India Business Law Journal - DFDL
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
India Business Law Journal
Your partner in legal intelligence June 2013
Volume 7, Issue 1
Punching above its weight
Is India’s competition watchdog up to the task it has set itself?
Scrutinizing India’s solar power policies
The top foreign law firms for India deals
Learning lessons from UK banking disputes
In-house counsel share IP protection tactics
www.indilaw.com
Contents
3 Leader
Building trust in troubled times
17
4 Inbox
Punching
5 News
Rao races back in-house above its
ELP rounds up new recruits
Tech Mahindra seals Satyam merger
weight
Multiples purchases stake in Milltec Is India’s competition watchdog
up to the challenges it has set for itself?
10 The wrap
Legislative & regulatory update: page 10
24
Court judgments: page 13
16 Vantage point
Falling short
Regulatory inadequacies are holding back Sunny
India’s drugs industry, argues DG Shah of
the Indian Pharmaceutical Alliance
solutions?
17 Cover story Solar power presents attractive investment
Punching above its weight opportunities, but investors must contend
with complex state and national regulations
24 Spotlight
Sunny solutions?
29 Looking in-house for IP insights
DuPont and JCB lawyers explain how to stay
37
ahead of India’s intellectual property violators
32 What’s the deal? The pioneers
London calling
Precedents set by English courts in banking Which international law
and finance disputes are highly relevant to firms are leading the
Indian investors and institutions way in keeping India’s
cross-border deals
37 Intelligence report on course?
The pioneers
58 Correspondents Expert advice from India Business Law Journal’s correspondent law firms
58 Aviation 66 Mergers & acquisitions
Tyabji Dayabhai Amarchand Mangaldas
59 Canada-India trade & investment 67 Mining
Bennett Jones RRG & Associates
60 Dispute resolution 68 Pharmaceutical sector
Bharucha & Partners Udwadia Udeshi & Argus Partners
61 Food law 69 Private equity & venture capital
DH Law Associates Khaitan & Co
62 Foreign direct investment 70 Real estate
OP Khaitan & Co Mine & Young
63 Healthcare & life sciences 71 Regulatory developments
Krishna & Saurastri Phoenix Legal
64 Infrastructure & energy 72 Taxation & transfer pricing
Trilegal Economic Laws Practice
65 Intellectual property
Singh & Associates
June 2013 India Business Law Journal 1
Editorial board
India Business
Law Journal
June 2013
Volume 7, Issue 1
ISSN: 1994-5841
Contact us
Pravin Anand Shamnad Basheer Lalit Bhasin Himavat Chaudhuri Sumes Dewan Girish Gokhale
Managing Partner Professor in IP Law Managing Partner Executive Director Partner President - Legal Editorial
Anand and Anand National University of Bhasin & Co & Senior Counsel Desai & Diwanji & Group General Email: editorial@indilaw.com
Juridical Sciences Turner General Counsel Telephone: +852 3622 2681
Entertainment Networks JSW
Subscriptions & customer service
Email: cs@indilaw.com
Telephone: +852 3622 2623
Fax: +852 3006 5377
www.indilaw.com
Editor
Vandana Chatlani
Toby Greenbury Manik Karanjawala Amit Anant Moghay Fali S Nariman Jane Niven Mysore R Prasanna Deputy editor
Consultant Partner General Counsel Senior Counsel Regional General Independent Rebecca Abraham
Khaitan & Co Karanjawala & Co HSBC Counsel Consultant
Jones Lang LaSalle Consultant editor
Simmie Magid
Contributors
Bhavana Alexander
Gargi Chatterjee
DG Shah
Nicola Vinovrški
Production editor
Pun Tak Shu
Premnath Rai Martin Rogers Vijaya Sampath Sunil Seth Ashok Sharma Pallavi Shroff Head of marketing
Founding Partner Partner Adviser to the Senior Partner Founder President Managing Partner
PRA Law Offices Davis Polk & Chairman & Seth Dua & Indian Corporate Amarchand Billy Chung
Wardwell Group CEO Associates Counsel Association Mangaldas Associate publisher
Bharti Enterprises Tina Tucker
Executive editor
Chris Hunter
Publisher
James Burden
Printed in Hong Kong
Amarjit Singh Shruti Dvivedi Sodhi Shardul Thacker Bhavna Thakur Jagannadham Rohan Weerasinghe
Managing Partner Director - Legal Partner Director & Head of Thunuguntla General Counsel &
Amarjit & Associates Colt Technologies Mulla & Mulla & Equity Capital Markets Strategist & Head of Company Secretary
Craigie Blunt & Caroe Citigroup Research Citigroup
SMC Global Securities
Vantage Asia Publishing Limited
21/F Gold Shine Tower
346-348 Queen’s Road Central
Correspondent law firms Hong Kong
Telephone: +852 3622 2673
Fax: +852 3006 5377
Email: enquiries@vantageasia.com
• Amarchand & Mangaldas & Suresh • Mulla & Mulla & Craigie Blunt & Caroe www.vantageasia.com
A Shroff & Co
• OP Khaitan & Co Directors
James Burden, Kelley Fong,
• Bennett Jones • Phoenix Legal Chris Hunter
• Bharucha & Partners • RRG & Associates Disclaimer and conditions of sale
• DH Law Associates • Saikrishna & Associates Vantage Asia Publishing Limited re-
tains the copyright of all material
published in this magazine. No part
• Economic Laws Practice • Singh & Associates of this magazine may be reproduced
or stored in a retrieval system without
the prior written permission of the
• Khaitan & Co • Trilegal publisher. The views expressed in this
magazine do not necessarily reflect
the views of the publisher, its staff or
• Krishna & Saurastri • Tyabji Dayabhai members of the editorial board. The
material in this magazine is not offered
• Mine & Young • Udwadia Udeshi & Argus Partners as advice and no liability is assumed in
relation thereto. The publisher, staff and
all other contributors to India Business
Law Journal disclaim any liability for the
consequences of any action taken or
Subscription information not taken as a result of any material
published in this magazine.
India Business Law Journal is published 10 times a year and has a subscription price of US$790 for one year or US$1,264 for © Vantage Asia Publishing Ltd, 2013
two years. To subscribe, please call +852 3622 2623, email cs@indilaw.com or subscribe online at www.indilaw.com.
