Choosing the type of entity- unincorporated or incorporated entities

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October 4, 2021

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This article has been written by Richa Tejwani pursuing the Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho. This article has been edited by Aatima Bhatia (Associate, Lawsikho) and Dipshi Swara (Senior Associate, Lawsikho).

Table of Contents

Introduction

India is one of the largest emerging markets, hence many foreign companies want to start operating in India. A foreign national or an entity can invest and own a company in India by acquiring shares of the particular company, subject to India’s Foreign Direct Investment Policy. The Economic liberalisation of 1991 acted as a catalyst for the Foreign Direct Investment in India. In most of the sectors, FDI is under the automatic route, i.e., allowed without seeking regulatory approval prior to such investment. Thus, FDI in most sectors does not require prior approval from the government. Various foreign investors can invest in a majority of sectors of the Indian Economy through the automatic route.

After completion of the regulatory formalities with respect to foreign exchange, the investor must choose the type of entity-incorporated or unincorporated, to run its operations in India.

Unincorporated entities

A foreign entity planning to set up business in India as unincorporated entities can do so through the following:

Liaison office.
Branch office.
Project office.
Partnership.

Liaison office

Liaison Office acts as a mode of communication between the Principal place of business/Head Office and entities in India. However, it is restricted to undertake any commercial, trading or industrial activity, directly or indirectly, and is responsible to maintain itself out of inward remittances sent by the principal place of business (abroad) through normal banking channels.

Prior approval of the Authorised Dealer (AD) is mandatory for sectors that permit 100% FDI under automatic route and prior approval under other sectors is granted after consultation with the Ministry of Finance.

Only liaison activities can be undertaken by a Liaison Office. It can act as a mode of communication between Head Office/Principal place of business abroad and parties in India. It is prohibited from undertaking any business activity in India which generates any revenue. Office of the investor’s Head Office outside India is responsible for all expenses of a Liaison office in India. The Liaison Office, thus, is restricted to gathering market information about possible opportunities and creating awareness about the company and its products to prospective Indian customers. Initially, approval for such offices is granted for a period of 3 years and may be extended as and when required by an “AD Category I bank”.

Branch office

Just like the Liaison office, prior approval of the AD is mandatory for sectors that permit 100% FDI under automatic route and prior approval under other sectors is granted after consultation with the Ministry of Finance. A branch office acts as the representative of its foreign parent company. It performs similar business operations as the foreign parent company which include, providing consultancy services, promoting import-export, encouraging technical or financial collaboration between parent and branch offices, amongst others. A branch office, however, is prohibited from carrying out any manufacturing, retail or processing activities. All the expenses of the Branch office will be incurred using the funds received from abroad or the income generated by the branch.

Project office

A project office is solely set up for a project and hence is completely different in terms of establishment criteria and also operationally. A project office may be opened by a foreign company in India subject to the prerequisite of having secured from an Indian company, a contract to execute a project in India. A project office is permitted to operate a bank account in India. Surplus revenue from the project may be remitted to the foreign parent company . The project office is the preferred choice for companies looking to establish a business presence in India for a limited period of time, as per the duration of the contract which is the case in one-time turnkey or installation projects.

Partnership

A partnership does not give effect to a separate legal entity. The liability of the partners is unlimited which means that the personal assets of the partners may be clawed back to meet debt/tax obligations arising out of the partnership business. A partnership is a relationship created between two or more persons who agree to share the profits of a business carried on either by all of them, or any of them acting for all of them. The partnership firm is bound by the acts of any one or all partners. Partners may enter into an agreement to govern the profit/loss sharing percentage in absence of which all partners have to bear the losses equally. Prior approval of RBI is required for investment by foreign entities in Indian partnership firms.

Incorporated entities

A foreign company planning to set up business operations in India as unincorporated entities can do so through the following:

Limited liability partnership

LLP is a type of business entity that allows individual partners to benefit from the economies of scale by working together at the same time protecting them from the liabilities incurred as a result of wrong decisions or misconduct of other partners. Each partner’s liabilities are limited to the amount they put into the business. Limited liability means that in case of insolvency, the personal assets of partners cannot be sold to meet the debt obligations.

LLPs are governed by the Limited Liability Partnership Act, 2008. LLP has a legal existence separate from its partners.

Companies under the Companies Act

Companies are governed by Companies Act, 2013. Companies can be broadly classified into private and public companies.

Private Limited Company

A private limited company has the following features:

Members- it should have a minimum 2 and maximum of 200 members.
Limited liability- The liability of shareholders is restricted to the number of shares they hold in the company. This essentially means that the personal assets of the shareholders are safe.
Perpetual succession- The company never ceases to exist even in case of the death or insolvency of any of its members.
Articles of Association of a private limited company must prohibit any invitation to the public to subscribe to the securities of the company.
Paid-up capital- a minimum paid-up capital of Rs 1 lakh or such a higher amount which may be prescribed from time to time.
Directors- It should have a minimum of two directors.
Name- all private limited companies to add the word ‘pvt ltd’ after their name.

Public Limited Company

A public limited company has the following features:

Members- it should have a minimum of 7 members and don’t have a cap on the upper limit.
It gives access to more capital by raising money through the issuance of shares in public.
Limited liability- Just like private limited companies, the liability of shareholders is restricted to the number of shares they hold in the company.
Paid-up capital- a minimum paid-up capital of Rs 5 lakh or a higher amount which may be prescribed from time to time.
Directors- It should have a minimum of 3 directors and there is no restriction on the maximum number of directors.
Name- all public companies are required by law to add the word ‘limited’ after their name.

One of the two minimum directors of a private limited company should be a person who resides in India for 182 days or more in a year. For foreign entities that are new to the market, this can be a challenge for a number of reasons, considering they don’t have a reliable relationship in India to appoint as the resident director.

A local non-executive director service is a potential solution to this problem faced by new foreign entities. In order to resolve this shortcoming, an independent director may be placed on the board of the Indian subsidiary primarily to oversee the compliance aspect of the business.

Conclusion

A foreign company may choose the type of entity- unincorporated or incorporated based on the need and requirement that it aims to meet. The unincorporated entities do not require as many regulatory formalities as compared to the incorporated ones. The scope of unincorporated entities is restricted with respect to earning revenue and if the plan is to establish presence for a longer duration, incorporated entities may be more beneficial.

References

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Arrest of a woman in India : procedure, rights, and landmark cases

By

Diganth Raj Sehgal

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October 4, 2021

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This article is written by Rishika Rathore, from Jagran Lakecity University. It deals with the procedure of arresting an accused woman, and her rights after being arrested while highlighting the landmark cases.

Table of Contents

Introduction

We all must have heard the rule, “women cannot be arrested before sunrise and after sunset”. Notably, the abstract word here is “darkness”. Why should any accused woman be kept away from the darkness? The answer is to protect the “accused” woman from becoming a “victim”. Thus, even at the time of an arrest where the accused is a woman, her safety is a priority for the fair trial of the accused. To ensure that, amendments in Section 46 of the Criminal Procedure Code, 1973, were made (Section 6) in 2005 to make a very significant point regarding the safety of women. Moreover, the UN Women annual report 2011 has also provided certain incentives and constructive ideas to foster women’s empowerment and gender equality around the world. This article explores the procedure for arrest of women in India as well as her rights during that procedure while going through some landmark cases in which the rights of women, during the trial, have been violated.

The arrest of a person

The provisions for “arrest of persons” have been provided in Chapter V i.e. Section 46 to Section 60A, of the Criminal Procedure Code, 1973. The said chapter deals with the detailed process of fair arrest. As per the judgment of Madras High Court in the case of Roshan Beevi vs. Joint Secretary, Government of Tamil Nadu (1983), it was held that there cannot be a second opinion regarding the method and execution of arrest of a person intended to be arrested. It should be performed only in the manner prescribed in the statute and the other methods of performance are forbidden, otherwise, the whole purpose of Section 46 (CrPC) would be nugatory and functionless. Therefore, a fair arrest should be the ultimate motive of the police officers

Procedure for the arrest of a woman

One of the prime motives of the legislature is to safeguard the woman during her arrest. The basic procedure regarding the arrest of a woman has been laid down in Section 46 of the Criminal Procedure code 1973, and Section 46(4) (amended under Section 6) of the Code of Criminal Procedure (Amendment) Act, 2005. Section 46(4) says that out of the ordinary circumstances, no women shall be arrested after sunset and before sunrise, and when such exceptional circumstances exist, the woman police officer, by making a written report, should obtain the prior permission of a first-class Judicial Magistrate within whose local jurisdiction the offense is committed or the arrest is to be made. Moreover, as per National Human Rights Commission Guidelines, women police officers should be associated when a woman is being arrested.

Section 160(1) – As per the provision of Section 160(1), women should not be called to the police station or to any other place other than their place of residence for questioning. It also says that neither a male under age 15 nor any woman shall be required to attend any place other than the place where they reside. In the case of Sheela Barse vs. State of Maharashtra (1983), the Hon’ble Supreme Court held that it is the duty of police officers making arrests to ensure that arrested females are segregated from men and kept in female lock-up in the police station. In the absence of separate lock-ups, the women should be kept in a separate room.

