In this article, Nandish Joshi pursuing M.A, in Business Law from NUJS, Kolkata discusses the Role of Company Secretary in Good Corporate Governance.

 Introduction

Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Corporate governance mainly involves balancing the interests of a company’s many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community at large.

The soul and core of corporate governance is not the conduct or behavior that we see on face of it. It is internalized values that an organization or a company and its top level management follows. The essence of a human being is consciousness and the world we create around us is the expression of our consciousness. The creative and the beautiful as well as the corrupt and degenerate are the outcome of consciousness of human beings.

The great thoughts and deeds of Mahatma Gandhi or Mother Teresa are the result of their consciousness. Similarly, the scams of WorldCom and sat yam are also the result of corresponding consciousness. The quality of our own consciousness is not determined by the intelligence quotient or our intellect.

Corporate governance is concerned with the process by which corporate companies and particularly limited liability companies are governed. Business people as well as general public expect good business ethics and effective corporate governance from the business leaders.

In the modern era of globalization, corporate governance plays an important role. It ensures that corporate managers run their businesses successfully and take care of long term interests of the stakeholders of the company. Corporate governance improves capital efficiency of companies and provides a roadmap for an entity, helping the leaders of a company in making decisions by law, benefits to stakeholders, etc.

Corporate governance is the application of best management practices, compliance of law in true letter and spirit and adherence to ethical standards for effective management of the company and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders of the company. Corporate governance rests with the vision and perception of the leadership and a leader need to adopt a vision for corporate governance.

Today’s business faces multitude of challenges, increasing business pressure on all the fronts, globalization, shorter product life cycles, cyber security, over capacity, complex rules and regulations by the government, currency volatility, and value migration etc.

These challenges will bring about economic discontinuities that are unprecedented in scale and scope, and would require highly innovative approaches. We have to leapfrog over existing technologies rather than incrementally improve them. Innovation will bring tremendous resistance from vested interest. This is the board’s priority in today’s economy which is driven by innovation.

By following good corporate governance practices corporate earns or achieves best reputation in the world.

World over, several committees and task forces have strongly advocated for corporate governance viz. Kumar Mandalay Birla Committee, Narayan Murthy Committee, Cadbury Committee etc. Some of the corporate governance practices would include independent oversight of management and accounts of the company, fair and equitable treatment for all the  shareholders of the company, fair voting processes conducted by the company, prohibition of insider trading and abusive self-dealing, open and efficient markets, timely and effective disclosure of financial and operating results to the stakeholders of the company, foreseeable risk factors and matters related to corporate governance and regulation and legal recourse if principles of fair dealing are violated.

The management must have freedom to drive the company forward. The board of directors of the company is accountable to shareholders of the company and the management is accountable to board of directors. The empowerment, combined with accountability provides an impetus to performance and improves effectiveness, thereby enhancing shareholder’s value leading to excellence.

Role of Company Secretary in Good Corporate Governance

Company secretaries all over the world have been assigned the responsibility for good corporate governance practices to be followed by the companies where they work or for their clients by the institute of company secretaries of india.

Under the erstwhile SEBI listing regulations under clause 49 there were provisions for corporate governance. Under new SEBI listing obligations and disclosure requirements there are provisions under regulation 15 to 27 there are provisions for good corporate governance.

Composition of Board of Directors

Regulation 17 of the listing regulations states that the board of a listed entity shall have an optimum combination of executive and non-executive directors with at least one woman director and 50% of the board shall comprise of non-executive directors. In case the chairperson of the board of directors is a non-executive director.

1/3rd of the board shall comprise of independent directors and where the chairperson is an executive director, ½ of the board shall comprise of independent directors. In case the non-executive chairperson is a promoter or related to the promoter or any other person occupying management position in the board of directors or at one level below the board of directors, at least ½ of the board of directors shall comprise of independent directors.

The Companies Act, 2013 however specifies that companies which are listed shall have at least 1/3rd of its board of directors as independent directors without making a distinction between the requirements for appointment of the number of independent directors when a chairperson of the board of directors is an executive or a non-executive director. However the companies (appointment and qualification of directors), rules 2014 specifies that public companies having a paid up capital of Rs. 10 crores or turnover of Rs. 100 crores or outstanding loans, debentures and deposits exceeding Rs. 50 crores as at the last date of the latest audited financial statements shall have at least 2 independent directors.

Here the role of the company secretary is to oversee whether the composition of the board is in conformity as per the provisions of the companies act as well as listing regulations.

A company secretary has to ensure that the board of directors of the company must consist of at least one women director. This provision has encouraged the women power and importance in today’s world.

Code of Conduct for the Board of Directors

The listing regulations specify that the board of directors shall draw up a code of conduct for all the members of the board and the senior management personnel of the listed entity.

The regulations further stipulate that the code shall incorporate the duties of the independent directors as laid down in the Companies Act, 2013. The regulations also require that the members of the board shall confirm compliance to the code in the first meeting of the board held in every financial year.

The annual report of the company shall also contain a confirmation to this effect by the directors duly certified by the chief executive officer. Here the role of a company secretary is to ensure that he/ she develop the code of conduct for the board of directors in consultation with the top management of the company.

Also a CS has to ensure that the same information is disclosed in the annual report of the company as well it shall be placed on the website of the company. For is compliance board of directors shall provide affirmation to the compliance of the code at each and every first meeting of the board held in each financial year.

Formation of Committees

Each and every listed entity shall ensure that the company has composed the below mentioned committees:

1. Audit committee
2. Nomination and remuneration committee
3. Risk management committee
4. Stakeholders grievances committee

• Role of company secretary is to ensure compliance by forming all the above mentioned committees. Along with proper combination of executive and independent directors.
• Company secretary shall act as a secretary of the all the above mentioned committees.
• Company secretary shall ensure that company shall have a policy on preservation of documents and shall divide the same in two parts whose preservation is permanent and which needs to be preserved for not less than 8 years.

• Company secretary or the registrar and share transfer agent shall be responsible for grievance redressal of shareholders complaints and resolve the same registered on scores platform or with NSE or BSE.
• Company secretary is responsible for appointment of independent directors in such a way that the directors fulfill the criteria laid down in companies act and listing regulations.
• Company secretary is not only responsible for compliance of companies act and listing regulations but he is also responsible for compliance of various other laws like provident fund laws, civil laws, and intellectual property laws etc.
• A company secretary shall ensure that the company holds at least 1 meeting of the board of directors in each quarter but the gap between two meetings shall not exceed more than 120 days. He/ she have also to ensure that the quorum requirements have been meet during the board meeting.
• Some of the directors may attend the board meeting through video conferencing, the facility of which shall be provided by the company.
• Company secretary has to ensure that the proper facility for video conferencing has to be provided by the company and proper data shall be maintained after conclusion of the meeting.
• The board of directors of the company can be paid sitting fees of Rs. One lakh per board meeting. Also commission can be paid to the board of directors for attending the meeting of the board as approved by the board or shareholders of the company.

Audit Committee

• Regulation 19 of the listing regulations, discusses the provisions with regard to the audit committee. The regulations stipulate that the committee shall have a minimum of 3 directors as its members and 2/3rd of the members shall be independent directors.
• Section 177 of the companies act, 2013 however stipulates that a listed entity shall have an audit committee which shall consist of a minimum of three directors with the independent directors being the majority. While the companies act stipulates that the majority of the audit committee including the chairperson shall be persons with ability to read and understand financial statements, the listing regulations states that all the members of the committee shall be financially literate and at least one member shall have accounting or related financial management expertise. Financially literate has been defined to mean the ability to read and understand basis financial statements and having accounting or related financial management expertise is defined to mean having requisite professional certification in accounting or any other comparable experience or background which results in the individual’s financial sophistication including being a CEO or CFO or such other senior officer with financial oversight responsibilities.
• Further the listing regulations have also mandated a quorum for the audit committee meetings, which shall be either two members or 1/3rd of the members of the committee, whichever is greater with at least 2 independent directors. In other words, if the audit committee has 3 members of which 2 are independent, both the independent directors should be present to constitute quorum for an audit committee meeting. The companies act, 2013 however does not contain such a stipulation.

Nomination and Remuneration Committee

• Both the listing regulations and the companies act, 2013 contain identical provisions with regard to the composition of the nomination and remuneration committee. There is a slight difference in the role of the nomination and remuneration committee as enumerated in the listing regulations as compared to the policy as stipulated under the companies act, 2013 as the regulations specify that the committee shall devise a policy on the diversity of the board of directors.
• Another important difference between the two is that the regulations stipulate the presence of the chairperson of the committee being present at the annual general meeting of the company to answer shareholder queries. The companies act stipulates that the policy shall be included in the board report, while no such requirement has been made in the listing regulations.

Stakeholders Relationship Committee

As per the listing regulations all listed entities must have a stakeholders relationship committee to specifically look into the mechanism of redressal of grievances of shareholders, debenture holders and other security holders, the companies act, 2013 specifies that a stakeholders relationship committee shall be constituted if a company consists of more than 1000 shareholders, debentures, deposit holders and any other security holders at any time during a financial year. The stipulation with regard to a minimum number is absent in the regulations and further deposit holders are not considered by the regulations.

Risk Management Committee

The listing regulations states that the board of directors shall constitute a risk management committee for the top 100 listed entities determined on the basis of market capitalization as at the end of the immediate previous financial year. On the other hand Section 134(3) of the companies act, 2013 states that all the companies must have a risk management policy, which shall be responsible for identification of risks which in the opinion of the board may threaten the existence of the company.

Related Party Transactions

The Companies Act, 2013 stipulates that a company shall enter into a contract or an arrangement with a related party with respect to 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 services, appointment of any agent for purchase or sale of goods, materials, services or property, appointment of a related party to any office or place of profit in the company, its subsidiary or associate company and underwriting the subscription of any securities or derivatives thereof of the company shall be entered only with the consent of the board of directors given by way of a resolution at a meeting of the board of directors.

Rule 6a of the companies (meetings of board and its powers) rules, 2014 stipulates that all related party transactions shall require the approval of the audit committee after the same is approved by the board of directors. The regulations, however, state that all the related party transactions shall require the prior approval of the audit committee. Hence, any transaction by the company, in addition to what is specified under section 188 of the Companies Act, 2013 with a related party as defined under section 2(76) of the Companies Act, 2013 shall require prior approval of the audit committee.

Ratification of the same by the audit committee or post facto approval by the audit committee after the transaction has been entered into is not accepted and would be treated as a non-compliance of the regulations. Omnibus approval by the audit committee for related party transactions has been provided in both the regulations and the act.

While the provisions for omnibus approval are the same, the regulations state that where the need for related party transaction cannot be foreseen and the details regarding the same are not available the audit committee may grant omnibus approval for such transactions subject to their value not exceeding Rs. 1 Crore per transaction and the rule has not specified any limit for the value of transaction seeking omnibus approval. Further the regulations state that the approval shall be valid for a period not exceeding one year and fresh approvals shall be taken after the expiry of one year, but rule 6a states that the approval shall be valid for one financial year and fresh approval shall be taken after the expiry of the financial year.

The listed entity, as per the listing regulations shall formulate a policy on materiality of related party transactions and on dealing with the related party transactions. The policy shall also be hosted on the website of the company. It is the duty of company secretary to formulate such policy.

The regulations further state that a transaction shall be considered material if the transaction or transactions to be entered into individually or taken together with the previous transaction during a financial year exceeds 10% of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity. While a blanket limit has been specified by the regulations, the act lays down individual limits for each of the related party transaction specified under section 188 of the act. Further while material related party transactions to be entered into by the company would require prior approval of the shareholders in the general meeting by way of an ordinary resolution, the regulations contain a restrictive clause that all the related parties shall not vote on the resolution. The Companies Act, 2013, however, states that only parties to the material related party transaction shall not vote on the resolution. The regulations require the disclosure of all related party transactions in the quarterly corporate governance compliance report submitted to the stock exchange while such a similar requirement has not been stipulated in the Companies Act, 2013.

All company secretaries and compliance officers of listed entities, their auditors, audit committee and board of directors need to have thorough understanding of the rots. the scrutinizers of the poll and remote e-voting need to be vigilant in providing their report to make complete and adequate compliance of regulation 23 and other applicable regulations of the SEBI (lord) regulations, 2015 as well as the provisions of sections 188 and 189 of the Companies Act, 2013. Further since so much of data and information are now required to be hosted on the website of the company and policies, etc which is being strictly watched by the regulators, taxation authorities, stakeholders and competitors, all the disclosure and information must be adequate, complete and accurate in all respect.

It the responsibility of the company secretary to conduct the annual general meeting of the company. Company secretary not only acts as the kmp of the company but he acts as the compliance regulator of the company.

• Government has assigned the responsibility of good corporate governance to the company secretaries of india.
• Today the figures of membership of company secretaries have crossed more than 50,000.
• Thus the company secretaries are not only compliance officers and kmp’s of the company but they are corporate professionals of the company governing the company’s core area.

In this article, Mohammed G A, pursuing M.A, in Business Law from NUJS, Kolkata discusses How to finance a Solar Power project.

Introduction

India is the fifth biggest power generator on the planet and is projected to be the third biggest by the year 2030. In 2010 India represented 5.78% of the world’s overall carbon emission and by 2030 it is anticipated that would double. [1] Renewable energy has begun having noticeable effect in the Indian energy sector by adding to around 12% in the national electric installed capacity. [2]

Solar and Wind Energy sectors are extremely dynamic in India. Over the traverse of three years more than 16,000 solar home systems have been financed through 2,000 bank branches, especially in rural territories of South India. [3] Launched in 2003, the Indian Solar Loan Program was a four-year association between United Nations Environment Programme (UNEP), the UNEP Risoe Centre, and two of India’s largest banks, the Syndicate Bank and the Canara Bank. [4] On 11th January 2010, our former Prime Minister, Dr. Manmohan Singh launched Jawaharlal Nehru National Solar Mission (JNNSM) under the National Action Plan on Climate Change. Through this plan it proposed to produce 1,000 MW of energy by 2013 and up to 20,000 MW grid-based solar power; 2,000 MW of off-grid solar power and covers 20 million square meters with collectors before the finish of the last phase of the mission in 2021-22. [5] and [6]. Further, Government of India has increased the target of Grid Connected Solar Power Projects from 20,000 MW by the year 2021-22 to 100,000 MW by the year 2021-22 under the JNNSM and it was approved by Cabinet on 17th June 2015. [7] This target will be achieved by the government in three phases.

The Targets of JNNSM are briefly represented underneath:

Table 1: JNNSM capacity Addition Targets [8]:

The aggregate investment in setting up 100,000 MW will associate with Rs. 6 lakh crores. In the 1st phase, the Government of India is giving Rs. 15,050 crores as capital subsidy to advance solar capacity expansion in the nation. This capital subsidy will be given for Rooftop Solar projects in different towns and cities, for Viability Gap Funding (VGF) based activities to be created through the Solar Energy Corporation of India (SECI) and for decentralized era through smaller projects. The Ministry of New and Renewable Energy (MNRE) plans to accomplish the objective of 100,000 MW with focuses under the three plans of 19,200 MW.

Apart from this, solar power projects with investment of about Rs. 90,000 crore would be developed using Bundling mechanism with thermal power. Further investment will come from large Public Sector Undertakings and Independent Power Producers (IPPs). State Governments have also come out with State specific solar policies to promote solar capacity addition. Aside from this, solar power projects with funding of about Rs. 90,000 crores would be produced utilizing Bundling mechanism with thermal power. Facilitate funding’s will originate from Independent Power Producers (IPPs) and large Public Sector Undertakings. State Governments have additionally turned out with State specific sunlight solar policies to promote the addition of solar capacity.

The Government of India may likewise approach international and bilateral donors as additionally the Green Climate Fund for accomplishing this target. Solar power can add to the long-haul energy security of India, and lessen reliance on petroleum products that put a strain on foreign reserves and the environment as well.

