Attached Newsletter is an attempt to cover monthly issues relevant in the context of transactions - covers SEBI, Companies Act, Income Tax, Stamp duty and other regulatory changes

1. TRANSACTION ADVISORS
Missive
Volume III – June 2011

2. Topics Page No
Dear Patron FEMA 1
Corporate Law 4
Here we are again with the Third successive issue of our monthly ‘Missive’. Transfer Pricing 6
Competition Law 7
The month witnessed a slew of updates relevant from the transaction perspective SEBI 8
and it seems that both the RBI and the Ministry of Corporate Affairs literally went Direct Taxes 9
into an overdrive in issuing circulars. The next few pages speak for themselves. Other Regulatory Updates 10
Recent News in Transactions 12
Of all these updates, FDI in LLP, Rolling out of the combination regulations, Green that made headlines
initiatives in the corporate governance and enactment of Foreign Contribution
Regulation Act are the ones who have stolen the show. Besides, courts in India have
also been delivering certain key decisions. And with various discussion papers,
concept notes and draft regulations already in the public domain for discussions, the
next few months are going to witness some serious action. “If you don’t like something, change
We trust you will enjoy reading this Missive. We would very much appreciate your
it….. If you can’t change it, change
feedback which consistently helps us in improving and upgrading the contents.
the way you think about it…..”
Thanks and regards,
Akhil Bansal
Editor, Knowledge Management Team

3. Foreign Exchange Management Act - RBI complexities for companies which have global operations. Indian companies
will get more flexibility in managing international joint ventures (JVs) and
Liberalisation of Overseas Direct Investment – A.P. (DIR Series) Circular No. 69 wholly-owned subsidiaries.
Dated 27.05.2011
The move regarding write-offs seems to be aimed at converging existing rules
RBI has made certain changes to the prevailing ODI Regulations, in order to and regulations with IFRS. Under IFRS, all investments are subjected to the
provide operational flexibility to Indian Corporates having investment abroad. impairment test, i.e. whether the investments are fully realisable or whether
Some of the changes brought about are with respect to: there is erosion in value.
§ Performance Guarantees issued by the Indian Party - Only 50% (as
against 100% at present) of the amount of performance guarantee Opening of Escrow Accounts for FDI transactions [A.P. (DIR Series) Circular
provided by Indian companies to overseas ventures will be taken into No. 58 dated – May 02, 2011]
account while computing the overall exposure limit. Indian companies
are allowed financial commitments in overseas ventures up to 400% of RBI has permitted under automatic route,
their net worth. § ADs to open non-interest bearing Escrow accounts in India on behalf of
residents and / or non-residents, towards payment of share purchase
§ Restructuring of the balance sheet of the overseas entity involving consideration
write-off of capital and receivables - Existing regulations allow § SEBI authorized Depository Participants to open and maintain Escrow
restructuring of balance sheets only for winding-up of JVs (atleast 51% accounts for securities
holding) and wholly-owned subsidiaries abroad. Now, listed companies
will be allowed to write off 25% capital, loans and other receivables Other key conditions with respect to above liberalization of escrow accounts
such as royalty and management fee of their JVs and wholly-owned are as follows
subsidiaries through the automatic route. Unlisted companies can do § The terms of the Escrow account to be laid down in the Escrow
so after approval. agreement, Share purchase agreement, conditions of issue of shares
etc.
§ Disinvestment by the Indian Parties of their stake in an overseas § The underlying FDI transaction for which the Escrow account is opened
JV/WOS involving write-off – certain amendments have been made should be compliant with extant FEMA provisions.
§ The Escrow account shall remain operational for a maximum period of
§ Issue of guarantee by an Indian Party to step down subsidiary of JV 6 months only
/WOS have now also been covered under general permission § No fund or non-fund based facilities would be permitted against the
balances in the Escrow account.
Impact: These are indeed welcome steps to provide additional headroom for
overseas investments through the automatic route and ease procedural
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4. § Balance in the Escrow account, if any, may be repatriated at the then § Pledge in favor of an overseas bank to secure the credit facilities being
prevailing exchange rate (i.e., the exchange rate risk will be borne by extended to the non-resident investor / non-resident promoter of the
the non-resident) Indian company or its overseas group company.