Search procedures

The search of an arrested person within his/her place of residence is a significant part of the arrest procedure. Under Section 47 and Section 51, the process of executing the search has been provided along with separate provisions for women. The person, place, or both can be searched by authorities who are executing the arrest.

Section 46(1) – “In making an arrest the police officer or other person making the same shall actually touch or confine the body of the person to be arrested unless there be a submission to the custody by word or action”. Provided that when a woman is to be arrested, her submission to custody shall be taken on an oral intimation unless the circumstances indicate to the contrary and, unless the circumstances otherwise require, or unless the police officer is a female, the police officer shall not touch the accused woman for making her arrest.

Section 47 (2) – This Section holds that the police officer or any other person, whoever is executing the arrest warrant comes to know that the premises to be searched, is the original residence of women, who according to custom does not appear in public, then such police officer or person shall appoint a notice to that woman regarding her right to cancel the search, before initiating the search.

Section 51(2) – As per the provision of Section 51(2) of Code of Criminal Procedure, 1973, whenever it is necessary to search the women, it should be performed by another female with strict decency.

Medical examination of an arrested woman

According to Section 53(1) of CrPC, if there is a reasonable suspicion that the medical examination of an accused person would help in the procurement of evidence related to the offense committed, the registered medical practitioner can carry out such examination at the request of a police officer, not below the rank of sub-inspector, or any other person acting in good faith. However, if the accused person brought for medical examination is a female, the provision is slightly different.

Section 53(2) – As per this section, whenever a woman is being examined, the examination shall be made only by, or under the supervision of a female registered medical practitioner. The definition of registered medical practitioner has been clearly stated in clause (b) of Explanation to Section 53. It states that a medical practitioner is a “registered medical practitioner” if he or she possesses the necessary qualifications mentioned under Section 2(h) of the Indian Medical Council Act, 1956 and his/her name has been enrolled in a State Medical Register.

Other than these provisions, it is given that women should be guarded by female constables or police officers while being questioned or arrested. All necessary prenatal and postnatal care should be provided to females who are arrested. Restraints for pregnant women should be used as a last resort, keeping in mind that their safety and the safety of their foetuses should never be compromised or never be put at risk. A woman should never be restrained during labour.

Rights of an arrested woman

It is an important task to maintain the modesty of a woman, even if she is accused of an offense. Therefore, certain general rights have been provided to arrested women along with some specifically allotted rights.

Right to free legal aid

The right to free legal aid has been provided under Article 39A of the Constitution. This right accompanies those people who are incapable of bearing the expenses of civil or criminal proceedings. It shall be the responsibility of the State to provide that person with adequate legal assistance at State’s expenses for proper representation in the court of law. This tree-like provision extends its branches to all sections of society, including women.

According to Section 304 of CrPC, the State Legal Services Authorities shall bear the cost of legal proceedings including the cost of printing and translation, and fees of the appointed legal counsel. If a woman is accused of an offense, she is entitled to exercise the right of free legal aid and hence, ensure her proper representation in the Court. This right was considerably exercised in Hussainara Khatoon v. State of Bihar (1979), where the Apex Court held that if an accused is not able to afford legal services, then he has a right to free legal aid at the cost of the State.

Right to be informed regarding the grounds of arrest and bail

Under the provisions of Section 50(1) of CrPC, the arrested person is entitled to gather information regarding the grounds of his/her arrest, and the police officer or any other person executing the arrest shall communicate the same to him/her. As per the judgement in D.K. Basu vs. State of West Bengal (1986), this right is exercisable by accused men and women as well. Moreover, as per Section 50(2) of CrPC, a woman shall be informed of her right to be released on bail after the arrest of a woman without a warrant for an offense other than a non-bailable one, and after arranging sureties on her behalf.

Right against manhandling and handcuffing

The submission to custody on oral intimidation of arrest shall be presumed when executing the arrest of an accused woman, provided under Section 46(1) of CrPC. Moreover, if touching an accused woman is necessary to execute the process of her arrest, it should be performed only by a female police officer other than in situations of absolute necessity. In the case of Vibin P.V. vs. State of Kerala (2012), it was observed that it is the duty of the law to protect an individual from torture and abuse by the police and other law enforcing officers.

Right to inform relatives or friends

While arresting a woman or man, the police officer, performing the arrest, has the duty to immediately provide the information regarding such arrest and place where the arrested person is being held, to any of the relatives or friends of the arrested person, whosoever he or she nominates for disclosure of the information.

Rights during detention

A police officer is not authorized to detain an arrested person for more than 24 hours (which excludes time of travelling) in his custody, under normal circumstances. As mentioned earlier, in the case of an arrested woman, the arrangements of her custody should be made with strict decency. In keeping with moral norms, arrested men and women cannot be kept in the same lockup, concerning the modesty of a woman. In the case, Gandharba Rath vs. Aparti Samal (1959), Orissa High Court observed that Section 56 makes it compulsory for police officer to make the arrest in a written order while specifying the person to be arrested and the offence or other cause for which the arrest is to be made, especially in cases where a police officer has deputed a subordinate to arrest without warrant.

Landmark cases of women’s rights

Bharati S. Khandhar v. Maruti Govind Jadhav (2012)

In the landmark case of Bharati S. Khandhar vs. Maruti Govind Jadhav (2012), the petitioner was aware of the provision of Section 46(1) but was not unaware about the provision of Section 46(4) of the Code of Criminal Procedure, following which she was arrested after sunset and was mistreated by the police officers. The Hon’ble Bombay High Court directed the Mumbai Commissioner of Police to hold an inquiry against the concerned police officers for illegal detention and arrest of the petitioner from 5:30 pm which was after sunset. The Director-General of Police, State of Maharashtra, and the Commissioner of Police, Mumbai were directed to issue instructions within a period of two weeks to all the concerned officers to follow the mandate of sub-section (4) of Section 46 of the Code of Criminal Procedure, 1973, stating that arrest any woman accused of any offense should not be done after sunset and before sunrise.

Sheela Barse v. State of Maharashtra (1983)

In Sheela Barse vs. State of Maharashtra (1983), a journalist Sheela Barse wrote a letter complaining of custodial violence to women prisoners while confined in the police lock-ups in the city of Mumbai, which was later treated as a Writ Petition. Following this case, various directions were issued to the State of Maharashtra conferring protection to women prisoners in police lockups.

Conclusion

The constant debates and discussions about the rights of women, gave rise to various amendments in the Criminal Procedure Code 1973, regarding women’s rights during and after the process of arrest. For an accused, it is essential to know the proper procedure, guidelines, and rights while getting arrested. It becomes even more important if the accused is a woman as women are more vulnerable to social evils. To provide a safeguard to arrested women, the Criminal Procedure Code 1973 laid down and amended certain sections related to strict guidelines, procedures, and rights of an arrested woman. If these sections had not existed, many women would have become victims of social or physical harassment, abuses, exploitations, and many more afflictions. Every person has the right to live with dignity, no matter whether the person is an accused or a victim.

References

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Essentials of a pre-acquisition tax planning

By

Abanti Bose

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October 4, 2021

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This article is written by Baneet Kaur Kohli, pursuing Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho. The article has been edited by Zigishu Singh (Associate, LawSikho) and Dipshi Swara (Senior Associate, LawSikho).

Table of Contents

Introduction

The provisions pertaining to compromises, arrangements and amalgamation are contained in Section 230 to Section 240 of Chapter XV of the Companies Act, 2013. The lawmakers finally introduced the provisions with respect to cross border mergers (Indian company merging with a foreign entity). The enabling provision in this regard is a significant step taken by the Government, helping companies having a global presence to restructure their operations. At the same time, the Reserve Bank of India (RBI) also issued draft regulations pertaining to cross border mergers, requiring a prior ‘deemed’ approval from RBI. Hence, allowing companies in India to merge with foreign companies in specified jurisdictions. However, certain tax provisions on mergers with foreign companies (which is taxable) need more clarity.

Following are some of the analysis on cross border mergers from point of view of the Companies Act, 2013 and Rules thereunder, FEMA / RBI regulations and Income-tax Act 1961.

Companies Act, 2013

Section 234 of Companies Act, 2013 was brought into force with effect from 13th April, 2017. MCA also notified Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2017 (“Rules 2017’) by inserting Rule 25A enabling Merger or Amalgamation of an Indian company with a foreign company and vice versa. In light of the above-mentioned amendments, the 2013 Act currently allows both inbound and outbound cross border mergers.

However, such cross border mergers would entail two primary conditions:

‘Deemed’ Prior approval of Reserve Bank of India (RBI),
Specified overseas jurisdictions where such cross border mergers and amalgamations of Indian Companies are permitted.

