india australia business report singhania & partners mar 2016
TRANSCRIPT
INDIA AUSTRALIA
BUSINESS REPORT
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INDIA AUSTRALIA
BUSINESS REPORT
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Australia is in India’s extended neighborhood, a point
made by then Australian Foreign Minister Stephen
Smith when he made a key note address in September
2008 at the University of Western Australia, “It is
under-appreciated that Perth and Chennai are
closer to each other than Sydney is to Seoul, to
Shanghai, or to Tokyo.” ……As the world sees the
potential of an Asian/Pacific century unfold Australia
sees India at the heart of this historic shift in political
and economic influence.
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Contents
INTRODUCTION ............................................................................................................................................ 6
FOREIGN DIRECT INVESTMENT (FDI) ........................................................................................................... 7
FDI Policy in India ............................................................................................................................. 7
RBI Revised Framework for External Commercial Borrowings (ECB) 2015 ................................... 10
Australian investment in India ....................................................................................................... 13
Indian investment in Australia ....................................................................................................... 14
INDIA ENTRY STRATGEY ............................................................................................................................. 15
As an Indian Company ........................................................................................................................ 15
As a Foreign Company ........................................................................................................................ 16
TRADE RELATIONSHIPS .............................................................................................................................. 17
DISPUTE RESOLUTION MECHANISM .......................................................................................................... 20
Arbitration in India ......................................................................................................................... 20
Commercial Courts ........................................................................................................................ 22
About us ...................................................................................................................................................... 24
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Chapter 1
INTRODUCTION
ndia and Australia, popularly connected by 3C’s i.e. Curry, Commonwealth and Cricket, were
ruled by British and inherited parliamentary system of governance. Both the countries have
several commonalities, which serve as a foundation for closer cooperation and multi-faceted
interaction, on lines similar to what India has developed with other western countries. Both
countries are members of regional organizations including the Indian Ocean Rim Association for
Regional Cooperation and ASEAN Regional forum. The relationship has grown in strength and
importance since India’s economic reforms in the nineties and has made rapid strides in all areas -
trade, energy, mining, science & technology, information technology, education and defence1.
Economic interests have driven them closer. The economies of Australia and India are highly
complementary with great potential for economic cooperation and trade. For instance, the rapid
growth of the Indian population and economy has sparked huge demand for energy resources and
agricultural products.
It is interesting to note that one third of the exclusive economic zone of Australia lie in the Indian
Ocean, and a significant portion of the country’s coal, iron ore, liquefied natural gas and other
resources is transported through the Indian Ocean.
1 http://www.mea.gov.in/Portal/ForeignRelation/Australia_July_2014.pdf
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Chapter 2
FOREIGN DIRECT INVESTMENT (FDI)
FDI Policy in India
he Indian government’s favorable policy regime and robust business environment have
ensured that foreign capital keeps flowing into the country. The government has taken many
initiatives in recent years such as relaxing FDI norms across sectors such as defence, PSU oil
refineries, telecom, power exchanges, and stock exchanges, among others.
According to World Investment Report 2015 released by the United Nations Conference on Trade
and Development (UNCTAD), India’s rank as a top prospective host country for FDI also rose to
third place from fourth place in an UNCTAD survey for the period 2015-17.2
According to UNCTAD World Investment Report 2015,
India acquired ninth slot in the top 10 countries attracting highest FDI in 2014 as compared
to 15th position last year. The report also mentioned that the FDI inflows to India are likely
to exhibit an upward trend in 2015 on account of economic recovery.
India also jumped 16 notches to 55 among 140 countries in the World Economic Forum’s
Global Competitiveness Index that ranks countries on the basis of parameters such as
institutions, macroeconomic environment, education, market size and infrastructure
among others.
India will require around US$ 1trillion in the 12th Five-Year Plan (2012–17), to fund
infrastructure growth covering sectors such as highways, ports and airways. This would
require support from FDI flows.
During 2014, foreign investment was witnessed in sectors such as services, telecommunications,
computer software and hardware, construction development, power, trading, and automobile,
among others.
2 According to Department of Industrial Policy and Promotion (DIPP), the total FDI inflows soared by 24.5 per cent
to US$ 44.9 billion during FY2015, as compared to US$ 36.0 billion in FY2014. FDI into India through the Foreign Investment Promotion Board (FIPB) route shot up by 26 per cent to US$ 31.9 billion in the year FY2015 as against US$ 25.3 billion in the previous year.
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According to Department of Industrial Policy and Promotion (DIPP),3 the total FDI inflows soared
by 24.5 per cent to US$ 44.9billion during FY2015. FDI into India through the Foreign Investment
Promotion Board (FIPB) route shot up by 26 per cent to US$ 31.9billion in the year FY2015 as
against US$ 25.3billion in the previous year, indicating that government's efforts to improve ease of
doing business and relaxation in FDI norms are yielding results.