Impact: Prior to the issuance of the Circular, there was uncertainty as to Impact: Since there are a substantial amount of overseas funds being
whether RBI approval was required for opening of escrow accounts invested in Indian shares, non-residents require freedom to leverage their
pertaining to FDI transactions; therefore, as a market practice, escrows were Indian investments for raising debt, both at an overseas level or India level.
often maintained outside India to facilitate the commercials of the Due to dispensation of prior RBI approval, there would be a reduced time
transaction (commercials includes the structuring of transactions, closing of frame for mobilization of debt funds raised by pledge of shares of Indian
transactions, etc.). But the above Circular, has now made it possible to set up company. The liberalisation concerning this pledge is a welcome initiative
and maintain such escrow accounts for FDI-related transactions in India and enhances the business purpose borrowing ability of the Indian Investee
without any delay. Company as well as its Non-Resident Investors.
Also, the RBI has finally realised, that the time taken in the legal and due
diligence process is prolonged and to facilitate the operation smoothly for Government approved FDI in LLP [Press Note 1 (2011 Series)]
new issues of transfer of shares to or from the NRIs, the authorization process
needs to be amended. Permitting opening of Escrow accounts will ease out The Government has decided that FDI in LLPs will be permitted and
the M&A transactions in India and enable the investors to complete due implemented in the calibrated manner. The salient features of the policy are as
diligence and other formalities before the completion of the transaction. below.
§ FDI in LLPs are permitted only in sectors where 100% FDI is permitted
Pledge of shares for business purposes [A.P. (DIR Series) Circular No. 57 dated under the automatic route and where no conditions are prescribed.
May 2nd, 2011] § Indian companies having FDI will be permitted to make downstream
investment in LLPs only if both the Indian company and the LLP are
RBI has decided to delegate powers to AD Category–I banks to allow pledge of operating in sectors where 100% FDI is permitted under the automatic
shares of an Indian company held by non-resident investor/s in the following route without any conditions. LLPs with FDI will not be eligible to make
cases (subject to compliance of certain conditions): any downstream investments.
§ The Foreign investor will be permitted to participate in the capital
§ Pledge in favor of an Indian bank in India to secure the credit facilities structure of the LLP only by way of cash considerations.
being extended to the resident investee company for bonafide § FII /FVCI not permitted to invest in LLPs.
business purposes; § LLPs will not be permitted to avail External Commercial Borrowings.
§ Conversion of a company with FDI into an LLP will be permitted only
with prior approval of FIPB.
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5. the guidelines public and may seek comments from all stakeholders
Impact: Permitting FDI in LLPs would give flexibility to foreign investors, again.
depending upon their nature and size of investment. Even foreign investors
with existing investments by means of joint ventures and wholly owned § RBI panel suggests tighter reporting norms for interest rates and forex
subsidiaries can now restructure and convert themselves to LLP, as long as derivatives. The report of the Working Group set up by RBI suggested
they meet the pre-requisites provided for in the said release. However, issues that Clearing Corporation of India (CCIL) should be made the repository
such as valuation norms, determination of ownership and control, non-cash of all interest rate and forex derivative transactions.
contributions still needs to be addressed by the Government.
§ The Government of India has decided to raise the overall limit for
external commercial borrowings to $30 billion from $20 billion before;
Other clippings so the corporates can borrow more
§ RBI is likely to make it mandatory for foreign banks in the country to § For IPO related transient capital flows under the Application Supported
operate as wholly-owned subsidiaries, in line with the international by Blocked Amount (ASBA) mechanism, foreign currency-rupee swaps
practice, so that the central bank can have better control over their have been permitted to the FIIs subject to certain conditions
working. At present, the foreign banks operate through their branches.
§ RBI in its proposed norms for holding companies has said that financial
groups can list both the holding company as well as the subsidiaries.
RBI had placed the Report of the Working Group on Introduction of
Financial Holding Company Structure in India on its website for inviting
comments from the public.
The proposed structure is similar to that prevailing in Western
countries where holding companies like Citigroup are listed and serve
as a vehicle for raising capital. The holding company in turn has
subsidiaries in banking, asset management, insurance, investment
banking and non-banking finance.
