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August 06, 2018

Legal Capsule: Recent Trends in Anti-Dumping Investigations by Economic Laws Practice

India is a frequent user of anti-dumping measures, having levied duties on 609 investigations since the inception of the World Trade Organization (“WTO”) in 1995. There have been several changes in the trend of anti-dumping duty investigations conducted by Directorate General of Trade Remedies (“DGTR”) recently.

Consolidation of trade remedy forums and creation of DGTR
  • The Government of India, through an amendment to the Government of India (Allocation of Business) Rules, 1961 on May 7, 2018, has consolidated multiple trade remedial forums under the umbrella of the “Directorate General of Anti-Dumping and Allied Duties” (“DGAD”). 
  • The DGAD, previously in charge of conducting anti-dumping and anti-subsidy investigations, has accordingly been rechristened the DGTR. 
  • The amendment creates a single integrated authority which will oversee both outbound as well as bound investigations on various trade remedial measures such as anti-dumping, anti-subsidy, safeguards and quantitative restrictions.

Greater flexibility on ‘form’ of duty
  • Three forms of duties under the anti-dumping framework are ‘fixed duties’ (fixed duty in USD per unit); ‘ad valorem duties’ (a fixed percentage of duty based on value); and ‘reference price duties’ (duty being levied based on the difference between the benchmark and import prices).
  • While India has historically favoured fixed duties for a majority of its anti-dumping levies, in recent times the Hon'ble Designated Authority has been considering different forms of anti-dumping duties at the time of recommending duties by way of final findings, in order to seek a balance between interests of all involved parties on a case to case basis.  

 Reduction in duration of duty levy to 3-years

  • The DGTR has the discretion to impose duties upto five years. 
  • Since April 2017, there have been five separate cases (out of thirty-six investigations) where the DGTR has recommended duties only for three years, taking a balanced position between the interests of the domestic industry and the interests of the opposing parties.
  • Prominent illustrations: Reference Price: MEK , Oxfloxin , O-Acids 

Record ‘No Duty’ recommendations made by the office of the DGTR

  • Since the year 2017-18, there has been a considerable increase in the proportion of cases where the DGTR has recommended ‘No Duty’ on at least one of the subject countries involved.
  • The largest impact of ‘No Duty’ recommendations has been observed in sunset reviews in over 45% of the cases in the year 2017-18 and 100% thereafter (3 sunset reviews issued in April and May 2018).
  • For the first time in the last five years, there were also four instances of the DGAD rejecting applications for sunset reviews in 2017-18.

Increasing focus on imports from Preferential Tariff Agreement sources such as Japan, Korea, Malaysia, Thailand and others
  • With the signing of the various preferential tariff agreements, there has been a consistent increase in trade volumes and value between signatory countries. This has inevitably led to an increased focus on these countries during anti-dumping investigations.
  • Once such example is the Japan-India Comprehensive Economic Partnership Agreement and its impact on Japan’s increasing prominence in India’s anti-dumping investigations – there has been an increase of approximately 300 % for anti-dumping investigations for imports originating in Japan in year 2017-18 when compared to previous year.
  • At the same time, ‘No Duty’ results constituted 37.5% of these findings – consistent with the 36% ratio overall – which is promising.
  • Prominent Illustrations:Hot Rolled flat products of alloy or non-alloy steel ,Caustic Soda 
View the video of ELP Partner Sanjay Notani on the latest trade related regulatory developments.

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

July 27, 2018

Khaitan & Co. tops Legal Advisor League Tables for Private Equity Deals in H1 2018

CAM, Trilegal take no.2 and no.3 slots; KCO also tops by deal volume, followed by AZB and CAM

Khaitan & Co. topped the Venture Intelligence League Tables for Legal Advisors to Private Equity & Venture Capital deals in H1 2018 advising deals worth $15.9 billion (across 37 deals) followed by Cyril Amarchand Mangaldas ($13.7 billion across 33 deals) and Trilegal ($13.3 billion across 14 deals). Shardul Amarchand Mangaldas ($8.1 Billion across 31 deals) and AZB & Partners ($5.9 Billion across 36 deals) came in at fourth and fifth respectively.

KCO and CAM advised PE-backed company Flipkart, while Trilegal advised Naspers in the $12 Billion exit by investors from Flipkart when it was acquired by Walmart.

The Venture Intelligence League Tables, the first such initiative exclusively tracking transactions involving India-based companies, are based on value of PE and M&A transactions advised by Transaction and Legal Advisory firms. The tables also include Private Equity investments and exits in Real Estate advised by law firms.

KCO also topped the tables by deal volume too advising 37 deals, followed by AZB & Partners (36 deals) and by Cyril Amarchand Mangaldas (33 deals each) at third place. SAM and J Sagar Associates completed the top 5 spots.

By Industry

In IT & ITeS, outside of Walmart-Flipkart, KCO also acted as advisor to Temasek's investment in UST Global. KCO and Trilegal advised the Softbank investment in Policybazaar. By deal volume KCO and CAM took the first two spots followed by NovoJuris and IndusLaw.

In Financial Services, AZB, Nishith Desai Associates, SAM and Wadia Ghandy advised the $1.7 Billion investment by KKR and others in mortgage company HDFC. JSA and AZB advised the $200 million investment by Lone Star in Rattanindia Finance.

In Real Estate, SAM and JSA advised the $730 million Indiabulls - Blackstone deal. DSK Legal  and SAM advised the sale of Equinox Business Parks by Essar Group to Brookfield.

The full league tables can be viewed online at

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

July 26, 2018

Shardul Amarchand Mangaldas tops Legal Advisor League Table for M&A deals in H1 2018

AZB & Partners, Cyril Amarchand Mangaldas claim the No.2 & No.3 slots

Propelled by the $16 Billion Walmart-Flipkart deal, Shardul Amarchand & Mangaldas (SAM) topped the Venture Intelligence League Table for Legal Advisors to M&A Transactions in H1 2018. SAM advised M&A deals worth $48.4 Billion (across 34 qualifying deals) during the period. AZB & Partners (AZB) which advised deals worth $33 Billion across 35 deals and Cyril Amarchand Mangaldas (CAM) ($24.2 Billion across 19 deals) followed next. Khaitan & Co. ($22.8 Billion) occupied the fourth spot, while Trilegal ($21.4 Billion) stood fifth. Four of the top 5 - SAM, CAM, Khaitan and Trilegal - were advisors to the Walmart-Flipkart deal.

