India updates

Arbitration & ADR

Contributed by Khaitan & Co
Award replacing contractual provisions with new terms "shocks the conscience" of Supreme Court
  • India
  • 20 June 2019

The question of whether a contract can be amended retroactively was raised in the arbitration proceedings between Ssangyong and the National Highways Authority of India. The Supreme Court's ruling on the case is a welcome exposition on the contours of Section 34 of the Arbitration and Conciliation Act, especially in relation to challenges on grounds of violations of principles of natural justice.

Enforcement of foreign awards: does violation of legal provision equate to contravention of fundamental policy?
  • India
  • 18 April 2019

In 2013 the Supreme Court held that the enforcement of a foreign arbitral award can be refused only if it is contrary to, among other things, the 'fundamental policy of Indian law'. This article focuses on the Indian courts' interpretation of this term and looks at a common question that arises in relation to this area of law – namely, whether a foreign arbitral award which is a mere violation of an Indian legal provision qualifies as a contravention of the fundamental policy of Indian law.

Arbitrability of consumer disputes: loophole in Booz Allen framework?
  • India
  • 14 March 2019

The Supreme Court recently ruled that consumer disputes are incapable of being submitted to arbitration, placing them in the infamous category of 'non-arbitrable' subjects in India. However, the court also stated that where an elected consumer fails to file a consumer complaint, the parties are not barred from submitting the dispute to arbitration. This article analyses whether such a statement could have far-reaching implications for arbitrability as a ground for challenging an award.

Clarity in arbitral proceedings – legislation post-pronouncement of arbitral award
  • India
  • 07 February 2019

The focus of India's rapidly evolving arbitration regime appears to be concentrated on factors such as ensuring that arbitrations are completed in a timely manner and appointed arbitrators are impartial. While these factors are significant, the importance of substantive and procedural clarity in terms of what happens after an award is passed is also crucial.

Revisiting Supreme Court Centrotrade decision and utility of two-tier arbitration clauses
  • India
  • 13 December 2018

Two-tier arbitration clauses or appellate arbitration mechanisms were upheld by a three-judge bench of the Supreme Court in Centrotrade Minerals and Metal Inc v Hindustan Copper Limited. This article discusses the evolution of the jurisprudence surrounding two-tier arbitration in India and analyses both the utility of such a mechanism for the parties and its usefulness in certain situations.


Banking

Changes to merchant discount rate framework: impact on stakeholders
  • India
  • 02 March 2018

The Reserve Bank of India and the Ministry of Electronics and Information Technology recently established a new regulatory framework for setting limits on and payments of merchant discount rates and encouraging digital payments. Rates will now be determined based not only on the basis of transaction value, but also on turnover. However, in its effort to curb transaction costs for merchants, the government risks imposing significant charges on other system participants.


Competition & Antitrust

Contributed by Vaish Associates Advocates
CCI holds that neither Flipkart nor Amazon is dominant in online marketplace
  • India
  • 18 July 2019

The Competition Commission of India has dismissed allegations that Flipkart India Private Limited and Flipkart Internet Private Limited abused their dominant position. Interestingly, although information was filed against the Flipkart entities, the commission held a preliminary conference with Amazon and concluded that no one player in the market could be said to have a dominant position at this stage of the market's evolution.

CCI rules that mere discussion of price increases does not constitute cartel
  • India
  • 11 July 2019

In November 2018 the Competition Commission of India (CCI) dismissed the allegations of cartelisation in the determination of flashlight prices against Eveready Industries India Limited, Panasonic Energy India Co Ltd, Indo National Ltd, Geep Industries (India) Pvt Ltd and the Association of Indian Dry Cell Manufacturers. Notably, the CCI exonerated the opposing parties despite the existence of two leniency applications.

CCI further amends combination regulations – minority acquisitions left untouched
  • India
  • 04 July 2019

In 2018 the Competition Commission of India (CCI) issued a notification which further amended the CCI (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations 2011. Following strong opposition from industry groups, the CCI has dropped a controversial amendment. This article highlights the notification's most important changes.

Supreme Court delivers second landmark cartel judgment
  • India
  • 27 June 2019

In October 2018 the Supreme Court issued a landmark judgment in which it upheld the appeals of 44 liquefied petroleum gas cylinder manufacturers and dismissed the earlier finding of bid rigging. In its decision, the court emphasised the need to evaluate the market structure and conditions before determining whether a cartel exists. This judgment signifies a new direction in case law and is likely to change the manner in which India's antitrust regulator evaluates evidence of cartels in future.

CCI penalises MRI machine manufacturer, but chair disagrees with market definition
  • India
  • 20 June 2019

The Competition Commission of India (CCI) recently imposed a penalty on Italian company Esaote SpA – a world leader in dedicated magnetic resonance imaging (MRI) – and its Indian subsidiary. According to the CCI's order, the Esaote group had abused its dominant position in the market through its sale of dedicated standing/tilting MRI machines to the informant. However, the CCI chair disagreed with the relevant market adopted by the majority of the commission.