2 India Business Law Journal June 2013
Opinion Leader
Building trust in troubled times
These have been tough times for As every in-house lawyer will know, maintaining the repu-
tation of a company is often linked to protecting its intel-
cricket lovers across India lectual property. While this is a particular challenge in India,
the fact remains that the country is an immensely attractive
A
recent spot-fixing scandal that revealed the seamier market for many global IP owners. In Looking in-house for IP
side of the glitzy Indian Premier League has left many insights (page 29) we turn to in-house counsel at the Indian
fans questioning the wisdom of their long-standing operations of DuPont and JCB for their perspectives on
loyalty to the game. Even after the Indian team emerged the problem. Their insights are incisive and will be of great
triumphant at the ICC Champions Trophy in early June, the interest to other in-house counsel in India and beyond.
struggles to keep the faith continue on account of the turmoil After all, nothing can beat local knowledge for getting a
within the body that oversees Indian cricket, the Board of handle on what is a very Indian problem.
Control for Cricket in India. Knowledge of a more distant kind comes into focus in
While this is bad news for Indian cricket, the scepticism this month’s What’s the deal? (page 32). Here we examine
it has triggered may also cast a shadow on other bod- the implications for Indian investors and financial institu-
ies that regulate sectors of the Indian economy. For, if the tions of banking-related judgments by UK courts. The UK is
powers-that-be lack the necessary vision a major hub for the resolution of banking
and integrity to ensure the well-being of a and derivatives disputes, and as such,
sport, can they be trusted to regulate criti- many of the judgments issued there –
cal sectors of the economy in a manner
India Business Law Journal and the precedents they set – are directly
Your partner in legal intelligence June 2013
Volume 7, Issue 1
that secures the common good? relevant to India.
The confidence inspired by a regula- Our coverage includes analysis
tor is critical for the well-being of the of recent cases involving the London
sector that it oversees. Writing in this Interbank Offered Rate (LIBOR) scan-
month’s Vantage point (page 16), DG dal, which will have far-reaching conse-
Shah, the secretary general of the Indian quences around the world.
Pharmaceutical Alliance, argues that reg- Closer to home, an acute shortage of
ulatory inadequacies are holding back power has long been one of the greatest
India’s drugs industry. Shah expresses challenges to India’s development. As
serious concerns over the effectiveness Punching above its weight steps are taken to tackle the problem,
of India’s drugs regulator, the Central Is India’s competition watchdog up to the task it has set itself?
renewable energy technologies, including
Drugs Standard Control Organization, and solar power, have risen to prominence.
argues that the regulator’s shortcomings Scrutinizing India’s solar power policies In Sunny solutions (page 24) we consider
The top foreign law firms for India deals
are damaging the international credibility Learning lessons from UK banking disputes
the burning issues facing investors in the
of the country’s pharmaceutical industry. In-house counsel share IP protection tactics sector. While the Electricity Act, 2003,
Shah may have been heart- remains the significant legislation regu-
www.indilaw.com
ened when India’s finance minister, lating the generation, transmission and
P Chidambaram, recently spoke of the distribution of electricity, investors must
need for a regulator that “favours none and spares none”. also grapple with numerous different state laws and poli-
The minister was delivering a lecture organized by India’s cies. Our coverage compares some of the key state solar
antitrust watchdog, the Competition Commission of India power policies and sheds much light on the how investors
(CCI). But is this a regulator that is up to task? may pursue opportunities in the sector.
In our Cover story this month (page 17), we look back This month’s Intelligence report (page 37) presents India
at the CCI’s short history and ask whether it is capable of Business Law Journal’s seventh annual survey of the top
rising to the considerable challenges it has set for itself. international law firms for India-related work. Our coverage
The CCI has been fully functional for just two years, but it reveals the top 10 foreign firms for India-related work, as
has already been flexing its muscles. It has imposed widely well as 10 key players and 20 significant players. We also
publicized penalties of previously unheard-of amounts and highlight 25 regional and specialist law firms, and 35 “firms
some observers have expressed concerns over the man- to watch”, that we believe in-house counsel should keep
ner in which it has gone about prosecuting cases of anti- well within their sights.
competitive behaviour. This issue of India Business Law Journal marks the start of
Samir Gandhi, a partner at AZB & Partners who heads our seventh year of publication. Since our first issue in June
the firm’s competition law practice, believes the CCI “may 2007, we have strived to make sense of complex transac-
be missing the wood for the trees” in its hurry to send out tions and regulations, to bring clarity to areas of confusion
a powerful message. However, others suggest that the CCI or ambiguity, and to foster intelligent debate on significant
is yet to develop the necessary rigour to be an effective issues. As we mark this important anniversary, we would
regulator. This may well prove to be the CCI’s Achilles heel like to thank our readers, our contributors, our advertis-
and will need to be overcome if the regulator is to make any ers, our correspondent law firms and our editorial board
headway in levelling the playing field, and in doing so, earn- members. We look forward to continuing to serve you in
ing people’s trust. the years ahead. g
June 2013 India Business Law Journal 3
Inbox Letters to the editor
Africa-India trade The format that included comments
from trade regulators and industry par- Intellectual property
ticipants gave an outlook of a steady
Roadmap for the savvy investor and dynamic transition from struggling
African economies to vibrant investor- Creative aesthetics
Dear Editor, friendly platforms.
The journal further put the eco- Dear Editor,
Congratulations on the release of nomic histories, reforms, challenges,
yet another insightful edition of India and the stages of development of India Business Law Journal is
Business Law Journal. The Intelligence divergent African economies into informative and keeps readers
report on investments in Africa pub- focus. Such a multifaceted approach abreast with the latest legal devel-
lished in the May issue of the journal adds value to the overall content and opments. I was intrigued particu-
highlights the recent investment cli- is useful to those with interests in larly by the May issue, which I saw
mate and issues particularly of inter- both Africa and Asia. at your booth at the International
est to Indian businesses in light of an The particulars are specific in con- Trademarks Association con-
increase in trade volume. tent and elaborate in jurisdiction. It ference. The cover, which fea-
The estimated annual trade volume goes without saying that the com- tured pictures of professionals in
between India and Nigeria in 2012, for ments and contributions are a useful the IP arena, was very creative.
example, was US$10 billion, resulting addition to advanced discourse on Keep it up!
in India overtaking the US as Nigeria’s investment in Africa.
largest trading partner. The assess- Vikram Grover
ment of the regulatory environment Oladiran Ajayi Principal
for investments in key African coun- Senior Associate Groverlaw
tries certainly provides a roadmap for Templars New Delhi
the savvy investor. Lagos
Opinions?
