I have been applying for jobs since my graduation in 2013! I have lost count of how many jobs and internships I have applied to. I literally have lost count. I did not have any marketable skills like drafting skills when I graduated.Thanks to the convenience of job portals and email options, I must have applied to numerous jobs. There have been countless rejections, most went without any response whatsoever. I don’t know which one bothered me more; the outright automated rejection or, the silence spreading over weeks before the realisation sets in.

The point is, being an avid job applicant (maybe this could go under my hobbies section some day), I have gone through a lot of job profiles prior to applying for them. With the passing years, the requirements have changed and become more specific. For instance, if the role is for a corporate law firm, they are generally looking for a specialist in M&A, PE, VC, etc. If it is for a TMT or Banking role, they are looking for significant experience in the industry.

This makes sense to an extent. Why not hire someone who already knows the role and the industry, rather than investing time to train them?

But apart from the varying specifics, there are some constant requirements too. These are the skill-sets like drafting, understanding litigation, advisory, etc. And amongst them, drafting undoubtedly remains the most common skill set.

Imagine, what if law schools taught us drafting in a more detailed manner? Considering that it is the most sought after skill set, maybe we should have started learning it from day one at law schools. But most of us did not, did we?

So why is drafting the most sought after skill set?

Drafting is an essential skill set for lawyers and law students alike. Lawyers have to draft plaints, petitions, applications, opinions, variety of contracts, etc. The language of such documents has to be simple, precise and on point. Most people including the laymen, cannot comprehend the legal jargon at all. Therefore, their only resort are lawyers.

The lawyers are trained to comprehend not only the laws, but all legal documents, like complaints, contracts, plaints, etc. The knowledge of law coupled with the ability to understand complex documents is a much desired skill set.  

But if law schools are not teaching drafting skills like litigation related drafting or contract drafting, then what should law students do? There are sample drafts available on the internet or one may do a contract drafting course to learn the practical aspects of the subject matter.

Drafting skills make a huge impact in the formative years for a lawyer. It is literally the bread and butter of all lawyers. The nature of drafting may vary but the impact is huge in any case.

# Supplementary income

The freshers or relatively new lawyers, usually in litigation, face financial uncertainty. Unless one comes from a legal background, it is difficult to sustain in the legal profession. This is where a lawyer’s resourcefulness and perseverance comes in handy. As a junior lawyer, I used to make negligible money compared to my counterparts in corporate or in-house roles. There were a lot of matters and running from courts to conferences and back was involved, but the money was only trickling through.

The practice in Indian legal scenario is mostly of the junior advocates having the privilege of assisting the seasoned lawyers, in lieu of their services. The newer lawyers have to be trained for years by the seniors, therefore to some it may seem a fair trade-off. But the reality of a situation is that money is needed for recurring expenses of the junior lawyers. Unless you have a generous senior, chances are you have to get creative to supplement your income.

This is where drafting skills of a lawyer can help them out. Most of my peers used to draft affidavits, applications, legal notices, complaints, etc. in their initial days, before moving on to plaints, petitions, etc. They used to also draft employment agreement, sale deeds, non-disclosure agreements, leave and license agreement, rent agreement, etc. to make extra income.

# Building practise through repeat clientele

In litigation or corporate law firms, clients are the most important factor as they bring in the business. Without clients, lawyers will literally be jobless. But how do you build a clientele? In my limited experience, I have seen how small acts add to a the bigger picture.

Recently, I had the opportunity to advise a startup duo on their business model. We met due to my younger brother. They started talking about their product to me as soon as my brother mentioned that I was a lawyer. They wanted to know how to best protect their interests. We had a detailed conversation about their possible options and then we all moved on.

A week later, one of them contacted me saying they are going for a soft trial launch with an institute and would like me to draft a suitable agreement to protect their product. I read up on it as I did not have much hands-on experience. After a week of consulting other experts, I drew an agreement and gave them. Then I forgot all about them. After about three weeks or so, I got another call saying they want me to help them register their company! I advised them regarding the kind of company they should register themselves as and connected them to the right people for the task.

What started as an off-hand conversation and discussion led to a favour and the client kept coming back for their legal needs. Once the trust is developed, even from a timely advice or drafting, usually the client will come back to you for the related work. So don’t underestimate the power of drafting. It can set you up with repeat clientele and more from word of mouth. You can build your reputation and business on the back of solid drafting skills. Just learn what you must and get on with it.

# Acquiring marketable skill sets

Check out any job profile for a lawyer on any website or job portal. You will find drafting skills as one of the top-most desired skill set. If you ensure that you learn litigation drafting or contract drafting, you can build an enviable practise.

In litigation, the drafting varies from other kinds of drafting. But there is never a dearth of clients looking for an affidavit, opinion, advise, application, or complaint. Sometimes there are dispute resolutions, settlements, and arbitrations that arise out of the said drafting.

Also in case of contract drafting, two more skill sets are interlinked: negotiation and dispute resolution. These skill sets are well desired in corporate or in-house lawyers as well. The one who is drafting the contract, is generally the one negotiating the same for their clients. They have to literally fight tooth and nail, to get their clients what they want or best need.

The lawyer who has drafted the contract, is also the one to whom the clients will go in case of a dispute. The lawyers insert the dispute resolution mechanism in a contract for potential disputes. Therefore, when it comes to resolving the said disputes, they are the first ones to be sought out by the clients.

These skills sets of drafting, negotiation, and dispute resolution are much desired by lawyers, in order to acquire marketable skill sets. These skill sets help to build one’s career with solid foundation. You know as a lawyer that drafting skills are quintessential towards building a solid career in litigation or as corporate or in-house lawyer.

All the other skill sets of arguing a case, negotiating a contract, dispute resolution – all come from the drafting. If the legal document is lacking in any way or form, the related skill sets will have to work in overdrive to salvage the same. But with good drafting skills, half the battle is won.

Therefore, learning drafting skills in the formative years is essential, towards building a lasting legal career. You may opt for contract drafting course to learn more about the variety of contracts, their drafting, negotiation, dispute resolution, or go the longer route and do it on your own. But don’t stop developing this skill set for it is necessary for the entirety of your legal career.

Good luck!

This article is a discussion about cancelled Cheque and the various questions surrounding the issue. Kashish Khattar is a 4^th Year B.A.LL.B. (Hons.) student at Amity Law School in New Delhi.

What is a cancelled Cheque?

A cancelled cheque is a cheque bearing the account holder’s name, account number and has CANCELLED inscribed across it.

A lot of times employers, banks or various establishments may have asked you for a cancelled cheque.

Why do they ask for it? What’s the purpose?

If you are a curious fellow like me you must have wondered about this at some point. Let’s address this.

Should you sign a cancelled cheque?

You just have to cancel cheque by drawing two parallel lines over it and writing “cancelled” in between the lines. You should NEVER sign on a cancelled cheque. You should ABSOLUTELY make sure that the person or institution to whom you are handing over this cancelled cheque of yours is highly reliable.

Details given out by such a Cheque

1. MICR CODE – MICR or Magnetic ink character recognition, it is a  9 digit code which has the name of the bank, the specific branch and the area code it is situated in.
2. IFSC CODE –  Indian financial system code, better known as IFSC, is 11 characters alphanumeric code mentioned on the cheque which assists the bank in providing services like the NEFT or RTGS.
3. The name of the Account Holder, Account Number and the Name of the Bank.

Where is it needed?

Following are some areas in our life where the cancelled cheque would be needed:

1. Bank account opening – When you open a savings or current account with a bank, you would have to submit a cancelled cheque to complete the account opening process.
2. KYC – Know your customer (KYC) is very essential for a lot of investments these days. KYC is needed for mutual funds, stock investments, etc.
3. ECS – Electronic clearing service (ECS), which is used for deducting money from your accounts every month also require a cancelled cheque.
4. EMIs – Different types of loans have EMI (Easy Monthly Installments) payments. EMIs are also applicable to purchase of mobiles, televisions, or any kind of tangible property for that matter. To complete the process of assigning EMIs, the bank or the company financing the EMI likes to ask for a cancelled cheque.
5. EPF withdrawal – Withdrawal from Employee Provident Fund (EPF) account would require a form and a cancelled cheque. These need to be submitted to the EPFO or the organisation you are currently you are employed in. This basically helps in validating your account details.
6. Insurance policy – When you purchase an insurance policy like term, endowment, money back, health, etc, you need to submit a cancelled cheque to the organization or agent.
7. Demat account – A demat account is needed for any person who wants to trade or invest in stocks. A cancelled cheque needs to be submitted to the stock brokerage along with the account opening form, ID proof, address proof, etc.

These are the alternatives to cancelled blank cheques for confirming MICR and IFSC for an account

1. Photocopy of the first page of the Passbook.
2. Copy of your account statement.
3. Many organization accept the photocopy of a cheque. Alternatively, you can scan a copy of one cancelled cheque and use it again and again whenever the need arises.

When should you refuse to give a cancelled cheque?

It depends upon the policy of the organisation, as to accept the cancelled cheque in what form. You should always ask for a letter or an email of their demand for this cancelled cheque. This is done for your own safety as this letter or email can be used as evidence in the court of law if such need arises.

In what ways could your cancelled cheque be misused?

A cancelled cheque has no monetary value, there have been reports of its misuse. Therefore, before handing over a cancelled cheque you should inquire if a photocopy or scanned copy of the cheque, or the first page of the passbook is acceptable as it is only required for your verification.

Does the picture of a cancelled cheque suffice for KYC in some cases?

It mainly depends upon the policy of the respective organisation you are submitting and can only be answered by them. Most of them should agree to accept a picture of a cancelled cheque because after all it is just needed for the purpose of verification.

Conclusion

A cancelled cheque does not require your signature at any point. Fraud relating to these cancelled cheques are not unheard of. Hence, the authority you are handing over this cheque should be extremely trustworthy and it should make sure that it would not fall into the wrong hands.

Cancelled Cheque

This article is written by Kashish Khattar, a 4^th Year B.A., LL.B. (Hons.) student at Amity Law School in New Delhi. The article is a discussion about the Dodd-Frank Reforms, their effects and the recent rollback of certain provisions of the Dodd-Frank under the Trump Administration.

Introduction

The Dodd-Frank Act (or the Dodd-Frank Wall Street Reform and Consumer Protection Act) (“DFA”) is a United States Federal Law that places regulation of the financial industry in the hands of the government. This was passed under the Obama Administration in effect to the aftermath of the Great Recession of 2008. Named after U.S. Senator Christopher J. Dodd and U.S. Representative Barney Frank, the Act is expected to reduce various risks in the U.S. financial system. Enacted in July 2010, it creates financial regulatory processes to limit risk by enforcing transparency and accountability. The 2300 paged financial reform creates a number of new government agencies, like the Financial Stability Oversight Council and the Consumer Financial Protection Bureau etc.

