consolidated FDI policy of India 2012

(17) FDI in construction development sector of India under consolidated FDI policy of India 2012

(18) FDI in industrial parks segment of India under consolidated FDI policy of India 2012

(19) FDI in satellites and private security agencies sectors of India under consolidated FDI policy of India 2012

(20) FDI in telecom services, ISPs and telecom infrastructure providing sectors of India under consolidated FDI policy of India 2012 and FDI in telecom sector of India and national security issues,

In this article Perry4Law and Perry4Law Techno Legal Base (PTLB) would discuss the FDI limits in wholesale trading and e-commerce sectors of India under consolidated FDI policy of India 2012.

 (i) FDI in cash and carry wholesale trading/ wholesale trading (including sourcing from MSEs), would be allowed upto 100% through automatic route.

Cash and Carry wholesale trading/Wholesale trading would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, be sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ex-bonded warehouse business sales and B2B e-Commerce.

The following Guidelines for Cash and Carry Wholesale Trading/Wholesale Trading (WT) would apply:

(a) For undertaking WT, requisite licenses/registration/ permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority/Local Self-Government Body under that State Government should be obtained.

(b) Except in case of sales to Government, sales made by the wholesaler would be considered as cash and carry wholesale trading/wholesale trading with valid business customers, only when WT are made to the following entities:

(i) Entities holding sales tax/ VAT registration/service tax/excise duty registration; or

(ii) Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/ Government Body/ Local Self-Government Authority, reflecting that the entity/person holding the license/ registration certificate/ membership certificate, as the case may be, is itself/ himself/herself engaged in a business involving commercial activity; or

(iii) Entities holding permits/license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies; or

(iv) Institutions having certificate of incorporation or registration as a society or registration as public trust for their self consumption.

An Entity, to whom WT is made, may fulfill any one of the 4 conditions.

(c) Full records indicating all the details of such sales like name of entity, kind of entity, registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis.

(d) WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture

(e) WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations.

(f) A Wholesale/Cash and carry trader cannot open retail shops to sell to the consumer directly.

FDI in E-commerce activities is allowed upto 100% through Automatic route. E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well.

FDI in test marketing of such items for which a company has approval for manufacture is allowed upto 100% through government approval route, provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facility commences simultaneously with test marketing.

FDI in Single Brand product retail trading is allowed upto 100% through government approval route. For this purpose:

(1) Foreign Investment in Single Brand product retail trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices.

(2) FDI in Single Brand product retail trading would be subject to the following conditions:

(a) Products to be sold should be of a Single Brand only.

(b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.

(c) Single Brand product-retail trading would cover only products which are branded during manufacturing.

(d) The foreign investor should be the owner of the brand.

(e) In respect of proposals involving FDI beyond 51%, mandatory sourcing of at least 30% of the value of products sold would have to be done from Indian small industries/ village and cottage industries, artisans and craftsmen‘. 'Small industries' would be defined as industries which have a total investment in plant and machinery not exceeding US $ 1.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. Further, if at any point in time, this valuation is exceeded, the industry shall not qualify as a 'small industry' for this purpose. The compliance of this condition will be ensured through self-certification by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts, which the company will be required to maintain.

(3) Application seeking permission of the Government for FDI in retail trade of Single Brand products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy and Promotion. The application would specifically indicate the product/ product categories which are proposed to be sold under a Single Brand. Any addition to the product/ product categories to be sold under Single Brand would require a fresh approval of the Government.

(4) Applications would be processed in the Department of Industrial Policy and Promotion, to determine whether the products proposed to be sold satisfy the notified guidelines, before being considered by the FIPB for Government approval.