Sub-rule (2) of Rule 25A of Rules 2017 enables merger of an Indian company into the foreign company incorporated in ‘specified jurisdiction’ as mentioned below:

(a) Jurisdiction whose securities market regulator is a signatory with SEBI’s International Organisation of Securities Commission’s (IOSCO) Multilateral Memorandum of Understanding or Bilateral Memorandum of Understanding.

(b) Jurisdiction which is unidentified in the public statement of Financial Action Task Force (FATF) as:

Jurisdiction comprising of strategic AntiMoney Laundering,
Jurisdiction opposing financing of terrorism to which counter measures apply,
Jurisdiction incapable to address the deficiencies, or
Jurisdiction which is not working with FATF to list the deficiencies.

(c) Jurisdiction whose Central Bank is a member of Bank of International Settlements (BIS)

FEMA and RBI preview on cross border merger

In order to facilitate approval for cross border mergers, RBI has proposed Foreign Exchange Management (Cross Border Merger) Regulations, 2017 (‘Draft RBI Regulation, 2017’), which states these conditions need to be complied with, in order to obtain its approval.

RBI proposed these draft RBI Regulations 2017 to address any concerns that may arise when a foreign company and an Indian company enter into a scheme of merger, demerger, amalgamation, or rearrangement. The companies involved in the scheme are required to act in accordance with the conditions laid down in these regulations.

RBI has provided certain definitions which inter alia include cross border mergers, foreign company and the resultant company. As per RBI Regulations 2017, Cross border merger means any merger, demerger, amalgamation or arrangement between Indian companies and foreign companies in accordance with the Co. Rules. However, Section 234 of the 2013 Act permits outbound mergers with India. However, it talks about mergers but does not include the terms “compromise/arrangement” leading to an element of the argument that whether outbound demergers will be permitted under the provisions of Section 234 of the Act, 2013 or not.

At the outset, the definition of “foreign company” under Draft RBI regulations 2017 and under the 2013 Act means any company or body corporate incorporated outside India regardless of whether it has a place of business in India.

The Draft RBI Regulation 2017 was drafted to regulate and monitor mergers, demergers, amalgamation and arrangements between Indian companies and foreign companies.

Key highlights of the RBI draft regulations governing cross border mergers for its deemed approval

For inbound mergers

The following applies to cross border mergers where the resultant company is an Indian company:

Issue or transfer of security to a non-resident by an Indian company shall be compliant with FEMA (Transfer or issue of security by a person resident outside India) Regulation, 2000 (i.e., FEMA 20).
Existing overseas debt of the foreign company that becomes the debt of Indian company should confirm to Foreign borrowing norms or Foreign Exchange Management (Guarantee) Regulations 2000 as applicable.
Pursuant to the merger, Indian companies may acquire/hold/transfer any assets outside India. In such a scenario the Indian company would abide by the Foreign Exchange Management Act, 1999 or Rules or Regulations framed thereunder (FEMA).

For outbound mergers

The following applies to cross border mergers where the resulting company is a foreign company:

Securities of the resultant foreign company may be acquired or held by a resident of India, as per the applicable Indian Foreign exchange regulations.
The resultant foreign company will be liable towards any outstanding borrowings of the Indian company as per the Scheme sanctioned by National Company Law Tribunal.
Any asset or security in India that may be acquired, held and transferred by the resultant foreign company is permitted as per the provisions of relevant Indian Foreign Exchange Regulations.

In case of contravention of FEMA provisions

Under both the inbound and outbound merger, if assets or securities held by resultant companies are violating the provisions of FEMA. The said assets/securities would be required to sell by the resultant company within 180 days from the sanction of the scheme of merger or sell proceeds to be repatriated to India or outside India as the case may be. This may attract huge tax and stamp duty implications and also involve penalties on account of violation of FEMA regulations.

Valuation

Under Draft RBI Regulation 2017: For the purpose of cross border merger as per Draft RBI Regulation 2017, the valuation of Indian company and foreign company should be in accordance with internationally accepted pricing methodology for valuation of shares on arms’ length basis which is duly certified by a chartered accountant/public accountant/merchant banker authorised to do in either jurisdiction.
Under Rules 2017: As per Sub-rule (2) of Rule 25A of Rules 2017 requires the Transferee company to verify that valuation is run by the valuers who are members of a recognised professional body in the jurisdiction of Transferee Company. Valuation should be in accordance with internationally accepted principles on accounting and valuation. Declaration to this effect shall be enclosed with the application made to RBI for obtaining its approval. Sub Rule (1) of rule 25A of Rules 2017 apply only in the case of outbound merger i.e., when an Indian company merges into a foreign company.

All cross border merger transactions undertaken in accordance with the above regulations would not be required to file an application to seek prior approval from RBI and shall be considered as deemed approval of RBI.

Income Tax Act, 1961

The Income Tax Act, 1961 (ITA), at present, contains exemption in case of tax neutral mergers subject to compliance with certain conditions which are as under:

All assets and liabilities of the transferor entity become the assets and liabilities of the transferee company, and
At least 75% in value of the shareholders of the transferor entity (other than shares already held by the transferee entity) become shareholders of the transferee company by way of amalgamation.

Previously, consideration for inbound mergers was in the form of shares. However, 2013 Act provisions also allow consideration in the form of depository receipts and cash. In such cases, mergers may not remain income-tax neutral. In the absence of specific tax provisions, the taxability arising on the merging company and shareholders is open to interpretation.

As for foreign companies merging into Indian companies, tax implications will not arise, in case it does not have any assets situated in India. Similarly, in the hands of shareholders, there would be no capital gains implications on the transfer of shares of the merger of Foreign company in India unless the shareholders are Indian tax residents or such shares derive their value substantially from assets in India (resulting in the trigger of indirect transfer provisions under the Indian tax laws). In case such a transaction may be taxable in the hands of shareholders, the capital gains would logically be computed based on the fair value of the shares of the merged company received as consideration.

Conclusion

The added provisions are a significant step taken by the Government, helping companies having a global presence to restructure their operations. The Reserve Bank of India’s (RBI) draft has allowed companies in India to merge with foreign companies in specified jurisdictions. However certain tax provisions on mergers with foreign companies (which is taxable) need more clarity.

References

MCA Notification No. GST 368 (E) dated 13th April, 2017
https://www.iosco.org/about/?subSection=mmou&subSection1=signatories
https://www.sebi.gov.in/sebi_data/internationalAffr/IA_BilMoU.html
RBI draft rules vide Notification No. FEMA. _____ /2017-RB read with press release dated April 26, 2017 (2016- 2017/2909)

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An overview of the adoption laws in Russia

By

Diganth Raj Sehgal

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October 4, 2021

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This article is written by Udita Prakash, a student at UPES, Dehradun pursuing BBA LLB(Hons.). This article deals with the adoption laws in Russia.

Table of Contents

Introduction

Adoption is when an adult legally assumes the role of determining a young child. Adoptions arise for many reasons, including when the young child’s biological mother and father are unable or unwilling to care for their child, when the biological mother and father have passed away, or when one of the biological parents is re-established by marrying another partner wanting to anticipate parental authority. Adoption can take over the area through numerous methods, starting from adoption through an organization that places children with adoptive mother and father, impartial adoption through an agreement between the adoptive and biological mother and father, or the adoption of a small child from some other country.

History of adoption in Russia

American people adopting in Russia began to take place in the early 1990s. Over the years, the adoption process in Russia has undergone many changes, but that didn’t stop it from quickly becoming an adoption destination for countless adoptive families. Towards the turn of the century, a significant part of international adoptions took place in Russia.

1999-2011

Entering the 21st century, Russia was consistently one of the most popular countries for American families to choose for adoption. Starting in 2008, a combination of factors, including new regulations, caused adoption in Russia to begin to decline. However, until 2011, US citizens adopted up to 1,000 or more Russian children every year.

2011-2013

Beginning in 2011, accounts of unfavorable adoption situations began to emerge, some of which involved adopted Russian children. Many Russian adoptees had particular needs, but due to the lack of medical information, the adoptive parents were unprepared for them. This resulted in a variety of problems that led to more limitations on adoption and an emphasis on domestic adoptions. In late 2012, families reported significant delays and difficulties in completing their adoptions.

2013-Present

In early 2013, Russia issued Federal Law No. 272-FZ, which prohibited the US citizens from adopting Russian children. In their explanation, they cited concerns for the welfare of the adopted children. After the ban, many adoptions that were in progress were never completed.

Adoption laws in Russia

According to the Russian Adoption Regulations, the courtroom judges within the area where the children were approved adoptions. The judge’s selection is based primarily on an overview of the numerous files within the case and a closed listening that generally lasts about an hour. The adoptive mother and father are required by regulation to await listening. Sometimes, the judges are content to renounce the presence of a certain person while there are compelling clinical or private reasons for the request. In some regions, a worker from the commercial adoption company may also serve as the mother and father in listening.