Let us also try to understand the concept of “Too Big to Fail” institutions in the economy, the business has become so large and influences so many spheres of the economy that the government will have to step in and help bail it out of financial troubles. However, this kind of a bailout would only make sense to the government if the cost of bailout is less than the ripple effects that would be created if the business fails. The DFA is an action plan of the US Government to avoid Future Bailouts. A part of the act requires the financial institutions to create living wills explaining how they would liquidate assets if they have they have to file for bankruptcy.

Main Features of the DFA

Basically, this law puts strict regulations on lenders and banks in an effort to protect consumers and prevent the economy from an all-out recession. Dodd Frank creates several new agencies to oversee the regulatory process and implement certain changes. It has 16 major reforms ranging from the Insurance sector to the Corporate Governance sector. The main provisions are as following:

1. Consumer Safeguards – The Act creates a new Consumer Financial Protection Bureau (“CFPB”) under the Federal Reserve. The CFPB is responsible for consumer financial education, creating financial curriculum and making it available to the public. It is mainly made to protect the public from scams, and to ensure that quality services are being provided to the general public.
2. Volcker Rule –  Named after Paul Volcker, he was the chairman of the Federal Reserve under President Carter and President Reagan, and chairman of the Economic Recovery Advisory Board under President Obama. The Volcker Rule is clearly a push in the direction of the Glass-Steagall Act of 1933 which had recognized the dangers of the entities extending commercial and investment banking services at the same time. The Volcker Rule mainly prohibits the banks from making risky short-term trading of securities, derivatives and commodity futures for their own benefit and it also prohibits banks from investing in private equity and hedge funds from their own accounts. Further, it also prohibits banks from converting their charter to avoid enforcement actions by the authorities.
3. Federal Reserve Reforms – The DFA restricts the emergency lending authority of the Federal Reserve by the following provisions: a. Prohibiting lending to an individual; b. Prohibiting lending to insolvent firms; c. Requiring approval of lending by the Secretary of Treasury; and d. Requiring sufficient collateral for all and any loans protecting taxpayers from losses. Further, the DFA imposes greater transparency on the Federal Reserve by requiring it to disclose all terms and conditions of an emergency lending situation on a regular basis. The DFA also directs an audit of all emergency lending administered by the Reserve at the time of the Crisis of 2008.
4. Every bank who has more than $50 billion of assets must take an annual stress test given by the Federal Reserve, which will help determine if that institution can survive a financial crisis in the future.
5. The Financial Stability Oversight Council (“FSOC”) is created to mainly oversee banks and financial firms like hedge funds whose failure could impact the whole financial system of the country. The main goal of the FSOC is to build a better future and rule out the option of any future government bailout. It is typically an early warning system, which will identify the threats looming the economy and try to respond to them through various reforms. The FSOC reforms can range from (i) breaking up banks that are considered too large; (ii) reducing their lending and investing capacities to requiring banks to provide contingency plans for a quick; (iii) orderly wind up of their business if they become insolvent; and (iv) providing for restructuring of banking companies which are not doing so well.
6. The Consumer Financial Protection Bureau (CFPB) protects consumers from the corrupt business practices of banks. This agency works with bank regulators to stop risky lending and other practices that could hurt American consumers. It also oversees credit and debit agencies as well as certain payday and consumer loans.
7. The DFA also implements a series of mortgage reforms to protect the customers. The DFA has a provision which talks of regulating derivatives such as credit default swaps which are deemed to be the culprit in the recent financial crisis of the country. The problem with these credit default swaps is that they are traded over the counter, with little to no regulation. This makes it practically impossible to know what kind of a market do these swaps have and hard to predict the risks involved in this specific market. The DFA sets up a centralized exchange for swap trades to reduce the risky nature of the counterparty default and also requires greater disclosure of the information related to the trade.
8. The Office of Credit Ratings ensures that agencies provide reliable credit ratings to those they evaluate. The DFA established an SEC Office of Credit Ratings as credit rating agencies were accused of giving misleadingly favourable investment ratings which contributed to the financial crisis of 2008. The office now has the job of ensuring that agencies will improve the accuracy of their ratings and maintain a standard and reliable method in the credit ratings business.
9. A whistle-blowing provision in the law promotes any person to come up with information about violations to report it to the government for a financial reward. The DFA mainly expanded the existing whistleblower program promulgated by the Sarbanes-Oxley Act (SOX). This Act focused on (i)  establishing a mandatory bounty program where the whistleblowers can receive about 10-30% of the proceeds from a litigation settlement; (ii) broadened the scope of a covered employee by extending the ambit of definition of the employee and including employees of the company, its subsidiaries and affiliates; and (iii) extending the statute of limitation where a whistleblower can now bring forward a claim against his employer in 90-180 days after the discovery of such violation.

Critical Analysis

It is also believed that the act takes away the competitiveness of the US Firms relative to their foreign counterparts. The compliance requirements are huge even in the case of smaller financial institutions and banks even when they had no role to play in the 2008 crisis. The institutions may be safer, but the constraints made up by the DFA has made a more illiquid market. The reserve requirement as established by the DFA is high, which typically means banks have to keep a higher percentage of their assets in cash which in turn affects their investments in the marketable securities. The critics believed that the DFA will ultimately hurt economic growth. It is also said to be a highly expensive regulation because of the compliance burden and the new regulators it creates.

Was the Dodd-Frank Act successful?

The Dodd-Frank was unsuccessful in a lot of avenues. The banks are still believed to be gambling with the FDIC-insured money. There has been no change in casino speculation of the Wall Street banks. There is still no curb in derivatives trading, which was the key loophole which leads to the financial crisis. Nobody has gone to jail. There have been so many examples of criminal behaviour during the meltdown, but not one megabank executive has gone to jail. Reform of the credit rating agencies is still a long way home. Fannie Mae and Freddie Mac have not been fixed, even one can be sure that they had a part to play in the crisis. It has to be evaluated considering both the sides of the situation. The US economy needed a law like Dodd-Frank to be risk-averse towards the next financial crisis. It did make the Wall Street more cautious about taking risks. The Volcker rule for small banks was seen as a regulatory burden towards them.

Partial Roll Back of the DFA

On 24 May 2018, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (“Act”) into law which reforms a lot of provisions of the DFA. As a result, only 10 biggest US banks have to now comply with the DFA. The changes executed through this Act mostly affect the small banks and not the large banking institutions of the country. The changes can be explained under the following heads:

1. Exemption of Small Banks from the Volcker Rule: Banks with less than $10 billion in assets that have total trading assets and trading liabilities accounting for 5% or less of the total assets and affiliates of such banks will be exempted from the Volcker Rule, which would help decrease the compliance requirement put up on these banks. Further, the Act removes a Volcker Rule limitation that prohibits a bank-affiliated investment advisor from using its name on hedge funds and private equity funds.
2. Reduction of Regulatory Burdens for all banking institutions: The Act rules out the need for banking companies with less than $250 billion in assets to comply with most aspects of “enhanced prudential standards” as defined in the DFA. The limit defined by the DFA was $50 billion in assets which was deemed to be too low by the standards of too big to fail institutions.
3. The other features of the Act include easing up mortgage loan data reporting requirements for the majority of banks, add safeguards for student loan borrowers and also include credit reporting companies to provide free credit monitoring services.

What are the expected long-term implications of the partial roll back of the Dodd-Frank Act?

The long-term implications of such a massive rollback of the DFA is clear. The Congress took away the teeth of the regulation and left it to monitor just the 10-12 big Banking institutions of the United States. It relaxed rules for around 25 banking institutions of the 38 biggest banking institutions that control 1/6th of the assets of the United States. The law loosens up on a lot of regulations that are important for stability, such as living wills, enhanced capital requirements and the stress test. There are a couple of loopholes in the law which will primarily help the largest players in the sector and also U.S. subsidiaries of foreign banks in the way forward. The limit could have been around $75 billion to $125 billion, but the $250 billion mark can be seen as really aggressive. The popular opinion that the community banks will get a lot of relief is untrue, they have been quite unprofitable in the present times. Their disappearance can be attributed towards their consolidation in medium or lower sized banks. The law dilutes most of the stringent regulations imposed, it makes things simpler for small and medium U.S. banks. It basically makes them more profitable and eases regulations for them to do business. The law only regulates bank which has assets amounting to $250 billion or more. The long-term implications can be dangerous because the banks with assets between $50 billion to $250 billion had a role to play in the crisis of 2008, as stated by the communications director of a non-profit coalition of organisations advocating for financial regulation. At the moment, it is too soon to figure out the long-term implications of this roll back can benefit the customers.

China’s very own Dodd-Frank

The Chinese regulators have introduced a new major regulation which is being termed as Beijing’s Dodd-Frank Act. This Act mainly tries to limit the shadow banking activities in light of President Xi Jinping’s call to reduce financial risks in the country. It is expected that around $15 Trillion or 100 trillion yuan will fall under the purview of this regulation. The regulation has been jointly drafted by the People’s Bank of China and China’s banking, securities and insurance regulators. The new regulations are a ministerial-level set of rules but they are expected to have a lasting impact on China’s financial world, drawing a parallel to the Dodd-Frank Act and its impact on the US Economy.

The draft legislation can put an end to China’s extraordinary financial market by restricting what the financial institutions can offer and what all can be bought by the investor in this market. A qualified investor is expected to have 5 mn yuan in family financial assets or should have earned more than 400,000 yuan a year for three consecutive years. The financial institutions will not any promises on returns and have to set aside 10% of their fee as risk reserves. The regulations are mainly expected to affect wealth management products which are offered online. The new rules aim to handle excessive leveraging in China’s non-financial banking sector with individual leverage limits to be set on asset management products. The rules are expected to cap the total assets to net assets ratio to 140% for mutual funds and 200% for private funds.

India’s take on the Dodd-Frank reforms

RBI decided to adopt the global best practices related to banking and came up with their own Framework for Dealing with Domestic Systemically Important Banks. (“D-SIBs”). There are only three banks that have been listed under this category. They are SBI, ICICI Bank and the HDFC Bank. SIBs are basically perceived as banks that are ‘Too Big to Fail’. This creates an expectation of government support at the time of distress. India, at present, has 3 too big to fails banks, they are mainly subject to a greater scrutiny than their peers and will always need to set aside a higher capital because the inclusion in this kind of a list gives them a premium status with regard to the other banks. It is perceived that these banks have direct support from the regulator and the government. Typically, the government will always throw them a lifeboat if ever such a need arises. There is enough evidence that the RBI and the Government never allow a bank to wind down irrespective of the hardships it is facing. The most recent example can be the Recapitalisation of Public Sector banks by the government. The government has already started thinking of consolidation of public sector banks, it is expected that despite these banks being hit by bad loans the lenders will be merged instead of being wound down.

