Guide to Doing Business

India
Prepared by Lex Mundi member firm,
Shardul Amarchand Mangaldas & Co.

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Doing Business
in India

Privileged and Confidential

For Private Circulation only
Enabling business by
providing solutions as trusted
advisors, through excellence,
responsiveness, innovation
and collaboration.
Contents

Introduction 2

General 4

Companies 8

Foreign Investment 16

Acquisition of Shares 24

Competition Law 26

Intellectual Property 36

Employees 40

Taxes 46

Miscellaneous 70

About us 74

1
Introduction
India, today, is one of the fastest growing
economies in the world. The newly elected
Modi Government in its first financial year,
2014-15, saw an accelerated growth rate of 7.3%
coupled with a curtailed inflation rate of 5% and
a current account deficit below 1% of the GDP.
Consequently, foreign investors are gung ho
about India and despite a fall in the global FDI
flows by 16 %, FDI inflows in India have seen
a record surge of more than 40% aggregating
to USD 13 billion in the first 4 months of the
current financial year (2015-16).
The Indian government realizes the potential
of India as an attractive destination for foreign
investors and has set its eyes on an annual target
of 8 to 10 % growth rate. To achieve this, the
government is undertaking various measures
to liberalize the foreign investment regulatory
regime so as to, encourage global investors
to manufacture and export out of India while
being part of the global supply chain. It has
recently liberalized the FDI Policy allowing
100 % FDI in Medical Devices, Telecom Sector
and Single Brand Retail, 100% FDI under
automatic route in Construction, operation and
maintenance of specified activities of Railway
India is on the anvil of becoming a manufacturing hub and a
pro-industry and business friendly economy. It is therefore
the opportune time for foreign investors to think of India as a
lucrative investment destination.
2
sector and increasing the FDI Cap in the insurance
and defence sector from 26 % to 49 %. The
government has also recently consolidated the
various sub-caps of foreign investment in various
sectors with a view to ease business in India.
Also, pro industry key legal reforms including the
Goods and Service Tax Bill - harmonised system
of taxation by subsuming all indirect taxes under
one tax and the Land Acquisition Bill - acquires
private land for the purpose of industrialization,
are in the offing. A corporate profit tax cut has also
been announced in the Union Budget for the year
2015-2106.
With the immense potential of India as an
investment destination given the large percentage
of young and educated English speaking populace
in India and the high purchasing power of the
Indian consumers, the Government is taking
drastic steps to improve the ease of doing business
in the country such as, allowing single-step
incorporation of companies and integration of
fourteen government services on an online single-
window portal. Cross-border trade has been made
easier by cutting the number of forms for export
and import and compliances under numerous
labour-related laws can now be filed through an
online portal. The Government has also increased
the initial validity period of industrial license to
three years from two years, a move that will give
enough time to licensees to procure land and
obtain the necessary clearances/approvals from
the relevant authorities. Further, to reduce the
logistic cost and turn-around time of suppliers,
dedicated freight corridors for transporting goods
from hinterland to Ports are being constructed.

India is on the anvil of becoming a manufacturing

hub and a pro-industry and business friendly
economy. It is therefore the opportune time for
foreign investors to think of India as a lucrative
investment destination.

This Doing Business in India Guide prepared by

Shardul Amarchand Mangaldas, seeks to provide
the reader with a flavour of the Indian regulatory
regime pertinent to every business set up in
India. It is divided into 9 chapters dealing with
important subject matters such as companies law,
regulations governing foreign investment in India
and acquisition of shares of an Indian company,
labour law regime, anti-trust laws, intellectual
property rights and taxation laws.
Founded on almost a century of legal
achievement, Shardul Amarchand Mangaldas
started anew in May 2015, with offices in 6 major
cities in India New Delhi, Mumbai, Bengaluru,
Kolkata, Ahmedabad and Gurgaon. Our mission
is enabling business in India by providing
solutions as trusted advisers, through excellence,
responsiveness, innovation and collaboration.
Please note that this Guide is meant to provide
a brief overview of the Indian legal and
regulatory regime existing as August 15, 2015
for informational purposes only and should not
be taken as a substitute to formal legal advice or
a recommendation of doing business/ investing
in India. Some of the policy changes/ initiates
announced by the Government are not effective
as on date and could vary. Shardul Amarchand
Mangaldas shall not be liable for any losses
incurred or suffered by any person from any use
of this publication or its contents. Readers should
consult their legal, tax and other advisors before
making any investment or other decision with
regard to undertaking any business in India.