§ The Finance ministry has cleared the RBI’s draft guidelines on new
bank licences with a rider that the existing 74% cap on foreign direct
investment be retained. The central bank, which had proposed
capping FDI in new banks at 49% in the first 10 years, is likely to make
3

6. Corporate Law
Other improvements in process in MCA21 to help stakeholders / corporates
Green Initiatives in the Corporate Governance
§ Introduction of Refund Process (refund of fees wrongly paid by the
The Ministry of Corporate Affairs has taken a “Green Initiative in the Corporate stakeholder while availing various services at MCA 21)
Governance” by allowing paperless compliances by the companies under the
provisions of the Companies Act, 1956. § Automatic approval for Form 2, Form 3 regarding return of allotment
of shares, Form 18 for change of registered office and for 32 for
§ Allowing service of Documents including Balance Sheets and Auditors change in directors details to be processed under STP mode (i.e.
report, etc through e-mail addresses (General Circular No. 17/2011 Straight through processing)
dated 21.04.2011 & Circular No. 18/2011 dated 29.04.2011)
§ Delegation of power to issue section 25 license to a company from
§ Participation by Directors and shareholders in meetings through video Regional Director to ROC
conferencing (General Circular No. 27-28/2011 dated 20.05.2011)
§ Companies which had defaulted in filing their annual returns and
§ Voting in General Meeting of Companies through electronic mode - In balance sheets for a continuous period of three years have been
order to have a secured electronic platform for capturing accurate moved into a separate basket as "Dormant" companies. Form 8, 10 (for
electronic processes, CDSL and NSDL are being given approval (General registration of charges) and Form 17 (for satisfaction of charges) are
Circular No. 21/2011 dated 02.05.2011) not allowed to be filed by a dormant company.
§ Companies who have not filed their statutory Annual Reports (i.e.
§ All certificates and standard letters issued by ROC to be issued
Balance Sheets, Profit and Loss Accounts and Annual Reports) with
electronically under the Digital Signatures of the ROC (General Circular
ROC, are now not allowed to file their other Forms except certain
No. 29/2011 dated 20.05.2011)
Forms (viz. Form 32 for change in directors, Annual return, Form 23AC
for filing financials, Form 21 i.e. notice of the court or company law
Impact: The above initiatives will allow the Companies to curb huge costs,
board order, etc) till the companies has filed its updated Statutory
particularly in the case of companies with overseas shareholding, and
Annual Accounts/ Annual Report in MCA-21 system. (Circular [F.No.
directors wherein meetings have now been allowed to be conducted
17/146/2011-CL-V], dated 12-5-2011)
electronically
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7. Marking a company as having management dispute by Registrar of said Rules have been amended wherein the clarifications have been
Companies under MCA-21 system in specific cases (General Circular 19/2011 made on composition of the committee. [vide Notification No. G.S.R.
dated May 2, 2011) 357(E), dated 02-05-2011]
This marking creates an alert and the documents are not approved and remain § MCA, in the conference of Official Liquidators, stresses to expedite the
in the registry as work in process till it is demarked by the Registrar. In order to Process of Liquidation Of Companies. This comes in view of the fact
ensure uniformity among ROCs, it has been clarified that the ROC shall use the that the time taken for liquidation of companies is one of the major
facility only in following specific cases factors responsible for India’s low rank in the global “doing business
survey” conducted by the World Bank. A series of measures have also
§ Where the court or CLB has directed to maintain the status-quo with been identified in the conference for expediting liquidation.
reference to any e-forms including the status of Directors in the
company or,
The Court or CLB has granted any injunction or stay in taking the Significant decisions
document on record and ROC is a party in such court cases, etc
§ In other cases, where ROC in not a party, it is for the parties to comply § The Supreme Court had set aside the judgment of the Gujarat high
to such orders and in case of non-compliances ,the law shall take its court and directed the sale of a wound-up company at a higher price
own course so that creditors will get their dues. The high court had confirmed the
sale at the earlier price on the ground that a confirmed auction sale
cannot be set aside merely because subsequently a higher price was
Other Updates offered by one of the bidders.
