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2020 Year in review

Against the backdrop of the global Coronavirus pandemic, the events of 2020 brought new challenges no one was prepared for, changing the way we live and how we connect with each other.

From the economic effects and catastrophic loss of life brought on by the COVID‑19 pandemic to new effects from the climate change crisis, the transformative moments in the Black Lives Matter protests, and a highly engaging US election, 2020 was a defining year.

For the fans, sports have always been an inspiration and a distraction, but this year it’s taken on renewed importance. Leagues around the world had to find new ways to keep audiences connected to the teams and athletes they love during trying times, all while stadiums remained empty and the playing field became a new platform for conversations about social and racial justice.

The live entertainment industry came largely to a halt, but stay‑at‑home mandates pushed creativity to new heights. Celebrities and musicians found renewed connection to fans with live streaming. Studios discovered innovative ways to produce and distribute content that was more inclusive. And when film festivals, fashion weeks, and more evolved with our new normal, it brought us all closer to the art we love.

In a year when loss of life seems almost routine, 2020 has reminded us of the impact of our icons. Whether it’s a firebrand U.S. Supreme Court Justice, an NBA legend, or a visionary rock guitarist, 2020 has shown us that though our heroes won’t live forever, their legacies will.

Trademark and Domain Names

15 YEARS ON: A RELOOK AT THE INDRP POLICY

INDRP – Indian Domain Name Dispute Resolution Policy & Domain Name Disputes

It is no surprise that ever since the recognition of Internet as a tool for advertisement and marketing, there has been a widespread increase in the number of domain name disputes. As per the statistics released by the World Intellectual Property Organization (WIPO), there has been a progressive increase in the number of domain dispute cases filed each year since 2013[1]. Similarly, the number of domain dispute cases filed in India with respect to Indian country code top-level domains (ccTLDs) have also seen a remarkable annual increase in the recent years as is evident from the chart below:

A large number of cases from the above can be attributed to cyber squatters who register domains in bulk, thereby, forcing honest and bonafide brand owners to resort to dispute resolution mechanisms so as to recover the domains. Often times, the term ‘virtual property’ is seen being used in conjunction with ‘domain names’ which has alarmed cyber squatters around the globe to get their share of ‘hot property’ and then use it to derive illegitimate monetary benefits by harassing honest and bonafide right owners. At the same time, the surge in numbers, year on year, can be attributed to various other factors including the change in economy, easy access to internet, new and more refined cybersquatting techniques, increasing usage of domain proxy services, and the periodic launch of new generic top-level domains (gTLDs) or country code top-level domains (ccTLDs) in the ever evolving internet world.

In India, domain name disputes relating to (gTLDs) are governed by the Uniform Domain Dispute Resolution Policy (UDRP) whereas disputes pertaining to (ccTLDs) are governed by the .IN Dispute Resolution Policy (INDRP) which is overseen and managed by the National Internet Exchange of India (NIXI). The .IN Dispute Resolution Policy (INDRP) was formulated in 2006 following the footsteps of the Uniform Domain Dispute Resolution Policy (UDRP) and is in line with the rules of procedure set out by the World Intellectual Property Organization (WIPO). However, the INDRP has a few fundamental differences which have been incorporated bearing in mind the requirements inherent to the Indian legal framework. A comprehensive understanding of the differences between the UDRP and INDRP can be viewed here.

The ever growing menace of cyber-squatting can be illustrated by the example of a Registrant/Respondent named “Gao Gou”, purportedly based in Toronto, Canada, The Registrant/Respondent under the said name has been involved in over 16 INDRP cases, which includes domain names such as tatamotors.in, louboutin.in, goodyear.in, sothebysrealty.in, etc. Indeed, one can even say that professional cybersquatting has even assumed the role of a career choice, wherein third parties register hundreds of domains, with the hope that brand owners would be willing to pay them significant sums to recover such domain names.

.IN Domain Name Dispute Resolution Policy (INDRP)

In nearly fifteen years of its existence, NIXI has been able to transparently and efficiently resolve over 1177 matters, thus far[2]. An analysis of the dispute resolution process as well as the judgements passed under the INDRP regime reveals that there has been a slight decrease in the number of decisions passed in favour of the Complainants. A latest analysis conducted for cases filed and decided over the last 15 years revealed that a significant number of decisions (over 97%) were passed in favour of the Complainants/Right holders.

An evaluation of a few notable judgements passed against the Complainant, under the INDRP regime in recent years, aids in understanding the rationale behind the shift in the decision-making paradigm.

Failure to establish the requirements laid down in Paragraph 4, INDRP

Alongside the requirements laid down in Paragraphs 4(i) and 4(ii), INDRP, the ‘bad faith’ requirement as envisaged under Paragraph 4(iii) read with Paragraph 6 of INDRP is one of the most essential pre-requisite to establish malafide intent on part of the Respondent. It may be noted that ‘bad faith’ registration and use of a domain name can be established by showing circumstances indicating that:

  • the Registrant has registered or acquired the domain name primarily for the purpose of selling, renting, or otherwise transferring the domain name registration to the Complainant, who bears the name or is the owner of the trademark or service mark, or to a competitor of that Complainant, for valuable consideration in excess of the Registrant’s documented out-of-pocket costs directly related to the domain name; or
  •  the Registrant has registered the domain name in order to prevent the owner of the trademark or service mark from reflecting the mark in a corresponding domain name, provided that the Registrant has engaged in a pattern of such conduct; or
  •  by using the domain name, the Registrant has intentionally attempted to attract Internet users to the Registrant’s website or other on-line location, by creating a likelihood of confusion with the Complainant’s name or mark as to the source, sponsorship, affiliation, or endorsement of the Registrant’s website or location or of a product or service on the Registrant’s website or location.

In Tata Motors Limited v. Amit Badyani, INDRP/1020, the Ld. Arbitrator observed that as the Respondent has adopted and registered the mark/domain name prior to the Complainant and has been using the same in respect of a bona fide offering of goods since before receiving notice to the dispute, the Complainant has failed to establish the grounds 4(i) and 4(ii) of the .INDRP policy. With regard to “bad faith”, the Ld. Arbitrator held that the Respondent has not satisfied all the criteria under 4 (iii) and therefore, it cannot be said that the domain has been registered to prevent the Complainant from reflecting the mark HARRIER in a corresponding domain. The Ld. Arbitrator also noted that “mere fear as to what may happen if the Respondent were ever to sell the domain to a third party cannot be the sole criteria for establishing bad faith, especially when bona fide adoption/use has been shown by the Respondent”.

Reverse Domain Name Hijacking (RDNH)

Paragraph 1, UNDR Rules defines Reverse Domain Name Hijacking as using the Policy in bad faith to attempt to deprive a registered domain-name holder of a domain name. The Rules further state that if after considering the submissions the Panel finds that the complaint was brought in bad faith, for example in an attempt at Reverse Domain Name Hijacking or was brought primarily to harass the domain-name holder, the Panel shall declare in its decision that the complaint was brought in bad faith and constitutes an abuse of the administrative proceeding”[3]. It may be noted that while there exists no specific jurisprudence on RDNH under the INDRP, the Tribunals in India have recognized the principal in a number of matters.

For instance, in Tickets Worldwide LLP v. India Portals, INDRP/1187, the disputed domain comprised of the generic word TICKETS. After careful examination of the facts of the case and the evidence placed on record, the panel held that the Complainant has failed to establish any of the requirements laid down under the INDRP. Further, the panel also noted that “the subject matter dispute is a case of Reverse Domain Name Hijacking, given the Complainant’s weak mark and its attempt to misrepresent its date of first use of the mark”. Reverse Domain Name Hijacking was previously held under the INDRP in Computer.in, INDRP/008 wherein the panel had observed that “the tribunal is of confirmed opinion that the domain name, trade name and trademark is a weak mark and absent of proof of fame of widespread recognition of the services provided by the Complainant makes this complaint without cause of action”. In conclusion, the Ld. Arbitrator observed “that the present complaint by the Complainant is a blatant attempt to hijack the domain name of the Respondent and in bad faith to harass the Respondent and to abuse the process of law.”

Other instances where decisions were not passed in favour of the Complainant

Proceedings Dismissed/ Neutral Decisions

Domain disputes are also dismissed on account of the Complaint suffering from inherent deficiencies with regard to the filing requirements or otherwise due to ownership related issues and and hence are dismissed on the grounds of maintainability.

In this regard, in Homeway.com, Inc. v. Ajay Gupta, INDRP/1056[4], the panel held that even though the Respondent has not filed any rebuttal to the Complaint, looking at the facts and circumstances of the case, the Complaint in its present form is not tenable as post the Complainant’s merger with Expedia, Inc., the Complainant are no longer in existence and therefore, lack the locus of filing the said Complaint. However, the Complainant being aggrieved by the Order passed by the panel, filed an appeal before the Hon’ble High Court of Delhi wherein the Ld. Judge set aside the impugned Order and directed the INDRP panel to allow the Complainant to file requisite documents proving ownership on affidavit and to provide an opportunity for an oral hearing before passing the Order. Upon evaluating the additional Affidavit filed by the Complainant and specifically in view of the fact that the Respondent had not challenged the complaint, the Ld. Arbitrator finally decided the matter in favour of the Complainant.

More recently, in Dell, Inc. v Madugula Kartik, INDRP/1059, the panel dismissed the Complaint, under section 25 (c) of the Arbitration and Conciliation Act, 1996, on account of non-compliance with various orders passed by the Tribunal. It is of note that the dismissal of the Complaint in the aforesaid matter was founded on deficiencies in the Complaint filed. Further, the Ld. Arbitrator also observed that the language used by the Counsel was improper and insulting and of the nature that cast aspersions on the Tribunal’s independence and impartiality.

Suspension and termination of proceedings

As per the law laid down under the INDRP, the panel may terminate the arbitration proceeding if, during the arbitration proceedings and before the Arbitrator’s decision, the parties agree to settle the dispute (Settlement or other grounds of termination, Rule 14, INDRP Rules of Procedure).

In this regard, it may be noted that Paragraph 18(a), UDRP Rules, states that “in the event of any legal proceedings initiated prior to or during an administrative proceeding in respect of a domain-name dispute that is the subject of the complaint, the Panel shall have the discretion to decide whether to suspend or terminate the administrative proceeding, or to proceed to a decision”. However, such terminology has not been explicitly used in the INDR Policy and the Rules framed thereunder and it cannot be said with certainty whether it was the legislative intent of the framers to give such an interpretation to the phrase “other grounds of termination”, as used in Rule 14.

Further, while the UDRP identifies settlement of domain name disputes via administrative proceedings to be a mandatory requirement (Paragraph 4(a), UDRP), the nomenclature used in INDRP lacks any such imposition thereby suggesting that concurrent proceedings pertaining to a single domain may be made.

The issue as to whether concurrent proceedings can exist under the INDRP as well as the civil procedure was dealt with at length in Citi Corp And Anr. vs Todi Investors And Anr. 2006 (4) ARBLR 119 Delhi[5]. The contention of the Defendants was that with the formulation of the INDRP, the subject proceedings are liable to be terminated as the dispute of this nature is to be covered under the INDRP and the Rules framed thereunder. The Court observed that “the scheme of the Policy and the Rules framed thereunder, in any case, show that there is no explicit ouster of the jurisdiction of the Civil Court”. It was further noted that “it is well established that where a right pre-existing in common law is recognized by the statute and a new statutory remedy for its enforcement is provided, without expressly excluding the Civil Courts jurisdiction, then both the common law and the statutory remedies might become concurrent remedies leaving open an element of election to persons of inherence”.  The Court further held that the whole scheme of the INDRP shows that the remedies available under the said Policy are of an extremely limited nature – “limited to requiring the cancellation of the Registrant’s domain name or the transfer of the Registrant’s domain name registration to the Complainant” (paragraph 12 of the Policy) and “Therefore, by not stretch of the imagination, can it be said that the Policy possesses the machinery by which adequate and complete relief can be provided to the plaintiffs herein.”

Therefore, the INDR Policy and the Rules framed thereunder do not ouster the jurisdiction of civil courts. Accordingly, in cases where relief sought is more than mere cancellation or transfer of domain and where the Plaintiff intends to seek compensation, a civil proceeding may be initiated.

Termination on other accounts

Other instances of termination of arbitration proceedings are seen in cases where there is a lack of prosecution of the Complaint[6] and in cases where all the parties involved are not correctly impleaded. For instance, in Disney Enterprises Inc. v RSADVVM SPT, INDRP/544, the panel observed that “this Tribunal cannot proceed further as there are third party interest involved and the said party is not a party before the Tribunal and the maxim of audi alteram partem restrains this Tribunal from passing any Orders behind the back of a party that too when its’s interest is involved”.

While the shift in numbers cannot be attributed to one specific reason, it can definitely be speculated that the same may be due to the evolution of the INDRP jurisprudence over the years, more sophisticated understanding of the law, NIXI’s continued attempts towards fair, transparent and impartial proceedings to name a few.

Tightening of due diligence – Wrong/Incomplete contact details provided by Registrants

While the above instances illustrate the growing number of cases wherein INDRP panellists have ruled in favour of Respondents/Registrants or have passed neutral orders, there have also been growing instances of INDRP panels tightening the screw on Registrants/Respondents with respect to them providing incorrect contact details while registering the impugned domain names. In many INDRP cases, NIXI/Complainants are not able to successfully serve hard copies of the complaints to the Registrants/Respondents and the couriers as sent return undelivered. This is a common tactic which a professional cyber-squatter might use to keep their personal identities and contact details removed from any legal proceedings. Providing such incorrect information while registering Indian ccTLDs is a violation of paragraph 3(a) of the policy, which stipulates that –

The Registrant’s Representations

By applying to register a domain name, or by asking a Registrar to maintain or renew a domain name registration, the Registrant represents and warrants that:

(a) the statements that the Registrant made in the Registrant’s Application Form for Registration of Domain Name are complete and accurate;

Since 2011, there have been cases wherein INDRP panels have pointed out the violation of paragraph 3(a) of the policy on part of Registrants/Respondent in their awards, including but not limited to the cases INDRP/562, INDRP/606. While this is not a ground prescribed under the INDRP with respect to bad faith on part of the Registrants/Respondents, the mere acknowledgment of the same suggests that the said fact, while looked at in conjunction with the facts and peculiar circumstances of a case, can be used to draw logical inferences to illustrate bad faith.

The above instance suggests that while there has indeed been an upsurge in cases decided in favour of Registrants/Respondents, at the same time there is growing jurisprudence which suggests that minute details like incorrect registration information of Registrants, is being scrutinized while arbitrating matters.

Conclusion

In conclusion, it is evident that arbitration proceedings, as contemplated under the INDRP, are a much sought after alternative for resolution of domain name disputes for aggrieved parties who do not wish to engage in protracted legal proceedings before courts. Further, from our aforementioned analysis, it is apparent that it is the endeavour of panellists in most domain dispute proceedings under the INDRP regime to pass decisions in favour of honest and bonafide right owners (Complainants or Respondents) so as to discourage cyber squatters from maliciously hoarding domains that they have no legitimate interest in.

Our exhaustive analysis of the INDRP, focusing on the procedural rules, the role of the Registrar, Registrant’s rights etc. can be viewed here.

[1] https://www.wipo.int/amc/en/domains/statistics/cases.jsp

[2] https://www.registry.in/Policies/DisputeCaseDecisions

[3]  https://www.icann.org/resources/pages/udrp-rules-2015-03-11-en

[4] https://www.registry.in/Policies/DisputeCaseDecisions

[5] https://indiankanoon.org/doc/1791092/

[6] Basf-se.in, INDRP/484 

Read More About Domain Name Dispute in India by clicking on below links. 

Evaluation of the .IN DOMAIN Name Dispute Resolution Policy (INDRP) in India

REVERSE DOMAIN HIJACKING- CARE-FULL WHO YOU PICK!

Rules & Regulations related to Domain name in India

For further information please contact at S.S Rana & Co. email:  info@ssrana.com or call at (+91-11 4012 3000). Our website can be accessed at www.ssrana.in

COPYCAT COVID PRODUCTS – NEW FACE OF COUNTERFEIT

Ever rational consumer was caught off guard at the inception of this pandemic, as an impulse to create stock piles of groceries, medical supplies, drugs etc. reverberated throughout the country. Despite reassuring claims of the government and manufacturers picking up the production pace, deep seethed fear amongst the public was palpable and some viewed this as a lucrative opportunity to cash-in upon this distress. While India continues to fiercely battle the novel coronavirus, the looming threat of counterfeiting rises consequentially and the market faces an onslaught of counterfeit products, especially drugs and medical supplies, thereby causing distraught to the public and manufacturers alike.

Also read Rise of Counterfeit PPE in India amid COVID-19

Focus will be on plight of established brands during COVID-19 pandemic due to such counterfeiting, stressing majorly on the pharmaceutical sector and how their Intellectual Property (IP) rights are affected. Before delving further, it is crucial to understand the impact of counterfeiting during a pandemic.

Counterfeiting in layman’s terms is deceptively posing as established brands, in order to market illicit products to the public and has been projected to drain approximately USD 4.3 trillion from the global economy, alongwith piracy by 2022[1]. Since the outbreak of the coronavirus, dependency on e-commerce has increased exponentially, thereby making a consumer more susceptible to online counterfeit attacks. Reportedly, Amazon had to remove more than 1 million fake products claiming to cure the virus[2]. As per Forbes estimate, the market is flooded with counterfeit drugs worth USD 200 billion annually[3] and with India being the 3rd largest producer, with an estimate industry value standing at USD 55 billion this year, it would be too optimistic to rule out the possibility of counterfeiting plaguing this industry[4].

Counterfeit Sanitizers during Pandemic

As demand and panic surged, so did the crime of counterfeiting. Counterfeiting, especially in pharmaceuticals, poses as double threat as there is an element of imminent threat to human life. Interpol conducted a global raid titled ‘Operation Pangea XIII’, wherein counterfeit hand sanitizers, face masks and antiviral drugs were seized, amounting to USD 14 million[5] from 90 countries. Close to 2,500 web links, including websites, social media pages, online marketplaces and online advertisements for illicit pharmaceuticals were blacklisted[6]. Fearing its ripple effect in India, the Central Bureau of Investigation (CBI) issued warning across all States and Union Territories to maintain a strict vigil for counterfeit gangs posing as PPE and selling hand sanitizers containing methanol, a highly-toxic substance as its base as opposed to ethanol, isopropanol or a combination of these[7]. Things took a turn for the worse, when the market saw an influx of ‘opportunists’ selling similar products under deceptively similar brand names. A few notable examples can be viewed herein:

COPYCAT COVID PRODUCTS

Additional statistics showing regarding counterfeit sanitizer industry amidst lockdown:

  • Hyderabad – Seized 25,000 units of 100 ml hand-sanitizers and raw materials worth INR 40 lakh. Racketeers managed sale worth INR 1.4 crore[8].
  • Bangalore – Seized fake hand-sanitizers worth INR 56 lakh during raids conducted in factories[9].
  • Delhi – Seized 2,480 kg of raw materials, including masks, hand-sanitizers, PPE kits being smuggled to China[10].
  • Mumbai – Seized fake sanitizers worth INR 2 lakh, manufactured by company with an expired license[11].

Read more – Proliferation of counterfeits during Covid-19

Intellectual Property (IP) and Counterfeiting

It is factual knowledge that robust IPR regime of a country stimulates economic development, as there is innovation growth, technology transfer and strong legal enforcement. For developing countries particularly, IP can provide tax incentives, attract FDIs, foster growth of small-medium enterprises (SMEs) and create employment opportunities. With circulation of counterfeits, not only is the economy crippled, there is infringement of intellectual property of well-known entities. In the case of pharmaceuticals, counterfeiters can reverse-engineer the laborious and capital-intensive research to produce a cheaper substitute and pass it off under the pretext of original product.

In India, ever since the Ministry of Consumer Affairs (MCA) declared hand-sanitizers and face masks as ‘essential commodities’ and introduced INR 20 lakh crore economic relief package catering specifically to local manufacturing, several budding companies and SMEs jumped on this lucrative business opportunity to secure a footing in the industry. [12]The Indian Trade Mark Offices saw a surge in trademark filings for sanitizers just between the periods of March – May, 2020 (approx. 350 applications).

Read more – Trademark Filing for hand sanitizers amid COVID-19 pandemicThe aforementioned cited marks ‘DEVTOL’ (Application No. 4494428) and ‘PUREVELL’ (Application No. 4485090) were filed for registration in Class 05, in respect of sanitizers. It is pertinent to note that both these applications were dated May 01, 2020 and April 05, 2020 respectively, which may be a dubious strategy at play here to take undue advantage of the pandemic situation. In lieu of the same, the Hon’ble High Court of Delhi recently granted injunctive relief in favour of Dettol manufacturer, Reckitt Benckiser (India) Pvt. Ltd. hereinabove, as it was of the concurrent view that ‘DETTOL’, being a well-known mark, was subject to infringement from sale of products labelled as ‘DEVTOL’.[13]

Read DETTOL v. DEVTOL- Delhi HC slaps fine for infringing the mark DETTOL

While an injunctive relief from production and sale of infringing articles is an active step towards curbing counterfeiting, emphasis is also needed on tackling the issue from the grassroots’ level. As per the study conducted by Organisation for Economic Co-operation and Development (OECD) titled “Governance Frameworks to Counter Illicit Trade”, two key aspects; enhancing the effectiveness of penalties and sanctions and rigorous screening of small shipments for illicit products, can counteract such illicit activities in the trade channels.[14]

REMEDIES UNDER INDIAN LEGISLATIONS

The Indian IP regime covers the spectrum of counterfeiting under numerous legislative texts, such as:

  • Section 29 read with Chapter XII of the Trade Marks Act, 1999 entitles a right holder to institute a suit for infringement and passing off against counterfeit goods being sold under the proprietor’s trademark[15].
  • In addition, Section 11(2)(n) and (u) of the Customs Act, 1962, read with the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007, import and export of goods which infringe upon the intellectual property of a right holder is prohibited and such infringing goods are liable to seizure[16].
  • In case of pharmaceutical drugs, if the process of manufacturing the drug or the product itself is identical then infringement relief as per the Patents Act, 1970 can be claimed.
  • Sections 9B and 17B of the Drugs and Cosmetics Act, 1940 cover the aspect of spurious or imitation drugs, either imported or manufactured in India[17]. As per the Act, marketing of spurious drugs is a cognizable and non-bailable offence and can be punishable by way of imprisonment and fine, in addition to seizure of such drugs.[18]
  • Sale/offer or expose for sale/issuance from dispensary of any drug or medical preparation as a different drug or medical preparation will be punishable by way of imprisonment or fine or both as per Section 276 of the Indian Penal Code, 1860[19].

Further, entities can undertake few measures on their own to ensure their brand is not a target of counterfeiting:

  • Conduct internal checks to ensure there is no IP infringement of their products or counterfeits circulating in the market.
  • Provide helpline numbers to wholesalers, retailers, traders and consumers for reporting of counterfeit articles in the market.
  • Using product identification means such as marks, labels or symbols to ensure brand authenticity and segregation from counterfeits.
  • Stringent inspections such as frequent investigations in the trade channels, to be conducted for determining the market of their counterfeit products, if any.
  • Maintaining IP vigilance towards any application(s) filed which infringe upon the IP rights.
  • Use advertisements and social media platforms to create brand awareness amongst public.

CONCLUSION

Brand imitation is not a new phenomenon and has been vexing established brands for years. Its influx by way of counterfeiting, is just another medium of infringing upon the rights of bona fide manufacturers and eating away their profits and now, it has vicariously jeopardised the safety and health of the nation in its wake. Especially, e-commerce platforms wherein the physical lag and lack of ‘seller’ information enables counterfeiters to guise themselves as the official supplier. On these lines Amazon had introduced its ‘Project Zero’ in 2019, which enabled genuine brands to identify such counterfeit products being sold on the platform

Also read Curbing Online Counterfeiting in India: Need of the Hour

[1] Global impacts of counterfeiting and piracy to reach US$4.2 trillion by 2022; https://iccwbo.org/media-wall/news-speeches/global-impacts-counterfeiting-piracy-reach-us4-2-trillion-2022/

[2] Amazon Says It’s Removed More Than One Million Products Making Fake Coronavirus Claims; https://www.forbes.com/sites/tedknutson/2020/03/04/marketplace-contagion-amazon-has-already-removed-a-million-fake-products-related-to-coronavirus/#7e4c36ae418c; accessed on 23 Jun. 20

[3] Counterfeit Drugs: A Bitter Pill To Swallow; https://www.forbes.com/sites/sap/2019/10/03/counterfeit-drugs-a-bitter-pill-to-swallow/#4b828f707a68; accessed on 23 Jun. 20

[4] India Pharma 2020 Propelling access and acceptance, realising true potential; https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/Pharma%20and%20Medical%20Products/PMP%20NEW/PDFs/778886_India_Pharma_2020_Propelling_Access_and_Acceptance_Realising_True_Potential.ashx; accessed on 23 Jun. 20

[5] Global operation sees a rise in fake medical products related to COVID-19; https://www.interpol.int/en/News-and-Events/News/2020/Global-operation-sees-a-rise-in-fake-medical-products-related-to-COVID-19; accessed on June 23, 2020

[6] Ibid

[7] CBI alerts police in states about racketeers selling fake hand sanitiser using methanol; https://economictimes.indiatimes.com/news/politics-and-nation/cbi-alerts-police-in-states-about-racketeers-selling-fake-hand-sanitiser-using-methanol/articleshow/76387560.cms; accessed on June 16, 2020

[8] Fake hand sanitiser racket busted in Hyderabad after 1 lakh bottles sold for Rs 1.4 crore; https://www.indiatoday.in/india/story/fake-sanitiser-racket-busted-in-hyderabad-after-1-lakh-bottles-sold-for-rs-1-4-crore-1656765-2020-03-18; accessed on 23 Jun. 20

[9] Fake sanitizers worth Rs 56 lakh seized by EOW in Karnataka; https://www.business-standard.com/article/news-ani/fake-sanitizers-worth-rs-56-lakh-seized-by-eow-in-karnataka-120032001389_1.html; accessed on 23 Jun. 20

[10] https://www.timesnownews.com/india/article/delhi-customs-busts-racket-of-illegal-export-of-masks-ppe-sanitisers-to-china-amid-covid-19-crisis/591574; accessed on 23 Jun. 20

[11] Coronavirus scare: Rs 2 lakh fake sanitisers seized in Mumbai; https://timesofindia.indiatimes.com/city/mumbai/rs-2-lakh-fake-sanitizers-seized-in-mumbai/articleshow/74603022.cms; accessed on 23 Jun. 20

[12] As per the notification dated March 21, 2020: Hand sanitizer (INR 100 per 200 ml bottle); 3PLY masks (INR 10) and 2PLY masks (INR 8);  https://consumeraffairs.nic.in/sites/default/files/file-uploads/essential-commodities-order/1197.pdf; accessed on 24 Jun. 20; Read More here: https://www.ssrana.in/articles/india-equitable-distribution-price-control-hand-sanitizers-face-masks/

[13] Reckitt Benckiser (India) PVT. LTD. Vs. Mohit Petrochemicals PVT. LTD. & Anr. CS(COMM)No.141/2020 & I.A.Nos.4034-37/2020

[14] Coronavirus (COVID-19) and the global trade

in fake pharmaceuticals; http://www.oecd.org/governance/illicit-trade/coronavirus-covid19-and-the-global-trade-in-fake-pharmaceuticals-brief.pdf; accessed on 24 June 2020

[15] Section 29 and Chapter XII Offences, Penalties And Procedure of the Trade Marks Act, 1999; http://www.ipindia.nic.in/writereaddata/Portal/IPOAct/1_43_1_trade-marks-act.pdf; accessed on 24 Jun. 20

[16] https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/formatted-htmls/ipr-enforcementrules and https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/cs-act-ch4-revised3; accessed on 24 Jun. 20

[17] The Drugs and Cosmetics Act, 1940; http://legislative.gov.in/sites/default/files/A1940-23.pdf; accessed on 24 June 2020

[18] Sections 13, 27 and 36C of the Drugs and Cosmetics Act, 1940; Ibid

[19] Section 276 of the Indian Penal Code, 1860; https://www.indiacode.nic.in/bitstream/123456789/4219/1/THE-INDIAN-PENAL-CODE-1860.pdf; accessed on 01 July, 2020

[20] https://brandservices.amazon.com/projectzero; accessed on 01 July 2020

[21] Amit Shukla vs UOI & Ors

For further information please contact at S.S Rana & Co. email:  info@ssrana.com or call at (+91-11 4012 3000). Our website can be accessed at www.ssrana.in

REVERSE DOMAIN HIJACKING- CARE-FULL WHO YOU PICK!

