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CAM Disputes Team

The CAM Disputes team can be reached at cam.mumbai@cyrilshroff.com

Not Just Old Wine In A New Bottle –Global Companies and the New Fortified Anti Bribery Regime

India’s anti-bribery and anti-corruption (ABAC) regime went through a massive change recently. After years of deliberation, the Indian parliament has enacted the Prevention of Corruption (Amendment) Act, 2018 (Amendment Act), bringing about crucial changes that could really impact the way companies do business in India. Below, we analyse the impact of the recent amendments and explain the measures that companies need to put in place to ensure compliance.

The amendments brought in by the Amendment Act are prospective in nature and take effect from the date the legislation received presidential assent – i.e. July 26, 2018. Hence, companies currently doing business in India need not retrospectively assess their compliance with the requirements introduced by the Amendment Act and shall only be regulated by these provisions prospectively.Continue Reading Not Just Old Wine In A New Bottle: –Global Companies and the New Fortified Anti Bribery Regime

Resetting the Clock Supreme Court Sends Jaypee Infratech Limited Back to NCLT for CIRP

By utilising its powers under Article 142 of the Indian Constitution, the Supreme Court of India has delivered an unprecedented decision on August 09, 2018 in Chitra Sharma & Ors. v. Union of India and Ors[1]., and other connected matters (the Jaypee / homebuyers Case)[2]. In this era of evolving jurisprudence on the Insolvency and Bankruptcy Code, 2016 (IBC), the Supreme Court, by this landmark decision, has settled some highly debated issues with respect to its implementation and has provided much required certainty. This has been achieved by the Supreme Court paving the way to reset the clock by re-commencing the Corporate Insolvency Resolution Process (CIRP).Continue Reading Resetting the Clock: Supreme Court Sends Jaypee Infratech Limited Back to NCLT for CIRP

BCCI v. Kochi Cricket Supreme Court’s Much Needed Third Umpire Decision

The Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) came into force with effect from October 23, 2015. Although this amendment was enacted to remove controversies and iron out wrinkles in the Arbitration and Conciliation Act, 1996, (Parent Act), it has in fact, given rise to its own set of controversies. One of the burning issues was the applicability of the 2015 Amendment. Section 26 of the 2015 Amendment provides for its applicability, and reads as follows:

  1. Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.

One would believe that the above provision would have settled any issue of applicability of the 2015 Amendment. It has instead given rise to more litigation,[i] which has now been partially addressed by the Supreme Court.[ii]

The controversy in all the litigation that came up before the High Courts, and which also saw conflicting points of view, was around the applicability of the amended Section 36 of the Parent Act. In the pre-amendment era, when an award debtor challenged an award under Section 34, the award creditor was prevented from enforcing the award until a determination had been made by a court on the challenge, because of an ‘automatic stay’ on the operation of the award.

In order to overcome this, and for the benefit of award creditors, Section 36 of the Parent Act, was amended to do away with this ‘automatic stay’. It required the challenging party to separately apply for a stay and also required the court to direct the award debtor to deposit the award amount, so as to avoid frivolous challenges. The question for the courts has been the applicability of the amended Section 36 to Section 34 applications that were filed before and after the 2015 Amendment came into force.Continue Reading BCCI v. Kochi Cricket: Supreme Court’s Much Needed Third Umpire Decision

Image credit: Scroll.in, September 26, 2017

This is the sixth blog piece in our series entitled “Those Were the Days”, which is published monthly. We hope you enjoy reading this as much as we have enjoyed putting this together.

The need for “rule of law” to prevail is repeatedly espoused by today’s social and political commentators. In light of this, it is important to revisit the origin of the doctrine of “rule of law”, and understand how it originated, so as to fully appreciate its significance and meaning.

In 1676, Sir Mathew Hale, the then Chief Justice of King’s Bench (1671-76), set out 18 tenets for dispensing of justice. The sixth tenet read as follows,

“That I suffer not myself to be possessed with any judgment at all till the whole business of both parties be heard.”

This very sound principle has two fundamental requirements.

The first is that the judge ought not to be predisposed to either one of the adversarial parties, and should not form a view on the merits of the matter before him until all the parties are heard. This of course is very difficult to do given that all persons including judges are bound to have their own views, opinions and preferences. However, through the ages the hallmark of an eminent member of the judiciary is the manner in which he/she overcomes inherent prejudices so as to ensure that the judicial adjudication is based only on the law, the facts based only on evidence on record before the court, and the interplay of the facts in relation to the law.Continue Reading The Principles of Natural Justice – Origin and Relevance

Fugitive Economic Offenders Bill, 2018

The Central Government in India had introduced the Prevention of Money Laundering Act, 2002 (“PMLA”), to prevent the circulation of laundered money. The Act defines money laundering as any process or activity connected to proceeds of crime, including its concealment, possession, acquisition or use and projecting or claiming it as legitimate property. While the PMLA Act allowed for confiscation and seizure of properties obtained from the laundered money, such actions were still subject to the processes of criminal prosecution. This led to many of the persons accused of money laundering, to flee the jurisdiction of Indian courts to avoid criminal prosecution under PMLA and the consequent confiscation of the properties.