The scope of this article pertains to reviewing the various options for financing of solar projects in India along with the financers / financing institutions involved in it, which are vital to achieve the objects Government of India’s Mission as laid down under JNNSM scheme. A reference shall also be made to the procedural aspects to be followed for availing finance for a solar project along with brief reference to practical examples in the current scenario. In this regard the article seeks to answer the following main research questions:

1. What are the modes of financing of solar power projects in India and the financing institutions involved in it?
2. What is the procedure to be followed for availing finance for solar power projects?

Modes of Solar Financing in India

Solar energy is free however setting up a MW Solar plant requires huge amount of capital. Financing alternatives is one of the greatest obstacles confronted by MW solar plant investors. It is crucial to select a solar financing choice that suits your organization. The standard cost of setting up a plant comes to around 6 Crores per MW. 30% of this is met by equity and the rest through debt financing. Equity is only a favor word for funding from your own assets or from other investors. Debt financing is typically accessible with recourse, i.e., the investor should present a collateral security against the loan he wants to take. Debt financing without recourse is a choice only for big players with extensive scale solar installations and with a decent reputation. MW solar power plants, in India, are financed by an equity-debt mix. The flowchart underneath gives a comprehension of the solar financing choices for a MW solar power plant in India:

In order to get loans (debt financing), the contractor can opt for either domestic or international financing arrangements.

Each of these financing modes is discussed below:

Domestic Financing (Essentially From Banks)

As of 2015, Indian banks are giving loan at interest rates in the range 11-13%, Non-banking financial Corporation (NBFCs) could be lending at marginally higher rates. IREDA (the Indian government’s renewable energy lending arm) lends at lower rates (10.2-11.4%). Collaterals required for qualification could fluctuate from 20% for entities such as IREDA to the full 100% for several banks. Domestic loans are generally given for the period of 7-10 years; however numerous Indian banks are currently agreeable to lend the money 15 year tenures. In Mar 2016, New and Renewable Energy Minister Mr. Piyush Goyal said in parliament that, 24 Public Sector and 8 Private Sector Banks and 4 Public Sector and 2 Private Sector NBFCs have obliged for financing renewable energy projects of 76,352 MW capacity with an expense of Rs 3.82 lakh crore over 5 years through green commitment certificates. Some of the prominent domestic financers / financial institutions are discussed below

Indian Banks

Several public and private sector banks like, State Bank of India (SBI), ICICI, Yes Bank, Axis Bank etc. have provided financing for various types of solar projects. In Mar 2016, Indian government in public release said that among public sector banks, SBI will be financing the biggest capacities of 15,000 MW with a cost of Rs.75, 000 crore, trailed by IDBI bank (3,000 MW). The 24 public sector banks will be financing plans of 31,649 MW. Further, Indian government through an RBI notification has clarified that that under Priority Sector Lending (PSL). that a borrower for individual households/residential buildings can avail a solar loans upto Rs. 10 lacs from the banks whereas borrowers for purposes like solar based power generator or one industrial / commercial buildings can avail solar loan upto 15 Crores from the bank. [9] This implies banks can meet their PSL targets by offering loan to rooftop solar projects. Accordingly, it is evident that loans shall be given to rooftop solar projects at interest rates of 9.5% to 10.5% per annum.

For e.g., In the year 2011, SBI has given a 14-year loan to a solar based plant being worked by Spain’s Grupo T-Solar Global SA and Astonfield Renewable resources company, which develops sun solar powered and biomass plants in India.[10] On June 2, 2017 State Bank of India announced that they had financed 100 MW grid connected roof top solar projects worth Rs. 400 crores with the private developers in India under a World Bank Program. [11] Further Mr. Sarnam Sekar, Deputy Managing Director; SBI said that that SBI has on Jun 2017 has provided Rs 30,000 crore funding to the clean energy projects which would in the long run touch Rs 75,000 crore mark by 2022.[12] Similarly, in Feb 2015, YES Bank, India’s fourth biggest private bank, obliged to provide give a Green Energy Commitment (GEC) of financing 5,000 renewal energy projects for the next 5 years i.e. by 2019.[13]

Non-banking financial companies (NBFCs) [14]

Some of the prominent NBFCs involved in debt financing of solar projects include:

• Infrastructure funds – Infrastructure Leasing & Financial Services Limited (IL&FS), SBI Macquarie, and Taurus Infrastructure Fund.
• Dedicated power sector financing – Rural Electrification Corporation (REC) and Power Finance Corporation (PFC)
• Investment banks – Larsen & toubro finances, SBI Capital Markets, BNP Paribas

Indian Renewable Energy Development Agency (IREDA)

IREDA is a Non-Banking Financial Institution under administrative control of Ministry of New and Renewable Energy (MNRE) for giving term loan for renewal energy and thermal energy efficiency projects.[15] IREDA provides finance upto 75% of the cost of the solar project venture. IREDA conducts credit rating for all grid associated projects and provides grading in a band of 4 grades (I, II, III & IV) in light of the risk assessment. The interest rates are connected with the grades. The interest rates are set by a “Committee for fixing interest rates” from time to time in view of economic situations. The current pertinent interest rates are as are as given beneath (w.e.f 01.04.2017): [16]

Table 2: Interest Rate matrix for Sectors w.e.f. 01-04-2017 onward: [17]

To obtain loan from IREDA, application forms available at the IREDA site need to be filled and submitted along with the list of documents mentioned in the application forms. IREDA gives fund to every single Renewable projects regardless of the innovation involved with a minimum debt  prerequisite of Rs 50 lakhs, in light of their techno-business practicality. IREDA provides loan to the projects in light of their techno-business viability after taking into account the subsidy/stipends accessible from the Government of India, assuming any.[18]

International Financing

The interest rates to finance a solar power project from global sources in generally between 8-10%, in the wake of calculating in all expenses, including the cost of hedging for exchange risks. In any case, the time to process the loan through this route would take a long time, around nine months and this could affect the project start time. In spite of the fact that interest rates are by and large lower in case of international financing, it is important to take into account the hedging cost against currency locations. Foreign loans are accessible for a period of 16-18 years.

Some of the international financers for solar projects in India include: International Finance Corporation (IFC), the financing arm of the World Bank is occupied with financing of solar power projects in India. US based EXIM Bank is additionally a decent choice for loans of solar power projects. The Asian Development Bank (ADB) has likewise risen as a prominent moneylender to advance solar power projects in India. European Investment Bank (EIB) is additionally intrigued by financing solar parks in India. Aside from these foundations, many green energy funds are giving equity funding at a less expensive rate for solar power projects.

International Finance Corporation (IFC)

It is the financing division of the World Bank is involved with the financing of solar power undertakings in India. IFC is a universal monetary organization that offers consultative, investment, and asset management services to support the development of private sector in developing nations. The IFC is the financing arm of the World Bank Group and is headquartered in Washington, DC. IFC was set up in 1956 as the private sector arm of the World Bank group, and is maintained by 184 member nations, a gaggle that jointly decides its policies. Its board of directors and board of governors, elected by the member nations, direct IFC’s projects and activities.[19] IFC is the sole multilateral wellspring of equity and debt financing for the private division with worldwide reach. IFC’s bonds offer a high-quality investment, even in unstable money related economic situations. [20]

IFC has invested over $15 billion in India since its first venture in 1958. India is considered as IFC’s top nation, exposure, globally. IFC’s conferred portfolio in India is over $5 billion as of June 30, 2016. In financial year 2016, IFC conferred $1.1 billion in new investments in the nation. In addition to building up of local capital markets in India, IFC is centered around boosting financing in infrastructure and logistics, advancing money related incorporation, making conditions to draw in expanded private capital, and organizing public-private partnerships. IFC is a key associate in creating and developing India’s capital markets through offshore rupee-connected and onshore rupee bond programs. IFC’s offshore Green Masala Bond concentrated on climate change. Beginning in 2009, IFC was one of the first global financers of solar and wind activities in India. IFC is a one stop-solution for equity debt and organized fund for private companies searching for opportunities in wind, solar and other types of renewable energy. IFC’s advisory engagement in India comprises of Odisha Street-Lighting Program, Gujarat Rooftop Solar PPP, Bihar G2P Payments and Jharkhand Diagnostics PPP. [21]

Some of the solar projects in which IFC has provided financial and advisory services include [22]:

• IFC is one of the earliest investors in Azure Power, now a main player in the grid-connected solar-power sector. After starting financing in 2010, IFC made numerous rounds of equity and debt and investments to support Azure’s development. Azure’s portfolio of solar plants now extends across several states and is on track to achieve 500 MW of operational capacity in the year 2016
• IFC additionally financed Sembcorp Green Infra Limited, which built up more than 200 MW of wind and solar plants in four Indian states.
• IFC also funded Applied Solar Technologies Company, which supplies off-grid solar power to telecom towers in remote areas of Uttar Pradesh and Bihar that generally depend on diesel for their power requirements.
• Recently IFC, funded Acme Solar for their upcoming 25 MW solar power project the aggregate investment is projected to be US$50 million, of which financing looked for is of the request of US$36 million. MP Power Management Co. will buy and use the plant under a 25-year power purchase.
• On the consultative side, IFC’s Lighting Asia/India program promotes, safe, economical and present day off-grid lighting for three million individuals in rural India. IFC supported the Gujarat Government to design a first-of-its-kind pilot grid-connected solar rooftop power project through a private-public partnership.  As of late, IFC banded together with the Madhya Pradesh government to set up the 750-MW Rewa ultra-mega solar-power project. This is the biggest single site solar-power power project across the globe. As the lead PPP transaction counselor, IFC is extending its worldwide skill to structure and actualize the transaction to draw in about $750 million in private investment.

Other international financers

The World Bank-Clean Technology Fund (CTF) advance will bolster various solar photovoltaic (PV) technologies, to expand the reach of rooftop solar systems to an assortment of client gatherings.[23] On Mar 31, 2017, The European Investment Bank (EIB) announced a long-term loan of euro 200 million (Rs. 1,400 crore) to SBI to fund mega solar power projects in the nation. This loan will bolster an aggregate investment of euro 650 million in five diverse large scale PV solar power ventures for India’s National Solar Mission. Four plans, with a generation capacity of 530 MW have been identified for this objective. Since 1993, the EIB owned by 28 member states of the European Union has financed projects totaling 1.7 billion euros (around Rs. 11,900 crore). [24]

EXIM Bank is the first foreign financing foundation to sanction solar power projects under India’s JNNSM and one of the first to support financings under the solar power policy of the Gujarat State. [25]  Ex-Im Bank has provided a long-term loan of $16 million to fund First Solar’s exports to Azure Power to assemble a five-megawatt solar PV plant in Rajasthan. Other US financial service providers to the venture incorporate General Cable Corp and SMA Solar Technology. EXIM has so far financed about $ 350 million to solar project in India. [26]

ADB has risen as the primary loan provider to advance solar power projects in India. ADB has likewise helped the Gujarat government in the financing of the transmission line for clearing the power generates from their Charanka Solar Park. Anil Ambani group Company Reliance Power has tied up funds for its 40 MW solar power project, with finances worth Rs 5.25 billion ($109.3 million) originating from the Asian Development Bank and the US Exim Bank. Apart from these foundations, many green friendly funds are also available which can give equity at a less expensive rate and back off the cost of financing for these solar projects.

Procedural aspects in Financing of Solar Power Project

A. What are the various criteria to be met by Borrower for Sanction of Loan?

There are specific criteria that the borrower needs to meet to be qualified for sanction of loan. A couple of them are listed underneath:

• Positive cash flow out of operations in the organization
• Company debt ought to be below 40% of its total assets.
• DSCR (Debt Service Coverage Ratio) of the organization ought to be more than 1.5

B. What are the Documents required to apply for Solar Financing?

The accompanying documents are to be delivered by the borrower while applying for the loan:

• Power purchase agreement (PPA)
• Feasibility study
• Prime Cost contract
• Quality and safety standards followed
• Operation and maintenance contract
• Evacuation
• Contracts for supply of parts
• List of authorizations and compliance gained/to be gained

C. What are the steps for Financing a Solar Project?

The various steps involved in the financing of solar project include[27]

Promoters Appraisal

This step involves due-diligence of aspects related to promoter’s background, financial statements to validate promoters net worth and capacity to contribute equity to the project

Technical Appraisal

This step comprises of Solar Radiation Verification, Technology Assessment and assessment of detailed project report

FINANCIAL APPRAISAL

This step includes due-diligence of funding and financial details related to Project Cost, means of financing, Cash flow & profitability projections, Risk assessment, Financing structure (Debt & equity), foreign exchange risk

INDUSTRY SPECIFIC APPRAISAL

This step includes, due-diligence of Industry specific factors like market trends and costs, creditworthiness of Off-taker, market attractiveness risk guarantees, long term demand, market drivers, regulatory & policy scenario etc

ENVIRONMENTAL APPRAISAL

It involves Due-diligence of the associated environmental by conducting environmental impact assessment study

INSURANCE PACKAGE

Ensuring that the project developer has obtained adequate insurance to cover the project risks

LEGAL APPRAISAL

This includes due-diligence of various contractual agreements including the power purchase agreement, Purchase orders, land agreement and contracts, Engineering, procurement and construction (EPC) contracts, and Performance Guarantee etc.

Loan Application

Approval of loan by the financial institution based on the analysis of Project Developers capacity.

D. Is it possible to procure low interest loan for MW Solar Project? If yes, what are the terms and conditions?

1. One situation where this is conceivable is if the financing is gotten from outside sources, particularly if the parts utilized are likewise imported from the lending nation. Hence DCR (Domestic Content Requirement) projects will ordinarily not be qualified. On the off chance that the project is financed globally, the loan fees are probably going to be 8-10% including hedging.

However, financing will just cover some portion of the project cost, typically panels. Financing for the rest of the project will in any case should be raised. Additionally, time to process the loan application is in the range of 6-9 months, which can affect monetary conclusion/project start time. Due diligence cost can be high, making it feasible only for plants of higher capacity (more than 10 MW). In addition, reimbursement is exposed to foreign exchange rate fluctuation. Hedging is vital, but will add to the cost (as much as 6% to loan interest rate). Extra terms might be imposed, for example, utilization of transportation lines from the lending nation, which can additionally add to the cost.

2. Some NBFCs, for example, IREDA give loan at lower interest rates for financing solar power projects in India. For instance, grid connected solar PV projects can avail interest rates of 10.2 – 11.4% depending upon the grading (Grade I, Grade II, Grade III or Grade IV) of the project. One of the alluring aspects of IREDA financing is that the collateral to be given for the purpose securing the loan is just 10-33% of the loan repayment amount which is significantly low in contrast with what a bank provides. It ought to be noticed that IREDA gives financing to any project with a minimum debt requirement of Rs 50 Lakhs, in light of their techno-commercial suitability.

Conclusion

The global environmental scene has changed fiercely over the last century. The changing scenario demands a greater concern and action-oriented enabling policy framework for the use of sustainable and renewable energy. The Government of India has taken necessary cognizance of the global developments and has initiated several green and environment-friendly policy measures under the National Action Plan on Climate Change. One of the initiatives taken by the government is the Jawaharlal Nehru National Solar Mission (JNNSM).

The worldwide natural scene has changed furiously over the last century. The changing situation requests a more noteworthy concern and action-oriented enabling policy framework for the utilization of renewable and sustainable energy. The Government of India has taken necessary cognizance of the worldwide developments and has started a several green and green and environment friendly policy measures under the National Action Plan on Climate Change. One of the activities taken by the legislature is the Jawaharlal Nehru National Solar Mission (JNNSM).  Through this mission government target to produce 1,000 MW of energy by 2013 and up to 100,000 MW grid-based solar power; 2,000 MW of off-grid solar power and covers 20 million square meters.

From the above analysis it is evident that by the help of various national and international financing agents, India is marching ahead in solar energy mission.  India has augmented its solar power generation capacity by nearly 5 times from 2,650 MW on 26 May 2014 to 12,288.83 MW on 31 March 2017.[28] This infers that the present solar power financing agent and policies of government would help India to achieve JNNSM mission and make India a world leader in green energy generators and user.  

References

REGULATIONS

• The National Action Plan on Climate Change (NAPCC)

PRESS NOTES, NOTIFICATIONS ETC.

