Indo Japan Trade and Investment Bulletin February 2014

Indo-Japan Trade & Investment
Bulletin
February Issue
Japan Desk, Corporate Professionals

2014

INDEX

Indo-Japan Trade & Investment Highlights
Hitachi to Acquire 76% Stake in Indian IT Firm-Micro Clinic India
India and Japan Signed MoU to Strengthen Tourism Sector
Japan’s Outsourcing Inc Buys 51% Stake in India’s Alp Consulting for $5 million
Japan’s Netprice looks to invest up to $4M in Indian tech startups in 2014
India’s Ruchi Soya forms JV with Canada’s DJ Hendrick and Japan's KMDI for
Specialty Soyabean Seeds
Honda Motor Inaugurates Second Manufacturing Facility in India
The Indian Economic Affair Committee Approves Acquisition of India’s Prizm
Payment by Japan’s Hitachi
India's Bajaj to Deepen its Partnership with Kawasaki, KTM to Enhance Exports
Sakra World Hospital to Invest Rs. 300 crore for Super Specialty Centre in India
Nissan Ends its Alliance with Hover Automotive in India
Japan may Invest INR 15K crore on Road Projects in North-East India
Japan's Shachihata to Expand India Operations
Indian IT firm Inks Deal with Japan’s All Nippon Airways
Japanese Companies Win Blast Furnace Project in India

Knowledge Centre

Termination of Employment in India

Indo-Japan Trade & Investment Highlights

Hitachi to Acquire 76% Stake in Indian IT Firm-Micro Clinic India
Hitachi Systems Ltd. has signed a share purchase agreement with Delhi-based Micro Clinic India
Pvt. Ltd. for acquiring 76 % in the Indian IT firm. Post-acquisition, the company will be renamed
as Hitachi Systems Micro Clinic Pvt. Ltd. and both the companies will work with the Hitachi
Group companies in India with the intent to expand their IT services business base in India.
Hitachi commenced business in India in the 1930s. At present, Hitachi has around 30 business
units and 7,500 employees in India. In addition to providing services in construction machinery
and air-conditioning systems, the company is developing into information & telecommunication
systems, power systems, industrial, transportation and urban development systems also.
India and Japan Signed MoU to Strengthen Tourism Sector
The ministries of tourism of the government of India and the Japan have signed a Memorandum
of Understanding (MoU) for strengthening cooperation in the field of tourism. The main
objective of the MoU is to expand bilateral cooperation in tourism sector for encouraging the
citizens of both countries to travel and exchange information related to tourism. The MoU is
expected to encourage cooperation between the tourism stakeholders in the two countries,
including hotels and tour operators for promoting safe, honorable and sustainable tourism. Japan
is a significant tourism generating source market for India especially because of the numerous
sites of Buddhist heritage in India. Likewise, India has also emerged as an important source
market for Japan. Considering the common benefits, MoU between India and Japan is predicted
to create an institutional mechanism for promoting cooperation in the tourism sector.
Japan’s Outsourcing Inc Buys 51% Stake in India’s Alp Consulting for $5 million
Japan‟s Outsourcing Inc has bought 51 per cent equity stake in Alp Consulting, an Indian hiring
firm based in Bangalore for $5 million. The acquisition is part of Outsourcing Inc‟s plans to
strengthen its foothold in the rapidly growing employment market of India. The Japanese
company decided to acquire 51 per cent of Alp Consulting and all shares of Datacore
Technologies Pvt. Ltd, which is a subsidiary company of Alp Consulting. Outsourcing Inc said
in a statement "By making the Alp Group a subsidiary, the company will enter the India market
which is expected to continue developing going forward,”. With the acquisition of Alp
Consulting, Outsourcing Inc is looking to meet the staffing needs of the Japanese companies
which are aiming to enhance their presence in India.

