Ecipl - Full Book1

CS EXECUTIVE – NEW SYLLABUS
ECONOMIC,COMMERCIAL&INTELLECTUALPROPERTY LAWS
INDEX
SR.NO CHAPTER PAGE NO
To be filled
by Student
1. FOREIGN EXCHANGE MANAGEMENT ACT, 1999
2. Foreign Contribution Regulation Act 2010

3. Foreign Direct Investments
4. Overseas Direct Investment
5. Law Relating to fugitive economic offenders
6. EXTERNAL COMMERCIAL BORROWINGS
7. FOREIGN TRADE POLICY
8. SPECIAL ECONOMIC ZONES ACT, 2005
9. COMPETITION ACT, 2002
10. CONSUMER PROTECTION ACT, 2019
11. ESSENTIAL COMMODITIES ACT, 1955
12. LEGAL METROLOGY ACT, 2009
13. REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016
14. BENAMI TRANSACTION PROHIBITION ACT
15. PREVENTION OF MONEY LAUNDERING ACT
16. INTELLECTUAL PROPERTY RIGHTS
17. LAW RELATING TO PATENTS
18. LAW RELATING TO TRADE MARKS
19. LAW RELATING TO COPYRIGHT

20. LAW RELATING TO GEOGRAPHICAL INDICATIONS OF GOODS
21. LAW RELATING TO DESIGNS
Dushyant Jain^^ Dushyant Jain Classes #csislife -1-

CHAPTER – 1
FOREIGN EXCHANGE
MANAGEMENT ACT, 1999
Features
• Initially foreign exchange was controlled through Defense of India Act, 1939.
• After that FERA, 1947 was passed for 10 years
• However the problem of foreign exchange was not solved in 10 years so in 1957 the FERA was made a
permanent law.
• In 1973, FERA, 1973 replaced FERA, 1947.
• Under FERA 1973, Enforcement Directorate was empowered to arrest any person even without
warrant.
• In 1991 due to economic Liberalization policy of Government of India, Foreign Exchange inflow
increased in substantially.
• In 1997 the RBI constituted Tarapore Committee on capital account convertibility.
• In order to cope up with economic liberalization on 1st June, 2000 FEMA 1999 came into force.
THE OBJECTIVES OF FEMA WAS:-
• Consolidate & amend law relating to foreign exchange

• Facilitating external trade.
• Maintenance of foreign exchange reserves.
• It also deals with inbound & out bound investment.
QUE: Discuss the objectives of enacting the Foreign Exchange Management Act, 1999. Explain in brief the
scheme of Foreign Exchange Management Act, 1999.
FEMA PROVIDES FOR:-
• Current account & capital account transactions

• Dealings in foreign exchange
• Adjustment & offences
• Act applies to whole of India & also on branches & offices located outside India. In case any offence
committed outside India controlled & owned by resident in India, then too this Act applies.
• FEMA contains 7 chapters & is divided in 49 sections, 12 sections are operational part & other deals
with contravention, penalties & adjudication.

THE FOLLOWING RULES ARE MADE UNDER FEMA BY CENTRAL GOVERNMENT:-
1) FEM (Encashment of Draft, Cheque, Instrument and Payment of Interest) Rules, 2000
2) FEM (Authentication of Documents) Rules, 2000
3) FEM (Current Account Transaction) Rules, 2000
4) FEM (Adjudication Proceedings and Appeal) Rules, 2000
5) FEM (Compounding Proceedings) Rules, 2000
6) The Appellate Tribunal for Foreign Exchange (Recruitment, Salary and Allowances and Other Conditions
of Service of Chairperson and Members) Rules, 2000.
DEFINITIONS
1. Authorized Person / Dealer :
JO KARTA HAI FOREIGN CURRENCY MAIN DEAL,
RBI LAGA DETI HAI US PE, AUTHORISED DEALER KI SEAL
Authorized Dealer is also called as money changer or offshore banking unit. Which is authorized by RBI to
deal in Foreign Currency.
An application for becoming authorized person has to be made to RBI in the prescribed form along with the
prescribed fees & RBI may grant certificate of Registration to the applicant after making necessary enquiries.
If authorized dealer makes any violation of FEMA or if RBI comes to know that authorized dealer / person has
provided wrong information at the time of obtaining registration, the RBI may after providing opportunity of
being heard cancel the certificate of Registration.
The registration of Authorized dealer is granted in 4 categories :

(a) Category – 1
Scheduled commercial banks, state co-operative bank, urban co-operative bank.
(b) Category – 2
Co-operative bank & Regional Rural Bank
(c) Category – 3
Selected Financial Institutions.
(d) Category – 4
Department of Post & Urban Co-operative Bank.
2. Foreign Exchange :
It includes the following:

(a) Deposits, credits
&balances payable in Foreign Currency.
(b) Drafts, Cheques &
traveler cheques drawn in India but payable in Foreign
Currency.

(c) Drafts, cheques, traveler cheques drawn outside India but payable in Indian Currency.
3. Foreign Security :
It means shares, debentures, bonds which are expressed in foreign currency.
An instrument which is denominated in foreign currency but interest or dividend or redemption of such
security is done in Indian currency.
4. Person :
− Individual
− Company
− HUF
− AOP
− Firm
− BOI
It also includes branches of office established by such person.
5. Person Resident in India :
1. It means a person who has stayed in India for a period of more than 182 in the previous financial year but
does not include :
A person who has gone outside India for a job or employment or for any business or for an uncertain period.
It also does not include a person who comes to India for a purpose of other than taking job or employment or
for doing a business or for an uncertain period.
2. Companies incorporated in India.
3. Office or branches in India which are controlled by persons resident outside India.
4. Office or branches outside which are controlled by persons resident in India
6. Non Resident Indian :
− A person who is citizen of India but resides outside India
− It also includes a person of Indian origin, it means:
*A person who has at any time held Indian Passport.
*A person whose either of parents or either of grandparents or spouse were citizen of India.
*However, it does not include a person who is citizen of Pakistan, Afghanistan, China, Bhutan, Srilanka , Iran,
Bangladesh & Nepal.
7. Repatriation :
Repatriation in India Repatriation outside India
It means bringing foreign exchange in India It means sending the foreign exchange outside
India.
8. Exchange earners foreign currency Account [EEFC A/c.]
JO LOG FOREIGN EXCHANGE KAMATE HAI,
WO LOG EEFC ACCOUNT KHOLTE HAI!
The person who earn foreign exchange on regular basis may open EEFC A/c. with the authorized dealer bank
and the balances in this account are kept is foreign currency.
Resident in India who are exporters, doctors engineers, lawyers, professionals, 100% Export orient unit [EOU]
can open this A/c. if they earn foreign exchange.

All the payments received in foreign currency by the above persons may be credited in this Account expenses
in foreign currency may be made through this Account.
9. Resident Foreign Currency Account :
This account is opened by person resident in India with the authorized dealer bank.
The balances in this account are maintained in foreign currency which may be in form of bank notes or
travelers cheque.
If a person :
a) Receives payment or gift or receives honorarium for services during his visit to outside India or receives
any payment for services provided in India to person resident outside India during his visit to India.
(Services not arising from business)
b) Raises amount through ADR, GDR
c) Receives gift or honorarium from a person resident outside India during his visit to India.
d) Has unspent amount of traveller’s cheque.
All the above foreign exchange may be creditor to RFC Account.
Note : The difference between EEFC A/c. & RFC A/c. is the EEFC A/c. for the person
who earn foreign exchange on regular basis.
‘Drawal : it means drawal of foreign exchange from an authorised person and includes:
a) Using of Letter of Credit or
b) Use of International Credit Card or International Debit Card or ATM Card or any other thing by which
foreign exchange liability is created.
SECTION 3 & 4: DEALINGS IN FOREIGN EXCHANGE POSSESSION & RETENTION IN FOREIGN CURRENCY
Section 3 prohibits any person from dealing in or transferring any foreign exchange or foreign security to any
person or making any payment to any person resident outside India in any manner or receiving any payment
by or on behalf of any person resident outside India in any manner except in the manner provided in the Act,
rules or regulations.
However the above transactions can be done through authorized dealer.

Section 3(d) prohibits a person to enter into any financial transaction in India as consideration for or in
association with acquisition or creation or transfer of a right to acquire, any asset outside India by any
person, except in a manner provided in the Act and rules or regulations made under the Act.
Financial transaction means making any payment to any person or receiving any payment from any person.
Financial transaction also includes drawing, issuing or negotiating any bill of exchange or promissory note or
transferring any security or acknowledging any debt.
If any person has entered in to any transaction outside India in connection with the acquisition of any asset or
right outside India, Such person can not enter in to any financial transaction (means making payments or
drawing Cheques or bills of exchange) in India in connection with such acquisition of asset outside India
except in a manner provided in this Act or rules and regulations contained in this Act.
1. The authorized dealer can possess the foreign exchange within the scope of his authority.
2. Foreign coins can be possessed by any person without any limits.
3. Upto 2000 US $ if foreign exchange is acquired through: All the five points covered in RFC Account.
4. A person who is resident in India but not permanently resident in India. [A person who comes for job or
assignment in India & whose period of stay in India does not exceeds 3 years] may bring all the foreign

exchange in India that he had earned while his stay outside India. Such foreign currency may be
maintained with authorized dealer bank in India.
5. A person who is not permanently resident in India & works with the branch or office of Foreign companies
in India may repatriate his net salary outside India. [This provision does not apply to citizens of
Pakistan].
REALIZATION REPATRIATION & SURRENDER OF FOREIGN EXCHANGE
AGAR VIDESH MAIN PAISA KAMAYA HAI,
TO USE VASSOLO AUR BHARAT LAO, JALD SE JALD
Section 8 of the of Foreign Exchange Management Act, 1999 requires the person resident in India to make all
reasonable efforts to realise and repatriate the foreign exchange due or accrued as per the directions of the
Reserve Bank. In exercise of the powers conferred by Section 8, Section 10(6), Section 47(2)(c) of the Foreign
Exchange Management Act, 1999, the Reserve Bank issued Foreign Exchange Management (Realisation,
Repatriation and Surrender of Foreign Exchange) Regulations, 2015 relating to the manner of, and the period
for, realisation of foreign exchange, repatriation of realised foreign exchange to India and its surrender.
1. A person to whom any payment in foreign currency is due shall take all the steps to realize such payment
and after such realization such payment shall be repatriated to India and such person shall not do
anything due to which the payment is delayed or is ceased (doob jaye).
2. Once the payment is realized and repatriated in India, it shall be sold to authorized dealer or can be
retained in an account with the authorized dealer bank as per the limits specified by RBI or can be used
to repay foreign debts in the manner specified by RBI.
3. If a person has received payment in Rupees from the bank account of a person outside India it shall be
assumed that money has been repatriated in India.
4. A person who is not individual and receives foreign exchange shall sell the realized foreign exchange
received as remumeration for services or income from any assets held outside India or on account of
settlement of a lawful obligation or as inheritance or settlement gift, within seven days from the date
of its receipt and cases apart from mentioned here the realized foreign exchange shall be sold within
90 days from the day of its receipt.
5. If person had drawn foreign exchange for travelling abroad the unspent foreign exchange shall be
surrendered to the authorized dealer bank within :
The above provisions do not apply to transactions with the people of Nepal & Bhutan or to the currency of
Nepal & Bhutan.
MANNER OF REPATRIATION OF FOREIGN EXCHANGE, SECTION 8
FOREIGN EXCHANGE VASOOL KIYA,
TO USE INDIA BHI BHEJNA AAP KA FARJ HAI

When a person realizes [recovers] foreign exchange, he must repatriate the foreign exchange in the following
manner:
a. He may sell it to authorized dealer against Indian rupees.
b. He may retain it in foreign currency bank account maintained with authorized dealer bank.
c. He may use it to discharge a debt or liability in foreign exchange upto the amount permitted by RBI.
Repatriation shall be deemed to complete when the payment is received in India through exchange house or
a bank located outside India in an account maintained in India.
Period of Surrender:
CURRENT ACCOUNT TRANSACTIONS – SECTION 5

BHAI NA KOI ASSET CREATE HOGA NA KOI LIABILITY,
FOREIGN MAIN JAKAR SHOPPING KAR LO!
Current Account Transaction is a transaction other than a capital account transaction and includes:
a. Payment due in connection with foreign trade, other current business, services and short term
banking and credit facilities in the ordinary course of business
b. Payments due as interest on loans and as net income from investments
c. Remittances for living expenses of parents, spouse and children residing abroad
d. Expenses in connection with foreign travel, education and medical care of parents, spouse and
children.
The definition of current account transaction is inclusive and any expenditure which is not covered under
capital account transaction will be current account transaction even if the transaction is not specified above.

As per the Foreign Exchange Management (Current Account Transactions) Rules, 2014, made by Central
Government in consultation with RBI, the current A/c. transactions are divided in following categories:
1. Prohibited current account transactions, Rule 3 :
It means the transactions for which drawer of foreign exchange is not allowed by RBI :
a) Transactions with people of Nepal & Bhutan
- No foreign exchange is provided for travelling to Nepal & Bhutan.
- No foreign exchange is provided for making transactions with the people of Nepal & Bhutan.
However with the permission of RBI, foreign exchange will be given.
b) Payment of commission on export towards equity investment in joint venture or wholly owned subsidiary
abroad.
c) Payment of call back charges: Call back service is a service in which the receiver of call has to make the
payment to receive the call.
d) Payment on commission on export made under rupee state credit route, however 10% of invoice value
may be paid as commission on export of tea and tobacco.
e) Remittances out of :
- Lottery Winnings
− Horse Racing or Horse Riding
f) Sending of money for purchase of lottery tickets or banned magazines.
g) Payment for money circulation scheme. In money circulation scheme a person is informed that he has
won a lottery & in order to claim the lottery, he has to deposit a certain sum of money into bank account
of a person.
h) Remittance of Interest on the funds held in Non-resident rupee Account
i) Payment of dividend by any company to which the requirement of dividend balancing is applicable
(adjustment of dividend to foreign investors against the total exports, matlab utna hi foreign investors ko
dividend pay kar sakte ho jitna export kar ke kamaya hai – it was an old method)
2. Current Account Transactions with the approval of Central Government: Rule 4
a) Cultural tour: Permission of Ministry of Human Resource Development has to be taken.
b) Advertisement in International Media: The permission of Ministry of Finance will be required when
advertisement related to calling of international bidding in excess of 10,000 US $ or for promotion of
tourism in India by Central Government or State Government.
c) Remittance of Hiring charges of Transponders :
d) T.V. Channels.
e) Internet service providers
f) Radio Channels
Permission of Ministry of Telecom & Ministry of Information & Broadcasting is required.
Que: Enumerate the situations in which the drawal of foreign exchange is prohibited under the Foreign
Exchange Management (Current Account Transactions) Rules, 2000.
3. Current Account transactions with the permission of RBI, RULE 5 :
The Central Government has introduced a scheme called as liberalized Remittance Scheme.
Under the scheme, 2,50,000 US $ are given to per resident per financial year to do current as well as capital
account transactions. (it also suggests that Indian National who resides abroad will not be entitled for the
benefits of LRS, but they can remit up to 1 million US$ under the NRO account - this is a linked benefit under
Non Resident Ordinary - account)

Benefit of Liberalized Remittance Scheme can be availed even by minors. In case of remitter being a minor,
the Form A2 must be countersigned by the minor’s natural guardian. The Scheme is not available to
corporates, partnership firms, HUF, Trusts etc.
Remittances under the Scheme can be consolidated in respect of family members subject to individual family
members complying with its terms and conditions. However, clubbing is not permitted by other family
members for capital account transactions such as opening a bank account/investment/purchase of property,
if they are not the co-owners/co-partners of the overseas bank account/ investment/property.
Further, a resident cannot gift to another resident, in foreign currency, for the credit of the latter’s foreign
currency account held abroad under LRS.
All other transactions which are otherwise not permissible under FEMA and those in the nature of remittance
for margins or margin calls to overseas exchanges/ overseas counterparty are not allowed under the Scheme.
For drawl of foreign exchange under liberalized Remittance Scheme the resident has to till an application
cum declaration form & in this form the purpose for which foreign exchange will be used has to be stated,
along with a declaration that the foreign exchange will not be used for prohibited purposes.
Under the LRS the foreign exchange may be utilized for :
a. Private visit to foreign countries – irrespective of number of visits foreign exchange can be obtained
from authorized dealer except for travel to Nepal and Bhutan. All tour related expenses can also be
met.
b. Gift or donation – gifts or donations can be made to individual or organizations outside India.
c. Medical treatment – Money can be released by Authorized dealer without insisting on estimates from
doctors, if this limit is to be exceeded, on providing of sufficient proofs from Indian or foreign doctor
the limit can be increased, without approval of RBI.
d. Going abroad for employment –
e. Immigration- if any person wants to immigrate outside India, he can be given the foreign exchange up
to the limits however excess foreign exchange may also be granted for meeting incidental expenses
but not for earning points for becoming eligible for immigration by making overseas investment in
Government Bonds (some countries allow immigration only when some investments are made in their
bonds)
f. Maintenance of close relative abroad - Remittance can be made for maintaining close relatives
abroad.
g. Studies abroad – Authorized dealer category I or II may allow even excess remittance based on
estimate received from institution abroad.
h. Travel for business, attending conferences, medical expenses & attendants for the patient – for
business trips, medical conferences trainings foreign exchange will be given irrespective of number of
foreign visits, 2,50,0000 $ is also available under LRS to the person going as attendant with the person
who is travelling abroad for medical treatment or a checkup.
For all the above transactions US $ 2,50,000 will be provided for LRS.
For the purpose of transactions covered in point c, e, g & h above, foreign exchange in excess of 2,50,000 US
$ will be given on production of sufficient proofs.

The limit of US $ 2,50, 000, will not apply when the payments are made through resident foreign currency
account.
For the purpose of transactions other than transactions mentioned in e, g or h if more than 2,50,000 US $ are
required in any financial year approval of RBI will be required.
It is mandatory to have PAN card to make remittances under the Scheme for capital account transactions.
However, PAN card need not be insisted upon for remittances made towards permissible current account
transactions up to USD 25,000.
Investor, who has remitted funds under LRS can retain, reinvest the income earned on the investments.
At present, the resident individual is not required to repatriate the funds or income generated out of
investments made under the Scheme. However, a resident individual who has made overseas direct
investment in the equity shares; compulsorily convertible preference shares of a JV/WoS outside India or
ESOPs, within the LRS limit, is required to comply with the terms and conditions prescribed by the overseas
investment guidelines under Foreign Exchange Management (Transfer or Issue of any Foreign Security)
(Amendment) Regulations, 2013.
Some Clarifications with regard to LRS:

Under LRS Remittances can be made even to Pakistan.
The Income from investments made from investment under LRS can be repatriated to India.
Que: What are the provisions relating to Acquisition/Sale of Foreign Securities by Resident Individual in India.
Documentation
The resident individual is required to compulsorily designate a branch of an AD through which all the
remittances under the Scheme will be made. The resident individual seeking to make the remittance should
furnish Form A2 for purchase of foreign exchange under LRS. Investor, who has remitted funds under LRS can
retain, reinvest the income earned on the investments. At present, the resident individual is not required to
repatriate the funds or income generated out of investments made under the Scheme.
However, a resident individual who has made overseas direct investment in the equity shares; compulsorily
convertible preference shares of a JV/WoS outside India or ESOPs, within the LRS limit, is required to comply
with the terms and conditions prescribed by the overseas investment guidelines under Foreign Exchange
Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2013
The capital Account Transactions that can be done under LRS:
1. Opening of Foreign currency accounts with bank abroad.

2. Purchase of property abroad.
3. Making investments in listed or unlisted shares or debt instrument of overseas companies
4. Acquisition of qualification shares for holding the post of director.
5. Acquiring shares of foreign company for providing professional services or for acquiring shares against
directors remuneration.
6. Investment in the units of Mutual funds, venture capital funds, unrated debt securities, promissory
notes.

Que: Up to what limit an authorised dealer may release foreign exchange for business trip and medical
treatment abroad, under Liberalised Remittance Scheme.
Permitted current Account transactions for the persons other than individuals i.e. company, firm, Body
corporate.
The following remittances by persons other than individuals require prior approval of the Reserve Bank of
India:
1) Gift or Donations :
If the amount of donation exceeds 1% of Foreign Exchange earning in previous 3 financial years or 50 lakhs US
$ whichever is less, permission of RBI will be required.
Donations can be made for following purposes :
a. Creation of chairs in the reputed educational institutions.
b. Contribution to university funds except investment funds.
c. Contribution to technical institutions which are in the field of activity of donor company.
Procedure:
For the purpose of remitting the amount of donation an application has to be made to the RBI along with
details of foreign exchange earning in last 3 financial years, background of the company & purpose of
donation.
2. Payments to the agent abroad for sale of residential property or commercial plot in India exceeding US $
25,000 or 5% of inward remittance whichever is more, will require the approval of RBI.
3. Remittances towards consultancy services.
Infrastructure project consultancy Other projects consultancy
Upto US $ 1 cr. can be remitted outside India Upto 10 lac US $ per project can be remitted
per project without the approval of RBI. without the approval of RBI.
4. Remittance towards reimbursement of pre incorporation expenses :
a) 5% of investment brought in India; or whichever is
b) US $ 1 lakh higher
Other Remittances for other then Individuals:

➢ Payment of Fees in foreign currency to the educational institutions under the administrative control of
foreign embassies. Actual fees can be remitted without the approval of RBI if the remittance is made
through authorized dealer bank.
➢ The cable operators or the agents of foreign TV channels in India may remit the subscription collected
from the subscribers through the authorized dealer bank.
➢ Bids in foreign currency for the projects to be executed in India.
When an Indian company makes a global bid for the purpose of global contracts that are to be executed
in India & such contracts are authorized by Central Government the authorized dealer may grant foreign
exchange to India companies that intends to make bid for such projects.
➢ Sale of overseas telephone cords :
The agents of foreign telecom companies who sell their calling cards in India, may remit the amount of
sale after deducting their commission outside India.
➢ Liberalization of foreign technical collaboration agreement.
If an Indian company has made a collaboration with foreign company the Indian company may remit the
royalty or lumpsum fees to foreign collaboration through authorized dealer

➢ When a person uses trademark of some foreign person by way of purchase or by way of franchisee the
payment towards such purchase of franchisee may be remitted outside India without the approval of RBI.
➢ Remittances for making tour arrangements
When a person travels abroad he books a hotel or accommodation abroad through an agent in India MMT,
Yatra, IBIBO, the payment made by such traveler through the agent may be remitted outside India to
such hotel by the authorized dealer, if the authorized dealer is satisfied that such traveler has purchased
the foreign exchange from authorized dealer
➢ Authorized dealer may open foreign currency account in the name of agent in India who have made tie-
ups with hotels of foreign country.
➢ This account will be credited with :
Bookings made by Travelers
Refunds on account of cancellations.
The account will be debited when the agent makes the payment to foreign hotels.
➢ The agents may also remit rail, road or water transportation charges from above account on behalf of the
traveler.
➢ In respect of travel to Nepal, Bhutan, Bangladesh &Srilanka the tour packages arranged by agents may
involve remittances outside India. The authorized dealer will allow such remittances only if it is satisfied
that the amount being remitted to neigbouring countries does not exceed the amount actually remitted
to India & the country of recipient of the amount is not Pakistan.
CAPITAL ACCOUNT TRANSACTIONS – SECTION 6

JIS TRANSACTION SE ASSET YA LIABILITIES,
HO JATE HAI CHANGE WO HI HAI CAPITAL AT:
The transaction that alters asset & liabilities of the persons are referred as capital account transactions.
The capital account transactions may be classified in 2 categories :
1) Capital A/c. transactions by person resident in India which alters assets & liabilities outside India.
2) Capital A/c. transactions by person resident outside India, which alters the assets & liabilities in India.
The below mentioned capital account transactions can be entered by person resident in India under the limit
of 2,50,000 US $ per financial year [LRS]
✓ Foreign currency loans raised in India & abroad.
✓ Investment in Foreign Securities.
✓ Acquisition of immoveable property
✓ Setting up Joint Venture Wholly Owned Subsidiary abroad.
✓ Acquisition of immoveable property.
✓ Guarantee issued in favour of person resident outside India.
✓ Export & Import of Foreign Currency & Maintaining bank account in Foreign Currency Outside India.
✓ Insurance Policy from an insurance company of outside India.
✓ Loan given to person Resident outside India.
✓ Remittance of Capital asset from outside India to India.
In case Resident in India (who is citizen outside India) or Resident Outside India wants to acquire or transfer
any immoveable property in India, RBI can prohibit or regulate such transaction, however this rule does not
apply to lease for a period of up to 5 years.
RBI may prohibit or regulate person resident in India from giving guarantee in respect of the debts taken by
Person Resident in India.

If the value of transaction goes beyond 2,50,000 US $ (under LRS) in one financial year, approval of RBI will
be required.
Permissible Capital Account Transaction of Person Resident Outside India:
a. Investment in Securities of Indian Company & body corporate.
b. Guarantee issued in favour of person resident in India.
c. Loans to persons resident in India.
d. Maintaining foreign currency Accounts in India.
e. Remittance of capital asset from India to outside India.
f. Investment in Capital of a firm or AOP.
g. Acquisition of Immoveable property in India.
Prohibited Capital Transactions by Person Resident Outside India :
The person resident outside India cannot make investment in the following sectors :
a. Chit Funds : However the state Govt. may allow the investment in chit funds from NRI’s on non
repatriation basis.
b. Nidhi Company.
c. Investment in agriculture, farmhouse, plantations.
d. Real Estate - it means dealing in vacant land.
e. Transferable Development Rights – It is a development right which a person gets when his property is
acquired for public purposes by the Government, through this right a person gets right to develop up to a
specified limit on a piece of land.
Every person selling or drawing foreign exchange to or from an authorised person for a capital account
transaction is required to furnish to Reserve Bank a declaration within the time specified in the regulations
relevant to the transactions.
Regulation Regarding Capital A/c Transactions :
Modes of Acquiring Property Outside India by Resident
According to section 6(4) of the Foreign Exchange Management Act, 1999 read with Foreign Exchange
Management (Acquisition and transfer of immovable property outside India) Regulations, 2015 The person
resident in India can acquire or transfer immoveable property outside India only after approval of RBI.
However, in the below mentioned cases no approval of RBI is required for acquiring immoveable property
outside India :
a. Property held by Foreign Citizen.
b. Property acquired before July 8, 1947 & held with the permission of RBI.
c. Property acquired by way of gift or inheritance from a foreign citizen.
d. A person may acquire a property jointly with his relative who is resident outside India & for such
acquisition no foreign exchange is remitted.
e. Property acquired from the funds held in RFC A/c.
f. The person who has acquired the property in the manner as described above may transfer such property
to any person resident in India by way of gift or inheritance.
A resident individual can send remittances under the Liberalised Remittance Scheme for purchasing
immovable property outside India.
Que: Explain the modes in which a person resident in India may acquire property outside India, without the
approval of RBI.

Acquisition & transfer of immoveable property in India by a person resident outside India who is a citizen of
India:
1) NRI may acquire any property in India except agricultural, plantation & farmhouses.
2) A NRI may transfer any of its properties to another NRI except agricultural, plantation & farmhouses.
3) The NRI can repatriate the sale proceeds outside India.
4) NRI Can make payments through the funds received in India through normal banking channels or by way
of inward remittance from outside India or by debit to his NRO, Foreign Currency Non Resident Account
5) Payment of acquisition can not be made by travellers cheque or by foreign currency notes or by any other
mode except as specified in point No. 4.
6) ‘Transfer’ includes sale, purchase, mortgage, exchange, pledge, gift, loan or any other form of transfer
of right, title, possession or lien.
INDIAN COMPANIES WITH OVERSEAS OFFICES

Indian Companies that have overseas offices may acquire immovable property without the approval of RBI, if
the amount to be spent for acquisition of property does not exceed:
a) 15% of the average turnover of Indian Entity during last 2 financial years, or
b) up to 25% of net worth.
Whichever is higher
Acquisition/ transfer by a Person of Indian Origin (PIO)

BHAI YAHAN PAR US NRI KI BAAT HO RAHI HAI,
JO PIO TO HAI PAR ABHI CITIZEN OF INDIA NAI HAI!
‘Person of Indian Origin' means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or
Afghanistan or China or Iran or Nepal or Bhutan) who at any, held an Indian Passport or who or either of
whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955.
*Purchase of immovable property
A PIO resident outside India can acquire by way of purchase any immovable property (other than agricultural
land/ plantation property / farm house) in India.
*Gift/ Inheritance of immovable property
*A PIO resident outside India may acquire by way of gift any immoveable property from NRI or person
resident in India.
*PIO can acquire any property by way of inheritance from a person who is resident outside India after
complying with FEMA or the property can be acquired by way of inheritance from a person who is resident in
India.
Payment for Acquisition of Immovable Property in India

PIO resident outside India can make payment for acquisition of immovable property in India by way of
purchase out of funds received by inward remittance through normal banking channels or by debit to his
NRE/ FCNR (B) / NRO account; Such payments cannot be made either by traveller’s cheque or by foreign
currency notes or by other mode other than those specifically mentioned above.
Acquisition of Immoveable Property by person resident outside India who is citizen of Pakistan, Bangladesh,
Nepal, Bhutan, Hong Kong, Macau, Sri Lanka, Afghanistan & China.

The citizens of above countries can acquire immoveable properties on lease for period not exceeding 5 years.
Any other kind of acquisition will require approval of RBI.
ACQUISITION AND TRANSFER OF IMMOVEABLE PROPERTY IN INDIA

As per section 6(5) of FEMA read with Foreign Exchange Management (Acquisition and transfer of immovable
property in India) Regulations, 2000, a person resident outside India can hold, own, transfer or invest in any
immovable property situated in India if such property was acquired, held or owned by him/ her when he/ she
was resident in India or inherited from a person resident in India.
REMITTANCES OF ASSET – SECTION 47
Remittances by Individuals not being NRI or person of Indian Origin.
BHAI APNA SAB KUCH BECH BACH KE FOREIGNER VAPS JA RAHA HAI,
JARA PATA LAGANA KYA WO RBI KA DIL DUKHA RAHA HAI
Asset means funds in deposit, provident fund balance, amount of matured insurance policies, sale proceeds
of shares, immoveable properties or other assets.
The authorized dealer may allow following kinds of remittances:
a. Person who is retired from any employment in India.
b. A person who has received gift from a person specified in Section 6 (5).
c. The person who is non resident widow / widower & has inherited asset from his or her spouse who was
Indian National.
However, maximum 1 million US $ can be remitted outside India per year. If the amount is remitted through
more than one instalment then such amount shall be remitted through one branch of authorized dealer bank.
d. the remittance is in respect of balances held in a bank account by a foreign student who has completed
his/ her studies, provided such balance represents proceeds of remittances received from abroad through
normal banking channels or rupee proceeds of foreign exchange brought by such person and sold to an
authorised dealer or out of stipend/ scholarship received from the Government or any organisation in India.
The above facilities are not available for citizens of Nepal or Bhutan or a PIO.
REMITTANCE OF ASSETS BY NRI / PERSON OF INDIAN ORIGIN :
NRI YA PIO INDIA CHOD KAR APNA SAB KUCH,
LEKAR INDIA SE JA RAHA HAI, $ BHI JA RAHE HAI!
The term PIO used here includes an ‘Overseas Citizen of India’ cardholder within the meaning of Section 7(A)
of the Citizenship Act, 1955.
The NRI/PIO can remit upto 1 million US $ per financial year on submission of sufficient documentary
evidences & such remittance will be mode out of :
a) The balances made available in Non resident ordinary A/c., Sale proceeds of assets which are acquired by
way of inheritance or by any other manner.
(that means NRI can repartriate the sell proceeds of capital assets up to 1 millon $ only per financial year
without approval of RBI)
b) Settlement made after the death of settler
c) If no death of settler takes place (basically partition in presence of settler, settler means the head of
family) then it will be considered as gift through non resident ordinary account.
If more than 1 instalment is used for remittance of assets then remittance shall be made through 1 branch of
authorized dealer.
At the time of remitting the amount an undertaking has to be given to the authorized dealer stating that the
amount is not a borrowed money & money does not belong to any other person.

ACQUISITION OF IMMOVEABLE PROPERTIES BY FOREIGN EMBASSIES, DIPLOMATS & CONSULATE GENERALS.
The properties can be acquired with the prior approval of Ministry of External Affairs & the funds shall be
brought in India through normal banking channels.
Agricultural, plantation properties & farmhouses cannot be acquired by foreign embassies.
REMITTANCES BY COMPANIES OR ENTITIES :

BHAI INDIAN COMPANY JIS MAI FOREIGNERS BHI SHAREHOLDER THE,
WO WINDUP HOGAI HAI, AUR AB PAISA FOREGINERS KO DENA HAI!
In case of liquidation or the winding up of companies under the direction of NCLT, remittances can be made
by such companies to its foreign shareholders [when there is surplus in winding up] in the following manner:
a) Remittance can also be made in respect of PF contributions of foreign staff.
b) The auditor gives a certificate stating that all the liabilities have been paid.
c) All the provisions of companies Act, 2013 + Insolvency & Bankruptcy code is complied.
d) In case of voluntary winding up a certificate by the auditor stating that no liabilities are pending & there
are no legal issues in remittance.
REMITTANCES ON WINDING UP OF FOREIGN BRANCH OFFICE :
When the foreign branches close their offices in India they can remit the assets outside India with the
permission of authorized dealer.
Following documents are required to be submitted to authorized dealer :

1) Permission letter of RBI for establishing of branch.
2) The branch has to state the manner in which the remittance will be made.
3) Auditors certificate stating:
4) No income from any source outside India shall be left unrepatriated.

5) All the RBI rules are complied.
6) A certificate from the foreign branch that no legal proceeding is pending in India.
7) Report from ROC.
REMITTANCES OF ASSET WHICH REQUIRE RBI’S APPROVAL :

BHAI UPAR 1 MILLION PAR YEAR TAK ALLOWED THA,
BHARAT SE BAHAR BHEJNA, LIMIT CROSS KIYA TO JAO RBI KE PAS
1. When the remittances in excess of 10 lakh (1 million) US $ per F. Y., on account of:
a) On account of legacy, bequest or inheritance to the citizen of foreign state outside the India.
b) When the NRI/PIO remits the money held in non-resident ordinary Account, sale proceeds or inheritance.
2. When hardship will be caused to a person if remittance from India is not made to such person.
(matlab aap ka case point no 1 main nai hai aur aap ko agar allow nai kiya to aap ko kafi dikkat hogi
aap RBI se permission le lo)

3. When assets that are remitted outside India which are not covered under above discussion the approval
of RBI will be required.
INCOME TAX CLEARANCES :

All the remittances as discussed above will be allowed only when clearance from the Income Tax Department
is obtained.
EXEMPTION FROM REALIZATION & REPARTRIATION : SECTION 9
In the following cases there will be no requirement of realization & repatriation of foreign exchange:
a) When RBI exempts certain persons.
b) A person who was holding foreign currency on or before July 8 1947 & income from that money.
c) Gift or inheritance from the person resident outside India as per the manner decided by the RBI.
d) Possession of foreign currency or coins by any person or class of persons, as the Reserve Bank may specify
is not prohibited.
e) A person who is resident in India but not permanently resident in India. [A person who comes for job or
assignment in India & whose period of stay in India does not exceeds 3 years] may bring all the foreign
exchange in India that he had earned while his stay outside India. Such foreign currency may be maintained
with authorized dealer bank in India.
f) A person who is not permanently resident in India & works with the branch or office of Foreign companies
in India may repatriate his net salary outside India. [This provision does not apply to citizens of Pakistan].
DUTIES OF AUTHORIZED PERSON OR AUTHORIZED DEALER Section 10 to 12
JAISA RBI KAHE VAISA KARO
APNE CLIENTS KI POORI JAANCH PADTAL KARO!
1. To comply with the directions issued by RBI from time to time.
2. If the authorized person does not comply with the directions issued by RBI then RBI after providing
opportunity of being heard may revoke the license of Authorized person.
3. The authorized person shall take undertakings from its clients stating that their transactions do not
violate the provision of FEMA, 1999.
4. The authorized person how to ensure that its clients use the foreign exchange only for the purpose for
which it was obtained otherwise it will constitute an offence.
5. In case, the person (client of authorized dealer) refuses to comply with such requirements or makes only
unsatisfactory compliances, the authorized person is under an obligation to refuse in writing to act on
behalf of such person in such transaction and report the matter to Reserve Bank.
6. RBI may order for inspection of records, documents & premises of authorized person & during such
inspection the officers of authorized person shall cooperate with the inspecting officers of RBI.
7. RBI may ask the authorized person to provide Information. If the authorized person does not provide the
information within the time prescribed by RBI, the authorized person shall be liable for a penalty of Rs.
10,000 + a further penalty of Rs. 2000 per day during which default continues.
Power of the Reserve Bank to issue directions to authorised person

Section 11 of the Act empowers the RBI to issue directions to the authorised person in regard to making of
payment or doing or desist from doing any act relating to foreign exchange or foreign security. Reserve Bank
has also been empowered to issue directions to the authorised persons to furnish such information in such
manner as it deems fit.

If any authorised person contravenes any direction given by the RBI or fails to file the return as directed by
RBI, he may be liable to a fine not exceeding `10,000/- and in the case of continuing contravention, with an
additional penalty which may extend to `2,000 for every day during which such contravention continues.
Power of Reserve Bank to Inspect authorised person
Section 12 of the Act empowers RBI to inspect the business of any authorised person for the purpose of
verifying the correctness of any statement/information or particulars furnished. In case authorised person
fails to furnish the information sought, the RBI can initiate inspection of the authorised person for obtaining
such information. RBI may also inspect the business of an authorised person for securing compliance with the
provisions of the Foreign Exchange Management Act or any of the Rules, Regulations or directions. The
Reserve Bank may make an order in writing authorising any of its officer for this purpose.
When an inspection is initiated by the Reserve Bank, it shall be the duty of every authorised person (where
the authorised person is a company or firm, every director partner or officer of such a company or firm), to
produce before the inspecting officer, such books, accounts and other documents in his custody and to
furnish any statement or information relating to the affairs of such authorised person within the time limit
and the manner in which such inspecting officer may direct.
ADJUDICATION & APPEALS

Section 16, Section 35 of FEMA, 1999 deals with adjudication & appeals.
The Central Government is authorized to appoint by notifications in the officials gazette, Assistant Director,
Deputy Director, Joint Director, Additional Director & Director of Directorate of enforcement as adjudicating
authority for purpose of this act.
Adjudicating authorities are the authorities that passes decision under the act.
The Central Government makes a complaint in writing before the Adjudicating Authority to make enquiries &
pass a decision on any matter under the Act.
Before passing any decision the adjudicating authority must provide opportunity of being heard to the
concerned party & if during the process of enquiry if the adjudicating authority is of the opinion that any
party may abscond from India then the Adjudicating Authority may ask the party to furnish a guarantee or a
bond.
APPEAL TO SPECIAL DIRECTORS [APPEALS]
The Central Government is empowered to appoint is special Director to hear the appeal against the orders of
adjudicating authority.
Member of Indian legal services holding the post in grade I for not less than 5 years or member of Indian
Revenue service & holding the post not below the rank of joint secretary may be appointed as Special
Directors [Appeals].

The decision passed by assistant or deputy directors may be challenged before special director [appeals]
within a period of 45 days from the date of receiving the decision of Assistant or deputy director. The
special director may also accept delayed appeals.
The decision passed by director of Directorate of Enforcement Additional Director. Director & joint Director
will be challenged before Appellate Tribunal for Foreign Exchange.
APPELLATE TRIBUNALS FOR FOREIGN EXCHANGE – SECTION 19
AGAR KHUSH NAI HO DIRECTORS KE DECISION SE,
SEEDHE APPELLATE TRIBUNAL JAO, YEH AAP KO KHUSH KAREGA
If any party is not satisfied with the decision passed by Special Director [appeals] & by the decision of
Director, joint Director, Additional Director, such party can make an appeal before Appellate Tribunals for
Foreign Exchange.
The Central Government is authorized to appoint chairperson & other members on the tribunal.
Any person appealing against the order of the Adjudicating Authority or the Special Director (Appeals)
imposing any penalty, shall deposit with the appeal, the amount of such penalty with such authority as may
be notified by the Central Government.
In any particular case, If the Appellate Tribunal is of the opinion that the deposit of such penalty would cause
unreasonable hardship to such person, the Appellate Tribunal may exempt such deposit subject on such
conditions as it may consider fit, to impose so as to safeguard the realization of penalty.
Every appeal shall be filed within a period of forty-five days from the date on which a copy of the order
made by the Adjudicating Authority or the Special Director (Appeals) is received by the aggrieved person or
by the Central Government and it shall be in such form, verified in such manner and be accompanied by such
fee as may be prescribed, However, the Appellate Tribunal may entertain an appeal after the expiry of the
said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that
period.
The jurisdiction may be exercised by one or more benches made by the chairperson with one or more
members as chairperson of the bench. Member of bench may also be transferred to the other bench.
The Appellate Tribunal sits at New Delhi for hearing & benches may be made for other territories in India.
A person who is or has been or is qualified to be the judge of the high court may be appointed as chairperson
of the tribunals.
A person who is or has been or is qualified to be the judge of the district court may be appointed as member
of the tribunal
Period of Office
a) Chairperson
− For a period of 5 years
Or whichever is earlier.

− Upto the age of 65 years
b) Member
− For a period of 5 years
Or whichever is earlier.
− Upto the age of 62 years
The chairperson & member may be reappointed if they are qualified.
The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the
concerned Adjudicating Authority or the Special Director (Appeals), as the case may be.
The appeal filed before the Appellate Tribunal shall be dealt with by it as expeditiously as possible and
endeavour shall be made by it to dispose of the appeal finally within one hundred and eighty days from the
date of receipt of the appeal.
If any appeal could not be disposed of within the said period of one hundred and eighty days, the Appellate
Tribunal shall record its reasons in writing for not disposing off the appeal within the said period.
Appellate Tribunal may, for the purpose of examining the legality, propriety or correctness of any order
made by the Adjudicating Authority under section 16 in relation to any proceeding, on its own motion or
otherwise, call for the records of such proceedings and make such order in the case as it thinks fit.
If any party is not satisfied with the decision passed by appellate Tribunal for foreign exchange such party
may within a period of 60 days from the date of receipt of the decision make an appeal to the High Court.
The appeal shall be made only when the case involves substantial question of law.
DIRECTORATE OF ENFORCEMENT – Section 36
The Central Government is authorized to establish an office called as Directorate of Enforcement with
directors & other class of officers.
Central Government can authorize director, additional director, special director or deputy director to
appoint officers below the rank of assistant director.
The Central Government can also authorize the police officers or officers of Central Government, State
Government to exercise functions under the FEMA.
INVESTIGATION (SECTION 37)
For the purpose of making investigations the act authorized the director of Directorate of Enforcement & the
offices who are not below the rank of Assistant Director to carry out investigations, whenever they are of
opinion, any contravention has taken place or may take place under this Act.
The Central Government also authorize the officers of Central Government, State Government, RBI, not
below the rank of secretary to carry out investigations & such officers will have the same powers vested to
the Income Tax Authority by Income Tax Act, 1961.
CONTRAVENTION BY THE COMPANIES - Section 42

If any contravention is made under this Act by any company then the persons who are in charge of the
company will be liable for the punishments under this act.
However, if such person proves that he had taken all the due care for the prevention of the contravention &
the contravention was done without his knowledge, in this case such officer of the company will not be liable
for the contravention.
COMPOUNDING OF CONTRAVENTION - Section 15
CHALO BHAI OFFENCE HUA HAI TO USKA SETTLEMENT KAR LETE HAI,
CHALO CHALE RBI KE GENERAL MANAGERS KE PAAS!
Basically under section 13 of FEMA, 1999 various penalties are provided, such as penalty for contravention of
FEMA 1999, rules, regulations, direction of RBI, the penalty is up to 3 times of the amount involved in
contravention if the amount is quantifiable or Rs 2 lacs if the amount is not quantifiable and further penalty
of Rs 5000 for every day after the first, during which the default continues, the Director of enforcement may
direct officer not below the rank of assistant director to start prosecution after recording reasons in writing.
Under Section 13(1C) if any person has acquired foreign exchange, foreign security or immoveable property
outside India, of value beyond prescribed limit, the person may be punished for imprisonment of up to 5
years in addition to the above penalty.
The Court will take cognizance of any offence only when complaint in writing is made by an officer who is
not below the rank of Assistant Director.
Section 14 deals with the manner in which the order of Adjudicating Authority will be enforced.
Under Section 15, Contraventions are settled.
Through compounding of contravention a settlement or compromise is made in relation to any kind of

contravention.
However, if the contravention was done with willful, fraud or malafide intention then in respect of such
contravention, no settlement / compounding will be made.
Through compounding an offence is settled in easy fast & flexible manner.

The Amount involved in contravention The authority for compounding
Upto Rs. 10 lakhs Assistant General Manager of RBI.
Rs. 10 lakhs - 40 lakhs Deputy General Manager of RBI.
Rs. 40 lakhs – 1 Cr. General Manager of RBI
Moe than Rs. 1 Cr. Chief General Manager of RBI.
COMPOUNDING OF OFFENCES BY REGIONAL AUTHORITIES OF RBI

Nature of Offence Regional Authority
1. Delay in reporting inward Remittances Regional office of RBI.
2. Delay in Filing form FC-GPR
3. Delay in informing about RBI
4. Delay in filing Annual Return on foreign assets

& liabilities
5. Violation of Pricing guidelines. Regional Office of RBI
6. Issue of shares without approval of foreign
investment promotion Board.
7. Delay in filing form FC-TRS
APPLICATION FOR COMPOUNDING

− The application for compounding will be made in the prescribed form along with the fees of Rs. 5000 by a
demand draft in favour of RBI payable at concerned regional office.
− Along with the application the details of foreign Direct Investments made in the company, External
Commercial Borrowings availed by the company, overseas Direct Investment made by the Company, the
copy of MOA, latest audited Balance Sheet & undertaking stating that no investigation is pending by RBI
or CBI, has to be given.
− If the application is incomplete or if the required approvals are not taken for making the application, the
application will be returned with refund of Rs. 5000 & opportunity of being heard will also be given.
− If the address of applicant is changed during the process of compounding the new address is to be
notified to the compounding authority.
ESSENTIAL REQUIREMENTS OF COMPOUNDING
− If same contravention is made within a period of 3 years from the date of compounding the second
offence will not be compounded.
− When proper approvals are not received the offences will not be compounded.
− If the contravention relates to national security or money laundering or when the compounding amount is
not paid to any party then the case will be transferred to Director of Directorate of Enforcement or to
the authority under prevention of Money laundering Act.
− If any contravention is identified by RBI or if any contravention is brought to the notice of RBI by any
party, the RBI will decide :
(a) Whether the contravention is of minor or technical nature.
(b) If the contravention is a material nature then whether all the procedures relating to compounding are
properly followed.
(c) Whether the case is of serious nature & need to be transfer of Director of Directorate of Enforcement.
(d) If application for compounding is made by the entity involved in contravention then the contravention
shall not be considered of minor nature.
Que; State the pre-requisites for compounding process in respect of contravention committed, under the
Foreign Exchange Management (FEMA) Act, 1999.
SCOPE AND PROCEDURE OF COMPOUNDING
1. After receiving the application for compounding the RBI shall examine all the documents & check
whether the amount involved in contravention is quantifiable.
2. RBI may call for additional information or documents.
3. At the time of passing compounding orders the RBI considers following factors :
(a) Gain made by the party
(b) Loss to the public
(c) Economic benefits to the party.
(d) Repetitive nature of contravention.

(e) Conduct during investigation of party.
(f) Conduct after contravention.
ISSUE OF COMPOUNDING ORDER
The RBI must pass order of compounding within a period of 180 days from the date of receiving the complete
application for compounding.
If the applicant opts for personal hearing, RBI will encourage the applicant to represent his case himself &
not through any advocate or expert.
If the applicant or his representative is not available for personal hearing then the RBI will pass the decision
on the basis of available information.
The compounding order will specify the provision under which contravention is made.
The copy of order :

− To be given to each party
− To be placed on the website of RBI.

CHAPTER – 2
FOREIGN CONTRIBUTION
(REGULATION) ACT, 2010
INTRODUCTION
The purpose of the Act is to regulate acceptance and
utilization of foreign contribution or foreign hospitality in
certain cases.
It is true that many political parties in India get financial
support from foreign countries. Sometimes, the support is
obtained through some social or apparently non-political
organization. It is also true that some countries provide
contribution or hospitality to persons at senior level, so that
these persons can look after interest of these countries in India.
Obviously, this is not in the interest of nation and hence purpose of the Act is to prevent such contribution
and hospitality at high places.
IMPORTANT DEFINITIONS
▪ FOREIGN CONTRIBUTION :
VIDESHON SE AANE WALE DAAN KO YAH KANOON REGULATE KARTA HAI,
QKI INDIA MAIN GALT JAGHON PAR YAH PAISA USE HOTA HAI!
Foreign contribution means the donation, delivery, or transfer made by any foreign source –
a) Of any article excluding any article given as gift for personal use and value of gift does not exceed Rs.
25000;
b) Of any currency; and
c) Of any foreign security.
The following will not be covered under definition of foreign contribution (exception):
a) Receipt of fees to be paid to universities or Institutions;
b) Payment for cost of goods or services (in ordinary course of business);
c) Money received as an agent of foreign source of India.
It may be noted that a donation, delivery, or transfer of any article, currency or any foreign security by any
person who has received it from any foreign source, either directly or through one or more persons shall also
be deemed to be foreign contribution.
Interest accrued on the foreign contribution deposited in any bank or any other income derived from the
foreign contribution or interest thereon shall also be deemed to be foreign contribution
▪ FOREIGN HOSPITALITY (Swagat aur Satkar Videshiyon ke dwara, High Level Ke logon Ka) :
Any Service or Hospitality Provided by Foreign Source
Service may include for providing a person with the cost of travel to Free means free not concession.
any foreign country or territory or with free board, lodging,
transport, or medical treatment

▪ FOREIGN SOURCE :
Yeh dhyan main rakiye ki contribution aur hospitality jab foreign source se aaegi tabhi yeh act lagu hoga!
Foreign source includes:-
a) The Government of any foreign country or any agency of such Government;
b) Any international agency; not being the United Nations, the World Bank or such other agency as the
Central Government may be notification in the official gazette specify in this behalf;
c) A foreign company within the meaning of the Companies Act, 1956;
d) A corporation incorporated in a foreign country;
e) A multinational corporation;
f) A company within a meaning of Companies Act, 1956 if more than one-half of the nominal value of share
capital is held either individually or in aggregate by one or more of the following, namely :-
− Government of a foreign country;
− Citizens of a foreign country;
− Corporation incorporated in a foreign country; and
− Trusts, societies or other associations of individuals formed or registered in a foreign country;
g) A trade union in any foreign country;
h) A foreign trust by whatever name called;
i) A society, club or other association of individuals formed or registered outside India;
j) A citizen of a foreign country.
It may be noted that the expression ‘foreign source’ does not include any foreign institution, which has been
permitted by the Central Government, by notification in the official gazette to carry on its activities in India.
▪ LEGISLATURE
It means any house of the parliament, state legislative assembly or council or either
Or
House of the legislature of the state.
Or
Legislative assembly of any union territory.
Or
Municipality Legislative assembly for National Capital Region.
▪ POLITICAL PARTY
An Association or body of Individual Citizens of India-
a) Registered with election commission of India under people representation Act.
b) Which has set up candidates for election to any legislature but is so not registered.
▪ ‘CANDIDATE FOR ELECTION’
MUJHE HI APNA VOTE DE,
BAKI SAB KO MAT DE!!
Candidate for election means a person who has been duly nominated as a candidate for election to any
legislature. ‘Political party’ means a party registered with Election Commission of India. It also means a
party, which has set up candidates for election, even if it is not registered with Election Commission of India.
PROHIBITION ON ACCEPTANCE OF FOREIGN CONTRIBUTION
AGAR LOGE FOREIGN CONTRIBUTION,
TO KAR SAKTE HO DESH KE SATH GADDARI!!
As per Section 3 following persons are prohibited from accepting foreign contributions:
a) Candidate for election of any legislature;

b) Correspondent, columnist, cartoonist, editor, printer or publisher of any newspaper;
c) Judge, government servant or employee of any government controlled corporation or government
company;
d) Member of any legislature;
e) Political party or office bearers of political party.
f) Organisation of political nature as may be specified.
g) Broadcasting organization involved in audio or audio visual news or current affairs programmes through
electronic mode as Per IT Act, 2000.
h) Public Servant (included by amendment act of 2020)
Resident in India shall not, and citizen of India resident outside India, shall not accept any foreign
contribution, or acquire or agree to acquire any currency from a foreign source, on behalf of any political
party, or any person, who is prohibited from accepting any foreign contribution.
Resident in India, shall not deliver any currency, whether Indian or foreign, which has been accepted from
any foreign source, to any person if he knows or believes that such other person may, or is likely, to deliver
such currency to any political party or any person, who is prohibited from accepting any foreign contribution.
Citizen of India resident outside India shall not deliver any currency, whether Indian or foreign, which has
been accepted from any foreign source, to, any political party or any person referred above or both, or any
other person, if he knows or has reasonable cause to believe that such other person intends, or is likely, to
deliver such currency to a political party or to any person referred above or both.
It may be noted that a person cannot accept foreign contribution on behalf of any of the aforesaid persons.
He also cannot deliver any such contribution to any of the aforesaid persons.
As per section 4, following are exempt from the provisions of section 3:

a) Salary, wages received;
b) Payment in course of international trade or commerce;
c) Contribution received as an agent of a foreign source in relation to transactions made by foreign source
with the government;
d) Gift as a member of any Indian delegation;
e) Foreign contribution received from the relatives with the prior permission of the Central Government.
f) Remittance received as per the provisions of FEMA, 1999.
g) By way of scholarships or the payments of like nature.
Que: "Section 3(1) of the Foreign Contribution (Regulation) Act (FCRA), 2010 deals with prohibition to
receive foreign contribution". Discuss,.
RESTRICTIONS ON ACCEPTANCE OF FOREIGN CONTRIBUTION BY ORGANIZATIONS OF POLITICAL NATURE
[SECTION 5]:
Any organization of political nature (not being a political party) cannot accept any foreign contribution
without prior approval of Central Government.
Further, any person cannot accept foreign contribution on behalf of such organization nor can he deliver any
such foreign contribution to such organization of political nature.