• RBI Notification on “Priority Sector Lending-Targets and Classification” [RBI/2014-15/573] dated 23rd April 2015, available at: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=9688&Mode=0
• Press Information Bureau Release on  “Revision of cumulative targets under National Solar Mission from 20,000 MW by 2021-22 to 1,00,000 MW” dated 17 Jun 2015  available at: http://pib.nic.in/newsite/PrintRelease.aspx?relid=122566

CITATIONS

• http://mnre.gov.in/file-manager/annual-report/2011-2012/EN/Chapter%201/chapter_1.htm
• Sethi, Nitin (November 18, 2009). “India targets 1,000mw solar power in 2013”. Times of India
• http://seci.gov.in/content/innerinitiative/jnnsm.php (Accessed on 25 Jun 2017)
• http://astonfield.com/press/pr/Astonfield-TSolar-Bloomberg-June2011.pdf         http://www.worldbank.org/en/news/press-release/2017/06/02/state-bank-of-india-approves-100mw-grid-connected-rooftop-solar-projects-under-word-bank-program         http://economictimes.indiatimes.com/articleshow/58964427.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst    https://www.yesbank.in/media/press-releases/fy-2014-15/yes-bank-commits-to-financing-5-gw-of-renewable-energy-projects-by-2019
• http://headwaysolar.com/solar-project-financing-india.html
• http://www.ireda.gov.in/forms/contentpage.aspx?lid=820
• http://www.ireda.gov.in/forms/contentpage.aspx?lid=740
• http://www.ireda.gov.in/forms/contentpage.aspx?lid=83        http://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/about+ifc_new/IFC+Governance       http://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/about+ifc_new/ifc+governance/investor+relations/ifc+bonds+and+investment+products      https://www.ifc.org/wps/wcm/connect/dbf85c004c7809549365bbd4c83f5107/IFC+in+India_04April+2016.pdf?MOD=AJPERES        http://profit.ndtv.com/news/banking-finance/article-sbi-gets-1-400-crore-loan-for-mega-solar-projects-1675819

http://www.exim.gov/news/ex-im-bank-announces-16-million-loan-support-first-solar-inc-exports

http://www.exim.gov/sites/default/files//managed-documents/bro-ind-16.pdf

http://www.solarguidelines.co.in/index.php/process/

http://www.solarguidelines.co.in/index.php/process/

WEB SITES

• http://mnre.gov.in
• http://www.ireda.gov.in/
• http://www.worldbank.org/
• http://seci.gov.in/
• http://www.exim.gov
• http://www.ifc.org/
• http://www.solarguidelines.co.in/
• http://solarrooftop.gov.in/login
• http://www.cleantech.com/

Endnotes

[1] The Confederation of Danish Industry Report available at: http://di.dk/SiteCollectionDocuments/DIBD/The%20Indian%20Cleantech%20Industry%202012.pdf (Accessed on 20  Jun 2017)

[2] http://mnre.gov.in/file-manager/annual-report/2011-2012/EN/Chapter%201/chapter_1.htm (Accessed on 25 Jun 2017)

[3] Consumer financing program for solar home systems in southern India

[4] UNEP wins Energy Globe award

[5] Sethi, Nitin (November 18, 2009). “India targets 1,000mw solar power in 2013”. Times of India

[6] http://seci.gov.in/content/innerinitiative/jnnsm.php (Accessed on 25 Jun 2017)

[7] http://pib.nic.in/newsite/PrintRelease.aspx?relid=122566 (Accessed on 25 Jun 2017)

[8] Ibid

[9] https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=9688&Mode=0 (Accessed on 25 Jun 2017)

[10]http://astonfield.com/press/pr/Astonfield-TSolar-Bloomberg-June2011.pdf (Accessed on 25 Jun 2017)

[11] http://www.worldbank.org/en/news/press-release/2017/06/02/state-bank-of-india-approves-100mw-grid-connected-rooftop-solar-projects-under-word-bank-program (Accessed on 25 Jun 2017)

[12]http://economictimes.indiatimes.com/articleshow/58964427.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst (Accessed on 25 Jun 2017)

[13] https://www.yesbank.in/media/press-releases/fy-2014-15/yes-bank-commits-to-financing-5-gw-of-renewable-energy-projects-by-2019  (Accessed on 25 Jun 2017)

[14] http://headwaysolar.com/solar-project-financing-india.html  (Accessed on 26 Jun 2017)

[15] http://www.ireda.gov.in/forms/contentpage.aspx?lid=820 (Accessed on 26 Jun 2017)

[16] http://www.ireda.gov.in/forms/contentpage.aspx?lid=740 (Accessed on 26 Jun 2017)

[17] Ibid

[18] http://www.ireda.gov.in/forms/contentpage.aspx?lid=833 (Accessed on 26 Jun 2017)

[19]http://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/about+ifc_new/IFC+Governance. (Accessed on 27 Jun 2017)

[20]http://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/about+ifc_new/ifc+governance/investor+relations/ifc+bonds+and+investment+products. (Accessed on 27 Jun 2017)

[21]https://www.ifc.org/wps/wcm/connect/dbf85c004c7809549365bbd4c83f5107/IFC+in+India_04April+2016.pdf?MOD=AJPERES. (Accessed on 27 Jun 2017)

[22] Ibid

[23]http://economictimes.indiatimes.com/articleshow/58964427.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst (Accessed on 27 Jun 2017)

[24] http://profit.ndtv.com/news/banking-finance/article-sbi-gets-1-400-crore-loan-for-mega-solar-projects-1675819 (Accessed on 27 Jun 2017)

[25] http://www.exim.gov/news/ex-im-bank-announces-16-million-loan-support-first-solar-inc-exports (Accessed on 27 Jun 2017)

[26] http://www.exim.gov/sites/default/files//managed-documents/bro-ind-16.pdf (Accessed on 27 Jun 2017)

[27] http://www.solarguidelines.co.in/index.php/process/ (Accessed on 27 Jun 2017)

[28] India’s solar energy capacity expanded by record 5,525 MW – The Economic Times”. The Economic Times. Published on 6 April 2017.  (Accessed on Apr 29 2017

In this article, Riddhima Kedia pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses Cyber Security Initiatives by the Government of India.

Introduction

The number of cyber security incidents has gradually increased in India over the last few years. Minister of State for Electronics and IT, Mr. PP Chaudhary stated that as per the information collected by India’s Computer Emergency Response Team (CERT-in), 44,679, 49,455 and 50,362 cyber security incidents took place in India during the years 2014, 2015 and 2016, respectively. These incidents include phishing, website intrusions and defacements, virus and denial of service attacks amongst others.[1] As per the ‘2016 Cost of Data Breach Study: India’ the average total cost of a data breach paid by Indian companies increased by 9.5 percent, while the per capita cost increased by 8.7 percent and the average size of a breach grew by 8.1 percent.[2] Although, the government has taken certain cyber security initiatives as discussed below, more expansive and aggressive measures are required to meet the rising challenges.

Government Initiatives

National Cyber Security Policy, 2013:[3]

The Government of India took the first formalized step towards cyber security in 2013, vide the Ministry of Communication and Information Technology, Department of Electronics and Information Technology’s National Cyber Security Policy, 2013.

The Policy is aimed at building a secure and resilient cyberspace for citizens, businesses and the Government. Its mission is to protect cyberspace information and infrastructure, build capabilities to prevent and respond to cyber attacks, and minimise damages through coordinated efforts of institutional structures, people, processes, and technology. The objectives of the policy include creating a secure cyber ecosystem, compliance with global security standards, strengthen the regulatory framework, creating round the clock mechanisms for gathering intelligence and effective response, operation of a National Critical Information Infrastructure Protection Centre for 24×7 protection of critical information infrastructure, research and development for security technologies, create a 500,000 strong cyber security workforce, to provide fiscal benefits to businesses for adopting cyber security practices, to build public private partnerships for cooperative cyber security efforts.

Some of the strategies adopted by the Policy include:

• Creating a secure cyber ecosystem through measures such as a national nodal agency, encouraging organisations to designate a member of senior management as the Chief Information Security Officer and develop information security policies.
• Creating an assurance framework.
• Encouraging open standards.
• Strengthening the regulatory framework coupled with periodic reviews, harmonization with international standards, and spreading awareness about the legal framework.
• Creating mechanisms for security threats and responses to the same through national systems and processes. National Computer Emergency Response Team (CERT-in) functions as the nodal agency for coordination of all cyber security efforts, emergency responses, and crisis management.
• Securing e-governance by implementing global best practices, and wider use of Public Key Infrastructure.
• Protection and resilience of critical information infrastructure with the National Critical .Information Infrastructure Protection Centre operating as the nodal agency.
• To promote cutting edge research and development of cyber security technology.
• Human Resource Development through education and training programs to build capacity.

In 2014, the Prime Minister’s Office created the position of the National Cyber Security Coordinator. In 2016, in response to the intrusions by infamous hacker group ‘Legion’, the Ministry of Electronics and Information Technology issued several orders and directives. These included use of the National Payment Corporation of India (NPCI) to audit the financial sector, review and strengthening of the IT Act, directives to social networking site Twitter to strengthen its network, and directives to all stakeholders of the financial industry including digital payment firms to immediately report any unusual incidents.[4] Some agencies that deal with cyber security in India are National Technical Research Organisation, the National Intelligence Grid, and the National Information Board. In 2016, India’s first chief information security officer (CISO) was appointed with the aim of enhancing cyber security in the country and subsequently all ministries were asked to appoint Central Information Security Officers. To address cyber security issues in India, government has recently introduced some other important measures as discussed below.

Cyber Swachhta Kendra’ (Botnet Cleaning and Malware Analysis Centre)

To combat cyber security violations and prevent their increase, Government of India’s Computer Emergency Response Team (CERT-in) in February 2017 launched ‘Cyber Swachhta Kendra’ (Botnet Cleaning and Malware Analysis Centre) a new desktop and mobile security solution for cyber security in India.

The centre is operated by CERT-in under Section 70B of the Information Technology Act, 2000. The solution, which is a part of the Ministry of Electronics and Information Technology’s Digital India initiative, will detect botnet infections in India and prevent further infections by notifying, enable cleaning and securing systems of end-users. It functions to analyze BOTs/malware characteristics, provides information and enables citizens to remove BOTs/malwar and to create awareness among citizens to secure their data, computers, mobile phones and devices such as home routers.

The Cyber Swachhta Kendra is a step in the direction of creating a secure cyber ecosystem in the country as envisaged under the National Cyber Security Policy in India. This centre operates in close coordination and collaboration with Internet Service Providers and Product/Antivirus companies to notify the end users regarding infection of their system and providing them assistance to clean their systems, as well as industry and academia to detect bot infected systems. The center strives to increase awareness of common users regarding botnet, malware infections and measures to be taken to prevent malware infections and secure their computers, systems and devices.[5]

The Centre offers the following security and protective tools:[6]

1. “USB Pratirodh”, was also launched by the government which, Union IT and Electronics Minister Ravi Shankar Prasad states is aimed at controlling the unauthorised usage of removable USB storage media devices like pen drives, external hard drives and USB supported mass storage devices.
2. An app called “Samvid” was also introduced. It is a desktop based Application Whitelisting solution for Windows operating system. It allows only preapproved set of executable files for execution and protects desktops from suspicious applications from running.
3. M-Kavach, a device for security of Android mobile devices has also been developed.[7] It provides protection against issues related to malware that steal personal data & credentials, misuse Wi-Fi and Bluetooth resources, lost or stolen mobile device, spam SMSs, premium-rate SMS and unwanted / unsolicited incoming calls.
4. Browser JSGuard, is a tool which serves as a browser extension which detects and defends malicious HTML & JavaScript attacks made through the web browser based on Heuristics. It alerts the user when he visits malicious web pages and provides a detailed analysis threat report of the web page.

Collaboration with industry partners

Development of Public Private Partnerships is an important strategy under the National Cyber Security Policy 2013. Pursuant to this aim, under the aforementioned Cyber Swachhta Kendra initiative, antivirus company Quick Heal is providing a free bot removal Tool.

To combat the ever-evolving techniques of cyber intrusions, the government also recognises the need for working in collaboration with industry partners. Consequently, Cisco and Ministry of Electronics and Information Technology’s Indian Computer Emergency Response Team (CERT-In) have signed a Memorandum of Understanding (MoU) whereby a threat intelligence-sharing programme will be established, wherein personnel from Cisco and CERT-In will work collectively to tackle digital threats and develop and incorporate new ways to improve cybersecurity.[8]

International Cooperation Initiatives

Information sharing and cooperation is an explicit strategy under the 2013 Policy. Consequently, as an answer to the increasing international nature of cyber crime, the Indian government has entered into cyber security collaborations with countries such as the USA, European Union and Malaysia. The U.K. has agreed to assist in developing the proposed National Cyber Crime Coordination Centre in India. The shared principles of the U.S.-India Cyber Relationship Framework provide for the recognition of the leading role for governments in cyber security matters relating to national security; a recognition of the importance of and a shared commitment to cooperate in capacity building in cyber security and cyber security research and development, and A desire to cooperate in strengthening the security and resilience of critical information infrastructure. The areas of corporation provide inter alia that both countries agree to share and implement cybersecurity best practices, share cyber threat information on a real-time basis, develop joint mechanisms to mitigate cyberthreats, promote cooperation between law enforcement agencies and improve their capacity through joint training programs, encourage collaboration in the field of cybersecurity research, and Strengthening critical Internet infrastructure in India.[9]

Conclusion

Future Initiatives

Experts have suggested the setting up of a National Cyber Security Agency (NCSA) to address cyber security issues and improve implementation at a national level. Such an agency is suggested to be equipped with staff that is technically proficient in both defensive and offensive cyber operations, to encrypt platforms and collect intelligence.[10] Another proposed measure is setting up of a National Cyber Coordination Centre (NCCC) as a cyber security and e-surveillance agency, to screen communication metadata and co-ordinate the intelligence gathering activities of other agencies. NCCC received prima facie approval in May 2013 to operate under the National Information Board.[11] In November 2014, Rs. 800 crore out of 1,000 crore allotted to improve Indian cyber security would be utilised for NCCC purposes.[12] However, establishing an NCCC like body would require compliance and adherence to international privacy law standards. It is hoped that the Government’s initiatives can keep pace with the rapidly changing nature of cyber attacks.

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References

[1] Government of India launches ‘Cyber Swachhta Kendra’; a new mobile and desktop security solution, Tech 2, February 21, 2017, http://tech.firstpost.com/news-analysis/government-of-india-launches-cyber-swachhta-kendra-a-new-mobile-and-desktop-security-solution-363415.html

[2] As India Gears Up for Cybersecurity Challenges, Threats Are Multiplying, Security Intelligence, August 2016, https://securityintelligence.com/as-india-gears-up-for-cybersecurity-challenges-threats-are-multiplying/

[3] National Cyber Security Policy, 2013, http://meity.gov.in/sites/upload_files/dit/files/National%20Cyber%20Security%20Policy%20%281%29.pdf

[4] IT Minister orders measures to strengthen India’s cyber security, The Economic Times, 13 December 2016, http://economictimes.indiatimes.com/articleshow/55963728.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[5] http://www.cyberswachhtakendra.gov.in/about.html

[6] Ibid

[7] Government of India launches ‘Cyber Swachhta Kendra’; a new mobile and desktop security solution, Tech 2, February 21, 2017, http://tech.firstpost.com/news-analysis/government-of-india-launches-cyber-swachhta-kendra-a-new-mobile-and-desktop-security-solution-363415.html

[8] Cisco India unveils three cyber security initiatives, The Week, 22 December 2016,

http://www.theweek.in/news/sci-tech/cisco-india-unveils-three-cyber-security-initiatives.html

[9] FACT SHEET: Framework for the U.S.-India Cyber Relationship, The White House, Office of the Press Secretary,

https://obamawhitehouse.archives.gov/the-press-office/2016/06/07/fact-sheet-framework-us-india-cyber-relationship

[10] Upgrading India’s cyber security architecture, The Hindu, 9 March 2016, http://www.thehindu.com/opinion/columns/upgrading-indias-cyber-security-architecture/article8327987.ece

[11] India’s Cyber Protection body pushes Ahead, Hindustan Times. 29 January 2014

http://www.hindustantimes.com/india/india-s-cyber-protection-body-pushes-ahead/story-4xa9tjaz6ycfDpVg95YqPL.html

[12]  Rs 1,000 crore set aside for Cyber Shield, Business Standard, 5 November 2014, http://www.business-standard.com/article/economy-policy/rs-1-000-cr-set-aside-for-cyber-shield-114110401377_1.html

In this article, Rajeev Kumar pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses regulation of Financial Technologies in India.