3
General
What are the business related laws
in India?
India has codified uniform commercial
laws that include legislations relating to
contracts, corporations, exchange control,
competition, taxation and the likes. Statutes
are supplemented by policy pronouncements,
press notes, notifications and regulations by
Governmental departments and regulators.
The key business related legislations in India
are the:
2013 Act (which governs the incorporation
management, restructuring and dissolution
of companies);
Indian Contracts Act (which lays down
general principles relating to formation and
enforceability of contracts);
FEMA (which provides for Indias foreign
exchange management regime and regulates
inflow and outflow of foreign exchange and
investment into/from India);
SEBI Act (which governs the functions and
powers of SEBI, Indias securities market
regulator);
SCRA (which governs listing and trading of
securities on stock exchanges in India);
Competition Act (which regulates
combinations (merger control) and anti-
competitive behaviour); and
Income Tax Act (which prescribes the income
tax treatment on income of individuals and
corporations ).
In addition, there are several sector specific
legislations (e.g. the Indian Telegraph Act, Drugs
4
and Cosmetics Act, Press Council Act, the
Banking Regulation Act, the Insurance Act,
Food Safety and Standards Act, 2006 and various
labour legislations (Industrial Disputes Act etc.)
that must also be considered depending on the
nature and type of the transaction.
What are the types of business entities
that can be set up in India? What is the
process, time and cost for setting up each?
Business ventures can be carried on in India
through sole proprietorships, partnerships
(including LLPs) or through companies
incorporated in India. Additionally, non-
residents can carry on certain limited business
activities through a branch office, liaison office
or a project office.
Table on various modes to enter into the Indian Market
Ways to enter
the market
Incorporate an
As a Foreign Co.
Indian Co.
Wholly owned Liason/Branch/
Joint Venture
subsidiary Project Oce
India has codified and uniform commercial laws that
include legislations relating to contracts, corporations,
exchange control, competition, taxation and the likes.
Sole Proprietorship
This is the simplest form of business. No
business registration is required under Indian
law. The owner of a sole proprietorship is
personally entitled to all profits and responsible
for all losses arising from the business.
Partnership
Partnerships in India are regulated under
the Partnership Act. Partners of a firm are
jointly entitled to all profits and are also jointly
responsible for all liabilities arising from the
business. While it is not mandatory to have a
partnership deed, most partners do enter into
a partnership deed to govern their inter-se
relationship as partners. A partnership does
not have a corporate character distinct from
its members. A partnership may even have
corporations as its members.
LLPs are a hybrid corporate entity with
characteristics of both a limited liability
company and a partnership. The nature of an
LLP is that of a body corporate with perpetual
succession and has a legal entity separate from
its partners. Two or more persons (including
a body corporate) can incorporate an entity
as a LLP under the LLP Act and there is no
maximum limit on the number of partners a
LLP may have. FDI is permitted in an LLP, with
the prior approval of the FIPB, in those sectors/
activities where 100% FDI is allowed, through
the Automatic Route and there are no FDI linked
performance related conditions. However, there
are certain restrictions on the activities of LLPs
with FDI.
Company
A company may be incorporated in India
either as a private company (including a one
person company, a new category of company
under the 2013 Act) or a public company.
While there are no minimum capitalisation
norms prescribed under the 2013 Act, foreign
investment in certain sectors such as NBFCs
and permitted real estate activities are subject
to minimum capitalization requirements as
per FEMA.
Branch / Liaison / Project Offices
Setting up branch offices and liaison offices
requires prior approval of the Reserve Bank.
The activities which may be undertaken by the
5
6
branch offices and liaison offices have been set
out in response to question 3 below. General
permission has been given by the Reserve Bank
for establishment of project offices that meet
specified conditions. Foreign companies i.e.
companies or body corporates incorporated
outside India, which establish a place of
business in India through a branch office or
through electronic mode must be registered
with the ROC and have to comply with certain
provisions of the 2013 Act that have been made
applicable to them including requirements to
file certain information and key documents like
charter documents, accounts etc. with the ROC.
The 2013 Act has expanded the meaning of a
place of business in India in respect of foreign
companies, to include physical or electronic
mode of existence in the country.
No approval of the Reserve Bank is required for
foreign companies to establish branch offices/
units in SEZs to undertake manufacturing and
service activities, subject to satisfaction of certain
conditions.
Are there any fetters on the business
activities that can be carried on by
business organizations in India?
A branch office may enter into contracts on
behalf of the non-resident parent and may
generate income. However, the activities
that can be undertaken by a branch office
are restricted to representing the parent
company, exporting/ importing goods,
rendering professional or consultancy services,
carrying on research work in which the parent
company is engaged, promoting technical
or financial collaborations between Indian
companies and the parent or overseas group
company, representing the parent company
in India and acting as buying/selling agent
in India, rendering services in information
technology and development of software in
India and rendering technical support to the
products supplied by parent/group companies.
The scope of the activities may be further
curtailed by conditions in the approval granted
by the Reserve Bank.
A liaison office, is not permitted to carry on
business in India. Its activities are restricted
to representing the parent company/group
companies, promoting export from/to India,
promoting technical/financial collaborations
between parent/group companies and
companies in India, gathering information
for the parent company and acting as a
communication channel between the parent
company and Indian companies. The expenses
of liaison offices are to be met entirely by way of
inward remittance from the non-resident.
A project office is usually set up for execution of
large projects such as major construction, civil
engineering and infrastructure projects.
An Indian company (even if wholly foreign
owned) has no similar fetters on its ability to
carry on business in India except as may be set
out in its Memorandum of Association.
7
Companies
Overview of the corporate law regime
in India and proposed legal changes
The 2013 Act, is the third consolidating and
amending law relating to companies in India
in the last 100 years. The 2013 Act (along with
the Companies (Amendment) Act, 2015),
is being notified and implemented by the
Central Government in a phased manner and
has substantively replaced the 1956 Act. The
1956 Act continues to apply for provisions
for which the corresponding provisions of
the 2013 Act have not come into force,
such as provisions in relation to mergers and
acquisitions and winding-up of companies.
Some of the key objectives behind formulation
of the 2013 Act are: (i) promoting investments
along with sound governance within corporate
structures; (ii) enhancing accountability; (iii)
protection of investors and minority shareholders;
(iv) de-linking substantial law from procedural
aspects; and (v) consonance with changes in
national and international economic environment.
The 2013 Act has inter-alia, introduced enhanced
corporate governance standards particularly
in relation to the independent directors,
audit, corporate social responsibility (CSR),
mandatory valuation, private placement of
securities, cross-border mergers including
merger of Indian companies into foreign
companies and class action suits. However,
barring the main provisions of the 2013 Act, the
Central Government is empowered to prescribe
additional requirements via subordinate rules,
which are ancillary to and have to be read along
with the main provisions of the 2013 Act.
8
What are the different types of
companies that can be incorporated
in India?
In India, companies may be incorporated as
(i) private companies or (ii) public companies.
The 2013 Act has now also introduced an
additional concept of a one person company.
One person companies are aimed at benefitting
small entrepreneurs, as these companies are
inter-alia exempt from some filing requirements
and requirements in relation to meetings etc.
While, a private company is required to have
a minimum of 2 members and 2 directors, a
public company is required to have a minimum
of 7 members and 3 directors. A one-person
company can be incorporated only with 1
person acting as the member and director of the
company. Every company can have a maximum
of 15 directors, provided that a company may
appoint more than 15 directors after passing a
special resolution.
Companies may be limited by shares, by
guarantee (which may or may not have share
capital) or unlimited (i.e. no limit on the liability
Key objectives behind 2013 Act are: (i)
promoting investments (ii) enhancing
accountability; (iii) protection of investors
and minority shareholders; (iv) de-linking
substantial law from procedural aspects;
and (v) consonance with changes in national
and international economic environment.
of the members). In India, the most commonly
used form is a company limited by shares.
Based on whether or not a company is listed on
a stock exchange, a company may be a listed
company (whose any securities are listed on
a recognised stock exchange in India), or an
unlisted company.
Unlisted private companies have greater
flexibility and less stringent rules in respect of
various matters including composition of board
of directors, forming committees of the board
of directors, holding of members meetings,
number of directors, determination of kinds of
share capital and voting rights, determination of
managerial remuneration etc.
Further, based on control and holding structure,
a company (in connection with another
company) may be categorized into a holding
company, a subsidiary company or an associate
company.
Other types of companies that receive mention
in the 2013 Act are foreign companies, small
companies, government companies, nidhi
companies, banking companies, producer
companies and dormant companies.
What is the incorporation process?
Indian companies (whether private or public,
limited or unlimited) are incorporated by
registration with the appropriate registrar of
companies (RoC) of the state in which the
registered office of the company is proposed to
be located. The relevant documents in respect
of such registration can be filed online with the
RoC and are available for public inspection.
As per the Companies (Incorporation) Rules,
2014, an integrated process of incorporation of a
company has been introduced with effect from
May 1, 2015, to simplify the filing of forms.
Other than the integrated process for
incorporation, the standard incorporation
process broadly entails: obtaining DIN by the
proposed first directors from the Ministry
of Corporate Affairs (MCA), followed by
obtaining digital signature certificate by at
least 1 (one) director, from the designated
authorities. Thereafter, approval of the name of
the company has to be obtained from the RoC.
Following the receipt of such name approval,
prescribed forms for application and declaration
for incorporation of new company, notice of
situation of registered office (or address of
correspondence until establishment of the
registered office) and particulars of subscribers
and directors, along with the Memorandum
of Association and the Articles of Association
(Constitutional Documents) of the proposed
company need to be filed with RoC.
Once the Constitutional Documents are
approved by the RoC and a certificate of
incorporation is issued by the RoC, a unique
Corporate Identity Number is issued to the
company. Thereafter, business can be
commenced by the company.
As regards the Constitutional Documents of
a company, the Memorandum of Association
9
 sets out the name of the company, state where
the registered office of the company is/will be
situated, main and ancillary objects, liability of
members and authorized share capital of the
company. The Articles of Association prescribe
the applicable provisions in respect of the
companys management and the rights of the
members/shareholders inter se and vis--vis
the company. Amongst other provisions of the
Articles of Association, the 2013 Act permits
inclusion of entrenchment provisions in the
Articles of Association, enabling companies
to place a higher approval threshold (i.e. in
excess of 75% (seventy five percent)) for altering
the Articles of Association. Entrenchment
provisions can be included in the Articles of
Association either at the incorporation stage
or by a subsequent amendment and a notice
has to be given to the RoC in cases where
entrenchment provisions are included in the
Articles of Association.
How are minority shareholders
protected under Indian law?
The term minority shareholders are not
defined under the 2013 Act. However, by
virtue of the provisions on power to apply for
oppression and mismanagement and purchase
of minority shareholding under the 2013 Act,
minority shareholders are understood as 100
members of the company or 10% (ten percent)
of the members of the company, whichever is
less, or any member/s holding not less than 10%
of the issued share capital, in case of a company
having a share capital; or 20% (twenty percent)
of the members, in case of a company not
having a share capital. At present, the provisions
10
in relation to the prevention of oppression and
mismanagement of a company in the 2013 Act,
have not been enforced and the corresponding
provisions of the 1956 Act are serving the said
purpose. In a paradigm shift from the 1956 Act,
minority shareholders have been given greater
powers and remedies under the 2013 Act, with
an aim to protect their rights. Some of these
protections are elucidated below:
i) As discussed above, incorporating
entrenchment provisions in the Articles of
Association is seen as a significant minority
protection tool, under the 2013 Act.
ii) For important actions such as substantial
disposal of the undertaking of a company,
under the 1956 Act, an ordinary resolution
approved by a simple majority of
shareholders would suffice. However, under
the 2013 Act, such decisions, except in case
of a private company, require a special
resolution.
iii) In the event an acquirer becomes a registered
holder of 90% (ninety percent) or more of
the issued equity share capital of a company,
by virtue of an amalgamation, share
exchange, conversion of securities or for any
other reason, the minority shareholder is
permitted to offer its shares to the acquirer
at a price determined on the basis of a
valuation of a registered valuer.
iv) Minority shareholders have also been
empowered with the option of approaching
the National Company Law Tribunal
 (NCLT) against oppression of the minority
and for mismanagement of the company
and if the affairs of the company are/will
be conducted in a manner prejudicial to the
interest of members or class of members.
v) Importantly now, the 2013 Act permits class
action suits that may be instituted against
the company, if the minority shareholders
are of the opinion that the management and/
or the conduct of affairs of the company is
prejudicial to the company, members and/or
depositors. Direct claim can be made against
third parties for damages or compensation
for fraudulent, unlawful or wrongful act or
conduct or any likely act or conduct.
How does one fund a subsidiary in
India?
A foreign company may fund an Indian
company, through shares, in the following
manner:
(i) subscribing to instruments such as, equity
shares, fully, compulsorily and mandatorily
convertible debentures and fully,
compulsorily and mandatorily convertible
preference shares, subject to pricing
guidelines and valuation norms prescribed
under the FEMA and the regulations framed
thereunder; and
(ii) other types of preference shares and/or
debentures i.e. non-convertible, optionally
convertible or partially convertible and/or
loan from foreign shareholders subject to
compliance with ECB norms.
What types of shares can a company
issue?
A company limited by shares may issue shares
of the following type(s):
i) Equity shares: In accordance with the 2013
Act, a company may issue equity shares
with voting rights, or with differential
rights as to dividend, voting or otherwise
subject to fulfillment of conditions under the
Companies (Share Capital and Debentures)
Rules, 2014; and
ii) Preference shares: In accordance with the
2013 Act, a company may issue preference
shares which carry a preferential right in
respect of: (a) payment of dividend; and (b)
repayment, in case of winding up.
11
The concept of CSR introduced in 2013 Act mandates
prescribed classes of companies to spend 2% of the
average net profits on CSR.
Who can be appointed as a director of a
company in India? Can a non-resident
be appointed as a director of an Indian
company?
The 2013 Act provides that no body corporate,
association or firm can be appointed as
a director of a company, and only an
individual can be so appointed.
Further, the 2013 Act has introduced many
changes in relation to board composition with an
objective of increasing board transparency and
accountability. For instance, every company is
mandatorily required to appoint at least 1 Indian
resident as director. Also, every listed company,
a public company having paid-up share capital
of Rs. 100 Crore or more and a public company
having turnover of Rs. 100 Crore or more is
required to appoint 1 woman director and every
listed public company is required to have at
least one-third of the total number of directors as
independent directors. Additionally, under the
2013 Act, a nominee director who is nominated
by a financial institution or Government can also
be appointed to the board of a company.
What are the liabilities/obligations of a
director under Indian law?
The 1956 Act did not contain any provision that
specifically identified the statutory or fiduciary
12
duties of directors. The 2013 Act has codified
the statutory duties of directors, which include,
the duty to act in accordance with the Articles
of Association, duty to act in good faith to
promote objects of the company for the benefit
of the members as a whole, duty of care, skill
and diligence and to exercise independent
judgment, duty not to involve in a situation of
conflicting interests with the company and duty
not to achieve any undue gain or advantage.
Please note that the independent directors have
additional duties, codified under the 2013 Act.
Other than the fiduciary duties, a director
has other duties including, attending board
meetings, disclosing any conflicting interest
and acting in accordance with the Articles of
Association of the company.
Any director who commits a breach may be
liable for both civil and criminal consequences,
depending upon the nature of the breach and the
statutory provisions.
Are there any corporate social
responsibility norms in India?
For the first time, the 2013 Act has introduced
the concept of CSR in respect of Indian
companies. It requires every company having
a net worth of INR 5,000 million or more, or a
turnover of INR 10,000 million or more, or a
net profit of INR 50 million or more, to spend
at least 2% (two percent) of the average net
profits of the company made during the 3
(three) immediately preceding financial years,
in pursuance of its CSR Policy. The 2013 Act
follows the comply or explain approach and
reporting is mandatory.
Are there any corporate governance
norms?
Yes. The wave of corporate governance
reforms started with amendments to the
Listing Agreement and to the 1956 Act. The 2013
Act provides for an elaborate mechanism for
companies to comply in relation to corporate
governance.
The corporate governance regime brought
in place by the 2013 Act inter-alia provides
for mandatory appointment of independent
directors and a woman director for certain
classes of companies; appointment of small
shareholders directors; constitution of
nomination and remuneration committee;
stakeholders relationship committee; audit
committee; vigil mechanism systems for
internal audits; appointment of key managerial
personnel; clarified ambit for duties and
obligations of directors; stringent policy for
related party transactions and inter-corporate
transactions; accounting standards; rotation
of independent directors and auditors; and
varied minority protection measures.
13
 Further, the Listing Agreement also requires
public listed companies to appoint a specified
number of independent, non-executive
directors and constitute separate sub-committees
of the board of directors for functions such as
audit and remuneration.
Are there any insolvency laws
applicable to companies established in
India?
Under the 2013 Act, winding up of a company
may be done either by the Tribunal or
voluntarily. Winding up of a company may be
required due to a number of reasons, including,
closure of business, loss, bankruptcy, etc. The
procedure for winding up of a company can also
be initiated voluntarily by the shareholders or
creditors of the company or by the NCLT.
As per the 2013 Act, a company may be wound
up by a Tribunal, if the company is unable
to pay its debts, if it has acted against the
interests of sovereignty and integrity of India, if
it has defaulted in filing its financial statements
or annual returns for 5 consecutive financial
years, or if the NCLT believes that it is just
and equitable to do so.
As per the 2013 Act, a company may also be
wound up voluntarily by the members of the
Company, if the company passes a special
resolution for winding up of the company, or
if the company in general meeting passes a
resolution requiring the company to be wound
up voluntarily as a result of the expiry of
the period of its duration, if any, fixed by its
Articles of Association or on the occurrence of
14
any event in respect of which the Articles of
Association provide that the company should be
dissolved. At present, the provisions in relation
to the winding up of a company in the 2013 Act,
have not been enforced and the corresponding
provisions of the 1956 Act are serving the said
purpose.
Separately, under SICA, if a company with 1 or
more industrial undertakings , were to become
sick (its accumulated losses are equal to or
exceed its net worth), the Board for Industrial
& Financial Reconstruction (BIFR) could order
for the winding up of the sick company. Under
the SICA, the board of directors are required
to make a reference to the Board for Industrial
and Financial Reconstruction within sixty days
from the date of finalisation of the duly audited
accounts of the company or the finalization of
opinion regarding the sickness of the company.
Recently, the obligations of the BIFR have
been vested with the NCLT and courts with
equivalent powers, although these provisions
have not been notified yet. The 2013 Act provides
framework for revival and rehabilitation of all
sick companies (and not only certain scheduled
industries). Under the 2013 Act, sickness of a
company is now determined by the inability of a
company to repay its debts within 30 (thirty) days
of receipt of a demand from secured creditors of
the company representing 50% (fifty percent) or
more of the outstanding debt. Any such secured
creditor may file an application before the NCLT
along with relevant evidence of such default, for
a determination that the company be declared as
a sick company.
Can voting rights be exercised by
proxy?
A member of a company who is entitled to
attend and vote at a meeting of the company
can appoint another person (whether or not a
member) as his/her proxy to attend and vote at
a meeting instead of him/her, subject to certain
compliances. However, in case of companies
having a share capital, a proxy is not entitled
to speak at the meeting and vote except on
a poll. In case of companies without a share
capital, the Articles of Association may prescribe
restrictions that may be applicable to proxies.
Can statutory meetings be held
through electronic means?
Under the 2013 Act, the Government has
attempted to bring in more regulations by
notifying a set of rules to be observed for
conducting board meetings through video
conferencing. A company is permitted to
conduct a board meeting through video
conference or other audio visual means,
provided the procedures prescribed in the
2013 Act are complied with. Additionally, as
prescribed under the rules framed under the
2013 Act, a list of matters cannot be dealt with in
a meeting through video conferencing.
Further, in order to ensure wider shareholder
participation in the decision making process of
companies, every listed company or a company
having not less than one thousand shareholders,
must provide to its members, a facility to
exercise their right to vote at general meetings
by electronic means.
15
Foreign Investment
How is foreign investment regulated
in India?
Foreign investment in India is primarily
regulated by: (i) the FDI Policy framed by the
DIPP; (ii) FEMA and rules and regulations
promulgated thereunder; and (iii) the
regulations and notifications issued by the
Reserve Bank.
Who are the key regulators that
monitor foreign investment in India?
The FIPB, a department of the Ministry of
Finance and DIPP, a department of the Ministry
of Commerce and Industry, are the regulatory
bodies responsible for regulating foreign
investment in accordance with the industrial
policy. In addition, the Reserve Bank also
16
regulates foreign investment for the purposes
of exchange control in accordance with the
provisions of the FEMA.
What are the different routes through
which a foreign investor may invest
in India?
A foreign investor may invest in India through
four routes, namely:
a) FDI, either under the Automatic Route or the
Approval Route; under Automatic Route,
the foreign investor or the Indian company
does not require any approval from the
Government of India or the RBI and under
Approval Route prior approval of the
Government of India and/or RBI is required.
A foreign investor can invest in equity shares, mandatorily
convertible preference shares, mandatorily convertible
debentures, partly paid equity/preference shares and warrants.
Under both routes foreign investors do
not require any prior registration with a
regulatory authority in India;
b) Investment under the Portfolio Investment
Scheme as an RFPI, subject to prior
registration with SEBI;
c) Investment as a foreign venture capital
investor, subject to prior registration with
SEBI; and
d) Investment as a NRI/PIO under the Portfolio
Investment Scheme through a registered
broker on a recognised stock exchange by
application to an AD bank. .
What are the different instruments
available for investment in India
under the FDI Policy?
As per the FDI Policy, a foreign investor can
invest in equity shares; fully, compulsorily
and mandatorily convertible preference
shares; fully, compulsorily and mandatorily
convertible debentures, partly paid equity/
preference shares and warrants. Further,
the price/ conversion formula of convertible
instruments should be determined upfront
at the time of issue of the instruments.
Issuance of preference shares or debentures
which are non-convertible, optionally
convertible or partially convertible are
considered as External Commercial
Borrowing (ECB) and would be subject
to compliance with extant regulations
pertaining to ECB.
Is FDI prohibited in any sector/
business?
FDI is prohibited in the following sectors:
a) Lottery business including Government /
private lottery, online lotteries, etc.;
b) Gambling and betting including casinos, etc.;
c) Chit funds;
d) Nidhi company;
e) Trading in transferable development rights;
f) Real estate business or construction of farm
houses;
g) Manufacturing of cigars, cheroots, cigarillos
and cigarettes, of tobacco or of tobacco
substitutes; and
h) Activities / sectors not open to private sector
investment atomic energy and railway
transport (other than mass rapid transport
systems).
Additionally, other than specified agriculture
related activities, FDI is not permitted in
Agriculture sector/activity.
17
 Are there any pricing guidelines
that a foreign investor has to comply
with while investing into any of the
instruments of an Indian entity?
The Reserve Bank has prescribed pricing
guidelines for both the subscription to, and
the acquisition of shares by non- residents.
Issue of Shares
a) Where shares of the Indian company are
listed on a recognised stock exchange in India,
the price of shares issued to a non-resident
shall not be less than the price at which a
preferential allotment of shares can be made
in accordance with the SEBI guidelines.
b) Where shares of the Indian company are
not listed on a recognised stock exchange in
India, the price of shares issued to a non-
resident shall not be less than the fair value
of shares to be determined by a merchant
banker (registered with SEBI) or a chartered
accountant as per any internationally
accepted pricing methodology on an arms
length basis.
c) Where the issue of shares is pursuant to
a rights issue of a listed company, the
issue price shall, subject to SEBI ICDR
Regulations, be at a price determined by the
company and where the investee company
is not listed, the issue price shall not be less
than the price at which shares are issued to
resident shareholders.
However, where non-residents (including NRIs)
are making investments in an Indian company
18
by way of subscription to its memorandum of
association, such investments may be made at
face value subject to their eligibility to invest
under the FDI scheme.
Transfer by Resident to Non-resident
a) Where shares of the Indian company are
listed on a recognised stock exchange in
India, the price of shares transferred, by
way of sale under a private arrangement,
shall not be less than the price at which a
preferential allotment of shares can be made
under the SEBI guidelines. The price per
share arrived at should be certified by a SEBI
registered merchant banker or a chartered
accountant.
b) Where shares of the Indian company are
not listed on a recognised stock exchange in
India, the price of shares transferred, by way
of sale, shall not be less than the fair value of
the shares to be determined by a merchant
banker (registered with SEBI) or a chartered
accountant as per any internationally
accepted pricing methodology on arms
length basis.
Pricing of optionality clauses
Agreements with investors having optionality
clauses and return linked to equity are
considered permissible under the extant FDI
policy and FEMA regulations. The optionality
clause shall oblige the buy-back of securities
from the investor at the price prevailing/
value determined at the time of exercise of the
optionality. There is a minimum lock-in period
of one year or a minimum lock-in period as
prescribed under FDI regulations, whichever
is higher (e.g. defence sector where the lock-
in period of three years has been prescribed).
Pricing guidelines have also been prescribed for
exit, after the duration of the applicable lock-in
period, by the foreign investor exercising such
option / right.
The guiding principle of such pricing guidelines
is that the non-resident investor is not
guaranteed any assured exit price at the time of
making such investment and shall exit at the fair
price computed as above at the time of exit.
What are the ways for a foreign
investor to invest in an Indian
company?
FDI in India can be done through the following
modes:
Issuance of fresh shares by a company: Subject
to compliance with the FDI Policy and FEMA,
an Indian company may issue permissible
instruments under the FDI Policy to a non-
resident investor.
Acquisition by way of transfer of existing shares:
Non- resident investors can also invest in Indian
companies by purchasing/acquiring existing
instruments permissible under the FDI Policy
from Indian shareholders or from other non-
resident shareholders in the following manner:
a) Non-resident to Non-resident: A person
resident outside India (other than an NRI or
OCB) can transfer, by way of sale or gift, the
shares or convertible debentures of an Indian
company to any person resident outside
India (including NRIs but excluding OCBs).
b) Resident to Non-resident: A person resident
in India can transfer, by way of sale, shares
or convertible debentures to a person
resident outside India, subject to compliance
with the applicable foreign exchange laws.
Gift of such instruments by a resident to a
person resident outside India will require
the prior approval of the Reserve Bank.
c) Non-resident on the Stock Exchange: A
person resident outside India can sell the
shares and convertible debentures on a
recognised stock exchange in India through a
19
 stock broker registered with stock exchange
or a merchant banker registered with SEBI.
Under the Portfolio Investment Scheme only
RFPIs and NRIs are permitted to invest/trade
in the shares of an Indian company on the
stock exchange through a registered broker.
Further, a non resident investor who has already
acquired and continues to hold the control in
accordance with SEBI Takeover Regulations can
acquire shares of a listed Indian company on
the stock exchange through a registered broker
under FDI scheme, subject to the FDI scheme
and FEMA regulations.
Purchase and sale of shares of convertible
debentures or warrants by a non-resident
Indian, on non repatriation basis is deemed to be
domestic investment at par with the investment
made by residents.
20
Are there any instances of transfer
by way of sale, which require prior
approval from the Reserve Bank/FIPB?
The prior permission of the Reserve Bank is
required in the following instances of transfer,
by way of sale, of shares/convertible debentures
from residents to non- residents:
a) Transfer of shares/convertible debentures of
an Indian company engaged in the financial
services sector, unless fit and proper / due
diligence as stipulated by the respective
financial sector regulator, FDI policy, and
FEMA regulations (in terms of sectoral caps,
conditionalities, etc.), is complied with by
the investor.
b) The transfer is to take place at a price that is
not determined in accordance with the pricing
guidelines prescribed by the Reserve Bank.
 c) The non-resident investor proposes
deferment of payment of the amount of
consideration.
The following instances of transfer of shares
from residents to non-residents, by way of sale
or otherwise, requires prior permission of the
FIPB, DIPP, or the Reserve Bank, as the case
may be:
a) The transfer of shares of companies engaged
in sectors falling under the Government
Route;
b) The transfer of shares resulting in foreign
investments in the Indian company,
breaching the applicable sectoral cap; and
c) Transfer of shares by way of a gift from a
resident to a non resident.
Further, transfer of shares from NRI to non-
resident, requires prior approval of Reserve
Bank.
What are the ECB norms in India?
Foreign investment in partially or optionally
or non-convertible preference shares/bonds/
debentures, is construed as an ECB and would
be subject to the ECB norms.
Borrowers can raise ECB from international banks, international capital
markets, multilateral financial institutions, export credit agencies,
suppliers of equipment, foreign collaborators and foreign equity holders.
ECBs may be accessed under two routes: (a)
automatic route; and (b) approval route.
Corporates, including those in the hotel,
hospital, software sectors (registered under the
Companies Act), companies in the miscellaneous
services sector (miscellaneous services means
conducting training activities, research and
development activities and activities that support
infrastructure sector), NBFCs categorized as
Infrastructure Finance Companies and NBFCs
categorised as Asset Finance Companies, Small
Industries Development Bank of India, holding
companies/core investment companies, micro
finance institutions, trusts and NGOs engaged
in micro-finance activities and SEZs units (if
such SEZ unit is using the funds for its own
requirement) except financial intermediaries,
such as banks, financial institutions, housing
finance companies and NBFCs (other than those
NBFCs specifically allowed by RBI) , are eligible
to raise ECB under the automatic route.
These borrowers can raise ECB from
internationally recognised sources such as (i)
international banks, (ii) international capital
markets, (iii) multilateral financial institutions
(such as IFC, ADB, CDC, etc.) / regional
financial institutions and Government owned
development financial institutions, (iv) export
21
 credit agencies, (v) suppliers of equipment, (vi)
foreign collaborators and (vii) foreign equity
holders (other than erstwhile OCBs).
An ECB, irrespective of whether it is obtained
through the automatic or approval route, cannot
be obtained at a cost that exceeds the current all-
in-cost ceilings prescribed by the Reserve Bank.
This ceiling includes the rate of interest, other
fees and expenses in foreign currency except
commitment fee, pre-payment fee and fees
payable in Indian Rupees.
The Reserve Bank prescribes minimum average
maturity periods over which the borrower must
repay the facility. Depending on the value of the
facility, the minimum average maturity ranges
from 3 to 5 years. ECBs of a shorter maturity
period require the prior approval of the Reserve
Bank. An ECB cannot be refinanced or prepaid
22
before the expiry of the
minimum average maturity
period applicable to it.
ECBs also have end-use restrictions on the
amounts received. The permitted uses include,
inter alia, the import of capital goods (as
classified by the Directorate General of Foreign
Trade in the Foreign Trade Policy), acquisition
of shares in the disinvestment process to
the public under the Indian governments
disinvestment programme of shares of public
sector undertakings, ODI in JVs / WOS and
the implementation of new projects and
modernization/expansion of existing production
units in the real sector industrial sector
including small and medium enterprises,
infrastructure sector and specific service sectors,
namely hotel, hospital and software in India.
ECBs are not permitted to be raised for (i)
on-lending or investment in capital markets
or acquiring a company (or a part thereof) in
India by a corporate; or (ii) use in real estate (as
defined and qualified by the ECB Guidelines); or
(iii) working capital, general corporate purposes
and repayment of existing Indian rupee loans
(except in the case of certain specified instances
set out in the ECB Guidelines).
Are there any limitations on
repatriation of royalty/dividend/
consultancy fees?
There are no restrictions specific to non-
residents on the remittance of dividends.
However, as noted above, restrictions do
exist on the ability of a company to declare
a dividend under the Companies Act. The
dividends (net of applicable taxes) declared
on foreign investments can be remitted freely
through normal banking channels. The rate
of dividend payable on preference shares or
convertible preference shares is restricted to 300
basis points over the prime lending rate of the
State Bank of India as on the date of the Board
meeting approving the issue of such shares.
Non-convertible or optionally convertible
preference shares and bonds are treated as an
ECB and the rate of interest has to be within the
limits provided in the ECB policy.
All remittances for royalty fall under the
Automatic Route.
Remittances of consultancy fees exceeding US$ 1
million per project for any consultancy services
procured by an Indian entity from outside India
(other than consultancy services rendered in
respect of infrastructure projects, where the limit
is US$ 10 million per project) requires the prior
approval of the Reserve Bank. However, this
rule does not apply if payments are made out
of funds held in an RFC account of the remitter
or Exchange Earners Foreign Currency (EEFC)
account of the remitter.
23
Acquisition of Shares
What are the various modes of
acquisition of shares of an existing
company?
Typically, shares or instruments convertible into
shares, of an existing company may be acquired
by way of: (i) allotment of newly issued shares by
the company; or (ii) a secondary sale of existing
shares from a shareholder of the company.
For Indian companies, issuance and allotment
and/or sale of shares has to be undertaken in
compliance with the provisions of the 2013 Act,
the rules made thereunder and other applicable
laws. In respect of Indian companies listed on a
stock exchange, additional requirements under
the SEBI ICDR Regulations, 2009 and the SEBI
Takeover Regulations, 2011 have to be duly
followed and complied with.
Are there pricing restrictions
applicable to subscription /
acquisition of shares? Are there
special restrictions applicable to
foreign investors?
Please refer to our response to question 6
under chapter Foreign Investments in
India.
In addition , it is pertinent to note that the
2013 Act has introduced the concept of a
registered valuer in an attempt to provide
a proper mechanism for valuation of various
assets and liabilities related to a company
and to standardise the procedure thereof. The
registered valuer is to be appointed by the audit
committee or in its absence by the board of
directors of the company.
24
While the specific provisions pertaining to the
registered valuer have not been notified yet,
matters such as (i) further issue of shares of a
company, other than rights issue; (ii) non-cash
transaction involving directors; (iii) preparation
of valuation report for a scheme of compromise
or arrangement; and (iv) purchase of minority
shareholding, require valuation to be completed
by a registered valuer. Furthermore, until a
registered valuer is appointed according to the
provisions of the 2013 Act (i.e. until the rules
under the relevant section are notified), the
valuation report can be made by an independent
merchant banker who is registered with SEBI or
an independent chartered accountant in practice
having a minimum experience of 10 years.
Therefore, any property, stocks, shares,
debentures, securities or goodwill or any other
assets requiring valuation under the provision
of the 2013 Act, have to be evaluated by a
registered valuer. A registered valuer is inter-
alia required to make an impartial, true and fair
valuation of any assets which may be required
to be valued and not undertake valuation of
any assets in which he has a direct or indirect
interest at any time during or after the valuation
of the assets.
Can parties enter into put and call
options for the sale and purchase of
shares?
After long deliberation and debate on the
permissibility of the put and call options, in a
major move to facilitate an investor friendly
atmosphere, in October 2013, SEBI sanctioned
pre-emptive provisions such as right of first
refusal, tag along rights, drag along rights to
be included in investment agreements and/or
the Articles of Association of a company.
Further, proviso to Section 58(2) of the 2013
Act provides that any contract or arrangement
between 2 (two) or more persons in respect of
transfer of securities is enforceable as a contract.
While the exact extent of this proviso is yet to
be laboured upon in case law, prima facie, it
appears that, in the context of a public company,
put options and call options may be enforced if
there exists a contract to that effect between the
option-holder and the other shareholders of a
public company.
Additionally, pursuant to an amendment
made by the Reserve Bank in 2013, optionality
clauses have been allowed in equity shares
and compulsorily and mandatorily convertible
preference shares/debentures to be issued to
a person resident outside India under the FDI
scheme with certain restrictions and conditions.
Please refer to our response to question 6 under
chapter Foreign Investments in India for
further discussion.
Can the acquirer enter into
an agreement with the other
shareholders of the company on
governance and transfer related
aspects?
In practice, an acquirer enters into a
shareholders agreement with the other
shareholders of the company for setting
out terms and conditions of operation and
management of a company. As is standard
practice globally, a shareholders agreement,
typically, records and sets out inter-alia the
mutual rights and obligations inter se the
shareholders; the manner in which the company
would be managed and governed including
matters concerning the right to appoint
directors, affirmative voting rights; restrictive
covenants and transfer restrictions on the
shares held by the parties to the agreement. As
an additional step to make such agreements
binding and enforceable, provisions of such
agreements are also incorporated into the
Articles of Association of the company.
25
Competition Law
What are the laws governing
competition/ anti-trust in India?
Competition law in India is governed by the
Competition Act, 2002 (the Competition Act)
and the rules, regulations and guidance notes
made thereunder. The Competition Act aims to
prevent anti-competitive practices, promote
and sustain competition, protect the interests
of the consumers and ensure freedom of trade
in markets. The Competition Act provides for
inter alia the establishment of the Competition
Commission of India (CCI), the nodal
authority for monitoring, enforcement and
implementation of competition law in India and
the Competition Appellate Tribunal (COMPAT).
Orders passed by the CCI may be appealed
to the COMPAT and thereafter, the orders
passed by the COMPAT may be appealed to the
Supreme Court of India.
What is the scope of the Competition
Act?
The Competition Act prohibits anti-competitive
practices, which cause or are likely to cause an
appreciable adverse effect on competition in
India (AAEC). It primarily seeks to regulate the
following:
a) anti-competitive agreements (Section 3);
b) abuse of dominance (Section 4); and
c) combinations (Sections 5 and 6).
What is meant by relevant market
under the Competition Act?
The Competition Act defines the relevant market
26
as the market which may be determined by the
CCI with reference to the relevant product
market or the relevant geographic market or
both. Relevant product market is defined
as a market comprising all those products or
services which are regarded as interchangeable
or substitutable by the consumer, by reason of
characteristics of the products or services, their
prices and intended use. Relevant geographic
market is defined as a market comprising the
area in which the conditions of competition
for supply of goods or provision of services
or demand of goods or services are distinctly
homogenous and can be distinguished from the
conditions prevailing in the neighboring areas.
What are anti-competitive
agreements?
Section 3 of the Competition Act prohibits
and renders void agreements entered into
between enterprises or persons or associations
of persons with respect to the production,
supply, distribution, storage, acquisition or
control of goods or provision of services, which
cause or are likely to cause an AAEC in
India. Under the Competition Act, horizontal
agreements (i.e. any agreement between
enterprises or persons, or associations thereof,
which are engaged in identical or similar trade
of provision of goods or services), including
cartels, are presumed to have an AAEC. This
presumption however, is rebuttable. There is no
presumption of an AAEC in vertical agreements
(i.e. agreements between enterprises or persons,
or associations, which are engaged at different
levels of the production or supply chain).
What is an abuse of a dominant
position?
Section 4 of the Competition Act prohibits the
abuse of a dominant position by an enterprise
or a group. A dominant position is defined
to mean a position of strength, enjoyed by an
enterprise in the relevant market in India,
which enables it to operate independently of
competitive forces prevailing in the relevant
market or affect its competitors or consumers
or the relevant market in its favor. A group
or an enterprise is presumed to be abusing its
dominant position if it either (i) imposes unfair
prices (including predatory pricing) or unfair
conditions on sale or purchase; or (ii) limits or
restricts production/technical development so
as to detrimentally affect consumers; or denies
market access to other players in the market;
(iv) makes conclusion of contracts subject to
acceptance of supplementary obligations which
have no connection with the subject of such
contracts; or (v) uses its dominant position in
one relevant market to enter into, or protect
another relevant market.
What are the factors that the CCI
may take into consideration while
determining the AAEC in cases
involving anti-competitive agreements
and abuse of dominant position?
Section 19(3) of the Competition Act sets out
certain factors that the CCI shall consider,
while determining whether an agreement
has an AAEC under section 3, including inter
alia creation of entry barriers, foreclosure of
competition/removal of competitors, accrual
of benefits to consumers, improvements in
production or distribution of goods or services,
promotion of technical, scientific and economic
development.
Section 19(4) of the Competition Act sets out
certain factors that the CCI shall consider,
while determining whether an enterprise enjoys
a dominant position under section 4, including
inter alia market share, size and resources of
the enterprise and its competitors, economic
power including commercial advantages over
competitors, extent of vertical integration,
dependence of consumers, entry barriers
(regulatory and otherwise), countervailing
buyer power, market structure and size,
social obligations and social costs, relative
advantage by way of contribution to economic
development by the dominant enterprise. The
CCI may also consider other factors that it may
consider relevant for the inquiry.
What is the merger control regime in
India?
From 1 June 2011, any acquisition, merger
or amalgamation, where the parties or their
groups cross the jurisdictional thresholds
(based on assets or turnover) specified in
the Competition Act (read with the relevant
notifications) must be pre-notified to the CCI.
These combinations are subject to Sections 5
and 6 of the Competition Act which prohibit a
combination which causes or is likely to cause
an AAEC in the relevant market in India and
treats such combinations as void. The merger
control regime in India is mandatory and
suspensory and transactions subject to review
by the CCI cannot be concluded until merger
27
clearance in India has been obtained or a
review period of 210 calendar days has passed,
whichever is the earlier.
What are the transactions that require
notification to the CCI?
Section 5 of the Competition Act covers three
broad categories of combinations.
First, the acquisition by one or more persons
of control, shares (including convertible
instruments), voting rights or assets of one or
more enterprises, where the parties or the group
to which the target will belong post-acquisition,
meet specified assets / turnover thresholds (see
below). Acquisitions not involving a change of
control are also caught in this category.
Second, the acquisition by a person of control
over an enterprise where the person concerned
already has direct or indirect control over
another enterprise engaged in the production,
distribution or trading of similar or identical
or substitutable goods, or in the provision of
a similar or identical or substitutable service,
where the parties, or the group to which the
target will belong post-acquisition, meet
specified assets/turnover thresholds (see below).
Third, mergers or amalgamations, where the
enterprise remaining, or enterprise created, or
the group to which the enterprise will belong
after the merger/amalgamation, meets specified
assets/turnover thresholds (see below).
The CCI also seeks to capture innovative
structuring of transactions designed to avoid
28
notifications to the CCI. The Competition
Commission of India (Procedure in regard to the
transaction of business relating to combinations)
Regulations, 2011 (Combination Regulations)
provide that a notification requirement must
be assessed with respect to the substance of
the transaction and that any structure of a
transaction, comprising a combination, which
has the effect of avoiding a filing requirement,
will be disregarded by the CCI. The scope
of this anti-avoidance provision is unclear
and it remains to be seen how the CCI will
assume jurisdiction over transactions which,
strictly speaking, do not trigger a notification
obligation. However, parties will now have
to ensure that transaction structures are not
devised in a manner which has the effect of
avoiding a filing requirement, even where such
an effect is not intended
What are the jurisdictional thresholds
under the Competition Act?
The jurisdictional thresholds are prescribed
in Section 5 of the Competition Act for the
Parties and the Group, as well as for the Target
and are set out in detail below. It should be
noted that there is currently very little formal
guidance from the CCI on the calculation of
1 P
 lease note, the
assets and turnover in order to assess whether foreign exchange
the thresholds are met. rate used for
computing the
thresholds is
Thresholds1 1 USD = INR
63.6, which is
the average spot
i) Parties Test: rate of the last six
months as on 15
a) the Parties have combined assets in India August 2015, as
of INR 1500 crores (approx. USD 235.84 provided by the
Reserve Bank of
million) or combined turnover in India India.
29
 of INR 4500 crores (approx. USD 707.51 Group Test; and (b) the Target Test
million); or are met, the transaction qualifies as a
combination and is notifiable to the CCI.
the Parties have combined worldwide
b)
assets of USD 750 million including As a result of the Target Test, if the target
combined assets in India of INR 750 enterprise either has assets or turnover in
2 T
 he crores (approx. USD 117.92 million) India, below the stipulated thresholds, the
Combination
Regulations or combined worldwide turnover of transaction involving such a target would be
clarify USD 2250 million including combined exempt from the requirement of pre-approval
that other
document turnover in India of INR 2250 crores from the CCI, irrespective of whether the other
referred above
(approx. USD 353.76 million); OR thresholds are met (the Target Exemption).
shall mean
any binding
document,
by whatever
ii) Group Test: Due to the wording of the Target Exemption,
name called, a) the Group has assets in India of INR 6000 it is currently only available in relation to
conveying an
agreement/ crores (approx. USD 943.35 million); or transactions effected by way of an acquisition
decision to turnover in India of INR 18000 crores and not through mergers or amalgamations.
acquire control,
shares, voting (approx. USD 2830.05 million); or The CCI has clarified that a de-merger of
rights or assets. assets/business undertaking, which takes place
Where such
document the Group has worldwide assets of USD
b) through a court approved scheme, will be
has not been
3000 million including assets in India treated as an acquisition under Section 5(a) of
executed but
the intention of INR 750 crores (approx. USD 117.92 the Competition Act, and the Target Exemption
to acquire is
communicated
million) or worldwide turnover of USD would be available in this case. It is relevant to
to a Statutory 9000 million including turnover in note that the Target Exemption is presently only
Authority, the
date of such India of INR 2250 crores (approx. USD available till March 3, 2016.
communication 353.76); AND
will be deemed
to be the date What is the trigger event that requires a
of execution iii) Target Test: filing?
of the other
document for The target enterprise (including its Under the Competition Act, the trigger event for
acquisition.
subsidiaries, units, or divisions) which is the notification of a proposed transaction to the
In the event being acquired has: CCI is:
of a hostile
acquisition,
a) assets in excess of INR 250 crores
other document (approx. USD 39.31 million) in India; and a) final approval of the proposed merger or
would mean
any document amalgamation by the boards of directors of
executed by b) turnover in excess of INR 750 crores the enterprises concerned; or
the acquirer
conveying a (approx. USD 117.92 million) in India. b) execution of any agreement or other
decision to document2 for acquisition or acquiring of
acquire.
If: (a) either the Parties Test or the control.