ORGANIZATION OF POLITICAL NATURE’ means such organization as the Central Government may specify in
this behalf by a gazette order.
While making such order Central Government shall consider activities, ideology or the programs of
organization. Thus, an organization will be treated as organization of political nature only if it is notified by
the Central Government by a gazette notification.
The Central Government before making the order or issuing notification issues a notice to the organization in
writing for informing the organization about the grounds on basis of which it is being declared as organization
of political nature.
On receipt of such notice the organization may within a period of 30 days from the date of the notice may
make a representation to the Central Government specifying the reasons for not considering it as
organization of political nature, even if the said representation is made after 30 days the Central
Government can accept the application if it is satisfied that delay was on account of sufficient cause.
The Central Government may forward the representation to any authority if it thinks fit.
After receiving the report of the Authority and considering the representations the Central Government may
organization as the organization of political nature.
The order shall be made by Central Government within a period of 120 days from the date of issue of notice
to the organization. However if no order is made within 120 days then Central Government can make order in
next 60 days from the date of expiry of 120 days by recording reasons in writing (X+120+60)
RESTRICTIONS ON ACCEPTANCE OF FOREIGN HOSPITALITY [SECTION 6]:
The below mentioned persons are restricted from accepting foreign hospitality (In logon ko hospitality milegi
to shayad yeh log desh hit se samjhauta kar sakte hai)
Following persons cannot accept the foreign hospitality without the prior permission of Central Government:
a) Judge, government servant or employee of any government controlled corporation or government
company;
b) Member of any Legislature;
c) Office bearers of any political parties.
d) Public Servant
However, prior permission is not required in case where emergent medical aid is needed on account of
sudden illness contracted during the visit outside India. In this case, such person is required to intimate the
fact of receipt of foreign hospitality to the Central Government within one month from the date of
acceptance.
The intimation should mention the source and manner of receipt of foreign hospitality.
Que: What do you understand by foreign hospitality ? List the categories of persons who require prior
approval from the Ministry of Home Affairs before accepting Foreign Hospitality ?
PROHIBITION TO TRANSFER FOREIGN CONTRIBUTION TO OTHER PERSON (SECTION 7)
The person who is registered under the act & has received a foreign contribution shall not transfer such
contribution to any other person who is not registered under the act or to any other person or association.
However such transfer can be done with prior approval of Central Government.
UTILIZATION OF FOREIGN CONTRIBUTION (SECTION 8)

The fund received as foreign contribution shall be utilized only for the purposes for which it was obtained &
income arising from it cannot be invested in any speculative business.
Every person, who is registered and granted a certificate or given prior permission under this Act and
receives any foreign contribution, shall not use a sum, not exceeding twenty per cent of such contribution,
received in a financial year, to meet administrative expenses.
Further administrative expenses exceeding twenty per cent of such contribution may be used with prior
approval of the Central Government.
The Central Government prescribes the elements which shall be included in the administrative expenses and
the manner in which the administrative expenses shall be calculated.
POWERS OF THE CENTRAL GOVERNMENT TO REGULATE THE ACCEPTANCE AND UTILIZATION OF FOREIGN
CONTRIBUTION AND FOREIGN HOSPITALITY (SECTION 9):
Section 9 and section 10 are the weapons of the Central Government to regulate and punish the persons who
make violation of this law or does not follow the directions of the Central Government.
Following are the important powers of the Central Government in this regard :
1) Prohibit any person or association from accepting foreign contribution;
2) Ask any person to obtain prior permission before accepting foreign hospitality;
3) Ask any person or association to furnish information about any foreign contribution received by it;
4) Prohibit payment of currency or of delivering any article obtained in contravention of the Act;
5) Appoint a Gazetted Officer to inspect accounts or records of any political party, organization, association
or any person;
6) Order audit of accounts of organization or association if it fails to furnish the requisite information;
7) The Central Government through any Gazetted Officer can seize any article or currency obtained in
violation of the Act.
POWER OF CENTRAL GOVERNMENT (SECTION 10)
The Central Government has power to prohibit any person from dealing, transferring, possessing in any
currency, article or security if it is satisfied that such currency, article or security was obtained in
contravention of Law.
SECTION 11 – REGISTRATION OF THE PERSONS

The section requires that the persons having a definite cultural, economic educational or religious or social
programme shall accept foreign contribution only if it obtains a certificate of registration from the Central
Government.
The persons who have already registered themselves under the existing act do not need to register.
PROCESS OF OBTAINING CERTIFICATE OF REGISTRATION – Section 12
The application must be made to the CG in the form prescribed
along with the appropriate fees.
If the application forms are not in complete in all respects the CG
may reject such application forms by giving an Opportunity of being
heard.
If form is accepted the CG makes an enquiry & generally within 90
days the registration is granted.

The central Government [Ministry of Home Affairs] will consider the following factors at the time of granting
registration or Prior Permission :-
(a) The applicant is not a benami person.
(b) He should not be guilty of :
✓ Moral turpitude
✓ Religious conversion
✓ Communal tension
✓ Diversion or misutilization of funds
(c) Whether the registration is obtained for personal gain.
(d) Whether the applicant is likely to advocate violent methods to achieve it’s objectives.
(e) The grant of registration should not affect :
✓ Public Interest
✓ Friendly relation with other countries.
(f) No case for any offence is pending against the director or officer or promoter of the applicant.
The person being other than an individual, any of its directors or office bearers has neither been convicted
under any law for the time being in force nor is any prosecution for any offence pending against him.
The acceptance of foreign contribution by the entity / person is not likely to affect prejudicially
• The sovereignty and integrity of India;
• The security, strategic, scientific or economic interest of the State;
• The public interest;
• Freedom or fairness of election to any Legislature;
• Friendly relation with any foreign State;
• Harmony between religious, racial, social, linguistic, regional groups, castes or communities.
The acceptance of foreign contribution
• Shall not lead to incitement of an offence;
• Shall not endanger the life or physical safety of any person.
1. It is mandatory to open an FCRA account in the State Bank of India (SBI), Main
Branch located at Sansad Marg, New Delhi by each NGO/association seeking
registration under FCRA, 2010.This “FCRA account” of the NGO would act as the
first exclusive port of receipt of foreign contribution in India.
2. Make an online application in form no FC 3A (online) on the portal of Ministry of
Home Affairs.
3. Before making application the applicant shall obtain a unique Darpan ID from the
portal of NITI Ayog.
4. Application form should be complete in all the aspects and no field of application
form should be left blank.
5. Following documents are to be attached with application:
a. All the members of NGO have to give an affidavit stating that they will be
following good practice guidelines issued by Financial Action Task Force.
b. Registration Certificates i.e. in case of society the society registration
certificate, in case of section 8 company, the certificate of incorporation, in
case of trust the trust registration certificate.
c. Copy of the project report for which the funds will be utilised.
d. Affidavit by the office bearers or the chief functionary of the NGO in form
“AA” stating that all the information is correct in the application form.

e. Copies of audited statement of accounts for the past three years (Asset and
Liabilities, Receipt and Payment, Income and Expenditure, for having a
registration 3 years existence is necessary)
6. Fees of Rs 10000 will have to be paid online.
7. The Central Government will consider all the above factors at the time of granting
registration.
8. If Central Government is satisfied it will grant a certificate of registration which
will be valid for a period of 5 years from the date mentioned in Certificate of
Registration.
Procedure to obtain Prior Permission
1. It is mandatory to open an FCRA account in the State Bank of India (SBI), Main
Branch located at Sansad Marg, New Delhi by each NGO/association seeking
registration under FCRA, 2010.This “FCRA account” of the NGO would act as the
first exclusive port of receipt of foreign contribution in India.
2. Make an online application in form no FC 3B (online) on the portal of Ministry of
Home Affairs.
3. Before making application the applicant shall obtain a unique Darpan ID from the
portal of NITI Ayog.
4. Application form should be complete in all the aspects and no field of application
form should be left blank.
5. Following documents are to be attached with application:
a. Registration Certificates i.e. in case of society
the society registration certificate, in case of
section 8 company, the certificate of
incorporation, in case of trust the trust
registration certificate.
b. Copy of the project report for which the funds
will be utilised.
c. Commitment letter from the donor specifying
the name of the donor, the amount of
contribution.
d. Affidavit by the office bearers or the chief
functionary of the NGO in form “AA” stating
that all the information is correct in the
application form.
e. Fees of Rs 5000 to be paid online
6. The Central Government will consider all the above factors at the time of granting
registration.
7. If Central Government is satisfied it will grant prior permission.
SUSPENSION OF THE CERTIFICATE

If the CG has a reason to believe that the Certificate granted under the act is necessary to be cancelled
(normally when the grounds exist for cancellation of certificate of registration but CG has not completed its

enquiry, the CG suspends the license), the CG may by an order in writing cancel such certificate for a period
of maximum 180 days.
During the period of suspension no contribution may be received without permission of CG.
During the period of suspension the available contribution shall be utilized only with prior approval of CG.
CANCELLATION OF CERTIFICATE OF REGISTRATION
If the Central Government is satisfied that:
✓ The Certificate of Registration was obtained by giving an incorrect information
✓ The Conditions on which certificate was granted are not complied
✓ In the public interest the certificate has to be cancelled.
✓ The provision of this act have been violated
An opportunity of being heard will be given to the concerned party & if certificate is cancelled it can-not be
reregistered for a period of 3 years.
The assets of Entity of which certificate has been cancelled will be transferred to such authority as may be
prescribed.
Within a period of 6 months before the expiry of certificate of registration an application has to be made to
the central government for the renewal of the certificate.
The Central Government shall renew the certificate within a period of 90 days from the receipt of application
subject to the terms & conditions as the CG may think fit.
Registration of Certain Persons with Central Government :

According to Section 11of the Act the Central Government may, by notification in the Official Gazette,
specify the person or class of persons who shall obtain its prior permission before accepting the foreign
contribution or the area or areas in which the foreign contribution shall be accepted and utilised with the
prior permission of the Central Government or the purpose or purposes for which the foreign contribution
shall be utilised with the prior permission of the Central Government or the source or sources from which the
foreign contribution shall be accepted with the prior permission of the Central Government.
Central Government can require Aadhaar Number as Identification Document

Section 12A states that, the Central Government may ask any person who wants to take prior permission or
prior approval under section 11, or makes an application for grant of certificate of regisration under section
12, or at the time of application for renewal of certificate under section 16, shall provide as identification
document, the Aadhaar number of all its office bearers or Directors or other key functionaries issued under
the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, or a copy
of the Passport or Overseas Citizen of India Card, in case of a foreigner.
Surrender of Certificate: Section 14A

If a request has been made, the Central Government may permit any person to surrender the certificate
granted under this Act, if, after making inquiries, Central Government is satisfied that such person has not
violated any of the provisions of this Act, and the management of foreign contribution and asset, if any,
created out of such contribution has been vested in the authority as specified in section 15.
Management of Foreign Contribution of Person Whose Certificate has been Cancelled or Surrendered:
Section 15

As per section 15, the foreign contribution and the assets created out of foreign contribution of any entity
whose certificate of registration has been cancelled or surrendered shall be transferred or vest in an
authority as may be prescribed by Central Government.
The Authority may in the public interest continue to manage the activities of the person as per the directions
of the Central Government. The authority may use the foreign contribution of the person or may also dispose
of the assets of the person, if the funds are insufficient for running such activity.
The authority shall return the foreign contribution and the assets vested upon it person whose certificate is
cancelled or surrendered if such person is subsequently registered under this Act.
The application for renewal of the certificate shall be made to the Central Government in such form and
manner and accompanied by such fee as may be prescribed.
The Central Government shall renew the certificate, ordinarily within ninety days from the date of receipt of
application for renewal of certificate subject to such terms and conditions as it may considers fit and grant a
certificate of renewal for a period of five year.
In case the Central Government does not renew the certificate within the said period of ninety days, it shall
communicate the reasons for non renewal of certificate to the applicant. The Central Government may
refuse to renew the certificate in case where a person has violated any of the provisions of this Act or rules
made under the Act.
Que: Elucidate the provisions regarding the management of foreign contribution of person (b) whose
certificate has been cancelled or surrendered.
Foreign Contribution through Scheduled Bank:

According to Section 17 of the Act every person who has been granted certificate or prior permission under
section 12 shall receive foreign contribution only in an account named as "FCRA Account", which shall be
opened for the purpose of receiving of foreign contribution in such branch of the State Bank of India at New
Delhi, as the Central Government may, by notification, specify.
A person may also open another ‘‘FCRA Account’’ in any of the scheduled bank of his choice for the purpose
of keeping or utilising the foreign contribution which has been received from his ‘‘FCRA Account’’.
It shall be noted that funds other than foreign contribution shall not be received or deposited in any such
account which is FCRA Account.
Specified branch of State Bank of India at New Delhi or the branch of the scheduled bank where the person
has opened his foreign contribution account or the authorised person in foreign exchange, shall report to
such authority as may be specified:
(a) the prescribed amount of foreign remittance.
(b) the source and manner in which the foreign remittance was received.
(c) other particulars, in such
INTIMATION BY CANDIDATE FOR ELECTION

Every candidate for election who accepted foreign contribution with 180 days preceding the date when he
was nominated for election, he has to disclose the amount & the manner in which such amount was utilized
in the prescribed manner to the Central Government.
NOTES
→ All the contribution must be received from one branch of bank which was specified in the application for
registration.
→ Every entity which has been granted a Certificate of Registration under the Act has to maintain the
accounts of funds received & utilized.
→ Any entity that has not provided any information to the Central Government as required by the Central
Government within the time prescribed by the Central Government in this case the CG may by a General
or a Special Order authorize an officer holding Group A post to audit any book of account.
→ If any person who was permitted to accept foreign ceases to exist or becomes defunct in this case all
assets of such person or entity shall be disposed of as per law under which such person was registered. In
absence of such law the assets of such person shall be transferred to the authority as may be prescribed
by the Central Government.
→ The court of session may pass an order for confiscation of seized commodity after providing an
opportunity of being heard.
All the foreign contribution must be received through single bank account. However for spending the
contribution different accounts may be opened.
→ Section 19 requires every person who has been granted a certificate or given prior approval to maintain,
in such form and manner as may be prescribed, an account of any foreign contribution received by him;
and a record as to the manner in which such contribution has been utilised by him.
INFORMATION TO THE CENTRAL GOVERNMENT

→ If any information required by Central Government is not provided to it within time prescribed by it then
the Central Government may appoint an officer to conduct the audit of accounts. The officer who is
holding a Group A post will be appointed for conducting enquiry & such person can enter premises before
sunset & after sunrise for the purpose of conducting inspection & audit.
SEIZURE
Section 24 provides that if, after inspection of an account or record, the inspecting officer has any
reasonable cause to believe that any provision of the Act or of any other law relating to foreign exchange has
been, or is being, contravened, he may seize such account or record and produce the same before the court,
authority or tribunal in which any proceeding is brought for such contravention.
CONFISCATION
Section 29 provides power to the court of session without any limit and by the officer who is not below the
rank of assistant session judge as may be prescribed by Central Government, to confiscate the currency or
security which has been seized by passing an order.
At the time of making order of confiscation, orders may be made for the disposal by confiscation or for
delivery of seized article or currency or security, as the case may be, to any person claiming to be
entitled to possession such seized article or currency.
Any person who considers himself to be aggrieved by the decision of the Court may appeal to the High Court
against the order of confiscation made by the Court of Session.

CONTRAVENTION OF ORDER OF CENTRAL GOVERNMENT
Any Person who has been prohibited by Central Government to accept the to accept foreign exchange under
section 10 of the act, contravenes the order of Central Government he shall be punished with imprisonment
for a term which may extend to three years, or with fine, or with both.
The court trying such contravention may also impose on the person convicted an additional fine equivalent to
the market value of the article or the amount of the currency or security in respect of which the prohibitory
order has been contravened by him or such part thereof as the court may deem fit.
Section 35 provides for punishment with imprisonment for a term which may extend to five years, or with
fine, or with both for accepting, or assisting any person, political party or organisation in accepting, any
foreign contribution or any currency or security from a foreign source, in contravention of any provision of
this Act or any rule or order made under the act.
Compounding of Offences
The offences which are committed under the act & are not punishable with imprisonment only may be
compounded (compound means to make a compromise, when many offences are done by any person such
offences may be compromised) by the officers of the Central Government through a notification in the
official gazette. The officer exercises his power to compound under a supervision & guidance of Central
Government.
Appeal Against Order of Confiscation
As per section 31 of the Act, an order of confiscation passed by the court of session may be challenged before
the high court which is superior to the court of session and in case the order of confiscation is passed by the
officer as specified in section 29, then the order can be challenged before the court of session in whose
jurisdiction the order was passed.
The appeal has to be made within one month of communication of order and one month’s extension can be
granted on sufficient cause if appeal could not be made during the said period of one month.
Every appeal preferred under this section shall be deemed to be an appeal from an original decree and the
provisions of Order XLI of the First Schedule to the Code of Civil Procedure, 1908.
Any organisation of political nature, or any person to whom the permission of receiving foreign
hospitality is denied by CG or any person aggrieved by order of CG under section 9, or aggrieved by an
order under section 5 or by an order of the Central Government refusing to give permission under this
Act, or by any order under section 12 (refusal to register or grant prior permission), as the case may
be, may, within sixty days from the date of such order, prefer an appeal against such order to the High
Court within the local limits of whose jurisdiction the appellant ordinarily resides or carries on
business or personally works for gain, or, where the appellant is an organisation or association, the
principal office of such organisation or association is located.
Que: When and to whom an appeal may be preferred against the order of adjudication of confiscation, under
the Foreign Contribution (Regulation) Act, 2010 ?

Que: Discuss adjudication of confiscation and procedure thereof, under the Foreign Contribution (Regulation)
Act, 2010.
Summary Notes for Foreign Contribution Regulation Act, 2010

1) The act intends to regulate the foreign contribution and foreign hospitality.
2)Foreign contribution means a donation, delivery or transfer of any article except article for personal use
whose value does not exceed Rs.25000
3)Foreign hospitality means free of cost boarding, lodging, medical treatment provided by foreign source.
4) The act prohibits judges, political parties, office bearers of political parties, member of legislature,
government employee, employee of government controlled corporation, editors, columnists, the person who
broadcasts news through audio or video mode from accepting foreign contribution.
5) However the above person may accept salaries, wages, cost for goods and services, gift received as the
member of delegation, payment received as an agent of foreign source, scholarships, fees received by
university and institutions ,remedies under FEMA.
6) The judge, Government employees, employee of government controlled corporation, office bearer of
political party and member of any legislature cannot accept foreign hospitality. However if the above person
get the sudden illness while they travel abroad, they may accept medical treatment and the details are to
be provided to the Central government within one month of receiving of hospitality.
7) The person who wants to accept foreign contribution has to register itself under the FERA 1973 with
ministry of home affairs under this regard Application has to be made in the form along with the prescribed
fees to the secretary of the ministry by the association involved in social, cultural, religious or charitable
activity.
8) The government considers that the applicant must have chosen the proper field and must have given
project report and should not be Benami person ,guilty of religion, prosecuted for criminal tension or should
not have contracted provision under the act.
9) If Central government is satisfied registration will be granted in 90 days from the date of application and
the registration will be valid for 5 years.
10) Under section 9 and 10 the Central government has been given various parts such as the power of
seeking information ,prohibit a person ,accept foreign contribution or receive foreign hospitality ,to prohibit
a person to receive foreign contribution received in contractual or out of and prohibit from dealing,
possession or transferring any currency, security or asset which is received in contribution of the act.
11) The Central Government can suspend registration of any person for the period of not exceeding. If
central government is satisfied that any person had made violation of any act and has taken registration, by
Opportunity of being heard.
12) Central Government can also appoint the officer who is holding post not below Group A to audit the
account of any person who is registered under the act and such person can also cease the asset and records
of the person if he is satisfied that contravention of the act has taken place .
13)Under this act the court of session is authorised to make confiscation of the ceased assets when the
central government registered the case under this act.
14)The organization of political nature can accept foreign contribution only with prior approval of central
government.

15) The officer of Central government can make compounding of offences under the act which are not
punishable with imprisonment only.
16) If a person accepts foreign contribution in contravention of act he can be punished with the
imprisonment of 5 years or fine. The court of session can increase fine upto the amount accepted in
contravention of act.
17)All the contribution accepted by candidate for election in last 180 days prior to being declared as
candidate for election ,has to inform Central government.
TEST
1) What punishment is provided in FCRA against contraventions.
2) Who are the persons who cannot accept foreign contribution?
3) What are exempted against payment under section 4
4) Mr.S who was punished last year for religious conversion wants to create NGO and register it under FCRA,
will he be allowed ?

CHAPTER – 3
FOREIGN DIRECT
INVESTMENT
Consolidated FDI Policy 2020

‘Foreign Investment’ means any investment made by a person resident outside India on a repatriable basis in
capital instruments of an Indian company or to the capital of a LLP.
Note: If a declaration is made by a person as per the provisions of the Companies Act, 2013 about a
beneficial interest being held by a person resident outside India, then even though the investment may be
made by a resident Indian citizen, the same shall be counted as foreign investment.
Note:- A person resident outside India may hold foreign investment either as FDI or as FPI in any particular
Indian company.
In India FDI can be made under 2 routes:
a) Automatic Route
b) Approval Route
It means investment in India without the approval of Government of India [FIPB] foreign investment
Promotion Board or RBI. Under this route, for making investment in India, the approval of Foreign Investment
Promotion Board will be required.
Erstwhile Overseas Corporate Body’(OCB) means a company, partnership firm, society and other corporate
body owned directly or indirectly to the extent of at least sixty percent by non-resident Indians and includes
overseas trust in which not less than sixty percent beneficial interest is held by non-resident Indians directly
or indirectly which can not be cancelled, and which was in existence on the date of commencement of the
Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs) )
Regulations, 2003 (the Regulations).

Under this chapter we will cover FOREIGN EXCHANGE MANAGEMENT (NON-DEBT INSTRUMENTS) RULES, 2019 +
FOREIGN EXCHANGE MANAGEMENT (MODE OF PAYMENT AND REPORTING OF NON-DEBT INSTRUMENTS)
REGULATIONS, 2019
Foreign Exchange Management (Non Debt Instrument) Rules, 2019 replaces Foreign Exchange Management
(Transfer and issue of Security by Person Resident Outside India) Regulations, 2017 & Foreign Exchange
Management (Acquisition and Transfer of Immoveable Property in India) Regulations 2018.
So basically the new rules issued by the Central Government under the Power Granted to it Under FEMA, 2000
deals with issue of equity and equity related instruments and also Acquisition and transfer of immoveable
properties by residents outside India.
Important Definitions
Convertible Note: it is a debt instrument issued by the start up company and it can be converted in equity
within a period of 5 years at the option of the holder as per the terms and conditions agreed between issuer
and the holder.
Depository Receipt:
It is a depository receipt which contains the underlying shares of the India Company issued by foreign
depository outside India and defined in Companies Act, 2013.
Equity Instrument: It means shares, convertible debentures, preference shares, warrants, which are fully and
compulsorily convertible in equity shares, warrant means warrant as issued under SEBI ICDR Regulations.
Equity instruments also have an optionality clause subject to minimum lock in period of 1 year or as
prescribed for specific sector, whichever is higher, equity shares also include partly paid shares.
Optionality clause allows the buyback of equity shares or convertible instrument from the investor at the
issue price after the expiry of lock in period.
Partly paid shares that are issued to resident outside India shall be made fully paid up within 12 months from
the date of issue or as prescribed by RBI, however 25% of total consideration shall be received upfront. In
case of share warrants 25% of total consideration shall be received upfront & remaining within 18 months
from the date of issue.
‘FDI linked performance conditions’ means the sector specific conditions for companies receiving foreign
investment.
‘FEMA’ means the Foreign Exchange Management Act, 1999.
‘Foreign Portfolio Investment’ means any investment made by a person resident outside India through
capital instruments where such investment is less than ten percent of the post issue paid-up share capital
on a fully diluted basis of a listed Indian company or less than ten percent of the paid-up value of each
series of capital instrument of a listed Indian company.
‘Foreign Portfolio Investor’ (FPI)1 means a person registered in accordance with the provisions of
Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019, as amended from
time to time.

‘FVCI’ means a Foreign Venture Capital Investor incorporated and established outside India and registered
with the SEBI under the Securities and Exchange Board of India (Foreign Venture Capital Investors)
Regulations, 2000, as amended from time to time.
‘Government Approval’ means the approval from the erstwhile Secretariat for Industrial Assistance (SIA),
Department for Promotion of Industry and Internal Trade, Government of India and/ or the erstwhile
Foreign Investment Promotion Board (FIPB) and/ or Competent Authority (Administrative
Ministry/Department) of the Policy, as the case may be.
‘Government Route’ means the entry route through which investment by a person resident outside India
requires prior Government approval and foreign investment received under this route shall be in
accordance with the conditions stipulated by the Government in its approval
‘Group Company’ means two or more enterprises which, directly or indirectly, are in a position to:
(i) exercise twenty-six percent or more of voting rights in other enterprise; or
appoint more than fifty percent of members of Board of Directors in the other enterprise.
“Hybrid Securities” means hybrid instruments such as optionally or partially convertible preference shares
or debentures and other such instruments as specified by the Central Government from time to time,
which can be issued by an Indian company or trust to a person resident outside India.
(ii)
‘Holding Company’ shall have the same meaning as assigned to it under the Companies Act, as amended
from time to time.
‘Indian Company’ means a company incorporated in India under the Companies Act, as applicable.
‘Investment’ means to subscribe, acquire, hold or transfer any security or unit issued by a person resident
in India. Explanation:-
(i) Investment shall include to acquire, hold or transfer depository receipts issued outside India, the
underlying
of which is a security issued by a person resident in India;
(i) for the purpose of LLP, investment shall mean capital contribution or acquisition or transfer of profit
shares;
‘Investment Vehicle’ shall mean an entity registered and regulated under relevant regulations framed by
SEBI or any other authority designated for the purpose and shall include (i)Real Estate Investment Trusts
(REITs) governed by the SEBI (REITs) Regulations, 2014, (ii)Infrastructure Investment Trusts (InvIts)
governed by the SEBI (InvIts) Regulations, 2014, and (iii)Alternative Investment Funds (AIFs) governed by
the SEBI (AIFs) Regulations, 2012
‘Investing Company’ means an Indian Company holding only investments in other Indian company(ies),
directly or indirectly, other than for trading of such holdings/securities.
‘Investment on repatriable basis’ means investment, the sale or maturity proceeds of which, net of taxes,
are eligible to be repatriated out of India and the expression ‘investment on non-repatriable basis’ shall
be construed accordingly.
‘Joint Venture’ (JV) means an Indian entity incorporated in accordance with the laws and regulations in

India in whose capital a non-resident entity makes an investment.
‘Limited Liability Partnership or LLP’ means a Limited Liability Partnership firm, formed and registered
under the Limited Liability Partnership Act, 2008.
‘Listed Indian company’ means an Indian company which has any of its equity instruments or debt
instruments listed on a recognised stock exchange in India and the expression “unlisted Indian company”
shall be construed accordingly.
‘Manufacture’, with its grammatical variations, means a change in a non-living physical object or article or
thing-
(a) resulting in transformation of the object or article or thing into a new and distinct object or article or
thing having a different name, character and use; or (b) bringing into existence of a new and distinct
object or article or thing with a different chemical composition or integral structure.
‘Non-resident entity’ means a ‘person resident outside India’ as defined under FEMA.
‘Non-Resident Indian’ (NRI) means an individual resident outside India who is a citizen of India.
‘OCI’ or ‘Overseas Citizen of India’ means an individual resident outside India who is registered as an
Overseas Citizen of India Cardholder under section 7A of the Citizenship Act, 1955 (57 of 1955).
A company is considered as ‘Owned’ by resident Indian citizens if more than 50% of the capital in it is
beneficially owned by resident Indian citizens and / or Indian companies, which are ultimately owned and
controlled by resident Indian citizens. A Limited Liability Partnership will be considered as owned by
resident Indian citizens if more than 50% of the investment in such an LLP is contributed by resident Indian
citizens and/or entities which are ultimately ‘owned and controlled by resident Indian citizens’ and such
resident Indian citizens and entities have majority of the profit share.
(i) ‘Person’ includes-
(ii) an individual,
(iii) a Hindu undivided family,
(iv) a company,
(v) a firm,
(vi) an association of persons or a body of individuals whether incorporated or not,
(vii) every artificial juridical person, not falling within any of the preceding sub-clauses,
(viii) any agency, office, or branch owned or controlled by such person.
Resident Indian Citizen’ shall be interpreted in line with the definition of ‘person resident in India’ as per
FEMA, 1999, read in conjunction with the Indian Citizenship Act, 1955.
“FDI” or “Foreign Direct Investment” means investment through equity instruments by a person resident
outside India in an unlisted Indian company; or in ten per cent or more of the post issue paid-up equity
capital on a fully diluted basis of a listed Indian company.
Note:- In case an existing investment by a person resident outside India in equity instruments of a listed

Indian company falls to a level below ten percent, of the post issue paid-up equity capital on a fully
diluted basis, the investment shall continue to be treated as FDI.
Explanation: - Fully diluted basis means the total number of shares that would be outstanding if all possible
sources
of conversion are exercised.
“Government approval” means the approval from the erstwhile Secretariat for Industrial Assistance (SIA),
Department of Industrial Policy and Promotion, Government of India and/ or the erstwhile Foreign
Investment Promotion Board (FIPB) and/ or any of the ministry/ department of the Government of
India, as the case may be.
DESH MAIN HOTA HAI VIDESHI NIVESH,

QKI VIDESHI LOG KARTE HAI APNE YAHA INVEST!
WHO CAN MAKE FDI IN INDIA?
a) A non resident entity can invest in India as per the FDI policy except in the sectors
where FDI is prohibited.
b) If the investor entity is of the country or the beneficiary of the investment in India is
citizen of the the Country which shares land border with India, such kind of
investments can be made only under the approval route.
c) Citizen of Pakistan or entity incorporated in Pakistan can invest only under approval
route except in defence, space, atomic energy, and the activities prohibited for
foreign investment.
b) NRI & the citizen of Nepal & Bhutan can make investment in India by way of inward remittance through
normal banking channels.
c) Foreign venture capital investor or Foreign portfolio Investor can make 100% funding of “start ups”, under
automatic route.
SEBI registered FVCI can invest in a domestic
venture capital fund registered under the SEBI
(Venture Capital Fund) Regulations, 1996 or a
Category- I Alternative Investment Fund
registered under the SEBI (Alternative
Investment Fund) Regulations, 2012.
d)Company, trust and partnership firm formed
outside India and owned and controlled by
residents outside India can make investment in
India as per special dispensation (exemptions)
available to NRIs under FDI Policy.
e)FPIs + NRIs can make investments can invest in listed companies through registered broker as per FEM (Non
Debt Instruments) Rules 2019. + FVCI can also invest as per FEM (Non Debt Instruments) Rules 2019
f)NRI can invest in Pension funds governed by PFRDA, the annuity and income can be repartriated.
General Points.-

a) Government approval means approval from concerned ministry of the government of India or of
erstwhile foreign Investment promotion Board or of sectoral regulator as the case may be.
b) Optionally or partly convertible preference share or debentures or other securities as specified by the
government from time to time are referred as hybrid securities.
c) Non-debt instrument means investment in equity instrument of company or capital participation in LLP or
investment in securitization investment or investment in depository receipt.
d) sectorial cap means the maximum investment by resident outside India (including NRI, however for NRIs
separate rules may also be issued but in general whenever we say resident outside India we include NRI)
in Indian company or LLP, FCCB & depository receipt in the nature of debt, shall not be included in
sectorial cap .
Bacchon aage yeh NRI kafi pareshan kareg, isliye pahle bata dun NRI Ko apan resident outside India
manenge ha par approval route main hum uske investment ko Domestic Investment Manenge!!
ELIGIBLE INVESTEE ENTITIES
1. FDI IN PARTNERSHIP FIRMS OR LLP

1) Investment by NRI & person of Indian Origin (in partnership firm or sole propertiory concern) :
a) The funds are to be invested through the authorized dealer bank.
b) If the firm or sole propertiory concern is engaged in real estate, agriculture, plantation, farm house,
print media, it cannot accept foreign investment.
c) The funds invested cannot be repatriated outside India. However, the party may make an application
to RBI and with the prior approval of RBI it can repatriate the funds outside India.
2) Investment by Residents outside India in Partnership firms or sole proprietorship :
The resident outside India may invest in sole proprietorship or partnership in India only with prior
approval of RBI.
3) Foreign Direct Investment in LLP by Resident outside India :
a) FDI in LLP can be made in the LLP which is registered under LLP Act, if the following conditions are
satisfied :
− LLP shall operate in a sector in which 100% FDI is allowed under automatic route an there are no
performance linked conditions (means there are no conditions that are to be satisfied by LLP for
accepting the FDI)
− The FDI received by LLP can be used for making downstream investments.
− Downstream investment means investment by LLP in other companies, body corporate or LLPs which
operate in sector where 100% FDI is allowed.
− The investments by LLP will be made as per the provisions of LLP Act.
b) If the LLP operates in the sector where 100% FDI is not allowed under automatic route then the
approval of RBI will be taken for making such investment.
Conversion of an LLP having foreign investment and operating in sectors/activities where 100% FDI is allowed
through the automatic route and there are no FDI-linked performance conditions into a company is permitted
under automatic route.
Conversion of a company having foreign investment and operating in sectors/activities where 100% FDI is
allowed through the automatic route and there are no FDI-linked performance conditions, into an LLP is
permitted under automatic route. FDI in LLP is subject to the compliance of the conditions of LLP Act, 2008.

Investment in LLP should not be less than the fair price as per any valuation norm which is internationally
accepted as per market practice and a valuation certificate to that effect shall be issued by the Chartered
Accountant or by a practicing Cost Accountant or by an approved valuer from the panel maintained by the
Central Government.
In case in case of transfer of capital contribution or profit share from a person resident outside India to a
person resident in India, the transfer shall be for a consideration which is not more than the fair price of the
capital contribution/ profit share of an LLP.
4)FDI in trust – FDI is not permitted in Trusts other than in Venture Capital Fund (VCF) registered and
regulated by SEBI and ‘Investment vehicle’.
‘Indian Venture Capital Undertaking’ (IVCU)

It means an Indian company:
(i) whose shares are not listed in a recognised stock exchange in India;
(ii) which is engaged in the business of providing services, production or manufacture of articles or things,
but does not include such activities or sectors which are specified in the negative list by the SEBI, with
approval of Central Government, by notification in the Official Gazette in this behalf.
‘Investment Vehicle’
It shall mean an entity registered and regulated under relevant regulations framed by SEBI and shall include
Real Estate Investment Trusts (REITs) governed by the SEBI (REITs) Regulations, 2014, Infrastructure
Investment Trusts (InvIts) governed by the SEBI (InvIts) Regulations, 2014 and Alternative Investment Funds
(AIFs) governed by the SEBI (AIFs) Regulations, 2012.
5)FDI IN INVESTEMENT VEHICLE
Investment Vehicle is permitted to receive foreign investment from a person resident outside India (other
than an individual who is citizen of or any other entity which is registered / incorporated in Pakistan or
Bangladesh), including a Registered Foreign Portfolio Investor (RFPI) or a non-resident Indian (NRI).
6)FDI IN STARTUP COMPANIES

ABHI TO START UP BACCHI HAI CHOTI SI,
ISE ALLOWED KIYA HAI, TAKI YEH AAGE BADE
Start-ups can issue equity or equity linked instruments or debt instruments to Foreign Venture Capital
Investor against receipt of foreign remittance, as per the FEMA Regulation.
In addition, start-ups can issue convertible notes to person resident outside India subject to the following
conditions:
1. A person resident outside India (other than an individual who is citizen of Pakistan or Bangladesh or an
entity which is registered/incorporated in Pakistan or Bangladesh), may purchase convertible notes issued by
an Indian startup company for an amount of twenty five lakh rupees or more in a single tranche.
2. A startup company engaged in a sector where foreign investment requires Government approval may issue
convertible notes to a non-resident only with approval of the Government.
3. A startup company issuing convertible notes to a person resident outside India shall receive the amount of
consideration by inward remittance through banking channels or by debit to the NRE /FCNR (B) / Escrow

account maintained by the person concerned in accordance with the Foreign Exchange Management (Deposit)
However an escrow account for the above purpose shall be closed immediately after the requirements are
completed or within a period of six months, whichever is earlier.
4. NRIs may acquire convertible notes on non-repatriation basis in accordance with Schedule 4 of the Foreign
Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000.
5. A person resident outside India may acquire or transfer, by way of sale, convertible notes, from or to, a
person resident in or outside India, provided the transfer takes place in accordance with the pricing
guidelines as prescribed by RBI.
Prior approval from the Government shall be obtained for such transfers in case the startup company is
engaged in a sector which requires Government approval.
6 The startup company issuing convertible notes shall be required to furnish reports as prescribed by Reserve
Bank of India.
7)FDI In Indian Companies
Indian Companies may accept FDI as per FDI policy.
8) Apart from the entities as allowed here no FDI is permitted in other entities.
AUTOMATIC ROUTE AND APPROVAL ROUTE
An Indian company may receive Foreign Direct Investment under the two routes as given under:
AUTOMATIC ROUTE
FDI is allowed under the automatic route without prior approval either of the Government or the Reserve
Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of
India from time to time.
GOVERNMENT ROUTE
FDI in activities not covered under the automatic route requires prior approval of the Government. Proposals
for foreign investment under Government route, are considered by respective Administrative
Ministry/Department.
Foreign investment in sectors/activities under government approval route will be subject to government
approval where:
The activities or sector which comes under the Government Approval Route will require the approval of
Government only in the cases mentioned below (it means not all the investments under approval route
require the approval, when any of the conditions given below applies then only the approval will be
required):
a) When the ownership or control in Indian company is not with resident entity or India Citizens.

b) The ownership or control of Indian Company which is with Indian citizens or with Indian Companies is
being transferred to non residents entities on account of fresh issue of shares or transfer of shares or
by way of merger, demerger or amalgamation.
c) The investment made through FCCB or through ADR, GDR in the nature of debt shall not be
considered as foreign investment. However when debt instruments are converted in equity then it
will be considered as foreign investment.
d) Investment by Non Resident Indians or Company or firm or trust incorporated outside India which are
owned and controlled by NRIs shall be considered as domestic investment – if the investment is made
under schedule 4 of FEM (Non Debt Instruments) Rules 2019. (When NRIs contribute to the capital of
Company or LLP in India or When NRIs purchase the units of domestic mutual funds)
e) Foreign investment shall include all types of investment, direct as well as indirect including the
investment by NRI, FDI, FPI, FVCI.
f) NRIs may acquire convertible notes on non repatriation basis as per schedule 6 of Foreign Exchange
Management (Non Debt Instrument) Regulations 2019.
g) A person resident outside India may acquire or transfer the convertible notes from or to resident in
India or outside India subject to applicable pricing guidelines under FEMA, prior permission will be
required for such transfer if the start up company is engaged in a sector which require prior
Government approval.
h) The start up issuing convertible note shall be required to provide reports as prescribed by RBI.
Foreign Investment into or Downstream Investment by Eligible Indian Entities

The Guidelines in this aspect are as follows:
In the limit of foreign investment, the investment made by non residents as well as the resident entities in
which non residents have made investment is counted.
When a resident entity in which a non resident has invested makes investment in the resident entity then it is
considered that resident entity has received foreign indirect investment.
But the indirect investment in Indian Entity may have cascading effect as it can be done through multi
layered structure.

1. All direct investment by non resident entity in Indian Company or LLP will be counted
towards foreign investment.
2. The foreign investment through investing Indian company or LLP which is owned and
controlled by resident Indian citizen or entities which are controlled by resident Indian citizen
will not be counted towards foreign indirect investment in Indian entity.
However if the investment is made through an entity whose sponsors or manager is not
incorporated as company or LLP then SEBI will decide whether it is foreign owned or
controlled.
3. In cases where the investing company is owned or controlled by non resident entities, then
the entire investment in Indian entity will be considered as indirect foreign investment.
However if indirect foreign investment is made in operating cum investment company, then
such investee company will be allowed to make investment up to limit as is received by it in
its 100% owned subsidiary.
Example:
1. Where Company Y has foreign investment less than 50%- Company X would not be taken as
having any indirect foreign investment through Company Y.
For Example if A Limited has FDI up to 50% only and it invests in B Limited, we
2.
will consider that B Limited does not have indirect foreign investment as A
Limited is not foreign controlled.
But if A Limited has FDI of 75%, and invests 26% in B Limited then we will
consider that B Limited has Foreign Indirect investment of 26%.
# In case A Limited has FDI of 75% and B Limited is WOS of A Limited, now in
this case we will consider that B limited has foreign indirect investment up to
75% only.
In case of the sponsors or investment managers who are other then formed as
Company or LLP owned and controlled by resident Indian Citizens will be
decided by SEBI.
The total foreign investment in Indian Entity will be total of foreign direct and
indirect investment.
Additional Conditions
Details of Foregin Investment + Ownership Details + to be provided to Government at the time of approval +
In case Inappropriate voting rights through shareholders agreement are provided to foreign parties, specific

approval will be required + The holdings by Indians beyond sectoral cap must be beneficially held by Indian
Resident Citizen + In information and broadcasting sector where sectoral cap is 49% it will have to be Owned
and Controlled by Resident Indian Citizens.
For the above calculations the Largest Indian Shareholder will be required to hold at least 51% of total equity
excluding the equity held by Public sector banks and Public Financial Institutions.
The above calculation will not apply to Insurance Sector and to the Downstream investments by Investment
vehicles.
Downstream Investments by Investment Vehicles:

The Downstream investment by investment vehicle will be considered as foreign investment if sponsor or
investment manager is not Indian owned and controlled (as per RBI regulations it means control of AIF is with
sponsors or investment managers who are not Indians)
Sectoral Cap guidelines are to be followed.
If Downstream investment is made in LLP then Foreign Exchange Management ( Non Debt Instrument
Regulations) 2019 are to be followed.
RBI must be informed about investment.
Foreign Investment in an Indian Company Engaged Only in Investing in the Capital of Other Company (No
Ownership Criteria – Can be owned by anyone)
Foreign Investment is 100% under Automatic Route if registered as NBFC with RBI + Investment in Core
Investment Company is subject to Government approval route + For doing the Activities Under Automatic
Route without, no foreign investment linked performance condition and also does not have operations + Does
not intend to make downstream investment can take fresh foreign investment under Automatic Route But if
investing relates to Government Route (means the company is going to invest in the Government Route
Sectors) in this case Government approval will be required.
Downstream investment by Entities not owned and Controlled by Resident Entities
1. Sectoral Cap is to be followed.
2. Inform RBI in form within 30 days of making investment.
3. Resolution of Board of Directors or shareholders agreement
is also to be given to RBI.
4. Pricing guidelines must be followed.
5. Requirement of bringing funds from abroad and not to
arrange funds from domestic market.
Note: Downstream investment/s made by a banking company, as defined in clause(c) of Section 5 of the
Banking Regulation Act, 1949, incorporated in India, which is owned and/or controlled by non-
residents/a non-resident entity/non-resident entities, under Corporate Debt Restructuring (CDR), or
other loan restructuring mechanism, or in trading books, or for acquisition of shares due to defaults in
loans, shall not count towards indirect foreign investment. However, their ‘strategic downstream
investment’ shall count towards indirect foreign investment. For this purpose, ‘strategic downstream
investments’ would mean investment by these banking companies in their subsidiaries, joint ventures and
associates.
1. Downstream investments by eligible Indian entities/LLPs will be subject to the following conditions:
(i) Such an entity is required to notify its downstream investment to RBI in Form DI as well as on

Foreign Investment Facilitation Portal in the form available at www.fifp.gov.in within 30 days of
such investment, even if capital instruments have not been allotted along with the modality of
investment in new/existing ventures (with/without expansion programme);
(ii) Downstream investment by way of induction of foreign investment in an existing Indian Company
to be
duly supported by a resolution of the Board of Directors as also a share-holders agreement, if
any;
(iii) Issue/transfer/pricing/valuation of capital shall be in accordance with applicable
FEMA/SEBI
guidelines;
(iv) For the purpose of downstream investment, the eligible Indian entities making the downstream
investments would have to bring in requisite funds from abroad and not leverage funds from
the domestic market. This would, however, not preclude downstream companies/LLPs, with
operations, from raising debt in the domestic market. Downstream investments through
internal accruals are permissible, subject to the applicable provisions. For the purposes of
foreign investment policy, internal accruals will mean as profits transferred to reserve
account after payment of taxes.
CAPS ON INVESTMENTS
Investments can be made by person resident outside India in the capital of a resident entity only to the
extent of the
percentage of the total capital as specified in the FDI policy.
ENTRY CONDITIONS ON INVESTMENT
Investments by non-residents can be permitted in the capital of a resident entity in certain

sectors/activity with entry conditions. Such conditions may include norms for minimum capitalization, lock-
in period, etc.
CONDITIONS ON INVESTMENT BESIDES ENTRY CONDITIONS
1. The investment/investors are required to comply with all relevant sectoral laws, regulations, rules,
security conditions, and state/local laws/regulations.
2. Establishment of branch office, liaison office or project office or any other place of business in India
shall be governed by the Foreign Exchange Management (Establishment in India of a branch office or
a liaison office or a project office or any other place of business) Regulations, 2016. Further,
acquisition or transfer of immovable property in India by citizens of certain countries shall be
regulated as per the relevant provisions under the Foreign Exchange Management (Non-Debt
Instruments) Rules, 2019, as amended from time to time.
CASES WHICH DO NOT REQUIRE FRESH APPROVAL
As per the consolidated FDI Policy 2020, the fresh approval of the Government for additional foreign
investment is not required in the following cases:

(i) Investment in the entities which earlier required the prior approval and such approval was taken but
afterwards the activities of such entity were placed under automatic route.
(ii) Entities, which were earlier subject to sectoral cap and also required the approval of Government but
afterwards such caps were either removed or increased and the activity of entity was placed under automatic
route and the additional investment is up to increased sectoral cap.
(iii) Additional foreign investment in the entity in which foreign investment was done with the prior
approval of the Government under the requirement of the press note of 1995 or 2005 (press notes
were like the policy regulating foreign investments) and afterwards such activity did not require the
approval of the Government for further investment.
(iv) In case additional investment is made in to the entity ot in to the wholly owned subsidiary of the
entity when the additional investment satisfies the below mentioned conditions:
a) The amount of additional as well as cumulative investment (total investment including additional
investment) does not exceed Rs 5000 Crore. And
b) The investment is within the approved foreign equity percentage.
Que: Describe the conditions which do not require fresh approval of the Government for bringing in
further foreign investment in a business entity, under Foreign Direct Investment FDI) in India
ONLINE FILING OF APPLICATIONS FOR GOVERNMENT APPROVAL
Guidelines for e-filing of applications, filing of amendment applications and instructions to applicants are
available at the Foreign Investment Facilitation Portal (www.fifp.gov.in).
POHIBITED SECTORS
FDI is prohibited in:

a) Lottery Business including Government/private lottery, online lotteries, etc.
b) Gambling and Betting including casinos etc.
c) Chit funds
d) Nidhi company
e) Trading in Transferable Development Rights (TDRs)
f)
f) Real Business or Construction of Farm Houses
g) ‘Real estate business’ shall not include development of townships, construction of residential
/commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and
regulated under the SEBI (REITs) Regulations 2014.
h) Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
Activities/ sectors not open to private sector investment e.g.(I) Atomic Energy and (II) Railway
operations (other than permitted activities).
Foreign technology collaboration in any form including licensing for franchise, trademark, brand name,
management contract is also prohibited for Lottery Business, Gambling and Betting activities.
PERMITTED SECTORS
(a) In the sectors given in FDI policy the FDI is allowed as indicated against each sector subject to

applicable laws and in sectors where FDI is not given in the FDI policy in those sectors 100% FDI is
allowed under automatic route subject to applicable laws.
(b) Sectoral cap i.e. the maximum amount which can be invested by foreign investors in an entity, unless
provided otherwise, is composite and includes all types of foreign investments, direct and indirect,
regardless of whether the said investments have been made under Schedules I (FDI), II (FPI), III (NRI),
VI (LLPs), VII (FVCI), VIII (Investment Vehicles), and IX (DRs), respectively, of Foreign Exchange
Management (Non-Debt Instruments) Rules, 2019. FCCBs and DRs having underlying of instruments
which can be issued under Schedule IX, being in the nature of debt, shall not be treated as foreign
investment. However, any equity holding by a person resident outside India resulting from conversion
of any debt instrument under any arrangement shall be reckoned as foreign investment under the
composite cap.
(c) Foreign investment in sectors under Government approval route resulting in transfer of ownership
and/or control of Indian entities from resident Indian citizens to non-resident entities will be subject
to Government approval. Foreign investment in sectors under automatic route but with
conditionalities, resulting in transfer of ownership and/or control of Indian entities from resident
Indian citizens to non-resident entities, will be subject to compliance of such conditionalities.
(d) The sectors which are already under 100% automatic route and are without conditionalities would
not be affected.
(e) Notwithstanding anything contained in paragraphs (a) and (c) above, portfolio investment, up to
aggregate foreign investment level as permitted under Schedule II of Foreign Exchange Management
(Non-Debt Instruments) Rules, 2019 will not be subject to either Government approval or compliance
of sectoral conditions, as the case may be, if such investment does not result in transfer of
ownership and/or control of Indian entities from resident Indian citizens to non-resident entities.
Other foreign investments will be subject to conditions of Government approval and compliance of
sectoral conditions as laid down in the FDI policy.
(f) Total foreign investment, direct and indirect, in an entity will not exceed the sectoral/statutory cap.
(g) Any existing foreign investment already made in accordance with the prior policy in existence will
not be required to obtain fresh approval if the policy is changed afterwards.
(h) Wherever the foreign investor wishes to specify a particular auditor/audit firm having international
network for the Indian investee company, then audit of such investee companies should be carried out
as joint audit wherein one of the auditors should not be part of the same network.
(i) The liability of compliance of above provisions will be on the investee company.
Permitted Sector & Routes.-
There are following entry routes.-

a) automatic route
b) approval route
c) foreign portfolio investment upto 49% or sectorial cap whichever is less shall not require government
approval if there is no transfer of ownership or control to person resident outside India from citizen
resident in India.
Sectoral Cap-

a) foreign investment shall not exceed sectorial cap
b) the sectors for which no sectorial cap is specified and neither covered in prohibited sector in such sector
100% FDI shall be allowed under automatic route.
c) at the time of calculation minimum foreign investment for any company or LLP face value and premium
which has been received shall be considered. However when such investment are transferred at higher
price, such higher price shall not be counted towards minimum foreign investment.
d) when an investing company (Indian company that only makes investment but do not make day to day
trading) which is not registered with RBI as NBFC, receives any FDI approval of government approval will
be required and if the investing company is registered as NBFC with RBI, 100% FDI may be accepted under
automatic route.
e) If an Indian company receives foreign investment & makes downstream investment then in this case the
company which has received downstream investment is said to have received foreign indirect investment.
If the investee company operates under automatic route with no performance liked condition, it may
receive foreign indirect investment without any government approval however if it is covered under
approval route the approval or government will be required.
(In these case the Indian company which has received investment is normally a core investement
company)
f) The liability of complying with sectorial cap shall be on the party which receives foreign investment.
g) In case the resident outside India who has made investment in Indian company specifies any auditor for
the audit of Indian company who has international network in these case the auditor of Indian
company shall be done jointly by auditor of international network and one auditor shall be who is not
such international network.
Investment by resident outside India in investment vehicle –
1. Person resident outside India or Entity incorporated outside India may invest in the units of
investment vehicles, and may also sell or redeeme such units of investment vehicle as per regulations
of RBI.
2. The investment vehicle may issue units to person resident outside India by way of swap of instrument
of special purpose vehicle, basically the investment vehicle invest in the instrument of special
purpose through the swap of instrument.
3. When investment is made by investment vehicle in Indian entity (investment vehicle which has
received foreign investment) then in these case we can say that Indian entity has received foreign
indirect investment if the sponser or manager of investment vehicle is not controlled by resident
Indian citizen or is controlled by resident outside India.
4. AIF category (III) (the AIF who invest only the object of making profit) shall make investments only in
the sectors in which FPIS are allowed.
5. The mode of payment and remittance of sale proceed or maturity process shall be as specified by RBI.
Investment by resident outside in depository receipts (ADR & GDR)
The investment by resident outside India in depository receipts shall be as per following conditions-
1) the investment shall be as per depository receipts scheme 2014.
2) The holder of ADR & GDR can redeem or transfer such ADR & GDR.
3) The custodian in India who keeps underlying shares can purchase the share on behalf of resident outside
India investor can convert his share in ADR & GDR.
4) The shares against which ADR & GDR can be issued shall not exceed the maximum foreign investment
limits.