Financial Technology

Financial technology is a disruptive technology, which made the banking and financial service more accessible, faster, efficient, time effective and easily perform and compete with the growing demand.

Financial Technology has made the revolution in 21^st century in banking and financial sector in the global market and totally wiping out the traditional system; it is new era of banking institution.

Credit Card, Debit card B2B payment, NEFT etc are example of financial technology. It not only made the peoples life easy but also saves the time and transaction of money from one country to another country takes a few of second is the example of implication of Financial Technology. ATM and credit card really change the concept of traditional banking services and quickly overtake the manual old banking service system.

Mobile Banking in India

Due to rapid growth of mobile users and wide coverage of mobile network in India, mobile has extended the user-friendly service in mobile banking as recognized by RBI. As per the press release of RBI, RBI issued the first circular in 8th Oct 2008 for Mobile banking transactions in India – Operative Guidelines for Banks. Time to time RBI further issued the circulars containing guidelines to enhance the modality of transaction of money through mobile banking. Statutory Guidelines issued by Reserve Bank of India is under section 18 of Payment & Settlement Systems Act, 2007, (ACT 51 of 2007).

RBI has issued the regulatory and supervisory issue in mobile banking as mentioned below:-

• Banks which are physically present in India and having the valid license and core banking solutions are allowed to provide the mobile banking services.
• Services are restricted to domestic in Indian Rupee and customer who is holding the banks/debit/credit cards issued as per the extant Reserve Bank of India guidelines and such services are prohibited to cross country transfer inward and outward.
• Banks may also use the services of Business Correspondent appointed in compliance with RBI guidelines, for extending this facility to their customers.
• The guidelines issued by the Reserve Bank on ‘Risks and Controls in Computers and Telecommunications’ vide circular DBS.CO.ITC.BC.10/31.09.001/97-98 dated 4th February 1998 will apply mutatis mutandis to Mobile Banking.
• The guidelines issued by Reserve Bank on “Know Your Customer (KYC)”, “Anti Money Laundering (AML)” and “Combating the Financing of Terrorism (CFT)” from time to time would be applicable to mobile based banking services also.
• Banks shall file Suspicious Transaction Report (STR) to Financial Intelligence Unit – India (FIU-IND) for mobile banking transactions as in the case of normal banking transactions.

RBI further regulate the wallet system, which are categories in three category Closed wallets, Semi-closed wallets and open wallets.

• Under the closed wallet system, which is issued by a company, a customer can do purchasing of goods from the company. Jabong, Flipkart, Amazaon etc are the examples of the closed wallet system. They don’t require any type of permission from RBI.
• Under the Semi-closed wallets, itcan be used to purchase goods and services at clearly identified merchant locations which have a specific contract with the issuer to accept the payment instrument. NBFCs can issue semi-closed wallets which need to be authorized by the RBI. Paytm and Mobikwik are the example of this.
• Under the Open wallets, a customer can do purchasing of goods and services, including financial services at any card accepting merchant terminal points. It can be also used for withdrawal of cash money at ATM. Prior approval is to be taken by Banks for issuing the open wallets.

The RBI has made slab system of pre-paid payment instruments into three categories

1. A customer can transact the amount up to Rs. 10,000 by providing the minimum details. Total outstanding transaction amount at any time and total reloads value per month should not exceed Rs 10,000. These instruments can only be issued in electronic form
2. From Rs. 10,001 to Rs. 50,000 – Official valid documents is required as per the rules 2(d) of the PML Rules, 2005. However It is non-reloadable in nature and
3. From Rs. 50,000 to Rs. 1,00,000-Full KYC is needed and It is reloadable in nature. Total cumulative amount should not exceed Rs. 1,00,000 at any time.

Online Payments in India

The National Payments Corporation of India (NPCI) was set up in April 2009 with the guidance of Reserve Bank of India and Indian Bank Association and it was incorporated as a section 25 company act 1956(now section 8 of company act 2013) and is objective to operate for the benefits of all the members of banks and their customers. It brought the all retails payments in a platform across the India.  Board for regulations of and supervision of payments and settlement systems (BPSS), which set up by RBI had given in principle approval to issue authorization to NPCI for operating various retails payments system in the country and granted certificate of authorization for national financial switch (NFS). ATM network is the boon of National Payments Corporation of India which started plays role from October 18, 2009. National Payments Corporation of India acting as an umbrella organization for all

ATM network is the boon of National Payments Corporation of India which started plays role from October 18, 2009. National Payments Corporation of India acting as an umbrella organization for all retails payments. As per the report of NPCI, during the last five years, organization has grown multi times from 2 million a day to 20 million transactions now. From as single service of switching of inter bank ATM TRANSACTIONS, the range of services has grown in cheque clearing, immediate payments service(24x7x365), automated clearing house electronic benefits and domestic card Ru pay to provide an alternative to international card scheme. Today NPCI not only brought the transparency but also create the satisfaction and easy mode of transaction of money to the customer.

The aims of innovation and technology of RBI is to deliver the products and services to customer though the available channel partners at low cost, secure and faster way.

Banking and Financial sector are one of sector of business where heavy transaction and operation taking place. Fin Tech application not only makes greater and efficient transaction over the traditional system but also make the convenient to the customer. Even a large volume can be transferred by small one. A customer can make number of small transaction in big volumes in lieu of single large transaction. It is self-learning technology and no training is required; a customer can themselves analyze the risk of transaction.

Globally Financial Technology has increased drastically and given the fruitful result.

As per last year study report of consulting company Accenture – In the first quarter of 2016, Global investment in financial technology (fintech) ventures was reached $5.3 billion that is a 67 percent growth over the same period last year.

Comparing with global markets, India is still far behind the developed country like Canada, USA etc in implementing the financial technology, however, it is seen that in Jan-March 2017 quarter, pay tm became the 3^rd largest online transaction.

No guidelines and regulations have been set up the government of India. However, RBI has issued some circulars time to time in this regards.  As per the press release of RBI dated 14^th July 2016, RBI sets up Inter-regulatory Working Group on Fin Tech and Digital Banking to review and appropriately reorient the regulatory framework and respond to the dynamics of the rapidly evolving Fin Tech scenario.

The terms of reference of the Working Group will be:

1. To undertake a scoping exercise to gain a general understanding of the major Fin Tech innovations / developments, counterparties / entities, technology platforms involved and how markets and the financial sector in particular, are adopting new delivery channels, products and technologies.
2. To assess opportunities and risks arising for the financial system from digitisation and use of financial technology, and how these can be utilised for optimising financial product innovation and delivery to the benefit of users / customers and other stakeholders.
3. To assess the implications and challenges for the various financial sector functions such as intermediation, clearing, payments being taken up by non-financial entities.
4. To examine cross country practices in the matter, to study models of successful regulatory responses to disruption across the globe.
5. To chalk out appropriate regulatory response with a view to re-aligning / re-orienting regulatory guidelines and statutory provisions for enhancing Fin Tech / digital banking associated opportunities while simultaneously managing the evolving challenges and risk dimensions.
6. Any other matter relevant to the above issues.

As per KPMG Pulse of Fintech Report, In India, payments and lending remained priorities with an increased interest in Artificial Intelligence (AI). The country witnessed a spike in Venture Capital invested in the first quarter in 2017, with Paytm attracting Asia’s largest funding round of $200 million.

Neha Punater, Head of Fintech, KPMG in India said “While payments and lending continue to drive most fintech investment in India, other areas are quickly gaining momentum. Artificial Intelligence (AI) and blockchain are receiving a lot of attention, while insurtech is poised to come into its own over the next few quarters. The government expected to release regulations for fintech, particularly related to peer-to-peer lending, which could lead to additional activity.”

Financial Technology in India in one way, will provide the opportunity and another way will face challenges while regulating it. Indian government is required to take concrete steps while framing the regulations. Hence while architecting the regulations India need to involve stake holders, Financial Institution, regulatory body of developed country etc apart from the RBI.

Some of the regulatory challenges are needed to be review while framing the regulations of fin tech in India

• Peer to Peer loans-lending (P2P) – It is the new of method of debt financing money, which allows to people to borrow and lend money without the financial institution. It will be boon for MSME and individuals who find difficult to access the finance, dependent on friend and relative. Country like India where getting loan is one of the difficult tasks from bank only a few percentages of people is having the institutional credit.P2P lending connects borrowers to investors faster. However, country like India where Indian regulations allow to intervene judiciary where Under Section 3 of the act, courts are empowered to intervene in cases where they find the interest of a loan to be excessive or the terms of the loan to be unfair.
• Apart from the above some of the major challenges are data and consumer protection issues, value based cost reduction, risk of exacerbating financial volatility and cybercrime.

In this article, Prashant Kumar Gupta pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses Ten innovation driven companies in India.

In the age of globalization and entrepreneurship, India couldn’t afford to stay behind. Today India has a promising start-up ambience. Not just that, low operating costs, less entry restrictions and the government’s proactive approach has made India Asia’s biggest start-up hubs. There was a time when joining a service at an MNC or a PSU was the only aim of the graduates. But today, the scene has changed and the ‘job-seekers’ are turning out to be ‘job-givers’. With the advent of new age startups across different fields, India has earned its reputation of becoming an innovative start-up hub. The author of this article has shortlisted ten innovative companies that have helped the country earn the badge of ‘innovation hub’.

1. Indigo Airlines

Flying in India was a dream until in 2006 when Indigo Airlines came into existence. Indigo Airlines, a subsidiary of InterGlobe Enterprises – a hospitality company, launched an economic class airliner that promised low fares and on-time arrival of flights especially at a time when the Indian airline industry was infamous for not being on time.

Indigo demonstrated the established players in the airline industry that low fares do not necessarily mean that they would provide low quality service. Within years of its establishment, Indigo became a prominent air carrier with a market share of 33%. The no-frills airline has transported nearly about 82 million passengers with 500 plus daily flights. It is predicted that India would become the third largest aviation market in 2020 and the largest by 2030.

Indigo has been able to grow exponentially over the years because it has been constantly innovating to cut costs and please customers as well. The step-less ramps cuts down the boarding times and a pit stop approach to aircraft cleaning to cut down own turnaround times.  Recently, it came up with services like an on-board Braille guide that helps the visually impaired to communicate with the crew. Also, dedicated stair lifts for passengers with special needs have been innovative enough for the airliner to win the hearts of flyers at large.

2. Unacademy

Founded in January 2016, Uncademy is India’s largest free online learning e-platform that aims to provide education to all. The platform allows the educators to create courses on various subjects using Unacademy’s app including content for various competitive examinations. Unacademy aims to get the best minds in the country share their knowledge under this platform. The startup currently garners more than a million monthly views.

The founders of this initiative include Roman Saini, Sachin Gupta, Hemesh Singh and Gaurav Munjal. The latter two were the founders of FlatChat which was acquired by CommonFloor in the year 2014. Roman Saini, an alumnus AIIMS and one of the youngest to crack the Civil Services Examination in the year 2013 was posted as an Assistant Collector in Jabalpur district before he left to pursue his passion to start Unacademy.

In April last year, Unacademy raised over $5,00,000 in its first round of external funding led by Blume Ventures. This initiative, with the help of its creators has created over 200 courses in the past few months since its launch. Some of the creators include Tina Dabi, the 2016 IAS topper and Kiran Bedi, India’s first woman IPS officer and now the Lt. Governor of Puducherry. In a span of few months, Unacademy has benefitted more than 3,00,000 students  from over 2,400 video lessons. The platform’s success stories include students who have cracked some of the toughest examinations in the country, improved their, reading, writing and vocational skills.

The startup plans to use the investment funds in developing its research, development, product technology and hiring.

3. NestAway

This start-up came with a great sigh of relief for the single people who face a great trouble in finding a home/room for rent. This startup, backed by Ratan Tata, offers a list of furnished/unfurnished rooms available for rent for not only single people but also for families.

This startup was founded way back in2014 by Jitendra Jagadev, Smuti Parida, Deepak Dhar and Amarendra – all alumni of the National Institute of Technology, Surathkal. NestAway makes homes available by way of depositing two months’ rent, without an interview by the owner.

This Bangalore based startup primarily aims to cater the homing needs of 22-30 age category. Their homes provide all the necessities including, sofa, mattress, refrigerator, washing machine and a furnished kitchen. The tenant can either rent a single room or the whole flat. Generally, the rent rates vary between INR 7,000-8,000 out of which NestAway charges a commission of 12.5% of the total rent amount per tenant. From support at the time of moving in, maintenance and rent payment, everything can be done by NestAway’s app.

4. EduKart

This startup aims to help students in their academics right from the initial years. Founded by Ishan Gupta, an alumnus of Stanford University and Mayank Gupta, an IIM graduate, EduKart has a huge platform with a plethora of online and distance learning courses affiliated to some of the world’s reputed universities. Also to note, some of the courses are designed by EduKart team as well. The startup already offers courses in diverse fields like Software Engineering, Finance, Entrepreneurship, Digital Marketing to name a few. To add more to it, these course are supported by telephonic support. This startup aims to target people who intend to develop their skills, improve industry knowledge to become market ready. Within a month of its official portal launch, its website witnessed a significant rise in its website traffic, not only from the metro cities but also from towns and cities as well.

5. ClearTax

ClearTax is one of its kind startup that helps the individuals to file their tax returns online. One would just have to upload Form 16 and the ClearTax software prepares the tax return instantly.  This company, founded by Archit Gupta along with his father Raja Ram Gupta, has a B2C tax filing platform and ClearTDS (for TDS returns), TaxCloud (for CAs and enterprises) on the B2B platform. It recently raised a Series ‘A’ funding from SAIF Partners. Apart from that, they received funding from Sequoia Capital and Founders Fund as well.

With funding from above, ClearTax also plans to launch two more B2C products and three more   B2B products for businesses in the next 15 months. Not just that, the firm has also launched GST software by the name of ClearTax GST that will help the firms/companies to manage compliances in a hassle free manner.

Looking at the future, the startup plans to get 50 Lakh individuals and entities file their tax returns on their platform and also help over 10 Lakh people save their taxes. The funding by SAIF Partners and Sequoia Capital has give ClearTax a bellwether to take this endeavor to a whole new level.

6. InShorts

News in Shorts, InShorts’ full name, was started by three IIT dropouts – Azhar Iqbal, Anunay Arunav and Deepit Purkayastha in 2013. They started this initiative with a thought that the youth of this country were ready to spend hours on Facebook/WhatsApp and other social media forums but were not even aware of the happenings around them.

Inshorts app gives a 60 word summary of the day’s top stories across diverse categories including sports, entertainment, politics, national and international affairs. Each news summary is written by an in-house team of editors and also includes a link to the news if the reader wants to read the news in detail. The reader can also opt for push notifications on their phones to get regular updates.

The company had in February 2015 raised a $4 million Series ‘A’ funding from Rebright Partners (Japan) and other angel investors namely – Nijhawan, Gaurav Bhatnagar, Manish Dhingra. The startup also raised funding from Flipkart founders – Sachin and Binny Bansal.

The app is free to download and for all users. The team is currently focusing on the quality of their content and getting more users on their platform. They have so far not monetized with in-app advertisements or other means.

The app is free to download for all users and the team is working on developing the quality of their content and simultaneously attracting more users n their platform. The company intends to monetize their app with in-app adverts and by other means as well. The company is also looking forward to raise more funds in the near future to augment their operations. On Google Play Store, the app has over 2.6 Lakh downloads and has been rated 4.7 out of 5 which is a clear indication that the startup has set its foundation right and is set for a steady growth in the near future.