An analysis of the recent domain dispute case: Religare Health Insurance Company Limited vs. Name Administration Inc. /Domain Administration (UDRP Case Ref. No. – D2019-2073)

Reverse Domain Hijacking or Reverse Cyber squatting

Cyber-squatting is a growing malady in the world of Intellectual Property (IP) offences. With increasing number of domain name registrations in bad faith, third-party registrants are phishing genuine business owners/traders/proprietors in order exchange money for their due right. In lay man’s terms, cyber-squatting is an act of extortion wherein a third-party, having no genuine right in the trade name/trademark, fraudulently registers a confusingly similar domain name with a view of trading in on the reputation and goodwill of a bonafide proprietor. However, what happens when rightful trademark owners attempt to secure a domain name by falsely making claims of cyber-squatting against a domain name owner? This strategy is referred to as Reverse Domain Name Hijacking wherein trademark/ brand owners use the UDRP proceedings as a means to coerce individual domain name owners to surrender their rights in a domain. Discouragement of this practice is ensconced in Paragraph 3(b)(xiii) of the UDRP Rules which requires each Complainant to furnish the below certification at the time of filing a complaint under the UDRP:

“Complainant certifies that the information contained in this Complaint is to the best of Complainant’s knowledge complete and accurate, that this Complaint is not being presented for any improper purpose, such as to harass, and that the assertions in this Complaint are warranted under these Rules and under applicable law, as it now exists or as it may be extended by a good-faith and reasonable argument.”

Further, Paragraph 15(e) of the UDRP Rules states that,

“If after considering the submissions the Panel finds that the complaint was brought in bad faith, for example in an attempt at Reverse Domain Name Hijacking or was brought primarily to harass the domain-name holder, the Panel shall declare in its decision that the complaint was brought in bad faith and constitutes an abuse of the administrative proceeding.”

Factual Background:           

The Complainant, Religare Health Insurance Company Limited, a leading health insurance vendor, moved the WIPO Arbitration and Mediation Centre(WIPO) on August 23, 2019 alleging cyber-squatting by  the Respondent, namely Frank Schilling’s Name Administration. The Complainant claimed to have trademark registrations in India for figurative trademarks for the term CARE (dating back to February 07, 2012) and the country-code top level domains <carehealthinsurance.co.in> and <carehealthinsurance.in> (both registered in August 2018).

Whereas the Respondent registered the disputed domain name <carehealthinsurance.com> on August 12, 2015 which resolved to an advertising page containing pay-per-click hyperlinks. The question of law as perused by the Panel was in-line with the Uniform Domain Name Dispute Resolution Policy (UDRP) and its Rules, wherein the following three grounds were required to be satisfied in toto:

  • the domain name is confusingly similar to the complainant’s trademark;
  • the registrant has no rights or legitimate interests in the domain name; and that
  • the domain name has been registered and is being used in “bad faith”[1]

Submissions by the Complainant:

The Complainant contended that the impugned domain name incorporates the Complainant’s trademark CARE in toto in conjunction with the descriptive words HEALTH INSURANCE which makes <carehealthinsurance.com> confusingly similar to the Complainant’s prior and bonafidely registered trademark. The Complainant also submitted that the Respondent was not making any use of the impugned domain name with a bona fide offering of goods and services and therefore had no rights or legitimate interest in the same. Lastly, the Complainant claimed that the Respondent ought to have been aware of theComplainant and its trademark and is causing harm to the Complainant’s business by operating a parked page from the impugned domain. Therefore, the Complainant claimed that the Respondent registered the impugned domain name in bad faith.

Submissions by the Respondent:

The Respondent stated that they specialise in providing advertising services for generic domain names and claimed that the Complainant is only the proprietor of a stylized version of the word “CARE” which in no way can be termed as distinctive of the Complainant’s goods and services, especially when followed by the words “HEALTH INSURANCE”. Further, the Respondent claimed that the Complainant has failed to demonstrate that the impugned domain is registered in bad faith as the Respondent operates from the Grand Caymen and has no reason to be aware of the Complainant (who has business operations only in India).

Judgement:

The three-person Administrative Panel was of view that even though the Complainant had satisfied the Panel on the first ground of confusing similarity of the Complainant’s trademark with the impugned domain, the Complainant failed to establish that the registration of the impugned domain by the Respondent was done in bad faith.,

While referring to the case of GMbH vs. Telepathy Inc.[2], the Panel opined that in order to establish bad faith while registering a domain name, it is crucial for the Complainant to show that the Respondent was aware, should have been aware or ought to have been aware of the Complainant and its trademark. The Panel stated that the presence of a coined/arbitrary word as part of the impugned domain name might have been helpful to demonstrate bad faith on the Respondent’s part, however “individual dictionary terms” such as CARE, HEALTH and INSURANCE cannot be considered to be distinctive of the Complainant’s goods and services. Further, the Panel reasoned that even though the order of the words CARE, HEALTH and INSURANCE is an “odd juxtaposition” (as opposed to the commonly used phrase “health care insurance”), the Complainant would have to tender evidence of extensive use of the same, which the Panel hinted “under certain circumstances” might have overcome the descriptive nature of such a combination of dictionary words. However, the Panel was of the view that since the Complainant has only furnished evidence relating to their use in India and nothing to indicate that they are known anywhere else in the world (despite the global nature of Internet), there is no evidence on record to suggest that the Respondent registered the impugned domain because they were aware of the Complainant and its trademark. As regards use, the Panel stated that the presence of a pay-per-click website advertising the Complainant’s competitors does not provide any evidence that the Respondent was specifically targeting the Complainant, as for Internet users not situated in India, this is a bona fide offering of health insurance services. Therefore, the Panel was reluctant to give a finding that the impugned domain name was registered and is being used in bad faith.

Concurring Finding:

It is pertinent to mention here that one of the Panelists, namely, Mr. Richard G. Lyon,arrived at a concurring finding that the above complaint would constitute Reverse Domain Name Hijacking as the Complainant brought the instant complaint in bad faith. The Panelist was of the view that the Complainant and its representatives ought to have known that the Respondent registered the domain <carehealthinsurance.com> in good faith and hence constitutes an abuse of this administrative proceeding.

The Panelist stated that that filing such a complaint “mocks the certification required by paragraph 3(b)(xiii) of the Rules” and that a quick Internet search and a reading of the WIPO Jurisprudential Overview would have been sufficient to ascertain that the complaint is unwarranted. He unsparingly summarized the Complainant’s complaint in the following terms:

“I have a mark, you don’t, pay-per-click is involved, and therefore I’m entitled to your domain.”

The flip side:

In light of the facts and circumstances of the aforementioned domain dispute, it may be concluded that for domain names incorporating descriptive/ common/ dictionary words, the Complainant has a higher threshold to show that their trademark has acquired a secondary meaning. In the present case, even though the Complainant adopted the trademark CARE in 2012, they could only furnish evidence of adopting the combination in the words CARE, HEALTH and INSURANCE from 2018 (3 years later than the registration of the impugned domain name). Further, the lack of documentary evidence to show that the Complainant is known outside the territory of India was an important facet that was considered by the Panel. In view thereof, given the descriptive nature of the Complainant’s trademark coupled with the above factors, it is not surprising that the Panel did not submit a finding in the Complainant’s favour. However, what is peculiar about the above judgment is the concurrent finding of Reverse Domain Name Hijacking tendered by one of the Panelists that to some extent goes so far as to question the Complainant and their representatives as to their motives of filing the above complaint based on such flimsy grounds.

The concurrent finding begets the question – is the above a case of a concerned trademark owner or just an overambitious Complainant looking to misuse their rights as a proprietor to coerce a domain owner into surrendering their rights? Most domain owners are individuals who do not have the resources to defend such unwarranted UDRP actions and are left with no choice but to transfer ownership of their domain to avoid legal action.

In disputes such as the above, it is difficult to make a finding on facts that can point to the intention of a Complainant of whether or not they instituted a complaint with a mala fide intent. In most cases, if the Complainant has even some modicum of rights in a trademark that is confusingly similar to a domain, Panelists will not be inclined to make a finding of Reverse Domain Name Hijacking unless there is a direct fact that points to the Complainant’s mala fide intent.

Furthermore, the Respondents in these cases are not liable to any relief except retention of their domains. A monetary compensation to the Respondent for bearing the cost of proceedings should be made mandatory in cases of Reverse Domain Name Hijacking. This will not only prevent malicious institution of complaints under the UDRP but will also instil confidence in domain owners who would otherwise settle and transfer their domainfor fear of engaging in protracted administrative proceedings under theUDRP. Some relief to the Respondents in such cases will also create balance and provide a stable platform to domain owners for defending themselves under the UDRP.

[1] Uniform Domain Name Dispute Resolution Policy- Paragraph 4(a); www.icann.org; https://www.icann.org/resources/pages/policy-2012-02-25-en#4aiii; accessed on January 08, 2020

[2] WIPO Case No. D2007-0261

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DETTOL v. DEVTOL- Delhi HC imposes fine for infringing the mark DETTOL

The High Court of Delhi vide its order dated May 28, 2020 imposed a cost of Rs. One Lakh on the Defendant, Mohit Petrochemicals Pvt. Ltd. and restrained them from using the mark ‘DEVTOL’.

Brief Background

The Plaintiff, Reckitt Benckiser (India) Pvt. Ltd., is manufacturer of the famous antiseptic liquid sold under the mark ‘DETTOL’.

The Plaintiff preferred a suit against the Mohit Petrochemicals Pvt. Ltd. for selling hand sanitisers under the mark and logo ‘DEVTOL’ and alleged that the impugned mark was deceptively similar to the Plaintiff’s registered mark and logo ‘DETTOL’.

In view of the similarity between the Plaintiff’s and Defendant’s mark and the nature of products being sold by both the parties, the Plaintiff sought the relief of injunction against the Defendants to restrain them from infringing the Plaintiff’s Trademark.

Also Read COPYCAT COVID PRODUCTS- NEW FACE OF COUNTERFEIT

Defendant’s Submissions

The Counsel for the Defendants appeared on advance notice and stated that the Defendants have agreed to stop manufacturing and selling their hand sanitizer under the infringing mark ‘DEVTOL’.

The Defendants further submitted that they have already filed a letter to the Trade Mark Authority on May 23, 2020 to withdraw their application for the infringing mark and have also written to their agents and dealers to withdraw the product bearing the infringing mark from the market.

Plaintiff Submissions

In view of the submissions made by the Defendants, the Plaintiff prayed that the suit may be decreed in favour of the Plaintiff and against the Defendant. However, the counsel for the Plaintiff insisted that a cost may be imposed on the Defendant.

Court’s Decision

In view of the submissions made by both the parties, the Hon’ble Delhi High Court decreed the suit in favour of the Plaintiff, restraining the Defendants from using the impugned mark DEVTOL and ordered the Defendants to recall their existing stocks from the market.

The Court further directed the Defendants to deposit a sum of Rs. 1,00,000 (Rupees One Lakh) to the Juvenile Justice Foundation in the name of the Registrar General, High Court of Delhi, New Delhi as cost.

Conclusion

In this pandemic, when every person is extra careful about hygiene and there is a rampant spread of misinformation, a few opportunistic minds are trying to capitalise on this situation. In this case, the Defendant had the simple agenda on free riding on the goodwill of an already established brand.

The rise in demand of protective apparatus and cleaning products during this pandemic, has also triggered an influx of counterfeit masks, sanitisation products and PPE kits s in the market, which may not necessarily be manufactured according to the set safety standards. Read more about this here.

It is a set principle of Trademark law, that two products are compared from the eyes of a person with an average mind with an average power of recollection. In that case, if a person who is buying a sanitiser for the first time comes across the Defendant’s product, then he is bound to be confused and establish an association with the Plaintiff’s well-established and well trusted product.

Also read:

Proliferation of Counterfeits during COVID-19

Rise of Counterfeit PPE kits in India

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TRANS-BORDER REPUTATION OF FOREIGN TRADEMARK- INDIA

Keller Williams Realty, Inc. vs. Dingle Buildcons Pvt. Ltd. And Ors.- a case analysis

Introduction

The Hon’ble Delhi High Court  vide its order dated  April 17, 2020, dismissed an application for the ad-interim injunction filed by real estate mogul, Keller Williams Realty, Inc. in the above suit[1]. The Court headed by Hon’ble Mr. Justice Rajiv Sahai Endlaw reaffirmed the principle of trans-border reputation and goodwill subsisting in a trademark upon the asterisk condition that the same shall reach the Indian shores for a substantial claim of infringement and passing-off.

Brief facts

Keller Williams Realty, Inc. i.e. the Plaintiff is a Texan real estate franchisor founded in 1983 and one of the largest privately held global residential real estate brokers.

Plaintiff’s brand operated through wholly owned subsidiaries, agents, franchisees and its associates on worldwide basis under the trademarks ‘KELLER WILLIAMS’/‘KW’/  and thus, acquired immense reputation for itself.

The Plaintiff claims to be the registered proprietor of KW trademark in numerous countries, including in India since 2012 under classes 35 and 36.

The Plaintiff approached the Court seeking permanent injunction against the acts of infringement and passing off against the three Defendants namely Dingle Buildcons Pvt. Ltd., KW Homes Private Limited  and its sister concern KW Security and Services Private Limited. It was alleged that the Defendants were running businesses under KW formative trademarks and the same being identically and/ or deceptively similar to the Plaintiff’s KW trademarks lead to deception and confusion amongst the general public.

Contentions of the Plaintiff

The counsel on behalf of the Plaintiff contended the following arguments:

  • Being the registered proprietor of an inherently distinctive trademark KW, adopted as an abbreviation of its trade name ‘Keller Williams’, in several classes entitled protection to the Plaintiff under the provisions of the Trade Marks Act, 1999 (The Act).
  • In India, the Plaintiff applied for registration of KW and KELLER WILLIAMS in Classes 35 & 36, on March 2, 2012 and the said registrations were granted;
  • Prior registered domain names such as kw.com and www.kwworldwide.com, dating far back to 1995 and 2005 respectively, extensive use and advertising campaign across nations, which resulted in generation of reputation amongst the public, including Indian public staying abroad as well as in India.
  • As against the Defendants, use of the KW formative trademarks such as , and KW BLUE PEARL amounted to infringement and passing-off as the same was identically and/or deceptively similar to its KW trademark, in respect of identical/similar services such as insurance, financial affairs, monetary affairs, real estate affairs, advertising, business management, business administration, office functions etc. and led to false association in the minds of public.
  • Legal history with the Defendant, wherein several applications and registrations in classes 08, 35 and 36 were previously contested for the KW The counsel for the Plaintiff relied on the fact that all such applications had common user detail showing use since April, 2006, in support of which no evidence had been procured.
  • Plaintiff relied on the judgment delivered by this Court in Mac Personal Care Pvt. Ltd. Vs. Laverana Gmbh and Co. Kg.[2], wherein, it was held that trans-border reputation is sufficient to establish a claim of passing-off for an unregistered trademark without having any commercial use in the market.
  • Defendants’ explanation for adoption of the impugned KW formative trademarks, has been inconsistent during the length of the proceedings.

Contentions of the Defendants

The counsel on behalf of the Defendants contended the following arguments:

  • Bonafide adoption of KW formative trademarks on account of being adopted from the initials of Lt. Umadhar Kesar Wani, founder of KW Group. Further, KW formative trademarks are distinctive on account of being used with other words.
  • Defendants are the registered proprietor of the KW formative trademarks in classes 14, 16, 17, 20, 21, 28, 35, 36, 37, 41 & 42. Defendant’s registration of the KW formative trademark in Class 35 dates back to August, 2011, as compared to Plaintiff’s registration of March, 2012 on proposed to be used basis. Defendants’ prior user claim dating back to April 1, 2006 for classes 36 and 37.
  • In addition, the Defendants also own copyright registrations for their trademarks.
  • Newspaper advertisements of the trademark KW SRISHTI dating back to 2010 and 2012, are indicative of prior use of the KW formative trademarks and therefore, protection of vested rights under Section 34.
  • Plaintiff’s reply to the examination report issued in its trade mark application, wherein it took the stand of dissimilar nature of Plaintiff’s and the Defendants’ business, in order to overcome the objections raised by the Registrar, acts an estoppel to its submissions in the plaint.
  • Plaintiff’s registration dated March 12, 2012 in India is on a ‘proposed to be used basis’ and it has also failed to establish continuous use, reputation and goodwill for a claim of passing off.
  • Registrations acquired by Plaintiff were liable to be removed from the Register on account of non-use as per Section 47 as there has been no use till date nor the Plaintiff has expressed any intention to use the same in India post registration.
  • Since Defendant is the also the registered proprietor of the mark KW in India, Plaintiff has failed to establish a suit for infringement as per Sections 29(1) and (2) and 30(2)(e).

Observations of the Court and Judgment

The  Hon’ble Court  made the following observations in his judgment:

  • Plaintiff placed reliance upon Neon Laboratories Limited Vs. Medical Technologies Ltd.[3], Milment Oftho Industries Vs. Allergan Inc.[4] in its favour, wherein, the test of ‘first in the world market’ was emerged.
  • Whereas, Defendants placed reliance upon Toyota Jidosha Kabushiki Kaisha Vs. Prius Auto Industries Limited[5], wherein as per the territorial doctrine of trademarks, prior claim of use of a trademark in one jurisdiction does not automatically grant exclusive rights of protection in another. The test of “first in market” is subject to the territorial limits of a trademark.
  • The Hon’ble Court distinguished the above two judgements referred by the Plaintiff in its favour, stating that the said judgements were passed in the context of drugs and medicinal products, having International character.
  • The Court placed reliance on the judgement of Hon’ble Supreme Court in Toyota vs. Prius (supra) and made an observation that ‘mere ownership or even registration of a mark does not lead to any presumption of the mark having a reputation and goodwill, even in the territories where the mark is being used; the plaintiff, while applying for registration of the mark, did not claim any use, in India, of the mark, by spill over of reputation and goodwill from another territory to India; the plaintiff has not made out any case of any use or spill over of goodwill and reputation, since registration’.
  • By applying aforementioned principle for a successful claim of passing off, the Plaintiff must establish reputation and goodwill spread into Indian territories much before its use by the Plaintiff and before the Defendants’ use of their trademark. Since the Plaintiff had neglected to use its KW trademark since registration in 2012 and had also failed to establish with sufficient evidence that the KW trademark had acquired any reputation in India, registration alone was not sufficient to stop the Defendants from using their KW formative trademarks in India. Had the Plaintiff acquired any reputation before filing for registration, the application would have been filed with a use claim.
  • No scope of any confusion between the trademarks in questions as they are dissimilar in nature and being used in respect of dissimilar services. Defendants’ KW formative trademarks appeared along with their corporate name or with BLUE PEARL, SRISHTI and DELHI-6 and the Plaintiff had also acquiesced to the same in their reply to the examination report. Furthermore, KW being English letters and common initials did not grant exclusive monopoly to any proprietor of a trademark.
  • Plea of likelihood of confusion sustainable, only at the beginning of the proceedings and not when the matter is at the final stages of adjudication.
  • Plaintiff guilty of delay and laches as they had been aware of Defendants’ use of the KW formative trademarks and had also defended their use against the Defendants’ in their reply to the examination report.

In view of the aforementioned observations, Hon’ble Justice Endlaw held that though the explanation of the Defendants of the reason for the use of alphabets ‘KW’ does not inspire confidence and is also contrary to the stand of the Defendants themselves, of KW standing for “Kesarwani World”, however the same alone would not entitle the Plaintiff to injunction without making out at least a prima facie case for infringement or passing off.

Therefore, there was no prima facie case of infringement or passing-off against the Defendants’ use of the KW formative trademarks and hence, dismissed Plaintiff’s application for ad-interim injunction.

Analysis and Take away

Chapter IV of the Trade Marks Act, 1999, enumerates both rights and limitations and their exercise upon a registered proprietor of a trademark. Registration cannot be construed as an impermeable right, especially against the rights of another registered proprietor of a resembling trademark. The underlined objective of the Act is to ensure protection against infringement and passing off by way of dishonest use of a trademark and not honest use by another[6]. The aforementioned case highlights that registration is entangled with responsibility. Defence of registration may not always ensure protection in a suit, especially in passing off as the registered proprietor must show its grievance to the use by the Defendant, substantial account of its use along with the reputation and goodwill earned throughout its use.

Trademarks are limited by their geographical limits unless such a reputation transcends those limits and permeates the jurisdiction of another region. This has to be cemented with the intention to use that trademark in such region, which was evidently absent in the Plaintiff’s case. Filing an application on a ‘proposed to be used’ basis has been clearly construed to be ‘no use of the mark’ at least as on the date of application at the ad-interim injunction stage, and the Plaintiff is burdened to prove the same through detailed trial.

An application for trademark can have ripple effects throughout its term of protection. Even as basic as a reply to the examination report of the Registrar can determine your future defences in a suit for infringement and hence, applicants are recommended to seek guidance from a trademark attorney before filing an application.

Related Posts

Transborder Reputation and Passing off Action: Toyota Prius Case

[1] Keller Williams Realty, Inc. vs. Dingle Buildcons Pvt. Ltd. And Ors. CS(COMM) 74/2019

[2] 2016 (65) PTC 357 (DB)

[3] (2016) 2 SCC 672

[4] (2004) 12 SCC 624

[5] (2018) 2 SCC 1

[6] Section 28(3) and Section 30(2)(e) of the Trade Marks Act, 1999; http://www.ipindia.nic.in/writereaddata/Portal/IPOAct/1_43_1_trade-marks-act.pdf; accessed on June 03, 2020

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Unauthorized Circulation of PDFs of E-Papers: Dainik Jagran Case

Introduction

An analysis of Delhi High Court’s judgment in Jagran Prakashan Limited vs. Telegram FZ LLC & Ors.[1]

When you come across any astounding news, you think of sharing it with someone and netizens are all too familiar with this concept of ‘viral’. Spreading of news, whether fake or titillating, through social media applications has become a vexing activity to curb and has now started to commercially affect the rights of media publication houses. A news recently sparked media frenzy wherein it was reported that sharing of PDFs of e-papers by administrators/creators of groups on social media platforms such as WhatsApp and Telegram would attract penalty[2]. With a view to seek injunctive relief against the same, Dainik Jagran moved the Delhi High Court against the instant messaging app, Telegram in respect of unauthorised circulation of its e-papers on its platform.

Also read- Misinformation and COVID-19: An analysis

Brief Facts

Plaintiff (Jagran Prakashan Limited) is the publisher of a leading Hindi newspaper, Dainik Jagran, which circulates in both print/physical and digital form throughout India. Riding on the technological wave to gain wider viewership, the digital newspaper may be read for free on its official website www.jagran.com or via paid subscription called E-Paper[3]. The Plaintiff is also the registered proprietor of the trademark DAINIK JAGRAN/ and variations thereof in several classes.

Defendant No. 1 (Telegram FZ LLC) is a Dubai-based IP service provider which provides its users free instant messaging and voice over IP services across various operating platforms. The application’s unique feature of maintaining anonymity while creating a channel led to the unauthorised circulation of the Plaintiff’s e-paper in PDF form by several unidentified users (Defendant No. 2 collectively), thereby infringing upon the trademark and copyright subsisting in the said e-paper.

In lieu of such infringement, the Plaintiff moved the Delhi High Court seeking ad interim injunction under Order 39 Rule 1 and 2 of the Code of Civil Procedure, 1908 to restrain the Defendants from subsequent infringement of its intellectual property rights.

Contentions of the Plaintiff

It was contended by the Plaintiff’s Counsel that although its digital e-paper was accessible for free on its official website, unlike in foreign jurisdictions wherein the Plaintiff charged subscription fee of USD 1, it had a security feature which barred the users from downloading the same in a PDF format. By using Defendant No. 1’s anonymity feature while creating a channel, several channels with the username IDs t.me/dainkjagran, t.me/dainikjagranhindi, t.me/dainikjagran_jnm, t.me/dainikjagranpdf, t.me/dainik_jagran, t.me/dainikjagran, t.me/DJagran, t.me/Dainik_Jagran_pdf, t.me/Fainik_Jagran_News and t.me/dainikja were created, wherein Plaintiff’s e-paper were uploaded in a PDF format. Furthermore, these channels allowed subscribers to download all previous editions of e-paper, a feature which was exclusive to paid subscription, thereby not only infringing upon the Plaintiff’s registered trademarks and copyrighted content but also causing irreparable financial loss.

Liability towards Defendant No. 1

It was contended by the Plaintiff that despite being an intermediary, Defendant No. 1 was liable in the present matter by way of permitting reproduction, adoption, distribution, transmission and dissemination of Plaintiff’s e-paper, evidenced by way of growing number of subscribers of Defendant No. 2’s channels (18989 subscribers on May 16, 2020 to 19239 on May 18, 2020).

Further, Defendant No. 1 failed to exercise due-diligence in accordance with Section 79(3)(b) of the Information Technology Act, 2000[4] read with Rules 3(2)(d) and (4) of the Information Technology (Intermediaries Guidelines) Rules, 2011[5], wherein upon receiving knowledge of such infringing acts in writing or via email, an appropriate action, herein blocking Defendant No. 2’s channels, shall be taken within 36 hours, which was absent despite Plaintiff’s repeated requests for an immediate action in this regard.

Court Observations and Judgment

Hon’ble Justice Mukta Gupta concurred with the counsel of the Plaintiff and held that the balance of convenience lied in favour of the Plaintiff. In lieu of the same the following directives were issued by the Court–

  • An ad-interim injunction as per Order 39 Rule 1 & 2 of the Code of Civil Procedure, 1908 issued in favour of the Plaintiff; and
  • Defendant No. 1 directed to disclose the basic subscriber information/identity of the users/owners of the aforementioned channels and blocking the same within 48 hours.

Analysis

It has become a norm to be aware of one’s liabilities more so than one’s rights when signing up with any media platform. A closer perusal of Dainik Jagran’s terms and conditions clearly stipulate copyright and trademark ownership with regard to the content subsisting with  Dainik Jagran. Further, users are barred from downloading the website content, either directly or indirectly. It permits them to download or print only extracts of such content for individual/personal and non-commercial use only[6]. Hence, dissemination of information via public channels of Telegram may have been with a malicious intent as a creator/administrator can create such channels with only a username and a telegram.me/link[7] and can post messages with or without a signature (username), a handy tool in escaping from liability such as in the present case. Further, a complaint of alleged infringement of one’s IP rights on a public channel would be entertained only upon request of the copyright owner or his authorised agent, and assessed individually before taking any action[8]. Such a provision is not in mandate with the Information Technology (Intermediaries Guidelines) Rules, 2011, as per which an intermediary can take suo-moto cognizance of such a matter[9].

Although, there is no copyright protection over news or facts, it does provide protection to the original expression of such news or facts. Works which once are in public domain do not attract any copyright protection[10], however, an e-paper is a subscription based service and thus, not entirely a part of public domain. Several other players in the media industry such as Times of India, The Hindu and The Indian Express etc. provide e-paper on a similar subscription basis, wherein unauthorised dissemination of their content will attract liability. As per Shailesh Gupta, President of Indian Newspaper Society (INS), circulation of PDFs of subscription based e-papers without authorisation does not only result in digital piracy and financial loss but also spites aggregators to misuse such information[11]. Therefore, there is no bar on circulation of PDFs of e-papers which have been provided by media houses at free of cost.

Conclusion

Curbing circulation of news is one of the pivot challenges for any government, entity or even media industry, dangerously circumventing one’s right to speech and expression. However, unauthorised circulation has also taken up as a form of digital piracy, threatening the inherent rights in such works. The present case can be seen as a commendable initiative taken up by the media house, Dainik Jagran to protect not only its pecuniary interests but also its intangible rights.

