DPIIT published draft e-commerce policy
The Department for Promotion of Industry and Internet Trade (“DPIIT”) on February 23, 2019 issued the Draft National E-Commerce Policy (“E-Commerce Policy”) in order to regulate e-commerce in India. The E-Commerce Policy aims to create a framework for achieving holistic growth in the e-commerce sector along with existing policies. Some of the main features of the E-Commerce Policy are:
- E-commerce platforms will be required to store all data of Indian users in India itself;
- E-commerce platforms will need to specify to its users the manner in which it shall use the user’s data. This information should be in a simplified and in an easily understandable form on the e-commerce platform;
- All e-commerce platforms will be required to phase out all discounts within 2 years of the E-Commerce Policy taking effect;
- The E-Commerce Policy proposes 49% FDI under the inventory model for firms that sell only locally-produced goods;
- All e-commerce platforms will need the authorization of trademark owners before listing their products. In the event of any compliant of a fake product, the same must be forwarded to the trademark owner within 12 hours of receiving the complaint;
- The E-Commerce Policy suggests that founders should have differential voting rights as compared to investors;
- The E-Commerce Policy proposes to establish the eCentral Consumer Protection Authority (“CCPA”) to regulate this sector;
- All active e-commerce entities will need to register themselves with the CCPA; and
- The E-Commerce Policy suggests that there should be a separate entity to look into all complaints raised by users.
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The E-Commerce Policy will impact the manner in which e-commerce platforms operate in India. Some of the consequences of the E-Commerce Policy will be:
- The cost of compliance for e-commerce platforms will increase as they will now be required to store all Indian users data in India itself;
- E-commerce platforms will no longer be able to provide any discounts on their platforms. Therefore, they will no longer have any price advantage over brick and mortar stores. This will definitely impact the growth of e-commerce in India;
- The E-Commerce policy, by suggesting that all founders have differential voting rights, aims to provide more power to founders, thereby reducing the influence of investors in the e-commerce platform. We saw this most recently in the case of Flipkart wherein the new investor (Walmart) changed the entire senior management of Flipkart;
An important omission in the E-Commerce Policy is that there is no mention of the recent FDI Pressnote that was published on December 26, 2018 whereby sellers were not allowed to sell on e-commerce platforms that controlled the inventory of sellers. Without any mention of the same, we cannot determine as to whether the FDI Pressnote will continue to be enforceable after the E-Commerce Policy take effect.
Companies to submit details about the company to the RoC by April 26
The Ministry of Corporate Affairs (“MCA”), on February 21, 2019 issued a notification to amend the Companies (Incorporation) Rules, 2014 (“Notification”) whereby all companies that have been incorporated on or before December 31, 2017 shall be required to file the particulars of the company and its registered office in e-form ACTIVE (Active Company Tagging Identities and Verification).
As per the Notification, any company which has been struck off, or is under the process of being struck off, or is under liquidation or amalgamation need not file e-form ACTIVE. The Notification also restricts companies that have not filed its financial statements or annual returns as per the provisions of the Act with the Registrar of Companies (“RoC”), from filing e-Form ACTIVE, unless such company is under management dispute and the same is recorded on the register by the RoC
All companies other than the restricted & exempted companies, are required to fill in e-Form ACTIVE on or before April 25, 2019. Companies will need to pay a fine of INR 10,000 in the event of delayed filing. In the event that companies fail to do so, they will be labelled as “ACTIVE non-compliant” and the RoC will not accept any forms relating to the following activities until the company submits e-Form ACTIVE:
- Change in its authorized share capital;
- Change in the paid-up share capital of the company;
- Change in the directors of the company except cessation;
- Change in the registered address of the company;
- Any amalgamation or de-merger relating to the company.
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- This Notification puts an additional compliance requirement on companies as they will need to submit e-Form ACTIVE. in order to submit any forms relating to the above-mentioned activities.
- Companies restricted from filing e-Form ACTIVE due to non-filing of financial statements & annual returns may need to first remedy such non-compliance and then undertake e-Form ACTIVE filing within the stipulated time period.
CBDT seeks details of start-ups that have received angel tax notices
The Central Board for Direct Taxes (“CBDT”) has sought details from start-up bodies such as Local Circles for details about start-ups that have received angel tax notices. This follows after the February 19, 2019 notification issued by the DPIIT granting some relaxation to start-ups on angel tax.
It has been reported that the CBDT has asked for details such as the name of the start-up and its PAN Card number, and the manner and method used by the start-up whilst determining its valuation.
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- This move will be welcomed by the entire start-up ecosystem. Although the rationale behind this request from the CBDT is not known, one can hope that this is a reaction to the February 19, 2019 notification issued by the DPIIT whereby the CBDT would like to resolve all matters relating to angel tax at the earliest.
GoM recommends uniform rate of GST rate for lotteries
The empowered Group of Ministers (“GoM”) has recommended to the GST board that there should be a uniform GST rate for lotteries in India. The GoM has recommended that lotteries should have a GST rate of either 18% or 28%. Currently, there is a dual rate of taxation on lotteries in India on the basis of the entity that sells the lottery ticket. A GST rate of 12% is placed on lottery tickets sold by the state government and a GST rate of 28% on lottery tickets sold by the state government through private distributors.
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- In our opinion, this proposal will remove the distinction between lottery tickets sold by the state government and private distributors. Therefore, private distributors are on the same footing as the state government. This will encourage more private distributors to sell lottery tickets on behalf of the state government.
Venue of arbitration cannot amend intention of parties vesting exclusive jurisdiction to a particular court
The Delhi High Court (“Delhi HC”), in the case of Spentex Industries Ltd (“petitioner”) vs. Louis Dreyfus Commodities India Pvt Ltd (“Respondent”), held that the venue of arbitration cannot amend the intention of the parties to vest the courts in a specific region with exclusive jurisdiction over disputes, when the same has been specifically mentioned in the agreement between the parties.
In the present case, after a dispute arose between the parties with regards to the sale of cotton, an arbitration tribunal was constituted by the cotton association of India. The arbitration was held in the Cotton Association of India’s office in Mumbai.
The Petitioner challenged the award of the arbitration tribunal at the Delhi High Court. The Respondent challenged the maintainability of such a petition as the arbitration was held in Mumbai and therefore, contended that the Bombay High Court would have jurisdiction of the case.
The Delhi HC, on reviewing the agreement between the parties noticed that the agreement clearly stated that the courts in Delhi would have exclusive jurisdiction over all disputes. In such a case, the Delhi HC rejected the arguments of the Respondent and ruled that the Delhi HC would have jurisdiction over the case.
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- This judgment, in our opinion, upholds the basic principle of arbitration recognizing party autonomy wherein parties have the right to choose the venue of arbitration, the relevant courts that can adjudicate on any disputes, and the governing law of the entire contract.
Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.