§ LLPs have now been allowed to be appointed as auditor of companies § Increase in Authorised Capital is not liable to stamp duty under Indian
Stamp Act, 1899 as applicable in Delhi, as there is no express provision
§ MCA has excluded banking, insurance, power, NBFCs and overseas for charging stamp duty on the increase in authorized share capital in
subsidiaries of these companies from Phase I of the implementation of Schedule IA of the Delhi Stamp Act. With the ruling in place, Delhi
XBRL. government will soon amend the schedule so as to bring it in line with
other state stamp act schedules which expressly mention about the
§ The Director’s Relative (Office or Place of Profit) Rules, 2011 (which chargeability of stamp duty on increase in authorized share capital
came earlier this year) provided that in case of a public company, the [Delhi High court in the case of S.E. Investment Limited]
remuneration not exceeding Rs 250,000 per month can be made to a
relative of director, provided the appointment is approved by a
Selection Committee comprising of a majority of independent directors
and an expert in the respective field from outside the company. The
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8. News Snippet Transfer Pricing
§ The Ministry is considering substituting Unlisted Public Companies Significant Decisions
(Preferential Allotment) Rules, 2003 by replacing it with new set of
Rules. The new rules have proposed that the securities should be § If loss making companies were excluded, a super profit earning
issued in Demat mode and imposed more disclosures on both the company should also be removed from the comparables [ITAT Delhi]
company and the buyer. It also requires the issuer to seek government
permission if the cumulative value of the allotment is over 5 crore. A § Arm’s length price under TNMM can be determined even with one
draft of such rules has been released for public comments. comparable company
§ As per MCA, the new company law will make it mandatory for
companies to disclose details of social sector initiatives, called CSR, in News Snippet
addition to money spent, to shareholders in their annual reports.
§ CAG may review transfer pricing case which has revenue implications
for the exchequer – Director General of Income Tax
§ CBDT had now instructed AOs and TPOs to look into technical evidence
involved in a tax or transfer pricing case by seeking assistance in the
form of opinion from technical experts in the relevant subject matter
for expeditious disposition of such cases especially where there are
substantial amounts of taxes at stake [Instruction No. 5/2011 dated 30
March, 2011]. This instruction follows from the directions provided by
Supreme Court in its ruling in the case of CIT v. Bharti Cellular Ltd.
[2010-TI1-05-SC-INTL].
6

9. Competition Law § Other cases like acquisition by underwriters, stock brokers, etc
The Competition Commission of India (Procedure in regard to the transaction This revised set of Combination Regulations addresses various concerns
of business relating to combination) Regulations, 2011 raised by industry forums on the draft regulations released earlier, and
provides some level of clarity on transactions, which would fall within the
A draft set of regulations for regulating combinations had been released for purview of Combination Regulations, or outside their purview.
public discussions (the brief provisions of which were covered in our April 2011
missive). After extensive discussions with various industry forums and
professionals, a revised set of Combination Regulations has been finalized. The Recent Orders by CCI
regulations would come into effect from June 1st, 2011, the same date when
the provisions relating to combinations would come into force. § CCI imposed a penalty of Rs 1 lakh each on 27 film producers on
charges of colluding through a cartel to exploit theatre owners. CCI
Initially, the draft regulations, sought to expand filing and approval imposed the fine on filmmakers after having found them guilty of
requirements to transactions, which would fall within the purview of a entering into anti-competitive agreement.
combination, but may not have had an Appreciable Adverse Effect (AAE) on
competition (such as a pro-rata bonus share issuance to shareholders). This § CCI pronounced the National Stock Exchange (NSE) guilty of abusing its
could have potentially resulted in unnecessary time delays in implementation dominant market position by adopting unfair trade practices in
of such “harmless” transactions. Keeping in line with the basic intention of connection with currency derivatives trading. The MCX-SX in its
Competition Law to regulate only those combinations, which could have an representation to CCI in November 2009 had alleged that NSE had
AAE in India, the Combination Regulations provide a schedule of transactions substantially reduced admission and trade related fees to eliminate
(otherwise qualifying as combinations), which may not have an AAE, and hence competition and discourage other entities from entering the market.
approval under Competition Law would not normally be required.