7. Perfint Healthcare

Perfint Healthcare is one of a kind healthcare startup that aims to introduce minimally invasive, image guided robotic systems that can guide doctors through surgery, cancer diagnosis etc and help them perform, navigate operations accurately and in a safe manner. A step in this direction is the introduction of Perfint’s new product called ‘Maxio’, a image guided robotic system that pinpoints precisely where a needle should enter the tumor. This technology has been used in 1500 procedures across the United States, Germany, Russia and India. It has also made inroads in Korea, Japan and other parts of Asia.

Perfint’s robotic systems can be easily transported from one place to another and is a first of its kind cancer therapy device. It is estimated that the global ultrasound guide abdominal procedure market is expected to cross more than a billion dollars by 2020 and this startup aims to capture one-tenth market of it.

Perfint aims to become all the more perfect by working closely with physicians al;l over the  world. Investors like Norwest venture Partners, IDG Ventures, Accel Partners have invested in this startup. Perfint now intends to penetrate its products into the hinterlands of India and Indonesia. The company also expanded its product into the Chinese market in 2014 and it already accounts for 20% of its total revenues.

8. NovoPay

A financial solutions startup started way back in 2014 by Gautam Bandyopadhyay, Sridhar Rao and Srikanth Nadamuni, NovoPay uses mobile as a medium to help the banking industry augment their customer size not only in the urban areas but also in the hinterland. The proposition simple – the startup would use Aadhar based UID database by issuing fingerprint scanners to the grocery stores as money deposit and fund transfer centres. So far, NovoPay has worked with more than 40,000 grocery stores in the country’s hinterland which serve as banking outlets. It has tied up with banks like ICICI, RBL, Axis, Bank of India, IDFC among others to deliver its banking services through a customer friendly app.

Novopay has been backed by Silicon Valley-based Vinod Khosla, the owner of Khosla Ventures, for an undisclosed sum. It wants to go after 400 million unbanked Indians and has created a business model to thrive on that segment.

This startup is backed by Vinod Khosla, the owner of Silicon Valley based Khosla Ventures. Rating agency CRISIL estimates there are over 5 crore (50 milion) grocery stores in the country and many of them carry NovoPay advertisements in their stores in the hinterland part of India. To transfer or deposit money.

The reason behind this venture’s success is that is gives the customer protection of his/her money. Whenever there is a transaction, the customer gets a message on his/her mobile regarding the transaction. Even after the implementation of Jan Dhan Yojana which aimed to provided banking to all, this venture is going strong. Even if a customer has a bank account, he/she does not have to travel miles far to the bank get a transaction done. They can do it by visiting their local grocery store affiliated to NovoPay and get the transaction done easily.

9. Tata Swach

Tata Swach is a water purifier developed by Tata Chemicals with the sole aim to provide affordable drinking water to the lower strata of the society. This technology uses processed rice husk ash soaked in silver nano-particles that provides clean drinking water removing upto a billion bacteria and over 10 million viruses from one litre of water at a minimal cost of just $ 0.003 per litre. More of all, this technology doesn’t require electricity making it all the more affordable. In the year 2013, Tata swach water purifiers wer provided to all the pilgrims who went on a pilgrimage to Mahakumbhmela, on the river Ganges in Allahabad, free of cost. This product definitely qualifies to be called innovative.

10. YourDost

Founded in the year 2014, YourDost is a one of its kind startup that provides online counselling and emotional support to foster mental health. People who are distressed emotionally or mentally can connect anonymously to experts, psychologists, counsellors, life coaches, psychotherapists who can understand problems well and guide them through via one-to-one confidential online sessions. YourDost was founded by Richa Singh, an IIT Guwahati alumnus who came up with this idea when her roommate at college committed suicide. The reason for here committing suicide was because of her placements and relationship issues. But she never spoke about it and kept it to herself. She says most people don’t talk about their problems openly fearing social implications.

Richa along with Puneet Manuja, an IIM graduate conceived the idea of creating YourDost. The founders not being from psychology backround was a drawback initially. The duo then approached many psychologists, took notes and authored many blog posts after inputs from the psychologists.

The startup has a ‘freemium’ model where individuals can receive text based counselling from over a team of 75 experts for no cost. The website witnesses over 4,000 unique visitors daily.

In September 2015, the startup had raised over $4,00,000 in the seed round of funding. Few days back on 26^th June 2017, YourDost raised over $1.2 Million from SAIF Partners and others in the pre-series ‘A’ round. The founders plan to utilize this investment to hire senior executives for domains like marketing, technology and operations. Currently, the team totals at 22 and with this funding, the firm will also establish a research division. This model is innovative in nature and differentiates exclusively from other forms of startups.

In this article, Nivedita Arora pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses how to tax income from transfer of intangible assets.

Introduction

The author tries to explain what are intangible assets, their definition and how income on transfer of intangible assets is taxed depending on whether the owner of such assets resides within or outside India.

What is an intangible asset?

In lay man’s language, assets that are not physical in nature such as patents, trademark, goodwill, copyrights and intellectual property rights are referred to as intangible assets.

These intangible assets can further be classified as definite and indefinite assets depending on the time period. Indefinite intangible assets are those which exist for a longer period of time such as company’s brand name or trademark and don’t get expired or destructed by natural consequences or acts of God. However, definite intangible assets are those which exist for a defined and shorter period of time. Few examples of definite intangible assets are goodwill, copyright, patents, intellectual property etc. Intangible assets are shown on the balance sheet along with the tangible assets and add to the company’s future worth and can be more valuable than tangible assets.

Definition

There is always a difference between the market value of the company as per the accounting records and as per market capitalization. This difference is caused due to the valuation of intangible assets. Thus we need to understand what an intangible asset actually means as per accounting standards and how is it valued.

According to the Financial Accounting Standards Board Accounting Standard Codification 350 (ASC 350), an intangible asset is defined as an asset which is not a monetary asset and lacks physical existence.

International Accounting Standards Board standard 38 (IAS 38) defines an intangible asset as identifiable non-monetary assets without physical existence. The objective of IAS 38 was to provide accounting treatment for the intangible assets which was not specified earlier is another IFRS. Thus IAS 38 requires that intangible assets that meet the specified criteria will be recognized as intangible as per IAS 38. The IAS 38 gave detailed guidelines about how to measure the value of intangible assets and what all disclosures have to made regarding intangible assets possessed by the company.

The three main attributes of an intangible asset are:

• Control
• Future economic benefits.
• Identifiability.

Identifiability according to IAS 38.12 refers to an intangible asset that

• Can be separated and sold, transferred, licensed, exchanged etc.
• Arises from contractual or legal rights.

Valuation of intangible assets

Valuation of tangible assets such as goods, inventory, machinery, land and building is a very simple and straightforward process. However, the valuation and assessment of intangible assets is a complicated process and it is even more difficult when the assets are outside the boundaries of the country and the national accounting standards require the companies to report the value of intangible assets on their balance sheets since 2002. However how the assets are classified as whether tangibles or intangibles on the balance sheet has a major consequence on the tax responsibility of the company.

Due to the globalization and increased rivalry, it is essential to value intangible assets for tax purposes. If a company keeps an asset for a longer period of time, say more than one year, it is considered to be taxable at a favourable capital tax improvement rate, thus making the company liable to be pay tax. Thus, intangible assets are also taxed at favorable capital gains rate.

A few organizations use transfer pricing method which is unreliable, inaccurate and does not fulfill the criteria and regulations of either the home country or the country where the valuation of intangible assets is done.

The three main concerns required for accurate and reliable  valuation of intangible assets:

• Research is needed in the theory of multinational enterprise, valuation of intangible assets and international transfer pricing techniques.
• Comparison of various transfer policy pricing where intangibles are involved.
• Various policy discussions that are undertaken on this subject by various tax authorities, international organizations and tax players.[1]

There is no clarity on how to tax income on transfer of intangible assets where the assets are situated outside India.

The Delhi High Court in 2011 in the case of CIT vs. Mediaworld Publications Pvt. Ltd. held that the transfer of intangible assets is taxable as the income arising out of transfer of such intangible assets is capital gains and not business income.

The High Court gave this judgement in favour of the taxpayer and held that the sale of intangible assets such as trademark and copyright, and income arising out of such sale is referred to as long term capital gain.

According to section 2(14) of the Income-tax Act, 1961, (referred to as ‘The Act’) ‘capital asset’ is defined as the property of any kind held by an assessor whether or not connected with his business or profession.[2]

Thus, according to this definition of ‘capital asset,’ we can infer that any property of any kind includes intellectual property, which is a kind of intangible asset. Trade marks, brand name, goodwill, copyrights, patents, technical know-how relating to the production of goods and services will also come under the definition of capital assets according to Section 2(14) of the Act.

If the income arose in India on account of transfer of capital assets situated in India, then the entire amount of consideration received on account of such sale or transfer was treated as gross income and was thus taxable.

According to section 2(14) and 2 (11) (b) of the Income Tax Act, 1961, the High Court has held that trademark, brand name, copyrights and goodwill are considered intangible assets of the business and are means of earning profit for the company.

The High Court clearly stated that the assets and contracts in the business and the transfer of the intangible assets, which formed major constituents of the agreement were transferred by the taxpayer.

On the basis of the aforesaid facts the High Court held as follows that the consideration received by the taxpayer is a long term capital gain and thus, accordance with the provisions of the proviso to Section 28 (va) of the Act, Section 28 (va) of the Act would not be applicable in the instant case. Thus the Court held that the sale of intangible assets will be considered capital gain and thus taxable.

“In a recent Delhi High Court judgment in July 2016, CUB Pty ltd. vs Union of India it was held that the situs of an intangible property is the place where the owner of the property resides, and a transfer of such property by a non-resident owner to another non-resident would not be taxable in India.”[3] Such decision was taken because there is no provision in the Income Tax Act, 1961 regarding situs of intangible assets such as trademarks, intellectual property rights, goodwill etc. thus the income arising out of transfer of such intangible assets outside India can not be taxed in India, if the owner of such assets is not a resident of India. However, if the owner of such intangible assets is an Indian, then the income accrued from transfer of such intangible assets can be taxable in India.”[4]

There is no such difficulty while valuing tangible assets as they exist at a specified location however, intangible capital assets don’t exist at a specified physical location and thus their valuation becomes difficult. Thus the Honourable Court held that adopted the concept the well-accepted principle of ‘Mobilia sequuntur personam’ for this case. The situs of the owner of an intangible asset was considered as the closest approximation of the situs of an intangible asset. Thus, considering the facts of the present case the title and interest in trademark ‘Foster’ in India was transferred by its non-resident owner, income arising from such transfer was not held taxable in India due to absence of any provisions related to this in the Income Tax Act, 1961.[5]

This judgement has brought several interesting questions and controversy due to the conflict with amendments to Section 9 of the Income Tax Act, 1961. Thus, there is a need to insert various provisions regarding in Explanation 5 to section 9(1)(i) providing clarity in respect of other intangible assets.

Thus, the conclusion is that the income arising on transfer of intangible asset outside India, if the owner is not the resident of India is not taxable in India unless any other specific domestic law applies to the contrary to tax such income. The Explanation 5 to section 9(1)(i) is confined to tax the income arising on transfer of shares or interest in a company and it cannot be extended to the transfer of any other intangible assets. Thus, as there is no provision in the Act, the situs of the intangible property is determined by the owner of such property and if the owner of the intangible property is not resident of India, then income on their transfer is not taxable. [6]

Conclusion

The income arising out of transfer of capital gains is taxable if the owner is a resident of India is taxable. However, clarity is still needed on how to tax income on sale or transfer of intangible assets where the owner of such assets is not a resident of India.

References

[1] https://blog.ipleaders.in/income-taxed-transfer-intangible-assets/

[2] Section 2(14) of the Income-tax Act, 1961,

[3] http://indiacorplaw.blogspot.in/2016/08/taxation-of-income-from-transfer-of.html

[4]  CUB Pty ltd. vs Union of India 2016 SCC Online Del 4070

[5] https://www.taxmann.com/budget/t23/situs-of-intangible-asset-–-clarity-needed.aspx

[6] https://www.taxmann.com/budget/t23/situs-of-intangible-asset-–-clarity-needed.aspx

In this article, Nandini Murali pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses The organisational structure of BCCI and answers why is it registered in Tamil Nadu.

An introduction to BCCI

During the 18^th century, when the British were trading with India and their only way in was through the sea, they brought along with their ships and goods, a culture of cricket into India. Although the year 1721 is of no apparent consequence to Indian History, it does have its contribution to what we are today. When the sailors of a British ship had parked at the port in Kutch for a number of days, they were seen to be playing a strange game.

When asked about it, the sailor names Downing said they were playing cricket and that was the first time in recorded history that Indians were introduced to the concept of cricket, this sport that rages throughout our entire nation today!

Let us look at a small timeline to study the progress and spread of cricket across our nation through the pages of history:

• 1751: The first ever match was played and recorded in India between the British army and the Indian settlers.
• 1787: The Marylebone Cricket Club was founded.
• 1792: The Calcutta Cricket Club (CCC) was founded.
  Once the CCC was set up, numerous cricket clubs started making an entry throughout the country!
• 1848: The Oriental Cricket Club was set up by the Parsis. However, this club did not last for long and therefore, the same community formed the Young Zoroastrians Club in 1850.
• 1866: The Hindus started the Hindu Gymkhana and this was followed by a number of Gymkhana clubs like the Mumbai Gymkhana and the Parsi Gymkhana.
• In 1884: The first International Cricket match in India took place when the team from Sri Lanka came to Calcutta for the match.
  So on and so forth various matches were played and clubs were founded.
• 1912: India sent an All Indian team to England for the very first time captained and financed by Maharaja of Patiala.
• Eventually, in November 1927, a meeting was conducted in Delhi regarding founding a board that will regulate cricket across all of India. The meeting was attended by delegates from across the country and finally in December 1928, the Board of Cricket Control India came into existence!

The country’s unexpected triumph in the World Cup in 1983 emboldened the BCCI to bid for the 1987 World Cup along with its Pakistani counterpart. It was the first time anyone had even thought of staging the competition outside England. The bid was upheld by the ICC, and the neighbours went on to stage a hugely successful event, the doubts raised by cynics notwithstanding. That one event showcased the organizational capabilities of the the cricket board.
The rest is history.[1]

This report will focus on the registration, organisational structure and status quo of the BCCI, as well as controversies surrounding the same and, will do so in the light of landmark Supreme Court judgments.

Registration of BCCI and the controversy hence

BCCI has indeed come a long way since its formation in December 1928. Initially, Board of Cricket Control India functioned as an “unregistered association, and in 1940 it got registered under the Societies Registration Act, 1860. Later, with the enactment of the Tamil Nadu Societies Registration Act, 1975, it was registered once again as a private club consortium”.[2]
Eventually, the Board of Cricket Control India now has a monopoly over every aspect of cricket and its regulation in India. The BCCI thus has an unfair advantage of being an unregulated monopoly and this has had an adverse effect on the Indian Cricket.

The organisational sphere of the Board of Cricket Control India as can be observed from all the scams and criminal complaints against the board. They are using their power to make money, while refusing to provide their services sufficiently.
As has been observed in the case Board of Cricket Control in India vs Cricket Association of Bihar and Ors[3]. “Over the years, cricket in India has had a dark cloud cast over it with allegations of match-fixing and betting which have questioned the working of the BCCI as a regulatory body.”

This was not what anticipated when the Board of Cricket Control India was formed back in 1928.
It is true that Mumbai (then Bombay) is and always was the headquarters of BCCI. Why then is it registered in Tamil Nadu?