Conclusion

The financial crisis was mainly due to the low regulation and trusting the large firm’s banks in the country who were too big to fail. The Dodd-Frank Wall Street Reform Act was the most comprehensive financial reform since the Glass-Steagall Act. The main objective of the Dodd-Frank Act was to regulate these large banks and firms who could have a major impact on the economy in a more stringent manner. President Trump approach towards easing the regulation of the DFA was clear, he will do whatever the business wants. He was a supporter of the real economy, which built things. President Trump had promised in his campaign trail, the revival of the Glass-Steagall Rule which separates investment banking from commercial banking. Nothing has been done of the sort, till now. The DFA roll back also concentrated on the provisions regarding the small banks and nothing which relates to the big banking institutions of the country.

Quoting from a Vox Article – “And the nature of bank regulation is that even when it’s done really, really poorly, the odds are overwhelming that on any given day, nothing bad is going to happen. As long as the economy is growing and asset prices are generally rising, a poorly supervised banking sector is just as good as a well-supervised one. But when the music stops, and it always does, a poorly supervised banking sector can turn into a huge disaster. It’s only a question of when.”

Only the time will tell, how this presidency will reform the banking regulation to make it more resilient towards a financial crisis.

This article is written by Aditi Singh of Symbiosis Law School, Pune. The article discusses the key highlights of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2018.

ABSTRACT

Foreign Direct Investment is advantageous for the economy of a country to develop but if it becomes limitless it can be equally disadvantageous. The Indian Government has been reluctant to remove restrictions for boosting the foreign direct investment in the country, but the Central Government in 2018 has liberalized the important sectors of the Indian economy to attract the foreign investors to invest in India by enacting the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2018 which aims towards enhancement of foreign direct investment, by relaxing the stringent and complex procedure under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017.

The paper interrogates the determinants of FDI in civil aviation sector, the Real Estate Sector, Single Brand Product Retail Trading, Power Exchange Sector, purchase and sale of capital instruments and other sectors by comparing the Principal Regulations of 2017 with the Amendment Regulations of 2018. The author has critically analyzed the intention of the Central government behind liberalizing the important sectors of the Indian economy and aims to understand the complexities involved in relaxing the procedures. The study has referred secondary sources of data collected mostly through the notifications of Reserve Bank of India.

Introduction

Central Government has been implementing favorable policies to enhance the Foreign Direct Investment in India. Passing of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2018 (hereinafter referred as Amendment Regulations 2018) is one such step. The Reserve Bank of India (“RBI”) under its ‘power to make regulations’[1] has brought the amendment regulations to the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2017 (hereinafter referred to as the Principal Regulations) to liberalize the important sectors of the Indian Economy. The RBI on March 26, 2018 notified the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulation, 2018. The significant changes brought by the Amendment Regulations 2018 with respect to sector-specific policy for Total Foreign Investment are as follows:

1. Foreign Investment In Non-Banking Financial Company

The first amendment that has been brought by the Amendment Regulations 2018, deletes the word “Indian Company” from sub-regulation 5 under Regulation 16.B of the Principal Regulations, and states that foreign investment in investing companies which are Non Banking Financial Companies, and are not registered with the Reserve Bank[2] engaged in the capital investment in other Indian entities will require prior approval of the government in addition to compliance with the regulatory framework under the Reserve Bank of India Act, 1934 and Regulations framed thereunder while Non- Banking Financial Companies which are registered with Reserve Bank will be under 100% automatic route unlike in the Principal Regulations 2017.

• Provisions with respect to the core investment companies still remains same.

Analysis of the Amendment Regulation

Non-banking financial companies are financial institutions that are engaged in the business of providing banking services without obtaining banking license. NBFCs are registered under the companies Act 2013, engaged in providing loan and purchase of bonds/stocks/shares/securities issued by Government, hire purchase, leasing, chit business.[3] NBFCs have been playing major role in the development of the Indian economy by providing almost similar services as banks. The procedure followed by the banks is more stringent and time taking in comparison to NBFCs and therefore, the Regulation has been amended to enhance the foreign Direct Investment by relaxing the procedure in the principal regulation. Investment through Automatic Route allows a foreign entity to invest in Indian entity without obtaining prior approval of the government or complying with the regulatory framework under the Reserve Bank of India Act [4]

Allowing Investment in Non-Banking Financial Company (registered with RBI) through automatic route up to 100% has removed the complexity of obtaining permission of the government which has relaxed the procedure and will attract the foreign entities to invest in the NBFCs (registered) in India. On one hand Investing Companies will feel secured because the NBFCs are registered with the RBI and on the other hand it will reduce the time taken in receiving approval by the government and complying with the frameworks under the RBI Act.

2. Joint Audit of The Indian Investee Company

The Amendment Regulations 2018 have inserted sub-regulation 8 to the regulation 16.B of the Principal Regulation, which now states that the auditioning of an investee company in India needs to be carried out as joint audit. The auditioning needs to be carried out by the auditor/auditing firm specified by the person who has invested in the investee company of India and by an independent auditor who is not associated with the audit/auditor firm specified by the person.

Analysis of the Amendment Regulation

Joint audit is where the auditioning of an entity is carried by two or more auditors. The principal Regulation is unclear about the appointment of auditors by the Indian Entity. The amendment ensures that the auditioning is just not carried by the auditors specified by the foreign investors but also by an auditor which is not a part of the international network making it a joint audit of the Indian Investee Company. The essence of the amendment lies in the fact that it will give an opportunity to the small and medium size audit firms in India. The Foreign Investors have always preferred the auditioning by the top international audit firms but the amendment will surely promote the role of domestic firms in case of joint auditioning. The amendment will further result in the interaction of domestic audit firms with the firms having international network.

It is to be also noted that the amendment regulation states that “wherein one of the auditors is not part of the same network”[5] which can also result in the auditioning by two international network auditioning firm which can defeat the purpose of the Amendment Regulation. The step of the central government has been brought up to enhance transparency, accountability and the promotion of good governance in India. It will be interesting to observe the consequence of such an amendment in near future.

3. Foreign Investment – Civil Aviation Sector

The regulations 2018 have amended existing SL. No 9.3(a) of regulation 16.B of the Foreign Investment.

Analysis of the Amendment Regulation

The Principal Regulations, 2017 allowed Foreign Investment in Air Transport Services up to 49% through automatic route. Anything beyond 49% was restricted under the regulations. The Amendment Regulations 2018, allowed 100% Foreign Investment in domestic airlines out of which, up to 49% through automatic route and beyond 49% through government route. After, relaxing the FDI norm 100% foreign investment is allowed in Domestic Scheduled Passenger Airlines, Non-Scheduled Air Transport Services, and helicopter and seaplane services.

However, it is to be noted foreign airlines are allowed to invest in the capital of Indian companies, operating scheduled and non-scheduled air transport, services up to the limit of 49 percent through government approval route.[6] The restriction ensures that the foreign airlines, which are in a position to fully own Indian airlines, do not control the management of Indian airlines. The amendment aims to boost foreign Investment to ease the process of doing business in India and also, ensures the involvement of the government to keep a check in case the investment is beyond 49%.

4. Foreign Investment In M/S Air India Ltd.

The Regulations, 2018 deletes Note 3 from SL.No 9.5 of regulation 16.B which stated that the policy mentioned at 9.5(c) above is not applicable to M/s Air India Limited.[7] The regulation 2018 permits the foreign investment in M/s Air India and inserted clause (d) in SL.No 9.5, after clause (c). The regulation lays down certain conditions with respect to investment in M/s Air India which are as follows-

• Foreign investment in M/s Air India Ltd., including that of foreign airline(s) shall not exceed 49% either directly or indirectly.
• Substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian Nationals.[8]

Analysis of the Amendment Regulation

M/s Air India is the national Carrier of India which has always received preferential treatment. There have been various reasons like regulation of price, security standards, public interest which has always refrained government from privatizing Air India. It is to be noted that United Kingdom and Australia have been successful after privatizing their national carrier. The amendment seeks to privatize M/s Air India so that it can enable from the debts of crores of rupees. Since, Note 3 from SL. No. 9.5 has been removed; the added clause (d) is subject to the conditions laid down in clause (c) and allows the Indian Nationals to have substantial ownership of Air India so that the risk to lose the management of the National Carrier is avoided.

The use of the word “Directly and indirectly” ensures that the foreign investment does not exceed the limit of 49% either by investing directly in M/s Air India or by indirectly investing in an entity which invests in M/s Air India. Foreign investors and foreign Airlines are permitted to invest in Air India but the amendment ensures that the effective control still remains with Indian Nationals to avoid any kind of future conflict of interest and also its smooth functioning. The essence of the amendment is to attract foreign investment in Air India but foreign entities usually refrain from investing in a sector where the government has a role to play.

5. Foreign Investment – Real Estate Broking Services

The Principal Regulations through SL. No. 10.2 of regulation 16.B stated the “other conditions” with respect to foreign investment in Construction Development: Townships, Housing, Built-up infrastructure. The Amendment Regulations, 2018 inserts Note 7 in SL. No. 10.2. Foreign investment is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights.[9] Real Estate Business has been defined under the Principal Regulation as

“dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships”[10]

Analysis of the Amendment Regulation

In India Foreign Investment is not permitted to invest in an entity investing in the Real Estate business. The restriction is imposed to avoid all such risks which can result in the control of Land of Indian Territory by an outsider. No country in the world can allow foreign entity to control its land. The amendment also, avoids the risk of prize escalation of land which can be one of the consequences of FDI in an entity investing in Real Estate Sector (Land). The regulation 2018 excludes Real Estate Broking services om the “Real Estate Sector” and permits Foreign Direct Investment up to 100% in the Real Estate Broking Sector through the Automatic route. Real Estate Broking Service is where a company or an individual is engaged in buying and selling of an immovably property.

The relaxation granted to the Real Estate Broking Sector is to boost the Real Estate sector. Broking services are different from Real Estate Business therefore the risk of controlling the Indian Territory by the outsiders remains out of the picture. It will further result in the registration of property brokers in India under RERA 2016.

6. Foreign Investment- Single Brand Product Retail Trading

(E-Commerce)

• As per the SL. No. 15.3 of the Principal Regulations 16.B, allows FDI up to 49% through automatic route and beyond 49% and up to 100% is permitted through government route. The Amendment Regulations 2018, amends the provision by substituting “Automatic up to 49%; Government route beyond 49%” with “Automatic”.

Analysis of the amendment Regulation

Single Brand Retail trading is to sell goods to the customers with the same brand name. Removal of investment through government route will also increase the competition among Indian entity and will attract the investment in production and marketing area. The amendment will provide more options to the customers in India. Participation of foreign players will boom the Real Estate Sector of India.

• L.No. 15.3.1 of 16.B of the Principal Regulation states other conditions with respect to Single Brand Product Retail Trading. Clause (d) of the SL. No. 15.3.1 has been amended and now, it excludes the requirement of license agreement between the investor company and the brand owner.

