Payment Companies perplexed on data localization

January 8, 2019
ISSUE No. 02
January 08, 2019



India: Payment Companies perplexed on data localization

The Payment Companies perplexed on data localization


The increased level of technological advancement can be witnessed from the fact that most of the transactions which were carried out manually or with much effort have now been switched with readily available and user friendly electronic equipments. Likewise, there has been development of the banking industry (also referred to as “payment companies”) which have resorted to the e-media. This simplified modern payment mechanism has allowed the people to purchase nearly all available goods/ services at the click of a button. Considering the sensitivity of the nature of the transactions involving money, such systems necessitate adoption of best safety and security measures on a continuous basis.

RBI regulations for E-payments

The Reserve Bank of India (hereinafter referred to as “RBI”), vide its notification dated April 6, 2018[1] imposed data localization (hereinafter referred to as “RBI regulation”). The RBI regulation requires all system providers to ensure that the entire data including the complete transaction details and information regarding the payment instruction relating to payment systems operated by them, are stored in a system only in India till October 15, 2018.

RBI introduced the said RBI regulation with a view to have unfettered supervisory access to data stored with these system providers as also with their service providers / intermediaries/ third party vendors and other entities in the payment ecosystem for better monitoring of the payment transactions in India.

Hurdles to the International Payment Companies

The challenge posed by the RBI regulation to foreign payment companies operating in India are that these entities have no servers or data centres in India. Setting up of such servers in India and data centres creation would be both expensive and time-consuming. Also, in order to route the information collected and sent to the foreign
countries would raise the administrative cost and compliance burden for such companies.

Union Government’s permission

The Union Government, is open to allowing companies to store their data outside the country while keeping a copy in India.


In view of the present scenario where ambiguity persists owing to RBI regulations on one hand and Union Government’s policies on the other, revised notifications from RBI regarding data localization by the payment companies are awaited before the expiry of the deadline provided in the RBI regulation.[2]





India: Fabindia agrees not to use ‘Khadi’ for their products anymore

Bombay HC

Khadi, is handspun, handwoven natural fiber cloth from India and some parts of Bangladesh and Pakistan, mainly made out of cotton. Colloquially, depending upon the Geographical region, it is also known as Khaddar. The cloth is usually woven from cotton, and may also include silk, or wool, which are all spun into yarn on a spinning wheel called a charkha. It is a versatile fabric, cool in summer and warm in winter. In order to improve the look, Khadi is sometimes starched to give it a stiffer feel and is widely accepted in fashion circles.

In India, Khadi is being promoted by Khadi and Village Industries Commission, under the patronage of the Ministry of Micro, Small and Medium Enterprises. The Khadi and Village Industries Commission (hereinafter referred to as the ‘KVIC’) is a unique statutory body formed by the Government of India, under the Khadi and Village Industries Act, 1956. The Statement of Objects and Reasons of the Act states that, the organization is constituted to ‘plan, promote, facilitate, organise and assist in the establishment and development of Khadi and village industries in the rural areas in coordination with other agencies engaged in rural development wherever necessary’.

Recently, during the month of May, KVIC filed a case against Fabindia at the Bombay High Court claiming INR 525 crore in damages for the unauthorized use of the ‘Khadi’ mark. The Khadi mark is registered as a trademark (bearing Registration Number 2851551) in India by KVIC and the Commission has also sought a Geographical Registration Protection (bearing Registration Number 492) over the same.

This is not the first instance of misuse of the Khadi mark by a commercial entity. As the table below lists down, there is a growing trend world over of entities applying for registration of the trademark ‘Khadi’.

Registration Number
Mark Country Registration Number Class Applicant Name Date of Application
Khadi Turkey 2016-08891 3 Khadi Naturprodukte GBR February 2, 2016
Khadi Germany 3020110340617 3, 30, 44 BNP Best Natural Products GmbH June 22, 2011
Khadi Argentina 3475609 24 Vazquez, Graciela Norma February 2, 2016
Khadi Italy 0000874985 3,8,14,18,25 Fusco Argenti S.R.L. August 6, 1999
Khadi United Kingdom UK00003295463 3 Claudia Williams March 8, 2018
Khadi Cash & Carry Market France 4192955 29 M. Mouiz Khalbous June 29, 2016

For instance, in Germany, a foreign company, BNP Best Natural Products GmbH, was granted a trademark over Khadi, thereby allowing the use of Khadi by the German company without paying any compensation to the community of Khadi weavers in India. The ongoing legal battle over Khadi involving Fabindia also led to a recent meeting by the Indian government that plans to promote Khadi as an Indian brand abroad to prevent further misappropriation of the Khadi mark.