According to many parents, the court hearing was thorough, professional, and friendly. Many describe it as one of the most moving and memorable elements of their adoption experience. Although the judge issues a decision on the day of the hearing, the sentence takes another ten days to go into effect. Appeals are possible during this time. In fact, many judges waive the 10 days waiting period. However, this is entirely up to the judge and depends to some extent on the region.

Procedure of adoption

To start the adoption process, parents request the Ministry of Education of the Russian Federation about the children available for adoption. They can make specific requests for the type of child they want to adopt (eg., age, gender, disabilities, sibling groups). Parents can also receive information about children from the Central Data Bank of the Federal Ministry of Education. When parents identify an orphan they want to adopt, they submit a formal adoption request to the court where the child lives. The following documents must accompany the application:

the couple’s marriage license. If they are not married, the adoptive father presents his birth certificate;
recent medical reports on the health of the future parents;
a certificate from their employer(s), verifying their job title;
a statement of income;
evidence that the future parents have permanent housing;
the results of a housing study carried out by state authorities.

Local child welfare representatives present the following:

the child’s birth certificate;
a medical report;
documents confirming that the child is in the Central Bank of Orphan Data and that no Russian citizen applied to adopt the child;
a statement from the local authorities that adoption is in the best interest of the child;
if the child is over 10 years old, a declaration of his/her consent to the adoption;
if the child is under 10 years of age, a statement from his/her biological parents agreeing to the adoption, or documents explaining why parental consent is necessary;
consent of the director of the institution where the child lives.

Once the judge’s decision takes effect, the new parents receive parental authority. A copy of the court decree must be sent within three days to the local civil registry office. When the adoption is registered, the new parents can request the adoption certificate, a new birth certificate (with the child’s new name and showing them as the child’s parents), and a passport.

Adoption in Russia is related to the USA

American residents can no longer receive children from Russia due to the fact that in 2013, while a ban instituted by Moscow ended a 22-year-old energetic software that tracked down more than 60,000 Russian-born children with foster parents inside Inactive software is getting a renewed hobby and scrutiny conducted roughly at Donald Trump, Jr.’s meeting with a Russian legal professional sometime in the 2016 presidential marketing campaign season. Trump Jr. said, to begin with, it revolved around US-Russian adoption software. But a New York Times headline from July 10, 2017: “When the Kremlin Says ‘Adoptions,’ it means ‘Sanctions,’ and we have come to realize the fact that we discovered that the assembly actually addressed issues beyond adoption. Is Russia’s international adoption software records with the US and why is it such a crucial hub in Washington-Moscow relations?

Adoption by numbers

Russia formalized its international adoption program in mid-1991. That year, 12 children were adopted by American families. That number grew rapidly, surpassing 1,000 children in 1994, reaching 4,292 in 2001 and reaching a peak of 5,862 adoptions in 2004. (International adoption reached an all-time high that year, with a total of 22,884 foreign-born children adopted by American families). Soon after, however, the number of Russian-born children adopted by American families began to decline dramatically from year to year. Only 748 of those adoptions were completed in 2012. The following year, Vladimir Putin signed a law prohibiting American families from adopting children born in Russia. The US Department of State (DOS) recorded 250 completed adoptions in 2013 and two in 2014, all of which were in process before the ban, and zero thereafter.

Negative perceptions of international adoption in Russia

As US citizens continued to adopt thousands of Russian-born children, many of whom had special medical and behavioral needs, the Russian public and legislators became increasingly uncomfortable with the number of “orphans” they encountered at home from abroad. The Russian government began tightening restrictions on adoption agencies, adoptive parents, and children eligible for adoption; it also began to promote national adoption. Overall, these efforts were successful and, in 2008, Russian citizens adopted more children than families from other countries.

Most Russian adoptees found safe and loving homes with families in the US for the duration of the country’s international adoption program. However, 19 children tragically died in the care of their adoptive families in the United States. Each case was widely publicized in Russia and several prompted talks about moratoriums. Two of the most publicized cases of heartbreaking deaths or mistreatment of Russian adoptees were those of Chase Harrison and Artyom Savliev. In 2008, months after Chase was adopted from Russia, the boy died of heatstroke while left alone in a car for nine hours. His adoptive father, Miles Harrison, was acquitted in the case. As Judy Stigger, LCSW, adoption therapist and clinical director of Adoption Learning Partners at The Cradle in Evanston, Illinois (at the time, Stigger was the agency’s director of international adoption) explained, outrage in Russia over the death of this little boy was compounded by cultural differences; the not guilty verdict was confusing for the Russians because their legal system “does not allow acquittal when something clearly went wrong.”

Ban on Russian adoptions

On December 28, 2012, Russian President Vladimir Putin signed the Dima Yakovlev Law (Russian Federal Law No. 272-FZ), which prohibited US residents from adopting Russian youth. The ban went into effect on January 1, 2013. At that time, hundreds of households had been within Russia’s adoptive form, including at least two hundred who had already been followed or had met the young people they were expecting adoption. While the regulation officially became the name of Dima (or Dmitry) Yakovlev, the initial call of the young Chase Harrison, it is very common for the regulation to become a direct retaliation for the Magnitsky Act exceeded by the US, Signed through President Barack Obama in February.

On February 14, 2012, he froze the property of Russians implicated in human rights abuses and denied them their visas to enter the United States. It is named for a Russian lawyer, Sergei Magnitsky, who exposed a tax fraud scheme regarding the overqualification of Russian officials. Magnitsky died in Moscow in 2009, after being in jail without trial for almost a year. Legislation consisting of the ban on Russian adoption is generally called the “Anti-Magnitsky” regulation. When it was first recognized roughly within the June 9, 2016 assembly between a Russian lawyer and Donald Trump, Jared Kushner, Paul Manafort, Russian-American lobbyist Rinat Akhmetshin, and probably others, Trump said in a quick statement that the assembly became roughly adoption: “We mainly mentioned a request in the adoption of young Russians that became energetic and famous among American households years ago and was canceled through the Russian government, but now it is no longer a campaign difficulty marketing in that second and there has been no superior follow-up. ” Less than 24 hours later, Trump revised this claim, noting that the meeting with Natalia Veselnitskaya, a lawyer with Kremlin connections, turned into a facility with the promise of receiving destructive statistics about candidate Hillary Clinton.

However, based primarily on her account, “it quickly became clear that she had no meaningful statistics. He then modified the difficulty and began to discuss the adoption of young Russians and adopted the Magnitsky Law. “This observation seems to underscore this direct hyperlink between Russia’s adoption request and sanctions imposed through the US, as mentioned in the New York Times on July 10 on Russia’s use of international adoption as a lever to inspire the US to raise sanctions against Russia Thus, the adoption and welfare of hundreds of young people had been used again as a pretext and method to attempt political revenge.

Conclusion

Adoption is a beautiful thing to do, as the children who don’t know the love and affection of the parents come to know that and the parents who can’t have children because of various reasons get them. Though it is not an easy task to have a child and be a parent, for becoming a parent one has to take all the responsibilities of the child until they turn to do their work on their own. A parent’s job is never complete thus, they should always be there with the child.

In Russia the adoption process was good and children were getting home and parents but, because of some mischief by other parents all the adoptees suffered. Some just took the mere advantages of the child and used them to have their work done, or some just lost affection and love from that child and no longer wanted them, some just planned to have their own child, etc. All these caused many problems and thus from the year 2012, no more adoption was continued between Russia and US citizens. This was a good step initiated by the Russian government to protect the children of their motherland and to protect them.

References

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Impact of cultural differences on cross-border M&A deals

By

Abanti Bose

-

October 4, 2021

0

img_93391_merger — Image Source: https://bit.ly/3fMeQ92

This article is written by Saumya Dwivedi, pursuing Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho. The article has been edited by Zigishu Singh (Associate, LawSikho) and Dipshi Swara (Senior Associate, LawSikho).

Table of Contents

Introduction

Cross border M&A are the mergers and acquisitions which happen between two companies from different nations. Cross border M&A involves when one company acquired the other company and merges into a third entity. When the two companies come together to form an alliance, there are several factors that affect the cross-border M&A and one of them is the cultural difference.

Cultural differences have a huge role in impacting cross-border M&A. The lack of compatibility between two cultures can lead to unsuccessful integration of mergers and acquisitions. Cultural differences can be dealt with by effective planning and strategy.

This article will throw light on the role of culture in mergers and acquisitions and measures to take in order to ensure that cultural differences do not become a hindrance to successful integration.

Role of culture in M&A

Culture is an essential part of cross border M&A. The compatibility and tuning between both companies can lead to successful integration. Every country has different work ethics and local policies. If one company is okay in removing people at an instant, one may have stringent policies for protecting the rights of a worker. It’s important to look upon the factors and concerns which are beneficial for both.

There are many tangible benefits of mergers and acquisitions for the newly incorporated company. Yet, cross border M&A can also be challenging and time taking. The most challenging part of a cross border M&A is different cultures- both corporate and national.

One of the major reasons behind the failure of cross border M&As are the cultural differences that have failed to be addressed by the two international organisations.

