India Business Law Journal's

India Business Law Journal Your partner in legal intelligence June 2013 Volume 7, Issue 1

Punching above its weight Is India’s competition watchdog up to the task it has set itself?

Scrutinizing India’s solar power policies The top foreign law firms for India deals Learning lessons from UK banking disputes In-house counsel share IP protection tactics www.indilaw.com

Contents

3 Leader Building trust in troubled times 17 4 Inbox Punching 5 News Rao races back in-house above its ELP rounds up new recruits weight Tech Mahindra seals Satyam merger Multiples purchases stake in Milltec Is India’s competition watchdog 10 The wrap up to the challenges it has set for itself? Legislative & regulatory update: page 10 Court judgments: page 13 16 Vantage point 24 Falling short Regulatory inadequacies are holding back Sunny India’s drugs industry, argues DG Shah of the Indian Pharmaceutical Alliance solutions? 17 Cover story Solar power presents attractive investment Punching above its weight opportunities, but investors must contend with complex state and national regulations 24 Spotlight Sunny solutions? 29 Looking in-house for IP insights 37 DuPont and JCB lawyers explain how to stay ahead of India’s intellectual property violators 32 What’s the deal? The pioneers London calling Precedents set by English courts in banking Which international law and finance disputes are highly relevant to firms are leading the Indian investors and institutions way in keeping India’s cross-border deals 37 Intelligence report on course? The pioneers

58 Correspondents Expert advice from India Business Law Journal’s correspondent law firms 58 Aviation 66 Mergers & acquisitions Tyabji Dayabhai Amarchand Mangaldas 59 Canada-India trade & investment 67 Mining Bennett Jones RRG & Associates 60 Dispute resolution 68 Pharmaceutical sector Bharucha & Partners Udwadia Udeshi & Argus Partners 61 Food law 69 Private equity & venture capital DH Law Associates Khaitan & Co 62 Foreign direct investment 70 Real estate OP Khaitan & Co Mine & Young 63 Healthcare & life sciences 71 Regulatory developments Krishna & Saurastri Phoenix Legal 64 Infrastructure & energy 72 Taxation & transfer pricing Trilegal Economic Laws Practice 65 Intellectual property Singh & Associates

June 2013 India Business Law Journal 1 Editorial board India Business Law Journal

June 2013 Volume 7, Issue 1 ISSN: 1994-5841

Contact us Pravin Anand Shamnad Basheer Lalit Bhasin Himavat Chaudhuri Sumes Dewan Girish Gokhale Managing Partner Professor in IP Law Managing Partner Executive Director Partner President - Legal Editorial Anand and Anand National University of Bhasin & Co & Senior Counsel Desai & Diwanji & Group General Email: [email protected] Juridical Sciences Turner General Counsel Telephone: +852 3622 2681 Entertainment Networks JSW Subscriptions & customer service Email: [email protected] Telephone: +852 3622 2623 Fax: +852 3006 5377 www.indilaw.com

Editor Vandana Chatlani Toby Greenbury Manik Karanjawala Amit Anant Moghay Fali S Nariman Jane Niven Mysore R Prasanna Deputy editor Consultant Partner General Counsel Senior Counsel Regional General Independent Rebecca Abraham Khaitan & Co Karanjawala & Co HSBC Counsel Consultant Jones Lang LaSalle Consultant editor Simmie Magid Contributors Bhavana Alexander Gargi Chatterjee DG Shah Nicola Vinovrški Production editor Pun Tak Shu Premnath Rai Martin Rogers Vijaya Sampath Sunil Seth Ashok Sharma Pallavi Shroff Head of marketing Founding Partner Partner Adviser to the Senior Partner Founder President Managing Partner PRA Law Offices Davis Polk & Chairman & Seth Dua & Indian Corporate Amarchand Billy Chung Wardwell Group CEO Associates Counsel Association Mangaldas Associate publisher Bharti Enterprises Tina Tucker Executive editor Chris Hunter Publisher James Burden

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Amarjit Singh Shruti Dvivedi Sodhi Shardul Thacker Bhavna Thakur Jagannadham Rohan Weerasinghe Managing Partner Director - Legal Partner Director & Head of Thunuguntla General Counsel & Amarjit & Associates Colt Technologies Mulla & Mulla & Equity Capital Markets Strategist & Head of Company Secretary Craigie Blunt & Caroe Citigroup Research Citigroup SMC Global Securities Vantage Asia Publishing Limited

21/F Gold Shine Tower 346-348 Queen’s Road Central Correspondent law firms Hong Kong Telephone: +852 3622 2673 Fax: +852 3006 5377 Email: [email protected] • Amarchand & Mangaldas & Suresh • Mulla & Mulla & Craigie Blunt & Caroe www.vantageasia.com A Shroff & Co • OP Khaitan & Co Directors • Bennett Jones James Burden, Kelley Fong, • Phoenix Legal Chris Hunter • Bharucha & Partners • RRG & Associates Disclaimer and conditions of sale • DH Law Associates Vantage Asia Publishing Limited re- • Saikrishna & Associates tains the copyright of all material published in this magazine. No part • Economic Laws Practice • Singh & Associates of this magazine may be reproduced or stored in a retrieval system without the prior written permission of the • Khaitan & Co • Trilegal publisher. The views expressed in this magazine do not necessarily reflect the views of the publisher, its staff or • Krishna & Saurastri • Tyabji Dayabhai members of the editorial board. The material in this magazine is not offered • Mine & Young • Udwadia Udeshi & Argus Partners as advice and no liability is assumed in relation thereto. The publisher, staff and all other contributors to India Business Law Journal disclaim any liability for the consequences of any action taken or Subscription information not taken as a result of any material published in this magazine. India Business Law Journal is published 10 times a year and has a subscription price of US$790 for one year or US$1,264 for © Vantage Asia Publishing Ltd, 2013 two years. To subscribe, please call +852 3622 2623, email [email protected] or subscribe online at www.indilaw.com.

2 India Business Law Journal June 2013 Opinion Leader Building trust in troubled times

These have been tough times for As every in-house lawyer will know, maintaining the reputation of a company is often linked to protecting its intel- cricket lovers across India lectual property. While this is a particular challenge in India, the fact remains that the country is an immensely attractive recent spot-fixing scandal that revealed the seamier market for many global IP owners. In Looking in-house for IP side of the glitzy Indian Premier League has left many insights (page 29) we turn to in-house counsel at the Indian A fans questioning the wisdom of their long-standing operations of DuPont and JCB for their perspectives on loyalty to the game. Even after the Indian team emerged the problem. Their insights are incisive and will be of great triumphant at the ICC Champions Trophy in early June, the interest to other in-house counsel in India and beyond. struggles to keep the faith continue on account of the turmoil After all, nothing can beat local knowledge for getting a within the body that oversees Indian cricket, the Board of handle on what is a very Indian problem. Control for Cricket in India. Knowledge of a more distant kind comes into focus in While this is bad news for Indian cricket, the scepticism this month’s What’s the deal? (page 32). Here we examine it has triggered may also cast a shadow on other bod- the implications for Indian investors and financial institu- ies that regulate sectors of the Indian economy. For, if the tions of banking-related judgments by UK courts. The UK is powers-that-be lack the necessary vision a major hub for the resolution of banking and integrity to ensure the well-being of a and derivatives disputes, and as such, sport, can they be trusted to regulate criti- many of the judgments issued there – India Business Law Journal cal sectors of the economy in a manner Your partner in legal intelligence June 2013 and the precedents they set – are directly Volume 7, Issue 1 that secures the common good? relevant to India. The confidence inspired by a regula- Our coverage includes analysis tor is critical for the well-being of the of recent cases involving the London sector that it oversees. Writing in this Interbank Offered Rate (LIBOR) scan- month’s Vantage point (page 16), DG dal, which will have far-reaching conse- Shah, the secretary general of the Indian quences around the world. Pharmaceutical Alliance, argues that reg- Closer to home, an acute shortage of ulatory inadequacies are holding back power has long been one of the greatest India’s drugs industry. Shah expresses challenges to India’s development. As serious concerns over the effectiveness Punching above its weight steps are taken to tackle the problem, of India’s drugs regulator, the Central Is India’s competition watchdog up to the task it has set itself? renewable energy technologies, including Drugs Standard Control Organization, and solar power, have risen to prominence. argues that the regulator’s shortcomings Scrutinizing India’s solar power policies In Sunny solutions (page 24) we consider The top foreign law ﬁrms for India deals are damaging the international credibility Learning lessons from UK banking disputes the burning issues facing investors in the of the country’s pharmaceutical industry. In-house counsel share IP protection tactics sector. While the Electricity Act, 2003, Shah may have been heart- www.indilaw.com remains the significant legislation regu- ened when India’s finance minister, lating the generation, transmission and P Chidambaram, recently spoke of the distribution of electricity, investors must need for a regulator that “favours none and spares none”. also grapple with numerous different state laws and poli- The minister was delivering a lecture organized by India’s cies. Our coverage compares some of the key state solar antitrust watchdog, the Competition Commission of India power policies and sheds much light on the how investors (CCI). But is this a regulator that is up to task? may pursue opportunities in the sector. In our Cover story this month (page 17), we look back This month’s Intelligence report (page 37) presents India at the CCI’s short history and ask whether it is capable of Business Law Journal’s seventh annual survey of the top rising to the considerable challenges it has set for itself. international law firms for India-related work. Our coverage The CCI has been fully functional for just two years, but it reveals the top 10 foreign firms for India-related work, as has already been flexing its muscles. It has imposed widely well as 10 key players and 20 significant players. We also publicized penalties of previously unheard-of amounts and highlight 25 regional and specialist law firms, and 35 “firms some observers have expressed concerns over the man- to watch”, that we believe in-house counsel should keep ner in which it has gone about prosecuting cases of anti- well within their sights. competitive behaviour. This issue of India Business Law Journal marks the start of Samir Gandhi, a partner at AZB & Partners who heads our seventh year of publication. Since our first issue in June the firm’s competition law practice, believes the CCI “may 2007, we have strived to make sense of complex transac- be missing the wood for the trees” in its hurry to send out tions and regulations, to bring clarity to areas of confusion a powerful message. However, others suggest that the CCI or ambiguity, and to foster intelligent debate on significant is yet to develop the necessary rigour to be an effective issues. As we mark this important anniversary, we would regulator. This may well prove to be the CCI’s Achilles heel like to thank our readers, our contributors, our advertis- and will need to be overcome if the regulator is to make any ers, our correspondent law firms and our editorial board headway in levelling the playing field, and in doing so, earn- members. We look forward to continuing to serve you in ing people’s trust. the years ahead. g

June 2013 India Business Law Journal 3 Inbox Letters to the editor

Af r i c a -In d i a t r a d e The format that included comments from trade regulators and industry par- In t e l l e c t u a l p r o p e r t y ticipants gave an outlook of a steady Roadmap for the savvy investor and dynamic transition from struggling African economies to vibrant investor- Creative aesthetics Dear Editor, friendly platforms. The journal further put the eco- Dear Editor, Congratulations on the release of nomic histories, reforms, challenges, yet another insightful edition of India and the stages of development of India Business Law Journal is Business Law Journal. The Intelligence divergent African economies into informative and keeps readers report on investments in Africa pub- focus. Such a multifaceted approach abreast with the latest legal devel- lished in the May issue of the journal adds value to the overall content and opments. I was intrigued particu- highlights the recent investment cli- is useful to those with interests in larly by the May issue, which I saw mate and issues particularly of inter- both Africa and Asia. at your booth at the International est to Indian businesses in light of an The particulars are specific in con- Trademarks Association con- increase in trade volume. tent and elaborate in jurisdiction. It ference. The cover, which fea- The estimated annual trade volume goes without saying that the com- tured pictures of professionals in between India and Nigeria in 2012, for ments and contributions are a useful the IP arena, was very creative. example, was US$10 billion, resulting addition to advanced discourse on Keep it up! in India overtaking the US as Nigeria’s investment in Africa. largest trading partner. The assess- Vikram Grover ment of the regulatory environment Oladiran Ajayi Principal for investments in key African coun- Senior Associate Groverlaw tries certainly provides a roadmap for Templars New Delhi the savvy investor. Lagos Opinions? Observations? Feedback? We want to hear from you.

India Business Law Journal welcomes your letters.

Please write to the editor at [email protected].

Letters may be edited for style, readability and length, but not for substance.

Due to the quantity of letters we receive, it is not always possible

to publish all of them.

4 India Business Law Journal June 2013 News

SEBI sparks race to comply with shareholding rules

he Securities and Exchange Board of India (SEBI) has begun T penalizing public listed companies that failed to meet the 3 June deadline for putting a minimum of 25% of their equity shares in public hands. Statistics from 4 June show that 105 companies have failed to comply with the regulator’s new public shareholding norms. The securities regulator has responded by imposing a range of sanctions on non-compliant companies. It has prohibited the promoters, promoter groups and directors of such companies from buying, selling or oth- erwise dealing in the securities of their companies. It has also ordered the freezing of promoters’ and promoter groups’ voting rights and corporate benefits. Furthermore, the promoters and directors of non-compliant companies have been restrained from holding new positions as a director of any listed company until they comply with the public shareholding norms. Companies affected by the penalties include Essar Ports, Hindustan Breweries & Bottling, Plethico Pharmaceuticals, Ras Resorts & and Colleen Laduzinski and associ- India and Deutsche Equities India on Apart Hotels, Steelco Gujarat, Tata ates Nikhil Naredi, Kevin Khan and the sale. Teleservices and Videocon Industries. Brandon Morris advised a syndicate Latham & Watkins in Singapore SEBI says it may take further action of DSP Merrill Lynch, Morgan Stanley, fielded a team including partner Rajiv on a case-by-case basis against com- Goldman Sachs, Standard Chartered, Gupta and foreign legal consultant panies that fail to comply. However, the SBI Capital Markets, Axis Capital, Citi, Scott Calver to represent the brokers. Associated Chambers of Commerce of Deutsche Equities, IDFC and Macquarie In some cases, more extreme meas- India (Assocham) has called for leni- Capital on the deal. ures have been taken. Indian IT, con- ency. “While it is true that it has been Amarchand Mangaldas, led by part- sulting and outsourcing group Wipro, three years since SEBI had asked listed ners Yash Ashar and Gaurav Gupte, for example, has split itself into two firms to take firm steps to increase acted as counsel to Adani Ports, while companies to comply with the new public holding, it must also be real- Khaitan & Co partner Nikhilesh Panchal public shareholding rules. ized that selling stocks in the mar- and executive director Sudhir Bassi The company has demerged its non-IT ketplace is a function of sentiments were counsel to the placement agents. divisions, including consumer care, light- or else the promoters would be com- In another quick-fire deal to com- ing, infrastructure engineering and medi- pelled to offload equity at a distressed ply with the new public shareholding cal diagnostic product divisions, into price,” Assocham’s secretary general, norms, Oracle Global (Mauritius) sold a separate promoter-controlled entity, DS Rawat, said in a statement. “This 4.4 million equity shares in Oracle leaving Wipro as a pure IT company. is particularly true about the small and Financial Services Software (India) at a Amarchand Mangaldas led by mid-cap companies.” price of `2,275 (US$37.75) per share. Mumbai-based managing partner Cyril Nevertheless, the new rules have The deal, which was valued at around Shroff along with Bangalore partners sparked a race for compliance. Adani `1 billion, reduces the Mauritian Arjun Lall and Nivedita Rao advised Ports and Special Economic Zone, company’s stake in Oracle Financial Wipro on the demerger. one of the 105 non-compliant com- Services Software (India) to 75%. Wilson Sonsini Goodrich & Rosati panies named, issued a US$180 mil- Kochhar & Co, led by partner Harry acted as US counsel to the investment lion institutional private placement of Chawla and associate Akshit Kapoor, banker – JM Financial Institutional equity shares on 5 June in order to advised Oracle Global (Mauritius) Securities – while SPJ Legal was the make itself compliant. This diluted the on the sale. Partner Yash Asher and legal counsel in court. promoter stake, taking the public hold- principal associates Kranti Mohan The demerger has been effective ing in Adani Ports just over the 25% and Abhimanyu Bhattacharya at since 31 March. The American deposi- threshold to 25.83%. Amarchand Mangaldas in Mumbai rep- tary receipt issuance is expected to be Jones Day partners Manoj Bhargava resented the brokers Morgan Stanley complete on 7 June.

June 2013 India Business Law Journal 5 News

subsidiaries in the US, the UK and with tax aspects of the deal. Sharon Ca p i t a l m a r k e t s the UAE in addition to the Indian par- Smith and Debbie Barbour, partners ent company. The issue was jointly in London and Abu Dhabi respec- Rolta issues managed by Barclays, Citigroup, DBS tively, also assisted with the security Bank and Deutsche Bank. structure. high-yield bonds DLA Piper designed the security AZB & Partners advised Rolta and structure of the deal and prepared its guarantors on Indian law mat- Rolta India has completed a Rule intercompany loan documentation to ters, while Davis Polk & Wardwell 144A/Regulation S high yield bond help implement the debt repayment acted as US counsel to the joint lead offering after issuing US$200 million aspects of the use of proceeds. The managers. of 10.75% senior notes in the interna- firm was US counsel to Rolta. The The Mumbai office of Trilegal tional markets. The notes will be listed team was led by Stephen Peepels, the advised the parties on the Indian law on the Singapore Stock Exchange. head of DLA Piper’s US capital mar- implications of the New York law- Rolta India is a technology com- kets practice in Asia. He was assisted governed transaction documents and pany that provides IT solutions for by associates Timothy Franklyn and the regulatory regime governing guar- defence and national security, utilities, Clark Chen. antees by an Indian company to an power, financial services and other Partners Chris Paci and Jason indirect wholly owned subsidiary. The industries. Harmon provided support in nego- team at Trilegal consisted of partner The bonds were issued by one tiating the covenant package and Srinivas Parthasarathy, senior associ- of Rolta’s US subsidiaries, Rolta implementing the security structure, ate Priyanka Kumar and associates LLC, with guarantees provided by while partner Steve Weerts assisted Gaurav Mukherjee and Anshul Gosavi.

not what I am happy with. I am more Pe o p l e m o v e s ELP rounds up comfortable in being an in-house counsel, and that is where my path new recruits Rao races back lies,” he added. Commenting on Rao’s depar- in-house ture, Kartik Ganapathy, a partner at Economic Laws Practice (ELP) has IndusLaw, said: “It was wonderful reconstituted its dispute resolution Private practice has proved not to when Pramod reached out and said he team with the addition of nine new be Pramod Rao’s cup of tea. The for- wanted to be a part of IndusLaw. We lawyers. mer IndusLaw partner has resigned did realize that Pramod remained an The new appointments were made from the law firm after just over a in-house person at heart, but would to replenish the firm’s litigation wing year to move back to an in-house try to make the transition. It has been following the departure of 14 lawyers, role. great working with him, and we hope including partners Sanjay Notani and In his new position as general coun- that this will continue.” Tarun Gulati, in April. sel at Citibank, Rao will head a team Rao replaces Sandeep Beri, the Kirat Singh Nagra joins ELP’s Delhi of around 18 lawyers in Mumbai. former general counsel for South Asia office as a partner after practising with Previously he had worked as general at Citibank. Beri joined Amarchand Amarchand Mangaldas for more than counsel of ICICI Bank. He had spent Mangaldas as a lateral partner in its 10 years. Nagra handles commercial almost 14 years with the bank, of New Delhi office. litigation and arbitration matters and which he was general counsel for has represented clients in sectors seven, before joining IndusLaw to set such as telecoms, aerospace and real up the firm’s Mumbai office. estate. He has appeared before the Rao said that when he left ICICI, Supreme Court of India, high courts, many law firms approached him, but regulatory forums and tribunals. “it was I who approached IndusLaw Tarun Jain joins ELP as a senior and wanted to be a part of [the firm]”. associate following a six year stint He said he enjoyed his rapport with at Lakshmikumaran & Sridharan. His other members of the firm. “I was expertise lies in indirect tax laws, delighted with the wonderful core primarily in central excise, customs, team of partners,” he said. “I found foreign trade policy, service tax and them to be experienced, business value added tax. focused and supportive. The estab- Also joining the firm are Pranav lishment of the Mumbai office and Vyas, formerly an associate at Fox the inclusion of Priyanka [Roy, for- Mandal, Kartik Yadav, who was an merly of Alliance Legal] as a part- associate with AZB & Partners, and ner … is testament to the vision of Somnath Shukla, who was an asso- IndusLaw.” ciate at Vaish Associates. The other Rao said his colleagues were sup- new hires are Kshitiz Karjee, Prithvi portive of his decision to move back Kapur, Shankey Agrawal and Avneesh in-house. “Personally the role of part- Arputham who have all joined ELP as Pramod Rao ner at a law firm in private practice is associates.

6 India Business Law Journal June 2013 News

Finsec gains one, loses two Ba n k i n g & f i n a n c e

Mumbai-based finance boutique Canara grants loan to 3B Fibreglass Finsec Law Advisors has appointed Anil Choudhary as a senior associ- The London branch of Canara Bank has provided a €10 million ate. Choudhary is a New York and (US$13 million) facility to 3B Fibreglass SRPL (Belgium), a member of India-qualified lawyer specializing in the 3B Binani group of companies. The loan facility was backed by a transactional work in the securities corporate guarantee extended by Binani Industries India – the holding market. company of the 3B Binani group. The deal required Reserve Bank of The Harvard law graduate worked India approval. at Luthra & Luthra, Nishith Desai Majmudar & Partners advised Canara Bank (London) on the loan. Associates and Trilegal before joining Partner Prashanth Sabeshan in Bangalore led the Majmudar & Partners’ Finsec. team. TLT was English counsel to the lender and Ashurst represented the Choudhary has advised large cor- Canara Bank on Belgium and Luxembourg laws. porate houses and investment banks on corporate and capital market transactions including IPOs, cross- border listings on stock exchanges practice”. He also told India Business had a stint at Finsec, has joined IC and private equity investments. Law Journal that his firm would be tak- Legal as an associate. Speaking to India Business Law ing on more new professionals in the “IC Legal came up with a brilliant Journal, he said his reasons for mov- near future. opportunity and our desire was to ing to Finsec were “to have a focused Choudhary’s appointment comes move from a proprietary model to practice area in securities and finan- hot on the heels of two departures a partnership which gives greater cial laws and to have an opportunity from Finsec. independence and opportunities to to work with Sandeep [Parekh], one Indrajit Mishra and Tejesh Chitlangi grow,” Chitlangi told India Business of the leading securities lawyer in this left Finsec in May to join IC Legal. Law Journal. country”. He added that the firm was Mishra, who was a partner and head IC Legal was set up in 2004 and “a great place for legal minds inter- of private equity at Finsec, and specializes in real estate, litigation ested in contributing to the financial Chitlangi, a former senior associate and media law. and securities law policies of the at the firm, moved to become equity The firm comprises 15 lawyers country”. partners at IC Legal. including five partners. It aims to Parekh, the founder of Finsec Law Mishra takes on the role of head of become a full-service law firm with Advisors, said Choudhary’s appoint- private equity and M&A while Chitlangi the new capabilities in private equity, ment would strengthen Finsec’s “pres- heads up the firm’s investment funds M&A and investment funds as a result ence in financial sector transactional practice. Janhavi Seksaria, who also of the hires.

Me r g e r s & a cquisitions McGraw Hill lifts stake in CRISIL

McGraw Hill Financial has made an open offer to acquire up to 15,670,372 shares from the public shareholders of CRISIL, a global analytical company which provides ratings, research and risk and policy advisory services. The share amount equals 22.23% of the total equity shares outstanding in CRISIL. Full acceptance of the offer would increase McGraw Hill Financial’s total stake in CRISIL to 75% from 52.77%. The parties intend to purchase the shares at an offer price of `1,210 (US$21.42) per share, making the total value of the deal approximately `19 billion.

June 2013 India Business Law Journal 7 News

Singhania & Partners advised McGraw Hill Asian Holdings, along Multiples purchases stake in Milltec with McGraw Hill Financial, S&P India and Standard & Poor’s International, on the voluntary open offer under Mumbai investment company Multiples Alternate Asset Management the Securities and Exchange Board has acquired a 50% stake in Milltec Industries (Bangalore), a manu- of India’s takeover regulations. The facturer of agricultural equipment. The deal, valued at US$43 million, team was led by the firm’s senior was conducted through a secondary investment by Multiples in Milltec partner Ravi Singhania and partner Machinery and an acquisition of a 100% stake by Milltec Machinery in Manish Kumar Sharma and was sup- Milltec Industries (Bangalore) and Milltec Outsourcing. ported by senior associate Shradha Khaitan & Co Bangalore partner Ganesh Prasad advised Multiples. Dubey and associate Medha Shah. J Sagar Associates represented the Milltec Group and the continuing Khaitan & Co advised Morgan shareholders throughout the transaction. The team comprised partners Stanley India as the manager to the Sajai Singh and Gerald Manoharan, senior associate Prashant Kumar issue. The team included partner and associate Roy George. Arindam Ghosh and executive direc- Dua Associates was counsel to the selling shareholders on the deal. tor Sudhir Bassi.

Victor Reinz acquires licence

S&R Associates has advised US vehicle parts manufacturer Dana Holding Corporation on an agreement to license its heat exchange technology to Victor Reinz India. Victor Reinz is Dana’s joint venture in India with the Jayant Group. Victor Reinz India, which has been producing gaskets and heat shields for automotive customers in India since 2009, will now produce engine, transmission and power steering oil and fuel coolers. Dwayne Matthews, the president of Dana Power Technologies, said the agreement was “the next logical step to meet the rising demand for high- quality thermal solutions in India.” The deal is subject to customary closing conditions and expected to be complete within two months. The S&R Associates’ team that worked on the deal consisted of partners Rajat Sethi and Juhi Singh and associates Radhika Iyer and Radhika Agrawal.

billion in a gas project in Rovuma He was assisted by associates Avichal Mozambique Area 1 Offshore Block in Mozambique. Prasad and Tarana Khan. The Hong OVL and OIL will make the acquisition Kong office of Simmons & Simmons draws OIL and OVL through a newly formed entity in which was the international counsel to the OVL will own 60% and OIL will hold two companies. Oil India (OIL) and ONGC Videsh 40%. Shardul Shroff, the Delhi managing (OVL) have signed definitive agree- Kochhar & Co’s Delhi office, led partner of Amarchand Mangaldas, led ments with Videocon Mauritius Energy by partner Ngangon Junior Luwang, a team that acted for Videocon. He was to acquire 100% of the shares of represented OIL and OVL as Indian supported by partners Vidyut Gulati, Videocon Mozambique Rovuma 1. counsel on the deal, advising on the Nikhil Narayanan and Puja Sondhi, Videocon Mozambique holds a 10% transactional documents, litigation, principal associate-designate Ramanuj participating interest worth US$2.475 taxation and general corporate issues. Gopalan and associate Neha Yadav.

8 India Business Law Journal June 2013 News

Tech Mahindra seals Satyam merger

Indian IT company Tech Mahindra has completed its US$1 billion merger with Mahindra Satyam. Tech Mahindra had already acquired a 43% interest in Mahindra Satyam in 2009 and agreed in March 2012 to fully merge Mahindra Satyam with Tech Mahindra. Mahindra Satyam shareholders will get two shares of Tech Mahindra for every 17 shares of Mahindra Satyam. Jones Day was the global antitrust counsel to Tech Mahindra. The team was led by partner Carsten Gromotke in Frankfurt with assistance from staff attorney Tanja Neumann and lawyer Lisa Schlepper, also in Frankfurt, partner Fiona Schaeffer in New York, partners Bevin Newman in Washington and lawyers Jean-Christoph Deverines, Thomas Dinh and Annette Morin, also in Washington. AZB & Partners acted as principal legal adviser to Tech Mahindra in India.

June 2013 India Business Law Journal 9 The wrap

Legislative and regulatory update

Ta x a t i o n Key amendments incorporated in Finance Act, 2013

The president of India on 10 May signed into effect the Finance Act, 2013. Several key amendments were incorporated into the Finance Act during the course of its passage through the Lok Sabha (the lower house of parliament) and the Rajya Sabha (the upper house). The following is a summary of the key amendments made to the Finance Bill, 2013, as proposed by India’s finance minister in his budget speech on 28 February.

Tax residency certificates

The Finance Bill had sought to provide that a tax residency certificate even if in the prescribed format would only be a necessary but not a sufficient condition for claiming benefits under a tax treaty. Responding to concerns raised had introduced section 194LC in the transaction” in respect of commodity by investors, the government aban- ITA, through which interest payments derivatives executed on a recognized doned the proposal and replaced it with made on foreign currency denominated association will not be considered a the requirement to provide such other long-term infrastructure bonds and loan speculative transaction. As a conse- documents and information as may agreements in foreign currency were quence, going forward, businesses be prescribed. As yet, the government afforded a lowered 5% rate of tax. This engaged in commodities trading has not indicated what information and lowered rate was subject to production would be able to set off losses from documents (if any) will be required for of a permanent account number (PAN) commodity derivative transactions obtaining treaty benefits. because of section 206AA of the ITA, against other kinds of income (avail- which provided that if the details of the able only against gains derived from Foreign investment in Indian debt payee’s PAN have not been provided, other speculative transactions). tax would be withheld at a minimum Further easing the country’s debt rate of 20% or the actual rate, which- Transfer pricing investment regime, the government ever was higher. The PAN requirement has introduced a new provision (sec- has now been done away with. The Finance Act, 2012, had intro- tion 194LD) in the Income Tax Act, 1961 duced a provision whereby the time (ITA), through which interest payments Commodities derivative transactions limit for completion of an assessment, made to foreign institutional investors where the matter has been referred to and qualified foreign investors on or A series of amendments to the Finance a transfer pricing officer (TPO), was after 1 June 2013 but before 31 May Bill clarifies the status of commodities extended to three years (from the year 2015 on rupee denominated bonds of transactions, in the context of the in which the income was first assessa- an Indian company and on government imposition of commodities transac- ble), as opposed to two years, in cases securities would be subject to tax at tions tax. Under Indian tax law, trans- where (i) reference has been made on the rate of 5%, instead of the ordi- actions not by way of spot delivery or after 1 July 2012, or (ii) reference nary rate of 20%. However, the lower of goods are treated as speculative has been made before 1 July 2012 but withholding rate would be applicable transactions and losses arising from an order has not been passed before only on interest paid on bonds whose speculative transactions are allowed that date. The Finance Bill, 2013, has interest rates do not exceed the rate as to be set off only against income from been amended to provide that the time specified by the central government in speculative transactions. The Finance lines for any assessment where a ref- this regard. Act, 2013, has amended section 43(5) erence has been made to the TPO will Additionally, the Finance Act, 2012, of the ITA to provide that any “eligible be three years.