30
Is there any time period within which
the CCI is required to be notified?
The Competition Act requires the parties to
notify the CCI of a proposed transaction within
30 (thirty) calendar days of a trigger event.
Are internal restructurings notifiable?
Among the various types of transactions that
are ordinarily exempt under the Combination
Regulations, Item 8 of Schedule I exempts
intra-group acquisitions from notification to
the CCI except where the acquired enterprise
is jointly controlled by enterprises that are not
part of the same group. In respect of intra-
group mergers and amalgamations, Item 9 of
Schedule I exempts those transactions that
take place: (i) when one enterprise holds more
than 50% shares or voting rights in the other
enterprise; and/or (ii) where enterprises within
the same group hold more than 50% of shares
or voting rights in each of the parties to the
merger/amalgamation. It should be noted,
however, that the exemption will not apply
where the merger/amalgamation results in the
transfer from joint control to sole control.
What is the process of merger filing?
The Combination Regulations, prescribe three
forms for filing a merger notification:
a) Form I (i.e. short form) All notifications
are ordinarily required to be filed in Form
I. The parties are required to provide basic
information pertaining to the combination,
with a filing fee of INR 1.5 million
(approximately USD 23,500).
b) Form II (i.e. long form) The parties are
free to file the merger notification in Form
II along with a filing fee of INR 5 million
(approx. USD 78,600). The Combination
Regulations recommend that Form II be filed
for transactions where:
the parties to the combination are
a)
competitors and have a combined market
share in the same market of more than
15%; or
b) where the parties to the combination are
active in vertically linked markets and
the combined or individual market share
in any of these markets is greater than
25%.
Further in cases where parties have
filed Form I, if the CCI believes that
it requires information in Form II, it
may require parties to file notice in
Form II. The time periods mentioned
in Section 6 (2A) and Section 31 (11) of
the Competition Act and Regulation 19
of the Combination Regulations would
restart if CCI required Form II to be
filed where the parties filed Form I.
The CCI also has the power to invalidate
a notification form, if it is of the opinion
that the notification is not complete, or is
not in conformity with the requirements
of the Combination Regulations.
c) Form III - is a post-completion application
form, which must be filed within 7 (seven)
days of an acquisition, share subscription
or financing facility entered into by a
31
 public financial institution, registered FII,
bank or registered Venture Capital Funds,
under a covenant in a loan agreement or an
investment agreement.
d) The obligation to notify the CCI lies with the
acquiring company in case of an acquisition
and jointly with the parties, in case of a
merger or amalgamation.
How long will the CCI review process
take?
Phase I Investigation
On receipt of a notification, the CCI is required
to form a prima facie opinion on whether a
combination causes or is likely to cause an AAEC
within the relevant market in India within a
period of 30 working days. If the CCI requires
the parties to remove defects in the notification
or to provide additional information, it stops
the clock until the additional information is
provided. This means that it can take much longer
than 30 days for the CCI to reach an opinion.
At this stage, the parties are also free to propose
modifications to the combination up front in
order to satisfy the CCI that the combination
will not cause an AAEC in the relevant market
in India. In such a scenario, the CCI will get
an additional 15 (fifteen) days to evaluate the
proposed modification.
Phase II Investigation
If the CCI forms a prima facie opinion that a
combination is likely to cause an AAEC, a
detailed investigation will follow and the parties
cannot complete the transaction until the earlier
of:
32
a) final decision by the CCI; or
b) lapse of 210 (two hundred and ten) days
from the date of notification to CCI.
During the Phase II Investigation, if the CCI is of
the opinion that the combination has or is likely
to have an AAEC, but such adverse effect can
be eliminated by suitable modification(s) to
the combination, it may propose appropriate
modification(s) to address such concerns.
The CCI has stated in the Combination
Regulations that it shall endeavor to clear
combinations within 180 (one hundred and
eighty) calendar days of filing a notice.
Are there any exemptions from
mandatory pre-notification?
In addition to the transactions that can avail
of the Target Exemption (as provided in
query 9 above), the transactions falling under
following 2 categories are exempt from making
a notification under the Competition Act:
a) Transactions expressly exempt under
the Competition Act: Acquisitions, share
subscriptions or financing facilities entered
into by public financial institutions,
registered FIIs, banks or registered VCFs,
under a covenant in a loan agreement or
an investment agreement, are exempted
from obtaining prior clearance from the CCI,
and a post facto filing in Form III within 7
(seven) days of completion of acquisition is
contemplated.
b) Transactions that are ordinarily
exempt under Combination Regulations:
 Transactions set out in Schedule I of the
Combination Regulations are presumed not
to cause an AAEC in India, and normally do
not require a notification as per Regulation
4 of the Combination Regulations. Such
transactions include transactions such as
acquisitions of shares or voting rights
which do not entitle the acquirer to hold
25% or more of the target company, made
solely for investment purposes or in the
ordinary course of business, not leading
to control; acquisitions of additional
3
shares or voting rights of an enterprise by
the acquirer or its group, not resulting in
gross acquisition of more than 5% of the
shares or voting rights of such enterprise
in a financial year, where the acquirer or
its group, prior to the acquisition, already
holds 25% or more shares or voting rights
of the enterprise, but does not hold 50%
or more of the shares or voting rights
of the enterprise, either prior to or after
such acquisition; acquisition of assets not
directly related to the business activity of the
acquirer, or made in the ordinary course of
business or solely as an investment, provided
that the assets do not represent substantial
business operations in a particular location
of the target enterprise and does not lead
to acquisition of control of the target
enterprise; acquisition of current assets in
the ordinary course of business; intra-group
3 P
 lease note,
this exemp- restructurings as described in Section 12,
tion has been above.
significantly
watered down
by the CCIs
Until the end of March 2014, the
decisional
practice. Combination Regulations provided an
exemption for transactions between
parties outside India provided there was
insignificant local nexus and effects on
markets in India. The CCI interpreted the
exemption narrowly, rendering it virtually
redundant. However, the CCI has now
withdrawn the exemption, so that foreign
to foreign transactions satisfying the
standard assets and turnover thresholds
under the Competition Act and not covered
by any of the other exemptions, will have
to be notified even if there is no local
nexus and effects on markets in India.
Is it possible to have pre-notification
discussions with the CCI?
It is possible to have substantive and
procedural prenotification consultations with
the CCI. However such consultations are oral
and non-binding on the CCI.
What are the factors that the CCI
may take into consideration
while determining the AAEC of a
combination in India?
Section 20 of the Competition Act sets out
certain factors that the CCI shall consider,
while determining if a combination causes or
is likely to cause an AAEC in the relevant
market in India, including inter alia, the actual
and potential level of competition through
imports in the market, entry barriers to the
market (regulatory and otherwise), degree of
countervailing power in the market, availability
of substitutes in the market, market shares
of each of the parties to the combination
(individual and combined), likelihood of
33
 foreclosure/removal of competitors, extent of
vertical integration in the market, etc. The
CCI is also required to consider the positive
effects that a combination could potentially
give rise to, i.e. possibility of saving a failing
business, nature and extent of innovation and
relative advantage through contribution to
economic development brought about by any
combination having or likely to have an AAEC
in India.
What orders can be passed by the CCI
in case of merger control?
The CCI can pass an order approving the
combination if the combination does not
cause an AAEC in the relevant market in
India. In the event that the CCI is of the view
that the combination results in an AAEC,
it may block such a combination and/or it
can propose suitable modifications to the
same, which are required to be carried out
within a prescribed time period. The parties
34
to the combination also have the option of
submitting amendments to the modifications
proposed by the CCI, which may be approved
or blocked by the CCI. The CCI may also
issue interim orders (by way of a temporary
injunction) restraining any party from
carrying on any act which is or is likely to
be in contravention of Section 3, 4 or 6 of the
Competition Act.
What are the penalties imposed in
the event of non-compliance with the
provisions of the Competition Act?
In case of failure to intimate the proposed
combination which exceeds the prescribed
thresholds, the CCI can impose a penalty up
to 1% (one percent) of the total turnover or
assets of a combination, whichever is higher.
If an enterprise is found to be in violation
of Section 3 of the Competition Act (anti-
competitive agreements), the CCI may order the
enterprises to discontinue and/or modify the
agreement and/or impose a penalty which may
be up to 10% (ten percent) of the average
turnover for the last 3 (three) financial years.
In case of cartels, the CCI may alternatively
impose upon each enterprise or person
which is included in the cartel, a penalty of up
to 3 (three) times of its profit for each year of
continuance of such agreement or 10% (ten
percent) of its turnover for each year of the
continuance of such agreement, whichever is
higher.
If an enterprise is found to be in violation of
Section 4 of the Competition Act (abuse of
dominance), the CCI may order the enterprise
to discontinue such an abuse and/or impose a
penalty which may be up to 10% (ten percent)
of the average turnover for the last 3 (three)
financial years and/or may order division of
an enterprise enjoying a dominant position to
ensure that such enterprise does not abuse its
dominant position.
Further, a failure to furnish information or
providing of false information will attract
a monetary penalty of a minimum of INR 5
million upto a maximum of INR 10 million.
The Competition Act also imposes a personal
liability on the responsible officers of a
company, in case of a contravention by a
company. Where a company has contravened
the provisions of the Competition Act, every
person who at the time of the contravention
was in charge of, and was responsible to the
company for the conduct of the business of
the company, shall be deemed to be guilty
and punished accordingly. However, such a
person will not be liable to any punishment if
he proves that the contravention was committed
without his knowledge or that he had exercised
all due diligence to prevent the commission
of such contravention. In addition, where the
contravention is attributable to any neglect on
the part of, any director, manager, secretary or
other officer of the company, such persons, shall
also be deemed to be guilty of the contravention
and be punished accordingly.
How is the procedure of CCI and the
COMPAT regulated?
The CCI and the COMPAT while discharging
their respective functions are guided by the
principles of natural justice, subject to the
provisions of the Competition Act and the
relevant rules made by the Central Government,
and have the power to regulate their own
procedure. Both have the same powers as
vested in a civil court under the Code of Civil
Procedure while trying a suit with respect to
matters such as summoning and enforcing
attendance of any person and examining him
on oath, receiving evidence on affidavit, etc.
35
Intellectual Property

