Intellectual Property Rights

AN INSIGHT INTO THE DIGITAL DATA PROTECTION ACT, 2023

The Digital Personal Data Protection Act (DPDP) Act, 2023, received assent on August 12, 2023, marking India’s inaugural legislation addressing data protection and privacy. The Act aims to balance individual rights with the necessity of processing personal digital data, establishing guidelines for both Data Fiduciaries (entities collecting/processing data) and Data Principals (individuals providing personal data). Key Features Introduced Recognition of the Concept of Consent: The Act emphasizes the significance of consent, allowing Data Fiduciaries to process data only when Data Principals provide explicit consent. Exceptions include situations where consent is impractical, and data processing is necessary for medical emergencies or compliance with a judgment. Establishment of Data Protection Board of India: Introducing the Data Protection Board of India, the Act grants it powers akin to a Civil Court. The Board, operating digitally, investigates data breaches based on complaints and holds the authority to impose penalties as per the Act. Punishment for Data Breach: A pivotal feature is the introduction of penalties for data breaches. Data Fiduciaries can face a maximum penalty of 250 crores in case of a breach, ensuring a deterrent against unauthorized data handling. Classification of Certain Entities as Significant Data Fiduciaries: Entities dealing with significant volumes of sensitive data are classified as Significant Data Fiduciaries. They must appoint a Data Protection Officer to address Data Principals’ grievances. Changes Incorporated Data Fiduciary to Provide a Notice: Data Fiduciaries must provide a notice outlining the purpose of data processing, the methods for Data Principals to exercise their rights, and the complaint filing process. This ensures transparency and informs individuals providing consent. Obligation to Erase Data When Consent is Withdrawn: Once a Data Principal withdraws consent, the Data Fiduciary is obligated to promptly erase the associated data, highlighting the Act’s commitment to data privacy. Appointment of a Consent Manager: A Consent Manager, appointed by Data Fiduciaries, serves as the point of contact for Data Principals. This individual facilitates the management, review, or withdrawal of consent. Telecom Disputes Settlement and Appellate Tribunal’s Appellate Jurisdiction: The Telecom Disputes Settlement and Appellate Tribunal now holds appellate jurisdiction in cases related to data breaches, providing an avenue for individuals aggrieved by the Data Protection Board’s decisions. Emphasis on Data Protection of Children: The Act recognizes and safeguards the rights of children by mandating parental/guardian consent for data processing. Failure to comply with these provisions incurs penalties. Effective Grievance Redressal: Significant Data Fiduciaries appoint Data Protection Officers, while others establish a grievance redressal mechanism through the Consent Manager, ensuring effective resolution of grievances before approaching the Board. Impact The Act significantly impacts sectors involved in data collection, including sales, marketing, finance, banking, human resources, and information technology. Entities within these sectors are given a one-year timeline for compliance. Conclusion As India’s inaugural data protection law, the Digital Personal Data Protection Act, 2023, effectively addresses the complexities of data processing, technology, and individual rights. It introduces innovative concepts, providing statutory protection for the fundamental right to privacy and establishing a robust data protection regime in India. While commendable, certain provisions may require further refinement and development.