Observations?
Feedback?
We want to hear from you.
India Business Law Journal welcomes your letters.
Please write to the editor at editorial@indilaw.com.
Letters may be edited for style, readability and length, but not for substance.
Due to the quantity of letters we receive, it is not always possible
to publish all of them.
4 India Business Law Journal June 2013
News
SEBI sparks race to comply with shareholding rules
T
he Securities and Exchange
Board of India (SEBI) has begun
penalizing public listed com-
panies that failed to meet the 3 June
deadline for putting a minimum of
25% of their equity shares in public
hands. Statistics from 4 June show
that 105 companies have failed to
comply with the regulator’s new public
shareholding norms.
The securities regulator has
responded by imposing a range of
sanctions on non-compliant compa-
nies. It has prohibited the promoters,
promoter groups and directors of such
companies from buying, selling or oth-
erwise dealing in the securities of their
companies. It has also ordered the
freezing of promoters’ and promoter
groups’ voting rights and corporate
benefits. Furthermore, the promoters
and directors of non-compliant compa-
nies have been restrained from holding
new positions as a director of any listed
company until they comply with the
public shareholding norms.
Companies affected by the penal-
ties include Essar Ports, Hindustan
Breweries & Bottling, Plethico
Pharmaceuticals, Ras Resorts & and Colleen Laduzinski and associ- India and Deutsche Equities India on
Apart Hotels, Steelco Gujarat, Tata ates Nikhil Naredi, Kevin Khan and the sale.
Teleservices and Videocon Industries. Brandon Morris advised a syndicate Latham & Watkins in Singapore
SEBI says it may take further action of DSP Merrill Lynch, Morgan Stanley, fielded a team including partner Rajiv
on a case-by-case basis against com- Goldman Sachs, Standard Chartered, Gupta and foreign legal consultant
panies that fail to comply. However, the SBI Capital Markets, Axis Capital, Citi, Scott Calver to represent the brokers.
Associated Chambers of Commerce of Deutsche Equities, IDFC and Macquarie In some cases, more extreme meas-
India (Assocham) has called for leni- Capital on the deal. ures have been taken. Indian IT, con-
ency. “While it is true that it has been Amarchand Mangaldas, led by part- sulting and outsourcing group Wipro,
three years since SEBI had asked listed ners Yash Ashar and Gaurav Gupte, for example, has split itself into two
firms to take firm steps to increase acted as counsel to Adani Ports, while companies to comply with the new
public holding, it must also be real- Khaitan & Co partner Nikhilesh Panchal public shareholding rules.
ized that selling stocks in the mar- and executive director Sudhir Bassi The company has demerged its non-IT
ketplace is a function of sentiments were counsel to the placement agents. divisions, including consumer care, light-
or else the promoters would be com- In another quick-fire deal to com- ing, infrastructure engineering and medi-
pelled to offload equity at a distressed ply with the new public shareholding cal diagnostic product divisions, into
price,” Assocham’s secretary general, norms, Oracle Global (Mauritius) sold a separate promoter-controlled entity,
DS Rawat, said in a statement. “This 4.4 million equity shares in Oracle leaving Wipro as a pure IT company.
is particularly true about the small and Financial Services Software (India) at a A m a rc h a n d M a n g a l d a s l e d b y
mid-cap companies.” price of `2,275 (US$37.75) per share. Mumbai-based managing partner Cyril
Nevertheless, the new rules have The deal, which was valued at around Shroff along with Bangalore partners
sparked a race for compliance. Adani `1 billion, reduces the Mauritian Arjun Lall and Nivedita Rao advised
Ports and Special Economic Zone, company’s stake in Oracle Financial Wipro on the demerger.
one of the 105 non-compliant com- Services Software (India) to 75%. Wilson Sonsini Goodrich & Rosati
panies named, issued a US$180 mil- Kochhar & Co, led by partner Harry acted as US counsel to the investment
lion institutional private placement of Chawla and associate Akshit Kapoor, banker – JM Financial Institutional
equity shares on 5 June in order to advised Oracle Global (Mauritius) Securities – while SPJ Legal was the
make itself compliant. This diluted the on the sale. Partner Yash Asher and legal counsel in court.
promoter stake, taking the public hold- principal associates Kranti Mohan The demerger has been effective
ing in Adani Ports just over the 25% and Abhimanyu Bhattacharya at since 31 March. The American deposi-
threshold to 25.83%. Amarchand Mangaldas in Mumbai rep- tary receipt issuance is expected to be
Jones Day partners Manoj Bhargava resented the brokers Morgan Stanley complete on 7 June.
June 2013 India Business Law Journal 5
News
Capital markets subsidiaries in the US, the UK and with tax aspects of the deal. Sharon
the UAE in addition to the Indian par- Smith and Debbie Barbour, partners
ent company. The issue was jointly in London and Abu Dhabi respec-
Rolta issues managed by Barclays, Citigroup, DBS tively, also assisted with the security
Bank and Deutsche Bank. structure.
high-yield bonds DLA Piper designed the security AZB & Partners advised Rolta and
structure of the deal and prepared its guarantors on Indian law mat-
Rolta India has completed a Rule intercompany loan documentation to ters, while Davis Polk & Wardwell
144A/Regulation S high yield bond help implement the debt repayment acted as US counsel to the joint lead
offering after issuing US$200 million aspects of the use of proceeds. The managers.
of 10.75% senior notes in the interna- firm was US counsel to Rolta. The T h e M u m b a i o ff i c e o f Tr i l e g a l
tional markets. The notes will be listed team was led by Stephen Peepels, the advised the parties on the Indian law
on the Singapore Stock Exchange. head of DLA Piper’s US capital mar- implications of the New York law-
Rolta India is a technology com- kets practice in Asia. He was assisted governed transaction documents and
pany that provides IT solutions for by associates Timothy Franklyn and the regulatory regime governing guar-
defence and national security, utilities, Clark Chen. antees by an Indian company to an
power, financial services and other Partners Chris Paci and Jason indirect wholly owned subsidiary. The
industries. Harmon provided support in nego- team at Trilegal consisted of partner
The bonds were issued by one tiating the covenant package and Srinivas Parthasarathy, senior associ-
of Rolta’s US subsidiaries, Rolta implementing the security structure, ate Priyanka Kumar and associates
LLC, with guarantees provided by while partner Steve Weerts assisted Gaurav Mukherjee and Anshul Gosavi.