What is the law relating to protection of intellectual property rights in India?

As a signatory to the TRIPs Agreement and keeping in line with Indias obligations, amendments
have been made in the existing legislations for compliance, such as the introduction of Patents
(Amendment) Act, 2005 and Patents (Amendment) Rules 2014 and a new Trade Mark Regime.

Important laws governing IP in India are:-

The Patents Act, 1970 as amended by The Patents (Amendment) Act, 2005
Patents
The Patent Rules,2003, as amended by The Patents (Amendment) Rules, 2014
Designs Act, 2000
Designs
Designs Rules, 2001 as amended by Designs (Amendment) Rules, 2014
Trade Marks Act, 1999 as amended by Trade Marks (Amendment) Act, 2010
Trademarks
Trade Marks Rules 2002, as amended by Trade Marks (Amendment) Rules, 2013
The Copyright Act, 1957 as amended by The Copyright (Amendment) Act, 2012
Copyrights
Copyright Rules, 2013
Geographical The Geographical Indications of Goods (Registration & Protection) Act, 1999
indications The Geographical Indications of Goods (Registration & Protection) Rules, 2002
The Protection of Plant Varieties and Farmers Rights Act, 2001
Plant varieties The Protection of Plant Varieties and Farmers Rights Rules, 2003 as amended by
Protection of Plant Varieties and Farmers Rights (Third Amendment) Rules, 2009.
Semiconductor The Semiconductor Integrated Circuits Layout- Design Act, 2000
integrated circuits The Semiconductor Integrated Circuits Layout- Design Rules, 2001
Biological Diversity Act, 2002
Biodiversity
Biological Diversity Rules, 2004

How are computer software and
programs protected in India?
India recognizes and protects computer
programmes, tables and compilations including
computer databases as literary works under the
Copyright Act. Both the object and source codes
can be protected as literary works under the
Act. The protection provides for rights to sell or
offer to sell, give on commercial rental or offer
for commercial rental any copy of the computer
programme, provided the programme itself is
an essential object of the rental. Also, under the
Copyright Act, the owner of a copyright work is
entitled to protect his works against unauthorised
use and/ or misappropriation of his work or a
substantial part thereof and obtain relief from a
court of law including injunction, damages and
accounts of profits.

36
The Patents Act prohibits patentability of
computer programme per se, which the
Patent Office in most cases treats as an absolute
preclusion on computer implemented method
claims. Essentially all computer programmes
need a combination with some hardware to avoid
the preclusion. Inventions directed at computer
programs coupled to hardware, enabling the
hardware to perform a certain function may be
allowable, if such an invention meets all other
conditions of patentability. System claims on
the other hand are routinely allowed, subject
to meeting the requirements for novelty and
inventiveness. The rights provided by patent
law bestow on the patentee the exclusive right
to prevent third parties from the acts of using,
offering for sale, selling or importing for those
purposes, the patented article.
What patent protection is available to a
biotechnology company?
Inventions in the field of biotechnology would
be subject to the same criteria as any other
invention relating to product and process.
Patents may not however be secured in respect
of plants and animals in whole or any part
thereof, including seeds, varieties and species
and biological processes for production or
propagation of plants and animals (some of
which are presently protectable under other
legislations such as Plant Varieties and Farmers
Rights Act.) The preclusion in patentability of
plants and animals does not however extend
to microorganisms that are subjected to
modification. However, microorganisms that
are found naturally occurring in nature are
statutorily precluded from patentability.
How are trademarks and service marks
protected in India?
Under the Trade Marks Act, trade mark is
defined as a mark that is capable of both: a) a
graphical representation and b) distinguishing
the goods or services of one undertaking
from another. Mark includes a device, brand,
heading, label, ticket, name, signature, word,
letter, numeral, shape of goods, packaging or
combination of colours or any combination
thereof.
Registration under the Trade Marks Act confers
exclusive rights to use the mark, subject to any
conditions imposed, and if these rights are
infringed to take action to restrain unauthorised
users.
Apart from and/or in addition to registration, a
person can also obtain rights in an unregistered
mark. By virtue of use of a trademark, a
proprietor acquires valuable goodwill which
is protectable at common law by way of a
passing off action. The protection also extends to
unauthorised use in relation to trade names or
domain names.
The civil remedies/reliefs available to trade mark
owners, among others, include an injunction,
damages or account of profits with or without
any order of delivery-up of the infringing labels
and marks for destruction and erasure. One
can seek interlocutory ex parte orders against
the misusers and seek appointment of local
commissioners to seize the infringing goods.
37
 How does one protect confidential
information and trade secrets in India?
Confidential information and trade secrets are
protected in India under principles of equity and
the law of contract. The protected information
must be such, the release of which would be
injurious to its proprietor or of advantage to third
parties; it must be confidential or secret, i.e. it is
not already within the public domain; and the
proprietor should have taken reasonable steps
to maintain its secrecy or confidentiality. The
methods usually used to protect confidential
information are confidentiality clauses in
employee contracts, non-disclosure agreements
with third parties in the course of a business
venture, and internal security mechanisms
to restrict access and dissemination of trade
secrets and confidential information within an
organization.
Legal recourses available include, inter alia,
injunctions restraining disclosure or use of
information, return of confidential proprietary
information on termination of a contract, and
damages and account of profits arising out of
Unauthorised disclosure or use .
Can the employees of an Indian company
be required to sign confidentiality
agreements?
Yes. Confidentiality provisions may be included
in the employment terms to bind the employee
to inter alia keep the information received
during the course of employment confidential.
Such terms may also include requirements for
personnel to return all confidential information
and material to their employer at the time of
38
termination of their employment. Additionally,
requirements preventing such personnel from
utilizing such confidential information in their
new job may also be imposed.
What is the protection available in case
of infringement of intellectual property
rights?
All the relevant statutes on intellectual property
have provisions relating to remedies and reliefs
available to an owner in case of infringement
including injunction, damages or accounts. In
addition to civil remedies, the owner is also, in
some cases, entitled to criminal remedies for
infringement of copyright and trademarks. There
are detailed provisions relating to such offences
which are punishable with imprisonment and
fine.
Does Indian law recognize transactions
carried out electronically?
The Information Technology Act, 2000,
provides for, inter alia, legal recognition for
transactions carried out by means of electronic
data interchange and other means of electronic
communication, commonly referred to as
electronic commerce. Such communication
may involve the use of alternative to paper-
based methods of communication and storage
of information to facilitate electronic filing of
documents with the Government agencies and for
matters connected therewith or incidental thereto.
The IT Act provides legal recognition to
electronic records if the information or matter is
(a) rendered or made available in an electronic
form; and (b) accessible so as to be usable for
a subsequent reference. The Act also provides
legal recognition for electronic signatures where
information or matter is authenticated by means
of digital signature affixed in such manner as may
be prescribed by the Central Government.
How can a company outsourcing its
activities to India safeguard intellectual
property; which is created in the course of
performance of an outsourcing contract?
Law permits for assignment of rights either
partially or wholly and for whole of the duration
or any part thereof. In a case where a company
outsources its work to a third party contractor/
vendor, it is essential to ensure that the contract
mentions ownership or terms of use of intellectual
property. In case of a pre-existing intellectual
property, generally ownership lies with the
party who created it, however, the third party
contractor/vendor may be afforded rights to use the
intellectual property through a negotiated license
agreement. The license agreement should contain
appropriate terms of use and may be exclusive
or non-exclusive. In case of a newly created
intellectual property, it is essential to identify who
will have ownership of the intellectual property
in the contract itself, and whether the vendor will
have certain rights regarding its usage or will it be
joint-ownership. The intellectual property related
terms and conditions must comply with the
requirements and provisions as laid down under
the respective intellectual property legislations.
What are the relevant data protection laws
in India?
The IT Act contains provisions relating to
data protection and imposes civil liability for
negligent handling of sensitive personal data
or information and criminal liability with
punishment in cases of disclosure of information
in breach of a lawful contract. The Information
Technology (Reasonable security practices
and procedures and sensitive personal data or
information) Rules, 2011 lay down directions
to be followed by a body corporate for the
protection of personal information including
sensitive personal information/data, procedure to
be followed for collection of such data and further
disclosure of such collected data. These Rules
regarding sensitive personal data or information
are applicable to body corporates or any person
located within India. Unauthorised disclosure is
punishable with imprisonment up to 3 years and
a fine upto Rupees 500,000 or both.
Additionally, the Act empowers the Government
that in the interest of sovereignty or integrity
of India, defence of India, security of the State,
friendly relations with foreign States or public
order or for preventing incitement to the
commission of any cognisable offence relating
to the above or for investigation of any offence,
it may by order, direct any agency of the
Government to intercept, monitor or decrypt or
cause to be intercepted or monitored or decrypted
any information generated, transmitted, received
or stored in any computer resource. Further, the
Information Technology (Procedure & Safeguards
for Blocking for Access of Information by Public)
Rules, 2009, provides that the Government may
exercise power to issue directions to block an
internet site. However, the reasons for blocking
have to be recorded in writing and are amenable
to judicial scrutiny.
39
Employees
What is the general frame work of
employment laws in India?
The Indian parliament as well as the legislature
of the relevant State has power to concurrently
legislate on the subject of labour. Broadly, the
key labour legislations in India can be grouped
as follows:
Group I
Laws to provide basic protection to industrial
workers:
a) Factories Act, 1948;
b) Payment of Wages Act, 1936;
c) Contract Labour (Regulation and Abolition)
Act, 1970 ;
d) Employees Compensation Act, 1923;
e) Employers Liability Act, 1938;
f) Fatal Accidents Act, 1855; and
g) Apprentices Act, 1961
Group II
Laws for promoting industrial peace, harmony,
conciliation and adjudication of industrial
disputes:
a) Industrial Disputes Act, 1947;
b) Industrial Employment (Standing Orders)
Act, 1946; and
c) Trade Unions Act, 1926.
Group III
Laws providing social security and welfare of
employees:
a) Employees Provident Funds and
Miscellaneous Provisions Act, 1952;
40
b) Employees State Insurance Act, 1948;
c) Payment of Gratuity Act. 1972;
d) Payment of Bonus Act, 1965;
e) Maternity Benefits Act, 1961;
f) Minimum Wages Act, 1948;
g) Factories Act, 1948; and
h) Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act,
2013.
Group IV
General Law:
a) Constitutional provisions relating to
fundamental rights enshrined in the
Constitution of India; and
b) Indian Contracts Act, 1872.
Group V
State Laws:
a) Shops and Establishments Acts in force in
various States;
b) Industrial Establishments (National And
Festival Holidays and Other Holidays) Act;
c) State specific Labour Welfare Fund Acts; and
d) State rules under and amendments to
Central laws.
Certain developments have been proposed by
the Government of India to consolidate, simplify
and make the labour legislations investor
friendly. Five labour codes are proposed which
will consolidate various labour legislations to
ease business for stakeholders and promote
effective compliance with labour laws in India.
Are there any restrictions on
employment of foreign nationals in
India?
Employment of foreign nationals is permitted
in India subject to possession of a valid
employment visa by such foreign national.
Employment visas cannot be issued for routine,
ordinary, secretarial or clerical jobs. It can be
issued to skilled/ qualified professionals or to
persons engaged or appointed on contractual or
employment basis and not otherwise.
A foreign national being sponsored for an
employment visa in any sector should draw
a salary in excess of US$ 25,000 per annum.
However, this condition of annual floor limit on
income will not apply to : (a) Ethnic cooks, (b)
Language teachers ( other than English language
teachers) / translators, (c) Staff working for the
concerned Embassy/ High Commission in India
and (d) Foreigners, eligible for E visa for honorary
work with the Non-Governmental Organisations
registered in the country without salary.
In the case of the issuance of an employment
visa for a period of 180 days or less, registration
with the concerned Foreigners Regional
Registration Office (FRRO) is not required.
If, however, the employment visa is valid for a
period of more than 180 days, it will carry an
endorsement to the effect that the employment
visa holder must register with the concerned
FRRO within 14 days of arrival.
No change of employer shall be permitted during
the currency of the employment visa. In cases
wherein the foreign national desires to change the
employment to another company/organization, he/
she will have to leave the country and apply for a
41
 fresh employment visa. However, there are certain
exceptions for which a permission is required to be
obtained from the relevant authorities.
What are the statutory working hours
prescribed under Indian labour laws
and is there a requirement to pay
overtime wages?
Indian labour legislations typically provide for a
maximum of 9 (nine) hours of working hours a
day and 48 (forty eight) hours a week.
It may be noted that employment of women
employees is restricted at night. However
special exemptions have been made available to
IT/ITES industries. IT/ITES companies are also
permitted to have 24 x 7 operations subject to
the satisfaction of the State specific prescribed
conditions.
Employees who work in excess of the normal
working hours are entitled to over-time wages,
typically at the rate of twice the ordinary rate of
wages.
Employees who work on National holidays
are entitled to compensatory off in addition to
overtime payment in most States.
Indian employees are permitted to subscribe
to equity shares of a foreign company under a
cashless ESOP scheme subject to the condition
that it does not involve remittance from India.
42
Are there statutory requirements for
grant of leave or public holidays?
The Factories Act, the relevant Shops and
Establishments legislations provide for annual
leave with wages to employees.
In addition to the weekly holidays and
compensatory holidays prescribed under
and the relevant Industrial Establishments
(National And Festival Holidays and Other
Holidays) Act and the State specific Shops and
Establishments Act, the employees are also
entitled to national holidays such as Republic
Day (26th January), Independence Day (15th
August) and Gandhi Jayanthi (2nd October)
and 5 (five) to 7 (seven) holidays from amongst
a list of holidays notified by the respective State
Governments for each calendar year under the
Negotiable Instruments Act.
Are employees entitled to maternity/
paternity leave?
Women employees are entitled to 12 (twelve)
weeks of paid maternity leave, if they have
worked for at least 80 (eighty) days in the
12 (twelve) months preceding the expected
delivery date.
Paternity leave although, not statutorily
recognised in India, may be granted in
accordance with the policies of the company.
Can employees of the Indian company
be granted employee stock options in a
foreign company?
A foreign company can issue employee stock
options to employees of (i) its office or branch