Analysis of the amendment Regulation

The amendment has relaxed the procedure by removing the requirement of “The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/ franchise/ sub-licence agreement, specifically indicating compliance with the above condition. The requisite evidence should be filed with the RBI for the automatic route and the Government for cases involving approval.”[11] The removal of the specified requirement implies that now, there is no need to file evidences with RBI for the investment through Automatic Route; the foreign entities can directly invest through automatic route. This definitely has eased out the procedure of doing business.

• In SL. No. 15.3.1 clause (g) and clause (h) which dealt with the requirement of application seeking permission of the government for foreign investment exceeding 49% and the requirement to process the said application by the Department of Industrial Policy has been deleted and a new clause (i) has been inserted. The new clause states that for the initial five years, incremental sourcing by overseas companies, including their group companies for the specific brand will count towards the mandatory 30% local sourcing commitment.

Analysis of the amendment Regulation

The amendment has changed the scenario of local sourcing requirement. Incremental sourcing is outsourcing from the other country, in the beginning a small part is outsourced and with the time the outsourcing increments. The principal regulation mandated the requirement of 30% local outsourcing from India for the foreign brands to invest from the beginning. The amendment has relaxed the procedure and it states that for initial 5 years incremental sourcing will count towards the requirement of 30% local outsourcing from India. The removal of the stringent regulation has been demanded by the foreign entities from a long time. The removal of the requirement will surely boost the investment in single brand retail trading in India.

• The Amendment Regulations 2018 also deletes Note 2 and Note 3 from SL. No. 15.3.1 and added Note 5 in Principal Regulations. The deleted Note 2 stated that the Indian manufacturer is permitted to sell its own branded products and Note 3 which mandated that Indian manufacturer would be the investee company, which is the owner of the Indian brand and which manufactures in India, in terms of value, at least 70 percent of its products in house, and sources, at most 30 percentfrom Indian manufacturers.

Analysis of the amendment Regulation

Under the principal regulation to qualify as the Indian Manufacture an entity has to manufacture 70 percent of its products in house, and sources, at most 30 percent from Indian manufacturers.[12] The amended regulation has removed this requirement from the Principal Regulations 2017. The amendment will allow foreign investment in case the Indian Manufacture could not meet the requirement stated in Note 3 of Principal Regulation. Now, the Indian Manufacturer can obtain FDI and wholesale, retail, including through e-commerce platforms.

The Amendment Regulations 2018 through the addition of Note 5 requires a committee to relax the procedure where the local sourcing is not possible which will enhance the foreign investment by allowing foreign investment without meeting the criteria of local sourcing and will bring wide options for the customers in India. It is definitely a great step by the Indian government to boost the Retail Industry. Note 5 also state the composition of the committee to be formed under the Chairmanship of Secretary, DIPP, with representatives from NITI Aayog, concerned Administrative Ministry and independent technical expert(s).[13] The amendment ensures that foreign brands could easily incorporate wholly owned subsidiariesIndia to undertake SBRT, without tying up with any local Indian partner.

7. Significance of The Word ‘Disability’

The Regulation 2018 replaces the word ‘handicap’ with ‘disability’ in SL. No. 16.3 in Note 2, in clause (a) and in sub-clause (ab) of clause 16.B of the Principal Regulations. Disability represents diversity and is a politically correct and respectable word to be used by the Indian Legislature. Handicap is never considered a positive word while the use of the word disability gives importance to an individual who is disabled.

8. Foreign Investment – Pharmaceutical Sector

SL.No. 16.3 deletes the Note 3 which stated that the definition of “medical device” is subject to the Drugs and Cosmetic Act.The amendment has widened the definition of medical devices which will lead to the increase of investment in pharmaceutical department. The amendment implies that the definition stated in the Principal regulation is complete and making it subject to Drugs and Cosmetic Act will restrict the scope of the definition of medical device.

9. Foreign Investment- Power Exchange

The Amendment Regulations 2018 deleted clause (a) from F.6.1 of schedule 1, which stated that Foreign Portfolio Investor can only invest through Secondary Market Route which implies that FPI can also invest through Primary Market.

Analysis of the amendment Regulation

Foreign Portfolio investment is a short term investment without aiming to control the business by the non resident of India unlike the aim of the FDI which is to establish long interest in the economy. FPI aims investment in shares, government bonds, and corporate bonds. FPI were restricted, to invest only through secondary market but after the amendment the restriction has been relaxed.

Investment through primary market means to invest directly in the stocks, bonds, shares of a company while investment through secondary market is investing, after the company had sold out all its bonds, stocks and shares through primary market. Initially to avoid any circumstance of direct control by the foreign investors in the Indian entity government restricted FPI only through secondary but now, to ease mobilization of funds and welcome better technology, restriction from primary market has been relaxed.

10. Purchase/ Sale of Capital Instruments of an Indian Company by a Person Resident Outside India

• The Regulation 2018, deleted Para 1 (6) from schedule of the Principal Regulation and has amended Para 1 (4) which allows an Indian entity to issue a capital instrument as a consideration through automatic route and through government route. The entity is supposed to comply with the conditions prescribed by the government and /or RBI. In case of government route, its mandatory for the entity to receive permission of the government. The amendment allows an Indian entity to issue capital instruments against:

1. Swap of capital instruments; or
2. Import of capital goods/ machinery/ equipment (excluding second-hand machinery); or
3. Pre-operative/ pre-incorporation expenses (including payments of rent etc.).

Analysis of the amendment Regulation

Schedule 1 of the Principal Regulations dealt with the Purchase/ Sale of capital instruments of an Indian company by a person resident outside India. As peer principal regulation an Indian Entity could issue securities against swap of Capital Instrument engaged in an automatic route sector. While the issue of security by an entity engaged in government route required prior permission of the government and it could be issued against Swap of capital instruments, Import of capital goods/ machinery/ equipment (excluding second-hand machinery) or Pre-operative/ pre-incorporation expenses. The amendment aims to issue of security by the Indian entity against Swap of capital market which is the exchange of financial instruments or against import of goods/machinery/equipment from foreign suppliers or against Pre-operative/ pre-incorporation expenses which is the expense incurred by the company before its incorporation/ expense incurred before it became operative by an entity engaged wither in automatic route or government route provided that the entity engaged in the government route should obtain prior permission of government.

In the principal regulation Indian entity issuing capital instrument engaged in government route could have issued against swap of capital instrument and Import of capital goods/ machinery/ equipment (excluding second-hand machinery) or swap of capital instrument and Pre-operative/ pre-incorporation expensesbut in the amendment regulation it can be issued against Swap of capital instruments; or Import of capital goods/ machinery/ equipment (excluding second-hand machinery); or Pre-operative/ pre-incorporation expenses (including payments of rent etc.).

The amendment has relaxed the procedure for an Indian entity to issue capital instrument engaged in both automatic route and government route. Import of second hand – machinery has been excluded in order to promote the reuse of machinery in the country for being green and clean.

• All the amendments mentioned above have been included in the Principal Regulations brought up by the RBI on 6^th of April 2018 by the Notification No. FEMA 20(R)/2017-RB. It is yet to be seen, the impact of the amendments in the future but the step to liberalize the various sectors of the Indian Economy is a great step taken by the Indian Government. The essence of all these amendments lies in the fact that the control of Indian Nationals over the important sectors still remains intact.

References

[1] The Foreign Exchange Management Act 1999, s 47

[2] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations 2018, reg 2(i)

[3]‘Frequently Asked Questions; All you wanted to know about NBFCs’ (Reserve Bank India, 10 January 2017). https://www.rbi.org.in/Scripts/FAQView.aspx?Id=92 accessed 13 June 2018

[4] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16 (A) (1)

[5]Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations 2018, reg (2) (iii)

[6] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL.No.9.5, cl (c)

[7]Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL.No.9.5, Note 3

[8]Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations 2018, reg (2) (xii)

[9] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL.No.10.2, Note 1

[10] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL No. 10.2, Note 6

[11] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL.No.15.3.1 cl (d)

[12] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, reg 16B, SL.No.15.3.1, Note 3

[13] Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations 2018, reg (2) (xii)

Inspired by the story written by Ramanuj Mukherjee titled ‘How I Blew My Interview With Amarchand Mangaldas’, we came up with an idea to do a How I Blew My Interview Series, while sipping a cup of tea and discussing work on Tuesday evening at office.

Here is our team member Mohona Thakur’s account of how she blew her interview with Star India.

If you’ve been following my writings by now you’d be aware that I have always dreamt of working in the FMCG or media space as an in-house counsel. So, naturally, in my final year of law school, I applied to a lot of media companies – from Disney India to Viacom 18 to the Times Group.

Star India was obviously one amongst them. I had heard from various sources that they are big on hiring and training freshers, the CTC packages were pretty much close to what top-tier law firms offered to their freshers, it was the fully owned subsidiary of 21st Century Fox, and do I really need to say much about the brand? It was my first choice.

This was one of the first companies I applied to. After a number of follow ups through five months, I finally got a call from the HR, right in between my final semester exams. In the excitement, although I had enough brains to push the interview date after the exams, I only pushed it to the very next day after the final exams got over. It was an HR interview, I thought. How wrong could it go? I had the choice of choosing a date, any date after exams got over, but I didn’t want butterflies in my stomach, so I chose the first possible day for the interview. The blunders began right here.

Soon, the back-to-back 100 mark final semester exams got over. For those of you who have studied under the University of Pune, you’d know how archaic the examination system is. We spend four to five days giving 100 mark law papers for subjects as vast as CrPc, Companies Law, Banking and Tax in our final semester. Students survive on excess food and red bull to keep themselves awake to revise the syllabus overnight to go give the papers the next day.

I do not think the magnanimity of the situation hit me till I realised that the HR interview was the very next day and to top it off, this was my very first interview for a job, ever.

As any prudent student would, I did what was required for the HR rounds. I prepared a list of probable questions that could be asked to me, soft questions like “Tell me about yourself.”, “Why law?”, “Why do you want to work with Star India?”, “What’s the CTC you’re expecting?” and the likes. I went the extra mile and did some quick research on the interviewer, read up about the recent developments of the company. In the limited time, I revised my resume. I focused on reading up my research notes from my internships that were media laws oriented. I knew I wasn’t a hundred percent ready, but I knew I was prepared enough for the HR rounds.

The next morning, I was ready logistically. I had requested my roommate to allow the room to myself for two hours, the wifi was smooth, I had a decent background with enough light. The only thing that felt anything contrary to ready was my stomach that was growling in nervousness. It was only when the interview started that I started to finally breathe.

Ms. Vibha Bhosale was across the screen, over Skype, quite ready to interview me. She introduced herself as the HR Business Partner to the legal team. The interview was going as expected. From “Tell me about yourself.” to “Why law?” to “Why Star India?”, until the dreaded “I see that you haven’t interned with any law firm, is there any specific reason for it? Or was it purely out of choice?”