10 India Business Law Journal June 2013 The wrap

Em p l o y m e n t La w an agent, independent contractors, and regularly organizing workshops trainees, and apprentices, with for sensitizing employees on this or without the knowledge of the issue. New law targets principal employer and working on a • The non-fulfilment of certain voluntary basis. employer obligations (such as sexual harassment • Under the act, the employer failure to constitute an ICC) could is required to set up an internal lead to penal consequences for the of women at work complaints committee (ICC) employer. at each office or branch of an The Sexual Harassment of Women organization that employs at least at Workplace (Prevention, Prohibition 10 employees. At the district level, and Redressal) Act, 2013, received the the government is required to set SEBI guidelines on president’s assent and was enacted up a local complaints committee on 22 April. (LCC) to investigate complaints employee stock The provisions of the act may be regarding sexual harassment from summarized as follows: establishments where an ICC has schemes clarified • The definition of sexual harassment not been constituted due to non- includes any unwelcome sexually fulfilment of the above criteria determined behaviour (whether or if the complaint is against the The Securities Exchange Board of directly or by implication) such as employer. India (SEBI), through a circular dated physical contact and advances, • The act provides that at the request 13 May, provided some clarifications demand or request for sexual of an aggrieved employee, the ICC to an earlier SEBI circular dated 17 favours, sexually coloured remarks, and the LCC may recommend to January 2013, which made amend- showing pornography, or any other the employer interim relief such as ments to the SEBI (Employee Stock unwelcome physical verbal or non- transfer of the aggrieved employee Option Scheme and Employee Stock verbal conduct of a sexual nature. or granting her up to three months Purchase Scheme) Guidelines, 1999, • The scope of “workplace” includes of paid leave. and the Equity Listing Agreement. government and non-governmental • The law allows female employees to The clarifications are as follows: bodies, private and public sector request to settle the matter through organizations, organizations conciliation although a monetary Applicability carrying on commercial, vocational, settlement should not be made educational, entertainment, industrial as a basis of conciliation. The act It was clarified that the circular dated 17 or financial activities, hospitals and provides a detailed elaboration of the January is applicable to all employee nursing homes, educational institutes, grievance redressal mechanism. benefit schemes involving securities of sports institutions and stadiums. • The act includes other employer a company where the schemes are set • The definition of “employee” covers obligations such as providing a safe up, managed or financed by the com- regular, temporary and ad hoc working environment, displaying the pany, whether directly or indirectly. employees, daily wage employees penal consequences of acts that either working directly or through may constitute sexual harassment Time extension

The earlier deadline of 30 June 2013 has been extended to 31 December 2013 and by this date all employee benefit schemes involving securities of companies must be made to conform to the guidelines. The Equity Listing Agreement must also be amended accordingly. Any further grant of options after 17 January 2013 has to be strictly in accordance with the guidelines.

Holding of securities by trusts

Employee benefits trusts which have already acquired securities of the company from the secondary market before 17 January 2013 may continue to hold them beyond 31 December 2013 provided that the schemes have been aligned to the guidelines.

Securities held by other schemes

Existing employee benefit schemes involving securities but not involving

June 2013 India Business Law Journal 11 The wrap

grant of options to purchase or purchase of securities by employees will be permitted to: (i) either hold securities of the company already acquired by them beyond 31 December 2013 provided the schemes have been aligned with the guidelines; or (ii) dis- pose of the securities by 31 December 2013. Further, the circular requires that listed companies must disclose the following information to the stock exchanges: 1. Details of benefits granted/shares allotted in the past up to 17 January 2013 and benefits due/options granted and pending exercise as on 17 January 2013, in pursuance of employee benefit schemes involving securities of the company which are not in alignment with the guidelines, must be disclosed in the prescribed format by 30 June 2013. 2. Details of allotments made/benefits format within seven days from the The legislative and regulatory update is com- granted post 17 January 2013 up end of each quarter. The details piled by Nishith Desai Associates, a Mum- to 13 December 2013 pursuant pertaining to the quarter ended in bai-based law firm. The authors can be con- to employee benefit schemes not March are required be disclosed tacted at [email protected]. Readers in alignment with the guidelines along with the quarter ending 30 should not act on the basis of this information must be disclosed in the prescribed June 2013. without seeking professional legal advice.

12 India Business Law Journal June 2013 The wrap

Court judgments

Ba n k i n g l a w Debt recovery tribunal cannot rule on workmen claims

Stating that “once the company is in winding up the only competent authority to determine the workmen’s dues is the liquidator”, a three-judge bench of the Supreme Court recently held that claims of workmen who claim to be entitled to payment pari passu have to be considered and adjudicated by the liquidator of a debtor company and not by a Debt Recovery Tribunal (DRT). Allowing an appeal in Bank of Maharashtra v Pandurang Keshav Gorwardkar & Ors, the court ruled that where a winding up petition against a debtor company is pending and a bank or financial institution has been repaid The ruling was prompted by two of a company and its priorities is vested its loans following an order of sale by appeals – by Bank of Maharashtra and entirely with the DRT. a DRT, the disbursements made by the Indian Banks Association – against The Bank of Maharashtra and the the DRT cannot be reopened when the a ruling by Bombay High Court, which IBA had argued that the workmen had debtor company subsequently goes allowed a writ filed in 2004 by Pandurang no claim or right over the security held into liquidation. However, if the debtor Keshav Gorwardkar and others who by a financial institution, that their dues company goes into liquidation before were workmen of a defaulter company. could only be adjudicated in an appro- the DRT has fully disbursed the sale The court held that under the Recovery priate court (e.g. Industrial Tribunal) proceeds, the DRT can disburse the of Debts Due to Banks and Financial when the company is not in liquidation, undisbursed proceeds only after giving Institutions Act, 1993, the jurisdiction to and that the DRT had no competence notice to, and hearing, the liquidator. determine the payment of sale proceeds in this regard.

Ed u c a t i o n l a w AICTE approval not required for MBA courses

Allowing an appeal in Association of Management of Private Colleges v All India Council For Technical Education & Ors, the Supreme Court recently held that a course for a master’s degree in business administration (MBA) “is not a technical course” within the definition of the All India Council for Technical Education Act, 1987. As such, private colleges do not require approval from the All India Council for Technical Education (AICTE) to run MBA courses. The court also held that while a

June 2013 India Business Law Journal 13 The wrap

master’s degree in computer applica- Re a l e s t a t e tions (MCA) is a technical course, the AICTE’s role in its conduct and regulation “must be advisory”. Court quashes circular The Association of Management of Private Colleges (AMPC) was appealing prohibiting GPA sales a 2003 ruling by Madras High Court, which held that while a university does Ruling in Pace Developers and Promoters Pvt Ltd v Govt of NCT through its not need to obtain permission from the Secretary, Delhi High Court recently set aside a 27 April 2012 circular issued AICTE for technical courses it runs, its by the government of the national capital territory of Delhi, which prohibited affiliated colleges must do so. Further, the transfer of immovable property on the basis of a general power of attor- the high court held that private col- ney (GPA), a will and an agreement to sell, collectively or separately. leges should get MCA courses that they Holding that the circular was contrary to the observations made by the intend to run ratified by the AICTE. Supreme Court in Suraj Lamp and Industries (P) Ltd v State of Haryana, the The AMPC argued that this contra- court ruled that “as long as the transaction is genuine, the same will have to vened settled principles of interpreta- be registered by the sub-registrar … a person may enter into a development tion of statutes and was also contrary agreement with a land developer or builder for development of a parcel of to the law laid down by the Supreme land or for construction of apartments in a building, and for this purpose a Court in Bharathidasan University & power of attorney empowering the developer to execute sale agreements Anr v AICTE & Ors. The AMPC further can be executed”. argued that the words MBA and MCA Pace Developers and Promoters had entered into a collaboration agree- were inserted in August 2000 in regula- ment in September 2011 with the owner an immovable property, who had tions of the AICTE, but were unenforce- executed a GPA in its favour. The GPA was registered and stamp duty paid able as parliament had not ratified the according to the Delhi Stamp Duty Amendment Act, 2001. The owner of the amendment as required under the act. property had also executed a will giving a director of the company a 25% The Supreme Court held that under share in ownership rights to the land. the University Grants Commission Act, The high court clarified that it was open to the government to examine 1956, colleges are part of the university the genuineness of transactions reflected in documents filed, at the time of that sanctions their courses. As a result, registration. If the sub-registrar concludes that a transaction is not genuine, the court held that “the exclusion of those presenting documents would be called on to explain their case and university in the definition of technical if unconvinced the sub-registrar could pass a “speaking order” giving the institution as defined in section 2(h) of reasons why the documents were not liable to be registered. the AICTE Act must be extended to the affiliated colleges”.

Mo t o r a c c i d e n t c l a i m s Court clarifies guidelines on compensation

In Reshma Kumari & Ors v Madan Mohan & Ors, a three-judge bench of the Supreme Court held that the multiplier specified in the second schedule of the Motor Vehicles Act, 1988, need not be scrupulously followed for calculating compensation in accident claims. For over a decade Supreme Court judges have expressed differing views about the application of the multiplier. While some judgments held that the table for calculating damages was “unworkable”, others maintained that Supreme Court referred this case to a 166 of the Motor Vehicles Act . the schedule was a good guide for larger bench for a final view. The task of the court was to remove computing compensation. As despite The three-judge bench clarified the discrepancies which may arise this controversy parliament had position regarding the application of between applications filed under failed to amend the law for over two the multiplier in the second schedule to section 166 and those filed under decades, a two-judge bench of the claims for compensation under section section 163A. Section 163A allows

14 India Business Law Journal June 2013 The wrap

compensation claims to be filed and provides for calculation of compensation on the basis of the second schedule. The multiplier mentioned in the schedule is a numerical value used for calculating the final quantum of compensation. The discrep- ancy arose because section 166 also allows compensation to be sought, but no formula is given for calculating compensation, nor is there any reference to the multiplier in the second schedule. Stressing the importance of having a standard method to determine compensation in cases of death, the Supreme Court directed all forums below to follow the new guidelines and those laid down in para 19 of its judgment in Sarla Verma (Smt) and Ors v Delhi Transport Corporation and Anr.

Re t a i l Supreme Court upholds FDI policy in multi-brand retail

Holding that “on matters affecting policy, this court does not interfere unless the policy is unconstitutional or contrary to the statutory provisions or arbitrary or irrational or in abuse of power”, the Supreme Court recently dismissed a writ petition in Manohar Lal Sharma v Union of India & Another, which challenged the government’s foreign direct investment (FDI) policy. A three-judge bench of the court held that “the competence of the central government to formulate a policy relating to investment by a non-resident entity/person resident outside India, in the capital of an Indian company is beyond doubt”. Sharma had petitioned the court to quash press notes 4, 5, 6, 7 and 8 (2012 Series), dated 20 September 2012, issued by the Department of the Reserve Bank of India (RBI) could the petitioner’s contention that the Industrial Policy and Promotion, by do this as per the Foreign Exchange press notes had no force of law, did not which the government reviewed its Management Act, 1999. survive. policy on FDI in single-brand retail, The court on enquiry found that after multi-brand retail, air transport serv- the press notes were issued the RBI ices, broadcasting carriage services had amended the Foreign Exchange and power exchanges. Management (Transfer or Issue of The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law Sharma argued that the press notes Security by a Person Resident Outside firm based in New Delhi. The authors can be were “unconstitutional and without India) Regulations, 2000, to allow for contacted at [email protected] or lbhasin@ any authority of law” and that the the changes to the FDI policy. The court gmail.com. Readers should not act on the basis central government had no power to observed that in the absence of any of this information without seeking professional make policies regarding FDI, as only challenge to the amended regulations, legal advice.

June 2013 India Business Law Journal 15 Vantage point Opinion

Falling short Regulatory inadequacies are holding back India’s drugs industry, argues DG Shah of the Indian Pharmaceutical Alliance

n May, Ranbaxy, an Indian pharmaceutical company that committees have not seen the light of day, and as a result, is part of the Daiichi Sankyo Group, was fined US$500 the CDSCO has failed to kept pace with global changes. million by the United States Food and Drug Administration An unfortunate consequence of this is that the credibility of (FDA) for offences relating to the manufacture and distri- India’s pharmaceutical industry, which is judged in part by bution of adulterated drugs that were made in India. the standing of its regulatory authority, has suffered. IIndia has the largest number of FDA-approved plants out- Furthermore, with confidence in the CDSCO lagging, side the US, and there are fears that the penalty has dam- other countries will become less trusting of the quality and aged the image of the country’s pharmaceutical industry. It safety of Indian pharmaceutical products, thus seriously has also focused attention on the shortcomings of India’s damaging India’s reputation as a supplier of safe, effective regulatory infrastructure for the sector. and quality medicines. The FDA has zero tolerance for manufacturing deficien- India’s pharmaceutical industry already exports more of its cies. Statistics on import alerts, which are issued by the FDA products than it sells domestically. For exports to grow further, when a product is deemed to present a safety risk, show it is vital that the industry has the backing and oversight of a that complying with the regulator’s exacting standards is a robust regulator that is held in high esteem by other regulators challenge for every company, whether Indian or American, and industry observers around the world. generic or innovator. Indeed, 63 import alerts are currently For the past three years, the Indian Pharmaceutical Alliance in force for Canadian products, 42 for UK products, 40 for (IPA) has been urging the government to address the shortfalls Japanese products, 35 for German products and 47 for of the CDSCO and implement reforms that will facilitate the Indian products. upgrading of India’s pharmaceutical regulatory framework. Maintaining consistently high quality is a particular chal- Just as building a quality organization happens by design, lenge for companies in India, where over the decades peo- not by accident, building an effective regulator requires strong ple have developed a tolerance for low standards in hygiene, leadership and a pathway with well-defined milestones. food, medicine and drinking water. As such, any Indian In a recent submission before an expert committee tasked company that has to adhere to more challenging standards with formulating policy guidelines and standard operating has to work to ensure that the entire organization embraces procedures for the approval of new drugs, clinical trials and a new culture. the banning of drugs, the IPA highlighted an increasing reluc- The Ranbaxy episode has driven home the fact that the tance by the CDSCO to grant approvals for new drugs, even cost of non-compliance far outweighs the cost of compli- if they have been approved elsewhere, as well as a worrying ance. It has also focused attention on the changes in attitude trend for the CDSCO to withhold permission for clinical trials and corporate culture – from the grassroots up – that are or bio-studies for exports. needed to foster quality organizations where higher techni- This is a typical example of the malaise that has permeated cal and ethical standards are the norm. the CDSCO and given rise to an unhealthy culture that seems In the pharmaceuticals sector, an effective regulatory to equate decision-making with risk-taking. This situation not framework is a prerequisite if Indian companies are to only inhibits India’s pharmaceutical industry as it strives to achieve the necessary jump in quality and the changes in compete in global markets, but also drives home the mag- attitude and corporate culture that need to accompany it. nitude of the challenge that lies ahead if the CDSCO is to be However, as it stands, there are serious concerns over the reinvigorated. working of India’s drugs regulatory authority, the Central Indian companies that value their presence in the US and Drugs Standard Control Organization (CDSCO). other international markets have already embraced the need Various committees have attempted to make the to raise their standards and develop corporate cultures that CDSCO more effective and accountable. Noteworthy among encourage and facilitate excellence. Now it falls to the coun- them are the Pharmaceutical Research and Development try’s pharmaceutical regulatory authority to recognize that it Committee, which published a report in November 1999, too needs to change in the interest of the long term growth and and the Mashelkar Committee, which released its report four prosperity of the industry. Such a change is long overdue. g years later. More recently, in its 59th report, the Parliamentary Standing Committee on Health and Family Welfare highlighted the need for greater transparency, accountability and DG Shah is the secretary general of the Indian Pharmaceutical efficiency in the working of the CDSCO. Alliance, which comprises 19 leading research-based Indian pharma- Sadly, most of the recommendations made by these ceutical companies.

16 India Business Law Journal June 2013 Competition law Cover story

Punching above its weight

India’s competition watchdog may be the new kid on the block, but it has already been flexing its muscles. Is it up to the challenges it has set for itself? Rebecca Abraham reports

evelling the playing field in India was never going to previously unheard of amounts. These included a `6.3 be an easy task so there was little surprise when it billion (US$110 million) penalty against one of India’s top L took six years for the country’s competition watch- real estate companies, DLF, for abuse of dominance, and dog, the Competition Commission of India (CCI), to be up a `60 billion penalty against an 11-strong cartel of India’s and running. top cement companies. Both DLF and the cement com- That the CCI has to be taken seriously was driven home panies are appealing the orders against them before the when it began imposing widely publicized penalties of Competition Appellate Tribunal (COMPAT).

June 2013 India Business Law Journal 17 Cover story Competition law

Practitioner’s perspective Competition in cyberspace Owners of patents used in cloud computing should review their antitrust risks urges Priya Christian at Dua Associates

“By 2020, the people of India will be more numerous, US Supreme Court ruling in Eastman better educated, healthier and more prosperous than any Kodak Co v Image Technical Services. time in our long history”. This is the Planning Commission’s In Eastman Kodak, the US Supreme vision as stated in a report entitled India Vision 2020. Court made it clear that the relevant To achieve this vision, the government views cloud market must be from a customer’s computing – a method of delivering information technol perspective and include only products ogy services over a network – as a cost-effective tool for or services that the customer views as a number of purposes, including setting up remote class interchangeable. Priya Christian rooms and delivering telemedicine. However, the use of In a cloud, customers may have a cloud computing raises serious competition concerns. choice among providers in a primary Competition laws look to ensure that firms in a free market. However, once they have subscribed to a particu- market economy do not restrict or distort competition in a lar provider, they may have no choice for services in the way that prevents the market from functioning optimally. aftermarket in that cloud and antitrust claims may arise if providers are seen to be bundling or locking-in services. What is cloud computing? This is just the beginning Cloud computing is the provision of data, storage or a software application to remote users on demand over The global public cloud services market is set to grow the internet. A cloud can be viewed as a five-layer stack: by 18.5% to US$131 billion in 2013, with Asia-Pacific hardware; virtualization; infrastructure as a service; plat expected to have highest growth rates. Licensing prac form as a service; and software as a service (SaaS). tices used in cloud computing are within well established Correct interworking between layers is vital for the legal principles, but the growing importance of the cloud cloud to work. So, when users open photographs in their means that it’s only a matter of time before competition Facebook accounts on their smartphones, they are using authorities question such practices. a SaaS application (the Facebook app) to retrieve data Tackling these fast moving and complex industries (the digital photograph file) stored in remote hardware involves maintaining a balance between causing harm (the Facebook servers) that is managed by virtualization to innovation and avoiding the emergence of entrenched software and an operating system. market power. Competition law decisions that relate to Each layer has potential product and technology markets challenging markets can alter established practice or that are interdependent. Most of the underlying technolo influence emerging business models. gies in these markets is protected by intellectual property As cooperation increases between competition author (IP) laws. Service providers rely on patent licensing, often ities, it is worth keeping in mind European Commission in the form of cross-licences and portfolio licences. But competition commissioner Joaquín Almunia’s thoughts competition laws impose limits on these processes. on IP rights: “It is totally legitimate for a firm to protect its intellectual property – that goes without saying – but Application of competition law property rights cannot be used to block entry in markets that were not covered by them initially. The digital sector Competition laws are mainly concerned with firms with is just the most prominent among the many industries that the market power to raise prices above marginal costs. To need an open environment to thrive, and I will continue to assess a firm’s market power, the relevant market of the promote openness and information in all of them”. product or services needs to be defined. A competition With this in mind, companies that own patents used authority’s task is to assess if a cloud provider has the in the cloud should review their strategy for competition power to influence prices or output in the relevant market. law risks. It could be argued that two separate markets – one providing cloud computing capabilities (primary market) and the other providing services or software within a cloud Priya Christian is a partner in the competition practice of Dua Associates in New Delhi. An Indian advocate and English solicitor, (aftermarket) – should be considered while defining the rel- she specializes in Indian and EU competition law and has experi- evant market for cloud services. This has been supported ence in oil and gas, aviation, defence, automobile, chemicals, by some court rulings, notably, a European Court of Justice financial services, information technology, manufacturing and ruling in Hugin Kassaregister AB and Hugin Cash Register media. She has appeared before the CCI and the European Com- Ltd v Commission of the European Communities and a petition Commission.

18 India Business Law Journal June 2013 Competition law Cover story

For a new body which does not competitive behaviour may prove to be its Achilles heel. have that many staff, [the CCI] A case in point is the cement case, in which the CCI relied on circumstantial evidence to establish the exist- are doing a phenomenal job in ence of a cartel. In the absence of any direct evidence, the terms of turning around merger order has been challenged on appeal and the COMPAT is expected to clarify the roles of direct and indirect evidence notifications in deciding a cartel case. Nisha Kaur Uberoi In another case, the COMPAT recently stayed an 8 Partner February order by the CCI that found the Board of Control for Cricket in India (BCCI) had abused its dominant posi- Amarchand Mangaldas tion by using its power to sanction events to foreclose competition. The CCI had imposed a `522 million penalty on the BCCI. On appeal the BCCI argued that issues considered by the CCI were not part of the report submitted by its investigative arm, the Director General (DG), and the COMPAT found a prima facie case in the BCCI’s favour. Observers such as Vinod Dhall, a former chairman of the CCI, put such reversals down to the CCI being “con- strained for resources”. “A cartel investigation or an abuse of dominance investigation requires a lot of evidence, and the reports [by the investigative arm of the CCI] have to stand scrutiny first at Low hanging fruit? the CCI and then subsequently in any appeal,” says Dhall, who is now the managing partner of Dhall Law Chambers, These are early days for competition law jurisprudence in a law firm that specializes in competition law matters. India. While sections 3 and 4 of the Competition Act, 2002, Others suggest that the competitions watchdog is yet to which deal with the prohibition of anti-competitive agree- develop the rigour necessary for this kind of work. ments and abuse of dominance respectively, came into “In their hurry to send out a powerful message, they may force in June 2009, a mandatory merger control regime as be missing the wood for the trees,” says Gandhi at AZB & provided for in sections 5 and 6 of the act has been in effect Partners. only since June 2011. The CCI’s investigations into anti-competitive agree- Investigations can be tricky ments and abuse of dominance have so far mostly centred on steel, tyres, cement, sugar and other sectors which There is also considerable concern about work done at Samir Gandhi, a Delhi-based partner at AZB & Partners the office of the DG, which is staffed by one DG and several and head of the firm’s competition law practice, refers to as additional director generals. “low hanging fruit”. Dhall says that “the DG’s office is struggling to keep “It was clear and evident that these were going to be the pace with the number of cases which are with them”. But first targets,” says Gandhi, who points to an almost “eye to others question the manner in which investigations are eye” comparison between the most investigated sectors in undertaken. the world and those that the CCI has investigated. The DG “often starts off with the assumption that some- thing wrong has been done as opposed to letting the inves- Forging ahead tigation reveal it,” says Ravisekhar Nair, a senior associate at Economic Laws Practice. Be that as it may, most observers report that the CCI has These sentiments are echoed by Sharad Bhansali, made great strides in getting itself up to speed and in training and other activities. On the merger control front, figures to the end of June The DG’s office is struggling to indicate that the CCI has received 121 notifications of com- keep pace with the number of binations (acquisitions of shares, voting rights and control, and mergers and amalgamations) and has passed orders cases which are with them in 116. Vinod Dhall “For a new body which does not have that many staff, they are doing a phenomenal job in terms of turning around Managing Partner merger notifications,” says Nisha Kaur Uberoi, a partner at Dhall Law Chambers Amarchand Mangaldas who heads the competition practice at the firm’s Mumbai office. Uberoi adds that in all instances where her team had filed a notice of combination and approval was required from the CCI and another regulator, the CCI’s approval had come first.

Withstanding scrutiny

However, commentators suggest that the manner in which the CCI has gone about prosecuting cases of anti-

June 2013 India Business Law Journal 19 Cover story Competition law

Practitioner’s perspective Time to align Transfer of technology agreements run the risk of falling foul of India’s competition regime say Meenakshi Arora, Harvinder Singh and Sumedha Dutta at HSA Advocates

The rapid evolution of technology can in part be attrib provisions that uted to protection given to innovators through intellectual clearly protect the property (IP) laws, which give IP owners an exclusive legal public interest. right to exploit their work. However, there are inherent ten The Patents Act, sions between IP and competition laws, as the latter strives for example, facili- to keep markets competitive by reducing barriers to trade. tates the compulsory licensing of Restraining competition patents. This was Meenakshi Arora Harvinder Singh enforced yet again The transfer of technology and know-how typically last year when the occurs through licensing agreements. These agreements Controller General normally contain restraining clauses such as tie-in arrange of Patents, Designs and Trademarks directed German ments, grant-back provisions, exclusive supply arrange pharmaceutical company Bayer to licence its anti-cancer ments and other restrictions, that limit how the licensed drug Nexavar on public interest grounds. technology can be utilized. As a result, licensing arrange ments may have a detrimental effect on competition. Guidelines needed Section 3 of the Competition Act, 2002, prohibits anti- competitive agreements that may cause appreciable The European Union’s attempts to align competition adverse effects on competition within India. However, an and IP laws have seen the prohibition of anti-competitive exemption detailed in section 3(5)(i) is granted to ensure arrangements, while also providing exemptions for tech that “reasonable conditions” exist for the protection of nology transfers. rights granted under several IP laws, including the Patents India, meanwhile, has only a blanket exemption from com- Act, 1970, and the Copyright Act, 1957. As a result, tech petition laws for the protection of IP rights. The Competition nology transfer arrangements that impose “unreasonable (Amendment) Bill proposes to widen the scope of this conditions” do not fall under this exemption and attract the exemption, but there is a clear need for more specific regula- provisions of the Competition Act. tions, particularly with regards to technology transfer agreements. In spite of the fact that the link between IP laws and Protecting public interests competition law has been recognized in a report published in 2000 by the High Level Committee on Competition Policy The Competition (Amendment) Bill, 2012, which is pend and Law, no such regulations currently exist. There are also ing before the Indian parliament, proposes amendments no authoritative judicial pronouncements in this area. which may affect technology transfer arrangements. As a result, the Competition Commission of India has In its present form, the act focuses only on the sale been forced to rely heavily on US and UK competition of goods within vertical agreements. However, the bill jurisprudence when dealing with technology transfer proposes to expand the scope of vertical agreements to agreements. In this regard, the 6 April 1995 antitrust guide- include the provision of services. Accordingly, restraining lines for the licensing of intellectual property by the US clauses in technology transfer agreements pertaining to the Department of Justice and the Federal Trade Commission, provision of services would come within the scope of verti and European Commission Regulation No 772/2004 of 7 cal agreements. This is subject to the exemption granted in April 2004 on the application of article 81(3) of the EU treaty section 3 of the Competition Act, detailed above. to categories of technology transfer agreements, are the The bill also proposes to amend this exemption, by most noteworthy. expanding it to make it applicable to IP rights granted Given the broad and somewhat ambiguous nature of the through “any other law for the time being in force relating Competition Act (Amendment) Bill, 2012, specific guide- to the protection of other intellectual property rights”. The lines will provide clarity to all. change would protect IP arrangements granted under foreign laws as well as Indian IP laws, whether currently in force or enacted in the future. Meenakshi Arora is a partner at HSA Advocates and heads its litiga Section 3 of the Competition Act, which grants exemp tion practice. Harvinder Singh is a partner at the firm and Sumedha tions for IP laws and other “reasonable conditions”, has Dutta is a senior associate – both are with the firm’s corporate M&A been criticized for not having a similar exemption based on practice group. Rohan Dang and Vasav Anantharaman, associates public welfare. Other laws arguably balance this by including at the firm, contributed to the article.

20 India Business Law Journal June 2013 Competition law Cover story

managing partner of Delhi-based APJ-SLG Law Offices, Conceptually the officials [of who states that the DG’s office has some way to go before the investigative arm of the its investigative skills become good enough for the challenge at hand. CCI] have to be trained as to “Conceptually the officials have to be trained as to who is playing what role who is playing what role,” says Bhansali, who recently represented an informant in a case where the CCI inves- Sharad Bhansali tigated and ruled on alleged cartelization in the market Managing Partner for soda ash in India. Bhansali reports that the informant APJ-SLG Law Offices was required to “prove himself to the hilt”, rather than just provide information that could set the ball rolling on the investigation. “If the informant has to give everything, what is the point of having the legal power to call for information?” asks Bhansali. “A large part of this problem is that the DG’s office receives people for two years and they leave just when they are well trained,” says Uberoi at Amarchand Mangaldas. “It’s not good for capacity building as there is a loss of knowledge and as a result industry suffers.”