Broadly, the following transactions are covered under the schedule subject to News Snippet
certain conditions.
§ CCI ruled out any conflict with SEBI over the notified M&A norms,
§ Direct/ indirect acquisition of non-controlling stake (equal or less than saying the new regime would not clash with the market regulator’s
15%) or additional stake acquisition by an existing majority takeover code.
shareholder (already holding 50%)
§ Corporate action like bonus, stock split, rights issue, etc
§ Asset acquisitions
§ Intra-group combinations
§ Foreign combinations with “insignificant local nexus”
7

10. SEBI 3,000 retail applicants withdrew their applications & several others
were disqualified due to stop-payment of cheques.
Pre-agreed buyback of shares through put/call option in not valid under SCRA
- SEBI § SEBI has asked mutual funds to inform the investors on an urgent basis
about their support or opposition to various business decisions of the
SEBI in its recent informal guidance to Vulcan Engineers Limited (VEL) (dated 23 companies. It is of the view that the fear of a possible opposition by
May, 2011) has communicated to VEL that, the pre-agreed buyback of VEL institutional investors like mutual funds being made public would force
shares from SIMEST through put/call option is not valid under SCRA. [LETTER the companies to follow best corporate governance practices in their
NO. CFD/DCR/16403/11] businesses.
SEBI, after the opinion in open offer by Vedanta wherein it had sought § SEBI has proposed to put in place a business intelligence gathering
removal of clauses of “call / put options” from the agreement regarding sale mechanism with an aim to enhance its surveillance and protect
of shares in Cairn India, is asserting the view that all kinds of put/call options investors’ interest.
are in the nature of forward contract and are therefore not valid under the
securities laws in India. § Securities Appellate Tribunal (SAT) has ruled in a matter wherein there
was a change in the term of plan (by increasing the term thereof), that
Even early this year, a 3-member arbitration panel in the BALCO case of the same affects the fundamental attributes of the scheme and
Sterlite versus the Government of India held that any restriction on the free modifies the interests of the unit-holders and thus the same should
transferability of shares of a public company is violative of Section 111A of have been given effect to after notifying the unit-holders and providing
the Companies Act. Corporates are regularly inserting put/call option clauses an exit option to them as set out in Reg. 18(15A) of the SEBI (Mutual
in the SPA/SSA, the practice may need to be reviewed, especially for listed Funds) Regulations, 1996, in the absence of which, the investors are
cos in India. entitled to relief.
§ NSE & BSE has received an in-principle nod from SEBI for SME
News Snippets exchange
§ SEBI wants IPO bankers to disclose their past record in handling the § SEBI may soon frame a stringent set of rules for funds investing in art
public offers works, antiques, coins and stamps, with an aim to check black money
flow into these products and safeguard the interest of genuine
§ SEBI stops Vaswani Industries listing, suspecting dummy IPO investors.
subscriptions on fears that a majority of the applicants could be
dummy investors, acting on behalf of a few big operators as around
8

11. Direct Taxes § Foreign corporates with subsidiaries in the country not subject to
payment of withholding tax for financial services like discounting of
Significant updates bills provided to their Indian arms [AAR]
§ India had Signed Double Taxation Avoidance Agreement (DTAA) with § Consideration received under a composite contract for services which
Tanzania, Colombia and Ethopia are ancillary to the main objective of providing a software user license
(in the nature of field data collection/mathematical model studies)
§ Agreement between India and Isle of Man and Commonwealth of The held to be Royalty [AAR]
Bahamas for exchange of information with respect to taxes has been
entered § Tax Refund Interest Not ‘Effectively Connected’ With PE [ITAT Delhi]
§ A recent notification issued by the Ministry of Finance fixing the rate of § Transfer of shares of Indian company without consideration in the
interest as 9.5 per cent on the Employees' Provident Fund (“EPF”) course of group reorganization, is not liable to tax in India [AAR]
balances for the purpose of income-tax exemption. In view of this
notification, the anomaly between the interest earned on EPF balances § Deduction U/s. 10A available on conversion of existing Domestic Tariff
and the income-tax exemption enjoyed by the RPFs member stands Area unit into Software Technology Park unit [Karnataka High Court]
removed.