The use of the Khadi mark (without the authorization of the KVIC) by commercial entities amounts to an infringement of KVIC’s trademark and a loss of licensing fee payable to KVIC for the use of the Khadi mark.

KVIC’s dispute with Fabindia goes back to 2015 when it first asked Fabindia to stop making unauthorized use of the Khadi mark. Despite giving assurances to KVIC that it would not use the Khadi mark, Fabindia continued using the Khadi mark without taking a licence from KVIC (the trademark owner of Khadi). KVIC sent a legal notice to Fabindia in February 2017 and finally filed a case at the Bombay HC to resolve the matter. Under the Khadi Mark Regulations, 2013 (issued by the Ministry of Micro, Small and Medium Enterprises), only those entities/individuals which sell genuine Khadi can use the Khadi mark tag/label.

Finally, on August 28, 2018, news broke out, that Fabindia has informed the Bombay High Court that it will not use the term “Khadi” in their current or future products. The Counsel representing Fabindia, informed the court that the company is currently not using the word “Khadi” for its products, and even if they want to use it in the future, they will give four weeks’ advance notice to KVIC. Hon’ble Justice S.J.Kathawala, who was hearing the case had accepted the undertaking of the company.



India: Environment Ministry creates awareness about Green Good Deeds

Environment Ministry creates awareness


Mother nature has bestowed human life with numerous blessings including access to breathable air, thirst quenching water resources, scenic beauty to adore, flora and fauna to cater the need of satisfying hunger as well as developing symbiotic association with them. With the passage of time, human greed has increased to such an extent that it is being harmful to nature itself.

Environment & its regulation

Environment includes water, air and land and the inter- relationship which exists among and between water, air, land, and human beings, other living creatures, plants, micro-organism and property (Section 2(e), Environment Protection Act, 1986). In order to protect and improve the environment, the Environment Protection Act, 1986 (hereinafter referred to as “the Act”) was enforced.

The Government regulates the environment protection activity through its nodal agency, the Ministry of Environment, Forest and Climate Change (hereinafter referred to as “MoEFCC”) through implementation of various environmental, forestry and biodiversity conservation programs and policies. The MoEFCC, works towards prevention and control of pollution, protection of the environment and conservation of forests and wildlife, afforestation and regeneration of degraded areas, welfare of animals, etc.

Green Good Deeds Campaign

The Union Ministry of Environment, Forests and Climate Change (MoEFCC) launched Green Good Deeds campaign (hereinafter referred to as “the campaign”) on February 3, 2018, with the objective to sensitise the people about climate change and global warming and to inculcate their participation in the protection of the environment. The campaign focuses on small deeds which each individual may adopt and thus voluntarily join the cause of preserving the environment.

In furtherance of the above, the MoEFCC, has audio-visual creatives in the form of jingles, pleas, etc. to reach out to the people so that awareness is created among people regarding their responsibility towards the environment, impact of the recent environment crisis and the urgency to resolve such issues. These audio-visual creatives emphasize on saying no to plastic, air pollution and saving water. The MoEFCC vide its recent notification works towards the creation of awareness with the help of the broadcast of the aforesaid audio-video creatives.

With a view to contribute towards safeguarding the environmental interests, the MoEFCC is constantly adopting approaches to create greater consciousness among the larger segment of the society towards the obligations in respect of the environment safety and development.



India: Flying drones to be legal in the Country beginning December!!

The Flying drones to be legal in the Country

Flying of Remotely Piloted Aircraft System (hereinafter referred to as the ‘RPAS’) or in common parlance, Drones, will be legal across India from December 1, 2018. The Ministry of Civil Aviation has finalised a national drone policy and has fixed parameters – including height – for drone flights. From the outset, the policy outlines a No Drone Zones. The regulation defines “No Drone Zones” as areas around airports, near international border, Vijay Chowk in Delhi, State Secretariat Complex in state capitals, strategic locations, vital military installations, etc.

Previously, the use of drones was limited to the military. The first large scale use of drones were in 1959, when the US Air Force, concerned about losing pilots over hostile territory, began planning for the use of unmanned aircraft. Since then, the commercial drone industry has undergone significant technological developments. There have been efforts to regulate the use of UAS to ensure that safety measures are in place even as the industry is seeing an increase in the number of commercial drones being used for defense, agriculture, filming and weather monitoring among others.