Understanding cultural differences

An interesting article in The Wall Street Journal has discussed how cultural differences can be costly. It identifies the inability of senior executives to bridge the cultural difference of two companies and how it badly affects mergers and acquisitions. Studies show that cultural issues are the contributing factors for 30% of failed M&As. The impact of cultural differences can be minimised at the beginning by taking some precautionary measures.

One of the biggest M&A deals which happened between the US Food Chain ‘Burger King’ and Canadian iconic Coffee Chain ‘Tim Hortons’ are examples of successful cross border M&A.

Tim Hortons culture was different from Burger King in several ways but constant negotiations and changing of plans led to this successful merger. They had included many risks and mitigated this with strategic planning. When two companies decide to come together and form a new entity, it is important to create a strategy to have a successful cultural M&A. It is essential to identify the potential risk involved in corporate culture and how to integrate both corporate cultures. The company has to look out for measurable objectives to form a cultural integration for successful M&A.

Measures to take before entering into a cross border M&A

There are various measures to take before entering into a cross border M&A. The companies should not overlook cultural differences or consider it as a light area. If the cultural measures have been incorporated before, this will help it to make a successful integration.

Identify corporate culture ‘owners’

Choose owners who have experience of corporate culture and can bring the changes according to the new culture. Assigning the responsibilities to the right candidate who can form a new set of structures. It will help to mitigate the risk of differences between the two cultures.

Make culture tangible and measurable

The goals must be defined, specific and supported which will be addressed by the culture owners. The culture owners need to bring the two cultures on the same page. It must be governed by the main objective that is the success of their newly formed corporation. The culture owners should strategise and work for the benefit of the company.

Consider cultural compatibility

Sometimes the cultural difference between the two companies is huge. The M&A should give them time to adapt to the corporate culture of the other. It takes time to get used to the cultural aspects of one company.

Understand the decision-making process

Post M&A can have a problem relating to making clear and long-lasting decisions. The new entity goal should be to stay on track for the benefit of its company. Sometimes the inability to take clear action results in the loss of a new organisation.

Organisations can improve their chances of a successful M&A by:

a) Identifying the decision-makers responsible for specific integration results

b) Understanding both structure and style each organisation has brought to the M&A

c) Communicating how decisions are defined and made in a new organisation.

Remember the employees

The major part of M&A might not give importance to retaining employees and it can be seen as collateral damage. The post M&A is not an easy time for employees especially to work in a whole different environment. This is why it’s important for the new entity to make a healthy environment for its people so that they can earn the loyalty of its former employees. The company objective is to bring trust and respect to make it a successful venture.

Consider the strengths of both existing cultures, not just the weaknesses

Often, mature companies acquire start-ups as a means of adding products to their portfolios.

What they often find is that the structural controls and well-defined processes that are a hallmark of predictable performance for the acquirer may be impossible to mix with the less structured ways of the start-up. A more varied integration than a simple addition of desired qualities is required.

Implement a decision-making process that is not hampered by cultural differences

Customer and employee loyalty is good for the company but if the company is not able to reach decisions, then it can result in a huge loss for the organisation. The ability to make effective and speedy decisions is good for the company.

The need to address this issue is vital for the success of an organisation. It can be addressed by the leader of the integration team with the support of the culture team:

Using culture to promote business

Culture influences the way we perceive our surroundings and the way we connect.

Burger king mergers with Tim Horton is an example of using culture to promote its business. Tim Horton has a great value in Canada. The decision of Burger King to make its headquarters in Canada works in favour of both. People connect emotionally with Tim Horton and now burger king- part of Tim Horton creates a vision, to make Tim Horton, a global brand.

The corporate owners must look for the culture to benefit their organisation. They can assign people who can bring good results and help them to achieve their goals.

People connect with the authenticity of a company. If a culture owner can bring them together and connect emotionally then it works as an added advantage for the company.

One of the examples is of international chains in India like Dominoes, KFC, Burger King and many more- they connect with their customer base by adapting Indian Culture, innovating new Indian flavours or adding the spices which people love.

The motto behind the international companies is to connect with their customer base and to earn their loyalty. This is where culture plays a major role. It helps the company to build trust between the customers and the organisation.

Conclusion

In the end, it is necessary for an international organisation to have a team that specialises in this area. The cultural difference must be bridged by the corporate owners and should not become the reason for a failure of M&A. culture can be used appropriately to build healthy relationships which will make a success for the newly incorporated corporation. Culture must be a focus for cross border M&A because it’s powerful and implicit. The employees generally do not want to change their cultural beliefs according to new ones and that can affect the business value. Culture can become an effective tool if used properly, trying to incorporate culture can bring forth the result and generate business value. It can help post-merger integration and make it a successful venture.

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

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

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Blog competition winner announcement (Week 1st August 2021)

By

Rachit Garg

-

October 3, 2021

0

So today is the day! We are finally announcing the winners of our Blog Writing Competition for 1st week of August 2021 (From 2nd August 2021 to 8th August 2021).

We’d like to say a big thanks to everyone for participating! It has been a great pleasure receiving your articles on a different legal topic, they were all amazing!

And now we’d like to congratulate our top 5 contestants, who become the undoubted winners. They will receive Prize money of Rs 2000, LawSikho store credits worth Rs. 1000 and a Certificate of Merit from team LawSikho.

They will also get an opportunity to intern at iPleaders under the mentorship of Ramanuj Mukherjee, Abhyuday Agarwal, Harsh Jain, and Komal Shah. Their articles will get published on iPleaders Blog (India’s largest legal blog). Click here to see other perks available to them.

Their entries (see below) received maximum marks based on the average marks given by the panel of editors, and have been crowned the winners!

S.no	Name	About Author	Article
1	Smaranika Sen	Intern	The concept of mahr under Muslim Law
2	Kishita Gupta	Intern	Residual doubt theory for capital punishment in India
3	Shreya Roushan	Student pursuing Certificate Course in Introduction to Legal Drafting: Contracts, Petitions, Opinions & Articles from LawSikho	Handbook on marriage and divorce under Muslim Law
4	Amritambu Satyarthi	Student pursuing Certificate Course in Advanced Civil Litigation: Practice, Procedure and Drafting from Lawsikho.com	All you need to know about consumer financial services litigation
5	Sharad Yadav	Intern	Recent developments in live-in relationships

Meet our next 5 contestants who made it to top 10 here. They will receive a Certificate of Excellence from team LawSikho.

They will also get an opportunity to intern at iPleaders under the mentorship of Ramanuj Mukherjee, Abhyuday Agarwal, Harsh Jain, and Komal Shah. Their articles got published on iPleaders blog (India’s largest legal blog). Click here to see other perks available to them.

S.no	Name	About Author	Article
6	Rajeshwari M V	Student pursuing Certificate Course in Introduction to Legal Drafting: Contracts, Petitions, Opinions & Articles from LawSikho	How is RTI rejected under Section 11 due to third party information
7	Shikha Pokhriyal	Intern	An analysis of the European Union data protection law system
8	Anurag Singh	Intern	An analysis of anti-monopoly laws
9	Akshita Rohatgi	Intern	UN’s Human Rights bodies and the Palestine crisis
10	Aarushi Pandey	Student pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho	Major ship repair contract : essential clauses to include in a ship repair contract

Click here to see all of the contest entries. Click here to see our previous week’s winners.

Our panel of judges, which included editors of iPleaders blog and LawSikho team, chose the winning entry based on how well it exemplified the entry requirements.

Certificates will be sent on the email address given by the contestant while submitting the article. The contestants have to claim their prize money by sending their account details as a reply to the mail in which they received their certificate within 1 month (30 days) of the date of declaration of results and not afterwards.

For any other queries feel free to contact Vanshika (Senior Managing Editor, iPleaders) at [email protected].

LawSikho credits can be claimed within twelve months from the date of declaration of the results (after which, credits will expire).

Congratulations to all the participants!

Regards,

Team LawSikho

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

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

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

Blog competition winner announcement (Week 5th July 2021)

By

Rachit Garg

-

October 3, 2021

0

So today is the day! We are finally announcing the winners of our Blog Writing Competition for 5th week of July 2021 (From 26th July 2021 to 1st August 2021).

We’d like to say a big thanks to everyone for participating! It has been a great pleasure receiving your articles on a different legal topic, they were all amazing!

And now we’d like to congratulate our top 5 contestants, who become the undoubted winners. They will receive Prize money of Rs 2000, LawSikho store credits worth Rs. 1000 and a Certificate of Merit from team LawSikho.

They will also get an opportunity to intern at iPleaders under the mentorship of Ramanuj Mukherjee, Abhyuday Agarwal, Harsh Jain, and Komal Shah. Their articles will get published on iPleaders blog (India’s largest legal blog). Click here to see other perks available to them.

Their entries (see below) received maximum marks based on the average marks given by the panel of editors, and have been crowned the winners!