in India; (ii) its subsidiary in India; and (iii) an
Indian company in which it has equity, direct
or indirect (through a Special Purpose Vehicle
or step-down subsidiary), irrespective of the
percentage of the direct or indirect equity stake
in the Indian company, provided that the shares
under the employee stock option scheme are
offered (a) globally on a uniform basis; and
(b) an annual return in the prescribed format,
is submitted by the Indian company to the
Reserve Bank of India through an authorized
dealer bank giving details of remittances and
beneficiaries.
Indian employees are permitted to subscribe
to equity shares of a foreign company under
a cashless employee stock option scheme
subject to the condition that it does not involve
remittance from India.
The Reserve Bank of India had announced a
Liberalized Remittance Scheme (the Scheme)
in February 2004 as a step towards further
simplification and liberalisation of the foreign
exchange facilities available to resident
individuals. The Scheme is amended every year
whereby the remittance limits are enhanced. As
per the latest amendment, resident individuals
may remit up to USD 250,000 per financial year
for any permitted capital and current account
transactions or a combination of both.
Can employment contracts contain
restrictive covenants like non-compete?
Any agreement in restraint of trade is void
under the provisions of the Indian Contract Act,
1872. Restrictive covenants operative during
the period of the contract of employment
when an employee is bound to serve his/ her
employer exclusively are generally not regarded
as restraint of trade and therefore do not fall
under section 27 of the Indian Contract Act.
A restrictive or negative covenant that the
employee would not engage himself in a trade
or business, or would not get himself employed
in any other manner, or perform similar or
substantially similar duties for another, is not
43
therefore a restraint of trade unless the contract
as aforesaid is unconscionable or excessively
harsh or unreasonable or one-sided. However,
any such restraint which extends beyond
the terms of this contract is void and not
enforceable. The Supreme Court of India has
held that agreements restraining an employee
from carrying on the activities that are similar to
that of his/her employer upon the termination
of such employment would be void and
unenforceable, whereas agreements that impose
a restraint during the course of employment
could be enforceable.
44
How can the services of an employee be
terminated?
The services of an employee can be terminated
in accordance with the terms of his/ her
employment contract and in compliance
with the applicable law. If such employee is
covered under the relevant States Shops and
Establishment Act or if such an employee is a
workman under the Industrial Disputes Act,
then the termination will have to also be in
accordance with such statute, which prescribe
the minimum notice period, payment in lieu of
notice and severance payments. Termination for
Services of an employee can be terminated in accordance
with the terms of his/ her employment contract and in
compliance with the applicable law.
misconduct/gross misconduct will need to be
preceded by a domestic enquiry following the
principles of natural justice.
Are severance payments statutorily
required to be paid in India?
Termination of employees and the associated
severance payments would depend on whether
such employees are classified as workmen
or non-workmen. Under the provisions of
the Industrial Disputes Act, a workman with
at least 1 (one) year of continuous service is
entitled to compensation equal to 15 (fifteen)
days average pay for every completed year of
continuous service or part thereof in excess
of 6 (six) months, if his/her services are
terminated for any reason, except on account of
disciplinary proceedings, voluntary retirement,
superannuation, non-renewal of employment
contracts or on the ground of continued ill
health. Statutory compensation is also payable
to workmen in the event of lay off/closure of
an undertaking. The Shops and Establishments
legislations in certain states also provide
for payment of severance compensation to
employees covered under the legislation on
termination of their employment. The Payment
of Gratuity Act entitles an employee to a
gratuity payment upon termination of his/ her
service after the completion of 5 (five) years
of continuous employment, of an amount of
severance pay equivalent to 15 (fifteen) days
wages for each completed year of service.
Is there a mandatory requirement to
engage apprentices?
The Apprentice Act, 1961 (Apprentice Act)
and the Apprenticeship Rules, 1992 (Rules)
have made it mandatory for organisations
falling under the notified industries to
engage apprentices in designate trades in
establishments where the number of workers
exceed forty (40) and prescribes the number of
apprentices required to be engaged. The term
worker has been given a wide import and
includes both direct and indirect employees.
The engagement of apprentices is required to
be in compliance with the prescribed procedure
under the Apprentice Act and Rules.
45
Taxes

What is the law relating to taxation in India?

Corporate Tax
Custom Duty

Dividend Distribution Tax

Minimum Alternate Tax Central Excise Duty

Capital Gains

Value Added Tax /

Security Transaction Tax
Central Sales Tax

Wealth Tax

Withholding Tax Entry Tax / Octroi

Transfer Pricing

Pofessional Tax
Tax Treaty Interpretation

The Constitution of India empowers the Central, State and Local Governments to levy taxes over specified subject
matters. The Central Government levies direct taxes personal income tax, wealth tax, corporate tax and indirect
taxes customs duty, central excise duty, central sales tax and service tax. The States are empowered to levy value
added tax, entry tax, and professional tax etc. Some local authorities are also empowered to levy municipal taxes e.g.,
octroi etc.

The Central Government and the State Governments enact their respective Finance Acts annually to establish
modified tax rates for the particular fiscal year. At the Central Government level, taxes are administered through the
Ministry of Finance (MOF) and at the state and local levels, taxes are administered by the state or local authorities
comprising of State Tax Commissions, Revenue Departments.

46
INCOME TAXES
What is the legislation, which governs
the levy of income tax in India?
The law relating to income tax is incorporated
under the Income Tax Act, 1961 (IT Act).
The IT Act undergoes changes every year with
amendments brought out through an annual
Finance Act passed by the Parliament.
The Indian financial year runs from April 1 to
March 31. The said period is commonly referred
to as Fiscal Year or Previous Year. The
year following the Previous Year is known as
Assessment Year.
What are the income tax rates in force for
Individuals in India?
Taxability in India is governed by tax residency
of an individual during a fiscal year, which is
based on the number of days an individual
is physically present in India in a fiscal year
and previous fiscal years. Tax Residency can
be categorized as Ordinarily Resident (ROR),
Not Ordinarily Resident (NOR) and Non
Resident (NR). Subject to any tax treaty
benefits, NOR and NR are generally taxed on
Indian sourced income. ROR are taxed on their
worldwide income in India.
The following table provides the income tax
rates applicable for individuals in relation to
fiscal year 2015-2016.
The effective tax rates in case of individual(s) are
as under:-
Total Income Tax Rate Effective Tax Rate*
Upto INR 250,000** Nil Nil
INR 250,001 to INR 500,000 10% 10.30%
INR 500,001 to INR 1,000,000 20% 20.60%
INR 1,000,001 and above 30% 30.90%
Note:
* The rates are inclusive of applicable education cess and secondary
& higher education cess, which is 3 per cent. A surcharge at the rate
of 12 per cent of income-tax will be levied, in case total income of an
individual exceeds INR 10 million. An Indian resident whose total
income does not exceed INR 5 lakhs eligible for a rebate of 100 percent
of income tax, subject to a maximum amount of INR 2000
** The exemption limit for resident individuals above 60 years of age
and below 80 years is INR 300,000. In case of a resident individual of
age of 80 years or above, the basic exemption limit is INR 500,000
How are Corporations taxed in India?
A Corporation is regarded as a resident in India
if:
It is incorporated in India; or
It is not incorporated in India but its place of
effective management (i.e. a place where the
key management and commercial decisions
that are necessary for the conduct of the
business of any entity as a whole are, in
substance, made), during the relevant fiscal
year, is in India.
Corporations resident in India are taxed on their
worldwide income arising from all sources.
47
Moreover, the IT Act imposes an additional What are the income tax rates in force for
tax on a domestic company buying back its Corporations in India?
shares (not being listed company shares) from The effective tax rates applicable to
its shareholders (Buy Back Tax). Such tax Corporations have been summarized below:
is payable on the difference between the buy
back price and the issue price of such shares.
Particulars Tax Rate Effective Tax Rate1
Furthermore, income in respect of such buy
back by the company is tax exempt in the hands Corporate Tax Rate
of shareholders Domestic Company
a) Taxable income up to 30.90%
In addition to the above, Dividend Distribution INR 10 million
30% in
b) Taxable income above 33.06%
Tax (DDT) is imposed on a domestic all cases
INR 10 million
company, which declares, distributes or c) Taxable income above 34.61%
pays any dividend to its shareholders. Such INR 100 million
dividend income is exempt in the hands of
Foreign Company
the shareholders. The IT Act provides for the a) Taxable income up to 41.20%
removal of the cascading effect of DDT in multi- INR 10 million
40% in
tiered corporate structures, subject to certain b) Taxable income above 42.02%
all cases
conditions. INR 10 million
c) Taxable income above 43.26%
INR 100 million
Nonresident corporations are essentially
taxed on the income earned from a business DDT
connection in India or from other Indian Domestic Company 15% 17.30%
sources. If a tax treaty exists between India
Buy Back Tax
and the country of residence of the taxpayer,
the provisions of the IT Act or the tax treaty, Domestic Company (unlisted) 20% 23.07%

whichever is more beneficial, will apply.

Accordingly, the taxability of non-residents in
India may be restricted or modified and lower
tax rates may apply. Non-resident corporations
are not subject to DDT or Buy Back Tax.
In general, Indias tax treaties provide that
1 I ncluding applicable surcharge and education cess.
As per the Finance Act, 2015, the domestic companies with total income in excess
of INR 100 million are subject to a surcharge at the rate of 12 per cent of income
tax. In case the total income of the domestic company is in excess of INR 10
million but less than INR 100 million, a surcharge of 7 per cent of the income tax
is levied. However, a surcharge of 12 percent is imposed on DDT and buy back
tax in all cases, irrespective of the amounts distributed. Moreover, in all cases,
domestic companies are subject to an education cess of 3 per cent on the amount
of income tax as increased by the surcharge payable by such company.

residents of other countries are subject to
Indian tax on business profits derived from a
business in India only if the non-resident has a
Permanent Establishment (PE) in India.
In case of a foreign company with total income in excess of 100 million rupees,
a surcharge at the rate of 5 per cent of income-tax will be levied. A surcharge of
2 per cent will continue to be levied on foreign companies with total income in
excess of 10 million rupees but which does not exceed 100 million rupees. In all
cases, education cess is levied at the rate of 3 per cent.

48
 The applicable withholding tax rates for foreign
Particulars Tax Rate Effective Tax Rate1
companies are as follows. The tax rates are
Minimum Alternative Tax (MAT)* subject to any beneficial rates available under
Domestic Company 18.5% 19.06% of the the applicable tax treaty.
a) Taxable income upto INR in all book profits
10 million cases Particulars Tax Effective Tax
b) Taxable income above INR 20.39 % of the Rates Rates
10 million book profits
Dividends* Nil Nil
c) Taxable income above INR 21.34% of the
100 million book profits Interest
a) Taxable income 41.2%/ 20.6%/
up to INR 10 5.15%
Foreign Company 40%/
million
a) Taxable income upto INR 18.5% 19.06% of the 20%/
b) Taxable income 42.02%/
10 million in all book profits 5%**
above INR 10 21.01%/ 5.25%
b) Taxable income above INR cases 19.44% of the in all
million
10 million book profits cases
c) Taxable income 43.26%/
c) Taxable income above INR 20.01% of the above INR 100 21.63%/
100 million book profits million 5.41%
Royalties and
FTS***
a) Taxable income 10.3%
Note:
up to INR 10
* Under the MAT regime, corporations are subject to a presumptive tax million 10%
on their book profits (i.e. profits shown in their financial statements), if b) Taxable income in all 10.51%
the tax payable as per the regular provisions of the IT Act is less than above INR 10 cases
18.5 % of the corporations book profits. million
c) Taxable income 10.82%
above INR 100
million

What are the withholding tax rates Note:
applicable to non-resident corporations * Presently, there is no incidence of withholding tax
in India? on the payment of dividends, where DDT is paid
Non-residents are taxed on interest, royalties
and fee for technical services (FTS) sourced ** Non residents are subject to income tax on
in India on a gross basis, at specified rates. interest income at the rate of 40 per cent (plus
However, where royalties and FTS are applicable surcharge and cess). However, non
attributable to the non-residents PE in India, the residents may avail of special rates applicable to
same are subject to tax as business profits on a interest income under the IT Act in inter-alia the
net basis under Indias domestic tax laws. following cases:
49
Capital gains earned by the seller of a capital asset are
subject to capital gains tax. The capital gains can be
classified into (a) short term or (b) long term, depending
on the period of holding.
a) A concessional rate of 20 per cent (plus
applicable surcharge and cess) on the
gross payment will apply, in respect of
interest received from an Indian concern
on monies borrowed or debt incurred in
foreign currency.
b) A concessional rate of 5% (plus applicable
surcharge and cess) on interest received
from an infrastructure debt fund referred to
under section 10(47) of IT Act.
c) A concessional rate of 5 per cent (plus
applicable surcharge and cess) on the
gross payment will apply in respect of
interest payments by an Indian company
or a business trust to a non- resident in
respect of monies borrowed after July 01,
2012 but before July 1, 2017 in foreign
currency, under a loan agreement in
compliance with the ECB Guidelines or on
long term bonds issued at any time after
October 1, 2014 but before July 1, 2017
d) A concessional rate of 5% will apply on
receipt of interest from a business trust in
terms of section 194LBA of the IT Act
e) Any interest income (described below)
paid to a Foreign Institutional Investor or a
Qualified Foreign Investor, will be subject
to tax at the rate 5 per cent (plus applicable
surcharge and cess). However, such interest
50
should be payable on or after the 1st day of
June, 2013 but before the 1st day of June,
2017 in respect of investment made by the
payee in
i) A rupee denominated bond of an Indian
company; or
ii) A Government security:
Provided that the rate of interest in respect of
bond referred to in point (i) above, shall not
exceed the rate as maybe notified by the Central
Government in this behalf.
*** Royalties and FTS, which are not received
from the Government of India or Indian
concern, are taxed on a net income basis at the
normal rates applicable to foreign corporations.
So also are royalties and FTS payable under
agreements that are not approved by the
Government of India or under arrangements
that are not in accordance with Indias Industrial
policy. These are taxed on a net basis at the
normal rates applicable to foreign corporations.
How are Capital Gains taxed in India?
Capital gains earned by the seller of a capital
asset (being the sale consideration less the cost
of acquisition, cost of improvement and sale-
related expenses), are subject to capital gains
tax. The capital gains can be classified into (a) short term or (b) long term, depending on the period
of holding.