Japan’s Netprice looks to invest up to $4M in Indian tech startups in 2014
Netprice.com Inc, Japanese internet incubation cum investment firm, is planning to step up its
activity in India by investing in startups in the web and mobile space in the country. The
Japanese firm is intending to put about $500,000 to $4 million in three-four Indian startup
companies in the year 2014, as per a recent statement made by Netprice.com‟s president and
CEO Teruhide Sato. However, the company did not clarify if it has already identified any Indian
companies for investments. Recently, Beenos Asia Pte Ltd, a subsidiary of Netprice had also
made investment announcement along with Japanese online payments firm Econtext Asia Ltd.,
in Citrus Payments Solutions, a Mumbai-based online payments company.
India’s Ruchi Soya forms JV with Canada’s DJ Hendrick and Japan's KMDI for Specialty
Soyabean Seeds
Ruchi Soya Industries Ltd., one of the largest edible oil companies in India, has entered into a
joint venture agreement with DJ Hendrick International Inc (DJHII), a Canadian firm and
Japan‟s KMDI International for developing and commercializing specialty soybean seeds. In the
joint venture, Ruchi Soya will hold 55 per cent stake, and DJHII and KMDI will hold 35 per cent
stake and 10 per cent stake respectively. David Hendrick, chairman of DJHII said in a statement
“We have vast experience in soy seed research and production of quality food which is rich in
nutritional values. Our knowledge and know-how will be very helpful in developing and
achieving the objectives of the joint venture". Currently, India is the world‟s fifth-largest
producer of soybeans in the world.
In 2013, Ruchi Soya formed a joint venture with two Japanese firms- Kagome and Mitsui for
processed tomato products and another joint venture with two other Japanese firms for
production and marketing of edible oils.
Honda Motor Inaugurates Second Manufacturing Facility in India
Japanese auto giant Honda Motor Company inaugurated its second manufacturing facility at
Rajasthan, India for passenger vehicles with the view to double its annual capacity to 240,000
units per annum. With the inauguration of the second plant, Honda has aimed to double their
production capacity in India. The second plant is part of the company‟s strategy to realise the
target of selling 300,000 units in India by 2016-17. The company is planning to utilize the 450acre manufacturing facility to produce entry-level sedan Amaze and production of any other
models will be decided later depending on market demand.

The Indian Economic Affair Committee Approves Acquisition of India’s Prizm Payment
by Japan’s Hitachi
The Cabinet Committee on Economic Affairs, India has permitted Hitachi Limited and its Indian
arm, Hitachi Consulting Software Services India Pvt. Ltd. to acquire Prizm Payment Services
Pvt. Ltd., a Chennai based payment service provider, for around Rs 1,540 crore 1. Prizm is a
service provider of payment services using ATMs and POS systems to banks in India. The
committee approved the proposal for acquisition of 100 per cent equity stake of Prizm Payment
Service and the approval is expected to result in foreign investment of approximately Rs. 1,540
crore in India. Hitachi‟s move is aimed at expanding its business in the Indian financial sector.
Hitachi (Japan) and Prizm Payment (India) are determined to utilize their respective business
process integration skills in order to work toward a fine process of maintaining business
momentum, for retaining personnel and enduring the best quality of customer support.
India's Bajaj to Deepen its Partnership with Kawasaki, KTM to Enhance Exports
Bajaj Auto, the Indian motorcycle manufacturer, is strengthening its partnerships with Japan's
Kawasaki Heavy Industries Limited and Austria's KTM AG as it intends to increase exports of
its motorcycles to accelerate growth. Bajaj Auto is planning to make use of its partnership with
KTM, in which the company has a 48 percent stake, to enhance sales in the developed markets of
United States, Europe, Japan and Australia. The company plans to sell its bikes in ASEAN, the
regional grouping of Southeast Asian countries, and Brazil through Kawasaki, as the company
already has a marketing agreement with Kawasaki to sell motorcycles in the Philippines and
Indonesia and other markets where the company does not have its own sales network.
Sakra World Hospital to Invest Rs. 300 crore for Super Specialty Centre in India
Sakra World Hospital, the first-ever healthcare collaboration between India and Japan, has now
come up in Bengaluru (India) at an investment of Rs.300 crore to set up a 300-bed multi-super
specialty centre. The facility is a joint venture between Kirloskar India, Toyota Tsusho Japan and
Secom Hospitals, Japan. The partners of this joint venture are working up to build a chain of
multi-specialty hospitals across India. The hospital has the most excellent Japanese medical
expertise and quality demanded by India‟s first-rate specialists. The hospital is expected to
recover the capital invested within a period of just three years.