S.no	Name	About Author	Article
1	Ishani Khanna	Guest Post	Concept of possession and ownership
2	Varchaswa Dubey	Intern	Uniform Civil Code : problems and prospects
3	Shikha Pokhriyal	Intern	International commercial arbitration system : a critical analysis
4	Arushi Agarwal	Student pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho	Drafting the key clauses of Sula Vineyard’s web development agreement
5	Komal Saloni and Millia Dasgupta	Intern	Role of bureaucracy in policy formulation and policy implementation in developing countries

Meet our next 5 contestants who made it to top 10 here. They will receive a Certificate of Excellence from team LawSikho.

They will also get an opportunity to intern at iPleaders under the mentorship of Ramanuj Mukherjee, Abhyuday Agarwal, Harsh Jain, and Komal Shah. Their articles got published on iPleaders blog (India’s largest legal blog). Click here to see other perks available to them.

S.no	Name	About Author	Article
6	J Jerusha Melanie	Guest Post	Right to liquor: is consumption and trade of liquor a fundamental right
7	Swetalika Das	Intern	Unemployment compensation in South Carolina : an insight
8	Aparna Jayakumar	Intern	Concept of consent under Indian rape laws
9	Prashant Samantrai	Student pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.com	Secondment : an understanding
10	Vineeta Narayan	Guest Post	Zero F.I.R in India

Click here to see all of the contest entries. Click here to see our previous week’s winners.

Our panel of judges, which included editors of iPleaders blog and LawSikho team, chose the winning entry based on how well it exemplified the entry requirements.

Certificates will be sent on the email address given by the contestant while submitting the article. The contestants have to claim their prize money by sending their account details as a reply to the mail in which they received their certificate within 1 month (30 days) of the date of declaration of results and not afterwards.

For any other queries feel free to contact Vanshika (Senior Managing Editor, iPleaders) at [email protected].

LawSikho credits can be claimed within twelve months from the date of declaration of the results (after which, credits will expire).

Congratulations to all the participants!

Regards,

Team LawSikho.

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

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

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

Entry routes for foreign investment in India

By

Rachit Garg

-

October 3, 2021

0

This article has been written by Rahel Roy, pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho. The article has been edited by Ruchika Mohapatra (Associate, LawSikho) and Dipshi Swara (Senior Associate, LawSikho).

Table of Contents

Introduction

India has become one of the most favoured destinations of foreign investors in recent years. Numerous factors are involved in the increased foreign investment such as: an abundant supply of labour, business-friendly policies, rising number of the educated middle class, etc. India attracted a total of $72.12 billion in Foreign Direct Investment (hereinafter, FDI ) from April, 2020- January, 2021.

When foreign investors are looking to invest in India, they need to be aware of the compliance needs which are related to the sectors in which the foreign investor is looking to invest in. The need for approval from authorities for FDI varies from one sector to the other. For example, FDI in the automobile sector does not need any prior approval from the government authorities while such approval is needed for the retail food products businesses. It is important for the foreign investors and legal professionals equally to understand the different entry routes in India for investment by a non-resident.

What is the entry route?

Entry routes refer to the different approval requirements which foreign investors need to fulfil before investing in India. There are two routes through which a non-resident can invest in India – automatic route and approval route. When a non-resident investor invests through the automatic route they do not have to take any prior approval from the government, whereas, through the government route, prior approval of the government is necessary to be obtained before investing in India.

The automatic route

Below are the sectors which can enter through automatic route-

SECTOR	FDI PERMITTED	CONDITIONS
Agricultural and Animal Husbandry Industry	100%	Non-scheduled air carriage services Helicopter Services/Seaplane Services requiring DGCA approval
E-commerce	100%	100 % FDI applicable only on the marketplace model of e-commerce. Marketplace based model means providing an electronic platform for the sellers and buyers to interact.100 % FDI not applicable for inventory based models of e-commerce. Inventory based model signifies a business model where the e-commerce goods are stored by the e-commerce entity and sold by them directly to the customers.
Cash & Carry Wholesale business	100%
Duty-Free Shops	100%	Duty-Free shops would be referred to as the shops which are established in the FDI in duty-free shops will be subject to the Customs Act, 1962. The Duty-Free shop will not be permitted to operate a retail business in any domestic tariff area of the country
Textiles & Garments	100%
Single Brand Product Retail Trading	100%	The product should be under the umbrella of a single brand products should be sold in the other countries under the same brand.
Thermal Power	100 %
Petroleum Refining	49 %
Broadcasting	100%	This may include-TeleportsDTHCable Networks (Multi-System Operators (MSOs) operating at the National or State or District level and undertaking upgradation of networks towards digitalization and addressability); Mobile TV; Headend-in-the Sky Broadcasting Service(HITS)Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs).

Through the Automatic Route, though the investors do not have to take prior approval of the government authorities or RBI , they have to abide by the sectoral regulations.

Government route

There are a few sectors in which foreign investment cannot take place without the prior approval of the government authorities. According to the consolidated FDI policy, approval for FDI will be required when:

An Indian company is being incorporated with investments from non residents and is not owned by an Indian entity.
An Indian company is being incorporated with investments from non residents and such company is not controlled by a resident of India.
A company which is currently owned or controlled by a resident is being transferred to a non – resident by transfer of shares or fresh issue of shares to a non-resident entity pursuant to a scheme of merger, amalgamation , acquisition, etc.
A company, trust and partnership firm established outside India and owned and controlled by non-resident Indians will be eligible for investment under Schedule IV of the Foreign Exchange Management ( Non-debt Instruments) Rules, 2019 and such instruments will also be deemed to be at par with domestic investments.

The sectors which need the approval of the government are –

SECTOR	FDI PERMITTED	CONDITIONS
Broadcasting Content Services	49%	Applicable to FM Radio and subject to conditions specified by the Ministry of Information and Broadcasting.
Digital Media	26%	Applicable to streaming of news and current affairs through Digital Media.
Food Products Retail Trading	100 %	The food products should be made or produced in India.
Print Media (Publication/ printing of scientific and technical magazines/specialty journals/ periodicals and facsimile edition of foreign newspapers)	100 %	Subject to guidelines issued by the Ministry of Information and Broadcasting.
Print Media (Publishing of newspaper, periodicals and Indian editions of foreign magazines dealing with news and current affairs)	26%	FDI is subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4.12.2008.

Steps involved in government route

Steps involved in taking approval of the government to enter through the government route will be as follows-

The applicant should submit the proposal for foreign investment to the Department of Promotion of Industries and Internal Trade.
After the application has been received by the Department of Promotion of Industries and Internal Trade (DPIIT) , it will identify the concerned administrative ministry/ department and transfer the application to the concerned administrative ministry/ department within 2 days.
When the proposal is received it should be circulated by DPIIT to the Reserve Bank of India for review of the compliance to the Foreign Exchange Management Act. In sectors which require security clearance for foreign investments , the proposal needs to be sent to the Ministry of Home Affairs .All proposals should be sent to the Department of Revenue and the Ministry of External Affairs. These ministries can communicate any objections or reviews directly to the concerned ministry.
If there are any specific issues in the proposal from the perspective of FDI policy, it may be referred to the DPIIT for clarification. Therefore, consultation with DPIIT will be based on circumstances and not regular and routine. The specific issue of the proposal with regards to the FDI policy will be clarified by the DPIIT within 15 days.
The Ministries or Departments whose consultations regarding the proposal are preferred should publish the information relating to the proposal within 4 weeks of the online receipt of the proposal. If the comments of the consulted ministries or authorities are not received within stipulated time , it would be considered that they have no comments to offer . When a proposal is sent to the Ministry of Home Affairs for security clearance it is supposed to send its clarification or comments to the competent authority within 6 weeks from the online receipt of such proposals. In cases where such proposals are not sent back with clarification within the stipulated time MHA will have to intimate the concerned administrative Ministry or Department about the time frame within which it will be able to give its comments.
The concerned authority should examine the proposal and documents within 1 week and ask the applicant to furnish any additional documents , if required. Such queries should be emailed to the applicant so as to avoid any delay.
Once the proposal is received , the concerned authority should process the application for decision and send the same to the applicant within 2 weeks.
All the recommendations of the FIPB on the FDI proposals above Rs 5000 crores should be first placed before the Cabinet Committee on economic affairs (CCEA) for consideration . After approval has been received by the CCEA, an approval letter should be issued by the concerned ministry within one week.
If the application gets rejected or conditions in addition to the conditions laid down in the FDI policy or sectoral regulations have been stipulated on the approval of the proposal , the approval of DPIIT should compulsorily be sought by the concerned ministry within 8 or 10 weeks from the receipt of the proposal.

Prohibited sectors

Foreign Investments are not allowed in the following sectors through any route-

Lottery Business Including private or government lotteries, online lotteries, etc.
Chit Funds- It is a type of rotating savings and agreement between different persons to subscribe to a certain sum for a money specified period of time.
Nidhi Companies.
Trading in transferable development rights.
Real estate or construction of farm houses but prohibition on FDI in Real estate business will not include construction of town shops, residential and commercial infrastructure , roads and bridges and Real Estate Investments trusts which are registered and regulated by SEBI through the SEBI (REITs) Regulations, 2014.
Manufacture of tobacco products and tobacco substitutes.
Sectors not open for private investments – atomic energy.