5) The price charged for ADR & GDR shall not be less than the corresponding price of shares charged from
Indian Investors.
6) Such investments shall also be as per FEMA.
Investment by FVCI
The investment by FVICI can be in equities or equity linked instruments or debt instruments issued by the
company (including start-ups and if a startup is organised as a partnership firm or an LLP, the investment
can be made in the capital or through any profit-sharing arrangement) or units issued by a VCF or by a
Category-I AIF. SEBI registered FVCIs are also allowed to invest under the FDI Scheme, as non-resident
entities, in other companies, subject to FDI Policy and FEMA regulations.
If the investment is in equity instruments, then the sectoral caps, entry routes and attendant (related)
conditions shall apply.
The FVCI may acquire or transfer, by sale or otherwise, to any person resident in or outside India, any
security or instrument in which it is allowed to invest, at a price that is mutually acceptable to the buyer
and the seller/ issuer. The FVCI may also receive the proceeds of the liquidation of VCFs or of Cat-I AIFs
or of schemes or funds set up by the VCFs or Cat-I AIFs.
LIST OF SECTORS IN WHICH A FVCI IS ALLOWED TO INVEST IS AS FOLLOWS:-
(a) biotechnology;
(b) IT related to hardware and software development;
(c) nanotechnology;
(d) seed research and development;
(e) research and development of new chemical entities in pharmaceutical sector.
(f) dairy industry;
(g) poultry industry;
(h) production of bio-fuels;
(i) hotel-cum-convention centres with seating capacity of more than three thousand;
(j) Infrastructure sector.
FVCI holding equity instruments of an Indian company or units of AIFs or a person resident in India, may
transfer such equity instruments or units held by him in compliance with the conditions, if any, prescribed in
Schedule VII of these rules and as specified by SEBI & RBI.
d) Overseas corporate Bodies have been derecognized as a class of investor for making investment in India.
However, the erstwhile overseas corporate bodies may make investment in India.
Erstwhile overseas corporate Bodies means.
e) NRIs may invest in the pension funds regulated by pension fund regulatory development authority of India
and the savings in the fund may be repatriated outside India.
General Rules for calculating limits on foreign investment
1. When debt instrument are converted in equity and held by person resident outside India, the resultant
equity shares must be counted in foreign investment.
2. FCCB and Depository Receipt in nature of debt shall not be considered in foreign investment.

3. The Indian Company that has received foreign portfolio investment for making downstream investment, in
this case the total portfolio investment held by Indian Company as on 31s March of previos year shall be
considered as foreign investment.
4. Indirect foreign investment received by a wholly owned subsidiary of an Indian company shall be limited
to the total foreign investment received by the company making the downstream investment. (jitna
holding foreign investment receive karegi utna hi wos main lagaegi aur wos max utna hi receive kar sakti
hai foreign investment)
5. Downstream investment shall have the approval of the Board of Directors as also a shareholders’
Agreement, if any. (aap ne foreign investment liya aur kisi dusre Indian Entity main invest kar diya)
6. The Indian entity making the downstream investment shall bring in requisite funds from abroad and not
use funds borrowed in the domestic markets and the downstream investments may be made through
internal accruals.
7. The first level Indian company making downstream investment shall be responsible for ensuring
compliance with the provisions of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019
for the downstream investment made by it at second level and so on and so forth.
Two-way Fungibility Scheme: A limited two-way Fungibility scheme has been put in place by the
Government of India for ADRs/GDRs. Under this Scheme, a stock broker in India, registered with SEBI, can
purchase shares of an Indian company from the market for conversion into ADRs/GDRs based on instructions
received from overseas investors. Re-issuance of ADRs/GDRs would be permitted to the extent of
ADRs/GDRs which have been redeemed into underlying shares and sold in the Indian market.
Sponsored ADR/GDR issue: An Indian Company can also sponsor an issue of ADR/GDR. Under this
mechanism, the company offers its resident shareholders a choice to submit their shares back to the
company so that on the basis of such shares, ADRs/GDRs can be issued abroad. The proceeds of the
ADR/GDR issue are remitted back to India and distributed among the resident investors who had offered
their Rupee denominated shares for conversion. These proceeds can be kept in Resident Foreign Currency
(Domestic) accounts in India by the resident shareholders who have tendered such shares for conversion into
ADRs/GDRs.
PROHIBITED SECTORS
In the following sectors no FDI is allowed :
a) Lottery business
b) Gambling
c) Chit funds
d) Nidhi Companies
e) Transferable Development Rights.
f) Real Estate or construction of farmhouse : However, the following shall not be included in the definition
of real estate (real estate here means purchasing and selling of land) :
− Development of Townships.
− Residential or commercial projects
− Investment in real estate investment trust.
− Investments by Real Estate Investment Trust

− Construction of bridges, roads & infra projects.
Transferable Development Rights means the certificates issued by the Government in consideration of the
compulsory acquisition of immoveable property for a public purpose. The holder of the certificate gets a
development right upto a specific limit & such right can also be transferred.
f) Manufacture of tobacco, cigars, cigarettes & other tobacco substitutes.
g) Atomic Energy.
h) Railways
i) Casinos, online lotteries.
j) Activities and sector not open for private sector investment, Atomic Energy and Railways Operations
(except the railway activities where private investment has been allowed)
FDI IN MAJOR SECTORS
HAR EK SECTOR KE LIYE SARKAR NE EK LIMIT BANAI HAI,
KI US SE JYADA FOREIGN INVESTMENT KISI COMPANY MAIN NAI HO SAKTA,
IS KO SECTORAL CAP BHI KAHTE HAI!
Some Specific Functions of FDI policy with regard to such sectors:
A. Agriculture and animal husbandry including agriculture, horticulture, vegetable, mushrooms,
development and production of seeds, breeding of dogs-> 100% FDI is allowed under automatic route.
{Beside above FDI is not allowed in any other agricultural sector}
B. Plantation includes tea, coffee, rubber, Cardamom, palm oil tree, olive oil tree plantation-> 100% FDI
is allowed under automatic route.
C. Mining includes mining and exploring of diamond, gold, silver, precious metals excluding titanium
100%, FDI under automatic route.
D. Coal and lignite for capitative consumption by power projects, steel and cement Units, setting up coal
processing plants but not for selling washed coal in open Markets, however coal shall be supplied to other
suppliers who supply coal to other processing units' under sale of coal as per mineral act 1957 -> 100% FDI
is allowed under automatic route.
E. Petroleum and natural gas includes exploration of natural gas fields, setting up infrastructure like
petroleum pipelines, research related to petroleum and natural gas, Marketing of petroleum product ->
100% FDI is allowed under automatic route.
F. Petroleum refining by PSUs 49% under automatic route.
G. Manufacturing includes manufacturing by investee entity or contract manufacturing in India through a

contract and manufacturer is permitted to sell its products in India through wholesale, retail or
ecommerce platforms without govt.
Approval -> 100% FDI is allowed under automatic route.
In spite of FDI policy, 100% FDI under Government approval route is allowed for retail trading including e
commerce for the products manufactured or produced in India.

H. Defence - Subject to industrial license under IDR Act 1945 and for manufacture of Small Arms and
Ammunition under the Arms Act 1953- 74% FDI under automatic route beyond 74% is also allowed under
automatic route if modern technology is to be used by recording reasons in writing.
The FDI proposal in defence sector will be checked on the ground of national security.
I. Broadcasting carriage services includes telephones, DTH, Cable networking, mobile, TV, Headend in sky
broadcasting – 100% FDI unless automatic route.
J. Broad casting content services includes FM 49% Government Approval Route (GAR), News and Current
Affairs TV Channels – 49% GAR, News and current affairs through digital media - 26% GAR , Non News
channels and Current Affairs - 100% through Automatic Route.
Extra conditions for broad casting sectors

1. The majority of BOD shall be Indian Citizens.
2. CEO, Officers In Charge of technical operators, and chief security officer shall be
3. resident Indian citizen.
4. Before change in the board of director permission of ministry of information and broadcasting has
to be obtained.
5. Key officers have to be security cleared.
6. All foreign pessimal who are employed for more than 60days in a year Security clearance for such
officers has to be taken once in 2 years.
7. On demand by the Government necessary infrastructure must be provided to the Government for
monitoring the operations.
8. Identity of subscribed must be provided to the Govt.
K. Print Media Includes:

Publishing of newspaper - 26%GAR
Indian edition of foreign magazine - 26% GAR
Scientific and technical magazine - 100% GAR
Facsimile edition of foreign newspapers - 100% GAR.
L. Civil aviation sector 100% automatic route

M. Airports 100% - automatic route.
N) Construction of townships, housing, infrastructural, Hotels, highways, sectors,
Bridges – 100% automatic route.
FDI is not permitted in an entity engaged in trading of TDRs and in real estate
business.
Real estate business means dealing in land with a view of earning profits.
O. FDI in Ecommerce Activities :

− Under the FDI policy the ecommerce entities will engage only in Business to Business commerce & not in
business to consumer commerce.
− Ecommerce means buying & selling of goods on electronic network.

− There are 2 modes of ecommerce :
Inventory based model Market place based model.
Ecommerce entity maintains its own inventory & Ecommerce entity provides a platform through
sells it to the consumers. which the buyer seller connects
No FDI is allowed 100% FDI is allowed under automatic route.
− Market place ecommerce entity will be permitted to enter into transactions with the sellers
registered on its platform on B2B basis.
− The ecommerce entity may provide support services to the sellers in respect of warehousing,
logistics, order fulfilment payment, collection, etc.
− In a single financial year maximum contribution in sales from a single vendor must not exceed 25% of
total sales.
− In the market place based model, the warranty & guarantee in respect of the product will be fulfilled
by the seller.
− Ecommerce entity shall not directly or indirectly influence the sale price of the goods or services.
Allied Services should be provided by the entities in which ecommerce entity has a direct or indirect
control.
P. FDI in single brand product retailing :
− In single brand product retailing FDI is allowed upto 100% under automatic route.
− The FDI in single brand retailing will be subject to the following conditions :
a) Products must be sold through single brand only.
b) In the international markets also the product must be sold under the same brand name.
c) It covers only the cases where the products are branded during manufacturing.
d) A single brand retail trading entity operating through brick & mortar store is permitted to undertake the
retail trading through e- commerce.
e) Prior to opening of Brick and Mortar store the entity can start ecommerce operations but in this case,
within a period of 2 years from the date of starting ecommerce operations.
f) The non resident entity which operates in India directly or indirectly [licensing, franchisee model etc.] in
the single brand retail sector.
In this case, the responsibility of complying with FDI policy will be on Indian party. The foreign party
must produce the evidence at the time of taking the approval in India, of the fact that the responsibility
of complying with all the provisions of FDI policy is given to Indian Party.
-If the FDI proposal in single brand retailing requires investment beyond 51% in this case sourcing of 30% of
the value of the goods purchased shall be done from India & preference should be given to village & cottage
industries, artisans & craftsmen, Micro Small & Medium enterprises. The domestic sourcing of material will
be checked by auditor. The procurement requirement is to be met in the average period of 5 years from the
date of approval for the first five years and after the first 5 years the requirement is to be met on annual
basis.
Q. FDI in multi brand retailing :

− In multi brand retailing 51% FDI is allowed under the approval route.
− The FDI in multi-brand retailing sector will be subject to the following conditions :
a) Fresh agricultural product including fruits, flowers, vegetable purses, grains, fishery, meat products may
be unbranded.

b) Minimum amount to be brought in by foreign investor shall be 100 M US $.
c) At least 50% of total FDI brought in shall be invested in back end infrastructure within first 3 years which
will include :
Packaging, manufacturing, logistics, warehouses, agriculture design, research, product improvement etc.
d) At least 30% of procurement of manufacture or processed product shall be sourced from Indian MSME,
which have total investment in plant & machinery not exceeding 2 Million US $, Sourcing from
agricultural co-operatives and farmers co-operatives would also be considered in this category and
the procurement requirement will have to be met on average basis of five years commencing from
April 1 of the year during which the first tranche of investment was received and than after expiry of
the first five years, the requirement will have to be met on annual basis.
e) Whether the above conditions are compiled or not the government can cross check.
f) Retail outlets will be established only in the cities which has the population of more than 10 lakhs as per
2011 census.
g) The Govt. will have the prior right to procure agricultural goods.
h) The company engaged in multi-brand retailing & have accepted FDI cannot carry on ecommerce activity.
i) This policy with respect to multi-brand retailing is an enabling policy which means the state Govt. & the
union territories may take their own decision with respect to FDI in multi-brand retailing Sector.
For example, there has been a joint venture between Bharti Group of India and Walmart of USA.
R. FDI in asset Reconstruction Company :
The companies that are involved in the business of Asset Reconstruction & registered with RBI under
securitization & reconstruction of financial asset & enforcement of Securities Interest Act, 2002 may accept
100% FDI under automatic route.
Conditions:
a) Investment limit of a sponsor in the shareholding of an ARC will be governed by the provisions of
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
b) The total shareholding of an individual FII/FPI shall be below 10% of the total paid-up capital.
c) FIIs/FPIs may be allowed to invest up to 100 per cent of each tranche in Security Receipts issued by ARCs,
subject to directions/guidelines of Reserve Bank of India.
S. FDI in insurance :
In the companies that are engaged in the business of :
− Insurance
− Insurance brokers
− Third party administrators
− Surveyors
− Other insurance intermediaries.
a) Insurance company - 74% FDI under Automatic route
b) Insurance intermediary - 100% Automatic Route
Conditions:-
1. Up to 74% FDI The approval of IRDAI will be required.
2. Provisions of Insurance Act, 1948 are to be followed.
3. Majority of directors + KMP + at least one of chairpersons of the board + MD + CEO shall be Resident
Indian Citizen
4. Investment by FDI shall be governed by FEM (Non Debt Instrument) Rules, 2019.
5. Further increase (Upto 74%) of stake shall be subject to pricing guidelines of RBI.

The insurance intermediary which has majority shareholding by Foreign investor shall comply with the
Following conditions:
a) incorporated as LLP or company.
b) At least one of the chairpersons or MD or CEO or Principle officer shall be Resident Indian Citizen.
c) Before repatriating dividend approval OF IRDAI has to be obtained
d) Payments to Foreign groups or promoters shall be made only after approval of IRDAI beyond what is
necessary
every payment made to foreign promoter & groups shall be reported to IRDAI
e)Composition of BOD shall be an specified by IRDAI
f) In case of companies whose core business is not insurance like banks may also become insurance
intermediaries, with the approval of IRDA. However, the revenue of such intermediary from its core
activity shall be more than 50% of its total revenue.
T.Industrial Park → 100% under AMT route, Industral Park means a project in which quality infrastructure in
the form of developed land & built space is created for the purpose of carrying industrial activity & common
Facility (Power, water, railway line road, air conditioning, travel desks, Canteen training, safety Services)
are also provided. However the entity may also be involved in providing common services only.
U. Satellites establishment & operation subject to sectrol guidelines of Department of science ISRO 100%
FDS AMT Route.
V. Private security agency - Upto 49% under Automatic route - Upto 74% under GAR, Conditions:
Private security agency also includes Armoured car services, private security agency does not include Govt
agency or department of Govt. & they are regulated by Private Security Agency Regulation Act 2005.
W. Telecom Services including Telecom infrastructure providers (Access services), long distance call, public
mobile, radio voice mail, Global mobile personal communication service - 100% FDI - Automatic roule
• Trading - Cash & Carry wholesale trading - 100% under automatic route - Cash Carry Whole Sale
Trading means sale of goods merchandises to retailers, industries, institutions or other professional users or
to other whole sellers other than sale for personal consumption.
Conditions:
• Permits & licences from relevant authorities are to be obtained
• Transactions are to be made with entity holding valid tax registration + Entities must have trade licenses +
entities having certificate of incorporations under required laws (However if transaction are made with Govt
these conditions are not required to be fulfilled.
•Record of all the transactions with name of entity & transaction value are to be preserved.
Other Sectors:
Duty Free shop 100% FDI - Automatic Route. (Shops in custom bonded area at sea port or airport
(international)
Railway infrastructure → suburban corridor projects through Private Public partnership, dedicated Freight
lines, Passenger terminals, Mass rapid transport system- 100% FDI – Automatic Route
Banking Private Sector - 49% Automatic Route, More then 49 but upto 74% Under GAR.

Banking Public = 20% GAR.
Credit Information Company → 100% FDI under Automatic Route.
Conditions:
Holding by single entity in Credit information company has be below 10% equity and any acquisition by more
then 1% equity by any entity (below 10%) will be reported to RBI.
Pension sector regulated by PFRDA Act, 2013 - 49% Automatic route.
Power exchange - 49% Automatic route
White Label ATM = 100% Automatic route

The NBFC which will set up white label ATM (ATMs owned by Non Banking Companies are called as white label
ATMs) should have net worth of ₹ 100 cr or more
Pharmaceutical (Greenfield) = 100% Automatic route

Pharmaceutical (brownfield - It means not setting up a new plant and using existing plant) = 74% Under
Automatic route, Beyond 74% GAR.
Condition:
a) Non Compete clause will not be allowed except with the approval of Govt (the Indian entity must not be
restricted from producing the same drug when the partnership ends).
b) With the application to the Govt. a certificate by foreign investor & investee company has to be provided
to the Govt. (With regard to compliance)
c) Additional condition brown field Project :-
1) Production level of medicines for next 5 years will be maintained as per requirement of benchmark of
National List of Essential Medicines.
2) Research & Development expenses for next 5yrs shall not be below highest expense done in last 3 yrs prior
to receiving FDI.
3) The administrative ministry will have to be informed with regard to technology transfer.
Manufacture of Medical Devices = 100% FDI = Automatic route
JOINT ACQUISITION BY THE SPOUSE OF A NRI OR AN OCI

A person resident outside India, not being an NRI or an OCI, who is a spouse of an NRI or an OCI may acquire
one immovable property (other than agricultural land or farm house or plantation property), jointly with his
or her NRI or OCI spouse :
However:
(a) consideration for transfer, shall be made out of -

(i) funds received in India through banking channels by way of inward remittance from any place outside
India, or
(ii) funds held in any non-resident account maintained in accordance with the provisions of the Act and the
regulations made by the Reserve Bank;
(b) no payment for any transfer of immovable property shall be made either by traveller’s cheque or by
foreign currency notes or by any other mode other than those specifically permitted under this clause.
It shall be noted that the marriage has been registered and subsisted for a continuous period of not less than
two years immediately preceding the acquisition of such property and the non-resident spouse is not in any
other manner prohibited from such acquisition.
FOREIGN EXCHANGE MANAGEMENT (NON-DEBT INSTRUMENTS) RULES, 2019
PORTFOLIO INVESTMENT SCHEME

IS SCHEME KE ZARIYA EK FPI STOCK BROKER KE THROUGH,
INDIAN COMPANY MAIN INVEST KARTA HAI!
This scheme facilitates the foreign portfolio investor who is registered with SEBI to make investments in
equity instruments or the other instruments of the Indian listed companies through a SEBI registered broker
on repatriation basis subject to fulfilment of following conditions:
a) A single foreign portfolio investor may acquire less then 10% of paid up equity capital or less than 10
percent of the paid-up value of each series of debentures or preference shares or share warrants issued
by an Indian company of company. (matlab 10% equity capital ka aur 10% jitney debenture issue hue hai
uska)
b) All the foreign portfolio investor together can hold up to sectoral capp.
The aggregate limit as provided above may be decreased by the Indian company to a lower threshold limit of
24% or 49% or 74% as deemed fit, with the approval of its Board of Directors and its General Body through a
resolution and a special resolution.
Such companies may increase such aggregate limit to 49% or 74% or the sectoral cap or statutory limits
respectively, with the approval of its Board of Directors and its General Body through a resolution and a
special resolution.
Once the aggregate limit has been increased to a higher threshold, the Indian company cannot reduce the
same to a lower threshold.
Provided also that the aggregate limit with respect to an Indian company in a sector where FDI is prohibited
shall be 24 per cent.
Two FPIs which have common ownership and control shall be considered as single FPI.

In case the FPIs breach the limit of less then 10% they need to sell the excess shares within 5 days of
receiving the shares in dmat account (settlement) and in next 2 days that means within 7 days from the date
of receiving the excess shares they need to inform the depository and the company regarding such breach
through their designated custodian in India.
In case the FPI does not sell the excess shares than it will be considered that the investment made by FPI is
not portfolio investment but a foreign direct investment and the FPI and its investor group shall not make
further portfolio investment in the company concerned and will be subject to applicable sectoral cap.
When limits are breached but shares are disinvested (sold) or when portfolio investment is converted in
foreign direct investment, it shall not be considered as violation of these rules.
When foreign government and its agencies make separate investment as separate FPI, their investment shall
be clubbed for the purpose of limit of 10%, however exemption can be granted by Central Government in this
regard.
Investment by NRI under Portfolio Investment Schemes :
(a) Single NRI or Overseas Citizen of India – Max 5% of total equity capital or series of debenture, Preference
Shares or warrant.
(b) All NRI & OCI together Max – 10% total equity capital or series of debenture or Preference Shares or
warrant.
(c) The banking company by passing a SR in GM can make this limit to 24%.
(d) All the above investments can be on repatriation as well as on non repatriation basis.
(e) Applications in case of investment in private banks which have joint venture and subsidiary in the
insurance sector, maybe made to RBI so that RBI consults with IRDAI, to check that sectoral cap of insurance
sector is not breached.
(f) Transfer of shares from residents to non residents under FDI require RBI or Govt. approval if applicable +
SEBI guidelines & IRDAI guidelines will have to be followed.
(g) RBI guidelines on acquisition of 5% controlling stake in private banks by purchase or otherwise it also
apply to non resident investors also.
PROHIBITION ON TRANSFER OF IMMOVABLE PROPERTY IN INDIA
A person resident outside India shall not transfer any immovable property in India, However the Reserve Bank
may, for sufficient reasons, allow the transfer subject to conditions as may be considered necessary by RBI or
a bank which is an authorised dealer may, as per directions issued by the Reserve Bank allow a person
resident in India to create charge on his immovable property in India in favour of an overseas lender, to
secure an external commercial borrowing availed under the provisions of the Foreign Exchange Management
(Borrowing or Lending in Foreign Exchange) Regulations, 2000;

An authorised dealer in India being the Indian agent of an overseas lender may, , create a mortgage on an
immovable property in India owned by an NRI or an OCI, being a director of a company outside India, for a
loan to be availed by the company from the said overseas lender.
However the funds shall be used only for its core business purposes overseas + in case of enforcement of
charge, the Indian bank shall sell the immovable property to an eligible acquirer and remit the sale proceeds
to the overseas lender.
A person resident outside India who has acquired any immovable property in India in accordance with foreign
exchange laws or with the general or specific permission of the Reserve Bank may transfer such property to a
person resident in India, if the transaction takes place through banking channels in India.
Purchase of equity instruments of an Indian Company by an FPI through public offer or private placement:
The foreign portfolio investors may even purchase shares when the Indian company makes public issue or
offers shares under private placement, however the following conditions are to be complied in this regard:
1. In case of public offer, the price of the shares to be issued is not less than the price at which shares are
issued to residents and in case of private placement the issue price shall not be less than, the price as per
SEBI regulations or the fair price as per any internationally accepted pricing methodology duly certified by a
Merchant Banker or Chartered Accountant or a practicing Cost Accountant, as applicable registered with
SEBI.
2. A FPI may, do short selling as well as lending and borrowing of securities subject to conditions of SEBI and
RBI regarding collateral security (margin or token for such trades)
PURCHASE OR SALE OF SECURITIES OTHER THAN EQUITY INSTRUMENTS BY FPIS.-
A FPI may purchase units of domestic mutual funds or Category III Alternative Investment Fund or offshore
fund (a fund of outside India which is registered with SEBI and will make investment in Indian Companies) for
which no objection is issued in accordance with the SEBI (Mutual Fund) Regulations, 1996, and such funds will
invest more than 50% in equity instruments of other Indian Companies on repatriation basis.
An FPI may purchase units of REITs and InVITs on repatriation basis, may also purchase, hold, or sell Indian
Depository Receipts (IDRs) of companies resident outside India and issued in the Indian capital market.
The mode of payment and other attendant conditions for remittance of sale or maturity proceeds shall be
specified by the Reserve Bank.
TRANSFER OF EQUITY INSTRUMENTS OF AN INDIAN COMPANY BY FPI
FPI holding equity instruments of an Indian company or units may transfer such equity instruments or units so
held by him as gift or through sale to any person resident outside India subject to below mentioned
conditions:
1. Prior government approval shall be obtained for any transfer in case the company is
engaged in a sector which requires the Government approval.

2. Where the acquisition has resulted in a breach of the applicable aggregate FPI limits or
sectorial limits, and the FPI sell such excess investment to resident, then it shall not be considered as a
contravention.
INVESTMENT BY NRI’S OR OVERSEAS CITIZEN OF INDIA

NRIs may also purchase the shares of Indian listed Company through a branch designated by an Authorized
Dealer on repatriation basis, subject to the following conditions :
a) A single NRI may hold 5% of the equity paid up capital of the company or 5% of the paid-up value of each
series of debentures or preference shares or share warrants.
b) All the NRI, together may hold more than 10% of the paid up capital of the company or 10% of the paid-up
value of each series of debentures or preference shares or share warrants.
c) If the company passes a special resolution in GM then NRIs can hold upto 24% of the paid up capital of the
company.
So generally yaad rakhna ki individual limits 5% se jyada exceed nahi hona chaiye. Aur sab ki holdings saath
mai milai toh voh 10% se zyada exceed nahi ho na chaiye.
But special resolution se yeh limit 24% tak badai ja sakti hai.
A NRI or an OCI may without limit purchase or sell units of DOMESTIC MUTUAL FUNDS which invest more
than 50 percent in equity.
A NRI or an OCI may, without limit purchase or sell shares in PUBLIC SECTOR ENTERPRISES being sold
(under disinvestment) by the Central Government, however the purchase is as per the terms and
conditions specified by such PUBLIC SECTOR ENTERPRISES.
A NRI or an OCI may subscribe to the NATIONAL PENSION SYSTEM managed by Pension Fund Regulatory
and Development Authority (PFRDA), if person is eligible to invest as per the provisions of the PFRDA Act.
The annuity/ accumulated saving will be repatriable: NRIs or OCIs may offer the instruments as permitted
by the Reserve Bank time as security to the recognised Stock Exchanges in India for their transactions in
exchange traded derivative contracts.
INVESTMENT BY NRI OR OCI ON NON-REPATRIATION BASIS
A NRI or an OCI may, on non-repatriation basis, purchase or sell equity instruments of an Indian company or
other securities or contribute to the capital of a LLP or a firm or proprietary concern, in the manner and
subject to the terms and conditions specified in Schedule IV of Rules.
Purchase or sale of equity instruments of an Indian company or units or contribution to the capital of a LLP
by Non-Resident Indian (NRI) or Overseas Citizen of India (OCI) on Non-repatriation basis
Purchase or sale of equity instruments or convertible notes or units or contribution to the capital of a LLP.
A NRI or an ORI including a company, a trust and a partnership firm incorporated outside India and owned and
controlled by NRIs or OCIs, may purchase or contribute, as the case may be, on non-repatriation basis the
following:
i. equity instrument issued by a company without any limit either on the stock exchange or outside it.
ii. units issued by an investment vehicle without any limit, either on the stock exchange or outside it.

iii. the capital of a LLP without any limit
iv. convertible notes issued by a startup company in accordance with these rules.
Purchase or sale of units of domestic mutual funds
A NRI or n OCI may without limit purchase or sell units of domestic mutual funds on non- repatriation basis
which invest more than 50% in equity.
Prohibition on purchase of equity instruments of certain companies.
NRI or an OCI including a company, a trust and a partnership firm incorporated outside India and owned and
controlled by NRIs or OCIs, shall not make any investment in equity instruments or units of:
i. Nidhi company
ii. company engaged in agricultural or plantation activities,
iii. real estate business,
iv. construction of farm houses,
v. dealing in transfer of development rights
A NRI or an OCI may invest on a non-repatriation basis, by way of contribution to the capital of a firm or a
proprietary concern in India provided such firm or proprietary concern is not engaged in any:
i. agricultural or
ii. plantation activity or
iii. print media or
iv. real estate business
The mode of payment and attendant conditions for remittance of sale or maturity proceeds shall be specified
by the Reserve Bank.
Further, a NRI or an OCI may trade or invest in all exchange traded derivative contracts approved by SEBI
Also, a NRI or an OCI may purchase, hold, or sell Indian Depository Receipts (IDRs) of companies resident
outside India and issued in the Indian capital market.
PRIOR PERMISSION OF RBI IN CASE OF TRANSFER OF CAPITAL INSTRUMENTS

In case of below mentioned transfer of capital instrument the prior approval of RBI is required.
1) Transfer of capital instrument from resident to non residentif :
a) The pricing of capital instrument is not as per RBI’s guidelines.
OR
b) The transfer involves deferment of consideration.
If RBI approves the transaction, within a period of 60 days from the date of receipt of consideration in
form & FC-TRS.

2) Transfer of capital instrument by way of gift from resident to non resident.
RBI approves the transaction if it is satisfied with the following factors :
a) Sectoral cap should not be breached.
b) The done shall be entitled to hold the gift.
c) The capital instruments shall not exceed 5% of paid up capital of the company.
d) The donor & donee shall be close relatives as per definitions of relative given in companies Act, 2013.
e) In a single financial year the value of gift must not exceed US $ 50,000/-.
3) Transfer of capital instrument by NRI to Non-Resident : RBI Approval is required.
Within a period of 60 days from the date of transfer in case of gift & within a period of 60 days from the date
of receiving consideration in case of sale, RBI has to be informed in form FC-TRS.
DOCUMENTS TO BE SUBMITTED BY A PERSON RESIDENT IN INDIA FOR TRANSFER OF SHARES TO A PERSON

RESIDENT OUTSIDE INDIA BY WAY OF GIFT:
i. Name and address of the transferor (donor) and the transferee (donee).
ii. Relationship between the transferor and the transferee.
iii. Reasons for making the gift.
iv. In case of Government dated securities and treasury bills and bonds, a certificate issued by a
Chartered
Accountant on the market value of such security.
v. In case of units of domestic mutual funds and units of Money Market Mutual Funds, a certificate
from the
issuer on the Net Asset Value of such security.
vi. In case of shares and convertible debentures, a certificate from a Chartered Accountant on the value
of such securities according to the guidelines issued by Securities & Exchange Board of India or as
per any internationally accepted pricing methodology on arm’s length basis for listed companies and
unlisted companies, respectively.
vii. Certificate from the concerned Indian company certifying that the proposed transfer of
shares/convertible debentures by way of gift from resident to the non-resident shall not breach the
applicable sectoral cap/ FDI limit in the company and that the proposed number of
shares/convertible debentures to be held by the non- resident transferee shall not exceed 5 per cent
of the paid up capital of the company.
viii. An undertaking from the resident transferor that the value of security to be transferred together
with any security already transferred by the transferor, as gift, to any person residing outside India
does not exceed the rupee equivalent of USD 50,000during a financial year*.
ix. A declaration from the donee accepting partly paid shares or warrants that donee is aware of the
liability as
regards calls in arrear and consequences thereof.

Que: What documents are to be submitted by a person resident in India for transfer of shares, to a person
resident outside India by way of gift.
TRANSFER OF CAPITAL INSTRUMENT WHICH DOES NOT REQUIRE APPROVAL OF RBI
1) Transfer of capital instrument by Non Resident to resident if the following conditions are satisfied :
(a) Shares were acquired by non resident under FDI scheme in compliance of FEMA.
(b) Pricing of shares is as per pricing guidelines issued by SEBI.
(c) A certificate from a practicing Chartered Accountant stating that the pricing is as per SEBI’s regulations.
2) * Transfer of shares from resident to Non – Resident :
This transfer will not require the approval of RBI if the following conditions are satisfied:
(a) The transaction is approved by Foreign Investment Promotion Board.
(b) The Pricing for transfer of such shares should be as per RBI’s guidelines or if it is not as per RBI’s
guidelines then it should be as per SEBI’s guidelines & the practicing Chartered Accountant shall issue a
certificate stating that the pricing is as per RBI’s or SEBI’s guidelines.
(c) If shares are transferred to non resident as per SEBI [substantial Acquisition of Shares and Takeover
Regulation, 2011], the price of such shares shall be as per RBI’s guidelines, no approval of RBI is required.
3) If the resident intends to invest in the company [investee company] which operates in the financial sector
, the investment can be made without the approval of RBI if :
(a) The investee company should have been issued a certificate by the financial regulator stating that the
company meets the criteria of fit & proper person.
(b) Sectoral conditions are complied.
ACQUISITION OF SHARES BY NON RESIDENTS IN THE INDIAN COMPANY UNDER THE SCHEME OF MERGER &
AMALGAMATION
The Indian company is allowed to issue shares to residents outside India in the new company which is formed
as the result of merger & amalgamation without the approval of RBI. If the following conditions are satisfied:
(a) Sectoral cap must not be breached on account of such allotment.
(b) The new company shall not operate in the sector in which FDI is prohibited.
ACQUISITION OF RIGHTS SHARES BY PERSONS RESIDENT OUTSIDE INDIA
If the person resident outside India already holds share in Indian company may purchase the right shares
offered by the Indian company without the approval of RBI, if the following conditions are satisfied :
(a) The original shares against which the rights shares are offered must have been acquired as per the
provisions of FEMA.
(b) The right shares will also be subject to the same conditions & repatriation restriction as applicable to the
original shares.
(c) The allotment of right shares shall not breach the sectoral cap.
(d) The price charged to Resident outside India Investor for right shares shall not be less than the price
charged to Indian Investor.
(e) The right shares shall be allotted within a period of 180 days from the date of inward remittance of the
funds.
(f) Within a period of 30 days from the date of allotment of right share RBI must be informed in form FC-
GPR.
ISSUE OF BONUS SHARES TO PERSON RESIDENT OUTSIDE INDIA
The Indian company can issue bonus shares to its shareholders who re resident outside India without the
approval of RBI if the following conditions are satisfied :
All the conditions are same as right shares except (d) & (e).

ISSUE OF SHARES TO PERSON RESIDENT OUTSIDE INDIA UNDER EMPLOYEE STOCK OPTION SCHEME OR SWEAT
EQUITY SHARES
The Indian company may offer shares under employee stock option scheme or through Sweat Equity Shares to
the employees or the directors of the company or of overseas subsidiary company or holding or joint venture
company, who are resident outside India.
STOCK OPTION OR SWEAT ISSUES AGAR NRI KO ISSUE KARNA HAI TOH VO RULES KE HISAB HONA CHAIYE. AUR
AGAR INVESTMENT APPROVAL ROUTE KE ANDAR ATA HAI TOH PEHLE GOVERNMENT APPROVAL LENA ZARURI
HAI. PAKISTAN AUR BANGLADESH KE CITIZEN KO ISSUE KARNA HAI TOH HAR BAR GOVERNMENT APPROVAL
LAGTA HAI.
The above allotment of shares can be made without the approval of RBI if the following conditions are
satisfied :
(a) If the company is a listed company, it has to follow SEBI’s regulations & if the company is unlisted
company then it has to follow companies Act for making allotment of such shares.
(b) If the company does not operate in a sector in which FDI is allowed under automatic route, the
permission of Foreign Exchange promotion Board will have to be obtained.
(c) If the employee is the resident of Pakistan or Bangladesh then the approval of Central Government will
be requires.
(d) Within 30 days of allotment RBI has to informed in form ESOP.
SHARES SWAP
It means exchange of shares. Through share swaps also FDI can be made in India. Under share swap the
resident outside India acquires shares in the Indian company & in the consideration of such acquisition gives
or issues the shares of the company incorporated outside India.
In case of share swaps, the approval of Government will not be required if :

(a) The company of which shares are acquired under share swap is covered in the sector in which FDI is
permitted under automatic route.
(b) The valuation of such shares is done by SEBI registered merchant banker & investment banker of foreign
country who is registered with regulatory authority of such country.
PLEDGING OF SHARES OF INDIAN COMPANY
PLEDGING MATAB SHARES GIRVI RAKHNA, INDIAN COMPANY,
KE PROMOTERS ECB KE TIME PAR SHARES GIRVI RAK SAKTE HAI!
When the Indian company avails FCB, against such ECB the promoter of Indian company pledges his shares in
the company or in the associate company in order to receive such ECB, in this case the promoter has to
obtain NOC from authorized dealer bank.
The authorized dealer bank will grant such NOC, if the following conditions are satisfied :
(a) There is a signed agreement between the lender & the borrower.
(b) Creation of pledge on the share by the promoter is one of the essential conditions of granting the ECB.
(c) The borrower has obtained a loan registration no. from RBI.
The pledge created by the promoter shall be subject to the following conditions :
(a) The period of pledge shall be co-terminus with the period of loan.
(b) The shares that are subject to pledge shall be transferred as per RBI’s Regulations.

(c) A certificate from the auditor of the company has to be obtained stating that the ECB will be utilized for
the purpose for which it is obtained.
PLEDGING OF SHARES BY NRI
NRIs who hold shares in the Indian company can pledge such shares with the authorized dealer bank who has
granted the loan to the investee company for the purpose of business of investee company. Such pledge shall
be subject to the following conditions :
(a) Transfer of shares by NRI to authorized dealer bank, should be as per FDI policy.
(b) The auditor of company should give a certificate stating that the loan will be utilized for the purpose for
which it is given.
(c) SEBI’s rules regarding pledge of the shares are complied.
(d) Section 19 of Banking Regulation Act, 1949 has to be followed.
TRANSFER OF SHARES & CONVERTIBLE SECURITIES BY NRI
The NRI may invest in Indian company by purchasing & acquiring shares from an existing shareholder of such
Indian company or from other non resident investors as per FDI policy.
NRI can acquire shares by way of transfer if :
(a) Sale or gift of shares made by person resident outside India to a NRI.
(b) One NRI may sell or gift shares to another NRI if the company is covered under the sector in which FDI is
allowed under automatic route.
(c) The person resident outside India can sell the shares in stock exchange or can also gift such shares to a
person resident in India.
(d) The person resident in India can sell the shares of Indian company to a person resident outside India
through a private agreement.
However such transfer shall be made only after obtaining KYC document of person resident outside India.
(e) If the person resident outside India or a NRI acquires the control of Indian listed company SEBI
[Substantial Acquisition of shares & Takeover Code, 2011] has to be followed.
(f) Within a period of 60 days from the date of transaction RBI has to be informed in form FC-TRS.
ESCROW ACCOUNT
It is a special purpose a/c which will be opened by person resident outside India & by NRIs. The money kept
in this account will be utilized to enter into transactions in India. This account is opened by Body corporate
incorporated outside India. The account will be opened with authorized dealer category – I bank for the
purpose of giving open offer or exit offer [for the purpose of acquiring the control of an Indian company.
Person resident outside India & NRIs may open this account with Authorised dealer category I bank for the
purpose of acquiring shares of Indian Company as per FDI policy. The designated depository participant may
open this Account for NRI & person resident outside India investor.
RBI’S GUIDELINES ON ISSUE PRICE
The transaction in securities made by person resident outside India or NRI shall be as per the following
guidelines issued by RBI in terms of pricing :
(a) The pricing should be as per SEBI regulations.
(b) Fair valuation of share price shall be done by a PCA or by SEBI registered merchant banker.
(c) RBI’s directions issued from time to time are to be followed.
(d) The NRIs may subscribe the shares of Indian company at the time of its incorporation at face value
without the approval of RBI.
CONVERSION OF ECB, ROYALTY & LUMPSUM PAYMENT IN EQUITY – we will do this ECB chapter!
The Indian company may convert its ECB into equity shares & issue such shares to the lenders of ECB subject
to the following conditions:

(a) The activity of the issuer shall be covered under automatic route & if it is not so covered approval of
government has to obtained.
(b) Sectoral cap should not be breached.
(c) Pricing should be as per FDI policy.
(d) Under this provision the company may convert its ECB unsecured loans, debentures, deposits into equity
shares.
General Permission is also granted by RBI to convert the royalty payments & the lumpsum fees into equity
shares subject to compliance of Tax Laws.
QUE:Whether conversion of ‘External Commercial Borrowing’ into equity is permissible ? Comment.
REMITTANCE ON WINDING UP OR LIQUIDATION OF THE COMPANY
When the company which had accepted FDI goes into winding up, the winding up proceeds can be remitted to
resident outside India investors by authorized dealer bank. However, such remittance shall be subject to the
following conditions :
The Resident outside India Investor will have to make application to the authorized dealer bank along with
following documents :
− NOC from Income Tax Department.
− Auditor’s certificate stating that all the liabilities have been paid.
− If the winding up is not through NCLT [Voluntary Winding up] then a certificate has to submitted stating
that no proceeding is pending against the company under Companies Act.
MODES OF PAYMENT ALLOWED FOR RECEIVING FDI IN AN INDIAN COMPANY

An Indian company issuing shares/ convertible debentures to a person resident outside India shall receive the
amount of consideration by:
(a) inward remittance through normal banking channels;
(b) debit to NRE/ FCNR (B) account of a person concerned maintained with an AD Category I bank;
(c) debit to non-interest bearing escrow account in Indian Rupees in India which is opened with the approval
from AD Category – I bank and is maintained with the AD Category I bank on behalf of residents and non-
residents towards payment of share purchase consideration;
(d) conversion of royalty/ lump sum/ technical know-how fee due for payment or conversion of ECB;
(e) conversion of pre-incorporation/ pre-operative expenses incurred by the a non-resident entity up to a
limit of five percent of its capital or USD 500,000 whichever is less;
(f) conversion of import payables/ pre incorporation expenses/ can be treated as consideration for issue of
shares with the approval of FIPB;
(g) against any other funds payable to a person resident outside India, the remittance of which does not
require the prior approval of the Reserve Bank or the Government of India: and
Swap of capital instruments, provided where the Indian investee company is engaged in a Government route
sector, prior Government approval shall be required
If the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward
remittance or date of debit to NRE/ FCNR (B)/ escrow account, the amount shall be refunded.
Further, Reserve Bank may on an application made to it and for sufficient reasons permit an Indian Company
to refund/ allot shares for the amount of consideration received towards issue of security if such amount is
outstanding beyond the period of 180 days from the date of receipt.

REPORTING OF FOREIGN DIRECT INVESTMENT
The company has accepted FDI, it has to report to the regional office of RBI in the advance reporting form
following reports are to be made:
(a) Details of consideration received by authorized dealer bank in respect of FDI along with KYC report of the
investor from the foreign bank remitting the amount in India.
(b) Within a period of 30 days from the date of issue shares under FDI a return in form FC-GPR has to be filed
with authorized dealer bank. Along with a form a certificate given by PCA or by a merchant banker
registered with SEBI stating that the pricing is as per RBI’s guidelines has to be filed.
(c) A certificate issued by MD or CS or Manager has to be given with the ARF stating that :
− The provisions of Companies Act, 2013 are followed.
− Company is eligible to issue shares under RBI guidelines.
− Company has obtained the required approval of GOI.
(d) The Foreign investment accepted by the company & the statement of foreign liability as on 31st March of
each year has to be filed with RBI upto 15th July of each year.
(e) When the shares are issued on account of conversion of ECB, lumpsum fees or royalty, RBI has to be
reported in form No. FC-GPR.
REPORTING OF SHARE TRANSFER

When the shares are transferred from resident to Non resident& from non resident to resident, RBI has to be
informed within a period of 60 days:
(a) From the date of receipt of consideration by the resident
OR
(b) From the date of receipt of shares by resident.
In Form FC-TRS
The obligation of reporting is on person resident in India.
When a company sells shares to NRI or persons resident outside India, it has to report to
authorized dealer bank, which in turn reports RBI.
REPORTING OF NON CASH–TRANSACTIONS
When the ECBs are converted into shares of borrower company or when lumpsum fees or royalty is converted
into shares, RBI is to be reported in the following manner :
Full Conversion of ECB Partial Conversion of ECB
RBI has to be reported within 7 days from the end RBI has to be reported within 7 days from the end
of the month in which conversion to place in form of the month in which conversion took place in
no. FC GPR & ECB-2. form no. FC-GPR & ECB-2,
In the form the word full conversion has to In the form the word “Partial Conversion” has to
highlighted. be highlighted.
REPORTING OF ADR & GDR

Whenever the company issues shares under ADR/GDR, within a period of 30 days from the date of completion
of issue of ADR/GDR, RBI has to be reported in form DRR.
Note: In form LEC(FII) The Authorised Dealer Category I banks shall report to the Reserve Bank the
purchase/transfer of equity instruments by FPIs on the stock exchanges in India and in case of LEC(NRI) in
case of NRI.

An Investment vehicle which has issued units to a person resident outside India shall file Form InVI within 30
days from the date of issue of units.
The entity making downstream investment shall notify the Secretariat for Industrial Assistance, DPIIT within
30 days of such investment even if equity instruments have not been allotted and shall file Form DI with the
Reserve Bank within 30 days from the date of allotment of equity instruments.
The Indian Start-up Company issuing Convertible Notes to a person resident outside India shall file Form CN
within 30 days of such issue and when person resident in India purchases from or sell to person resident
outside India the convertible notes issued by start ups shall also report in form CN within 30 days of the
transaction.
LLP receiving investment consideration against share of profit shall file Form LLP (I), within 30 days from the
date of receipt of the amount of investment consideration.
The transfer or disinvestment of capital between a resident and a non-resident (or vice versa) shall be filed
in Form LLP(II) within 60 days from the date of receipt of funds by the Resident transferor/transferee.
Form Employees’ Stock Option (ESOP): An Indian company issuing employees’ stock option to persons
resident outside India who are its employees/directors or employees/directors of its holding company/joint
venture / wholly owned overseas subsidiary/subsidiaries shall file Form-ESOP, within 30 days from the date
of issue of employees’ stock option.
Form Depository Receipt Return (DRR): The Domestic Custodian shall report in Form DRR, the issue /
transfer of depository receipts issued in accordance with the Depository Receipt Scheme, 2014 within 30
days of close of the issue.
Form LLP (I): A Limited Liability Partnerships (LLP) receiving amount of consideration for capital contribution
and acquisition of profit shares shall file Form LLP (I), within 30 days from the date of receipt of the
amount of consideration.
Form LLP (II): The disinvestment/transfer of capital contribution or profit share between a resident and a
non-resident (or vice versa) shall be filed in Form LLP(II) within 60 days from the date of receipt of funds. The
onus of reporting shall be on the resident transferor/transferee.
LEC(FII): The Authorised Dealer Category I banks shall report to the Reserve Bank in Form LEC (FII) the
purchase/transfer of equity instruments by FPIs on the stock exchanges in India.
LEC(NRI): The Authorised Dealer Category I banks shall report to the Reserve Bank in Form LEC (NRI) the
purchase/transfer of equity instruments by Non-Resident Indians or Overseas Citizens of India on stock
exchanges in India.
Form InVI: An Investment vehicle which has issued its units to a person resident outside India shall file Form
InVI within 30 days from the date of issue of units.
Downstream Investment
(a) An Indian entity or an investment vehicle making downstream investment in another Indian
entity which is considered as indirect foreign investment for the investee Indian entity in terms
of the Rules, shall notify the Secretariat for Industrial Assistance, DPIIT within 30 days of such
investment, even if equity instruments have not been allotted, along with the modality of
investment in new/existing ventures (with/without expansion programme).
(b) Form DI: An Indian entity or an investment Vehicle making downstream investment in another

Indian entity which is considered as indirect foreign investment for the investee Indian entity in
terms of Rule 22 of the Rules shall file Form DI with the Reserve Bank within 30 days from the
date of allotment of equity instruments.
(2) Form Convertible Notes (CN):
(a) The Indian Start-up Company issuing Convertible Notes to a person resident outside India shall
file Form CN within 30 days of such issue.
(b) A person resident in India, who may be a transferor or transferee of Convertible Notes issued by
an Indian start-up company shall report such transfers to or from a person resident outside
India, as the case may be, in Form CN within 30 days of such transfer.
Provided, the format, periodicity and manner of submission of such reporting shall be as prescribed by
Reserve Bank in this regard.
Provided further that unless otherwise specifically stated in Foreign Exchange Management (Mode of
Payment and Reporting of Non-Debt Instruments) Regulations, 2019 all reporting shall be made through or
by an Authorised Dealer bank, as the case may be.
SETTING UP OF BRANCH, LIASION OR PROJECT OFFICE IN INDIA – NOT IN ICSI MODULE JUST READ
The person resident outside India without the approval of Reserve Bank of India cannot establish a branch,
liaison or project office in India. However, no such approval is required to establish a bank branch in India, if
the bank completed with the provisions of Banking Regulations Act, 1949.
However, the person who are citizens of : China, Sri Lanka Afghanistan, Iraq, Bangladesh, Pakistan cannot
establish any branch, project office or liaison office without the approval of RBI.
The approval for opening of branch office, project office or liaison office is granted under 2 categories :
RBI Route Government Route
If the branch, project or liaison office relates to the If the branch project or liaison office relates to
sector where 100% FDI is allowed under automatic the sector where 100% FDI is not allowed.
route
Approval is granted by RBI Approval is granted by GOI.
At the time of granting the approval, the following factors will be considered :
1) For establishing branch / project office.
− Profits in preceding 5 years
− Net worth of preceding year at least 1 lac US $
2) For opening liaison office
− Profit in preceding 3 years
− Net worth of preceding year at least 50 K US $
PERMISSIBLE ACTIVITIES FROM THE BRANCH OFFICE
1. Export & Import of goods
2. Customer services
3. Foreign online shopping services
4. Promote technical & financial collaboration in India

5. Representing parent company in India.
6. Research work.
PERMISSIBLE ACTIVITIES FROM THE LIASONING OFFICE

1) The liasoning office will act as communication channel between India parties & the parent company
outside India.
2) Promote technical & financial collaboration in India.
3) Representing Group Companies in India.
4) Promotion of Import & Export.
Activities from Project office :

From the project office all the activities can be carried on that have a relation with the project which is
undertaken in India.
Extension of Validity Period of Approval of Laisioning Office or Branch Office
The designated AD Category - I bank may extend the validity period of LO/s for a period of 3 years from the
date of expiry of the original approval / extension granted if the applicant has complied with the following
conditions and the application is otherwise in order:
(a) The LO should have submitted the Annual Activity Certificates for the previous years and
(b) The account of the LO maintained with the designated AD Category – I bank is being operated in
accordance with the terms and conditions stipulated in the approval letter.
Such extension has to be granted, as expeditiously as possible as and in any case not later than one month
from the receipt of the request under intimation to the General Manager, Reserve Bank of India, CO Cell,
New Delhi quoting the reference number of the original approval letter and the UIN.
Further, entities engaged in construction and development sectors and Non-Banking Finance Companies are
permitted to open a liaison office for two years only. No further extension would be considered for liaison
offices of entities which are Non-Banking Finance Companies and those engaged in construction and
development sectors (excluding infrastructure development companies). Upon expiry of the validity period,
the offices shall have to either close down or be converted into a Joint Venture / Wholly Owned Subsidiary in
conformity with the extant Foreign Direct Investment policy.
Registration with police authorities

Applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau or Pakistan desirous of
opening BO/LO/PO in India shall have to register with the state police authorities.
Copy of approval letter for ‘persons’ from these countries shall be marked by the AD Category-I bank to the
Ministry of Home Affairs, Internal Security Division-I, Government of India, New Delhi for necessary action
and record.
Application for additional offices and activities

i. Requests for establishing additional BOs / LOs may be submitted to the AD Category-I bank in a fresh FNC
form. However, the documents mentioned in form FNC need not be resubmitted, if there are no changes to
the documents already submitted earlier.