1

Crore = 10 Million

Nissan Ends its Alliance with Hover Automotive in India
Japan‟s Nissan Motor Co. has ended its exclusive sales, marketing and distribution agreement
with India‟s Hover Automotive India Pvt. Ltd., to distribute its vehicles in the South Asian
country. The Japanese auto maker tied up with India‟s Hover in the year 2008 to sell its vehicles
across India and for developing a network of dealers. But the company would now sell its own
brand of vehicles in India directly through separate dealerships. The President of Nissan Motor
India Pvt., Mr. Kenichiro Yomura, said that the company is "now at a point of maturity in India
where the time is right to establish our own marketing and distribution operations." Nissan was
so far the only company in India which didn't promote cars on its own. It announced in
November last year that it would sell vehicles in India directly under the Datsun brand and not
through the agreement with Hover. The company said that it would open separate showrooms for
Datsun cars with its existing network of dealers in India.
Japan may Invest INR 15K crore on Road Projects in North-East India
As the Japanese investments in India are on a never before high, two of the Japanese agencies,
Japan International Cooperation Agency (JICA) and Japan Bank for International Cooperation
(JBIC), have started performing feasibility studies for more than a dozen highway projects in the
North East region. The project estimated cost is about Rs. 15,000 crore. In August last year, an
official from JICA had initiated a study to evaluate the status of the Indian regional transport
infrastructure such as road, rail and port linkages in and around South and South-East Asia.
Japan's Shachihata to Expand India Operations
Artline (India) Pvt. Ltd., the Indian subsidiary of Japan‟s stationery manufacturing company,
Shachihata Inc. has decided to expand production to target school and office segments. The
company further stated its intentions of making India the new export hub for the group as the
Indian stationery industry is growing at a healthy rate of over 10 percent and it is a significant
market for Shachihata. One more Japanese stationery group, Kokuyo, bought controlling stakes
in Indian company Camlin Ltd. last year.
Indian IT firm Inks Deal with Japan’s All Nippon Airways
One of Asia's major airline groups in terms of revenues, All Nippon Airways (ANA) has tied up
with Indian IT firm for the implementation of two next-gen solutions for Vanilla Air, ANA
Group's ne low cost carrier, for the purpose of managing its passenger reservations and flight
operations.

Japanese Companies Win Blast Furnace Project in India
Japan‟s Nippon Steel & Sumikin Engineering Co. (NSENGI) and Marubeni Corp. announced in
February first week that they were jointly awarded a contract to do up a blast furnace in India.
JSW Steel Ltd., one of India‟s major steel companies, had chosen the Japanese companies over
European suppliers for the revamping project at its Dolvi Works Blast Furnace. This project will
nearly double the furnace volume to increase production and will introduce „the revamping
method‟ which will be performed for the first time in India and it is expected to shorten the
shutdown period to less than 100 days and also minimize production loss. In the year 2010,
Nippon Steel & Sumikin Engineering India was established as a subsidiary company by
NSENGI in Kolkata, India with the intent to use it as its business hub for India. The company
has since been promoting its business domestically in India. In addition to this project, NSENGI
and its subsidiary have supplied a coke dry quenching facility to Tata Steel Ltd., India, JSW and
Bhushan Steel Ltd., India.

