Laws for Owning Drones and Gyroplanes in Pipeline in India

Ravi Singhania


22/08/2017  

Drones are unmanned aircraft that can fly autonomously without a human in control. The flight (speed, navigation, aerobatics, etc.) are controlled by onboard computers which are in turn directed by remote human operators.

Gyroplanes are aircrafts, such as a Helicopters, Microlight aircraft, Light sport aircraft or Autogyros, equipped with wings that rotate about an approximately vertical axis.

Recently the Director General of Civil Aviation has laid down the following draft rules for commercial usage of drones and gyroplanes:

Licence permit for Drones

  • Drones weighing more than 250 grams will not be allowed to fly unless such aircraft has been allotted a Unique Identification Number by the Director-General. The fee to issue a unique identification number for a remotely piloted aircraft would amount to Rupees 1000 only.
  • The fees payable for grant of permit is Rupees 50,000 and for renewal of permit is Rupees 15,000 which is to be paid in the manner specified by the Director-General.
  • As per the conditions of the permit issued by the Director-General, a remotely piloted aircraft with all up weight exceeding the limit as specified by the Director- General from time to time is not to be permitted to fly by the operator.

Licence and pilot permit for Gyroplanes

  • The applicant should not be less than 17 years of age on the date of application.
  • Should have passed Class 10 or equivalent examination from a recognised Board.
  • Provide a certificate of physical fitness from an approved medical practitioner as per the requirements notified by the Director General.
  • Pass a written examination in Air Regulations, Air Navigation, Aviation Meteorology and Aircraft and Engine. An applicant who holds a valid Private Pilot’s Licence (Aeroplanes)/ (Helicopters) or a higher category of Pilot’s Licence shall pass an examination in Aircraft and Engines only.
  • Completed flying training in accordance with the syllabus prescribed by the Director-General.
  • The Licence shall indicate the type of gyroplane the holder is entitled to fly.
  • A Pilot of a gyroplane should have completed at least 40 hours of flight time that includes at least 15 hours of solo flight time of which 10 hours at the minimum should be completed within 12 months.
  • The holder of a current Private Pilot’s Licence (Helicopter) or a higher category of Licence (Helicopter) are only required to carry out familiarization flights under the supervision of an approved Examiner or a Flight Instructor authorized by the Director-General satisfactorily that need to be followed by not less than 3 solo take-offs and landings.
  • When a pilot completes a minimum of 100 hours of flight time as Pilot-in-Command, they are given an open rating for all types of gyroplanes.
  • Successfully perform the procedures and maneuvers prescribed in the syllabus, within 6 months of the date of application.
  • A Gyroplane Pilot is not allowed to:
    • Carry a passenger or property for compensation or hire.
    • Fly at night.
    • Fly in Class D and E airspace (controlled airspace) unless he holds a valid Flight Radio Telephony Operator’s Licence (Restricted) and has been trained by an approved instructor.
    • Fly at an altitude of more than 10,000 feet mean sea level or 2000 feet above ground level, whichever is higher and surface visibility is less than 5000 meter.
    • Fly without visual reference to surface.
    • Fly contrary to any operating limitation placed on the special certificate of airworthiness of the aircraft being flown.

The Companies (Amendment) Bill, 2016 – Key Features

Ravi Singhania


22/08/2017  

With a focus to ease doing business in India, the Government of India through this Bill addresses inconsistencies and procedural restrictions in the present Companies Act, 2013. Considering the changes the Bill propose to bring about, it can be clearly said that there will be a sea change in the present Act which will boost economic growth and upheave foreign investment in India.

INTRODUCTION

In order to facilitate ease of doing business in India, the Lok Sabha on 27th July, 2017 passed The Companies (Amendment) Bill, 2016 (“Bill”) thereby bringing change to the present Companies Act, 2013 (“Act”) with respect to structuring, disclosure and compliance requirements for the companies.

Some of the focal points of the Bill are discussed hereinbelow:

  1. Associate Company: In order to align the definition with the Accounting Standards, the Bill propose to change the definition of “significant influence” in section 2(6) of the Act and accordingly, it shall mean control of twenty percent of the total voting power, or control of or participation in business decisions under an agreement.