The Venture Intelligence League Tables, the first such initiative exclusively tracking transactions involving India-based companies, are based on value of PE and M&A transactions advised by Transaction and Legal Advisory firms.

Khaitan topped the tables in terms of deal volume with 40 deals, followed by AZB and SAM. CAM finished at fourth spot while J Sagar Associates (with 18 deals worth $1.6 Billion) took the fifth.

By Industry

In IT & ITeS, outside of Walmart-Flipkart, HSA Advocates advised the $2 Billion Aricent - Altran Technologies deal.
In Telecom, as many as six firms including AZB, Bharucha & Partners, S&R Associates, Shardul Amarchand Mangaldas, Talwar Thakore & Associates and foreign law firm Slaughter & May advised the $14.6 Billion Indus Towers - Bharti Infratel deal.
In Energy, SAM, CAM and AZB advised the $5.7 Billion HPCL - ONGC merger deal. Trilegal, CAM and HSA advised the $1.6 Billion acquisition of Ostro Energy by Renew Power Ventures.
In the second quarter of 2018, the Manufacturing industry witnessed 39 deals worth over $7 Billion led by large cross border deals and the acquisitions under insolvency proceedings. AZB and SAM advised the $5.4 Billion Bhushan Steel - Tata Steel deal. AZB and SAM were also involved in the $2.1 Billion acquisition of L&T Electricals & Automation business by Schneider Electric, in addition to Trilegal and Khaitan.
The full league tables can be viewed online at

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

July 25, 2018

I-Bankers to Walmart-Flipkart Deal Top Transaction Advisor League Tables for M&A Deals in H1 2018

Advisors to the Walmart-Flipkart deal - JP Morgan ($17 Billion across 3 deals), Barclays ($16.4 Billion across 2 deals) and Goldman Sachs ($16 Billion across 1 deal) - topped the Venture Intelligence League Tables for Transaction Advisor to M&A deals in H1 2018. Morgan Stanley and DSP Merrill Lynch ($14.6 Billion across 2 deals) and Arpwood Capital ($7.5 billion across 5 deals) came in at fourth and fifth respectively.

The Venture Intelligence League Tables, the first such initiative exclusively tracking transactions involving India-based companies, are based on value of PE and M&A transactions advised by Transaction and Legal Advisory firms.

By Deal Volume

Ernst & Young topped the tables by deal volume advising 10 deals worth $964 million. AvendusKPMG, and Arpwood Capital came in at second spot with 5 deals each. Citi came in third with 4 deals.

Other Advisory Services

Inclusive of its roles in due diligence and related advisory activities, Ernst & Young topped by deal volume advising 25 deals worth $10.8 Billion.

By Industry

Within IT & ITeS, apart from the Walmart - Flipkart deal, JP Morgan also advised the $1 Billion Intelenet acquisition by French company Teleperformance. By deal volume Avendus advised 4 deals worth $728 million.

In Telecom, Morgan Stanley and DSP Merrill Lynch advised the $14.6 Billion Indus Towers - Bharti Infratel merger.

In Energy, Citi and SBI Caps advised the $5.7 Billion HPCL - ONGC deal.

In the second quarter of 2018, the Manufacturing industry witnessed 39 deals worth more than $7 Billion led by large cross border deals and the acquisitions under insolvency proceedings. Arpwood Capital acted as financial advisor to $5.4 Billion Bhushan Steel - Tata Steel and $2.1 Billion L&T Electricals & Automation - Schneider Electric deals. Standard Chartered Bank advised the $305 million Union Cement - Shree Cement deal. Evercore advised the $201 million Reydel Automotive - Motherson Sumi Systems deal.

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

July 24, 2018

Legal Capsule: India’s Pharmaceutical sector: Facing Headwinds by Economic Laws Practice

Indian pharmaceutical industry accounts for 3.1- 3.6 % (value terms)  and approximately 10% (volume terms) of the global industry and is expected to grow to USD 100 billion by 2025. The pharmaceuticals market in India comprises of medical drugs (generic drugs -70 %; Over-the-counter medicines - 21%; patented drugs - 9%) and medical devices, etc, with prevalence of loan licensee model (drug manufacturing outsourced to licensed manufacturer). This industry has contributed immensely to Indian as well as global healthcare, being material in manufacturing critical, high-quality and low‐cost medicines, with exports of USD 16.84 billion in 2016-17 (expected to reach USD 20 billion by 2020 ). 

Introduction of GST in India in July 2017 with a view to overcoming the tax inefficiencies prevalent under the earlier regime has had far reaching implications for the industry. With the onset of GST, pure economic and commercial considerations have taken prominence over tax cost considerations in deciding the operation and distribution structures, all of which has triggered structural changes within the industry in terms of product plant re-allocation, depot rationalisation, etc. 