Knowledge Center

TERMINATION OF EMPLOYMENT IN INDIA
Retrenchment of workers in the private sector is principally governed by the Industrial Disputes
Act, 1947 (the “Act”) and the employment contracts. According to Section 2 (j) of the Act, it is
applicable to any industry meaning any business, trade, undertaking, manufacture or calling of
employers and includes any calling, service, employment, handicraft, or industrial occupation or
avocation of workmen.
The Act defines “Workman” as any person (including an apprentice) employed in any industry to
do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or
reward, whether the terms of employment are express or implied. However, important exceptions
are2:
(i)
(ii)

Workman employed mainly in a managerial or administrative capacity; or
Workman, being employed in a supervisory capacity, draws wages exceeding Rupees ten
thousand (Rs. 10,000) per month or exercises, either by the nature of the duties attached
to the office or by reason of the powers vested in him, functions mainly of a managerial
nature.

Under the prevailing laws in India, every industrial establishment that employs more than 100
workers is under mandatory obligation to seek permission from the government before it can
proceed with lay-off3, retrenchment, or closure of undertaking. Any action by the employers to
the contrary that results in job losses without seeking prior permission as prescribed under the act
is illegal and workers are entitled to receive wages for the period of illegality. 4
However, an industrial establishment that employs less than 100 workers may retrench its
surplus employees/workers in accordance with the provisions laid down under Section 25F, 25G
& 25H of the Act without seeking permission of the government. Nonetheless, employees
appointed for a fixed period under the contract of fixed term may be discharged from their
services without complying with the provisions contained in Section 25F of the Act and his/her
services may be terminated either on the ground of expiry of the fixed period or in stipulation of
the provision contained therein.

2

See Section 2(s) of The Industrial Disputes Act, 1947
See Section 25M of The Industrial Disputes Act, 1947
4
See Section 25N (7) of The Industrial Disputes Act, 1947
3

Permitted Causes of Dismissal:
1. Inefficiency
It is an accepted fact that businesses majorly operate with an objective of earning profits
among various other motives. In such a scenario, it will not be feasible for any employer
to retain an employee if he has been consistently inefficient and has failed to meet
organizational targets. A contract of employment these days clearly establishes the job
description and the expectations which the employee will have to fulfil. Therefore, where
a worker‟s employment was terminated on the ground of her unsatisfactory work, the
court held such reason to be a valid cause.5
2. Breach of Confidence or Misconduct
Section 2 (oo) of the Act specifically excludes termination of a workman as a punishment
inflicted by way of disciplinary action from the protection of the retrenchment under the
Act. Therefore, any disciplinary action including for misconduct, breach of
confidentiality or other vital requirements of rules of employment is allowed as a just
cause for termination. The term misconduct is very subjective and therefore it is always
recommended that the employer‟s human resource policy (rules of employment)
comprehensively cover as to what conduct will tantamount to misconduct and eventually
lead to termination of employment. Similarly, breach of confidentiality e.g. clientele
details, technology details, chemical formulae may be a valid ground for termination.
3. Termination of the service of a workman on the ground of continued ill health is another
ground recognized as a valid ground of termination.6
Prohibited Termination:
Any termination that is not punishment as a result of disciplinary action or termination of the
service of the workman as a result of the non-renewal of the contract of employment between the
employer and the workman concerned on its expiry or of such contract being terminated under a
stipulation in that behalf contained therein, or termination of the service of a workman on the
ground of continued ill health is considered as retrenchment and hence requires proper procedure
to be followed as per the provisions of the Act.
A termination which is based on no inquiry, no charge and is neither by way of punishment as a
result of disciplinary action may be considered retrenchment.7 Section 12 (1) of the Maternity
Benefit Act, 1961 makes it unlawful for an employer to discharge or dismiss a female employee
5