December 11, 2023

Distinguished Details Delivered – November 2023

MINISTRY OF CORPORATE AFFAIRS (MCA) MCA PROBING MG MOTOR INDIA AS SCRUTINY ON CHINESE FIRMS WIDENS The Ministry of Corporate Affairs (MCA) is considering an expanded inquiry into MG Motor India’s financial records based on the Registrar of Companies’ 2022 findings. MG Motor India emphasized legal compliance, stating it provided all necessary information during the March Registrar of Companies inquiry. BID FOR TRANSPARENCY: INDIA’S CORPORATE AFFAIRS MINISTRY CALLS FOR REGULAR GENERAL MEETINGS OF COMPANIES India’s Ministry of Corporate Affairs underscores the significance of frequent general meetings in response to a rise in company formations. These meetings offer shareholders a forum to query managerial choices, playing a vital role in mitigating corporate fraud and financial vulnerabilities. UNVEILING TRANSPARENCY: LLPS TAKE CENTER STAGE WITH THE NOTIFIED LIMITED LIABILITY PARTNERSHIP (SIGNIFICANT BENEFICIAL OWNERS) RULES, 2023 The Ministry of Corporate Affairs introduces the Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023, effective from November 9, 2023. Applicable to all LLPs, these rules mandate proactive identification of ‘significant beneficial owners.’ RESERVE BANK OF INDIA (RBI) BANKS’ BORROWING FROM MSF HIGHEST IN NOVEMBER AS LIQUIDITY TIGHTENS Borrowings from the Reserve Bank of India’s (RBI) Marginal Standing Facility (MSF) by banks surged in November, indicating a strained liquidity environment in the banking system. MONETARY POLICY COMMITTEE POSSIBLY UNDERESTIMATES Q2 ECONOMIC GROWTH RBI Governor Shaktikanta Das’ positive outlook on second-quarter economic growth contrasts with the Monetary Policy Committee’s (MPC) projection of 6.5%. National account figures, including Gross Domestic Product (GDP), for the quarter are set to be disclosed later. RBI IMPOSES MONETARY PENALTY ON THE PATLIPUTRA CENTRAL COOPERATIVE BANK LTD, BIHAR The RBI imposes a ₹1.50 lakh penalty on The Pataliputra Central Cooperative Bank Ltd, Bihar, dated November 13, 2023, for non-compliance with RBI directives. MERGERS AND ACQUISITIONS CHEMICALS MAJOR PCBL PLANS TO ACQUIRE PUNE-BASED AQUAPHARM CHEMICALS FOR ₹3,800 CRORE PCBL Ltd plans to acquire a 100% stake in Aquapharm Chemicals Pvt Ltd (ACPL) for ₹3,800 crore, subject to agreed adjustments, through internal accruals and external fundraising. AIA ENGINEERING ACQUIRES STAKE IN VEGA INDUSTRIES PERU, SHARES RISE AIA Engineering Ltd. and subsidiary Vega Industries (Middle East) FZC subscribe to 3,65,328 shares in Vega Industries Peru Ltd, marking the acquisition of a 100% stake. MARUTI SUZUKI’S ACQUISITION OF SUZUKI MOTOR GUJARAT GETS OVERWHELMING APPROVAL FROM SHAREHOLDERS Shareholders overwhelmingly back Maruti Suzuki’s ₹12,841.1 Crore Acquisition of Suzuki Motor Gujarat’s 100% Equity Share Capital. M&A ACTIVITY DIPS AMID GEOPOLITICAL CONCERNS, ONLY 5 MEGA DEALS THIS YEAR A Boston Consulting Group report notes a downturn in M&A during Q1 2023, attributed to rising interest rates, geopolitical tensions, and recession fears. TAX EASE OF I-T REFUNDS, TAXPAYERS SAW REDUCED TIME, SIMPLIFIED PROCESS: SURVEY The survey indicates reduced time for refunds and streamlined processes, with 90% of individual taxpayers receiving automatic refunds. GST AMNESTY SCHEME PROVIDES RELIEF, APPEALS TO BE FILED BY JANUARY 31, 2024 The Finance Ministry outlines the appeal procedure for the GST amnesty scheme, aiming to assist taxpayers who missed the earlier appeal deadline. INCOME TAX DEPARTMENT INTRODUCES NEW ‘DISCARD ITR’ FACILITY FROM AY24 The income tax portal introduces a feature allowing users to “Discard ITR” for unverified original, belated, or revised Income Tax Returns (ITRs) beginning from the assessment year 2023-24. SECURITIES EXCHANGE BOARD OF INDIA (SEBI) SEBI BOARD GIVES NOD TO SMALL & MEDIUM REITS, DEFERS DECISION ON DELISTING NORMS SEBI board approves flexibility for SSEs and a framework for small and medium REITs. Decision on delisting regulations deferred due to limited data. KRONOX LAB SCIENCES INITIATES IPO JOURNEY, SUBMITS PAPERS TO SEBI Vadodara-based Kronox Lab Sciences files draft-red herring prospectus (DRHP) with SEBI for an IPO, aiming to raise Rs 150-180 crore. SEBI PROPOSES 4-MONTH COOL-OFF PERIOD FOR TRADING PLANS SEBI proposes significant revisions to trading plans, including shortening the cool-off period and reducing the minimum coverage period. ARBITRATION ARBITRATION IN INDIA PLAGUED BY RAMPANT CORRUPTION: JUSTICE SANJIB BANERJEE Former Chief Justice Sanjib Banerjee notes widespread corruption in India’s arbitration scenario, observing abuse of arbitration laws. SCRAPPING OF TATA NANO PROJECT IN SINGUR: ARBITRAL TRIBUNAL AWARDS ₹766 CRORE COMPENSATION TO TATA MOTORS The Arbitral Tribunal orders the West Bengal government to pay ₹766 crores in compensation to Tata Motors for scrapping the Tata Nano project in Singur. ARBITRAL AWARD DISPUTE: HC ASKS SPICEJET MD AJAY SINGH TO APPEAR IN JANUARY The Delhi High Court summons SpiceJet MD Ajay Singh concerning a dispute involving interest payments on an arbitral award exceeding Rs 570 crore in favor of Kalanithi Maran. DELHI HC DISMISSES AIR INDIA’S PETITIONS CHALLENGING TWO 2016 ARBITRAL AWARDS The Delhi HC dismisses Air India’s petitions challenging two 2016 arbitral awards related to service conditions and wage revisions. INFORMATION TECHNOLOGY (IT) PUNE CIVIC BODY PORTAL HACKED TO CHANGE CHILD’S NAME IN BIRTH CERTIFICATE, FIR LODGE An unidentified person allegedly breached the Pune Municipal Corporation’s birth and death registration portal, changing a child’s name on the birth certificate without parental consent. HC SEEKS GOVTS’ STAND ON TECHNOLOGY UPGRADE FOR BETTER TRAFFIC MANAGEMENT The Delhi High Court requests responses from the Central and Delhi governments regarding a petition urging technology and infrastructure enhancement for monitoring traffic violations. SUPREME COURT SIGNS MOU WITH IIT MADRAS FOR COLLABORATING ON USAGE OF ARTIFICIAL INTELLIGENCE & TECHNOLOGY The Supreme Court formalizes a collaboration with IIT Madras for leveraging Artificial Intelligence and emerging technologies for various applications. INDIA ADDRESSES DEEPFAKE THREATS: CALLS FOR LEGAL ACTION AND TECH SOLUTIONS The Indian government tackles deepfake threats by urging social media platforms to adhere to takedown regulations and emphasizing legal measures against digital impersonation. GAMING INCOME TAX PAYABLE ON WINNINGS FROM ONLINE, OFFLINE GAMES OF CHANCE E-commerce platforms’ gaming contests are considered games of chance and are subject to a flat 30% tax rate plus additional cess. ONLINE GAMBLING ACT | BAN WON’T APPLY TO POKER, RUMMY: MADRAS HIGH COURT The Madras High Court rules that the ban on online gambling won’t apply to poker and rummy, considering these games legal in physical form. MINISTERS GROUP LIKELY TO DISCUSS E-GAMING ON DECEMBER 15 The Group of Ministers