On March 12, 2018, the Indian government introduced the Fugitive Economic Offenders Bill, 2018 (“Bill/Proposed Act”), in the Lok Sabha, after receiving approval from the Cabinet, to address the issue of such economic offenders avoiding criminal prosecution. The Bill defines a ‘fugitive economic offender’ as any individual against whom a warrant for arrest in relation to economic offences, under various statutes, listed in a schedule to the Bill (“Scheduled Offence”) has been issued, on or after the enactment of this Bill, by any Indian court, and who:

  • Has left India to avoid criminal prosecution, or
  • Being abroad refuses to return to India to face criminal prosecution.

Pertinently, in 2015, the definition of proceeds of crime in the PMLA was amended to include property equivalent to proceeds of crime held outside the country.Continue Reading Fugitive Economic Offenders Bill, 2018

Red Flags in a Pharmaceutical Audit

Globally, regulatory authorities have developed a keen interest in the pharmaceutical industry. Recent enforcement actions, including the cases of GlaxoSmithKline, Johnson & Johnson, Valeant Pharmaceuticals, Abbott Laboratories etc., have paved the way for regulatory agencies to dig deeper into the malpractices prevalent in the pharmaceutical industry.

Back in 2014, the total pharmaceutical revenues worldwide had exceeded one trillion U.S. dollars for the first time. Increased competition owing to the growing size of the industry has noticeably increased the complexities of operations, sales and marketing, which in turn have led to an alarming spike in malpractices by stakeholders involved at various levels in the industry.

With the growth of the pharmaceutical industry and the unavoidable by-products that result from it, the industry is currently faced with a number of schemes that have been tailored to manipulate and defraud enforcement agencies and the public at large. The present article aims to identify the most common ‘red flags’ and fraudulent schemes that plague the pharmaceutical industry in India. Sufficient awareness about these fraudulent schemes is essential to equip auditors with a more focused and effective audit plan.

Red Flags and Fraudulent Schemes

The Indian pharmaceutical industry is faced with a number of challenges from a compliance point of view. The most prevalent fraudulent schemes in the industry relate to year-end targets, sales returns, etc., which are used as a veil to effectuate concerns around channel stuffing, free of cost products, free samples, fraud.Continue Reading Red Flags in a Pharmaceutical Audit

Look Out Notices A Questionable Exercise in Power

The Supreme Court of India has termed the right to travel beyond the territory of India as a fundamental right guaranteed under Article 21[1] of the Constitution of India. This was most famously stated in the case of Menaka Gandhi v Union of India (Supreme Court, 1978), which had confirmed its earlier judgment in Satwant Singh Sawhney v D. Ramarathnam (1967). As a signatory to the Universal Declaration of Human Rights (1948), Indian legislation in this regard is also bound by Article 13, which guarantees people: (1) the right to freedom of movement and residence within the borders of each state; and (2) the right to leave any country, including their own, and to return to their country.

However, reasonable travel restrictions are constitutionally valid, and are enforced through the provisions of the Passports Act, 1967.[2] Recently, Governmental agencies, police authorities and courts have begun issuing these restrictions through ‘Look out Notices’ or ‘Look out Circulars’ (LOC). These communications are being issued to restrict the departure of persons from India if they are subject to an investigation by the issuing agency for a cognisable offence, or where the accused is evading arrest or the trial, or where the person is a proclaimed offender. Until the Maneka Gandhi case there were no regulatory guidelines for enforcing any travel restrictions, or for issuing LOCs.

The Regulatory History of LOCs

Even though LOCs were first officially recognised in 1979, they have recently been used, frequently, to telling effect. In 1979, the Ministry of Home Affairs (MHA) for the first time issued guidelines for issuing LOCs, followed by two more such communications:

  • A letter dated September 5, 1979 (25022/13/78-F.I) (1979 MHA Letter);
  • An office memorandum dated December 27, 2000 (25022/20/98/F.IV) (2000 Memorandum)
  • An office memorandum dated October 27, 2010 (25016/31/2010-Imm) (OM)

Continue Reading Look Out Notices: A Questionable Exercise in Power?