The Bill propose to include the definition of “joint venture” which shall mean a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

  1. Key Managerial Personnel (KMP): The definition of KMP as given in section 2(51) has been extended to include any other officer of the company (i) who is not more than one level below the directors; (ii) who is in whole time employment; and (iii) has been designated by the Board as a KMP.
  2. Related Party: The term “company” under section 2(76) (viii) is proposed to be substituted with “body corporate” so as to include the companies incorporated outside India related to the Indian company under the related party definition.

Additionally, a body corporate which is an investing company or the venturer of a company would also be a related party.

  1. Small Company: Paid-up Capital is proposed to be increased from INR 5 Million to INR 100 Million in section 2(85). Turnover from minimum of INR 20 Million and maximum of INR 200 million is proposed to be revised to a maximum of INR 1000 Million in the said section.
  2. Liability of Members: Insertion of new clause 3A providing for liability of members when the minimum number of members falls below the statutory limit i.e. seven in case of a public company or two in case of a private company and such a situation continues for a period exceeding six months or more. The persons continuing to be involved with the company as members shall be severally liable for the payment of the debts contracted during the above period and they shall also be liable to be sued severally for such debts.
  3. Business Objects: The company would not be required to have main objects in its Memorandum of Association as required under section 4(1) (c) and 4 (5) (i) and is permitted to engage in any lawful act or activity or business, or any act or activity or business to pursue any specific object or objects, as per the law for the time being in force.

However, where the company propose to carry out any specific object or activity, it has to mention the same in the Memorandum and the company shall not pursue any other activity than mentioned in the Memorandum.

The time limit for reservation of name of the company by the Registrar of Companies has been proposed to be reduced to twenty days from the existing period of sixty days.

  1. Registered Office: It is proposed that the company shall within 30 of its incorporation have registered office instead of present requirement of 15 days as provided under section 12 (1). Also, in case of change of registered office of the company, it shall intimate such change to the Registrar of Companies within 30 days from the date of change instead of 15 days.
  2. Beneficial Interest: The Bill propose to define “beneficial interest” under section 89 in a share shall now include holding directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with another person to either exercise the rights attached to the shares or to receive or participate in respect of the dividend on the said shares.
  3. Annual Return: The Bill propose to exclude the extract of Annual Return forming part of the Board’s Report as provided under section 92.
  4. Place of Annual General Meeting: The Bill Propose to amend section 96 whereafter Annual General Meeting (AGM) of unlisted company may be held at any place in India if consent is given in writing or by electronic mode by all the members in advance.
  5. Global Extra-Ordinary General Meeting: Extra-Ordinary General Meeting (EGM), as provided under section 100, of wholly owned subsidiary of a company incorporated outside India can be held outside India.

EGM can be called at a shorter notice where consent is given by members holding not less than 95% of paid-up share capital in case the company is having share capital.

  1. Consolidated Financial Statements: The company shall prepare a consolidated financial statement of the company and of all the subsidiaries and associate companies in the same form and manner as that of its own and in accordance with applicable accounting standards, which shall then be laid before the AGM of the company. Presently, as per section 129 (3) the company is required to file consolidated financial statement of only its subsidiaries.
  2. Board’s Report: Few of the proposed changes in section 134 are as follows:
  • The Board Report shall be signed by the Chief Executive Officer, whether he is a director in the company or not.
  • Disclosures which have been provided in the financial statement shall not be required to be reproduced in the report again.
  • The extract of the Annual Return is not required to be annexed with the board’s Report. Only the of the web address where the Return can be accessed needs to be furnished;
  • The company need not mention the exact text of the policies, key feature of policies along with its web link shall be disclosed in Board’s Report.
  1. Corporate Social Responsibility (CSR): Eligibility criteria for constituting the corporate social responsibility committee and incurring expenditure towards CSR as provided under section 135 is proposed to be calculated based on immediately preceding financial year instead of preceding three financial years.

The CSR committee can be constituted with two or more directors in case the company is not required to appoint independent director.