[1] CS(COMM) 146/2020 & I.A. 4073/2020

[2] https://www.indiatoday.in/fact-check/story/is-it-illegal-to-circulate-pdfs-of-epaper-1673993-2020-05-03; accessed on June 04, 2020

[3] https://epaper.jagran.com/epaper/packages.php; accessed on June 04, 2020

[4] Section 79 of the Information Technology Act;  https://indiacode.nic.in/bitstream/123456789/13116/1/it_act_2000_updated.pdf; accessed on June 04, 2020

[5] Rule-3 (2)(d) and (4) of the Information Technology (Intermediaries Guidelines) Rules, 2011 ; https://www.wipo.int/edocs/lexdocs/laws/en/in/in099en.pdf; accessed on June 04, 2020

[6] Terms and Conditions; https://www.jagran.com/terms-conditions.html; accessed on June 04, 2020

[7] Telegram – Channels FAQ https://telegram.org/faq_channels; accessed on June 04, 2020

[8] Telegram FAQ; https://telegram.org/faq#q-there-39s-illegal-content-on-telegram-how-do-i-take-it-down; accessed on June 04, 2020

[9] Rule 3(4) of the Information Technology (Intermediaries Guidelines) Rules, 2011 ; https://www.wipo.int/edocs/lexdocs/laws/en/in/in099en.pdf; accessed on June 04, 2020

[10] Eastern Book Company v. D.B. Modak, (2008) 1 SCC 1, 111

[11] Supra Note 2

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Throughout the history of mankind, the combined artistic affinity has given rise to various forms of artistic expressions. One such form is the use of multiple still pictures to show motion and movement. From as far back as 5000BC Iran, where an old pottery bowl was discovered in Shahr-e Sukhteh which had five serial pictures painted around it showing various phases of a goat leaping up to nip at a tree, to the first flipbook that surprisingly was patented in the year 1868, animation has leapt bounds and is a major part of mainstream media in the modern times. Traditional animation built up and developed throughout the first quarter of the twentieth century, has now transformed into a technical marvel; a separate and essential part of the media industry. With the first traditional animation movie being the 1908 Fantasmagorie by the French artist Émile Cohl who created the film using what came to be known as traditional animation methods later.[1]

Indian animation history bloomed later than the pioneers in the field. It all started in the year 1956, when Disney Studios animator Clair Weeks, who was one of the animators who worked on the animated motion picture Bambi, came to India on an invitation by the Films Division of India to help establish and train the very first animation studio as part of a technical co-operation agenda. This training let to the very first animated production film called The Banyan Deer (1957). Since then the Indian Animation industry has developed slowly and steadily with features productions like “Ek Anek Aur Ekta” an educational film in the year 1974 and has now become a stable part of the media sector.

KPMG India – FICCI, in the Indian Media and Entertainment Industry Report 2017, pointed towards the growth of the Indian animation and VFX industry. It grew at 16.4 per cent rate in the year 2016 to reach a commercial size of INR 59.5 billion (5950 crores), driven mostly by a 31 per cent growth in VFX, with animation at a steady growth rate of 9 percent.[2]

Although, much of this growth in work and money comes from sources outside of India, it still cannot undermine the promise of this media sector. Not only are Indian animators establishing themselves as skilled work force internationally, but are already major contributors to many international media ventures for visual effects and animation, such as Maleficent, Game of Thrones and How to Train Your Dragon to name a few.

Before the elaboration of the role of copyright and IP laws in promoting the growth of animation industry in India, there needs to be an understanding as to why is it required in the first place. The reason is the innate profitability factor of animation sector, for example a country with a developed animation industry like Japan charted a market value of 2 trillion yen (USD18 billion or INR 1.1 trillion) for the year 2016. With numbers such as these, there is no reason to not indulge in safeguarding and promoting the growth of the animation industry and its facilitation by the use of IP laws in India.

Legal Protection

The past decade saw a drastic rise in the growth and market value of the Animation Industry in India. This growth needs protection; legal awareness as well as awareness of how to exploit IPs for maximum profit can be the protection that leads to the overall structural rise of this industry.

The foremost protection for animation works is that of copyright. Copyright subsists in the following facets of an animated work:

  • Any animated work would have an array of animated (pictorial) content that would fall under the ambit of copyright protection. Further the art work if featured with a story, the story would be construed as a literature work attached to it, which will invoke its separate copyright.
  • Any animated work that is converted into a cinematographic film would establish a separate set of copyright. Photographs/poster/stills from the movie are also protected by copyright.
  • A later aspect of the creation of an animated work is character rights and merchandising but at the same time one of the most important part to tap into the latent animation market in India. A character right is a copyright over a certain character being isolated and derived from a literary and artistic work. Merchandising is using these character rights for ancillary economic promotion as well as to create and garner attention with respect to a certain character. This in turn paves way for creating required hype for the target audience for an animated work.

To put this into better perspective, a breakdown of the parts of an animated feature that can be protected under copyright are written in the table below:

Literary and Artistic work.Cinematographic & Sound Recordings.Ancillary Rights.
The ScriptAdvertisementsCharacter / Personality Rights
The Screenplay / DialoguesTrailers / PromosCharacter Merchandising
The Sketches, Pictures, StillsMotion picture (Movie)Publishing Rights
Character DesignsOn Screen Tracks (OST)Broadcasting (TV/Radio) Rights

It can be said that copyright is the linchpin of the animation industry when it comes to IP protection, along with the source for commercially exploiting the work. The works under animation are mainly protected by the Copyright Act, 1957 under the following sections:

  • Section 17: First owner of copyright:

This section is relevant as it helps prescribe the flow of the bundle of rights that the copyright entails. The owner of the rights can influence its exploitation. In some cases, lets say in the case of a comic artist hired by Marvel studios to create a superhero, would not be the owner but the author of the copyrighted work and Marvel studios will be the owner. That is why its Marvel Studios and Sony that are in talks about the use of the character “Spiderman” and not the individuals who created it.

  • Section 14: Meaning of copyright:

This section lays down the content that falls under the ambit of copyright protection as well as stipulates the various protection it garners for the copyrighted work. It clearly gives structure to the ways in which copyright can be used, for example, an independent animator sell his artwork and distribute it exclusively and sue anyone who uses the work without the animator’s permission.

  • Sections 18 & 30: Assignment and Licensing:

These two sections hold the highest relevance when profitability of any animated content is considered and incentivizes the creation of work independently. That is because the independent work created can be further assigned in return for a one time lump sum consideration or can be licensed under a contract of royalty, for example, an independent animator can license his work to a production house like Dreamworks or Pixar and get royalty and compensation for its exploitation when it is used in any animated feature.

As the animation sector is already legally guarded by way of copyright protection, its exploitation is what requires a more adept knowledge of the market. Vaibhav Kumaresh of Vaibhav Studios, which is credited with making original promos for Toon Disney’s birthday said way back in 2006 that, “The best part of animation in India is limitless untapped opportunities. To create IP in animation we should first focus on short duration content like advertisements and promos. We can put our energies on longer original animation content once we have a strong base.”[3]

The animation industry in India since then have come forward leaps and bounds with Animation Hubs being established everywhere. Companies such as Green Gold Animations, Cosmos Maya have been successful in penetrating the animation market by their home productions “Chota Bheem” and “Motu Patlu” respectively. The success of the works produced and made in India cannot be underplayed. Although, till date, there has been no serious development in the movie capabilities of such ventures. This is because of two reasons:

  • There is so substantial demand or supply of home grown animated characters or stories in India. Lack of the same creates a very insufficient buzz and potential profit aspects are not pursued.
  • The key IP developments in the field of production, product/character development and marketing are lacking and need to be picked up.

Although there has been an overall growth in the animation industry, there still lies a lot of scope for improvement. To tackle this, there needs to be IP development in the area of building a character base (characters that can appeal to an international audience) and on marketing and merchandising. These two areas would not only be seriously protected under the IP laws, but would also give a chance to creators to come forth and tap into the profitability of this sector.

With the kind of incentive that exists with the creator and the owner of the work, it is more practical for the author/ owner of the work to ensure possible protections for their Intellectual Property. The character, script, or any other compilation of copyrightable content is always open to becoming a basis of commercial exploitation. In view thereof, IP protection especially under Copyright laws, should be the focus for every animated creation.

Related Posts

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Copyright Licensing in India

[1] Beckerman, Howard (2003). Animation: The Whole Story. Allworth Press. ISBN 1-58115-301-5.

[2]Indian animation and VFX industry is getting bigger and better: By Girish Menon:  Available at: https://economictimes.indiatimes.com/industry/media/entertainment/media/indian-animation-and-vfx-industry-is-getting-bigger-and-better/articleshow/58896119.cms

[3] Developing intellectual property in Indian animation, Available at: https://www.exchange4media.com/advertising-news/developing-intellectual-property-in-indian-animation-20390.html

[1] O.S.A. No. 154 of 2019 and C.M.P. No. 13790 of 2019.

[2] O.A.No.710 & 711 of 2013 in C.S.No.639 of 2013

[3] O.S.A.No.63 of 2018

[4] (m) “infringing copy” means,— 4[(m) “infringing copy” means,—”

(i) in relation to a literary, dramatic, musical or artistic work, a reproduction thereof otherwise than in the form of a cinematographic film;

[5] CS.No.820 of 2017

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As recently as September 2020, few Twitter statuses shared by Swami Vaishampayan was in the limelight when Swamiji’s post about his experience of chanting Ganesh Atharvashirsha was confronted on the ground that the Ganesha Atharvashirsha has been copyrighted by T-series and Royalty Network (an American Company). This whole incident has raised a debatable issue, i.e.“Why should copyrights claims be entertained when it comes to the greatest treasure of Vedic wisdom passed on since centuries through Shrutis and Smritis in Gurukuls all over India?”

Pursuant to the aforesaid outcry, Swamiji raised a Public Grievance vide registration number PMOPG/E/2020/0759421 dated August 20, 2020 with the Prime Minister Office (Government of India), to which a reply dated September 08, 2020 was issued by Copyright Office confirming the following points[1]:

  1. That as per the records available in the Copyright Office, no work under the title ‘Vedic Chanting Mantras including the sacred Ganesh Atharvashirsha has been registered under the Copyright Act 1957.
  2. That vedic scriptures and mantras are the part of traditional knowledge in public domain which is not subject matter of Copyright.

In light of the copyright issue raised and clarification provided by the Copyright office (Government of India), it would be appropriate to address some important questions relating to Copyright and understand the extent of Copyright protection available to a work.

1.    Can Chants and Mantras be Copyrighted?

Chants and Mantras are age old Vedic wisdoms which are used, performed, reproduced by humans for peace and/ or communication/ pray with the Almighty. Since, such chants and mantras are being used since centuries, therefore no copyright can be claimed on the literary content of these chants, mantras or any other shlokas or other content which is being used by mankind since centuries especially such content which has religious/ spiritual value or has been derived from the knowledge vault of a religion.

2.    Can Performance of the Chants and Mantras be Copyrighted?

Yes, the performance of the chants and mantras can be copyrighted as sound recording or cinematograph film. Where an individual/ entity intends to perform any chants/ mantras/ shlokas or any other religious or spiritual content derived from the religious wisdom, then such performance by the individual/ entity can be protected/ registered as a copyright.

3.    To what extent such Copyright Protection can be claimed on the Performance of the Chants and Mantras?

Where a performance is performed, recorded and protected/ registered by the individual/ entity, then the Copyright protection can only extend over the use of such performance as performed by the individual/ entity.

The individual/ entity will not be able to restrict any third party from performing the chants and/ or mantras, however, third parties can be restrained from using that specific recording created or performed by the individual/ entity.

In a gist, the right extends to the complete recording as recorded by the individual/ entity, however, such performance does not give right to the individual/ entity to claim exclusive rights over the literary content of the recording/ performance.

Note: Where chants/ mantras are performed in a specific manner which is unique and different from the existing practice, then a claim on such manner of performance can be claimed through the recording so created/ performed by the individual/ entity.

4.    Can the performer claim exclusive rights on the content of performance?

No. When a performance is recorded, either as a sound recording or cinematograph work, then the copyright on such performance extends only to such recording and not to the elements of the recording. Each element of the recording, if copyrightable, can be protected separately under different categories such as Literary work (the content), Musical work (the music notes used), etc.

Anybody who wishes to perform these chants/ mantras/ shlokas and other works related to religion, cannot be denied the liberty to do the same as these works are derived from the knowledge vault of the religion and have been in use since centuries. Every individual has a universal right to express the chants/ mantras/ shlokas in a manner that helps them achieve their intended purpose (peace, communication with the Almighty etc.) and therefore, each individual will have a right to claim exclusivity over their own manner of performance or recording.

5.    Is it time to establish an IP regime based on Religion?

Religions prime focus has been the betterment of people and therefore, religion must be kept free for access by all human beings. Therefore, making the religion or any other aspects of religion from its vault of knowledge subject to IP or exclusive to a specific person or entity will be unfair and prima facie against the whole purpose of religion itself. No religion creates monopoly in favour of one individual, rather religion is the only aspect of human life which can and should be accessed and recreated at any point of time for any duration and free of charge.

Intellectual Property Rights is a systematic mechanism of law wherein the original creators of a work, are motivated and encouraged to derive exclusive benefits from their creation. However, if religion and its knowledge vault is made subject to IP regime, then even the most important part/ aspects of mankind, i.e. the reliance on religion by people, will lose its essence.

Understanding Copyright in Recordings

Due to lack of awareness about Copyright protection, it has become difficult for people to enforce their rights and act against any misleading infringement actions. Copyright laws has been created to motivate and encourage the original author/ creator to enjoy the benefits from his creation. Copyright is only available to the owner/ author of the work unless expressly transferred to any other party.

A recording can be a compilation of multiple works (by various interested parties) as mentioned herein below:

S. NoCategory of WorkParticularAuthorOwner
1Literary WorkThe lyrics/ screenplay/ written content of the recordingLyricist/ WriterUsually, the owner of the recording is the producer of the recording, subject to agreement between the producer and author(s) (Section 17 of the Copyright Act 1957)
2Musical WorkThe graphical notes of the musicMusician
3Sound RecordingAudio compilationMultiple authors such as Lyricist/ Writer, Musician, Singer, composer,  musical director, director of recording etc.
4Cinematograph FilmVisual Compilation

When we talk about copyright protection over a recording, then the protection extends to the recording as a whole and not to each and every work encompassed in the recording (as mentioned above). Where an individual/ entity creates/ records a performance of chants, then the recording of chants/ mantras is the copyrighted work of such entity/ individual, however the rights over the individual elements can be claimed subject to the agreement between the individual/ entity and the author/ owner of each work encompassed in the recording as identified above.

Section 14 of the Copyright Act 1957 provides for exclusive rights vested with the owner of the copyright. For Sound Recording/ Cinematograph Films, the following exclusive rights are granted:

(d) in the case of a cinematograph film,—

(i) to make a copy of the film, including—

(A) a photograph of any image forming part thereof; or

(B) storing of it in any medium by electronic or other means;

(ii) to sell or give on commercial rental or offer for sale or for such rental, any copy of the film;

(iii) to communicate the film to the public;

(e) in the case of a sound recording,—

(i) to make any other sound recording embodying it including storing of it in any medium by electronic or other means;

(ii) to sell or give on commercial rental or offer for sale or for such rental, any copy of the sound recording;

(iii) to communicate the sound recording to the public.

The mere perusal of provisions relating to exclusive rights clearly indicates that the exclusive rights mention about exploiting the recording as a whole but not other works encompassed in the recording. This supports the argument that the exploitation of a recording can be done as a whole only and no right can be claimed on individual works encompassed in it, unless express rights are obtained for individual work from the author/ owner of such work

The Conclusion

With the clarification issued by the Copyright Office, it is now established that the chants, mantras and other vedic scriptures, are the part of traditional knowledge in public domain which is not subject matter of Copyright.

Further, the performance of the Chants and Mantras by an individual/ entity can be protected as copyright however, use of performance for religious ceremony or for benefit of religious institution is exempted as an act not constituting infringement[2]. The religious ceremony as explained includes marriage procession and other social festivities associated with a marriage.[3] Similarly, where an activity is done for the benefit of religious institution is also exempted from infringement.[4] With these exceptions in place, it can be argued that the performance of any recording done for religious purpose and for non-commercial exploitation will be covered as an activity exempted from any infringement.

However, a copyright will vest with the individual/ entity which created a recording bearing performance of the chants/ mantras to exclusively use that particular recording created by them and an unauthorised use of such recording by a third party can infringe upon the rights of such individual/ entity.

[1] https://twitter.com/swamianandv/status/1306083701856624641/photo/1

[2] https://ssrana.in/articles/does-playing-music-in-marriages-and-religious-ceremonies-amount-to-copyright-infringement/

[3] Section 52(1)(za), the Copyright Act 1957.

[4] Section 52(1)(l), the Copyright Act 1957.

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CORPORATE

Advertisement Standards Council of India (ASCI), a self-regulatory voluntary organization of the advertising industry on October 20, 2020 has issued an advisory concerning COVID-19 advertisements[1].

In its advisory, ASCI noted that there has been a proliferation of advertisements with misleading claims around COVID-19 cures and preventions during the pandemic.

Also read Rise in false and misleading advertisements amidst Coronavirus

What does the advisory say?

  • Advertising claims not applicable to Coronavirus- The Advisory states that advertisers should avoid making claims that the advertised product can assist in destruction or removal of any virus other than coronavirus. In case advertisers choose to claim removal of any other virus in their advertisement, they should include a disclaimer such as “Claim not applicable to coronavirus (COVID-19)” or a similar message with the disclaimer size and position as per the Disclaimer Guideline of ASCI
  • Advertising of AYUSH products– That the Advertisers of Ayurvedic, Unani, Siddha and Homeopathy (AYUSH) products and services have been advised to abide by the Order of Ministry of AYUSH dated April 1, 2020[2], on coronavirus (COVID-19) advertisements which directs AYUSH Regulatory authorities of states and UTs to prevent misleading advertisements of AYUSH-related claims for COVID-19 treatment in print, TV and electronic media and take necessary action against the persons/agencies involved in contravening the relevant legal provisions of Disaster Management Act, 2005. Section 52 of the Disaster Management Act makes making false claims a punishable offence. Section 33-E of the Drugs and Cosmetics Act, 1940 states that an AYUSH drug shall be deemed to be misbranded if it makes any false claim or is misleading in any particular manner and is punishable under Section 33-I(2) of the Act.
  • Claims supported by National and International authorities- Further, advertisers making to claims to reduce the chances of becoming infected with coronavirus (COVID-19) or gain immunity against it must substantiate their claims with technical support of national and international authorities such as WHO, ICMR, MoHFW, AYUSH, DCGI, CDC (USA), well recognized medical/technical literature or regulatory-approved clinical research conducted by a recognized medical institute/laboratory.

ASCI’s Code for Self-Regulation in Advertising

Advertising is the key to product placement in the market and also in the minds of consumers. Therefore, in order to regulate the content of advertisements, ASCI’s Code for Self-Regulation in Advertising prescribes that advertisements should be truthful and not distort facts or mislead consumers by omissions or implications. Further, they shouldn’t violate trust of consumers or exploit their lack of experience or knowledge.

While the pandemic has wreaked havoc, it has also prompted consumer goods, pharmaceutical and ayurvedic companies to design and develop new products that enable consumers to practice better hygiene practices and enhance their health. Companies around the globe are working towards develop therapeutic drugs and vaccines that cures and protects patients infected by the virus. The Advisory serves as a reminder to companies to not make claims that the advertised product cures coronavirus or provides complete immunity from the virus without backing such them with scientific evidence.

The Press Release states that ASCI has processed 250 advertisements and reported 233 from the healthcare sector to the ministry. Of these, 162 were successfully resolved as the advertisers either withdrew the advertisements or modified them. The remaining 71 were taken up by the ministry for appropriate action. Further, it has screened more than 500 advertisements that had COVID-related misleading claims on social media platforms and advertiser websites.

[1] https://ascionline.org/images/pdf/press-release-asci-announces-covid-19-advertising-advisory.pdf

[2] https://ascionline.org/images/pdf2/ministry_of_ayush_order_for_states_uts.pdf

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Unpaid Instalments under Settlement Agreement Not Operational Debt under IBC

In a recent case, the National Company Law Tribunal (“NCLT”), New Delhi in M/s Brand Reality Services Ltd. v. M/s Sir John Bakeries India Pvt. Ltd[1], has stated that an operational debt under Insolvency and Bankruptcy Code, 2016[2] (“the Code”) does not take account of unpaid installments under settlement agreement and that if the relationship between the parties to dispute is not of corporate debtor and operational creditor then, such other payment defaults would not come within the ambit of Insolvency and Bankruptcy Code, 2016 (Code).

Factual background

The Corporate Debtor approached the Operational Creditor for investing in a new retail opening and the Operational Creditor agreed to the same. On June 15, 2018, both the parties to dispute entered into an Account Settlement Agreement (“the Agreement”), wherein the Corporate Debtor agreed to pay Operational Creditor,  outstanding dues of over Rs. 33,940,00/ through postdated cheques-.

However, the Corporate Debtor failed to pay the agreed settled amount and continued to default on the payment. In 2019, the cheques issued by the Corporate Debtor were returned by the Bank to the Operational Creditor on the ground of ‘stop payment’.

The Operational Creditor subsequently sent a demand notice on April 30, 2019, but the Corporate Debtor replied to the notice after the expiration of prescribed time period under Section 8(2) of the Code i.e., 10 days from the date of receipt of notice.

Aggrieved by the breach of terms and conditions mentioned under the Agreement by the Corporate Debtor, the Operational Creditor filed the present application seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.

Submissions made by the Corporate Debtor

The Corporate Debtor submitted that no debt was due or owed to the Operational Creditor in terms of the meaning of Operational Creditor, under Section 5(21) and Section 9 of the Code.  Furthermore, the Corporate Debtor contended that, payment had been settled on December 19, 2017 which the Operational Creditor did not divulge.

The Corporate Debtor also asserted that, in reply to the aforementioned demand notice, Corporate Debtor had raised and pointed out an objection on the subsistence of an issue/dispute. Subsequent to which the Operational Creditor was ordered to furnish all the important and significant documents. However, the Operational Creditor failed to  serve or furnish the same.

Judgment and analysis

  • The Tribunal observed that as per the terms and conditions of the settlement agreement, the concerned Corporate Debtor had paid the settlement sum of Rs. 21,66,511.00/- to the Operational Creditor. Hence, the present dispute was on further subsistence of liability or debt of Rs. 33,94,000.00/- as per the Agreement dated June 15, 2018; owed and payable to the concerned Operational Creditor.
  • The Hon’ble NCLT referred to the case of Delhi Control Devices(P) Ltd. vs. Fedders Electric and Engineering Ltd. (14.05.2019 – NCLT – Allahabad[3]) wherein it was ruled that unpaid installments under Settlement Agreement shall not be considered as debts within the meaning and ambit of Section 5(21) of the Code. Other relevant provisions such as Section 3(11) and Section 3(12) defining debt and default respectively were also adhered to, in order to ascertain if the said default in payment of installments could initiate CIRP. The Tribunal pointed out that in order to initiate CIRP under Section 9 of the Code, the Operational Creditor has to establish and demonstrate the default or non-payment of operational debt by the Corporate Debtor according to the definition of operational debt. As per Section 5(21) of the Code, operational debt means, a claim with regard to the supply and provision of products, goods or services. It also comprises employment or a debt, with regard to the payment of dues arising under any law for the time being in force and payable to the Central or any State Go
  • While referring to the facts and circumstances of the present case, the Tribunal was of the view that the application to commence CIRP under Section 9 of the Code was not based on the settlement agreement dated November 28, 2014 by which invoices/bills were raised by the Operational Creditor, but was based on the Settlement Agreement dated June 15, 2018, whose terms and conditions were contended to have been breached by the Corporate Debtor thereby leading to payment defaults and present petition. The NCLT thus observed that the concerned application was born out of breach of an agreement under which the parties to dispute do not share the relationship of corporate debtor and operational creditor. It was also held by the Tribunal thatthe failure to adhere to settlement agreement could not be a valid ground to commence CIRP under Section 9 of the Code.[4]
  • Additionally, the Tribunal also noted that NCLT was not a recovery Court/Tribunal and hence, the application made for recovery of dues owing to breach of the Settlement Agreement was liable to be dismissed.

In view of the Tribunal’s observations in the present case, it can be summed up that:

  • Unless the relationship between the parties to dispute is not of corporate debtor and operational creditor then, such other payment defaults would not come within the ambit of Insolvency and Bankruptcy Code.
  • An unpaid installment according to the settlement agreement cannot be termed as operational debt, as per the definition under Section 5(21) of the Code. Therefore, the contravention or breach of the Settlement Agreement cannot be considered as a valid ground to commence CIRP.

[1] MANU/NC/7776/2020

[2] https://www.indiacode.nic.in/bitstream/123456789/2154/1/A2016-31.pdf

[3] MANU/ND/7880/2019

[4] Delhi Control Devices(P) Ltd. vs. Fedders Electric and Engineering Ltd. (14.05.2019 – NCLT – Allahabad

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Best Before Date on Sweets mandatory from October 1, 2020- FSSAI

The Food Safety and Standards Authority of India (FSSAI) has vide its order dated September 25, 2020 mandated display of “Best before date” on non-packaged/ loose sweets, container /tray holding sweets at the outlet for sale mandatory with effect from October 01, 2020[1]. The order also states that the FBO’s (Food Business Operators) can also display “Date of manufacturing”, however the same is voluntary and not mandatory.

The aforesaid order has been issued by the Food regulator in suppression of its previous order dated February 24, 2020[2], whereby the FSSAI had mandated display of both “Date of Manufacturing” as well as “Best Before Date” on non-packaged/ loose sweets, container /tray holding sweets at the outlet for sale with effect from June 01, 2020.

Read FSSAI-Loose sweets to have manufacturing date and best before date

The February order also mandated display of “Date of Manufacturing” and “Best before date” for pre-packaged sweets on their labels as per the Food Safety and Standards (Packaging and Labelling) Regulations, 2011.

Hence, the FSSAI vide its order dated September 25, 2020 has relaxed the aforesaid compliances and made the display of the “Date of Manufacturing” on the container/ tray holding the non-packaged or loose sweets voluntary while “Best before date” remains mandatory.

The FSSAI has also directed that:

  1. FBO’s shall decide and display “best before date” depending upon the nature of product and local conditions
  2. FBO’s dealing in sweets shall comply with the aforesaid directions and the Commission of Food Safety of all States and UT’s shall ensure compliance by such FBO’s.

Food Safety assumes substantial prominence in India owing to the fact that India has always been a great host of multiple cuisines owing to its love for food and the desire to serve. However, the food industry in India is not untouched by the vices of adulteration and food adulteration particularly in sweets has been quite rampant lately. Moreover, considering that festivities in India which is dominated by consumption of sweets is about to begin, the compliance of the aforesaid FSSAI order by FBO’s dealing in sweets may help to ensure food safety and standards to a great extent.

A Brief on Food Safety Laws in India

Regulatory mechanism for commercialization of food in India

In order to monitor the laws relating to food, the Government of India enforced the Food Safety and Standards Act, 2006 (hereinafter referred to as the “Act”). The Food Safety and Standards Authority of India (hereinafter referred to as “FSSAI”) is the authority for regulating food laws in India. FSSAI is responsible for laying down science-based standards for articles of food and to regulate their manufacture, storage, distribution, sale and import, to ensure availability of safe and wholesome food for human consumption.

Packaging of food- India

In order to ensure the marketable value and durability of the food products intended to be sold in the Indian market, the manufacturers are required to follow sound packaging practices which enable the longer storage of food products in adequate storage conditions thus extending the timeframe during which the same remains consumable. The Food Safety and Standards (Packaging and labelling) Regulations, 2011 (hereinafter referred to as “Rules”) along with the Legal metrology (Packaged Commodities) Rules, 2011 prescribe for the specifications of the packaging to be used to store food products and the declarations to be made thereon enabling the consumers to make an informed decision before purchasing the food product.

Compliances to be made by sweet shops?

India being a land of diverse cultures and festivities is a home to various delicacies including sweets which accomplish the celebrations. The country has a rich heritage and tradition including preparation of fresh sweets at the local sweet shops and their distribution on different occasions, thereby carving a special place in hearts of those having a “sweet tooth”. However, the sweet shops are bound to ensure compliance to hygiene and safety norms while preparing the sweets for consumption.