People moves not what I am happy with. I am more
comfortable in being an in-house
ELP rounds up
Rao races back
counsel, and that is where my path
lies,” he added.
new recruits
C o m m e n t i n g o n R a o ’s d e p a r-
in-house ture, Kartik Ganapathy, a partner at Economic Laws Practice (ELP) has
IndusLaw, said: “It was wonderful reconstituted its dispute resolution
Private practice has proved not to when Pramod reached out and said he team with the addition of nine new
be Pramod Rao’s cup of tea. The for- wanted to be a part of IndusLaw. We lawyers.
mer IndusLaw partner has resigned did realize that Pramod remained an The new appointments were made
from the law firm after just over a in-house person at heart, but would to replenish the firm’s litigation wing
year to move back to an in-house try to make the transition. It has been following the departure of 14 lawyers,
role. great working with him, and we hope including partners Sanjay Notani and
In his new position as general coun- that this will continue.” Tarun Gulati, in April.
sel at Citibank, Rao will head a team Rao replaces Sandeep Beri, the Kirat Singh Nagra joins ELP’s Delhi
of around 18 lawyers in Mumbai. former general counsel for South Asia office as a partner after practising with
Previously he had worked as general at Citibank. Beri joined Amarchand Amarchand Mangaldas for more than
counsel of ICICI Bank. He had spent Mangaldas as a lateral partner in its 10 years. Nagra handles commercial
almost 14 years with the bank, of New Delhi office. litigation and arbitration matters and
which he was general counsel for has represented clients in sectors
seven, before joining IndusLaw to set such as telecoms, aerospace and real
up the firm’s Mumbai office. estate. He has appeared before the
Rao said that when he left ICICI, Supreme Court of India, high courts,
many law firms approached him, but regulatory forums and tribunals.
“it was I who approached IndusLaw Tarun Jain joins ELP as a senior
and wanted to be a part of [the firm]”. associate following a six year stint
He said he enjoyed his rapport with at Lakshmikumaran & Sridharan. His
other members of the firm. “I was expertise lies in indirect tax laws,
delighted with the wonderful core primarily in central excise, customs,
team of partners,” he said. “I found foreign trade policy, service tax and
them to be experienced, business value added tax.
focused and supportive. The estab- Also joining the firm are Pranav
lishment of the Mumbai office and Vyas, formerly an associate at Fox
the inclusion of Priyanka [Roy, for- Mandal, Kartik Yadav, who was an
merly of Alliance Legal] as a part- associate with AZB & Partners, and
ner … is testament to the vision of Somnath Shukla, who was an asso-
IndusLaw.” ciate at Vaish Associates. The other
Rao said his colleagues were sup- new hires are Kshitiz Karjee, Prithvi
portive of his decision to move back Kapur, Shankey Agrawal and Avneesh
in-house. “Personally the role of part- Pramod Rao
Arputham who have all joined ELP as
ner at a law firm in private practice is associates.
6 India Business Law Journal June 2013
News
Finsec gains one,
Banking & finance
loses two
Mumbai-based finance boutique
Canara grants loan to 3B Fibreglass
Finsec Law Advisors has appointed
Anil Choudhary as a senior associ- The London branch of Canara Bank has provided a €10 million
ate. Choudhary is a New York and (US$13 million) facility to 3B Fibreglass SRPL (Belgium), a member of
India-qualified lawyer specializing in the 3B Binani group of companies. The loan facility was backed by a
transactional work in the securities corporate guarantee extended by Binani Industries India – the holding
market. company of the 3B Binani group. The deal required Reserve Bank of
The Harvard law graduate worked India approval.
at Luthra & Luthra, Nishith Desai Majmudar & Partners advised Canara Bank (London) on the loan.
Associates and Trilegal before joining Partner Prashanth Sabeshan in Bangalore led the Majmudar & Partners’
Finsec. team. TLT was English counsel to the lender and Ashurst represented the
Choudhary has advised large cor- Canara Bank on Belgium and Luxembourg laws.
porate houses and investment banks
on corporate and capital market
transactions including IPOs, cross-
border listings on stock exchanges practice”. He also told India Business had a stint at Finsec, has joined IC
and private equity investments. Law Journal that his firm would be tak- Legal as an associate.
Speaking to India Business Law ing on more new professionals in the “IC Legal came up with a brilliant
Journal, he said his reasons for mov- near future. opportunity and our desire was to
ing to Finsec were “to have a focused Choudhary’s appointment comes move from a proprietary model to
practice area in securities and finan- hot on the heels of two departures a partnership which gives greater
cial laws and to have an opportunity from Finsec. independence and opportunities to
to work with Sandeep [Parekh], one Indrajit Mishra and Tejesh Chitlangi grow,” Chitlangi told India Business
of the leading securities lawyer in this left Finsec in May to join IC Legal. Law Journal.
country”. He added that the firm was Mishra, who was a partner and head IC Legal was set up in 2004 and
“a great place for legal minds inter- of private equity at Finsec, and specializes in real estate, litigation
ested in contributing to the financial Chitlangi, a former senior associate and media law.
and securities law policies of the at the firm, moved to become equity The firm comprises 15 lawyers
country”. partners at IC Legal. including five partners. It aims to
Parekh, the founder of Finsec Law Mishra takes on the role of head of become a full-service law firm with
Advisors, said Choudhary’s appoint- private equity and M&A while Chitlangi the new capabilities in private equity,
ment would strengthen Finsec’s “pres- heads up the firm’s investment funds M&A and investment funds as a result
ence in financial sector transactional practice. Janhavi Seksaria, who also of the hires.
Mergers & acquisitions
McGraw Hill lifts
stake in CRISIL
McGraw Hill Financial has made an
open offer to acquire up to 15,670,372
shares from the public shareholders
of CRISIL, a global analytical com-
pany which provides ratings, research
and risk and policy advisory services.
The share amount equals 22.23%
of the total equity shares outstand-
ing in CRISIL. Full acceptance of the
offer would increase McGraw Hill
Financial’s total stake in CRISIL to
75% from 52.77%.
The parties intend to purchase the
shares at an offer price of `1,210
(US$21.42) per share, making the
total value of the deal approximately
`19 billion.