December 6, 2023

Moti Mahal v. Darya Ganj: The Culinary Legal Battle

In the heart of the Indian culinary world, a legal clash has emerged between two iconic Delhi-based restaurant chains, Moti Mahal and Daryaganj. This dispute, now before the Delhi High Court, revolves around the rightful claim to the invention of the beloved dishes, Butter Chicken and Dal Makhani. Moti Mahal, tracing its roots back to 1920, asserts that its founder, Kundal Lal Gujral, introduced these dishes post-Partition, establishing a culinary legacy. Daryaganj, gaining fame through Shark Tank India, declared itself the “inventor” of both dishes, attributing the culinary innovation to Kundan Lal Jaggi. The legal battleground involves trademark infringement and passing off, with Moti Mahal accusing Daryaganj of misleading the public and using a manipulated photograph of the Peshawar Moti Mahal on its website. Moti Mahal’s plea seeks to restrain Daryaganj from claiming any association with Moti Mahal and using specific taglines. Daryaganj’s defense labels the suit as “misconceived” and argues that a cropped photograph on their website aims to avoid trademark infringement. Despite this, Daryaganj commits to removing the contentious photograph as a “conciliatory gesture.” The case is ongoing, with the next hearing scheduled for May 29, 2024. Delving into the legal intricacies, trademark law in India, governed by the Trade Marks Act, of 1999, grants exclusive rights to registered symbols. Trademark infringement occurs when unauthorized use of a registered mark takes place. The concept of passing off, a form of unfair trade competition, is crucial in attribution disputes, where one party deceives consumers about the association with an established brand. The article explores the Indian standpoint on trademark registration and protection, analyzing the nuances of ‘passing off.’ It also delves into the concept of attribution and the moral rights of trademark owners, highlighting the ambiguity in Indian trademark law regarding explicit provisions for moral rights. Section 30(4) of the Trade Marks Act becomes significant, allowing trademark owners to oppose further dealings if legitimate reasons, like changes or impairments to goods, exist. In the Moti Mahal v. Daryaganj dispute, the lack of explicit mention of moral rights in Indian trademark law adds complexity. While Section 30(4) provides a potential recourse, its effectiveness requires careful interpretation and proof of damage to goodwill. The ongoing case not only addresses legal nuances but also delves into historical attribution and cultural significance, intertwining with the legal concepts of passing off and trademark infringement. The court’s decision could set a precedent for future culinary disputes, shaping the narrative of iconic dishes like Butter Chicken and Dal Makhani.