This was a question the answer to which would lead to the next question: “Why do you want to work with a company as a fresher? Why not a law firm?” To be absolutely honest, I knew the answer to both these questions. But I decided that my honesty may cost me a job if what I said next made the HR feel that I wasn’t up for hard-work which was absolutely in contradiction to my personality. There is no way you want the HR to feel that you do not have it in you to put in the work. And this was a deciding factor.

Instead of saying what I have always believed to be a driving force behind the decision to be working in-house, I gave a standard and half-true answer: “I believe I have both legal and managerial skills, and companies would be the best place to put both of them to use and grow.” She didn’t buy it. She repeated the question again. I stuck to my answer, thinking this was a test to see if I crack under pressure and change my answer – to figure out if I was fickle minded about my decision to join companies and the reason behind it.

By the fourth time I was asked the very same question by Ms. Bhosale, I knew she wasn’t convinced at all. She could see through me, but I was in a position from where I could not return. And definitely, changing the answer wasn’t anymore an option. I knew that my chances of getting this dream job at a company that not only encourages young talent but also trains them (which is a gem to find in the legal industry) was almost gone.

So, I was more than glad when she moved on to my resume and began asking questions from there. I must say, I was impressed. You do not expect HR personnels to have any legal knowledge as such about the laws, but here Ms. Bhosale knew what she was speaking about. I was grilled on my resume as though it was a technical round. From questions regarding my post graduate diploma in media laws from NALSAR to my internship with Hindustan Times in my second year of law school, I was grilled on anything that remotely pointed to the Telecom, Media and Technology sector.

If you think that HR rounds are easy, treat this right here as a reality check. Most HRs, especially in companies with as much resources as Star India are nothing, if not well-trained. I had merely brushed through the technical parts in the resume, so I relied purely on my memory to give the right answers. It went great until I was asked about a telecom policy I had worked on in my last internship.

“What work did you partake while formulating the policy for the telecom sector? What exactly was the policy about?” I answered rather reluctantly, stammered a bit, and said, “Since the Act that the policy was made for has not been passed by the Delhi Government, I can’t specifically give you details, but it was to do with regulation of telecom towers. I was given to review the entire Act and prepare a report on where the statute lacked and what could be the possible solutions.” I would call this an evasive answer, while I did answer the question somewhat, I made it very clear that I didn’t know enough. My memory definitely did fail me here.

Every interview has those moments – when you know whether you’ve made it to the next round, or not. While I had already lost the trust of the HR by bluffing about why I wanted to work with companies with a predominant fear that I would be misunderstood, not knowing a crucial piece of work I had worked on not six months ago showed poor preparation.

The interview lasted for about 45 minutes, and Ms. Bhosale bid her goodbye saying the usual – “The next round will be taken by Mr. Deepak Jacob. Our team will let you know if there is a next round.”

This was my very first interview for a job. Ever. And I screwed it up. In fact, I was so sure that I wasn’t making it that after the two-week mark, I didn’t even bother following up.

Two years down the line, today when I look back how I blew up that first interview, I can point out a few blunders:

Blunder #1: Stupidity

When I was called for the interview, instead of taking time and thinking a date through, I made the quick decision of doing the HR round right after my final semester exams got over. I didn’t even think of giving myself a breather after the exams. In spite of knowing that Pune University exams are physically tiring and most students are sleep deprived by the end of the exams, I made a choice in hurry rather than buying time – due to the fear of losing an opportunity.

This is nothing but career defining decisions made in haste. Yes, I had been following up with the company for months, but rather than jumping at the one opportunity I got for an interview, I should have thought it through, asked for a couple of hours, maybe even a day and gotten back with a calm mind.

Blunder #2: Lies

HR personnel are trained to hire people. They can see through your lies, even if you are the best at keeping a poker face. It is best to be honest with them, and frame your answers in a way that would convince them of who you really are rather than portray a picture of you who you’d want them to hire. They can see through it all, I believe so.

When I was asked about why I wanted to work with a company and not a law firm right out of law school, I freezed. There was a time in my fourth year while interning for Godfrey Phillips India, when the Senior Manager there had asked me the same question but in the context of internships – “Why do you intern with companies only? Why haven’t you interned with law firms yet?” I had very honestly answered her question back then. “Because I believe that companies give you stability, work-life balance, financial resources and a great amount of work. Everything I could ask for as a lawyer.” In reply to this, I was asked, “Are you sure this is the reason? Or is this your easy way out, of putting in hard work and hours?” I was offended, but then that also gave me glimpse into how a number of lawyers themselves look at in-house jobs.

Working with companies to the middle class has always been equivalent to stability. And, why not? You have steady flow of income every month, you have provisions for House Rent Allowance and a PF and Gratuity account that takes care of you post retirement. To a lot of us lawyers, most of them on the top of the pyramid, after having worked days and nights for years moving in-house means work-life balance resulting out of a stark difference in terms of the quantity of workload.

I wanted this very stability and work-life balance from the beginning of my career. I didn’t want to make the switch from law-firms to in-house after I was exhausted of the law firm life. It was a conscious choice that I was making. And there is no shame in admitting it. Is it a crime to want a work-life balance? Does working in-house mean you’re having it easy in the legal field?

Instead of saying the truth, I gave a half-baked answer presuming my answer would be construed against who I really am.

Blunder #3: Undermining HR Rounds

Right from the moment I was told that it would be an HR round to my preparation for the interview, I didn’t pay two heeds to preparing for the technical side of my resume in and out. I brushed through it, barely enough to recall what I had done in various internships, diplomas and publications.

The HR rounds may be presumed to be a test of your character, zeal, potential to fit in the company, but it is as important as to know your stuff while you sit for this round. Knowing your resume thoroughly, whether it is the HR round or the technical round is mandatory. And in case you do not know the answer to a question, have the ability to say you don’t know or don’t remember. Do not give ambiguous answers to dodge the question.

A lot of lawyers, more often than not, and especially freshers think of the HR interviews to be “just a formality”. This is a reality check for all of you.

I screwed up the first and the most important interview I had bagged in spite of having a more-than-decent resume because I was under prepared, sleep deprived and clearly not thinking straight enough to admit truths while being interviewed and it showed. As rightly pointed out by Ramanuj in his story, blunders genuinely do not begin in the room where you are being interviewed but much beforehand. Mine began from the moment I got the call for the interview.

We are writing our stories in an attempt to bring awareness about where one could go wrong during interviews. We hope there’s some take away and you gain from these attempts. As a small part of our attempts, we have made a course on how you can excel at internships and crack PPOs and interviews. You can check it out here.

In case you have your own stories to share with us, do reply to this in comments or write to us at [email protected] with your own story on #HowIBlewMyInterview. We would love to hear from you and even publish some of your stories.

When I decided to study law, back in 2005, and shared the news with my father, he was very disappointed. He had a hard time accepting that his son will be a lawyer. It was almost as if he felt that I was throwing my life away.

I got similar reactions from my teachers too.

I was a good boy, did well in school. I was studying in the science stream after 10th standard, and should attempt to become a doctor. Or an engineer at least. Law was not an acceptable option.

It took me many months of convincing my father and mother to be able to study law.

From there, in 2018 when I am writing this, perception of law as a career has completely changed. It is now considered a very good option. Everyone has heard the stories that corporate lawyers can earn in crores. Litigators can earn even more.

Engineering used to be the big favourite of average Indian parent. In recent years, engineering colleges are shutting down, and some of them even turned into ghost towns due to lack of students. Many MBA colleges have met the same fate, as jobs are hard to come by after doing MBA or engineering. In this context, law is becoming a favourite of many Indian parents. Unlike before, parents have began to push their kids towards studying law.

There are a lot of new legal career options opening up regularly, while the traditional work for lawyers have also stayed strong and only increased in demand. Everyone is well aware of the trend, but not quite about the details of where those opportunities are arising and how to capitalize on them.

As Indian economy continue to grow strongly, the demand for skilled lawyers is only going up. However, at the same time, it is a paradox that a large number of law graduates remain unemployed or struggle to find work.

This can happen for two reasons. One is that these law graduates are not adequately trained. Many of them have theoretical knowledge of law, but are not employable and cannot serve real clients as they do not have practical skills.

This is why, choosing the right law school where the administration has a vision and understanding of where the legal market is headed is very important. Always check before joining, does your preferred law school have a method in place to provide practical training to the students? Are the students graduating with jobs or are they able to find well paid work on their own?

For example, from a distance, Jindal Global Law School seems to be doing a decent job towards this.

That is the critical question to ask and then it is even more important find the right answer.

Most law schools will claim that they give practical training. Most even have some name sake courses and classes where they supposedly teach skills like contract drafting, petition drafting etc. However, usually these classes are ineffective. They do not have any proper faculty or material to teach such skills.

This is why, at iPleaders and LawSikho.com, we have began helping some universities and law schools to provide this kind of training to their students. These colleges and universities acknowledge the problem, and seek outside help to address it.

Actively learn about the career opportunities that are arising in new areas of legal work, such as M&A, banking, media law, technology and cyber law, transfer pricing, corporate litigation, energy law, regulatory litigation, arbitration and so on. See which ones appeal to you. Then decide which one you want to focus on, and what skills are necessary to succeed in that job.

Then you have to go ahead and actually build those skills. That is hard work. There is no shortcut for that.

However, if you college also helps you in that, that is wonderful. Otherwise, it is counter-productive to struggle on your own as your valuable resources, time and money, goes into the wrong direction as far as college in concerned.

To sum up, there are ample opportunities after studying law to have a fantastic career. However, one has to be careful. This is an applied area of work, not of theoretical knowledge. You must develop your skills in practical legal work one way or another.

If your college does not help you to develop practical skills, please check out lawsikho.com, and take up a course that will help you to acquire those practical skills that are valued by recruiters, and will help you to be gainfully employed or build your very own law practice with paying clients.

We know the exact problems you will face when you are trying to find internships, when you are trying to impress a potential employer during that internship, or what you will face in job interviews. We will train you to succeed in each of those stages. We will even help you to get the internships and interviews if you perform well in our course.

We know the challenges you will face when you begin your job, or when you will begin to build your own practice. We will train you for success if you are our student.

In any case, whether you come to us or not, prepare your strategy as to how you are going to get the dream job or start your own practice and find the clients. Don’t leave it until it is too late.

All the best!

In this article, Swati Garg, an Advocate and an LL.M. graduate from Gujarat National Law University discusses FDI in single brand, multi-brand retail and e-commerce.

Single Brand Retail Trading

Single brand retail trading means selling different products under one brand name. For example, Starbucks sells beverages and food items under the brand of Starbucks. It also sells cups under the same brand name. Other examples could be Ikea, Nike, Adidas etc.

As per the latest policy issued by Department of Industrial Policy and Promotion (DIPP), 100% foreign direct investment (FDI) is allowed in case of single brand retail through automatic route. Only those products that are branded during manufacturing and also sold under the same brand in other countries will be covered under this.