(a) If the number of offices exceeds 4 (i.e. one BO / LO in each zone viz; East, West, North and South), the
applicant has to justify the need for additional office/s and it shall require prior approval of RBI.
(b) The applicant may identify one of its offices in India as the Nodal Office, which will coordinate the
activities of all of its offices in India.
(c) Whenever the existing BO/LO is shifting to another city in India, prior approval from the AD Category-I
bank is required. However, no permission is required if the LO/BO is shifted to another place in the same city
subject to the condition that the new address is intimated to the designated AD Category-I bank. Changes in
the postal address may be intimated to the CO Cell, New Delhi by the AD Category-I bank at the earliest.
ii. Requests for undertaking activities in addition to what has been permitted initially (Annex C) by Reserve
Bank of India/ AD Category-I bank may be submitted by the applicant to the Reserve Bank through the
designated AD Category -I bank justifying the need.
Transfer of assets of BO/LO/PO

Proposals for transfer of assets may be considered by the AD Category-I bank only from BOs/LOs/POs who are
adhering to the operational guidelines such as submission of AACs (up to the current financial year) at regular
annual intervals with copies endorsed to DGIT (International Taxation); have obtained PAN from IT
Authorities and have got registered with ROC under the Companies Act 2013, if necessary. Also,
(i) Transfer of assets by way of sale to the JV/WoS be allowed by AD Category-I bank only when the non-
resident entity intends to close their BO/LO/PO operations in India.
(ii) A certificate is to be submitted from the Statutory Auditor furnishing details of assets to be transferred
indicating their date of acquisition, original price, depreciation till date, present book value or written down
value (WDV) and sale consideration to be obtained.
Statutory Auditor should also confirm that the assets were not re-valued after their initial acquisition. The
sale consideration should not be more than the book value in each case.
(iii) The assets should have been acquired by the BO/LO/PO from inward remittances and no intangible assets
such as good will, pre-operative expenses should be included.
No revenue expenses such as lease hold improvements incurred by the BO/LO can be capitalised and
transferred to JV/WOS.
(iv) AD Category-I bank must ensure payment of all applicable taxes while permitting transfer of assets.
(v) Credits to the bank accounts of BO/LO/PO on account of such transfer of assets will be treated as
permissible credits.
(vi) Donation by BO/LO/PO of old furniture, vehicles, computers and other office items etc. to NGOs or other
not-for-profit organisations may be permitted by the AD category-I banks after satisfying itself about the
bonafide of the transaction.

REPATRIATION OF SALE PROCEEDS BY PERSON RESIDENT OUTSIDE INDIA OR HIS SUCCESSOR
In case, the person resident outside India or his successor sells any immoveable property which is located in
India, repatriation of sale proceeds outside India shall be made only with the prior approval of RBI.
REPATRIATION OF SALE PROCEEDS BY PERSON RESIDENT OUTSIDE INDIA WHO IS ALSO A CITIZEN OF INDIA
The person resident outside India who is also a citizen of India may repatriate the sale proceeds of any
immoveable property situated in India except agricultural, plantation, farmhouse without the approval of
RBI, if the following conditions are satisfied.
(a) Such immoveable property was acquired after complying with FEMA Rules.
(b) Maximum repatriation in respect of 2 residential immoveable property is allowed.
(c) The maximum amount of repatriation shall not exceed :
− The amount paid in foreign exchange for acquisition of property.
− The funds that are held in foreign currency Account or non resident account in India.
− Foreign currency equivalent of the amount of payment which was through the fund held in non
resident, external account.
If the repatriation exceeds the above limit the approval of RBI has to be taken.
Penalties
If a person violates/contravenes any FDI Regulations, by way of breach/non-adherence/non-compliance/

contravention of any rule, regulation, notification, press note, press release, circular, direction or order
issued in exercise of the powers under FEMA or contravenes any conditions subject to which an
authorization is issued by the Government of India/ Reserve Bank of India, he shall, upon adjudication, be
liable to a penalty up to thrice the sum involved in such contraventions where such amount is quantifiable,
or up to two lakh Rupees where the amount is not quantifiable, and where such contraventions is a
continuing one, further penalty which may extend to five thousand Rupees for every day after the first
day during which the contraventions continues.
Where a person committing a contravention of any provisions of this Act or of any rule, direction or order
made there under is a company (company means anybody corporate and includes a firm or other association
of individuals as defined in the Companies Act), every person who, at the time the contravention was
committed, was in charge of, and was responsible to, the company for the conduct of the business of the
company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to
be proceeded against and punished accordingly.
Any Adjudicating Authority adjudging any contraventions above, may, if he thinks fit in addition to any
penalty which he may impose for such contravention direct that any currency, security or any other
money or property in respect of which the contravention has taken place shall be confiscated to the
Central Government.
Adjudication and Appeals
For the purpose of adjudication of any contravention of FEMA, the Ministry of Finance as per the
provisions contained in the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules,
2000 appoints officers of the Central Government as the Adjudicating Authorities for holding an enquiry in
the manner prescribed. A reasonable opportunity has to be given to the person alleged to have committed
contraventions against whom a complaint has been made for being heard before imposing any penalty.

The Central Government may appoint as per the provisions contained in the Foreign Exchange
Management (Adjudication Proceedings and Appeal) Rules, 2000, an Appellate Authority/ Appellate
Tribunal to hear appeals against the orders of the adjudicating authority.
Compounding Proceedings
Same as we covered in FEMA

FOREIGN EXCHANGE MANAGEMENT (DEBT INSTRUMENTS) REGULATIONS, 2019
1. These regulations regulate the investment in debt securities by Residents outside India.
2. Reserve Bank may, on an application made to it and for sufficient reasons, permit a person resident
outside India to make any investment in India subject to such conditions as may be considered necessary.
3. An Indian entity or a mutual fund, or a venture capital fund or a firm or an association of persons or a
proprietary concern shall not receive any investment in India from a person resident outside India or record
such investment in its books, however Reserve Bank may, on an application made to it, for sufficient reasons,
permit the above to receive any investment in India from a person resident outside India or to record such
investment subject to such conditions as may be considered necessary.
4. A person resident outside India may:

o purchase or sell debt instruments, permitted by RBI in consultation with CG as per these
regulations.
o trade in all exchange traded derivative contracts approved by Securities and Exchange
Board of India from time to time as per conditions given in these regulations.
o enter into contract in any derivative transaction subject to conditions laid down by the
Reserve Bank from time to time.
5. An FPI may purchase the following debt instruments on repatriation basis subject to the
terms and conditions specified by the SEBI & RBI:
a) dated Government securities/ treasury bills;
b) non-convertible debentures/ bonds issued by an Indian company;
c) commercial papers issued by an Indian company;
d) units of domestic mutual funds or Exchange-Traded Funds (ETFs) which invest less than or
equal to 50 percent in equity;
e) Security Receipts (SRs) issued by Asset Reconstruction Companies;
f) debt instruments issued by banks, eligible for inclusion in regulatory capital;
g) Credit enhanced bonds;
h) Listed non-convertible/ redeemable preference shares or debentures issued in terms of
Regulation 6 of these Regulations;
i) Securitised debt instruments, including (i) any certificate or instrument issued by a special
purpose vehicle (SPV) set up for securitisation of asset/s with banks, Financial Institutions or NBFCs as
originators;
j) Rupee denominated bonds/ units issued by Infrastructure Debt Funds;

Provided this will include such instruments issued on or after November 22, 2011 and held by deemed FPIs.

k) Municipal Bonds
6. A NRI or an OCI may, without limit, purchase, on repatriation basis, Government dated
securities (other than bearer securities) or treasury bills or units of domestic mutual funds or Exchange-
Traded Funds (ETFs) which invest less than or equal to 50 percent in equity, Bonds issued by a Public Sector
Undertaking (PSU) in India, Bonds issued by Infrastructure Debt Funds, Listed non-convertible/ redeemable
preference shares or debentures issued in terms of Regulation 6 of these Regulations.
7. An NRI or an OCI may purchase on repatriation basis debt instruments issued by banks,
eligible for inclusion in regulatory capital.
8. An NRI may subscribe to National Pension System governed and administered by Pension
Fund Regulatory and Development Authority (PFRDA), provided such person is eligible to invest as per the
provisions of the PFRDA Act. The annuity/ accumulated saving will be repatriable.
9. An NRI or an OCI may, without limit, purchase on non-repatriation basis, dated Government
securities (other than bearer securities), treasury bills, units of domestic mutual funds or Exchange-Traded
Funds (ETFs) which invest less than or equal to 50 percent in equity, or National Plan/ Savings Certificates.
10. An NRI or an OCI may, without limit, purchase on non-repatriation basis, listed non-
convertible/ redeemable preference shares or debentures issued.
11. An NRI or an OCI may, without limit, on non-repatriation basis subscribe to the chit funds
authorised by the Registrar of Chits or an officer authorised by the State Government.
12. Foreign Central Banks, Multilateral Development Banks or any other entity permitted by the Reserve
Bank, may purchase or sell dated Government Securities/treasury bills, as per RBIs terms and condition,
consideration for purchase of instruments shall be paid out of inward remittance from abroad through
banking channels or out of funds held in a foreign currency account and/ or Special Non-Resident Rupee
(SNRR) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations,
2016. The foreign currency account and SNRR account shall be used only and exclusively for transactions
under this Schedule.
13. A person resident outside India who has purchased instruments as per these regulations
may sell/ redeem the instruments subject to conditions as may be specified by the Reserve Bank and the
Securities Exchange Board of India.
14. The sale/ maturity proceeds (net of taxes) of instruments held by Foreign Portfolio Investors (FPIs) may
be remitted outside India or may be credited to the foreign currency account or SNRR account of the FPI.
15. The net sale/ maturity proceeds (net of taxes) of instruments held by NRIs or OCIs, may be Credited to
the NRO account if were held on non-repatriation basis or Credited to the NRO account person concerned
where the payment for the purchase of the instruments sold was made out of funds held in NRO account, or
Remitted abroad or at the NRI/ OCI investor's option, if the instruments were purchased on repatriation
basis.
16. In all other cases, the sale/ maturity proceeds (net of taxes) may be remitted abroad or credited to an
account opened with the prior permission of the Reserve Bank.
17. Where a Scheme of Arrangement for an Indian company has been approved by National Company Law
Tribunal (NCLT), the Indian company may issue non-convertible redeemable preference shares or
nonconvertible redeemable debentures or issue bonus shares to the shareholders resident outside India,
subject to the following conditions, namely:
a. the original investment made in the Indian company by a person resident outside India as
per these regulations

b. the said issue is as per Companies Act, 2013 and as per conditions specified by NCLT.
c. the Indian company shall not engage in any activity/ sector in which investment by a
person resident outside India is prohibited.
18. All transaction under these Regulations shall be undertaken through banking channels in India and subject
to payment of applicable taxes and other duties/ levies in India.
19. The remittance of sale proceeds of a debt instrument held by a person resident outside India shall be
made only as per these regulations. An authorised dealer may allow the remittance of sale proceeds of a
debt instrument (net of applicable taxes) to the seller of such instrument resident outside India, However the
instrument was held by the seller must be on repatriation basis + Reserve Bank's approval has been obtained
in other cases for sale of the instrument and remittance of proceeds
20. Authorised dealer may allow remittances – both inward and outward – related for permitted derivatives
transactions.
PENALTIES:
If a person violates/contravenes any Foreign Direct Investment Regulations, by way of breach/non-

adherence/non-compliance/contravention of any rule, regulation, notification, press note, press release,
circular, direction or order issued in exercise of the powers under Foreign Exchange Management Act(FEMA)
or contravenes any conditions subject to which an authorization is issued by the Government of India/
Reserve Bank of India, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in
such contraventions where such amount is quantifiable, or up to two lakh Rupees where the amount is not
quantifiable, and where such contraventions is a continuing one, further penalty which may extend to five
thousand Rupees for every day after the first day during which the contraventions continues.
Additional Points for Foreign Non Debt Investment Regulations
Acquisition of immovable property for carrying on a permitted activity
According to Rule 26 of Foreign Exchange Management (Non-debt Instruments) Rules, 2019, a person
resident outside India who has established in India in accordance with the Foreign Exchange Management
(Establishment in India of a Branch office or a liaison office or a project office or any other place of
business) Regulations, 2016, as amended from time to time, a branch, office or other place of business for
carrying on in India any activity, excluding a liaison office, may -
(a) acquire any immovable property in India, which is necessary for or incidental to carrying on such
activity.
Provided that,-
(i) all applicable laws, rules, regulations, for the time being in force are duly complied with; and
(ii) the person files with the Reserve Bank a declaration in the Form IPI as specified by the Reserve
Bank
from time to time, not later than ninety days from the date of such acquisition;
(b) transfer by way of mortgage to an authorised dealer as a security for any borrowing, the immovable
property
acquired in pursuance of clause (a) stated above.
Provided that no person of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Hong
Kong or Macau or Nepal or Bhutan or Democratic People’s Republic of Korea (DPRK) shall acquire

immovable property, other than on lease not exceeding five years, without prior approval of the Reserve
Bank.
Acquisition by a long-term visa holder
As per Rule 28 of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, a person being a
citizen of Afghanistan, Bangladesh or Pakistan belonging to minority communities in those countries, namely,
Hindus, Sikhs, Buddhists, Jains, Parsis and Christians who is residing in India and has been granted a Long
Term Visa (LTV) by the Central Government may purchase only one residential immovable property in India as
dwelling unit for self-occupation and only one immovable property for carrying out self-employment subject to
the following conditions, namely :-
(a) the property shall not be located in and around restricted or protected areas so notified by the
Central
Government and cantonment areas;
(b) the person submits a declaration to the Revenue Authority of the district where the property is
located,
specifying the source of funds and that he or she is residing in India on LTV;
(c) the registration documents of the property shall mention the nationality and the fact that such
person is on LTV;
(d) the property of such person may be attached or confiscated in the event of his or her indulgence in
anti- India
activities;
(e) a copy of the documents of the purchased property shall be submitted to the Deputy Commissioner
of Police (DCP) or Foreigners Registration Office (FRO) or Foreigners Regional Registration Office
(FRRO) concerned and to the Ministry of Home Affairs (Foreigners Division);
(f) such person shall be eligible to sell the property only after acquiring Indian citizenship, however,
transfer of the property before acquiring Indian citizenship shall require prior approval of DCP or FRO
or FRRO concerned.
FOREIGN EXCHANGE MANAGEMENT (MODE OF PAYMENT AND REPORTING OF NON- DEBT INSTRUMENTS)
REGULATIONS, 2019
Purchase or Sale of Equity Instruments of an Indian Company by a Person Resident outside India
Mode of payment:
(1) The amount of consideration shall be paid as inward remittance from abroad through banking
channels or out of funds held in NRE/FCNR(B)/Escrow account maintained in accordance with the
Foreign Exchange Management (Deposit) Regulations, 2016.
Explanation: The amount of consideration shall include:
(i) Issue of equity shares by an Indian company against any funds payable by it to the investor
(ii) Swap of equity instruments.
(2) Equity instruments shall be issued to the person resident outside India making such investment within

sixty
days from the date of receipt of the consideration.
Explanation: In case of partly paid equity shares, the period of 60 days shall be reckoned from the
date of receipt of each call payment
(3) Where such equity instruments are not issued within sixty days from the date of receipt of the
consideration the same shall be refunded to the person concerned by outward remittance through
banking channels or by credit to his NRE/ FCNR (B) accounts, as the case may be within fifteen days
from the date of completion of sixty days.
(4) An Indian company issuing equity instruments under this Schedule may open a foreign currency
account with an Authorised Dealer in India in accordance with Foreign Exchange Management (Foreign
currency accounts by a person resident in India) Regulations, 2016.
Remittance of sale proceeds
The sale proceeds (net of taxes) of the equity instruments may be remitted outside India or may be
credited to the NRE/ FCNR (B) of the person concerned.
Investments by Foreign Portfolio Investors
Mode of payment:
channels or out of funds held in a foreign currency account and/ or a Special Non-Resident Rupee
(SNRR) account maintained in accordance with the Foreign Exchange Management (Deposit)
Regulations, 2016.
Provided balances in SNRR account shall not be used for making investment in units of Investment
Vehicles other than the units of domestic mutual fund.
(2) The foreign currency account and SNRR account shall be used only and exclusively for transactions
Remittance of sale proceeds:
The sale proceeds (net of taxes) of equity instruments and units of domestic mutual fund may be remitted
outside India or credited to the foreign currency account or a SNRR account of the FPI.
The sale proceeds (net of taxes) of units of investment vehicles other than domestic mutual fund may be
remitted outside India.
Mode of payment:
channels or out of funds held in a Non-Resident External (NRE) account maintained in accordance
with the Foreign Exchange Management (Deposit) Regulations, 2016.
(2) The NRE account will be designated as an NRE (PIS) Account and the designated account shall be
used
exclusively for putting through transactions permitted under this Schedule.
(3) Investment in units of domestic mutual fund shall be paid as inward remittance from abroad through

banking channels or out of funds held in NRE/FCNR(B) account.
(4) Subscription to National Pension System shall be paid as inward remittance from abroad through
banking channels or out of funds held in NRE/FCNR(B)/NRO account.
Remittance of sale proceeds:
The sale proceeds (net of taxes) of equity instruments may be remitted outside India or may be credited
to NRE (PIS) account of the person concerned.
The sale proceeds (net of taxes) of units of mutual funds and subscription to National Pension System may
be remitted outside India or may be credited to NRE (PIS)/FCNR(B)/NRO account of the person concerned
at the option of the NRI/OCI investor.
Purchase or sale of equity instruments of an Indian company or units or contribution to the capital of a LLP by
Non-Resident Indian (NRI) or Overseas Citizen of India (OCI) on Non-repatriation basis.
Mode of Payment:
The amount of consideration shall be paid as inward remittance from abroad through banking channels or
out of funds held in NRE/FCNR(B)/NRO account maintained in accordance with the Foreign Exchange
Management (Deposit) Regulations, 2016.
Sale/maturity proceeds:
(1) The sale/maturity proceeds (net of applicable taxes) of equity instruments or units or disinvestment
proceeds of a LLP shall be credited only to the NRO account of the investor, irrespective of the type
of account from which the consideration was paid;
(2) The amount invested in equity instruments of an Indian company or the consideration for contribution
to the
capital of a LLP and the capital appreciation thereon shall not be allowed to be repatriated abroad.
Investment in a firm or a proprietary concern
Mode of payment:
The amount of consideration shall be paid as inward remittance from abroad through banking channels or
out of funds held in NRE/FCNR(B)/NRO account maintained in accordance with the Foreign Exchange
Management (Deposit) Regulations, 2016.
Sale/maturity proceeds:
(1) The disinvestment proceeds shall be credited only to the NRO account of the person concerned,
irrespective
of the type of account from which the consideration was paid;
(2) The amount invested for contribution to the capital of a firm or a proprietary concern and the
capital appreciation thereon shall not be allowed to be repatriated abroad.

Investment by other non-resident investors
Mode of Payment:
The amount of consideration shall be paid out of inward remittances from abroad through banking channels.
Remittance/credit of sale/ maturity proceeds:
The sale/ maturity proceeds (net of taxes) may be remitted abroad.
Investment in a Limited Liability Partnership
Mode of payment:
Payment by an investor towards capital contribution of an LLP shall be made by way of an inward
remittance through banking channels or out of funds held in NRE or FCNR (B) account maintained in
accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.
Remittance of disinvestment proceeds:
The disinvestment proceeds may be remitted outside India or may be credited to NRE or FCNR (B) account
of the person concerned.
Investment by a Foreign Venture Capital Investor
Mode of payment:
channels or out of funds held in a foreign currency account and/or a Special Non-Resident Rupee
Regulations, 2016.
Remittance of sale/maturity proceeds:
The sale/maturity proceeds (net of taxes) of the securities may be remitted outside India or may be
credited to the foreign currency account or a Special Non-resident Rupee Account of the FVCI.
Investment by a person resident outside India in an Investment Vehicle
Mode of payment:
channels or out of funds held in a foreign currency account and/or a Special Non-Resident Rupee
Regulations, 2016.
The sale/maturity proceeds (net of taxes) of the securities may be remitted outside India or may be

credited to the foreign currency account or a Special Non-resident Rupee Account of the FVCI.
Issue of Indian Depository Receipts
Mode of Payment:
NRIs or OCIs may invest in the IDRs out of funds held in their NRE/FCNR (B) account, maintained in
accordance
with the Foreign Exchange Management (Deposit) Regulations, 2016.
Redemption/conversion of IDRs into underlying equity shares of the issuing company shall be a compliance
the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004.
Issue of Convertible Notes by an Indian start-up company:
A start-up company issuing convertible notes to a person resident outside India shall receive the amount
of consideration by inward remittance through banking channels or by debit to the NRE/FCNR(B)/Escrow
account maintained by the person concerned in accordance with the Foreign Exchange Management (Deposit)
Regulations, 2016.
Repayment or sale proceeds may be remitted outside India or credited to NRE/FCNR(B) account maintained
by the
person concerned in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

CHAPTER – 4
OVERSEAS DIRECT
INVESTMENT
INTRODUCTION
INDIAN LOG INDIA KE BAHR INVEST KARTE HAI,

IS SE VIDESHI MUDRA BAHAR JATI HAI!
In order to encourage global business our Central Government is simplifying the procedures and easing the rules
and regulations under the Foreign Exchange Management Act, 1999.
In this direction, a significant step has been taken with implementation of a new Overseas Investment
regime. Foreign Exchange Management (Overseas Investment) Rules, 2022 have been notified by the Central
Government on August 22, 2022.
Overseas Direct Investment (ODI) means:

a) Acquisition of any unlisted equity capital or subscription as a part of the
Memorandum of Association of a foreign entity, or
b) Investment in 10% or more of the paid-up equity capital of a listed foreign
entity, or
c) Investment with control where investment is less than 10% of the paid-up
equity capital of a listed foreign entity.
For better understanding of Overseas Direct Investment (ODI), foreign entity means an entity formed or registered
or incorporated outside India, including in International Financial Services Centre (IFSC) in India, that has limited
liability.
Further, Control means the right to appoint majority of the directors or to control the management or policy
decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by
virtue of their shareholding or management rights or shareholders’ agreements or voting agreements that entitle
them to ten percent or more of voting rights or in any other manner in the entity.
“Overseas Investment” means financial commitment and Overseas Portfolio Investment by a person resident in
India.

It may be noted that financial commitment by a person resident in India means the aggregate amount of
investment by way of ODI, debt other than Overseas Portfolio Investment (OPI) and non-fund-based facility or
facilities extended by it to all foreign entities.
An Indian entity may lend or invest in any debt instruments issued by a foreign entity or extend non-fund based
commitment to or on behalf of a foreign entity, including overseas SDSs of such Indian entity, subject to the
following conditions:
a. the Indian entity is eligible to make ODI;
b. the Indian entity has made ODI in the foreign entity;
c. the Indian entity has acquired control in the foreign entity on or before the
date of making such financial commitment
Indian Entity Means: A Company defined under the Companies Act, 2013 + A Body corporate incorporated by any
law for the time being in force + A Limited Liability Partnership formed under the Limited Liability Partnership Act,
2008. A Partnership firm registered under the Indian Partnership Act, 1932
Overseas Portfolio Investment (OPI) means investment, other than ODI, in foreign securities, but not in any unlisted
debt instruments or any security issued by a person resident in India who is not in an IFSC:
However, OPI by a person resident in India in the equity capital of a listed entity, even after its delisting shall
continue to be treated as OPI until any further investment is made in the entity.
Debt instruments are : (i) Government bonds; (ii) corporate bonds; (iii) all tranches of securitisation structure which
are not equity tranche; (iv) borrowings by firms through loans; and (v) depository receipts whose underlying
securities are debt securities
"host country" or "host jurisdiction" means the country or jurisdiction, including the International Financial
Services Centre, in which the foreign entity is formed, registered or incorporated, as the case may be;
PERMISSION FOR OVERSEAS INVESTMENT
A person resident in India may make or transfer any investment or financial commitment outside India under
general permission/automatic route subject to the provisions contained in the Foreign Exchange Management
(Overseas Investment) Rules, 2022 and Foreign Exchange Management (Overseas Investment) Regulations, 2022.
Accordingly, overseas investment may be made in a foreign entity engaged in a bona fide business activity, directly
or through Step Down Subsidiary (SDS) /Special-Purpose Vehicle (SPV)
Further, Subsidiary/Step Down Subsidiary (SDS) of a foreign entity means an entity in which the foreign entity has
control and the structure of such subsidiary/SDS shall comply with the structural requirements of a foreign entity,
i.e., such subsidiary/SDS shall also have limited liability where the foreign entity’s core activity is not in strategic
sector. The investee entities of the foreign entity where such foreign entity does not have control (as defined
above) shall not be treated as SDSs and therefore need not be reported henceforth.
PROCEDURE FOR MAKING OVERSEAS INVESTMENT

The person intending to make any financial commitment shall fill up the Form FC duly supported by the requisite documents
and approach the designated Authorised Dealer (AD) bank for making the investment/remittance
In respect of any case under the approval route, the applicant shall approach their designated AD bank who shall forward the
proposal to the Reserve Bank after due scrutiny and with its specific recommendations. The application for overseas investment
under the approval route would continue to be submitted to the Reserve Bank in physical/electronic form through email as
hitherto, in addition to the online reporting
The designated AD bank before forwarding the proposal shall submit the relevant sections of the Form FC in the online OID
application and the transaction number generated by the application shall be mentioned in their reference.
The following documents shall be submitted along with the proposal:
1. Background and brief details of the transaction.
2. Reason(s) for seeking approval mentioning the extant FEMA provisions.
3. Observations of the designated AD bank with respect to the following:
Prima facie viability of the foreign entity;
Benefits which may accrue to India through such investment;
Financial position and business track record of the Indian entity and the foreign entity;
Any other material observation
Recommendations of the designated AD bank with confirmation that the applicant’s board resolution or resolution from an
equivalent body, as applicable, for the proposed transaction(s) is in place
Diagrammatic representation of the organisational structure indicating all the subsidiaries of the Indian entity horizontally and
vertically with their stake (direct and indirect) and status (whether operating company or SPV)
Valuation certificate for the foreign entity (if applicable)
Other relevant documents properly numbered, indexed and flagged
The proposal shall be submitted to the Reserve Bank of India
APPROVAL FROM CENTEAL GOVERNMENT
The applications for overseas investment/financial commitment in Pakistan/other jurisdiction as may be advised by
the Central Government from time to time or in strategic sectors/specific geographies shall be forwarded by the AD
banks from their agents to the Reserve Bank as per the specified procedure for further submission to the Central
Government. (Means we will apply to AD Bank and the bank will further forward the application to RBI)
Strategic sector shall include energy and natural resources sectors such as Oil, Gas, Coal, Mineral Ores, submarine
cable system and start-ups and any other sector or sub-sector as deemed fit by the Central Government. The
restriction of limited liability structure of foreign entity shall not be mandatory for entities with core activity in any
strategic sector. Accordingly, Overseas Direct Investment (ODI) can be made in such sectors in unincorporated
entities as well.
An Indian entity is also permitted to participate in a consortium (groups) with other international operators to
construct and maintain submarine cable systems on co-ownership basis. AD banks may allow remittances for ODI in
strategic sector after ensuring that Indian entity has obtained necessary permission from the competent authority,
wherever applicable.
APPROVAL OF RBI

Financial commitment by an Indian entity, exceeding USD 1 (one) billion (or its equivalent) in a financial year shall
require prior approval of the Reserve Bank even when the total financial commitment of the Indian entity is within
the eligible limit under the automatic route. (if investment proposal exceeds USD 1 Billion, in a financial year, we
have to take prior approval of RBI even if the commitment by Indian Party is within the limit of Automatic Route)
NO OBJECTION CERTIFICATE (NOC) FROM THE LENDER BANK/REGULATORY BODY/INVESTIGATIVE AGENCY

Any person resident in India having an account appearing as a Non-Performing Asset (NPA) or is classified as wilful
defaulter or is under investigation by a financial sector regulator/ investigative agency shall obtain an NOC from the
lender bank/regulatory body/investigative agency concerned before making financial commitment or undertaking
disinvestment.
Where an Indian entity has already issued a guarantee in accordance with the FEMA provisions before an
investigation has begun or account is classified as NPA/wilful defaulter and subsequently is required to honour such
contractual obligation, such remittance due to the invocation will not constitute fresh financial commitment and
hence NOC shall not be required
MODE OF PAYMENT (HOW WOULD YOU FUND YOUR OVERSEEAS INVESTMENT)

a) by remittance made through banking channels;
b) from funds held in an account maintained in accordance with the
provisions of the Foreign Exchange Management Act;
c) by swap of securities;
d) by using the proceeds of American Depository Receipts or Global
Depositary Receipts or stock swap of such receipts or external commercial
borrowings raised for making ODI.
NOTE:
a) Overseas investment by way of cash is not permitted.
b) An Indian entity can make remittances (send money) to its office/branch
outside India only for the purpose of normal business operations of such
branch or office. so, no remittance shall be made by any Indian entity to its
branch/office outside India for making any overseas investment.
c) A person resident in India shall not make any payment on behalf of any
foreign entity other than by way of financial commitment as permitted
under the OI Rules/Regulations
d) Any investment/financial commitment in Nepal and Bhutan shall be done
in a manner as provided in the Foreign Exchange Management (Manner of
Receipt and Payment) Regulations, 2016.
e) All dues receivable on investments (or financial commitment) made in
freely convertible currencies, as well as their sale/winding up proceeds are
required to be repatriated to India in freely convertible currencies only.
PRICING GUIDELINES

The AD bank, before facilitating, an overseas investment related transaction, shall ensure compliance with the
provisions of Overseas Investment Rules in relation to the documents to be taken by the AD bank, they shall be
guided by their board approved policy, which may, provide for checking the valuation as per any internationally
accepted pricing methodology.
The AD bank shall have a board of Directors approved policy within two months from the date of these directions.
Such policy may also provide for scenarios where the valuation may not be insisted upon, such as:
i. transfer on account of merger, amalgamation or demerger or

liquidation, where the price has been approved by the competent
Court/Tribunal as per the laws in India and/or the host jurisdiction.
or
ii. price is readily (easily) available on a recognised stock exchange,
etc.
iii. The policy shall also clearly provide for additional documents such
as the audited financial statements of the foreign entity, etc. that
may be taken by the AD banks for ascertaining the bona fides in
cases involving write-off of the investment
TRANSFER OR LIQUIDATION
A person resident in India holding equity capital in accordance with Overseas Investment Rules may transfer such
investment, in compliance with the limits and subject to the conditions for such investment or disinvestment,
pricing guidelines or documentation and reporting requirements, as per these rules and the Foreign Exchange
Management (Overseas Investment) Regulations, 2022.
A person resident in India may transfer equity capital by way of sale to a person resident in India, who is eligible to
make such investment under these rules, or to a person resident outside India.
In case the transfer is on account of merger, amalgamation or demerger or on account of buyback of foreign
securities, such transfer or liquidation in case of liquidation of the foreign entity, shall have the approval of the
competent authority as per the applicable laws in India or the laws of the host country or host jurisdiction, as the
case may be.
It is clarified that where the transferor is required to repatriate all the dues before disinvestment, such requirement
shall not apply to the dues that do not arise on account of investment in equity or debt like export receivables, etc
RESTRUCTURING
A person resident in India who has made ODI in a foreign entity may permit restructuring of the balance sheet by
such foreign entity, which has been incurring losses for the previous two years as per last audited balance sheets,
subject to ensuring compliance with reporting, documentation requirements and subject to the reduction in the
total value of the outstanding dues towards such person resident in India on account of investment in equity and
debt, after such restructuring not exceeding the proportionate amount of the accumulated losses.

It means the total contribution of the Indian party in restructuring can not exceed the amount of dues that Indian
party has on account of equity or debt investment made in foreign entity and that too, the contribution has to be
made in the proportion of accumulated loss.
For example, if loss was Rs 100 Crore and Indian party has outstanding dues of Rs 10 Crore then in this case, if Indian
Party is contributing Rs 5 Crores then there will be reduction of Rs 5 Crore from debt and maximum reduction in debt
can not exceed the proportionate amount of loss that the Indian party is contributing in restructuring.
It may be noted that in case of such diminution where the amount of corresponding original investment is more
than USD 10 million or in the case where the amount of such diminution (reduction) exceeds twenty per cent of the
total value of the outstanding dues towards the Indian entity or investor, the diminution in value shall be duly
certified on an arm’s length basis by a registered valuer as per the Companies Act, 2013 or corresponding valuer
registered with the regulatory authority or certified public accountant in the host country.
The certificate dated not more than six months before the date of the transaction shall be submitted to the
designated AD bank.
The certificate shall mention the amount of accumulated losses as per the audited balance sheet of the foreign
entity, the proportionate amount of accumulated losses based upon the share of the Indian entity/investor, the
amount of diminution in the value of the outstanding dues towards the Indian entity/investor post restructuring
and that such diminution does not exceed the proportionate amount of accumulated losses. The above stated
provisions shall not be used where the assets are simply revalued in the books of the Indian entity without any
restructuring of the balance sheet of the foreign entity.
OPENING OF FOREIGN CURRENCY ACCOUNT ABROAD BY AN INDIAN ENTITY

An Indian entity may open, hold and maintain Foreign Currency Account (FCA) abroad for the purpose of making
ODI in accordance with the provisions contained in Foreign Exchange Management (Foreign Currency Accounts by a
resident in India) Regulations, 2015
OBLIGATIONS OF THE PERSON RESIDENT IN INDIA

A person resident in India acquiring equity capital in a foreign entity, which is reckoned as ODI, shall submit the evidence of
investment to the AD bank within six months, failing which the funds remitted overseas shall be repatriated within the said
period of six months.
The evidence of investment shall be retained by the designated AD bank, who shall monitor the receipt of required documents
and satisfy themselves about the bona fides of the documents so received
Form FC shall be submitted along with requisite documents to AD bank for obtaining UIN on or before making initial ODI.
The AD bank after due verification shall report the details in the OID application for allotment of UIN
Any remittance towards a foreign entity shall be facilitated by the AD bank only after obtaining the necessary UIN for such
entity.
The allotment of UIN does not constitute an approval from the Reserve Bank for the investment made/to be made in the

foreign entity.
The issue of UIN only signifies taking on record of the investment for maintaining the database.
MANNER OF MAKING ODI – Rule 11 & Schedule 1

1. (1) An Indian entity may make ODI by way of investment in equity capital for the purpose of
undertaking bonafide business activity in the manner and subject to the limits and conditions provided in
this Schedule.
(2) The ODI may be made or held by way of, —
(i) subscription as part of memorandum of association or purchase of equity capital, listed or
unlisted;
(ii) acquisition through bidding or tender procedure;
(iii) acquisition of equity capital by way of rights issue or allotment of bonus shares;
(iv) capitalisation, within the time period, if any, specified for realisation under the Act, of any amount
due towards the Indian entity from the foreign entity, the remittance of which is permitted under
the Act or does not require prior permission of the Central Government or the Reserve Bank under
the Act or any rules or regulations made or directions issued thereunder;
(v) the swap of securities;
(vi) merger, demerger, amalgamation or any scheme of arrangement as per the applicable laws in India
or laws of the host country or the host jurisdiction, as the case may be.
ODI in financial services activity.
2. (1) An Indian entity engaged in financial services activity in India may make ODI in a foreign entity,
which is directly or indirectly engaged in financial services activity, subject to the following conditions,
namely: —
(i) the Indian entity has posted net profits during the preceding three financial years;
(ii) the Indian entity is registered with or regulated by a financial services regulator in India;
(iii) the Indian entity has obtained approval as may be required from the regulators of such financial
services activity, both in India and the host country or host jurisdiction, as the case may be, for
engaging in such financial services:
(2) An Indian entity not engaged in financial services activity in India may make ODI in a foreign entity,
which is directly or indirectly engaged in financial services activity, except banking or insurance, subject
to the condition that such Indian entity has posted net profits during the preceding three financial years:
Provided that an Indian entity not engaged in the insurance sector may make ODI in general and health
insurance where such insurance business is supporting the core activity undertaken overseas by such an
Indian entity.
(3) If an Indian entity does not meet the net profits required under sub-paragraphs (1) & (2) of this
paragraph due to the impact of Covid-19 during the period from 2020-2021 to 2021-2022, then the
financial results of such period may be excluded for considering the profitability period of three years:
Provided that such period may be extended by the Reserve Bank in consultation with the Central
Government, as it may deem necessary:

(4) Notwithstanding anything contained in this paragraph, Overseas Investment by banks and non-banking
financial institutions regulated by the Reserve Bank shall be subject to the conditions laid down by the
Reserve Bank under applicable laws in this regard.
Limit for financial commitment.
3. (1) The total financial commitment made by an Indian entity in all the foreign entities taken together at
the time of undertaking such commitment shall not exceed 400 percent of its net worth as on the date of
the last audited balance sheet or as directed by the Reserve Bank, in consultation with Central Government
from time to time.
(2) The total financial commitment referred to in sub-paragraph (1) shall not include capitalisation of
retained earnings for reckoning such limit but shall include—
(i) utilisation of the amount raised by the issue of American Depository Receipts or Global
Depositary Receipts and stock-swap of such receipts; and
(ii) utilisation of the proceeds from External Commercial Borrowings to the extent the corresponding
pledge or creation of charge on assets to raise such borrowings has not already been reckoned
towards the above limit:
Provided that the financial commitment made by Maharatna or Navratna or Miniratna or
subsidiaries of such public sector undertakings in foreign entities outside India engaged in
strategic sectors shall not be subject to the limits laid down under this paragraph.
Explanation. — For the purposes of this Schedule, a foreign entity shall be considered to be
engaged in the business of financial services activity if it undertakes an activity, which if carried
out by an entity in India, requires registration with or is regulated by a financial sector regulator in
India.
OVERSEAS INVESTMENT BY PERSON RESIDENT IN INDIA OTHER THAN INDIAN ENTITY

AND RESIDENT INDIVIDUAL – Schedule 4 – Rule 14
ODI by Registered Trust or Society.
Any person being a registered Trust or a registered Society engaged in the educational sector or which has
set up hospitals in India may make ODI in a foreign entity with the prior approval of the Reserve Bank,
subject to the following conditions, namely: —
(i) the foreign entity is engaged in the same sector that the Indian Trust or Society is engaged in;
(ii) the Trust or the Society, as the case may be, should have been in existence for at least three
financial years before the year in which such investment is being made;
(iii) the trust deed in case of a Trust, and the memorandum of association or rules or bye-laws in case
of a Society shall permit the proposed ODI;
(iv) such investment have the approval of the trustees in case of a Trust and the governing body or
council or managing or executive committee in case of a Society;
(v) in case the Trust or the Society require special licence or permission either from the Ministry of
Home Affairs, Central Government or from the relevant local authority, as the case may be, the
special licence or permission has been obtained and submitted to the designated AD bank.
Overseas Investment in IFSC by person resident in India – Schedule V - Rule 15

Overseas Investment in IFSC by person resident in India.
Subject to the provisions of these rules and the Foreign Exchange Management (Overseas Investment)
Regulations, 2022, a person resident in India may make Overseas Investment in an IFSC in India within
the limits provided in these rules .
A person resident in India may make Overseas Investment in an IFSC in the manner as laid down in
Schedule I or Schedule II or Schedule III or Schedule IV:
Provided that —
(i) in the case of an ODI made in an IFSC, the approval by the financial services regulator concerned,
wherever applicable, shall be decided within forty-five days from the date of application complete
in all respects failing which it shall be deemed to be approved;
(ii) an Indian entity not engaged in financial services activity in India, making ODI in a foreign entity,
which is directly or indirectly engaged in financial services activity, except banking or insurance,
who does not meet the net profit condition as required under these rules, may make ODI in an
IFSC.
(iii) a person resident in India may make contribution to an investment fund or vehicle set up in an
IFSC as OPI;
(iv) a resident individual may make ODI in a foreign entity, including an entity engaged in financial
services activity, (except in banking and insurance), in IFSC if such entity does not have
subsidiary or step down subsidiary outside IFSC where the resident individual has control in the
foreign entity.
A recognised stock exchange in the IFSC shall be treated as a recognised stock exchange outside India for
the purpose of these rules.
REPORTING REQUIREMENTS
All reporting with respect to overseas investment by a person resident in India shall be made through the designated AD bank
in the prescribed manner and in the format provided by the Reserve Bank
A person resident in India who has made ODI or making financial commitment or undertaking disinvestment in a foreign entity
shall report the following, namely:–
(a) financial commitment, whether it is reckoned towards the financial commitment limit or not, at the time of sending
outward remittance or making a financial commitment, whichever is earlier;
(b) disinvestment within thirty days of receipt of disinvestment proceeds;
(c) restructuring within thirty days from the date of such restructuring
A person resident in India other than a resident individual making any Overseas Portfolio Investment (OPI) or transferring such
OPI by way of sale shall report such investment or transfer of investment within sixty days from the end of the half-year in
which such investment or transfer is made as of September or March-end.
Provided that in case of OPI by way of acquisition of shares or interest under Employee Stock Ownership Plan or Employee
Benefits Scheme, the reporting shall be done by the office in India or branch of an overseas entity or a subsidiary in India of an
overseas entity or the Indian entity in which the overseas entity has direct or indirect equity holding where the resident
individual is an employee or director
Any acquisition of foreign securities through conversion of Indian Depository Receipts (IDRs) shall be duly reported as ODI or
OPI, as applicable
The Annual Performance Report (APR) shall be certified by a chartered accountant where the statutory audit is not applicable,

including in case of resident individuals. It is also clarified that where APR is required to be filed jointly, either one investor
may be authorised by other investors for filing APR, or such persons may jointly file the APR
In case a person resident in India has made a delay in filing/submitting the requisite form/return/document, such person may
file/submit the requisite form/return/ document, etc. and pay the Late Submission Fee (LSF) through the designated AD bank
in accordance with OI Regulations.
A person resident in India who has made a financial commitment in a foreign entity in accordance with the Act or rules or
regulations made thereunder, shall not make any further financial commitment, whether fund-based or non-fund-based,
directly or indirectly, towards such foreign entity or transfer such investment till any delay in reporting is regularised.
AD bank shall not facilitate any outward remittance/further financial commitment by a person resident in India towards a
foreign entity until any delay in reporting is regularised
RESTRICTIONS AND PROHIBITION – Rule 19

Unless otherwise provided in the Act or these rules, no person resident in India shall make ODI in a
foreign entity engaged in—
(a) real estate activity;
(b) gambling in any form; and
(c) dealing with financial products linked to the Indian rupee without specific approval of the Reserve
Bank.
Explanation. — For the purposes of this sub-rule, the expression "real estate activity" means
buying and selling of real estate or trading in Transferable Development Rights but does not
include the development of townships, construction of residential or commercial premises, roads
or bridges for selling or leasing.
Any ODI in start-ups recognised under the laws of the host country or host jurisdiction as the case may be,
shall be made by an Indian entity only from the internal accruals whether from the Indian entity or group
or associate companies in India and in case of resident individuals, from own funds of such an individual.
No person resident in India shall make financial commitment in a foreign entity that has invested or
invests into India, at the time of making such financial commitment or at any time thereafter, either
directly or indirectly, resulting in a structure with more than two layers of subsidiaries:
However, such restriction shall not apply to the following classes of companies mentioned in sub-rule (2)
of rule 2 of the Companies (Restriction on Number of Layers) Rules, 2017 as may be amended from time
to time, namely:—
(a) a banking company
(b) a non-banking financial company
(c) an insurance company being a company which carries on the business of insurance in accordance
with provisions of the Insurance Act, 1938 (4 of 1938) and the Insurance Regulatory and
Development Authority Act, 1999 (41 of 1999); and
(d) a Government company referred to in clause (45) of section 2 of the Companies Act, 2013
Restriction on acquisition or transfer of immovable property outside India – Rule 21
A person resident in India shall not acquire or transfer any immovable property situated outside India
without general or special permission of the Reserve Bank:
However, noting contained in this rule shall apply to a property—

(i) held by a person resident in India who is a national of a foreign State;
(ii) acquired by a person resident in India on or before the 8th day of July, 1947 and continued to be
held by such person with the permission of the Reserve Bank;
(iii) acquired by a person resident in India on a lease not exceeding five years.
In spite of anything contained above:
(i) a person resident in India may acquire immovable property outside India by way of inheritance or
gift or purchase from a person resident in India who has acquired such property as per the foreign
exchange provisions in force at the time of such acquisition;
(ii) a person resident in India may acquire immovable property outside India from a person resident
outside India—
(a) by way of inheritance;
(b) by way of purchase out of foreign exchange held in RFC account;
(c) by way of purchase out of the remittances sent under the Liberalised Remittance Scheme
instituted by the Reserve Bank:
Provided that such remittances under the Liberalised Remittance Scheme may be
consolidated in respect of relatives if such relatives, being persons resident in India,
comply with the terms and conditions of the Scheme;
(d) jointly with a relative who is a person resident outside India;
(e) out of the income or sale proceeds of the assets, other than ODI, acquired overseas under
the provisions of the Act;
(iii) an Indian entity having an overseas office may acquire immovable property outside India for the
business and residential purposes of its staff, as per the directions issued by the Reserve Bank
from time to time;
(iv) a person resident in India who has acquired any immovable property outside India in accordance
with the foreign exchange provisions in force at the time of such acquisition may—
(a) transfer such property by way of gift to a person resident in India who is eligible to
acquire such property under these rules or by way of sale;
(b) create a charge on such property in accordance with the Act or the rules or regulations
made thereunder or directions issued by the Reserve Bank from time to time.
The holding of any investment in immovable property or transfer thereof in any manner shall not be
permitted if the initial investment in immovable property was not permitted under the Act.

CHAPTER – 5
Law Relating to fugitive
economic offenders
Introduction
There have been several instances of economic offenders fleeing the jurisdiction of Indian courts anticipating the
commencement of criminal proceedings or sometimes during the pendency of such proceedings.
The absence of such offenders from Indian courts has several deleterious consequences, such as, it obstructs
investigation in criminal cases, it wastes precious time of courts and it undermines the rule of law in India. Further,
most of such cases of economic offences involve non-repayment of bank loans thereby worsening the financial
health of the banking sector in India.
The existing civil and criminal provisions in law are inadequate to deal with the severity of the problem. In order to
address the said problem and lay down measures to deter economic offenders from evading the process of Indian
law by remaining outside the jurisdiction of Indian courts, Parliament enacted a legislation, namely, the Fugitive
Economic Offenders Bill, 2018 to ensure that fugitive economic offenders return to India to face the action in
accordance with law
Fugitive Economic Offenders Act, 2018 provides for measures to deter fugitive economic offenders from evading
the process of law in India by staying outside the jurisdiction of Indian courts, to preserve the sanctity of the rule of
law in India
Salient Features of the Act
Defines the term such as “Fugitive Economic Offender”, “Key Managerial Personnel”, “Proceeds of Crime
Provisions for attachment of the property of a fugitive economic offender and proceeds of crime
Empowers Director relating to survey, search and seizure and search of persons
Confiscation of the property of a fugitive economic offender and proceeds of crime.
Disentitlement of the fugitive economic offender from putting forward or defending any civil claim
Appointment of an Administrator
Appeal to the High Court against the orders issued by the Special Court

Fugitive Economic Offender
Any individual against whom a warrant for arrest in relation to a Scheduled Offence has been issued by any Court in
India, who –
(i) has left India so as to avoid criminal prosecution; or

(ii) being abroad, refuses to return to India to face criminal prosecution is a fugitive economic offender
It may be noted that Scheduled Offence means an offence specified in the Schedule appended to the Fugitive
Economic Offenders Act, 2018 if the total value involved in such offence or offences is one hundred crore rupees
or more
Procedure for Declaration of Fugitive Economic Offender
(1) Where the Director appointed for the purposes of the Prevention of Money-laundering Act, 2002 or any
other officer not below the rank of Deputy Director authorised by the Director, has reason to believe (the
reasons for such belief to be recorded in writing), on the basis of material in his possession, that any
individual is a fugitive economic offender, he may file an application in such form and prescribed manner in
the Special Court that such individual may be declared as a fugitive economic offender
(2) The application shall contain—
(a) reasons for the belief that an individual is a fugitive economic offender;
(b) any information available as to the whereabouts of the fugitive economic offender;
(c) a list of properties or the value of such properties believed to be the proceeds of crime, including any
such property outside India for which confiscation is sought;
(d) a list of properties or benami properties owned by the individual in India or abroad for which
confiscation is sought; and
(e) a list of persons who may have an interest in any of the properties listed under clauses (c) and (d) above
Proceeds of Crime means any property derived or obtained, directly or indirectly, by any person as a result of
criminal activity relating to a Scheduled Offence, or the value of any such property, or where such property is taken
or held outside the country, then the property equivalent in value held within the country or abroad
(3) Where an application has been duly filed, the Special Court shall issue a notice to an individual who is
alleged to be a fugitive economic offender.
(4) The notice shall also be issued to any other person who has any interest in the property mentioned in the
application.
(5) A notice of Special Court shall—
(a) require the individual to appear at a specified place and time not less than six weeks from the date of
issue of such notice; and
(b) state that failure to appear on the specified place and time shall result in a declaration of the individual
as a fugitive economic offender and confiscation of property under the Act
(6) A notice shall also be forwarded to such authority, as the Central Government may notify, for effecting
service in a contracting State. The authority shall make efforts to serve the notice within a period of two weeks
in such prescribed manner.