Mana Thomas Gonsalvies v. Concept Pharmaceuticals (P) Ltd, (2002) IV LLJ (Supp) Bom. 906
See Section 2 (oo) (c) of the Industrial Dispute Act, 1947
7
Sachiv, Krishi Upal Mandi Samiti Sanawad V. Mahendra Kumar, 2004 LLT 405
6

on account of her absence from work due to her pregnancy or give notice of discharge or
dismissal when such notice period was to expire in her absence. Therefore, the employer can
issue a notice of termination to the female employee provided the expiry date of the notice issued
is after her date of joining service.
It is considered advisable to negotiate a voluntary exit of the employee by paying a higher
financial amount over and above the statutory dues, and contractual dues, in order to avoid any
legal hassles wherein the retrenchment procedure is a complex and cumbersome exercise
exposing the employer to the risk of litigation.
Contractual Obligations:
The employment contracts signed between the employer and employees/workmen play a
significant role in determining the terms and conditions of termination. Any procedure or terms
agreed in the employment contract must be followed in order to avoid any law-suit based on
contractual liability. Proper legal planning based on the law and terms of employment contracts
for retrenchment/lay-off may minimise any legal hurdles and consequences.
Compensation for Retrenchment:
Section 25 F of the Act lays down the procedure for the retrenchment and provides for
compensation for retrenched workman. The employer must satisfy the following conditions
before retrenching a worker employed for a period of continuous period of not less than one
year:
(i)
one month‟s notice in writing to the workmen indicating the reasons for retrenchment and
the period of notice has expired, or the workman has been paid in lieu of such notice,
wages for the period of the notice8;
(ii)
payment of retrenchment compensation which shall be equivalent to fifteen (15) days
average pay (for every completed year of continuous service) or any part thereof in
excess of six months; and
(iii) notice in the prescribed manner is served on the appropriate government.9
Depending upon the applicability, a workman may be entitled to gratuity (if served continuously
for 5 years or longer) and other conditions under The Payment of Gratuity Act, 1972. Gratuity is
payable at the rate of 15 days salary for per completed year of service. Similarly, statutory dues
8

Note: Notice period of 3 months has been prescribed in case of 100 or more employees, see section 25N of the Industrial Disputes Act, 1947. It
must be noted that if the employment contract contemplates any longer notice period, such notice period or salary/wages in lieu of such notice
must be honoured accordingly.
9

Note: Prior approval from the state government is required for retrenchment of workman of an industry with 100 or more employees, see
section 25N of the Industrial Disputes Act, 1947

such as leave encashment and provident fund, if and as applicable, are required to be paid at the
time of termination.

DISCLAIMER:
The document has been prepared and produced only for the information purpose only and is not to be construed as an
advertisement, solicitation, invitation, personal communication or inducement of any kind by the Firm, the author or any of its
Partner or associates. The entire content of this document has been developed on the basis of relevant statutory provisions and
as per the information available at the time of the preparation. Though the author has made utmost efforts to provide authentic
information, however, the material contained in this document does not constitute/substitute professional advice that may be
required before acting on any matter. The author and the firm expressly disclaim all and any liability to any person who has read
this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such
person in reliance upon the contents of this document.

CONTACT US

MUMBAI
Mastermind- I, Royal Palms Estate, Aarey Colony,
Goregaon (East), Mumbai -400065
Tel: +91 9820079664
Fax: +91 9810037390

PANKAJ SINGLA
Japan Desk, Corporate Professionals
NEW DELHI
D-28, South Extension Part - I, New
Delhi – 110049
Tel: +91-11-40622200
Dir: +91-11-40622293
Fax: +91-11-40622201
Mob:+91-99715-08320
Email: pankaj@indiacp.com

BEDFORD (UNITED KINGDOM)
2-4 Mill Street, Bedford MK40 3HD U.K.
Tel: +44 (0) 2030063240
Fax: +44 (0) 2030063241

Indo Japan Trade and Investment Bulletin February 2014

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