June 2013 India Business Law Journal 7
News
Singhania & Partners advised
McGraw Hill Asian Holdings, along
with McGraw Hill Financial, S&P India
Multiples purchases stake in Milltec
and Standard & Poor’s International,
on the voluntary open offer under Mumbai investment company Multiples Alternate Asset Management
the Securities and Exchange Board has acquired a 50% stake in Milltec Industries (Bangalore), a manu-
of India’s takeover regulations. The facturer of agricultural equipment. The deal, valued at US$43 million,
team was led by the firm’s senior was conducted through a secondary investment by Multiples in Milltec
partner Ravi Singhania and partner Machinery and an acquisition of a 100% stake by Milltec Machinery in
Manish Kumar Sharma and was sup- Milltec Industries (Bangalore) and Milltec Outsourcing.
ported by senior associate Shradha Khaitan & Co Bangalore partner Ganesh Prasad advised Multiples.
Dubey and associate Medha Shah. J Sagar Associates represented the Milltec Group and the continuing
K h a i t a n & C o a dvised Morgan shareholders throughout the transaction. The team comprised partners
Stanley India as the manager to the Sajai Singh and Gerald Manoharan, senior associate Prashant Kumar
issue. The team included partner and associate Roy George.
Arindam Ghosh and executive direc- Dua Associates was counsel to the selling shareholders on the deal.
tor Sudhir Bassi.
Victor Reinz
acquires licence
S&R Associates has advised US
vehicle parts manufacturer Dana
Holding Corporation on an agreement
to license its heat exchange technol-
ogy to Victor Reinz India. Victor Reinz
is Dana’s joint venture in India with the
Jayant Group.
Victor Reinz India, which has been
producing gaskets and heat shields
for automotive customers in India
since 2009, will now produce engine,
transmission and power steering oil
and fuel coolers.
Dwayne Matthews, the president of
Dana Power Technologies, said the
agreement was “the next logical step
to meet the rising demand for high-
quality thermal solutions in India.”
The deal is subject to customary
closing conditions and expected to be
complete within two months.
The S&R Associates’ team that
worked on the deal consisted of part-
ners Rajat Sethi and Juhi Singh and
associates Radhika Iyer and Radhika
Agrawal.
billion in a gas project in Rovuma He was assisted by associates Avichal
Mozambique Area 1 Offshore Block in Mozambique. Prasad and Tarana Khan. The Hong
OVL and OIL will make the acquisition Kong office of Simmons & Simmons
draws OIL and OVL through a newly formed entity in which was the international counsel to the
OVL will own 60% and OIL will hold two companies.
Oil India (OIL) and ONGC Videsh 40%. Shardul Shroff, the Delhi managing
(OVL) have signed definitive agree- Kochhar & Co’s Delhi office, led partner of Amarchand Mangaldas, led
ments with Videocon Mauritius Energy by partner Ngangon Junior Luwang, a team that acted for Videocon. He was
to acquire 100% of the shares of represented OIL and OVL as Indian supported by partners Vidyut Gulati,
Videocon Mozambique Rovuma 1. counsel on the deal, advising on the Nikhil Narayanan and Puja Sondhi,
Videocon Mozambique holds a 10% transactional documents, litigation, principal associate-designate Ramanuj
participating interest worth US$2.475 taxation and general corporate issues. Gopalan and associate Neha Yadav.
8 India Business Law Journal June 2013News Tech Mahindra seals Satyam merger Indian IT company Tech Mahindra has completed its US$1 billion merger with Mahindra Satyam. Tech Mahindra had already acquired a 43% interest in Mahindra Satyam in 2009 and agreed in March 2012 to fully merge Mahindra Satyam with Tech Mahindra. Mahindra Satyam shareholders will get two shares of Tech Mahindra for every 17 shares of Mahindra Satyam. Jones Day was the global antitrust counsel to Tech Mahindra. The team was led by partner Carsten Gromotke in Frankfurt with assistance from staff attorney Tanja Neumann and lawyer Lisa Schlepper, also in Frankfurt, part- ner Fiona Schaeffer in New York, part- ners Bevin Newman in Washington and lawyers Jean-Christoph Deverines, Thomas Dinh and Annette Morin, also in Washington. AZB & Partners acted as principal legal adviser to Tech Mahindra in India. June 2013 India Business Law Journal 9
The wrap
Legislative and regulatory update
Taxation
Key amendments
incorporated in
Finance Act, 2013
The president of India on 10 May
signed into effect the Finance Act, 2013.
Several key amendments were incor-
porated into the Finance Act during the
course of its passage through the Lok
Sabha (the lower house of parliament)
and the Rajya Sabha (the upper house).
The following is a summary of the key
amendments made to the Finance Bill,
2013, as proposed by India’s finance
minister in his budget speech on 28
February.
Tax residency certificates
The Finance Bill had sought to provide
that a tax residency certificate even if
in the prescribed format would only be
a necessary but not a sufficient condi-
tion for claiming benefits under a tax
treaty. Responding to concerns raised had introduced section 194LC in the transaction” in respect of commodity
by investors, the government aban- ITA, through which interest payments derivatives executed on a recognized
doned the proposal and replaced it with made on foreign currency denominated association will not be considered a
the requirement to provide such other long-term infrastructure bonds and loan speculative transaction. As a conse-
documents and information as may agreements in foreign currency were quence, going forward, businesses
be prescribed. As yet, the government afforded a lowered 5% rate of tax. This engaged in commodities trading
has not indicated what information and lowered rate was subject to production would be able to set off losses from
documents (if any) will be required for of a permanent account number (PAN) commodity derivative transactions
obtaining treaty benefits. because of section 206AA of the ITA, against other kinds of income (avail-
which provided that if the details of the able only against gains derived from
Foreign investment in Indian debt payee’s PAN have not been provided, other speculative transactions).