November 24, 2023

AI and Creativity: Navigating Legal Waters in India’s Creative Landscape

Exploring AI’s Transformative Impact: Artificial Intelligence, with its capacity for tasks like visual interpretation, music composition, and even film production, is significantly altering the creative landscape in India. This shift sparks crucial discussions on the traditional concepts of authorship and intellectual property rights. Challenges to Copyrighted Works: One of the primary concerns is the challenge to copyrighted works. AI systems, through data processing and algorithmic techniques, generate content that blurs the lines between original and AI-generated works. This poses a substantial threat to the established principles of creativity and originality required for copyright protection. Inadvertent infringement is a critical issue, as AI systems may unintentionally reproduce or incorporate copyrighted material. Addressing this necessitates AI systems capable of recognizing and avoiding copyrighted content. However, this approach may not always be practical, especially when such content is fundamental for AI learning. Fair Use Doctrine in India: The applicability of the fair dealing doctrine in India adds another layer of complexity. While Section 52 of the Indian Copyright Act provides exceptions for certain uses without explicit authorization, the scope is narrower than fair use in other jurisdictions. Courts may need to reassess these provisions, contemplating whether AI-generated content should benefit from a broader fair use exception. AI and Right to Privacy: The case of Anil Kapoor highlights the intersection of AI and personal rights. Unauthorized manipulation of a celebrity’s persona, powered by AI, prompted legal action. The Delhi High Court’s decision underscores the need to protect personality rights in the age of advanced technologies. Anticipated Legislation and Legislative Frameworks: India’s participation in the Global Partnership on AI and proposed legislative changes showcase the nation’s commitment to responsible AI development. The evolving legislative landscape, including the potential Digital India Bill, aims to strengthen intellectual property rights and regulate emerging technologies like AI. Conclusion – Striking a Delicate Balance: As India adapts its legal and regulatory frameworks to the AI era, a delicate equilibrium must be sought. Balancing innovation with the preservation of cultural heritage is paramount. The ongoing dialogues involving artists, AI developers, and legal experts play a crucial role in shaping regulations that harness AI’s potential while safeguarding the rights of creators. India’s proactive stance in this evolving landscape signals a commitment to navigating the complexities of AI in the creative domain.

November 19, 2023

Understanding Downstream Investment in India – An Insight into Indirect FDI

Foreign Direct Investment (FDI) serves as a crucial pathway for foreign investors to enter the Indian market. This investment can be executed either directly or indirectly through an existing Indian entity, the latter being termed as “downstream investment” or “Indirect Foreign Direct Investment (IFDI).” In this article, we explore the nuances of downstream investment and the compliance requirements set forth by the Foreign Exchange Management Act, 1999 (FEMA). Indirect Foreign Direct Investment – An Overview: When a foreign investor chooses to invest in India through an Indian entity, it falls under the category of downstream investment or IFDI. FEMA governs these investments and mandates that Indian entities receiving IFDI must adhere to specific conditions, including entry routes, sectoral caps, and pricing guidelines. Compliances Under FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019: To ensure transparency and regulatory adherence, the Indian entity making downstream investment into another Indian entity must follow certain compliances: Understanding “Other Attendant Conditions”: The term “other attendant conditions as applicable for foreign investment” remains broad and undefined in FEMA NDI Rules. However, Rule 9(6) of FEMA NDI Rules, dealing with deferred consideration and indemnity payable by Foreign Owned or Controlled Companies (FOCCs), sheds light on the concept. It specifies that deferred consideration should not exceed 25% of the total sale consideration, with a period not exceeding 18 months from the date of the transfer agreement. Applicability of Rule 9(6) in the Context of Downstream Investment: Rule 9(6) appears to be pertinent to the transfer of equity instruments between a person resident in India and a person resident outside India, focusing on the deferral payment condition. Notably, an Indian entity, even if foreign-owned or Controlled, is considered a “person resident in India” under FEMA NDI Rules. Consequently, Rule 9(6) may not apply to the transfer of equity shares between resident sellers and FOCC, as both parties are considered residents in India. This interpretation aligns with the reporting requirements outlined in Form FC-TRS, which is not mandatory for transfers between two Indian residents. In conclusion, a harmonious reading of FEMA provisions suggests that Rule 9(6) may not apply to the transfer of equity shares from a resident seller to a person resident in India, even if the latter is a FOCC.