While FSSAI has introduced norms aiming to adopt best hygiene and safety practices while preparing food products, including non-packaged or loose sweets having limited shelf life and storage time, it has struck a balance by considering the interests of those selling such food items in the form of reduced compliance burden. Since the mentioning of “Best Before Date” suffices the objective of consumer protection in respect of the said non-packaged or loose sweets, FSSAI has done away with the compulsion of stating “Date of Manufacturing” thereby ensuring consumption of non-packaged or loose sweets to be a sweet experience.

[1]https://www.fssai.gov.in/upload/advisories/2020/09/5f6ddbe03942eOrder_Direction_Date_Sweets_25_09_2020.pdf

[2]https://www.fssai.gov.in/upload/advisories/2020/02/5e53d8889957fOrder_Direction_Manufacturing_Date_BestBefore_24_02_2020.pdf

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BIS Certification for “Safety of Toys” made Compulsory

The Bureau of Indian Standards (hereinafter referred to as BIS) is a statutory body established under the Bureau of Indian standards Act, 2016 (hereinafter referred to as the Act). One of the main functions of BIS is to prescribe standards for covering goods and systems under the BIS regime.

Recently, BIS has brought ‘Safety of Toys’ under compulsory certification with effect from September 01, 2020 as per Toys (Quality Control) Order, 2020 issued by DPIIT, Ministry of Commerce and Industry[1].

Also read BIS Certification for Imported Toys made mandatory

Classification of Toys for BIS certification

As per the said order for the purpose of BIS certification, toys have been classified into following two types:

S No.TypeApplicable primary standards
1.Non Electric Toys (these are ordinary toys such as rattles, dolls, puzzles, etc. which do not have any function dependent on electricity) S 9873 (Part 1):2019
2.Electric Toys (these are toys which have at least one function dependent on electricity)IS 15644:2006

The license to the manufacturers would be granted by BIS under the BIS Standard Mark as per Scheme I of Schedule II of the BIS (Conformity Assessment) Regulations, 2018. Further, both International and domestic manufacturers can now apply for obtaining the certification online.

If licence is required for more than one type of toy, separate applications shall be made for each type. (However, samples shall be tested by BIS for conformity to the primary standard and the secondary standards which are applicable i.e. IS 9873 parts 2,3,4,7, and 9 etc.)

The above notification has ended a long haul wait for the toy manufacturers and is a great initiative to ensure safety of toys available in the market are of the prescribed quality and standard.

[1] https://bis.gov.in/wp-content/uploads/2020/07/Safety_of_toys.pdf

Also read

Bureau of Indian Standards (BIS) Hallmarking: India

Bureau of Indian Standards (BIS)- Foreign Manufacturer’s Certification Scheme

Bureau of Indian Standards (BIS)– Overview and Importance

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Can Ex-employee of Financial Creditor be Interim Resolution Professional?

In a recent case, the National Company Law Appellate Tribunal (“NCLAT”), vide its ruling dated May 22, 2020 upheld the order passed by respective National Company Law Tribunal (“NCLT”) dated January 4, 2020 with respect to substitution of appointment of an ex-employee of the Financial Creditor as the Interim Resolution Professional (IRP).

Factual Background

In the present appeal, State Bank of India is the Appellant (“Financial creditor”) and M/s Metenere Limited is the Respondent (“Corporate Debtor”). Appellant had furnished an application under Section 7 of Insolvency and Bankruptcy Code, 2016[2] (“Code”) for initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Respondent. The Appellant had nominated one of its ex-employee, who worked in the Appellant Bank for 39 years, to be appointed as the IRP for insolvency proceedings against the Corporate Debtor. Aggrieved by IRP’s proposed appointment, the Corporate Debtor or Respondent objected the same on the ground that the appointment of IRP was partial and biased.

NCLT’s Order

In view of the aforesaid objection made by the Corporate Debtor, the concerned NCLT vide its order dated January 4, 2020 ordered and directed the Financial Creditor to substitute IRP as the he had worked for Appellant bank for 39 years straight, thereby subsequently creating apprehension of bias and unlikely to render fair and unbiased services.

Hence, the Financial creditor was ordered substitution of IRP.

Appeal before NCLAT

Aggrieved and dissatisfied with the order passed by NCLT, the Financial Creditor appealed before the NCLAT on the ground that the concerned and proposed IRP fulfilled the requirements, eligibility and qualification as enumerated in the Code and thus, should be appointed as the IRP.

Issue- Whether an ex-employee of Financial Creditor can be appointed as an Interim Resolution Professional?

NCLAT’s Order and Observations

  • Relying on Regulation 3(1) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016[3](“Corporate Persons Regulations”); NCLAT considered such nomination of IRP appointment as valid and legitimate. The Tribunal observed that merely because a nominated IRP was an employee of Financial Creditor did not disqualify him/her and did not make him/her an interested and biased person. The Tribunal also stated that as per the regulations, an IRP should independent of any relation with Corporate debtor and not Financial Creditor.
  • NCLAT also relied upon the case of State Bank of India v. Ram Dev International Limited[4] wherein it was observed that, even if an IRP is acting/working as an Advocate , Company Secretary or Chartered Accountant with the ‘Financial Creditor’, such a proposal for appointment couldn’t be disqualified merely on such employment basis, except, when there is any disciplinary proceeding pending against him/her or if that person is an interested party, such as an employee or on the payroll of the ‘Financial Creditor’.
  • The Tribunal noted that in the present case, the proposed IRP was neither undergoing any disciplinary proceedings nor not on afore stated panel or engaged as a retainer by the ‘Financial Creditor’ but was merely a pensioner as he had rendered his services to the Appellant Bank for almost four decades.
  • The Appellate Tribunal also made reference to Section 17(1) of the Income Tax Act, 1961 and opined that bringing pension within the ambit of ‘salary’ could not be interpreted to render a pensioner of a ‘Financial Creditor’ under the statutory framework ineligible as an ‘interested person’ being in employment of the ‘Financial Creditor’ as the definition of ‘salary’ under the Income Tax Act, 1961 is designed only for the purposes of computing of income to determine tax liability.
  • However, the Tribunal could not avoid taking note of the fact that in the present case, the Appellant chose to propose its ex- employee, namely, Mr. Shailesh Verma as ‘Interim Resolution Professional’ in view of his past loyalty and long services rendered to the Bank. The NCLAT while making this observation further noted that its view was further reinforced in view of the present appeal initiated by ‘Financial Creditor’ as the Appellant Bank was aggrieved by NCLT’s order directing substitution of IRP.
  • The Appellate Tribunal also on the case of Ranjit Thakur v. Union of India and Ors[5] wherein, the necessity for a test of apprehension of bias was considered in order to ascertain the probability of impartiality, unfairness and bias.

In view of the aforesaid facts and circumstances, the NCLAT ruled that the apprehension and disregard expressed by Financial creditor in the present case could not be overlooked and hence dismissed the appeal.

Conclusion

The order of NCLAT in the present case is an essential one as the Tribunal though judged the Financial Creditor’s ex- employee as an eligible IRP under the Code but refused to appoint him as IRP, as the Financial Creditor’s grievance for not appointing its ex-employee as IRP in the case was evident and hence did not pass the test of apprehension and bias.

[1] MANU/NL/0241/2020

[2] https://www.mca.gov.in/Ministry/pdf/TheInsolvencyandBankruptcyofIndia.pdf

[3]https://ibbi.gov.in/webadmin/pdf/legalframwork/2018/Apr/word%20copy%20updated%20upto%2001.04.2018%20CIRP%20Regulations%202018_2018-04-11%2016:12:10.pdf

[4] https://nclat.nic.in/Useradmin/upload/17783526875b6a8fe536213.pdf

[5] MANU/SC/0691/1987

Related Posts

India: Role of Insolvency Resolution Professionals appointed under IBC

IBBI strengthens norms over Insolvency Resolution Professionals (IRP’s)

Impleadment of MCA in every Insolvency and Company matters not mandatory- NCLAT

India: Insolvency in times of COVID-19

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Consumer Protection (E- Commerce) Rules, 2020 comes into force

To protect the consumers from unfair trade practices and to address their concerns, the Ministry of Consumer Affairs, Food and Public Distribution on July 23, 2020 notified the Consumer Protection (E-Commerce) Rules, 2020. The E-commerce Rules have primarily been formulated with the objective to regulate the E-commerce sector in India and protect consumers from unfair trade practices on such platforms.

The Rules are applicable to  all goods and services bought or sold over digital or electronic network including digital products;  all models of e-commerce, including marketplace and inventory models of ecommerce; all e-commerce retail, including multi-channel single brand retailers and single brand retailers in single or multiple formats; and  all forms of unfair trade practices across all models of E-commerce[1].

Also read Draft E-commerce Guidelines issued by the Ministry of Consumer Affairs

Key Highlights of the Consumer Protection (E-Commerce) Rules, 2020

A conspectus of some of the key provisions of the E-commerce Rules are enumerated as under:

  • Duties of E-commerce entities

The E-commerce Rules specify certain duties which the E-commerce entities are required to abide by. The duties inter alia include the following

  1. Every E-commerce entity shall provide the following information on its platform-
    • legal name of the E-commerce entity;
    • principal geographic address of its headquarters and all branches;
    • name and details of its website; and
    • contact details like e-mail address, fax, landline and mobile numbers of customer care as well as of grievance officer.
  2. Every E-commerce entity shall establish a grievance redressal mechanism and appoint a grievance officer for consumer grievance redressal, and display the name, contact details, and designation of such officer on its website. The grievance officer is required to acknowledge the receipt of consumer complaints within forty-eight hours and redresses the complaint within one month from the date of receipt of the complaint.
  3. While offering any imported goods and services to the consumers, an E-commerce entity must mention the name and details of the importer. (Also read: Country of Origin to be specified on E-commerce websites
  4. No E-commerce entity shall impose cancellation charges on consumers unnecessarily.
  5. An E-commerce entity cannot record the consent of the consumer to purchase any good or service automatically, it must be expressed through an explicit and affirmative action.
  6. Manipulation of the price of goods and services so as to gain unreasonable profit from consumers shall not be entertained.
  • Liabilities of marketplace E-commerce entities

There are certain conditions which are expected to be fulfilled by marketplace E-commerce entities which inter alia include as under-

  1. A market place E-commerce entity must ensure that descriptions, images, and other content pertaining to goods or services on their platform is precise and relates directly with the appearance,  nature, quality and other general features of such good or service.
  2. Every marketplace entity shall enable the consumers to make informed decisions by providing the followingdetails about the sellers offering goods and services, including the name of their business, whether registered or not, their geographic address, customer care number, any rating or other aggregated feedback about such seller; – ticket number for each complaint from which the consumer can track the status of complaint; –  information relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, and grievance redressal mechanism; -information on all the available payment methods; – a description explaining the ranking of the goods in simple and intelligible manner.
  3. Every market place entity shall also include in its terms and conditions a description of any different treatment which it gives to goods or services or sellers of the same category, if any.
  • Duties of sellers on marketplace
  1. No seller shall falsely present itself as a consumer and post fake reviews about the goods and services or about the features or qualities of those goods and services.
  2. No seller shall refuse to take back goods, or withdraw or discontinue services purchased or agreed to be purchased, or refuse to refund if the goods or services provided by the seller are defective or do not match the qualities or features mentioned by the seller on the website or if they are delivered later than the expected delivery date.
  • Duties and liabilities of inventory e-commerce entities

Every inventory E-commerce entity shall provide the following information-

  1. Accurate information related to return, refund, exchange, warranty and guarantee, delivery and shipment, cost of return shipping, mode of payments, grievance redressal mechanism, all mandatory notices and information required by applicable laws, display single figure total along with the break-up price and ticket number for each complaint from which the consumer can track the status of complaint.
  2. If any inventory E-commerce entity vouches for the authenticity of goods or services sold by it then shall bear appropriate liability in any action related to the authenticity of such good or service.

The E-commerce sector has witnessed an unprecedented growth in the recent years, as people are relying on online shopping for almost everything today. Therefore, a set of uniform rules regulating E-commerce transactions and subsequent consumer issues is the need of the hour in order to ensure fair competition and consumer protection. Thus, the introduction of the Consumer Protection (E-Commerce) Rules, 2020 if implemented in true spirit will shield consumers from unfair trade practices to a great extent.

Also read:

E-commerce Websites now come under the purview of Legal Metrology Act, 2009

Curbing Online Counterfeiting in India

[1] https://consumeraffairs.nic.in/sites/default/files/e-commerce%20rules_Hindi_0.pdf

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Delayed Possession- MahaRERA awards Rs. 5 Crore to Allotee

Factual Background:

M/s Renaissance Infrastructure, the Respondent herein, is the original complainant (hereinafter referred to as the Complainant) and Parth B. Suchak is the Appellant herein, originally the Respondent-promoter (hereinafter referred to as the Promoter). As per the agreement of sale (“the agreement”) dated December 10, 2009, the Complainant had bought six plots of land along with a warehousing building from the Respondent Promoter. According to the agreement, Promoter was supposed to provide possession of the suit property to the Complainant or allottee by March 9, 2010. It is pertinent to point out that, Complainant and Promoter were originally partners and on Complainant’s retirement from the partnership, his share was compensated by providing the suit property, as per the sale agreement. Subsequently, the Promoter failed to adhere to the conditions enumerated under the agreement and thereby, could not hand over possession of the suit property on time i.e. even after extension of further six months. As per the terms of the agreement, on failure to hand over possession on time, the Promoter would be liable to pay or compensate the Complainant/allottee for loss of rent i.e., Rs. 10/- per sq. ft. per month. Hence, a complaint was filed by the allottee for delay of possession of suit property before the Maharashtra RERA Authority.

RERA’s Order

The adjudicating authority passed the order in favor of the allottee, ordering the Promoter herein to compensate the Allottee/Complainant[1]. The adjudicating officer calculated total compensation amount to be Rs. 5.04 Crores upto June 30, 2018 i.e., till the time of filing of the complaint, including the period of six months extension from the agreed date of possession of the suit property (i.e., 80 months). Thus, the concerned adjudicating authority, by order dated March 20, 2019 directed the promoter to pay Rs. 6,30,000/- per month from September 9, 2010 (i.e., after the grace period of six months, from the agreed date of possession) till handing over the possession of suit property. The concerned authority also ordered to execute a conveyance deed.

Consequently, the Promoter challenged this order before the RERA Appellate Authority, However, the appellate authority, vide it’s orders dated January 9, 2020 and January 24, 2020 upheld the order passed by Maharashtra RERA Authority. The appellate authority held that, Promoter/Appellant herein was a promoter and hence was liable to deposit 50% of the compensation amount as per proviso to Section 43(5) of the Act. In view thereof, the concerned appeal was dismissed, and promoter was directed to pay the said compensation amount to allottee.

Subsequently, the three orders passed by the adjudicating authority and appellate authority dated March 20, 2019; January 9, 2020 and January 24, 2020 respectively, were challenged by the Appellant before the Hon’ble High Court of Bombay.

Bombay High Court’s order

The counsel for promoter/Appellant made the following assertions and challenged the previous orders[2]:

  • It was alleged that the Appellant was not the promoter as parties to dispute were partners before and the agreement between the parties resulted in the present complaint. Thus, the agreement in question was not agreement for sale per se, but an agreement in lieu of the Respondent’s share in the partnership with the Appellant. In other words, the said agreement was acted upon to compensate for the shares owned by the Respondent, as he was retiring from the partnership.
  • It was also contended by the Appellant that the original averment of the Respondent was pre-mature and Further, the Appellant also contended that the adjudicating officer do not have jurisdiction in the present case as the same was in the nature of liquidated damages.

The Hon’ble High Court of Bombay in view of facts and circumstances of the case and law prevailing on the subject, made the following observations and order in the case:

  • The Hon’ble Court noted that as the Appellant was involved in construction of a real estate project and selling of plots and flats, the Appellant was a Promoter. It was further observed by the Court that the agreement entered into between the parties to dispute, clearly enumerated sale of suit property and hence the same was an “agreement for sale”.
  • That as per the agreement for sale, promoter/Appellant was bound to hand over possession of the concerned property within the agreed time, i.e., till September 9, 2010 (including 6 months’ grace period). Reportedly, the promoter failed to adhere to the terms and conditions mentioned within the agreement, consequent to which, promoter was liable to compensate the allottee.
  • It was also pointed out by the Court that, consideration of an agreement for sale, instead of money could also be a valuable consideration, including satisfaction of the allottee’s share in the promoter’s partnership. Hence, the present case dealt with allotment and sale of constructed premises with land (i.e., the suit property), in lieu of allottee’s claim and shares in the business/assets of the partnership. It was therefore observed by the Court that the Appellant herein was in fact the promoter and thus the adjudicating authority had jurisdiction over the issue.
  • In view of the aforesaid observations, the Court pointed out that, as the Appellant was a promoter, he had to adhere to the proviso to Section 43(5) of the Act and accordingly pay 50% of the compensation as a condition precedent to filing an appeal. Thus, the Hon’ble Bombay High Court found no infirmity and illegality in the impugned orders passed by adjudicating authority and upheld the same.

The Court thereby dismissed both the appeals and directed the promoter to pay half of the compensation as directed by the adjudicating authority, within the stipulated time of 4 weeks and further instructed that no sale shall of the suit property shall take place until payment of compensation and failure to comply with the order would authorize the concerned tehsildar to commence sale of suit property.

Delayed possession of flats and compensation under RERA

The delayed possession of flats or plots to home buyers has emerged as one of the most crucial issues in the Real Estate sector in India. In the past few years, home buyers have several times approached Courts and Tribunals with the grievance of delayed possession of flats by promoters and developers.

Prior to 2016, lack of any specific law governing the Real estate sector in India rendered home buyers helpless and handicapped in such circumstances of delayed or non-possession of flats even after paying the entire consideration as per the terms of development agreement. However, the enactment of Real Estate (Regulation and Development) Act, 2016 and judiciary’s stringent approach against such builders has helped in contouring the law and legal implications pertaining to delayed possession of flats by promoters/builders in India.

[1] MANU/RT/0001/2020

[2] https://images.assettype.com/barandbench/2020-09/ebff8344-c294-42fe-adfa-a07f30f35be5/Gupte_J__SA_Order_28_09_2020.pdf

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DISPLAY OF  ‘COUNTRY OF ORIGIN’- REGULATIONS IN DIFFERENT JURISDICTIONS: A COMPARATIVE ANALYSIS

‘Make in India’ and ‘Made in India’ have become popular issues in the recent times. It is a common belief that ‘Make in India’ and ‘Made in India’ are the same and are often used interchangeably in the public and media domain. However, they are two different economic programs. These economic programs have gained more attention ever since the Government has clamped down on imports from China, and banned nearly 59 Chinese apps on the grounds of data security and privacy, while also appealing to consumers to purchase locally made products[1]. Consequent to this, the DPIIT (Department for Promotion of Industry and Internal Trade) had also instructed all e-commerce websites to disclose the ‘Country of Origin’ of all their product listings by August 1, 2020, for non-legacy products and by October 1, 2020, for legacy products.

What is ‘Make in India’?

The Prime Minister of India launched the Make in India initiative in 2014, with the primary motive of making India a global manufacturing hub, while encouraging both, multinational as well as domestic companies to manufacture their products within India[2]. Headed by the Department of Industrial Policy and Promotion Ministry of Commerce & Industry, the initiative targets to raise the contribution of the Country’s manufacturing sector to up to 25% of the Gross Domestic Product (GDP) by the year 2025 from the existing 16%. Make in India has introduced numerous initiatives, from promoting Foreign Direct Investment (FDI), to implementing Intellectual Property Rights (IPR). It has also helped in the development of the manufacturing sector[3]. It marks 25 sectors of the economy which include but are not limited to the Automobile sector, Information Technology (IT) and Business Process Management (BPM). Furthermore, it also seeks to facilitate job creation, foster innovation, enhance skill development and protect IPR.

While explaining the vision behind the scheme, the PM added “Come make in India. Sell anywhere, [but] make in India.”

What is ‘Made in India’?

‘Made in India’ initiative gives an identity to the products being manufactured in India. A product needs to be borne out of Indian factors of production such as land, labour, capital, entrepreneurship or technology, for it to be termed as a product that is ‘Made in India’. This implies that there would be utilization of India’s natural talent and resources as well as generation of employment opportunities for the Indian masses at large. A Made in India product could eventually promote Indian home grown local brands, similar to the Swiss cheese or the German cars. There can also be a potential brand recognition for products arising from the Indian origin. [4] Generally speaking, Made In India would also provide the domestic manufacturers with a platform to compete with foreign products and raise the standards of their products.[5]

When is a product termed as/can be termed as ‘Made in India’?

As mentioned in the preceding paragraphs, for a product to be termed as Made in India, it needs to be borne out of Indian factors of production such as land, labor, capital, entrepreneurship or technology. However, unlike other countries, India is yet to come up with a definite legislation in this regard. Various countries around the globe have particular statutes defining the different parameters and composition percentages required for a product to be called as one originating from a certain jurisdiction, which will be discussed briefly hereunder.

“Country of Origin” Regulations in different jurisdictions: A Comparative analysis

Switzerland

In Switzerland, for a watch to qualify as Swiss Made and carry its trademark, it must have a movement produced and encashed in Switzerland, though only 50% of the value of the components in that movement are required to be of Swiss origin. The laws additionally require the product’s final inspection to be conducted in Switzerland. In 2018, certain luxury watch brands had been outsourcing the manufacturing of components, and in some instances even the complete watches, were being outsourced from China. Some have been open about it, however, the remaining brands were furtive, and their “Swiss Made” label lacked precision. Sources suggested that the practice of producing watch components in China wasn’t strictly new, however, outsourcing complete watches from a different country and selling them under the name ‘Swiss Made’ definitely raised concerns. The Federation of the Swiss Watch Industry (FH), being the trade organisation that protects the use of the ‘Swiss Made’ Label stated that “The use of any Swiss name or symbol on the display can mislead the consumer to believe the watch has been produced in Switzerland. It is a sensitive area, and the Federation seeks to actively protect it and has asked the members to look after the use of Swiss Made.”[6] Subsequently a task force was set up by the Federation to make sure that the rules relating to Country of Origin were respected by all the brands.

Australia

In Australia, under the Australian Consumer Law (“ACL”) certain food products offered or suitable for retail sale will be required to display country of origin information. The ACL doesn’t require non-food products to carry country of origin labelling, although other laws may do so. All businesses, whether they are legally required or choose to display country of origin labelling, are prohibited from making false or misleading representations or engaging in misleading or deceptive conduct about the origin of goods (both food and non-food). In general, for non-food products, the ACL sets out the following classifications to be mentioned on the products: were ‘grown in’ a particular country; are the ‘product of’ a particular country; and were ‘made (or manufactured) in’, or otherwise originated in, a particular country[7].

Canada

In Canada, new Enforcement Guidelines on “Product of Canada” and “Made in Canada” Claims have introduced a distinction between “Product of Canada” and “Made in Canada” claims. Product of Canada claims will be subject to a higher threshold of Canadian content (98%), while Made in Canada claims will remain subject to a 51% threshold of Canadian content. Made in Canada claims should be accompanied by a qualifying statement indicating that the product contains imported content. In both cases, the last substantial transformation of the product must have occurred in Canada[8]. These guidelines provide industry with useful information that would help in ensuring that they are in compliance with the false or misleading representations provisions of the Competition Act, the Consumer Packaging and Labelling Act and the Textile Labelling Act, when making claims about the Canadian origins of their products.

New Zealand

Similarly, in New Zealand, whether a product is New Zealand made will vary depending on the nature of the product and what consumers may understand about it. It is not possible to set out a precise formula as to exactly which products can be called ‘New Zealand made’. However, legitimate considerations include:

  1. for a clothing item, where is it actually changed from fabric into a garment
  2. for a food item, where were the ingredients grown? Were they transformed elsewhere into another food item?
  3. or a manufactured product, is it substantially manufactured in New Zealand? Where were the critical parts manufactured? Are any significant stages of manufacture carried out overseas?

If the product is produced in New Zealand from virtually all New Zealand components then there is little risk in claiming that such a product is ‘New Zealand made’[9]. However, if important components are imported or if part of the manufacturing process is undertaken off shore, then a ‘New Zealand made’ claim risks breaching the Fair Trading Act. Furthermore, breaching the rules as prescribed under the said Act shall also entail monetary damages. In May 2017, a health supplement company and its owner were fined more than $500,000 for claiming that bee pollen of the product was New Zealand-made when the bee pollen was sourced from China. Similarly, a company promoted an office chair as being ‘New Zealand made’. The chairs were assembled in New Zealand using components manufactured in Taiwan, China and Italy to the company’s specifications. The imported components included the base, castors, gas lift, chair adjustment levers and seat and back assemblies. The only parts of the chair manufactured in New Zealand were some incidental parts and the foam and upholstery for the seat and back support. The court held that the representation ‘New Zealand made’ was misleading in this case because the New Zealand input into the chairs was not sufficient to justify describing the chairs as ‘New Zealand Made’[10].

Conclusion

There are a number of Laws and Regulations in India that prohibit false and misleading claims as part of their advertising strategies. These have been enacted to protect the consumers from various forms of exploitation. However, one of the major problem relates with the effective implementation of these Acts, as a result of which, very little or no action is taken[11]. Furthermore, as mentioned herein above, the vagueness in the parameters that are required, which aid in the identification of a product as a “Made in India” product are also presently missing. Considering the given scenario, wherein locally produced goods and products are being actively promoted, and it further seems that the Indian consumers may also prefer locally grown products over the ones imported from other countries, the Government ought to/must come up with definite regulations in this regard.

Also read:

COUNTRY OF ORIGIN TO BE SPECIFIED ON E-COMMERCE WEBSITES FOR PRODUCT LISTINGS

Country of Origin Tag on all Imports

Consumer Protection (E- Commerce) Rules, 2020 comes into force

[1] https://economictimes.indiatimes.com/industry/services/retail/dpiit-to-discuss-country-of-origin-tag-with-etailers/articleshow/76780041.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppstThe

[2] https://www.makeinindia.com/article/-/v/make-in-india-reason-vision-for-the-initiative#:~:text=new%20processes-,Prime%20Minister%20Narendra%20Modi%20launched%20the%20Make%20in%20India%20initiative,their%20products%20within%20the%20country.

[3] https://www.makeinindia.com/article/-/v/make-in-india-reason-vision-for-the-initiative#:~:text=new%20processes-,Prime%20Minister%20Narendra%20Modi%20launched%20the%20Make%20in%20India%20initiative,their%20products%20within%20the%20country.

[4] https://nickledanddimed.com/2016/04/12/make-in-india-vs-made-in-india-a-laymans-guide/

[5]https://www.mapsofindia.com/my-india/government/make-in-india-made-in-india-forming-the-backbone-of-indianeconomy#:~:text=Whereas%2C%20Made%20in%20India%20primarily,in%20the%20manufacturing%20of%20products.&text=Made%20in%20India%20refers%20to,as%20well%20as%20foreign%20markets.

[6] https://www.ft.com/content/8ce9d068-e3e7-11e2-91a3-00144feabdc0

[7] https://www.accc.gov.au/business/advertising-promoting-your-business/country-of-origin-claims#country-of-origin-labelling-for-other-products

[8] https://www.competitionbureau.gc.ca/eic/site/cb-bc.Nsf/eng/02228.html

[9] https://comcom.govt.nz/news-and-media/media-releases/2018/reminder-to-businesses-about-made-in-new-zealand-claims#:~:text=The%20Fair%20Trading%20Act%20(FTA,or%20produced%20in%20New%20Zealand.

[10]https://comcom.govt.nz/__data/assets/pdf_file/0038/89849/Place-of-origin-representations-Fact-sheet-July-2018.pdf

[11] https://consumeraffairs.nic.in/sites/default/files/file-uploads/misleading-advertisements/misleading_advertiesment_and_consumer%20%281%29_0.pdf

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In a recent development, as reported by the Hindustan Times, the Maharashtra Real Estate Regulatory Authority (MahaRERA) vide its order dated July 30, 2020 in the case of Mr. Deepesh S Singh and ors vs. M/s. Neelkanth Constructions, has directed the Respondent i.e., M/s Neelkanth Constructions to not carry out any construction of extra floors on the project titled ‘Neelkanth Vihar Phase I’, in the absence of prior approval from the existing buyers.[1]

Brief background

The Complainants are allottees in the present case. The sale agreement was executed between allottees and builder in the year 2017-2018. As per the agreement, possession of the flats had to be given by March 31, 2019 but due to absence of occupancy certificate, the same got delayed. Hence, the possession was granted in the December, 2019 to the Complainants. Thereby, Complainants invoked Section 18 of the Real Estate (Regulation and Development) Act, 2016 asking for interest payment due to delayed possession. Along with the above mentioned contention, space for car parking, formation of society [under Section 11(4)(e)], execution of conveyance deed were also prayed.