Data for FY2015 indicates that the increase in the FDI inflows was primarily driven by investments in infrastructure and services sector. Most recently, the total FDI inflows for the month of September 2015 touched US$ 2.9billion as compared to US$ 2.5billion in the same period last year.
FDI EQUITY INFLOWS IN INDIA
Mauritius US$ 9.03billion
Singapore US$ 6.74billion
Netherlands US$ 3.43billion
Japan US$ 2.08billion
US US$ 1.82billion
According to the data released by Grant Thornton India, the total merger and acquisitions (M&A)
and private equity (PE) deals in the month of August 2015 were valued at US$ 2.6billion (151
3 http://indiainbusiness.nic.in/newdesign/index.php?param=investment_landing/247/1
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deals), which is 62 per cent higher in volume as compared to last year. Some of the recent
significant announcements in relation to Foreign Direct Investments in Budget for the Financial
Year 2016-17 (FY’17) are as follows:
Overseas investors will be allowed to own 100 per cent stake in businesses marketing food
products produced in India, but with clearance from FIPB.
100 per cent FDI in Asset Reconstruction Companies (ARC).
The Union Budget 2016-17 has proposed liberalization of FDI norms in following sectors:
o Insurance, pension4
o Stock exchanges
o Marketing of food products
o Listed Central Public Sector Enterprises (CPSE) except banks and areas governed by
financial sector regulators, falling beyond the 18 specified NBFC activities.
FY’17 Budget has also proposed to hike the investment limit for foreign entities in Indian stock exchanges from 5 per cent to 15 per cent on par with domestic institutions.
The existing 24 per cent limit for investment by foreign portfolio investors (FPI) in CPSEs other than banks, listed in stock exchanges, will be increased to 49 per cent.
Recent Policy Measures (MAKE IN INDIA) The government has put in place an investor-friendly policy on FDI, under which FDI up to 100 per
cent is permitted under the automatic route in most sectors/activities.
Under this route, no permission from the Central Government is required for FDI inflows, but the
same is subject to applicable laws/regulations, security and other conditions.
Defence: The government, vide Press Note 7 (2014) dated 26th of August, 2014, has allowed
FDI up to 49 per cent on approval route in Defence sector with certain conditions, for example,
the applicant company seeking FIPB approval should be owned by an Indian company and
controlled by resident Indian citizen.
Railways: The government has allowed 100 per cent private and foreign direct investment
under the automatic route in construction, operation and maintenance of the rail infrastructure
projects. However, proposals involving FDI beyond 49 per cent in sensitive areas from a
security point of view would have to be brought by Ministry of Railways before cabinet
committee on security for consideration on case to case basis.
Policy initiatives:
100 per cent FDI is allowed in the telecom sector.
100 per cent FDI in single-brand retail.
FDI in commodity exchanges, stock exchanges &depositories, power exchanges, petroleum
refining by PSUs, courier services under the government route has now been brought under
the automatic route. 4 Foreign investment up to 49 per cent in the insurance and pension sectors, will not require prior government vetting
while similar rules will be extended to more non-banking financial company (NBFC) activities.
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Removal of restriction in tea plantation sector.
FDI limit rose to 74 per cent in credit information & 100 per cent in asset reconstruction
companies.
Other reforms:
FDI in Limited Liability Partnerships ('LLPs').
100 per cent FDI is now permitted under automatic route in LLPs operating in sectors/
activities where 100 per cent FDI is allowed under automatic route, and there are no FDI-
linked performance conditions.
LLPs having foreign investment will be permitted to make downstream investment in
another company or LLP in sectors in which 100 per cent FDI is allowed under the
automatic route, and there are no FDI-linked performance conditions.
In order to promote investment into businesses, Securities Exchange Board of India and Reserve
Bank of India have been striving to liberalize financing. While the SEBI has floated concept papers
on crowdfunding and has introduced an institutional trading platform for startups and the small
and medium-sized enterprises, Reserve Bank of India (RBI) has moved to improve the foreign
investment prospects in Indian companies by issuing various circulars on this subject matter from
time to time.
RBI Revised Framework for External Commercial Borrowings (ECB) 2015
External Commercial Borrowings (ECB) can be obtained either through automatic or approval route, depending on the restrictions which may be in force at the time of filing the application. For automatic route, the cases are examined by the concerned Authorized Dealer Banks (‘AD Banks’), whereas under the approval route, the prospective borrowers are required to send their requests to RBI through their concerned AD Banks. RBI permits the eligible borrowers (viz. the companies belonging to manufacturing, infrastructure,
hotels, hospitals and software sectors) to obtain ECB from direct equity holders for general
corporate purposes (including working capital requirement), under the automatic route.