Conclusion

The Central Government’s dedication towards increasing the inflow of foreign investment in India has been remarkable. Even through the approval route, the government has made the process more streamlined and the decision on the proposal is conveyed to the applicant quicker. Experts believe that the spike in FDI will continue in India. “FDI in India is likely to pick up going ahead on the back of a strong rebound in growth. Any pullback in FDI, I think, will only be temporary.” Frederic Neumann, co-head of Asian economics research at HSBC.

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

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

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M/s Orator Marketing Pvt. Ltd. v. M/s Samtex Designz Pvt. Ltd.

By

Diva Rai

-

October 3, 2021

0

Ph_08032021173622 — Image source - https://bit.ly/3DaDdZw

This article has been written by Abhilekh Tiwari pursuing the Certificate Course in National Company Law Tribunal (NCLT) Litigation from LawSikho. The article has been edited by Zigishu Singh (Associate, LawSikho) and Dipshi Swara (Senior Associate, LawSikho).

[Disclaimer for the readers: This piece has been written in the context of laws and facts prevailing at the time of publication. Kindly be updated with any new development post-publication of this piece.]

Hon’ble Supreme Court of India, on 26^th July, 2021 passed judgement in the case of M/s Orator Marketing Pvt. Ltd v. M/s Samtex Desinz Pvt. Ltd. and upheld that interest free loan would be considered as financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016.

Table of Contents

Introduction

Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC) states that financial debt would be a debt that has a time value attached to it i.e. there must be some interest deriving from the amount given as debt. Most recently in the case of M/s Orator Marketing Pvt. Ltd v. M/s Samtex Desinz Pvt. Ltd., Hon’ble Supreme Court gave a contrary view to this established principle. This article attempts to analyse the issues and arguments in the case and the rationale behind such interpretation of the Section 5(8).

Factual Background

M/s Tata Capital Financial Services (Tata Capital) provided a secured loan of 14 crore to M/s Samtex Desinz Pvt. Ltd. (Samtex). Later, M/s Sameer Sales Pvt. Ltd. (Sameer Sales) which is a sister concern of Samtex lent an interest free loan of 1.60 crores to Samtex for two years as the initial loan was not sufficient for the capital requirements of the Samtex. Sameer Sales later assigned the debt to M/s Orator Marketing Pvt. Ltd. (Orator).

Designation of the relevant parties

Tata Capital – Institutional Lender

Sameer Sales – Sister Concern of Samtex

Samtex – Corporate Debtor

Orator – Appellant, Financial Creditor

Hon’ble National Company Law Tribunal (NCLT) refused to admit Section 7 application initiated by the Financial Creditor Orator stating that the loan is interest free and hence has no time value of money attached to it. Further, due to no time value attached to the amount disbursed, the debt would not be considered as financial debt under Section 5(8) of the IBC.

Later, an appeal was filed before National Company Law Appellate Tribunal (NCLAT), whereby the order of the NCLT was upheld citing the same reason. Finally appeal was filed before the Hon’ble Supreme Court and the Division Bench comprising Justice Indira Banerjee and Justice V. Ramasubramanian, delivered a judgement stating that interest free loans would fall under the category of Financial Debt under Section 5(8) of the IBC.

Issue

Whether the interest free loan amount can be a financial debt Section 5(8) of the IBC?

Basis of decision in NCLT and NCLAT

The NCLT relied on the case of Dr BVS Lakshmi v. Geometrix Laser Solutions Private Limited in which the concept of disbursement was dealt with and it was laid by the NCLAT that if any creditor claims to be financial creditor as under Section 5(8) of IBC then it has to be shown that the debt was disbursed against the time value of money. Similarly, the case of Shreyans Realtors Private Limited & Anr v. Saroj Realtors & Developers Private Limited was also referred wherein a certain unsecured loan amount was disbursed by the respondent against 24% interest which was being claimed as a financial debt. However, when the case at hand was previously in NCLT, it was found that the loan was never accepted with an interest but rather it was an interest free loan. Based on these precedents NCLT New Delhi held that the debt cannot be considered as a financial debt under Section 5(8) of the IBC as there is no time value of money attached to it.

Later, the Appellant filed an appeal before the NCLAT. NCLAT perused the Loan Agreement between the parties and interpreted the meaning of financial debt. Clause 3 of the ‘Terms and Conditions’ of the loan agreement states that the loan is an unsecured loan and Clause 4 of the same states that there shall be ‘NIL’ interest. Hence, it is clear that the loan was an interest free loan and would not be within the ambit of financial debt.

Decision by Supreme Court

– Hon’ble Supreme Court stated that NCLT and NCLAT have patently erred in the judgement. The meaning and interpretation of financial debt should not be done in isolation and without considering the context.

– The legislative intent must be looked upon while interpreting any provision of any statute. It should be considered that what mischief was sought to be removed through any legislation.

– In case of Section 7 application under IBC, the Adjudicating Authority has to look upon the records of information utility or any evidence of default.

– Further, the IBC is a beneficial legislation and its aim is not just to recover the debt for the creditors but also to revive the debtor.

– The ‘financial debt’ cannot be interpreted in isolation without acknowledging the other relevant definitions which are ‘claim’ under Section 3(6), ‘corporate debtor’ in Section 3(8), ‘creditor’ under Section 3(10), ‘debt’ under Sec t ion 3(11), ‘default’ under Section 3(12), ‘financial creditor’ under Section 5(7) along with Section 7 of the IBC. Financial creditor can file an application if there is default and if there is any question with regard to the eligibility of the person filing Section 7 application then it has to be interpreted in accordance with the terms used in the respective provisions.

– The NCLT and NCLAT did not consider the words ‘if any’ in the definition of Financial Debt under Section 5(8). The initial wording of Section 5(8) of the IBC states that financial debt is a debt along with interest, if any, which is disbursed against time value of money. The words ‘if any’ denote that if there is no interest then the principal amount would qualify as financial debt. Further, the clause (f) of Section 5(8) of the IBC states about the commercial effect of borrowing which in the case at hand is present. Furthermore, Section 5(8)(a) of the IBC is inclusive in nature and the clauses are illustrative and not exhaustive.

– The Supreme Court referred the case of Dilworth v. Commissioner of Stamps (Privy Council) to interpret the term ‘include’. It was stated in this case that the term ‘include’ is added in the interpretation clause to enlarge and comprehend the scope of meaning.

– However, the Supreme Court also stated that the enlargement of the scope of the term ‘include’ should not defeat the purpose of the statute. For this the court referred to the case of Anuj Jain, Interim Resolution Professional for Jaypee Infratech Ltd. V. Axis Bank Ltd wherein the Avoidance Transactions were discussed at length. It was stated in this case that the root requirements disbursement against time value of money cannot be overlooked because if overlooked then any transaction could come within the ambit of financial debt.

– Finally the court stated that under IBC, the Financial Creditor is entrusted by the legislature to revive a financially distressed company and is involved with the Corporate Debtor since its inception by providing the necessary financial support. Hence, there is no reason to exclude a loan which was for the working capital of the Corporate Debtor to be outside the purview of Financial Debt.

Analysis

Time value of money means that the money which is being given will be more at the time of return. This would be through the interest on the principal amount. In the case at hand, even if we acknowledge the words ‘if any’, the provision also mentions the consideration of time value of money. Hence, in the present case there is no consideration of time value of money as there was no interest against the amount disbursed. This issue was not answered in the judgement at length which may create some issues in the future. However, it should also be acknowledged that if only ‘interest’ per se would have been laid a sole criteria then ends of justice might have been affected as the Appellant/Financial Creditor would have no other suitable mechanism for recovery of the interest free amount disbursed. Hence, at times it becomes necessary to consider each case in an innovative and unique way and in furtherance of complete justice, courts may slightly deviate from the established precedent.

Conclusion

The basis of the decision were the words ‘if any’. Section 5(8) of the IBC states that financial debt is the debt which may have interest attached to it. In the present case a company took an interest free loan with another and since there was no interest then time value of money could not exist and hence the NCLT and NCLAT dismissed the Section 7 application. However, the Supreme court held that the definition of financial debt should be interpreted in context and the words ‘if any’ in Section 5(8) cannot be overlooked. And hence, it is finally a precedent that interest free loans would fall within the purview of financial debt for the purpose of filing Section 7 application under IBC.

References

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Balwinder Singh vs. State of Punjab

By

Diva Rai

-

October 3, 2021

0

1553032958563 — Image source - https://bit.ly/2ZHhVUD

This article is written by Prachi Singh, pursuing a Certificate Course in Advanced Criminal Litigation & Trial Advocacy from LawSikho. The article has been edited by Zigishu Singh (Associate, LawSikho) and Dipshi Swara (Senior Associate, LawSikho).