Nature of Period of Holding [security (other than a unit) listed in a Period of Applicable Rates#
Gains recognised stock exchange in India, unit of the Unit Trust of Holding (all (excluding applicable
India, unit of an equity oriented fund or a zero coupon bond] other assets) surcharge and cess)*
Long Term >1 year > 3 years 20%**
Short Term 1 year 3 years 40%*** (30% in case of
a domestic company)

Note:

#Transfer of listed securities on market, where securities transaction tax is payable, long term capital gains tax is exempt and
short term capital gains tax is 15 per cent (plus applicable surcharge and cess).

* As per the Finance Act, 2015, the domestic companies with total income in excess of INR 100 million are subject to a surcharge
at the rate of 12 per cent of income tax. In case the total income of the domestic company is in excess of INR 10 million but less
than INR 100 million, a surcharge of 7 per cent of the income tax is levied. Moreover, in all cases, domestic companies are subject
to an education cess of 3 per cent on the amount of income tax as increased by the surcharge payable by such company.

In case of a foreign company with total income in excess of 100 million rupees, a surcharge at the rate of 5 per cent of income-tax
will be levied. A surcharge of 2 per cent will continue to be levied on foreign companies with total income in excess of 10 million
rupees but which does not exceed 100 million rupees. In all cases, education cess is levied at the rate of 3 per cent.

**Rate of 10 per cent is applicable where benefit of indexation is foregone by the taxpayer;

*** The stated tax rate of 40 per cent in the case of a foreign company is subject to rates provided under the relevant tax treaty, to
the extent that the tax treaty is more beneficial.

Does India have General Anti
Avoidance Rules?
General Anti Avoidance Rules (GAAR), which
codify the substance over form doctrine will
come into effect from April 1, 2018. GAAR
empower the Income-tax authorities to re-
characterize a transaction the main purpose of
which is to obtain a tax benefit.
The onus of proving that a transaction falls
within the purview of GAAR is on the Income-
tax Authorities. Furthermore, the IT Act
currently provides that GAAR shall override
the provisions of tax treaties. The monetary
threshold for invoking GAAR is INR 30 million.
Are there transfer pricing restrictions
in India? What are precautions to
be taken to avoid transfer pricing
disputes in India?
Under Indias transfer pricing regulations, any
international transaction and/ or a specified

51
Taxpayers, who enter into international transactions
and / or specified domestic transactions, are required
to maintain prescribed documents and furnish an
accountants report.
domestic transaction between two or more
associated enterprises (including PEs) must be at
arms length price. Transfer pricing regulations
require the application of the most appropriate
amongst the following prescribed methods:
Comparable uncontrolled price method.
Resale price method
Cost plus method
Profit split method
Transactional and net margin method
Taxpayers, who enter into international
transactions and / or specified domestic
transactions, are required to maintain
prescribed documents and furnish an
accountants report, which includes prescribed
details.
Advance Pricing Arrangement (APA)
The IT Act empowers the Central Board of
Direct Taxes (CBDT) to enter into an APA.
to determine the arms length price or the
manner of determining the arms length price
in relation to international transactions to be
entered into by a person for a period specified
in such APA, not exceeding five consecutive
years. Finance Act, 2014 has introduced roll-
back mechanism under which an APA may also
52
apply up to four previous years prior to the first
effective year of such APA.
i) regarding the most appropriate transfer
pricing method or arms length price.
Safe Harbour Rules
In addition to APAs, the IT Act also provides
for safe harbour rules, which broadly cover the
following business transactions:
Software development services
KPO services
Contract research and development services
Manufacture and export of core and non-
core auto components
Intra group loans
Corporate guarantees
What are some direct tax incentives
available in India?
To give an impetus to Indias economy, the IT
Act provides tax incentives such as tax holidays,
deductions and rebates to the industry. These
incentives are aimed at encouraging exports and
research activities, setting up of new industrial
undertakings, development of infrastructural
facilities, software industry, research activities
and development of backward areas.
Tax Holidays for Special Economic Zones (SEZ) 2

Nature of business undertaken Quantum of Deduction

Undertaking located in SEZ and engaged in 100% deduction in respect of export profits for a period
manufacture or production of articles or things or of five years. For subsequent 10 years, deduction of 50%
provision of service profits is allowed (for last 5 years, deduction subject to
transfer of profits to investment reserve)

SEZ developers 100% deduction of its business profits for 10 years (out
of 15 years) beginning from the year in which SEZ is
notified by Central Government

Offshore Banking Units and International Financial 100% deduction of its income for 5 years and 50% for the
Services centers located in SEZ next 5 years

Profit Linked Incentives

Incentives for infrastructure Sector
Developing/ developing and maintaining/ developing, 100% of profits and gains - 10 years (out of 20 years)
operating and maintaining infrastructure facilities
such as a roads, bridges, rail system, highway
project, water supply project, water treatment
system, etc.

Incentives for Power Sector

Generation or generation and distribution of Powers 100% of profits and gains for 10 years (out of 15 years)
where operation of eligible undertakings commence
Transmission or distribution of power by laying a before March 31, 2017
network of new transmission or distribution lines.

Substantial renovation and modernization of the

existing network of transmission or distribution lines.
Incentives for Oil & Gas Sector
Commercial production of mineral oil and natural gas 100% for 7 years
in licensed blocks

2 S
 EZs are especially delineated duty free enclaves deemed to be foreign territory for the limited purposes of trade operations and duties and tariffs.
With SEZs scheme, Government of India aims to promote export-led growth of the economy, supported by integrated infrastructure for export
production and a package if incentives to attract foreign and domestic investment.

Though tax holiday is enjoyed by units in SEZ, they are required to pay MAT on book profits and DDT on income distributed as dividend.

53
 Investment-linked incentives
Investment linked incentives are provided on:
(i) specified businesses; and (ii) Research and
Development.
The investment-linked tax incentives for specified
business are provided by way of allowing
deductions, ranging between 100 per cent and 150
per cent, in respect of the expenditure of capital
nature incurred wholly and exclusively, for the
purposes of certain specified business during
the Previous Year in which such expenditure is
incurred. This deduction is provided for a period
of 8 years beginning from the Previous Year in
which such asset is acquired or constructed.
Laying and operating a cross-country natural
gas pipeline network for distribution including
storage facilities being integral part of such
network; and building & operating a new hotel
of two-star or above category as classified by the
Central Government are couple of examples on
specified business for which investment-linked
tax incentives are provided.
Similarly, investment-linked tax incentives
for Research & Development are provided by
way of allowing deductions, ranging between
100 per cent and 175 per cent, in respect of
the expenditure of capital nature incurred
wholly and exclusively, for the purposes of
certain research & development during the
Previous Year in which such expenditure is
incurred. Such investment linked tax incentives
are provided if the payment is made to a
3 I ntroduction research association/university, college or other
of new section
institution for scientific research; or payment
Section 32AD
in the IT Act is made to an Indian company to be used for
54
scientific research and development that fulfills
certain conditions; etc.
Tax incentives for State of Andhra Pradesh,
State of Bihar, State of Telangana and State of
West Bengal
a) To encourage the setting up of industrial
undertakings in the notified backward areas
of the State of Andhra Pradesh, the State of
Bihar, the State of Telangana and the State of
West Bengal, the Finance Act, 2015 proposes
the following incentives (with effect from
Assessment Year 2016-17) under the IT Act:
In addition to the investment allowance
presently available under Section 32AC
of the IT Act, an additional investment
allowance of an amount equal to 15 per
cent of the cost of new assets acquired
and installed will be provided, subject to
prescribed conditions.3
Currently, Section 32(1) (ii) of the IT Act
provides for an additional depreciation
of 20 per cent (over and above the general
depreciation) on the cost of plant and
machinery acquired and installed. Finance
Act, 2015 provides a higher depreciation
at the rate of 35 per cent (instead of 20
per cent) if the new plant and machinery
(other than a ship and aircraft) is acquired
and installed for setting up manufacturing
units in the notified backward areas of
the State of Andhra Pradesh, the State of
Bihar, the State of Telangana and the State
of West Bengal, between April 1, 2015 and
March 31, 2020.
Does India tax capital gains arising
on the indirect transfer of underlying
assets situated in India?
Where a non-resident earns capital gains from
the transfer of shares or interest of a company
or a non-resident entity incorporated or
registered outside India, such capital gains
will be taxable in India if such shares or
interest derive their value substantially,
whether directly or indirectly, from assets
located in India.

A share or interest will be deemed to derive its

value substantially from the assets (whether
tangible or intangible) located in India, if on
the specified date, the value of Indian assets,
exceeds the amount of INR 10 crore and
represents at least fifty per cent of the value of
all the assets owned by the company or entity,,
as the case may be. The following may be noted
in this respect:
Value of an asset shall mean the fair market
value of such asset without reduction of
liabilities, if any, in respect of the asset.
The specified date of valuation shall be the
date on which the accounting period of the
company or entity, as the case may be, ends
preceding the date of transfer. However, if
the book value of the assets of the company
on the date of transfer exceeds by at least
15 per cent of the book value of the assets
as on the last balance sheet date preceding
the date of transfer, then instead of the date
mentioned above, the date of transfer shall
be the specified date of valuation.
The manner of determination of fair market
value of the Indian assets vis-a-vis global
assets of the foreign company shall be
prescribed in the rules.
The taxation of gains arising on transfer
of a share or interest deriving, directly or
indirectly, its value substantially from assets
located in India will be on proportional
basis. The method for determination of
proportionality is proposed to be provided
in the rules.
Further, the following exemptions have
been provided in respect of taxation indirect
transfers:
Exemption to transferor in case company/
entity, whose share/ interests are transferred,
directly owns Indian assets: An exemption
shall be available to the transferor of a share
of, or interest in, a foreign entity if he along

55
 with its associated enterprises (i) neither
holds the right of control or management;
(ii) nor holds voting power or share capital
or interest exceeding 5 per cent of the total
voting power or total share capital, in the
foreign company.
Exemption to transferor in case company,
whose share/ interests are transferred,
indirectly owns Indian assets: An exemption
shall be available to the transferor if he along
with its associated enterprises (i) neither
holds the right of management or control in
relation to such company or the entity; (ii)
nor holds any rights in such company which
would entitle it to either exercise control
or management in the company/entity that
directly holds Indian assets or entitle it to
voting power exceeding five percent in the
company/ entity that directly holds Indian
assets.
An exemption has also been provided
for transfer of shares in an offshore
amalgamation/ demerger subject to certain
conditions.
In addition, a reporting obligation has been cast
on an Indian concern through or in which the
Indian assets are held by the foreign company or
the entity. The Indian entity shall be obligated
to furnish information relating to the off-shore
transaction having the effect of directly or
indirectly modifying the ownership structure or
control of the Indian company or entity.
What are the advantages of the
Indias Double Taxation Avoidance
Agreements (DTAAs) with
56
Mauritius, Singapore, etc.? Do non-
residents require a tax residency
certificate to avail of any tax treaty
benefits?
Indias DTAAs with Mauritius and Singapore
do not permit India to tax capital gains earned
by a tax resident of Mauritius and Singapore
respectively, that arise from the alienation
of shares of an Indian company. Typically,
investments into India are routed through an
intermediate holding company set up in such tax
jurisdictions.
However, considering the recent pursuits of
the Indian Revenue Authorities, the beneficial
treatment under such DTAAs may be denied on
the premise that the intermediate holding company
is a conduit entity, which lacks commercial
substance and/or does not qualify as the beneficial
owner of the shares of the Indian company.
Note that GAAR (which will come into effect
from April 1, 2018), empower tax authorities
to re-characterize transactions which inter-alia
lack commercial substance. Furthermore, a
transaction will be deemed to lack commercial
substance if it inter-alia it involves the place of
residence of any party which is without any
substantial commercial purpose other than
obtaining a tax benefit. It may be noted that
GAAR override the provisions of Indias tax
treaties.
Therefore, in order to avail the benefit of
the DTAA, it is important to demonstrate
the commercial substance and beneficial
ownership of the intermediate holding
company. Please note that the Singapore-India
DTAA contains a limitation of benefits clause.
Moreover, India and Mauritius have agreed
in principle to the introduction of a limitation
of benefits clause under the India-Mauritius
Double DTAA. The specific details of such
clause are, however, to be worked out.

In order to avail tax treaty benefit, a non-resident

taxpayers is required to furnish a tax residency
certificate (TRC) and a self declaration in form
10F.

The information to be furnished in form 10F is as

follows:

1. Status (individual, company, firm, etc.) of the

taxpayer
2. Permanent Account Number (PAN) of the
taxpayer if allotted
3. Nationality (in case of an individual) or
country or specified territory of incorporation
or registration (in case of others)
4. Taxpayers tax identification number in the
country or specified territory of residence
and in case there is no such number, then,
a unique number on the basis of which the
person is identified by the Government of the
country of the specified territory of which
the taxpayer claims to be a resident
5. Period for which the residential status, as
mentioned in the TRC, is applicable
6. Address of the taxpayer during the period
for which the TRC is applicable