Challenges under the GST regime

The GST journey has been a rather bumpy ride for the industry - without undermining the inherent GST-related benefits, it is important to also underscore the corresponding challenges that need to be addressed: 
  • Multiple credit blockages: Contrary to the promise of seamless credit, there are potentially multiple credit blockages qua transactions peculiar to the industry involving distribution of free samples, disposal/ destruction of expired stock, control samples and testing samples. Further, for organisations which have operations spread across different States, having a proper mechanism for distribution of credits pertaining to common expenses (which includes, royalty payments, technical fees, advertisement expenses) to its each location for discharging the output tax liability becomes important. 
  • Inaccuracies in tax rates: Contrary to the objective of replicating the pre-existing rate structure in terms of the ‘equivalence principle’, there have been inaccuracies ,  including for certain orthopaedic and surgical items and life-saving drugs, to name a few, which have been taxed at a higher rate, thereby impacting the transaction costs
  • Suspension of tax concessions: With GST, the tax concessions extended under the earlier tax regime to manufacturing facilities set up in certain backward regions for incentivizing investments, have been suspended mid-way, with only marginal benefit correlated to the GST levied by the Centre being recompensed back.  
  • Anti-profiteering provisions: These provisions, constituted with the benevolent objective of ensuring percolation of tax cuts under GST to the end consumer, have been a nightmare to comply with, owing to limited guidance and complex trade dynamics. Up till now, several entities have been slapped with notices for proving proper compliance, and the threat of prescribed penal consequences continues to loom.  
  • Continuation of several legacy issues: While the industry is in the process of adjusting to these changes, there are certain legacy issues under the erstwhile tax regime which have continued under GST – these include classification of certain OTC medicines as ‘drug’ or ‘cosmetics’, where ‘cosmetics’ attract a significantly higher tax rate, and, treatment of research activities outsourced to India as “exports” (i.e. zero-rated). 

The Indian pharmaceutical industry’s proven track record of achieving continuous growth amidst the challenging environment, complemented by the Indian government’s resolve and commitment to simplifying the tax and regulatory environment is a positive bell weather for this industry.However, challenges continue to loom. 

The industry has had its share of issues with the customs administration in the recent past. Some illustrations include, disputing the valuation of samples imported for non-commercial use (example, for stability testing), the controversial denial of the benefit under Served From India Scheme (“SFIS”) correlated to service exports made by Indian entities (rendering R&D services) to its foreign affiliate entities. Additionally, the extent of scrutiny of cross border transactions (including rigid country by country reporting norms) from an anti-avoidance and transfer pricing perspective, has seen a manifold increase, which is also true for indirect acquisitions of India-based entities. 

New policy initiatives by the government
  • Medical Device Rules, 2017: In an effort to promote domestic manufacturing of medical devices of world standard, the Medical Device Rules, 2017 (“Rules”) were notified on January 31st, 2017. These Rules came into effect on January 1, 2018 and should help the industry by enabling greater access to the market in India as well as abroad. Prior to introduction of the Rules, medical devices were governed solely by the Drugs and Cosmetics Act, 1940 which were not customised to suit the needs of the medical devices industry.
  • New pharma policy:This is expected to bring about exhaustive reform of rules and regulations governing pharma and medical devices with the goal of ensuring that ease of doing business and ease of living can go hand in hand. It is expected that domestic manufacturers will be given a push with policy aimed at encouraging end to end domestic manufacturing, including preference in public procurements. Also, quality control mechanisms would be gradually streamlined to foster better control over quality while at the same time removing systemic bottlenecks.
  • Protecting consumer interest: In light of heightened scrutiny by US regulators, there have been a spate of amendments to the Drugs and Cosmetics Act, 1940 which appear to be aimed at achieving stricter scrutiny of drugs by the Government before their entry into the market.
  • New pharma pricing policy: The government has sought views of experts on whether the National List of Essential Medicines (NLEM) should be linked to the Drug Price Control Order (“DPCO”), to ascertain which drugs are to come under price control and how price caps should be determined. The intent is to overhaul the drug pricing system to ensure a transparent pricing structure for essential medicines.
  • National database of pharma manufacturers: India's drug regulatory body - Central Drugs Standard Control Organization (“CDSCO”) - is creating a national digital database of pharmaceutical manufacturers and their medicines so that regulators can be more effective when acting on problems like drug shortages and quality issues.

Challenges to Indian pharmaceutical industry are manifold, and companies will have to re-invent their strategies to remain relevant in the market. Increased domestic and international regulatory compliance requirements; emerging concerns around data privacy and pricing; increasing M&A and consolidation; heightened concerns from a competition law perspective; emerging policies on pricing, etc. have all added to the headwinds faced by the industry. However, these changes, if legislated and implemented with the proper intent, should help the industry emerge as a potent force on the global landscape.

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

Vernacular E-Commerce Anyone?

Economic Times has an interesting article on the opportunities and challenges of E-Commerce in regional languages. Extracts:
About 75% of Indian internet users are expected to be regional language speakers by 2021, as per industry estimates. To reach this demographic, companies including Helion Ventures-backed Wooplr and Beenext-backed Elanic are working on launching platforms in vernacular languages including Hindi, Telugu and Tamil so sellers and buyers can engage better....
...Industry players and experts believe that re-cataloging of products in vernacular languages is a massive challenge and a major cost for established ecommerce companies. Even Paytm Mall’s platform, whose user interface is available in several vernacular languages, has a lot of its product listings in English. The KPMG-Google study reported that around 44% of Indian language users find it difficult to comprehend product description and customer reviews on ecommerce platforms. “High involvement categories like fashion and lifestyle need to invest in product description and user reviews in Indian languages,” the report stated. “Over 50% of offline shoppers are willing to access e-tailing websites if provided with end-to-end Indian language interface.”
But this makes for an expensive proposition. Experts peg the cost of creating content for each product to be at least Rs 100. “I don’t think it’s the lack of intent for established players but more about the enormity of the task of reproducing everything into multiple languages that demands high cost and resources,” said Anup Jain, managing partner at Orios Venture Partners.  

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

KPMG Tops League Table for Financial Advisor to Private Equity Transactions in H1 2018

The transaction advisory unit of KPMG claimed the top position in the Venture Intelligence League Table for Transaction Advisor to Private Equity deals in the first half of 2018, advising deals worth $1.7 Billion. KPMG acted as the financial advisor to NHAI in the $1.5 Billion investment by Macquarie to operate 9 highway projects under the toll-operate-transfer (TOT) model. Ernst &  Young (which advised the $730 million asset sale by Indiabulls Real Estate to Blackstone) and Kotak (which advised the Vishal Megamart - Partners Group deal) accounted for the second and third spots respectively.