Recently, a revised framework (‘Revised Framework’) of ECB policy was floated by the RBI in
November, 20155 for further simplification of the procedure for availing ECB, inter-alia, for general
corporate purposes. The said Revised Framework has been enforced with effect from December 02,
2015.6
Cont…
5 Vide Circular No. 32 dated November 30, 2015
6 Date of publication of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange)
(Amendment) Regulations, 2015 in the Official Gazette of Government of India – Extraordinary – Part-II, Section 3, Sub-Section (i) dated 02.12.2015- G.S.R.No.920(E).
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Revised Framework segregates ECB broadly into following three tracks7:
Track I Medium term foreign currency denominated ECB with minimum average maturity period of 3/5 years
Track II Long term foreign currency denominated ECB with minimum average maturity period of 10 years
Track III Indian Rupee denominated ECB with minimum average maturity period of 3/5 years
The Revised Framework has bifurcated the permitted sectors of the older regime where ECB was
permitted for general corporate purposes, under all 3 Tracks (for manufacturing and software
development sector) and under Track II & Track III (infrastructure sector8 which inter-alia includes
hospitals and hotels) under the new regime. The minimum average maturity period with respect to
the ECBs for general corporate purposes has increased for Track II eligible borrowers, from 7 years
to 10 years, it has comparatively reduced for Track I and III eligible borrowers. Reshuffling of
automatic/approval route, widening of the list of the recognized lenders and minimization of the
restricted end-uses may further solidify investments in various sectors.
Infrastructure sector9 which inter-alia includes hospitals and hotels can no longer avail medium
term foreign currency denominated ECB under the new regime.
The Revised Framework clearly states that Track I eligible borrowers viz. companies in
manufacturing and software development sector can avail medium term foreign currency
denominated ECB for general corporate purposes (including working capital) from foreign equity
holders with a minimum average maturity period of 5 years, it appears that all Track II eligible
borrowers (which also includes Track I eligible borrowers) can avail long term foreign currency
denominated ECB for general corporate purposes (including working capital) from all the
recognized lenders including foreign equity holders, with a minimum average maturity period of 10
years.
It also appears that all Track III eligible borrowers (which also includes Track I and II eligible
borrowers but excludes NBFCs, NBFCs-MFI, NGO, not for profit companies under the Companies
Act, 1956/2013, developers of SEZs and NMIZs) can avail Indian rupee denominated ECB for
general corporate purposes (including working capital) from all the recognized lenders excluding
foreign equity holders, with a minimum average maturity period of 3 years for ECB up to US$
50million or its equivalent or 5 years for ECB beyond US$ 50million or its equivalent.
Under the Revised Framework, the definition of the ‘foreign equity holder’ has been simplified and
includes (a) a direct foreign equity holder with a minimum direct equity shareholding of 25 per
cent in the borrower entity, (b) an indirect equity holder with a minimum indirect equity
7 Master Direction – External Commercial Borrowings, Trade Credit , Borrowing and Lending in Foreign Currency by
Authorised Dealers and Persons other than Authorised Dealers dated January 01, 2016 8 Liberalisation of definition of Infrastructure Sector under A.P. (DIR Series) Circular No. 48 dated September 18,
2013 9 Ibid.
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shareholding of 51 per cent in the borrower entity or (c) a group company with a common overseas
parent.
The individual limits, on the other hand, have remained the same for companies in manufacturing,
infrastructure and software development sector. The following table explains the proposed model
for obtaining ECBs in the permitted sectors –
Individual limits (per financial year)
Manufacturing and Infrastructure Sector including Hospitals and Hotels
Software Development Sector
Other Sectors
Upto US$ 200million or its equivalent
Automatic Route Automatic Route Automatic Route
Upto US$ 500million or its equivalent
Automatic Route Approval Route Automatic Route
Upto US$ 750million or its equivalent
Automatic Route Approval Route Approval Route
Beyond US$ 750million or its equivalent
Approval Route Approval Route Approval Route
Under the Revised Framework, the criteria for determining the applicable route i.e. approval route/
automatic route is still largely based on individual limits.
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Australian investment in India An analysis of FDI flows into India from Australia reveals that investment from Australia has risen
off a low base since the announcement of India’s new industrial policy in August 1991. Australia’s
FDI in India as a percentage of total Indian FDI has remained low and relatively constant.
Share of Australia in FDI Equity Inflows from April 2000 to May 2014:
Australia ranks 24th10 in terms of total FDI Inflows in India at US$ 600.67million
Apart from the above listed sectors, Australian investment in India also attracts industries such as
chemicals, food and beverage, personal and household goods, retail, media, specialized consumer
services, banks, real estate, healthcare, industrial goods and services, oil and gas and utilities.
Around 100 Australian companies have set up offices in India.