How and why of fines by the CCI. This is seen in other jurisdictions and is common for tax-related disputes in India. However, Nathani There is considerable concern about the lack of consist- argues that it is fundamentally wrong in the Indian con- ency in the quantum of fines, as there are no clear guide- text, especially in view of the delays that parties can face lines as to how and when penalties are to be imposed. in court. “The orders are not reasoned orders,” says Uberoi, “Much as I would love to see anti-competitive behav- pointing to two instances of bid-rigging in which COMPAT iour fined, I am watching in dismay as practices in this had reduced the penalty imposed by the CCI while realm hurtle towards those in the tax jurisdiction of the agreeing with the CCI that competition laws had been country,” says Nathani. violated. In February, the COMPAT reduced a penalty imposed Extra-territorial reach in April 2012 on MDD Medical Systems India and two other companies, from 5% of the average turnover to 3%. In recent months, the CCI has also imposed fines on Doing so the COMPAT had criticized the CCI for not giv- international companies that failed to notify India’s anti- ing any reason for fixing the penalty at 5%, stating that trust regulator before going ahead with an acquisition. there was a “catena of Supreme Court decisions which In April, the CCI penalized a New York Stock Exchange have unhaultingly held that in the absence of any justify- listed company, Titan International, for the delay in noti- ing reasons the exercise of discretion tends to become fying the commission of its end-2012 acquisition of Titan arbitrary”. Europe. As a result, Titan International has indirectly COMPAT said it was reducing the fine taking in view acquired 35.91% of the equity share capital of Wheels mitigating factors such as the nascent stage of competition India and while the CCI ruled that there was no appreci- law in India and as the parties in question were first-time able adverse effect on competition in India, it fined the offenders. company `10 million. This ruling was cited by Gulf Oil Corporation and oth- The CCI can potentially fine companies up to 1% of ers when they appealed an April 2012 order of the CCI, combined assets or turnover, whichever is higher, for in which they had been found guilty of bid-rigging and failing to file notices of combinations on time. While it is awarded penalties averaging 3% of three years’ turno- yet to impose a fine of this magnitude Uberoi warns that ver. In April, choosing to “dilute the punishment” after “global M&A will now have to watch out for the CCI”. taking into account several mitigating factors, COMPAT reduced the penalty to 10% of the amount imposed by Greater powers on the way the CCI. “There is a lack of consistency in fining,” remarks Suhail The Competition (Amendment) Bill, 2012, introduced Nathani, a Mumbai-based partner at Economic Laws in parliament in December 2012, would give the CCI Practice. He adds that this and the fact that “on similar greater powers to investigate anti-competitive conduct. facts the case may turn differently” leaves clients, and One of the better known amendments would allow the sometimes even practitioners, confused. chairman of the CCI to authorize the DG to conduct But relief may be at hand. Dhall believes that “the dawn raids. As it stands the CCI can conduct dawn raids commission and the appellate tribunal both are actively only after a magistrate has issued a warrant. considering as to what should one do about penalties Gandhi at AZB & Partners believes that while dawn and what should be the guiding factors to determine the raids “are not necessarily a bad thing”, the amendment penalty”. should have included rules on how the chairman’s dis- There is also concern about the COMPAT’s position cretion is to be exercised. that it will hear appeals against orders only after the par- In addition, Gandhi highlights other “more nuanced ties in question pay a percentage of the penalty imposed and legalistic amendments”, which may not have caught

June 2013 India Business Law Journal 21 Cover story Competition law

Much as I would love to see acquisitions made in this sector do not meet existing anti-competitive behaviour merger thresholds. “Here you have a public policy purpose, which is fined, I am watching in dismay ostensibly protectionist in nature, being put in through as practices in this realm the competition law system,” says Gandhi. “This is essentially not supposed to happen.” hurtle towards those in the tax Other significant changes being proposed in the bill jurisdiction of the country include widening the scope of the exemption for intellec- Suhail Nathani tual property rights provided under the Competition Act. At present rights conferred by certain specific laws, such Partner as the Copyright Act, 1957, the Patents Act, 1970, and the Economic Laws Practice Designs Act, 2000, cannot be restricted by the Competition Act. The bill proposes that this exemption be extended to “any other law for the time being in force relating to the protection of other intellectual property rights”. Amendments proposed in the area of regulation of combinations could result in the definition of a group being changed to two or more enterprises where either enterprise can exercise 50% or more of voting rights. At present the level is set at 26% or more. In addition, the bill proposes that the time allowed for the CCI to pass an order after being notified of a combination be reduced to 180 days from 210 days. as much attention, but are as problematic. Growing area of work These include the bill’s introduction of the concept of joint dominance in section 4 of the act, which prohibits Competition law is a growing area of work for many of abuse of dominance. As a result, two or more compa- India’s corporate law firms in Delhi and Mumbai. While nies that may not have been independently dominant merger filings are done by the larger firms, which typi- can now be collectively dominant and consequently they cally advise on large mergers and acquisitions, firms of could be found to be guilty of abusing their dominance. all sizes are taking on competition law specialists, some This is seen as problematic by several commentators with experience in jurisdictions with more mature com- including the Confederation of Indian Industries, which petition law regimes. said in a statement that in the absence of a definition of Firms that have done so include Dua Associates, collective dominance this would give the CCI discretion- which recently took on Priya Christian, a lawyer who had ary powers. previously worked at Freshfields Bruckhaus Deringer in “Surely if it was a concerted effort in doing so [abusing London. Christian, who has also worked at the competi- dominance] together that would be caught under the car- tion directorate of the European Commission in Brussels, tel provisions,” remarks Gandhi, who says the concept has joined Dua’s office in Delhi. of joint dominance blurs the distinction between collec- Similarly, Kochhar & Co hired Piyush Gupta in 2012 to tive and unilateral action. “I really think it’s far too early set up its competition law practice. Gupta, who was part for the Indian commission to be going on this line.” of the in-house team at Singapore Airlines between 2008 and 2010, had also worked at Singapore-based Rajah & Back-door protectionism?

The bill also seeks to introduce sector-specific merger [Sector-specific merger thresholds. It would allow the government to lower or thresholds] is an indirect raise the thresholds for notification according to the sector in which the merger or acquisition was taking place. way of lowering thresholds “This defeats the reason why thresholds were initially in not just one sector, but set in such a high way,” says Gandhi pointing out that existing thresholds are the result of industry concerns in a number of them about the merger regime. “This is an indirect way of low- Samir Gandhi ering thresholds in not just one sector, but in a number Partner of them and we have no idea of which sectors are going to finally be affected by this”. AZB & Partners Commentators suggest that the move to introduce sector-specific thresholds has been triggered by the government’s desire to protect India’s valuable generics industry, which is made up of a large number of small manufacturers. These companies are targets for acquisition by big players in the global pharmaceutical industry and there is a fear that the increasing involvement of multinational corporations in the generics industry will drive the smaller players out of business. As it stands,

22 India Business Law Journal June 2013 Competition law Cover story

Tann and in-house at IndiGo airlines. the finance minister, P Chidambaram, remarked that Commenting on the task ahead for companies in India, “the deadening effect of lack of competition or the lack Gupta says that that given that they “tend to explore of incentives to innovate or produce quality goods and the extreme boundaries” beyond which an act becomes services is as likely to affect public sector enterprises, illegal, “a paradigm shift in mentality” will be needed where survival is assured, as it does private sector enter- before companies take on board the realities of the new prises”. He also turned the spotlight on the vast public competition law regime. procurement machinery of the state, which he said was “an often neglected area of competition policy”. Interesting times ahead Remarking on this and other opportunities that lie ahead Rahul Singh, a counsel at Trilegal who is an aca- While these are clearly challenging times for both demic turned practitioner, comments: “Every new regula- competition law practitioners and companies that need tor can either become a pawn in the hands of corporate to figure out how to remain compliant, there is a growing players … or become an independent really autonomous realization that several large tracts of the Indian economy regulator and carve out a niche for itself”. remain untouched. Only time will tell how the CCI will evolve and whether Delivering the CCI’s annual day lecture on 20 May, in so doing it will level the playing field.g

Figuring out filings After two years of merger control the number of law firms that have experience in this kind of work is slowly increasing

India has one of the most liberal merger control the reasoning behind the joint filing. regimes in the world so merger control filings are While it is the acquirer’s responsibility to notify the typically done only by firms with clients that undertake CCI about acquisitions of shares, voting rights and large M&A deals. control that meet certain thresholds, notifications of Speaking recently to India Business Law Journal, mergers and amalgamations can be filed by any party Nisha Kaur Uberoi, a partner at the Mumbai office of or jointly. Amarchand Mangaldas, reported that her team had Khaitan & Co reports that its competition team, which filed (singly or jointly) 30 of the 57 notices of acquisi- consists of lawyers in both New Delhi and Mumbai, has tions received by the Competition Commission of India filed 13 notices of combinations. (CCI). The team was also involved in the two long-form Trilegal reports that it has filed “approximately 10 notifications of acquisitions that had been filed to notifications of combinations”. date. The CCI has received 121 merger filings, of which 55 Smaller firms also file relate to intra-group reorganizations. The Delhi office of Amarchand Mangaldas reported However, there are signs that mid-size and smaller that while they had filed 14 notices of combinations, firms are muscling their way into this area of work. they had “advised several clients on various exemp- The mid-size firm of Udwadia Udeshi & Argus Partners tions available … so as to ensure that notifications are reports that it has notified the CCI of one joint venture, not necessary”. one merger, two amalgamations, one restructuring and two acquisitions. Slicing the pie Pankaj Singla, a senior associate at Corporate Professionals, a small firm in Delhi, says the firm has Samir Gandhi, a partner at AZB & Partners, reports filed two notifications of combinations, both of which that his team has been involved in 26 notifications of were approved within 30 days of the notification being combinations – none of which have been long-form fil- filed. ings – and that this is a large part of what he does. But, The 30-day period as calculated by the CCI includes as he says, “there are many ways in which you can slice only days on which the CCI is working on the notifica- this pie”, so it is important to understand how and why tion and does not include periods when the party that a particular firm has made a filing. has made the filing is putting together additional infor- One of the two long-form filings was for a transaction mation that the CCI has sought. When this happens the whereby the UK drinks giant Diageo bought a stake in clock stops. United Spirits. Amarchand Mangaldas, which advised “If you don’t give them the information that is required the seller, filed the notification of acquisition jointly with in the form that they expect it, it’s a continuing defect,” Platinum Partners, the firm that advised the acquirer. says Uberoi. She points out that a lot of the work sur- “Diageo had a minimal market share in India and the rounding merger filing “is not just mere filing and letting majority of market share and determination of relevant it be, there is a lot of interaction which happens with the market pertained to the target,” says Uberoi, explaining case teams at the CCI”.

June 2013 India Business Law Journal 23 Spotlight Solar power

Sunny solutions?

Bhavana Alexander and Gargi Chatterjee compare India’s state solar power policies and consider the burning issues facing domestic and foreign investors in the sector

ndia is suffering from an acute energy shortage. Rolling Solar energy law blackouts, which plague large parts of the country on a I daily basis, affect all levels of Indian society, from the The Constitution of India, 1950, gives the central and pantries of modest homes to major domestic and interna- state governments the power to legislate on electricity. tional businesses and even the country’s parliament. Yet as However, in the event of a conflict, central law prevails. state and national policymakers grapple with the problem, The Electricity Act, 2003, remains the significant piece their efforts to find a solution are frustrated by inconvenient of legislation regulating the generation, transmission and realities such as declining coal reserves and severe water distribution of electricity in India. A host of policies, codes, depletion. As a result, renewable energy technologies, rules and guidelines encompassing all areas of the energy including solar power, are taking on greater significance in sector along with the act form the comprehensive law on energy planning. the sector.

24 India Business Law Journal June 2013 Solar power Spotlight

The Ministry of New and Renewable Energy (MNRE) is fossil fuels must install solar water heating systems. responsible for all matters relating to new and renewable The state government issued amendments to the energy. Each state has its own renewable energy develop- Tamil Nadu District Municipalities Building Rules, ment agency. In an attempt to harness the potential of solar 1972, making the use of solar water heating systems energy, the central government launched the Jawaharlal mandatory for all designated new buildings. Nehru National Solar Mission (NSM) in 2010, setting a target to deploy a 20,000MW solar power grid by 2022 5. The government also aims to develop solar power through private participation. Among other aims, the NSM projects through competitive and reverse bidding in seeks to reduce the cost of solar power generation to `4-5/ order to fulfil the target of building utility-scale solar Kwh by 2017-2020 to achieve grid parity by 2022. parks with a capacity of about 50MW each in 24 Tamil Nadu issued its much awaited solar policy in 2012. districts. This article examines Tamil Nadu’s new solar policy and compares it with the policies in other states, particularly 6. Other aims include fostering research and development Rajasthan, Andhra Pradesh and Gujarat, to assess the on solar technologies, solar thermal storage systems, opportunities and threats the different policies present to testing facilities and technology demonstrations domestic and foreign investors in the sector. on innovative projects in association with reputed institutions. Tamil Nadu 7. Tamil Nadu will promote integrated solar generation Tamil Nadu’s solar policy consists of the following: and manufacturing parks. Preference will be given to establish solar manufacturing industries in SEZs, 1. Solar rooftop systems industrial estates, parks and similar government a. All domestic consumers will be encouraged to install organizations. rooftop solar installations. A generation-based incentive scheme (GBI) will be provided for all solar or solar- 8. Global industry leaders in the solar value chain will wind hybrid rooftops installed before 31 March 2014. be invited to invest in the creation of manufacturing b. Solar home lighting is to be installed in 300,000 facilities in Tamil Nadu, with appropriate incentives. houses under the chief minister’s Solar Powered Green House Scheme by 2015-2016. Rajasthan c. Solar energy is to be used to power 100,000 street lights by 2015-2016. The state government of Rajasthan seeks to promote: d. All new government/local body buildings must install solar rooftops. Existing buildings must do so 1. Early execution of projects sanctioned by the MNRE in a phased manner to meet energy needs and to under the guidelines for GBI for grid interactive solar energize water supply systems. power generation projects issued by the MNRE.

2. Solar purchase obligations (SPO) 2. Solar power plants will be sanctioned under orders Domestic consumers, cottage and tiny industries, of the Rajasthan Electricity Regulatory Commission power looms, low tension industrial consumers and (RERC). The power produced from these plants must agricultural consumers are exempted from SPO. A be procured by NTPC Vidyut Vyapar Nigam (NVVN) mandated 6% of SPO (3% till December 2013 and and purchased by the state distribution companies 6% from January 2014) has been imposed on high (known as discoms). tension consumers including special economic zones (SEZs), industries guaranteed with 24/7 power sup- 3. Development of solar photo voltaic (SPV) and solar ply, IT parks, telecom towers, colleges and residential thermal power plants of 50MW by selection of solar schools, buildings with a built-up area of 20,000 square power producers through a tariff-based competitive meters or more. These entities must fulfil their SPO bidding process using a concept of bundling solar obligations by: power with the equivalent amount of MW capacity a. Generating captive solar power; of conventional power. Power from the solar power b. Buying equivalent to, or more than, their SPO from plant and an equivalent amount of MW capacity from third-party solar power projects in Tamil Nadu; conventional power plants must be purchased by state c. Buying renewable energy certificates (REC) discoms through a tariff-based competitive bidding generated by solar power projects in Tamil Nadu process. equivalent to, or more than, their SPO; d. Purchasing power from Tamil Nadu Generation and 4. Utility grid power projects of unlimited capacity for Distribution Corporation at tariffs applicable to solar captive use or direct sale to third parties or states power. other than Rajasthan or for sale through the REC solar mechanism. The solar power producers are required 3. Competitive bidding mechanisms will be encouraged to deposit a security amount of `500,000 per MW by to initiate joint ventures and the REC mechanism, demand draft and `2 million per MW in the form of which permits developers to possess one tradable a bank guarantee within one month from the date of REC for every 1,000 units of energy wheeled to the issue of in-principle clearance. distribution utility/other licensee. 5. Rooftop photo voltaic and other small solar power 4. Industries that have hot water or steam boilers using plants connected to LT/11kV grid. The capacity for these

June 2013 India Business Law Journal 25 Spotlight Solar power

power plants must be in line with MNRE guidelines. of `12 per KwH on distribution licensees who fail to meet the minimum solar power purchase, wheel for captive 6. Set up of solar power plant to promote manufacturing consumption or third party sale. This penalty must be facilities in the state along with SPV manufacturing lifted in the event of inadequate generation from solar plants. Solar power producers that establish SPV power projects in Gujarat. manufacturing plants (thin film technology modules or crystalline technology modules involving processing Bird’s eye view from wafers stage) of a minimum of 25MW per annum in Rajasthan will be eligible for sanction of SPV-based The Tamil Nadu policy is the only one that lays a strong solar power plant. emphasis on the fulfilment of solar purchase obligations or renewable purchase obligations. This policy deserves 7. The state proposes to promote solar thermal collectors credit for encouraging the proliferation of rooftop solar in public/private hospitals, hotels, housing boards, applications and solar parks containing research facilities educational institutions, prisons, other government unlike its counterparts. buildings, public places and in industrial applications. Gujarat was the first Indian state to launch its own solar policy in 2009 preceding the NSM. Gujarat’s notable 8. Development of solar parks of more than 1,000MW success owes much to the fact that reverse bidding for capacity in identified areas of Jodhpur, Jaisalmer, projects and the domestic content requirement (DCR) Bikaner and Barmer districts in various stages. were not introduced. Unlike the NSM, Rajasthan’s solar power policy man- 9. The state has agreed to extend government land for the dates that solar power producers within the state are purpose of setting up a solar power project and has laid required to source SPV modules from their own manu- down the procedure for the allotment or reservation of facturing units in Rajasthan. It shows far more thought land subject to the Rajasthan Land Revenue (Allotment leadership in the area of solar energy and is naturally con- of Land for Setting Up of Power Plant Based on ducive to solar projects due to indigenous advantages of Renewable Energy Sources) Rules, 2007. Government cheaply available land and high solar irradiation. land required for solar power plants must be allotted to Andhra Pradesh’s solar policy was the first to be based solar power producers at a concessional rate of 10% entirely on the renewable energy certificate mechanism. of the district level committee rate. However, the policy also includes exemption from cross- subsidy charges, electricity duty, refund of value added Andhra Pradesh taxes, stamp duty and registration charges, which are not permitted under the Central Electricity Regulatory Andhra Pradesh has agreed to promote the set up of Commission for REC-based projects as these projects are solar power plants for captive use, or for the sale of power prohibited from using any other benefits. It is unclear if the to third parties and other states. Under this policy, the government has clarified this policy. government will encourage solar power developers to set Karnataka has abolished all wheeling and transmission up solar power plants for captive use or sale of power to charges in order to promote investment in solar energy, third parties or states other than Andhra Pradesh. Andhra however, the state has very limited availability (only 40MW Pradesh’s government has not only withheld any financial allocations every year till 2017 and applications have incentives but has also made it very clear in the policy that already been received for 1.7GW). It is the only state to the burden of acquiring land for any solar power project emphasize energy conservation. will be the responsibility of the project developer. Investment and funding Gujarat Off-grid solar power projects fall under priority sector Renewable purchase obligations for distribution licen- lending. Nevertheless, costs remain a significant obstacle sees have progressively increased from 0.25% in 2011 to for solar developers. Foreign investors are permitted to 1.5% in 2014. Land is the responsibility of the developer invest up to 100% in the clean energy segment under the although there is a system of single window clearance. automatic route and can enter into a joint venture with an Developers must furnish a bank guarantee of `5 million Indian partner for financial and/or technical collaboration. per MW when signing the power purchase agreement with The government encourages foreign investors to set up the distribution licensee. Gujarat Energy Transmission projects on a build, own and operate basis. However, if Corporation must set up the evacuation for power trans- an Indian company is a foreign direct investment (FDI) mission. Projects set up under the MNRE cannot claim company i.e. where FDI in the Indian company exceeds dual benefits. Any other subsidy or incentive received by 50% of its shareholding and/or the board of the Indian a project should be reduced from the benefits available company is dominated by foreign investors, the company under Gujarat’s solar policy. may face problems while procuring land, especially agri- Only new plant and machinery must be installed in cultural land. It would be advisable to seek prior Foreign projects under this policy. All incentives granted to solar Investment Promotion Board clearance to acquire agricul- power generators are valid for 25 years from the date of tural land for conversion into a solar farm. commissioning of the power project or the lifespan of The renewable sector is also privy to sundry tax and the power project. The generator must sell the energy custom benefits. State policies do not have a funding from a solar power project to the distribution licensees in mechanism such as viability gap funding, but instead the state at fixed tariffs for 25 years. The policy seeks to operate using preferential tariff-based competitive bid- enforce the purchase of solar power by levying a penalty ding (although Gujarat and Andhra Pradesh have moved

26 India Business Law Journal June 2013 Solar power Spotlight

from preferential tariff to the REC market due to the heavy roadmap for achieving grid parity is not very clear. States financial burden). Tamil Nadu is the only state to provide other than Tamil Nadu, Rajasthan and Karnataka do not tax incentives to foreign investors investing in solar power place any emphasis on, or offer incentives for research and projects. The Tamil Nadu Industrial Policy grants exemp- development. The strain of lack of technology on costs was tions from entry tax on works contract and input taxes highlighted when solar manufacturers acting through the in relation to standalone high-technology research and Indian Solar Manufacturers’ Association filed a case with development centres. However, this means that compa- the Directorate General of Anti-Dumping (DGAD) against nies will have to structure their group entities in such a dumping by solar panel manufacturers from China, the US manner so as to satisfy the standalone criteria. and Malaysia. Companies like Tata, BP Solar and Indosolar Further, the absence of a domestic content requirement were reported to have come to a grinding halt due to in the state policies further augments participation from dumping by foreign manufacturers. foreign investors. In fact the presence of the DCR in the To add to their woes, while the NSM mandates local NSM is one of its major disadvantages. manufacturing for solar photovoltaic developers that The governments of Rajasthan and Karnataka are the choose the crystalline silicon route, it puts no such only state governments that have created fund vehicles to condition on thin film technology. While developers foster developments in the solar energy sector. The ben- raised concerns about this, producers, through the efits of the Rajasthan Renewable Energy Infrastructure Solar Independent Power Producers Association, on the Development Fund are not clear, however, Karnataka’s contrary have expressed worries about soaring solar policy statement has created a fund to foster project power prices should the anti-dumping duty be levied on finance and energy conservation. imported goods (as Indian crystalline module manufacturers rely heavily on imported raw materials). Research and development Attempting to bolster indigenous generation of solar power through a reliance on foreign raw materials is Low levels of research and development in India have harmful to the future India’s energy infrastructure and made solar energy expensive. Due to the high costs, the generation. The ideal way is for Indian manufacturers to develop efficient photovoltaic cells at an affordable price. India, by virtue of being a developing country under the agreement on the Trade Related States with solar policies Aspects of Intellectual Property Rights could profit from assistance States with no solar policy from developed economies, which States having solar policy have an obligation to foster the trans- States having renewable cum solar fer of technology. energy policy Jammu and Kashmir States where solar policy is in draft stage Legal and regulatory limits

There are no restrictions on the Himachal Pradesh structure for solar power projects Chandigarh inviting domestic investments. Hence, Punjab Haryana Uttarakhand companies, partnerships, co-opera- tives, public-private partnership com- Delhi Arunachal Pradesh panies, non-government organiza- Sikkim tions and individuals are all permitted Uttar Pradesh Rajasthan Assam to generate power from solar energy. Bihar Nagaland However, developers seeking to solicit foreign direct investment may only opt Meghalaya Manipur Jharkland Tripura for the structure of a limited company Gujarat Madhya Pradesh West Mizoram or a limited liability partnership (LLP). Bengal Foreign institutional investors and foreign venture capital investors are not Orissa Daman Dadra and Nagar Haveli allowed to invest in an LLP. LLPs are and Diu Maharashtra also not eligible to raise debt through Chhattisgarh the ECB route.

Andhra Pradesh Environmental clearance Goa Kamataka As solar developers are green industries, SPV power projects and solar thermal power projects have Pondicherry been excluded from the ambit of the Kerala Tamil Nadu Environmental Impact Association Andaman and Nicobar Islands Lakshadweep Notification 2006 and hence no environmental clearance is required for such projects. However, because

June 2013 India Business Law Journal 27 Spotlight Solar power

solar thermal projects occupy huge areas of land, state The single window clearance systems introduced by Tamil pollution control boards will have to ensure that the lands Nadu, Uttar Pradesh, Karnataka and Rajasthan have helped proposed to be used are not wetlands, agricultural lands, developers meet these cumbersome regulatory demands. ecologically sensitive areas, areas rich in biodiversity, Similar systems have been introduced by the government in areas with large habitation or forest areas. different areas (environmental consents, building approvals, Further, developers are required to satisfactorily prove securities market) and the ease of administration has bol- to the authorities that the area has the requisite quantity stered market confidence greatly. However, only a minority of water for the project. Developers must also obtain a of states have implemented this system. no objection certificate or a consent to establish from the state pollution control board as per the relevant state Political power guidelines. In addition, they must ensure that there will be no dumping of any type of waste in the site area. Do we need a new solar energy law? A comprehensive solar energy law would be welcome since manufacturing Land availability industries depend heavily on solar energy, although the use of solar energy is nowhere regulated, nor sought to Some of the primary hurdles in the solar power sector be. It is advisable for lawmakers to provide a consolidated have been the accessibility and availability of land. Tamil framework addressing solar power processes, subsidies, Nadu’s solar policy, for example, requires 7.5 to 10 acres and facilities. This will facilitate greater intra-state energy per MW for solar thermal technology, costs, research and commerce. development and skilled manpower. Other notable issues The story of solar success is heavily dependent on include the conversion of agricultural land to industry, political stability and consistency in policy implementa- lengthy governmental approvals and multiple approvals to tion by the government. A lack of confidence among procure permits for land use, and the right of way for set- developers will bring the entire machinery to a grinding ting up transmission lines to evacuate power. These proc- halt unless policy makers opt for a cleaner environment esses must be simplified to lower costs and hasten the instead of politicized policies. g completion of projects. The Indian government is already in the process of preparing a new Land Acquisition Bill. Once finalized the bill may provide comprehensive direc- Bhavana Alexander is a senior associate and Gargi Chatterjee is an as- tions on land acquisition, which will apply to solar parks. sociate at Universal Legal in Chennai.

28 India Business Law Journal June 2013 Intellectual property Spotlight

Looking in-house for IP insights

Rebecca Abraham asks in-house counsel at DuPont and JCB how they stay ahead of India’s intellectual property violators

ndia’s intellectual property (IP) protection credentials have “critical growth market” for Pfizer. As such, Pfizer – and many taken a beating in recent months. In March, Roy Waldron, companies like it – routinely expend considerable resources I the chief IP counsel at Pfizer, gave a statement to the US to protect their patent and trademark portfolios in India. House of Representatives Subcommittee on Trade saying With this in mind, India Business Law Journal spoke to the that a “growing trend of anti-IP developments in India” is in in-house lawyers at two companies with considerable IP effect “leading to a worldwide deteriorating trend on intel- assets – DuPont India and JCB India – seeking their insights lectual property”. into what it takes to stay ahead of the country’s IP rights A few weeks later there was more debate when India’s violators. Supreme Court put an end to an eight-year-long campaign by Novartis for a patent in India for its anti-cancer drug Infringements on the rise Glivec. The dismay among IP owners – especially those con- tending with competition from the generic drugs industry – Sanjit Kaur Batra, a senior legal counsel at DuPont India, was compounded by reports that more compulsory licences reports that even after a “dramatic improvement” in India’s for anti-cancer drugs were on their way. In March 2012, the IP rights atmosphere over the last decade, the number of patent office had issued India’s first compulsory licence for infringements is on the rise. an anti-cancer drug patented in India by Bayer. “DuPont is very patent intensive as a research and devel- Despite these problems, India remains an immensely opment organization, and we also have a huge trademark attractive market for many global IP owners. portfolio,” says Batra, who looks after the company’s trade- Indeed, in his statement to the US House of Representatives marks in India. “In terms of infringement, yes, we have a lot Subcommittee on Trade, Waldron described India as a of issues, be it trademark infringement or counterfeiting.”

June 2013 India Business Law Journal 29 Spotlight Intellectual property

Identifying trigger points I am already feeding the law firm with 80 to 90% of the When approaching the courts for relief, Batra says that while the location of the court is significant – Delhi High material, it’s only the filling in the Court is considered the most IP-savvy – success in obtain- paragraphs that they need to do ing a favourable order depends greatly on how arguments are structured. S Ramaswamy “The evidence you show the court has to be convincing Vice-President, General enough,” she says, adding that it is vital to identify “the trig- Counsel & Company Secretary ger points” that can win favour with the court. “In DuPont we believe that though an infringement is an IP issue, the JCB India implications are much broader.” As such, DuPont often focuses on the public health and safety implications of a counterfeit product being used, especially when taking on the manufacturers of spurious versions of their crop protection products and seeds. Batra reports that they argue that human and animal health and the environment could be affected, as the counterfeiter’s manufacturing process and DuPont’s processes would have very different safety and efficacy standards.

[When we go to court we and don’t want to drag cases on,” he remarks. try to argue that] though an Ramaswamy suggests that arriving at a swift settlement with an IP violator, rather than waiting for the courts to act, infringement is an IP issue, the may be against the interests of external counsel. But he says implications are much broader this is one area where general counsel “need to chart their own course”. Sanjit Kaur Batra JCB India has more than 500 IP registrations in India and Senior Legal Counsel an annual legal budget of around `20 million (US$330,000). DuPont India The subsidiary contributes up to 40% of JCB’s global turnover and Ramaswamy describes it as “literally the jewel in the crown” for its UK-based parent company.