CITATION: 1996 AIR 607

DATE: 9^TH November, 1995

Table of Contents

Introduction

The case of Balwinder Singh vs. State of Punjab highlights an important concept of circumstantial evidence. The conviction was set aside by the Supreme Court on the ground that the circumstantial evidence was not fully established hence the guilt of the accused was not proved beyond reasonable doubt. The article analyses the case in detail and also discusses the important pointers for relying on circumstantial evidence.

Facts of the case

1. Balwinder Singh (hereinafter the appellant) married Smt. Tajinder Kaur on 18.03.1984 and two daughters were born from this wedlock, Pinky who was about 6 years and Rozy who was about 2 years at the time of the commission of the offence. The appellant’s mother, Ajmer Kaur and the appellant were both unhappy with Tajinder Kaur for giving birth to daughters and used to constantly quarrel with her regarding the same. On several occasions, they even inflicted injuries on her.

2. Following the same, Appellant and his mother conspired together to take the life of the two daughters and in pursuance of the same on March 18, 1984; Appellant informed his wife that he would return only after killing both the daughters. He took his daughters to the Patiala bus-stand where he met Balwant Kaur, where he informed her that he was taking away his daughters to kill them. On hearing this, Balwant Kaur informed about the same to the Appellant’s wife.

3. Appellant took his children to his sister Mohinder Kaur’s home in Ludhiana and stayed there for a few hours. After that, he left the house stating that he was going to Rara Saheb.

4. On 19.03.1984, the dead body of a female child was discovered by Dr. Jaswant Singh at around 12 pm. The dead body was taken out and at about 4:30 pm, Appellant reached there and identified the dead body to be his daughter Rozy. The Appellant took the dead body for cremation near Gurdwara Rara Saheb. Meanwhile, Pinky was nowhere to be found.

5. Satya Walia who was a social worker and neighbour of the Appellant filed a written complaint to the police on 23.03.1984 after discovering about the murder and the extra-judicial confession made by the appellant about killing his daughters.

6. An F.I.R was registered and the investigation was done by ASI Iqbal Singh. During the investigation, a disclosure statement was made by the Appellant following which some bones and steel bangles were discovered from the place where the dead body of Rozy was found.

7. After the investigation was concluded, the Appellant and his mother were charged under Section 120-B of Indian Penal Code, 1860 for criminal conspiracy and also under Section 302 and 201 of the Indian Penal code for committing the murder or Rozy and thereafter cremating her dead body to save himself.

8. While the case was in Trial Court, the charge of criminal conspiracy under section 120-B could not be established and as a result, the Appellant and his mother were acquitted for the same. Furthermore, charges against the Appellant under section 302 as to committing murder of Pinky could not be established and hence he was only convicted for the murder of Rozy. There was no direct evidence involved in this case and the prosecution relied upon circumstantial evidence to establish the guilt of the accused.

9. The appellant was convicted under Section 302/201 of the Indian Penal Code and was sentenced to Imprisonment along with fine of Rs. 2000/- and if there is default in payment, further rigorous imprisonment of 2 years under section 302 and another rigorous imprisonment of 2 years under section 201 which has to run concurrently.

10. Thereafter, an Appeal was filed in the Supreme Court questioning the said conviction and sentence passed by the learned judge at Patiala Special Court, under Section 14 of the Terrorist Affected Areas (Special Courts) Act, 1984.

Issue in the present case

Whether the Appeal filed by the appellant challenging the conviction and sentence under section 300 and 201 of the Indian Penal Code, 1860 is maintainable.

Analysis

This case was completely based on circumstantial evidence and there was no direct evidence involved in this case. The prosecution only relied upon various circumstances to establish the guilt of the accused as to committing the murder of his daughter Rozy. Circumstantial evidences are a series of facts which are so associated with the fact-in-issue that inference as to the guilt of the accused can be drawn from them. Circumstantial evidence is susceptible to fallibility and therefore they must only be relied upon if they completely establish the guilt of the accused and exclude any other hypothesis. The chain of events in such cases must be concrete and the guilt has to be proved beyond any reasonable doubt.

At the trial court, prosecution relied upon several circumstances to establish the guilt which are as follows:

i. Prosecution relied upon the ‘Last Seen theory’ as per the statements provided by Tajinder Kaur, Mohinder Kaur and Balwant Kaur.

Tajinder Kaur deposed about the constant quarrels that used to take place with respect to the birth of daughter and also deposed about the fact that appellant and his mother conspired together to kill both the daughters in furtherance of which the appellant took the daughters on March 18, 1984.

On 19 March, 1984 the mother of the appellant then informed Tajinder that both the daughters were killed by the appellant and thrown in the canal. Then on 20 March, 1984 the appellant also informed his wife that he killed both the daughters and cremated Rozy at Gurudwara Rara Saheb.

Satya Walia deposed that when he heard about the murder of both the daughters he enquired about the same from the appellant after which appellant confessed to him about killing his daughters. The Trial Court relied upon the statements made by Tajinder Kaur.

The Supreme Court did not consider these circumstances concrete so as to form a chain because during the cross-examination of Tajinder Kaur, she admitted that she did not inform anyone about the constant quarrels and also did not disclose to anyone about the fact that happened on 18^th and 19^th March with respect to appellant and his mother conspiring to kill both the daughters. She only informed this to Satya Walia on 20^th March but did not inform the police or even her parents regarding the same.

Mohinder Kaur also deposed that the appellant never came to her house along with daughters as was stated by the prosecution.

Moreover, the statement of Balwant Kaur was also contradictory during cross-examination and was not in furtherance of what was stated by Tajinder Kaur. Therefore, due to contradictions and no conclusive chain the Supreme Court considered these evidence as untrustworthy.

The Supreme Court stated that the trial court erred by relying upon the statements of Tajinder Kaur and overlooked the fact of delay in reporting the crime, and also prosecution has failed to establish the last seen theory and the chain of circumstances beyond any reasonable doubt.

ii. The Trial Court relied upon the extra judicial confession made by the appellant to Satya Walia about killing his daughters and also to Tajinder Kaur, and connected it with the discovery statement made by the appellant through which the dead body and bones were recovered of Rozy.

The Supreme Court emphasized upon the weak nature of the extra judicial confessions and how the trial court has erred in considering them since the circumstances were not fully established and all the statements were contradictory to each other instead of being in consonance with each other. The court stated that extra-judicial confessions should be used with great care and caution and corroboration of all the circumstances is necessary to establish such confessions.

iii. Prosecution also relied upon the fact that the appellant identified the dead body of Rozy and corroborated this fact with the above-mentioned circumstances. However, the defence stated that when the appellant came to identify the dead body, he told everyone that his children fell in the canal and he was searching for them.

The Supreme Court pointed towards the fact that since above-mentioned circumstances are not clearly established hence, they cannot be corroborated with the fact about appellant identifying the dead body. The court also stressed upon the fact that no identification parade was conducted so as to establish whether the person who identified the dead body was the appellant.

Judgment by the court

The Supreme Court considered all the facts and circumstances and then came to the conclusion that since the circumstantial evidence was not fully established, hence the guilt of the accused was not proved beyond reasonable doubt. Court held that the trial court wrongfully convicted the appellant and took a more emotional approach and emphasized upon the killing of a female child, that the trial court got swayed by emotions and did not consider all the circumstances in its entirety.

Therefore, the Supreme Court in this case allowed the appeal, and the conviction and the sentence of the appellant was set aside.

Supreme court’s recent verdict on circumstantial evidence

In a recent judgment passed on 16^th April, 2018 in the case of NAVANEETHAKRISHNAN v. THE STATE BY INSPECTOR OF POLICE, Court stated that when conviction of the accused is entirely based upon circumstantial evidences then there are certain points that are to be kept in mind:

· Each and every incriminating circumstance has to be clearly established by some reliable evidence and the circumstances should form such a chain of events that no alternate hypothesis against the guilt of the accused is available.

· The court has to ensure that the chain of events must be such as to rule out the possibility of innocence of the accused.

· Even if one of the links is broken, the chain of circumstances gets snapped and the guilt of the accused cannot be established beyond any reasonable doubt.

· Court has to avoid the danger of suspicion to take the place of legal proof.

· There is a difference between “may be true” and “must be true” and when the entire case depends upon circumstantial evidence then the court has to be cautious.

Conclusion

Circumstantial evidence by its very nature is weak and it is extremely important to establish all the chain of circumstances with precision. If there is even a slight possibility of an alternate theory being created in favour of the accused, then the benefit of the doubt has to be given to the accused. The essentials for circumstantial evidence are that it should be conclusive and the guilt has to be proved beyond any reasonable doubt, but this was not the situation in this present case. If the entire case is based upon circumstances, then all the evidence must be scrutinized with great care to eliminate any alternate hypotheses. However, the trial court in this case overlooked various crucial elements which clearly created alternate hypotheses, and took a more emotional stance. The Supreme Court here took a pragmatic approach and weighed all the minute details, which ultimately led the case in appellant’s favour.

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