FDI Equity inflows from India in Australia FDI Equity inflows from Australia in
India are:
o Natural Resources
o Hospitality
o Manufacturing
o Software
o Banking and telecommunications sectors
o Agriculture & Mining
o Manufacturing
o Services Sector
o Construction and materials
o Finance, Insurance and Business Services
o Hotel & Tourism
o Metallurgical Industries
o Telecommunications
o Consultancy Services
o Automobile Industry11
10
http://ficci.in/international/75137/Project_docs/Australia-Final.pdf 11
http://ficci.in/international/75137/Project_docs/Australia-Final.pdf
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Indian investment in Australia With the recent opening of the Indian economy, however, flows of Indian investment into Australia
have been rising, albeit off a low base. Investment from India was valued at US$ 11.0billion (ranked
23rd)12
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https://dfat.gov.au/about-us/publications/Documents/international-investment-australia.pdf
MAJOR INDIAN COMPANIES IN AUSTRALIA MAJOR AUSTRALIAN COMPANIES IN
INDIA
Natural Resources
• Adani
• Aditya Birla Group
(Copper Mines)
• Asian Paints
• Jindal Steel and Power
Limited
• Lanco Infratech
• Petronet LNG
• GVK
• Gujarat NRE Co. (Coal
Mines)
• NMDC
• Aditya Birla Group
• Vedanta
• JSW Steel
• Sterlite Industries
(Copper Mines)
• International Coal
Ventures Private
Limited
Technology
• Infosys
• Wipro
• Tata Consultancy
Services
• Mahindra Satyam
• HCL
• Pentasoft
Marketing
GMR
Resources
Argyle Diamonds
BHP Billiton
CSR Limited
Rio Tinto
Infrastructure
CIMIC
Snowy Mountain Engineering
Investment Banking and financial
services
Macquarie Group
AMP Limited
Logistics
TNT Express
Telecommunications
Telstra
Information Technology
ANZ
Brewery
Fosters
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Chapter 3
INDIA ENTRY STRATGEY
ith the liberalization of FDI policy 2013, foreign investment is prohibited in very few
sectors now. Moreover, investment ceilings, which are applicable in certain cases, are
gradually being removed or phased out.
A non-resident entity can invest in India, subject to the FDI Policy, except in those sectors/activities,
which are prohibited. FDI is allowed either under the automatic route without prior approval of the
Government or the RBI in all the sectors as specified in the FDI Policy. FDI in sectors not covered
under the automatic route requires prior approval of the Government, which is considered by the
FIPB.
Depending upon its business needs, a foreign company can choose between setting up a liaison
office, a branch office or a project office or incorporating an Indian company, either it’s wholly
owned subsidiary or joint venture with an Indian/overseas partner.
A foreign company planning to set up business operations in India has the following options
AS AN INDIAN COMPANY
A foreign company can commence operations in India by incorporating a company under the
Companies Act through Joint Ventures; or Wholly Owned Subsidiaries.
Foreign equity in such Indian companies can be up to 100 per cent depending on the requirements
of the investor, subject to equity caps in respect of the area of activities under the FDI policy.
Details of the FDI policy, sectoral equity caps & procedures can be obtained from Department of
Industrial Policy & Promotion, Government of India.
Joint Venture with an Indian Partner
Foreign Companies can set up their operations in India by forging strategic alliances with Indian
partners. Joint Venture may entail the following advantages for a foreign investor:
Established distribution/ marketing set up of the Indian partner
Available financial resource of the Indian partners
Established contacts of the Indian partners which help smoothen the process of setting up
of operations
Wholly Owned Subsidiary Company
Foreign companies can also set up wholly owned subsidiary in sectors where 100 per cent foreign
direct investment is permitted under the FDI policy.
Incorporation of Company- For registration and incorporation, an application has to be
filed with Registrar of Companies (ROC). Once a company has been duly registered and
incorporated as an Indian company, it is subject to Indian laws and regulations as applicable
to other domestic Indian companies.
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AS A FOREIGN COMPANY
Foreign Companies can set up their operations in India through
Liaison Office/Representative Office
Project Office
Branch Office
Such offices can undertake any permitted activities. Companies have to register themselves with
Registrar of Companies (ROC) within 30 days of setting up a place of business in India.
Liaison office/ Representative office
Liaison office acts as a channel of communication between the principal place of business or head
office and entities in India. Liaison office cannot undertake any commercial activity directly or
indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting
information about possible market opportunities and providing information about the company
and its products to prospective Indian customers. It can promote export/import from/to India and
also facilitate technical/financial collaboration between parent company and companies in India.
The approval for establishing a liaison office in India is granted by the RBI.
Project Office
Foreign Companies planning to execute specific projects in India can set up temporary project/site
offices in India. RBI has now granted general permission to foreign entities to establish Project
Offices subject to specified conditions. Such offices cannot undertake or carry on any activity other
than the activity relating and incidental to execution of the project. Project Offices may remit
outside India the surplus of the project on its completion, general permission for which has been
granted by the RBI.
Branch Office
Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up
Branch Offices in India for the following purposes:
Export/Import of goods.
Rendering professional or consultancy services.
Carrying out research work, in which the parent company is engaged.
Promoting technical or financial collaborations between Indian companies and parent or
overseas group company.