Halfway to justice

In mid-December 2012, DuPont won a decree against a company called Dupont Hydro Industries following action it had initiated in Delhi High Court less than three months previously. Dupont Hydro Industries acknowledged DuPont’s proprietory rights to its name, trademark, logo and label, and agreed to hand over the domain name www.duponthydro. com to the American company. Choosing the right advocate DuPont had discovered the presence of Dupont Hydro Industries, which manufactured, sold and exported hydraulic But not every lawyer can put forward these broader arguments effectively. Batra says it is vital to have a lawyer who understands the subject thoroughly, and reports that DuPont I am a pragmatist and don’t only uses lawyers from India’s leading law firms. want to drag cases on However, not everyone subscribes to this view. S Ramaswamy, the vice-president, general counsel and com- S Ramaswamy pany secretary at JCB India, says that he “could even go for Vice-President, General somebody who is four or five notches below” a top-level IP lawyer, if he knows that the lawyer in question can deliver. Counsel & Company Secretary “I am already feeding the law firm with 80 to 90% of the JCB India material, it’s only the filling in the paragraphs that they need to do,” says Ramaswamy, adding that you need to “pick and choose the right guy who has the right authority” in a particular court. Ramaswamy says that he also uses the services of leading IP lawyers for certain matters – he names Pravin Anand, the managing partner of Anand and Anand, as one of the leading lawyers that he chooses to use. Given the severe delays that plague India’s courts Ramaswamy says it is often futile to pursue a case to its very end. “A lot of disputes end in settlement … I am a pragmatist

30 India Business Law Journal June 2013 Intellectual property Spotlight

machinery and hydraulic components, a few months previ- The whole world seems to ously. In September 2012, it obtained an interim injunction think that Teflon is a generic from Delhi High Court against Dupont Hydro Industries. As both Batra and Ramaswamy indicate, obtaining an term … people assume there interim injunction from an Indian court is half the battle won. is no IP right on it IP violators who may not respond to legal notices from companies react differently when a court-appointed local Sanjit Kaur Batra commissioner visits their premises and a raid is conducted. Senior Legal Counsel Indeed, in some cases a temporary injunction is all that is DuPont India required to make a party back down. But the fact that many disputes are being disposed of at this halfway stage without full adjudication has been criticized by some observers, including the country’s highest court. In a 2009 ruling in the case of Bajaj Auto Ltd v TVS Motor Company Ltd, the Supreme Court described the situation as a “very unsatisfactory state of affairs” and directed all courts and tribunals to speed up the hearing of cases so that parties would no longer have the need to turn to interim injunctions to push cases to a rapid conclusion. “The final judgment should be given normally within four months from the date of the filing of the suit,” the court said. they should, companies have to be satisfied with obtaining a decree against individual violators. When damages don’t hurt Searching for needles in haystacks Courts up and down the country may not be following this direction as yet, but observers suggest that the Supreme As such, a comprehensive intelligence gathering system Court’s ruling, combined with the fact that at least one Indian is vital for safeguarding IP assets in India and both Batra court has begun awarding punitive damages in cases of IP and Ramaswamy report that this is well-recognized by their infringement (Delhi High Court has awarded punitive dam- respective companies. ages in IP cases since a 2005 ruling in Time Incorporated v “I have a very robust counterfeiting action programme Lokesh Srivastava & Anr), indicates the protection of IP rights within JCB on a pan-India presence,” says Ramaswamy, is receiving greater attention. who adds that his challenge is to always be on the lookout However, damages awards are typically not very substan- for “imitators or fly-by-night companies or counterfeiting tial. “Courts in India have not reached the level where dam- companies”. ages awarded will cripple the infringer’s business,” laments Ramaswamy says that trade exhibitions, where manu- Ramaswamy. “Just seeking damages as almost a standard facturers showcase their products, can be a useful hunting clause in a plaint does not really serve a purpose.” ground for IP violators and reports that he always has a ready- In the absence of significant punitive damages that could made lawsuit in hand while visiting such venues. He cautions, “discourage and dishearten lawbreakers who indulge in vio- however, that the initial investigation needs to be extremely lations with impunity” as the ruling in Time Incorporated said thorough if he is to get any help from the courts. When a potential IP violation has been spotted, the technical team works out the extent of the violation: what are the exact similarities between JCB’s product and the so-called imitator’s product? Then they put together a pictorial representation of the two products to present to the court. “I am fairly successful at getting my evidence accepted by the courts,” says Ramaswamy.

The cost of fame

DuPont uses its in-house capabilities and an external law firm to monitor the use of its IP assets. Batra says this is a particular challenge in the case of its “hero-brands” such as Teflon, which is a registered trademark owned by DuPont in several countries including India. “The whole world seems to think that Teflon is a generic term … people assume there is no IP right on it,” remarks Batra. “We work day-in and day-out to try to spread aware- ness and take action against people who are using it as a generic term.” While the challenges and risks involved in protecting such iconic brands are definitely not to be understated, the fact Vi e w f r o m t h e i n s i d e : In-house counsel are pragmatic that both companies have been in India for decades suggest about IP protection. that it is worth it. g

June 2013 India Business Law Journal 31 What’s the deal? Dispute resolution

London calling

Precedents set by English courts in banking and finance disputes are highly relevant to Indian investors and institutions By Nicola Vinovrški

he UK remains a popular jurisdiction for the determi- disputes into UK courtrooms. As a result, the UK’s regula- nation of disputes for parties from other parts of the tions governing financial services – and the interpretation T world. This is the case both for disputes that have a of these regulations by the English courts – have the poten- UK connection, and for those for which a neutral territory is tial to affect transactions all over the world. sought for adjudication. In particular, the interpretation of the International Swaps Many recent disputes before English courts have and Derivatives Association (ISDA) Master Agreement, involved Indian parties. These include tussles between described by Justice Briggs in Lomas & Ors v JFB Firth Virgin Atlantic Airways and Jet Airways; Force India Rixson Inc & Ors as “probably the most important standard Formula One team and the Malaysia racing team; and market agreement used in the financial world”, has been Cruz City 1 Mauritius Holdings and Unitech. The latter highly significant. was a dispute that arose from a joint venture development As such, English case law, and the interpretation of of slum-clearance land in Mumbai. financial regulations by the English courts, is highly rel- London’s position as a major financial centre has also evant to financial institutions and investors from India and led many international banking and derivatives-related other countries. Moreover, for companies seeking redress

32 India Business Law Journal June 2013 Dispute resolution What’s the deal?

for the mis-selling of financial products, or that are look- Derivatives mis-selling cases ing to resolve disputes regarding close-out valuations or interest rates, keeping an ear to the ground in the UK’s It is fair to say that claims based on the mis-selling of courtrooms is essential. derivative products have increased in recent years. The This article considers some of the recent developments typical causes of action pleaded in mis-selling cases are that are likely to have the greatest relevance to India that the derivative product sold was unsuitable for the Business Law Journal’s readers. customer, that the seller misrepresented the nature of the product sold, that there was an advisory relationship The march towards stricter regulation between seller and buyer which was breached, or claims under section 150 of the Financial Services and Markets Financial institutions and the markets are still dealing Act 2000. Contractual estoppel remains a key defence – with the fallout from the global financial crisis. One result in other words no reliance, no representation and entire of the crisis has been a shift towards tighter and increas- agreement clauses are usually upheld by English courts, ingly proactive regulation. particularly in cases where the buyer is a sophisticated We are all familiar with the heavy sanctions imposed investor (e.g. Springwell Navigation v JP Morgan Chase on banks by UK, European and US regulators. These Bank and Standard Chartered Bank v Ceylon Petroleum may well lead to sanctions in other countries as govern- Corporation). ments come under pressure to crack down on practices Other potential defences to mis-selling claims relate that are believed to have contributed to the global finan- to principles of causation and remoteness. For example, cial crisis. in Camerata Property Inc v Credit Suisse, it was accepted It is likely, therefore, that other countries will follow that the collapse of Lehman Brothers in September 2008 the UK towards steeper sanctions, higher best practice was unforeseeable. In Rubenstein v HSBC, it was argued standards, increased reporting requirements (particularly that the collapse of the markets was unforeseeable. in respect of derivatives trading) and perhaps overhaul However, in the latter case, the Court of Appeal held their regulations with a view to creating more forward- that the loss was not too remote and that the bank’s looking systems that are designed to anticipate problems duty was to protect Mr Rubenstein from the very market before they occur. turmoil which happened. Mis-selling claims are decided by English courts on a case-by-case basis and the Interest rate hedging products factual matrix surrounding the transaction is of critical importance. Of direct relevance to parties that have been sold interest rate hedging products (IRHPs) will be an ongoing Close-out and valuation of derivatives review by the UK’s Financial Conduct Authority. Following an investigation into the sale of IRHPs to small businesses Another category of cases to emerge in recent years is that were made after 1 December 2001, serious failings disputes about valuation and close-out of derivatives and were identified. IRHPs are designed to provide customers the meaning and effect of the relevant provisions of the with a hedge against the risk of interest rate fluctuation ISDA Master Agreement. Both the 1992 and 2002 agree- and are often sold in conjunction with a loan. However ments contain complex close-out and valuation provisions the UK regulator found that many of the products osten- setting out what should happen if a derivative does not run sibly sold for this purpose were highly complicated and its course. not really understood by the customers who entered into In April 2012, the Court of Appeal handed down them. Barclays, HSBC, Lloyds, RBS, Allied Irish Bank judgment in four conjoined appeals: Lomas v JFB Firth UK, Bank of Ireland, Co-operative Bank, Clydesdale Rixson Inc, Lehman Brothers Special Financing v Carlton and Yorkshire Banks, National Westminster Bank and Communications, Pioneer Freight Futures Company Limited Santander UK have agreed to review their sales of IRHPs (In Liquidation) and Britannia Bulk Plc (In Liquidation) v and provide redress to customers based on the principles Pioneer Navigation Ltd. The court held that the non- outlined in the regulator’s report. defaulting party does not have to perform where section The review is focused on the sale of IRHPs to “non- 2(a)(iii) of the ISDA Master Agreement is engaged but the sophisticated” customers. The definition of “sophisticated” defaulting party can cure its default at any time, even after has been amended to ensure that customers that may be the natural term of the swap has expired. The Court of large in terms of balance sheet, turnover and employees Appeal also importantly approved Justice Briggs in the but that, in reality, are unlikely to understand the risks Anthracite case in respect of three key principles of close- associated with such products, are covered by the review. out valuation in the 1992 agreement. Namely that “loss” Therefore, it may be the case that large companies that are and “market quotation” are aimed at the same objective, not focused on the trading of financial instruments will be loss of bargain is to be valued “clean” (meaning the valuer in line for compensation if they bought IRHPs from any of assumes that the non-defaulting party will perform all the banks that are under review. its obligations for the remainder of the transaction, even Customers excluded from the review may still com- if that is unlikely) rather than “dirty” and that the close- mence court proceedings or, if the loss suffered is less out formula is not a proxy for common law loss. Lehman than £150,000 (US$232,000), complain to the Financial Brothers International (Europe) v Lehman Brothers Finance Ombudsman Service. Such customers should be aware considered close-out valuation under section 14 of the that, generally, they must commence court proceed- 2002 agreement. Justice Briggs maintained the “clean” ings within six years from the date their cause of action valuation approach but this was overturned in The Joint arose. For those sold IRHPs in 2007, this limitation is fast Administrators of Lehman Brothers International (Europe) approaching. v Lehman Brothers Finance. The ISDA is currently issuing

June 2013 India Business Law Journal 33 What’s the deal? Dispute resolution

new precedent transaction documentation in response to (ITAT) in February demonstrates the importance of the such cases and market consultation. LIBOR rate in international commerce, particularly for Indian investors. Indian clothing company Cotton Naturals LIBOR cases provided a loan for working capital to its subsidiary in the US, JPC Equestrian, because JPC did not have access to The way in which the London Interbank Offered Rate local credit. It is common for Indian companies to establish (LIBOR) and the Euro Interbank Offered Rate (EURIBOR) subsidiaries in foreign countries and then provide funds are set is that panel banks answer the question; “at what from India by way of an interest-bearing loan. The issue rate could you borrow funds if you had to do so by asking in such cases is whether the interest rate charged by the for and accepting interbank offers in a reasonable market?” parent company is an appropriate arm’s length price. This for different periods and in different currencies. The answers arises because the interest rates in India are quite high. The are submitted to Thomson Reuters on behalf of the British problem gets multiplied because companies must comply Banking Association. Thomson Reuters then excludes the with the transfer pricing laws of both countries. If the par- outlying high and low figures and calculates an average to ent company receives interest from the foreign subsidiary produce the published rates. These are two of the most at a higher rate, revenue authorities where the subsidiary is important interest rates in the global financial markets and located may raise objections. On the other hand, if the rate directly influence the value of trillions of dollars of financial of interest is low (in line with LIBOR), Indian tax authorities deals between banks and other institutions. may demand that the higher Indian interest rate should LIBOR and EURIBOR affect interest rate swaps, interest apply. The ITAT held that LIBOR should be taken as the rate futures, mortgages and loans, currency futures and benchmark rate for international transactions. options pricing, commodities futures and options pricing The first British damages claim trial over the manipula- and the pricing of other derivative swaps or future obligation of LIBOR – Graiseley Properties Limited v Barclays Bank tions. Recently, it has come to light that some banks may PLC – has been delayed until next year. Barclays is being have deliberately submitted high or low figures with a view sued in a test case stemming from the wider LIBOR scan- to affecting the rates and so inflate profits or reduce losses. dal, which is being closely watched for its impact on other Barclays and other banks have already paid huge settle- possible claims against banks involved in the manipulation ments to regulators for misconduct and an international of the benchmark interest rate. investigation into the setting of interbank rates is ongoing. Graiseley-owned Guardian Care Homes alleges that A decision by the Delhi Income Tax Appellate Tribunal Barclays mis-sold them interest-rate swaps which were

34 India Business Law Journal June 2013 Dispute resolution What’s the deal?

pegged to the LIBOR rate. Guardian initially sued Barclays the interest payable under the loan or the swap payment for up to £38 million for mis-selling two interest rate swaps obligations. The judge commented that this might have in 2007 and 2008. The company then applied to add a been a more logical plea but that of course the damages claim based on LIBOR manipulation to its case against flowing from a breach of such an implied promissory term Barclays. Justice Julian Flaux allowed Guardian to amend would be difficult to quantify because one would have its claims to include the allegation of false and fraudulent to calculate the impact on the specific transactions in representation. Barclays denies all the allegations and is question. appealing Justice Flaux’s ruling. A trial was due to begin in Unitech did not argue that it had suffered loss as a result October but has now been delayed until April 2014 to allow of the LIBOR manipulation. Instead it contended that it Barclays’ appeal to be heard by the Court of Appeal. would never have entered into the loan and the swap but While Justice Flaux allowed Guardian to add a LIBOR for the implied representation by Deutsche Bank that the manipulation-related claim to its case, Indian company LIBOR rate was genuine. Unitech was recently refused permission by Justice The judge commented that most implied representa- Jeremy Cooke to add LIBOR claims to its counterclaim tions arise in the context of express representations. He against Deutsche Bank in Deutsche Bank AG & Ors v also noted that common implied representations are that Unitech Global Limited and Unitech Limited. Deutsche an opinion given was honestly held or that the repre- Bank commenced proceedings against Unitech to recover sentor believes that facts exist which reasonably justify monies pursuant to a loan and an interest rate swap sold the opinion expressed. The judge accepted Deutsche in conjunction. Unitech made a counterclaim in those pro- Bank’s submission that the court must consider whether ceedings, essentially saying that the swap was mis-sold a reasonable person in the position of and with the char- and not a proper hedge of the interest rate risk arising acteristics of Unitech would reasonably have understood from the loan (which provided for the payment of interest that an implied statement was being made in the terms by reference to LIBOR). alleged. Recently, Unitech sought to amend its pleading to include In this case, as is the norm, the bank’s documentation a claim that it would not have entered into the loan or the contained numerous clauses to the effect that no rep- swap if it had known about the manipulation of LIBOR by resentations are made by the bank and that no reliance the banks. Deutsche Bank opposed the amendment on the can be placed on the bank when deciding whether or basis that such a claim would have no realistic prospect not to enter into the transactions. The judge found that, of success. Justice Cooke agreed and refused permission because of the way Unitech’s representations about even though the threshold test for allowing amendments is LIBOR were pleaded, in order to work, “every bank par- low and the amendments were sought at an early stage of ticipating in any panel on any one of the 150 LIBOR rates the proceedings. Unitech is appealing this decision and the would be taken as making this representation about the appeal is due to be heard in October. whole system and the parts played by every bank within it”. He thought that this was unrealistic and would not Implications of court interpretation pass the reasonable representee test. The judge also

Unitech’s application and the court’s treatment of it warrant further discussion because it could be relevant to others considering whether to bring a claim over losses suffered due to the LIBOR scandal. Essentially, Unitech wanted to argue that Deutsche Bank had represented that LIBOR was a genuine average of the estimated rate at which panel banks could borrow from each other in a reasonable market, that the submissions to Thomson Reuters were made in good faith, that Deutsche Bank would not in any way “undermine the integrity” of LIBOR and that it had no reason to believe that any other panel banks were doing so. Unitech sought to plead representation by conduct or implication; it did not assert that Deutsche Bank had made an express representation about LIBOR rate manipulation. Nor did it seek to plead an implied promise not to manipulate the LIBOR rate in future, which, if Gl o b a l r e a c h : Decisions taken in English courts are relevant to investors and broken, might cause a change in financial institutions in India and other countries.

June 2013 India Business Law Journal 35 What’s the deal? Dispute resolution

thought that determining the point at which it could be occurred. The starting point will be to assess the impact of said that the integrity of LIBOR had been undermined, as the submissions by the banks involved on the published asserted by Unitech, was too uncertain and so that plea rates and then determine the effect of the LIBOR rate dif- also would not work. ferential on the relevant transaction. So, where does this leave LIBOR manipulation cases? This would be a difficult exercise involving complicated Justice Cooke did note that in cases where dishonesty mathematics. However, it is not impossible and there are is alleged, standard no representation and no reliance already experts in the market capable of valuing highly clauses will carry much less weight. Furthermore, he complex financial products, so arguably, the tools do said he could believe that one could find a promise “to exist. do nothing that would jeopardize the ordinary and proper assessment of the relevant particular LIBOR rate to Practical advice for in-house counsel which [a] transaction is linked”. What he struggled with was finding “an implied representation of fact when no In an increasingly global marketplace and in the face representation relevant to it is expressly made, whether of complex regulation in the financial sectors, there are in the contract or elsewhere, and when disclaimers or certain basic principles that may assist companies and other clauses in the agreement militate against such their legal counsel to overcome some of the risks. implication” on the basis of the fact that Deutsche Bank Firstly, keep good records. English case law demon- was a panel bank and the transaction was linked to strates that international banking disputes are fact-sensi- LIBOR (the only two bases identified by Unitech accord- tive. If you think you potentially have a claim then a com- ing to the judge). plete record of the contemporaneous correspondence and Justice Cooke seemed to indicate that a case would be records of meetings will be vital to your lawyers in advising more viable if there were some relevant pre-contractual you of your prospects of success and eventually establish- statements. In relation to Justice Flaux’s decision to allow ing your case. amendments to add claims for fraudulent misrepresenta- Secondly, you should regularly take stock of your tion against Barclays in relation to LIBOR, Justice Cooke potential cases and take advice about applicable limita- simply said that the case before Justice Flaux was dif- tion periods. If you have cases which should be properly ferent and that it was unclear from the judgment how he brought in the UK, then, in general, you must file your applied the relevant test to the facts of the Barclays case claim within six years of the date on which the cause of to arrive at a different result. action arose or risk losing your claim. International busi- It remains to be seen whether the Court of Appeal will nesses should keep a close eye on all applicable limita- allow Unitech to amend its case and in what form. Of tion periods. course, the most interesting stage will be to see whether, Even for domestic disputes, consider case law from if LIBOR manipulation claims are allowed in both cases, other jurisdictions. While this may not be binding on such claims ultimately succeed. the court or tribunal hearing your case, such authorities might be persuasive and arguably are relevant if the Future LIBOR cases issue is the interpretation of instruments as ubiquitous as the ISDA Master Agreement. In terms of future cases, it seems that there is scope Consider carefully what expert evidence you need and for several types of claim by counterparties to products contact potential experts, through your lawyer, as early pegged to LIBOR or EURIBOR. For example, if it can be as possible. For a mis-selling case, you might need a shown that the rates were deliberately understated by market expert such as a banker. For a valuation dispute, banks and that the bank then sold products to hedge you may need an expert with an entirely different skill set. against low rates, or gave counterparties the right to Particularly in the case of complex financial derivatives, receive LIBOR or EURIBOR in swaps, then it might be current and accurate expert opinion could be crucial to possible to formulate a claim. winning your case. Firstly, a counterparty could argue that it would never Get in touch with regulators – you may fall within a have entered into the transaction but for the bank’s compensation scheme. If you do then this route is prob- express or implied representation that interbank rates ably less expensive, will waste less management time were not being manipulated. Alternatively, a counterparty and may ultimately be more profitable than litigation. might argue that it was happy to enter into the transaction Think carefully about standard terms and identify any but that the bank’s manipulation of interbank rates was a bespoke amendments that need to be made in a schedule breach of contract. or side letter. Be aware of the case law about interpreta- Another type of claim could be one based on conspiracy tion of the sample document you are using and how this or the concerted unlawful acts of more than one bank. The might affect your potential upside and downside. Think Financial Services Authority Final Notice issued to Barclays carefully about your dispute resolution clause: Where would arguably satisfy the unlawful means requirement would you like any disputes heard? Would arbitration be and it is currently thought that certain banks may have preferable to court? conspired to manipulate the rates. To succeed, a claimant A close assessment and understanding of these points would have to prove not only that conspiracy, but also that will hopefully highlight the potential strengths and weak- there was an intention to cause loss and that it did suffer nesses of your agreements and enable you to tailor loss. clauses to robustly protect your business. g In a case where damages are claimed (i.e. the claimant is not seeking to unwind the transaction), the court will have to assess the damages required to place the claimant in the Nicola Vinovrški is a legal director in Clyde & Co’s banking litigation position in which it would have been had no manipulation and arbitration team based in London.

36 India Business Law Journal June 2013 Foreign law firms Intelligence report

The pioneers

India Business Law Journal reveals the top international law firms keeping India’s cross-border deals on course

Vandana Chatlani reports

June 2013 India Business Law Journal 37 Intelligence report Foreign law firms

sense of lethargy is dominating India’s eco- Top 10 nomic activity. Interest in deal making from Allen & Overy domestic and international companies has faded and policy stagnation continues to Clifford Chance threaten deals of all sizes. Of particular con- Freshfields Bruckhaus Deringer cernA to foreign companies are changes introduced by Herbert Smith Freehills India’s Finance Acts of 2012 and 2013 and the proposed Direct Tax Code, in which many shades of grey exist. Other Jones Day anxieties stem from the high cost of fundraising in India, Latham & Watkins political inconsistencies in the economic reform process, Linklaters the time required to obtain judicial decisions, and difficul- ties in enforcing arbitral awards in India. Milbank Corruption is another worry, not just for international Norton Rose Fulbright companies operating in India, but equally for Indian busi- Shearman & Sterling nesses venturing outside of the country. International law firms are working to educate clients about provisions of the UK Bribery Act 2010, the US Foreign Corrupt Practices Act and similar legislation in other jurisdictions. Indian compa- areas, size and geographical reach. These names rarely nies are increasingly looking to foreign firms for assistance change. with legal intelligence in relation to new and proposed laws Allen & Overy scores high marks for its role on four of and regulations and other changes. India Business Law Journal’s 2012 Deals of the Year. The firm advised the Export-Import Bank of the US on the US$2.1 Deep analysis, close observations billion financing of the expansion of Reliance Industries’ petrochemical refinery in Gujarat; acted as counsel to Against this backdrop of frustration, uncertainty and Vedanta Resources on its acquisition of a majority stake transformation, India Business Law Journal showcases in Cairn India for US$9.6 billion; and advised the lenders the India-related achievements and activities of law firms on the financing of Korean steel giant POSCO’s plant in around the world. Our survey, now in its seventh year, Maharashtra. The firm’s current platter of capital markets, draws on an analysis of over 600 law firms from every M&A and disputes suggests it is in no danger of losing continent that have recorded transactions or cases with an work despite its separation last December from Indian best Indian connection over the past year. friend Trilegal. Key India advisers include James Grandolfo, Doing our best to remain objective, we attempt to pro- Kayal Sachi, Sanjeev Dhuna, Matthew Gearing, Andrew vide insightful conclusions based on rigorous research, Harrow, Barry Irwin, Amit Singh, Gautam Narasimhan and wide-ranging editorial experience, feedback from corpo- Ian Stanley. rate counsel and Indian law firms as well as a vast network Clifford Chance also figured in four of our 2012 Deals of contacts. of the Year, including the first sale through the auction As in previous years, we received hundreds of submis- route by a private company (Wipro). The firm’s Brussels sions from law firms and painstakingly reviewed public and office was global counsel to Pfizer on the US$11.85 billion other records to ensure the accuracy of the information sale of its infant-nutrition business to Nestlé, while Marc reported, with valuable inputs from Indian and international Rathbone in Singapore advised GAIL India on its US$11 media. billion 20-year deal with Sabine Pass Liquefaction, a sub- As a result of our efforts, India Business Law Journal is sidiary of Cheniere Energy Partners, to import liquefied delighted to reveal its selections of the top 10 foreign law natural gas from the US. Rathbone has since moved to the firms for India-related work. We also list 10 firms that are Singapore office of Australian firm Gadens, however work considered key players for India-related assignments (page remains buoyant under the leadership of Andrew Carnegie, 39), and an additional 20 firms that are categorized as sig- Rahul Guptan, Geraint Hughes, Mark Poulton and others. nificant players, up from 15 firms last year (page 43). In January, the firm acquired Cavenagh Law in Singapore, As always, we pay close attention to regional and special- bringing on board Harpreet Singh, Paul Sandosham and ist firms in key economies such as Singapore, Canada and former Clifford Chance partner Nish Shetty to boost its the UAE, emerging regions such as sub-Saharan Africa, dispute resolution offerings. and offshore jurisdictions such as the Channel Islands. We Freshfields Bruckhaus Deringer returns to the top identify 25 firms in this category that are well equipped to 10 having advised on a slew of interesting deals. The handle India-related matters (see page 47). firm advised BG Group on the sale of its 65.12% stake in We further highlight 35 “firms to watch” (page 54). Some Gujarat Gas to GSPC Distribution Networks for US$470 of these firms appear poised to attract more mandates million and acted for Citi Venture Capital International on with an India connection while others may be striving to the acquisition of a minority stake in Prometheon Holdings reinvigorate the burgeoning India practices they had in (UK), a subsidiary of Cox & Kings, an international travel the past. We believe, on the evidence available, that these company listed on the Bombay Stock Exchange and the firms are committed to India and bullish about attracting National Stock Exchange of India. Around the same time, it India-related work. was counsel to French food products company Danone on All of the lists are in alphabetical order. its acquisition of Wockhardt’s nutrition business. Our top 10 table consists of the legal heavyweights that With the addition of 1,200 lawyers across Australia have solidified their presence on big-ticket deals involving and Singapore as a result of a merger with Freehills last Indian parties, thanks in large part to their robust relation- October, Herbert Smith Freehills now has 66 partners in ships with Indian companies, experience across practice its India group, headed by Chris Parsons and Nimi Patel. In

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the past 12 months, it has counted among its clients United 2012, it advised the Sahara Group on its US$575 million Breweries, Tata Communications, National Aluminium purchase of a controlling interest in New York’s Plaza Hotel Company, Adani Mining, NTPC, Asian Development Bank and advised the underwriters on Bharti Infratel’s US$825 and Wipro. Its achievements include advising Indian phar- million IPO. It has acted for Tata Steel on its offering of maceutical company Strides Arcolab on its US$1.6 bil- S$300 million (US$240 million) of 10-year Singapore dol- lion cash sale of a unit to Mylan and representing United lar notes and represented Reliance Industries on a US$2 Breweries on the £1.28 billion (US$2.1 billion) investment billion capital markets and loan financing supported by the by global drinks giant Diageo in United Spirits. The firm is Export-Import Bank of the US. Sanjeet Malik left Milbank’s currently drafting and negotiating a long-term agreement Singapore office in April to pursue opportunities in the for GVK Resources for the performance of contract min- renewable energy sector in India, however Naomi Ishikawa ing services for a 30 million tonne a year coal mine, which and David Zemans continue to keep the India focus alive in would be the world’s largest contract mining agreement. the city. Glenn Gerstell coordinates Milbank’s India practice It is also known for its strength in dispute resolution. “For from Washington. international arbitration, Herbert Smith is very good,” says One of the world’s biggest law firms, Norton Rose Zarir Bharucha, the managing partner at Zarir Bharucha & Fulbright advises its Indian clients on banking and finance Partners in Mumbai. transactions, corporate and energy deals and technology Jones Day is another firm that had a role in four India matters. It has also developed an active ship finance prac- Business Law Journal 2012 Deals of the Year. It advised the tice from Singapore. Its recent India work includes advis- institutional investors on Mahindra & Mahindra Financial’s ing India’s ELGI Equipments on its acquisition of Italian qualified institutional placement, represented the underwrit- company Rotair; advising Axis Bank on the restructuring ers in Multi Commodity Exchange of India’s IPO, and was of its financing to PT Srinivasa for the acquisition of mining the international counsel to Qualcomm on the sale of its interests in Indonesia; and representing the project lend- broadband wireless access business to Bharti Airtel. Jones ers in relation to GMR Group’s divestment of its interest Day represented a US subsidiary of Tata Technologies in its in its 800-MW combined cycle project to Petronas and a leveraged acquisition through a reverse triangular merger Philippines consortium. The firm merged with US law firm of Cambric Holdings, a US-based end-to-end engineering Fulbright & Jaworski this month, leading to a rechristening services firm. It also acted for Godrej Consumer Products and creating a network of 3,800 lawyers in over 50 cities and Godrej Netherlands on the financing for the acquisition around the world. Key India contacts are Madhavi Gosavi, of the Soft & Gentle brand from Colgate-Palmolive. Key Sherina Petit and Raj Karia. India-focused lawyers at the firm are Sushma Jobanputra Shearman & Sterling continued to close private and Manoj Bhargava. New hires include Karim Mahmud equity, M&A, finance and capital markets deals during the from Blakes, Sumesh Sawhney from Clifford Chance and past 12 months, despite the general slowdown in India- Baiju Vasani from Crowell & Moring. related activity. It advised Tata Consultancy Services on Latham & Watkins has more than 50 India-focused law- its acquisition of the French technology services com- yers across the firm’s offices in Asia, Europe, the Middle pany Alti for €75 million (US$97 million); acted for Aditya East and the US. The firm was counsel to the underwriters Birla Group on its acquisition of Columbian Chemicals in the simultaneous rights offerings by Network18 Media and some of its subsidiaries; and advised Jaguar Land & Investments and its subsidiary TV18 Broadcast, adviser Rover on its £500 million offering of fixed-rate high-yield to Sutherland Global Services on its acquisition of Apollo bonds due in 2020. “We have had an exceptionally good Health Street, and counsel to the underwriters on ICICI experience with Shearman & Sterling,” says one client Bank’s US$5 billion global medium-term note programme. from a global multi-stage fund. “They always deliver high Other clients include Navistar, Dian Swastatika Sentosa, quality work in a timely fashion and we now work exclu- Orchid Chemicals & Pharmaceuticals, GTL Infrastructure sively with them.” The firm recently promoted Sidharth and Subex. The firm’s India-focused partners include Bhasin, a key member of its India team, to the partner- Michael Sturrock, Rajiv Gupta and David Miles. ship and hired Sriram Kilapakkam as an associate in Linklaters advised on six India Business Law Journal its Hong Kong office. “Sidharth Bhasin is outstanding,” 2012 Deals of the Year, more than any other foreign law says one client. “He offers excellent client service skills firm. It was international counsel to Bharti Infratel on its and great advice.” US$825 million IPO; represented Vodafone on the sale of a further stake in Vodafone India to Piramal Healthcare for US$605 million; and advised CMP Asia – the Asian Key players arm of Carlyle – on Carlyle’s exit from Indian mortgage Ashurst lender Housing Development Finance Corporation. It also advised the arrangers and the trustee on IDFC’s Bird & Bird medium-term note programme and represented Infosys Clyde & Co on its US$326 million acquisition of Swiss consulting firm Davis Polk & Wardwell Lodestone. In February, the firm poached Will Kirschner, a key member of White & Case’s India practice group. DLA Piper Sandeep Katwala heads Linklaters’ India group and Arun Gibson Dunn & Crutcher Balasubramanian is active on India-related deals. The O’Melveny & Myers firm formed an alliance with South African firm Webber Wentzel in February, increasing its reach in the African Reed Smith market. Slaughter and May With 15 partners in its India team, Milbank is a strong White & Case contender for finance, M&A and project-related deals. In