The Venture Intelligence League Tables, the first such initiative exclusively tracking transactions involving India-based companies, are based on value of PE and M&A transactions advised by Transaction and Legal Advisory firms.

Arpwood Capital (which advised the $760 million investment by Temasek in the $2.1 Billion Schneider Electric buyout of L&;T Electrical and Automation business) and Avendus (which advised the $210 investment led by DST Global and Naspers in Swiggy) completed the Top 5 list by value.

Avendus and KPMG (7 deals) topped in terms of volume of PE deals advised, while Unitus Capital claimed the second spot advising 6 deals. IndigoEdge and Masterkey Holdings came in at third position advising 5 deals each. 

Inclusive of its roles in due diligence and related advisory activities, KPMG also topped the tables advising deals with a value tag of $2.7 Billion (across a total of 21 qualifying deals) during H1'18. EY came in at second spot advising deals worth $1.9 Billion.

By Industry

Within IT & ITeS, Avendus topped by volume and value advising 5 deals worth $575 million. By deal volume, IndigoEdge (4 deals) came in at second followed by Masterkey Holdings, Dexter Capital and Candle Partners with 3 deals each.

In Financial Services, Ambit Corporate Finance topped the table, advising the $105 million investment by Warburg Pincus in IndiaFirst Life Insurance. By deal volume, Unitus Capital topped with 7 deals worth $64 million followed by Avendus and Intellecap with 2 deals each.

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

July 23, 2018

Legal Capsule: Summary of judicial decisions defining the indirect tax landscape in India by Economic Laws Practice

Indian tax litigation landscape assures a plethora of court rulings, given the 24 High Courts and various benches of the Tribunal pronouncing verdicts on a regular basis. Broadly speaking, various issues involved in all types of indirect taxes levied (in the pre-GST era) pertained to classification, valuation, taxability, benefits of exemptions and/or Notifications/Circulars, eligibility of CENVAT credit, input tax credit, refund/rebate/drawback, availability of various schemes under the Foreign Trade Policy for the promotion of exports from India, constitutionality of entry tax, etc. These issues inter alia constitute the major litigation defining indirect taxes landscape in India.

Pursuant to the roll out of GST wef 01 July 2017, the judiciary has been instrumental in disposing of the cases in relation to the erstwhile legislation expeditiously. New Tribunal Benches have been formed and Tribunal Members have resorted to faster ways of disposal of cases by clubbing matters involving similar issues and bulk disposals. Adjudicating authorities and First Appellate Authorities have been transitioned into GST regime and rigorous training is imparted for faster understanding of the new legislation and resolution of queries/issues.

A few of the recent landmark judgments have had industry-wide ramifications for the indirect tax landscape in India. These are summarised below.

State of Kerala & Others vs. Fr. William Fernandez & Others


Supreme Court upholds levy of entry tax on imported goods - 'Origin' of goods held as irrelevant for chargeability of taxes 
  • The Supreme Court of India (“SC”)upholds levy of entry tax on goods imported from outside the country into local areas for consumption, use or sale, under entry tax acts of Orissa, Kerala and Bihar.
  • Concludes that “goods imported after having been released from customs barriers are not immune from any kind of State Taxation, which fall equally on other similar goods”, thus rejecting the assesses’ contention that such immunity shall continue till goods reach the premises where they are to be taken for consumption, sale and use. 
  • Legislation is concerned only with entry of goods into a local area for consumption, use or sale, and the ‘origin’ of goods has no relevance with regard to chargeability of entry tax.
  • This judgment is likely to force companies to reassess their sourcing and supply chains and re-visit pricing for goods being imported for local consumption in an area.

Commissioner of Trade & Taxes, Delhi vs. Arise India Ltd. 


Supreme Court upholds High Court’s quashing of Input Tax Credit disallowance to bona-fide purchaser for seller's default. 
  • SC dismisses Revenue’s Special Leave Petition and refuses to interfere with order of Delhi High Court (“HC”) that held Section 9(2)(g) of Delhi VAT Act - to the extent it disallows Input Tax Credit (“ITC”) to purchaser due to default of selling dealer in depositing tax - as violative of Articles 14 and 19(1)(g) of the Constitution of India.
  • According to the HC, Section 9(2)(g) gave a free hand to Department in deciding to proceed either against the purchasing dealer or selling dealer. In the present instance, the defaulting party was the selling dealer for which the purchasing dealer was expected to bear the consequence. HC observed that failure by Legislature to distinguish between bona fide and non-bona fide purchasing dealers resulted in Section 9(2)(g) applying equally to both the classes of purchasing dealers, which was certainly hit by Article 14 of Constitution.
  • SC grants liberty to Revenue to move the HC with particulars of cases where purchase transactions are not bona-fideto have the matters therein remitted back to the competent authority.
  • This judgement is a big relief to all the bona-fide purchasing dealers across different industries, who could otherwise be held liable for default by the selling dealers

M/s JSW Energy Limited (Maharashtra) 

Advance Ruling Authority [No. GST-ARA-05/2017/B-04]
  • The conversion of coal (supplied by M/s Jindal Steel Limited to the Applicant) into power is considered to be a “manufacture” under GST Act as the product undergoes a complete transformation and electricity is a new commodity which is delivered to M/s Jindal Steel Limited.   
  • Supply of power by the Applicant is not covered under the ambit of job work and shall be considered as a supply between related persons. 

M/s Deepak & Co. (New Delhi) 

Advance Ruling Authority [No. 02/DAAR/2018]
  • Supply of food served on-board trains shall be considered as pure supply of goods and levied to GST according to individual GST rates
  • Supply of newspaper shall attract ‘nil’ rate of GST in accordance with Notification No. 2/2017-Central Tax (Rate) dated June 28, 2017
  • Supply of food in stalls of platform at the rates fixed by Indian Railways shall be classified as “supply of goods” and not as “supply of service” and leviable to individual rates

These cases are shaping the indirect tax framework in the post-GST era in India and are vital for providing clarity to many of the new provisions under this Act. Tax Litigation in India is in a volatile state at present; however, with time, many of the issues will stabilize and a cleaner and a transparent system as envisaged by the Government. The ‘One Nation One Tax’dream is on its way to be realised.