Representing the parent company in India and acting as buying/selling agents in India.
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Chapter 4
TRADE RELATIONSHIPS
ecent years have seen remarkable growth in trade relationship between the two countries
fueled by complementarities between the two economies. Two-way trade in goods and
services has grown in value from US$ 6.8billion in FY2003-04 to US$ 14.8billion in
FY2013-14.
In the last decade, India-Australia trade witnessed tremendous growth from US$ 3.3billion in 2000
to US$ 21billion in 2011-2012. It is projected to reach US $ 40 billion in 2016 as negotiations on the
Comprehensive Economic Cooperation Agreement (CECA) progresses13.
Australia is India’s eighth largest trading partner and India is Australia's fifth largest.
India’s export of goods to Australia in 2010-11 was A$ 2.08billion (US$ 2.05billion).
India’s import of goods was A$ 15.74billion (US$15.58billion).
India’s export of services was A$ 0.69billion ( US$ 0.68billion)
India’s import of services was A$ 2.5billion. (US$ 2.47billion).
Natural resources sector is important component of bilateral agreement for coal, mining, power,
petroleum & natural gas and new & renewable energy.
Free Trade Agreement (FTA) was launched in 2011 after negotiations between Australia and India.
It aimed at achieving greater economic integration between the two countries. This will broaden
the base of merchandise trade, remove non-tariff barriers to services trade, facilitate and encourage
investment and address behind-the-border restrictions on trade.
EXPORTS FROM AUSTRALIA TO INDIA EXPORTED FROM INDIA TO AUSTRALIA
Copper and copper ores
Electronic components Gold
Silver and platinum
Telecommunication equipment
Vegetables
Wool
Main Australian service exports to India are
education, education-related travel and
tourism.
Agricultural products
Floor coverings
Leather and leather goods
Precious and semi-precious stones
Textile
India’s main service exports to Australia are
computer and information services and tourism.
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http://www.icwa.in/pdfs/VPIndopacific.pdf
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AUSTRALIA-INDIA COMPREHENSIVE ECONOMIC COOPERATION AGREEMENT (AICECA)
AICECA negotiations started in 2011 and there have been nine rounds of negotiations, the most
recent of which was held in September 2015.
Key interests and benefits foreseen from the agreement are:
Trade in goods: A comprehensive Free Trade Agreement (FTA) would assist in broadening
the base of merchandise trade by addressing tariff barriers and behind the border
restrictions on trade in goods.
Trade in services: There is significant potential to expand trade in services between India
and Australia. An FTA could facilitate growth in services trade by reducing barriers faced by
Australian service suppliers and by increasing regulatory transparency.
Investment: An FTA could facilitate and encourage investment by reducing barriers,
increasing transparency and enhancing investment protections.
COMMON AREAS OF INTEREST
Intellectual Property (IP) Industry in India is becoming increasingly conscious of the value of intellectual property rights.
Improved Indian policies, laws and resourcing for IP have had a significant impact in India.
India's strategy in the area of Intellectual Property has been:
to meet international obligations;
to safeguard public interest;
to modernize her Intellectual Property Rights administration; and
to create awareness about Intellectual Property Rights.
In India, the DIPP is concerned with legislation relating to Patents, Trade Marks, Designs and
Geographical Indications. These are administered through the Office of the Controller General of
Patents, Designs and Trade Marks (CGPDTM), subordinate office, in accordance with:
The Patents Act, 1970 (through the Patents offices);
The Designs Act, 2000 (through the Patents offices);
The Trade Marks Act, 1999 (through the Trade Marks Registry ); and
The Geographical Indications of Goods (Registration & Protection) Act , 1999 (through the
Geographical Indications Registry).
An Intellectual Property Appellate Board (IPAB) has been set up to hear appeals against the
decisions of Registrar of Trademarks, Geographical Indications and the Controller of Patents.
Other IP Legislation includes Copyright Act, 1957, Semi-conductor Integrated Circuits Layout-
Design Act, 2000; and Protection of Plant Varieties and Farmers' Rights Act, 2001.
India's IP administration has been improved and modernised in a number of ways. The Indian
Patents Act was amended in 2005 in order to make it compatible with India's international
obligations. E-filing facility for patent and trademark applications was introduced in July 2007.
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Enforcement of Intellectual Property has been improved — civil and criminal provisions exist in
various laws for dealing with counterfeiting and piracy. DIPP has also set up an inter-ministerial
Committee to coordinate IP enforcement issues.
Both Australia and India recognise that the effective protection and enforcement of IP rights is a
key element in fostering creativity, innovation and technological reform, which facilitates trade
and investment.
Both the countries are parties to the WTO Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS). In addition to the TRIPS Agreement, Australia and India are common
signatories to a number of other international conventions on IP protection and registration.
Given the importance of the subject, and in order to enhance cooperation in the field of Intellectual Property Rights, an FTA between India and Australia may address issues of capacity building, human resources development, public awareness, and outreach activities.