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Ashurst’s coordinated India practice comprises over DLA has been the best firm we 60 English, US, Australian and Indian-qualified lawyers. It have worked with during the has worked with several Indian law firms and has a non- exclusive referral arrangement with Indian Law Partners. last three to four years Ashurst maintains close ties with clients such as Aditya Birla Akash Aggarwal Group, GVK, Vedanta Resources, Mahindra & Mahindra, Asian Development Bank, IDFC Capital and Jubilant Energy. Vice President of It was counsel to Bank of America Merrill Lynch, Citi, HSBC, Investment Banking Nomura, Morgan Stanley and JM Financial in connection Axis Capital with Oil & Natural Gas Corporation’s US$2.5 billion disin- vestment by offer for sale, and to GVK on its US$10 billion investment in the Alpha Coal Project in Australia. Go-to lawyers for India work are Richard Gubbins (head of Ashurt’s India practice), Tony Denholder, Justin Shmith and Padmini Singla. Bird & Bird’s promotion to the key players list was prompted by its activeness on both mid-market and high- value India deals. In the past 12 months it represented a German company on its joint venture with an Indian entity, a Finnish subsidiary of an Indian company on acquisition financing, and an Indian client on a contractual dispute in Hong Kong with a multinational company. Another highlight vice president of investment banking at Axis Capital. “The was representing ICICI Bank on the English law aspects of direct involvement of their capital market partner during the a `42.7 billion (US$715 million) financing to Essar Power drafting sessions and discussion on critical points makes Jharkand and advising on the subsequent refinancing of all the difference.” Finance and capital markets lawyer this loan. Bird & Bird has hired India hands Allan Poulter and Joywin Matthew left White & Case to join DLA this month, Mark Abell from Field Fisher Waterhouse as well as David strengthening the firm’s debt capital markets practice. Renton from Baker Botts. Nipun Gupta is the firm’s primary Daniel Sharma and Biswajit Chatterjee are global heads of India contact. the India group. Clyde & Co offers expertise in the insurance, aviation, Gibson Dunn & Crutcher has climbed the charts thanks shipping, infrastructure and projects sectors. It advised to a streak of prominent India deals. The firm advised Afcons Infrastructure and Marico on their investments in Grandway Global Holdings and Atlas Equifin in the sale of Saudi Arabia; assisted Dr Reddy’s Laboratories in relation their stake in Multi Screen Media to SPE Mauritius Holdings to its US operations; and advised Essar Oil on its dispute and SPE Mauritius Investments, indirect subsidiaries of with United India Insurance – one of the largest disputed Sony Pictures Entertainment, for US$271 million. Jayesh insurance claims in Indian history and an India Business Law Parekh, the managing director at Sony Entertainment Journal 2012 dispute of the year. Sidhant Rajagopal, an avia- Television and Apollo Television, praises the firm for “excel- tion specialist, rejoined the firm as an equity partner in Dubai lent coordination among all parties and good understanding in April after almost two years at Clasis Law, Clyde & Co’s of the legal, tax, compliance and regulatory issues”. The firm best friend firm in India. also represented Acumen on a US$5 million equity financ- Davis Polk & Wardwell strengthened its capabilities last ing of Husk Power Systems, and advised Gulf Capital on its December by hiring Asian litigators Martin Rogers and James acquisition of OCB Oilfield Services FZCO. The firm is cur- Wadham from Clifford Chance. The firm’s India practice has rently assisting clients with anti-corruption and compliance over 25 lawyers, including 10 partners and one counsel, who in India, telecom and healthcare investments, renewable are involved in Indian M&A and capital markets transactions. energy business and litigation. Gibson Dunn added two new They are based throughout Davis Polk’s 10 global offices associate attorneys to its India practice group to support the with the majority in Hong Kong where the India practice is increase in India work over the past 18 months. Jai Pathak is led by Kirtee Kapoor. “Kirtee Kapoor is exceptional,” says a primary contact for India transactions. one private equity client. Kapoor was counsel to Morgan O’Melveny & Myers’ core India team includes Pooja Stanley Infrastructure Partners in its acquisition of a majority Sinha, David Makarechian, Andrew Hutton, Dev Sen and stake in Continuum Wind Energy – one of the biggest pri- Junaid Chida. Capital markets, financing and private equity vate equity deals in the Indian wind energy sector. The firm form the bulk of its work. The firm offers expertise on counts Indiabulls Real Estate, ICICI Bank, DLF Hospitality, securities offerings by Indian companies and has handled TPG and Warburg Pincus among its clients. investments in sectors such as technology and consumer DLA Piper is flying high as international counsel to Etihad goods as well as insolvency and restructuring mandates. Airways on its US$600 million investment in Jet Airways – O’Melveny & Myers represented Deutsche Bank as arrang- the first investment by a foreign airline in an Indian airline. ers in several rounds of restructuring of US$365 million in In other recent cross-border acquisition assignments, DLA convertible debentures issued by the Lodha group, as well advised Wipro on its US$144 million acquisition of a con- as on related derivative transactions with private equity and sumer business across Southeast Asia; Jindal Group on hedge fund investors. its US$235 million acquisition of the global film business Reed Smith enters the key players category for the first of ExxonMobil Chemical, spread across six jurisdictions; time on the back of its robust contentious and non-conten- and PCM Group, on the acquisition of Rail One. “In my tious India-related work, which mainly involves advising on opinion DLA has been the best firm we have worked with English law or US law along with a strong focus on interna- during the last three to four years,” says Akash Aggarwal, tional arbitration. Gautam Bhattacharyya and Roy Montague-

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Jones co-chair the firm’s India practice, which comprises 25 Nilufer von Bismarck [at partners and a team of associates. Recent highlights include Slaughter and May offers] advising Wockhardt and Swiss subsidiary Wockhardt Bio as borrower and guarantor on the rescheduling of a US$250 outstanding technical expertise million syndicated loan advanced by Indian and international and knowledge, high quality banks, and on Wockhardt’s US$355 million sale of its nutrition business to Danone; acting for a bank syndicate’s agent support and is very easy to bank in English High Court litigation against a European work with company and its Indian parent company; and acting for New Palwinder Hare York Stock Exchange-listed Curtiss-Wright on its US$120 million acquisition of Williams Controls, which involved its Head of Legal - M&A/Corporate Indian operating subsidiaries. Standard Chartered Bank Slaughter and May has clinched roles on a slew of important deals. It advised Diageo on its US$3.8 billion acquisition of a controlling stake in United Spirits and Mylan on its US$1.6 billion acquisition of Agila Specialties, an Indian developer, manufacturer and marketer of generic injectable products. It has also acted for GlaxoSmithKline on its voluntary offer to increase its stake in its publicly listed consumer healthcare subsidiary in India, and represented an international financial institution in relation to the disposal of its Indian business. In addition, Slaughter and May is handling a range of India-related disputes including an arbitration at the International Court of Arbitration. The associate general counsel of a multinational company describes the firm as “Nilufer von Bismarck [offers] outstanding technical exper- “excellent, consistent, intelligent” with “strong integrity”, sin- tise and knowledge, high quality support and is very easy to gling out lawyer Simon Nicholls as “hugely intelligent” and work with”. Nick Archer, Simon Hall and von Bismarck are “client friendly” with “good risk radar”. Palwinder Hare, head primary India contacts at the firm. of legal - M&A/corporate at Standard Chartered Bank, says White & Case, one of the top 10 in our 2012 rankings,

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moves down after a relatively quiet 12 months and the loss [Cleary Gottlieb] proved to be of Will Kirschner, formerly head of the firm’s India prac- of invaluable help, assuring tice, who moved to Linklaters earlier this year, and Joywin Matthew, who left for DLA Piper this month. The firm’s India that the deal moved forward practice now rests in the hands of Nandan Nelivigi, George and effectively liaised with Cyriac and David Eisenberg. Over the past few years, White & Case has advised Pfizer, GMR, Wockhardt India, the Asian our Indian lawyer and our Development Bank and Deutsche Bank on India-related counterpart deals. Recently, the firm was counsel to GMR Infrastructure Teresa Chávez Martínez and GMR Infrastructure (Singapore) on the sale of a 70% stake in GMR Energy (Singapore) to FPM Power Holdings Senior Corporate Counsel for S$600 million. Grupo Kuo

Significant players Baker & McKenzie Cleary Gottlieb Steen & Hamilton Dorsey & Whitney Eversheds Field Fisher Waterhouse Fladgate Goodwin Procter conglomerate Grupo Kuo, which engaged Cleary Gottlieb Hogan Lovells for advice on setting up a joint venture in India, says the Kirkland & Ellis firm “proved to be of invaluable help, assuring that the deal moved forward and effectively liaised with our Indian lawyer Lawrence Graham and our counterpart”. She adds that the firm “provides a first Mayer Brown class service with an outstanding level of skilfulness and reli- ability”. She praises Shreya Lal Damodaran, the firm’s senior Nabarro India consultant, for “valuable help with key Indian legal Penningtons issues” and Nallini Puri for “excellent legal advice and an-all Pepper Hamilton time availability”. Dorsey & Whitney lost a key member of its India team Pinsent Masons last November when Jamie Benson left to join Duane Morris Ropes & Gray & Selvam. However, since then John Chrisman, Dorsey’s India practice group chair, was instructed to act as interna- Simmons & Simmons tional counsel to India’s Ministry of Steel on its offer for sale Simpson Thacher & Bartlett of a 5.82% stake in Steel Authority of India, which raised Taylor Wessing US$279 million. The firm also represented the book running lead managers on IndusInd Bank’s US$36.8 million qualified Vinson & Elkins institutional placement in January. Eversheds is developing a flourishing arbitration practice thanks to the experience of its Singapore director Oommen Ashok Lalwani heads Baker & McKenzie’s India practice Mathew. Mathew along with associate Kate Lan advised the from the firm’s Singapore office. The firm has advised Indian Maldives government on a dispute between Male Airport companies on mergers and acquisitions, joint ventures, and GMR – one of India Business Law Journal’s 2012 dis- structured financings, project development, real estate putes of the year. The firm is also advising an Indian energy investment and dispute resolution. Baker & McKenzie part- company on a claim in Singapore. In addition, the firm has ner Edward West advised Chemtura Corporation as inter- advised Sequoia Capital on setting up corporate legal enti- national counsel on the acquisition of the bromine manu- ties for investment into India; US and UK retailers on entry facturing and distribution business of Solaris Chemtech, a strategies into India; AZ Electronic Material on the purchase subsidiary of India’s Avantha Group. Andrew Martin, Michael of Clariant’s polysilazanes coatings and resins business in Mensik and Philippe Reich are other India contacts at the India and Germany; and United Drug on its US$61 million firm. acquisition of the Bilcare Global Clinical Supplies business. Cleary Gottlieb Steen & Hamilton acted for the brokers Parmjit Singh heads the firm’s India group. on three offers for sale by the Indian government, involv- Field Fisher Waterhouse is known for its active licensing ing US$1.1 billion in shares of NMDC (National Mineral and franchise practice for companies keen to enter India. Development Corporation), US$585 million in shares of The firm has assisted companies such as retailer Thomas Oil India and US$2 billion in shares of NTPC (National Pink, toy company Hamleys and dim sum restaurant Ping Thermal Power Corporation). The firm has also advised B4U Pong in securing franchise rights in India. It advised Indian Television network on its planned acquisition by Bollywood broadcaster B4U’s European arm in a copyright infringe- film producer and distributor Eros International. Teresa ment case brought by the Indian Performing Right Society; Chávez Martínez, senior corporate counsel at Mexican advised Vestergaard Frandsen in the UK on an international

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action concerning the theft of trade secrets, which involved [Sunil Sheth at Fladgate] is a case in Delhi High Court; and conducted due diligence swift in understanding clients’ for an Indian retail group on the potential takeover of a European fashion and clothing company. India specialists needs and addressing them Mark Abell and Allan Poulter left the firm to join Bird & Bird. ML Bhakta Nick Rose now runs the India practice with support from James Martin. Senior Partner Fladgate has been winning work across practice areas for Kanga & Co Indian clients since expanding its offerings. It acted for the owner of a Dubai hotel project in relation to arrangements for technical assistance from the Taj Group; advised India’s Maneesh Pharmaceuticals, and Svizera Holdings, in connection with claims for the repayment of an outstanding loan and debt of US$38 million; and is representing a UAE subsidiary of Jindal Steel & Power in relation to litigation concerning an Omani gas plant. The firm’s India practice is led by Sunil Sheth, who “is swift in understanding clients’ needs and addressing them”, according to Kanga & Co senior partner ML Bhakta. Sheth is supported by Mythily Katsaris, Rajeshwar Vyakarnam and Ashish Bhakta. Karishma Parekh, who has six years of litigation experience in India, has also represented Goldman Sachs’ private equity arm during a been hired by the firm. US$54 million financing round for Nova Medical Centers, a Goodwin Procter owes its steady stream of India work to Bangalore-based healthcare company. Yash Rana in Hong its corporate and private equity expertise. The firm assisted TA Kong chairs the firm’s Asia practice, with support from Brian Associates with follow-on investments in IndiaIdeas.com and McDaniel, Brinda Dutta and Shantanu Mukherjee. Dr Lal PathLabs, and Bessemer Ventures with financing for Hogan Lovells wins praise from clients for its contentious Anunta Technology Management Services. Goodwin Procter capital markets work. Shankh Sengupta, a counsel at Trilegal acted for Bangalore-based IT services company MphasiS on who worked with the firm on disputes arising from foreign its US$200 million acquisition of Digital Risk in Florida and currency convertible bonds (FCCBs) issued by companies

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[Andrew Carey at Hogan to become a legal adviser at the Abu Dhabi Investment Lovells] is very quick to Authority. Sunil Kakkad, who has advised clients such as Advaita Indian Energy Ventures, Satyam Computer Services appreciate issues which may and NIIT Technologies, is head of the firm’s India group. not be his areas of expertise, Mayer Brown demonstrated its competition law skills when it acted as Nestlé’s global antitrust counsel for its such as litigation in India acquisition of Pfizer’s infant-nutrition business – a deal worth Shankh Sengupta US$11.85 billion. Advising clients on India-related mergers Counsel and acquisitions, joint ventures and equity investments is a core strength of the firm’s India practice. Last November, Trilegal Mayer Brown was counsel to a UK subsidiary of Gulf Oil Corporation (the India-based lubricants division of the Hinduja Group) on its purchase of US industrial fluids manufacturer Houghton International for US$1.04 billion. Paul de Bernier and David Carpenter co-chair the firm’s India practice. Kiran Desai and Edmund Parker are co-leaders of the group. Nabarro has handled many India-related matters over the past 12 months. It is currently helping India-based businesses across sectors such as clean technology and infrastructure seek equity investments through London’s AIM market. It is also advising an Indian company interested in in India, says Andrew Carey “has a very good understanding mining opportunities in East Africa and is acting for an inter- of a default situation and is very quick to appreciate issues national equipment manufacturer in relation to corporate which may not be his areas of expertise, such as litigation issues arising from a divestment in India. Nabarro’s clients in India.” Sonali Sharma, a partner at Juris Corp who also include Infrastructure India, Nandan Cleantech, Larsen & worked with the firm on FCCB-related recoveries, lauds Toubro and OPG Power Ventures. Ian Binnie heads the firm’s Carey for “his experience, clarity of thought and understand- India initiative with the help of 10 partners and eight associ- ing of the law”. Sengupta further praises Jill Baraclough as “a ates across several practice areas. valuable resource in the team” who “handles crisis situations With 67 partners and 360 staff in the UK, Penningtons with ease”. Hogan Lovells advised International Finance has won clients such as Tata Motors, Nihilent and Syndicate Corporation and Proparco on a US$70 million financing for Bank. The firm provides commercial as well as legal advice an Indian company in the education sector; advised Citibank on entry and exit strategies for the Indian market and invest- as trustee on enforcement proceedings against Moser Baer ments from India into the UK and Europe. In addition to India arising out of defaults on bonds issued by Moser Baer; corporate and commercial services, it also advises clients and represented Mattel in trademark and copyright litigation on employment, immigration, dispute resolution and IP relating to its Scrabble game in India. The Mattel matter was matters. Jimmy Contractor, the company secretary at Tata led by senior IP partner David Latham, who sadly passed in London, has used Penningtons since 1995 and says “we away in February. found them economical and good in [several] aspects of law Kirkland & Ellis has had a relatively quiet 12 months on … [using them in] various sectors like IP, brands, employ- the India front compared with the year-earlier period when it ment and immigration law. We also have recommended advised on headline deals such as Patni Computer Systems’ them to our Indian group companies for advice on various delisting from the Indian stock exchanges. Nevertheless, matters.” Contractor recommends Rustam Dubash, Anna the firm recently advised the Harbourvest and Axiom Asia Frankham and Jon Huevel “for their knowledge and advice. Private Capital funds on their purchase with Asia Growth We have dealt with quite a few others, but these three are Capital Advisors of Credit Suisse’s Asian private equity outstanding”. Dubash jointly leads the India practice with portfolio. Kirkland also represented Golden Gate Capital on Saionton Basu. the sale of Vistec Lithography Inc and Vistec Lithography Pepper Hamilton takes pride in its strong dispute BV to Raith, which included the transfer of Vistec’s produc- resolution practice. The firm has handled litigation for tion facilities and its service and support centres in the US, yeast manufacturer and distributor Lesaffre & Cie, which Europe, China, India and Korea. Sarkis Jebejian, who during has a dispute with its Indian joint venture partner, and his time at Cravath Swaine & Moore advised Genpact on for India’s NDTV, which is suing Nielsen in the US for its 30% stake sale to Bain Capital for US$1 billion (an India Business Law Journal 2012 Deal of the Year), joined Kirkland & Ellis last December. Srinivas Kaushik is a key contact at [Penningtons is] economical the firm. and good in [several] aspects Lawrence Graham’s strengths include its outsourcing and technology practice and its expertise in investments of law ... We also have for high net worth individuals. The firm also focuses on recommended them to our banking transactions, corporate tax, employment, M&A, real estate and regulatory matters. It acted for Greenko on Indian group companies the sale of `8.2 billion worth of shares in Greenko Mauritius Jimmy Contractor to the Government of Singapore Investment Corporation. Company Secretary Peter Brudenall, a partner experienced on IT and outsourcing transactions in India, left Lawrence Graham in March Tata (London)

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[Pepper Hamilton] knows the advised Bain Capital on its US$1 billion purchase of a 30% Indian market very well ... stake in Genpact. Energy and infrastructure is one of Simmons & James Rosener is fantastic. He Simmons’ four core global industry sector focuses and is very sharp and I find him very its priority in India. The firm advised Indian petroleum company ONGC Videsh on its US$1.1 billion purchase of commercial in his approach a 2.72% interest in the Azeri, Chirag and Guneshli (ACG) Rohit Kumar fields in Azerbaijan and a 2.36% interest in the associ- Deputy General Counsel ated BTC pipeline – ONGC Videsh’s first acquisition of oil producing assets in Central Asia. Sharing his personal United Phosphorus views, Priyank Srivastava, deputy legal adviser at ONGC Videsh, says Vivian Yang, Ian Wood and Matthew Davis demonstrated understanding and good negotiation skills. “For any transaction to be successful it is essential to capture the risks associated with it and legally safeguard the present and future interests of the organization,” he says. “Simmons & Simmons were effective in fulfilling our requirements.” On the infrastructure front, the firm acted for AIM-listed Ishaan Real Estate on the proposed sale of its property interests to Chalet Hotels Private and other entities connected to K Raheja Corp for approximately £70.3 million. The firm plans to open a Singapore office negligence and breach of contract. Other offerings this year, which will target India matters. include legal advice on M&A, private equity, corrup- Simpson Thacher & Bartlett is a magnet for private tion, white collar crime, tax and capital markets. Pepper equity work. Its clients include Blackstone, Kohlberg Hamilton “knows the Indian market very well and I have Kravis Roberts (KKR), the Carlyle Group, Nalanda India found them more cost competitive than equivalent US Fund and One Equity Partners. It recently advised KKR on law firms,” says Rohit Kumar, deputy general counsel its proposed acquisition of a controlling stake in Alliance at United Phosphorus. He says the firm’s lawyers are Tire Group (ATG) from an affiliate of Warburg Pincus. ATG “hands-on”, “commercial” and understand the needs has manufacturing plants and research and development of their clients. “James Rosener is fantastic,” enthuses facilities in India and elsewhere. The firm also represented Kumar. “He is very sharp and I find him very commercial Blackstone Real Estate Partners on the acquisition of a in his approach. He also has a technical background stake in Pune Dynasty Projects and the purchase of a which makes him very relevant for someone like us.” stake in EON Kharadi Infrastructure – an owner and devel- Last August, Pepper Hamilton merged with Freeh oper of office parks and an operator of a special economic Sporkin & Sullivan, enhancing its corporate investiga- zone in Pune. Kathryn King Sudol, Anthony King and Jin tions, white collar advocacy and enforcement practice. Hyuk Park lead Simpson Thacher & Bartlett’s India-related Louis Freeh, a former director of the Federal Bureau of M&A practice, real estate practice and capital markets Investigation and former federal judge, is currently chairman of Pepper Hamilton. Valérie Demont is the practice leader for India. For any transaction to be Pinsent Masons’ ties with India go back to the 1940s, successful it is essential to when Ralph Mason, one of its founding partners, was a partner at a Calcutta law firm. The firm has maintained a capture the risks associated solid reputation since then, advising companies on inbound with it and legally safeguard and outbound investments. GMR engaged the firm for advice on its dispute with the Maldives government over the present and future interests its contract to operate Male International Airport – one of of the organization. Simmons India Business Law Journal’s 2012 disputes of the year. The & Simmons were effective in firm’s Dubai office represented Air Works India Engineering on its acquisition of a 74% stake in Dubai-based Empire fulfilling our requirements Aviation Group, while its Leeds lawyers advised Quantum Priyank Srivastava Clothing Group on its acquisition by Japanese trader Itochu. Quantam is based in Nottinghamshire and employs Deputy Legal Adviser 5,000 staff worldwide with operations in Cambodia, Sri ONGC Videsh Lanka and India. Sachin Kerur and Martin Harman focus on India-related matters. Ropes & Gray has undertaken due diligence on eight India-related deals since July 2012; conducted more than a dozen anti-corruption training sessions in India for global private equity firms and Indian-based companies; and advised an ad hoc committee of bondholders on the restructuring of foreign currency convertible bonds issued by Suzlon Energy. The firm represented Goldman Sachs as one of the selling shareholders in Bharti Infratel’s US$825 million IPO and

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practice, respectively, from Hong Kong. Christopher Walker [of Vinson Taylor Wessing’s IP expertise has landed it some inter- & Elkins] is an outstanding esting contentious work over the past 12 months including advising Jet Airways on patent and design infringement litigator with good local proceedings brought against it by Virgin Atlantic Airways in knowledge and understanding relation to Jet’s business class lie-flat seating. Previously, the firm advised Indian generics maker Intas Pharmaceuticals of Indian law and procedure on a UK High Court case that successfully challenged an Zarir Bharucha AstraZeneca patent relating to the anti-psychotic drug Managing Partner quetiapine. Taylor Wessing focuses on specific sectors in India – technology and communications, consumer brands, Zarir Bharucha & transportation and logistics, real estate, hotels and infra- Partners structure, financial institutions and services, life sciences and healthcare. The firm’s India group is led by four partners – Laurence Lieberman, Tandeep Minhas, Russell Holden and this work. “For oil and gas disputes, Vinson & Elkins is Vinod Bange. Its India reach was strengthened last August top,” says Zarir Bharucha at Zarir Bharucha & Partners in with the opening of a Singapore office. Mumbai. “Christopher Walker is an outstanding litigator Vinson & Elkins’ client list reflects its solid reputation. with good local knowledge and understanding of Indian With clients such as Essar Global, Reliance Industries law and procedure.” and Cairn India, the firm attracts projects, disputes and Afridi & Angell offers services related to investments in investments with an India connection. Vinson & Elkins has the UAE and beyond and advises companies in the Middle been particularly active on arbitration matters before the East on their expansion into India. Amjad Ali Khan, the Permanent Court of Arbitration in the Hague, Malaysian firm’s co-founder and managing partner, has advised cli- courts and the International Court of Arbitration. Partners ents on investments into India, Rahat Dar has assisted with James Loftis and Mark Beely in London, Christopher IPOs and secondary offerings in India, and Ziyad Hadi has Walker in Hong Kong and Nicholas Song in Beijing lead acted for companies on cross-border transactions involving Indian parties. Fellow UAE firm Al Tamimi & Co advised the share- Regional and specialist firms holders of Dubai-based Empire Aviation Group on the sale of a 74% stake to Air Works India Engineering, a Afridi & Angell (UAE) Mumbai-based independent provider of aviation mainte- Al Tamimi & Co (UAE) nance, repair and overhaul (MRO) services. This was the Appleby first global acquisition in the area of aviation MRO by an Indian company and one of India Business Law Journal’s Arun Nigam & Associates (Hong Kong) 2012 Deals of the Year. Al Tamimi’s banking and finance Bennett Jones strengths have landed it clients such as State Bank of India, Bank of Baroda, Punjab National Bank and the Blakes Export-Import Bank of India while its commercial acumen BLC Chambers has brought mandates from Samsung India, Dabur India, Larsen & Toubro and Wipro. Conyers Dill & Pearman With offices in Bermuda, the British Virgin Islands (BVI), Corrs Chambers Westgarth (Australia) the Cayman Islands, Guernsey, the Isle of Man, Jersey, Mauritius and the Seychelles, Appleby has positioned itself DFDL to be a legal adviser on India-related transactions with an Harneys offshore element. The firm’s Cayman office recently repre- Heuking Kühn Lüer Wojtek (Germany) sented State Bank of India on a US$300 million foreign currency facility for HGHL Holdings and a letter of comfort facil- Inventus Law (US) ity for HGHL Holdings and Gulf Oil Corporation to assist in Kojima Law Office the Hinduja Group’s acquisition of Hill Holding Corporation in the US. In addition to its offshore locations, the firm has Maples and Calder offices in London, Hong Kong, Shanghai and Zurich. McCarthy Tetrault (Canada) Hong Kong-based Arun Nigam & Associates focuses Mourant Ozannes on work with an India connection. An increasing portion of its work involves helping Indian-run companies and Indian Rajah & Tann (Singapore) private and public sector banks in Hong Kong with a variety Shook Lin & Bok (Singapore) of legal matters. Since merging with Pierrepont Law Office earlier this year, Arun Nigam & Associates has taken on a Stikeman Elliott (Canada) rising number of disputes under the leadership of Mark Torys (Canada) Pierrepont. An Indian logistics company recently engaged Uteem Chambers (Mauritius) the firm to aid in the recovery of money owing to its Hong Kong subsidiary. The firm is also assisting the Hong Kong Webber Wentzel branch of an Indian public sector bank with debt collec- Werksmans tion in Hong Kong and litigation, and a group of prominent Indian businessmen in connection with a loan to a South WongPartnership (Singapore) Indian film producer for a film project in Fiji.