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

July 18, 2018

Legal Capsule: Defence & Aerospace: Analysing the Opportunity in India by Economic Laws Practice

Driven by an ambition of creating a local military-industrial complex in India, Defence & Aerospace has been a priority sector for the government over last several years and has been the subject of frequent policy and regulatory updates in response to various industry concerns. Along with large procurement programs, the urgent need to focus on war preparedness – as highlighted by an internal report submitted by Minister of State for Defence last year – is expected to boost the business case for creating an even more enabling framework for private sector participation. 

There are several encouraging signs:

Swifter decisions by Defence Acquisition Committee for purchasing equipment for the armed forces (many of these purchases are being made from Foreign OEMs and Ordnance Factories to enable quicker deliveries, followed by a ‘Make-in-India’ purchase)
Delegation of power to Secretary (DP) for Tier I sub-vendors in certain specified scenarios, and to Army Commanders for securing bases of armed forces
Formation of a high-level ‘Defence Planning Committee’ under the Chairmanship of National Security Advisor and membership of the Foreign Secretary, three Service Chiefs, and the Secretary (Expenditure), Ministry of Finance, to draft the national security strategy and facilitate a comprehensive and integrated planning for defence matters, including in-country capacity creation
In a clear indication of its desire to focus on exports of indigenous equipment, India invited all of its 44 ‘Defence Attaches’ posted across the world for a specialised briefing along the side lines of the recently concluded DefExpo 2018, for exploring new markets for indigenous defence equipment and promoting ‘Make-in-India’ (India is already in talks with Vietnam for export of its Akash Surface to Air Missile)

Emerging opportunities for the industry

The Government has taken many encouraging steps to bring the defence manufacturing sector out of its present state of inertia; however, the effects of these steps will only be felt in the medium to long term. The present focus on purchase of arms and ammunition is succinctly limited to addressing the immediate war preparedness. This, however, will not yield the desired results for the market stakeholders – India’s Ministry of Defence(“MoD”)and Armed Forces to achieve the much-elusive self-reliance and the Industry (both foreign and Indian) to have enough orders to keep their factories running. To this end, the following developments are noteworthy:

FDI liberalisation: A much-awaited decision pertains to increasing the FDI cap from the present 49% to now 74% - this proposal is contained in the Defence Production Policy 2018, a draft of which was circulated by Department of Defence Production (“DDP”), Ministry of Defence for comments to the public. However, the draft has not yet been notified in light of conflicting views from the industry. If this proposal gets notified, a significant number of concerns envisaged by foreign defence manufacturing companies are likely to be addressed under India’s corporate laws framework applicable to 74% holding structures. Concerns of domestic industry, however, are not misplaced and will need to be resolved. 
Swifter discharge of offset obligations: The government has invited comments on Draft Modifications to Defence Offset Guidelines wherein the Ministry of Defence has proposed three additional avenues for discharge of offsets (investment in Specified Projects, invest in defence manufacturing through equity investment, and investment in specified SEBI regulated Funds for Defence, Aerospace and Internal Security), which, if notified, are likely to ease access to funds and technology and benefit foreign vendors by providing quicker ways of discharging offset obligations. Furthermore, a draft amendment modifying the Offset Procedure proposes very high multipliers (4/5) for all investments made in the Defence Industrial Corridors towards discharge of an OEM’s offset obligation.
Announcement to setup Defence Industrial Corridors: In February 2018, Government of India announced setting up of Defence Industrial Corridors (“DIC”) in two states in India (Tamil Nadu and Uttar Pradesh). Investment in these Corridors is likely to attract many incentives such as 10-25% reimbursement of land cost, 70-90% GST reimbursement, etc., details of which are under finalisation- Defence Production Policy 2018 - This Policy was expected to be publicly announced and notified at DefExpo 2018 in Chennai earlier this year. When notified, the Policy has several measures including Competency Mapping of Indian Industry, simplifying MAKE II procedure, liberalising licensing norms, including lifetime support for large platforms which would enable making a credible business case for Industry, etc. and stands to benefit all the stakeholders in the industry.

The Road Ahead

While there are several positive developments that signal the Government of India’s increasing business-friendly attitude toward this sector, legacy issues persist. The government had earlier introduced the ‘Make’ procedure under DPP 2006 for boosting indigenous defence manufacturing – as it happened, not a single program was finalized under this initiative. The recent ‘Strategic Partnership’ model – introduced with much fanfare as the ‘mother of all out-of-box policies’ – seems set for a similar fate with the first RFI issued under this program already awarded to Mazagon Dock Shipbuilders Ltd, a Defence Public Sector Undertaking. 

These developments have further boosted the industry’s scepticism on the government’s intent and have been quite a pushback to Government’s intent to induce pace in this sector. While focusing on immediate preparation for a worst-case scenario of a two-front war is critical, Government of India will need to be mindful of its long-term aim for the sector at large and thus will have to take concrete, definitive steps to reassert its intent to the Industry.

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

July 16, 2018

Legal Capsule: International Trade – Sectoral Highlights from India by Economic Laws Practice

Per the latest economic data, India’s global trade has increased by 16.32% to USD 767.9 billion in 2017-18. As India continues to create a modern, vibrant economic framework for business, developments in international trade law can have far-reaching impact on local companies and their competitiveness on the global stage. This risk gets even more amplified in light of India’s growing integration in the global economy. Notable highlights pertaining to several emerging industrial sectors are enumerated below:

Electric Vehicles

  • Government of India (“GoI”) is likely to extend incentives to the tune of USD 1.4 billion for promoting use of electric vehicles under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (“FAME”) – II Scheme
  • The GoI is planning to offer capital investment subsidy of 20% - 25% (proposal is currently awaiting cabinet approval)
  • While this surely will augment the market for electric vehicles in India, it remains to be seen whether the scheme would have any domestic content requirement which may trigger WTO-incompatibility issues