Further it was contended by the Complainants that, despite Clauses 24 and 25 of the sale agreement with respect to construction of extra floors (modifications to the sanctioned plan) to utilize the FSI of the whole project land, provisions (Section 14) of RERA would supersede as the project is registered with Maharashtra RERA.

MahaRERA Order

The MahaRERA vide its order dated July 30, 2020 directed the Respondent builder, under Section 18 of RERA (Real Estate Regulation and Development Act, 2016)[2] (“the Act”) to pay interest amount for the time period April 1, 2019 to November 27, 2019 i.e., till the date on which occupancy certificate was obtained with respect to the project, to the Complainants. Along with the directions to pay interest, adjudicating body also ordered the benefit of ‘moratorium period’ to the Respondents.

Keeping in view the application of Section 11(4)(e) of the Act, MahaRERA ordered the Respondent to form a society along with execution of conveyance deed with respect to the said society, within the stipulated time of 3 months from the date of order.

Can a builder add floors or make alterations in the sanctioned layout?

According to Section 14 of the Act, any building project shall adhere to the requirements, conditions and terms present in the sanctioned plan for the respective project. The project must be in consonance with the layout plan and other specifications. The statutory provision under Section 14 further states that irrespective of any agreement, contract or legislation, the builder/promoter shall not make any changes or modifications/alterations to the sanctioned plan, except:

  • when due to architectural or structural reasons, with due recommendation from an Engineer or Architect and intimation to the allottees, certain minor modifications can be made to the structural plan.
  • with written consent of 2/3rd of the allottees (buyers) agreeing to make alterations or additions to the layout plan under sanctioned project.

Moreover, Section 14 (3) of the Act says that, in case buyer finds any defect or issue in the quality, services provided by the builder/promoter, non- compliance of the agreement etc, within the time of 5 years from the date of delivery of possession of flat to the buyer, the aggrieved home buyer is entitled to proper redressal of his complaints within 30 days of making the complaint. Failing which, such aggrieved buyer shall be entitled to appropriate compensation.

On similar grounds, a judgment was pronounced in the case of Shri Vitthal Laxman Patil v. Kores (India) Ltd. Real Estate Division Mumbai & ors., observing that Section 7 of Maharashtra Ownership Flats Act (“MOFA”)[1] akin to Section 14 of RERA, restricts a promoter/builder from making any further alterations and modifications to the sanctioned project plan, after the scope and extent of modification over a project has been disclosed. Further, Section 7A of MOFA necessitates prior consent of buyers in case of  structural modifications to the respective building (it does not include every other building of the project, but the concerned structure).

In view of the aforesaid, it is abundantly clear that the statutory provisions mandate that the promoter shall disclose all the specifications of the project, area, amenities, scope of development, possible additions and modifications etc. to the buyers/purchasers in the sanctioned plan. Despite the plan, if modifications are required, express approval and written consent shall be taken from the buyers for the same.

Even in the present case, the MahaRERA while interpreting while interpreting Section 14 of the Act, restricted Respondent builder/ developer from commencing any construction activity or make any modifications in the sanctioned plan without the 2/3rd consent and approval of the existing (allottees) buyers i.e., those who already have bought the flat.

[1]https://www.indiacode.nic.in/bitstream/123456789/8802/1/the_maharashtra_ownership_flats_act%2C1963_%2845_of_1963%29pdfcompressor-2856906.pdf

[1] https://www.hindustantimes.com/mumbai-news/developer-can-t-add-extra-floor-without-nod-of-buyers-maharashtra-real-estate-regulator/story-UUiwdRUYGzpeUkIphqooVN.html

[2] https://www.up-rera.in/pdf/reraact.pdf

[3]https://www.indiacode.nic.in/bitstream/123456789/8802/1/the_maharashtra_ownership_flats_act%2C1963_%2845_of_1963%29pdfcompressor-2856906.pdf

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Digital Media including OTT Platforms under Purview of Ministry of I & B

In a recent move, the Ministry of Information and Broadcasting has brought all kinds of Digital/Online Media including Over the Top (OTT) Platforms under its ambit, according to the notification S.O. 4040(E) dated November 9, 2020,[1] issued by the Government of India. In an interview to a newspaper daily, a ministry official said the move was taken to ensure a level playing field for all media, and bring an “enabling regulatory environment so that all digital players adhere to the laws of the land. Some content on certain platforms has caused a lot of problems to the citizens of the country who don’t even have a grievance redressal platform. There have been at least 40 court cases where the government had to make an appearance. Courts have also urged the ministry to have a regulatory mechanism. We have been working on that with stakeholders.”[2]

The notification includes the following under the umbrella of Digital/Online Media:

  • Films and Audio-Visual programs are made available by online content providers.
  • News and current affairs content on online platforms

To date, there was no law regulating digital content in India. However, with this notification in place, the government will now control the online content.

Previously, in September 2020, fifteen Indian streaming services and digital companies released the “Universal Self-Regulation Code for Online Curated Content Providers”.[3] Though, the government expressed displeasure at the model proposed by the Internet and Mobile Association of India (IAMAI). The model was largely rejected because it did not define the code of ethics and was not clear on the definition of prohibited content. The IAMAI was asked to look into the model followed by the News Broadcasting Standards Authority (NBSA) and Broadcasting Content Complaints Council (BCCC).[4]

With the new notification in place, it would be interesting to see the impact it will have and the changes it would bring in the arena of digital media.

[1] https://www.livelaw.in/pdf_upload/pdf_upload-384486.pdf

[2] https://economictimes.indiatimes.com/industry/media/entertainment/media/govt-brings-all-otts-like-netflix-amazon-prime-and-digital-news-sites-under-ib-ministry/articleshow/79166254.cms?from=mdr

[3] https://www.medianama.com/2020/09/223-iamai-occp-self-regulation-summary/

[4] https://indianexpress.com/article/entertainment/web-series/ott-platforms-under-government-purview-7047502/

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Social Media Influencer – Legal ImplicationsFor further information please contact at S.S Rana & Co. email:  info@ssrana.com or call at (+91-11 4012 3000). Our website can be accessed at www.ssrana.in

The Deputy Director, Legal Metrology has issued a letter dated September 28, 2020 to the Direct Selling Entities with respect to the compliance of the provisions of the Legal Metrology Act, 2009 and Legal Metrology (Packaged Commodities) Rules, 2011.

In the letter, the Deputy Director has directed that certain mandatory declarations are required to be made on all pre-packaged commodities in the interest of consumers like name and address of the manufacturer/ packer/ importer, country of origin, name of the commodity, net quantity, month and year of manufacturing/ pre-packing/ import. ‘best before or use by date, month and year’ of a commodity which may become unfit for human consumption after a period of time, retail sale price in the form (MRP) Rs…(inclusive of all taxes) and consumer care details.

The Deputy Director has requested compliance of the aforementioned provisions by the Direct Selling Entities and also submit copy of Registration certificate issued under Rule 27 of the Legal Metrology (Packaged Commodities) Rules, 2011.

Legal Metrology Provisions

The mandatory declarations included on pre-packaged commodities as given under Chapter –II- Provisions Applicable to Packages Intended for Retail Sale:

Article l6. Declarations to be made on every package. –

(1) Every package shall bear thereon or on label securely affixed thereto, a definite, plain and conspicuous declaration made in accordance with the provisions of this chapter as to-

(a) the name and address of the manufacturer, or where the manufacturer is not the packer, the name and address of the manufacturer and packer and for any imported package the name and address of the importer shall be mentioned.

(aa) The name of the country of origin or manufacture or assembly in case of imported products shall be mentioned on the package;

(b) The common or generic names of the commodity contained in the package and in case of packages with more than one product, the name and number or quantity of each product shall be mentioned on the package.

(c) The net quantity, in terms of the standard unit of weight or measure, of the commodity contained in the package or where the commodity is packed or sold by number, the number of the commodity contained in the package shall be mentioned.

(d) The month and year in which the commodity is manufactured or pre-packed or imported shall be mentioned in the package.

(e) the retail sale price of the package (Maximum Retail Price)

Rule 27 ‘Registration of Manufacturers, Packer and Importers

Rule 27 provides for the mandatory registration of manufacturers, packers and importers of pre-packaged commodities is deemed mandatory.

In view thereof, the Direct Selling Entities have to comply with the provisions as enumerated above and accordingly make mandatory declarations on pre-packaged commodity and ensure registration under Rule 27.

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Display calorie values menu cards India FSSAI

The Food Safety and Standards Authority of India (FSSAI) on August 21, 2020 issued a notification mandating the display of calorific value of food items on menu cards at various food service establishments from January 01, 2022[1].

It would be relevant to mention here that the draft of the Food Safety and Standards (Packaging and Labelling) Amendment Regulations, 2018 was published by the FSSAI on October 08, 2018 and objections and suggestions were invited from persons likely to be affected by the Regulations. In view of the objections and suggestions to the Regulations received, the FSSAI has amended the Food Safety and Standards (Packaging and Labelling) Regulations, 2011 (Regulation of 2011) by introducing a new rule i.e. Rule 2.4.6 in the Regulations. The new Rule states as follows:

“2.4.6 – Display of information in food service establishments – (1) Food Service Establishment having central license or outlets at ten or more locations shall mention the calorific value (in kcal per serving and serving size) against the food items displayed on the menu cards or boards or booklets and the reference information on calorie requirements shall also be displayed clearly and prominently as “An average active adult requires 2,000kcal per energy per day, however, calorie needs may vary.”

Display of information relating to allergens made mandatory

The FSSAI further mandates the display of information relating to food allergens on the menu card, if food consists of or is made of the following:

  • Cereals containing gluten; i.e., wheat, rye, barley, oats, spelt or their hybridized strains and products of these;
  • Crustacean and their products;
  • Milk and milk products;
  • Eggs and egg products;
  • Fish and fish products;
  • Groundnut tree nuts and their products;
  • Soybeans and their products;
  • Sulphite in concentrations of 10mg/kg or more:

The Rule also states that for convenience, allergens can be depicted by symbols.

The Rule additionally provides that the prescribed logo for vegetarian or non-vegetarian should also be displayed on the menu card.

Does the Rule apply to all restaurants and hotels?

As per the amendment, the impugned Rule applies to Food Service Establishments having central license or outlets at ten or more locations.

Exceptions to the Rule

Additionally, the rule also specifies the exceptions as under:

“2.4.6. – Display of information in food service establishments –

(3) The provisions of this regulation shall not be applicable to the following, namely: –

  1. Event caterers and food service premises that operate for less than sixty days in a calendar year (consecutively or non-consecutively);
  2. Self-service condiments that are free of charge and not listed in the menu card; and
  3. Special-order items or modified meals and menu items as per request of the customer.”

In addition to this, the food establishments such as restaurants have been instructed to mandatorily mention information concerning nutrition specific to organic food or ingredients, if applicable, “provided that deviation of 25% may be tolerated in case of nutritional information declaration.”

Does the Rule apply to E-commerce food business operators?

The new rule specifically mentions that the E-commerce Food Business Operators shall get the requisite information (as mentioned aforesaid) for the food items from the respective Food Business Operator and provide the requisite information on their website wherever applicable.

The FSSAI is of the view that by making this practice mandatory, the customers will make a more informed choice and will also empower them in making the right choices. This will help one in keeping a count of calories that one intakes and can balance their calorie intake accordingly.

The compliance to the new rule by food service establishments before January 01, 2022, is voluntary.

[1]https://fssai.gov.in/upload/notifications/2020/08/5f4611c4eca96Gazette_Notification_Information_Display_Food_26_08_2020.pdf

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 For further information please contact at S.S Rana & Co. email:  info@ssrana.com or call at (+91-11 4012 3000). Our website can be accessed at www.ssrana.in

GST registration after physical verification of business place if Aadhaar not authenticated

As per the fresh directions issued by the Central Board of Indirect Taxes and Customs (CBIC) vide Notification no. 62/2020, businesses willing to register under GST can choose to opt for Aadhaar authentication, in the absence of which registration would be granted after physical verification of the place of business.

Key highlights of CBIC notification

  • The CBIC has further clarified that when an applicant for GST registration opts for authentication of Aadhaar number, he shall, with effect from August 21, 2020, undertake the said authentication while submitting an application.
  • The notification states that where a person fails to undergo authentication of Aadhaar number or does not opt for authentication of Aadhaar number, the registration shall be granted only after physical verification of the place of business in the presence of the said person.
  • Thus, any person registering under GST can opt for Aadhaar authentication, in which case registration is deemed to be granted within 3 days without physical inspection of the premises. In other cases, the time period could be up to 21 days and authorities can undertake physical verification of place of business or detailed review of documents as necessary.

Earlier in March this year, CBIC had issued a notification making Aadhaar authentication mandatory for GST registration from April 1, 2020. 

Conclusion

The new notification issued on Friday is deemed to be a positive step to restrict tax evasion by rigorous pre-registration verification norms. The notification will also speed up the registration process amidst the COVID-19 outbreak by allowing verification through Adhaar when physical verification of the business place is difficult. Furthermore, linking GST, Adhaar and PAN will be helpful for the government in a number of ways as it will further centralise the tax database to ease the regulatory operation for the concerned authorities.

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Sanitizer business and its regulatory framework amidst COVID 19

The sudden outbreak of the novel COVID 19 virus has left a damaging impact all over the globe. The situation is such that even some of the developed countries are unable to find the cure for the virus and control its spread. As the virus can be transferred through human contact, almost all countries including the World Health Organisation (hereinafter referred to as ‘WHO’) is strictly recommending the use of face masks and hand rub sanitizers, along with social distancing, as a measure to curb the virus contamination.

Prior to the outbreak, India was a dormant market for hand sanitizers. However, the outset of the pandemic has resulted in an overwhelming, nationwide demand for hand sanitizers. While many businesses are struggling to survive, the sanitizer business is one of the few to have thrived during these difficult times. The frantic expansion of sanitizer market has attracted many entrepreneurs towards its development.

Also read: Equitable distribution and price control of hand sanitizers and face masks amid COVID-19

Licenses for sale/ manufacture/ distribution of sanitizers

As sanitizers fall within the definition of “Drugs” under the Drugs and Cosmetics Act, 1940, the license to sell/ manufacture/ distribute the same has to be obtained from the Licensing Authority as prescribed by the Government under the Drugs and Cosmetic Rules, 1945 (hereinafter referred to as ‘1945 Rules’).

The application for the sale/ stock/ exhibit or offer for sale has to be made in the prescribed relevant Form as provided under the 1945 Rules. The licensee has to submit the required details and has to follow the conditions attached with the license.

The application for manufacturing has to be submitted in accordance with the prescribed Form under the 1945 Rules along with the required documents including but not limited to plan of premises. As stated above, the license would further have to abide by the conditions attached to the license. For those entrepreneurs, who are not having manufacturing facility of their own, can obtain a loan license to manufacture the drug for sale. In this regard, they would have to provide a consent letter from the premises where such manufacturing is being carried out.

WHO guidelines for composition of sanitizers

With a view to safeguard the interests of the general public and to maintain the quality of sanitizers brought in the market, the WHO has recommended a certain composition of the sanitizers. As per the [1], applicable on India, handrubs with optimal antimicrobial efficacy usually contain 75 to 85% ethyl alcohol/ ethanol, isopropanol, or a combination of these products. Therefore the formulations advised by WHO either contain 75% v/v isopropanol, or 80% v/v ethanol.

Relaxation measures taken by the government in view of COVID 19

In view of the excessive demand for sanitizers, the Government has introduced relaxations for the sanitizer industry vide order dated March 19, 2020. The Central Government by way of this order has directed the State Governments to carry out the following actions.

  1. Permission on account of licensing and storage of Ethyl alcohol may be granted to the existing sanitizer industry without any quota restriction on supply of Ethyl alcohol. Ethyl alcohol is one of the major components in manufacturing of sanitizer.
  2. Ensuring easy procurement of Ethyl alcohol so that sanitizers can be obtained by producers at reasonable prices.
  3. Sanitizer industry to be motivated to increase working capacity for enabling enhanced production.
  4. As distillery members can also produce sanitizers in bulk, they are to be accorded with necessary permissions on priority basis.

Pursuant to the above, the Delhi Government has already eased the permission granted to all manufacturers of drugs and cosmetics in Delhi producing items based on ethanol up to June 30, 2020.

Ministry of AYUSH on licensing/approval/renewal process of sanitizers

Considering the crunch of time during the COVID 19 pandemic and subsequent need of sanitizers, the Ministry of AYUSH  has also rolled out a circular on April 02, 2020[2] on expediting the process for grant of approval/license/renewal of license for manufacturing sanitizers. The Government in this regard has directed the AYUSH  Licensing Authorities to complete the licensing/approval/renewal process expeditiously and dispose of the applications of the manufacturer’s maximum within a week’s time. However, the licensing/approval/renewal has to be in accordance with the terms of use of ingredients and permitted excipients, i.e. ingredient of medication.

[1] https://www.who.int/gpsc/5may/Guide_to_Local_Production.pdf

[2] https://www.ayush.gov.in/docs/124.pdf

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In the recent past, social media marketing has witnessed an enormous increase. This has given birth to a bandwagon of social media influencers, who spend hours in creating content and doing various other activities such as endorsing, reviewing or advertising a brand. Influencer marketing can be understood as a type of marketing that focuses on using key leaders to drive the brand’s message to the larger market, rather than marketing directly to a large group of consumers, the brand instead inspire/hire/pay influencers to get out the word for it.[1]

As per a report titled, ‘The State of Influencer Marketing 2019: Benchmark Report’ by Influencer Marketing Report revealed that the outlook for influencer marketing is extremely positive[2]. It further showed that 92% of consumers believed that influencer marketing was an effective form of marketing.[3] Therefore, with the increase in the industry, various issues in this regard have also elevated.

This article goes through various legislations that the government has enforced in the best interest of the consumers. Additionally, it also reiterates some of the points that an influencer must keep in mind while making a decision to endorse or advertise goods/services of a particular brand.

Like any other form of advertising the purpose of getting endorsements from the influencers is to help the consumer in making an informed choice. However, there have been some instances in the past where these social media influencers were called out for some negative effects of the endorsed product. Therefore, the regulating bodies are now taking steps to regulate the bandwagon of social media influencers in order to balance and protect the interests of the members of the purchasing public.

Endorsement and Advertisements by Influencers- The Law

  1. The Consumer Protection Act, 2019 – The Consumer Protection Act, 2019 (hereinafter referred to as ‘the Act’) notified on August 9, 2019. Alongwith certain other changes, the Act also focusses on misleading advertisements and endorsements by celebrities that also includes social media influencers. If an influencer has not informed that it is a paid promotion and intentionally lying about the product that it is good when it is not, followers can sue the influencer for misleading advertising for up to INR 10 lakh and repeat offenders can be fined up to INR 50 lakh.[4] This is the very first legislation that emphasizes on targeted advertising, market campaigns through influencers[5], as the Ministry has repeatedly felt that advertisements by celebrities and influential personnel can take a negative turn and harm the consumers. There have been instances where advertisements may have become misleading while making it attractive for the consumers.
  2. The Draft Central Consumer Protection Authority (Prevention of Misleading Advertisements and Necessary Due Diligence for Endorsement of Advertisements) – In addition to above regulation, the Ministry of Consumer Affairs have released in September 2020, the Central Consumer Protection Authority (Prevention of Misleading Advertisements and Necessary Due Diligence for Endorsement of Advertisements) (hereinafter referred to as ‘the Draft Guidelines’) to keep a watch on all kinds of endorsements and endorsers irrespective of the medium. With the influencer industry growing, a lot of micro influencers have been advertising for personal reasons of self-growth and money, ignoring the interests of the purchasing public. Hence, to keep a tab on this the Ministry have made it mandatory to conduct a due diligence on the product or at least research on the facts of the product before endorsing or advertising it, for the sole purpose of authenticity and the best interest of the public. Though these guidelines are yet to come in force but will soon be implemented. Thus, it is important for the social media influencers to know about the guidelines.
  3. The Code for Self-Regulation of Advertising – The Advertising Standards Council of India (ASCI) has established the Code for Self-Regulation[6] (hereinafter referred to as ‘the Code’) with a view to achieve the acceptance of fair advertising practices in the best interest of the consumers. The Code includes a series of rules and regulations that helps maintain the authenticity of the advertisement content. Also, as per certain reports the ASCI is in the process of framing disclosure rules for social media influencers who promote products on the internet. In its bid to protect consumer interest, the advertising regulator is framing guidelines basis international best practices to enable end-users make informed decisions regarding their purchases online.[7]

Certain Key Points to be kept in mind by Social Media Influencers to avoid any legal liability

Every player in the marketing industry, including the consumers, manufacturers, brands have become a part of the Influencer Industry. A brand is endorsed by an influencer, the influencer advertises to influence a consumer so as to make a purchase decision, etc. Therefore, having to be a part of such a dynamic industry, the social media influencers, being the key players of it, ought to keep in mind multiple aspects while deciding upon a brand that they desire to endorse or advertise.

The very first thing to be kept in mind and is of utmost importance is that DUE DILIGENCE is social media influencer’s best friend. Due Diligence in simple words can be understood as the care that a reasonable person exercises to avoid harm to other persons or their property.[8] For a social media influencer, it would entail doing every possible thing to be sure of the claimed authenticity, quality & safety of a product before endorsing it.

Apart from this, below is a non-exhaustive list of the points that may guide the extent and limits of an influencer for their key job:

  1. The social media influencer ought to do a background check and research on the brand and the product being endorsed or advertised.
  2. Every celebrity or influencer ought to ensure that their advertisement does not violate any provisions of the applicable legal regulations.
  3. The representation of the opinion or preferences of the influencer should portray its genuineness.
  4. The influencer, while endorsing or advertising ought to put a disclaimer regarding the personal preference, so the consumer is well aware, and can do a further personal research on the product.
  5. The influencers must avoid the practice of generalizing a product for all types of consumers.
  6. If the post made by the influencer is a result of a paid partnership with the brand, please disclose it.[9]
  7. Make the difference between the personal opinion about products and the endorsement views very visible and known to the viewers. Using hashtags may also help, such as #ad, #sponsored, #paidpromotion.[10]
  8. It is advisable to have a written contract in place for any endorsements done. This contract should clearly define the rights and liabilities in place.
  9. Before endorsing a product that affects public health and wellness, it is advisable to pay particular attention to what product claims are being made and are the claims backed by proper and authentic evidences.

[1] https://www.tapinfluence.com/blog-what-is-influencer-marketing/

[2] https://influencermarketinghub.com/influencer-marketing-2019-benchmark-report/

[3] https://www.business2community.com/marketing/the-rise-of-influencer-marketing-and-what-to-expect-in-2020-02318375

[4] https://www.marketingmind.in/social-media-influencers-can-now-be-sued-upto-rs-50-lakh-heres-why/

[5]https://www.mondaq.com/india/dodd-frank-consumer-protection-act/877176/consumer-protection-laws-influencers-be-aware

[6] https://www.ascionline.org/images/pdf/code_book.pdf

[7] https://www.businesstoday.in/current/corporate/social-media-influencer-to-be-soon-on-advertising-regulators-radar-asci-advertising-standards-council-of-india/story/383739.html

[8] https://www.merriam-webster.com/dictionary/due%20diligence

[9] https://www.artistiklicense.org/post/what-every-influencer-in-india-ought-to-know-right-now

[10] Ibid

 For further information please contact at S.S Rana & Co. email:  info@ssrana.com or call at (+91-11 4012 3000). Our website can be accessed at www.ssrana.in

Emerging Frauds in the Digital World: How Perpetrators are using your name to defraud others!!

Introduction

It is no doubt that the Age of Digitalization has made access to businesses and organizations easier, it has made it possible for us to conduct transactions worth lakhs from the comfort of your home. But how does a person, who pays his hard earned money, confirm that the bank account given to him/her for making money transaction is legitimate, that it was given to him/her by legitimate source?

We all are aware about the ‘surprise lottery schemes’ that pops up in our SMSs and the junk folder of our email accounts, but this problem is closure to home than we realize.

The method of conducting cyber fraud that we are addressing in this article is impersonation and its effects on the organizations, which are being impersonated along with how a fraudster hides behind the web of phone numbers, email addresses and bank accounts to evade the authorities. We also try to highlight some basic due diligence which the members of the general public can refer to make sure that they don’t fall prey to such unsocial activities.

What is a Business Email Compromise?

Business Email Compromise (BEC) is an exploit, in which an attacker obtains access to a business email account and imitates the owner’s identity, in order to defraud the company and its employees, customers or partners or the attacker may create an account with an email address almost identical to one on the corporate network, relying on the assumed trust between the victim and their email account. BEC is sometimes described as a “man-in-the-email attack”.

One of the examples in which a BEC situation may arise is when the impersonator who is using a domain name, which is deceptively similar to your domain name to register its email IDs to trick the members of the general public into believing that it has affiliation or any association with your business to dupe the general public in the garb of giving a job opportunity or fake franchise.

Another very classic example, wherein, the impersonator would create an email id on a deceptively similar domain name; hack all your data; send email to your clients asking them to make payment of your outstanding invoices in a new digital payment portal like PayPal, owned by the imposter.

In the recent times, a rise has been witnessed in occurrence of such frauds particularly in cities which are IT Hubs in India, like Hyderabad, Bangalore, Gurgaon also in cities with are demographically suitable for young job seekers.

According to the FBI’s Internet Crime Complaint Center (IC3), “the BEC scam continues to grow, evolve, and target businesses of all sizes. Since January 2015, there has been a 1,300% increase in identified exposed losses, now totaling over $3 billion.”[2]

PM Cares Fund Fraud amid COVID-19: Deceptively similar UPI IDs

In the wake of Coronavirus outbreak in India, Hon’ble Prime Minister of India initiated a fund raiser scheme PM-CARES to help the country to fight the Coronavirus pandemic. The payment could be made by UPI transaction directly in the bank account of the scheme. However, within a day or two, a spurt in number of fake UPI IDs has been revealed. These fake UPI IDs are also being circulated on social media to seek funds under the PM-CARES scheme. Cybercriminals are trying to scam good Samaritans of the society by promoting dubious UPI accounts. According to Delhi Police, one such fake UPI ID was “pmcare@sbi” which was deceptively similar to the correct UPI ID “pmcares@sbi”. The State Bank of India has acted promptly and blocked the fake UPI ID. The National Cyber Security Coordinator (NCSC) in Prime Minister’s Office has issued a cautioning statement to cybercriminals not to take advantage of the present coronavirus crisis and commit financial frauds against unsuspecting citizens and enterprises[3].

Modus Operandi

The modus operandi used by the imposters/fraudsters in such cases usually comprises of the following steps:

  1. Spotting the Target:

Generally, such information is gathered from job portals/ where there is an abundance of young job seekers, fresh college passed out.

  1. The Bait:

This is done by various means, one of the ways is registering a deceptively or confusingly similar domain name and sending mails to potential target. The offers are too good to refuse, in an attempt to bait the victim. This is a hit and run process as many of the potential victims are far sighted and don’t pay heed to such spam messages.

  1. Trapping the Target:

If the victim replies, then comes the turn for telephonic conversation, where a trained member of the impersonators, posing as a Recruiter or a Human Resource Executive will make sure that the victim falls into the trap. The perpetrators use persuasion and pressure methods to groom and manipulate human nature. This is also known as grooming the victim. They use their impressionable skills and buy the confidence of the victim.

  1. The Minuscule Amount:

The impersonators then ask for a nominal fee from the victim posed as an Application Fee, which is in the bracket of INR 10,000-15,000. The victim is usually not bothered by this amount as they trap such victims who are desperate for the job and inveigle them with high salary packages.

  1. Milking the Cash Cow:

After receiving the application fee, it is just about how far they can take the victim. In pretense of further stages towards a successful job opportunity, they keep asking money from the victim and state that if the victim does not pay the amount in the prescribed time then the money initially given as application fee will be forfeited.  The victim in an attempt to save his initial investment, has no other option but to pay the imposters.

  1. Cut the Golden Goose:

When the imposters have extracted the desired amount, then they are ready to vanish. Consequently, they cut all contacts from the victim and change their sim cards, switch their domain names and even close their bank accounts. This makes them untraceable by the members of the general public.