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Raj Sahni, a partner in the bankruptcy and restructuring Mauritius and on a deal between a Mauritian financial entity practice group at Bennett Jones, chairs the firm’s India and a financial services provider in India. The firm recently Business Group. Sahni and his team assist Canadian cli- formed an association with Harneys. ents in the Indian market and Indian companies with invest- With clients such as Vodafone, Vedanta and MakeMyTrip, ments and acquisitions in Canada. The firm has worked Conyers Dill & Pearman is a strong contender for India with an Indian food processing company on trademark and mandates in offshore jurisdictions. Its India practice covers IP issues in North America, advised an Indian engineering corporate, M&A, finance, banking and commercial matters. company on investments in a Canadian power project and The firm’s recent work includes advising on the forma- offered legal advice on a host of outsourcing and technol- tion of an India-related private equity fund and providing ogy licensing agreements involving Indian outsourcing Ingredion with corporate advice on a holding structure companies. Kasi Rao is a senior adviser on India. involving India. Blake Cassels & Graydon – now known as Blakes – is Australian firm Corrs Chambers Westgarth’s technol- another Canadian firm that has been bullish about India. ogy team is one of the key groups within Corrs pursuing The firm has advised IFFCO Canada on an investment in India-related work. The firm represents a corporation which the company by La Coop fédérée, Investissement Québec has been engaged to build a significant infrastructure and Kisan International Trading FZE (KIT). KIT is a sub- technology system for the state of Victoria, in relation to sidiary of Indian Farmers Fertiliser Cooperative Limited its subcontracting arrangements with an Indian technology (IFFCO), and is involved in the international trading of ferti- company. The firm is also working with State Bank of India lizers and related products. IFFCO Canada is establishing on the restructuring and refinancing of the Abbot Point Coal a C$1.2 billion (US$1.2 billion) nitrogen fertilizer plant in Terminal. The restructuring includes a partial refinancing by Bécancour, Quebec. The first tranche of the investment a syndicate of lenders and complex priority arrangements closed last December and the plant’s construction is being agreed with the syndicate in relation to the project. expected to begin in 2014. The firm is also advising York Southeast Asian law firm DFDL has a dedicated University on opening a campus in Hyderabad. India desk focusing on Indian outbound investment into Mauritius-based BLC Chambers mainly practises cor- Southeast Asia, South Asia and beyond. Its India team porate, finance and investment funds law. It also has a comprises nine members led by senior adviser Vinay Ahuja strong litigation wing. BLC has assisted with the financing with support from partners and associates in Singapore, of a company investing in Indian real estate, and advised Bangaldesh, Cambodia, Thailand, Myanmar and Vietnam. on investments in India’s renewable energy sector through The firm recently advised Birla Lao Pulp and Plantation – an

48 India Business Law Journal June 2013 Foreign law firms Intelligence report

Aditya Birla Group company – on its pulp plantation project Heuking is always pragmatic, expansion in Laos and associated legal, tax and IP issues. quick, reasonable and with an DFDL has also advised Tata International on expansions in Laos and Cambodia; Export-Import Bank of India on a amazing understanding of our US$2 million loan to a Vietnamese coffee manufacturer; business PepsiCo India on its setup and IP issues in Bangladesh; and Khamin Development (an Indian hospitality company) Marion Welp on its bid for a Thai development company in the hospital- Senior Vice President and ity sector. “Their experience in the Mekong region is quite Head of Group Legal superior to the others and this was evident with the services they provided to us,” says a client at a large Indian and Compliance multinational company. “We are not their regular clients ... Esprit but given a chance (in due course) we see them as good partners in our progress.” Offshore law firm Harney Westwood & Riegels (known as Harneys) practises BVI, Cayman, Cyprus and Anguilla law technology. The firm advised Neumayer Tekfor Group on through offices around the world. It has 30 partners and its sale to Indian automotive supplier Amtek Auto; advised focuses on corporate matters, funds, finance and litiga- a German shipping company on the sale of its sharehold- tion. The firm has joined forces with Mauritian law firm BLC ing in an Indian joint venture company involved in logistics Chambers to offer clients access to a greater array of legal and port operations; and acted for a German transport and and corporate services. The firm’s India desk operates from logistics company on the formation of a joint venture with London where lawyers assist with the setting up of BVI Jindal Group for the operation of two terminals at Khor Al or Cayman investment funds, advise banks and financial Zubair harbour in Iraq. In addition, one of Heuking’s sen- institutions on lending arrangements and create trusts and ior partners has acted as an arbitrator in an International other wealth management structures. Chamber of Commerce arbitration on monetary claims Heuking Kühn Lüer Wojtek has been involved in several connected with the establishment of an industrial plant Indo-German deals in the past 12 months, particularly in in Agra. Marion Welp, senior vice president and head of the vibrant mid-market segment. Its core practice areas for group legal and compliance at Esprit, says “Heuking is India-related work are corporate, M&A, IP, and media and always pragmatic, quick, reasonable and with an amazing

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understanding of our business”. She recommends Rudolf Anil Advani provides a unique du Mesnil, “who took care of the whole organization of blend of India and ‘big law the legal matters with his Indian lawyers … it was easy to explain to him what kind of legal situation I would like to firm’ experience … with the achieve under German standards, and he implemented personal and responsive touch everything accordingly. This made my life much easier.” Inventus Law wins praise from clients for its expertise of a boutique law firm and client service. “I feel with his India experience and Vinod Kumar Menon knowledge of the Indian Companies Act and appreciation General Counsel for Indian business culture, Anil Advani provides a unique blend of India and ‘big law firm’ experience (having worked Accel Partners at global law firms like Orrick Herrington & Sutcliffe and Cooley Godward), with the personal and responsive touch of a boutique law firm,” says Vinod Kumar Menon, the general counsel at Accel Partners in Bangalore. Menon also praises Inventus’ pricing model with a “greater emphasis on value-driven fixed fee arrangements”. The firm assisted Willow TV on structuring its global cricket licensing business and strategic relationships; advised Myntra on its acquisition of US-based Fitiquette; and represented Singapore-based Graphic Media on an India-related venture financing, strategic licensing and partnership agreements, employment and other corporate matters. “I have Tokyo-based Kojima Law Office trains Indian lawyers worked on transactions where Inventus Law has been as part of its ongoing training programme and one of on the other side representing the companies Accel has its associates, Hirokazu Amemiya, has spent time train- invested in, and I have always been impressed with their ing with Indian law firms Economic Laws Practice and legal acumen, integrity, work ethic, hard work and abil- J Sagar Associates. The firm’s veteran practitioners, ity to get parties together on complex business and legal such as Hideki Kojima and Hiromasa Ogawa, have han- issues,” adds Menon. dled Indo-Japanese transactions for years, advising on

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investments in Japan and India, joint venture contracts, Rajah & Tann has been the best technical collaboration agreements, acquisitions under [for India transactions] given India’s Sick Industrial Companies (Special Provisions) Act, Securities and Exchange Board of India regulations, India’s their knowledge on all elements Companies Act, and assisting with government licences of India centric investment and approvals. Offshore law firmMaples and Calder won the role of BVI products adviser to Jindal Steel & Power (Mauritius) on the merger of Alok Nanavaty Jindal BVI with Canadian and Botswana-listed coal com- Director pany CIC Energy. The firm opened a Singapore office last September in a bid to boost its Asia offerings. Commonwealth Canadian firm McCarthy Tétrault has advised Indian Centrum Advisors clients in a host of industries on their expansion into North America. The firm works with Indian and Indian diaspora broadcasters and their North American agents on Canadian market entry including licensing, distribution and regulatory compliance. Media clients have included Aastha TV, ARY Digital, Channel Punjabi, India Today Group, Sahara Filmy and UTV Movies. In addition, the firm is counsel to La Coop fédérée, as a joint venture partner with Investissement Québec and Indian Farmers Fertiliser Cooperative Limited, in its investment in IFFCO Canada and is advising an India- based consortium on its development of a hydroelectric project in Georgia. Canadian and international clients have also turned to McCarthy Tétrault for advice on entry into WNS is a global business process outsourcing company India. incorporated in Jersey, with a principal executive office in Mourant Ozannes advised long-standing client WNS India and over 22,000 professionals in 25 delivery centres (Holdings) on its public offering of American depositary in India and elsewhere. The offering included an offer of shares (ADS) on the New York Stock Exchange (NYSE). new ADS by WNS and a sale of ADS by Warburg Pincus,

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WNS’ largest shareholder. Mourant Ozannes previously [Stikeman Elliott has] provided advised WNS on its IPO in 2006, which made it one of the excellent advice which is first Jersey companies with a primary listing on the NYSE. Singapore firm Rajah & Tann features prominently in precise and very business- India transactions. The firm advised Equis Asia Fund on its oriented and they have been investment in a DANS hydro project – one of the first private equity investments from an overseas fund in a hydro able to adapt themselves to project in northeast India. Last October Rajah & Tann acted work with Indian firms in jointly for Religare Health Trust Trustee Manager, the trustee-man- advising Indian clients ager of Religare Health Trust (RHT), and Fortis Healthcare, the sponsor of RHT, in RHT’s IPO on the Singapore Stock L Viswanathan Exchange. “Rajah & Tann has been the best [for India trans- Partner actions] given their knowledge on all elements of India centric investment products,” says Alok Nanavaty, a director Amarchand Mangaldas at Commonwealth Centrum Advisors in Hong Kong. This May the firm represented Pearson (Singapore) and Pearson Overseas Holdings in the acquisition by the former of 50% of the issued shares in Educomp Higher Initiatives from Educomp Asia Pacific. Prakash Pillai is an India expert and head of the firm’s South Asia practice. Pillai is also the vice chairman of the Singapore Indian Chamber of Commerce and Industry and formerly an adjunct associate professor at the National University of Singapore teaching Indian business law. Shook Lin & Bok has a thriving India practice led by Azmul Haque with the support of dispute resolution spe- company; represented Bank of India, Singapore Branch cialists Sarjit Singh Gill, Probin Dass and Debby Lim. The (the facility and security agent for a syndicate of banks), in firm acted for a major Indian cooperative in an arbitra- relation to a US$276.4 million term loan facility extended to tion involving a US$75 million claim against a US-listed Armada D1, a Singapore joint venture company; and acted

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For Mauritius, I believe with Stikeman Elliott,” says L Viswanathan, a partner at Uteem Chambers to be Amarchand Mangaldas. “Largely, these were in relation to the Indian companies pursuing opportunities in the natural the best law firm resources sector in Canada. They have provided excellent Ravi Dubey advice which is precise and very business-oriented and they have been able to adapt themselves to work with Senior Associate Indian firms in jointly advising Indian clients.”Amyn Abdula Luthra & Luthra and Dee Rajpal and are co-leaders of Stikeman Elliott’s India practice. Fellow Canadian firm Torys is equally focused on serv- for a claimant that was awarded US$77 million in dam- ing energy-focused Indian clients seeking acquisitions and ages in an international arbitration involving a claim against investment in Canada’s energy sector and the industries an Indian mining company for breach of two contracts of that support or supply it. Torys enviable client list includes affreightment. Hindalco Industries, Essar Steel Algoma, ArcelorMittal Canadian firm Stikeman Elliott is a frontrunner for India and Novelis. Torys advised Gujarat State Fertilizers & work thanks to its relationships with top Indian companies Chemicals on its C$45 million strategic investment in such as Tata Steel and Essar Steel. Other clients have Karnalyte Resources in January through a private place- included ICICI Bank Canada, JSW Energy, Mittal Steel and ment and off-take agreement for the purchase of potash DPF India Opportunities Fund. The firm recently advised from Karnalyte’s Wynyard Carnallite Project. In addition, it Jindal Steel & Power on its C$116 million acquisition of CIC advised ArcelorMittal on the restructuring of its joint ven- Energy, which is developing coal and energy in Botswana, ture arrangement with Baffinland Iron Mines Corporation. and represented a Tata Steel joint venture in its strategic Patricia Koval is the co-founder and co-chair of the India joint venture agreement with Labrador Iron Mines. The group. parties will cooperate to develop a rail line through their Mauritius law firmUteem Chambers is a popular choice respective properties in Labrador, Newfoundland; develop for Indian clients, particularly for finance mandates. More infrastructure at the new deep sea dock at the Port of Sept than 80% of the firm’s practice involves advising interna- Iles; and consider potential off-take arrangements and the tional financial institutions, multilateral development banks, sharing of rail cars, repair facilities and mine camp accom- inter-governmental organizations, institutional investors modation. “I have had a fantastic experience working and merchant banks. Uteem’s lean team of seven includes

June 2013 India Business Law Journal 53 Intelligence report Foreign law firms

lawyers qualified in Mauritius, England and Wales, Malaysia Firms to watch and Bangladesh, with proficiency in French, Cantonese, Akin Gump Mandarin, Malay, Hindi, Urdu and Bengali. Ravi Dubey, a senior associate at Luthra & Luthra, says “For Mauritius, Anderson Mori & Tomotsune I believe Uteem Chambers to be the best law firm”. He Berwin Leighton Paisner appreciates the firm’s professionalism and “constant focus on promptness and improving client service.” The firm was Carey Olsen Mauritius counsel to Tiger Veda Bharat and Tattersalls, Chadbourne & Parke the shareholders of BSCPL Infrastructure, for BSCPL’s listing to raise US$120 million, and advised on restructur- Clayton Utz ing closed-end funds and collective investment schemes Covington & Burling investing in securities or debt instruments managed by Kotak Mahindra (UK). Cramer-Salamian Robert Appelbaum leads the India practice at South Cravath Swaine & Moore African firm Webber Wentzel, advising Indian companies on their on their investments in South Africa and other Debevoise & Plimpton parts of the continent. His clients have included Dr Reddy’s Dentons Laboratories, ICICI Bank, Jindal Steel & Power, Infosys, JB Chemicals, JSW Energy, Kalpataru India, L&T Infotech, Duane Morris & Selvam Lupin India, Tata Motors and Matrix Laboratories. Last Eakin McCaffery Cox December, Webber Wentzel announced a collaborative Fichte & Co alliance with Linklaters, giving it access to the magic circle firm’s 4,500 professionals across 28 offices worldwide. Foley Hoag Linklaters’ India clients can also profit from the legal knowl- Foley Lardner edge now available to them across Africa through Webber Wentzel. Frost Brown Todd Werksmans, another South African firm, has han- Gianni Origoni Grippo Cappelli & Partners dled an interesting array of matters for Indian clients. In the past 12 months, the firm has advised on three Hassans renewable energy (photovoltaic) projects, each worth Ince & Co at least US$110 million, for SunEdison, which has its Kelley Drye & Warren regional head office for emerging markets in India. Other Indian clients included Nihilent and the Ritnand Balved King & Spalding Foundation. Indian companies with African aspirations King & Wood Mallesons can profit from Werksmans’ affiliation with the Lex Africa network of law firms, which has members in 24 African Lexincorp countries. Werksmans’ core strengths are corporate law Nagashima Ohno & Tsunematsu including M&A, company law, tax, labour law, competition law, banking and finance. Saravia & Munoz Rachel Eng, Andre Maniam and Kah Keong Low drive Sidley Austin Singaporean firm WongPartnership’s India practice. The Skadden firm specializes in M&A, joint ventures, real estate and hospitality-related investments and strategic alliances. Squire Sanders It also supports capital raising efforts by Indian clients. Stephenson Harwood WongPartnership is keen to handle disputes and India- related arbitrations seated at the Singapore International Sullivan & Cromwell Arbitration Centre and the International Court of Arbitration Thompson & Knight as well as in Singapore courts. The firm acted for Stamford Tyres Corporation on setting up Falken Tyre India, a joint TLT venture with Sumitomo Rubber Asia (Tyre), an Asian sales Weil Gotshal & Manges subsidiary of Sumitomo Rubber Industries. It also assisted Wragge & Co Mahindra Satyam and SBI Hong Kong Holdings with their inaugural US$50 million joint fund aimed at investing in information and communication technology companies globally. Berwin Leighton Paisner, which has also represented The firms to watch category is a mixed bag. Some of the Indian outsourcing companies on transactions in the UK firms have slipped in the rankings due to the loss of key and elsewhere and an Indian company on the sale of a India partners or a slowdown of India-related deals, while majority stake to a third party. The firm’s “expertise is others are new to this area and keen to increase their foot- unmatched” and it has “a wonderful and dedicated team print and serve Indian clients. who puts in countless hours to ensure we met our dead- Among these firms, Anderson Mori & Tomotsune lines,” says one Indian client. He adds that Tom Budgett advised on Nippon Life Insurance Company’s investment and Jamie Wiseman Clarke “drove the documentation in a in Reliance Capital Asset Management and the acquisition very cordial and effective manner” and that under Budgett’s of Netmagic Solutions by NTT Communications. leadership “it is an unbeatable combination”. Go Airlines, Komli Media and Axis Bank are clients of Offshore law firm Carey Olsen provides ongoing Jersey

54 India Business Law Journal June 2013 Foreign law firms Intelligence report

legal advice to Vedanta in connection with a Jersey sub- in his ability to lead complex transactional negotiations”, sidiary. The firm has developed a dedicated Indian team while John Anderson is described as “one of the few attor- made up of partners Greg Boyd (BVI), Anthony McKenzie neys that can synthesize the complexity and ambiguity (Cayman Islands), Tom Carey (Guernsey), and Alan Stevens of Indian tax matters into actionable advice”. Aditya Birla (Jersey). Stevens is a former Linklaters partner who han- Group, Morgan Stanley and Providence Equity Partners dled significant Indian business during his time at the firm. are clients. Australian firm Clayton Utz acts for Indian investors Duane Morris & Selvam poached India specialist looking at targets in Australia, including companies hunting and capital markets expert Jamie Benson from Dorsey for resources. The firm has worked with Adani Corporation & Whitney. Benson, who co-heads the firm’s India desk, in relation to its US$6 billion Carmichael Coal Project; has worked on more than 30 offerings by Indian issuers International Coal Ventures on its potential acquisition of in the past eight years, including equity offerings by TBZ, coal projects in Australia; and JSW on its coal projects in Dhanlaxmi Bank, ING Vysya Bank, Ashoka Buildcon, Queensland. Ramky Infrastructure, IBN18 Broadcast, Central Bank Cramer-Salamian’s Dubai office has advised corporate of India, Bank of Baroda, Jagran Prakashan, HT Media clients from multinational corporations to family run busi- (Hindustan Times), IDFC, Allahabad Bank and Yes Bank. nesses on India inbound and outbound investments and Duane Morris & Selvam is currently advising an Indian the effective use of double taxation avoidance treaties for bank on setting up a Singapore-based fund for invest- tax mitigation. The firm has advised an Indian ultra high net ing into India and has worked on patent and litiga- worth individual on the structuring of a UAE-based private tion matters for US subsidiaries of Indian generic drug equity vehicle for African investment purposes. manufacturers. Debevoise & Plimpton combines the “sophistication, Australian firm Eakin McCaffery Cox focuses on liti- responsiveness, and project management of a top-tier gation, IP, mining, power generation and infrastructure. global law firm … with strong knowledge of local law and It is currently advising on a million-dollar damages claim strong relationships with local law firms,” according to one against the Indian government. Over almost two decades happy client who has worked with the firm for five years on of litigation, many members of India’s senior bar have been fund formation and transactional work. “We have worked retained on this matter and associated cases. with about half a dozen global law firms on Indian matters; Dubai-based Fichte & Co has acted for ship owners, Debevoise is clearly the strongest,” he says. The firm’s operators and traders in India who have a presence Geoff Burgess is commended for being “particularly strong in the UAE or have trade interests in Gulf Cooperation

Eakin McCaffery Cox

“Two decades of Indian practice allows us to unlock Incredible India for our Australian clients.”

Tim Eakin, Managing Partner

John Cox, Vice-President of the Australia India Business Eakin McCaffery Cox is ranked as one of the top Council, is ideally suited to assist Indian companies with inbound international law firms for India related work, investments into Australia through his exemplary thoroughness. India Business Law Journal, June 2013

For more information please contact:

Tim Eakin + 61 2 9265 3043 [email protected]

John Cox +61 2 9265 3061 [email protected]

EAKIN McCAFFERY COX SYDNEY AUSTRALIA www.eakin.com.au

June 2013 India Business Law Journal 55 Intelligence report Foreign law firms

Council countries. The firm is advising an Indian shipping [Frost Brown Todd] had to company on civil and criminal proceedings before UAE understand similarities between courts; assisting a subsidiary of a major Indian shipping company in a commercial dispute; and filing an arbitration cooperative and community proceeding in London to recover damages resulting from banks in India and the US to an off-specification cargo of iron ore loaded from Indian mines. understand our technology Foley Hoag is known for its expertise on fund formation offerings … They were very and private equity investments. “They have been a pleas- hands-on [and] thorough ure to work with,” says Alok Nanavaty of Commonwealth Centrum Advisors in Hong Kong. They are “extremely Mandar Agashe prompt and totally professional in all elements of the rela- Founder tionship.” Foley Hoag has acted as US counsel to Bay Capital Partners on its suite of India-focused investment Sarvatra Technologies funds; advised the Pragnya Group, a real estate investment company focused on India, in connection with its investment fund; and represented International Data Group as the Indian-based worldwide business technology company in sponsor and lead investor in IDG Ventures India, a family of federal grand jury and related investigations concerning funds formed under Mauritius law with India-based manage- immigration matters. Daljit Doogal is recommended for “his ment for the purpose of investing in IT companies in India. knowledge and connections”. “Meridith Haviland is a great resource as she not just can Mandar Agashe, the founder of Sarvatra Technologies advise on the present but is also able to provide guidance in in Pune, approached Frost Brown Todd for advice related a futuristic and instinctive manner,” adds Nanavaty. to expanding its business in the US midwest. “They Foley Lardner has served Indian clients on a variety had to understand similarities between cooperative and of matters over the past 12 months. It has assisted community banks in India and the US to understand our Global Green USA in working with the Food and Drug technology offerings to this sector and build suitable legal Administration and the Environmental Protection Agency contracts,” explains Agashe. “They were very hands-on to secure the release of imports of pickles and pickle prod- as well as thorough in their work. They spent considerable ucts from India. It has also represented employees of an amounts of time to understand our exact needs before

56 India Business Law Journal June 2013 Foreign law firms Intelligence report

engaging the correct lawyers to help us.” Agashe sin- InsCarbon, a subsidiary of Rain Commodities (India), on its gles out Joe Dehner for “his vast global experience” and US$914 million acquisition of RÜTGERS, a German manu- applauds the firm’s “deep domain expertise”. facturer of specialty chemicals. Italian firm Gianni Origoni Grippo Cappelli & Partners Thompson & Knight represented Oil India on its pur- specializes in M&A and commercial matters and dispute chase of a 20% working interest in the Niobrara shale resolution. The firm is representing Bharat Petroleum in assets in Colorado of Carrizo Oil & Gas. The firm’s litiga- its litigation for a credit recovery of US$21 million against tion team recovered US$1.2 million from Houston-based Alitalia and acted for Italian company Rotair on the sale of Petroleum Pipe Americas for breaching a contract with the company to Coimbatore-based ELGI Equipments. Indian company Jindal SAW. The case was heard at the US Ince & Co offers advice on shipping and offshore energy District Court for the Southern District of Texas. matters, including major shipping casualties, and works TLT’s finance experience has attracted the likes of Bank with Indian law firms to provide advice on English law. The of India, State Bank of India, Bank of Baroda, ICICI Bank firm has offices in Beijing, Dubai, Hamburg, Hong Kong, and Punjab National Bank (International). The firm advised Le Havre, London, Monaco, Paris, Piraeus, Shanghai and Bank of Baroda, Bank of India and Export-Import Bank Singapore. of India on several high-profile transactions in the past Nagashima Ohno & Tsunematsu has advised compa- 12 months. TLT also advised Bank of Baroda London on nies from Japan on a spate of investments including the a working capital facility for Gujarat NRE Coking Coal. purchase of an Indian IT company, the setup of a cosmet- Richard McBride, Richard Tall and Annette Newport are key ics joint venture in India and the purchase of additional practitioners for India-related assignments. shares in an Indian insurance company. The firm currently Weil Gotshal & Manges has won new clients such as has four associates training or working at Indian law firms Summit Partners and Advent International and further and at Indian companies with a Japanese affiliation. developed its relationships with clients such as Baring Skadden’s India client list includes GMR Group, 3i Private Equity Asia and Providence Equity Partners, which Infotech, Kotak Mahindra, Enam Securities, ICICI and has led to the expansion of its India-related work. The firm Lupin. The firm acted for UBS Investment Bank and recently advised Decision Resources Group on its US$635 Deutsche Bank Securities as lead underwriters in the million sale to Piramal Healthcare and advised Providence US$100 million IPO of Amira Nature Foods (UAE). Skadden Equity Partners on its purchase of Hathway Cable and recently advised Mylan on its US$1.6 billion acquisition of Datacom, a publicly listed cable TV and internet provider Agila Specialties from Strides Arcolab and advised Rain CII in India. g

June 2013 India Business Law Journal 57 Correspondents Aviation

Foreign airline investment takes off with Etihad deal

Lentin Chambers Dalal Street Mumbai - 400 001 India Tel: +91 22 2265 0342 By Nimish Vakil, Fax: +91 22 2265 8209 and Sneha Rao Email: [email protected] Tyabji Dayabhai

ithin just seven months of the maintenance expansion, product devel- and destroying its national carrier, Air government of India permitting opment and training. Further advan- India? W foreign direct investment (FDI) tages include opportunities for joint by foreign airlines in the Indian aviation purchasing of fuel, spare parts, equip- Conclusions sector, Etihad, Abu Dhabi’s flag carrier, ment and external services such as has struck a deal to buy a 24% stake in insurance and technology support. The Jet-Etihad deal could bode well India’s foremost airline, Jet Airways. for other private Indian airlines looking Jet was among the first to enter the Other gains to partner with foreign carriers, such aviation sector when India’s skies were as Emirates, which is likely to face opened up to private operators in the The alliance will bring additional traf- increased competition and therefore early 1990s. Now it has again taken the fic and revenues to tier II and III airports to seek a local partner in India. Other initiative to forge the first partnership as well as to metro airports. This will private Indian carriers also may see no between an Indian and a foreign airline boost growth in airport infrastructure choice but to strike similar alliances – a partnership that will certainly ben- and services as Etihad is expected to or risk losing seats on international efit Etihad, Jet, airport infrastructure bring with it service practices on par routes. and passengers in general. with global standards. Before embarking further on permit- Passengers will benefit from lower ting FDI in the aviation sector, it would Mutual benefits fares, better regional connectivity and be prudent for the Indian government a far greater choice of destinations. to focus on formulating and imple- The capital infusion from Etihad will Investments in the Indian aviation sec- menting a new national aviation policy, enable Jet to achieve sustainable prof- tor could be on the rise as a result of the covering wide ranging issues includ- itability. Jet can use the sale proceeds Jet-Etihad deal and others to follow. ing FDI, amendments to the Aircraft to repay its huge debt and may even Act,1934, amendments to the Civil consider adding to its expansion plans, Repercussions Aviation Requirements and regulations especially in the Middle East. It will for implementation of the Cape Town be able to widen its network through How is this affecting Air India, India’s Convention (which has now been rati- “code share” alliances, whereby a seat national flag carrier, which has an oper- fied by India). purchased from one airline is on a flight ating deficit of about US$2.6 million a It is important for the government to operated by a cooperating airline under day and reported a loss of about US$1.4 ensure through its regulatory frame- a different flight number or “code”. Jet billion for the financial year ended in work and policy formulation that Indian will also be looking to decrease operat- 2012? When the cream of Air India’s carriers do not lose control of flights ing costs by sharing engineering and international revenue comes from its and routes to and from the country as airport services. It may also consider operations in the Gulf region, the Indian result of liberalization. changing its hub to Abu Dhabi to ena- government on one hand is permitting If the investment by Etihad in Jet is a ble it to buy fuel at cheaper prices. a deal that will move passenger traffic trend-setter for the likes of Emirates and Etihad on the other hand will be able from major Indian hubs to Abu Dhabi Qatar Airways looking to invest in Indian to tap into India’s fast growing travel and on the other hand infusing funds carriers, will it be a win-win situation market, which provides huge passen- into Air India to keep it afloat. for the partnering airlines as well as the ger traffic to Etihad’s Middle Eastern, The long-term effect of such deals Indian aviation sector as a whole or will European and North American desti- needs to be carefully evaluated by the Indian aviation sector find itself in nations. This will further enhance the the Indian government. With a huge the hands of Etihad and others? airline’s already strong and strategically increase in the bilateral arrangements well placed international presence, between India and Abu Dhabi and partly owing to its minority stakes in with Dubai and Qatar in the queue, Nimish Vakil and Sneha Rao are both partners four other global airlines. is India helping Etihad, Emirates and at Tyabji Dayabhai. Tyabji Dayabhai was estab- Together, Jet and Etihad will ben- Qatar Airways fortify international hubs lished in 1872 and has over 25 years’ experi- efit from synergies and cost savings at Abu Dhabi, Dubai and Doha at the ence in handling all types of aviation transac- in areas including fleet and operations expense of Mumbai and New Delhi tions and litigation.