tax would be withheld at a minimum
Further easing the country’s debt rate of 20% or the actual rate, which- Transfer pricing
investment regime, the government ever was higher. The PAN requirement
has introduced a new provision (sec- has now been done away with. The Finance Act, 2012, had intro-
tion 194LD) in the Income Tax Act, 1961 duced a provision whereby the time
(ITA), through which interest payments Commodities derivative transactions limit for completion of an assessment,
made to foreign institutional investors where the matter has been referred to
and qualified foreign investors on or A series of amendments to the Finance a transfer pricing officer (TPO), was
after 1 June 2013 but before 31 May Bill clarifies the status of commodities extended to three years (from the year
2015 on rupee denominated bonds of transactions, in the context of the in which the income was first assessa-
an Indian company and on government imposition of commodities transac- ble), as opposed to two years, in cases
securities would be subject to tax at tions tax. Under Indian tax law, trans- where (i) reference has been made on
the rate of 5%, instead of the ordi- actions not by way of spot delivery or after 1 July 2012, or (ii) reference
nary rate of 20%. However, the lower of goods are treated as speculative has been made before 1 July 2012 but
withholding rate would be applicable transactions and losses arising from an order has not been passed before
only on interest paid on bonds whose speculative transactions are allowed that date. The Finance Bill, 2013, has
interest rates do not exceed the rate as to be set off only against income from been amended to provide that the time
specified by the central government in speculative transactions. The Finance lines for any assessment where a ref-
this regard. Act, 2013, has amended section 43(5) erence has been made to the TPO will
Additionally, the Finance Act, 2012, of the ITA to provide that any “eligible be three years.
10 India Business Law Journal June 2013The wrap
Employment Law an agent, independent contractors, and regularly organizing workshops
trainees, and apprentices, with for sensitizing employees on this
New law targets or without the knowledge of the
principal employer and working on a
issue.
• The non-fulfilment of certain
sexual harassment •
voluntary basis.
Under the act, the employer
employer obligations (such as
failure to constitute an ICC) could
of women at work is required to set up an internal
complaints committee (ICC)
lead to penal consequences for the
employer.
at each office or branch of an
The Sexual Harassment of Women organization that employs at least
at Workplace (Prevention, Prohibition 10 employees. At the district level,
and Redressal) Act, 2013, received the
president’s assent and was enacted
the government is required to set
up a local complaints committee
SEBI guidelines on
on 22 April.
The provisions of the act may be
(LCC) to investigate complaints
regarding sexual harassment from
employee stock
summarized as follows:
• The definition of sexual harassment
establishments where an ICC has
not been constituted due to non-
schemes clarified
includes any unwelcome sexually fulfilment of the above criteria
determined behaviour (whether or if the complaint is against the The Securities Exchange Board of
directly or by implication) such as employer. India (SEBI), through a circular dated
physical contact and advances, • The act provides that at the request 13 May, provided some clarifications
demand or request for sexual of an aggrieved employee, the ICC to an earlier SEBI circular dated 17
favours, sexually coloured remarks, and the LCC may recommend to January 2013, which made amend-
showing pornography, or any other the employer interim relief such as ments to the SEBI (Employee Stock
unwelcome physical verbal or non- transfer of the aggrieved employee Option Scheme and Employee Stock
verbal conduct of a sexual nature. or granting her up to three months Purchase Scheme) Guidelines, 1999,
• The scope of “workplace” includes of paid leave. and the Equity Listing Agreement.
government and non-governmental • The law allows female employees to The clarifications are as follows:
bodies, private and public sector request to settle the matter through
organizations, organizations conciliation although a monetary Applicability
carrying on commercial, vocational, settlement should not be made
educational, entertainment, industrial as a basis of conciliation. The act It was clarified that the circular dated 17
or financial activities, hospitals and provides a detailed elaboration of the January is applicable to all employee
nursing homes, educational institutes, grievance redressal mechanism. benefit schemes involving securities of
sports institutions and stadiums. • The act includes other employer a company where the schemes are set
• The definition of “employee” covers obligations such as providing a safe up, managed or financed by the com-
regular, temporary and ad hoc working environment, displaying the pany, whether directly or indirectly.
employees, daily wage employees penal consequences of acts that
either working directly or through may constitute sexual harassment Time extension
The earlier deadline of 30 June 2013
has been extended to 31 December
2013 and by this date all employee
benefit schemes involving securities of
companies must be made to conform
to the guidelines. The Equity Listing
Agreement must also be amended
accordingly. Any further grant of options
after 17 January 2013 has to be strictly
in accordance with the guidelines.
Holding of securities by trusts
Employee benefits trusts which have
already acquired securities of the com-
pany from the secondary market before
17 January 2013 may continue to hold
them beyond 31 December 2013 pro-
vided that the schemes have been
aligned to the guidelines.
Securities held by other schemes
Existing employee benefit schemes
involving securities but not involving
June 2013 India Business Law Journal 11The wrap
grant of options to purchase or pur-
chase of securities by employees will
be permitted to: (i) either hold securi-
ties of the company already acquired
by them beyond 31 December 2013
provided the schemes have been
aligned with the guidelines; or (ii) dis-
pose of the securities by 31 December
2013.
Further, the circular requires that
listed companies must disclose the
following information to the stock
exchanges:
1. Details of benefits granted/shares
allotted in the past up to 17 January
2013 and benefits due/options
granted and pending exercise as on
17 January 2013, in pursuance of
employee benefit schemes involving
securities of the company which are
not in alignment with the guidelines,
must be disclosed in the prescribed
format by 30 June 2013.
2. Details of allotments made/benefits format within seven days from the
The legislative and regulatory update is com-
granted post 17 January 2013 up end of each quarter. The details piled by Nishith Desai Associates, a Mum-
to 13 December 2013 pursuant pertaining to the quarter ended in bai-based law firm. The authors can be con-
to employee benefit schemes not March are required be disclosed tacted at nishith@nishithdesai.com. Readers
in alignment with the guidelines along with the quarter ending 30 should not act on the basis of this information
must be disclosed in the prescribed June 2013. without seeking professional legal advice.
12 India Business Law Journal June 2013The wrap
Court judgments
Banking law
Debt recovery
tribunal cannot rule
on workmen claims
Stating that “once the company is in
winding up the only competent authority
to determine the workmen’s dues is the
liquidator”, a three-judge bench of the
Supreme Court recently held that claims
of workmen who claim to be entitled to
payment pari passu have to be consid-
ered and adjudicated by the liquidator
of a debtor company and not by a Debt
Recovery Tribunal (DRT).