Textiles and Clothing

  • India acquired export competitiveness in textiles by crossing the 3.25% threshold in 2010. As per WTO law, it is expected to phase out export subsidies in this sector by the end of 2018
  • The GoI is currently devising strategies for subsidising to producers/ exporters that will be compliant with WTO law 
  • While it remains to be seen what programs/schemes are formulated by the GoI, the Indian textile sector would need to compete aggressively in the world market once the current subsidies are phased out

  • India is one of the fastest growing B2B and B2C e-commerce markets. The recent Walmart-Flipkart deal proves the huge potential of this market in India
  • While India formally opposed any new negotiation on e-commerce at MC11 until the outstanding issues of Doha Ministerial Agenda are resolved, it has ignited discussions to set-up a task force to finalize comprehensive set of recommendations by September 2018
  • The task force includes representatives from several technology and e-commerce players. This is a good time to file representations before the GoI to put forward views of various stakeholders, given the complexities surrounding e-commerce, including customs clearance, data localisation, market access and consumer protection  

Renewable Energy 

  • India has developed one of the world’s largest renewable energy program with an ambitious target of developing a capacity of 175 GW by 2022
  • While the DSB report in DS 516 required India to phase-out subsidies contingent on domestic content requirement, the GoI has been planning to come up with WTO-consistent support schemes to incentivise solar cells/modules manufacturers and solar power developers
  • Industry can expect few schemes/programs soon from the GoI making this market more attractive for global renewable energy players to set up manufacturing facilities in India

Electric and IT Equipment manufacturing and Make in India 

  • Indian electrical equipment industry exceeded USD 25 billion and contributes nearly 1.5% of India’s overall GDP 
  • The GoI has promulgated a Preferential Market Access (“PMA”) policy for electronic products. The policy provides preferences to domestically manufactured electronic products. This is WTO consistent till such time that the GoI uses the procured products without a view to commercial resale or use in production of goods for commercial sale   
  • To promote manufacturing in India, the GoI, in February 2018, hiked customs duties on certain IT products, including smartphones and smartwatches, by 15-20%
  • WTO Members have raised their concern on this increase as they view it as being inconsistent with India’s obligations under the Information Technology Agreement of the WTO    

WTO Challenge to India’s export subsidy schemes

  • The United States has complained and alleged that some of the key exports subsidies of India under its Foreign Trade Policy including Export Oriented Unit, Special Economic Zones scheme and Merchandise Exports from India scheme are prohibited export subsidies
  • The consultations between both countries have been concluded and a formal request by the United States to establish a panel is likely to be placed on DSB agenda sometime in 2018
  • Should India be unable to defend its schemes successfully, it would have major ramifications on India’s foreign trade policy and would require a complete overhaul of its subsidy programs

India’s Public Procurement and Preferential Markey Access Policies  

  • In 2017, the GoI introduced a public procurement policy with an aim to promote manufacturing and production of goods and services in India   
  • The policy, which includes domestic content requirements, is currently being used by the railways and defence sectors
  • To the extent that procurement is limited to governmental agencies, this scheme is consistent with India’s commitment at the WTO. Presently, India is not a signatory to the WTO Government Procurement Agreement  Notably, this policy should not be confused with the PMA policy which has been adopted for the electronics, steel and telecommunication sectors 

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

July 03, 2018

Legal Capsule: General Data Protection Regulation: Impact on India-based businesses by Economic Laws Practice

General Data Protection Regulation (“GDPR”), approved and adopted by European Parliament in April 2016, is a ‘rights based’ data protection model which allows the users to have greater rights over his/her data.  This came into force on May 25, 2018 GDPR and is today an important topic for most businesses, given the extra-territorial reach of these regulations. This article explores some of the key facets of GDPR and highlights pertinent points.

  • Applicability:Primarily, GDPR lays down rules in relation to protection of natural persons with regard to their personal data. The GDPR is applicable not only to organisations located within the European Union (“EU”), but also applies to organisations located outside of the EU if they ‘process’ personal data of EU subjects as a ‘controller’ or a ‘processor’, and where the processing activity relates to (a) offering of goods or services (including for free) to data subjects in EU; or (b) monitoring theirbehaviour if the behaviour takes place within EU.
  • Processing of personal data:‘Processing’ in the context of GDPR means any operation or set of operations which is performed on personal data or on sets of personal data, whether or not by automated means, such as collection, recording, organisation, structuring, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, restriction, erasure or destruction.
  • Data Protection Principles: GDPR lays down specific data protection principles for processing of personal data. Each ‘controller’ and ‘processor’ needs to ensure that the personal data is (a) processed lawfully, fairly and in a transparent manner, (b) collected for a specific, explicit and legitimate purpose, (c) adequate, relevant and necessary in relation to the purposes for which it is collected, and (d) accurate and is kept up to date. There is not only a requirement to comply with the prescribed principles but the ‘controller’ should be able to demonstrate the compliance.
  • Obligation to comply with GDPR: The obligation to comply with the above principles is not only on the entity collecting personal data of EU subjects but also the entity which stores, transmits, alters, uses such personal data on behalf of the data controller.
  • Lawful data processing under GDPR: Data processing will be considered lawful under GDPR if the data subject has given consent to the processing of personal data for one or more specific purposes. But mere consent of the data subject is not sufficient. The controller shall be able to demonstrate that the data subject has provided the consent. The request for consent by the controller shall be presented in a manner which is clearly distinguishable from other matters, in an intelligible and easily accessible form, using clear and plain language.[2] The data subject shall also have the right to withdraw his/her consent at any time, and it shall be as easy to withdraw consent as it is to give consent.
  • Sensitive personal data: Information which is considered specifically sensitive such as racial or ethnic origin or physical or mental health condition etc. cannot be obtained, stored, transmitted, processed, unless explicit consent for processing of such personal data has been provided by the data subject for one or more specified purposes.