§ Charges for data processing not ‘royalty’ [Mumbai ITAT]
§ It is mandatory for Companies and Banks to issue Form 16A from TIN
to their deductees for deductions made from April 1, 2011 (F.Y. 2011- News Snippet
12 onwards). [CBDT circular no. 03/2011 dated May 13, 2011]
§ The Government has constituted a Committee under Chairman of
Significant Decisions CBDT to examine ways to strengthen laws to curb the generation of
black money in the country, its illegal transfer abroad and its recovery.
§ High court upheld deduction claimed in respect of
remuneration/royalty paid to subsidiaries and holding companies on § Desperate to curb the flow of blackmoney into the country’s economy,
the contention that revenue authorities have not specified as to how the Income Tax department has now begun to track all fliers and
much ordinary profit was supposed to be and the basis of its visitors who travel to tax havens like Switzerland, Virgin Islands and
determination, before treating royalty payment as excessive and Bahamas for personal or business purposes secretly. India is also
unreasonable. [Delhi HC] seeking pressure on tax havens to share information. Mauritius has for
the first time provided banking information about a person being
investigated by the Income Tax Department (ITD) for tax evasion and
money laundering
9

12. Other Regulatory Updates
§ Government of India has issued updates to the FAQ on Provident Fund
Foreign Contribution (Regulation) Act, 2010 [PF] for international workers [IWs] on 6 May 2011 with a view to
provide greater clarity on the applicability of PF regulations.
FCRA, 2010 has come into effect from May 1, 2011. While the provisions of the
repealed FCRA, 1976 have generally been retained, the FCRA, 2010 is an § AS-11 provides for immediate recognition of exchange differences
improvement over the repealed Act as more stringent provisions have been arising on long-term foreign currency monetary items. However, in
made in order to prevent mis-utilisation of the foreign contribution received by order to prevent immediate burden on the companies, alternatives
the associations. Some new features of the legislation are were proposed in earlier years wherein such differences (in case of
depreciable capital assets) can either be added or reduced from the
§ No person who receives foreign contribution as per provisions of this cost of assets and depreciation over the life of such assets, or be
Act shall transfer to another person, unless that person is also accumulated in the “Foreign Currency Monetary Item Translation
authorized to receive foreign contribution. Difference Account” and amortized over the life of the monetary item
§ Foreign contribution shall be utilized for the purpose for which it has but not after March 31, 2011. The government had now again
been received and such contribution can be used for administrative extended the sunset date in the transitional provisions thereto by one
expenses up to 50% of such contribution received in a financial year. more year.
§ New provisions have been made for suspension as well as cancellation
of registration granted for violation of the provisions of the Act,
management of foreign contribution and assets created out of such Significant Decisions
contribution of persons whose certificates have been cancelled,
§ The Delhi HC has dismissed the appeal of Champagne, Moet &
limiting the validity of registration certificate granted for a period of
five years (with option for renewal thereof), imprisonment on violation Chandon (manufacturer of wines) in a Trade Mark Case against a Delhi
firm selling meat products under the same name by upholding that
of the provisions, etc
though the marks were identical, the products were different.
Other Updates § Indian court has no jurisdiction in an international arbitration petition
as the agreement provided that law governing the arbitration will be
§ A Bank cannot Loan for subscription of Indian Depository Receipts English law [Supreme Court in the case of Videocon Industries Ltd vs
(IDRs) or against security/collateral of IDRs - [RBI/2010-11/543 DBOD. Union of India]
Dir.BC. 96 /13.03.00/2010-11 dated May 25, 2011]
§ No case made out under the Negotiable Instrument Act if cheque was
§ Splitting of Minimum Wages for the purpose of PF contribution not issued for Security Deposit and not towards the discharge of any debt
permissible - Ministry of Labour & Employment or loan [Bombay HC]
10

13. § The HC can only interpret a notification, it cannot alter the same – § SKS Microfinance have challenged the special act passed by the Andhra
[Supreme Court in case involving Central Excise Act] Pradesh government to regulate micro finance institutions in the state
before the Supreme Court on the ground that micro finance sector falls
§ If an Act excludes a service from service tax then same cannot be under the central list and is not a state subject
imposed by virtue of any circular [Madras high court]
§ The Centre plans to introduce bill on Land Acquisition in the next
§ Mortgage suit cannot be referred for settlement through arbitration. session of Parliament
According to Apex court, all disputes are not capable of settlement
through arbitration; some by nature have to be adjudicated by courts § International Accounting Standards Board (IASB) wants full IFRS
[Supreme Court in the case of Booz Allen and Hamilton Inc. Vs. SBI adoption in India. Large companies may have to adopt IFRS from next
Home Finance Ltd. & Ors] financial year when new tax regime comes into effect.