  1. Ratification of Auditors: The requirement of ratification of appointment of auditors under section 139 at every AGM shall not be necessary.
  2. Qualifications of Directors: Few of the proposed changes in chapter XI are as follows:
  • The computation of 182 days for determining whether a director is resident in India shall be done in reference to previous financial year instead of calendar year;
  • The Central Government should be empowered to recognize any other identification number in place of Director Identification Number;
  • Directorships in dormant company shall be counted for the purpose of calculating the ceiling limit of number of directorships;
  • Any director who has been disqualified under section 167(2) shall cease to his directorship in other companies except the company in which he has defaulted;
  • It is optional to file form DIR-11 by the director upon resignation; and
  • The directors shall be allowed to participate on restricted items at board meetings through video conferencing or other audio-visual means if there is quorum through physical presence of directors.
  1. Loans to Director: The entire section 185 has been substituted. Some important changes are:
  • The Bill propose to impose complete restriction on providing loan, guarantee or security in connection with loan to any director, director of the holding company or any partner or relative of any such director or any firm in which any such director or relative in a partner;
  • Loan to any private company of which any such director is a director or member; any body corporate at a general meeting of which not less than twenty- five per cent. of the total voting power may be exercised or controlled by any such director, or by
  • two or more such directors, together; or any body corporate, the Board of directors, managing director or manager, whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company; is allowed subject to special resolution passed by the shareholders of the company.
  1. Loan and investment by a company: The Bill propose to remove the restriction under section 186 of making investment through not more than two layers of investment companies.

CONCLUSION

With a focus to ease doing business in India, the Government of India through this Bill addresses inconsistencies and procedural restrictions in the present Companies Act, 2013. Considering the changes the Bill propose to bring about, it can be clearly said that there will be a sea change in the present Act which will boost economic growth and upheave foreign investment in India.

 

(The author would like to thank Ankita Singh, Associate of the firm for the valuable assistance in researching for this article.)

Indian Government’s Move to Encourage Private Participation in Infrastructure

Ravi Singhania


22/08/2017  

According to various studies undertaken on the infrastructure sector in India, in many cases where the award is made against government bodies, the government sector would inevitably challenge the award, and the private player would inevitably have to await not only the arbitration process, but also the entire challenge process. According to the available data, over 85% of the claims raised against the Government bodies are still pending of which 11% is pending with the Government agencies, 64% with the arbitrators and 8.5% with the Courts. An amount of nearly Rs. 3,400 crore is the awarded dues and another Rs. 4,500 is still under arbitration. No wonder the report commissioned by the CII indicates pointed out that the pending claims from government bodies are the key factor behind burgeoning debt of construction companies, accounting for about 150 % of the debt.

However, the Government of India has decided to change all this to encourage private participation in infrastructure and improve the overall condition of Infrastructure in the country.

On 31st August, 2016, the Cabinet Committee on Economic Affairs, chaired by Mr. Narendra Modi, Hon’ble Prime Minister of India, approved various measures to revive the construction sector[1]. The decision was taken in the backdrop of the constant stress that the sector has been undergoing. According to the decision, in cases where the award is made against any Government agency or a Public sector undertaking, and the agency is challenging the award, it will have to pay 75 per cent of the amount of the award in an escrow account against margin free bank guarantee. This escrow account will thereby be used to repay bank loans or to meet commitments in ongoing projects. The measures will strengthen the ailing construction sector.

The benefits of this step are manifold. There is expected to be a drastic increase in the employment opportunities, for the construction sector, which is the largest sector of direct and indirect employment. Moreover, the projects which had to be halted, for the want of funds, will be able to resume the construction. The regime will, thereby, ensure that the contractor does not suffer once the dispute is resolved by arbitration. The average time settlement of claims is estimated to be more than seven years, and a majority of arbitration awards are given against the Government agencies. Therefore, the step will ensure the loss of time and blockage of capital and material is avoided.

It is also likely to benefit the banking sector. Once the projects get restarted, the companies would begin to repay the interests and the principal dues, thereby, the books of the banks are expected to improve, however the improvement will be gradual. Currently, the exposure of financial service sector on the construction is more than of Rs. 3 lakh crore, out of which 45 % are under stress. Therefore, there is expectation of increase in liquidity of financial service sector.

Several other measures have also been introduced. One of them is that in all new contracts, there would be a provision for conciliation board, which will comprise of independent subject experts. This has been included to ensure that there will be a contractual mechanism for renegotiations without bringing projects to a standstill, when public servants are reluctant to participate in the renegotiations on changes in commercial circumstances. Moreover, it will promote a cheaper and less time-taking mechanism of dispute resolution. Further, the contractors have also been provided with an option of shifting their pending disputes with government bodies, to the new arbitration procedures, from the old Arbitration Act. This will provide them with the opportunity of utilizing the cheaper and fast track arbitral process, as introduced by the recent amendment.