It so happens that while Bombay was headquarters, it was not the only office. There were an office each in Madras and Delhi as well. The BCCI initially worked unregistered. So, when Mr. Paramasivan was appointed as the fifth president of BCCI, he administered his duties from Madras and it so turned out that many of the functional aspects were rooted in Madras. Thus, under his reign and initiative, BCCI was registered in the Madras Societies Act during the 1930s. This continued to be the case even after his presidency. Nearly 40 years later, when the 17^th President Mr. Chinnaswamy was appointed, the board was confirmed to continue to be registered in Tamil Nadu under the Tamil Nadu Societies Registration Act in the 1970s as it was simpler and easier as for the process of registration since they were already registered under Madras Societies Act as well as for purposes of tax exemptions as per provisions of the Act. This is why the BCCI was and remains registered in Tamil Nadu.

The Times, supporting Tamil Nadu took a stand that the BCCI is answerable to the Tamil Nadu Government since it’s registered office is so situated and that the Tamil Nadu government may interfere if there is a necessity. However, the BCCI remains as autonomous as always and refused to submit to such alleged jurisdiction.

STRUCTURE OF BCCI – Then and Now:

The Economic Times lays out that “Neither does the BCCI follow a structure like other sports bodies in the world, nor does it have a corporate structure. It does not follow laws of corporate governance either. The board functioned from the residence of whoever was the president, till about 2006. It used to be headquartered in a small one-and-a-half room office near to Mumbai’s Brabourne Stadium. Today, the BCCI is housed in the spanking stone-and-glass Cricket Centre at the Wankhede Stadium.”[4]

BCCI is one of the most autonomous institutions in India and all of it’s decisions are taken by the members of the board itself with little or no interference from the sports ministry. The ICC considers the BCCI as it’s model and religiously follows the path that the BCCI decides to take. If the BCCI decides on a team, that will be the team India and represent India for all purposes as decided by the board. This is on a national level as the BCCI is not involved in state teams and matches.

The BCCI is, therefore, an autonomous body performing functions of national importance (considering that it governs cricket in India, cricket being India’s most watched and ardently followed sport as well as a most prominent front for India as far as the field of sports goes) and it is doing so as a private registered society outside the scope of governmental interference and no apparent transparency in its very structure!
Although it is registered in Tamil Nadu, it refuses to accept the jurisdiction of Tamil Nadu government. For that matter, it refuses to accept any jurisdiction.

The whole structure of the BCCI itself is destructive to its purpose. Through the years, BCCI has been involved in so many cases of corruption, match fixing, bribery, etc that the chastity of the sport is no more sacred. It is a mere profit making mechanism or so it would seem to any layman who looks into the facts and trend of the BCCI’s actions.

Lodha committee

Thus, in the light of the nature of BCCI’s functions and the result of absolute autonomy of the board, the Supreme Court in its landmark judgment declared that BCCI would have to restructure its organisation and for this purpose, gave the responsibility to the Lodha committee to recommend for the same.

The Lodha committee, headed by Justice Lodha and members including Saurav Ganguly (ex- Indian team captain) and other cricket associated as well as judicially associated members, laid down it’s recommendations after a long haul with the BCCI.

The Supreme Court ordered that the BCCI should implement all such recommendations within 6 months and the state bodies do so within 1 year.
However, the BCCI absolutely disregarded the order of the Supreme Court and ignored the recommendations of the Lodha Committee, in fear of losing the autonomous power they held all along.
As a result of such defiance, the Supreme Court, in January 2017 had removed the President, Secretary and disqualified all board members from being so. It has since appointed a four member committee to take care of matters within BCCI, headed by Mr. Vinod Rai, former Comptroller and Auditor General.

The committee was asked to look into how much of the Lodha recommendations had been implemented and gradually nullify all negative effects the autonomous nature of BCCI has had on the sport in the past as well as to gain back public trust.

Thus, the BCCI is now in its phase of change and the judiciary has rightly taken the necessary steps to detox the BCCI and return its sanctity and mission to achieve the original purpose or facilitating and governing cricket in India.

References

[1] http://www.bcci.tv/about/2017/history

[2] The Legal Status of BCCI as instrumentality of State Under Article 12 of the Indian Constitution,http://www.commonlii.org/in/journals/NALSARLawRw.2013/6.pdf   Obtained from the NALSAR Law Review Journal, published in 2013

[3] CIVIL APPEAL NO.4235 OF 2014

[4] http://economictimes.indiatimes.com/definition/BCCI

In this article, Milind Talegaonkar pursuing M.A, in Business Law from NUJS, Kolkata discusses Laws relating to Medical Devices in India.

Overview

The Indian Medical Devices market is currently valued at around US$ 10 billion and is predicted to touch US$ 25 billion by 2025 [1]. There are over 800 Indian manufacturers and the size of market ranks fourth in Asia. The current phase can be called transitory as many regulatory changes are yet to come into force and many others are nearing their promulgation. We begin to study the need for regulation and then move on to the discussion on the present laws addressing those needs.

Regulatory needs surrounding the Medical Devices Industry

The Medical Devices industry requires regulation for addressing the following:

1. Standards of Device Quality and safety
2. Medical Accreditation
3. Prices, Availability and Distribution
4. International Trade (Imports and Exports)
5. Taxation / Incentives
6. Foreign Investment
7. Package and labelling requirements
8. Therapeutic claims and validation mechanisms
9. Control over manufacturing conditions
10. Shelf life determination and declaration
11. Recall of defectives and non-conforming batches

Discussion on the Applicable laws

Prices, Availability and Distribution

As of now the price of coronary stents, condoms, and intra-uterus devices are under price control. Stents were included in the NLEM by way of Notification No. X – 11035/344/2015 – DFQC dated 19th July 2016. Thereafter, these were incorporated into Schedule I of the Drug Prices Control Order, 2013 (DPCO-2013) on 21st December 2016 vide notification No. S.O. 4100 (E). By way of Order S.O. 412 (E) dated 13th February 2017 the ceiling prices of following categories of Coronary Stents were notified:

The noteworthy features of DPCO-2013 promulgated under the Essential Commodities Act are:

1. The ceiling prices become effective from the date of ceiling notification. The 15 days period allowed in such notifications is not intended for selling at the erstwhile prices but is merely to facilitate recall, re-labelling and re-issue of such stocks.
2. The unsold stock bearing old prices requires a recall and relabeling to bring it in conformity with the notified ceilings;
3. The term manufacturer includes in its ambit the marketers as well;
4. The manufacturers selling above the ceiling prices are required to bring down their prices in conformity with the mandate of the applicable ceiling notification;
5. The manufacturers selling below the ceiling prices cannot increase their price to the ceiling prices and they are required to freeze their prices to the values prevailing at the time of ceiling notification;
6. The yearly increase in prices is permitted in conformity with the wholesale price index (WPI) notified. It is basically the annual wholesale price index of all commodities as announced by the Department of Industrial Policy and Promotion, Government of India, from time to time. In case of negative WPI, the prices have to be decreased;
7. Form-V is required to be issued to the trade channel, the state drug controllers notifying them about the DPCO compliant prices, as initially notified or changed from year to year as per WPI;
8. Form-II is required to be filed within 15 days of the date of revision of the prices under DPCO.
9. The scheduled DPCO products production and availability are monitored by the Government based on Form-III submissions.
10. The discontinuation of scheduled DPCO product by any manufacturer requires giving public notice and an intimation to the Government in Form-IV at least six months prior to the discontinuation. The Government in public interest may direct the continuation of production or import for a period not exceeding one year. After notification of price ceiling of Coronary Stents, several companies had approached NPPA for notifying their intent to discontinue its marketing. However, NPPA has rejected them  on grounds like:

• Application not having been made on statutory form IV;
• Order directing continuation of supplies being already in force;
• Advised to formally produce data and justify its different pricing;

11. Existing manufacturers cannot cease or reduce production of scheduled DPCO products without prior permission.
12. In cases of non-compliances, the National Pharmaceutical Pricing Authority is authorized to issue overcharge notices and recover the overcharged amount together with interest and penalty, if any.
13. The Ceiling Prices of coronary stents as they stand revised by S.O. 1041 (E) dated 1st April 2017 considering the WPI @ 1.97186% for the year 2016 over 2015 are set out below:

14. Elaborate framework for ensuring collection of information about the prices and volumes of drugs and devices which are the subject of price controls is there in the form of Integrated Pharmaceutical Data-Base Management System (IPDMS).
15. Instances of overcharging and other malpractices faced in the implementation of price controls are deftly identified by way of elaborate monitoring through market surveillance, use of subscription databases like IMS. These are then followed by the issue of show-cause notices which are then followed by recovery proceedings.
16. Based on a recent study submitted to the NPPA citing exorbitant margins on the balloon and guiding catheters, it is expected that the regulator would soon take steps to bring them under price control and notify their ceiling prices.

Manufacturing Licence

A License to manufacture Medical Device in India can be obtained from the state FDA, after conduct of a joint inspection from the State FDA and CDSCO. However, for notified devices, DCGI’s approval is needed. One of the essential information for obtaining a device manufacturing license is the implementation of Good Manufacturing Practices (GMP) as per Schedule M of the Drugs and Cosmetics Act. License is usually valid for 5 years and is renewable.

Foreign Investment

Consolidated FDI Policy circular effective from 7th June 2016 provides 100% FDI in the manufacturing of Medical Devices for both green-fields as well as brownfield projects. However, the definition of Medical Devices follows the Drugs and Cosmetics Act. With the notification of MDR-2017, which has an overriding effect over the Drugs and Cosmetics Rules, 1945, a greater certainty has emerged in this sector.

Standards of Quality and Safety

The Bureau of Indian Standards (BIS) is the regulator in India on the subject of quality and safety of the medical devices and equipment. BIS is a member of the international organisation for standardisation (ISO). The ISO is an international non-governmental organization which is independent and has a membership of 163 national standards bodies. Through its members the ISO brings together experts to share knowledge and develop voluntary, consensus-based, market relevant International Standards that support innovation and provide solutions to global challenges. The scope of Medical Equipment & Hospital Planning Division Council of the BIS, as approved by its Subject Advisory Committee, aims to standardise in the fields of Medical Equipment, Laboratory Instruments and Equipment, Surgical Dressings, Artificial limbs, Rehabilitation Equipment Diagnostic Kits, Veterinary Surgery instruments Dental Equipment. In some of the cases the Indian Standards could be the total adoption of ISO /IEC while in some others, assistance may have been taken of ISO/IEC Standards for formulation of Indian Standards. By way of a cursory look at the list of standards one can divide them into following broad areas [2]:

1. Surgical Instruments
2. Orthopaedic Instruments, Implants And Accessories
3. Obstetric And Gynaecological Instruments
4. Ear, Nose And Throat Surgery Instruments
5. Ophthalmic Instruments And Appliances
6. Thoracic And Cardiovascular Surgery Instruments
7. Neurosurgery Instruments Implants And Accessories
8. Dentistry
9. Artificial Limbs, Rehabilitation Appliances And Equipment For The Disabled
10. Medical Laboratory Instruments
11. Anaesthetic, Resuscitation And Allied Equipment
12. Hospital Equipment
13. Veterinary And Surgical Instruments
14. Electromedical Equipment
15. Surgical Dressings & Disposable Products
16. Imaging & Radiotherapy Equipment
17. Immuno-Biological Diagnostic Kits
18. Medical Biotechnology And Nanotechnology

A typical standard would usually cover parameters like shape and dimensions, material, workmanship and finish, tests to be subjected to, service conditions, controls and functions, calibration, marking, packing and the like. With the coming into force of the MDR-2017 the medical devices shall be required to confirm to the standards laid down by the Bureau of Indian Standards. In cases where no standards for medical devices are specified, the standards laid down by the International Organisation for Standardisation (ISO) or the International Electrotechnical Commission (IEC) or any other pharmacopoeial standards shall have to be complied with. In case no standards are available, validated Manufacturers standards shall be applicable.

Medical Accreditation

Since a long time in India, there has existed a regulatory vacuum in so far as the medical devices are concerned. Only a handful of devices were notified and considered regulated under the drugs and cosmetics act and all the others remained unregulated. The newly notified Medical Devices Rules 2017 (MDR-2017) which shall come into effect from 1st January 2018 attempts to address this gap. The accreditation requirement is voluntary till the MDR-2017 comes into effect. Accreditations serve to address patient safety, and provide enhanced consumer protection and also instil confidence among consumers/users. It is expected that once fully functional, it will significantly curb the trading of sub-standard products or devices of dubious origins which is a prevalent and unhealthy phenomenon in the Indian market. As of now a voluntary ICMED scheme is operational and has two levels of certification:-

• ICMED 9000 certification that is ISO 9001 plus some additional requirements
• ICMED 13485 which is ISO 13485 plus some additional requirements.

More details about the requirement of accreditation appear in the section dedicated to MDR-2017.

Make in India Initiative

In pursuit of its ‘Make in India’ initiative a Task Force was constituted under the chairmanship of the Secretary, Department of Pharmaceuticals (DoP) to address the concerns relating to the domestic production of advanced medical devices and pharmaceutical manufacturing equipment in the country. Based on the recommendations of the said committee the following initiatives, by way of issue of Notification Nos. 4/2016-Customs and 5/2016-Customs, both dated 19.01.2016, have been taken:

1. Increase of Import Duties on Medical Devices

The rate of basic customs duty on certain specified medical device has been increased from 5% to 7.5%. Moreover, the exemption from additional customs duty (SAD) on these medical devices has also been withdrawn, and these imports will now attract 4% SAD.

2. Reduction of Import duties on the Raw Materials, Parts or Accessories of Medical Devices

With a view to boost the domestic manufacturing of Medical devices the basic customs duty has been lowered to 2.5% on the raw Materials, parts or accessories of Medical Devices. Full exemption from SAD on raw materials, parts and accessories for manufacture of medical devices, falling under headings 9018 to 9022 has also been provided or continued.

Single Window Project for Customs Clearance of Import Consignments

Drugs and notified devices capable of dual use etc need to be examined by the Assistant Drug Controllers office (“ADC”) based at notified Customs stations. Thus, the import of 22 types of notified medical devices is regulated. As trade facilitation measure a Single Window Interface for Trade has been conceptualised and implemented with a view to reducing the dwell time and the cost of doing business. The notified medical devices requiring ADC clearance can only be imported at the ports notified by the CDSCO / DCGI.   

GST and Medical Devices

The GST rate on Medical Devices has been pegged at 12%[3].

MSME Exemptions and Concessions

Medical Devices Park

Based on the recommendations of the Task Force on Promotion of Domestic Production of High End Medical Devices, the Government has declared its intent to set up Medical Devices Parks in the Country. The status of various projects are discussed herein:

1. Andhra Pradesh

The units located in Andhra Pradesh MedTech Zone Limited (AMTZ) Zone at Visakhapatnam enjoy the following Income Tax benefits[4] subject to fulfilling the stipulated conditions:

• Additional Depreciation available u/s 32(1)(iia) – 35%
• Additional Depreciation u/s 32 AD – 15%
• Investment Allowance u/s 32 AC – 15%
• Normal Depreciation(other than lifesaving) u/s 32 – 15%
• Normal Depreciation(life saving) u/s 32 – 50%

As of now around 28 companies have booked for location of their units in AMTZ which includes names like Panacea Medical Technologies Pvt. Ltd, and Biosense Technologies Private Limited. Apart from the above, Stamp duty and registration fee exemption is also available on lease or purchase of land/buildings in the AMTZ as per notifications [5].

2. Tamilnadu

The “Mini Ratna” PSU HLL Lifecare is to sub-lease its land for the purpose of establishing a medical devices manufacturing park. The location of the park will be at Chengalpattu (outskirts of Chennai) and shall have an expanse of about 330.10 acres.

3. Telangana

This Medical Devices Park will be based at Sultanpur village of Patancheru Mandal in Medak, near Hyderabad City and will focus on Research and Development (R&D), innovation and manufacturing. It is a Telangana Government initiative.

4. Gujarat

The location identified for the project is Sanand. A Detailed Project Report has been submitted to the Centre and a favourable response on the same is awaited.

5. Maharashtra

The location identified for the project is Mihan, Nagpur and estimated to have a size of 200 acres in the SEZ.