Contracting State means any country or place outside India in respect of which arrangements have been made
by the Central Government with the Government of such country through a treaty or otherwise
(7) A notice may also be served to the individual alleged to be a fugitive economic offender by electronic means
to–
(a) his electronic mail address submitted in connection with an application for allotment of Permanent Account
Number under section 139A of the Income-tax Act, 1961;
(b) his electronic mail address submitted in connection with an application for enrolment under section 3 of
the Aadhaar ; or
(c) any other electronic account as may be prescribed, belonging to the individual which is accessed by him over
the internet, subject to the satisfaction of the Special Court that such account has been recently accessed by
the individual and constitutes a reasonable method for communication of the notice to the individual
(8) Where any individual to whom notice has been issued by the Special Court shall appears in person at the
place and time specified in the notice, the Special Court may terminate the proceedings under the Act.
(9) Where any individual to whom notice has been issued fails to appear at the place and time specified in the
notice, but enters appearance through counsel, the Special Court may in its discretion give a period of one
week to file a reply to the application.
(10) Where any individual to whom notice has been issued fails to enter appearance either in person or through
counsel, and the Special Court is satisfied—
(a) that service of notice has been effected on such party; or
(b) that notice could not be served in spite of best efforts because such individual has evaded service of notice,
it may, after recording reasons in writing, proceed to hear the application
Declaration of Fugitive Economic Offender
After hearing the application, if the Special Court is satisfied that an individual is a fugitive economic offender, it may,
by an order, declare the individual as a fugitive economic offender for reasons to be recorded in writing.
On a declaration, the Special Court may order that any of the following properties stand confiscated to the Central
Government—
(a) the proceeds of crime in India or abroad, whether or not such property is owned by the fugitive economic
offender; and
(b) any other property or benami property in India or abroad, owned by the fugitive economic offender.
The confiscation order of the Special Court shall, to the extent possible, identify the properties in India or abroad that
constitute proceeds of crime which are to be confiscated and in case such properties cannot be identified, quantify the
value of the proceeds of crime.
The confiscation order of the Special Court shall separately list any other property owned by the fugitive economic

offender in India which is to be confiscated
Where the Special Court has made an order for confiscation of any property and such property is in a contracting State,
the Special Court may issue a letter of request to a Court or authority in the contracting State for execution of such
order.
Every letter of request to be transmitted to a contracting State shall be transmitted in such form and manner as the
Central Government may, by notification, specify in this behalf.
The Special Court may, while making the confiscation order, exempt from confiscation any property which is a proceed
of crime in which any other person, other than the fugitive economic offender, has an interest if it is satisfied that such
interest was acquired bona fide and without knowledge of the fact that the property was proceeds of crime.
All the rights and title in the confiscated property shall, from the date of the confiscation order, vest in the Central
Government, free from all encumbrances.
Where on the conclusion of the proceedings, the Special Court finds that the individual is not a fugitive economic
offender, the Special Court shall order release of property or record attached or seized under this Act to the person
entitled to receive it.
Where an order releasing the property has been made by the Special Court, the Director or any other officer
authorised by him in this behalf may withhold the release of any such property or record for a period of ninety days
from the date of receipt of such order, if he is of the opinion that such property is relevant for the appeal proceedings
under the Act
Power to Disallow Civil Claims
Notwithstanding anything contained in any other law for the time being in force,
(a) on a declaration of an individual as a fugitive economic offender, any Court or tribunal in India, in any civil
proceeding before it, may, disallow such individual from putting forward or defending any civil claim; and
(b) any Court or tribunal in India in any civil proceeding before it, may, disallow any company or limited liability
partnership from putting forward or defending any civil claim, if an individual filing the claim on behalf of the
company or the limited liability partnership, or any promoter or key managerial personnel or majority
shareholder of the company or an individual having a controlling interest in the limited liability partnership has
been declared as a fugitive economic offender.
It may be noted that:
“Key Managerial Personnel” shall have the same meaning as assigned to it under Section 2(51) of the Companies
Act, 2013. “Company” means any body corporate and includes a firm, or other association of persons; “Limited
Liability Partnership” shall have the same meaning as assigned to it under Section 2(1)(n) of the Limited Liability
Partnership Act, 2008

Attachment of property
The Director or any other officer authorised by the Director, not below the rank of Deputy Director, may, with the
permission of the Special Court, attach any by an order in writing in prescribed manner.
Director or any other officer, not below the rank of Deputy Director, authorised by the Director, may, by an order in
writing, at any time prior to the filing of the application to the Special Court, attach any property
 for which there is a reason to believe that the property is proceeds of crime, or is a property or benami property
owned by an individual who is a fugitive economic offender; and
 which is being or is likely to be dealt with in a manner which may result in the property being unavailable for
confiscation
Director or any other officer who provisionally attaches any property shall within a period of thirty days from the
date of such attachment, file an application before the Special Court.
The attachment of any property shall continue for a period of one hundred and eighty days from the date of order
of attachment or such other period as may be extended by the Special Court before the expiry of such period.
Power of Survey
Where a Director or any other officer authorised by the Director, on the basis of material in his possession, has
reason to believe (the reasons for such belief to be recorded in writing), that an individual may be a fugitive
economic offender, he may enter any place:
(i) within the limits of the area assigned to him; or

(ii) in respect of which he is authorised for the purposes of this section, by such other authority, who is
assigned the area within which such place is situated
Where the Director or any other officer authorised by him, on the basis of material in his possession, has reason to
believe (the reasons for such belief to be recorded in writing) that an individual may be a fugitive economic offender
and it is necessary to enter any place, he may request any proprietor, employee or any other person who may be
present at that time, to—
(a) afford him the necessary facility to inspect such records as he may require and which may be available at
such place;
(b) afford him the necessary facility to check or verify the proceeds of crime or any transaction related to
proceeds of crime which may be found therein; and
(c) furnish such information as he may require as to any matter which may be useful for, or relevant to any
proceedings .
The Director, or any other officer acting under this section may:

(i) place marks of identification on the records inspected by him and make or cause to be made
extracts or copies therefrom;
(ii) make an inventory of any property checked or verified by him; and
(iii) record the statement of any person present at the property which may be useful for, or relevant to,
any proceeding
Search and Seizure
Where the Director or any other officer not below the rank of Deputy Director authorised by him, on the basis of
information in his possession, has reason to believe (the reason for such belief to be recorded in writing) that any
person:
(i) may be declared as a fugitive economic offender;

(ii) is in possession of any proceeds of crime;
(iii) is in possession of any records which may relate to proceeds of crime; or
(iv) is in possession of any property related to proceeds of crime, then, subject to any rules made in this
behalf, he may authorise any officer subordinate to him to–
(a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that
such records or proceeds of crime are kept;
(b) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the
powers conferred by clause (a) where the keys thereof are not available;
(c) seize any record or property found as a result of such search;
(d) place marks of identification on such record or property, if required or make or cause to be made
extracts or copies therefrom;
(e) make a note or an inventory of such record or property; and
(f) examine on oath any person, who is found to be in possession or control of any record or property, in
respect of all matters relevant for the purposes of any investigation under this Act
Where an authority, upon information obtained during survey, is satisfied that any evidence shall be or is likely to
be concealed or tampered with, he may, for reasons to be recorded in writing, enter and search the building or
place where such evidence is located and seize that evidence.
Search of Persons
Notwithstanding anything contained in any other law for the time being in force—
(a) if an authority, authorised in this behalf by the Central Government by general or special order, has reason to
believe (the reason for such belief to be recorded in writing) that any person has secreted about his person or
anything under his possession, ownership or control, any record or proceeds of crime which may be useful for or
relevant to any proceedings under this Act, he may search that person and seize such record or property which may
be useful for or relevant to any proceedings under the Act;
(b) where an authority is about to search any person, he shall, if such person so requires, take such person within
twenty-four hours to the nearest Gazetted Officer, superior in rank to him, or a Magistrate; It may be noted that the

period of twenty-four hours shall exclude the time necessary for the journey undertaken to take such person to the
nearest Gazetted Officer, superior in rank to him, or the Magistrate’s Court;
(c) if the requisition under clause (b) is made, the authority shall not detain the person for more than twenty four
hours prior to taking him before the Gazetted Officer, superior in rank to him, or the Magistrate referred to in that
clause: Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the
place of detention to the office of the Gazetted Officer, superior in rank to him, or the Magistrate’s Court;
(d) the Gazetted Officer or the Magistrate before whom any such person is brought shall, if he sees no reasonable
ground for search, forthwith discharge such person but otherwise shall direct that search be made;
(e) before making the search , the authority shall call upon two or more persons to attend and witness the search
and the search shall be made in the presence of such persons;
(f) the authority shall prepare a list of record or property seized in the course of the search and obtain the
signatures of the witnesses on the list;
(g) no female shall be searched by anyone except a female; and
(h) the authority shall record the statement of the person searched in respect of the records or proceeds of crime
found or seized in the course of the search
Rules of Evidence
The burden of proof for Notwithstanding anything The standard of proof applicable
establishing contained in any other law for the to the determination of facts by
time being in force, where any the Special Court under the Act
(a) that an individual is a fugitive person claims that any interest in shall be preponderance of
economic offender; or (b) that a any property was acquired bona probabilities.
property is the proceeds of crime fide and without knowledge of
or any other property in which the fact that, such property
the individual alleged to be a constitutes proceeds of crime, the
fugitive economic offender has an burden of proving such fact shall
interest, shall be on the Director lie upon him.
or the person authorised by the
Director to file the application.
Appeal
(1) An appeal shall lie from any judgment or order, not being an interlocutory order, of a Special Court to
the High Court both on facts and on law.
(2) Every appeal shall be preferred within a period of thirty days from the date of the judgment or order

appealed from
(3) High Court may entertain an appeal after the expiry of the said period of thirty days, if it is satisfied that
the appellant had sufficient cause for not preferring the appeal within the period of thirty days
(4) No appeal shall be entertained after the expiry of period of ninety days.
Bar of Jurisdiction
No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Special
Court is empowered by or under the Act to determine and no injunction shall be granted by any court or other
authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act
Overriding Effect. The provisions of Fugitive Economic Offender Act shall have effect, notwithstanding anything
inconsistent therewith contained in any other law for the time being in force

CHAPTER – 6
EXTERNAL COMMERCIAL
BORROWINGS
VIDESHI MUDRA MAI LOAN LENE KA KARE MAN KABHI BHI,

LE LO, LE LO>>>>>>>>>>>>ECB
Many Indian Companies prefer to borrow from outside India in Foreign Currencies or Indian Currencies as the
rate of interest in developed Countries is less in Comparison with Indian rates. Such kind of borrowings are
referred as External Commercial Borrowings.
ECB refers to the loan raised by eligible resident entities (Indian Entities) from the recognized non resident
entities in Indian or foreign currency. ECB are regulated by section 6(3)(d) of FEMA 1999.
Many provisions in respect of overseas borrowings are included in foreign Exchange Management (Borrowing
or lending in foreign exchange) Regulations, 2018 and FEMA (Guarantees)Regulations 2000.
Under ECB framework 2 options are covered:
a) Foreign Currency denominated ECB :-
In this case ECB loans are raised in any freely convertible foreign currency. Borrowing is done in the form
of Bank loans, issue of floating or fixed rate notes or bonds other than fully and compulsory convertible
instruments, trade credits beyond 3 years (trade credit means the credit period given foreign supplier),
foreign currency convertible bonds, foreign currency exchangeable bonds and financial lease (financial
lease is like buying goods on instalments from foreign supplier).
Eligible borrower under the this option
1. All the entities who are eligible to receive FDI can receive foreign currency based External
Commercial Borrowing and also the following entities :
2. Port trusts (basically these are the bodies which maintain Port Infrastructre
3. units in SEZ ,
4. SIDBI,
5. EXIM Bank of India.
b) Indian Rupee denominated ECB :-
Through this option the Indian entities raise loans including bank loans, floating or fixed rate notes (it
means, company takes loans and issues a written promise to pay at a fixed rate or fluctuating rate) or
bonds (other than fully and compulsory convertible instruments) ,trade credits beyond 3 years and

financial lease. Also plain vanilla, Rupee denominated bonds issued overseas ,which can be either placed
privately or listed on exchange as per host country regulation.
Eligible Borrower under the this option
All the entities who are eligible to raise Foreign Currency ECB and the registered entities which are
engaged in micro finance activities such as companies not for profits, registered societies ,trusts ,co-
operatives and NGO’s.
Plain Vanilla Rupee Bond
Denominated in Indian Currency, Issued to investor outside India, Currency risk is on investor not on
Borrower, These may be listed or privately placed.
Recognized lenders
The lender should be resident of FATF (Financial Action Task Force) or IOSCO (International organization of
securities commission) Compliant country including transfer of ECB and also includes:
a) Multilateral (iska matlab ek aisi financial institution jise bahut sare logon ne milkar ya Countriesne milkar
banaya hai) and Regional Financial Institutions (like Asian Development Bank etc) of which India is a member
country.
b) Individual Lenders will be allowed if they are foreign equity holders or subscribers to bonds or debentures
listed abroad.
c) Foreign Branches or subscribers of Indian banks are permitted as recognized as lenders only for foreign
currency (except FCCB and FCEB)
Foreign branches or subsidiaries of Indian Banks can also participate as arrangers underwriters, market
makers or traders of Rupee denominated bonds by complying with prudential norms issued by RBI.
(plz understand, the overseas branches of Indian bank can give ECB only in foreign currency however they can
act as arranger or underwriter matlab Indian Company agar ECB leti hai to foreign branches madat kar sakti
hai paise ka jugad karwane main)
However underwriting for issuance by Indian banks will not be allowed.
FATF Compliant country means: Country which is a member of FATF or member of FATF style regional body
,and should not be a country indentified in public statement of the FATF as :
a) Having deficiencies in putting Anti money laundering guidelines or financing of terrorism

b) Has not made progress in implementing the action plan to address the above deficiencies
IOSCO Compliant country means a country that complies with IOSCO’s multilateral memorandum of
understanding or has signed a bilateral agreement with SEBI with regard to sharing of information .

Minimum average maturity period :
Minimum Average Maturity period means the minimum period for which ECB can be raised by Indian Entities,
maximum period can be personally agreed between the borrower and lender.
Minimum average maturity period shall be 3 years for ECB and no call or put option shall be exercised before
completion of 3 years (call or put option means the option to surrender or satisfy the ECB)
However for the below mentioned categories, the specific time limits will apply:
a) ECB raised by manufacturing companies for upto USD 50 million or equivalent per financial year –minimum
average maturity period 1 year.
b) ECB from foreign equity holders for working capital or general corporate purpose or for repayment of
rupee loans (means you have obtained loan in India in Rupee and for repaying it you are taking ECB) –
minimum average maturity period 5 years .However this ECB cannot be raised from foreign branches or
subsidiaries of Indian Banks (as this would result in money coming from Indian Bank to another Indian bank).
c) ECB raised for working capital or general corporate purpose or for further lending by NBFC for working
capital purpose or general corporate purpose (matlab NBFC loan degi ECB lekar working capital ya general
corporate purpose ke liye) –minimum average maturity period 10 years .However this ECB can also not be
raised from foreign branches or subsidiaries of Indian Banks .
d) ECB raised for repayment of rupee loans availed domestically for capital expenditure or for further lending
by NBFC for same purpose (capital expenditure- matlab NBFC ECB raise kar rahi hai aur use India main as loan
de rahi hai capital expenditure ke liye) minimum average maturity period - 7 years .However this ECB cannot
be raised from foreign branches or subsidiaries of Indian Banks.
e) ECB raised for repayment of Rupee repayment of rupee loan availed domestically for purposes other than
capital expenditure or for further lending by NBFC for same purpose (other than capital expenditure)
minimum average maturity period 10years. However for this purpose also ECB cannot be raised from foreign
branches or subsidiaries of Indian banks.
Chart for same:
Category Minimum
Average
Maturity
Period
(MAMP)
(A) ECB raised by manufacturing companies up to USD 50 million or its equivalent per 1 year
financial year.
(B) ECB raised from foreign equity holder for working capital purposes, general corporate 5 years
purposes or for repayment of Rupee loans. It may be noted that:
(i) ECB cannot be raised from foreign branches / subsidiaries of Indian banks.
(ii) the prescribed MAMP will have to be strictly complied with under all circumstances.

(C) ECB raised for 10 years
(i) Working capital purposes or general corporate purposes.
(ii) on-lending by NBFCs for working capital purposes or general corporate
purposes. It may be noted that:
(a) ECB cannot be raised from foreign branches / subsidiaries of Indian banks.
(b) the prescribed MAMP will have to be strictly complied with under all
circumstances.
(D) ECB raised for 7
years
(i) repayment of Rupee loans availed domestically for capital expenditure.
(ii) on-lending by NBFCs for the same purpose. It may be noted that:
(a) ECB cannot be raised from foreign branches / subsidiaries of Indian banks.
(b) the prescribed MAMP will have to be strictly complied with under all
circumstances.
(E) ECB raised for 10
years
(i) repayment of Rupee loans availed domestically for purposes other than capital
expenditure.
(ii) on-lending by NBFCs for the same purpose.
It may be noted that for the categories mentioned at (B) to (E) –
(i) ECB cannot be raised from foreign branches / subsidiaries of Indian banks.
(ii) the prescribed MAMP will have to be strictly complied with under all circumstances.
All in cost ceiling (maximum how much you can spend to raise ECB )
Benchmark rate + 450 basis points.
(It means maximum cost that Indian Entity can incur for raising ECB can not exceed the benchmark rate +
4.5%, that means if benchmark rate in USA is 2%, then maximum expense that can be incurred on ECB can not
exceed 6.5%)
LIBOR rate of different currencies (LIBOR is London Interbank operating rate so if the lender is from UK,
LIBOR may be considered as benchmark rate) or any other interbank interest rate applicable to the currency
of borrowing.
For example : If money is borrowed from German lender then EURIBOR may be considered as benchmark
rate.
In case the ECB is raised in Indian rupees then the benchmark rate will be ‘Prevailing yield (rate ) of Govt.
security of similar maturity
All in cost includes the following costs :Rate of interest ,fees, expenses ,guarantee fees ,Export credit agency
(ECA ) charges and will not include commitment fees and withholding tax

In case of FCCB the issue expenses shall not exceed 4% of issue size and for privately placed ECB it shall not
exceed 2% of the issue size in addition to all in cost limits (it means in case of FCCB or FCEB the issue
expense can be 2% of issue size + the benchmarkrate+450 basis points)
In case of trade credits the cost shall include rate of interest, other fees, expenses guarantee fees whether
paid in INR or foreign currency, withholding tax payable in INR shall not be included.
ECB proceeds cannot be used for payment of interest or charges.
It means agar ECB liya hai to usee business main use kariye usi se uska interest mat pay kigiye ☺
Other Costs
Other costs in respect of ECB including the prepayment penalty or any additional interest for default or
breach of terms and conditions of ECB, should not be more than 2 per cent over and above the contracted
rate of interest on the outstanding principal amount and will not be included in the all-in-cost ceiling.
These limits on ceilings are to be met on yearly basis and averaging is not allowed, for example in one year
limits are breached and in second year lesser cost is incurred to meet the requirement on average basis, this
is not allowed.
End-uses (Negative list)
It means for the following purposes ECB proceeds cannot be utilised:
1. Real estate activities – However real estate does not include construction activities.
2. Investment in capital market.
3. Equity investment – In the new issue of securities pursuant to listing.
4. For Working capital purposes, except ECB raised from foreign equity holder or for further lending by Non-
Banking Financial Companies (NBFCs) for working capital purposes or general corporate purposes.
5. General corporate purposes, except in case of ECB raised from foreign equity holder or fur further lending
by NBFCs for working capital purposes or general corporate purposes.
6. Repayment of Rupee loans, except in case of repayment of Rupee loans availed domestically for capital
expenditure or for further lending by NBFCs for the capital expenditure purpose and also for repayment of
Rupee loans availed domestically for purposes other than capital expenditure or for further lending by NBFCs
for the purposes other than capital expenditure.
7. Apart from NBFC no other Indian entity that has raised ECB can use the ECB for further lending however
NBFC can raise ECBs for further lending for the purposes specified above.
Exchange rate
This rate is basically applicable when the currency of ECB is changed from foreign currency to Indian Rupee.

Change of currency of Foreign Currency ECB into Indian Rupee ECB can be at the exchange rate prevailing on
the date of the agreement for such change between the parties Concerned or at an exchange rate, which is
less than the rate prevailing on the date of the agreement, if consented to by the ECB lender.
For conversion to Rupee, the exchange rate shall be the rate prevailing on the date of settlement.
Hedging Provisions
Hedging means risk management procedures so that the movement in the currency exchange rate does not
affect the borrower. It means having resources to repay the ECB and manage the price fluctuation of
currency. The entities that have raised ECB are required to follow guidelines for hedging issued by any
sectoral or prudential regulator of foreign currency exposure .
The raising entities are required to hedge 70% of ECB exposure if the average maturity is less than 5 years
and the designated branch of authorized dealer shall verify the 70% hedging requirement and report the RBI
through form ECB -2.
The following shall be complied :
a) Coverage : Hedging shall be made for principal and interest from the date of creation of liability in
respect of ECB
b) Tenure and rollover : Minimum duration of hedging shall be for 1 year and it shall be renewed from
time to time to ensure that the ECB are not unhedged at any point of time.
c) ECB’s will be considered to be naturally hedged if the project for which ECB’S were raised generates
maturity cash flow within the same accounting year ,in matching currency after offsetting all
expenses.
d) Overseas investors are eligible to hedge their exposure in rupee through permitted derivative
products with AD category 1 Bank.
Charge of currency of borrowing
Change of currency of ECB from one freely convertible foreign currency to any other freely convertible
foreign currency as well as to Indian Rupee is freely permitted. For example if we had borrowed ECB in US $
we can convert in Euro.
Change of currency from Indian Rupee to any freely convertible foreign currency is not permitted.
It may be noted that the ECB framework is not applicable in respect of investments in Non-Convertible
Debentures in India made by Registered Foreign Portfolio Investors (it is covered under SEBI Regulations).
Lending and borrowing under the ECB framework by Indian banks and their branches/subsidiaries outside
India will be subject to prudential guidelines issued by the Department of Banking Regulation of the Reserve
Bank. Means, how will banks take ECB will be decided by RBI.
Further, other entities raising ECB are required to follow the guidelines issued, if any, by the concerned
sectorial or prudential regulator.
Limit and Leverage

All eligible borrowers can raise ECB up to USD 750 million or equivalent per financial year under the
automatic route. Further, in case of Foreign Currency denominated ECB raised from direct foreign equity
holder, ECB liability-equity ratio for ECB raised under the automatic route cannot exceed 7:1.
ECB liability ratio means the maximum ECB that can be raised from foregin equity holder can not exceed 7
time of his equity investment in the Borrowing Entity.
However, this ratio will not be applicable if the outstanding amount of all ECB, including the proposed one, is
up to USD 5 million or its equivalent. Further, the borrowing entities will also be governed by the guidelines
on debt equity ratio, issued, if any, by the sectoral or prudential regulator concerned.
Issuance of Guarantee, etc. by Indian banks and Financial Institutions
Issuance of any type of guarantee by Indian banks, All India Financial Institutions and NBFCs relating to ECB is
not permitted.
Further, financial intermediaries (viz., Indian banks, All India Financial Institutions, or Non Banking Financial
Companies) shall not invest in Foreign Currency Convertible Bonds/ Foreign Currency Exchangeable Bonds in
any manner whatsoever.
Parking of ECB proceeds
Basically parking of ECB means keeping or investing ECB till the time it is utilised for the purpose for which it
was obtained.
ECB proceeds are permitted to be parked abroad as well as domestically in the manner given below:
Parking of ECB proceeds abroad: ECB proceeds meant only for foreign currency expenditure can be parked
abroad pending utilisation. Till utilisation, these funds can be invested in the following liquid assets
(a) deposits or Certificate of Deposit or other products offered by banks rated not less than AA (-) by
Standard and Poor/Fitch IBCA or Aa3 by Moody’s;
(b) Treasury bills and other monetary instruments of one-year maturity having minimum rating as indicated
above and (c) deposits with foreign branches/subsidiaries of Indian banks abroad.
Parking of ECB proceeds domestically: ECB proceeds meant for Rupee expenditure should be repatriated
(brought to India) immediately for credit to their Rupee accounts with AD Category I banks in India.
ECB borrowers are also allowed to park ECB proceeds in term deposits with AD Category I banks in India for a
maximum period of 12 months cumulatively. These term deposits should be kept in unencumbered (free from
liability) position.
Procedure of raising ECB
All ECB can be raised under the automatic route if they comply with rules prescribed under ECB framework.
For approval route cases, the borrowers may approach the RBI with an application in prescribed format (Form
ECB) through their AD Category I bank.

Approval Route cases shall be considered keeping in view the overall guidelines, macroeconomic situation
and benefits of the specific proposals.
ECB proposals received in the Reserve Bank above certain threshold (cut off) limit (fixed from time to time)
will be kept before Empowered Committee set up by the Reserve Bank.
The Empowered Committee will have external as well as internal members and the Reserve Bank will take a
final decision on the basis of recommendation of the Empowered Committee.
Entities who want to raise ECB under the automatic route may approach an AD Category I bank with their
proposal along with duly filled in Form ECB.
Reporting Requirements
Borrowings under ECB Framework are subject to following reporting requirements:
Loan Registration Number (LRN): Any use of ECB should happen only after obtaining the LRN from the Reserve
Bank.
Form no ECB has to be filed with required details for obtaining LRN, in duplicate to the designated AD
Category I bank. The AD Category I bank will forward one copy to the Director, Reserve Bank of India,
Department of Statistics and Information Management, External Commercial Borrowings Division, Bandra-
Kurla Complex, Mumbai – 400 051.
Copies of loan agreement for raising ECB are not required to be submitted to the Reserve Bank.
Changes in terms and conditions of ECB: Changes in ECB conditions can be made however such changes must
comply with ECB guidelines.
Change may relate to reduced repayment by mutual agreement between the lender and borrower and it
should be reported to the Department of Statistics and Information Management through revised Form ECB at
the earliest, in any case not later than 7 days from the changes effected. All the changes should be specified
in communication.
Monthly Reporting of actual transactions: The borrowers are required to report actual ECB transactions
through Form ECB 2 through the AD Category I bank on monthly basis so that it reaches Department of
Statistics and Information Management within seven working days from the close of month to which it
relates.
Late Submission Fee (LSF) for delay in reporting:
Any borrower:
a) Who is not in compliance of ECB guidelines or
b) Makes a delay in reporting of drawdown (use) of ECB proceeds before obtaining LRN or
c) Makes delay in submission of Form ECB 2 returns
Such borrower can regularise the delay by payment of prescribed late submission fees.

Standard Operating Procedure (SOP) for Untraceable Entities:
Untraceable Entity means the entity whose directors or auditors or promoters are not reacheable or do not
give resopense to the email or letters or phone for at least 2 quarters in case of documented communication
and have not replied to 6 or more reminders sent during 2 quarters and also the following conditions are to
be satisfied:
1. Not found to be operative at the registered office on visits by officials of AD Bank or on visits of any other
agency authorised by AD Bank. +
2. Have not submitted auditors certificate for last 2 years or more.
The following SOP has to be followed by designated AD Category-I banks in case of untraceable entities who
do not comply with reporting provisions either physically or electronically, for past eight quarters or more:
1. The AD Bank will file Revised Form ECB, if required, and last Form ECB 2 Return without certification from
company with UNTRACEABLE ENTITY’ written in bold on top.
2. The outstanding amount will be treated as written-off from external debt liability of the country but may
be kept by the lender in its books for recovery through judicial/ non-judicial means;
3. No fresh ECB application by the entity should be examined/processed by the AD bank.
4. Directorate of Enforcement should be informed whenever any entity is designated ‘UNTRACEABLE ENTITY.
5. No inward remittance or debt servicing will be permitted under automatic route.
Conversion of ECB into equity
Conversion of ECB, including those which are matured but unpaid, into equity is permitted subject to the
i. The activity of the borrowing company is covered under the automatic route for Foreign Direct Investment
or Government approval is received, wherever applicable, for foreign equity participation as per extant
Foreign Direct Investment policy.
ii. The conversion, which should be with the lender’s consent and without any additional cost, should not
result in contravention of eligibility and breach of applicable sector cap on the foreign equity holding under
Foreign Direct Investment policy;
iii. Applicable pricing guidelines for shares are complied with;
iv. In case of partial or full conversion of ECB into equity, the reporting to the Reserve Bank
will be as under:
# For partial conversion, the converted portion is to be reported in Form FC-GPR prescribed for reporting of
FDI flows, while monthly reporting to DSIM in Form ECB - 2 Return will be with suitable remarks, viz., "ECB
partially converted to equity".

# For full conversion, the entire portion is to be reported in Form FC-GPR, while reporting to DSIM in Form
ECB 2 Return should be done with remarks “ECB fully converted to equity”. Subsequent filing of Form ECB 2
Return is not required.
# For conversion of ECB into equity in phases, reporting through Form FC-GPR and Form ECB 2 Return will
also be in phases.
v. If the borrower concerned has availed of other credit facilities from the Indian banking system, including
foreign branches/subsidiaries of Indian banks, the applicable prudential guidelines issued by the Department
of Banking Regulation of Reserve Bank, including guidelines on restructuring are complied with;
vi. Consent of other lenders, if any, to the same borrower is available or atleast information regarding
conversions is exchanged with other lenders of the borrower.
vii. For conversion of ECB dues into equity, the exchange rate prevailing on the date of the agreement
between the parties concerned for such conversion or any lesser rate can be applied with a mutual
agreement with the ECB lender. It may be noted that the fair value of the equity shares to be issued shall be
worked out with reference to the date of conversion only.
Security for raising ECB
On behalf of the borrower the AD Bank can create security on moveable and immoveable assets, financial
securities and by issue corporate guarantee or personal guarantee in favour of lender subject to the
1. ECB is in compliance with the ECB guidelines,
2. The creation of security is as per loan agreement between the borrower and the lender.
3. The assets on which security is created is already given as security to ECB lender No objection certificate
from previous lender has to be obtained.
On satisfaction of above conditions security may be created, for the period of the ECB (period of security and
period of ECB must be same), subject to the following:
Creation of Charge on Immovable Assets:
1. Comply with FEMA and Rules made under FEMA.
2. This provision should not amount to permission of acquiring property by overseas lender or trustee (who
keeps security on behalf of lender)
3. If default is made in repaying the loan the security will be sold only to a person resident in India and the
sale proceeds shall be repatriated to for satisfaction of ECB.
Creation of Charge on Movable Assets: If default is made in repaying the loan, the claim of the lender,
whether the lender takes over the movable asset or otherwise, will be restricted to the outstanding claim
against the ECB.
Lender may also take moveable property outside India subject to permission of Authorities.

Creation of Charge over Financial Securities: When financial securities are pledged against ECB following
rules will apply:
1. Pledge of shares of the borrowing company held by the promoters as well as in domestic associate
companies of the borrower is permitted.
2. Pledge on bonds and debentures, Government Securities, Government Savings Certificates, deposit
receipts of securities and units of the Unit Trust of India or of any mutual funds, standing in the name of ECB
borrower/promoter, is also permitted.
3. In addition, security interest (rights which a person gets when he gives loan and gets a mortgage so the
rights on mortgage can be considered as security’s interest) over all current and future loan assets.
4. Cash in the bank account maintained with AD bank by promoter or borrowing company in Rupees can also
be in the form of escrow arrangement or debt service reserve account, can also be given as security.
5. In case of default transfer of financial securities shall be in accordance with the extant FDI/FII policy
including provisions relating to sectorial cap and pricing as applicable read with the Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017, as amended
from time to time.
Issue of Corporate or Personal Guarantee: It means the company that borrows ECB issues guarantee to the
lender of ECB, such issuance of guarantee shall be subject to the following conditions:
# A copy of Board Resolution in favour of persons issuing guarantee on behalf of the company or in their
individual capacity should be submitted to the AD bank who will pass it on to the lender.
# The person who are issuing guarantee on behalf of the borrower company, Specific requests from such
person to the borrowing company, to issue personal guarantee indicating details of the ECB should be
submitted to the AD bank who will pass it on to the lender.
# Such security shall be subject to provisions contained in the Foreign Exchange Management (Guarantees)
# ECB can be credit enhanced / guaranteed / insured by overseas party/ parties only if it/ they fulfil/s the
criteria of recognised lender under ECB guidelines.
ECB facility for Oil Marketing Companies
Public Sector Oil Marketing Companies (OMCs) can raise ECB for working capital purposes with minimum
average maturity period of 3 years from all recognised lenders under the automatic route without hedging
and individual limit (borrowing limits) requirements.
The overall ceiling for such ECB shall be USD 10 billion or equivalent. However, OMCs should have a Board of
Directors approved forex mark to market (system of making valuation) procedure and good risk management
policy, for such ECB.
All other provisions under the ECB framework will be applicable to such ECB.

ECB facility for Start ups
AD Category-I banks can allow Start ups to raise ECB under the automatic route as per the following
framework:
1. Eligibility: An entity recognised as a Startup by the Central Government as on date of raising ECB.
2. Maturity: Minimum average maturity period will be 3 years.
3. Recognised lender: Lender / investor shall be a resident of a FATF compliant country.
However, foreign branches/subsidiaries of Indian banks and overseas entity in which Any Indian entity has
made overseas direct investment as per the Overseas Direct Investment Policy will not be considered as
recognised lenders under this framework.
4. Forms: The borrowing can be in form of loans or non-convertible, optionally convertible or partially
convertible preference shares.
5. Currency: Any freely convertible currency or in Indian Rupees (INR) or a combination of both.
When the the non-resident lender grans loan in Rupeee, he should arrange INR through swaps (exchange of
currency or outright sale of foreign currency to arrange Rupee) done through an AD Category-I bank in India.
6. Amount: The borrowing per Startup will be limited to USD 3 million or equivalent per financial year either
in INR or any convertible foreign currency or a combination of both.
7. All-in-cost: Shall be mutually agreed between the borrower and the lender.
8. End uses: For any expenditure in connection with the business of the borrower.
9. Conversion into equity: Conversion into equity is freely permitted subject to Regulations applicable for
foreign investment in Startups.
10. Security: The kind of security to be provided to the lender is left to the start ups which borrow.
It can be any security as permitted under ECB guidelines (same as was covered for normal ECBs)
Further, issuance of corporate or personal guarantee is allowed. Guarantee issued by a nonresident(s) is

allowed only if such parties qualify as lender under ECB for Startups.
However, issuance of guarantee, standby letter of credit, letter of undertaking or letter of comfort by Indian
banks, all India Financial Institutions and NBFCs is not permitted.
11. Hedging: The overseas lender, in case of INR denominated ECB, will be eligible to hedge its INR exposure
through permitted derivative products with AD Category – I banks in India.
Startups raising ECB in foreign currency, whether having natural hedge or not, are exposed to currency risk
due to exchange rate movements and hence are advised to ensure that they have an appropriate risk
management policy to manage potential risk arising out of ECB.

Conversion rate: In case of borrowing in INR, the foreign currency - INR conversion will be at the market rate
as on the date of agreement.
Other Provisions: Other provisions like parking of ECB proceeds, reporting arrangements, powers delegated to
AD banks, borrowing by entities under investigation, conversion of ECB into equity will be as included in the
ECB framework.
Borrowing by Entities under Investigation
All entities against which investigation / adjudication / appeal by the law enforcing agencies for violation of
any of the provisions of the Regulations under FEMA pending, may raise ECB as per the applicable norms, if
they are eligible, in spite of the pending investigations / adjudications / appeals, The outcome of such
proceedings does not affect ECBs.
The borrowing entity shall inform about pendency of such investigation / adjudication / appeal to the AD
Category-I bank / RBI as the case may be. AD Category I Banks / Reserve Bank while approving the proposal
shall inform the agencies concerned by endorsing a copy of the approval letter.
An entity which is under a restructuring scheme/ corporate insolvency resolution process (defaulting entity)
can raise ECB only if specifically permitted under the resolution plan.
Eligible corporate borrowers who have availed Rupee loans domestically for capital expenditure in
manufacturing and infrastructure sector and which have been classified as SMA-2 or NPA can avail ECB for
repayment of these loans under any one time settlement with lenders.
Lender banks are also permitted to sell, through assignment, such loans to eligible ECB lenders, however, the
resultant external commercial borrowing complies with all-in-cost, minimum average maturity period and
other relevant norms of the ECB framework.
Foreign branches/ overseas subsidiaries of Indian banks are not eligible to lend for the above purposes. The
applicable MAMP will have to be strictly complied with under all circumstances.
Eligible borrowers under the ECB framework, who are participating in the Corporate Insolvency Resolution
Process under Insolvency and Bankruptcy Code, 2016 as resolution applicants, can raise ECB from all
recognised lenders, except foreign branches/subsidiaries of Indian banks, for repayment of Rupee term loans
of the target company.

CHAPTER – 7
FOREIGN TRADE
POLICY
INTRODUCTION
Foreign Trade Policy (FTP) 2023 is a policy document which is based on continuity of time-tested
schemes facilitating exports as well as a document which is nimble and responsive to the
requirements of trade. It is based on principles of ‘trust’ and ‘partnership’ with exporters. In the
FTP 2015-20, changes were done subsequent to the initial release even without announcement of a
new FTP responding dynamically to the emerging situations. Hereafter, the revisions of the FTP shall
be done as and when required. Incorporating feedback from Trade and Industry would also be
continuous to streamline processes and update FTP, from time to time.
The FTP 2023 aims at process re-engineering and automation to facilitate ease of doing business for
exporters. It also focuses on emerging areas like dual use high end technology items under SCOMET,
facilitating e-commerce export, collaborating with States and Districts for export promotion. The
New FTP is introducing a one-time Amnesty Scheme for exporters to close the old pending
authorizations and start afresh. The FTP 2023 encourages recognition of new towns through “Towns
of Export Excellence Scheme” and exporters through “Status Holder Scheme”. The FTP 2023 is
facilitating exports by streamlining the popular Advance Authorization and EPCG schemes, and
enabling merchanting trade from India.
The Key Approach to the policy is based on these 4 pillars: (i) Incentive to Remission, (ii) Export
promotion through collaboration - Exporters, States, Districts, Indian Missions, (iii) Ease of doing
business, reduction in transaction cost and e-initiatives and (iv) Emerging Areas – E-Commerce
Developing Districts as Export Hubs and streamlining SCOMET policy.
KEY HIGHLIGHTS OF FTP 2023
Process Re-Engineering and Automation

Greater faith is being reposed on exporters through automated IT systems with risk management
system for various approvals in the new FTP. The policy emphasizes export promotion and
development, moving away from an incentive regime to a regime which is facilitating, based on
technology interface and principles of collaboration. Considering the effectiveness of some of the
ongoing schemes like Advance Authorisation, EPCG etc. under FTP 2015-20, they will be continued
along with substantial process re-engineering and technology enablement for facilitating the
exporters. FTP 2023 codifies implementation mechanisms in a paperless, online environment,
building on earlier 'ease of doing business' initiatives. Reduction in fee structures and IT-based
schemes will make it easier for MSMEs and others to access export benefits.

Duty exemption schemes for export production will now be implemented through Regional Offices in a
rule- based IT system environment, eliminating the need for manual interface. During the FY23-24,
all processes under the Advance and EPCG Schemes, including issue, re-validation, and EO extension,
will be covered in a phased manner. Cases identified under risk management framework will be
scrutinized manually, while majority of the applicants are expected to be covered under the
'automatic' route initially.
Towns of Export Excellence
Four new towns, namely Faridabad, Mirzapur, Moradabad, and Varanasi, have been designated as
Towns of Export Excellence (TEE) in addition to the existing 39 towns. The TEEs will have priority
access to export promotion funds under the MAI scheme and will be able to avail Common Service
Provider (CSP) benefits for export fulfillment under the EPCG Scheme. This addition is expected to
boost the exports of handlooms, handicrafts, and carpets.
Recognition of Exporters
Exporter firms recognized with 'status' based on export performance will now be partners in
capacity- building initiatives on a best-endeavor basis. Similar to the 'each one teach one' initiative,
2-star and above status holders would be encouraged to provide trade-related training based on a
model curriculum to interested individuals. This will help India build a skilled manpower pool
capable of servicing a $5 Trillion economy before 2030. Status recognition norms have been re-
calibrated to enable more exporting firms to achieve 4 and 5-star ratings, leading to better branding
opportunities in export markets.
Promoting export from the districts
The FTP aims at building partnerships with State governments and taking forward the Districts as
Export Hubs (DEH) initiative to promote exports at the district level and accelerate the development
of grassroots trade ecosystem. Efforts to identify export worthy products & services and resolve
concerns at the district level will be madethrough an institutional mechanism – State Export
Promotion Committee and District Export Promotion Committee at the State and District level,
respectively.District specific export action plans to be prepared for each district outlining the
district specific strategy to promote export of identified products and services.
Streamlining SCOMET Policy
India is placing more emphasis on the "export control" regime as its integration with export control
regime countries strengthens. There is a wider outreach and understanding of SCOMET (Special
Chemicals, Organisms, Materials, Equipment and Technologies) among stakeholders, and the policy
regime is being made more robust to implement international treaties and agreements entered into
by India.A robust export control system in India would provide access of dual-use High end goods and
technologies to Indian exporters while facilitating exports of controlled items/technologies under
SCOMET from India.
Facilitating E-Commerce Exports
E-commerce exports are a promising category that requires distinct policy interventions from
traditional offline trade. Various estimates suggest e-commerce export potential in the range of $200
to $300 billion by 2030. FTP 2023 outlines the intent and roadmap for establishing e-commerce hubs
and related elements such as payment reconciliation, book-keeping, returns policy, and export
entitlements. As a starting point, the consignment wise cap on E-Commerce exports through courier
has been raised from ₹5Lakh to ₹10 Lakh in the FTP 2023. Depending on the feedback of exporters,

this cap will be further revised or eventually removed. Integration of Courier and Postal exports with
ICEGATE will enable exporters to claim benefits under FTP. The comprehensive e-commerce policy
addressing the export/import ecosystem would be elaborated soon, based on the recommendations
of the working committee on e-commerce exports and inter-ministerial deliberations. Extensive
outreach and training activities will be taken up to build capacity of artisans, weavers, garment
manufacturers, gems and jewellery designers to onboard them on E- Commerce platforms and
facilitate higher exports.
Facilitation under Export Promotion of Capital Goods (EPCG) Scheme
The EPCG Scheme, which allows import of capital goods at zero Customs duty for export production, is
being further rationalized. Some key changes being added are:
Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme has
been added as an additional scheme eligible to claim benefits under CSP(Common Service
Provider) Scheme of Export Promotion capital Goods Scheme(EPCG).
Dairy sector to be exempted from maintaining Average Export Obligation – to support dairy
sector to upgrade the technology.
Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater
Treatment and Recycling, Rainwater harvesting system and Rainwater Filters, and Green
Hydrogen are added to Green Technology products – will now be eligible for reduced Export
Obligation requirement under EPCG Scheme
Facilitation under Advance authorization Scheme

Advance authorisation Scheme accessed by DTA units provides duty-free import of raw materials for
manufacturing export items and is placed at a similar footing to EOU and SEZ Scheme. However, the
DTA unit has the flexibility to work both for domestic as well as export production. Based on
interactions with industry and Export Promotion councils, certain facilitation provisions have been
added in the present FTP such as
Special Advance Authorisation Scheme extended to export of Apparel and Clothing sector
under para 4.07 of HBP on self-declaration basis to facilitate prompt execution of export
orders – Norms would be fixed within fixed timeframe.
Benefits of Self-Ratification Scheme for fixation of Input-Output Norms extended to 2 star and
above status holders in addition to Authorised Economic Operators at present.
Merchanting trade
To develop India into a merchanting trade hub, the FTP 2023 has introduced provisions for
merchanting trade. Merchanting trade of restricted and prohibited items under export policy would
now be possible. Merchanting trade involves shipment of goods from one foreign country to another
foreign country without touching Indian ports, involving an Indian intermediary. This will be subject
to compliance with RBI guidelines, and won’t be applicable for goods/items classified in the CITES
and SCOMET list. In course of time, this will allow Indian entrepreneurs to convert certain places like
GIFT city etc. into major merchanting hubs as seen in places like Dubai, Singapore and Hong Kong.
Amnesty Scheme
Finally, the government is strongly committed to reducing litigation and fostering trust-based

relationships to help alleviate the issues faced by exporters. In line with "Vivaad se Vishwaas"
initiative, which sought to settle tax disputes amicably, the government is introducing a special one-
time Amnesty Scheme under the FTP 2023to address default on Export Obligations. This scheme is
intended to provide relief to exporters who have been unable to meet their obligations under EPCG
and Advance Authorizations, and who are burdened by high duty and interest costs associated with
pending cases. All pending cases of the default in meeting Export Obligation (EO) of authorizations
mentioned can be regularized on payment of all customs duties that were exempted in proportion to
unfulfilled Export Obligation. The interest payable is capped at 100% of these exempted duties under
this scheme. However, no interest is payable on the portion of Additional Customs Duty and Special
Additional Customs Duty and this is likely to provide relief to exporters as interest burden will come
down substantially. It is hoped that this amnesty will give these exporters a fresh start and an
opportunity to come into compliance.
LEGAL FRAMEWORK AND TRADE FACILITATION
Legal Basis of Foreign Trade Policy
The Foreign Trade Policy (FTP) 2023 is notified by Central Government, in exercise of powers given
under Section 5 of the Foreign Trade (Development & Regulation) Act, 1992.
Duration of FTP
The Foreign Trade Policy (FTP) 2023 incorporating provisions relating to export and import of goods
and services, shall come into force with effect from 1st April, 2023 and shall continue to be in
operation unless cancelled or amended.
Amendment to FTP
CG has the powers of making amendments to the policy.
Hand Book of Procedures (HBP) and Appendices & Aayat Niryat Forms (ANF)
Director General of Foreign Trade (DGFT) may, by means of a Public Notice, notify Hand Book of
Procedures, including Appendices and Aayat Niryat Forms or amendment in the form specifying, the
procedure to be followed by an exporter or importer or by any Licensing/Regional Authority or by
any other authority for purposes of implementing provisions of FT (D&R) Act.
“Importer” means a person who imports or intends to import and holds an IEC number, unless
otherwise specifically exempted.
Transitional Arrangements
a) Any License/ Authorisation/ Certificate/ Scrip/ instrument bestowing financial or fiscal

benefit issued before commencement of FTP 2023 shall continue to be valid for the purpose
and duration for which it was issued, unless otherwise specified.
b) Item wise Import/Export Policy specified in the ITC (HS) Schedule I and Schedule II

respectively. The importability/ exportability of a particular item is governed by the policy
as on the date of import/ export.
c) Bill of Lading and Shipping Bill are the key documents for deciding the date of import and
export respectively.
d) In case of change of policy from ‘free’ to ‘restricted/prohibited/state trading’ or ‘otherwise
regulated’, the import/export already made before the date of such regulation/restriction
will not be affected.
e) Whenever, Government brings out a policy change of a particular item, the change will be
applicable prospectively (from the date of Notification) unless otherwise specified.
It may be noted that –
“Free” as appearing in context of import/export policy for items means goods which do not need
any ‘Authorisation’/ License or permission for being imported into the country or exported out.
ITC (HS) refers to Indian Trade Classification (Harmonized System) at 8 digits.
“Authorisation” means permission as included in Section 2(g) of the Act to import or export as per
provisions of FTP.
TRADE FACILITATION AND EASE OF DOING BUSINESS
National Committee on Trade Facilitation (NCTF)
India has ratified the World Trade Organization’s Trade Facilitation Agreement (TFA) in April 2016.
To facilitate coordination and implementation of the TFA provisions, an inter-ministerial body i.e.
National Committee on Trade Facilitation (NCTF) has been constituted.
National Trade Facilitation Action Plan aims to achieve : -

• Improvement in Ease of Doing Business through reduction in transaction cost and time
• Reduction in cargo release time
• A paperless regulatory environment
of
• A transparent and predictable legal regime

• Improved investment climate through better infrastructure
pillars
DGFT as a facilitator of exports/ imports

Four
TFA
DGFT has a commitment to function as a facilitator of exports and imports. Focus is on good
governance, which depends on efficient, transparent and accountable delivery systems. In order to
facilitate international trade, DGFT consults various Export Promotion Councils as well as Trade and
Industry bodies from time to time.
Free passage of Export Consignment
Consignments of items meant for exports shall not be withheld/ delayed for any reason by any agency of
Central/ State Government. In case of any doubt, authorities concerned may ask for an undertaking
from exporter and release such consignment.

No seizure of export related Stock
No seizure shall be made by any agency so as to disrupt manufacturing activity and delivery
schedule of exports. In exceptional cases, concerned agency may seize the stock on the basis of
prima facie evidence of serious irregularity. However, such seizure should be lifted within 7 days
unless the irregularities are substantiated.
Export of perishable agricultural Products
To reduce transaction and handling costs, a single window system to facilitate export of perishable
agricultural produce is being facilitated through Agricultural and Processed Food Products Export
Development Authority (APEDA). The detailed procedure is at Appendix 1C.
Niryat Bandhu - Hand Holding Scheme for new export/ import entrepreneurs
DGFT is implementing the Niryat Bandhu Scheme for mentoring new and potential exporter on the
intricacies of foreign trade through counseling, training and outreach programmes including the
‘Districts as Export Hubs’ initiative with ‘industry partners’, ‘knowledge partners’ and other
stakeholders to create vibrant District-Product-Market relevant knowledge ecosystem.
DGFT Online Customer Portal
Export Import related information including Acts, Rules, Policy and Procedures etc. are available
online at DGFT portal https://dgft.gov.in/.
Issue of e-IEC (Electronic-Importer Exporter Code)
Importer Exporter Code (IEC) is mandatory for export/ import from/to India as detailed in paragraph
2.05 of this Policy. DGFT issues Importer Exporter Code in electronic form (e-IEC). For issuance of e-
IEC, application can be made on DGFT website (https://dgft.gov.in).
Online facility for e-RCMC/RC Related Processes
DGFT has created a common digital platform for application of issuance, renewal, amendment and
related processes pertaining to Registration Cum Membership Certificate (RCMC)/ Registration
Certificate (RC) issued by Registering Authorities in electronic form as per Chapter 2 of HBP.
Online facility for e-Certificate of Origin (e-CoO)
DGFT has created a common digital platform for issue of Preferential and Non-Preferential
Certificate of Origin (e-CoO) by designated agencies. The CoO Certificates are issued in an online
environment without any physical interface (https://coo.dgft.gov.in).
A unique number i.e. UDIN (Unique Document Identification Number) and a QR code is endorsed on
every e-CoO for validation and authentication by user agencies.
Online facility to file Quality Control and Trade Disputes (QCTD)
DGFT has created a common digital platform for handling Quality Control and Trade Disputes cases

as per Chapter 8 of Foreign Trade Policy where all jurisdictional Indian Mission abroad and Regional
Authorities of DGFT have been onboarded to work towards amicable resolution of disputes raised by
Indian/Foreigner Importer/Exporter in online environment.
Electronic record of export proceeds through eBRC & EDPMS
(a) e-BRC (Electronic Bank Realisation Certificate) has allowed DGFT to capture details of
realisation of export proceeds directly from the Banks through secured electronic mode. This
has facilitated the implementation of various export promotion schemes without any physical
interface with the stake holders.
(b) RBI has also developed a comprehensive IT-based system called Export Data Processing and
Monitoring System (EDPMS) for monitoring of export of goods and software and facilitating AD
banks to report various returns through a single platform. RBI EDPMS data available in DGFT IT
System can also be used by exporters on DGFT portal.
IT Initiatives in DGFT
DGFT has undertaken a number of IT Initiatives to enable a paperless, contactless and transparent
environment for availing benefits under the export promotion schemes with a view to improve the
ease of doing business. The details of these initiatives have been provided in Para 1.04 of Handbook
of Procedures.
24 X 7 Helpdesk Facility
A dedicated 24 X 7 Helpdesk facility has been put in place to assist the exporters in filing
online applications on the DGFT portal and other matters pertaining to Foreign Trade Policy.
Trade Data and Statistics
Continuous efforts are being made for better collection, compilation and wider dissemination of
Trade Data and Statistics to help the policy makers, researchers, exporters and importers to
formulate their trade strategy. The trade statistics for merchandise trade is available at -
i. Department of Commerce’s portal at https:// commerce.gov.in & data bank available at
https:// tradestat.commerce.gov.in/eidb/default.asp,
ii. DGCI&S portal at http://www.dgciskol.gov.in and
iii. NIRYAT Portal at https://niryat.gov.in.
Trade Facilitation at Customs
CBIC has undertaken a number of initiatives to facilitate Trade. Some of these are as follows:
i. 24X7 Customs clearance in 20 sea ports and 17 Airports and extended clearance in ICDs as
per the needs of the Trade.
ii. Single Window in Customs
iii. E-Sanchit – Enabling Paperless clearance environment

iv. Pan-India Implementation of Faceless e-Assessment in imports.
v. TURANT Customs
vi. Implementation of electronic messages from Document Clearance to Cargo Movement
vii. Paperless Customs initiatives –Preparation and issuance of electronic documents like e-LEO
SB, e- Gatepass/e-OOC etc.,
viii. Contactless customs initiatives such as Turant Suvidha Kendras (TKSs).
ix. Release of ICE-DASH–Indian Customs EoDB Monitoring Dashboard
x. Direct Port Delivery (DPD) on imports and Direct Port Entry (DPE) on exports
xi. Compliance Information Portal (CIP)
xii. End to End automated and simplified procedure for Import of certain specified Goods at
Concessional Rate of Duty or for specified end use.
xiii. For detailed guidelines/procedures visit https://www.cbic. gov.in/ and
https://icegate.gov.in/.
Authorised Economic Operator (AEO) Programme
a. Based upon WCO’s SAFE Framework of Standards, Authorised Economic Operator (AEO)
programme’ has been developed by Indian Customs to enable business involved in the
international trade to reap the following benefits:
i. Secure supply chain from point of export to import;
ii. (Ability to demonstrate compliance with security standards when contracting to supply
overseas importers /exporters;
iii. Enhanced border clearance privileges in Mutual Recognition Agreement (MRA) partner
countries;
iv. Minimal disruption to flow of cargo after a security related disruption;
v. Reduction in dwell time and related costs; and
vi. Customs advice / assistance if trade faces unexpected issues with Customs of countries with
which India have MRA.
b. The AEO programmes have been implemented by other Customs administrations that give AEO
status holders preferential Customs treatment in terms of reduced examination, faster
clearances and other benefits.
c. As a step further towards trust-based compliance, Indian Customs has introduced the
new/revamped Authorised Economic Operator (AEO) Programme in which more benefits are
provided.
d. Under the AEO program of Indian Customs, the MSMEs are also covered.
For detailed guidelines/procedures, visit https://www. aeoindia.gov.in/ and

https://www.cbic.gov.in/.
Towns of Export Excellence (TEE)
a. Objective: Development and growth of export production centres. A number of towns have
emerged as dynamic industrial clusters contributing handsomely to India’s exports. It is
necessary to grant recognition to these industrial clusters with a view to maximize their potential
and enable them to move up the value chain and also to tap new markets.
b. Selected towns producing goods of Rs. 750 Crore or more may be notified as TEE based on

potential for growth in exports. However, for TEE in Handloom, Handicraft, Agriculture and
Fisheries sector, threshold limit would be Rs.150 Crore. The following facilities will be provided
to such TEE:
i. Recognized associations of units will be provided financial assistance under MAI scheme, on
priority basis, for export promotion projects for marketing, capacity building and
technological services.
ii. Common Service Providers in these areas shall be entitled for Authorisation under EPCG
scheme.
c. Notified Towns (TEE) are listed in Appendix 1B.
Duty Free Entitlements to Select Sectors
With a view to expand employment opportunities, certain special focus initiatives for Marine
Products and Sports Goods & Toys sectors are required. These sectors are being provided the
following duty free entitlements (only basic customs duty is exempted) as per the relevant Customs
Notifications:
Marine Sector - Duty free import of specified specialized
inputs/ chemicals and flavoring oils not exceeding 1% of FOB
value of seafood exports during the preceding financial year.
Sports Goods and Toys - Duty free import of specified inputs not
exceeding 3% of FOB value of sports goods exports during the
preceding financial year.
For details, refer relevant Customs Notifications in this regard.
Status Holder Certification
AGAR ACCHA KARTE HO EXPORT<

TO STATUS DEKAR SARKAR KAREGI TUMHE SUPPORT
1. The business leaders who have shown an excellent performance in exports will be granted a status
under the Foreign Trade Policy.
2. Holder of IEN shall be entitled for status based on export performance in the current year + previous
3 financial year. However, for Gems & Jewelry Sector above export performance threshold during the
current and preceding two financial years shall be required.
3. The export performance will be considered on FOB Value of export in Indian Rupees.
4. In case of deemed export, free on Road and Free in Rail Value in Rs. shall be converted in foreign
exchange as per the prevailing conversion rate.
EXP Status Holder Categories
Status Category Export Performance Threshold In USD Million

One Star Export House 3

Two Star Export House 15
Three Star Export House 50
Four Star Export House 200
Five Star Export House 800
Grant of Double Weightage
a. Double Weightage (it means export performance will be considered as double then actual)
shall be available for grant of One Star Export House Status category only. The exports by IEC
holders under the following categories shall be granted double weightage for calculation of
export performance for grant of status:
i. Micro and Small Enterprises as defined in Micro, Small & Medium Enterprises
Development (MSMED) Act 2006
ii. Manufacturing units having ISO/BIS Certification
iii. Units located in North Eastern States including Sikkim, and Union Territories of
Jammu ,
Kashmir and Ladakh
iv. Export of fruits and vegetables falling under Chapters 7 and 8 of ITC HS
b. A merchandise shipment/ service rendered can get double weightage only once in any one of
above categories.
Export performance of one IEC holder shall

not be permitted to be transferred to
another IEC holder. Hence, calculation of
exports performance based on disclaimer
shall not be allowed.
Other
Conditions
for Grant of
Status
Export of items under
Authorisation, including SCOMET Exports made on re-export basisshall
items, would be included for not be counted for recognition.
calculation of export performance.
Privileges of Status Holders
1. Custom Clearance on Self Declaration basis.