IP cooperation between Australia and India is already strong. IP Australia and DIPP, India signed a Memorandum of Understanding in May 2008 and have prepared an Action Plan to increase IP cooperation.
Competition Policy
The Competition Commission is now fully constituted in accordance with the provisions of the Competition Act. The Competition Act inter-alia provides that the Competition Commission of India set up under the Act may, for the purpose of discharging its duties or performing its functions under this Act, enter into any memorandum or arrangement with the prior approval of the Central Government, with any agency of any foreign country. Trade in goods
In possible future FTA negotiations, both sides could consider mechanisms to facilitate:
i. agreement on the recognition of conformity assessment procedures on products of their
export interest;
ii. approval procedures, inspection requirements, testing and certification; and
iii. acceptance of conformity assessment including inter alia recognition of each other’s
testing laboratories or certification bodies.
iv. Cooperation for the development of capacity of institutions.
Trade in services
Given the existing synergies between the two economies, India and Australia should work
towards encouraging the mutual recognition by relevant professional bodies of professional
qualifications with the aim of facilitating easier movement by them between the two countries.
Governments could also support easier certification norms and accreditation of professional
service providers in fields such as health care, engineering, and architecture.
In a possible future FTA, the two Governments should therefore facilitate increased dialogue
between the regulatory/professional bodies, with the aim of facilitating mutual recognition of
qualifications between them.
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Chapter 5 DISPUTE RESOLUTION MECHANISM
he Prime Minister has been stressing on steps to promote ease of doing business in India
especially in the light of Make in India campaign. Indian government is supporting the
creation of a vibrant domestic manufacturing base. India has never offered so many tangible
opportunities to pursue co-development and co-production projects in various sectors. Policy
initiatives coupled with pro-industry dispute resolution mechanism present opportunities for
Indian and foreign companies to collaborate.
At present there are various levels of judiciary in India—different types of courts, each with varying
powers depending on the tier and jurisdiction bestowed upon them. They form a hierarchy of
importance, in line with the order of courts in which they sit, with the Supreme Court of India at the
top, followed by High Courts of respective states with District Judges sitting in District Courts and
Magistrates of Second Class and Civil Judge (Junior Division) at the bottom. However, many
organizations are resorting to arbitration for resolution of disputes and including arbitration clause
in their commercial contracts.
Arbitration in India
In India, arbitration proceedings are of two types: ad-hoc arbitration and institutional arbitration.
The parties have the option to seek recourse to either of them depending on their choice and
convenience.
Ad-hoc arbitration:
It refers to an arbitration where the procedure is either agreed upon by the parties or in the
absence of an agreement, the procedure is laid down by the arbitral tribunal. Thus, it is an
arbitration agreed to and arranged by the parties themselves without seeking the help of any
arbitral institution. In Ad-hoc arbitration, if the parties are not able to nominate arbitrator/arbitrators by consent, the
appointment of arbitrator is made by the High Court (in case of domestic arbitration) and by the
Supreme Court(in case of international commercial arbitration). In India, still most of the
arbitrations are Ad-Hoc Arbitrations.
Arbitration
Ad-hoc Institutional
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Institutional arbitration:
In an institutional arbitration, the arbitration agreement may stipulate that in case of dispute or
differences arising between the parties, they will be referred to a particular institution such as:
Indian Council of Arbitration(ICA)
International Chamber of Commerce(ICC)
Federation of Indian Chamber of Commerce & Industry(FICCI)
World Intellectual Property Organisation(WIPO)
The International Centre for Alternative Dispute Resolution(ICADR)
London Court of International Arbitration – India (LCIA-India)
Delhi International Arbitration Centre (DIAC) – New Delhi
Construction Industry Arbitration Council (CIAC)- New Delhi
All these institutions have framed their own rules of arbitration which would be applicable to
arbitral proceedings conducted by these institutions. Such rules supplement provisions of the
Arbitration Act in matters of procedure and other details as the Act permits. They may provide for
domestic arbitration or for international commercial arbitration or both and the disputes dealt with
by them may be general or specific in nature.
Now, in line with the intent to evolve a pro arbitration and speedy dispute redressal mechanism,
Parliament has passed the "Arbitration and Conciliation (Amendment) Act, 2015". This act
prohibits appointment of government nominated arbitrators. Also the said amendment to the
Arbitration Act puts a stringent test on the independence and impartiality of the arbitrator.
Also, under the amendments to the Arbitration and Conciliation Act, 1996, an arbitrator will have to
settle a case within 18 months. After the completion of 12 months, certain restrictions will be put in
place to ensure that the arbitration case does not linger on.
Amendment to the Arbitration and Conciliation Act, which now replaces the ordinances which were
promulgated in December 2014, has added additional grounds to set aside an award viz. those
awards contravention with the fundamental policy of Indian Law or in conflict with the notions of
morality or justice, in addition to the grounds already specified in the Act.