Thinking Ahead to Minimize Exposure And Liabiities

Key takeaways for India-based organisations

The world’s 500 biggest corporations are on track to spend a total of $7.8 billion to comply with GDPR, according to consultants Ernst & Young.[3] In light of the significant compliance cost and burden, companies need to start thinking about the impact on their business model and pricing strategies.

GDPR provides the data subjects greater access to ascertain the manner in which their data is processed. Each controller is now required to maintain a record of processing activities under its responsibility and there are stringent conditions prescribed for notification of the personal data breaches. Given the strict compliance norms and the quantum of penalty involved, it has become imperative for organizations to have dedicated teams for ensuring ongoing GDPR compliance.

GDPR’s extra-territorial application could potentially have a significant impact on Indian organisations, making it critical for companies to analyseand assess whether GDPR is applicable to them. The sectors which are most likely to be affected are IT and ITeS services, business process outsourcing (BPO) units, e-commerce companies catering to customers in EU etc. 

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

July 02, 2018

Legal Capsule: Emerging Trends & Issues under the Insolvency & Bankruptcy Code, 2016 by Economic Laws Practice

India’s jump from Rank 130 to 100 in World Bank’s ease of doing business rankings can be largely attributed to various legal reforms in the country, including the Insolvency and Bankruptcy Code, 2016 (“IBC”), which has been notified with a vision to resolve the rampant insolvency situation.

IBC essentially provides for revival of insolvent corporate entities through a corporate insolvency resolution process (“CIRP”) in a time bound manner, failing which such entities undergo liquidation. Over the past one and half years, IBC has proved instrumental in addressing the corporate insolvency situation in the country. However, several crucial issues have emerged under IBC framework. With a view to address some of those issues, the Government of India promulgated the Insolvency and Bankruptcy (Amendment) Ordinance, 2018  (“2018 Ordinance”) on 6 June 2018. Despite this move, certain issues still remain unresolved and require proper analysis. A few critical points are discussed below.

  • In practice, is the process time-bound? Even though IBC lays down that the CIRP has to be concluded within a period of 270 days (including an extension of maximum 90 days), the adjudicating authorities under IBC, namely the National Company Law Tribunal (“NCLT”) and the appellate body, National Company Law Appellate Tribunal (“NCLAT”), across various jurisdictions have started to allow exclusion of certain days from computation of this period ‘if the facts and circumstances justify such exclusion’, largely due to increased litigation on various unsettled issues under IBC. The NCLAT has also laid down a few grounds as illustrations for claiming such exclusion (for example, if CIRP is stayed, or resolution professional is not functioning). This has made strict adherence to the timelines contemplated under IBC a practical challenge. The press release issued by the Government  with respect to the 2018 Ordinance stated that further clarity would be brought about vide regulations laying down mandatory timelines, processes and procedures for CIRP by addressing some of the specific issues including non-entertainment of late bids, no negotiation with the late bidders and a well laid down procedure for maximizing value of assets. The existing regulations,once amended, to bring in place the proposed strict timelines will need to be examined.

  • Is the Limitation Act, 1963 applicable to proceedings under IBC? The law relating to limitation of suits and other legal proceedings is covered under the Limitation Act, 1963 (“Limitation Act”). IBC earlier did not clearly set out whether the Limitation Act was applicable to the proceedings under it. Though NCLAT had in the matter of Speculum Plast Private Limited. v/s PTC Techno Private Limited (Speculum Case) held that the Limitation Act was not applicable to the proceedings under IBC, an appeal was referred to the Supreme Court. Pending the appeal, the 2018 Ordinance has shed some light on this issue by making the provisions of the Limitation Act applicable to the proceedings under IBC. The status of various applications pending before the NCLTs and pending appeal before the NCLAT or the Supreme Court may need to be seen in view of this newly inserted provision, especially since the new provision does not clarify whether the pending applications are protected under this provision. Also, the status of various applications which could not be filed in light of the Speculum Case, needs to be clarified. Interestingly, the NCLAT in the Speculum Case had observed that even if the Limitation Act were to be made applicable to IBC, the period of limitation of 3 years as per the Limitation Act would begin to run from the date when the right to apply under IBC accrued, i.e. 1 December 2016 (when IBC was notified). If the NCLTs take a cue from these observations of the NCLAT, could it mean that virtually no application can be rejected on the grounds of expiry of limitation period until 1 December 2019 or 3 years from the date of enforcement (6 June 2018) of the 2018 Ordinance?

  • Obligations on the insolvency professional? IBC has provided various obligations upon an insolvency professional including keeping the corporate debtor as a going concern. In addition, the 2018 Ordinance has cast another responsibility for complying with the requirements under any law for the time being in force on behalf of the corporate debtor. In many instances, the regulator (Insolvency and Bankruptcy Board of India) has imposed penalties on insolvency professionals who have failed to comply with their obligations. However, as a practical matter, insolvency professionals (being individuals) may find it difficult to ensure strict compliance with IBC rules and regulations therein, as sole responsible persons appointed for the purpose. We may expect a change in the existing rules and regulations permitting a corporate body or a firm to be appointed as an insolvency professional to run the CIRP. Such an amendment would enable safeguarding and ring fencing the value of a corporate debtor under CIRP. 

  • Mandatory sale of shares of existing shareholders in a resolution plan? As per the provisions of IBC, a resolution plan may provide for the measures required for implementing it, including but not limited to the substantial acquisition of shares of the corporate debtor. It will be an interesting situation to see whether a contemplation in the resolution plan to require the sale of shares of an existing shareholder/promoter can be made binding against such shareholder/promoter, especially as IBC makes the resolution plan binding against the shareholders. In fact, IBC also provides that a provision in a resolution plan which would otherwise require the consent of the members or partners of the corporate debtor, under the terms of the constitutional documents of the corporate debtor, shareholders’ agreement, joint venture agreement or other document of a similar nature, shall take effect notwithstanding that such consent has not been obtained. These provisions seem to largely undermine the rights of the shareholders of the corporate debtor, especially when IBC has been introduced as a non-obstante law.