Corporate Tax

Contributed by BDO LLP
Does Section 195 of Income Tax Act apply to salaries of employees seconded by foreign entities?
  • India
  • 05 July 2019

The Bombay High Court recently considered whether a taxpayer, which was resident in India and the sole owner of a business that provided personnel on an as-needed basis to foreign companies, had been required to deduct tax under Section 195 of the Income Tax Act when paying an employee who it had loaned to a Kuwait-based company. Section 195 of the act requires taxpayers to deduct tax on any payment (other than salary payments) made to non-residents.

Budget 2019: a box of possibilities
  • India
  • 28 June 2019

With a clear mandate from Indian citizens, the newly elected government is expected to bring a fresh perspective to tax matters when it issues its budget on 5 July 2019. The tax rates are unlikely to change substantially and the amendments made in the interim budget will remain intact. However, to increase India's competitiveness from an investment perspective, the government may reduce the peak tax rate for all businesses and entities.

Mumbai Tax Tribunal rules on service permanent establishment threshold: leave periods and multiple counting
  • India
  • 21 June 2019

The Mumbai Tax Tribunal recently ruled in a case concerning the threshold for determining whether a taxpayer has a service permanent establishment in India, finding that the multiple counting of employees on a particular day is prohibited under the India-UK tax treaty. Further, the tribunal held that since the employee in question had been on leave and no other employee of the taxpayer had rendered services in India, the employee's leave period had to be excluded from the threshold calculation.

CBDT and GSTN to sign MoU on exchange of taxpayer information
  • India
  • 14 June 2019

The Central Board of Direct Taxes (CBDT) has authorised the principal director general of income tax (systems) to share taxpayer information with the Goods and Service Tax Network (GSTN). The CBDT also confirmed that in order to facilitate the provision of information, it will enter into a memorandum of understanding with the GSTN, which will set out, among other things, the nature of data exchanges, the ways in which confidentiality will be maintained and mechanisms for the safe preservation of data.

CBDT issues draft report on attribution of profits by permanent establishments
  • India
  • 07 June 2019

Due to the uncertainty and unpredictability resulting from the application of Rule 10 of the Income Tax Rules, the Central Board of Direct Taxes formed a committee to examine the existing profit attribution scheme. The committee recently issued a report on this issue and is seeking comments from stakeholders. Broadly speaking, the report suggests amending Rule 10 to adopt a three-factor method to attribute profits with equal weight to sales (a demand-side factor) and manpower and assets (supply-side factors).


Employment & Benefits

Contributed by Shardul Amarchand Mangaldas & Co
Keeping up with the times: EPF goes digital
  • India
  • 10 July 2019

The employees' provident fund is a social security fund comprising contributions from employers and employees, which are paid to employees on their retirement. The entire process is administered by the Employees' Provident Fund Organisation (EPFO), which is a statutory body established by the Ministry of Labour and Employment. To keep up with digitisation, the EPFO recently updated the process under which subscribers can withdraw and transfer provident funds.

Casting a wider net – ESI rates amended
  • India
  • 03 July 2019

The Employees' State Insurance (ESI) (Central) Rules 1950 were recently amended to reduce the required rates of contribution to the statutory fund maintained by the ESI Corporation for the provision of sickness and health benefits. The aim of this change is to cast a wider net by expanding social security coverage to a larger part of the population. However, news reports indicate that – as is often the case – the change has come under criticism.

To compete or not to compete – that is the question
  • India
  • 19 June 2019

Non-compete restrictions are the tool most commonly used by employers to protect their proprietary interests following the end of an employment relationship, particularly in the case of C-suite employees. However, non-compete restrictions which apply beyond the term of an employment relationship are generally unenforceable in India. That said, this does not mean that employers have no recourse whatsoever.

Supreme Court rules on whether special allowances constitute basic wages for purposes of PF contributions
  • India
  • 24 April 2019

The Supreme Court recently examined whether certain components of an employee's overall salary are subject to provident fund (PF) contributions. As the Supreme Court has clarified that special allowances paid to employees must be included in the calculation of PF contributions, employers should review and analyse their current salary structures to determine any increase in PF liabilities.

Reducing minimum period of unemployment to withdraw provident fund accumulations
  • India
  • 22 August 2018

The Central Board of Trustees of the Employees' Provident Fund Organisation recently approved a proposal to permit provident fund members to withdraw 75% of their accumulations after a period of one month of continuous unemployment instead of two months. The proposal would come into effect when the Employees' Provident Funds and Miscellaneous Provisions Act and the Employees' Provident Funds Scheme are amended.