2. 3 Star & above Export houses are entitled to benefits under accredited clients programme.

3. SION is fixed on priority within 60 days of application.
4. Exemption from furnishing bank guarantee under foreign Trade Policy.
5. 2 Star & above export house can establish warehouses on the ports.
On the basis of SION fixed by DGFT, exemption is provided in the payment of import duty in respect
of raw material and consumables.
6. Exemption from compulsory negotiation of documents through banks.

The status holders would be entitled to preferential treatment and priority in handling of their
consignments by the concerned agencies.
7. Manufacturers who are also status holders (Three Star/Four Star/Five Star) will be enabled to self
certify their manufactured goods (as per their Industrial Entrepreneurial Memorandum (IEM)/
Industrial Licensing (IL)/ Letter of Intent (LOI) as originating from India with a view to qualify for
preferential treatment under different preferential trading agreements (PTA), Free Trade
Agreements (FTAs), Comprehensive Economic Cooperation Agreements (CECA) and Comprehensive
Economic Partnership Agreements (CEPA). Subsequently, the scheme may be extended to remaining
Status Holders.
8. Manufacturer exporters who are also Status Holders shall be eligible to self-certify their
goods as originating from India as per Hand Book of Procedures.
9. Status holders shall be entitled to export freely exportable items (excluding Gems and
Jewelry, Articles of Gold and precious metals) on free of cost basis for export promotion
subject to an annual limit of Rupees One Crore or 2% of average annual export realization
during preceding three licensing years, whichever is lower.
10. For export of pharma products by pharmaceutical companies, the annual limit would be 2%
of the average annual export realisation during preceding three licensing years.
11. In case of supplies of pharmaceutical products, vaccines and lifesaving drugs to health
programmes of international agencies such as UN, WHO-PAHO and Government health
programmes, the annual limit shall be upto 8% of the average annual export realisation
during preceding three licensing years. It may be noted that-
“Manufacture” means to make, produce, fabricate, assemble, process or bring into existence, by
hand or by machine, a new product having a distinctive name, character or use and shall include
processes such as refrigeration, re-packing, polishing, labeling, Re-conditioning repair, remaking,
refurbishing, testing, calibration, re-engineering.
Manufacture, for the purpose of FTP, shall also include agriculture, aquaculture, animal husbandry,
floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining.
“Manufacturer Exporter” means a person who exports goods manufactured by him or intends to export
such goods.
Skilling and Mentorship Obligations

a. To improve the trade ecosystem by enhancing the available skilling opportunities, Status
Holders are being made “partners” in providing mentoring and training in international trade.
Status Holders will endeavor to provide skill upgradation/ training in international trade as
detailed below:
Status Number of Trainees per year
Two Star Export House 5

Three Star Export House 10
Four Star Export House 20
Five Star Export House 50
b. A model training program of a minimum duration of 6 weeks would be put up in public

domain for guidance.
c. Detailed eligibility requirements, selection criteria, training curriculum etc will be at the
discretion of the Status Holder.
Inter-Ministerial Committee for MSME Trade related grievances
An inter-ministerial committee to be set up to examine MSME trade related grievances which have
policy ramifications. This will expedite decision making with a ‘whole of government approach’.
Citizen’s Charter
DGFT has in place a Citizen’s Charter, giving time schedules for providing various services to
clients. Timeline for disposal of an application is given in Chapter 11 of HBP.
GENERAL PROVISIONS REGARDING IMPORTS AND EXPORTS
Objectives
The general provisions governing import and export of goods and services are dealt with in this
chapter.
Policy regarding import /Exports of goods
a. Exports and Imports shall be ‘Free’ except when regulated by way of ‘Prohibition’, ‘Restriction’
or ‘Exclusive trading through State Trading Enterprises (STEs)’ as laid down in Indian Trade
Classification (Harmonized System) [ITC (HS)] of Exports and Imports. The list of ‘Prohibited’,
‘Restricted’, and STE items can be viewed under ‘Regulatory Updates’ at https://dgft. gov.in
b. Further, there are some items which are ‘Free’ for import/export, but subject to conditions
stipulated in other Acts or in law for the time being in force.
It may be noted that-

“Prohibited” indicates the import/export policy of an item, as appearing in ITC (HS) or elsewhere,
whose import or export is not permitted.
“Restricted” is a term indicating the import or export policy of an item, which can be imported
into the country or exported outside, only after obtaining an Authorisation from the offices of DGFT.
Indian Trade Classification (Harmonised System) [ITC (HS)] of Exports and Imports
A) ITC (HS) is a compilation of codes for all merchandise/goods for export/ import. Goods are classified
based on their group or sub-group at 2/4/6/8 digits.
(b) ITC (HS) is aligned at 6 digit level with international Harmonized System goods nomenclature
maintained by World Customs Organization (http://www. wcoomd.org). However, India maintains
national Harmonized System of goods at 8 digit level which may be viewed by clicking on ‘Downloads’ at
http://dgft.gov.in.
(c) The import/export policies for all goods are indicated against each item in ITC (HS). Schedule 1 of
ITC (HS) lays down the Import Policy regime while Schedule 2 of ITC (HS) details the Export Policy
regime.
Compliance of Imports with Domestic Laws
a. Domestic Laws/ Rules/ Orders/ Regulations/ technical specifications/ environmental/safety

and health norms applicable to domestically produced goods shall apply, mutatis mutandis,
to imports, unless specifically exempted.
b. However, goods to be utilized/ consumed in manufacture of export products may be
exempted by DGFT from domestic standards/ quality specifications.
Authority to specify Procedures
DGFT may, specify Procedures to be followed by an exporter or importer or by any

licensing/Regional Authority (RA) or by any other authority for purposes of implementation of the
provisions of FT (D&R) Act, the Rules and the Orders made there under and the FTP. Such
procedures, or amendments if any, shall be published by means of a Public Notice.
Importer-Exporter Code (IEC)
An IEC is a 10-character alpha-numeric number allotted to an entity (firm/company/LLP etc.) and is

mandatory for undertaking any export/import activities. With a view to maintain the unique identity
of an entity, consequent upon introduction / implementation of GST, IEC shall be same as
Permanent Account Number(PAN) and shall be separately issued by DGFT based on an online
application.
(a) No export or import of goods shall be made by any person without obtaining an IEC unless
specifically exempted. For export of services or technology, IEC shall be necessary on the date of
rendering services for availing benefits under the Foreign Trade Policy.
(b) Exempt categories and corresponding permanent IECs are given in Para 2.07 of Handbook of
Procedures.
(c) Application process for IEC and updation in IEC is completely online and IEC can be generated by

the applicant as per the procedure detailed in the Handbook of Procedures.
(d) An IEC holder has to ensure that details in its IEC is updated electronically every year, during the
April- June period. In cases where there are no changes in IEC details same also needs to be
confirmed online.
(e) An IEC shall be de-activated, if it is not updated within the prescribed period. An IEC so de-
activated may be activated, on its successful updation. This would however be without
prejudice to any other action taken for violation of any other provisions of the FTP.
(f) An IEC may also be flagged for scrutiny. IEC holder(s) are required to ensure that any risks
flagged by the system are timely addressed; failing which the IEC shall be de-activated.
“Person” means both natural and legal and includes an individual, firm, society, company,
corporation or any other legal person including the DGFT officials.
Mandatory documents for export/ import of goods from/into India
a. Mandatory documents required for export of goods from India:

i. Bill of Lading/ Airway Bill/ Lorry Receipt/ Railway Receipt/Postal Receipt
ii. Commercial Invoice cum Packing List*
iii. Shipping Bill/Bill of Export/ Postal Bill of Export
b. Mandatory documents required for import of goods into India
i. Bill of Lading/Airway Bill/Lorry Receipt/ Railway Receipt/Postal Receipt in form CN-
22 or CN 23 as the case may be.
ii. Commercial Invoice cum Packing List**
iii. Bill of Entry
c. For export or import of specific goods or category of goods, which are subject to any
restrictions/ policy conditions or require NOC or product specific compliances under any
statute – additional documents may be prescribed by authorities.
d. In specific cases of export or import, the regulatory authority concerned may electronically
or in writing seek additional documents or information, as deemed necessary to ensure legal
compliance.
Principles of Restriction
DGFT may, through a Notification, impose ‘Prohibition’ or ‘Restriction’:
a) on export of foodstuffs or other essential products for preventing or relieving critical

shortages;
b) on imports and exports necessary for the application of standards or regulations for the
classification, grading or marketing of commodities in international trade;
c) on imports of fisheries product, imported in any form, for enforcement of governmental
measures to restrict production of the domestic product or for certain other purposes;
d) on import to safeguard country’s external financial position and to ensure a level of reserves;
e) on imports to promote establishment of a particular industry;
f) for preventing sudden increases in imports from causing serious injury to domestic
producers or to relieve producers who have suffered such injury;
g) for protection of public morals or to maintain public order;

h) for protection of human, animal or plant life or health;
i) relating to the importations or exportations of gold or silver;
j) necessary to secure compliance with laws and regulations including those relating to the
protection of patents, trademarks and copyrights, and the prevention of deceptive
practices;
k) relating to the products of prison labour;
l) for the protection of national treasures of artistic, historic or archaeological value;
m) for the conservation of exhaustible natural resources;
n) for ensuring essential quantities for the domestic processing industry;
o) essential to the acquisition or distribution of products in general or local short supply;
p) for the protection of country’s essential security interests
i. relating to fissionable materials or the materials from which they are derived;
ii. relating to the traffic in arms, ammunition and implements of war;
iii. taken in time of war or other emergency in international relations; or
q) in pursuance of country’s obligations under the United Nations Charter for the
maintenance of international peace and security.
Export/Import of Restricted Goods/ Services
Any goods /service, the export or import of which is ‘Restricted’ may be exported or imported only
in accordance with an Authorisation / Permission or in accordance with the Procedures prescribed in
a Notification / Public Notice issued in this regard.
Actual User Condition
Goods which are importable freely without any ‘Restriction’ may be imported by any person.
However, if such imports require an Authorisation, Actual User alone may import such good(s)
unless Actual User condition is specifically dispensed with by DGFT.
“Actual User” is a person (either natural & legal) who is authorized to use imported goods in his/ its
own premise which has a definitive postal address.
(a) “Actual User (Industrial)” is a person (either natural & legal) who utilizes imported goods for
manufacturing in his own industrial unit or manufacturing for his own use in another unit
including a jobbing unit which has a definitive postal address.
(b) “Actual User (Non-Industrial)” is a person (either natural & legal) who utilizes the imported
goods for his own use in.
(i) any commercial establishment, carrying on any business, trade or profession, which
has a definitive postal address; or
(ii) any laboratory, Scientific or Research and Development(R&D) institution,
university or other educational institution or hospital which has a definitive postal
address; or
(iii) Any service industry which has a definitive postal address.
“Jobbing” means processing or working upon of raw materials or semi-finished goods supplied to job

worker, so as to complete a part of process resulting in manufacture or finishing of an article or any
operation which is essential for aforesaid process.
Terms and Conditions of an Authorisation
Every Authorisation shall, inter alia, include either all or some of the following terms and conditions
(as applicable in terms of the para under which the Authorisation has been issued), in addition to
such other conditions as may be specified:
Description, quantity and value of goods;
Actual User condition (as defined in Chapter 11);
Export Obligation;
Minimum Value addition to be achieved;
Minimum export/import price;
Bank guarantee/ Legal undertaking / Bond with Customs Authority/RA (as in para
2.35 of FTP).
Application Fee
Validity period of import/export as specified in Handbook of Procedures.
a. Application for IEC/Authorisation/License/Scrips/ Registration must be accompanied by
application fees as indicated in the Appendix 2K of Appendices and Aayat Niryat Forms. Fees
must be paid online through any of the channels as notified under Appendix 2K, unless provided
otherwise.
b. Application fee is nothing but the fee for processing of the application. Therefore, the fee once
received will not be refunded except in the circumstances and in a manner laid down in
Appendix 2K.
Clearance of Goods from Customs against Authorisation
Goods already imported / shipped / arrived, in advance, but not cleared from Customs may also be
cleared against an Authorisation issued subsequently. However, such goods already
imported/shipped/arrived, in advance are first warehoused against Bill of Entry for Warehousing and
then cleared for home consumption against an Authorisation issued subsequently. This facility will

however be not available to ‘Restricted’ items or items traded through STEs, unless specifically
allowed by DGFT.
Authorisation - not a Right
No person can claim an Authorisation as a right and DGFT or RA shall have power to refuse to grant or
renew the same in accordance with provisions of FT (D&R) Act, Rules made there under and FTP.
Penal action and placing of an entity in Denied Entity List (DEL)
a. If an Authorisation holder violates any condition of such Authorisation or fails to fulfill export
obligation or fails to deposit the required amount within the period specified in demand notice
issued by Department of Revenue and /or DGFT, he shall be liable for action in accordance with
FT (D&R) Act.
b. With a view to raising ethical standards and for ease of doing business, DGFT has provided for
self- certification system under various schemes. So self certification must be made with care.
c. A firm may be placed under Denied Entity List (DEL), by the concerned RA, under the provision
of Rule 7 of Foreign Trade (Regulation) Rules, 1993. If a firm is placed under DEL, all new
licences, authorisations, scrips, certificates, instruments etc. will be blocked from printing/
issue/renewal.
d. DEL orders may be placed on hold, for reasons to be recorded in writing by the concerned RA.
DEL order can be placed in abeyance, for a period not more than 60 days at a time.
e. A firm’s name can be removed from DEL, by the concerned RA for reasons to be recorded in
writing, if the firm completes Export Obligation/ pays penalty/ fulfils requirement of Demand
Notice(s) issued by the RA/submits documents required by the RA.
“Export Obligation” means obligation to export product or products covered by Authorisation or
permission in terms of quantity, value or both, as may be prescribed or specified by Regional or
competent authority.
Firm/company under adjudication proceeding before the National Company Law Tribunal (NCLT)
Any firm/company coming under the adjudication proceeding before the National Company Law
Tribunal (NCLT) shall inform the concerned Regional Authority (RA) and NCLT of any outstanding
export obligations/liabilities under any of the schemes under FTP. The total outstanding duty saved
amount/dues along with interest, and any penalty imposed under FT (D&R) Act, or any other dues,
shall be counted as part of the dues to the government against the said firm/company.
PROHIBITIONS ON TRADE (COUNTRY, ORGANISATIONS, GROUPS, INDIVIDUALS ETC. AND PRODUCTSPECIFIC)

Prohibition on Import and Export of ‘Arms and related material’ from / to Iraq
Notwithstanding the policy on Arms and related materials in Chapter 93 of ITC (HS), the
import/export of Arms and related material from/to Iraq is ‘Prohibited’. However, export of Arms
and related material to overnment of Iraq shall be permitted subject to ‘No Objection Certificate’
from the Department of Defence Production.
Prohibition on Trade with the Islamic State in Iraq and the Levant [ISIL, also known as Daesh], Al Nusrah
Front [ANF] and other individuals, groups, undertakings and entities associated with Al Qaida
In compliance with United Nations Security Council Resolution trade in oil and refined oil products,
modular refineries and related materials, besides items of cultural (including antiquities), scientific
and religious importance is prohibited with the Islamic State in Iraq and the Levant [ISIL].
Prohibition on direct or indirect import and export from/to DPRK
Direct or Indirect export and import of items, whether or not originating in Democratic People’s
Republic of Korea (DPRK) to/from DPRK is detailed in Appendix – I of this Chapter.
Direct or Indirect Export/Import to/ from Iran
a. Direct or indirect export to Iran or import from Iran of any item, material, equipment, goods
and
technology mentioned in the following documents would be permitted subject to the provisions
contained in Annex-B to the United Nations Security Council Resolution 2231 (2015):
i. Items listed in INFCIRC/254/Rev.14/Part1 and INFCIRC/254/Rev.11/Part 2 (IAEA
Documents) as updated by the UNSC and IAEA from time to time.
ii. Items listed in S/2015/546 (UN Security Council document) as updated by the Security
Council from time to time.
b. All the UN Security Council Resolutions/Documents and IAEA Documents referred to above are
available on the UN Security Council website (https://www. un.org/security council/) and IAEA
website (https:// www.iaea.org/).
Prohibition on Import of Charcoal from Somalia
Direct or indirect import of charcoal is prohibited from Somalia, irrespective of whether or not such
charcoal has originated in Somalia [United Nations Security Council Resolution 2036(2012)].
Importers of Charcoal shall submit a declaration to Customs that the consignment has not originated
in Somalia.
IMPORT / EXPORT THROUGH STATE TRADING ENTERPRISES

State Trading Enterprises (STEs)
a. State Trading Enterprises (STEs) are governmental and non-governmental enterprises,

including marketing boards, which deal with goods for export and /or import, import or
export of which is governed through exclusive or special privilege granted to State Trading
will be subject to ITC (HS).
b. Such STE(s) shall make any such purchases or sales involving imports or exports solely in
accordance with commercial considerations, including price, quality, availability,
marketability, transportation and other conditions of purchase or sale in a non-
discriminatory manner and shall afford enterprises of other countries adequate opportunity,
in accordance with customary business practices, to compete for participation in such
purchases or sales.
c. DGFT may, however, grant an authorisation to any other entity to import or export any of the
goods notified for exclusive trading through STEs.
State Trading Enterprises (STEs), for the purpose of this FTP, are those entities which are granted
exclusive right/privileges export and /or import as per Para 2.20 (a) of FTP.
TRADE WITH SPECIFIC COUNTRIES
Trade with Neighbouring Countries
DGFT may issue instructions or frame schemes as may be required to promote and regulate trade
and strengthen economic ties with neighbouring countries.
Transit Facility
Transit of goods through India from/ or to countries adjacent to India shall be enabled and regulated
in accordance with strategic and economic interests of India as well as the bilateral treaties between
India and those countries. Such arrangements will be subject to conditions and restrictions as may
be specified by DGFT in accordance with International Conventions/ Treaties/Agreements.
Trade with Russia under Debt-Repayment Agreement
In case of trade with Russia under Debt Repayment Agreement, DGFT may issue instructions or
frame schemes as may be required, and anything contained in FTP, in so far as it is inconsistent with
such instructions or schemes, shall not apply.
IMPORT OF SPECIFIC CATEGORIES OF GOODS

Import of Samples
No Authorisation shall be required for Import of bonafide technical and trade samples of items
“restricted” in ITC (HS) except defence/security items, seeds, bees and new drugs. Import of
samples shall be further governed by Para 2.62 of Handbook of Procedures.
Import of Gifts
Import of goods, including those purchased from e-commerce portals, through post or courier,
where Customs clearance is sought as gifts, is prohibited except for life saving drugs/ medicines and
Rakhi (but not gifts related to Rakhi).
Explanation:
1. Rakhi (but not gifts related to Rakhi) will be covered under Section 25(6) of Customs Act,
1962 that reads that “no duty shall be collected if the amount of duty leviable is equal to or less
than Rs. 100/-”
2. Import of goods as gifts with payment of full applicable duties is allowed.
Import through Passenger Baggage
Bona-fide household goods and personal effects may be imported as part of passenger baggage as
per limits, terms and conditions specified in Baggage Rules notified by Ministry of Finance.
a. Samples of such items that are not freely importable under FTP may also be imported as part of
passenger baggage without an Authorisation.
b. Exporters coming from abroad are also allowed to import drawings, patterns, labels, price tags,
buttons, belts, trimming and embellishments required for export, as part of their passenger
baggage, without an authorization subject to value limit as laid down in FTP (vaps aate vakt bhi
saman sath main la sakte hai)
c. Any item(s) including Samples or Prototypes of items whose import policy is “restricted” or
“prohibited” or is canalised through STEs are not permitted as part of passenger baggage except
with a valid authorization/ permission issued by DGFT.
Re – import of goods repaired abroad
Capital goods, equipment, components, parts and accessories, whether imported or indigenous,
except those restricted under ITC (HS) may be sent abroad for repairs, testing, quality improvement
or upgradation or standardization of technology and re-imported without an Authorisation.

“Capital Goods” means any plant, machinery, equipment or accessories required for manufacture or
production, either directly or indirectly, of goods or for rendering services, including those required
for replacement, modernisation, technological up-gradation or expansion. It includes packaging
machinery and equipment, refrigeration equipment, power generating sets, machine tools,

equipment and instruments for testing, research and development, quality and pollution control.
Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry,
floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for use in
services sector.
Import of goods used in projects abroad
Project contractors after completion of projects abroad, may import without an Authorisation,
goods including capital goods used in the project, provided they have been used for at least one
year.
Import of Prototypes
Import of new / second hand prototypes / second hand samples may be allowed on payment of duty
without an Authorisation to an Actual User (industrial) engaged in production of or having industrial
license / letter of intent for research in item for which prototype is sought for product development
or research, as the case may be, upon a self-declaration to that effect, to the satisfaction of
Customs authorities.
Import of Metallic Waste and Scrap
a. Import of any form of metallic waste, scrap will be subject to the condition that it will not
contain hazardous, toxic waste, radioactive contaminated waste/scrap containing
radioactive material, any types of arms, ammunition, mines, shells, live or used cartridge or
any other explosive material in any form either used or otherwise as detailed Handbook of
Procedures.
b. The types of metallic waste and scrap which can be imported freely, and the Procedures of
import in the shredded form; un-shredded, compressed and loose form is laid down in Para
2.51 of Handbook of Procedures.
Removal of Scrap/Waste from SEZ
A SEZ unit/Developer/ Co-developer may be allowed to dispose of in DTA any waste or scrap,
including any form of metallic waste and scrap, generated during manufacturing or processing
activity, without an Authorisation, on payment of applicable Customs Duty.
“Developer” means a person or body of persons, company, firm and such other private or
government undertaking, who develops, builds, designs, organises, promotes, finances, operates,
maintains or manages a part or whole of infrastructure and other facilities in SEZ as approved by
Central Government and also includes a co- developer.

OTHER PROVISIONS RELATED TO IMPORTS
Import under Lease Financing
No specific permission of DGFT is required for import of lease financed Capital Goods.
Execution of Legal Undertaking (LUT) / Bank Guarantee (BG)
a. Wherever any duty-free import is allowed or where otherwise specifically stated, importer
shall execute, Legal Undertaking (LUT) / Bank Guarantee (BG) / Bond with the Customs
Authority, as prescribed, before clearance of goods and in case of indigenous sourcing,
Authorisation holder shall furnish LUT/BG/Bond to the RA concerned before sourcing
material from indigenous supplier/ nominated agency as Handbook of Procedures.
Private/Public Bonded Warehouses for Imports
a. Private/ Public bonded warehouses may be set up in DTA as per rules, regulations and
notifications issued under the Customs Act, 1962, except prohibited items, arms and
ammunition, hazardous waste and chemicals may be stored in warehouses.
b. Such goods may be cleared for home consumption in accordance with provisions of FTP and
against Authorisation, wherever required.
c. The clearance of the warehoused goods shall be as per the provisions of the Customs Act, 1962.
“Domestic Tariff Area (DTA)” means area within India which is outside SEZs and EOU/ EHTP/ STP/BTP.
“EOU” means Export Oriented Unit for which a letter of permit has been issued by Development
Commissioner.
Special provision for Hides Skins and semi-finished goods
Hides, Skins and semi-finished leather may be imported in the Public/ Private Bonded warehouse for
the purpose of DTA sale and the unsold items thereof can be re-exported from such bonded
warehouses on payment of the applicable rate of export duty.
Sale on High Seas
Sale of goods on high seas for import into India may be made subject to FTP or any other law in force.
Merchanting Trade

Merchanting trade involving shipment of goods from one foreign country to another foreign country
without touching Indian ports, involving an Indian intermediary is allowed subject to compliance
with RBI guidelines, except for goods/items in the CITES and SCOMET list.

“SCOMET” is the nomenclature for dual use items of Special Chemicals, Organisms, Materials,
Equipment and Technologies (SCOMET). Export of dual-use items and technologies under India’s FTP
is regulated. It is either prohibited or is permitted under an Authorisation.
EXPORTS
Free Exports
All goods may be exported without any restriction except to the extent that such exports are
regulated by ITC(HS) or any other provision of FTP or any other law for the time being in force.
DGFT may, however, specify through a Public Notice such terms and conditions according to which
any goods, not included in ITC(HS), may be exported without an Authorisation.
Benefits for Supporting Manufacturers
For any benefit to accrue to the supporting manufacturer, the names of both supporting
manufacturer as well as the merchant exporter must figure in the concerned export documents,
especially in Tax Invoice / Shipping Bill / Bill of Export/ Airway Bill.
“Merchant Exporter” means a person engaged in trading activity and exporting or in tending to
export goods.
(a) “Supporting Manufacturer” is one who manufactures goods/products or any
part/accessories/components of a good/ product for a merchant exporter or a manufacturer
exporter under a specific Authorisation.
(b) “Supporting Manufacturer” for the EPCG Scheme shall be one in whose premises/ factory Capital
Goods imported/ procured under EPCG Authorisation is installed.
Third Party Exports
Third party exports (except Deemed Export) shall be allowed under FTP. In such cases, export
documents such as shipping bill shall indicate name of both manufacturing exporter/manufacturer
and third-party exporter(s). E-Bank Realization Certificate (e-BRC) or export Realizations from RBI’s
EDPMS wherever available in DGFT IT Systems, Export Order and Invoice should be in the name of
third-party exporter.

“Third-party exports” means exports made by an exporter or manufacturer on behalf of another
exporter(s).

EXPORTS OF SPECIFIC CATEGORIES
Export of Samples
a. Exports of bonafide trade and technical samples of freely exportable item shall be allowed
without any limit.
b. The procedure for Export of Samples and Free of charge goods shall be governed by provisions
given in Para 2.63 of Handbook of Procedures.
Export of Gifts
Goods including edible items, of value not exceeding Rs.5, 00,000/- in a licensing year, may be
exported as a gift. However, items mentioned as restricted for exports in ITC (HS) shall not be
exported as a gift, without an Authorisation.

“Licensing Year” means period beginning on the 1st April of a year and ending on the 31 st March of
the following year.
Export of Passenger Baggage
a. Bona-fide personal baggage may be exported either along with passenger or, if
unaccompanied, within one year before or after passenger’s departure from India. However,
items mentioned as restricted in ITC (HS) shall require an Authorisation. Government of India
officials proceeding abroad on official postings shall, however, be permitted to carry along
with their personal baggage, food items (free, restricted or prohibited) strictly for their
personal consumption.
b. Samples of such items that are otherwise freely exportable under FTP may also be exported
as part of passenger baggage without an Authorisation.
Import for Export
(pahle import karo aur un goods ko baad main export kar do)
I. (a) Goods imported, in accordance with FTP, may be exported in same or substantially the same
form without an Authorisation provided that item to be imported or exported is not in the
restricted for import or export in ITC(HS) Schedules.
(b) Goods, including capital goods (both new and second hand), may be imported (including
restricted goods but excluding prohibited goods) for export provided:
i. Importer clears goods under Customs Bond;
ii. Goods are freely exportable, i.e., are not “Restricted” or “Prohibited” or subject to
“exclusive trading through State Trading Enterprises” or any conditionality or
requirement as may be required under Schedule 2 of the Export Policy of the ITC (HS);
iii. Export is against freely convertible currency.
(c) Capital goods, which are freely importable and freely exportable, may be imported for export
on execution of LUT/BG with the Customs Authority.
(d) Notwithstanding the above, goods which are freely importable may be re-exported except

items as in the Prohibited or SCOMET List of exports, in same or substantially same form even
though such goods are under “Restricted list” for export, subject to the following conditions:
(i) Goods are not of Indian Origin;
(ii) Goods imported shall be kept in bonded warehouse under supervision of Customs;
(iii) Goods to be exported have never been cleared for home consumption;
(iv) Export of goods shall be subjected to Section 69 of Customs Act, 1962.
Export of Replacement Goods
(defective goods replace ho sakte hai)
Goods or parts thereof on being exported and found defective/damaged or otherwise unfit for use
may be imported for replacement free of charge by the exporter in accordance with the relevant
Customs Notification.
Export of Repaired Goods
(export wale goods ko repair ke liye import kar sakte hai)

Goods or parts of the goods, except restricted on being exported and found defective, damaged or
otherwise unfit for use may be imported for repair and subsequent reexport. Such goods shall be
allowed clearance without an Authorisation
Export of Spares
Warranty spares (whether indigenous or imported) of plant, equipment, machinery, automobiles or

any other goods [except those restricted under ITC (HS)] may be exported along with main
equipment or subsequently but within contracted warranty period of such goods, subject to approval
of RBI.
“Spares” means a part or a sub-assembly or assembly for substitution that is ready to replace an
identical or similar part or sub- assembly or assembly. Spares include a component or an accessory.
Re-export of imported Goods found defective and unsuitable for use
Imported goods found defective after Customs clearance, or not found as per specifications or
requirements may be re-exported back as per Customs Act, 1962.
Private Bonded Warehouses for Exports
Private bonded warehouses exclusively for exports may be set up in DTA as per terms and
conditions of notifications issued by Department of Revenue.
a. Such warehouses shall be entitled to procure goods from domestic manufacturers for
manufacturing and other operations in accordance with Section 65 of the Customs Act, 1962.
PAYMENTS AND RECEIPTS ON IMPORTS / EXPORTS

Denomination of Export Contracts
a. All export contracts and invoices shall be denominated either in freely convertible currency
or Indian rupees but export proceeds shall be realized in freely convertible currency.
b. However, export proceeds against specific exports may also be realized in rupees, provided it
is through a freely convertible Vostro account (account that a bank holds on behalf of other
bank, example bank of Americas Vostro Account may be held by SBI) of a non-resident bank
situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal
or Bhutan.
c. Contracts (for which payments are received through Asian Clearing Union (ACU) shall be
denominated in ACU Dollar). However, participants in the ACU may settle their transactions
in ACU Dollar or in ACU Euro as per RBI Notifications.
d. Invoicing, payment and settlement of exports and imports is also permissible in INR subject
to compliances as under RBI’s Circular.
i. Indian importers undertaking imports through this mechanism shall make payment in INR
which shall be credited into the Special Vostro account of the correspondent bank of the
partner country, against the invoices for the supply of goods or services from the
overseas seller
/supplier.
ii. Indian exporters, undertaking exports of goods and services through this mechanism,
shall be paid the export proceeds in INR from the balances in the designated Special
Vostro account of the correspondent bank of the partner country.
Non-Realisation of Export Proceeds
a. If an exporter fails to realize export proceeds within time specified by RBI, he shall, without
affecting any liability or penalty under any law in force, be liable to return all benefits /
incentives availed against such exports and action in accordance with provisions of FT (D&R)
Act.In case an Exporter is unable to realize the export proceeds for reasons beyond his control
(force majeure), he may approach RBI for writing off the unrealized amount as laid down in
Para 2.72 of Handbook of Procedures.
b. The payment realized through insurance cover, would be eligible for benefits under FTP as per
Procedures laid down in Para 2.71 of Handbook of Procedures.
Export Credit Agencies (ECAs)
a. Export Credit Agencies (ECAs) are policy instruments for Government to support exports.
ECAs support exports by insurance, guarantee and also direct lending. Export Credit Agencies
(ECAs) like Export Credit Guarantee Corporation of India Ltd. (ECGC) provides credit
insurance support to exports and export credit lending. Covers issued by ECGC to exporters,
protect against losses arising out of payment failures due to insolvency or default of the
buyers or due to political risks.
b. Exporters can diversify their markets in addition to protecting existing markets through such
covers.

c. ECGC also supports Medium and Long term (MLT) exports including project exports. Exim
Bank is the other ECA in the business of lending for MLT exports and fronting the
government’s line of credit.
d. ECGC indemnifies losses of exporters in export trade due to insolvency or default of the
buyer. Additionally, losses due to political risk like war, sudden import restriction,
promulgation of law or decree after the shipment has been affected are also covered.
e. Some of the anti- dumping measures or non-tariff barriers introduced after a shipment has
been made will come under the purview of the political risk. In such cases exporter’s interest
are protected by ECGC.
(Exporters aur exports ko support karti hai)

“Project Exports” refers to export of engineering goods on deferred payment terms and execution
of turnkey projects and civil construction contracts abroad collectively. Project Exports would
encompass :
i. Civil construction contracts;
ii. Turnkey Engineering contracts including supply of Capital Goods on deferred payment terms;
iii. Process and Engineering Consultancy Services; and
iv. Project Construction items (excluding Steel and Cement).
EXPORT PROMOTION COUNCILS
Recognition of EPCs to function as Registering Authority for issue of RCMC
a) Export Promotion Councils (EPCs) are organizations of exporters, set up with the objective to
promote and develop Indian exports. Each Council is responsible for promotion of a particular
group of products/ projects/services as given in Appendix 2T of ANF.
b) EPCs are also eligible to function as Registering Authorities to issue Registration-cum-
Membership Certificate (RCMC) to its members. The criteria for EPCs to be recognized as
Registering Authorities for issue of RCMC to its members are detailed in Para 2.78 of the
Handbook of Procedures.
Registration-cum-Membership Certificate (RCMC)
Any person, applying for an Authorisation to import/ export under the FTP (except items listed as
‘Restricted’ items in ITC (HS)) or applying for any other benefit or concession under FTP, shall
be required to provide, the RCMC granted by competent authority in accordance with Procedures
specified in Handbook of Procedures unless specifically exempted under FTP.
(b) Certificate of Registration as Exporter of Spices (CRES) issued by Spices Board and Certificate of
Registration as Exporter of Coir & Coir products issued by the Coir Board shall be treated as
Registration-Cum- Membership Certificate (RCMC) for the purposes under this Policy.
“Competent Authority” means an authority competent to exercise any power or to discharge any
duty or function under the Act or the Rules and Orders made there under or under FTP.

“Registration-Cum-Membership Certificate” (RCMC) means certificate of registration and
membership granted by an Export Promotion Council/Commodity Board/Development Authority or
other competent authority as prescribed in FTP or HBP.
Interpretation of Policy
(a) The decision of DGFT shall be final and binding on all matters relating to interpretation of
Policy, or provision in Handbook of Procedures, Appendices and Aayat Niryat Forms or
classification of any item for import / export in the ITC (HS).
(b) A Policy Interpretation Committee (PIC) may be constituted to aid and advice DGFT. The
composition of the PIC would be as follows:
(i) DGFT: Chairman
(ii) All Additional DGFTs in Headquarters: Members
(iii) All Joint DGFTs in Headquarters looking after Policy matters: Members
(iv) Joint DGFT (PRC/PIC): Member Secretary
(v) Any other person / representative of the concerned Ministry / Department, to be co-opted
by the Chairman.
Exemption from Policy/Procedures
DGFT may in public interest pass such orders or grant such exemption, relaxation or relief, as he may
deem fit and proper, on grounds of genuine hardship and adverse impact on trade to any person or
class or category of persons from any provision of FTP or any Procedures. While granting such
exemption, DGFT may impose such conditions as he may deem fit after consulting the Committees
as under:
Sl. No. Description Committee

1 Fixation/modification of product norms Norms Committees
under all schemes
2 Nexus with Capital Goods (CG) and EPCG Committee

benefits under EPCG Schemes
3 All other issues Policy Relaxation Committee (PRC)
“NC” means the Norms Committee in the Directorate General of Foreign Trade for approval of adhoc
input
–output norms in cases where SION does not exist and recommend SION to be notified in DGFT.
Personal Hearing by DGFT for Grievance Redressal
a) Government is committed to easy and speedy redressal of grievances from Trade and Industry.
If an importer/exporter is aggrieved by any decision taken by Policy

Relaxation Committee (PRC), or a decision/order by any authority in the Directorate General of
Foreign Trade, a specific request for Personal Hearing (PH) along with the prescribed
application fee as per Appendix-2K has to be made to DGFT.
The opportunity for Personal Hearing will not apply to a decision/order made in any proceeding,
including an adjudication proceeding, whether at the original stage or at the appellate stage,
under the relevant provisions of FT (D&R) Act, 1992, as amended from time to time.
Regularization of EO default and settlement of Customs duty and interest through SettlementCommission
With a view to providing assistance to firms who have defaulted under FTP for reasons beyond their
control as also facilitating merger, acquisition and rehabilitation of sick units, it has been decided to
empower Settlement Commission in Department of Revenue to decide such cases also with effect
from 01.04.2005. However, in cases where the matter is under the purview of the NCLT, Para 2.15
of the FTP shall apply.
SELF-CERTIFICATION OF ORIGINATING GOODS
Approved Exporter Scheme for Self- Certification of Certificate of Origin
a) Currently, Certificates of Origin under various Preferential Trade Agreements [PTA], Free Trade
Agreements [FTAs], Comprehensive Economic Cooperation Agreements [CECA] and
Comprehensive Economic Partnerships Agreements [CEPA] are issued by designated agencies as
per Appendix 2B of Appendices and Aayat Niryat Forms.
b) The Manufacturers who are also Status Holders shall be eligible for Approved Exporter Scheme.
Approved Exporters will be entitled to self-certify their manufactured goods as originating from
India with a view to qualifying for preferential treatment under different
PTAs/FTAs/CECAs/CEPAs which are in operation. Self-certification will be permitted only for the
goods that are manufactured as per the Industrial Entrepreneurs Memorandum (IEM) / Industrial
License (IL) /Letter of Intent (LOI) issued to manufacturers.
c) Status Holders will be recognized by DGFT as Approved Exporters for self-certification based on
availability of required infrastructure, capacity and trained manpower as per the details in Para
2.94 of Handbook of Procedures read with Appendix 2F of Appendices & Aayaat Niryat Forms.
d) The details of the Scheme, along with the penalty provisions, are provided in Appendix 2F of
Appendices and Aayaat Niryat Forms and will come into effect only when India incorporates the
scheme into a specific agreement with its partner/s and the same is appropriately notified by
DGFT. Further the entities to whom such self-certification will be extended bilaterally under
FTA/PTA will be subject to the provisions and conditions of that FTA.
(Aayat Niryat forms ke hisab se aap apne goods ko self certify kar sakte hai)
“Status holder” means an exporter recognized for export performance by an RA as per para 1.25 of the

FTP.
Certification of Origin of Goods EU- GSP
Exporters can self-certify the Statement on Origin of their goods, as per the self-certification
scheme, Certification of Origin of Goods for European Union Generalised System of Preferences (EU-
GSP), of the European Union (EU) under the Registered Exporter System (REX) as in Para 2.89(A)(c)
of the Handbook of Procedures.
DEVELOPING DISTRICTS AS EXPORT HUBS
(distticts ko identify karna aur pata lagana ki waha se kya export ho sakta hai aur export ko
promote karna)
Objective
To encourage districts of the country to become export hubs by identifying products and services with
export potential in the district, addressing problems for exporting these products/services,
supporting local exporters/ manufacturers to scale and find potential buyers outside India with the
aim of promoting exports, manufacturing & services industry in the District.
This is intended to bring greater level of awareness and commitment regarding exports at the
district level, build capacity to create new exporters and identify new markets for the focused
products and services. This will also empower MSMEs, farmers and small scale industries to grow.
District Export Promotion Committees - Institutional Mechanism at District Level
Every district has products and services which are being exported, and can be further promoted,
along with new products / services, to increase production, grow exports, generate economic
activity and achieve the goal of Atma Nirbhar Bharat, Vocal for local and Make in India.
Products/services (GI products, agricultural clusters, toy clusters etc.) with export potential in each
District have to be identified and promoted.
Each District shall constitute a District Export Promotion Committee (DEPC) chaired by
Collector/DM/DC of the District and co-chaired by designated DGFT Regional Authority with various
other stakeholders as its members.
The primary function of the DEPC will be to prepare and implement district specific Export Action
Plans in collaboration with all the relevant stakeholders at the Central, State and the District level.
DGFT Regional Authorities will be engaging with all the relevant State and Central agencies to take
forward this initiative in each district.
District Export Action Plans for Each District

The District Export Action Plan (DEAP) may be prepared for each district. 2-3 high potential
products/services from the districts may be prioritised and comprehensive plan for their export
growth may be prepared. It may include the support required by the local industry in boosting their
manufacturing and exports with impetus on supporting the industry from the production stage to the
exporting stage.
State/UT Export Promotion Committees
To synergise the efforts of the Department of Commerce/ DGFT and the State/UT governments in
promotion of exports from the State, each State shall constitute a State Export Promotion Committee
(SEPC) headed by Chief Secretary of the State. The designated Regional Authority of DGFT shall be
the co-convener of the committee.
Nodal DGFT Regional Authority
Districts of the States/UTs have been assigned to the Jurisdictional DGFT Regional Authority and the
nodal RA shall be responsible for the Districts under their jurisdiction for all activities related to
Districts as Export Hubs initiative in those Districts.
Online Monitoring of District Export Action Plans
DGFT would develop an online monitoring portal that may be accessed on the DGFT website to
enable the States/ DGFT RAs to upload all information related to the products/services with export
potential of every District. The portal may also help in monitoring the progress of District Export
Action Plan and DEPC meetings in all the Districts..
Support in the form of product/sector specific training and development needs of local industries,
dissemination of information through outreach activities including buyer- seller meets, trade fairs,
workshops etc. may be provided in each District.
The District Export Action Plan notified by the District Export Promotion Committee in each District
may include clear identification of products (goods and services) with export potential in the
District, and various support measures for promoting exports from the distrits.
Once the plan is formally adopted by the DEPC of the each District, the plan may be implemented
by the DEPC by identifying the projects/activities required to be done to promote export growth from
the Districts.
DUTY EXEMPTION / REMISSION SCHEMES

Objective
Schemes under this Chapter enable duty free import of inputs for export production, including
replenishment of inputs or duty remission.
Schemes
1. Duty Exemption Schemes.- The Duty Exemption schemes consist of the following:
• Advance Authorisation (AA) (which will include Advance Authorisation for Annual
Requirement).
• Duty Free Import Authorisation (DFIA).
2. Duty Remission Scheme- Duty Drawback (DBK) Scheme, administered by Department of Revenue.
3. Scheme for Rebate on State and Central Taxes and Levies (RoSCTL), as notified by the Ministry of
Textiles.
4. Schemes for Remission of Duties and Taxes on Exported Products (RoDTEP) notified by
Department of Commerce and administered by Department of Revenue.
Applicability of Policy & Procedures
Authorisation under this Chapter shall be issued in accordance with the Policy and Procedures in
force on the date of issue of the Authorisation.
Advance Authorisation
(a) Advance Authorisation is issued to allow duty free import of input, which is physically
incorporated in export product (making normal allowance for wastage). In addition, fuel, oil,
catalyst which is consumed
/ utilized in the process of production of export product, may also be allowed.
(b) Advance Authorisation is issued for inputs in relation to resultant product, on the following basis:
(i) As per Standard Input Output Norms (SION) notified (available in Hand Book of
Procedures); OR
(ii)On the basis of self declaration as per Handbook of Procedures. OR
(iii)Applicant-specific prior fixation of norm by the Norms Committee as per of Handbook of
Procedures.
OR
(iv)On the basis of Self Ratification Scheme as per of Foreign Trade Policy.

“SION” means Standard Input Output Norms notified by DGFT.
Advance Authorisation for Spices

Duty free import of spices covered under Chapter-9 of ITC (HS) shall be permitted only for activities
like crushing / grinding / sterilization / manufacture of oils or oleoresins. Authorisation shall not be
available for simply cleaning, grading, re-packing, etc.
Special Advance Authorisation Scheme for export of Articles of Apparel and Clothing accessories
(fabric import bina duty ke kar lo)

Duty free import of fabric under ‘Special Advance Authorisation Scheme for export of Articles of
Apparel and Clothing Accessories’ shall be allowed, as per, subject to the following terms and
conditions:
a. The authorisation shall be issued based on Standard Input Output Norms (SION) or prior
fixation of norms by Norms Committee.
b. The authorisation may also be issued on the basis of self-declaration as per HBP. In such cases,
adhoc-norms shall be fixed within stipulated time period of 90 days.
c. The authorisation shall be issued for the import of relevant fabrics including inter lining only as
input. No other input, packing material, fuel, oil and catalyst shall be allowed for import under
this authorisation.
d. Exporters shall be eligible for All Industry Rate of Duty Drawback, for non-fabric inputs, as
determined by Central Government for this scheme. For the purpose of value addition norm of
FTP, the value of any other input used on which benefit of Drawback is claimed or intended to
be claimed shall be equal to 22% of the FOB value of export realised.
e. Where the exporter desires to claim drawback determined and fixed by Jurisdictional Customs
Authority (brand rate), he shall follow FTP para regarding declarations to be made in
application for the authorisation and make export under claim for brand rate.
f. Authorisation, and the fabric imported, shall be subject to actual user condition. The same
shall be nontransferable even after completion of export obligation
g. The fabric imported shall be subject to pre-import condition and it shall be physically
incorporated in the export product (making normal allowance for wastage).
Eligible Applicant / Export /Supply
a. Advance Authorisation can be issued either to a manufacturer exporter or merchant exporter

tied to supporting manufacturer.
b. Advance Authorisation for pharmaceutical products manufactured through Non-Infringing (NI)
process (as indicated in paragraph 4.18 of Handbook of Procedures) shall be issued to
manufacturer exporter only.
c. Advance Authorisation shall be issued for:
i. Physical export (including export to SEZ)
ii. Intermediate supply; and/or
iii. Supply of goods to the categories mentioned in paragraph 7.02 (b), (c), (d), (e), (f)
and (g) of this FTP.
iv. Supply of ‘stores’ on board of foreign going vessel / aircraft, subject to condition
that there is specific Standard Input Output Norms in respect of item supplied.

Self-Ratification Scheme
i. Where there is no SION/valid Adhoc Norms for an export product or where SION has been
notified but exporter intends to use additional inputs in the manufacturing process, eligible
exporter can apply for an Advance Authorisation under this scheme on self-declaration and
self-ratification basis.
ii. A Certificate from a Chartered Engineer who has been not been penalised in the last five years
under FT(D&R) Act 1992,Customs Act 1962, Central Excise Act 1944, GST Acts and allied acts
iii. Detailed procedure for administering the scheme shall be prescribed in the Handbook of
Procedures.
iv. An exporter (manufacturer or merchant), who holds AEO Certificate under Common
Accreditation Programme of CBEC is eligible to opt for this scheme.
v. A status holder who is a manufacturer cum actual user and holds valid 2-star or above status
under para 1.25 of FTP and who has already submitted its application for grant of AEO on
CBIC’s AEO portal is also eligible to apply for this scheme subject to following conditions:-
a) Status holder submits copy of numbered and dated acknowledgement of its
application for grant of AEO.
b) Status holder undertakes to the DGFT that –
1. Their application for grant of AEO certification has not yet been
rejected;
2. There is no case of infringement of Customs and allied laws against the
status holder in the current year and last three FYs.
3. Status holder has not been issued show cause notice by Customs or GST
authorities in the current year and last three FYs.
4. Status holder has positive net current assets.
5. There are no insolvency, bankruptcy or liquidation proceedings taken
against the status holder in the current year and last three FYs.
c) If status holder is unable to obtain the AEO certification within 120 days from date of
application under this scheme para, the exporter agrees that the facility under this
para shall stand withdrawn and he (status holder) will be bound to approach the
concerned Norms Committee of DGFT for fixation of norms and to abide by the
decision of the said Committee.
d) In case of situation as at (c) above, no further authorisation under this scheme para
will be issued.
e) The DGFT may deny authorisation under this scheme para to two star and above
status holder based on its risk management principles.
f) Status holder shall be audited by the DGFT as laid down in the Handbook of Procedures.
vi. The scheme shall not be available for the following export products:
a) All items covered under Chapter-1 to 24 and Chapter-71of ITC (HS) Classification;
b) Biotechnology items and related products; and
c) SCOMET items.
vii. The scheme shall not be available for the following inputs:
A. All vegetable / edible oils classified under Chapter-15 and all types of oilseeds classified
under Chapter-12 of ITC (HS) book;
B. All types of cereals classified under Chapter–10 of ITC (HS) book;

C. Horn, hoof and any other organ of animal;
D. Wild animal products, organs and waste thereof;
E. Honey;
F. All items with basic customs duty of 30% or more;
G. All types of fruits/ nuts/ vegetables classified under Chapter-7 and Chapter-8 of ITC (HS)
book;
H. Items covered under heading 2515, 2516, 3301, 3302, 3303, 6801 and 6802 of ITC (HS)
Classification;
I. Items covered under Chapter 50 to 63 of ITC (HS) classification;
J. Acetic Anhydride, Ephedrine and Pseudoephedrine;
K. Vitamins;
L. Biotechnology items and related products;
M. Insecticides, Rodenticides, Fungicides, Herbicides, Anti sprouting products, and plant
growth regulators, disinfectants and similar products of all forms, types and grades;
N. Waste/Scrap of all types; and
O. Second hand goods.
viii. Inputs imported shall be subject to pre import condition and they shall be physically
incorporated in the export product (making normal allowance for wastage).
Special Audits may be taken in order to ascertain whether the compliances under the policy are made or
not. If chartered engineer provides wrong declarations actions may be taken against him as per the
FTP and FTDR Act.
Advance Authorisation for Annual Requirement and Eligibility Condition
a. Advance Authorisation for Annual Requirement shall only be issued for items notified in
Standard Input Output Norms (SION). And it shall not be available in case of adhoc norms
under paragraph
4.03 (b) (ii) of FTP.
b. Advance Authorisation for Annual Requirement shall also not be available in respect of SION
where any item of input appears in Appendix 4-J.
c. Exporters having past export performance (in at least preceding two financial years)
shall be entitled for Advance Authorisation for Annual requirement.
d. Entitlement in terms of CIF value of imports shall be upto 300% of the FOB value of physical
export and / or FOR value of deemed export in preceding financial year or Rs 1 Crore,
whichever is higher.
Value Addition
Value Addition for the purpose of this Chapter (except for Gems and Jewellery sector for which
value addition is prescribed in paragraph 4.37 of FTP) shall be:-

VA = A-B x 100, where
B
A =FOB value of export realized/FOR value of supply received.
B =CIF value of inputs covered by Authorisation, plus value of any other input used on which benefit of
DBK is claimed or intended to be claimed.
Minimum Value Addition
(i) Minimum value addition required to be achieved under Advance Authorisation is 15%.
(ii) Export Products where value addition could be less than 15% are given in Appendix 4D.
(iii) Minimum value addition for Gems & Jewellery Sector is given in paragraph 4.60 of Handbook of
Procedures.
(iv) In case of Tea, minimum value addition shall be 50%.
(v)In case of spices, minimum value addition shall be 25%. 4.10 Import of Mandatory Spares Import
of mandatory spares which are required to be exported / supplied with the resultant product
shall be permitted duty free to the extent of 10% of CIF value of Authorisation.
Import of Mandatory Spares
Import of mandatory spares which are required to be exported / supplied with the resultant product
shall be permitted duty free to the extent of 10% of CIF value of Authorisation.
Ineligible categories of import on Self Declaration basis
a. Import of following products shall not be permissible on self-declaration basis:

i. All vegetable / edible oils classified under Chapter- 15 and all types of oilseeds
classified under Chapter- 12 of ITC (HS) book;
ii. All types of cereals classified under Chapter–10 of ITC (HS) book;
iii. All Spices other than light black pepper (light berries) having a basic customs duty of
more than 30%, classified under Chapter-9 and 12 of ITC (HS)book;
iv. All types of fruits/ vegetables having a basic customs duty of more than 30%,
classified under Chapter-7 and Chapter-8 of ITC(HS) book;
v. Horn, Hoof and any other organ of animal;
vi. Honey;
vii. Rough Marble Blocks/Slabs;
viii. Rough Granite;
ix. Vitamins except for use in pharmaceutical industry; and
x. All items with a basic custom duty of more than 30%.
b. For export of perfumes, perfumery compounds and various feed ingredients containing
vitamins, no Authorisation shall be issued by Regional Authority under paragraph 4.07 of
Handbook of Procedures and applicants shall be required to apply under paragraph 4.06 of

Hand Book of Procedures to the Norms Committee.
c. Where export and/or import of biotechnology items and related products are involved,
Authorisation under paragraph 4.07 of Handbook of Procedures shall be issued by Regional
Authority only on submission of a “No Objection Certificate” from Department of
Biotechnology.
Accounting of Input
a. The quantity of input used in manufacture of the export product must match with the
quanity as given in bill of entry.
b. At the time of discharge of export obligation or at the time of redemption, Regional Authority
shall allow only those inputs which have been specifically indicated in the shipping bill
together with quantity.
c. The above provisions will also be applicable for supplies to SEZs and supplies made under
Deemed exports. Details as given above will have to be indicated in the relevant Bill of Export,
ARE-3, Central Excise certified Invoice / import document / Tax Invoice for export prescribed
under the GST rules.
Pre-import condition in certain cases
i. DGFT may, by Notification, impose pre-import condition for inputs under this Chapter.
ii. Import items subject to pre-import condition are listed in Appendix 4-J or will be as
indicated in Standard Input Output Norms (SION).
Details of Duties exempted
Imports under Advance Authorisation are exempted from payment of Basic Customs Duty, Additional
Customs Duty, Education Cess, Anti- dumping Duty, Countervailing Duty, Safeguard Duty, Transition
Product Specific Safeguard Duty, wherever applicable. Import against supplies covered under
paragraph
7.02 (c) & (f) of FTP will not be exempted from payment of applicable Anti-dumping Duty,
Countervailing Duty, Safeguard Duty and Transition Product Specific Safeguard Duty, if any.
However, imports under Advance Authorisation for physical as well as deemed exports are also
exempt from whole of the Integrated Tax and Compensation Cess leviable under sub-section (7) and
sub-section (9) respectively, of section 3 of the Customs Tariff Act, 1975 (51 of 1975).
Admissibility of Drawback
Drawback as per rate determined and fixed by Customs authority in terms of DoR Rules shall be
available for duty paid imported or indigenous inputs (not specified in the norms) used in the export
product.