SFIO – Putting Corporate Fraudsters Behind Bars

Introduction

The battle against financial fraud and malpractices has significantly intensified over recent years. Globally, governments are establishing stricter regulatory frameworks and compliance standards to combat fraud in commercial transactions. A manifestation of such heightened awareness and regulatory action in India is evident under the provisions in relation to the Serious Fraud Investigation Office (SFIO) introduced under the Companies Act, 2013 (the Act) and Rules thereunder. These provisions bring with them implications for companies, which need to be fully understood and preventative steps taken to avoid any suspicion of fraud and consequent arrests. In the following paragraphs, we have analysed key aspects of the newly introduced Rules and the steps that must be taken by corporates to avoid any adversity under the same.

Under the provisions of the Act, the SFIO has been established by the Central Government as a multi-disciplinary office consisting of experts from diverse fields. The SFIO has been empowered to investigate serious cases of ‘fraud’, as defined under the Act. Furthermore, under the recently notified Companies (Arrests in Connection with Investigation by Serious Fraud Investigation Office) Rules, 2017 (the SFIO Rules or Rules), the SFIO has been empowered to arrest any person if believed to be guilty of fraud. The legislative intent behind these provisions and the wide-ranging powers granted to the SFIO is certainly clear. The power of investigation coupled with the power to arrest any person ‘believed to be guilty of fraud’ indeed equips the SFIO with potent powers to combat the menace of corporate fraud, which is deeply entrenched into and plagues our economy.Continue Reading SFIO – Putting Corporate Fraudsters Behind Bars

Image credit: Scroll.in, September 26, 2017

Published here is Part II of the blog piece on the Indra Sawhney Case, which examines in-depth, the case of Indra Sawhney, the use of ‘caste’ as a factor in determining backwardness for the purpose of reservation, and the delicate balance between the needs of the society and the constitutional vision.  

We hope you enjoy reading this as much as we have enjoyed putting this together.

II.  The Mandal Commission and the case of Indra Sawhney

A. The Mandal Commission and its Recommendations

In the year 1979, the Second Backward Classes Commission (Mandal Commission) was set up which was tasked with, inter alia, determining the criteria for defining the socially and educationally backward classes. After an exhaustive survey, the Mandal Commission identified 52% of the Indian population as “Socially and Economically Backward Classes” (SEBCs). Subsequently, it recommended a 27% reservation for SEBCs in addition to the previously existing 22.5% reservation for SC/STs.

In the year 1990, Prime Minister V.P. Singh announced that his government would implement reservations on the basis of the recommendations of the Mandal Commission.[1] Two office memoranda, O.M. No. 36012/13/90-Estt (SCT) dated August 13, 1990 as amended by O.M. No. 36012/13/90-Estt(SCT) dated September 25, 1990 sought to enforce these recommendations. The decision sparked widespread controversy and led to thousands of students coming out onto the streets to protest against the decision. There was a complete breakdown of law and order and some students even immolated themselves.[2]Continue Reading Casteism Much? – An Analysis of Indra Sawhney: Part II

Image credit: Scroll.in, September 26, 2017

This is the third blog piece in our series entitled “Those Were the Days”, which is published monthly. 

This is a two-part piece which analyses the Indra Sawhney Case – a case that is famous for both settling several issues and unsettling several others in the great Indian backward-class-reservation jurisprudence. Published here is Part I of the piece, which examines the legal history of affirmative action in India.   

We hope you enjoy reading this as much as we have enjoyed putting this together.

The “Mandal Commission Report” and the controversy that followed it, is etched in the memory of every Indian. By upholding the implementation of the Mandal Commission Report, the Apex Court judgment in the case of Indra Sawhney v. Union of India, established a central role for itself in every debate on the sensitive issue of reservations in India.

One of the avowed objectives of the Indian Constitution is the creation of an egalitarian society, including, and especially, by way of the eradication of caste and the caste system. In support of this objective, several successive governments have devised various affirmative action policies to eradicate caste and support the social mobility of backward classes. These measures typically include reserving seats in representative and educational institutions or public employment for members of certain classes that have been traditionally and historically marginalised. However, over time, these measures have become a tool for populism and to appease certain communities. Therefore, every time such a measure is introduced, it has resulted in dividing public opinion and caused widespread controversy. On some occasions, this divide has escalated into public demonstrations and even riots, for or against reservation.[1]

When these hotly contested measures have come up for adjudication, the judiciary’s role has not been easy; it has to account for social realities, while simultaneously grounding its decision within the sacred framework of the Constitution. One recurrent controversy that has arisen on multiple occasions before the Apex Court is the criteria for determining backwardness in order to qualify for reservation. There have been several cases that directly deal with this question. Of these, the most significant is the 1992 decision of by the Supreme Court in Indra Sawhney v. Union of India, (1992) Supp. (3) SCC 217 [2] (Indra Sawhney).Continue Reading Casteism Much? – An Analysis of Indra Sawhney: Part I