The perpetrators use a number of techniques to screen their true identity.

For instance, the bank account details as shared to the victims are shown as in the name of company/business as portrayed to the victims, but in fact, the bank accounts are in the names of impersonators or their allies. Once the amount is transferred, they are siphoned in various other bank accounts of the members of the organized group or withdrawn from the ATM.

Also, they are usually not from the same city/State as that of the victim. This multi-jurisdictional nature of the fraud is a fail-safe measure to make sure that it becomes increasingly difficult to report and/or investigate these crimes.

Also, the amounts being extorted are small, which helps the perpetrators evade the jurisdiction of Economic Offence Wing’s scanner. Because of the multi-jurisdictional nature, the complaints by the victims are filed in individual police stations/cyber cells and are seen as cases of individual, small-scale frauds.

The perpetrators also change their mobile numbers frequently – often right after the initial payment is made.

Here is an example as given on the website of Haryana Police[4]:

  1. An Email received by the victim which posed to be from a homegrown automobile giant that his resume has been shortlisted from a Job Site Monster.com for engineer at their Manufacturing Unit offering him a salary of Rs. 2.0 lacs /month
  2. He has to deposit Rs. 8,200 in a State Bank of India Account Number and come for the interview with the pay slip and also that it was said in the email that this amount is refundable.
  3. The Emails traced were from all foreign countries, and the bank accounts were also fake to which the money was deposited, and the amount was immediately withdrawal from ATMs.
  4. The Criminal was also doing SMS and Phone Calls to the victim.
  5. The Criminal were traced with the help of Mobile Calls and were arrested.

How does it affect the Business, it is impersonating and how can they protect themselves?

A Business entity, which is being impersonated has to protect its name, reputation and goodwill in the market  as the imposters, most of the time, to make themselves look legitimate, use the name, logos, office address, similar websites and email ids of the organization they are impersonating.

In such a case, an organization has both, criminal and civil remedies at its  disposal.

In Criminal remedy, a complaint can be filed with a Police Station, wherein the crime is said to be committed, under provisions of Indian Penal Code including fraud, impersonation, forgery etc. Police is required to record the statements of victims and register FIR. If Police fails to register FIR, a complaint can be filed with the concerned Magistrate under Section 156(3) Cr.PC for seeking proper investigation/registration of FIR in the complaint.

Then there is the civil remedy. In addition to the criminal complaint, the business, which is being impersonated can file a suit for permanent injunction infringement of its intellectual property rights against the unknown impersonators. The banks in which the imposters have their bank accounts, Domain Registrars, website developers can be impleaded as necessary parties to the suit.

Along with the suit, the Plaintiff can also file an application for an Interim Application for a Mareva injunction. In a Mareva injunction, the bank accounts as well as domain names which are used by the imposters are directed to be freeze by the Court. Banks and Domain Registrars are directed to disclose the identity of the imposters and file their identity related documents used at the time of registering to their services. This in turn will help in the criminal investigation mentioned above.

The Indian Judiciary has recognized such frauds and given judgements in the favor of businesses/companies. In the case of HCL Technologies Ltd. v Ajay Kumar & Ors.[5], the High Court of Delhi ordered the Banks to place on record necessary documents including Aadhar Card details, PAN number etc., of the perpetrators on the basis of which the accounts were opened with the banks and to freeze the bank accounts. The Court directed Paytm, one of the Defendants to freeze the accounts too.

A similar order was passed by the High Court of Delhi in Colgate Palmolive Company v NIXI[6] and Jasper Infotech Pvt. Ltd. v Aadi Sins & Ors.[7]

How to Spot a Fake Website/Scam

There are some easy steps you can take to check the authenticity of a website:

  1. HTTP = Bad, HTTPS = Good: The ‘S’ in https:// stands for ‘secure’. It indicates that the website uses encryption to transfer data, protecting it from hackers.
  2. Check for easy markers such as spelling mistakes, typos and broken links. It is highly improbable for a legitimate business to have such mistakes on their website.
  3. Domain age: The imposters usually register a domain name just for a few days/months before changing the name of the domain and registering a new one. You can us search engines such as Whois.com to look up the information such as the date of registration of the Domain name.
  4. Look for reliable contact information: Try to do background check. There is no harm in double checking with the company itself through alternate contact modes such as emails, contact us/query options given on websites etc. .
  5. Be vigilant of suspicious or unexpected ‘urgent’ payment requests.

What if you have made the payment?

  1. Gather all documentation regarding the transaction and emails/invoices received.
  2. DO report the incident as soon as possible to your local police.
  3. DO immediately alert your bank to the fraudulent transaction. The bank should immediately try to re-call the funds.
  4. DO consider consulting a lawyer in the country where the money was deposited into the beneficiary bank account. This might be of help to address the bank in trying to recover the money and/or launch a civil complaint regarding the account holder.

Conclusion  

The emergence of such frauds has exposed companies/organizations to the perils of phishing attacks and hacking. A Delhi- based research-oriented security group also suggests every second an Indian organization, be it big or small is victim of email phishing attacks[8]. The impact of such attacks can be substantial from businesses losing their goodwill and reputation to an apprehension of a complaint being filed against them by any of the victims. Hence, proper security measures and prompt action by businesses is recommended in the event of commission of such frauds.

At the same time, it is advisable that general public conducts proper due diligence before transferring any amount to a faceless voice behind the email sent to them. If it is too good to be true, then just walk away.

Related Posts

Cyber Crime during Coronavirus Pandemic

Cybersecurity – The Indian aspect

India: Onus of cyber-safety to vest with social media engines

https://www.americanbb.bank/internet-fraud
https://www.bloombergquint.com/law-and-policy/reliance-jio-mobile-tower-scam-fake-reliance-websites
https://www.interpol.int/en/Crimes/Financial-crime/Business-Email-Compromise-Fraud

[1] https://www.barracuda.com/glossary/business-email-compromise

[2] https://www.fbi.gov/news/stories/business-e-mail-compromise-on-the-rise

[3]  https://inc42.com/buzz/fraudsters-try-to-scam-pm-cares-donors-with-fake-upi-id/

[4] http://gurgaon.haryanapolice.gov.in/job-froud.htm

[5] CS (COMM) 466/2017, Order dated 18.07.2017

[6] CS(COMM) 193/2019, Order dated 12.04.2019

[7] CS(COMM) 1214/2018, Order dated 01.11.2018

[8] https://www.bankinfosecurity.asia/emergence-business-email-compromise-a-8310For further information please contact at S.S Rana & Co. email:  info@ssrana.com or call at (+91-11 4012 3000). Our website can be accessed at www.ssrana.in

External Commercial Borrowing and Foreign Investment: India

External Commercial Borrowing (ECB), as the expression hints, is the loan/ debt/ borrowings taken by an eligible entity in India for commercial purpose, externally i.e. from any recognized entity outside India. However, these borrowings taken must confirm with norms of the Reserve Bank of India (RBI). The ECBs are governed by the regulations of RBI under Master Direction – External Commercial Borrowings, Trade Credits and Structured Obligations (Master Direction),[1] and Foreign Exchange Management Act, 1999 (FEMA).[2] The article aims to help understand the ECB and its impact on the Indian Economy.

External Commercial Borrowing

ECBs has made it easy for the Indian eligible entities to access foreign capital and meet its needs. ECBs are in simple words commercial loans taken for a commercial purpose in form of bank loans, suppliers’ credit, buyers’ credit or securitized instruments, sought from foreign lenders. The ECBs can be obtained through automatic route or approval route or by combination of both the routes. Monitored by RBI, ECB is a facility made available to Indian eligible entities to be able to seek huge investment from outside India and allow for foreign capital flow in India.

Policies for External Commercial Borrowing

RBI in order to ensure inflow of clean funds, has divided the borrower as eligible entities and lenders as recognized non-residents, and has further kept checks in form of forms of ECB, end-use restriction, minimum maturity period etc.

Eligible Borrower and Recognized Lenders

The ECBs can be taken under Foreign Currency ECB (FCY ECB) and Indian Currency ECB (INR ECB) by eligible borrowers such as any entity which is eligible for seeking Foreign Direct Investment (FDI) or specified entities like Port Trusts, Units in Special economic zone (SEZ), Small Industries Development Bank of India (SIDBI) and EXIM Bank of India. The ECBs can be obtained from ‘recognized lenders’ i.e. any entity that is a member of the Financial Action Task Force (FATF) and International Organization of Securities Commissions (IOSCO). In addition to FATF and IOSCO, Multilateral and Regional Financial Institutions where India is a member country, Foreign branches / subsidiaries of Indian banks (subject to applicable prudential norms) and individuals if they are foreign equity holders or for subscription to bonds/debentures listed abroad, are also accepted as recognized lenders for obtaining ECBs.

End-use Restrictions

With time, RBI has relaxed the restriction on end-use of ECBs raised and vide the latest circular dated July 30, 2019 use of ECB proceeds is now permitted for working capital requirements, general corporate purposes, repayment of rupee loans and on-lending for such purposes, subject to limit and leverage requirements detailed in the Master Direction.[3] In view therefore, the major development in ECB raised is with respect to permitted use of ECB for working capital purpose and general corporate purpose with minimum average maturity period (MAMP) of 10 years. Further, the ECB proceeds can also be used for repayment of rupee loans availed domestically for capital expenditure with MAMP of 7 years. The Non-Banking Financial Company (NBFC) are also permitted to on-lend the ECBs obtained for repayment of rupee loans availed domestically for capital expenditure with MAMP of 7 years.

The Master Direction has also clearly mentioned the negative list for which ECBs cannot be used as under:

  1. Real estate activities.
  2. Investment in capital market.
  3. Equity investment.
  4. Working capital purposes, except in case of ECB mentioned at v(b) and v(c) above.
  5. General corporate purposes, except in case of ECB mentioned at v(b) and v(c) above.
  6. Repayment of Rupee loans, except in case of ECB mentioned at v(d) and v(e) above.
  7. On-lending to entities for the above activities, except in case of ECB raised by NBFCs as given under the Master Direction.

To give a basic gist on the MAMP and End Use Permitted, please see the below chart:

mamp

ECB INDIA STATISTICS

A recent reporting by the Hindu refers to the RBI data which confirms that India raised External Commercial Borrowings (ECBs)/ Foreign Currency Convertible Bonds (FCCBs) worth $25.17 billion (both under the Approval and Automatic routes) in the April-September period.[4] The borrowing is 53 per cent higher than the $16.48 billion that Indian entities raised during the comparable period last year.[5] In Financial Year 2019, the total borrowing through the ECB route was nearly $42 billion up from $29 billion in Financial Year 2018.

Source: Article published on the Hindu by NARAYANAN V  Chennai | Updated on November 11, 2019  Published on November 11, 2019.[6]

The ECBs have shown a growing trend which can be seen through the below chart:

Source: Article published in Times of India dated July 31, 2019.[7]

It is fair to state that with the RBI relaxing the rules for external commercial borrowings (ECBs), there has been a surge in ECB inflow, which can be seen below:

The recent report by RBI shows further increase in statistics on ECB Registrations as under:

Source: Reserve Bank of India Bulletin (January 2020), VOLUME LXXIV NUMBER 1.[8]

The RBI has in its January 2020 Bulletin confirmed that ECBs are one of the reasons of rise in external debt of India in 2018-19 and first half of 2019-20. The report further provides the below notes:

  1. The share of commercial bank loans in commercial borrowings has witnessed a decline, while that of ECB raised through securitised instruments (including FCCB) and banks’ overseas borrowings have increased between end-March 2015 and end-September 2019.
  2. The share of commercial bank loans in commercial borrowings which was 56 per cent at end-March 2015, stood at 47 per cent at end-September 2019. In contrast, the share of ECB through securitised instruments (including FCCB) increased from 7 per cent at end-March 2015 to 16 per cent at end-September 2019.

CONCLUSION

With favourable overseas conditions such as low interest rates and liquidity, the ECB is expected to be the preferred choice of India Inc., to bring investment/ loan for new projects, permitted use by RBI. The overseas market is expected to be favourable market for the foreseeable future, and therefore it is expected to lead to higher borrowings by India Inc. With RBI’s check on the ECB, making industry specific distinctions for automatic route and approval route, clearly establishing the end-use restriction and minimum average maturity period etc., it is expected that the ECBs are going to be the priority for bringing investment in India.

With RBI allowing the use of ECB proceeds for repayment of loans, the Indian GDP is expected to keep its stability intact and at the same time allows the Indian Corporates to seek required funds (which may not be allowed through local banks/ NBFC) from the overseas market with lesser interest rates.

[1] Available at https://m.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=11510.

[2] Available at http://legislative.gov.in/sites/default/files/A1999-42_0.pdf

[3] Ashima Obhan and Akanksha Dua, India: Relaxation Of End-Use Norms For External Commercial Borrowings By Corporates And NBFCs, available at http://www.mondaq.com/india/x/835574/Contract+Law/Relaxation+Of+EndUse+Norms+For+External+Commercial+Borrowings+By+Corporates+And+NBFCs

[4] India Inc’s ECBs surge 53% in first half of fiscal year to $25 billion, available at https://www.thehindubusinessline.com/economy/india-incs-ecbs-surge-53-in-first-half-of-fiscal-year-to-25-billion/article29941885.ece

[5] Id.

[6] Id.

[7] RBI eases foreign borrowing norms for NBFCs, defaulters, available at https://timesofindia.indiatimes.com/business/india-business/rbi-eases-foreign-borrowing-norms-for-nbfcs-defaulters/articleshow/70457777.cms

[8] Available at https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/37T_BULLETIN88AAFDB7C8B240C8A82A45749D6D4C2F.PDF

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IP Due Diligence in M&A- 4 points to consider

With the rapid growth in technology in the last two decades, the Mergers and Acquisitions (M&A) landscape has evolved drastically in India. In the modern day, technology assessment and Intellectual property due diligence has become an important part of M&A deals. The valuation of Intellectual Property Rights (IPR) becomes indispensable for parties while undergoing an M&A deal and a poorly structured IP plan can be detrimental to the entities involved in an M&A deal. Therefore, it is important to draft a list of necessary cautionary reviews of certain aspects of an M&A deal that involve the IPRs owned by both the parties.

In this article, we have elaborated four major aspects of the IP due diligence that should be duly performed while entering an M&A deal. The following points form an important part of the necessary precaution that must be taken to protect Intellectual property rights while finalising an M&A transaction:

1.    Technology Transfer

Technology transfers play a key role in M&A deals in the modern day. Technology transfer is a process where research and innovations which were developed into commercially exploitable techniques and products are transferred from one entity to another for some basic consideration. All companies have specific strategic goals in the market and hence, their approaches to M&A depend upon several factors which sometimes revolve around the technologies owned by the other company involved in the deal.

Acquiring a business method or technology developed by another company through an M&A deal helps in strengthening your companies position in the market and also in preventing a possible competitor in the market. Data protection, privacy laws and IP protection are some important points to consider while entering into an M&A deal that majorly targets the acquisition of certain technology possessed by the target entity.

The following laws are relevant for such M&A transactions in India are:

  • Copyright Act, 1957
  • Trade Marks Act, 1999
  • Patents Act, 1970
  • Designs Act, 2001
  • Information Technology Act, 2000
  • Payment and Settlement Systems Act, 2007

(Note: Similarly, for jurisdictions outside India, the counterparts of these Acts will govern technology transfers)

The identification of innovative technologies or partnering with special technological capabilities is crucial. The following precautions must be adopted in this regard:

  • Assessment of technological capabilities, selection of the most promising ones and the terms of the acquisition in this regard;
  • Transfer of the technology to the acquirer (technology acquisitions), if these negotiations have been successful.

2.    Confidential Information

As a part of legal due diligence, a review of the target company is a standard procedure which followed while finalising an M&A transaction in the modern day. It is inevitable that during the course of review, the acquiring entity will come across some confidential information about the target company itself and its business relations. For finalising a M&A deal, several accesses have to be granted to review sensitive and confidential corporate data of the target entity. Therefore, for the purpose of protecting the interest of both the parties, it is advisable that they enter into a non-disclosure agreement (hereinafter “NDA”)

It is to be noted that the confidential information that is being disclosed will most definitely include the important information regarding IP protections availed by the target company and also various strategies adopted for businesses, which may be a result of the intellectual or professional efforts of several individuals working for the company. This may include copyrights, inventions, details about customers/clients, trade secrets, databases and business methods

Taking necessary and adequate precautions for protecting, as also preventing misuse of the above-mentioned confidential information is a critical part of the IP due diligence. It is important for parties to enter into a NDA to protect sensitive information of the business entities which includes information that forms a part of the IP owned by the entities. However, the obligations arising out of the NDA cannot be derived from the IP laws of the relevant jurisdiction and only the contractual laws will function as the backbone of these agreements.

3.    Valuation of the Intellectual Property

Intellectual property is not an end in itself but a powerful means for achieving the end of/for a brand success. Their value is much more than being passively available on a register. They must be used creatively and should be used as commercially valuable assets than mere legal concepts and enforceable rights. This can be achieved primarily by putting them to work as tools for creating and developing a brand value for fostering the business. Strong brand image is a result of various efforts like the brand strategy, communication, marketing, media usage, quality control, trying to have an edge over the competitors.

In a majority of situations, the primary reason for considering an M&A deal is the value of the IP assets owned the target company. IP valuation allows the parties to make an informed decision on the cost of capital of the target company and in deciding on financial leverage strategy to be adopted for the transaction. Hence, it plays a key role in determining resulting company’s value and determining share prices.

Some factors to be considered for IP valuation include the study of the industry, entry barriers in the industry, market share of the owner, economic condition of the business, profits, possibilities of business expansion, possession of new technologies, concentration and level of competition in the market.

IP is an intangible asset and hence, its valuation is a slightly complicated. However, valuation of IP owned by the target company forms a crucial part the process of IP due diligence for M&A deal.

3.1.   IP Audit for IP Valuation Purposes:

The valuation process necessitates gathering much information about the IP assets as well as in-depth understanding of economy, industry, and specific business that directly affect the value of the IP. This information can be obtained by conducting (‘even driven’) IP audit and background research as well[1].

An Intellectual Property audit is a review of a company’s IP assets and related risks. IP audits are helpful in assessing the opportunities arising out of M&A deal for a company and these audits also play a critical role in enhancing and preserving the IP of a company undergoing M&A.

These audits can correct defects in IP rights, identify risks such as the products or services that infringe another’s IP, put unused IP to work and ensure that best practices for IP asset manager are followed by both the parties. A proper IP audit involves not only a mere review of an entity’s IP assets, but also a thorough review of the company’s IP related agreements, procedures, competitor’s IP and policies.

For more information on this subject, please refer to our detailed article on IP Audits here.

4.    Registering IP acquired in a Mergers and Acquisitions deal in all relevant Jurisdictions

All IP rights acquired after an M&A deal have to be transferred immediately to the new owner in all such jurisdictions where the right exists. There should be a timely recordal of such transfer of rights, as any delay caused may lead to loss in/of royalties.

Furthermore, though the unregistered IPRs are protected as the proprietor has a recourse to common law remedies, they offer a very narrow scope of protection and a limitation on assertion of the proprietary rights. Therefore, IP registration is recommended in relevant jurisdictions since it makes the proprietor the exclusive owner of the intellectual property across the applicable territory.

Conclusion

For the survival and growth of any company it is important to protect the company’s IP assets in the M&A deals. A proper IP structure focusing on transfer and dissemination of technology can be helpful to achieve their common technological goals. Further, it becomes pertinent that all steps, as mentioned in the preceding paragraphs, in regards to the M&A transaction must be taken with great caution so as to protect both the parties involved in the said transaction.

[1] WIPO – Module 11: IP Valuation, available at: https://www.wipo.int/export/sites/www/sme/en/documents/pdf/ip_panorama_11_learning_points.pdf

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IBC THRESHOLD-WHETHER PROSPECTIVE IN NATURE?

Introduction

In the wake of COVID-19 pandemic, the Government of India vide Notification S.O. 1205(E) (“Notification”) dated March 24, 2020 raised the minimum threshold amount with respect to default in Corporate Insolvencies. Pursuant to Government’s notification, the threshold to initiate Corporate Insolvency Resolution Process (“CIRP”) has been raised to Rs. 1 Crore, from the earlier amount of Rs. 1 Lakh. However, one of the intrinsic issue that has arise post aforementioned notification is whether the notification effecting increase in threshold to trigger CIRP under the Insolvency and Bankruptcy Code, 2016 (IBC) is prospective or retrospective in nature.

Read Threshold Limit under IBC enhanced to INR 1 Crore

Corporate Insolvency Resolution Process (CIRP)- Meaning and Law

Corporate Insolvency Resolution Process (CIRP), as the term suggests is a procedure or mechanism under the Insolvency and Bankruptcy Code 2016, whereby financial creditor, operational creditor and the company itself can apply for initiation of insolvency proceedings conditional to minimum default amount i.e., 1 Crore.  Section 4 of the Code deals with the minimum threshold default amount and the same has been increased from Rs. 1 Lakh to Rs. 1 Crore as per the Notification released by the Government on March 24, 2020.

Interestingly, the above notification is a double edged sword for the apparent benefactors of the notification i.e., MSME’s, as on one hand it offers them protection and on other hand takes away their right to recover from big corporations. In view of rising concerns and speculations, the the Hon’ble National Company Law Tribunal (“NCLT”) in some of its recent judgments has rendered clarity on the issue- whether the modification in IBC threshold with respect to CIRP is prospective in nature?

Judicial pronouncements

M/s Arrowline Organic Products Pvt. Ltd. v. M/s Rockwell Industries Limited[1](NCLT Chennai- 2/6/20)

Facts:

Submissions by the Corporate Debtor/Applicant

The applicant contended that, as per the Notification vide S.O. 1205(E) dated March 24, 2020; the Government of India, raised the minimum threshold amount (under Section 4 of the Code) with respect to default in Corporate Insolvencies from Rs. 1 Lakh to Rs. 1 Crore. Corporate Debtor also asserted that, as the claim amount stated by Operational Creditor is less than the increased threshold i.e., Rs. 1 Crore, hence the order to commence CIRP under company petition IBA/1031/2019 should be quashed.

Submissions made by the Operational Creditor/ Respondent

The Operational Creditor in its counter, asserted that tribunal does not possess the power to recall or review the order passed on merits. Also, it was alleged by the Operational Creditor that, neither Section 420 of Companies Act, 2013 nor Rule 11 of NCLT Rules, 2016 confers power or authority upon NCLT to review or recall its orders.

Issues:

  1. Whether NCLT has the authority to recall the order passed on merits?
  2. Whether the notification dated March 24, 2020 is prospective or retrospective in nature?

In simple terms, whether the modified threshold to commence CIRP will be applicable to cases initiated prior to release of the Notification or not?

Judgment and Reasoning:

  • The Tribunal while adjudicating upon the issue of power of NCLT to recall the order passed, under Section 420 of Companies Act, 2013, relied upon various pronouncements such as, Peoples General Hospital vs. Alliance Industries[2], Dinesh Goyal v. DCB Bank Limited[3], Hero Exports v. K. Vasudevan[4]. The Tribunal observed that, the purported Section 420 of the Companies Act 2013 does not specifically confer power on any NCLT to recall or review any order(s) passed, but, at the same time permits and deals with rectification of records.
  • With respect to the prospective application and operation of the impugned notification, the Tribunal considered the verdict passed in the case of Bakul Cashew Co. vs. Sales Tax Officer Quilon,[5] wherein it was observed by the Supreme Court that only the Legislature has the power to make and amend laws and when any power is delegated by the legislature to any authority to notify any modification or alteration in a statute, the same power is limited and cannot be exercised retrospectively.
  • The Tribunal while shedding some light on the issue of prospective application of the Notification, relied upon Kirti Kapoor v. Union of India[6], in which issue relating to applicability (prospective or retrospective) of modification of the pecuniary limit under Section 1(4) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 from Rs. 10 Lakhs to Rs. 20 Lakhs, for filing an application for recovery of debts in the Debt Recovery Tribunal (DRT) by Banks and Financial Institutions had been discussed. The Division bench of Hon’ble Rajasthan High Court in Kirti Kapoor case[7] did not expressly hold the application of notification to be prospective in nature, but relied on the notion of ‘conditional legislation’ and sufficiently clarified the fact that, operation and application shall affect only future applicants, keeping in view the good belief of the respective applicants for recovery of debts.
  • The Tribunal also observed the nature of substantive and procedural laws and referred to the case of Hitendra Vishnu Thakur Ss ors. vs. State of Maharashtra & ors
  • Government exercising delegated legislative power and authority cannot act upon its discretion with respect to retrospective or prospective applicability– The Hon’ble Supreme Court in Indramaniyarelal Gupta v.W. R. Nath[9], Union of India v. Madan Gopal Kabra[10] and Allahabad High Court in the case of Modi Food Products Limited vs. Commissioner of Sales Tax, U. P[11] reiterated that legislature has the power to act retrospectively unless otherwise provided. But at the same time, Government exercising delegated legislative power and authority cannot act upon its discretion with respect to retrospective or prospective applicability. Power and authority of Parliament and delegated institutions, do not overlap. Legislature, being the maker of enactments and statutes, can confer retrospective effect while, Government exercising delegated powers, under such statutes, cannot lay its discretion or make laws retrospective unless mentioned expressly.
  • NCLT is a creation of legislature under a statute. It exercises delegated power, hence, the power to recall or review judicial enactments and statutes in not within the ambit of a Tribunal. In the present case, concerned Notification is issued by the Central Government and the provisions under which the same has been issued, does not confer power upon the Tribunal to act retrospectively.

CONCLUSION

In view of the recent observations made through judicial pronouncements and precedents it can be summed up that the Notification dated March 24, 2020 is prospective in nature. As far as the power to recall and review is concerned, the NCLT has been formed according to and under a statute and the same lacks the authority to act upon applicability and validity of enactments[12].

[1] MANU/NC/6868/2020

[2] Company Appeal 105/2018

[3] Company Appeal 702 of 2019

[4] CRP No. 499/2020

[5] MANU/SC/0410/1986

[6] Civil Writ Petition No. 21860/2018

[7] ibid

[8] MANU/SC/0526/1994

[9] MANU/SC/0066/1962

[10] MANU/SC/0053/1953

[11] MANU/UP/0171/1961

[12] Dr. Indramaniyarelal Gupta vs. W R Nath (1963 SC 274)

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Impleadment of MCA in every Insolvency and Company matters not mandatory- NCLAT

In a recent decision passed in Company Appeal (AT) (Insolvency) No. 1417 of 2019, Union of India versus Oriental Bank of Commerce, the National Company Law Appellate Tribunal (NCLAT) set-aside the order of the Principal Bench of National Company Law Tribunal, New Delhi,(NCLT), whereby the NCLT directed mandatory impleadment of MCA (Ministry of Corporate Affairs) in all Insolvency and Company related matters.

The NCLAT, upon deliberation of the said order came to an inevitable and irresistible conclusion that such a direction of mandatory impleadment in all cases of Insolvency and Bankruptcy Code, 2016 (IBC)  is nothing but beyond the power of the Tribunal and it tantamounts to imposition of a new rule in a compelling fashion.

The Impugned Order

It is pertinent to note that vide order dated November 22, 2019, the NCLT had passed direction to the effect that the Union of India, MCA through the Secretary is to be impleaded as a Respondent party in order to facilitate availability of authentic record by the officers of the MCA for proper appreciation of the matters. The same was made applicable throughout the country and directions were issued to all the benches of NCLT.

Contention by the Appellant i.e. MCA

The MCA through the present appeal, assailed the impugned order of NCLT on the ground that it bristles with numerous infirmities and that the Adjudicating Authority i.e. NCLT was exercising the ‘rule making power’, which was the exclusive domain of the Central Government.

It was further contended that the NCLT passing the impugned order ought to have issued notice to the Union of India, since the subject matter in issue concerns about the imposition of a new rule, which the said Authority has no power to make especially its direction to implead.

While contending about the mandatory impleadment of a party in a suit, the Appellant also relied on Supreme Court’s verdict in the case of Antonio S.C. Preria v. Ricardina Noronha (D) By Lrs.[1], wherein the Apex Court had held that the third person must be heard in the same dispute if he or she has suffered or is likely to suffer any substantial injury by the decision of the Hon’ble Court.