  • What are the difficulties in withdrawing an application under IBC? Until the 2018 Ordinance, the language under IBC did not specifically provide for withdrawal once a petition for initiation of CIRP against a corporate debtor was admitted. Many parties had explored the settlement options after their cases were admitted. The NCLAT and Supreme Court of India had also allowed withdrawal on a case-by-case basis, which led to plethora of litigations. The Supreme Court had been exercising its powers under Article 142 of the Constitution of India (which gives it the power to pass orders for doing complete justice) to allow withdrawal. The 2018 Ordinance now provides for withdrawal after admission of an application under IBC, subject to the approval of the Committee of Creditors (“COC”) with 90% of the voting share. Since the procedure for such withdrawal has not been laid down yet, it will be interesting to see whether this mechanism proves viable, in practice. Also, keeping such a high threshold for withdrawal may pose practical difficulties, especially for operational creditors who do not form part of the committee of creditors.

  • Whether moratorium is applicable to personal guarantor? IBC provides for applicability of ‘moratorium’ upon the admission of an application by the NCLT against a corporate debtor. The moratorium is essentially a period wherein no suits or proceedings for recovery, enforcement of security interest, sale or transfer of assets, or termination of essential contracts can be instituted or continued against a corporate debtor. However, whether personal guarantee of the corporate debtor can be invoked pending the proceedings under IBC and in the light of the moratorium, was a question that created a lot of stir. While the Allahabad High Court in Sanjeev Shriya v/s State Bank of India & Ors, and Deepak Singhania & Anr v/s State Bank of India, (“Sanjeev Shriya Case”) vide order dated 6 September 2017 had answered the question in negative, with the ratio that while the liability of guarantors is co-extensive, but the entire proceeding which is going on before IRP under IBC is still in fluid stage and for the same cause of action, two split proceedings cannot go simultaneously before the debt recovery tribunal as well as NCLT. The 2018 Ordinance has intended to resolve the confusion, by stating that moratorium shall not apply to the surety in a contract of guarantee to a corporate debtor. This move could, however, give rise to multiple parallel proceedings as certain creditors would choose to rather invoke the guarantee than wait for CIRP to conclude. This might also lead to reconstitution of many COCs which have already been formed. It will also be interesting to see how the guarantors parallelly run two proceedings in light of the ratio of Sanjeev Shriya case.

  • Whether operational creditors have any say in CIRP? As per IBC, the resolution plan requires approval from the COC which is constituted of financial creditors only even if there are operational creditors; however, in case there are no financial creditors, the COC comprises of operational creditors. There can be circumstances where a corporate debtor may have higher exposure of operational debt than financial debt – in such a scenario, it is not right to allow only the financial creditors to have the ability to adopt or reject a resolution plan.The 2018 Ordinance has in fact brought the allottees of any real estate project within the ambit of the “financial creditors”. Such allottees would also enjoy the rights available to a financial creditor such as forming a part of the COC and voting during the CIRP, but the operational creditors have been kept out of it.

  • Criteria for eligibility of ‘resolution applicant’: too stringent? With an aim to put in place certain safeguards to prevent unscrupulous, undesirable persons from misusing or vitiating the provisions of IBC, amendments have been made vide the Insolvency and Bankruptcy Code (Amendment) Act, 2018 and further by the 2018 Ordinance, to IBC to keep-out such persons who have wilfully defaulted, or are associated with non-performing assets, or are habitually non-compliant and, therefore, are likely to be a risk to successful resolution of insolvency of a company. However, the grounds for eligibility of such a resolution applicant have been made quite stringent – given that the amendment is new, and its effects are still being tested, there is an apprehension that it might become impractical for bona-fide resolution applicants to submit a resolution plan, thereby defeating the spirit of IBC for revival of insolvent corporate entities. The 2018 Ordinance however states that the eligibility criteria as amended thereunder shall apply to the resolution applicant who has not submitted a resolution plan as on 6 June 2018. It would mean that the eligibility criteria applicable to the resolution applicants who have already submitted a resolution plan would be different from the eligibility criteria applicable to the resolution applicants who are yet to submit a resolution plan vis-à-vis the same corporate debtor. This might lead to an unfair advantage to certain resolution applicants over the others, so far as their eligibility criteria is concerned.

  • Special resolution (75%) under Section 10 (suo-moto initiation of CIRP by corporate debtor)? Section 10 of IBC contains a provision whereby the corporate debtor itself can file an application for initiation of CIRP. This provision was earlier misused by certain promoters to avoid the attachment of their personal property which was secured against the loan facilities availed by the corporate debtor by obtaining an order of admission and hence moratorium. In order to rectify this shortcoming, the 2018 Ordinance has inserted a requirement of special resolution of the shareholders of the corporate debtors to trigger insolvency resolution under Section 10 of IBC. Given that this change is in nascent and has not been tested, in case of a typical joint venture structure (51%-49%), just one JV partner of a loss making JV may find it difficult to invoke the provisions of Section 10 of IBC for initiating CIRP.


IBC has brought about various welcome changes in the insolvency regime in India, such as incorporation of insolvency professional entities (“IPE”), through which both Indian and foreign insolvency professionals can provide services, thereby increasing the pool of talented and experienced insolvency professional in the country.  In fact, IBC also contemplates and contains provisions whereby the Indian Government can enter into bilateral treaties with other countries for application of IBC to assets or property situated outside India.  

Further, with a view to boost the micro, small and medium sector enterprises (“MSME”), the 2018 Ordinance has empowered the Government of India to provide a special dispensation under IBC. The immediate benefit it would provide is that, it would not disqualify the promoter to bid for his enterprise undergoing CIRP, provided he is not a wilful defaulter and does not attract other disqualifications not related to default. It has also empowered the Central Government to allow further exemptions or modifications with respect to the MSME Sector, if required, in public interest.

Though it is true that there are various gaps which need to be filled and various practical difficulties which need to be addressed under IBC, it has so far proved to be effective in meeting its purpose. As this law evolves, it is likely to further boost India Inc’s corporate governance practices and help the country optimally address the widespread problem of mounting corporate debt.

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.