However, where the FDI is more than 51%, at least 30% of the value of goods should be sourced from India. This was in view to promote domestic sectors in India i.e. micro, small and medium enterprises, village and cottage industries, artisans and craftsmen. As a relief to the companies, in the initial five years, this requirement has to be made as an average of total value of goods purchased in the five years. After that, every year 30% requirement has to be completed.

E-commerce stores of single brand retailers

The policy also allows a single brand retail entity which is operating through brick and mortar stores, to trade through e-commerce. Indian entity has to make sure that all the compliances has been fulfilled whereas the investing entity will be responsible to file the evidence with RBI to prove the effective compliance.

Multi Brand Retail Trading

Multi-brand retail trading is selling products of different brands under one roof. For example, Big Bazar, Reliance, Shopper Stop etc. These establishments sell products of different brands at one establishment. With regards to multi brand retail trading, the central government has just framed an enabling policy specifying the maximum FDI which is allowed and the procedure. States/Union Territories’ governments have been given the ultimate authority to allow or reject this policy. Till date, 12 States/Union Territories have agreed to the central government policy.

As per the central government, only 51% FDI is allowed and for that also, one needs permission from government unlike in the case of single brand retail trading where only compliances has to be proved; no permission from any governmental authority is required. There are certain conditions over 51% cap which are explained as below:

1. A minimum amount of US $ 100 million i.e. approx 700 crores INR has to be invested in India. They can only open their establishments/stores in an area having minimum 10 lakhs population.
2. 50% of total FDI has to be invested in ‘back-end infrastructure’ within three years. Back- end infrastructure as defined in the policy will include capital expenditure on all activities, excluding that on front-end units. Back-end infrastructure will include processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc.
3. 30% of the goods should at least be procured from Indian domestic sector especially in micro, small and medium enterprises, agricultural co-operatives and farmers co-operatives. Even if an enterprise during the course of sourcing the goods stops being micro, small or medium enterprises, they will still be considered as small enterprises. Process of determination is same as in single-brand retail.
4. Unlike single-brand retail trading, multi-brand retail traders are in no way allowed to trade by means of e-commerce.
5. Fresh agricultural and meat produce sold at these multi-brand retail shops can be unbranded.

To what extent did liberalisation of FDI in multi-brand retail enable foreign players to enter India (if at all)?

As stated above, FDI in multi-brand retail is limited by various aspects. First of all, the particular State/UT has allowed the FDI in multi-brand retail trading. Secondly, only 51% FDI is allowed that too only after the approval of the government. Thirdly, there is a requirement of the investment of minimum US $100 million where 30% of the products has to be sourced from India. Moreover, they are not permitted to enter into e-commerce space. This situation has limited foreign brands to enter Indian market.

Another route which can be adopted to overcome this issue is Foreign Portfolio Investment (FPI). FPI is different from FDI. IN FPI, a foreign investor invests in the company’s stocks, bonds or securities. They do not have any control on the management and they can be liquidated in a shorter time frame than FDI.

Why the difference between FDI in single brand retail and multi-brand retail?

Indian marketplace is dominated with many small shops and business. If foreign investment in multi-brand retail is to be permitted, then the business of these small shop owners will be in danger. Consumers will be spoilt with choices and due to high competitions, prices will go down, thus these multi-brand retail establishment will be able attract consumers at a large scale.

However, in case of single-brand retail shops, they usually bring premium or luxury goods in the market so as such they are not in direct conflict with Indian small business.

FDI in e-commerce sector – Is it the same as multi-brand retail?

E-commerce retail trading is buying and selling of products and services online. There is no brick and mortar establishment. For example, Flipkart, Amazon, Tatacliq, etc.

Earlier, FDI in e-commerce would attract the norms on multi-brand retail, and so corporate lawyers started using a different kind of corporate structure for the transaction. They separated the technology and the trading company, and took investment in the technology company, and argued that there has been no investment in the retail sector.

Over time, RBI has separated the treatment of multi-brand brick and mortar stores and multi-brand e-commerce stores.

FDI in e-commerce retail trading is 100% through automatic route. That is just like in the case of single-brand retail trading, no permission from any governmental authority is required to invest in e-commerce retail trade whereas in multi-brand retail, as explained above, foreign investment can be done through government approval route only and that to upto 51%.

For example: If Walmart, which is a multi-brand retail store, was to open a store in India, it will need government approval and it can only invest up to 51%. Instead, if it invests in Flipkart under the regime for e-commerce companies, it can acquire up to 100% of it under the automatic route (provided that the structuring of Flipkart is in accordance with the FDI provision). Accordingly, it has acquired more than 75%.

How to structure an e-commerce venture to take foreign investment

100% foreign investment is allowed in marketplace model of e-commerce which is basically providing a platform online where a buyer can buy stuff from a seller. However, in case of inventory based model i.e. where e-commerce entity owns the products and services and directly sell to consumers, in this case FDI is not permitted.

Note: In case of FDI in wholesale business and single brand retail trading, they can use the digital platform to sell their products and services, implying they can have an inventory based model, provided they have a brick and mortar establishment. It is important to note down here that where FDI is in multi-brand retail traders, they are not allowed to to trade by means of e-commerce.

An e-commerce company needs to comply with the following conditions to receive FDI

1. FDI in trading platform and technology services (including support services)

Foreign investors invest either in providing the trading platform or in technology services. For example, Amazon provides a trading platform for sellers to use to sell their goods to buy, with packaging, payment collection and logistics services. The platform cannot own any inventory of its own. An example for investment in technology services can be Walmart investing in Flipkart.

2. FDI in a B2B entity

In this case, a foreign investor invests in a B2B company which takes order from different B2C companies, totally unrelated to it. Even in case of sudden large orders, these B2B will be able to handle it more efficiently as they will have more resources to manage the trading and marketing of goods and services.

Other conditions under FDI Policy for receiving FDI in e-commerce

1. Other than providing a platform to sell services and products, providing support services to sellers which can vary from, logistics, warehousing, to delivery, payment collection, call centre and other services is also permitted.
2. More than 25% sale of a financial year from one particular vendor or its group of companies is also not permitted. For instance, till this regulation came into picture, on Flipkart, approximately 40% of revenue came from one particular vendor WS Retail. Similarly, on Amazon, its maximum revenue comes from Cloudtail. Now as per the policy, the revenue should not cross 25%.
3. E-commerce entity can not exercise ownership over the products sold through its website as it will make it an inventory based model.
4. Details of the seller has to be clearly provided on the website. And all the post selling customer satisfaction, guarantee/warranty of the product or services will be the responsibility of the seller.
5. E-commerce entity should not influence the price of goods and services.
6. All the payments made online has to be in conformity with the RBI guidelines.

Structure of Flipkart

Let’s take an example of Flipkart to understand how they are allowing FDI in their company’s model.

Flipkart Private Limited (FPL) is the holding company registered and incorporated in Singapore. Flipkart Payments Private Limited, Flipkart Marketplace Private Limited and Flipkart Logistics Private Limited are subsidiaries of FPL, also registered in Singapore. The last five companies are Indian companies in which subsidiaries of FPL invest.

As FDI is allowed in wholesale cash and carry, so there is Flipkart India Private Limited for the same. As FDI is allowed in providing technology platform, for that a Flipkart Internet Private Limited was established. Similarly for other things also. In this way flipkart is providing all the services by establishing different entities so that they can receive different FDIs.

Now let’s take a look at relation between Flipkart and WS RetaiL

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In this article, Swati Garg, an Advocate and an LL.M. graduate from Gujarat National Law University discusses How approvals for government route investments is obtained in post Foreign Investment Promotion Board era.

In India, Foreign Direct Investments (FDI) can be made through Automatic Route or Government-Approval Route. By automatic route, it simply implies that the investor is not required to take permission from the government whereas in government-approval route, as the name suggests, there is a need to take permission from government. Till 2017, Foreign Investment Promotion Board (FIPB) was a nodal agency for 25 years for processing FDI applications for government-approval route. However, in May 2017, an office memorandum was issued which abolished FIPB and it gave the authority to the concerned departments. The important point to remember here is that the concerned department has to take a decision in consonance with the Department of Industrial Policy and Promotion (DIPP).

Important Points to Remember

The link here gives a comprehensive list of competent authorities for the government approval route FDI.

Competent authority/ministry/departments for sectors/activities requiring government approval route.

A list of sector/activities where foreign investment can be made automatically up to a certain extent but there after, if anyone needs to invest more than that, government approval is required.

If there is some sector/activity which is not mentioned in the list, the concerned Ministry/Department will be the competent authority. If still there is a confusion left, DIPP will identify the competent authority.

These authorities will also be responsible for monitoring the compliances of FDI regulations by these companies.

For foreign investment more than Rs. 5000 crore, the competent authority has to place the proposal before Cabinet Committee on Economic Affairs (CCEA) for their consideration. Ministry can also refer the proposals to CCEA for consideration.

Any rejection of the proposal has to be done by competent authority in consultation with DIPP.

Central government in consultation with Ministry of Corporate Affairs and DIPP has published Standard Operation Procedure for filing proposals for FDI which can be accessed here:

http://dipp.nic.in/sites/default/files/Standard%20Operation%20Procedure%20%28SOP%29%20for%20Processing%20FDI%20Proposals.pdf

Procedure for filing proposals for FDI

Government has tried to make the FDI procedure less complex and expeditious by making the whole procedure online, even clarifying all confusions over e-mail and by fixing the time period to process the proposal.

1. All the proposals for foreign investment requiring government approval has to be filed on Foreign Investment Facilitation Portal at http://www.fifp.gov.in/. There is no fees to file the proposal.

Mandatory documents which has to be attached with the proposal are:

1. Certificate of Incorporation of the Investee & Investor Companies/Entities
2. Memorandum of Association (MOA) of the Investee & Investor Companies/Entities
3. Board Resolution of the Investee & Investor Companies/Entities
4. Audited  Financial  Statement of  Last Financial  Year of the Investee  & Investor Companies/Entities
5. Article of Association of the Investee & Investor Companies/Entities
6. List of Names and addresses of all foreign collaborators along with Passport Copy/ Identification Proof of the Investor Company/Entity
7. Diagrammatic representation of the flow and funds from the original investor to the investee company and Pre and Post shareholding pattern of the Investee Company
8. Affidavit stating that all  information provided in hard copy  and online are the same and correct

Moreover, the format of approval letter and list of other documents which has to be attached can be found by visiting this link.

2. After filing, DIPP has to identify the right competent authority and e-transfer the proposal.

3. If the proposal is not digitally signed, one need to file physical signed copies of the proposal only after intimation by DIPP.

4. Other than the competent authority, DIPP has to forward the proposal to the following authorities within 2 days:

All these comments have to be send directly to competent authority/ministry. If comments has to be required from any other ministry, reasons has to be mentioned.