The construction companies are expecting an immediate benefit out of the regime. So far the implementation seems to be a success. Government bodies seem to be already acting on these initiatives. On 23rd March, 2017, ONGC issued a Protocol for the implementation of the Niti Aayog’s initiative for the revival of construction sector, as approved by its Board on 31st January’17 in the 289th meeting[2]. It laid down comprehensive guidelines for complying with the regime. With a total of around 597 cases pending, under arbitration proceedings or pending before the court, in respect of PSUs, this step was most welcomed. With the co-operation of PSUs like ONGC, the implementation seems to be proceeding at a decent rate. The regime has received a positive response in the market and is expected to divulge outcomes within 2-3 years.

With all these measures in place, India would definitely become a much more attractive investment option for the private players as far as the infrastructure sector is concerned.

(The author would like to thank Gunjan Chhabra, Senior Associate of the firm for the valuable assistance in researching for this article.)

[1] Press note released by Press information Bureau, 31st August, 2016, available at:

[2] Available at:

Labour Law Primer for Multinational Companies in India

Ravi Singhania


22/08/2017  

With increasing trade relations between India and the World, cross-border movement of employees from and out of India has increased quite considerably. In India, employees enjoy the protection of diverse laws and regulations.

The business model of the companies is increasingly service centric and it is essential for employers to have the most efficient human resource and to grant them their legal rights and entitlements. However, in a country like India, the complex legal regime usually leave the employers facing typical issues related to interpretation of the large number of labour and employment laws governing the industry. These issues prove even more challenging when one of the parties involved is a foreign national.

Hence, this primer highlights the basic requirements of labour laws both from the perspective of Indian and foreign nationals employed in India. While throwing light on the appointment/ secondment of foreign nationals by Indian employers, the primer covers issues like taxation, working conditions, various social security benefits, issues related to termination of employees, importance and enforceability of non-solicitation clauses, retrenchment, various statutory registrations etc. With increasing concern for the security of female employees, employers have also been conferred with the duty to ensure protection against sexual harassment of women at the workplace.

Further, the primer also addresses the most common concern of all employers while entering into employment contracts, like the enforceability of clauses related to confidentiality, competition, poaching employees and soliciting clients. Keeping this in view, the primer would discuss the common controversies that arise from clauses in employment contracts and the caution that should be kept in mind in drafting an enforceable employment contract.

The key object is to enable the employers to familiarize themselves with the vast labour law regime of India.

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Indian Copyright Law

Ravi Singhania


22/08/2017  

LEGISLATION AND REGULATION
What are the main sources of copyright law?

The Copyright Act, 1957 (the “Act”), supported by the Copyright Rules, 1958 (the “Rules”), is the governing law for copyright protection in India. Substantial amendments were carried out to the Copyright Act, in May 2012.

India follows common law legal system thus relies on case laws to interpret and set precedents in law. As a result there are a number of judicial decisions that contribute to the sources of copyright law in the India.

India is a member of the Berne Conventions and Universal Copyright Convention. The Government of India has also passed the International Copyright Order, 1958. According to this Order, any work first published in any country – which is a member of any of the abov conventions – is granted the same treatment as if it was first published in India.

SUBSISTENCE OF COPYRIGHT

What type of works can be protected by copyright?

Copyright subsists throughout India in the following classes of works:

Original literary, dramatic, musical and artistic works; Cinematograph films; and Sound recordings.

These are the broad categories, and can be summarised as follows:

LITERARY WORKS

The term ‘Literary works’ covers works that are in print or writing, irrespective of the quality of style of the work. Literary work refers not only to works of prose and poetry, but anything that would be under the ambit of ‘literature’. However, there will be no copyright if the work is merely a collection of words, the collection of which involved no literary skill. In India, a computer programme is treated as a “literary work” and is protected as such.

DRAMATIC WORKS

A dramatic work includes any piece for recitation, choreographic work or entertainment in dumb show, the scenic arrangement or acting form of which is fixed in writing or otherwise but does not include a cinematograph film.

MUSICAL WORKS

Musical work means a work consisting of music and includes any graphical notation of such work but does not include any words or any action intended to be sung, spoken or performed with the music. A musical work need.