§ A firm of architects or engineers is obliged to contribute to the § The government plans an umbrella law to tighten financial scrutiny and
Employees State Insurance Fund. The court held that it is not only a regulation of religious trusts and non-profit organisations.
place where “goods” are sold which comes within the meaning of the
word “shop”. A place where “services” are sold has also been legally § An inter-ministerial group on inflation has recommended allowing FDI
interpreted to be a “shop” [Delhi high court in the case of Consulting in multi-product retail as one of the two steps to tame rising prices
Engineering Services (India) Ltd vs ESI Corporation].
§ DIPP has issued a Discussion Paper on Utility Models wherein it
§ The application praying for withdrawal of the withdrawal application in
examines the viability of introducing the same in IPR regime. Utility
a court is maintainable [Supreme court]
models are a framework for providing limited protection to those
innovations which may not meet the standards of the Patents Act and
§ Unless a different intention appears from the terms of contract, in case yet are commercially exploitable and socially relevant.
of the imposition or increase in the tax after the making of a contract,
the party shall be entitled to be paid such tax or such increase. The § Housing ministry has prepared the Model Residential Tenancy Act,
decision was rendered in the context of service tax on rent [Delhi High 2011 that is intended to replace archaic rent control legislations that
court] capped rentals, resulting in landlords getting a pittance for properties
in prime localities in metros.
News Snippet
§ DEPB scheme may not get extension – Commerce Ministry
11

14. Recent News in Transactions that made Headlines § Aditya Birla Group bought Swedish pulp maker Domsjo Fabriker for
$340 million signalling intent to grow the fibre business globally
§ Adani Buys Coal Port in Australia for $2 b
§ The Finance Ministry and regulators will change the rules to give
§ Bombay High Court had asked Jet Airways to pay 478 crore to Sahara Sovereign wealth funds floated by governments of rich countries more
India within two weeks as dues for the takeover of Air Sahara headroom, when they buy shares in listed Indian companies. It is
proposed that SWFs belonging to countries that have signed treaties or
§ Facebook and Google Inc are separately considering a tie-up with agreements with India should be allowed to buy up to 20% shares of a
Skype after the web video conferencing service delayed its IPO listed company, without making an open offer to existing shareholders.
§ UK-based Serco Group is in talks with Blackstone to acquire a
controlling stake in India’s largest unlisted BPO, Intelenet Global
Services
§ Oracle Corp, the world’s second biggest software maker, is in early-
stage discussions with potential bidders and investors about a possible
sale of its software services unit
§ Morgan Stanley, Isolux Corsan to invest $400 mn in India JV
§ Global investment fund T. Rowe Price, which acquired a strategic 26%
stake in UTI Asset Management Company (UTI AMC) last year, has
threatened to exit the venture, complaining of government
interference in the appointment of its chairman
Errata - Please ignore the impact of our first update in the ‘May’ missive
§ Pension Fund Regulatory and Development Authority (PFRDA) had wherein we have stated that even foreign directors would need to obtain
staked a claim to the pension schemes of insurance companies, setting PAN in view of General Circular 11/2011 dated April 7th, 2011. The correct
the stage for a turf war with IRDA, the insurance regulator. The matter interpretation is that only Indian nationals are supposed to mention the
has been referred to the Financial Stability and Development Council, PAN and Foreign Directors have to register their passport number instead
the regulatory dispute settlement body. of PAN. We sincerely regret the error and inconvenience caused to you
12

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TRANSACTION ADVISORS
This publication is intended as a service to clients and associates and to provide them with details of the important Transaction updates. It has been prepared
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