Such additional information under form 10F

is not required to be provided if it is already

57
Corporate tax liability is required to
be estimated and discharged by way
of advance tax in four installments on
June 15, September 15, December 15
and March 15.
covered under the TRC. The taxpayer is
required to keep and maintain the documents
which are necessary to substantiate the above
information. Furthermore, the income tax
authority may ask for such documents from the
taxpayer in relation to his claim for tax treaty
benefit.
Is prior permission of Indian income
tax authorities required before
transferring assets?
Section 281 of the IT Act states that where a
taxpayer during the pendency of any proceeding
under the IT Act or after the completion thereof,
but before the service of notice of recovery,
transfers any of his assets in favour of another
person, such transfer shall be void as against
any claim in respect of any tax or any other
sum payable by such taxpayer as result of the
completion of the said proceeding or otherwise.
However, such a transfer shall not be void if:
i) the transfer is for an adequate consideration;
and the transferee does not have notice
of the pendency of any proceeding or, as
the case maybe, of such tax or other sum
payable by the assessee
58
ii) with the previous permission of the
Assessing Officer
This section only applies to cases where the
amount of tax or other sum payable or likely to
be payable exceeds INR 5000 and the assets
charged or transferred exceed INR 10000 in
value.
For the purposes of the said section, assets
have been defined to mean land, building,
machinery, plant, securities and fixed deposits
in banks, to the extent to which any of the
assets aforesaid does not form part of the stock-
in-trade of the business of the taxpayer.
What are the major tax registrations
and compliances to be followed by
corporations in India?
A company doing business in India must
obtain a PAN and a Tax Deduction Account
Number (TAN).
It is mandatory to quote PAN on returns
of income and all correspondence with any
income tax authority. For enforcing the
requirement to obtain PAN registrations, the IT
Act provides that in case the taxpayer does not
provide PAN, the deductor will withhold tax
at the higher of, rates in force (including treaty
rates) or at the rate of 20 per cent.
Furthermore, the provisions of the IT Act
make it mandatory for to quote TAN in
all tax deducted at source/tax collection at
source/annual information returns, payment
challans and certificates to be issued by persons
under an obligation to deduct tax at source.
The key compliances to be followed by
Corporations under the IT Act are herein under.
Filing of Corporate Tax September 30
Return
Filing of Tax Audit Report September 305
Filing of Transfer Pricing November 30
Report
Filing of TDS Return Quarterly
Corporate tax liability is required to be
estimated and discharged by way of advance
tax in four installments on June 15, September
15, December 15 and March 15.
What is the ordinary appellate dispute
resolution channel in India?
The ordinary appellate dispute resolution
procedure in India includes the following
forums:
a) Commissioner of Income Tax (Appeals)
A taxpayer may file an appeal before
the Commissioner Income Tax (Appeals)
within a period of 30 days against any
order passed against such taxpayer by
the Assessing Officer in the course of
assessment proceedings.
b) Dispute Resolution Mechanism (DRP)
The IT Act has constituted a DRP for
eligible taxpayers viz. taxpayers with
transfer pricing disputes and all foreign
companies, irrespective of the nature of
their dispute. The Assessing Officer is
required to forward a copy of the draft
assessment order to the eligible taxpayer if
it is proposed to make a variation in the
income/loss of the eligible taxpayer, which
4 is prejudicial to such taxpayer.
c) Income-tax Appellate Tribunal (ITAT)
An appeal may be filed against the order of
the Commissioner of Income Tax (Appeals)
or the final assessment order after
directions from DRP are issued before the
ITAT on any question of fact or law both.
The ITAT is a fact finding authority.
d) High Court
An appeal may be filed before the High
Court against the order of the ITAT within
120 days, where the same relates to a
substantial question of law.
e) Supreme Court
The Honble Supreme Court of India is the
final appellate authority. An appeal may be
filed before the Supreme Court against the
4 I n case of an
order of the High Court. assessee being a
company which
is required to
What are other dispute resolution furnish transfer
alternatives available to taxpayers? pricing report,
the due date of
a) Authority for Advance Rulings (AAR) filing the return
is November 30.
An advance ruling, which is issued by an
independent adjudicatory body called the 5 I n case of an
assessee being a
AAR, is binding on the person seeking it company which
in relation to the specific transaction and is required to
furnish transfer
the Revenue Authorities cannot challenge pricing report,
the same unless there is a change in facts the due date of
filing the return
or applicable law. An advance ruling is only is November 30.
59
 binding on the parties to whom it applies,
although it does have a persuasive value for
other transaction. Furthermore, the scope
of the AAR has been widened to include
applications made by resident and non-
residents on questions implicating GAAR.
The AAR mechanism has also been extended
to residents in respect of their own tax
liability for transactions with value in excess
of INR 100 crores.
Though statutorily, no appeal can be
preferred from the ruling of an AAR,
constitutional remedies like writ can be
availed to challenge an AAR ruling.
b) Settlement Commission
The Settlement Commission is a statutory
body and deals with the settlement
60
applications filed by the assesses under the
IT Act.
An assessee can approach the Settlement
Commission at any stage of the
proceedings for assessment pending before
an Assessing Officer, subject to certain
prescribed conditions.
The Commission has the power to grant
immunity from prosecution from any
offence under IT Act also from imposition
of penalty under the IT Act or under the
Indian Penal Code or any other Central
Acts, in cases where the applicants make a
full and true disclosure of their income or
wealth and fulfills certain other prescribed
conditions.
The Black Money Act levies
tax on undisclosed assets held
aboard by a person who is a
resident of India at a rate of 30%
of the value of such assets
The order passed by the Settlement
Commission is conclusive as to the matters
stated therein and no appeal lies to any
authority against the order passed by the
Settlement Commission.
c) Mutual Agreement Procedure (MAP)
MAP is a dispute resolution mechanism
provided for under the DTAAs.
MAP can be invoked by the taxpayers where
an action of any one of the Contracting States
to the DTAA results in or will result for
him in taxation, which is not in accordance
with the DTAA.
Further, recourse to MAP does not deprive
the tax payer from ordinary legal remedies
available under the domestic law. There is
no time limit prescribed within which the
Competent Authorities of the DTAA are
to arrive at a conclusion in respect of the
MAP application.
d) Bilateral Investment Protection Agreements
(BIPA)
The objective of BIPA is to promote and
protect the interests of investors of either
country in the territory of other country.
Such Agreements increase the comfort level
of the investors by assuring a minimum
standard of treatment in all matters and
provides for justifiability of disputes with
the host country.
Off-late, foreign investors have been
invoking the protection under BIPA to
resolve their disputes with the Indian
Government in the sphere of income tax.
What is the Black Money Law? What are
its tax implications?
Black Money (Undisclosed Foreign Income and
Assets) and Imposition of Tax Act, 2015 (the
Black Money Act) levies tax on undisclosed
assets held aboard by a person who is resident
of India at a rate of 30% of the value of such
assets, provides for a penalty of 90% of the value
of such assets, provides for a penalty equal to
90% of the value of such asset, and also provides
for rigorous imprisonment of three to ten years
for willful attempt to evade tax in relation to a
undisclosed foreign income or asset.
The residency of a person, for the purpose
of Black Money Act, is to be determined in
accordance with the provisions of the IT Act.
There is an introduction of one-time compliance
opportunity for a limited period (Compliance
Scheme) for the persons who are affected
by the Black Money Act to provide a chance
to come clean and streamline their affairs
(September 30, 2015).
61
 INDIRECT TAXES
What are the indirect tax legislations
applicable in India?
a ) Customs Duty
Customs duty is imposed on the import of goods
into India and export of goods outside India.
Customs duty is levied in terms of the Customs
Act, 1962 and Customs Tariff Act, 1975 on the
transaction value of goods. Currently, the effective
rate of customs duty on import of most non
agricultural products in India is 29.44% (approx).
The rates of customs duty for or each item are
specified under the Customs Tariff Act, 1975,
and are dependent on the classification of the
goods determined under the First Schedule of
the Customs Tariff Act, which is aligned with the
Harmonized System of Nomenclature (HSN)
provided by the World Customs Organization.
Every person proposing to engage in import
of goods into India or export of goods from
India is required to obtain an Importer Exporter
Code (IEC) from the Director General of Foreign
Trade, Ministry of Commerce and Industry.
b) Customs Duty on Export of Goods
In order to encourage exports, export duty is
levied on very few items, mentioned under the
Second Schedule of the Customs Tariff Act, 1975.
Excise Duty
Excise duty is imposed on the manufacture of
goods in India. The power to levy excise duty
primarily remains with the Central Government,
62
though the power to levy excise duty on
alcoholic products and other intoxicants has
been conferred upon State Governments.
a) Central Excise Duty
Central excise duty is levied on the goods
manufactured in India under provisions of t h e
Central Excise Act, 1944 and the Central Excise
Tariff Act, 1985.
Every person who produces or manufactures
dutiable excisable goods or is a first stage or
second stage dealer intending to issue excisable
invoice or persons holding warehouses for
storing non-duty paid goods etc., is required
to register under the Central Excise Rules,
2002. Every such person is required to obtain
separate registration for separate premises. Such
registration is valid for as long as production
activity continues and no renewal is necessary.
Currently, most non-agricultural products attract
a uniform rate of 12.5 % of excise duty.
Further, the Central Government is empowered
to exempt products from levy of excise duty
wholly or partially. The Central Government
has also levied a Clean Energy cess on certain
specified goods.
Central excise duty is a modified value added tax
(also known as Cenvat) wherein a manufacturer
is allowed to take credit of the following:
1) Excise duty paid on locally sourced goods;
2) CVD and SAD paid on imported goods;
3) Service tax paid on input services.
The Cenvat credit so availed can be utilized
for payment of excise duty on the clearance of
dutiable final products manufactured in India or
output service tax liability, if any, applicable in
accordance with the Cenvat Credit Rules, 2004.
b) State Excise Duty
The power to regulate movement of liquor
and other intoxicants and to levy tax on
manufacture/ production of liquor and
other intoxicants is conferred on State
Governments by virtue of the Constitution of
India. As a result, movement and sale of liquor
and other intoxicants is dependent upon the
excise policy of the respective States, which is
revised annually.
The scope of the State excise policies and
regulations inter alia includes requirements for
import, export, transport, possession and sale
of liquor within the concerned State. State
excise legislations also empower the State
Governments to issue licenses by way of tender,
auction, tender-cum-auction or by any other
prescribed mechanism.
State excise policies often contain the rules
governing filing of statutory returns and other
compliances which vary from State to State.
Service Tax
The service tax regime in India is governed by
the Finance Act, 1994 (Finance Act). Presently
all services provided in the taxable territory
of India (i.e. the whole of India except Jammu
and Kashmir), except those specified in the
negative list or otherwise specifically exempt,
are subject to the levy of service tax.
Generally, the liability to pay service tax is
that of the service provider. However, in
certain specified circumstances such as import
of services or with respect to certain specified
services such as manpower supply services,
works contract services etc., the whole or part
of the service tax liability has been shifted on
63
the service recipient under the reverse charge
mechanism.
Currently the rate of service tax is 14%.
Additionally, enabling provisions have also
been created for levy of a Swachh Bharat Cess
at the rate of 2% on value of all or any of the
taxable services, from a date to be notified by
the Central Government, which would further
increase the effective rate of service tax to 16%.
In cases of cross-border transactions, the taxability
of such services in India is determined on the basis
of the place of provision of such services. Services
for which the place of provision is outside the
taxable territory of India would not be chargeable
to service tax in India. The place of provision of
a service is required to be determined in terms of
the statutory principles laid down in the Place of
Provision of Service Rules, 2012.
of India, tax on sale of goods may be imposed
by the Central Government or the State
Government depending upon the situs of the
sale. However, import of goods into/export
of goods outside India or sale in the course of
import/export of goods are not exigible to the
State Value Added Tax/Central Sales Tax.
i) Intra-state Sales Tax/ Value Added Tax
(VAT)
The power to levy sales tax on intra-state
sale is conferred upon State Governments
under the Constitution of India. In the
event that a sale takes place within
a particular State of India, the same
would qualify as a local sale or intra-
state sale, and would be chargeable to
VAT at the applicable rates under the
relevant State VAT legislation.

Service tax also operates on the principle of

value addition and taxes paid on input services/
capital goods are available as credit for set off
purposes in accordance with the provisions of
Cenvat Credit Rules, 2004.

Every service provider engaged in providing

taxable services over a specified limit, or a
recipient of service, statutorily required to pay
service tax under reverse charge etc. is required
to obtain service tax registration.

Sales Tax
Sale of almost all moveable goods in India
is chargeable to a levy of Value Added Tax/
Central Sales Tax. Under the federal structure

64
 Under the VAT regime, the VAT paid on
goods purchased within the State is eligible
for input VAT credit. The input VAT credit
can be utilized against the VAT/ Central
Sales Tax (CST) payable on the sale of
goods subject to fulfillment of conditions
in this regard. It is, thus, ensured that
cascading effect of taxes is avoided and
value addition alone is taxed.
VAT rates are dependent on the relevant
State VAT Legislation. However, they
are usually classified into four broad
slabs depending upon the nature of the
products. These are generally nil, 4/5%,
12.5-15.5% and 20%.
Every dealer engaged in sale or purchase
of goods over and above the specified
threshold limit in a particular State is
required to obtain VAT/CST registration in
each of such States and undertake necessary
compliances in this regard.
Rules concerning filing of VAT returns
vary from State to State. Statutory returns
are normally filed on a yearly/ quarterly/
monthly basis (depending upon the taxable
turnover of the dealer). These returns are
filed with the jurisdictional VAT officer.
ii) Central Sales Tax (CST)
CST is levied on inter-state sale of goods.
Where goods move from one State to
another pursuant to a contract of sale,
or a sale is affected by the transfer of
documents of title during the movement of
goods from one State to another, such a sale
is known as an inter-state sale.
The power to levy CST is conferred on the
Central Government by the Constitution
of India. The levy of CST is governed by the
Central Sales Tax Act, 1957 (CST Act).
Currently, CST is chargeable at the
concessional rate of 2% on submission of
requisite statutory form (Form C), prescribed
in this regard.
The power to collect CST is in the hands of
the State governments. Further, Section 9
of the CST Act provides that the provisions
inter-alia including provisions relating to
returns, provisional assessment, advance
payment of tax, registration and penalties
etc. under the local VAT law in a particular
State shall also be applicable for the
compliances under the CST Act.
Octroi / Entry Tax
a) Entry Tax
Entry tax is levied on the entry of goods
in a particular State jurisdiction for use,
consumption or sale of goods within such
jurisdiction.
The rate of entry tax is contingent on the
nature of goods brought within the State
territory. Once again, the rate of tax and the
rules governing the filing of returns vary
from State to State. Generally, returns are
filed on a monthly/ yearly basis, depending
65
 upon each State,with the jurisdictional VAT
officers.
b) Octroi
Currently, entry of specified goods
in certain Municipal jurisdictions of
Maharashtra, for use, consumption or sale
therein, also attracts a levy of Octroi. The
rate of Octroi varies from municipality to
municipality and is dependent on the goods
sought to be brought in.
Every person causing to bring such
specified goods in the specified
municipalities are required to obtain
registration and undertake necessary
compliances in this regard.
The rules governing the filing of returns vary
within each municipality. Normally, the
rules governing levy of Octroi stipulate for
filing of requisite declaration at the time of
bringing the goods within municipal limits.
Research and Development Cess
Research & Development Cess Act, 1986 levies cess
on all payments made by an industrial concern
for import of technology. At present, cess is levied
at 5 per cent on payment towards technology
imports. The R&D cess has to be deposited before
the payment for technology import can be made
and proof of deposit in respect of R&D cess may
be submitted with the bank through whom the
technology related payment is being made.
Credit for R&D cess is available against the
service tax payable on services related to
66
intellectual property rights and technology
transfers.
Luxury Tax
Luxury tax is levied on the goods and services
for enjoyment over and above the necessities of
life. State governments have been empowered
to levy taxes on luxuries at the rates specified
in the State (Luxury Tax) Acts.
Rules governing filing of returns vary from State
to State. Generally, statutory returns are filed
on a monthly basis. Such returns are filed with
the jurisdictional Excise, Entertainment and
Luxury Tax Department or with jurisdictional
Commercial Tax Department of the relevant
State.
Professional Tax
Certain States in India also levy a tax on every
person engaged in any profession, trade, calling
or employment in the said State. Every person
liable to pay professional tax is required to
obtain an enrollment certificate under the
professional tax laws and undertake necessary
compliance in this regard.
Further, every company is also required to
withhold professional tax on behalf of its
employees and deposit the same with the
Government exchequer. The rate of withholding
tax is dependent on the number of employees
and their monthly salaries. Further, every such
company is also required to obtain a registration
certificate in its capacity as employer and also
obtain an enrolment certificate.
The rate slabs of professional tax vary from
State to State subject to the maximum of INR
2500 per annum.
What are some of the indirect tax
incentives available in India?
Customs and Central Excise
There are various schemes and incentives
available under customs and central excise laws
for various sectors including power, oil and gas,
transportation, fertilizers, renewable sources of
energy etc.
Further India has also signed Free Trade
Agreements (FTA) with various countries
for exemptions from import duty of various
specified goods.
Foreign Trade Policy, 2015-2020
(FTP)
The current FTP which has come in to effect
from April 01, 2015. FTP provides for a suite
of export promotion schemes such as the
Merchandise Exports from India Scheme
(MEIS), the Service Exports from India Scheme
(SEIS), the Export Promotion Capital Goods
Scheme (EPCG), recognition of Star Export
Houses as Status Holders etc.
Incentives are also extended to Exported
Oriented Units (EOUs), Software Technology
Parks (STPs) etc.
Special Economic Zone (SEZ)
a) Subject to conditions prescribed in this
regard, Developers of an SEZ and Units
established in an SEZ are entitled to
various indirect tax benefits inter-alia
including:Exemption from payment of
import duties on imported goods;
b) Exemption from payment of excise duty on
domestically procured goods;
c) Exemption from duty of excise on goods
manufactured by an SEZ;
d) Drawback or such other benefits as may
be admissible from time to time on goods
brought or services provided from the
Domestic Tariff Area into an SEZ or Unit.
e) Exemption/refund from service tax on
services provided in relation to authorized
operations in an SEZ, to a Developer or a
Unit of Special Economic Zone
f) Exemption from CST on the sale or
purchase of goods if such goods are meant
to carry on the authorized operations.
g) Exemption from VAT on supply of goods to
an SEZ developer or Unit or sale of goods by
an SEZ developer or Unit. This is subject to
67
 the respective sales tax/VAT legislation of the
State in which the SEZ is set up.
What is the ordinary appellate dispute
resolution channel for indirect taxes in
India?
Under Customs, Excise and Service Tax Laws
The ordinary appellate dispute resolution
procedure in India includes the following
forums:
a) Appeals to Commissioner of Customs/
Central Excise (Appeals):- This is the first
level of appellate mechanism. An appeal in
this regard can be filed within 60 days from
the date of receipt of the order passed by
an adjudicating authority lower than the
rank of Commissioner.
b) Appeal to the Appellate Tribunal
Customs Excise and Service Tax Appellate
Tribunal (CESTAT):- An appeal to
CESTAT can be filed against an order
of the Commissioner (Adjudication) or
Commissioner (Appeals). Such appeals have
to be filed within three months from the date
of receipt of the order.
c) High Court
An appeal may be filed before the High
Court against the order of the CESTAT
within 180 days, where the same relates
to a substantial question of law. However,
appeals against a CESTAT order on the
issues of classification or valuation are
not admissible before High Court and are
68
required to be filed directly before Supreme
Court.
d) Supreme Court
The Honble Supreme Court of India is the
final appellate authority. An appeal may be
filed before the Supreme Court against the
order of the CESTAT or High Court.
Further, the ordinary appellate dispute
resolution channel with respect to VAT and
other local levies such as entry tax may depend
on local VAT legislation which may vary from
State to State
What are other dispute resolution
alternatives available to indirect
taxpayers?
Apart from the above, with respect to central
levies i.e. customs, excise and service tax, the
following two dispute resolution alternatives are
available:
a) Settlement Commission
The basic objective of setting up of the
Settlement Commission is to expedite
payments of customs,excise duties and
service tax involved in disputes by avoiding
costly and time consuming litigation process
and to give an opportunity to tax payers to
come out clean.
Eligible assessees can make an application
in such form and in such manner as may
be prescribed by the Commission and
containing Full & True disclosure of his
duty liability which has not been disclosed