The term unmanned aircraft system (hereinafter referred to as the ‘UAS’) was adopted by the United States Department of Defense and the United States Federal Aviation Administration in 2005 according to their Unmanned Aircraft System Roadmap 2005-2030. It is broadly defined as, “powered, aerial vehicle that does not carry a human operator, uses aerodynamic forces to provide vehicle lift, can fly autonomously or be piloted remotely, can be expendable or recoverable, and can carry a lethal or non-lethal payload.

Last year, the Directorate General of Civil Aviation (hereinafter referred to the ‘DGCA’) on November 1, 2017, released a draft regulation, calling for public comments and stipulating the requirements for Operation of Civil Remotely Pilot Aircraft System. Prior to that the DGCA had on October 7, 2014 released a public notice banning the use of UAS in the country. The notice for the first time recognized the menace of drones and acknowledged the underling safety and privacy issues in it.

As per the regulations, to be effective from December 1, all civilian drone operations will be restricted only during day time and flying will be restricted within visual line of sight which usually would be 450 metres. Except nano drones and those owned by National Technical Research Organisation and Central Intelligence agencies, the rest would be registered and issued Unique Identification Number.

However, the guidelines in the current form prohibit flying of drones that are not in the operator’s visual line of sight that restrict various applications such as carriage of goods or passengers. The government has identified 23 sites across the country where the drone technology will be put to extensive use to evaluate its further usage.

The registration of the drones, permission to fly will be done digitally through the ‘digital sky platform’, connected to local police, which will implement “no permission, no take off”. The DGCA in its guidelines has also detailed the requirements that manufacturers need to equip the drones with without which the regulator will not clear the aircraft for flying. These are inclusion of the “no permission, no take off” feature and a facility to take over a rogue drone.



India: Licensed Organic Foods

Licensed Organic Foods

Increasing awareness about the benefits of healthier lifestyle has led to the deviation towards proper eating. More and more people are incorporating organic foods in their diet owing to the fact that their cultivation does not involve use of any chemicals or fertilizers thereby having high nutrition content.

Since the market for organic products has expanded to a great extent, Food Safety Standards Authority of India (hereinafter referred to as “FSSAI”) regulates the sale of such products in India through the Food Safety and Standards (Organic Foods) Regulations, 2017, (hereinafter referred to as “the Regulations”). These FSSAI regulations monitor all aspects of the organic products in the Indian market including their manufacture, packaging and sale.

Vide notification dated July 29, 2018, FSSAI laid down the following guidelines in respect of organic products in India:

  • Use of non-detachable stickers with respect to FSSAI’s organic logo have been allowed for organic products till September 30, 2018.
  • The business operators involved in manufacturing/ processing or handling of organic products in India are required to obtain license under Food Safety and Standards Act, 2006 or get the organic food license endorsed under the Food Licensing and Registration System till September 30, 2018.

The increasing demand of organic products is attributable to their high nutritional value and to the fact that at the same time it is devoid of the harmful impact of any non-natural source of growth. The recent legal framework has been developed to cater the need of a more systematic approach to regulate the commercial activities dependent on the organic products.



India: Imported Textiles get costlier

The Imported Textiles get costlier


In the era of globalization where trans-border trade is increasingly becoming the need of the hour, the law of the land monitors that the same does not obstruct the conduct of business of the locals. The Customs Act, 1962 came into force with the objective of regulating the trade overseas.

In furtherance of the aim to promote “Make in India” mission, the Government of India has doubled the customs duty on the import of 328 textile products vide its notification date August 7, 2018. The tariff charges have increased from the existing rate of 10% to 20% under Section 159 of the Customs Act, 1962.

By this step, the Government aims to strengthen the domestic market and reduce the import from the neighbouring nations entering the Indian apparel market. As per the Confederation of Indian Textile Industry, since Bangladesh has zero duty access for all apparel products, the Chinese fabric is entering India duty free through Bangladesh. With a view to prevent the same, the textile and garment industry has represented to the ministries of commerce and textiles to make it mandatory for Bangladesh under the South Asian Free Trade Area (SAFTA) agreement to use either their own or Indian yarn and fabric in their garments to be able to supply to India at zero duty. It has also urged for the introduction of “rules of origin” for imports from Bangladesh in the said regard.

While the proposal remains under the consideration by the Government, taking recourse to such stricter measures would prevent the Chinese fabric from being made available in the Indian market without the payment of the requisite duties by using Bangladesh as channel. Also, this helps to encourage the domestic industrialists to avail and expand the scope of the textile industry.

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