The amendment also limits the jurisdiction of Courts for passing interim orders when it says “the
Court must not accept such an application, unless it thinks that the arbitral tribunal will not be able
to provide a similar remedy”. In case of International Arbitration, the amendment says that the
relevant court would only be the relevant high court.
The amendment also adds that the provisions under part 1 of the Act would now also apply to
international commercial arbitrations even if the place of arbitration is outside India. Another
feature of this amendment is that, it says that challenge to an arbitral award that is made before a
Court, must be disposed of within a period of one year. It also permits parties to choose to conduct
arbitration proceedings in a fast track manner. The award, in that case, would be granted within six
months.
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The amendments to the law come amid keenness of the government to attract the greater foreign
investment.
Commercial Courts Government has been continuously taking steps to ensure an efficient and effective dispute resolution mechanism for a stable legal and business environment. The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 is a step in this direction. Commercial Courts are a courts equivalent to District Courts and will adjudicate commercial disputes.
Commercial Courts have been made equivalent to the Commercial Division of a High Court as an appeal from the order of such Commercial Court is directed to Commercial Appellate Division of the concerned High Court.
Appellate Division in High Courts would hear the appeals from orders and judgments from the Commercial courts.
Suits of a value of US$ 0.15million (Rs 1 Crore) or more that are pending in the High Court/ District courts will now be transferred to the commercial division/would be transferred to the commercial court. Commercial divisions may be set up in those High Courts which exercise ordinary original civil jurisdiction, that is, the High Courts of Delhi, Bombay, Calcutta and Madras.
The Act also says that appeals to High Court from the orders passed by tribunals like Competition Appellate Tribunal, Debt Recovery Appellate Tribunal, Intellectual Property Appellate Board, Company Law Board or the National Company Law Tribunal, Securities Appellate Tribunal and Telecom Dispute Settlement and Appellate tribunal may be heard by the commercial appellate division of the high court if it relates to a commercial dispute.
The Delhi High Court has already set up six commercial division courts and four commercial appellate division courts for adjudicating commercial disputes of a specified value of which is above US$ 0.15million.
Commercial Courts Vis- À-Vis Arbitration Arbitration matters, involving a Commercial Dispute of subject matter of value of more than US$
0.15 million including applications or appeals arising out of such arbitration is to be heard and
disposed by the - (i) Commercial Court, in case of matter, which would ordinarily lie before any
principal civil court; or (ii) Commercial Division of the High Court, in case of matter which would
ordinarily lie before the original jurisdiction of the concerned High Court.
In view of the Arbitration and Conciliation Act, 1996, (as Amended), all matters pertaining to
international commercial arbitrations involving disputes of subject matter of value of more than
Rs.1 Crore have been brought within the ambit of the High Courts and thus such matters pertaining
to international commercial arbitrations are to be heard and disposed by the Commercial Division.
Highlights of the Act are summarized here in a simplified manner: Wide definition of Commercial Dispute. Judges of the Commercial Courts, Commercial Division and Commercial Appellate Division to be
presided by Judges having experience in dealing Commercial Dispute.
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Applications and appeals related to international commercial arbitration to be heard by the
Commercial Division of the concerned High Court.
Determination of Specified Value of the subject matter of Commercial Dispute.
Timely disposal of Commercial Disputes and appeals.
Amendments to the Civil Procedure Code, 1908, as applicable to Commercial Disputes.
Application for summary judgment in respect of certain claim of Commercial Disputes.
India’s continual high levels of economic growth have
transformed its relationship with the outside world.
Its rising middle class, already estimated at more than
two-hundred million, has become a focal point for a
global economy. Remarkably, this represents only a
small part of the potential of the Indian economic
miracle.
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About us
Singhania and Partners LLP (Estd. 1999) is an Indian law firm and advise foreign companies with
their India entry strategy. Our practice leaders advise Indian/foreign companies for joint-ventures,
Mergers & Acquisitions in India and abroad. We also have a strong domestic as well as cross border
commercial dispute resolution practice.
Our Corporate M&A, Dispute Resolution and IP Litigation practice areas have been rated by
Chambers and Partners, Legal500, and AsiaLaw.
We currently represent clients such as Standards & Poor’s, Raytheon, Verisign, America Online,
McGraw Hill Education, Case New Holland, Inmarsat, Denel, Oxford University Press, Fiat and
leading infrastructure companies. We also counsel Australian businesses like Bravura, Eagle Boyz
Pizza, Secure Parking Solutions, Indo Gold, Kolar Gold etc.
The firm is particularly strong in Infrastructure (Roads & Highways, Railways, Ports & Shipyards),
Aerospace, Defence, Energy and Natural Resources (Power, Oil & Gas), Banking & Financial
Services, Food, Drugs & Cosmetics, Education, Healthcare, Real Estate, and Information Technology.
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Foreign Exchange Management
Cross-border transactions, investment routing and tie-ups.