before the proper officer having jurisdiction
subject to fulfilment of conditions prescribed
in the regard.
b) Authority for Advance Rulings
The Central legislations governing levy of
customs, excise and service tax, provide for
a scheme of Advance Ruling where specified
categories of non-residents/ foreign investors
and certain specified categories of residents
proposing to undertake business in India
may approach the authority for ascertaining
their tax liability in relation to central excise,
customs and service tax, in India.
What is Goods and Service Tax (GST)
in India?
The proposed introduction of Goods and Service
Tax (GST) is anticipated to be one of the
biggest tax reforms in India.
The proposed GST will subsume several
existing indirect taxes which are collected at
various points, including the central level excise
duty and service tax, and the State level VAT,
entertainment tax, lottery tax, electricity duty
etc, with one single tax. This will facilitate the
consolidation of a single market across the
country and allow for greater supply chain
efficiency and economies of scale.
GST would be applicable on supply of all goods
or services (barring few exceptions) as against
the present concept of different taxes on the
manufacture or on sale of goods or on provision
of services.
Further, in line with international taxation
principles, it would be a destination based
consumption tax seeking to tax services in the
jurisdiction in which final consumption by
ultimate consumers occur. It would operate on
the mechanism of taxing value addition at every
stage of the economic process while allowing
deduction of taxes on purchases by all but the
final consumer.
Keeping in mind the peculiar federal structure,
India is currently endeavouring to adopt a dual
GST structure wherein GST would have two
components i.e. the Central GST to be levied and
collected by the Centre and the State GST to be
levied and collected by the respective States.
Introduction of GST in India would require a
constitutional amendment to grant concurrent
powers to the Centre as well as State to levy and
collect GST. Such a Constitutional Amendment
Bill needs to be passed by a two-thirds majority
in both houses of Parliament and by the
legislatures of half of all the States to become law.
The Constitution Amendment Bill, is pending
decision before the Parliament in India.
GST would impact and change the business
and tax environment in India. GST will have a
far reaching impact on virtually all aspects of
business operating in the country.
69
Miscellaneous
Are there any restrictions on foreign
ownership of land?
A non-resident is not permitted to acquire
immoveable property in India (other than
through a lease for a term of less than five
(5) years) without the prior permission of the
Reserve Bank. However, a person who has
established a branch office or other place of
business (other than a liaison office) for carrying
on any activity in India can acquire immoveable
property in India which is necessary for or
incidental to the carrying on of such activity. A
declaration in the prescribed form has to be filed
with the Reserve Bank. An Indian subsidiary
set up by a company resident outside India
would be an Indian resident and is permitted
to acquire movable and immoveable property
incidental to its business. Similarly an LLP set
up by a company resident outside India with
the permission of the FIPB would be an Indian
resident and is permitted to acquire movable
and immoveable property incidental to its
business.
What are the anti-money laundering
standards applicable in India?
Pursuant to the Prevention of Money
Laundering Act (which was brought into effect
on July 1, 2005), SEBI and the Reserve Bank
have issued detailed guidelines on Anti-Money
Laundering Standards which apply to every
banking company, financial institution and other
intermediaries (including merchant bankers,
underwriters, portfolio managers, trustees
and other such entities registered with
SEBI). The detailed guidelines are in line
with international requirements in relation
70
to prevention of anti-money laundering. The
requirements include maintaining detailed
records of all cash transactions of the value
of more than INR 1 million or the equivalent
in foreign currency. All suspicious transactions
(whether or not in cash and including non-
monetary transactions) have to be recorded and
reported.
Does India have anti-corruption laws?
Yes, India has anti-corruption legislations. The
Prevention of Corruption Act is the principal
anti-corruption legislation in India. This,
together with the Indian Penal Code, which is a
substantive criminal code, deals with bribery/
corruption related offences in India. There also
exist special statutes like the Representation
of People Act (which regulates the conduct
of elections) and a vast body of subordinate
legislation formulated as service rules which
are applicable to various categories of public
servants. These rules, inter alia, amongst other
issues, seek to regulate the giving and the
acceptance of gifts and hospitality by public
servants (including elected representatives).
Does India have anti-dumping laws?
Yes, India does have anti-dumping measures
in place. The use of anti-dumping measures
as an instrument of fair competition and to
establish fair trade is permitted by the World
Trade Organization (WTO). In particular, anti-
dumping measures are provided for by the
WTO in the Agreement on Implementation of
Article VI of the General Agreement on Tariffs
and Trade 1994.
In India, the above mentioned Agreement has
been ratified and given effect to by the The
Customs Tariff Act, 1975 and the Customs Tariff
(Identification, Assessment and Collection of
Anti-dumping Duty on Dumped Articles and
for Determination of Injury) Rules, 1995. The
Customs Tariff Act, 1975 and the Rules, contain
the entire framework for anti-dumping in India.
What laws exist in India to ensure
recovery of bad debts by secured
creditors without recourse to courts?
To speed up the process of recovery from
non-performing assets, the Securitisation
and Reconstruction of Financial Assets
and Enforcement of Security Interest Act
(SARFAESI) Act was enacted in 2002 for
regulation of securitization and reconstruction
of financial assets and enforcement of security
interest by secured creditors. The SARFAESI
Act empowers banks / financial institutions to
recover their non-performing assets without the
intervention of the Court.
The SARFAESI Act provides following methods
of recovery from non-performing assets: :
a) Securitization of Financial Assets;
b) Reconstruction of Financial Assets; and
c) Enforcement of Security Interest.
In furtherance of the foregoing mechanism,
the SARFAESI Act, inter alia, prescribes the
following framework:
a) setting-up and registration of securitization
companies or asset reconstruction
companies;
b) various measures available to secured
creditors in order to recover bad debts from
defaulting borrowers;
c) the exercise of such measures for recovery
of bad debts including the limitations,
procedures and modalities of the application
of such measures;
d) Grievance redressal mechanism available
to any person (including the borrower)
in relation to the action taken by secured
creditors.
In addition to the SARFAESI Act, the Reserve
Bank of India has also issued guidelines
governing, inter alia, securitization companies
or asset reconstruction companies, asset
classification norms and the exercise of
measures by secured creditors.
What are Government regulations with
respect to E-Commerce?
Information Technology (IT) Act 2000 regulates
the basic acts of e-commerce. The Act is based
upon the UNCITRAL Model. E-commerce laws
and regulations are also supplemented and
complemented by different laws as applicable
to the field of e-commerce. For instance,
e-commerce with respect to pharmaceuticals,
healthcare, traveling, etc. are governed IT Act,
2000 and the respective sectoral laws.
What are the Environmental Regulations
in India?
The Ministry of Environment and Forests
(MOEF) is the apex administrative government
body for the regulation, formulation,
conservation, planning, promotion,
71
co-ordination and overseeing the
implementation of environmental and forestry
programmes. The Ministry is the Nodal
agency for the implementation of the United
Nations Environment Programme (UNEP).
The responsibility of prevention and control
of industrial pollution is upon the Central
Pollution Control Board (CPCB), which is a
statutory authority, attached to the MOEF.
The relevant environment related laws in India
are the Air (Prevention and Control of Pollution)
Act, 1981; Biological Diversity Act, 2002;
Environment (Protection) Act, 1986; for study of Yoga, vedic culture, Indian system
Forest Conservation Act, 1980; Indian Forest
Act, 1927; National Green Tribunal Act, 2010;
the National Environment Appellate Authority
Act, 1997; the National Environment Tribunal
Act, 1995; Protection of Plant Varieties and
Farmers Rights Act of 2001; Public Liability
Insurance Act, 1991; the Scheduled Tribes and
Other Traditional Forest Dwellers (Recognition
of Forest Rights) Act, 2006; Water (Prevention
and Control of Pollution), 1974; the Water
(Prevention and Control of Pollution) Cess
Act, 1977; Wild Life (Protection) Amendment
Act, 2002; Wildlife Protection Act of 1972;
Noise Pollution Act and the Hazardous waste
Handling and Management act, 1989.
What are the visa and registration
requirements for foreign nationals
working in India?
The Foreign Registration Office is the primary
agency which regulates the registration,
movement, stay, departure and also for
72
recommending the extension of stay of foreign
nationalsin India. These offices are located
in New Delhi, Mumbai, Kolkata, Amritsar,
Chennai, Bengaluru, Hyderabad, Calicut,
Cochin, Goa and Trivandrum and Chief
Immigration Office in Ahmedabad. In other
places, the Superintendents of Police of the
district are registration officers for foreigners.
All foreigners including foreigners of Indian
origin visiting India on long term (more than
180 (one hundred and eighty) days) basis
under: (i) Student visa (including those coming
of dance and music), (ii) Research visa, (iii)
Employment visa, (iv) Medical visa and (iv)
Missionary visa are required to get themselves
registered with the concerned Registration
Officer within 14 (fourteen) days of his/her first
arrival, irrespective of the duration of their stay.
Foreigners visiting India on other categories
of long term visa including business/entry
visa would not require registration with
the concerned Foreign Registration Office if,
duration of his/her stay does not exceed 180
(one hundred and eighty) days on a single
visit. In case a foreigner intends to stay for
more than 180 (one hundred and eighty)
days on a single visit he should get himself
registered well before the expiry of 180 (one
hundred and eighty) days.
The Ministry of Home Affairs has set out
conditions for the purpose of issuing
Employment Visas to foreign nationals, which
inter alia include that the employee should
draw a salary of a minimum of USD 25,000 per
annum. For the purpose of calculating this USD
25,000 limit, the salary and all other allowances
paid to the foreign national in cash and
perquisites such as rent free accommodation
etc. are taken into consideration.
Do companies require an industrial
license?
Except for the industries falling within the
following categories, all industrial undertakings
are exempt from obtaining an industrial license:
industries reserved for the public sector.
These are limited to atomic energy and
railway transport;
industries retained under compulsory
licensing. These include distillation and
brewing of alcohol, hazardous chemicals,
etc; and
items reserved for the small-scale sector
(currently there is a list of 20 (twenty) items
reserved for manufacturing by the small
scale sector);
Are there any industry-specific licenses
that are necessary?
Yes. Examples of industry-specific licenses are:
license from the Department of
Telecommunications for telecom operating
companies;
license from the Insurance Regulatory
Development Authority for insurance
companies;
registration from the Reserve Bank for banks
and NBFC;
registration with SEBI for mutual funds and
venture capital funds.
Are there any registrations required for
activities not falling under the industries
specified above?
These would be regular business related
registrations, some of which are common to all
industries and some would be specific to certain
activities proposed to be carried on and the
location of the industry.
Illustratively, some of the standard registrations
for an establishment proposing to undertake
business activities would include:
a) Income Tax registration;
b) VAT / Sales Tax registration; and
c) license under the Shops and Establishment
Act of the relevant State in which the
establishment is located.
A manufacturing unit would ordinarily also
require registration/license/consents under
the Factories Act, the different environmental
protection legislations, etc. depending on the
nature and location of the unit.
73
About us
Firm Overview
Shardul Amarchand Mangaldas & Co (SAM
& Co) is one of Indias leading full-service law
firms. Founded on almost a century of legal
achievement, Shardul Amarchand Mangaldas
& Co started anew in May 2015, with offices in
six major cities in India New Delhi, Mumbai,
Bengaluru, Kolkata, Ahmedabad and Gurgaon.
With over 70 Partners and over 370 lawyers, the
Firm employs its legal resources across all major
practices and focuses on several core areas of
commercial activity.
Its new mission is enabling business by
providing solutions as trusted advisors through
excellence, responsiveness, innovation and
collaboration. The Firm has been at the helm
of major headline transactions in all segments
of industry and business besides representing
major trans-national corporates on their India
entry and business strategy.
The Firm is known for its exceptional Mergers
& Acquisitions, Tax, Competition Law, Dispute
Resolution & Arbitration, Regulatory Litigation,
Capital Markets and Private Equity practices
globally.
Areas of Practice
General Corporate
Our work in the areas of Mergers and
Acquisitions, JVs, Private Equity and Business
Restructuring is well documented in the annals of
Indian corporate history. Our Tax, Competition
Law, Intellectual Property and Regulatory teams
work very closely with the corporate teams for
74
facilitating deal closures. Our Insurance Practice
is robust and well recognised.
Projects and Project Finance
We advise developers, EPC contractors, investors
and lenders on various infrastructure projects
in sectors such as power, oil & gas, nuclear
energy, ports, roads and mining. We also
advise on regulatory aspects, contractual issues
and government tendering aspects typically
associated with such large scale projects.
Capital Markets
Our offerings include legal and regulatory
advice on IPOs, FPOs, rights issues, QIPs, ADRs,
GDRs, IDRs, AIM listings, on the Equity side.
On the Debt Capital Markets side, our offerings
include issuance and restructuring of FCCBs,
non-convertible bonds, unlisted infrastructure
bonds, and medium term note programs (MTN
Programs). We also have a well-developed
Financial Regulatory Practice (FRP).
Dispute Resolution
We are a go-to firm for domestic & international
arbitrations, commercial & corporate and
regulatory disputes in various courts, tribunals,
forums, administrative authorities & regulators
in India.
Banking & Finance
Our offerings range from traditional banking
documentation to securitisation, factoring,
setting up payment banks, syndicated loans,
structured finance, acquisition finance and
mortgage backed securities, guarantee
structures, equipment financing, non-convertible
debentures, external commercial borrowings
and working capital loans.

Competition Law
With a strong and recognized competition
practice in India, the 21-member strong
competition team has a proven track record of
successfully steering clients through their largest
transactions, complex investigations and high-
stakes litigation

Intellectual Property Rights

We offer a full range of services that cover
patents, trademarks, copyrights, designs and
other allied laws, from conceptualization to
enforcement and from negotiations to creation
of innovative corporate structures based on
intellectual property

Other Practice Areas and Industry

Expertise
Bankruptcy & Insolvency, Consumer Protection
& Product Liability, Corporate/Commercial
Advisory, Defence, E-Commerce, Employment,
Environment and Climate Change, E-trade and
Outsourcing, FCPA & Bribery Investigations,
Infrastructure, Internet Governance, Mining
and Energy, Pro bono, Philanthropy and Trusts,
Real Estate & Trusts, Regulatory & Public Policy,
Retail, Taxation, TMT, Trade Law and White
Collar Crime.

75
Our Key Leaders
Mr Shardul S. Shroff
Executive Chairman
Mr. Shardul S. Shroff is the Executive
Chairman of Shardul Amarchand
Mangaldas. With an extensive
experience of over 35 years in General
Corporate, Banking & Finance, and
Projects & Project Finance. Mr. Shroff
is a recipient of the National Law Day
Award from the President of India
in November 2009, and has been
commended as a leading corporate
lawyer, for his unique contribution to
the field of corporate law and leadership
in its practice.
Contact us
NEW DELHI
Amarchand Towers
216 Okhla Industrial Estate, Phase III
New Delhi 110 020
T +91 11 4159 0700, 4060 6060
F +91 11 2692 4900
Contact: Pallavi Shroff
E: pallavi.shroff@AMSShardul.com
BENGALURU
Prestige Sterling
Square,Madras Bank
Road,Off Lavelle Road
Bengaluru 560 001
Contact: Jatin Aneja
E: jatin.aneja@AMSShardul.com
76
Ms Pallavi S. Shroff
Managing Partner
Ms. Pallavi S. Shroff is the Managing
Partner of Shardul Amarchand
Mangaldas, with an extensive experience
of over 34 years. Acclaimed as a
doyenne of Indian competition law,
her broad and varied representation
of public and private corporations has
earned her national and international
acclaim. Ms. Shroff is also the lead
litigation Partner at the Firm, with
substantial knowledge in matters of
dispute resolution and arbitration. She
also heads the Competition Law practice
at the Firm.
GURGAON
MPD Towers, 6th Floor, D  LF Ph-V
Sector 43, Golf Course Road
Gurgaon 122 022
T +91 124 459 5150, 436 7734
F +91 124 436 7730
Contact: Amit Kumar
E: amit.kumar@AMSShardul.com
MUMBAI
Express Towers, 17th Floor
Nariman Point
Mumbai 400 021
T +91 22 4933 5555
Contact: Akshay Chudasama
E: akshay.chudasama@AMSShardul.com
Mr Akshay Chudasama
Managing Partner Mumbai
Mr. Akshay Chudasama is the
Managing Partner of Shardul
Amarchand Mangaldas, and heads
the Firms Mumbai office. He has an
extensive work experience in Mergers
& Acquisitions, Joint Ventures, Cross
Border Investments, Private Equity, Real
Estate, Hospitality, Retail & Franchising
and Media & Entertainment law. Mr.
Chudasama has specialised expertise in
Cross Border Mergers & Acquisitions,
advising both foreign companies
entering India and Indian companies in
their outbound acquisitions, particularly
in the Real Estate sector.
AHMEDABAD
301-302, Parshwanath E-square
Corporate Road, Prahladnagar
Ahmedabad 380 015
T +91 79 4900 9200, 2929 7831
F +91 79 4900 9250
Contact: Pankaj Agarwal
E: pankaj.agarwal@AMSShardul.com
KOLKATA
Anand Lok, 227, A.J.C. Bose Road
Kolkata 700 020
T +91 33 4010 8400, 2283 6748
F +91 33 2290 2349
Contact: Siddhartha Datta
E: siddhartha.datta@AMSShardul.com
Disclaimer

This is intended for general information purposes only. It is not a substitute

for legal advice and is not the final opinion of the Firm. Readers should consult
lawyers at the Firm for any specific legal or factual questions.

Shardul Amarchand Mangaldas & Co.