58 India Business Law Journal June 2013 Canada-India trade & investment Correspondents

Progress on India-Canada nuclear cooperation accord

Suite 3400, 1 First Canadian Place P.O. Box 130 Toronto, Ontario M5X 1A4 Fax: +1 416 863 1716 Tel: Raj Sahni, Chair – India Business Group +1 416 777 4804 By Raj Sahni, Website: www.bennettjones.com Bennett Jones LLP

ndia has announced plans to estab- Indeed, a strong case can be made arrangements for the International lish 12 new nuclear power reactors for the nuclear agenda to be front and Atomic Energy Agency (IAEA) to moni- I by 2021 to help meet its industrial centre in the new relationship between tor the use of uranium to ensure non- growth and burgeoning energy needs. India and Canada. India’s unprece- proliferation beyond peaceful uses. It has been estimated that such an dented and burgeoning demand for increase in nuclear energy capacity will electricity is currently undersupplied, Step forward require some 1,500 additional tonnes of even with more than 205,000 mega- uranium each year. watts of electricity in production. The This April marked an important step Canada is uniquely positioned to majority of that electricity is currently towards full implementation of the work with India in helping to meet this produced from non-renewable sources India-Canada Nuclear Cooperation demand. Canada is the world’s sec- such as coal, gas and oil, and the focus Agreement. In early April, India’s ond largest producer of uranium (after of the government’s energy policy is to Department of Atomic Energy and the Kazakhstan) and produces over 10,000 shift as much new production as pos- Canadian Nuclear Safety Commission tonnes of uranium per year, accounting sible to renewable and more environ- announced that they had finalized for approximately 30% of annual global mentally friendly energy sources. arrangements allowing for the export uranium production. This Canadian India’s plan to establish 12 new nuclear of nuclear equipment and fuel from uranium is produced almost exclusively power reactors within the next decade Canada to India for energy use. in Canada’s mid-western province of is a key part of that energy policy. These arrangements are an impor- Saskatchewan, which exports some tant milestone as they will allow 8,000 tonnes of uranium per year to Can do CANDU Canadian companies to export con- nuclear facilities in the United States trolled nuclear equipment, technology and other parts of the world. Many of India’s existing nuclear and materials (including uranium) to Saskatchewan is already one of facilities (including those designed India for energy (and other peaceful Canada’s largest exporters to India and constructed by India) are based uses) in accordance with Canada’s (including lentils and other pulses and on Canadian CANDU nuclear reactor nuclear non-proliferation policy and agricultural products) so economi- technology from the earlier period of under safeguards applied by the IAEA. cal shipping and trade routes are well collaboration between Canada and The insertion of IAEA monitoring and established. In addition, Canada has India, and India’s nuclear scientists and safeguards will also give Indian compa- several significant new uranium mines engineers are therefore proficient in nies comfort that neutral and globally that are expected to be ready to start CANDU technology. This, coupled with accepted standards will be employed production within the next couple of Canada’s abundant supply of uranium, and should help India gain broader years, further boosting Canada’s ura- makes the nuclear agenda between acceptance as a significant player in nium export capacity. India and Canada a natural part of the global nuclear power sphere. the renewed economic partnership As discussions between India and History overcome between the two countries. Canada on an overall economic partner- A formal agreement on nuclear coop- ship continue to make significant head- While nuclear collaboration between eration between India and Canada, way, it is interesting and heartening to Canada and India has had a troubled titled the Agreement for Cooperation in see that a decades old dispute between history – Canada ended nuclear trade Peaceful Uses of Nuclear Energy, was the two countries on the nuclear issue with India in 1976 when India tested signed more than two years ago, but its has given way to a renewed friendship its first nuclear bomb using plutonium implementation has lagged as govern- and spirit of cooperation. from a Canadian test reactor – eco- mental agencies work through details. nomic and bilateral relations between In November of 2012, during a visit the two countries now are at a record by Canadian prime minister Stephen Raj Sahni is a partner and chair of the India Busi- high. Both governments have made Harper to India, prime ministers Harper ness Group at Bennett Jones LLP, a law firm with nuclear cooperation a renewed focal and Manmohan Singh announced that offices in Calgary, Toronto, Edmonton, Ottawa, point of their trade and economic part- they had made significant progress Dubai, Abu Dhabi and Doha, and representative nership discussions. in clearing the final hurdles, including offices in Washington DC and Beijing.

June 2013 India Business Law Journal 59 Correspondents Dispute resolution

The skyscraper debacle: ruling on Palais Royale

Bharucha & Partners Advocates & Solicitors Cecil Court, 4th Floor, MK Bhushan Road Mumbai-400 039 India Tel: +91-22 2289 9300 By Vivek Vashi Fax: +91-22 2282 3900 and Prakritee Yonzon, E-mail:[email protected] Bharucha & Partners

alais Royale at Worli, which is Court’s findings floors, servants’ toilets, and the need planned to be Mumbai’s tallest to obtain a no objection certificate from P building, has attracted a lot of The court rejected the respondent’s the high-rise committee, in six weeks attention not only in Mumbai but all preliminary objection that there was from the date of the judgement, in over India. The 320-metre, 56-storey no public interest involved, holding order to resolve the issues brought to skyscraper, showcasing more than 100 that such legal issues concern sev- light in the case. The builder was given apartments, defines Mumbai’s skyline eral cases of multi-storey buildings in the right to be heard before the com- and has achieved a first for India in Mumbai. The case was accordingly missioner decided the matter. Leadership in Energy and Environmental examined on merits. Design certification. In an astounding judgment, the court Analysis and impact However, the legality of Palais Royale held that the PPL was not illegal by and its adjacent public parking lot (PPL) upholding the principle of equity recog- To appreciate the judgment, it is has been challenged in a public interest nized in section 51 of the Maharashtra important to note and differentiate the litigation (PIL) filed by a non-govern- Town and Regional Planning Act, 1966. multiple facets involved. While the court mental organization by the name of Under this section, the Municipal graciously accepted the petitioner’s Janhit Manch. The PIL has brought Corporation of Greater Mumbai ought locus to file the PIL, it also narrowed into the limelight the complex legal and not to invoke its power once the work the ambit of the PIL by delegating the factual matrix that is involved in the has “substantially progressed”, even onerous issues to the commissioner. construction of high-rise buildings. though the builders, Shree Ram Urban While this may be seen as a reasonably Infrastructure, sought to continue on smart move in light of the technicalities Facts of the case the basis of deemed permission. and intricacies involved in the calcula- The court further held that the 900 tion of incentive FSI, permitted height of In the case of Janhit Manch and parking spaces of the PPL had been structural columns, set-back areas, etc., another v State of Maharashtra and others, constructed in accordance with the the court’s hesitance to intervene and the petitioners sought to challenge the sanctioned plans, despite the absence rule that the builder had not obtained approvals and commencement certifi- of a commencement certificate, and the required permissions or approvals cates in respect of the building and PPL that the PPL was to be handed over to reflects not only the complicated factual and also sought a writ of mandamus for the corporation free of cost and for the and legal matters involved in the case, the demolition of additional floors of the use of general public. The respondent but also the intertwining of the judicial residential building. The petitioners also was entitled to use incentive FSI. and executive powers in cases of con- raised various issues regarding the ref- With respect to the main residential struction of high-rise buildings. uge area and the resulting additional floor building, the court did not think it nec- Although the court may have tried space index (FSI), the set-back areas, essary to intervene and issue a drastic to avoid overstepping the executive in passages, structural columns, amenity order of demolition, on the ground exercising its functions, this should not floors and servants’ toilets. that the construction beyond the 46th be seen as a green signal by builders, to The petitioners’ case was that: (a) floor exceeded the commencement proceed with construction without the the PPL was illegal as it had been con- certificate that had been issued, as the required approvals or sanctions until their structed without a commencement cer- building plans had been sanctioned up actions are brought to the attention of tificate; (b) the FSI was manifestly ille- to the 56th floor. the authorities concerned. With the pace gal as the refuge area was 72.2% of the The court also observed that the at which the Mumbai skyline is rising, total habitable built-up area, whereas refuge area, and the additional FSI obtaining permissions is a small price to the Development Control Regulations that can be gained from it, was exces- pay in contrast to the potential overlap- (DCR) allow a maximum of 4%; (c) sive and directed the municipal com- ping of the functions of authorities. with respect to the other structures, missioner to carry out the necessary incentive FSI had been misused and calculation. The commissioner was the structures had been constructed directed to determine the factual posi- Vivek Vashi is the mainstay of the litigation contrary to the DCR and the relevant tion in relation to the set-back areas, team at Bharucha & Partners, where Prakritee notifications in the regulations. passages, structural columns, amenity Yonzon is an associate.

60 India Business Law Journal June 2013 Food law Correspondents

The new act: A boost for the food processing sector

Mumbai Delhi 111, Free Press House 510, 5/F DLF Tower – A Free Press Journal Road Jasola 215, Nariman Point, New Delhi – 110 025 By Sidhartha Mumbai - 400 021 Srivastava and T: +91-22-6625 2222 T: +91 11 6464 9865 F: +91-22-2285 5821 F: +91 11 2652 1415 Gurmeet Kainth, DH Law Associates Email: [email protected]

ndia’s fast growing food process- representatives of the food industry, and provides for special courts and the ing sector has triggered a significant consumers, farmers and retailers. Food Safety Appellate Tribunal to expe- I increase in litigation and corporate Statutory authorities for food laws ditiously hear food-related cases. This is commercial work over the past few years. under the PFA were the Central a relief for companies and food business The Federation of Indian Chambers of Committee For Food Standards, Central operators. Commerce and Industry expects the Food Laboratory, food inspectors, etc. sector to expand from US$40-50 billion Licences: Under section 31 of the Keeping pace with change to US$300-350 billion by 2020. FSSA all food business operators need In August 2011, the numerous laws a licence or registration issued by a The food authority issues guidelines to that govern the sector were replaced local authority. Temporary stall holders keep pace with developments in interna- with the Food Safety and Standards Act, are exempted from this, but are required tional food safety. One recent guideline 2006, (FSSA). However, even two years to get their business registered with the pertains to the approval of food products. after it was introduced, the FSSA is still in panchayat or local municipality. Though the new guideline does not con- implementation stages with some of its Novel food, genetically modified food, template major changes from regulations provisions currently under review. etc: While the PFA set no limit on vita- previously in force, it has streamlined the mins, minerals and other nutrients, such classification of ingredients of products Understanding the new law foods have been defined for the first into the following: time under section 22 of the FSSA. • Food products where safety of ingre- Differences between the FSSA and Food recall: The FSSA allows for the dients present are known and permitted one of the main acts it replaced, the removal of unsafe food from the market under FSS Regulation, 2011/Codex and Prevention of Food Adulteration Act, to minimize and prevent injury to con- other regulatory bodies like EU/FSANZ/ 1956, (PFA) are detailed below: sumers. It can be initiated voluntarily by USFDA, etc. Definition of food: The FSSA defines the manufacturers and distributors or • Food products where safety of ingre- food as any substance intended for by the food authority. The PFA did not dients present are known and permitted human consumption, whether processed, provide for recall of food. under FSS Regulation, 2011/Codex and partially processed or unprocessed. It Improvement notice: While the PFA was other regulatory bodies like EU/FSANZ/ includes primary food as defined in sec- silent on this, the FSSA states that a des- USFDA, etc. and the food product con- tion 3(ZK) of the act, genetically modified ignated officer may serve an improve- tains plants or botanicals or substances or engineered food or food containing ment notice on a food business operator from animal origin. such ingredients, infant food, packaged who fails to comply with the act. • Food products where safety of the drinking water, alcoholic drink, chewing Prohibition of import: The PFA prohib- ingredients is insufficient to make a safety gum, and any substance, including water ited import of adulterated or misbranded determination. used in food during its manufacture, food. The FSSA similarly prohibits import • Food products where safety of ingre- preparation or treatment. of food which is unsafe, misbranded, dients and their conditions of use are The PFA defined food as any article sub-standard and that which contra- prescribed/standardized or permitted by used as food or drink for human con- venes any provisions of the act. the FSSAI. sumption other than drugs and water. It The new guidelines are at: www.fssai. had included any article which ordinarily Advantages of the FSSA gov.in/Portals/0/Pdf/ProductApproval% enters into, or is used in the composition 2817-05-2013%29.pdf or preparation of, human food, any fla- The enactment of the FSSA and the The FSSA is a step forward for the vouring matter or condiments. introduction of food audits, improvement food industry and consumers. However, Authority: The FSSA provides for the notices and food recall procedures make the new regime is still at a nascent stage Food Safety and Standards Authority India’s food laws at par with those in the and its effectiveness will depend on how of India (FSSAI) as a single statutory US, the UK and the European Union. the FSSA is implemented. body for food laws, standards setting While introducing laws for packag- and enforcement. Food safety is also ing and labelling, the FSSA imposes regulated by a technology and scientific restrictions on food advertisements. It Sidhartha Srivastava and Gurmeet Kainth are committee, central advisory committee, also prohibits unfair competition in food partners at DH Law Associates.

June 2013 India Business Law Journal 61 Correspondents Foreign direct investment

Africa-bound investment: New globalization pattern

Khaitan House B-1, Defence Colony, New Delhi - 110 024, India Tel: +91 11 4650 1000 Fax: +91 11 2433 7958, 4155 1590 Email: [email protected] By Gautam Khaitan [email protected] and Nidhi Mathur, Website: www.opkhaitan.com OP Khaitan & Co

frica is among the world’s most opened a new chapter in the history China story differs rapidly growing economic regions, of the India-Africa relationship. India’s A emerging relatively unscathed annual foreign direct investment in Africa While Chinese and Indian companies from the global economic crisis. India touched US$15 billion as some of its have similar interests in African markets, is Africa’s fourth-largest trading partner largest conglomerates have turned to they function in different ways. Chinese behind the EU, China and US, and a Africa for their expansion and growth. companies operating in Africa are mostly significant investor in the continent. It Companies such as Tata, Vedanta, state owned or controlled, while Indian is estimated that more than 200 Indian Godrej, and Jindal Steel & Power have ones are largely privately owned or are companies are doing business in Africa lined up greenfield investments and private-public partnerships. The Indian across sectors. Indian oil companies are geared to companies are less vertically integrated Trade between India and Africa goes acquire oil and gas assets. The world’s and prefer to procure both materials and back to the 16th century when Indian largest rose exporter, Karuturi, has also labour from local governments. traders sailed to the east coast of Africa forayed in Kenya and Ethiopia. India has been seen as a counterbal- in search of mangrove poles, elephant India’s engagement with African coun- ance to China in Africa. Although invest- tusks, gold and gemstones. During the tries is driven mainly by the presence ment is smaller in scale, a much longer colonial period, many Indian immigrants of natural resources and a search for historical presence of an Indian diaspora were brought in to work on the railways new markets, supported by diplomatic in Africa has enabled smoother and less in East Africa, and on sugar and other initiatives and strategic partnerships. controversial economic involvement in plantations in Mauritius, Madagascar Apart from energy, Indian companies are Africa than is the case for China. and southern Africa. investing in mining, telecommunications, While trade and investment between agriculture, healthcare, pharmaceuticals, India and African countries are on a rise, Natural synergy infrastructure and information technol- India’s trade relationships with Africa suf- ogy. Many Indian manufacturers are also fer from a few weaknesses. These include: As emerging economies, India and negotiating pacts to acquire back-end (i) India’s Africa policy lacks a strong and Africa have a lot in common – rich natural facilities in these sectors. proactive diplomatic thrust; (ii) engaging resources, similar demography and large Nigeria, Angola, Algeria and South with politically unstable yet resource-rich domestic markets. This provides a natu- Africa have trade surpluses with India African countries could threaten India’s ral synergy for building partnerships. The and account for 68.6% of the total Africa- interests in the long run and taint the per- relationship between India and Africa India trade. Of India’s top 10 trading part- ception of India’s engagement with African has been marked by mutual respect and ners in Africa, seven export oil to India. countries; (iii) India sometimes appears to sensitivity to shared compulsions and India has also executed bilateral investor be emulating China’s aid-for-resources developmental needs. protection and promotion agreements strategy (by providing loans in exchange India has significantly increased its eco- with Mauritius, Kenya, Ethiopia, Uganda for access to the natural resources of nomic and diplomatic footprint in Africa. and Ghana. African countries), which may not be the India’s style of doing business with Africa Mauritius offers investors a strate- best long-term approach. is multi-pronged and has gained momen- gic platform for inbound and outbound In the future, India could play increas- tum; it aims at increasing trade volumes Indian investments which is blended ingly important and diverse roles in all and investment, alongside developmental with institutional, cultural, geographical aspects of African life. Nevertheless, activities. Bilateral trade between Indian and geopolitical comfort. It acts as an investors are advised to ensure that and Africa has risen from US$3 billion in ideal jurisdiction for locating a holding a detailed due diligence is conducted 2000 to about US$70 billion during the company mainly because of the follow- and proper strategies are formulated for current financial year and is expected to ing reasons: (i) uniquely favourable tax complying with local government regula- touch US$90 billion by 2015. treaty with India; (ii) offers flexible choice tions and structuring finances. of entities; (iii) effective tax rate is only Recent developments 3% and no capital gains tax; (iv) corporate laws allow flexibility for repatriation OP Khaitan & Co is a 40-lawyer law firm, based in Bharti Airtel’s acquisition of 15 telecom of capital; (v) no exchange controls so New Delhi. Gautam Khaitan is the firm’s managing operations in Africa for US$10.7 billion repatriation of income is easy. partner and Nidhi Mathur is a junior partner.

62 India Business Law Journal June 2013 Healthcare & life sciences Correspondents

Impact of patent linkage on the healthcare industry

Mumbai | Delhi | Bangalore | Pune | Ahmedabad Head Office: New Excelsior Building, 7th Floor, Wallace Street, A.K. Nayak Marg, Fort, Mumbai – 400001 India Dr Rachna Bharadwaj, Associate Tel: +91 22 2200 6322 Ext 245 Fax: +91 22 2200 6326 / 66550607 By Dr Rachna Bharadwaj, Email: [email protected] Krishna & Saurastri Associates Website: www.krishnaandsaurastri.com

he introduction of product patents unless by licence or assignment. Patents Act, 1970, which it interpreted for pharmaceutical products post In the US, under what is known as the as being the “law for the time being in T 2005 had a tremendous impact on Hatch-Waxman Act (1984), the Food and force”. Bayer contended that these two India’s healthcare industry. Previously, the Drug Administration provides marketing sections, read together, allowed for pat- generics industry flourished and drugs approval for pharmaceutical products. ent linkage and imposed a duty on the were cheaper. The other factor impacting This act allows for speedier introduction DCGI to look into the patent issue prior the healthcare industry is patent linkage, of generic competition in exchange for to granting marketing approval to drugs. which delays the entry of generic drugs limited periods of protection, increased This would exceed the statutory pow- in the market. India’s Supreme Court, in rights for drug companies to recoup pat- ers of the DCGI under the Drugs and a landmark judgment in December 2010, ent terms that have been shortened by Cosmetics Act. disallowed patent linkages, upholding clinical trials and regulatory delays, and Cipla rejected Bayer’s claim, arguing Delhi High Court’s rejection of Bayer’s a linkage system conditionally allowing that the DCGI’s approval to Cipla on the petition seeking patent linkage in India registration of generic equivalents in the basis of safety and efficacy could not be for its anticancer drug Nexaver (sorafenib absence of patent claims. interpreted as infringement of Bayer’s tosylate). In contrast, the European Union does patented product. Patent linkage is a system linking drug not have a patent linkage system. A Delhi High Court rejected Bayer’s argu- marketing approval to the patent sta- generics manufacturer can conduct test- ments, holding that no patent linkage tus of the originator’s product, denying ing and pre-registration activities dur- regimen could be read into the existing marketing approval to a generic version ing an eight-year exclusivity period and legal provisions. The court observed that of a patented drug manufactured by a apply for marketing approval after com- the Drugs and Cosmetics Act was a pub- non-patentee prior to the expiration of pletion of this period. lic regulatory measure for ensuring safety the patent term, unless consented to by and efficacy of drugs, while the Patents the patent owner. Situation in India Act provided private monopoly rights Compulsory licensing and drug pric- in favour of the inventor. The controller ing of patented drugs could also impact In India, the Drug Controller General of of patents evaluates the patentability of access to healthcare. In a recent develop- India (DCGI) gives marketing approval to a product or process based on novelty ment the Intellectual Property Appellate drugs based on safety, efficacy and clini- and inventive step, and the DCGI grants Board (IPAB) passed an order on 4 March cal trial data. The requirement of stating market approval of drugs on the basis of deciding on royalty to be granted by the patent status in form 44 is for the safety and efficacy. Natco to Bayer in relation to a compul- purpose of conducting bioequivalence The court further observed that by sory licence. It will be interesting to see studies. The DCGI is not required to look establishing or decreeing a patent link- if the question of whether the IPAB over- into patent validity. age as desired by Bayer, the court would stepped its jurisdiction comes up when In 2008 Bayer filed a writ petition not only make a policy choice, avoided the case is heard in Bombay High Court. against the DCGI and Cipla, stating that by the parliament, but would overstep the DCGI had to consider the patent the interpretive boundaries. Situation in US and EU status of sorafenib tosylate before giving The Supreme Court upheld Delhi High marketing approval to generic versions. Court’s judgment. Some member states introduced pat- The judgment of Delhi High Court in this Experts believe that if patent linkage ent linkage by a combined reading of arti- case elucidates India’s position on patent is allowed, it would affect the early entry cle 28.1(a) and article 39.3 of the TRIPS linkage. of generic medication into the market, (trade-related aspects of intellectual impacting access to drugs. In India pat- property rights) agreement. This requires Landmark case ent linkage is now a settled issue, disal- a generics manufacturer to prove to the lowing patent linkage. drug regulator that the drug for which it Bayer based its arguments on section seeks market authorization is not cov- 2 of the Drugs and Cosmetics Act, 1940, ered by a valid patent, and prevents mar- which states that the act is in addition to Dr Rachna Bharadwaj is an associate at Krish- ket approval for a drug while the original and not in derogation of any “law for the na & Saurastri Associates and an advocate version of that drug is still under patent, time being in force”, and section 48 of the registered with the Bar Council of India.

June 2013 India Business Law Journal 63 Correspondents Infrastructure & energy

Draft offshore wind energy policy, 2013: Will it work? New Delhi Mumbai A-38, Kailash Colony One Indiabulls Centre, New Delhi – 110 048 14th floor, Tower One, India Elphinstone Road, Tel: +91 11 4163 9393 Mumbai – 400 013 Fax +91 11 4163 9292 Tel: +91 22 40791000 By Avirup Nag and E-mail: delhioffice@ Fax: +91 22 40791098 Kaif Ahmed Siddiqui, trilegal.com Email: mumbaioffice@ Trilegal trilegal.com

ndia currently does not have any com- project developers, and assist the project the developers will end up visiting “multi- mercial offshore windfarms, but with developers with obtaining clearances for ple windows” for obtaining various clear- I a long coastline, the country has the offshore wind projects. The draft policy ances for their projects. potential to develop 1 gigawatt of off- also proposes to establish an Offshore Further, the draft policy does not fully shore wind capacity, especially in states Wind Energy Steering Committee to address issues related to creating reliable such as Tamil Nadu, Gujarat, Kerala, oversee the overall development of the transmission and power evacuation infra- Karnataka and Goa. offshore wind energy industry in India. structure (both offshore and onshore). Although the long-term prospects for The draft policy further provides for For project developers, having to bear offshore wind power are promising, the fiscal incentives and concessions such sole responsibility to develop offshore sector faces many challenges, particu- as tax holiday for the first 10 years of transmission facilities may prove to be a larly in terms of technology risk, evacu- offshore wind power generation and disincentive. The MNRE should consider ation risks (i.e. getting the power to a customs duty and excise duty exemp- setting up separate offshore grid opera- grid for distribution), impact on the local tion for procurement of technology and tors responsible for development and environment, lack of skilled personnel, equipment. Service tax is proposed to be operations of offshore grids which feed shortage of appropriate auxiliary services waived for services by third party consult- in the electricity from multiple offshore (such as crane vessels), competition with ants for the projects (such as conducting wind projects to the onshore transmis- other marine users, and multiplicity of resource assessment, environmental sion system. This system is already used clearances and approvals required from impact assessment and oceanographic by Germany. various government agencies. Therefore, studies) and for the use of survey and The high cost associated with develop- if India wants to attract private invest- installation vessels. ment of offshore wind farms is a material ment to develop offshore wind power The power from the offshore wind concern, and although the draft policy projects, it needs to put in place a robust projects set up under the draft policy envisages fiscal incentives (such as tax policy framework that guarantees inves- would be sold to state distribution com- holidays and concession on payment of tor confidence. panies (or agencies nominated by the rel- duties), these alone may not be sufficient This article analyses India’s draft off- evant state governments) at a regulated incentives for investment in offshore shore wind energy policy to see if the tariff to be fixed by the Central Electricity wind power projects. framework proposed under the draft Regulatory Commission or the relevant To provide fiscal incentives which help policy addresses the key issues that state regulatory commission (as the case the bottom line and improve returns for investors and project developers assess may be). Project developers would be the investors, the government should while considering an investment. required to construct the offshore evacu- consider requiring the state electricity ation infrastructure and the off-taker or regulatory commissions to fix a minimum Salient features designated state agency would pro- percentage of energy which distribution vide the required onshore facilities for licensees must purchase from offshore In order to develop India’s offshore evacuating power from the offshore wind wind projects until such time as offshore wind sector, the Ministry of New and power projects. wind power achieves parity with onshore Renewable Energy (MNRE) has recently wind power. come out with a draft policy for the devel- Are the risks addressed? Therefore, while the draft policy is a opment of offshore wind energy. The step in the right direction to tap the vast draft policy aims to set up offshore wind In respect to addressing the key risk offshore wind potential, as to providing projects in Indian territorial waters (i.e. factors affecting development of offshore a simple and holistic policy framework up to 12 nautical miles from the coast) wind power projects, the draft policy has governing the offshore power sector, through private participation. scope for improvement. While it aims to there is certainly scope for improvement. Under the draft policy, the MNRE would create a single window clearance for set- set up the National Offshore Wind Energy ting up an offshore wind power project Authority (NOWA) to carry out initial wind (through the NOWA, which has a coor- Avirup Nag is a counsel at Trilegal and Kaif resource assessment, allocate offshore dination role), the project developers are Ahmed Siddiqui is an associate. Trilegal is a full- blocks (through international competi- ultimately responsible for obtaining the service law firm with offices in Delhi, Mumbai, tive bidding), execute lease deeds with required consents. Therefore in practice, Bangalore and Hyderabad.

64 India Business Law Journal June 2013 Intellectual property Correspondents

How to choose the best way to protect a design in India

N-30, Malviya Nagar, New Delhi -110017 India Tel: +91 11 4666 5000, 2668 7993, 2668 0331 Fax: +91 11 2668 2883, 4666 5001 Email: [email protected] By Manoj K Singh, Website: www.singhassociates.in Singh & Associates, Advocates & Solicitors

he design of an article can be is artistic in nature can get copyright that since “design” was defined in the registered as a design, a trade- protection. Designs Act the provisions had to be T mark or a copyright. Three laws read together to decide the question. provide protection, each from a differ- Preventing misuse The case dealt with the effect of ent perspective. Design owners need non-registration of the design under to understand this to maximize their The sections mentioned above show section 15 of the Copyright Act. It was protection from the commercial point that designs are protected under the found that the design clearly fell within of view. different intellectual property laws in the definition in the Designs Act, and Designs Act, 2000: As per section India. The laws and the judiciary also within the meaning of the Copyright 2(d), “design” means only the features ensure that the protection provided is Act, so the plaintiff could not claim of shape, configuration, pattern, orna- not misused. copyright protection with reference to ment or composition of lines or colours Under section 15 of the Copyright the drawings. applied to any article, whether two Act, as amended by the Copyright In relation to users of an interna- or three dimensional or both, by any (Amendment) Act, 2012: “(1) Copyright tional design, it was ruled that that the industrial process or means, whether shall not subsist under this Act in any article concealed in the design should manual, mechanical or chemical, sepa- design which is registered under the be suited to production in quantity. rate or combined, which in the finished Designs Act, 2000. (2) Copyright in any An article which would normally be article appeal to and are judged solely design, which is capable of being reg- unique or only capable of being pro- by the eye. istered under the Designs Act, 2000, duced singly, such as an artistic crea- The term “design” does not include but which has not been so registered, tion or architectural work, would be any mode or principle of construction shall cease as soon as any article to excluded. The court also held that the or anything which is in substance a which the design has been applied purpose and the intention of draw- mere mechanical device, and does has been reproduced more than fifty ings would be relevant to determine not include any trademark as defined times by an industrial process by the whether drawings could be a design in section 2(1)(v) of the Trade and owner of the copyright or, with his within the meaning of the Designs Act Merchandise Marks Act, 1958, or any licence, by any other person.” and the Copyright Act. property mark as defined in section Design owners have to be careful in 479 of the Indian Penal Code, 1860, or applying for copyright protection as Conclusion any artistic work as defined in section under section 15 the protection will 2(c) of the Copyright Act, 1957. cease once the article is produced Each form of design protection has Trade Marks Act, 1999: As per sec- more than 50 times. pros and cons and applicants need to tion 9(3), a mark cannot be registered Further, the Designs Act provides understand which will best suit their as a trademark if it consists exclu- that anything which is defined as a requirements. For example, copy- sively of: (a) the shape of goods which trademark under the Trade Marks right is best if the sole motive is to results from the nature of the goods Act or any artistic work under the protect a design’s uniqueness. If the themselves; or (b) the shape of goods Copyright Act will not be considered a intention is to maximize commercial which is necessary to obtain a tech- design under the Designs Act. value by producing and selling the nical result; or (c) the shape which same design, protection under the gives substantial value to the goods. Important case Designs Act would be best. Finally, if A shape that does not fall into these the design has a distinctive shape that categories can be registered as a In Samsonite Corporation v Vijay can identify the applicant’s goods the trademark. Sales (1998), Delhi High Court dealt design should be registered under the Copyright Act, 1957: Section 13 with the subject of confusion regard- Trade Marks Act. provides protection for the following the subject matter of design and ing classes of works: (a) original lit- copyright. The court addressed the erary, dramatic, musical and artis- effect of the absence of a specific Manoj K Singh is the founding partner of Singh tic works; (b) cinematographic films; meaning for work design, for the pur- & Associates, a full-service international law firm and (c) recordings. A design which poses of the Copyright Act. It held with headquarters in New Delhi.