November 12, 2023

The meetup of the 52nd GST Council

Amnesty Scheme for filing of appeals against demand orders in cases where appeal could not be filed within the allowable period: filing of appeal by the taxpayers will be allowed against such orders up to 31st January 2024, subject to the condition of payment of an amount of pre-deposit of 12.5% of the tax under dispute, out of which at least 20% (i.e., 2.5% of the tax under dispute) should be debited from Electronic Cash Ledger. This is a golden opportunity for those taxpayers who might have missed the appeal deadline. This will facilitate a large number of taxpayers, who could not file appeals in the past within the specified period. Rule 159 of the CGST Rules, 2017 to be amended: Automatic restoration of provisionally attached property after completion of one year. The Council has recommended an amendment in sub-rule (2) of Rule 159 of CGST Rules, 2017 and FORM GST DRC-22 to provide that the order for provisional attachment in FORM GST DRC-22 shall not be valid after the expiry of one year from the date of the said order. Clarified that no GST would apply on personal guarantee offered by directors to the bank against the credit limits/loans sanctioned to the company. Defined the taxable value for corporate guarantee provided between related persons (a holding company to its subsidiary) as 1% of the amount of such guarantee offered, or the actual consideration, whichever is higher. The GST Council on Saturday recommended keeping Extra Neutral Alcohol (ENA) used for the manufacture of alcoholic liquor for human consumption outside GST. Allowing supplies to SEZ units/developers for authorised operations for IGST refund route by amendment in Notification 01/2023-Integrated Tax dated 31.07.2023: A Special Economic Zone unit for authorised operations to make supply of goods or services (except the commodities like pan masala, tobacco, gutkha, etc. to the Special Economic Zone developer or the Special Economic Zone unit for authorised operations on payment of integrated tax and claim the refund of tax so paid. Rules defined for the Composition of GSTAT Minimum age limit is 50 years while the maximum is 70 years for the President and 67 years for members of GSTAT. Advocates with 10 years of experience can only be appointed as judicial members. Clarifications given on Key Issues The District Mineral Foundation Trust (DMFT) in mineral mining are eligible for the same GST exemptions as other government authorities. Job work services to process barley into malt attract 5% GST and not 18%, being “job work about food and food products”. 18 states have passed the amendments to charge 28% GST on gaming companies w.e.f. 01.10.2023 along with the GST Rules while 13 are yet to notify changes. Supply of all goods and services by Indian Railways shall be taxed under the Forward Charge Mechanism to enable them to avail of ITC. This will reduce the cost for Indian Railways GST Rate changes on goods GST rates on “Food preparation of millet flour in powder form, containing at least 70% millets by weight”, falling under HS 1901, with effect from the date of notification, have been prescribed as a. 0% if sold in other than pre-packaged and labelled form b. 5% if sold in pre-packaged and labelled form To clarify imitation zari thread or yarn made out of metallised polyester film /plastic film, falling under HS 5605, is covered by the entry for imitation zari thread or yarn attracting a 5% GST rate. However, no refund will be allowed on polyester film (metallised) /plastic film on account of inversion. GST Rate changes on services Whether supply of pure services and composite supplies by way of horticulture/horticulture works (where the value of goods constitutes not more than 25 per cent of the total value of supply) made to CPWD are eligible for exemption from GST under Sr. No. 3 and 3A of Notification no 12/2017-CTR dated 28.06.2017. A conditional IGST exemption is given to a foreign flag and foreign going vessel when it converts to coastal run subject to its reconversion in six months. GST exempted on pure and composite services to Central/State/UT governments and local authorities for Panchayat/Municipality functions. All services provided by Indian Railways will be subjected to forward charge, with ITC available for discharging liabilities. Facilitation Measures in Trade: Key Updates These measures aim to simplify processes, provide relief, and bring clarity to various aspects of trade and taxation.

November 7, 2023