Actual User Condition for Advance Authorisation
Advance Authorisation and/or material imported under Advance Authorisation shall be subject to ‘Actual
User’ condition. The same shall not be transferable even after completion of export obligation.
However, Authorisation holder will have option to dispose of product manufactured out of duty free
input once export obligation is completed.
Validity Period for Import and its Extension
Validity period for import under Advance Authorisation shall be as prescribed in Handbook of
Procedures.
Importability / Exportability of items that are Prohibited/ Restricted / STE
i. No export or import of an item shall be allowed under Advance Authorisation / DFIA if the
item is prohibited for exports or imports respectively. Export of a prohibited item may be
allowed under Advance Authorisation provided it is separately so notified, subject to the
conditions given therein.
ii. Items reserved for imports by STEs cannot be imported against Advance Authorisation / DFIA.
However, those items can be procured from STEs against ARO or Invalidation letter. STEs are
also allowed to sell goods on High Sea Sale basis to holders of Advance Authorisation / DFIA
holder. STEs are also permitted to issue “No Objection Certificate (NOC)” for import by
Advance Authorisation / DFIA holder and may charge a reasonable fee subject to a maximum
of ₹5000 from the applicant.
iii. Items reserved for export by STE can be exported under Advance Authorisation / DFIA only
after obtaining a ‘No Objection Certificate’ from the concerned STE.
iv. Import of restricted items shall be allowed under Advance Authorisation/DFIA unless
specifically disallowed.
v. Export of restricted / SCOMET items however, shall be subject to all conditionalities or
requirements of export authorisation or permission, as may be required, under Schedule 2 of
ITC (HS).
Free of Cost Supply by Foreign Buyer
Advance Authorisation shall also be available where some or all inputs are supplied free of cost to
exporter by foreign buyer.
Domestic Sourcing of Inputs

• Holder of an Advance Authorisation/Duty Free Import Authorisation can procure inputs from
indigenous supplier/ State Trading Enterprise in lieu of direct import. Such procurement can be
against Advance Release Order (ARO), Invalidation Letter, and Back-to-Back Inland Letter of
Credit.
• When domestic supplier intends to obtain duty free material for inputs through Advance
Authorisation for supplying resultant product to another Advance Authorisation/Duty Free Import
Authorisation (DFIA)/Export Promotion Capital Goods (EPCG) Authorisation, Regional Authority
shall issue Invalidation Letter.
• Regional Authority shall issue Advance Release Order if the domestic supplier intends to seek
refund of duty through Deemed Exports mechanism of FTP.
• Regional Authority may issue Advance Release Order or Invalidation Letter at the time of issue of
Authorisation simultaneously or subsequently.
1) Export proceeds shall be realized in freely convertible currency except otherwise specified.
2) Export to Rupee Payment Area (RPA) (for which payments are not received in freely convertible
currency) shall be subject to minimum value addition as specified in Appendix-4C.
3) Export to SEZ Units shall be taken into account for discharge of export obligation provided
payment is realised from Foreign Currency Account of the SEZ unit.
4) Export to SEZ Developers/Co-developers can also be taken into account for discharge of export
obligation even if payment is realised in Indian Rupees.
Re-import of exported goods under Duty Exemption/Remission Scheme

Goods exported under Advance Authorisation/Duty Free Import
Authorisation may be re-imported in same or substantially same form subject to such conditions as may
be specified by Department of Revenue.
Authorisation holder shall also inform about such re-importation to the

Regional Authority which had issued the Authorisation within one month from date of re-import.
DUTY FREE IMPORT AUTHORISATION SCHEME (DFIA)
DUTY FREE IMPORT AUTHORIZATION SCHEME
CONSUMABLES KO KARO BINA DUTY KE IMPORT,

AUR KARO EXPORT, SARKAR KAREGI AAP KO SUPPORT!
Under this scheme duty free import of inputs including oil, catalyst and consumables is allowed. The
benefit of this scheme is available after export in respect of the products for which SION is fixed.
An application to avail the benefits of the scheme has to be made before export with the regional office
of DGFT. Export has to be made within a period of 12 months from the date of making application.
At least 20% value addition has to be made in the imports.
On each export, file no. or application no. should be mentioned. After completion of the export &
realization of export proceeds, request for issuance of transferable duty free import Authorization has
to be made to regional office DGFT. Such request has to be made within:
a. 6 months from the date of realization of export proceeds.

OR
b. Within 12 months from the date of export.
Whichever is later.
On such application the regional office of DGFT shall issue transferable duty free import authorization
which will be valid for 12 months from the date of issue & no further validation will be done of
authorization.
SCHEMES FOR GEMS AND JEWELAY SECTOR

Import of Input
Exporters of gems and Jewelry can import/procure duty free input for manufacture of export product.
Items of Export
Following items, if exported, would be eligible:
(i) Gold jewellery, including partly processed jewellery and articles including medallions and coins
(excluding legal tender coins), whether plain or studded, containing gold of 8 carats and above;
(ii) Silver jewellery including partly processed jewellery, silverware, silver strips and articles including
medallions and coins (excluding legal tender coins and any engineering goods) containing more than 50%
silver by weight;

(iii) Platinum jewellery including partly processed jewellery and articles including medallions and coins
(excluding legal tender coins and any engineering goods) containing more than 50% platinum by weight.
The schemes are as follows:
(i) Advance Procurement/Replenishment of Precious Metals from Nominated Agencies -
Exporter of gold / silver / platinum jewellery and articles thereof including mountings and
findings may obtain gold/ silver / platinum as an input for export product from Nominated
Agency, in advance or as replenishment after export in accordance with the procedure
specified in this behalf. Replenishment of gold/silver/platinum will be subject to Customs
notification .
(ii) Replenishment Authorisation for Gems - Exporter may obtain Replenishment Authorisation for Gems
from Regional Authority in accordance with procedure specified in Handbook of Procedures as per the
replenishment rate prescribed in Appendix 4F
(iii) Replenishment Authorisation for Consumables – Replnishment is given for consumables and tools.
(iv) Advance Authorisation for Precious Metal – Advance Authorisation is given for pre import of gold,
silver and platinum of specified fineness
Value Addition
Minimum Value Addition norms for gems and jewellery sector would be calculated as under:
VA = A-B/B ×100, where
A = FOB value of the export realised/FOR value of supply received.
B = Value of inputs (including domestically procured) such as gold/silver/platinum content in export

product plus admissible wastage along with value of other items such as gemstone etc. Wherever gold
has been obtained on loan basis, value shall also include interest paid in free foreign exchange to
foreign supplier.
DFIA not available Duty Free Import Authorisation scheme shall not be available for Gems and Jewellery
sector.
Sensitive Items under Duty Free Import Authorisation
a. In respect of following inputs, exporter shall be required to provide declaration with regard to
technical characteristics, quality and specification in Shipping Bill: “Alloy steel including
Stainless Steel, Copper Alloy, Synthetic Rubber, Bearings, Solvent, Perfumes / Essential Oil/
Aromatic Chemicals, Surfactants, Relevant Fabrics, Marble, Articles made of Polypropylene,
Articles made of Paper and Paper Board, Insecticides, Lead Ingots, Zinc Ingots, Citric Acid,
Relevant Glass fibre reinforcement (Glass fibre, Chopped / Stranded Mat, Roving Woven
Surfacing Mat), Relevant Synthetic Resin (unsaturated Polyester Resin, Epoxy Resin, Vinyl Ester
Resin, Hydroxy Ethyl Cellulose), Lining Material”.
ii. While issuing Duty Free Import Authorisation, Regional Authority shall mention technical

characteristics, quality and specification in respect of above inputs in the Authorisation.
Wastage Norms
Wastage or manufacturing loss for gold/silver/platinum jewellery shall be admissible as per paragraph
4.59 of Handbook of Procedures.
DFIA not available
Duty Free Import Authorisation scheme shall not be available for Gems and Jewellery sector.
Nominated Agencies
(i) Exporters may obtain gold / silver / platinum from Nominated Agency. Exporter in EOU and
units in SEZ would be governed by the respective provisions of Chapter-6 of FTP / SEZ Rules,
respectively.
(ii) Nominated Agencies are The Handicraft and Handlooms Exports Corporation of India Ltd, MSTC
Ltd., and Diamond India Limited.
(iii) Reserve Bank of India can authorize any bank as Nominated Agency.
Import of Diamonds for Certification / Grading & Re-export
Following agencies are permitted to import diamonds to their laboratories without any import duty,
for the purpose of certification / grading reports, with a condition that the same should be re-
exported with the certification/grading reports, as per the procedure laid down in Hand Book of
Procedures:
(1) Gemological Institute of America (GIA), Mumbai, Maharashtra.

(2) Indian Diamond Institute, Surat, Gujarat, India.
(3) De Beers India Private Ltd., Surat, Gujarat, India.
(4) HRD Diamond Institute Private Limited, Mumbai, Maharashtra, India
(5) International Gemological Institute (India) Pvt. Ltd., Bandra Kurla Complex, Mumbai,
(6) Gemological Science International (GSI) Pvt. Ltd., Mumbai, Maharashtra, India.
Export of Cut & Polished Diamonds for Certification/ Grading & Re-import
List of authorized laboratories for certification / grading of diamonds of 0.25 carat and above are
given in paragraph 4.73 of Handbook of Procedures.

SCHEME FOR REMISSION OF DUTIES AND TAXES ON EXPORTED PRODUCTS
Scheme Objective and Operating Principles
i. The Scheme’s objective is to refund, currently unrefunded:

a. Duties/ taxes / levies, at the Central, State and local level, borne on the exported
product, including prior stage cumulative indirect taxes on goods and services used in
the production of the exported product and
ii. Such indirect Duties/ taxes / levies in respect of distribution of exported product. The rebate
under the Scheme shall not be available in respect of duties and taxes already exempted or
remitted or credited.The determination of ceiling rates under the Scheme will be done by a
Committee in the Department of Revenue/Drawback Division with suitable representation of
the DoC/DGFT, line ministries and experts, on the sectors prioritized by Department of
Commerce and Department of Revenue.
iii. The overall budget/outlay for the RoDTEP Scheme would be finalized by the Ministry of
Finance in consultation with Department of Commerce (DoC), taking into account all relevant
factors.
iv. The Scheme will operate in a Budgetary framework for each financial year and necessary
calibrations and revisions shall be made to the Scheme benefits, as and when required, so
that the projected remissions for each financial year are managed within the approved Budget
of the Scheme. No provision for remission of arrears or contingent liabilities is permissible
under the Scheme to be carried over to the next financial year. The scheme is bound to
provide great encouragement to the exporters.
Ineligible Supplies/ Items/Categories under the Scheme
The following categories of exports/ exporters shall not be eligible for rebate under RoDTEP Scheme:
i. Export of imported goods covered under paragraph 2.46 of FTP.
ii. Exports through trans-shipment, meaning thereby exports that are originating in third
country but trans-shipped through India.
iii. Export products which are subject to Minimum export price or export duty.
iv. Products which are restricted for export under Schedule-2 of Export Policy in ITC (HS).
v. Products which are prohibited for export under Schedule-2 of Export Policy in ITC (HS).
vi. Deemed Exports.
vii. Supplies of products manufactured by DTA units to SEZ/FTWZ units.
viii. Products manufactured in EHTP and BTP.
ix. Products manufactured partly or wholly in a warehouse under section 65 of the Customs Act,
1962 (52 of 1962).
x. Products manufactured or exported in discharge of export obligation against an Advance
Authorisation or Duty Free Import Authorization or Special Advance Authorisation issued
under a duty exemption scheme of relevant Foreign Trade Policy.
xi. Products manufactured or exported by a unit licensed as hundred per cent Export Oriented
Unit (EOU) in terms of the provisions of the Foreign Trade Policy.
xii. Products manufactured or exported by any of the units situated in Free Trade Zones or

Export Processing Zones or Special Economic Zones.
xiii. Products manufactured or exported availing the benefit of the Notification No. 32/1997-
Customs dated 1st April, 1997.
xiv. Exports for which electronic documentation in ICEGATE EDI has not been generated/ Exports
from non-EDI ports.
xv. Goods which have been taken into use after manufacture.
Government, however, reserves the right to modify any of the categories as mentioned above for
inclusion or exclusion under the scope of RoDTEP, at a later date.
Inclusion of exports made by categories mentioned in para 4.55 (x), (xi) and (xii) above and
RoDTEP rates for export items under such categories would be decided based on the
recommendations of the RoDTEP Committee.
Nature of Rebate
The e-scrips would be used only for payment of duty of Customs leviable under the First Schedule
to the Customs Tariff Act, 1975 viz. Basic Customs Duty.
Monitoring, Audit and Risk Management System
For the purposes of audit and verification, the exporter would be required to keep records
substantiating claims made under the Scheme. A monitoring and audit mechanism with an IT based
Risk Management System (RMS) would be put in place by the CBIC, Department of Revenue to
physically verify the records of the exporters on sample basis. Sample cases for physical verification
will be drawn objectively by the RMS, based on risk and other relevant parameters.
For a broad level monitoring, an Output Outcome framework will be maintained and monitored at
regular intervals.
EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME
Objective
The objective of the EPCG Scheme is to facilitate import of capital goods for producing quality
goods and services and enhance India’s manufacturing competitiveness.
EXPORT KARO BINDAS, MACHINE VAGAIRAH,
BHI DUTY FREE IMPORT KARO, EPCG KE ANDAR
Under this scheme the imports of capital goods is allowed for producing or manufacturing the export
product.

The capital goods for production, pre-production, post production may be imported at zero custom
duty.
The authorization under the scheme shall be valid for a period of 18 months from the date of
authorization.
The benefit of the scheme will not be available for export of :

a. Powers under deemed export.
b. Powers.
c. Use of power in other units.
d. Supply of electricity transmission services.
The export obligation under the scheme shall be fulfilled by the manufacturer or service provider who
has the authorization under the scheme. The units in agri economic zone will be asked to provide 15%
bank guarantee or bond in respect of meeting the export obligation.
COVERAGE OF EPCG SCHEME
a. The scheme covers manufacturer exporters with or without supporting manufacturer, merchant
exporters who are tied to supporting manufacturers and service provides.
b. The name of supporting manufacturer shall be endorsed on EPCG authorization, before installation
of capital goods in the factory of supporting manufacturer.
c. The service provider, certified as common service provider by DGFT or by state Industrial
Infrastructure corporation in town of export excellence, subject to following conditions:
a. Submission of bank guarantee equivalent to duty saved.
b. Export by user of common service to be counted towards export obligation and the details of
shipping bills and EPCG authorization shall be produced.
Actual User Condition
Import of capital goods shall be subject to Actual User condition till export obligation is completed.
EXPORT OBLIGATION
BHAI JAB AAP NE DUTIES MAIN RIYAYAT KA FAYDA UTHAYA HAI,
TO EXPORT OBLIGATION TO FULFILL KARNA PADEGA NA!
- It has to be fulfilled by the authorization holder or his supporting manufacturers.

- Export obligation should be over and above the average level of export achieved in the preceding 3
years, for same or similar product.
- In case of Indigenous sourcing of capital goods the export obligation shall be reduced by 25%.
- Shipment under DFIA, Advance Authorization, duty drawback scheme or reward scheme, deemed
exports, royalty payments that are received by authorization holder will be counted towards export
obligation.
Legal Undertaking (LUT)/Bond/ Bank Guarantee (BG)in case of Agro units

Legal Undertaking /Bond or 15% Bank Guarantee, as applicable, may be furnished for EPCG authorisation
granted to units in Agri-Export Zones provided EPCG authorisation is taken for export of primary
agricultural
product(s) notified or their value added variants.
Indigenous Sourcing of Capital Goods and benefits to Domestic Supplier
A person holding an EPCG authorisation may source capital goods from a domestic manufacturer. Such
domestic manufacturer shall be eligible for deemed export benefit under FTP. Such domestic sourcing
shall also be permitted from EOUs and these supplies shall be counted for purpose of fulfilment of
positive Net Foreign Exchange (NFE) by said EOU as provided in FTP.
CALCULATION OF EXPORT OBLIGATION
IN CASE OF DIRECT IMPORTS IN CASE OF DOMESTIC SOURCING
Export obligation, will be duty saved on imports. Export obligation will be as per, national custom
duty saved on Free on Road/ Rail value.
Provision for companies admitted under the provisions of Insolvency and Bankruptcy Code 2016
A company holding EPCG authorizations and having been admitted under the provisions of Insolvency
and Bankruptcy Code 2016 for commencement of insolvency proceedings and in respect of whom the
resolution plan has been approved under Section 31 of IBC 2016 by Adjudicating Authority may be
permitted to relief, concessions and waivers in accordance with the resolution plan approved/
finalised by Adjudicating Authority/Appellate Authorities as the case may be.
Reduced EO for North East Region and UTs of Jammu & Kashmir and Ladakh
For manufacturing units located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura, Jammu & Kashmir and Ladakh, specific EO shall be 25% of the EO, as
stipulated in Para 5.01(b). There shall be no change in average EO imposed, if any, as stipulated in
Para 5.04(c).
Authorisations issued during various policy periods viz., 2002-07, 2004-09, 2009-14, 2015-20 issued
prior to 05.12.2017 and 2015-20 RE 2017 shall be governed by corresponding Foreign Trade Policy
provisions and Handbook of Procedures, unless otherwise specifically stated.

SCHEMES FOR EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE TECHNOLOGY PARKS (EHTPs),
SOFTWARE TECHNOLOGY PARKS (STPs) AND BIO-TECHNOLOGY PARKS(BTPs)
BHAI SEZ SE BHI TO EXPORT BADHANA HAI,
TO YEH SCHEMES UN KE LIYE HAI
Objectives of these schemes are to promote exports, enhance foreign exchange earnings, attract
investment for export production and employment generation.
- The units located in EOU, EHTP, STP, BTP, may export all kinds of goods and services and the units
located in these areas may import and procure from DTA or Bonded warehouse in DTA without
payment of duty.
- Second hand capital goods, may also be imported duty free.
- EOU, EHTP, STP, BTP may also take goods on lease without payment of duty and such units may also
sell the capital goods and take back the same goods on lease basis if following conditions are
satisfied:
o Permission of commissioner of customs.
o The goods sold and leased back shall not be removed from the unit’s premises;
o The unit should be NFE positive at the time when it enters into sale and lease back
transaction with NBFC
o Joint undertaking to pay duty in case of violation of rules.
NET FOREIGN EXCHANGE EARNINGS
- Calculated in the block of 5 years commencing from the year of commencement of production and
EOU, EHTP, STP, BTP, shall be positive starting from commencement of production.
LETTER OF PERMISSION
EOU, EHTP, STP, BTP, - 2 years time will be given for installation of plant and machinery and further
extension of 1 year can be given by development commission on the ground of sufficient reasons.
Investment Criteria
Only projects having a minimum investment of Rs . 1 Crore in plant & machinery shall be considered for
establishment as EOUs. However, this shall not apply to existing units, units in EHTP/STP/BTP, and EOUs
in Handicrafts/Agriculture/Floriculture/Aquaculture/Animal Husbandry/Information Technology,
Services, Brass Hardware and Handmade jewellery sectors. BOA may allow establishment of EOUs with a
lower investment criteria.
APPLICATION AND APPROVAL
- The Approval Committee shall approve the setting of unit in EOU, in 15 days, in other cases Board of
approval may also grant aaproval.
- Conversion of DTA unit in EOU- with investment of 50 crore and above top be dealt by Board of
approval.

SALE OF FINISHED PRODUCTS /REJECTED GOODS/ WASTE OR SCRAP IN DOMESTIC TERRIF AREA.
BHAIYA SEZ MAIN GOODS BACH GAYE,
TO USE BECHENGE DTA MAIN
- Upto 50% of FDB value of export, if Net Foreign Exchange is fulfilled, can be sold on payment of
concessional duties except by gems and jewelry units.
- No clauses on distinction of scrap / waste or rejects.
- By products may be sold, on payment of duties on achievement of positive NFE.
- In case of new EOUs, advance DTA sale will be allowed not exceeding 50% of its estimated exports
for first year, except pharmaceutical units where this will be based on its estimated exports for first
two years.
- There shall be no duties/taxes on scrap/waste/remnants, in case same are destroyed with
permission of Customs authorities.
OTHER SUPPLIES
Following supply will be counted in Net Foreign Exchange by EOU, EHTP, STP, BTP,.
- Supplies in DTA against foreign exchange remitted from overseas.

- Supplies to other EOU/ EHTP.
- Supply of tags, labels, stickers, bets, buttons to DTA units for exports.
- Supply to holders of adv. Authorization DPIA/ EPCG.
ENTITLEMENT FOR SUPPLIES FROM DTA
- Supply from DTA to EOU will be considered as deemed export and supplier will be eligible for
benefits.
- Suppliers of precious and semi-precious stones, synthetic stones and processed pearls from DTA to
EOU shall be eligible for grant of Replenishment Authorisations at rates and for items mentioned in
HBP.
- Exemption from payment of Central Excise Duty on goods procured from DTA on goods manufactured
in India.
Other entitlements to EOU/ EPCG.
Other entitlements of EOU/EHTP/STP/BTP units are as under:
(a) Exemption from industrial licensing for manufacture of items reserved for SSI sector.
(b) Export proceeds will be realized within nine months.
(c) Units will be allowed to retain 100% of its export earnings in the EEFC account.
(d) Unit will not be required to furnish bank guarantee at the time of import or going for job work in
DTA,
where:

(i) the unit has turnover of Rs. 5 crore or above;
(ii) the unit is in existence for at least three years; and
(iii) the unit:
(1) has achieved positive NFE/export obligation wherever applicable;
(2) has not been issued a show cause notice or a confirmed demand, during the preceding 3 years
INTER UNIT TRANSFER
- Transfer of manufactured goods from one EOU to another is allowed with the prior permission of the
concerned department.
- Capital goods may be transferred or given on loan to other EOU/ EHTP/ SPTP with prior intimation to
the development commissioner of SEZ.
SUB CONTRACTING
EOU/ EHTP/ STP units including gems and jewellery units, may on the basis of annual permission from
custom authorities sub-contract the production process to DTA through job work, which may involve
change in the nature of goods, however only 50% of overall production of previous year may be sub
contracted.
EOU may with annual permission from custom authorities undertake job work of DTA exporter.
SALE OF UNUTILISED MATERIAL
In case the EOU/ EHTP/ STP/ BTP units are not able to utilize the goods and services imported or
procured from DTA, such uncertified goods including capital goods and spares that have become
obsolete or surplus, may be
- Transferred to other EOU, EHTP

- Disposed of in DTA with permission of custom authorities,
- Exported.
REPLACEMENT/REPAIR OF IMPORTED/INDIGENOUS GOODS
(a) General provisions of FTP relating to export/import of replacement/repair of goods would also apply
equally to EOU/EHTP/STP/BTP units. Cases not covered by these provisions shall be considered on
merits by Development Commissioner (DC).
(b) Goods sold in DTA and not accepted for any reasons, may be brought back for repair/replacement,
under intimation to concerned jurisdictional Customs/Central Excise authorities.
EXIT FROM EOU SCHEME
(a) With approval of Development Commissioner, an EOU may opt out of scheme. Such exit shall be
subject to payment of Excise and Customs duties as per industrial policy in force.

(b) If unit has not achieved obligations, it shall also be liable to penalty at the time of exit.
(c) In the event of a gems and jewellery unit ceasing its operation, gold and other precious metals,
alloys, gems and other materials available for manufacture of jewellery, shall be handed over to an
agency nominated by Department of Commerce (DoC), at price to be determined by that agency.
(d) Unit proposing to exit out of EOU scheme shall intimate DC and Customs and Central Excise
authorities in writing.
CONVERSION
(a) Existing DTA units may also apply for conversion into an EOU/EHTP/STP/BTP unit.
(b) Existing EHTP/STP units may also apply for conversion/merger to EOU unit and vice-versa. In such
cases, units will remain in bond and avail exemptions in duties and taxes as applicable.
MONITORING OF NFE
Performance of EOU/EHTP/STP/BTP units shall be monitored by Units Approval Committee as per

guidelines in HBP.
PERSONAL CARRIAGE OF IMPORT/EXPORT PARCELS INCLUDING THROUGH FOREIGN BOUND PASSENGERS
POCKET MAIN ROCKET LEKAR MAT JAO,
PAR POCKET MAIN JEMS AND JEWELLARY RAK KAR EXPORT KARO
Import/export through personal carriage of gems and jewellery items may be undertaken as per Customs
procedure. However, export proceeds shall be realized through normal banking channel. Import/export
through personal carriage by units, other than gems and jewellery units, shall be allowed provided goods
are not in commercial quantity. An authorized person of Gems & Jewellery EOU may also import gold in
primary form, upto 10 Kgs in a financial year through personal carriage, as per guidelines prescribed by
Reserve Bank Of India and Department of Revenue.
APPROVAL OF EHTP/STP
In case of units under EHTP/STP schemes, necessary approval/permission under relevant paras of this
Chapter shall be granted by officer designated by Ministry of Communication and Information
Technology, Department of Electronics & Information Technology, instead of Development
Commissioner, and by Inter-Ministerial Standing Committee (IMSC) instead of Board of Approval.
APPROVAL OF BTP

Bio-Technology Parks (BTP) would be notified by DGFT on recommendations of Department of
Biotechnology. In case of units in BTP, necessary approval/permission under relevant provisions of this
chapter will be granted by designated office for of Department of Biotechnology.
WAREHOUSING FACILITIES
An EOU which intends to set up warehousing facilities outside the EOU premises and outside the
jurisdiction of
Development Commissioner, at a place near to the port of export, to reduce lead time for delivery of
goods overseas and to address unpredictability of supply orders, is permitted to do so subject to the
provisions related
to export warehousing as per terms and conditions of Notifications issued by the Department of
Revenue.
Export through Exhibitions/Export Promotion Tours/Showrooms Abroad/Duty Free Shops
VIDESH MAIN SHOW ROOM KHOLO,
AUR DHAPA DHAP APNA MAAL BECHO
EOU/EHTP/STP/BTP are permitted to:
a. Holding or participating abroad in the exhibitions with the permission of Development Commissioner.
b. Personal carriage of gold, silver, platinum, precious or semi precious stones.
c. Export goods for display or sale in the permitted shops abroad or in showrooms of their distributor or
agent abroad.
d. Set up showrooms or retail outlets in the international airports.
DEEMED EXPORTS
Objective
To provide a level-playing field to domestic manufacturers and to promote Make in India, in certain
specified cases, as may be decided by the Government from time to time.
Deemed Exports
(i) “Deemed Exports” for the purpose of this FTP refer to those transactions in which goods
supplied do not leave country, and payment for such supplies is received either in Indian rupees

or in free foreign exchange. Supply of goods as specified in Paragraph 7.02 below shall be
regarded as “Deemed Exports” provided goods are manufactured in India.
(ii) “Deemed Exports” for the purpose of GST would include only the supplies notified under
Section 147 of the CGST/SGST Act, on the recommendations of the GST Council. The benefits of
GST and conditions applicable for such benefits would be as specified by the GST Council and
as per relevant rules and notification.
Categories of Supply
Supply of goods under following categories (a) to (c) by a manufacturer and under categories (d) to
(g) by main / sub-contractors shall be regarded as ‘Deemed Exports’:
A. Supply by manufacturer:
a) Supply of goods against Advance Authorisation / Advance Authorisation for annual

requirement / DFIA.
b) Supply of goods to EOU / STP / EHTP / BTP.
c) Supply of capital goods against EPCG Authorisation.
B. Supply by main / sub-contractor(s):
(a) (i) Supply of goods to projects financed by multilateral or bilateral Agencies / Funds as notified
by Department of Economic Affairs (DEA), MoF, where legal agreements provide for tender evaluation
without including customs duty.
(ii) Supply and installation of goods and equipment (single responsibility of turnkey contracts) to
projects financed by multilateral or bilateral Agencies/Funds as notified by Department of Economic
Affairs (DEA), MoF, for which bids have been invited and evaluated on the basis of Delivered Duty
Paid (DDP) prices for goods manufactured abroad.
(iii) Supplies covered in this paragraph shall be under International Competitive Bidding (ICB) in
accordance with procedures of those Agencies / Funds.
(iv) A list of agencies, covered under this paragraph, for deemed export benefits, is given in Appendix-
7A.
(b) (i) Supply of goods to any project or for any purpose in respect of which the Ministry of Finance
by Customs Notification No. 50/2017-Customs dated 30.6.2017, as amended from time to time,
permits import of such goods at zero basic customs duty subject to conditions mentioned therein.
Benefits of deemed exports shall be available only if the supply is made under procedure of ICB.
(ii) Supply of goods required for setting up of any mega power project, as specified in the list 31 at
Sl. No. 598 of Department of Revenue Notification No. 50/2017-Customs dated 30.6.2017, as
amended from time to time and subject to conditions mentioned therein, shall be eligible for
deemed export benefits provided such mega power project conforms to the threshold generation
capacity specified in the above said Notification.
(c) For mega power projects, ICB condition would not be mandatory if the requisite quantum of
power has been tied up through tariff based competitive bidding or if the project has been awarded
through tariff based competitive bidding. Supply of goods to United Nations or International
organization for their official use or supplied to the projects financed by the said United Nations or
an International organization approved by Government of India in pursuance of Section 3 of United
Nations (Privileges and Immunities Act), 1947. List of such organization and conditions applicable to

such supplies is given in the Customs Notification No. 84/97- Customs dated 11.11.1997, as amended
from time to time. A list of Agencies, covered under this paragraph, is given in Appendix-7B.
(d) Supply of goods to nuclear power projects provided:
i) Such goods are required for setting up of any Nuclear Power Project as specified in the
list 32 at Sl. No. 602, Customs notification No. 50/2017- Customs dated 30.6.2017, as
amended from time to time and subject to conditions mentioned therein.
ii) The project should have a capacity of 440 MW or more.
iii) A certificate to the effect is required to be issued by an officer not below the rank of
Joint Secretary to Government of India, in Department of Atomic Energy.
iv) Tender is invited through National competitive bidding (NCB) or through ICB.
Benefits for Deemed Exports

Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and
supply of goods, qualifying as deemed exports, subject to terms and conditions as given in HBP and
ANF-7A:
(a) Advance Authorisation / Advance Authorisation for annual requirement / DFIA.

(b) Deemed Export Drawback.
(c) Refund of terminal excise duty for excisable goods mentioned in Schedule 4 of Central Excise
Act, 1944 provided the supply is eligible under that category of deemed exports and there is
no exemption.
“Excisable goods” means any goods produced or manufactured in India and subject to duty of excise
under Central Excise and Salt Act 1944(1of 1944).
Benefits to the Supplier /Recipient
Categorie Benefits on supplies, as given in Para 7.03 above, whichever is applicable.

s
o Para 7.03 (a) Para 7.03 (b) Para 7.03 (c)
f Advance Duty Terminal Excise
supplies Authorisation Drawback Duty
as per
Para 7.02
(a) Yes (for intermediatesupplies against an Yes Yes
invalidation letter) (agains
t ARO)
(b) Yes Yes Yes
(c) Yes Yes NA
(d) Yes Yes NA
(e) Yes Yes NA

(f) Yes Yes NA
(g) Yes Yes NA
Conditions for refund of Terminal Excise Duty
Supply of goods will be eligible for refund of terminal excise duty as per Para 7.03 (c) of FTP,
provided recipient of goods does not avail CENVAT credit/rebate on such goods.
Conditions for refund of Deemed Export drawback
Supplies will be eligible for deemed export drawback as per para 7.03 (b) of FTP, as under:
Refund of drawback on the inputs used in manufacture and supply under the said category can be
claimed on ‘All Industry Rate’ of Duty Drawback Schedule notified by Department of Revenue from
time to time provided no CENVAT credit has been availed by supplier of goods on excisable inputs or
on ‘Brand Rate Basis’ upon submission of documents evidencing actual payment of basic custom
duties.
Common conditions for deemed export benefits
(i) Supplies shall be made directly to entities listed in the Para 7.02. Third party supply shall not
be eligible for benefits/exemption.
(ii) In all cases, supplies shall be made directly to the designated Projects / Agencies/ Units/
Advance Authorisation/ EPCG Authorisation holder. Sub-contractors may, however, make
supplies to main contractor instead of supplying directly to designated Projects/ Agencies.
Payments in such cases shall be made to sub-contractor by main-contractor and not by project
Authority.
(iii) Supply of domestically manufactured goods by an Indian Subcontractor to any Indian or foreign
main contractor, directly at the designated project’s/ Agency’s site, shall also be eligible for
deemed export benefit provided name of sub- contractor is indicated either originally or
subsequently (but before the date of supply of such goods) in the main contract. In such cases
payment shall be made directly to sub-contractor by the Project Authority.
(iv) Steel manufacturers supplying steel against Advance Authorization under Para 7.02 (a), through
their Service Centers/ Distributors/ Dealers/ Stock yards, shall also be eligible to claim duty
drawback provided such supplies are made in accordance with Ministry of Steel O.M. No. S-
21016/3/2020- TRADE-TAX-Part(1) dated 27.5.2020 read with O.M. dated 24.6.2020, as
amended from time to time. However, the invoice against such supplies would be raised by the
manufacturer on the Advance Authorization holder. Delivery of such supplies can be made
through their Service Centers/ Distributors/ Dealers/ Stock yards, who in turn will raise the
tax invoice on the steel manufacturer bearing a cross reference for such supplies.
Benefits on specified supplies

(i) Deemed export benefits shall be available for supplies of “Cement” under Para 7.02(d)
only.
(ii) Deemed export benefit shall be available on supply of “Steel”:
(a) As an inputs to Advance Authorisation/ Annual Advance Authorisation/DFIA holder/
an EOU.
(b) To multilateral/ bilateral funded Agencies as per sub-para 7.02(d).
(iii) Deemed export benefit shall be available on supply of “Fuel” (in respect of eligible
fuel items covered under Schedule 4 of Central Excise Act, 1944) provided supplies are
made to:
(a) EOUs.
(b) Advance Authorisation holder / Annual Advance Authorisation holder.
Liability of Interest
Incomplete/deficient application is liable to be rejected. However, simple interest @ 6% per annum

will be payable on delay in refund of duty drawback and terminal excise duty under the scheme,
provided the claim is not settled within 30 days from the date of issue of final Approval Letter by RA.

Risk Management and Internal Audit mechanism
(a) A Risk Management system shall be in operation, wherein every month, Computer system in
DGFT headquarters, on random basis, will select 10% of cases, for each RA, where benefit(s)
under this Chapter has/have already been granted. Such cases shall be scrutinized by an
internal Audit team, headed by a Joint DGFT, in the office of respective Zonal Addl. DGFT.
The team will be responsible to audit claims of not only for its own office but also the claims of
all RAs falling under the jurisdiction of the Zone.
(b) The respective RA may also, either on the basis of report from Internal Audit/ External Audit
Agency (ies) or suo-motu, re-assess any case, where any erroneous/ in-eligible payment has
been made/claimed. RA will take necessary action for recovery of payment along with interest
at the rate of 15% per annum on the recoverable amount.
Penal Action
In case, claim is filed by submitting mis-declaration/ mis-representation of facts, then in addition to

effecting recovery under Para 7.10(b) above, the applicant shall be liable for penal action under the
provisions of FT (D&R) Act, Rules and orders made there under.
QUALITY COMPLAINTS & TRADE DISPUTES
Under the Foreign Trade Policy one of the main focus is to

maintain sound relationship between foreign buyers &
sellers. The FTP contains a mechanism to resolve the
dispute that may arise between importers & exporters
regarding poor quality of goods, delayed deliveries,
guarantees & warranties, unethical conduct.
Indian suppliers may also have complaints regarding

delayed payments, non acceptance of goods, rejection on
unfair grounds, default in payments.
All the above complaints & disputes will be resolved by

committee on quality complaints & trade disputes [CQCTD] & the committee will reserve the above
disputes through arbitration & conciliation.
The CQCTD is formed at every regional office of DGFT & it comprises of :

a) Additional or joint DGFT → Chairman of the committee.
b) Representative of Board of Indian Standard [B/s] – Members.
c) Representative of Agriculture & processed food production Export Development Commission
[APFDPED] – Member.
d) Representative of branch manager of concerned bank.
e) Representative of Federation of Indian Chamber of Commerce & Industry [FICCI].
f) Representative of Export Inspection Agency.

g) Nominee of Development Commissioner of SEZ.
h) Officer nominated by Chairman – Secretary.
FUNCTIONS OF THE COMMITTEE ON QUALITY COMPLAINTS AND TRADE DISPUTE
a. Investigation in quality related complaints.

b. It will redress the grievances of importer & exporter within a period of 3 months from the date of
receiving the complaint.
c. It can also take the help of export promotion councils.
d. The proceedings before CQCTD are conciliatory in nature.
e. The CQCTD may ask the export import agencies to check the technical failure of the exporter or
importer and find out the reason as to why exporters are not able to meet the design standards or
the quality standards of the products.
Corrective Measures
a) The Committee at RA level can authorize the Export Inspection Agency or any technical
authority to assess whether there has been any technical failure of not meeting the standards,
manufacturing/ design defects, etc. for which complaints have been received;
b) Initially, efforts will be made to settle the complaint/ dispute amicably. In case the matter is
not settled amicably, action may be taken against the erring Indian entity in terms of the
Foreign Trade (Development & Regulation) Act, 1992, as amended, and the Foreign Trade
(Regulation) Rules, 1993, as amended;
Case Officer
A Case Officer will be assigned for monitoring purposes in the designated Regional Authorities for
resolving complaints and trade disputes in a time bound manner.
Nodal Officer
Director General of Foreign Trade would appoint an officer, not below the rank of Joint Director
General, in the Headquarters, to function as the ‘Nodal Officer’ for monitoring the trade disputes and
coordinating with Regional Authorities of DGFT, Foreign Trade Divisions of Department of
Commerce, Indian Missions and other agencies.
PROMOTING CROSS BORDER TRADE IN DIGITAL ECONOMY
• The objective is provide a framework for cross-border trade of goods and services from India in
the digital economy and the promotion of e-Commerce and other emerging channels of exports

from India.
• Export of goods where selling is through the internet on an e-Commerce platform, the payment
for which shall be done through international credit or debit cards, or other authorised
electronic payment channels and as specified by the RBI from time to time.
• E-Commerce platform is an electronic platform, including a web-portal, that enables the

commercial process of buying and selling through the internet.
• Any service provider who provides logistics services towards exports of goods or services for e-
Commerce Exports.
• Exports through a registered courier service/Foreign Post Office is permitted as per

Notification(s) issued
• Aaryat Niryat Bandhu Scheeme is also helping the ecommerce exports.
• Ecommerce hubs are also created. The objective is to establish designated areas as E-
Commerce Export Hubs (hereafter called “ECEH”), which would act as a centre for favourable
business infrastructure and facilities for Cross Border E-Commerce activities.
Features of SCOMET
Export of dual-use items, including software and technologies, having potential civilian / industrial
applications as well as use in weapons of mass destruction is regulated. It is either prohibited or is
permitted under an Authorization unless specifically exempted.
SCOMET is an acronym for Special Chemicals, Organisms, Materials, Equipment and Technologies.
Accordingly, the SCOMET list is our National Export Control List of dual use items munitions and
nuclear related items, including software and technology and is aligned to the control lists of the all
the multilateral export control regimes and conventions. The SCOMET List has been notified under
Appendix 3 to Schedule 2 of ITC (HS) Classification of Export and Import Items, which is available on
the website of DGFT.
Classification of SCOMET categories and Licensing jurisdiction
The SCOMET List is divided into nine categories of items from Category 0 to Category 8. However,

Category 7 is presently ‘Reserved’ and has not been populated. The broad classification of different
categories under SCOMET List and their jurisdictional licensing authorities are tabulated as under:
Table: SCOMET Categories and Licensing Jurisdiction
Jurisdictional
SCOMET
Category SCOMET items Licensing Remark
Authority
Nuclear materials, nuclear-related Department Including items
0
other o mentioned in
materials, equipment and technology f Atomic Note 2 of CINof SCOMET
Energy (DAE) List
Directorate
1 Toxic chemical agents and other
Genera
chemicals
l of
Foreign Trade
(DGFT)
2 Micro-organisms, Toxins DGFT

Materials, Materials Processing
3 DGFT
Equipment
and related Technologies
Nuclear-related other equipment
4 DGFT
and
technology, not controlled under
Category ‘0’
Aerospace systems, equipment,
including production and test
equipment, and related Technology
5 and specially designed components DGFT
and accessories thereof.
Department
Excluding those covered
6 Munitions List o
under Note 2 and 3 of CIN
f Defence and Sub- category 6A007,
Production (DDP)/ 6A008
Ministry of
Defence
7 ‘Reserved’ DGFT
Special Materials and Related
Equipment, Material Processing,
8 Electronics, DGFT
Computers
, Telecommunications, Information
Security, Sensors and Lasers,
Navigation and Avionics,
Marine, Aerospace and Propulsion.
Export authorization for SCOMET items will be issued centrally by the DGFT (HQrs). Amendments,
including revalidation, etc. on such authorization will also be done by the DGFT (HQrs) only. The
procedure for Revalidation is prescribed in Para 10.20 of Handbook of Procedures.
DGFT in association with Administrative Ministries/ Departments and Trade Associations will organize
Industry Outreach Programmes on regular basis for effective awareness among the
exporters/importers dealing with trade and manufacture, in particular, of SCOMET items.
Institutional mechanism will be adopted to organize sector specific / region specific outreach
programmes with focus on MSMEs and Startups.

CHAPTER – 8
SPECIAL ECONOMIC
ZONES ACT, 2005
SALIENT FEATURES OF THE ACT
The salient features of Special Economic Zone Act, 2005 are as follows:-
✓ Matters dealing with setting up of special Economic zone and units there-in.
✓ Matters dealing with off-share banking
units and units in international financial service centre in SEZ.
✓ The branches of the bank that are
located at SEZ are called as off shore banking unit.
✓ The Central Government may approve
the setting of International Financial Services Centre in SEZ & may
specify the requirement for setting the same. In one SEZ one
International Financial Services Centre will be present
✓ Single window clearance mechanism at
zone level.
✓ Fiscal regime/scenario for developers
of Special Economic Zone and units
✓ Providing authority for each SEZ granting them administrative autonomy
✓ Setting up special courts to ensure faster settlement of cases and speedy investigation in equation to
offences committed in Special Economic Zones.
✓ Special Economic Zones are created to promote the exports made by the country & hence we can say that
the SEZ are growth engines of the economy.
✓ Central Government has formed Board of Approval for purpose of granting, rejecting, modifying
approvals, approval of operations in the SEZ, approval of the developers, approval or rejection of
infrastructure facilities, disposing of appeals etc.
✓ Any person who intends to establish an SEZ may identify an area & make proposal to the concerned state
government.
✓ The person may also make a direct application to the Board of approval in this case if the Board approves
the proposal the consent of the state government will also have to be taken.
✓ When a State Government receives a proposal for setting of SEZ it forwards the same to the Board along
with its recommendation.
✓ The Central Government is empowered to prescribe minimum land for setting of an SEZ.
✓ Any private/public/joint sector or State Government or its agencies can set up Special Economic Zone
(SEZ)
✓ After approval of any proposal the Board has to communicate the same to the Central Government.
✓ If the proposals are rejected by the Board reasons must be given.
✓ The Central Government is also authorized to appoint Development Commissioner for each SEZ, the
Development Commissioner guides the entrepreneurs, takes steps for increasing exports from SEZ,
coordinates with Central Government, monitor the performance of the developer in SEZ.
✓ The application for setting up of unit in SEZ has to be made to the Development Commissioner who will
forward the same to the Approval Committee which may allow or disallow the unit.

✓ SEZs also generate employment in the Economy.
✓ FTWZ means Free Trade &Warehousing Zones. These zones are the categories of SEZ; these zones have
been formed to promote infrastructures for import & export of goods & services.
✓ Off shore banking unit means a branch of bank located in SEZ.
✓ Section 17 of the Special Economic Zones Act, 2005 dealing with setting up and operation of offshore
Banking Unit provides that an application for setting up and operation of an Offshore Banking Unit in a
Special Economic Zone may be made to the Reserve Bank, in the prescribed form and manner.
✓ The Reserve Bank of India may, on being satisfied that the applicant fulfills all the specified conditions,
grant permission to such applicant for setting up and operation of an Offshore Banking Unit in a Special
Economic Zone. Section further empowers the Reserve Bank to specify, by notification, the terms and
conditions subject to which an Offshore Banking Unit may be set up and operated in the Special Economic
Zone.
✓ Any person wishing to establish SEZ may make a proposal to Board of Approval. However Central
Government can form SEZ without referring the same to Board of Approval.
✓ If the state Government receives any proposal for forming SEZ it forwards the same to Board of Approval.
✓ Section 31 dealing with the Constitution of Authority empowers the Central Government to constitute by
notification in the Official Gazette, an Authority for every SEZ to exercise powers conferred on and
discharge the functions assigned to it.
✓ In the case of an existing SEZ established by the Central Government the Central Government has been
empowered to establish such authority within six months from the date of commencement of the Act. It is
further provided that the person or authority (including Development Commissioner) which is exercising
control over an existing SEZ, shall continue to do so till the authority is constituted. Section 31(2) provides
that every authority shall be a body corporate by name as assigned, having perpetual succession and a
common seal, with power to acquire, hold and dispose of property, both movable and immovable and to
contract and shall sue and be sued, the SEZ Authority, shall take following measures:
a) The development of infrastructure at SEZ
b) Promoting Exports from SEZ.
c) Reviewing the performance of SEZs.
d) Collecting fees or rents for the use of the property belonging to the authority.
e) Performing such other functions as may be prescribed.
f) No act or proceedings of an authority shall be invalidated merely by reason of:
− Any vacancy in or any defect.
− Any defect in the appointment of a person as its member.
− Any irregularity in the procedure of the authority not affect.
✓ The Central Government is empowered to issue directions to SEZ Authority.
✓ If in the opinion of Central Government the SEZ Authority fails to meet any obligation given in this act or
makes a persistent breach in its functions, the Central Government by a notification in the official
Gazette may supersede the SEZ Authority. The agency appointed by Central Government takes over the
management & administration of SEZ Authority.
✓ When the Central Government takes such action it shall make a report & place such report in parliament
within a period of 3 months from the date of notification.
✓ The Central Government is empowered to constitute an Approval Committee to:
a) Approve the import or procurement of goods from Domestic Tariff Area.
b) Approve providing of services by a service provider from outside India or from Domestic Tariff Area.
c) Monitor utilization of Goods or services or warehousing or trading in SEZs.
d) To check whether conditions are compiled or not on basis of which approval was granted for SEZ.
QUE: Explain under what circumstances the Central Government is empowered to supersede any authority
constituted under Special Economic Zones Act, 2005 ? What will be the consequences if such power is
exercised by Central Government ?
QUE: How the ‘‘Special Economic Zone Authority’’ is constituted under Special Economic Zone Act, 2005 ?
Which are the defects or irregularities for which any act or proceedings of an authority can not be invalidated
?

FUNCTIONS OF DEVELOPMENT COMMISSIONER
Section 12 of SEZ Act deals with the various functions of the development commissioner.
❖ Guiding the entrepreneurs for setting up the units in SEZ.
❖ Take suitable steps for promoting exports from SEZ.
❖ Ensuring coordination between state government and central government and such other agencies in
respect to the above.
❖ Monitoring the performance of the Developer and Units in SEZ
❖ Discharge any other function as entrusted by Central Government and Board of Approval.
OVERRIDING EFFECT OF THE ACT:
Special Economic Zone Act, 2005 has been given overriding effect. As per Section 51, the provision of this Act
shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time
being, in force or in any instrument having effect by virtue of any law other than this Act.
DEEMED EXPORTS
Deemed exports are transactions entered into with a view to avail
benefits/advantage in relation to production including licence for
intermediate supply. These are not actually exports yet are deemed
as exports and benefits accrue to the seller as in case of export.
BENEFIT OF SEZ
(a) Creation of the employment in the
areas where SEZs are created.
(b) Improvement in the infrastructure
(c) Building foreign reserves of the nation
(d) Increase in GDP & per capital income of
the country.
(e) Development of the business organization
(f) Development of the banking system.
(g) By creating SEZs many benefits are received by the country so it is right to say that the SEZ are growth
engines of the economy.
Broader guidelines that Central Government must consider, while notifying an area to be a SEZ includes:
a) Generation of additional economic activity.
b) Promotion of export of goods or services.
c) Promotion of Investment from Domestic and Foreign sources.
d) Creation of employment opportunities and development of infrastructure facilities.
e) Maintenance of sovereignty and integrity of India, the security of State and friendly relations .
Processing and non processing areas :
The Central Government or the specified authority may specify the SEZ areas as processing or non-processing
areas.
*The SEZ in which goods are manufactured and services are rendered or trading or warehousing activities are
done will be called as Processing areas.
Section 7 of SEZ Act states that all the goods imported from SEZ and exported to SEZ or procured from
Domestic Tariff area shall be exempted from the payment of taxes ,duties and cess .
Suspension of letter of approval and transfer SEZ in certain cases:

The Board of approval in the following cases, may suspend the letter of approval which is granted to
Developer and in this case may ask the administrator to discharge the function of Developer.
Grounds of suspension:
*The Developer:
a) violates his duties
b) has persistently defaulted in complying with directions of Board .
c) violated the terms and conditions of later of approval

d) his financial condition may not let him discharge the function of Developer .
The suspension will be done by giving 3 months notice and in the said period of 3 months the developer may
state his objections.
The Board instead of suspending the approval may also impose conditions on the Developer.
The Board may also transfer the SEZ of Developer whose license has been suspended.
Cancellation of letter of approval granted to an Entrepreneur :

The approval committee has a power to cancel the letter of approval granted to an entrepreneur who has
setup his unit in the SEZ after providing an opportunity of being heard and after such cancellation the
entrepreneur shall loose all the exemption from payment of taxes and duties.
Setting up of offshore Banking Unit :
The application for setting up of offshore banking unit in SEZ may be made to RBI.
The Central Government may approve only one, if RBI is satisfied it may grant permission .
Setting up of IFSC:
The Central Government may approve setting up of one IFSC in one SEZ after considering the guidelines
framed by RBI,IRDA or any other statutory authority .
Single application form ,Returns
Central government has to prescribe single application forms for obtaining license, permission, registration or
approval by Developer or an Entrepreneur.
Agency to inspect:
The Central government may by notification appoint any officer or agency for the purpose of making
inspections of Developer or units of Developer.
Single enforcement officer :
Central government may notify single enforcement officer to enforce all the Central acts in SEZ.
Inspection ,Investigation ,Search and Seizure :
The officer appointed by Central government may by giving a prior intimation to the Development
Commissioner carry out the inspection, Investigation, search or Seizure of Developer or the entrepreneur and
such inspection can be done without intimation to Development Commissioner, if it is authorised by Central
Government.
Appeal to high court :
If any party is not satisfied with the decision of designated courts in SEZ, such party within 60 days of
receiving the copy of decision of designated court may prefer an appeal in the High court and the high court
may grant an extension of further 60 days if High court is satisfied that delay was due to insufficient cause.
Exemptions ,drawbacks and concessions to the Developer and Entrepreneur :
Under the following laws exemptions and drawbacks are available:
*Central Excise act
*central Excise tariff act
*central sales tax act,(GST act)
NOTES:
Till the time SEZ authority is formed all the functions of SEZ authority will be discharged by development
commission
The Central Government may also supersede the authority for a period of not exceeding 6 months if SEZ
authority does not comply with the directions of Central government.
Que: How the approval committee is constituted under the Special Economic Zone (4 marks) (d Act, 2005?