It is was also brought to the notice of NCLAT, that diligent efforts have been made by MCA by issuance of Office Memorandum to all the concerned parties directing them to furnish a list of companies under ‘CIRP, Liquidation and Master Data’.

The Director Legal MCA also pointed out about the provision for separate application under Section 399(2) of the Companies Act, 2013 for production of documents from the Registrar of Companies, and the easy availability of the complete record on MCA 21 Portal on payment of requisite fees.

NCLAT’s Order and Observations

The Hon’ble Three Judge Bench of NCLAT, prima facie made the observation –

“That if a certain thing is to be performed in a particular manner, then the same is to be done in that way. In fact, a procedural wrangle cannot be allowed to be shaked or shackled with”

The Bench then reiterated the axiomatic principle in law in relation to a ‘proper party’ and ‘necessary party’ to a dispute. It further noted that though, the Addition of parties/ striking out parties of course, is a matter of discretion to be exercised by a Tribunal/ Court based on sound judicial principles, the same cannot be exercised in a cavalier and whimsical fashion, and it depends on facts and circumstances of each case.

The Appellate Tribunal further opined that rules of ‘principles of Natural Justice’ are to be adhered to by the Tribunal and opportunity of hearing is to be given to such a third party to explain its stand, as a just, fair and final order can only be passed after hearing the Objections/ Reply of the said party, as non-observance will result in serious miscarriage of justice, besides causing undue hardship.

The NCLAT, went on to observe that in order dated November 22, 2019, the Appellant was not provided with an adequate opportunity of being heard in the subject matter in issue. The NCLAT further took note of the applicability of the impugned order throughout the country, and opined that such a wholesale, blanket and omnibus directions cannot be issued in single stroke.

CONCLUSION

The NCLAT ordered that the impugned order making it applicable throughout the country to all the Benches of NCLT is untenable one and suffered from material irregularity and patent illegality in the eye of Law. In view of the aforesaid observations, the NCLAT held thatthe NCLT has to exercise its discretion of impleading MCA on case-to-case basis, and on sound appreciation of the factual position as well as the basic Principles of law.

[1] (2006) 7 SCC 740

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ARBITRATION AND DOMESTIC ARBITRAL AWARD

Arbitration is a legal procedure to solve disputes, precisely commercial matters, outside court of law. Its functioning is analogous to judicial courts and arbitral awards are equally binding on contesting parties. Arbitration is gaining recognition and emerging businesses, companies are opting arbitration as a mode to resolve disputes. An arbitral award can be described as a formal and legal declaration and recognition of the merits of matter in dispute, by an arbitration tribunal which is equivalent to the judgment of judicial courts.

Is stamping of domestic arbitral award obligatory for enforcement?

For an arbitral award to be enforceable, there are a number of obligatory and non-obligatory requirements that ought to be fulfilled, for proper execution or setting aside of arbitral award. One of those requirements is stamping and registration of domestic arbitral awards. Insufficiency or any inadequacy in stamping of documents have certain consequences over its validity and enforceability. Some of the major legislations and provisions governing such issues are, Section 34 and Section 36 (setting aside of arbitral award and enforcement/execution of arbitral award respectively) of Arbitration and Conciliation Act 1996[1], Section 17 and Section 3 of Indian Stamps Act, 1899[2].

ISSUES PERTAINING TO UNSTAMPED DOMESTIC ARBITRAL AWARDS

After completion of the process of arbitration, finality to the merits is given by pronouncing an arbitral award. Consequent to the passage of award, there are two possible outcomes namely, setting aside of arbitral award and enforcement of such award by execution under Sections 34 and 36 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) respectively. Some case laws are briefed below, about unstamped or inadequately stamped arbitral awards, their validity and status with regard to Sections 34 and 36 of the Act.

According to Section 33 of the Stamps Act, a public officer is obligated to impound any document which is inadequately stamped or unstamped. It is a mandatory clause and not merely directory. The Supreme Court in the case of N. Bhargavan Pillai v. State of Kerala[4] while referring to the said provision opined that such public officer while exercising his/her power under Section 33 of the Stamps Act, 1899 cannot force the parties to produce documents and also, has the power to impound only original instruments and not copy of it. As per Section 31(5) of the Act, after pronouncement of arbitral award each party is to be delivered copy of the award, in case of contesting such award under Section 34 of the Act, i.e. challenging the award passed on the grounds as enumerated under Section 34. Therefore, to rectify the conflict between Section 33 of Stamps Act, 1899 and Section 34 of the Arbitration Act of 1996, the Delhi High Court practice directions are to be followed, according to which, on notice from Registry of High Court, Arbitrator is mandated to forward the original arbitral award along with the respective arbitral record to the Registry of High Court.

In the case of Eider PW1 Paging Limited and Eider PW1 Communications Ltd. vs. Union of India (2010)[5] the issue in question was the validity of judgment passed in the case of M Anasuya Devi vs. M Manik Reddy[6] i.e.  whether an unstamped arbitral award challenged under Section 34 of Arbitration and Conciliation Act can be impounded on the basis of Section 33 of Stamps Act, 1899. The Delhi High Court in this case considered the judgment given in Anasuya’s case by the Apex court to be per incuriam and further pronounced that the provision under Section 33 of Stamps Act, 1899 is mandatory and thereby, an unstamped arbitral award under Section 34 for setting aside arbitral award is liable to be impounded as per Section 33 of the Stamps Act, 1899.

Meanwhile, the Delhi High Court in the case of M. Sons Enterprises Pvt. Ltd. and Anr vs. Suresh Jagasia and Anr[7].took another path while considering the interplay between Section 34 of Arbitration Act and Section 33 of Stamps Act. It held in contrast to the judgment given in Eider’s case, stating that, the verdict passed by Supreme Court in Anasuya’s case cannot be invalidated as per incuriam as it was  silent over the provisions under Stamps Act.

CONCLUSION

Considering the contentions and contradictory judgments delivered by the Supreme Court and High Courts, the question of the interplay between Section 33 of the Stamps Act, 1899 and Section 34 of the Arbitration and Conciliation is still vague and ambiguous. Keeping in view the verdict passed in the M. Sons’s case, the question of enforceability over non-stamping of award can be questioned under Section 36 of the Act (execution of award).

[1] https://www.indiacode.nic.in/bitstream/123456789/1978/1/A1996-26.pdf

[2] http://legislative.gov.in/sites/default/files/A1899-2.pdf

[3] (2003) 8 SCC 565

[4] (2004)13 SCC 217

[5] 2010 SCC Del 422

[6] (2003) 8 SCC 565

[7] (2011) SCC Del 82

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India: Advertisements in Insurance sector

Advertisements play an essential role in carving out the image of the entrepreneur in respect of the services it intends to offer. Not only the advertisements help in dissemination of information about the services, but they also help in convincing and thus attracting the consumers to the unique quality, standards and benefits being offered therein thus enhancing the sales of the provider.

Insurance and law

Insurance may be defined as a social device providing financial compensation for the effects of misfortune, the payments being made from the accumulated contribution of all parties participating in the scheme.

In India the transactions pertaining to insurance business are being governed under the provisions of the Insurance Regulatory and Development Authority of India Act, 1999 (hereinafter referred to as the ‘Act’) and the guidance of the Insurance Regulatory and Development Authority (hereinafter referred to as ‘IRDA’)

Regulation of advertisements in the Insurance Sector

With a view to monitor the content of the advertisements intended to be broadcasted in respect of the insurance policies being offered for purchase, the insurers should ensure adherence to the guidelines listed down by IRDA under IRDA (Insurance Advertisements and Disclosure) Regulations, 2000[1] as well as the Advertisement Standards Council of India (hereinafter referred to as the ‘ASCI’).

Some of the components of the advertisements for insurance products have been listed as under:

  • Information regarding the policy
  • Type of coverage
  • Prominently disclose in the advertisement and that part of the advertisement that is required to be returned to the company or insurance intermediary or insurance agent by a prospect or an insured the full particulars of the insurance company, and not merely any trade name or monogram or logo.
  • State clearly and unequivocally that insurance is the subject matter of the solicitation and state the full registered name of the insurer/ intermediary/ insurance agent.
  • Should not promote unfair or misleading content.
  • Should comprise of content in legible font size, colour, type.
  • Should indicate the name of the products and the benefits associated thereto.
  • There should be clear disclosure of any underlaying conditions.
  • Should not include logos, marks, symbols which are likely to create confusion regarding the source of the provider.
  • Should include contact details of the insurer.

The IRDA Notification No. F.No.IRDA/Reg./7/2000 dated July 14, 2000 prescribes to take the following actions, if the advertisement is not in accordance with the above components:

  • issue a letter to the advertiser seeking information, within a specific time
  • direct the advertiser to correct or modify the advertisement already issued in a manner suggested by the Authority with a stipulation that the corrected or modified advertisement shall receive the same type of publicity as the one sought to be corrected or modified
  • direct the advertiser to discontinue the advertisement forthwith
  • or, any other action as deemed fit

Conclusion

While insurance are the devices which are opted owing to their ability to mitigate the risks of uncertainties, insurers need to ascertain that the marketing techniques including advertisements are in consonance with the standards acceptable in India. IRDA as well as ASCI have laid down an extensive framework in order to safeguard the interests of the purchasers of insurance products.

[1] https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo61&flag=1

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The sudden outbreak of the COVID 19 pandemic has surely left the entire global population baffled and anxious. As the primary symptoms of COVID 19 include flu like conditions, it becomes important to take down the temperature of the symptomatic as well as asymptomatic persons. Owing to these circumstances, the consumption of infrared thermometers has radically enhanced. These thermometers are now required for screening by almost all kinds of establishments, at airports, hotels, restaurant, offices and at all those places which are hosting even a small gathering of people. Therefore, the business of infrared thermometers or digital thermometers is one of the few businesses to have thrived during this crucial situation.

Also read- Sanitizer business and its regulatory framework amidst COVID-19

How do infrared thermometers work: The thermometer is pointed at the forehead of a person without any physical contact and accordingly the person’s temperature is displayed on the thermometer’s screen. An illustrative image of infrared thermometer is pasted below for ready reference.

Source: Google Images

Compliances under Legal Metrology Laws

  1. Model Approval – As thermometers are a measuring instrument they require a model approval from the Legal Metrology Department. Any person who wishes to manufacture these thermometers has to obtain the said model approval prior to its manufacturing and import. The application for model approval can be made to the Director of the Legal Metrology Department. The applicant has to submit the sample of the thermometer along with the prescribed fees and documents. The sample thermometer is then forwarded to the standard laboratory which tests the sample and accordingly provides the report as to whether the thermometer complies with the applicable standards. Once the model approval is obtained the, applicant shall be provided with a unique model number which is required to be displayed on all the devices offered for sale thereafter.[2]
  2. Manufacturer and Packer registration – Under the Legal Metrology Act, 2009 and Legal Metrology (Packaged Commodities) Rules, 2011 the manufacturer and packer of the product are required to obtain registration. It is pertinent to mention that the said registrations are mandatory and not optional.[3] If the said registrations are not obtained by the manufacturer and the packer then the same can amount to a non-compliance and the said non-compliance can attract monetary under Rule 32 of the Legal Metrology (Packaged Commodities) Rules, 2011.
  3. Importer’s registration – For those entities which are not manufacturing the thermometers but intend to sell them in the Indian market through an importer are required to obtain importer’s registration under the Legal Metrology Laws. Notably, this importer’s registration is to be obtained apart from the IEC (Importer Exporter Code) which is issued by the Director General of Foreign Trade.
  4. Dealership License – Under the provisions of Legal Metrology Act, 2009 a dealer is required to obtain a dealership license, who is engaged in the business of buying, selling or distributing any weight or measure.
  5. Mandatory Declarations – Under the Legal Metrology (Packaged Commodities) Rules, 2011 any pre-packaged commodity is required to display mandatory declarations on its packaging. Some of these declarations include generic name of the product, name and registered address of the manufacturer and packer, date of manufacture, etc.
  6. Stamping requirements – The Legal Metrology Laws also make it mandatory for weights and measures devices to be duly verified and stamped. The said stamping and verification provide the authorization that the product meets the standard quality as prescribed under the Legal Metrology Laws.

Compliance under Drugs and Cosmetic Laws

As digital thermometers have been classified as a medical device, the manufacturer/ importer of such device is required to register the device with the Central Drugs Standard Control Organisation (CDSCO). The applicant is required to submit the device with CDSCO along with the prescribed fees and documents. Once the registration has been done, a registration number shall be allotted to the device which has to be mentioned on the device’s label.

The compliance process can appear to be an exhaustive process, however, having the required documents in place and designing of the thermometer in accordance with the applicable standards can help in procuring the license in a convenient manner.

[1] Google Images

[2] Rule 5 of the Legal Metrology (Approval of Models) Rules, 2011

[3] Rule 27 of Legal Metrology (Packaged Commodities) Rules, 2011

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Ministry eases deposit rules for Start-Ups- India

The Ministry of Corporate affairs (MCA) in consultation with the Reserve Bank of India (RBI) has issued a notification dated September 07, 2020, amending the Companies (Acceptance of Deposit) Rules, 2014 [1], in order to provide more flexibility to Start-Ups to raise funds, especially during the pandemic.

Also read Start-Up Funding in India

Key Highlights of Companies (Acceptance of Deposits) Amendment Rules, 2020

1).MCA amended the Companies (Acceptance of Deposits) Rules, 2014 to enable start-ups to raise funds through corporate bonds or other convertible instruments for “ten years”, as against the stipulated period of “five years” earlier;

2). Changes made in period of repayments: The period of repayment has also been changed from “five years” to “ten years”.

Rule 2(1) (c) (xvii) has been amended. Prior to amendment, Start-Ups could receive funding of up to INR 25 Lakh by way of a convertible note (convertible into equity shares or repayable within a period not exceeding five years from the date of issue) in a single tranche, from a person. However, post the notified amendment, the period of repayment by Strat-Ups has been increased to “ten years” from the date of issue.

The amendment easing out deposit and repayment rules by Start-Ups is a welcome move. It comes as a sigh of relief for already distressed Start-Ups in India. The economic distress and slowdown caused by the COVID-19 outbreak have severely impaired the Start-Ups. To revive the economy, the Government has been announcing relief measures and the present move would certainly help in creating a conducive environment for Start-Ups and businesses to thrive in India.

Also read Impact of COVID-19 on Start-Ups

[1] http://www.mca.gov.in/Ministry/pdf/Rule_08092020.pdf.

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The Ministry of Consumer Affairs released Draft Guidelines for Misleading Advertisements

Earlier, in the month of August 2020, the Ministry of Consumer Affairs (hereinafter referred to as ‘the Ministry’) announced that it will soon come up with draft guidelines aiming at regulating and keeping a check on misleading ads. Thereafter, the Ministry has released the draft guidelines taking its first step towards curbing misleading ads and with the aim of protecting the consumers, who may be exploited or affected by such advertisements.

The full regulation namely “Central Consumer Protection Authority (Prevention of the Misleading Advertisements and Necessary Due Diligence of Endorsement of Advertisements) Guidelines, 2020[1]” (hereinafter referred to as ‘Draft Guidelines’) has been released in the public domain for suggestions and comments. The Ministry has given a deadline September 18, 2020 for the public to send their suggestions, comments and objections to the Ministry.

About the Draft Guidelines

The aim of the Draft Guidelines is to check any misleading ads that may be harmful to the public interest. The Draft Guidelines established under the Consumer Protection Act, 2019 (hereinafter referred to as ‘Act 2019’) has set out the scope and applicability of the guidelines keeping in mind the aim of such a regulation. It states as follows:

3. Scope & Applicability. –

  • These guidelines cover all advertising/marketing communications regardless of form, format or medium.
  • These guidelines are applicable to the manufacturer/server providers whose products/services are subject of the advertising/marketing communications, as well as to advertisement agency and endorser (wherever applicable) of the product/service.”

Misleading Advertisements

A ‘misleading advertisement’ has been defined under the Act 2019 under Section 2(28 as:

“2. (28) “Misleading advertisement” in relation to any product or service, means an advertisement, which –

  1. falsely describes such product or service; or
  2. gives a false guarantee to, or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or
  • conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or
  1. deliberately conceals important information.”

The Draft Guidelines include that an advertisement should not be similar in terms of layout, slogans, music, visual presentation, etc., and should also be not similar to the previous advertisements that may have been published by another advertiser. Additionally, it mentions that the advertisement should not mislead the consumer about the product or service that is being advertised. Along with a list of elements for determining a valid advertisement[2], the Draft Guidelines also covers various types of advertising methods such as comparative advertising, bait advertising, and surrogate advertising, puffery in advertising. The Ministry has also made an effort at laying down duties and responsibilities of advertising players such as advertisers, advertising agencies and service providers. The guidelines not only focus on consumers in its general capacity but also focuses on consumers as children, in specific.

Provision for claiming a product to be free?

The Draft Guidelines has made an effort to focus on advertisements that may claim their product or service to be free. It clearly specifies that an advertisement may not claim its product or service to be free if the consumer has to pay any kind of amount other than the delivery cost of the product or a response to the advertisement. The guideline lays down certain circumstances that does not constitute for a product or service to be free. It states as follows;

“10. Free claims –

(3) An advertisement shall not describe a good or service as free if – :

  1. Consumers have to pay for packing, packaging, handling or administration of free good or service;
  2. The cost of response, including the price of a good or service that a consumer shall purchase to take advantage of the offer, has been increased, except where the increase results from factors that are unrelated to the cost of the promotion; or
  3. The quality or quantity of the good or service that a consumer shall purchase to take advantage of the offer has been reduced.”

In addition to this, the Ministry has also kept in mind the challenges pertaining to “your money is back” offers and has mentioned in the guidelines that advertisements shall not use terms such as “free trial” for offers that requires a non-refundable purchase.

Disclaimers[3]

The Ministry has taken due care of the disclaimers that may be attached with advertisements. As per the guidelines by the Ministry, any disclaimer that has a small font size in advertisements and comparative advertising and is not factual, will be considered to be misleading and may carry a penalty with it[4]. Moreover, disclaimers that are not easily noticeable or understandable to an ordinary consumer will also be referred to as misleading advertisements.

Endorsements

In addition to stating the essential components of a valid advertisements and defining types of advertisements, the Draft Guideline also includes provisions of endorsement of the content of the advertisement. It is stated that the honesty of statements and due diligence is to be made by an endorser in support of the advertisements[5]. This provision is more of a mandatory provision rather than directive. The Draft Guidelines has divided endorsements into three major provisions namely, honest statements by endorsers, personal use of products and consumer endorsement that also includes celebrity endorsement, and expert endorsements.

Connection between Draft Guidelines and Consumer Protection Act, 2019

The newly established Consumer Protection Act, 2019 (Act 2019) has highly emphasized upon ‘misleading advertisements’, so much so that the Act 2019 has particularly defined the term ‘misleading advertisement’. Keeping in mind the interest of the consumers, the legislation gives numerous powers to the Central Authority to investigate, search and seizes material subject to misleading ads. Therefore, to make such an offense even stricter, the Ministry has drafted the Draft Guidelines under the Act 2019 aiming to prevent unfair trade practices such as misleading claims by advertisers and that the related players such as the advertisers, endorsers, manufacturers, etc., do not exploit and violate the interests of the consumers.

The Ministry expects suggestions and objections from the public by September 18, 2020.

[1]https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/Draft%20guidelines%20for%20stakeholders%20consultation.pdf

[2] Guideline 4, Central Consumer Protection Authority (Prevention of the Misleading Advertisements and Necessary Due Diligence of Endorsement of Advertisements) Guidelines, 2020.

[3] Guideline 13, Central Consumer Protection Authority (Prevention of the Misleading Advertisements and Necessary Due Diligence of Endorsement of Advertisements) Guidelines, 2020.

[4] https://economictimes.indiatimes.com/industry/services/advertising/government-releases-draft-guidelines-on-advertising-to-treat-non-legible-disclaimers-as-misleading-ads/articleshow/77963604.cms?from=mdr

[5] Guideline 15, Central Consumer Protection Authority (Prevention of the Misleading Advertisements and Necessary Due Diligence of Endorsement of Advertisements) Guidelines, 2020.

Read more:

Consumer Protection Act, 2019 comes into force

Key Features of Consumer Protection Act, 2019

Rise in False and Misleading advertisements amidst Coronavirus Outbreak

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NCLAT allows Exit from CIRP- paves way for Out of Court Settlement

In a recent case, the National Company Law Appellate Tribunal (“NCLAT”) permitted exit or withdrawal from Corporate Insolvency Resolution Process (“CIRP”) after Interim Resolution Professional (“IRP”) was appointed and moratorium was imposed in the case. The said order by NCLAT acted as a relief to corporate debtors, as it has paved way for out of Court settlement between the disputed parties. The said order was passed by NCLAT in the case of Vivek Bansal vs Burda Druck India Pvt. Ltd. & Anr.[1]wherein, Vivek Bansal, Dynamic Textbooks Printers Ltd is the Petitioner (“Corporate Debtor”) and Burda Druck India Pvt. Ltd, the Respondent (“Operational Creditor”).

It would be relevant to mention herein that the initiation of CIRP has been temporarily suspended in the wake of COVID-19 pandemic via IBC Ordinance 2020. Thus, the present ruling can also prove to be beneficial for those entities already facing CIRP as they can now resort to out of Court settlements.

Brief facts of the case

In the present case, the Respondent or Operational Creditor, in order to recover the monetary claims, filed an application for initiation and commencement of CIRP under Section 9 of Insolvency and Bankruptcy Code, 2016 (“Code”)[2] against the Corporate Debtor. The said application for initiation of CIRP was admitted and accepted by National Company Law Tribunal, Delhi Bench five (“NCLT”) leading to appointment of IRP under Section 16 of the Code and thereby, imposition of moratorium under Section 14.

As per Section 21 of the Code, Committee of Creditors (“COC”) shall be constituted within 30 days from the appointment of IRP. In this case, order for appointment of IRP and moratorium imposition was passed on May 27, 2020. Conforming to the NCLT’s order, IRP was appointed and moratorium imposed. However, before the constitution of Committee of Creditors, the parties to dispute ended up settling the issue cordially, whereby, both Operational Creditor and Corporate Debtor agreed to settle at Rs. 4,25,00,000/- as final amount of claims. Consequently, the parties to dispute formed and entered upon a settlement agreement on July 7, 2020, failing which, the Operational Creditor shall have the right to revive and initiate CIRP.

NCLAT  allows Exit from CIRP

Subsequent to the settlement agreement, the Corporate debtor furnished an appeal to NCLAT[3], under Rule 11 of NCLAT Rules, 2016[4] with respect to quashing of order passed on May 27, 2020. Relying on the case of Swiss Ribbons Pvt. Ltd. vs. Union Of India on 25 January 2019[5], NCLAT set aside the order passed by NCLT on May 27, 2020 releasing the corporate debtor and thereby, the company, from the holds of law and CIRP proceedings.

The Court not only permitted withdrawal from insolvency proceedings but also disposed of the case with respect to terms and conditions of settlement agreement. The adjudicating body ordered removal of IRP, revival of Board of Directors and the company itself. The NCLAT, nevertheless, also ruled that, if Corporate debtor failed to adhere to the terms and conditions of settlement agreement, the concerned operational creditor shall have the right to approach NCLT, New Delhi (Bench five) for revival of CIRP proceedings.

Conclusion

The concerned verdict opens up a window for Corporate Debtor to depart from CIRP proceedings and opt for out of Court settlement. Considering the suspension of initiation of CIRP as per IBC Ordinance 2020 and economic crisis due to COVID-19 pandemic, the ruling comes as a relief in these distressed times for corporations as now the parties to the dispute can settle on their own terms with better value of claim and within less span of time. In addition to this, it would also permit corporate debtors to retain their company.

[1] Company Appeal (AT) (Insolvency) No. 552 of 2020

[2] https://www.mca.gov.in/Ministry/pdf/TheInsolvencyandBankruptcyofIndia.pdf

[3] 2020 SCC OnLine NCLAT 582

[4] https://nclat.nic.in/Useradmin/upload/4699011755ae16a9902907.pdf

[5] 2019 SCC OnLine SC 73

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Online Gaming – a Profitable Venture in India

With over 18.9 crore monthly active users and 5.1 crore daily active users[1], it would not be wrong in saying that online Ludo has become the King – the LUDOKING.  

Why is Online Gaming a profitable business in today’s time? Find the answers in numbers  

As the impact of the COVID-19 continues, online gaming industry is witnessing a profitable increase in the number of its users as those confined within their houses have sought respite in the virtual world for entertainment as well as monetary benefits. The wide availability of hand held devices, deep penetration of internet in the remotest nooks and corners of India coupled with factors of  social distancing and lockdown have also contributed significantly to the rapid popularity of the online gaming in India and across the world. Gaming portals such as Paytm First Games and Gamerji have reported a 200% and 50% increase in their users of online gaming portals over March 2020.[2] Over half a million daily active gamers spending 30- 45 minutes on gaming platforms. According to a KPMG report, India is already the largest emerging market when it comes to gaming app downloads.[3]

Gaming industry is expected to witness a rise in revenue $1.1 billion by 2021[4]. With the viral outbreak having increasing number of victims and more and more people have found increased number of users and the online gaming market in India is expected to rise.

All you need to know about Online gaming business in India

Is the Profit story true for Gaming Startups as well?

India’s gaming industry has acquired investment of about USD 350 million from venture capital firms between 2014 and 2020, growing at rate of 22%, with over 400 gaming Startups in the nation, according to a report by Maple Capital Advisors titled ‘Gaming – India Story’. As per the said report, the Indian gaming industry currently valued at USD 930 million and is expected to grow at 41% annually thereby raising its expected valuation at USD 3,750 million by 2024.[5]

Launched last year, Paytm First Games, the gaming arm of the fintech giant Paytm, has also witnessed a 200% increase in the user base in the last one month.[6] Another startup joining the club here is Gameberry Labs, whose two games- Parchisi STAR and Ludo STAR together have seen an over 300% growth in daily engagement and installation.[7] Adda52Rummy is also following the same path. It has seen a 200 percent increase in new users[8]. Ashish, of Adda52Rummy, in an interview given to online portal, was quoted saying ‘Earlier, people used to play from 7 pm till 1 am. Now, we are observing that they are playing in the morning and afternoon hours as well. We have launched new tournaments for these hours’[9]

Also read Lockdown: A potential for the Online Gaming Industry

Key pointers- for game developers

While online games are one of the most loved sources of entertainment it is essential to ensure that the customer loyalty as well as new acquisitions continue to ascertain revenue generation of gaming portals. Some of the key aspects which should be taken care of while developing the game have been listed as under:

  • New concepts- the developers must focus on enhancing their creativity while choosing the scheme and themes of their game. Novel concepts should be adopted so that it creates greater customer base.
  • Longer engagement – the developers should develop games with subjects engaging the users for a longer time. This may be done by opting for multi-level games, accrual of points/ rewards and multiple attempts.
  • Virtual assets- the developers may take recourse to the development of games including graphics, designs, look and feel and animation which involve high degree of skills and detailing thereby attracting greater customer attention.
  • In-App purchases- the developers may add animated equipment/ tools/ devices which may be purchased by the users for real money. With the optimum pricing, this can serve as a media to increase the profit share for the game developers.
  • Multiplayer- the developers can engage many users at a time by permitting multiplayer game scheme. This will allow the users to advertise about the game by word of mouth this increase the number of users on the gaming portal.
  • Personalization- the developers can provide a scope for the users to personalize their space on the portal. This can be a source of attracting users who can add their personal touch to the game within the allocated space.
  • Skills- the developer must ensure that the games being developed and offered to the public comprise of substantial degree of skill. The winner should not be determined by luck or chance.

On one hand it is mandated under the law to have the winning outcome dependent on sufficient exercise of labour by the users while on the other hand skills of varied nature creates interest amongst the users to choose the developer’s games over all others available in the market.

What is the law related to Online Gaming in India?

By the virtue of the provisions of the Public Gambling Act, 1867, gambling activities where victory is dependent on the occurrence/ non-occurrence of an uncertain event are prohibited in India. The games which base success upon the existence of skill are known as games of skill. The law in India holds a game to be a game of skill, even with the element of chance if it depends upon3:

  • Superior knowledge;
  • Training;
  • Attention;
  • Experience;
  • Adroitness of the player;
  • Element of Skill predominates over the element of chance

The Legal framework clearly recognizes that the games with below elements are not “gambling[10]:

  • where success depends on substantial degree of skill; and
  • despite there being an element of chance there is requirement of application of skill.