Security clearance from Ministry of Home Affairs is required in the following cases:

• Investments in Broadcasting, Telecommunication, Satellites – establishment  and operation;
• Investments in Private Security Agencies, Defence, Civil Aviation;
• Investments in Mining & mineral separation of titanium bearing minerals and  ores, its value addition and integrated activities; and
• Investments from Pakistan and Bangladesh.

5. If competent authority/ministry needs some clarification as to the FDI policy, they can ask for comments from DIPP. DIPP has to reply within two weeks.

6. After receiving all the comments, competent authority has to scrutinise and ask for clarifications from applicant, if any, by email. Applicant should reply within a week.

7. Once all the above aspects are covered, competent authority/ministry should process the proposal within two weeks and convey the same to applicant.

8. If it is the case of foreign investment more than 5000 crore, competent authority/ministry should send the proposal to CCEA for consideration and after their reply, competent authority/ministry should convey the decision within one week to the applicant.

9. Total expected time period for processing the proposal is 8 weeks and 10 weeks in case if security clearance is required.

10. If the proposal has to be rejected, DIPP must be consulted and that consultation may take an extra two weeks time.

In this article, Swati Garg, an Advocate and an LL.M. graduate from Gujarat National Law University discusses the commercial reasons for creating a holding and subsidiary company structure, permitted transactions between holding and subsidiary companies and layering of subsidaries.

Understanding what a subsidiary and holding company is

Essentially, if one company holds more than 50% of the shares of another or appoints a majority of the other company’s directors, the second company is a subsidiary of the first. The first company is called the holding company.

If the holding company owns 100% of the shares of the subsidiary, the subsidiary is known as a wholly owned subsidiary (WOS).

A private company requires a minimum of two shareholders, so 100% shareholding is technically impossible. The company may give one share to another shareholder (who is friendly or aligned to the holding company). Typically, it is a relative of the promoters who run the company.

5 Commercial reasons for creation of a holding subsidiary structure

1. To segregate the business structure and to create the distinct entities with separate management. For example, FMCG products can be housed under one vertical and consumer durables and electronics can be in another. This enables the value of different businesses to be captured separately. It facilitates buying and selling of an individual business. An investor can directly acquire shares of the company it is interested in. If an investor wants exposure (i.e. stake or benefit) in both segments then it can invest at the parent company level.
2. Holding-subsidiary structure can also be used by companies to create different brands and brand categories for different kinds of products. For example, Vivanta is the budget brand of the Taj Group of Hotels. Companies may prefer to house different brands under different verticals. It enables them to bundle a brand and its intellectual property together in the event of a sale. This planning is typically done beforehand or when the company’s operations expand and they need to be ‘organized’ or ‘restructured’ in a new way.
3. Companies use subsidiary structures to when they do business internationally, where they incorporate a separate subsidiary company in each country. This enables a company to enter and exit from business with respect to a particular country.
4. Sometimes, this form of structuring enables companies to take advantage of lower tax rates in other jurisdictions. For example, many international venture capital funds have structured investments into India through a Mauritius entity to take advantage tax exemptions under India and Mauritius Double Taxation Avoidance Agreements (DTAAs).
5. The structure can be expanded and extrapolated further by adding more layers of subsidiaries. For example, a global company may have a South Asia Holding company which has a parent India subsidiary, and further subsidiaries for different industry segments that the company sells products/ services in.

Subsidiary and holding company under Companies Act

Holding company and subsidiary company is defined under the Companies Act, 2013 (herein referred as Act).

Holding Company

Section 2(46) of the Companies Act, 2013 defines Holding Company. The company is said to be the holding company if that particular company holds/owns at least 50% of the other companies and has the authority to make management decisions, influences and controls the company’s board of directors. A holding company may exist for the sole purpose of controlling and managing subsidiary companies.

Subsidiary Company

Section 2(87) of the Companies Act, 2013 defines the Subsidiary Company. The subsidiary company is the company that is controlled by the holding or parent company. It is defined as a company/body corporate where the holding company controls the composition of the Board of Directors. As per the Companies Amendment Act, 2017, Section 2(87)(ii), if the holding company have control over more than one-half of the voting power of another company, that particular company will be identified as the subsidiary company.

Note: If a holding company owns 100% of the stock of other company, then the other company would be known as whole owned subsidiary of the holding company.

Layers of subsidiaries

The word layer as used in the section 2(87) of the act implies subsidiary or subsidiaries of a holding company. The context in which it is used in the section, it implies it means vertical subsidiaries. Section 186 and proviso to Section 2(87) of the Companies Act restricts the number of layers that holding companies can have. It must be read in conjunction with the Companies (Restriction on Number of Layers) Rules, 2017.

Note that wholly owned subsidiaries have now been excluded from being treated as a separate layer as per the rules above.

The restriction on layered structuring also does not apply when a specific law requires a layer to be created. We have discussed this later.

Step-down subsidiary company

This phrase is not defined anywhere in the Companies Act, 2013. In common parlance, it is used to specify a subsidiary of the subsidiary company.

5 Unique features of transactions between holding and subsidiary companies

1. All transactions qualify as related party transactions and need to comply with the relevant restrictions on related party transactions. These restrictions are of multiple kinds, depending on the type of transaction. They could range from disclosure of interest, abstention from voting or taking approval of a specific majority of shareholders before entering into the transaction. These principles seek to ensure that the transaction does not get influenced merely by the relationship between the parties and is executed on an arm’s length basis.
2. There are certain stamp duty relaxations available on transactions between holding and subsidiary companies, especially if they are wholly owned. Since the holding and subsidiary are different legal entities, their relationship and transactions between them will require various kinds of contracts to be executed, and payment of stamp duty on each contract can be onerous. Hence, stamp duty relaxations are beneficial. These exemptions have been done with a view to facilitate such structuring and organization of a company’s business. These exemptions are made available through separate notifications hence they are not ordinarily visible in the text of the state-level Stamp Act or schedule.
3. From an income tax perspective, arm’s length pricing principles may have to apply especially, if the holding-subsidiary relationship is international. In certain cases, arm’s length pricing applies in domestic situations also under Indian law.
4. Transferring dividend from a level 2 or level 3 subsidiary (where permitted) to the holding company can be cumbersome and have unintended tax implications if the structuring is not done carefully.
5. For loan transactions, one or more holding companies may issue guarantees for the obligations of the subsidiary.

Practical Tip: When you are working on a transaction between a holding and subsidiary company, at the time of checking the stamp duty under the relevant state-level Stamp Act or schedule for the transaction, make sure that you also check whether there is an exemption or relaxation for that transaction if it is undertaken between holding and subsidiary companies.

What are the permitted transactions between subsidiary and holding companies? Are there any transaction which are prohibited? What is the logic behind the prohibition?

Permitted Transactions

1. Any loan made by a holding company to its wholly-owned subsidiary company is permitted if the said loan is used for wholly-owned subsidiaries’ principal business. The loan should not be used for any other investment by the subsidiary company.
2. Holding company can provide guarantee/security for any loan made to its wholly-owned subsidiary company if the said loan is used for wholly-owned subsidiaries’ principal business. The loan should not be used for any other investment by the subsidiary company.
3. Furthermore, holding company can provide guarantee/security for any loan made to its subsidiary company by any bank and financial institution if the said loan is used for wholly-owned subsidiaries’ principal business. The loan should not be used for any other investment by the subsidiary company.

Other than above, transactions between holding companies and subsidiary companies are classified as related-party transactions under section 2(76). For these transactions, consent of Board of directors should be given by a resolution at a Board meeting. Moreover, if these transactions are not entered by the holding or subsidiary company in its ordinary course of business, they have to make sure that they have followed arm’s length principle. Thereafter, holding company and subsidiary company can enter into a contract or an arrangement for the following things:

• Sale, purchase or supply of any goods or materials;
• Selling or otherwise disposing of, or buying, property of any kind;
• Leasing of property of any kind;
• Availing or rendering of any service;
• Appointment of any agent for purchase or sale of goods, materials, service or property;
• Appointment of related party to any office or place of profit in the company, or its subsidiary or associate company;
• underwriting the subscription of any securities or derivatives thereof, of the company.

To further govern these related party transactions, central government came up with The Companies (Meetings of Board and its Powers) Rules, 2014.

Prohibited Transactions

As can be seen above, permitted transactions have been specified in the act. One thing we need to remember is that if the proper procedure has not been followed to conduct permitted transactions, it will be in contravention of the act and will result into penalty for the company.

However other than that, the act also specifies various prohibited transactions between subsidiary and holding company. The rationale behind is that to ensure that the directors are not utilising the companies’ funds for their own benefit. Prohibited transactions are:

1. A subsidiary cannot have an shares in its holding company. Thus, cross-holdings are not permitted between holding subsidiary companies. Holding company can not allot or transfer its shares to any of its subsidiary company. If you see the holding structure of the Tata group there are numerous cross-holdings between companies (i.e. Company A will have some shares in Company B and Company B will also have some shares in Company A). That is possible if the two companies are not holding and subsidiary companies (i.e. mutual shareholding in each other should be less than 50%).
2. Any loan made by a holding company to the subsidiary company is not permitted under the act.
3. Any loan/guarantee/security made by the subsidiary company to the director of the holding company is not permitted.

What kind of layering is permitted under the Companies Act and rules and what layering is not permitted? Is the situation different in the case of foreign holding company or foreign subsidiary company?

As explained above, layering under the act means subsidiary or subsidiaries of the holding companies. As given under the proviso of section 2(87), there is a prohibition on the holding company to not have more layers as prescribed under the act. Section 186(1) of the act specifies that a company should not invest in more than two layers of investment companies. Keeping in mind the proviso of section 2(87) of the act, on 20th September 2017, the Central Government enacted “the Companies (Restriction on Number of Layers) Rules, 2017. These rules specify that no companies shall have more than two layers of subsidiaries. This restriction is for vertical subsidiaries not for horizontal subsidiaries.

Before going into the details of layering, let’s first understand why there is a need for restricting layers of the company which is as follows:

1. To reduce the illicit fund flows.
2. To curb diversion of funds.
3. To keep a check on the multiple layers of subsidiaries.
4. To stop companies to reduce shell companies for diversion of funds.
5. To prevent the company from money laundering, the illegal way of obtaining money.
6. To enable the authorities to identify the beneficiaries of corporate structures.

Restrictions on Layering under the Companies (Restriction on Number of Layers) Rules, 2017

Now, let’s take a look at the provisions of these rules.