June 2013 India Business Law Journal 65 Correspondents Mergers & acquisitions

Higher cap needed to woo defence sector investment

Amarchand Towers 216 Okhla Industrial Estate - Phase III New Delhi - 110 020 By Anuj Prasad Tel: +91 11 2692 0500 and Kanishk, Fax: +91 11 2692 4900 Managing Partner: Shardul Shroff Amarchand Email: [email protected] Mangaldas

n 5 April, the government of India select a particular category must now not be the leading cause for lack of issued its latest annual consoli- state reasons for excluding all higher transfer of technology. O dated foreign direct investment preferred categories. (FDI) policy. Contrary to popular expec- 2. Simplification of procedure for Buy Promising start tations, norms governing the defence & Make (Indian) category. sector did not undergo any change. As 3. Clear definition of indigenous Despite no changes in the consoli- this was probably the last consolidated content. dated FDI policy, the MoD press release FDI policy to be released by the current 4. Advance consultation with various dated 20 April states that a “defence central government, the absence of lib- stakeholders for potential “Make” cases. items list” has been finalized by the eralization of the defence sector acted 5. Transfer of “power to approve devia- MoD and will soon be notified by the as a dampener for major foreign origi- tions from the DPP” from the defence min- Ministry of Commerce and Industry. Up nal equipment manufacturers (OEMs), ister to the Defence Acquisition Council. to now, the scope of “defence industry” which have been campaigning for an which attracts the 26% cap and other increase in the FDI cap of 26% and clar- Will it succeed? restrictions was undefined and there- ity in relation to the scope of the “defence fore confusion prevailed especially in industry”, which attracts various foreign Probably driven by recent criticisms relation to dual use items i.e. items investment restrictions under the current relating to impropriety in defence pro- used in both defence and civilian sec- regime including the 26% cap, an indus- curements, the government may have tors, which invariably led to delays in trial licence requirement, and restrictions ignored lessons from the history of approvals of investment proposals. The on the composition of boards of directors defence manufacturing in India. Until clarification that dual use items will not and CEO appointments. 2001, the defence sector was a public be defence items and the announce- sector monopoly. As over the years the ment of a “defence items list” should Procurement procedure public sector failed to innovate and pro- go a long way in clearing the prevail- vide timely deliveries, by way of Press ing confusion in this sector, which will The Ministry of Defence (MoD) by Note 4 of 2001, the government liberal- make doing business easier. way of press releases dated 20 and ized the defence sector by permitting Details of the amendments are still 29 April, announced a major overhaul Indian private sector participation up to awaited, however, until the FDI cap is of the defence procurement proce- 100% with FDI permissible up to 26%, increased, defence sector joint ven- dure (DPP), which broadly governs all both subject to industrial licensing. tures and transfer of technology agree- capital procurement by the MoD and The past 12 years have seen many ments will be few and far between. the Indian armed forces. The press Indian entities venturing into defence With limited transfer of technology, the releases stated that “these amend- and aerospace but most remain periph- Indian industry will find it difficult to ments aim at enhancing indigenization, eral players in low technology sectors. fulfil the needs of the Indian armed reducing processing time and bring Only a few big players, such as Tata, forces for most defence items, and the further clarity in the capital acquisi- Reliance and L&T, have tried to enter objective of strengthening the defence tion process” and were being carried high-technology areas with technology manufacturing base in the country may out “with the twin objective of infusing transfers from and joint ventures with remain merely an aspiration. It is there- greater efficiency in the procurement global leaders. fore hoped that the policy will be revised process and strengthening the defence The reluctance on the part of leading sooner rather than later, to enhance the manufacturing base in the country”. foreign OEMs to share their technology FDI cap such that the revised procure- The salient features are: with companies in which they have a ment norms may be successful. 1. Preference to indigenous produc- mere 26% stake may be a major rea- tion and categorization of various forms son why in the past 12 years, despite of procurement in decreasing order low manufacturing costs in India, India Anuj Prasad is a partner and Kanishk is a se- of preference: (i) Buy (Indian); (ii) Buy has not become a major defence man- nior associate at Amarchand & Mangaldas & & Make (Indian); (iii) Make; (iv) Buy & ufacturer or a technology leader. The Suresh A Shroff and Co, New Delhi. The views Make with Transfer of Technology; and much maligned export restrictions in expressed in this article are those of the authors (v) Buy (Global). Further, a proposal to some countries including the US might and do not reflect the position of the firm.

66 India Business Law Journal June 2013 Mining Correspondents

State mining commitments: the emerging legal trend

C-14, Lower Ground Floor Chirag Enclave Greater Kailash-I New Delhi - 110048 By Ranjana Roy Tel: +91 11 4056 3742 Gawai and Safeena Fax: +91 11 4100 5046 Email: [email protected] Mendiratta, RRG & Associates

ines and minerals constitute MOUs & state commitments Despite some ambiguity with respect national wealth and are vital to enforceability of state commitments Mraw material for infrastructure, The companies proposing to under- in the above cases, their ratio holds capital goods and basic industries. take mining operations often execute a good as they were made in different Their conservation, preservation and memorandum of understanding (MOU) factual contexts. intelligent use is necessary in view of with the state government, in which the In addition to these rulings, the the public interest involved and com- latter agrees to assist and support in Ministry of Mines through a recent panies’ intense drive to exploit them. handing over the land subject to avail- notification provided that besides other To achieve this objective, certainty ability, to recommend to the central factors MOU cases where a plant/ about the binding nature of states’ government allotment of suitable min- industry has already been set up on the commitments and a transparent regu- ing blocks and to assist in obtaining basis of an MOU but a mineral conces- latory regime is essential. related clearances/approvals. Such sion is not yet granted may subject MOUs are assurances on part of the to certain conditions be construed as Indian regulatory framework state to encourage investments subject “special reason” for the state govern- to its industrial policy. ment to recommend a mineral conces- Under article 39(b) of Directive Recently, there has been a series of sion proposal under section 11(5) of the Principles of State Policy, states shall, Supreme Court rulings on the distribu- act. Therefore, if the state itself intends in particular, direct their policy towards tion of national wealth generally. A few to consider the execution of MOUs as a securing that the ownership and con- decisions have specifically discussed “special reason”, then MOUs may alto- trol of the material resources of the the enforceability of states’ commit- gether be declared as legally enforce- community are distributed as best to ments in such MOUs. able just like any other contracts. sub-serve the common good. Under In Sandur Manganese and Iron Ores article 39(c), the states must ensure Limited v State of Karnataka, the Supreme Conclusion that the operation of the economic sys- Court while interpreting the provisions tem does not result in the concentra- of section 11 observed that the state In view of the above, clarity is sought tion of wealth and means of production government had no authority under the as to the power of the states to execute to the common detriment. act to make commitments to any person such MOUs and whether this power The public interest is writ large in the that it will, in future, grant a mining lease springs from the fact of ownership. provisions of the Mines and Minerals if the person invests in any project. Additionally, any clarification by the (Development and Regulation) Act, In Monnet Ispat and Energy Ltd v Union Supreme Court as to the interpretation 1957. Section 2 of the act declares of India and Ors, the Supreme Court of the words “to the extent provided that it is expedient in the public interest affirmed that the state is the “owner of in the MMDR Act”, in section 2 of the that the Union should take under its minerals” within its territory and the min- act, would be welcome to ascertain the control the regulation of mines and the erals “vest” in it. It further clarified that an exact parameters of control exercised development of minerals to the extent MOU for mining lease is not a contract by the Union as well as the states in provided in the act. The act’s pream- as contemplated under article 299(1) relation to the regulation of mines and ble states that it is “an Act to provide of India’s constitution. In these circum- the development of minerals. for the development and regulation of stances, it was of the view that the over- While such issues are legally settled, mines and minerals under the control riding public interest prevented the court it will be important for the Ministry of of the Union”. from invoking the doctrines of promis- Mines to list and clarify the above rul- Undisputedly, state governments sory estoppel and legitimate expectation ings rather than issuing new notifica- are the owners of the minerals located to enforce commitments in the MOU. tions and guidelines on MOUs thereby within their respective boundaries. They In contrast, in Bhushan Power and adding to the existing uncertainty. grant concessions subject to the provi- Steel Ltd and Ors v State of Orissa and sions of the act and the rules made Anr, the Supreme Court applied the under it, while the regulation and devel- principles of legitimate expectation and Ranjana Roy Gawai is the managing partner and opment of mines and minerals remains permitted enforcement of state com- Safeena Mendiratta is a senior associate at RRG under the control of the Union. mitments to a private party. & Associates.

June 2013 India Business Law Journal 67 Correspondents Pharmaceutical sector

Charting the paradigm for a new drug patent regime

Udwadia Udeshi & Argus Partners 1st Floor, Elphinstone House By Soorjya Ganguli 17 Murzban Road, Mumbai - 400 001 and Pooja Tel: +91 22 2200 1400 Fax: + 91 22 2200 1411 Chakrabarti, Other offices: Delhi, Bangalore, Kolkata and Chennai Udwadia Udeshi & Email: [email protected] Argus Partners

ndia’s stand on product patents of “evergreening”, a term used to label the Finally, the Supreme Court held that pharmaceutical inventions has under- practice in certain jurisdictions of effect- imatinib mesylate does not qualify as I gone considerable change since ing an insignificant change to an existing an “invention” under the 1970 act. inception. The Patents and Designs product and claiming a new invention Act, 1911, provided for product patent with the intent of extending the paten- Conclusions protection in pharmaceutical inventions. tee’s exclusive rights over the product. The Patents Act, 1970, however, did The judgment will have a positive away with product patents for pharma- The Novartis case effect on affordability and accessibility ceutical products. of medicines as generic companies sell Process patents could still be obtained, Against this backdrop, India’s the anti-cancer drug at affordable prices. which meant that minor alterations in the Supreme Court recently delivered a land- The decision is also a strong statement synthesis of a molecule could yield new mark decision in an appeal by Novartis against evergreening by patentees in process patents and drugs could be rep- against the denial of a patent. The case India. The higher standard introduced in licated through different methods. This involved Zimmermann’s N-phenyl-2- section 3(d) ensures that no drug with a encouraged the production of generic pyrimidine-amine derivatives, including chemical modification can be patented drugs and helped establish India world- imatinib, which have had US patents unless it is therapeutically more effec- wide as a low-cost producer. since 1996. In 1998, Novartis applied tive. After the expiry of the term of pat- for a patent on the beta crystalline form ent protection, other entities can enter TRIPS agreement of imatinib mesylate, used for the treat- the market offering competitive prices. ment of leukemia. Novartis claimed The Supreme Court has, however, left In 1995, the Trade-related Intellectual that the beta crystal form of imatinib open the question of how to interpret Property Rights (TRIPS) agreement was mesylate had beneficial flow proper- “therapeutic efficacy”, inviting further reached, to which India was a signatory. ties, better thermodynamic stability and debate on this important issue. Article 28 of TRIPS requires member lower hygroscopicity than the alpha The Novartis decision may lead phar- countries to provide patent protection for crystal form of imatinib mesylate, mak- maceutical giants to take a conservative both products and processes, subject to ing it a superior product. approach to investing in India. While a requirements of novelty, inventiveness In considering Novartis’s appeal, the developing nation has a responsibility and industrial applicability. Patent owners Supreme Court deliberated extensively to provide lifesaving drugs at affordable must also have the right to assign, trans- on section 3(d) and concluded that for a prices, it must also uphold treaties and fer by succession or conclude licensing medicine that claims to cure a disease, conventions to which it is a party, fail- contracts for their patents. the test of efficacy could only be “thera- ing which it risks sanctions. Adopting the TRIPS regime led to the peutic efficacy”, i.e. the capacity of Retired Justice Markandey Katju of removal of section 5 of the Patents Act, the drug for beneficial change. A mere the Supreme Court has said that a bal- 1970, which barred patents for sub- change of form with properties would ance has to be struck between mon- stances intended for use as food, med- not qualify as an enhancement of the etary inducements for new inventions icine or drugs or prepared by chemical efficacy of a known substance. and making inventions available to the processes. By way of an amendment The court also dealt with “disclo- masses in underdeveloped countries at to the 1970 act, India agreed to 20-year sure” and “coverage” of the patent. affordable prices. patents on pharmaceutical products. Imatinib mesylate was covered by the The balance is both delicate and This new regime effectively outlawed Zimmermann patent but not disclosed in elusive. generic production of new medicines. it. The court opined that the law should In endeavouring to restrict the effects not develop on lines where there may be of this new regime, section 3(d) of the a vast gap between the coverage and the Udwadia Udeshi & Argus Partners is a full-service 1970 act was amended so that discov- disclosure under the patent. The court law firm with offices in Mumbai, Delhi, Bangalore, ery of a new form of an existing sub- found that imatinib mesylate is a known Kolkata and Chennai. Soorjya Ganguli is a partner stance would not qualify for protection, substance from the Zimmermann patent and Pooja Chakrabarti is a senior associate at the unless the substance had enhanced effi- itself. Its pharmacological properties are firm. The views expressed by the authors are per- cacy. This in part was India’s answer to also known in the Zimmermann patent. sonal and do not reflect the views of the firm.

68 India Business Law Journal June 2013 Private equity & venture capital Correspondents

Investing in India through non-convertible debentures

Khaitan & Co

Simal, 2nd Floor 7/1 Ulsoor Road

Bangalore 560 042 - India

Tel: +91 80 4339 7000

Fax: +91 80 2559 7452 By Ganesh Prasad Email: [email protected] and Sharad Moudgal, Bangalore | Kolkata | Mumbai | New Delhi Khaitan & Co

ndian companies are increasingly look- issue and the terms of issue of the NCDs (5) the investment conditions prescribed ing at alternative means of raising cap- stipulate that the NCDs will be redeemed under the foreign direct investment (FDI) I ital. In the past few years, the Reserve if listing is not achieved within this time. route do not apply to NCD investments; Bank of India (RBI) and the Securities The SEBI (Issue and Listing of Debt (6) returns on NCDs can be linked to and Exchange Board of India (SEBI) Securities) Regulations, 2008, deal with identified assets of the issuer company; have taken significant steps to expand the listing of secured and unsecured (7) holders of NCDs, being creditors, the country’s debt market, which is less debt securities (including NCDs) issued can negotiate quasi-equity rights with developed than the equity markets. by way of a public issue or a private issuer companies; (8) investments can One such initiative is to allow for- placement by both private and pub- be structured to maximize capital protec- eign debt infusions in Indian compa- lic companies. A public issue of NCDs tion by stipulating a minimum return on nies through non-convertible debentures resembles a public issue of shares by an the NCDs acquired while also participat- (NCDs). This has become a popular route Indian company, including filing a draft ing in the risks and rewards of the Indian for Indian companies to raise capital from and final offer document, making requi- company as an equity holder; and (9) overseas investors. site disclosures, obtaining a credit rating NCDs can be acquired through entities The provisions relating to issuance of and obtaining requisite “in-principle” established in tax beneficial jurisdictions, debentures under the Companies Act, approvals. such as Cyprus. 1956, apply equally to NCDs. In addi- NCDs may also be issued on a private tion, the issuance of NCDs could be placement basis, subject to certain con- Associated risks treated as an issuer company accepting ditions prescribed under the regulations, a “deposit” under the Companies Act. including filing an information memoran- The main risk associated with NCD However, NCDs are typically issued in a dum, obtaining a credit rating and ensur- investments lies in how Indian regulators manner that allows the issuer company ing that any security created to secure may perceive them. Viewed with their to benefit from certain exemptions under the NCDs is adequate to ensure 100% accompanying rights, such investments the Companies (Acceptance of Deposits) asset cover sufficient to discharge the could be re-characterized as a means Rules, 1976. principal amount of the NCDs. of circumventing regulations on foreign While issuance of debt instruments is An issuer company desirous of listing investment in India. For example, invest- common in the domestic debt market, NCDs must also comply with the debt ments in the real estate sector could be the RBI and SEBI have encouraged debt listing agreement to be executed with the seen as violating FDI investment condi- financing from overseas entities under stock exchange on which the NCDs are tions as well as end-use restrictions on the NCD investment route. Under Indian sought to be listed. An issuer company proceeds from external commercial bor- foreign exchange laws, registered foreign must comply with the specific conditions rowings. Similarly, regulators could per- institutional investors (FIIs) or qualified mentioned under the debt listing agree- ceive NCD investments by foreign inves- foreign investors (QFIs), or entities which ment, including reporting requirements, tors in Indian companies as a means of maintain a sub-account with a registered ensuring timely interest/redemption pay- guaranteeing returns on accompanying FII, may invest in “listed” or “to-be-listed” ments and ensuring maintenance at all equity investments made by them. NCDs issued by an Indian company. times of 100% asset cover. While the regulations enable NCDs Until recently, the regulations pre- to be secured, Indian foreign exchange scribed by the RBI and SEBI conflicted Key benefits laws require that regulatory approval on whether FIIs could invest in to-be- be obtained prior to creating any secu- listed NCDs. FIIs adopted a cautious The NCD investment route has drawn rity interest in favour of non-residents. approach and structured their invest- much attention from foreign investors. Opinions differ as to when the approval ments by acquiring NCDs upon their Key benefits include: (1) NCDs are liquid is to be obtained. listing via the secondary markets only. instruments which may be freely traded; The conflict has since been remedied (2) holders of NCDs enjoy a preferential and FIIs and QFIs are now permitted position as creditors in the winding up Ganesh Prasad is a partner and Sharad Moudgal to acquire to-be-listed NCDs directly of an issuer company; (3) NCDs may be is a principal associate at Khaitan & Co. The views from Indian companies provided that the secured by Indian assets; (4) no caps are of the authors are personal, and should not be NCDs are listed within 15 days from their prescribed on the returns from NCDs; considered as those of the firm.

June 2013 India Business Law Journal 69 Correspondents Real estate

Streamlining could reduce new home costs and delays

C-346, Defence Colony New Delhi - 110 024 India

Telephone: +91 11 2433 7572, +91 11 2433 7573 By Amitabh Fax: +91 11 2433 7574 Chaturvedi and Utkarsh Tewari, Email: [email protected] Mine & Young

n average real estate project authorities, which would continue to made available on the websites of the from launch to possession takes operate without any time commitments. authorities concerned. A about five to six years. There Instead of the much needed single- (4) Approving authorities should be is usually a grace period of six to12 window clearance, the bill would estab- brought under strict time constraints months. Yet at times there is further lish a Real Estate Regulatory Authority for granting or refusing approval of a delay in possession of property. – another addition to the list of authori- real estate project. If an authority fails Although details vary from state to ties to which a promoter must apply. To to comply with a time constraint, the state, a real estate builder/developer meet the new law’s objectives, it should application to the authority should be currently has to apply to 40 to 50 cen- cover all stakeholders. deemed to be approved. tral, state and local departments for More importantly, the approval proc- (5) With a flexible approach towards approval for a single project. The whole ess needs to be streamlined. This could developers, an approving authority may process takes about three to five years. be accomplished by a technologically be able to speed up the approval proc- During this period, the cost of con- equipped and competent central single ess. For example, approval for a project struction rises and so does the cost of window facilitation committee, with development plan could be granted homes. According to a 2010 report sub- a presence in all states. Approving without insisting on prior development mitted to the Indian government by the authorities can also take steps to speed of internal infrastructure, subject to an McKinsey Global Institute, titled India’s up the approval process, and ultimately undertaking from the developer that Urban Awakening, approvals account the delivery of houses. the internal infrastructure will be com- for 40% of a project’s sale value. pleted before applying for an occupa- Most authorities are not bound by any Recommended changes tion certificate. time limit and take up to three years to (6) The norm is that an environmental grant an approval or no-objection certifi- (1) Automating the building plan impact assessment (EIA) is carried for cate (NOC) to a project. Clearance from approval process would reduce paper- each project. This takes up to 90 days. certain authorities, such as the National work, physical visits, human error, ambi- To simplify, an EIA could be carried out Monuments Authority, Archeological guity, and the time taken in scrutinizing when the master plan of an area is devel- Survey of India and Airports Authority of plans. This could be achieved through oped. The department concerned could India could be avoided by clear demar- the websites of urban local bodies publicize the guidelines to be followed cation of restricted and non-restricted (ULBs), where building plans would be for different types of projects and put the areas. submitted in electronic format for scru- guidelines on its website. Responsibility The urban population is projected to tiny. Specially designed software could for compliance could be left to the devel- rise from 31.2% of India’s population in automatically check the building plan opers, and for enforcement and monitor- 2011 to 40% by 2030. There is an urgent against building bye-laws and give the ing to the project approving authority. need to meet the rising demand by results. Online payment of the scrutiny (7) Online registration for selected speeding up the supply. Environmental fee on the same website would reduce clearances should be introduced. clearances for affordable housing corrupt practices. The real estate sector is important. projects for the economically weaker (2) Bye-laws of ULBs could be stand- It accounted for 5% of India’s GDP in section/low income group segment ardized, updated and uploaded on the 2011-12. Restrictions and hurdles are should be given special treatment. ULBs’ websites. States may also con- slowing its growth. By bringing in trans- The Real Estate (Development & sider directing ULBs to put in place a parency and updating rules and pro- Regulation) Bill, which has been cleared dedicated cell to act as single facilitation cedures, this sector can be given the by the cabinet, aims to bring transpar- or clearance window. opportunity of soon becoming one of ency and accountability to the sec- (3) Consolidation and simplifica- the largest and most successful in the tor and to protect consumers. The bill tion of building bye-laws is needed nation. would prevent promoters from launch- to provide clear laws and guidelines. ing a project until all of the required This could involve bringing together licences and approvals are in place. provisions under legislation governing Amitabh Chaturvedi is the managing partner The bill provides for control over the several authorities. The resulting laws of Mine & Young, where Utkarsh Tewari is a developers but not over the sanctioning and guidelines could be publicized and partner.

70 India Business Law Journal June 2013 Regulatory developments Correspondents

Put and call options: Light at the end of the tunnel?

New Delhi Mumbai Second Floor, First Floor, CS-242, 254, Okhla Industrial Estate, Mathuradas Mill Compound, Phase III, New Delhi-110020 NM Joshi Marg, Lower Parel India Mumbai - 400 013, India By Siddharth Hariani Tel +91 11 4983 0000 Tel: +91 22 4340 8500 and Davis Kanjamala, Fax: +91 11 4983 0099 Fax: +91 22 4340 8501 Email: [email protected] Email: [email protected] Phoenix Legal

he Law Ministry is reported to execution of the contract for the transac- However, given that on appeal the have approved a proposal by the tion). The provisions of the 1969 notifica- Supreme Court permitted the parties T Securities and Exchange Board tion were substantially subsumed in a to enter into settlement terms and pre- of India (SEBI) to permit the use of put central government notification in 2000, scribed that the findings of Bombay and call options for corporate restruc- which additionally permitted derivative High Court would not be binding on turing and non-speculative purposes. contracts traded and settled through a such settlement, the value of this deci- This development should finally bring recognized stock exchange. sion appears to have been diluted. A some clarity over the use of these tools, As evident from its stance adopted in silver lining from these proceedings was favoured by those active in the spheres informal guidance provided to a listed that SEBI appears to have been given of private equity, and mergers and company in 2011, SEBI was of the opin- impetus to rethink its stance on options. acquisitions. ion that put and call options would con- Shortly after the settlement, SEBI was tinue to be hit by the 2000 notification reported to have submitted a proposal Strategic tools as they did not fall in either category of to the Law Ministry to rectify the uncer- permissible securities contracts. Several tainty surrounding these options, which Put and call options are widely used transactions in the recent past, such as now appears to have been accepted around the world in structuring transac- the acquisition of stakes by mining con- and is expected to be notified shortly. tions to attain certain objectives. Typically, glomerate Vedanta in Cairn India and put options are granted by promoters of by leading spirits multinational Diageo Taking stock companies to investment funds which in United Spirits, saw this issue being have a determinate term and require raked up by SEBI, which forced deal While put and call options have been an alternative exit route, should a pri- makers to delete references to options incorporated in investment agree- mary market offering or strategic sale not in their agreements. ments, there has been no certainty prove feasible. Call options facilitate an on whether such clauses would be increase in stake at a later date, enabling A call for change enforceable in the event of a dispute consolidation by the joint-venture partner between the parties. Permitting put and or the original promoters. Recently, in a dispute between MCX call options would significantly boost These options may also be handy in Stock Exchange and SEBI, Bombay investor sentiment in India, especially various scenarios, such as events of High Court made a ruling that favoured in these choppy markets. default, breach of contractual obliga- the validity of put and call options. In its Currently, the fine print of the proposed tions, or even to resolve a deadlock extensive discussion on the develop- change is not in the public domain, and between shareholders and investors. ment of the law and judicial precedent there is speculation as to whether it will By linking the exercise of options to the on this issue, it rejected SEBI’s con- be implemented through a notification, achievement of certain milestones, put tention that such options constituted or require an amendment of the SCRA and call options can also be deployed forward contracts, and were therefore (which would entail a longer timeline). by parties as positive or negative incen- illegal. As options were exercisable at Questions also abound as to whether tives in the management of a company. the prerogative of the option holder, the Reserve Bank of India – which has they were akin to contingent contracts, in the past objected to put and call Regulatory putdown which would only be concluded at their options involving monetary outflows – is exercise. Provided that the exchange on board with this. However, the sound- A notification issued by the central of consideration and delivery of securi- bites emanating from the Law Ministry government in 1969 under the provisions ties was made on the same day or the and industry bodies seem to indicate of the Securities Contracts (Regulation) day after the option was exercised, it that investors may finally have some Act, 1956 (SCRA), forbade parties from could be construed as a spot delivery valid grounds for elation. entering into securities contracts other and therefore permissible under law. than spot delivery contracts (which Unfortunately, SEBI’s second pillar of involve exchange of consideration and objection to options – that these were Siddharth Hariani is a partner and Davis Kan- delivery of possession of the security off-market derivatives – was not taken jamala is an associate at the Mumbai office of on the same or next day as the parties’ up due to procedural grounds. Phoenix Legal.

June 2013 India Business Law Journal 71 Correspondents Taxation & transfer pricing

Transponder payments: Are they royalty or not?

Economic Laws Practice 1502 A Wing, Dalamal Towers Free Press Journal Road Nariman Point, Mumbai 400021 India By Pranay Bhatia Tel: +91 22 6636 7000 and Hardik Choksi, Fax: +91 22 6636 7172 Economic Laws Email: [email protected] Practice [email protected]

apid and constant change in Legal aspects were neither royalty nor fees for tech- technology is creating challenges nical services. The ITAT observed that R for both revenue authorities and To settle the long-standing contro- the taxpayer could not be held be liable taxpayers, in terms of the finer technical versy, the Finance Act, 2012, made a to deduct tax in earlier years based on nuances of new technology, the charac- retrospective amendment to the defini- the subsequent amendment which is terization of payments relating to it, and tion of “royalty” by adding two expla- applicable retrospectively. its taxability in India. Controversy and lit- nations to section 9(i)(vi) of the Income In a recent decision involving Zee igation repeatedly arises when it comes Tax Act. As per explanation (v), royalty Telefilms, the Mumbai ITAT held that pay- to assessing the taxability of e-com- included any consideration in respect ment by Zee to its non-resident subsidi- merce, information technology, relaying of any right, property or information ary company which then made payment of signals through a transponder, band- irrespective of whether the possession to a foreign satellite company for use width and other payments, primarily or control of such right or property or of transponder bandwidth was liable to because India’s tax laws have not kept information is with the payer, or whether tax in India as the payment was a sepa- pace with these developments. such right, property or information is rate contractual payment. Further, even Among such issues, payment for used directly by payer, or whether such though the tribunal sent the matter back transponder leasing has been matter of right, property or information is situ- to lower authorities, it distinguished the persistent litigation for almost a decade. ated in India. Explanation (vi) clarified Delhi High Court decision firstly because that the term “process” in the definition Zee had entered into contracts with Background of royalty, includes “transmission by Asia Sat through its foreign subsidiary satellite (including up-linking, amplifi- as opposed to a direct contract and In a landmark decision in 2011 in the cation, conversion for down-linking of secondly because the foreign subsidiary case of Asia Satellite Telecommunica- any signal), cable, optic fibre or by any had a business connection in India and tions (Asia Sat), Delhi High Court held other similar technology, whether or a permanent establishment through its that payments by broadcasting com- not such process is secret”. holding company, i.e. Zee. panies to satellite operators for use of The proposed Direct Tax Code (DTC) transponder capacity cannot be taxed also includes payments for “the use Conclusion as royalty under the provisions of the of or right to use of transmission by Income Tax Act, 1961, and accordingly satellite, cable, optic fibre or similar Contrary to the globally followed are not taxable under the act. technology” within the definition of principle, the legislature, through an The court’s key observations “royalty”. Thus, payments for trans- amendment with retrospective effect, included: ponder capacity are taxable under the has demonstrated its intension to tax • The substance of the agreement DTC regime. transponder payments, thereby nullify- between Asia Sat and the broadcasting In contrast, the commentary on the ing the principles laid down by Delhi company was the provision of broad- OECD Model Tax Convention states that High Court in the Asia Sat case. In spite band capacity available on the trans- payments by customers under typical of such an unfavourable treatment ponder and not the right to use any transponder leasing arrangements are of taxing foreign satellite operators process embedded in it. in the nature of business profits and not under the tax laws of India, it is always • A transponder being an inseparable royalty as there is no leasing of any indus- imperative to take the initiative to ana- part of the process of a satellite, its pos- trial, commercial or scientific equipment lyse the relevant tax treaty to check the session and control cannot be handed because customers do not acquire the possibility of taking advantage of any over to a broadcasting company. Thus, physical possession of the transponder, beneficial provisions. the broadcasting company can neither but simply its transmission capacity. control nor operate the satellite or a In a 2012 decision in the case of transponder by themselves. Channel Guide (I), the Mumbai Income Economic Laws Practice is a full-service law firm • The arrangement between Asia Sat Tax Appellate Tribunal (ITAT), reiterat- with headquarters in Mumbai and offices in New and the broadcasting company was ing the Delhi High Court decision dis- Delhi, Pune and Ahmedabad. Pranay Bhatia only for lease of the transponder capac- cussed above, held that transponder is a partner at the firm and Hardik Choksi is an ity and not for lease of the equipment. fees for satellite uplink for telecasts associate.

72 India Business Law Journal June 2013