However, the games involving exercise of a skill of some sort are permissible to be offered, even for real money except, in few States such as Assam[11],  Odisha[12] , Telangana[13]

Also read Online Gaming Law in India

Can we get a License for Online Games in India?

Online skill games are not prohibited in most of the States in India, however the north-eastern State of Nagaland accords legal validity to the games of skill under the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016 and the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Rules, 2016 (hereinafter referred to as the “online game of skills law”).

The online game of skills law provides legal accreditation to the games where the users are required to expend their efforts and skills to emerge out victorious in a game session. Some of the games for which the said license is issued are Chess, Sudoku, Quiz, Rummy, Virtual racing, Virtual sports (Soccer/ Cricket/ Archery/ Snooker/ Bridge/ Pool), Fantasy games, etc.

Conclusion

With the gaming spree becoming the new favorite for all, the potential players may face challenge to stand out amidst their competitors. The developers need to think out of the box to have customers diverted towards them and thus enabling them to carryout successful business operations and at the same time ensure that there is adherence to the provisions of the applicable laws pertaining to online gaming in India.

[1] https://gadgets.ndtv.com/games/features/ludo-king-creator-vikash-jaiswal-total-users-downloads-india-success-2232634

[2] https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/egaming-companies-have-a-field-day-as-virus-keeps-millions-home/articleshow/75001617.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[3] https://yourstory.com/2020/03/online-gaming-startups-coronavirus-covid-19

[4] report by Google-KPMG- https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/for-indian-gaming-startups-covid-19-lockdown-is-a-boon-for-business/articleshow/75115595.cms?from=mdr

[5] https://economictimes.indiatimes.com/tech/software/indian-gaming-industry-attracted-350-million-venture-capital-investments-between-2014-2020-report/articleshow/76009775.cms

[6] https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/for-indian-gaming-startups-covid-19-lockdown-is-a-boon-for-business/articleshow/75115595.cms?from=mdr

[7] Ibid

[8] https://yourstory.com/2020/03/online-gaming-startups-coronavirus-covid-19

[9] Ibid

[10] State of Bombay v. RMD Chamarbaugwala[ A.I.R., 1957 S.C. 699] – held by the Apex Court of India

[11] Assam Game and Betting Act, 1970

[12] Orissa Prevention of Gambling Act, 1955

[13] Telangana Gaming Act 1974

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Online Gaming Advertisement Guidelines ASCI

It has been recently reported by an Indian Daily, that ASCI (Advertisements Standards Council of India) may introduce guidelines to provide a streamlined regulatory framework to ascertain that online games involving real money are being offered in a responsible manner[1]. The advent of clear regulatory guidelines for advertisements by online gaming portals may be beneficial for the online gaming portals to impart clarity regarding the permitted mode of offering online games while aiming to safeguard the interests of the gamers who may be misled otherwise.

Online Gaming- On high rise!!

Mobile phones and handheld devices have now become an indispensable part of the lifestyle of people belonging to almost all walks of life and varied economic backgrounds. Such devices have not only connected people globally for communication but have also become a source of other services such as commercial transactions, banking, education, entertainment, etc.

With the penetration of internet connectivity in every nook and cranny of India, the pleasures of Online Gaming can be derived by anyone from anywhere. India has been reported to be one of the countries with the highest number of game downloads in 2019. India has acquired wide-scale popularity with a market value of more than USD 500 million in 2020 and an expected increase of USD 1.1 billion by 2021.[2] With the ongoing restrictions and social distancing mandates, on account of the COVID-19 pandemic, more and more people are opting for different home-bound sources of entertainment, which has been beneficial for the gaming industry as several gaming portals such as Paytm First Games and Gamerji have reported a 200% and 50% increase in their users of online gaming portals over March 2020.[3] Over half a million daily active gamers are reported to be spending 30- 45 minutes on gaming platforms.

Also read Lockdown- A Potential for the online gaming industry!!

As the online gaming industry is expanding its wings, the online gaming portals need to ensure that they opt for proper advertisement strategies to promote their games. With the expansion of internet services, the modes of advertisements by online gaming portals are no longer limited to print, radio, television commercials but now extend to online media including social media portals.

Advertising games on Social Media?? Do’s and Don’ts

Role of advertisements

Advertisements have been an age-old form of communication informing about the different types of products and services being offered. Not only do the advertisements help in the dissemination of information about the products or services, but they also help in convincing and thus attracting the customers and maximize the revenue generation.

Regulations monitoring broadcasting of advertisements in India

The advertisements in India are regulated by the Government as well as authorities such as the Advertising Standards Council of India (hereinafter referred to as “ASCI”) thereby preventing any prohibited content from being displayed in any advertisement.

  • The Code for Self-Regulation formulated by ASCI requires the advertisements to adhere to fair and just legal practices and ensure compliance to norms, including but not limited to, being based on honest representations, not being be offensive to the public, not encourage any harmful/ hazardous substances, must encourage fair competition, etc.
  • Specific to the gaming industry, online skill games with stakes are often confused with gambling activities operation of which is not legal in India. The Information Technology (Intermediaries Guidelines) Rules, 2011 read with Section 79(2) the Information Technology Act, 2000 requires ‘intermediaries’ like internet service providers, network service providers, search engines, telecom operators, etc. not to host or transmit any content which inter alia relates to or encourages gambling (Rules 3(2)(b), Rule 3(4)). Therefore, it is of extreme importance to clarify that the online games being offered for real-time money do not fall within the purview of gambling.
  • Gaming falls within the exclusive jurisdiction of the respective State laws.: Several States in India such as Assam, Odisha, Telangana, etc. do not allow the offering of games of skills with stakes. Therefore, it is essential that neither the skill games for money (including the online games) are offered in the States prohibiting them nor are the advertisements indicating their availability to the users resident thereof, be made.

While the new guidelines may prove helpful to online gamers in establishing transparency in respect to the risks associated while playing for real money, online gaming portals must clearly indicate compliance to accepted principles of law, including but not limited to, clearly specifying the permitted age of the gamers (individuals below the age of 18 years would not be offered to play games for real money on their portal), incorporation of appropriate disclaimers on the portal, before the online games for real money are offered by the online gaming portals.

Read more about online gaming and related laws in India here.

[1] https://www.livemint.com/industry/advertising/regulator-to-issues-advertising-norms-for-real-money-online-gaming-platforms-11605769585999.html

[2] https://www.livemint.com/

[3] https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/egaming-companies-have-a-field-day-as-virus-keeps-millions-home/articleshow/75001617.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

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Parliament passes Bill to bring Co-operative Banks under RBI Supervision

The Banking Regulation (Amendment) Bill, 2020[i] was passed by Lok Sabha on September 16,  2020 and by Rajya Sabha on September 22, 2020. The Bill replaces Banking Regulation (Amendment) Ordinance, 2020[ii] which was promulgated in June, 2020. The Bill seeks to amend Banking Regulation Act, 1949[iii] and bring cooperative banks under the supervision of the Reserve Bank of India (RBI)

Co-operative Banks in India

Cooperative Banks have played an instrumental role in India’s growth and development. These smaller, more localized banks fulfilled banking needs of those for whom branches of Scheduled Banks were inaccessible. People have had immense trust in them because often they are created by persons belonging to the same local or professional community, sharing a common interest with the aim not to maximize the profits but to provide the best possible products and services to its members.

In the recent years, co-operative banks have suffered on account of serious governance issues that resulted in depositors running from pillar to post for their own money. Most prominently at PMC Bank, of its total loan book of Rs 8,880 crore, as on March 31, 2019, about 70 percent had been taken by real estate firm HDIL which is currently facing corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code. Subsequently, the Bank collapsed and depositors were only allowed to withdraw a maximum amount of Rs. 50,000 from their accounts.

In the year 2019, RBI cancelled the license of CKP Co-operative Bank, Mapusa Urban Co-operative Bank and imposed restrictions on Guru Raghavendra Sahakara (Co-operative) Bank Niyamitha and Kolikata Mahila Cooperative Bank. This year, RBI has put at least 44 co-operative banks across the country under watch citing deterioration in their financials or for flouting prudential norms[iv]. Nirmala Sitharaman stated that during the COVID-19 period, many cooperative banks have come under stress. 277 urban cooperative banks are reporting losses and 105 have been unable to meet minimum regulatory capital requirements[v].

Banking Regulation (Amendment) Bill, 2020- Key Highlights:

  • The Bill brings all the co-operative banks under RBI’s umbrella except primary agricultural credit society and co-operative society whose primary object and principal business is providing long-term finance for agricultural development. Thus, Cooperative banks will now be subject to same guidelines as Scheduled Banks with certain exceptions.
  • Section 12 of the Bill allows cooperative banks to issue equity shares or preference shares or special shares or unsecured debentures or bonds or other like securities with initial or original maturity of not less than ten years with prior approval of RBI and such conditions as may be specified by RBI.
  • Pursuant to Section 10(1)(b) of the Banking Regulation Act, Co-operative banks can no more employ as Chairman, someone who is insolvent or has been convicted of a crime involving moral turpitude or whose remuneration takes the form of commission or share in profits of the bank. RBI may remove the Chairman if he is not fit and proper and appoint a suitable person if the bank does not do so.
  • Under Section 36AAA, RBI will now have the power to supersede the Board of Directors of a co-operative bank after consultation with the state government.
  • RBI has been the power to exempt co-operative banks from complying with certain provisions relating to employment, qualifications of the Board of Directors and, appointment of a chairman by issuing a notification in the official gazette through insertion of Section 53A in the Banking Regulation Act, 1949.

The amendment addresses rampant governance issues prevalent in cooperative banks that have resulted in losses not only to account holders but erodes confidence of people in the entire banking sector. These provisions bring cooperative banks to similar footing in terms of regulatory oversight as those applicable on Scheduled Banks.

It is expected that the scrutiny and oversight of RBI over cooperative banks will ensure that the money of local communities are protected. The power given to cooperative banks under Section 12 will also allow cooperative banks to raise money, maintain liquidity and recover from the crisis by issuing shares either through private placement or public offer.

[i]https://www.prsindia.org/sites/default/files/bill_files/Banking%20Regulation%20Bill%2C%202020%20as%20passed%20by%20LS.pdf

[ii] https://pibcms.nic.in/WriteReadData/userfiles/PIB%20Delhi/cooperative%20bank%20(2).pdf

[iii] https://rbidocs.rbi.org.in/rdocs/publications/pdfs/banki15122014.pdf

[iv] https://www.moneycontrol.com/news/business/in-2020-so-far-rbi-has-put-44-co-op-banks-under-watch-how-deep-is-the-mess-here-5406961.html

[v] https://www.businessinsider.in/finance/banks/news/rajya-sabha-passes-banking-amendment-bill-2020/articleshow/78251384.cms

Related Posts

India: RBI clarifies Co-operative societies cannot use the word “Bank” in their names

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PATENTS

Computer Programs Patentable if “Technical Effect” or “Technical

Computer Programs Patentable if “Technical Effect” or “Technical Contribution” demonstrated: Delhi High Court

In a recent case namely, Ferid Allani v. Union of India & ors., the Hon’ble High Court of Delhi has held that an invention even if based on a computer program demonstrates a “technical effect” or a “technical contribution” is patentable.

Brief Facts:

The present writ petition was filed before the Hon’ble High Court of Delhi against IPAB’s (Intellectual Property Appellate Board) order, wherein the IPAB while confirming the order of Patent Office rejected the Petitioner’s patent application for “method and device for accessing information sources and services on the web”.

The petitioner’s application was rejected by the Patent office on the ground that Claims 1-8 is a computer program and does not constitute to be a patentable invention as defined in Sub-section k of Section 3 of Patent Acts 1970 and Claimed invention in Claims 9-14 lacks Novelty as well as Inventive steps.

Aggrieved by the aforesaid, the Petitioner approached the High Court of Delhi.

Petitioner’s contentions

  • That the specification clearly disclosed a technical effect and a technical advancement, especially as of the priority date.
  • That the invention was not a mere software which is simply loaded on to a computer. It required a particular method of implementation.
  • The Petitioner also placed reliance on the Draft Guidelines for Examination of Computer Related Inventions, 2013 which defines “technical effect” and “technical advancement”.
  • The Petitioner further contended that any patent application which disclosed an invention allowing the user more efficient data base search strategies, more economical use of memory or higher speed, etc., would constitute “technical effect” and that Section (3)(k) of the Patent Act ought to be interpreted in the context of the Draft guidelines which have been introduced.

Delhi High Court

The Hon’ble High Court of Delhi while directing re-examination of the patent application, made the following notable remarks and observations in the case:

  • The High Court while passing the order in the present case rendered special attention to the Guidelines issued by the Patent office in respect of CRIs, namely, Draft Guidelines for Examination of Computer Related Inventions, 2013, Guidelines for Examination of Computer Related Inventions, 2016, Revised Guidelines for Examination of Computer Related Inventions, 2017.
  • While substantiating on Section 3(k) of the Act, the Court noted that the bar on patenting is in respect of `computer programs per se….’ and not all inventions based on computer programs.
  • The Court also remarked that in today’s digital world, when most inventions are based on computer programs, it would be retrograde to argue that all such inventions would not be patentable.
  • The Court was of the view that the Patent applications in these fields would have to be examined to see if they result in a “technical contribution”. That if the invention demonstrates a “technical effect” or a “technical contribution” it is patentable even though it may be based on a computer program.

The Hon’ble High Court in view of the Guidelines issued by the Patent Office and judicial precedents directed the Patent Office to re-examine the patent application of the Petitioner and render a decision on the same within two months from the date of this order.

Related Posts

What is the term of Patent in India?

Patents in India

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Delhi High Court proposes Rules governing Patent Suits, 2020

The Hon’ble High Court of Delhi vide its public notice dated October 09, 2020, has notified that the Court is in the process of framing Rules under Section 158 of the Patents Act, 1970[1]. The Court has also released a draft of the proposed “The High Court of Delhi Rules Governing Patent Suits, 2020” and has requested members to provide their comments/suggestions on the same within four weeks, to the Office of the Registrar General of Delhi High Court by e-mail at jrrules.dhc@gov.in.

The High Court of Delhi Rules Governing Patent Suits, 2020

Given the spurt in patent infringement cases in the last few years, the Hon’ble High Court has framed these Rules to mitigate the complexities faced in patent suits and actions. The Rules shall govern the procedure for adjudication of all patent suits in accordance with the provisions under the Patent Act, 1970, and the Code of Civil Procedure, 1908 (CPC) as amended by The Commercial Courts Act, 2015.

The Rules shall govern all patent suits and actions and the procedure set out in these Rules over the Delhi High Court (Original Side) Rules, 2018, insofar as they are inconsistent with the Delhi High Court (Original Side) Rules, 2018.

Key highlights of the Draft Rules governing Patent Suits

  • Definitions- The draft Rules render specific definitions of Patent Suits, claim construction briefs, invalidity brief, infringement brief, non- infringement brief, technical primer, damages brief, scientific advisors, and priority patent application.
  • Content of Pleadings- Under Rule 3, the draft enumerates the Content of Pleadings i.e. what all should be mentioned in a plaint, written statement, counterclaims, and replication in a suit for a patent infringement action.
  • Filing of Documents- Rule 4 lists out the various documents to be filed by the parties to a suit along with the plaint, written statement, and counter statements and also any other documents that may be filed by either party to the suit.
  • Hearings- The Draft Rules also delineate provisions pertaining to the hearing of patent suits and also about first, second, and third case management hearing. These stages of hearings enumerate the course of action which the Court may take while hearing patent suits.
  • Constitution of Confidentiality club– The Rules provide for the constitution of confidentiality club by the Court for the preservation of confidential information between the parties.
  • Compulsory mediation- The Court may at any stage of the suit appoint a mediator if it is of the opinion that the parties to the suit shall explore settlement through mediation
  • Scientific Advisors Panel­- shall be drawn up by The Delhi High Court to assist judges while deciding patent suits.
  • Hot–tubbing- The Rules propose a hot-tubbing methoda modern method adopted to record evidence during the Second Case Management Hearing.
  • Audio/Video recording of evidence has been permitted. Special permission to allow video recording of evidence.
  • Independent Technical Experts could be chosen from each side and be directed to be present for the final hearing to assist the Court.

The Delhi High Court has formulated the Draft Rules in a manner that it helps in eliminating the various complexities that are faced by the Hon’ble Court while adjudicating patent suits. The Rules briefly provide for all the necessary elements i.e. the content and documents that are to be included in plaints, written statements, and counterclaims. The stage of hearing has also been bifurcated and the suggested course of action for each stage of hearing has been illustrated. If the Rules are followed by parties to patent suits in true letter and spirit, then it is expected that the same may result in the timely disposal of patent infringement cases in India.

Please note that comments and suggestions to the proposed High Court of Delhi Rules Governing Patent Suits, 2020 can be sent by November 06, 2020 at jrrules.dhc@gov.in

[1] http://delhihighcourt.nic.in/writereaddata/Upload/PublicNotices/PublicNotice_G3SK9Q0PX99.PDF

Also read

Historic Patent Prosecution Highway (PPH) programme strengthens Indo- Japanese relations

Innovative Relationship of Patents & Business Entities During Crisis

Patent Filing Fees & Forms

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Patents (Amendment) Rules, 2020- Comes into force!!

The Ministry of Commerce and Industry (Department for Protection of Industry and Internal Trade) vide its notification dated October 19, 2020 released the Patents (Amendment) Rules, 2020[1].

Also read Patent Amendment Rules, 2019 comes into force

AMENDMENTS TO THE PATENT RULES

While the patent filing process has been made easier, following are the key highlights of the changes/substitutions brought about in the amended Patent Rules:

PRE-AMENDMENTPOST-AMENDMENTCOMMENTS
Rule 21 Filing of Priority Document (1) Where the applicant in respect of an international application designating India has not complied with the requirements of paragraph (a) or paragraph (b) of rule 17.1 of the regulations under the Treaty, the applicant shall file with the patent office the priority document referred to in that rule before the expiration of the time limit referred to in sub-rule (4) of rule 20. (2) Where priority document referred to in sub-rule (1) is not in the English language, an English translation thereof duly verified by the applicant or the person duly authorised by him shall be filed within the time limit specified in sub-rule (4) of rule 20. (3) Where the applicant does not comply with the requirements of sub-rule (1) or sub-rule (2), the appropriate office shall invite the applicant to file the priority document or the translation thereof, as the case may be, within three months from the date of such invitation, and if the applicant fails to do so, the claim of the applicant for the priority shall be disregarded for the purposes of the Act.  Rule 21 Filing of Priority Document (1) Where the applicant in respect of an international application designating India has not complied with the requirements of paragraphs (a), (b) or (b-bis) of rule 17.1 of the regulations under the Patent Cooperation Treaty, and subject to paragraph (d) of the said rule 17.1 of regulations under the Treaty, the applicant shall file the priority document referred to in that rule before the expiration of the time limit referred to in sub-rule (4) of rule 20 in the Patent Office. (2) Where sub-paragraph (i) or sub-paragraph (ii) of paragraph (e) of rule 51bis.1 of the regulations under the Patent Cooperation Treaty is applicable, an English translation thereof duly verified by the applicant or the person duly authorised by him shall be filed within the time limit specified in sub-rule (4) of rule 20. (3) Where the applicant does not comply with the requirements of sub-rule (1) or sub-rule (2), the Patent Office shall invite the applicant to file the priority document or the translation thereof, as the case may be, within three months from the date of such invitation, and if the applicant fails to do so, the claim of the applicant for the priority shall be disregarded for the purposes of the Act.The amended Rule 21 has been harmonized to include PCT regulations. This provision now explicitly puts in writing what has already been in practice, i.e. submission of a copy of Form PCT/IB/304 at Indian Patent Office to suffice the requirement of filing a priority document. Although, the deadlines for filing priority documents and English translation of the documents remain unaltered.                          
Rule 131(b) Form and manner in which statements required under section 146(2) to be furnished (2) The statements referred to in sub-rule (1) shall be furnished in respect of every calendar year within three months of the end of each year.  Rule 131(b) Form and manner in which statements required under section 146(2) to be furnished (2) The statements referred to in sub-rule (1) shall be furnished once in respect of every financial year, starting from the financial year commencing immediately after the financial year in which the patent was granted, and shall be furnished within six months from the expiry of each such financial year.”Earlier, statements on Form 27 were supposed to be furnished within three months of the end of each calendar year. Now, according to the amendment, statements on Form 27 shall be furnished within six months (rather than three months) from the expiry of each financial year (rather than calendar year). Thus, according to the new Rules, Form 27 for the previous financial year can be filed by 30th September of the subsequent financial year.
Form 27 Statement regarding the working of the patented invention on commercial scale in India Separate Forms were to be filed in respect of multiple patents belonging to a single patentee, even when the patents were related to each other and their revenue could not be separately calculated.Form 27 Statement regarding the working of the patented invention on commercial scale in India A single commercial working statement (on Form 27) may be filed in respect of multiple patents, provided all of them are related patents, wherein the approximate revenue/value accrued from a particular (single) patented invention cannot be derived separately from the approximate revenue/value accrued from related patents, and all such patents are granted to the same patentee(s).    Instead of filing separate commercial working statements for each related patents (all belonging to a single patentee), now a single commercial working statement filed on Form 27 for said related patents would suffice the requirement. Additional changes in Form 27 Earlier patentees were required to enter exact amount of revenue accrued, but now only APPROXIMATE value is sufficient. Statement regarding public requirement met “partly/adequately/to the fullest extent” or not has now been done away with. Country wise details of import are not required to be submitted now. Details of licenses and sub-licenses granted are not required to be submitted now    

 

The aforesaid legislative changes brought about by the Ministry is a commendable move as it simplifies the process of patent prosecution by allowing filing of one form for multiple related patents. Past decade has witnessed some path breaking changes brought about in the Patenting landscape in India to encourage innovations, research and development and adequate protection of the same under the Indian Patent Law.

[1] http://www.ipindia.gov.in/writereaddata/Portal/Images/pdf/patents_amendment_rules_2020.pdf

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GEOGRAPHICAL INDICATION

Geographical Indications of Goods (Registration and Protection) (Amendment) Rules, 2020- notified

The Ministry of Commerce and Industry (Department for Promotion of Industry and Internal Trade) vide notification G.S.R. 528(E) dated 26th August, 2020 have amended the Geographical Indications of Goods (Registration and Protection) Rules, 2002. These rules will now be called the Geographical Indications of Goods (Registration and Protection) (Amendment) Rules, 2020 (hereinafter referred to as ‘GI Rules 2020’).

GI Rules 2020- Key amendments

  • Only proposed authorized user can file application – The GI Rules 2020 has substituted Rule 56 as:
  1. Authorised User.-

(1) An application for registration of authorized user under section 17 may be made to the Registrar in Form GI-3 accompanied by a statement of case as to how the applicant claims to be the producer of the registered geographical indication.

(2) A copy of application made under sub-rule (1) shall be forwarded to the registered proprietor of geographical indication and intimate the same to the Registrar.

  • Amendment in Rule 59 titled ‘Registration of an authorised user entry in the Register’ – It has amended Rule 59(1). For the registration of an authorized user entry in the register, where an opposition is filed and dismissed the registrar can enter the authorized user in Part B of the register and shall issue a registration certificate with the seal of Geographical Indication Registry. The position before the amendment was that the Registrar had to wait till the end of the appeal period after the opposition is dismissed to enter the authorized user in Part B of the register and the same was to be done with the prescribed fees but the draft amendment rules seek to remove the appeal period obligation along with removal of the fees that is charged currently. Further it amended Rule 59(3) as a result of which the unmounted representation of the geographical indication will now not be required at the time of registration.
  • No fees for registration of an authorized user of a registered GI – In Schedule I, under Entry 3A, the fees to be paid for the registration of an authorized user of a registered geographical indication is proposed to be reduced from INR 500 (7 USD Approx.)  to INR 10. Similarly, the fees for renewal under Entry 3C of Schedule I is proposed to be reduced from INR 1000 (14 USD Approx.) to INR 10. Further, Entry 3B in Schedule I is deleted to cancel the fees charged for the issuance of certificates.

One of the highlights of the amendment is that it will further strengthen the Intellectual Property Ecosystem as it has reduced the fees to be paid for the GI registration process and has further eased the procedure for registration of an authorized user of the registered geographical indication.

The Geographical Indications of Goods (Registration and Protection) (Amendment) Rules, 2020 can be accessed over here.

Read more:

India: Draft amendment to the Geographical Indications of Goods (Registration & Protection) Rules, 2002

Geographical Indications of Goods (Registration and Protection) Act, 1999

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INTELLECTUAL PROPERTY MISCELLANEOUS

Intellectual Property Annual Report 2018-2019- Released!!

The Office of the Controller General of Patents, Designs and Trade Marks (hereinafter referred to as the ‘Office’), aims to meet requirements of constantly changing IP landscape and aspires to strengthen the culture of transparency, accountability and efficiency in its management. It endeavors to establish a vibrant and balanced IP regime in the country to support the country’s innovation and developmental objectives. The Office has undergone sweeping transformations due to various initiatives for easing of access to all stakeholders, augmenting efficiency in processing of IP applications, accomplishing uniformity and consistency in the examination of application, strengthening transparency and dissemination of IP related information, nurturing bilateral co-operation at the international level and leveraging the level of IP awareness amongst the public.

With its responsibilities in mind, the Office on April 03, 2017, released its Annual Report for the year 2015-16. The details of the activities performed by various offices under the Office during the year 2015-16 as well as the revenue and expenditure details of all offices under the Office and other relevant statistics are also included in it. Some of the highlights are mentioned in detail below:

The Intellectual Property Annual Report shows that this year overall filing of applications for various IPRs (4,05,324) has been higher as compared to the previous year (3, 50,546), exhibiting an overall increase of 15%.

Trends in last five years with respect to filing of IP applications are shown below:

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PATENTS

During this year, 50,659 patent applications were filed exhibiting an increase of 5.9% in the filing as compared to the previous year. The trends of last five years in respect of patent applications filed, examined, granted, and disposed are given below. Disposal of applications includes patents granted/refused by the patent office and applications withdrawn and abandoned by the applicants. Further, during 2017-18, the domestic filing has increased to 33.6% as compared to 32.5% in 2017-18.

Year2014-152015-162016-172017-182018-19
Filed42,76346,90445,44447,85450,659
Examined22,63116,85128,96760,33085,426
Granted5,9786,3269,84713,04515,283
Disposal14,31621,98730,27147,69550,884

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­­­­­­­­­­­­­­­­­­­­­­­­­­­­With regards to foreign filing applications the top filing countries are:

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DESIGNS

During this year, a total of 12,585 design applications were filed exhibiting an increase of 6.3% over the last year. The number of design applications examined was 12,661 showing an increase of 6.8%. Although the number of design registrations decreased marginally, disposal of design applications increased by 5.8% in 2018-19 as compared to 2017-18.

Year2014-152015-162016-172017-182018-19
Filed9,32711,10810,21311,83712,585
Examined7,4599,42611,94011,85012,661
Registered7,1477,9048,27610,0209,483
Disposal7,2188,0238,33210,78811,414

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The filing trends of Indian and foreign origin are:

indian-foregin-ogin

With regards to foreign filing applications the top filing countries are:

foregin-filing-application

TRADEMARKS

During this year, 3,23,798 applications of trademarks were filed. The number of applications examined is more than applications filed during this period and pendency in examination has been brought down to less than a month. The number of trademark registrations showed an increase of 5.3%.

Year2014-152015-162016-172017-182018-19
Filed2,10,5012,83,0602,78,1702,72,9743,23,798
Examined1,68,0262,67,8615,32,2303,06,2593,37,541
Registered41,58365,0452,50,0703,00,9133,16,798
Disposal83,6521,16,1672,90,4445,55,7775,19,185

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Out of total 323798 applications filed with the Registry; the number of applications filed by foreign applicants during the year was 13682. The top filers are:

GEOGRAPHICAL INDICATIONS

During this financial year, a total of 32 applications were filed and 35 applications were examined. A total number of 23 Geographical Indications were registered. The trends in GI applications filed, examined, and registered during the last five years are given below.

Year2014-152015-162016-172017-182018-19
Filed4717323832
Examined60200281843
Registered2026342523

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