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Validity of invocation of bank guarantee to be judged on facts of each case: Supreme Court

Ravi Singhania


22/08/2017  

Legitimacy of invocation of bank guarantees has always been a bone of contention between the parties who have entered into commercial arrangements. While the general view of the courts in India has been that invocation of bank guarantee should generally be not interfered by the courts when challenged, as it will defeat the purpose of such guarantees in commercial contracts. However, there is no dearth of judicial pronouncements against invocation of bank guarantees albeit in exceptional circumstances.

A bank guarantee is a written contract given by a bank on behalf of its customer. By issuing this guarantee, a bank takes responsibility for payment of a sum of money in case, if it is not paid by the customer in performance of its contractual obligations.

There are two types of bank guarantees:

  • Unconditional bank guarantee- In anunconditional bank guarantee, the bank/guarantor has to pay the guarantee amount to the beneficiary in whose favour the bank guarantee has been issued on demand, irrespective of any pending disputes;
  • Conditional bank guarantee- In a conditional bank guarantee, the bank/guarantor has to pay the guarantee amount to the beneficiary in whose favour bank guarantee has been issued on demand, only after the specific conditions for invocation in the contract are fulfilled.

The law with respect to the grant of injunction against invocation of bank guarantee has been settled by catena of judicial pronouncements. Courts have consistently held that an unconditional bank guarantee, which is an independent agreement between beneficiary and the Bank, can be invoked by the beneficiary, regardless of the disputes between the beneficiary and principal obligation (i.e. the party on whose behalf the bank guarantee has been given).

It is a settled position that invocation of unconditional bank guarantee cannot be stayed by the courts except

  • In case of fraud which would destroy the very purpose for which such bank guarantee was issued
  • In a case where encashment of the bank guarantee would result in irreparable harm or injustice to one of the parties concerned. In view of the aforesaid settled position, a party seeking stay against invocation of the bank guarantee used to find it very difficult, nay impossible, to obtain favourable order.

However, in its recent pronouncement, the Hon’ble Supreme Court of India seems to have made a paradigm shift by holding that each case of injunction against invocation of the bank guarantee has to be decided with reference to the facts involved therein. The Apex Court in Gangotri Enterprises v. Union of India held that while there can be no quarrel to the proposition laid down in the cases pertaining to encashment of bank guarantees, the same would not be applied in every case. Holding that the in the case in hand, law laid down in the case of Union of India Vs. Raman Iron Foundry was applicable, the apex court reversed the judgment of Allahabad High Court which declined to grant injunction against invocation of bank guarantee by beneficiary party.

The present ruling of the Supreme Court has widened the so far restrictive parameters with which a case of grant of injunction against bank guarantees were being consider by the courts. The Apex Court has held that facts and circumstances of the case have to be considered and the court has not to apply or follow the general propositions relating to bank guarantee cases, regardless of the facts peculiar to each case. The judgement suggests that invocation of bank guarantee is not justified merely because the party invoking the bank guarantee has some claim of damages against the party who furnished the bank guarantee. It has been held that a claim for damages is not a crystallised or ascertained amount or a sum due and payable in praesenti( meaning ‘at present’), therefore invocation of bank guarantee would not be justified on the basis of such claim which are yet to the decided by the competent forum. The court further held that bank guarantee given for searching the performance of one contract cannot be invoked for claims or disputes in another contract between the same parties. This judgment has to some extent diluted the position that an unconditional bank guarantee can be invoked regardless of the dispute between the beneficiary and the principal obligation. The Supreme Court in some ways has supplemented to the line of authority of judgments against invocation of bank guarantee by beneficiary like the Hindustan Construction Co. Ltd. v. State of Bihar, which held that the invocation of bank guarantee will have to be strictly in accordance with the terms of the contract/Bank guarantee deed.

This judgement of Gangotri Enterprises will certainly come to the rescue of litigants, primarily contractors executing work under contracts awarded by government agencies and the said agencies were exercising unbridled discretion in the matter of encashment of bank guarantees furnished by the contractor. A general belief that bank guarantees can beencashed irrespective of the main dispute between the contractor and the department, or for covering the claims for damage, which are yet to be crystallized, has been set right but this judgement. Therefore, whenever any party would seek to encash the bank guarantees provided by other party to the contract on the basis of their claims of damages, such an attempt would not be successful as a claim of damages is not a sum due and payable in present. Similarly, bank guarantee given for one contract cannot be encashed for breaches/disputes concerning to another contract.