Labelling and Packaging Requirements

In accordance with the requirements of the Drugs and Cosmetics Act read with the Legal Metrology Act and the rules respectively framed thereunder the following information needs to appear on the Label/package of the Medical Devices:

1.    Trade name;
2.    Proper name i.e. the generic;
3.    Net content per unit selling pack
4.    The Name and address of the  Manufacturer;
5.    Batch number/Lot number
6.    Manufacturing license number (for indigenously manufactured products)
7.    Date of manufacture
8.    Date of expiry
9.    Storage conditions
10.  Pharmacopoeia /law requirement if any
11.  Import license number (for imported products)
12.  Importer’s name and marketing firm’s address
13.  Maximum retails price (inclusive of all taxes)

Medical Devices Rules, 2017

MDR-2017 is by far the most extensive comprehensive rules on the subject. These have been enacted under the Drugs and Cosmetics Act. It is rather interesting to note that only 22 devices were notified under the provisions of the Drugs and Cosmetics Act, 1940 and the rules framed thereunder prior to 31st January 2017. The notified medical devices are enumerated below:

1. Disposable Hypodermic Syringes;
2. Disposable Hypodermic needles;
3. Disposable perfusion sets;
4. In vitro diagnostic devices of HIV, Bag and HCV;
5. Catheters;
6. Intraocular lenses;
7. I.V.Cannulae;
8. Bone Cements;
9. Heart Valves;
10. Scalp Vein Set;
11. Orthopaedic Implants;
12. Internal Prosthetic Replacements;
13. Blood Grouping Sera;
14. Ligatures, sutures and staplers;
15. Tubal rings;
16.  Surgical dressings;
17. Umbilical tapes;
18. Blood / Blood component bags;
19. Drug eluting stents;
20. Cardiac Stents (BMS);
21. Condoms;
22. Intra Uterus Devices

With the notification of the Medical Devices Rules 2017 the regulation of medical devices has undergone a sea change. The various facets of the MDR-2017 are discussed below [6]:

Risk based Classification

The new rules specifically define ‘Medical devices’ and also classify them into 4 categories based on their associated risks as mentioned below:

• Class A (low risk),
• Class B (low moderate risk),
• Class C (moderate high risk) and
• Class D (high risk)

The coverage of these rules governing devices could range from the simplest of devices such as thermometers or disposable gloves to implantable devices such as stents and artificial joints. All the manufacturers of medical devices shall have to comply with the risk proportionate regulatory requirements which have been specified in the MDR-2017.

Licensing for Imports and Manufacturing

A differentiating feature of the licences to be issued for imports or manufacture of medical devices is the perpetual validity of the issued Licences as against the renewable 5 year term licences. This, of course, is subject to the license being suspended, terminated or surrendered earlier in terms of the MDR-2107. The MDR-2017 seeks to encourage self-certification and to that end permit Class A manufacturers to apply and receive manufacturing licenses before the audit of their unit. However, even in these cases, an audit has to be conducted by an NABCB accredited body, after getting the approval. The State licensing authorities have been authorised in terms of MDR-2017 to grant licenses in respect of Class A and also the Class B device manufacturers. Class C and Class D medical devices manufacturers’ category will be regulated by the Central Licensing Authorities who can seek the assistance of experts and other notified bodies on need basis.

Shelf Life

Unless justified otherwise, the shelf life of a medical device shall not be more than 60 months. In the case of imports the restriction shall be with reference to the residual shelf life as on the date of import.

Management of Quality

Elaborate and mandatory framework covering, inter-alia, the design and development, packaging and servicing of medical devices. The verification and assessment of the quality management systems of class A and class B category medical devices shall be done by Notified Bodies which would be accredited for this purpose by the National Accreditation Board for Certification Bodies.

Identification and Traceability

Traceability of Medical Devices. These procedures need to outline the extent of product traceability and the records required. Where traceability is a requirement as per the MDR-2017, the unique identification of the product shall have to be allotted and controlled.

The manufacturers need to secure that their agents or distributors to maintain the records of the distribution of implantable medical devices to so as to allow traceability. These records shall be available for inspection of the Authorities.

Clinical Trials

In terms of MDR-2017 the clinical trials of medical devices are to be referred to as ‘clinical investigations’. No four-phase stringent trial norms, typical to the Pharmaceutical products, will now be necessary and a two-phase process will have to be complied with. While Phase one (Pilot Clinical Investigation) will require the conduct of a pilot study on a few number of subjects to acquire specific essential information about the medical device, phase-two (Pivotal Clinical Investigation) is a definitive study, conducted on a large number of patients, in which evidence is gathered to support the safety and effectiveness of the medical device for its intended use. The Central Drugs Standard Control Organization (CDSCO) shall regulate the trials of investigative medical devices. Adequate provisions for medical condition management and requisite compensation for the subjects of the investigation are there in MDR-2017 and it provides compensation of up to INR 800,000 for people affected by an adverse investigation. The Central Drugs Standard Control Organization (CDSCO) has been empowered to regulate the trials of investigative medical devices.

Product Recall

MDR-2017 defines “recall” to mean any action taken by its manufacturer or authorised agent or supplier to remove the medical device from the market or to retrieve the medical device from any person to whom it has been supplied, because of the medical device being hazardous to health or failing to conform to any claim made by its manufacturer relating to its quality, safety or efficacy; or not meeting the requirements of the Act and these rules. The licence holder of a Medical Device is required to notify the licence issuing authority about the occurrence of any suspected unexpected serious adverse event and action taken thereon which may include any recall. Recall would be necessary if a direction to that effect is received from the Licensing Authority on the ground that any part of any lot of the medical device has been found not conforming to the Drugs and Cosmetics Act or the MDR-2017.

Conclusion

A significant thrust to the Medical Devices Sector can be seen from the actions of the Central and the State Governments. The changes being witnessed during the last three years are aimed at boosting the ‘Make in India’ initiative which in turn could lead to more employment, import substitution and export promotion. The aim is also to fill up the regulatory void in the sector and ensure availability of goods quality and affordable medical devices to the masses. It will be interesting to see if these efforts may transform into innovation of the highest order and research driven production which may help in the realisation of the vision of the Government for this industry which in its own words are “…sharpen the competitive edge and provide incentives to firms to become more efficient, innovative and competitive. All this will support entrepreneurship, market entry and economic growth that, in turn, would produce high paying, high quality jobs” [7].

References

1. Medical Device Monitor (March 2017) by SKP group;
2. Recommendations of the Task Force on the Medical Devices Sector in India 2015;
3. OPPI Position Paper on Medical Diagnostics and Medical Devices;
4. Medical Devices Rules, 2017
5. Draft National Medical Device Policy, 2015, Department of Pharmaceuticals

Endnotes

[1]https://www.ibef.org/arab-heatlh-2017/download/PR_Arab_health_IBEF_January_302017.pdf

[2] http://www.bis.org.in/sf/pow/MHDPOW.pdf

[3] http://pib.nic.in/newsite/PrintRelease.aspx?relid=162025

[4] http://www.amtz.in/images/FAQs/Income%20Tax.pdf

[5] site

[6] http://www.mondaq.com/india/x/565872/Healthcare/New+Rules+for+Medical+Devices

[7] http://pib.nic.in/newsite/PrintRelease.aspx?relid=157955

In this article, Kanishka Chakraborty pursuing M.A, in Business Law from NUJS, Kolkata discusses Fundamentals of the Legal Metrology (Packaged Commodities) Rules, 2011.

The Legal Metrology Act, 2009 came into effect from the 1st of April, 2011, replacing the Weights and Measures Act. The Act was passed with the purpose of establishing and enforcing standards of weights and measures or aspects incidental to the same.

Under the act, there are various rules, but a crucial arm of the act is the Packaged Commodities Rules, i.e. Legal Metrology (Packaged Commodities) Rules, 2011 (hereinafter referred to as “Rules”).

The Department of Legal Metrology falls under the Department of Consumer Affairs, and is therefore concerned with fair and honest practices in relation to all aspect of trade. The Rules deal with goods that are packaged and provide inter alia how declarations are to be made and what declarations are to be contained in a packaged commodity that is meant to be for sale.

Why are Declarations required in Packaged Commodities

It may be questioned why declarations are required in the first place, after all, when we buy vegetables or meat from sellers, or groceries from vendors that are not packed, they are not mandated to provide any declarations with respect to the same.

The probable answer is because when we buy the things in an unpacked form, we know who we are buying it from, or the identity of the seller, on occasions we even see it being manufactured in front of us (for example flour), however when we buy goods that are packaged we do not know where they are from or how fresh they are or when they expire. Hence it can be said that the purpose of the Rules is to ensure that the end consumer gets clarity and all relevant information when he buys a product that is in packaged form.

Are all Packaged Commodities covered under the Rules

Yes and No. While certain provisions are applicable for all packaged commodities there are certain rules that do not apply to certain kinds of commodities. Chapter II of the Rules, for example, deal with packages that are meant for retail sale, these provisions would not be applicable to certain kind of commodities.

Beyond the obvious, these rules would not be applicable for products meant for institutional or industrial consumers, i.e. those institutions who directly purchase from the manufacturer for use by the said institution OR consumers who buy the products directly from the manufacturer for use in that industry.

For example, a hospital buying packaged paint directly from paint company would amount to an institutional consumer, and the products would not require the declarations that otherwise are required had the products been sold in retail market.

Similarly, an automobile company that buys packaged paint and consumes it for the purposes of painting the vehicles would amount to an industrial consumer and the packaged paint would similarly not require the declarations otherwise required.

Further, commodities which contain quantity of more than 25 kg or 25 litres (50 respectively in case cement and fertilizers) are exempted from the specific requirements of retail packages.

Additionally, the Rules do not apply to certain packages even if they satisfy all other criteria if: [1]

1. The package is sold by weight or measure and amounts to less than 10 ml or 10 gm (provided the product is not tobacco); or
2. Package contains fast food items and is packed by hotels/restaurant/similar body; or
3. Contains scheduled drugs and non scheduled drugs covered by the Drugs (Price Control) Order, 1995; or
4. Agricultural farm produce in packages above 50 kgs; or
5. Thread which is sold in the form of coil to handloom weavers.

Which Declarations are Mandated under the Rules

Rule 6 of the Rules dictate the declarations that must be present in every packaging. They include: –

(a) The name and address of the manufacturer/importer/packer, as may be applicable. Note that if the manufacturer and packer are separate entities then their names are to be mentioned separately. Also it is to be noted that address to be mentioned is registered office address (this is a departure from the Weights and Measurements Act as well as the earlier iteration of the rules – this clarification and amendment came into being vide GSR 385 – E, dated 14th May, 2015, with effect from 1st January, 2016). It is to be noted that this declaration is waived if the product is or contains a food article, instead the specific provision under the Food Safety and Standards Act, 2006 will be applicable.

(b) Generic name of the commodity being sold.

(c) Price at which the product is being sold, inclusive of all taxes. Note that there is a specified format at which the same is to be declared, viz. “Maximum Retail Price ……………… Inclusive of all taxes” or “MRP ……………… Inclusive of all taxes”. The symbol of the currency is to be mentioned, i.e. the Rupee symbol, or Rs. or INR. Price is to be declared up to two decimal places.

(d) Date of manufacture/packaging/import, as the case may be, viz. the month and year. If the date of packaging and manufacture differ, separate declarations are to be given.

(e) Quantity of the commodity (explained in further detail later on)

(f) Name, address, telephone number, e-mail address of the person or office who can be contacted for consumer grievances.

Are these the only Declarations

Not necessarily. Different acts may have other requirements, for example the Food Safety and Standards Act requires certain declarations, but these are all in addition to the basic and fundamental declarations under the Rules.

How and Where are these Declarations to be Made

Just declaring the above mentioned mandatory declarations aren’t sufficient, they have to be made in a particular manner.

The declarations are to appear on the principal display panel of the packaged commodity, and what constitutes the principal display panel is determined as follows:

1. In case the product is rectangular in shape, then one side of the package can be considered to be the principal display panel side – (area of the display panel being the surface area of that particular side).
2. In case the product is pipe shaped or nearly cylindrical, 40% of the surface area.
3. In other cases, 40% of the total surface area of the package. [2]

However, it is to be kept in mind that for the purpose of calculating principal display panel area, the top, bottom, flange at the top and bottom of cans, and shoulders and neck of bottle and jars shall not be included. [3]

Also, the height of fonts is an important aspect of the declarations.

As the purpose of the Rules is to ensure that consumers are made aware of the nature of the goods – specific provisions are in place to ensure that the declarations are prominent and legible. [4] As these are vague and subjective terms, the font height and size are important aspects to ensure that the packaging declarations are made in a proper manner.

Rule 7 (3) provides that the height of any declaration should not be less than 1mm and if the nature of declaration is such that it may be embossed or perforated or molded or blown or formed, then the height should not be less than 2mm.

There is a separate provision for height of ‘numerals’ in the declarations as denoted by the below mentioned tables.

When Quantity is declared in terms of Weight/Volume

When Quantity is declared in terms of Length/Area/Number – area of Principal Display Panel

As we can see from the tables above, while the height of the letters in a declaration are to be at least 1mm, for numerals it ranges from 1mm to 6mm.

While it may appear obvious, it is important that we understand what a numeral is because it has an important impact on the manner of declarations, including practicality [5] and aesthetic value of the artwork.

The meaning of numeral has not been defined either in the Act of 2009 or in Rules of 2011. Meaning of the word numeral therefore will have to be looked into Dictionary. Meaning of Numeral has been given in Online Oxford English Dictionary as below:

‘A figure, word or group of figures denoting a number’ [6].

Therefore a numeral needs to be a number. Neither the Act of 2009 nor the Rules of  2011 have defined ‘number’. Once again therefore one has to look into Dictionary.

Meaning of number has been given in Online Oxford English Dictionary as below :

‘An arithmetical value expressed by word, symbol or figure, representing a particular quantity.’ [7]

From the above it is clear that ‘numeral’ is a ‘number’ having an arithmetical value and a number not having any arithmetical value is not a numeral.

Therefore postal pin codes, telephone numbers, Road Nos., City Survey Nos. etc.  are not numerals. Such numbers do not represent any value. For example, performing functions of addition, deletion, subtraction or division of quantity expressed in numbers or price in numbers is possible and brings about an arithmetical value. However, the said functions cannot be performed on pin codes are telephone numbers. Such numbers do not have any arithmetical value.

What are the Numerals in the Mandatory Declarations

It is the author’s view that the declarations amongst the six mandatory declarations that should be considered as numerals are:

1. Quantity related declarations,
2. Price and
3. Month and year of manufacturing/packing/importing (only when expressed in numbers).

These are the only fields on which arithmetical operations can be performed; as illustrated above.

Special Requirement while Declaring Quantity

The Rules specify that the space surrounding the quantity declaration should be devoid of printed information at least to the following extent:

1. To the top and bottom by a space equal to the height of the numeral in the quantity declaration.
2. To the left and right by a space equal to double the height of the numeral in the quantity declaration. [8]

Can Labels be Used to Make the Declarations

Not all manufacturers and traders are equipped to make the declarations on the artwork of the packaging, the same requires substantial investment and printing costs which a manufacturer or packer may understandably want to avoid; comparatively the costs associated with sticking labels on the product are substantially lower and require lesser investment – therefore labelling on the product is allowed for the purpose of making the declarations. However, this is done through a negative right.

The provisions state that it is not permissible to apply individual stickers[9] on a package for either altering or making declarations. While this provision prima facie disallows a party from making individual declarations through labels – as a corollary it also permits making all mandatory declarations through a single label.

What about the Declarations the Values of which Regularly Vary

Changing an artwork is a time taking and expensive affair, for declarations such as date of manufacture which is bound to vary frequently (every month) it is impractical to make the entire declarations through artwork.

While the act is silent about the aspects of this, the general practice across industries (which prefer declarations through artwork as opposed to labels) is that barring date of manufacture and maximum retail price – all declarations (viz. generic name of product, name and address of manufacturer/packer/importer, quantity, customer care declarations) are made on the artwork and a blank space is left for declaring the MRP and the Date of Manufacture/Packed Date/Date of Import.