1. A company shall not have more than two layers of subsidiaries.
2. A wholly owned subsidiary company would not be taken in account as a separate layer.
3. Following classes of companies are outside the scope of these rules:
4. 1. A banking company;
5. 1. A non-banking financial company;
6. 1. An insurance company;
7. 1. A government company.
8. 1. A company acquiring a company incorporated outside India having more than two layers of subsidiaries provided it is in accordance with law of that country.
9. 1. A subsidiary company who is required to have an investment subsidiary under any law or rules.
10. These rules are prospective in nature. Therefore, any company who had more than two layers of subsidiaries on or before these rules came into force, they are required to
11. 1. file a return in Form CRL-1 to Registrar within 150 days of publication of these rules.
12. 1. shall not add more layers of subsidiaries.
13. 1. If the layers are reduced after these rules came into force, shall not increase their number of layers beyond two.
14. A maximum fine of Rs. 10,000 will be imposed on the companies and every officer of the company which is in contravention of these rules. If the contravention is a continuing one, then a maximum fine of Rs. 1,000 every day will be imposed.

Illustration 1: Layering – Distinction between subsidiary and step-down subsidiary

Here Company A is the holding Company.

Company B, F, G and H are the horizontal subsidiaries of the holding company where the restrictions are not applicable. They can have as many horizontal subsidiaries.

Company F, G and H can have step down/layer subsidiaries just like company B.

Company B, C, D and E as the vertical subsidiaries company of the holding company A. Here, we have to test the restrictions.

As company B is wholly owned subsidiary of company A, it will not be considered separately as a layer. Therefore, it can be said that in the given illustration, holding company A has 3 step down subsidiaries or layer companies i.e. company C, D and E.

As the rules specifies, any holding company can have only two layers, therefore company C and D are well within laws. However, company A can’t have company E as its subsidiary.

Illustration 2: Layering: Single and Two-Level Subsidiaries (with exceptions)

Illustration 3: Layering in International Context

Here in the illustration, in India, a parent company C can have two layers of subsidiary but if it has to acquire an offshore company and the offshore company has more than two layers of subsidiaries which is permitted as per the jurisdiction of the offshore company, it will be exempted under Indian law.

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In this article, Neel Vasant of Symbiosis Law School, Pune discusses Restitution of Conjugal Rights Under the Hindu Marriage Act.

Abstract

“We do not create marriage from scratch. Instead, in the elegant language of the marriage ceremony, we ‘enter into the holy estate of matrimony.’[1]

Marriage and family are two strong pillars of the Indian Society. Both these terms are considered as highly sacrosanct. In our country Marriage is a religious institution which is pivotal for the growth of our society and on a larger frame our country. Marriage forms family and thus it can also be said that family is a subset of marriage. We live in a generation where the life is too fast and thus it results in many feuds. All these things have resulted in the lack of harmony among married couples. Following is an interesting observation done by Burgess and Locke.

“Family is a social group of persons united by the ties of persons united by the ties of marriage, interacting and communicating with each other in their respective social roles”[2]

During the last one decade it has also been noted that the rate of Matrimonial Dispute is continuously rising. In earlier times matrimonial disputes weren’t given much of an importance. But with changing times, a new steam of thought has take place where alternative methods are adopted to solve a matrimonial dispute. Owing to these reasons it is very necessary to study and analyse the topic.

This article is an attempt to critically analyse the concept of Restitution of Conjugal Rights, a matrimonial remedy available for the Hindus in the Hindu Marriage Act of 1955. The author will also analyse the cases decided by the apex court relating to the issue of conjugal rights. The author will elucidate upon the same by discussing the object, scope and the extent of applicability of Section 9 of the Hindu Marriage Act, 1955.

Introduction

Marriage as an institution gives rise to a relationship between two partners: The Husband and the wife, which further gives rise to more relations. This relationship also gives birth to different sets rights and obligations. These rights and obligations cumulatively constitute’ Conjugal rights’ and can be termed as essence of the marital union. The term ‘Conjugal Rights’ in literal sense means ‘Right to stay together.’[4]

It is a general accepted norm that each spouse should act as a support to other in hard times, should be there to comfort and love the partner. But if any of the partner leaves the other without any reasonable or sufficient cause, then the aggrieved party can knock the doors of the court to seek justice. Restitution of conjugal rights is the only matrimonial remedy available is restitution of Conjugal Rights.

Section 9 – The Hindu Marriage Act, 1955

Restitution of Conjugal Rights, “When either the husband or the wife has, without reasonable excuse, withdrawn from the society of the other, the aggrieved party may apply, by petition to the district court, for restitution of conjugal rights and the court, on being satisfied of the truth of the statements made in such petition and that there is no legal ground why the application should not be granted, may decree restitution of conjugal rights accordingly.”.[5]

When a spouse is guilty of staying away without any reasonable or a just cause and if the suit of restitution of conjugal rights succeed than the couple would be required to stay together. Thus it can also be inferred that section 9 is the marriage saving clause or section. This remedy was earlier applied in England and later on implemented by the privy council in India, for the first time in a case namely Moonshee Bazloor v. Shamsoonaissa Begum[6]. However, this matrimonial remedy of restitution of conjugal rights has been removed in England way back in 1970.[7]

There are three important requisites to be fulfilled for Section 9[8]

• Spouses must not be staying together.
• Withdrawal of a party from the other must have no reasonable ground for such withdrawal.
• The aggrieved party must apply for restitution of conjugal rights

Constitutional Validity of Section 9

It is to be noted that there arises a contention that restitution of Conjugal Rights clearly violates Right to privacy of the wife. Although the Supreme Court is its judgement of Kharak Singh vs. State of UP[9] has held right to privacy “is an essential ingredient of personal liberty”. In Gobind v. State of M.P.[10] again the court had to encounter the issue raised in the case of Kharak Singh. In this case the honourable Supreme Court came to a conclusion that right to privacy -among other rights is included in right to liberty.

Judicial Approach

In T. Saritha Vengata Subbiah v. State[11], the court had ruled that that S.9 of Hindu Marriage Act relating to restitution of conjugal rights as unconstitutional because this decree clearly snatches the privacy of wife by compelling her to live with her husband against her wish. In Harvinder Kaur v. Harminder Singh[12], the judiciary again went back to its original approach and help Section 9 of Hindu Marriage Act as completely valid. The ratio of this case was upheld by the court in Saroj Rani Vs. S.K. Chadha[13]

Restitution of Conjugal Rights Violates

• Freedom of Association – Article 19 (1) (c)
• Freedom to reside and settle in any part of India – 19(1) (e).
• Freedom to practice any profession – 19 (1) (g)

Infringement of Freedom of Association

In our country every citizens have a fundamental right to associate with anyone according to his/her wish, By the matrimonial remedy of restitution of conjugal rights is freedom is violated as a wife is compelled to have a association against her will, with her husband. In Huhhram Vs Misri Bai[14], the court passed the restitution against the will of the wife. In this case though the wife had clearly stated that she would not wish to live with her husband, still the court went ahead and gave the judgement in favour of the husband. The opposite thing happened in Atma Ram. v. Narbada Dev[15], where the judgement was passed in favour of wife.

Infringement of Freedom to reside and to Practice any Profession

We live in a society where there is complete freedom as to which profession to choose. At times under the restitution of conjugal rights a person is forced to live with the partner with no general wish or interest. And thus, this freedom to freely reside and practice any profession of choice, seems to be violated. Several times in the past courts have tried to give a remedy. The apex court in the case of Harvinder kaur v. State[16] it was said that, “Introduction of the Constitutional Law in the Home is most inappropriate, it is like introducing a bill in a China shop”

Suggestions for Improvement

Restitution of Conjugal Rights is a highly debatable and a controversial subject. Some people feel it is to preserve the marriage while some say that there is no meaning in forcing the other party to stay with the aggrieved party as they are not at all interested. However, there is always a scope of improvement by tweaking something.

The concept of Reconciliation may be tried in place of the rigid conjugal rights.[17] The idea of restitution is very harsh and barbaric, as it forces either of party to compromise. While on the other hand the tone of reconciliation is very mild and requesting. The problem with restitution is that there are high chances that the situation may turn up ugly after both the parties are forced to live together unwillingly. But if the remedy is reconciliation than it may not be offensive to either of the parties and will also clear the air of misunderstanding.

To implement this the judiciary should not be intervened as the function of the Court is to settle disputes not reconciliation. What can be done is a separate committee should be formed and the sole function of this specially formed committee will be to administer and solve the matrimonial disputes. The idea of reconciliation is also very effective as it is fast, effective and practical.

Conclusion

“A Horse can be brought to the water pond but cannot be compelled to drink”[18]

The above-mentioned proverb is very famous and the concept of restitution seems to be akin to the theory of conjugal rights. When a person is separated emotionally from another, then it becomes really difficult to unite them. Thus, restitution of conjugal rights is such a matrimonial remedy, which will force the person to save the marriage but it cannot guarantee its effectiveness. Some section of people also say that it is against the concept of natural law theory.

References

[1] “Matrimony Quotes”, https://www.brainyquote.com/topics/matrimony, Accessed on 22 July 2018.

[2] “Quotes on a family”, http://www.quoteambition.com/inspirational-family-quotes-sayings/, Accessed on 22 July 2018.

[3] A popular English translation from her magnum opus: Simone de Beauvoir. The Second Sex (1949). In so called authentic translation from the French, her original language, statement may be read thus, “…keeping a husband is work; keeping a lover is a kind of vocation.’

[4] “Definition of Conjugal Rights”, https://www.merriam-webster.com/dictionary/conjugal%20rights, Accessed on 22 July 2018.

[5] The Hindu Marriage Act, 1955 sec 9.

[6] Monshee Bazloor v. Shamssonaissa Begum, 1866-67 (11) MIA 551

[7] “Restitution of Conjugal Rights: Meaning & Scope”, http://www.lawvedic.com/blog/restitution-of-conjugal-rights-meaning-and-scope-50, Accessed on 23 July 2018.

[8] “Conjugal Rights in India”, https://www.indianbarassociation.org/restitution-of-conjugal-right-a-comparative-study-among-indian-personal-laws/, Accessed on 23 July, 2018

[9] Kharak Singh v. State of UP, AIR 1963 SC 1295: (1964) 1 SCR 332.

[10] Gobind v. State of M.P, (1975) 2 SCC 148; AIR 1975 SC 1378.

[11] T. Saritha Vengata Subbiah v. State, AIR 1983 AP 356.

[12] Harvinder Kaur Vs Harmander Singh, AIR 1984 Delhi 66

[13] Saroj Rani Vs. S.K. Chadha, AIR 1984 SC 1562.

[14] Huhhram Vs Misri Bai, AIR 1979 MP 144

[15] Atma Ram. v. Narbada Dev, AIR 1980 RAJ 35

[16] Harvinder Kaur v. State (SCC) AIR 1984 Delhi 66.

[17] “Conjugal Rights: New Prospective”, http://www.legalserviceindia.com/articles/abol.htm, Accessed on 23 July 2018.

[18] “Restitution of Conjugal Rights: Constitutional Perspective”, National Digital Library, http://ndl.iitkgp.ac.in/document/ 718w, Accessed on 23 July 2018.