Foreign Investments via both approval and automatic routes.
External commercial borrowings.
Conversion of debt into equity.
Foreign exchange remittances/repatriations of funds.
Advice to foreign clients on private placement of shares and debt instruments.
Compounding of defaults.
Establishment of branch office/ Project Office/ Liaison Office by foreign companies in India.
Corporate Governance
Focus on ensuring regulatory, procedural and business compliance requirements of the client
are met and risk of non-compliance is minimized.
Significant experience in advising senior management of companies of all sizes on corporate
governance procedures, conduct of AGMs, investor protection committee guidelines, disclosure
and transparency rules.
Advisory covers regular secretarial compliances pursuant to the Companies Act and LLP Act.
Advisory for constituting CSR committee, policy formulation and monitoring required under the
Companies Act and rules.
Employment
Extensive experience in advising Indian and overseas companies across sectors for:
Drafting of employment contracts/compliances.
National collective agreements.
Advising on entire gamut of labour law issues.
Structuring of stock option plans.
Employment of expatriates.
Termination of employment contracts and severances.
Transfer of employees and restrictive covenants in employment arrangements.
Representing companies and their management in social security legislations related disputes
with employees.
Advising on laws on sexual harassment of women at workplace.
Constitution of Internal Complaints Committees (ICC) and assistance in conducting inquiries
and proceedings.
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Real Estate
Advisory involving development of large land parcels, ownership and development of land by
local and overseas purchasers in issues related to real estate acquisition.
Expertise in title verification, loan, lease and license agreements.
Construction contracts including bidding documents, agreements with sub-contractors, leasing
& renting of equipment.
Collaboration and redevelopment agreements.
Drafting lease deeds, leave and license agreements.
Conveyance, re-conveyance, mortgage and other modes of creating security.
Guiding clients through the regulations governing the acquisition and sale of property,
remittance of sale proceeds out of India.
Real estate litigation.
Commercial Contracts
Assessment of the risks and commercial issues involved with the contracts which enables us to
provide both legal and strategic commercial advice in
Trade Arrangement and Technology Transfers
Techno-commercial contracts
Intellectual property licensing and assignments
Marketing, advertising, sponsorship, manufacturing, franchise and distributor agreements
Escrow arrangements and powers of attorney
Commercial Disputes
Endeavor to identify the best resolution strategy and initiate necessary action.
Litigation practice and expertise in dealing with high value international and domestic
commercial arbitrations before institutional and ad-hoc forums.
Experience of complex multimillion dollar disputes in infrastructure projects, Government
Contracts, Consultancy and Dealership agreements.
Regularly appear before the Company Law Board /Regional Directorate on matters such as
compounding of offence under Companies Act and Foreign Exchange Management Act,
oppression and mismanagement cases, dead-lock and hostile takeovers.
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Prominent Clients
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Our Footprint in India
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PRACTICE LEADERS
Ravi Singhania Managing Partner [email protected] Core Expertise Corporate-Commercial Commercial Litigation International Arbitration Mergers & Acquisitions
Shilpa Shah Senior Partner [email protected] Core Expertise Corporate-Commercial Commercial Litigation Employment Laws Intellectual Property Litigation
Dipak Rao Senior Partner [email protected] Core Expertise Corporate-Commercial Intellectual Property Project Finance Real Estate
Vikas Goel Partner [email protected] Core Expertise Contractual Disputes Government Procurement International Arbitration Real Estate
Sunil Kumar Partner [email protected] Core Expertise Employment Foreign Exchange
Management
Shambhu Sharan Partner [email protected] Core Expertise Antitrust Litigation Bank Guarantee Disputes Contractual Disputes
Sonil Singhania Partner [email protected] Core Expertise Employment Laws Intellectual Property Laws Real Estate
Manish Kumar Sharma Partner [email protected] Core Expertise Capital Markets Corporate-Commercial Foreign Exchange
Management Mergers & Acquisitions
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Madhu Sweta Partner [email protected] Core Expertise Construction Disputes Consumer Disputes Land Acquisition Disputes
Abhimeet Sinha Associate Partner [email protected] Core Expertise Infrastructure Project Finance Real Estate
Abhishek Kumar Associate Partner [email protected] Core Expertise Company Law Board Matters Intellectual Property
Litigation
Yaman Deep Associate Partner [email protected] Core Expertise Alternative Dispute
Resolution Commercial Litigation
NEW DELHI
P-24 Green Park
Extension,
New Delhi 110016,
t: +91 (11) 4747 1414
BANGALORE
401, Prestige Meridian II,
30, Mahatma Gandhi Road,
Bangalore 560001, India
t: +91 (80) 4113 1900
HYDERABAD
614, Babukhan Estate,
Basheer Bagh,
Hyderabad 500001, India
t: +91 (40) 4210 2424
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© March 2016. All rights reserved. Every effort has been made to ensure accuracy of the information in this publication at the time of production.
www.singhania.in