Allowing an appeal in Bank of
Maharashtra v Pandurang Keshav
Gorwardkar & Ors, the court ruled that
where a winding up petition against a
debtor company is pending and a bank
or financial institution has been repaid The ruling was prompted by two of a company and its priorities is vested
its loans following an order of sale by appeals – by Bank of Maharashtra and entirely with the DRT.
a DRT, the disbursements made by the Indian Banks Association – against The Bank of Maharashtra and the
the DRT cannot be reopened when the a ruling by Bombay High Court, which IBA had argued that the workmen had
debtor company subsequently goes allowed a writ filed in 2004 by Pandurang no claim or right over the security held
into liquidation. However, if the debtor Keshav Gorwardkar and others who by a financial institution, that their dues
company goes into liquidation before were workmen of a defaulter company. could only be adjudicated in an appro-
the DRT has fully disbursed the sale The court held that under the Recovery priate court (e.g. Industrial Tribunal)
proceeds, the DRT can disburse the of Debts Due to Banks and Financial when the company is not in liquidation,
undisbursed proceeds only after giving Institutions Act, 1993, the jurisdiction to and that the DRT had no competence
notice to, and hearing, the liquidator. determine the payment of sale proceeds in this regard.
Education law
AICTE approval
not required for
MBA courses
Allowing an appeal in Association of
Management of Private Colleges v All India
Council For Technical Education & Ors,
the Supreme Court recently held that a
course for a master’s degree in business
administration (MBA) “is not a technical
course” within the definition of the All
India Council for Technical Education
Act, 1987. As such, private colleges do
not require approval from the All India
Council for Technical Education (AICTE)
to run MBA courses.
The court also held that while a
June 2013 India Business Law Journal 13The wrap
master’s degree in computer applica-
Real estate tions (MCA) is a technical course, the
AICTE’s role in its conduct and regula-
Court quashes circular tion “must be advisory”.
The Association of Management of
prohibiting GPA sales Private Colleges (AMPC) was appealing
a 2003 ruling by Madras High Court,
which held that while a university does
Ruling in Pace Developers and Promoters Pvt Ltd v Govt of NCT through its not need to obtain permission from the
Secretary, Delhi High Court recently set aside a 27 April 2012 circular issued AICTE for technical courses it runs, its
by the government of the national capital territory of Delhi, which prohibited affiliated colleges must do so. Further,
the transfer of immovable property on the basis of a general power of attor- the high court held that private col-
ney (GPA), a will and an agreement to sell, collectively or separately. leges should get MCA courses that they
Holding that the circular was contrary to the observations made by the intend to run ratified by the AICTE.
Supreme Court in Suraj Lamp and Industries (P) Ltd v State of Haryana, the The AMPC argued that this contra-
court ruled that “as long as the transaction is genuine, the same will have to vened settled principles of interpreta-
be registered by the sub-registrar … a person may enter into a development tion of statutes and was also contrary
agreement with a land developer or builder for development of a parcel of to the law laid down by the Supreme
land or for construction of apartments in a building, and for this purpose a Court in Bharathidasan University &
power of attorney empowering the developer to execute sale agreements Anr v AICTE & Ors. The AMPC further
can be executed”. argued that the words MBA and MCA
Pace Developers and Promoters had entered into a collaboration agree- were inserted in August 2000 in regula-
ment in September 2011 with the owner an immovable property, who had tions of the AICTE, but were unenforce-
executed a GPA in its favour. The GPA was registered and stamp duty paid able as parliament had not ratified the
according to the Delhi Stamp Duty Amendment Act, 2001. The owner of the amendment as required under the act.
property had also executed a will giving a director of the company a 25% The Supreme Court held that under
share in ownership rights to the land. the University Grants Commission Act,
The high court clarified that it was open to the government to examine 1956, colleges are part of the university
the genuineness of transactions reflected in documents filed, at the time of that sanctions their courses. As a result,
registration. If the sub-registrar concludes that a transaction is not genuine, the court held that “the exclusion of
those presenting documents would be called on to explain their case and university in the definition of technical
if unconvinced the sub-registrar could pass a “speaking order” giving the institution as defined in section 2(h) of
reasons why the documents were not liable to be registered. the AICTE Act must be extended to the
affiliated colleges”.
Motor accident claims
Court clarifies
guidelines on
compensation
In Reshma Kumari & Ors v Madan
Mohan & Ors, a three-judge bench of
the Supreme Court held that the multi-
plier specified in the second schedule
of the Motor Vehicles Act, 1988, need
not be scrupulously followed for cal-
culating compensation in accident
claims.
For over a decade Supreme Court
judges have expressed differing views
about the application of the multiplier.
While some judgments held that the
table for calculating damages was
“unworkable”, others maintained that Supreme Court referred this case to a 166 of the Motor Vehicles Act .
the schedule was a good guide for larger bench for a final view. The task of the court was to remove
computing compensation. As despite The three-judge bench clarified the d i s c re p a n c i e s w h i c h m a y a r i s e
this controversy parliament had position regarding the application of between applications filed under
failed to amend the law for over two the multiplier in the second schedule to section 166 and those filed under
decades, a two-judge bench of the claims for compensation under section section 163A. Section 163A allows
14 India Business Law Journal June 2013The wrap
compensation claims to be filed and
provides for calculation of compen-
sation on the basis of the second
schedule. The multiplier mentioned
in the schedule is a numerical value
used for calculating the final quan-
tum of compensation. The discrep-
ancy arose because section 166 also
allows compensation to be sought,
but no formula is given for calculating
compensation, nor is there any refer-
ence to the multiplier in the second
schedule.
Stressing the importance of hav-
ing a standard method to determine
compensation in cases of death, the
Supreme Court directed all forums
below to follow the new guidelines
and those laid down in para 19 of its
judgment in Sarla Verma (Smt) and Ors
v Delhi Transport Corporation and Anr.
Retail
Supreme Court
upholds FDI policy
in multi-brand retail
Holding that “on matters affecting
policy, this court does not interfere
unless the policy is unconstitutional
or contrary to the statutory provisions
or arbitrary or irrational or in abuse of
power”, the Supreme Court recently
dismissed a writ petition in Manohar
Lal Sharma v Union of India & Another,
which challenged the government’s
foreign direct investment (FDI) policy.
A three-judge bench of the court
held that “the competence of the cen-
tral government to formulate a policy
relating to investment by a non-res-
ident entity/person resident outside
India, in the capital of an Indian com-
pany is beyond doubt”.