These details are then imprinted on the artwork through a separate inkjet, dot-matrix, or any other kind of printer. As the rest of the declarations for a particular artwork will always remain constant, this is the preferred way to make declarations.

Can Stamps be used to Make the Declarations

There is nothing in the provisions that specifically prohibit the use of stamping to make declarations. But it is of interest to note that previously a proviso to Rule 6 (1) (d) [10] stated that a manufacturer could indicate the month and year using a rubber stamp. This proviso has since been omitted [11] for unknown reasons.

Rule 9 (1) (b) however states that numerals of the retail sale price and net quantity declaration ought to be painted, inscribed, or printed. This could be an indication that stamping is disallowed, at least with respect to the abovementioned declarations.

Units to be Used in the Declarations

All units in the packaging material should follow International System of Units (S.I) system. For items sold by number, the qualifying symbol used should be “N” or “U”.

For depicting length, if the quantity is less than one meter, it is to be depicted in centimeter. Else, meter.

For depicting mass, if the quantity is less than one kilogram, it is to be depicted in grams. Else, kilogram.

For depicting area, if the quantity is less than one square meter, it is to be depicted in square decimeter. Else, square meter.

For depicting volume, if the quantity is less than one litre/one cubic meter/one cubic decimeter, it is to be depicted in millilitre/cubic centimeter/cubic centimeter respectively. Else, litre/cubic meter respectively. [12]

A schedule to the Rules specifies certain products (i.e. their generic name) and in terms of what their quantity is to be declared. For example, curd is to be expressed in terms of weight, but ice cream and other similar frozen products are to be expressed in terms of weight OR volume. The schedule however only specifies twenty six items, and Rule 12 states how other products may be declared, viz.

1. In terms of weight – if the product is solid, semi-solid, viscous or a mixture of liquid and solid.
2. In terms of volume – if the product is sold by cubic measure or is liquid.
3. In terms of number – if the product is sold by numbers.
4. In terms of area – if the product is sold by area measure.
5. In terms of length – if the product is sold by linear measure.

Dimensions of the product may be additionally required to be mentioned in case the same is a pertinent factor for the product in question.

The Second Schedule to the Act also specifies certain commodities (i.e. their generic name) and their standard pack sizes, such mentioned products can only be sold in the specified quantities[13], for example Mineral Water and Drinking Water can only be sold in quantities of 100 ml, 150 ml, 200 ml, 250 ml, 300 ml, 500 ml, 750 ml, 1 litre, 1.5 litres, 2 litres, 3 litres, 4 litres, 5 litres, and subsequently in multiples of 5 litres.

For products that do not fall under the ambit of this list, there is no such restriction with respect to pack sizes.

Combination Packs

We frequently see one product containing a number of components which are packed in two or more units for sale as a single commodity (for example razor handle and razor being sold as a kit). In such cases, the declarations required should appear on the main package and such package should also contain information about the other accompanying packages.

From the wordings, it is clear that main package does not amount to a single package in which each of such components are contained, but refers to the single most important component of the package.

It is important to understand what would be construed as the ‘main package’ in such instances, for the aforesaid example it is clear that the razor handle is the main package but for every possible scenario it may not be as lucid.

Therefore, the provision also gives the option of giving independent declaration for all of the components and intimation to that effect should be reflected on the main package. But this is a potential grey area that the law should address.

Wholesale Packages

The Rules define ‘Wholesale Packages’ to mean packages

1. Containing a number of retail packages, where the said package is meant for sale, distribution, or delivery to an intermediary and is not for sale directly to a single consumer, or
2. Sold by bulk to an intermediary for further selling, distribution, or delivery to customer in small quantities, or
3. That contain 10 or more retail packages, provided that the retail packages are labelled as mandated under the Rules.

Wholesale packages do not require all of the declarations as provided under Rule 6, but it is mandatory that they state:

1. Generic name of the product
2. Total number of retail packages within such wholesale package or quantity declaration, as the case may be, and
3. Name and address of the manufacturer/importer/packer.

Miscellaneous Provisions

If a product has an outside container or wrapper, the said container/wrapper should also have the relevant declarations. However, this requirement is waived if the container/wrapper is transparent and the declarations are easily readable through such external packaging. [14]

If a product is likely to undergo variations in quantity that are significant owing to environmental or other factors can be qualified by the words “when packed” in its quantity declaration. This allowance is presently restricted to soaps, lotions, creams (other than cream of milk), and camphor. [15]

When stating quantity in terms of weight, the weight of packaging and/or any other object apart from the product is to be excluded. [16]

Additional Information and Penalty for Offences

The Rules additionally provide for registration of manufacturers, packers and importers with the Director of Legal Metrology or State Controller of Legal Metrology which is a mandatory requirement.[17] Penalty for non registration is a fine of Rs. 4000/-[18].

Penalty for quoting or publishing non-standard units[19] is a fine of Rs. 2000/- (if compounded by retailer/wholesaler/dealer) or Rs. 4000/- (if compounded by manufacturer/packer/importer).

For manufacturing, packing, importing, selling, or offering to do any of the above with respect to products which do not adhere to the Rules pertaining to the declarations –  the penalty amount may extend to Rs. 25,000 for the first offence. For the second offence, the fine may extend to Rs. 50,000 and for any subsequent offence the fine would not be less than Rs. 50,000 and may extend to Rs. 100,000 or imprisonment which may extend upto one year, or both. [20]

For manufacturing, packing, or importing with error in net quantity – for the first offence, no less than Rs. 10,000 fine but which may extend upto Rs. 50,000. For second and subsequent offences, the fine may extend upto Rs. 100,000 or with imprisonment for upto one year, or both. [21]

Selling products for more than the MRP declared is subject to a fine of Rs. 2000 for retailers or wholesale dealer, and Rs. 5000 for manufacturer or importer. [22]

For any other offence under the Rules, the penalty amount payable shall be Rs. 2000. [23]

The Act also provides for appealing before the relevant state Controller against the findings/order of the Inspector.

Practical Challenges & Conclusion

In spite of the noble intentions, there are certain stumbling blocks being faced in implementation of the Rules. Lack of manpower to check and enforce the provisions of the Rules is a continuous issue being faced by most state governments. [24]

Further, while the penal provisions lay out consequences of offences and subsequent offences – and there is clearly no intention of restricting the offences to a particular jurisdiction, this inadvertently occurs.

Ideally an offence committed in any state should count as an offence and another offence committed in another state should amount to a subsequent offence; however, owing to difficulties in coordination between different state bodies, offences are tracked independently by each state, so an offence, even if committed by an entity for the nth time but for the first time in a particular state – the same amounts to a first offence.

With the present Government’s increased encouragement of digitization perhaps the day is not far off that a central repository would be kept where offences are tracked irrespective of where they occur.

Lastly, the Legal Metrology Inspectors who carry out checks and seizures are often not very familiar with the Rules themselves, and are not aware of the latest case laws in the matter. This results into unnecessary complications and dragged out proceedings which do not serve the interests of any party concerned. Training programs should be conducted from time to time for knowledge updating of the very people who practically monitor and enforce the law in this regard.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:  

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

References

Statutes

The Legal Metrology Act, 2009

The Legal Metrology (Packaged Commodities) Rules, 2011

Books

Gupta, S.V. (2016). Landmark judgments in the field of Legal Metrology. New Delhi: Commercial Law Publishers.

Online Document

Nair B. (2015, February 6). Legal Metrology plans all out meter testing drive. www.dnaindia.com/mumbai/report-legal-metrology-plans-all-out-meter-testing-drive-2058477

Endnotes

[1] Rule 26.

[2] Rule 7.

[3] The Rules however have exception provisions that pertain to “soft drinks, ready to serve fruit beverages or the like.” Not further elaborated as to where the declarations should appear on this kind of commodities owing to limitations in the assignment topic.

[4] Rule 9.

[5] Font heights impact space available for making declaration, this often leads to running out of space for remaining declarations.

[6]https://en.oxforddictionaries.com/definition/numeral

[7]https://en.oxforddictionaries.com/definition/number

[8] Rule 8.

[9] Throughout the Rules, the terms ‘Label’ and ‘Sticker’ have been used interchangeably.

[10] The said rule mandates declaring of the Month and year of manufacturing/packing/importing.

[11] GSR 784 (E) dated 24th October, 2011 – with effect from 1st July, 2012.

[12] Rule 13.

[13] Rule 5 read with Second Schedule.

[14] Rule 9 (3).

[15] Rule 11 (4).

[16] Rule 11 (1).

[17] Rule 27.

[18] Rule 32.

[19] An offence under Section 29 of the Legal Metrology Act, 2009 read with Rule 32.

[20] Section 36 (1) of the Legal Metrology Act, 2009. Note that Rs. 5000 is the fine payable for retailers or wholesale dealer in this case. Read with Rule 32.

[21] Section 36 (2) of the Legal Metrology Act, 2009. Note that penalty applicable for Retailer/Wholesale Dealer is Rs. 10,000, read with Rule 32.

[22] Rule 32.

[23] Rule 32.

[24] http://www.dnaindia.com/mumbai/report-legal-metrology-plans-all-out-meter-testing-drive-2058477

2 day live workshop on Drafting Commercial Contracts on 26th – 27th August (Sat – Sun), iPleaders Office, New Delhi, Fees: INR 4500

Register by 21st August [20 seats only]

What stops young lawyers from drafting their best contracts?

Reading a contract (or a book on contract drafting) and drafting contracts everyday are entirely different ball games. You may have read a book, you may know how to draft, but you may find yourself stuck when it comes to drafting the right clause all by yourself. Every word you write has legal implications for your clients and other parties, which can give you a tremendous sense of responsibility and fear, especially when you haven’t been trained or practised in drafting contracts day in and day out.

Irrespective of one’s level of knowledge, we have seen that a lot of barriers come in the way while drafting contract, such as:

• Anxiety and fear. Many students just cannot start typing a contract, even if they know something conceptually.
• Being sure that what you’re doing is right. We have seen people over-thinking and stress on issues that do not ultimately have a bearing on the transaction or are relatively disproportional. They have no way of recognizing that this is not required.  
• Focussing on issues which are not important for the client

There is so little that is taught in law schools about contract drafting that any real life practice you can get is worth having. Unfortunately, in internships, you rarely get work beyond proof-reading of a contract. It doesn’t take much to realize that proofreading skills and contract drafting skills are poles apart. Even if you try to learn drafting and write imaginary clauses by yourself, who is there to approve them, give you feedback or answer your questions? In a law firm, the seniors and partners don’t have time to teach you and you have to figure out things yourself.

What is the downside of not learning and sharpening your contract drafting skills in law school?

If you don’t have contract drafting skills, it has a very visible impact on your career:

1. You don’t have an opportunity to distinguish yourself in interviews, which simply wipes off many jobs you could have secured.
2. When you start work, seniors don’t give you any concessions for not knowing contract drafting beforehand, despite knowing that you were not taught this in law school, and despite not having learnt this themselves in law school.   
3. You will end up taking too much time on drafting assignments, spending time on trivia and technical factors which do not impact the direction of the deal. Clients and seniors can get the experience that you are not focussing on their business and the deal, but are wasting time on technical aspects at their cost, and you’ll not know why. In fact, on one of his first assignments at Trilegal, Abhyuday, co-founder of iPleaders, had spent almost two hours listing the statutory provisions that the other side must comply with in one of the clauses to the contract, which was later replaced by my senior adding a simple ‘The client will comply with all statutory requirements’ by his seniors. He spent two hours on something that should have taken only 30 seconds to a minute. This was only one area of improvement, and there were countless others which he learnt over the year.

iPleaders is announcing a live 2-day workshop on Drafting Commercial Contracts to impart the next level of practical training, which will be led by Bhumesh Verma, Founder and Manager of Corp. Comm. Legal, who was earlier a partner at several big law firms in India.

There are only 20 seats, and you will get in-depth guidance and personalized feedback.

Imagine applying yourself to construct an entire contract from scratch. Imagine unlocking your mind to think freely of all the different permutations and combinations in which you can draft each clause. You will dive into the situation head on and get extensive practice and feedback.

What will your performance be like if you learn and practice drafting contracts clause by clause and learn from the expertise of a senior partner?

How much time, struggle and effort will you save in your career? What will that be worth? What kind of results will you create?   

Even if you have read a book or taken a course on contract drafting earlier, we suggest you participate and don’t miss out on the opportunity. At the end of the workshop, you will have a new level of freedom with drafting contracts.     

Dates and Timings

26th August (Saturday): 4 pm – 9 pm

27th August (Sunday): 11 am – 5 pm

Those who are interested can register here.

What will you learn in the workshop?  

When you first start working on drafting contracts, certain practical questions need to be answered:

• What your client expects and how to add maximum value to transactions?
• How can you ensure that every contract you create is your best contract?   
• Is your client’s interest being adequately expressed in words, timelines and money? How will you know if the contract adequately protects your client’s interest?
• How should you work with templates? How to decide what to add, edit or delete?
• How to foresee new kinds of risks that the parties didn’t contemplate and allocate responsibility for them?
• How to express your client’s intentions in language even if you haven’t drafted that kind of contract earlier contract?
• How to review contracts quickly and suggest changes that matter?
• What to look for in contracts will conducting M&A or banking & finance due diligence?

Key exercises and methodology of the workshop

You will learn 20 critical clauses (and more, if we have time) and perform very interesting exercises that simulate real life situations (such as finding a missing clause in a template, preparing a list for a client and drafting a real contract from scratch, without any precedent during the workshop.

In the process, you will get a real sense of what happens at each stage from the time when the client briefs you till the point you complete the work. You will also get the point behind each and every word in each clause you write and appreciate its relevance. It will literally get into your second nature. Your contracts will also be very sharp and precise.

It is very different from copying things from a template or reading in a book. The kind of energy you will discover will move you.  

• Draft contracts and clauses from scratch, and without any precedents and templates.  
• Get one-to-one feedback on your work.
• Participate in teams and groups to represent your interest.
• Identify gaps in clauses and suggest critical modifications.   
• Move beyond your fears and doubts and draft with ease.

Day-wise itinerary and syllabus

26th August (Saturday):  4 pm – 9 pm  

• What is the gap in how students & professionals learn drafting?
• What should be your primary focus while drafting an agreement?
• How to capture commercials from your client for drafting an agreement?
• How and when to use precedents / templates and when not to?
• Creation of an agreement clause-by-clause.
• Why and how you should balance a draft?
• How to remember all that you learn in the workshop for your life?

Exercises

1. Write, edit and critique clauses of a contract (this will be a group-level contract creation exercise. You will give up any fear of drafting a contract).  
2. Prepare a requisition list for capturing commercials for an agreement from your client.
3. Identify missing clauses in a template for an agreement.  

You will get a 30 minutes snack break (tea will be provided, for anything else, you will need to make your own arrangements. There are plenty of places nearby.)

27th August (Sunday) – 11 am – 5 pm

All day exercises and contract drafting session

1. You will be drafting two contracts and get live coaching as you draft it. You will first get an overview of what such a transaction does, the commercials of the deal and the interest of the client. However, we will not give you templates, the intention is to free you up completely to draft in any situation.  
2. Joint Venture Agreement
3. Lease Agreement
4. Identify missing clauses in a template

You will have an hour lunch break between 1 – 2 pm (You will need to make your own arrangements for lunch. There are plenty of places around to eat.)

Faculty

The session will be led by Bhumesh Verma, Founder & Managing Partner at Corp Comm. Legal at iPleaders New Delhi Office. He has been a partner at Khaitan & Co., Paras Kuhad & Associates and Link Legal India Law Service and has authored a very successful book on Drafting of Commercial Agreements.

Address

iPleaders Office (New Delhi),

33A, Mehrauli Badarpur Road,

Saidulajab, (Around 100m walk from Saket Metro Station (Saidulajab Exit) on the main road)

New Delhi – 110030.   

Landmarks: Next to Lingaya’s Building / Red Onion Restaurant on Mehrauli Badarpur Road

Cost

INR 4,500

Seats

20 only, selected on a first-come-first-serve basis (block your seat by registering here).

In case you have any questions, feel free to call us on 011-33138901 or write to [email protected].