Sharma had petitioned the court
to quash press notes 4, 5, 6, 7 and
8 (2012 Series), dated 20 September
2012, issued by the Department of the Reserve Bank of India (RBI) could the petitioner’s contention that the
Industrial Policy and Promotion, by do this as per the Foreign Exchange press notes had no force of law, did not
which the government reviewed its Management Act, 1999. survive.
policy on FDI in single-brand retail, The court on enquiry found that after
multi-brand retail, air transport serv- the press notes were issued the RBI
ices, broadcasting carriage services had amended the Foreign Exchange
The update of court judgments is compiled by
and power exchanges. Management (Transfer or Issue of
Bhasin & Co, Advocates, a corporate law
Sharma argued that the press notes Security by a Person Resident Outside firm based in New Delhi. The authors can be
were “unconstitutional and without India) Regulations, 2000, to allow for contacted at lbhasin@bhasinco.in or lbhasin@
any authority of law” and that the the changes to the FDI policy. The court gmail.com. Readers should not act on the basis
central government had no power to observed that in the absence of any of this information without seeking professional
make policies regarding FDI, as only challenge to the amended regulations, legal advice.
June 2013 India Business Law Journal 15Vantage point Opinion
Falling short
Regulatory inadequacies are holding back India’s
drugs industry, argues DG Shah of the
Indian Pharmaceutical Alliance
I
n May, Ranbaxy, an Indian pharmaceutical company that committees have not seen the light of day, and as a result,
is part of the Daiichi Sankyo Group, was fined US$500 the CDSCO has failed to kept pace with global changes.
million by the United States Food and Drug Administration An unfortunate consequence of this is that the credibility of
(FDA) for offences relating to the manufacture and distri- India’s pharmaceutical industry, which is judged in part by
bution of adulterated drugs that were made in India. the standing of its regulatory authority, has suffered.
India has the largest number of FDA-approved plants out- Furthermore, with confidence in the CDSCO lagging,
side the US, and there are fears that the penalty has dam- other countries will become less trusting of the quality and
aged the image of the country’s pharmaceutical industry. It safety of Indian pharmaceutical products, thus seriously
has also focused attention on the shortcomings of India’s damaging India’s reputation as a supplier of safe, effective
regulatory infrastructure for the sector. and quality medicines.
The FDA has zero tolerance for manufacturing deficien- India’s pharmaceutical industry already exports more of its
cies. Statistics on import alerts, which are issued by the FDA products than it sells domestically. For exports to grow further,
when a product is deemed to present a safety risk, show it is vital that the industry has the backing and oversight of a
that complying with the regulator’s exacting standards is a robust regulator that is held in high esteem by other regulators
challenge for every company, whether Indian or American, and industry observers around the world.
generic or innovator. Indeed, 63 import alerts are currently For the past three years, the Indian Pharmaceutical Alliance
in force for Canadian products, 42 for UK products, 40 for (IPA) has been urging the government to address the shortfalls
Japanese products, 35 for German products and 47 for of the CDSCO and implement reforms that will facilitate the
Indian products. upgrading of India’s pharmaceutical regulatory framework.
Maintaining consistently high quality is a particular chal- Just as building a quality organization happens by design,
lenge for companies in India, where over the decades peo- not by accident, building an effective regulator requires strong
ple have developed a tolerance for low standards in hygiene, leadership and a pathway with well-defined milestones.
food, medicine and drinking water. As such, any Indian In a recent submission before an expert committee tasked
company that has to adhere to more challenging standards with formulating policy guidelines and standard operating
has to work to ensure that the entire organization embraces procedures for the approval of new drugs, clinical trials and
a new culture. the banning of drugs, the IPA highlighted an increasing reluc-
The Ranbaxy episode has driven home the fact that the tance by the CDSCO to grant approvals for new drugs, even
cost of non-compliance far outweighs the cost of compli- if they have been approved elsewhere, as well as a worrying
ance. It has also focused attention on the changes in attitude trend for the CDSCO to withhold permission for clinical trials
and corporate culture – from the grassroots up – that are or bio-studies for exports.
needed to foster quality organizations where higher techni- This is a typical example of the malaise that has permeated
cal and ethical standards are the norm. the CDSCO and given rise to an unhealthy culture that seems
In the pharmaceuticals sector, an effective regulatory to equate decision-making with risk-taking. This situation not
framework is a prerequisite if Indian companies are to only inhibits India’s pharmaceutical industry as it strives to
achieve the necessary jump in quality and the changes in compete in global markets, but also drives home the mag-
attitude and corporate culture that need to accompany it. nitude of the challenge that lies ahead if the CDSCO is to be
However, as it stands, there are serious concerns over the reinvigorated.
working of India’s drugs regulatory authority, the Central Indian companies that value their presence in the US and
Drugs Standard Control Organization (CDSCO). other international markets have already embraced the need
Various committees have attempted to make the to raise their standards and develop corporate cultures that
CDSCO more effective and accountable. Noteworthy among encourage and facilitate excellence. Now it falls to the coun-
them are the Pharmaceutical Research and Development try’s pharmaceutical regulatory authority to recognize that it
Committee, which published a report in November 1999, too needs to change in the interest of the long term growth and
and the Mashelkar Committee, which released its report four prosperity of the industry. Such a change is long overdue. g
years later. More recently, in its 59th report, the Parliamentary
Standing Committee on Health and Family Welfare high-
lighted the need for greater transparency, accountability and DG Shah is the secretary general of the Indian Pharmaceutical
efficiency in the working of the CDSCO. Alliance, which comprises 19 leading research-based Indian pharma-
Sadly, most of the recommendations made by these ceutical companies.
16 India Business Law Journal June 2013Competition law Cover story
Punching above
its weight
India’s competition watchdog may be the new kid on the block, but it has
already been flexing its muscles. Is it up to the challenges it has set for itself?
Rebecca Abraham reports
L
evelling the playing field in India was never going to previously unheard of amounts. These included a `6.3
be an easy task so there was little surprise when it billion (US$110 million) penalty against one of India’s top
took six years for the country’s competition watch- real estate companies, DLF, for abuse of dominance, and
dog, the Competition Commission of India (CCI), to be up a `60 billion penalty against an 11-strong cartel of India’s
and running. top cement companies. Both DLF and the cement com-
That the CCI has to be taken seriously was driven home panies are appealing the orders against them before the
when it began imposing widely publicized penalties of Competition Appellate Tribunal (COMPAT).
June 2013 India Business Law Journal 17You can also read