.
CHAPTER – 9
COMPETITION ACT,
2002
INTRODUCTION
JAB BAHUT SARE SELLERS, CONSUMER KO ATTRACT KARNE KA LETE HAI ACTION
WO SITUATION CREATE KARTI HAI COMPETITION
1. Through competition the welfare of

the consumer enhances.
2. Competition encourages efficiency
in the market.
3. Through competition firm saves cost
& such cost is returned to the consumer as lower price for the
product.
4. “William Lewis” in his book titled
“Power of productivity” stated that for the growth of a firm a
factor which is required more than other factor is “Competition”.
5. Prices of the commodity & services
fall due to competition.
Definition of competition
There is no practical definition of competition. The report given by world bank has defined competition as “A
situation in market in which the firm or the sellers independently strive for buyers patronage in order to
attain business objectives”.
It also means “economic rivalry” between market player to attract consumer.
Competition and economic efficiency
− There is a relation between competition, innovation, productivity & economic growth.

− Through competition innovative activities of the firm enhances.
− Competition between the firms is blood of strong and effective market.
− Michael Porter in his book “Can Japan Compete” stated that “In Japan only domestic competitive firms
were able to remain internationally competitive during economic slowdown.
Competition law & competition policy
− Competition policy is the broad policy of the government which represents the intention of the
government in the matters relating to competition. In order to achieve the objective mentioned in
competition policy, the government makes competition law.
− The competition policy of India has two main objectives:
(a) To promote healthy & fair competition amongst the business firms.
(b) To prevent an anti-competitive practices in the Indian market.
− In order to achieve the above objectives, the competition act, 2002 was passed by the parliament.

− Whenever there are changes in the competition policy the required changes are also made in the
competition law.
− Asian Development Bank in its report titled as “During The Economic Transition & Reforms” stated that
the benefit of an open economy cannot be fully realised unless the restriction on competition are
removed.
− The competition policy plays a major role in removal of restrictions in competition.
− Competition policy affects the businessman who unfairly want to take advantage over their competitors.
Competition regime in India
INDIA KI HALAT THI KAFI KHARAB, QKI YHA THA LICENSE RAAJ,
− In Indian economy, there was very less competition till the years 1969 as there was no liberalization &
existence of “License Raj”.
− Due to existence of “License Raj”, it was very difficult for the new firms to make an entry in the Indian
market due to which the existing firms had a monopoly in the market.
− In that time India had a law known as “Monopoly & Restrictive Trade Practices, 1969” which used to
regulate the completion in the market.
− The objective of MRTP Act was to:
(a) Preventing monopolies
(b) Stopping bad practices by monopolistic firms.
IMPORTANT DEFINITIONS
Acquisition
KAH KE LE LENA KISI COMPANY KO
This term has been specifically defined. It means – directly or indirectly, acquiring or agreeing to acquire: (i)
shares, voting rights or assets of any enterprise; (ii) control over management or control over assets of any
enterprise. [(Section 2(a)]
The terms ‘acquiring’ or ‘acquisition’ are relevant for “Regulation of Combinations”.
▪ Agreement
By making agreement the producers, sellers, or the business
men try to disturb the competition. According to Section 2(b)
of Competition Act “Agreement includes any arrangement or
understanding or action in concert –
a) Whether or not, such
agreement, understanding or action is formal or in writing; or
b) Whether or not, such
agreement, understanding or action is intended to be
enforceable by legal proceedings.”
It is clear that the agreement need not be in writing.
▪ Cartel
CHALO HO JAO EKATTHE AUR WAAT LAGAO MARKET KI
Cartel includes an association of producers, sellers or distributors, traders or service providers who, by
agreement amongst themselves, limit, control, or attempt to control the production, distribution, sale or
price of goods or services, or, trade in goods or provision of services.
The Competition Act, 2002 prohibits formation of certain cartels.
The reasons for creation of the cartels are:-
(a) Lesser competition, as lesser competitors are more united.
(b) High entry and exit barriers, due to this there are lesser players in the market and hence they form
cartels.
(c) Similar production cost, when cost of products are similar the producer can come together to control the
market.
(d) High dependence of the consumer on the product.

The reasons that are conducive (supportive) to creation of Cartel:
− Excess capacity
− Very few competitors
− Similar products
− High dependence of consumer on the product
− Similar cost of production.
Que: What are the conditions that are conducive to cartelization ?
▪ Consumer
JIS KE NAAM MAIN HI HAI MAR WO HAI CONSUMER
Consumer means any person who –
(a) Buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or
under any system of deferred payment and includes any person who uses those goods with the approval of
the person buying those goods, whether such purchase of goods is for resale or for any commercial
purpose or for personal use;
(b) Hires or avails of any services for a consideration which has been paid or promised or partly paid and
partly promised, or under any system of deferred payment and includes any person who is the beneficiary
of those services with the approval of hirer or avails of those services, whether such hiring or availing of
services is for any commercial purpose or for personal use;
It may be noted that under the Competition Act, 2002 even if a person purchases goods or avails of services
for commercial purpose, he’ll be a consumer, whereas for the purposes of Consumer Protection Act, 1986 a
person purchasing goods or availing services for commercial purposes is not a consumer and cannot seek relief
under that Act.
▪ Enterprise
Enterprise means a person or department of the Government, who or which is, or has been, engaged in
any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or
goods or the provision of services of any kind.
▪ However, it does not include any activity of the Central Government relating to sovereign functions of
Government including all activities carried on by the Government Departments dealing with atomic
energy, currency, defence and space.
▪ ‘Activity’ includes profession or occupation. ‘A unit or division’ includes a plant or factory established for
production, supply, distribution, acquisition or control of any goods or any branch or office established for
provision of any service.
▪ Goods
Goods mean goods as defined in the Sale of Goods Act, 1930 and include the following:
− Products manufactured, processed or mined;
− Debentures, shares and stocks after allotment
− In relation to “goods supplied”, imported in India.
Person
Person includes (i) an individual; (ii) a Hindu undivided family; (iii) a company; (iv) a firm; (v) an association
of persons; (vi) a corporation established under Central, State Act or a Government Company (vii) a body
corporate incorporated by or under a law of a foreign country; (viii) a co-operative society registered under
any Law (ix) local authority (x) every artificial juridical person.
‘Government Company’ for this Section will be same as defined under Section 2(45) of Companies Act, 2013 .
▪ Services
Services means service of any description which is made available to potential users and includes the
provision of services in connection with business of any industrial or commercial matters such as banking,
communication, education, financing, insurance, chit funds, real estate, transport, storage, material
treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement,
constructions, repair, conveying of news or information and advertising, it also incudes the services relating
to investments in shares or debentures, whether the services are offered from central office or from the
branches.

It may be noted that under the Competition Act, 2002 the services of industrial or commercial nature also fall
within the scope of the Act, whereas under the Consumer Protection Act, 1986 the services of commercial
nature or for business or industrial purposes are excluded for interpreting deficiency in the supply of any
service.
▪ Relevant market, relevant geographic market, and relevant product market
The terms Relevant Market, Relevant Geographic Market, and Relevant Product Market have relevance in
determination of the agreements being and-competitive within the meaning of Section 3 of the Competition
Act, 2002.
KISI BHI ANTI COMPETITIVE PRACTICE SE KAHAN HO RAHA HAI NUKSAAN,
YEH PATA KARNE KE LIYE RELEVANT MARTKET KA HONA CHAIYE GYAN
Relevant Market means the market, which may be determined by the Competition Commission of India with
reference to both the markets [Section 2®].
Basically relevant market is to be determined to know whether an enterprise is abusing its dominance in the
relevant market. This is the market in which an enterprise enjoys dominance. This market is to be determined
on the basis of relevant product market or relevant geographic market or both the market.
The relevant market must have both a product and a geographical aspect, the product market must be clearly
defined in order to arrive at geographical boundaries.
The Competition law clearly specifies ascertainment of relevant market for the purpose of analysing the case
of abuse of dominance and Combinations.
Relevant Geographic Market means a market comprising the area in which the conditions of competition for
supply of goods or provision of services or demand of goods or services are distinctly homogeneous, can be
distinguished from conditions prevailing in neighbouring areas [Section 2(s)].
The relevant geographic market comprises of the area in which the enterprises are involved in supply and
demand of the products or services in which conditions of services are same and can be distinguished from
neighbouring area, because condition of competition is different in neighbouring area.
It also means that if in any market demand substitutes are available, the consumer may easily make a shift to
the substitutes and the power of seller will be reduced.
Before declaring a market as a relevant geographic market the Competition Commission of India considers the
following factors:
(a) Availability of substitutes
(b) Regulatory trade barriers
(c) Local traditions, customs, requirements, specifications.
(d) Transportation cost
(e) Customer preferences
(f) Local language
(g) Distribution facilities.
Relevant product market means a market comprising of all those products or services, which are regarded as
interchangeable or substitutable by the consumer, by reasons of characteristics of products or services, their
prices and intended use [Section 2(t)].
Example: Tea & Coffee, matchbox and disposable lighters.
In the case of Kansan News Pvt Ltd. Vs Fast ways, it was decided that the cable TV is not a substitute for DTH
Service.

If two products are functionally interchangeable they will become the part of same product market.
The following factors are considered while fixing any market as Relevant Product Market:
Basically through these factors we compare whether substitutes are available or not. If good number of
substitutes are available then, the CCI will not take any action if complaint is made regarding abuse of
dominance as CCI believes that if one firm is exercising dominance the consumer may shift to substitutes.
(a) Physical characteristics or end-use of goods;
(b) Price of goods or service;
(c) Consumer preferences;
(d) Exclusion of in-house production
(e) Existence of specialized producers;
(f) Classification of industrial products.
The terms relevant market, relevant geographic market & relevant product market are used in understanding
whether any agreement in any particular territory is anti -competitive or not.
An agreement in the nature of cartel which aims to control or prohibit the production, supply or distribution
of goods or services is looked with reference to the relevant market.
Relevant market is also determined to know whether any enterprise is abusing dominance in any market.
Say for example: A news paper charges excess advertisement rate in the City of Pune, and the news paper
Company is abusing dominance. A complaint has been made to the Competition Commission of India. Now in
this case first we have to determine, which is the relevant market, i.e. the market in which dominance is
abused. In this case we can ascertain the relevant market with the help of relevant product market and
relevant geographic market.
Now in this example, the service of advertisement is the relevant product market. The market of Pune may
be considered as relevant geographic market as the advertisement is to be published in Pune.
So We can say that the provision of services related to publication of advertisement, in the newspaper of
Pune can be considered as relevant market.
In the case of Satyendra Singh Vs Gaziabad Development Authority (GDA), in this case Mr Singh was allotted a
flat for Rs 2 lacs by GDA, under economic weak section scheme, but at the time of transferring the possession
the GDA demanded Rs 5 Lacs more. Mr Singh filed a complaint before the CCI accusing the GDA of abuse of
dominance.
CCI Decided:
The provision of service for construction of Economic Weak Section Home is relevant product market and
Ghaziabad is relevant geographic market.
The CCI decided that in Ghaziabad the GDA is the only enterprise which is making houses Economic Weak
Section Scheme and hence CCI decided that by charging excess price of 5 Lacs the GDA is exercising abuse of
dominance.
▪ Competition policy
Basically competition policy means a policy framed by the Government to promote competition in the
country. The policy basically has two objectives the first is to promote competition in the country & the
second is to prevent the anti competitive practices that have appreciable adverse effect on competition.
Competition Policies framed by the Governments have a broader scope then competition laws because the
policies try to increase the capacity of competition between local players & national players in their
respective markets & also these policies lower the entrée barriers in the market.

So competition policy plays a significant role in shaping up the competitive markets in the Country. To
implement the policy the competition law is made by the Government.
Turnover
Turnover includes value of sale of goods or services. [Section 2(y)]
The definition of the term ’turnover’, is relevant and significant in determining whether the combination of
merging entities exceeds the threshold limit of the turnover specified in Section 5 of the Act. It is also
relevant for the purpose of imposition of fines by the Commission.
Que: Discuss 'Competition Law and Policy' under the Competition Act, 2002.
Price
It means a valuable consideration paid for the sale of any goods or for performance of any service and also
includes any consideration which actually relates to sale of any goods or service but ostensibly (appears to be)
relating to some other matter or thing.
ANTI – COMPETITIVE AGREEMENTS – Section 3
JO BIGADTE HAI MARKET KA SENTIMENT,
WO KAHLTE HAI ANTI COMPETITIVE AGREEMENT
Section 3(1) of the Competition Act, 2002 provides that no enterprise or association of persons shall enter into
any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or
provision of services, which causes or is likely to cause an appreciable adverse effect on competition. Section
3(2) further provides that any anti-competitive agreement within the meaning of section 3(1) shall be void.
The agreement entered between traders or enterprises or association of persons or between persons or any
decision taken by persons or association of persons will be presumed to have appreciable adverse effect on
competition if:
a. Such agreement fixes the purchase or sale price.
b. Such agreement limits or controls the production, sale, supply, distribution, technical
development of the goods or services.
c. Such agreement results in sharing of market or source of production by way of allocation of market
or type of goods or services or sharing of number of customer in the market
(agreement kar kea ap market ka share baat ligiye for example delhi main ultratech cement
bikega aur Mumbai main birla cement)
d. Such agreement results in bid rigging or collusive bidding.
Prohibition on agreements having appreciable adverse effect on competition

The following agreements shall be deemed to be prohibited under section 3(1), if such agreements cause or
are likely to cause an appreciable adverse effect on competition:
There are two types of Anti-Competitive agreements:

(a) Horizontal agreements
(b) Vertical agreements
HORIZONTAL AGREEMENTS
Between the same level player for example, between the competitors.
Bid rigging or collusive bidding:
It is the common practice between the parties in relation to bids.
The agreement may include:
− Not to bid against each other
− Withdrawing a bid
− Bids by rotation - it means the bidders mutually decide that in one tender a particular bidder will bid and
in other tender the other bidder will bid so that they do not compete against each other.
− Agreement to throw out the outside bidders
− Agreement to submit identical bids.

For Example: Many bidders for the Road Project may come together and decide that all the bidders will make
identical bids for the project, this will result in elimination of competition and thus the project will be
awarded at higher price.
VERTICAL AGREEMENTS
Between two players belonging to different level for example between manufacturer and retailer.
a) Tie-in arrangements i.e., The term “tie-in agreement” includes any agreement requiring a purchaser of
goods, as a condition of such purchase, to purchase some other goods.
A good example of tie-in agreement is where a gas distributor requires a consumer to buy a gas stove as a
pre condition to obtain connection of domestic cooking gas. [Chanakaya and Siddharth Gas company],
“Agr aap ko frige kareedna hai to washing machine bhi Kareedni padegi”
b) Exclusive supply agreement, i.e., Through this agreement the supplier restricts the purchase from buying
goods from any other supplier or supplier asks the purchaser to purchase from specific supplier only.
This restricts the purchaser from acquiring goods or services from alternate sources. Competition also affects
due to this.
Thus, where a manufacturer asks a dealer not to deal in similar products of its competitor directly or
indirectly and discontinues the supply on the ground that dealer also deals in product of suppliers’
competitor’s goods is an illustration of exclusive dealing agreement. [Bhartia Curtec Hammer Ltd.]
“Agar mere se saman khareedna hai to kisi aur se mat khareedo”
Que: Define the terms "tie-in agreement"" and "exclusive supply agreement" under the Competition Act, 2002.
a) Exclusive distribution agreement, i.e., an agreement to limit, restrict or withhold the output or supply of
any goods or allocate any area or market for the disposal or sale of the goods.
For example, in the year 2014 when there was huge demand for Honda Activa Honda decided to supply
500 Activa per month per dealer this resulted in increase of price.
“Mai jaha bolu wahi saman supply karo”
b) Refusal to deal, i.e., an agreement which restricts, or is likely to restrict, by any method the persons or
classes of persons to whom goods are sold or from whom goods are bought.
Through this agreement buyer or seller both may restrict the opposite party from dealing in goods of other
person. In case of exclusive supply agreement it was the seller who was restricting the purchaser but here
any party even the purchaser may restrict the seller, for example the purchaser may say that if seller
wants to sell goods to me he shall not to sell to any other person or his competitors.
Patalnajali Limited once restricted the milk producer stating that if they supply milk to Patanjali then they
can not supply milk to the competitors of Patanjali, this was considered as Refusal to deal.
In case of DGIR v. Titan industries, it was decided that, an agreement which provides that the franchisees will
not deal in products or goods of similar nature for a period of three years from the date of determination of
agreement within a radius of five kms from showroom amounts to exclusive dealing agreement.
“Agar muj se deal karna hai to kisi aur se deal mat karo”
Que: Define 'Refusal to deal' under Competition Act, 2002.
c) Resale price maintenance, i.e., an agreement to sell goods on condition that the prices to be charged on
the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that
prices lower than those prices may be charged.
“Mai jo price fix karu us k neeche goods mat becho”
Note: Efficiency enhancing joint ventures entered into by parties engaged in identical or similar goods or
services, shall not be presumed to have appreciable adverse effect on competition but judged by rule of
reason. The term “cartel” used in the Section is the most severe form of entering into ‘anti competitive
agreements’ and has been defined in Section 2(c).
Moreover, Section 3 does not apply to the conditions that are imposed by a person for the purpose of
protecting his trademark, copyright, patent, designs, geographical indications etc.

That apart, the Act does not restrict any person’s right to export from India goods under an agreement which
requires him to exclusively supply, distribute or control goods or provision of services for fulfilling export
contracts. The exclusion of ‘export business’ is in view of ‘effect theory’, and doctrine of ‘relevant market’.
PROHIBITION ON ABUSE OF DOMINANT POSITION (SECTION 4)
DOMINANT POSTION MAI HO TO ACCHA KAR USE,

MAT KARO USKA ABUSE, NAI TO CCI UDA DEGA TUMHARA FUSE
Dominant Position means a position of strength enjoyed by an enterprise or a group in the relevant market in
India as a result of which:
a) Such enterprise is able to operate independently of competitive forces in the relevant market, or
b) Affect its competitors or consumers in the relevant market.
Que: What is meant by dominant position under the Competition Act, 2002 ?
An enterprise will be said to be abusing the dominance if:

(a) Unfair or discriminatory conditions are imposed on purchase or sale of Goods.
Example: the seller imposes the condition of tie in agreement.
(b) Unreasonable price is charged including predatory pricing. (selling below cost to eliminate competition)
(c) Creation of barriers to entry
Example: The seller does not allow any new comer to survive in the market.
(d) Denying market access
(e) It limits or restricts production of goods or provision of services or the market for goods or services.
(f) Putting Supplementary Conditions in the contracts relating to purchase or sale of goods, which have no
connection with commercial usage relating to purchase of goods or services.
(g) Example: if you purchase goods from me you cannot by goods from any other party.
(h) Using of dominant position in one relevant market to enter in or protect other relevant market.
Example: Asian Paint who is in dominant position in paints market asks all its dealers to sell Cement also
made by Asian Paint, if the dealers want to have the dealership of Asian paints.
(i) No scientific or technical development in the product that affects the consumer.
Example: there is no improvement in the product.
Similarly, Section 4 also specifies three other forms of abuses namely, if any person indulges in practice or
practices resulting in denial of market access in any manner; or making sale with the supplementary
conditions which do not have any connection with the goods or services being sold, if any person uses
dominant position in one relevant market to enter into, or protect, other relevant market.
Example: Bharti Airtel Accused Reliance Industries for using its dominant position in petrochemical business to
enter in telecom business but this allegation was rejected by Competition Commission of India.
The term “predatory price” has been defined as the sale of goods or provision of services, at a price which is
below the cost, as may be determined by regulations, of production of goods or provision of services, with a
view to reduce competition or eliminate the competitors. Thus, the two conditions precedent to bring a case
with the ambit of predatory pricing are:
(i) selling goods or provision of service at a price which is below its cost of production and
(ii) that practice is resorted to eliminate the competitors or to reduce competition.
QUE:How the competition commission will determine whether an agreement has appreciable adverse effect
on competition ?

When an undertaking abuses its dominant position the CCI may order for division of such undertaking. The
order of division of an undertaking may be given in the following manner :
An undertaking may be ordered for division in the following manner to prevent the abuse of dominant
position:
(a) The transfer of asset, property, liabilities of one enterprise to the other enterprise.
(b) Transfer of shares, stocks and securities.
(c) Winding up of an existing company & the formation of the new company.
(d) Transfer of licenses, approvals or permissions.
(e) Any other order which is appropriate in the opinion of CCI.
(f) Transfer of contracts or orders of one enterprise to another enterprise.
REGULATION OF COMBINATION – Section 5
JAB DO COMPANIES KA HOGA MAIL,

COMPETITION KA BIGAD JAEGA TAAL MAIL!
Basically combination is the term which indicates the merger of coming together of two or more enterprises.
When two or more enterprises come together the competition is affected as one competitor is eliminated
from the market. So the combinations that affect the Competition are regulated by the Competition Act.
Regulation of Combination is one of the core provisions of the Competition Act, 2002. Section 5 of the
Competition Act, 2002 provides that acquisition of one or more enterprises by one or more persons or merger
or amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises which
are above the certain prescribed size in terms of (a) assets or (b) turnover as provide under section 5.
Amalgamation or merger of the enterprise will be called combination only if the combined values of asset or
turnover exceeds the threshold limits given below:
In India Assets Turnover
Individual (Combined 2000 Cr. Or Or 6000 Cr.
Value of both)
Group (to which the 8000 Cr. Or 24000 Cr.
parties will belong
after the acquisition)
In India & Outside Assets Turnover
India
Total Minimum Indian Or Total Minimum Indian
Component Component
Individual Parties 1 Billion Rs. 1000 Cr $ 3 Billion Rs. 3000 Cr
Group $4 Billion Rs. 1000 cr. Or $ 12 Billion Rs. 3000 CR
#when we are calculating the individual assets and turnover we will consider the consolidated assets and
turnover, which means the assets or turnover of individual parties with their downstream subsidiaries.
Beta wo In India and outside India wala point tab use hoga jab dono entities ke pas jointly assets post
combination, us limit main aayen jo upar table main hai.
In Case of group, the value of assets or turnover of the group which is acquiring the control will be considered
along with the value of assets and turnover of the entity which is being acquired along with its downstream
subsidiaries.

# The Central Government is authorised to enhance or reduce the values of assets or turnover by issuing a
notification and after making consultation from CCI.
Definition of Group:
It means two or more enterprises, which are in the position to, exercise 26% or more of voting rights in the
other enterprise or controls the management and affairs of the other enterprise or, appoints more than 50% of
the members of board of directors of other enterprise.
For an example if A Ltd. Together with C Ltd has 26% or more voting rights in B Ltd whether directly or
through one of more subsidiary or subsidiaries than B Ltd will be considered as the part of the A Ltd’s Group.
The exemption to the “group” exercising less than fifty per cent of voting rights in other enterprise from the
provisions of Section 5 of the Act has been continued for a further period of 5 years. (this means, when
calculation of group will be made the entities in which the group has less then 50% of voting rights will not be
considered as part of the group)
Exemption has been provided to the enterprises being the parties to the combinations as referred above
where, where enterprises whose control, shares, voting rights or assets are being acquired have assets of not
more than Rs. 350 crore in India or turnover of not more than Rs. 1000 crore in India, are exempt from
Section 5 of the Act for a period of 5 years.
In
respect of combination the following orders may be passed by CCI
− An order for approval of combination.
− An order for modification of the combination.
− The parties within 30 days of order of modification may submit amendment to the modification proposed
by CCI.
− If CCI agrees to the proposal of parties then it may approve the combination.
The factors that CCI will consider while determining whether any combination causes appreciable adverse
effect on competition
If CCI is of the opinion that the proposed combination will not affect competition CCI will directly approve the
combination without making enquiry.
(a) Creation of entry barriers in the market;
(b) Power to influence the market;
(c) Foreclosure of competition;
(d) Likelihood of increase in the prices and profit margins of combined entity, then scientific improvement,
development and innovation in the product;
(e) Availability of the substitutes in the market;
(f) Driving existing competitors out of the market.
Regulation of Combination
Section 6 of the Competition Act, 2002 provides that any person or enterprises entering into a combination
which causes or is likely to cause an appreciable adverse effect on combination within the relevant market in
India and if such a combination is formed, it shall be void.
Section 6(2) states that any person or enterprise, who or which proposes to enter into any combination, shall
give a notice to the Commission disclosing details of the proposed combination, in the form, prescribed and
submit the form together with the fee prescribed by regulations. Such intimation should be submitted within
30 days of:
(a) Approval of the proposal relating to merger or amalgamation, by the board of directors of the enterprise
concerned with such merger or amalgamation
or

(b) Execution of any agreement or other document for acquisition for acquiring of control referred (in case of
acquisitions)
The combination will come to effect only after the expiry of 210 days from the day on which the above notice
(within 30 days of agreement or passing of resolution) was given to CCI or any earlier date as CCI may order.
After receipt of the notice the CCI will deal with the notice as per section 29, 30 and 31.
The provisions of Section 6 do not apply to share subscription or financing facility or any acquisition, by a
public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any
covenant of a loan agreement or investment agreement. This exemption appears to have been provided in the
Act to facilitate raising of funds by an enterprise in the course of its normal business.
Under Section 6(5), the public financial institution, foreign institutional investor, bank or venture capital
fund, are required to file in prescribed form, details of the control, the circumstances for exercise of such
control and the consequences of default arising out of loan agreement or investment agreement, within seven
days from the date of such acquisition or entering into such agreement, as the case may be.
As per the explanation appended to Section 6(5)
(a) “foreign institutional investor” has the same meaning as assigned to it in clause (a) of the Explanation to
Section 115AD of the Income-tax Act, 1961;
(b) “venture capital fund” has the same meaning as assigned to it in clause (b) of the Explanation to clause
(23 FB) of Section 10 of the Income-tax Act, 1961.
It may be noted that under the law, the combinations are only regulated whereas anti-competitive
agreements and abuse of dominance are prohibited. Further, under the MRTP Act prior to 27.9.91,
undertakings of certain size were required to be registered and such undertakings were required to seek prior
approval of the Central Government before embarking upon expansion plans. In the present Act, there is no
requirement of registration of an undertaking and further, there is no need to have prior approval of the
Central Government but CCI will only examine as to whether or not combination is or is likely to have an
appreciable adverse effect on competition.
The Competition Act with many innovative concepts coupled with power to impose fine is likely to let in harsh
glare of sunlight to disinfect pernicious anti-competitive practices.
For Ease of Reference we will discuss section 29, 30 and 31, relating to regulation of combination:
Section 29 – The Procedure of Making Enquiries in Combination
1) First of all, the CCI has to form an opinion (prima facie opinion) that the proposed combination may have
adverse appreciable effects on competition.
(the procedure we are discussing here commences from the day when the CCI receives the notice as we
discussed under 6(2) with regard to informing CCI within 30 days of passing board resolutions or entering
in agreement relating to mergers, so CCI will form the opinion after receipt of such notice)
2) After forming an opinion, show cause notice will be sent to the parties asking them to state why an
investigation must not be started and the parties will be asked to respond within 30 days from the date of
receipt of the notice.

3) After receiving reply from the parties, if the CCI is of the opinion that the proposed combination may have
adverse appreciable effect on completion, it shall be within 7 days direct the parties to publish
information to the public regarding proposed combination within 10 days of the receipt of the order.
4) The CCI may call for objections from any party who considers it to be affected by such combination within
15 days from the date of publishing of the notice.
5) Within 15 days of receiving objections, the CCI may call for additional or other information which shall be
furnished by the parties to combination within 15 days of calling such information, the parties may ask for
additional time from CCI to provide the other information.
6) Within 45 days of receiving further objections, the CCI may proceed to deal with the case.
7) No combination shall come into effect until 210 days have passed from the day of notice (under section
6(2)) or the Commission has passed orders, whichever is earlier.
Section 30 – Inquiry in Disclosures under Section 6(2)

Section 30 empowers the Commission to determine whether the disclosure made to it under Section 6(2) is
correct and whether the combination has, or is likely to have, an appreciable adverse effect on the
competition.
Section 31 – Orders of Commission on Certain Combinations
CCI MAY MAKE FOLLOWING ORDERS IN RESPECT OF COMBINATIONS:

(i) In the case where the Commission is of the opinion that the combination has, or is likely to have an
adverse effect on competition, it shall direct that the combination shall not take effect.
(ii) Where the Commission is of the opinion that adverse effect which has been caused or is likely to be
caused on competition can be eliminated by modifying such Combination then it shall direct the parties to
such combination to carry out necessary modifications to the Combination.
(iii) The parties accepting the proposed modification shall carry out such modification within the period
specified by the Commission.
(iv) Where the parties who have accepted the modification, fail to carry out such modification within the
period specified by the Commission, such combination shall be deemed to have an appreciable adverse effect
on competition and shall be dealt with by the Commission in accordance with the provisions of the Act.
(v) If the parties to the Combination do not accept the

proposed modification such parties may within thirty days
of modification proposed by the Commission, submit
amendment to the modification proposed by the
Commission.
(vi) If the Commission agrees with the agreement

submitted by the parties it shall, by an order approve the
combination.
(vii) If the Commission does not accept the amendment

then, parties shall be allowed a further period of thirty
days for accepting the amendment proposed by the Commission.
(viii) Where the parties to the combination fail to accept the modification within thirty days, then it shall be
deemed that the combination has an appreciable adverse effect on Competition and will be dealt with in
accordance with the provisions of the Act.

(ix) Where the Commission directs under Section 31 (2) that the combination shall not take effect or it has, or
is likely to have an appreciable adverse effect, it may order that, the proposed combination shall not take
place.
(x) If CCI does not make any communication within a period of 210 days from the date of sending the notice
under section 6(2), it shall be assumed that CCI has approved the combination.
However if CCI has granted any extension of time on the request of the parties for providing extra
information, and the time of 30 days for hearing the objections as referred (15+15) above then such extension
and the said 30 days, shall not be included in the period of 210 days.
In case the CCI has directed that the combination shall not take place as it has appreciable adverse effect on
competition then in addition to penalty or prosecution which may be imposed or initiated under this Act, CCI
may also order that the acquisition or acquiring of control or merger or amalgamation shall not take place
and CCI may also frame a scheme in this regard.
Section 18 – Duties of CCI

It shall be the duty of CCI to:
(i) Eliminate the practices that have appreciable adverse effect on completion.
(ii) Promote and sustain coemption in the market.
(iii) Protection of interest of consumer
(iv) Ensuring freedom of trade.
Section 18 also empowers the Commission to enter into any memorandum or arrangement, with the prior
approval of the Central Government, for the purpose of discharging the duties and functions under this Act
with any agency of any foreign country. This will enable the CCI to have extra territorial reach and shall
facilitate exchange of information and enforcement of its order.
Que: Discuss briefly, the establishment, composition and term of office of chairperson and other members of
Competition Commission of India.
Section 19 – Inquiry in to Certain Agreements and Dominant Position of Enterprises
PROCEDURE FOR MAKING ENQUIRY BY THE CCI IN ABUSE OF DOMINANCE OR ANTI COMPETITIVE AGREEMENTS
1. The Commission may inquire into any abuse of dominance or in anti competitive agreements on its own or
on:
(a) receipt of any information in such manner and accompanied by such fee, from any person, consumer or
consumer association or trade association; or
(b) a reference made to it by the Central Government or State Government or a statutory authority.
CCI may enquire in to all the below parameters to decide whether any enterprise is abusing dominance or has
entered in to agreements which causes appreciable adverse effect on competition.
Important factors while determining whether an agreement has an ‘Appreciable Adverse Effect’ on
competition
Section 19(3) of the Competition Act, 2002 provides that while determining whether an agreement has
appreciable adverse effect on competition, the Commission shall give due regard to all or any of the following
factors, namely –
a) Creation of barriers to new entrants in the market;
It means new players are not able to enter in to market as the existing players are very strong.
b) Driving existing competitors out of the market;
It means the existing players are compelled to move out of the market, to strong hold of existing players,
the existing players may exercise predatory pricing.
c) Foreclosure of competition by hindering entry into the market’

It means closing of the competition. Basically the exiting players do not let in any new player in the
market – it is also referred as market blocking.
d) Accrual of benefits to consumers;
The benefits to the consumers are restricted.
e) Improvements in production or distribution of goods or provision of services; and
f) Promotion of technical, scientific and economic development by means of production or distribution of
goods or provision of services.
Factors that are considered while determining whether an organization enjoys dominant position or not:
(a) Market share of the enterprise – large market share may result in dominant position.
(b) Size and resources of enterprise - large resources may result in dominant position.
(c) Size and importance of competitor – if competitors are weak it may result in dominant position
(d) Dependence of consumer on the Enterprise – if consumer is fully dependent on the enterprise it may
result in dominant position.
(e) Market structure and size of the market - if market is large with very few enterprise it may result in
dominant position.
(f) Social obligation and social cost.
(g) Whether monopoly acquired by being a Government Entity
(h) Countervailing the buying power.
(i) Other factors that CCI considers relevant.
Section 20 - Inquiry in Combination by CCI

The Commission may, on its own knowledge or information relating to combination, inquire into whether such
a combination has caused or is likely to cause an appreciable adverse effect on competition in India, however
the Commission shall not initiate any inquiry after the expiry of one year from the date on which such
combination has taken effect.
The Commission shall, on receipt of a notice under sub-section (2) of section 6 or upon receipt of a reference
under sub-section (2) of section 21 (reference by statutory authority), inquire whether a combination
referred in that notice has caused or is likely to cause an appreciable adverse effect on competition in India.
For the purposes of knowing whether a combination would have the effect of or is likely to have an
appreciable adverse effect on competition in the relevant market, the Commission shall have due regard to
all or any of the following factors, namely:
(a) actual and potential level of competition through imports in the market;
(b) extent of barriers to entry into the market;
(c) level of combination in the market;
(d) degree of countervailing power in the market;
(e) likelihood that the combination would result in the parties to the combination being able to significantly
and sustainably increase prices or profit margins;
(f) extent of effective competition likely to sustain in a market;
(g) extent to which substitutes are available or are likely to be available in the market;
(h) market share, in the relevant market, of the persons or enterprise in a combination, individually and as a
combination;
(i) likelihood that the combination would result in the removal of a vigorous and effective competitor or
competitors in the market;

(j) nature and extent of vertical integration in the market;
(k) possibility of a failing business;
(l) nature and extent of innovation;
(m) relative advantage, by way of the contribution to the economic development, by any combination having
or likely to have appreciable adverse effect on competition;
(n) whether the benefits of the combination outweigh the adverse impact of the combination, if any.
Que: State the factors, which are taken into account by the Competition Commission to determine whether
the combination would have the effect of or is likely to have a appreciable adverse effect on competition in
the relevant market ?
Section 21 - Reference by statutory authority.—
Where in the course of a proceeding before any statutory authority an issue is raised by any party that any
decision which such statutory authority has taken or proposes to take, is or would be, contrary to any of the
provisions of this Act, then such statutory authority may make a reference in respect of such issue to the
Commission.
On receipt of a reference as above, the Commission shall, after hearing the parties to the proceedings, give
its opinion to such statutory authority which shall thereafter pass such order on the issues referred to in that
sub-section as it deems fit: Provided that the Commission shall give its opinion under this section within sixty
days of receipt of such reference.
REFERENCE BY Commission – Section 21A
In the course of a proceeding before the Commission an issue is raised by any party that any decision which, the
Commission has taken during such proceeding or proposes to take, can be contrary to any provision of this
Competition Act, and whose implementation is given to a statutory authority, then the Commission may make a
reference in respect of such issue to the statutory authority:
However the Commission, may, suo motu, make such a reference to the statutory authority.
On receipt of a reference as above, the statutory authority shall give its opinion, within sixty days of receipt of such
reference, to the Commission which shall consider the opinion of the statutory authority, and thereafter give its
findings recording reasons therefor on the issues referred to in the said opinion.
So for example if CCI is approving any merger and if such merger is to be implemented by NCLT under Companies Act, 2013 so
CCI can make a reference to NCLT.
Section 26 – Procedure for Enquiry Under Section 19 (The procedure for determining whether the factors
given in section 19, exists or not for determining whether an agreement causes appreciable adverse effect on
competition or not or whether an enterprise is at dominant position or not)
1. The Commission may inquire into any abuse of dominance or in anti competitive agreements on its own or
on:
(a) receipt of any information in such manner and accompanied by such fee, from any person, consumer or
consumer association or trade association; or
(b) a reference made to it by the Central Government or State Government or a statutory authority.
If CCI believes that the matter of an information is already covered in some previous information then CCI can
club the new information with the previous information.

If on receiving the above information the CCI believes that there exists a prima facie case, it shall direct the
Director General to make an investigation in the matter.
If on receiving information from Central or State Government or from Statutory Authority, if CCI believes that
there exists no prima facie case in this case CCI shall close the matter immediately and pass such orders as it
thinks fit and the copy of the report must be sent to respective Government or the Statutory Authority.
The Director General is not vested with a right to move an application for institution of an enquiry relating to
anti-competitive agreements or abuse of dominance.
The terms ‘person’ and ‘statutory authority’ have been defined under Sections 2(l) and 2(w) respectively. The
term ‘person’ has been given wide connotation and it includes an individual, a HUF, a company, a firm, an
association of persons, any corporation established under any Central, State or Provincial Act or a
Government company, a co-operative society, a local authority and every artificial juridical person.
The CCI directs the Director General to make an enquiry in to the relevant market.
2. The Director General starts the enquiry on the parameters given in the act.
3. The Director General shall submit the report within the time as specified by CCI.
4. The DG sends a report to the CCI after the enquiry.
5. After receiving the report the CCI sends the report to the Central Government, State Government or any
other relevant authority for its comments (if investigation or enquiry was started on information of CG SG
or statutory Authority)
If after considering the objection or comments of CG or SG or Statutory Authority, the CCI agrees with the
recommendations of DG then CCI must close the matter immediately and the copy of order of CCI must be
sent to CG SG or statutory Authority and to the parties.
If after considering the objection or comments of CG or SG or Statutory Authority, the CCI believes that
further investigation must be done then CCI must order for further enquiry as per the Act.
Commission on receipt of recommendation of Director General is of the opinion that there is contravention of
any of the provisions of the Act, and a further inquiry is called for, shall inquire into such contravention in
accordance with the provisions of the Act
COMPETITION COMMISSION OF INDIA

IS POORE ACT MAIN POWERS HAI CCI KO
Establishment of CCI [Section 7]
Section 7 empowers the Central Government to establish a Commission to be known as “Competition
Commission of India.” The Commission is a body corporate having perpetual succession and common seal.
The Competition Commission has its head office at New Delhi (established w.e.f. 14-10-2003). In addition to
this, the Commission can establish its offices at other places in India.
Composition of CCI [Section 8]

• Minimum 2 members & Maximum 6
Members • 1 will be the Chairman & remaining other Members
• Ability, Integrity and Standing

Chairman
• 15 years Experience in the particular Fields.

.
• Shall hold office for 5 years.

Tenure Of
Office • Can be re-appoint if he satisfies the crieteria of age of 65 years.
The Commission shall consist of a Chairman and other members, which shall not be less than 2 and more than
6. The Chairman and all the members shall be appointed by the Central Government.
Following are the qualifications of Chairman and the members :
1) He shall be a person of ability, integrity and standing; and he has special knowledge and professional
experience of not less than 15 years in international trade, economics, business, commerce, law, finance,
accountancy, management, etc.
Selection of chairperson and members of CCI:

Chairperson and the members of CCI are appointed by the central government on the recommendation of the
selection committee. The selection committee consists of following:
Cheif justice of india or his nominee, who will be the chairman of the
committee
Secretary in the ministry of corporate affairs
Secretary in the ministry of law and justice
Two expert who have special knowledge in the feild of law, finance,
accountancy, management, industry, public affairs, economics, business,
commerce
Term of office [Section 10]

The term of office of Chairman shall be 5 years or up to the age of 65 years, whichever is earlier and that of
other members shall be 5 years or up to the age of 65 years, whichever is earlier. However, they shall be
eligible for reappointment.
A vacancy caused by the resignation or removal of the Chairperson or any other Member or by death or
otherwise shall be filled by fresh appointment. The Chairperson and every other Member shall, before
entering upon his office, make and subscribe to an oath of office and of secrecy in such form, manner and
before such authority, as may be prescribed.

In the event of the occurrence of a vacancy in the office of the Chairperson by reason of his death,
resignation or otherwise, the senior-most Member shall act as the Chairperson, until the date on which a new
Chairperson, appointed to fill such vacancy, enters upon his office. When the Chairperson is unable to
discharge his functions owing to absence, illness or any other cause, the senior-most Member shall discharge
the functions of the Chairperson until the date on which the Chairperson resumes the charge of his functions.
Removal of Chairperson and other Members [Section 11]

The Chairperson or a Member of CCI may be removed from the office by the Central Government in the
following cases:
(a) Adjudged as an insolvent.
(b) Acquiring such interest which may prejudicially affect his functions.
(c) Physically or mentally incapable
(d) Abused his position.
Resignation of chairman & members of CCI

The Chairman and the other members of CCI may at any-time by giving a resignation letter resign from their
office. However, such resignation will be effective from the earliest of the following dates:-
(a) After expiry of 3 months from the date of resignation.
(b) From the date when a successor is appointed.
(c) The date on which term of the office comes to an end.
Restriction on employment of chairperson and other members [Section 12]

As per section 12, the Chairperson and other members shall not, for a period of two years, accept any
employment connected with the management or administration of any enterprise which has been a party to
any proceeding before the Commission under this Act.
However, the said restriction shall not apply where the Chairperson or any member is offered an employment
in a corporation established by or under any Central, State or Provincial Act or any local authority or in
Government Company.
Validity of acts of competition commission of India [Section 15]

An act of Competition Commission of India cannot be challenged on the ground only of any defect in the
constitution of Competition Commission of India or the existence of any vacancy in the Competition
Commission of India.
However, acts of Competition Commission of India can be questioned on other acts such as acting mala fide,
acting on the basis of untenable evidence, etc.
It may be noted that when an act of Competition Commission of India is called in question on such other
grounds, defects in the constitution or the existence of a vacancy in the Competition Commission of India may
also be urged as an additional ground.
Financial and Administrative Powers of Member Administration

A Member of the Commission as per Section 13 may be designated by the Central Government as Member
Administration who shall exercise such financial and administrative powers as may be vested in him under the
rules made by the Central Government.
However, the Member Administration shall have authority to delegate such of his financial and administrative
powers to any other officer of the Commission as he may deem fit subject to the condition that, while
exercising delegated powers such official shall continue to act under the direction, superintendence and
control of the Member Administration.
Salary and Terms and Conditions of Service
The salary allowances and other terms and conditions of service of the Chairman and other member including
travel expenses, house rent allowance, conveyance facility, sumptuary allowance and medical facilities shall
be such as may be prescribed.

Further, to ensure freedom in the functioning of the Chairperson and the Member, Section 14(2) provides that
the salary allowance and other terms and conditions of service of the Chairperson or Member shall not be
varied to his disadvantage after his appointment.
POWERS OF CCI
CCI HI IS KANNOON KO LAGU,
KARNE KE LIYE ZIMMEDR HAI!
Following are the important powers of CCI:
1) To inquire into anti-competitive agreements and abuse of dominant position;
2) To determine whether an agreement has an appreciable adverse effect on competition;
3) Enquire whether a combination has cause or likely to cause an appreciable adverse effect on competition;
4) To issue “cease and desist” orders;
5) To grant such interim relief as would be necessary in a particular case;
6) To award compensation;
7) To impose fines;
8) To order division of dominant undertakings;
9) To order demerger;
10) To order cost for frivolous complaints.
DUTIES OF CCI
1. To eliminate the practices having adverse effect on competition.
2. To promote and sustain competition.
3. To protect the interest of consumers.
4. To ensure freedom of trade.
MEETINGS & DECISIONS OF CCI (SECTION 22)

The decision of CCI in respect of any matter is taken in its meeting on the vote of majority of the members of
CCI.
The quorum for the meeting of CCI is 3 members.
If the Chairman took the decision and approved the combination & the majority of members were not in the
favour of decision so, the decision taken by the Chairman is the decision of chairman & not of the CCI, has
this decision has no legal validity.
POWERS OF CCI TO REGULATE ITS OWN PROCEDURE

[SECTION 36]
The CCI has been empowered to lay down its own procedure and regulation and shall not be bound by the
procedure laid down by the Code of Civil Procedure, 1908. However, it shall observe the principles of natural
justice and shall be subject to the rules made by the Central Government for the procedure to be followed in
inquiries.
The CCI shall have the same powers as are vested in the civil court under the Code of Civil Procedure, 1908,
while trying a suit, in respect of the following matters, namely:
(a) Summoning and enforcing the attendance of any person and examining them on oath;
(b) Requiring the discovery and production of documents;
(c) Receiving the evidence on affidavits;
(d) Issuing the commissions for the examination of witnesses or documents;
(e) Requisitioning any public record/document from any office;
(f) Dismissing an application in default or deciding it;
(g) Any other such matter as may be prescribed.
Section 36 of the Competition Act, 2002 empowers the Commission to call upon the experts from the fields of
economics, commerce, accountancy, international trade or from any other discipline to assist the Commission
in the conduct of any inquiry before it.

DIRECTOR GENERAL
Section 16 empowers the Central Government to appoint a Director General and such number of additional,
joint, deputy or assistant Director Generals or other advisers, consultants or officers.
These persons shall be appointed from amongst the persons of integrity and outstanding ability and who have
experience in investigation and knowledge of accountancy; management, business, public administration,
international trade, economics, law etc.
Director General is an important functionary under the Competition Act, 2002. He assists the Commission by
furnishing Investigation Report in respect of such matters as are referred to him by the CCI. He also assists
the Commission in conducting proceedings of enquiries, which are initiated by the CCI suo-moto.
The salary, allowances and other terms and conditions and service of Director General, consultants, advisors
or other officers assisting him shall be such as may be prescribed by the Central Government.
The Commission may appoint a Secretary and such officers and other employees, as it considers necessary for
the efficient performance of his functions under the Act. The Commission may engage, in accordance with the
procedure specified by regulations, such number of experts and professionals of integrity and outstanding
ability, who have special knowledge of, and experience in, economics, law, business or such other disciplines
related to competition, as it deems necessary to assist the Commission in the discharge of its functions under
the Act.
Duties of Director General

On the instructions of CCI the director general has to assist the CCI in investigations.
Under section 36(2) the Commission is having same powers as are vested in Civil Court under the Code of Civil
Procedure (1908) while trying a suit, in respect of the following matters, namely:
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses or documents;
(e) subject to the provisions of Sections 123 and 124 of the Indian Evidence Act, 1872, requisitioning any
public record or document or copy of such record or document from any office;
The Director General has the same power of investigation as the power is granted to the inspector appointed
by Central Government for under Companies Act, 2013.
This power includes search and seizure of the record of any person in respect of which an investigation has
been directed by the Commission. It has been provided that wherever the approval of the Central Government
is required, the same shall be given by the Commission.
COMPETITION ADVOCACY

Section 49 of the Competition Act, 2002 provides that while formulating a policy on competition including
review of laws related to competition, the Central Government may make a reference to the CCI its opinion
on the possible effects of such a policy on competition.
The Commission shall, within 60 days of receipt of such a reference, give its opinion on it to the Central
Government. Thereafter the Central Government may formulate such policy as it deems fit. It may be noted
that the role of the Commission is advisory and the opinion given by it shall not be binding on the Central
Government.
In Summary view Competition Advocacy is:
If the Central govt. in the process of:
→ Making a Policy on competition Or,
→ Making some amendments in the Competition Law Or
→ Any other matter Relating to competition;
→ Then the CG can ask CCI for its recommendation or opinion on the above matters.
→ And if the CG asks for such recommendation then it is the duty of CCI to provide the same within a
period of 60 days from the date of request by the CG.
The CCI had also been assigned the role to take prescribed suitable measures for the following :
(a) Promotion of competition advocacy
(b) Creating awareness about the competition
(c) Imparting training about completion issues.
DIFFERENCE BETWEEN MRTP ACT AND COMPETITION ACT

Following are the important differences between the MRTP Act, 1969 and Competition Act, 2002:
S.No. MRTP ACT COMPETITION ACT
1) MRTP Act is based on the pre-liberalization scenario Competition Act is based on the post
liberalization scenario.
2) MRTP Act emphasizes on curbing monopolies Competition Act emphasizes on
promoting competition.
3) MRTP Act provides for compulsory registration of In Competition Act, there is no such
agreements relating to restrictive trade practices requirement of registration of
agreements.
4) Under Competition Act, dominance per se is not bad but Whereas under the MRTP Act,
only the abuse of dominance is considered bad dominance itself is bad.
5) Combinations are not regulated by MRTP Act They are regulated by Competition
Act.
6) MRTP Act does not vest MRTP Commission power to The Competition Act seeks to
inquire into cartels of foreign origin in a direct manner regulate them
THE FOLLOWING ORDERS MAY BE PASSED BY CCI AFTER MAKING ENQUIRY INTO AGREEMENTS RELATING TO
ABUSE OF DOMINANCE
− It may pass an order for cease & desist (Ruk Jao aur dobara mat karna).
− It may pass an order charging penalty not exceeding 10% of the average turnover of preceding 3 financial
years.
− It may also pass an order for modification of any agreement that is entered by such enterprise.
− Any specific direction may be issued by CCI.
− Order for Division of undertakings.
INQUIRY INTO DISCLOSURES UNDER SECTION 6(2)

Upon receipt of notice of Combination by the enterprises in relation to combination, the Commission shall
examine such notice and form its prima facie opinion as to whether the combination has, or is likely to have,
an appreciable adverse effect on the competition in the relevant market in India.
ACTS TAKING PLACE OUTSIDE INDIA HAVING EFFECT ON COMPETITION IN INDIA
The CCI may pass orders in respect of the agreements that are made outside India or if any party to such
agreement is outside India or if any undertaking abusing dominance is outside India or a party to combination
is outside India if such agreement may have appreciable adverse effect on competition in India.
QUE: Whether the jurisdiction of the competition commission of India extends to acts/agreements taking
place outside India, which affects competition in India ? Explain.
National Company Law Appellate Tribunal (NCLAT)
An Appeal against the order of CCI may be preferred to National Company Law Appellate Tribunal within 60
days of receipt of the order of CCI.
National Company Law Appellate Tribunal may entertain an appeal after the expiry of the said period of sixty
days if it is satisfied that there was sufficient cause for not filing it within that period.
The National Company Law Appellate Tribunal after receiving the appeal may confirm, modify or set aside the
order of CCI.
The Appellate Tribunal shall send a copy of every order made by it to the Commission and the parties to the
appeal.
The NCLAT shall dispose of the case at the earliest and it shall take all the steps to dispose of the appeal
within a period of 6 months from the date of receipt of the appeal.
A person preferring an appeal to the Appellate Tribunal may either present the appeal personally or authorize
one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of
its officers to present his or its case before the Appellate Tribunal.
The Central Government or a State Government or a local authority or any enterprise preferring an appeal to
the Appellate Tribunal may authorize one or more chartered accountants or company secretaries or cost
accountants or legal practitioners or any of its officers to act as presenting officers for filing appeal before
the Appellate Tribunal.
The CCI may also authorize one or more chartered accountants or company secretaries or cost accountants or
legal practitioners or any of its officers to act as presenting officers for filing appeal or representing it before
the Appellate Tribunal.
If any person does not follow the orders of the National Company Law Appellate Tribunal than it shall be
deemed that such person has made a contempt of the order of the High Court
APPEAL TO THE SUPREME COURT

An Appeal against the order of NCLAT may be preferred to Supreme Court within 60 days of receipt of the
order of NCLAT.
The Supreme court may, if it is satisfied that the applicant was prevented by sufficient cause from filing the
appeal within the said period, allow it to be filed after the expiry of the said period of sixty days.
APPERANCE BEFORE COMMISSION

The following persons are entitled to appear before commission:
a) Complainant

b) Defendant
c) The Director General
d) The following persons may appear before CCI as representative of the above parties:
Practicing CA, CS or Cost Accountant or any Legal Practitioner.
The above provisions unambiguously state that a ‘Company Secretary in Practice’ is entitled to represent an
informant or a defendant or Director General. A Company Secretary in Practice can also get himself
empanelled with the Director General to prosecute his cases before the Commission.
POWER OF CCI TO REGULATE ITS OWN PROCEDURE

The CCI has got power to make its own procedure relating to the cases brought before it. It is not bound to
follow the procedure as given in CPC. However it has got the same power that is granted to Civil Court under
CPC like summoning of the parties, examining witnesses, receiving affidavits, requiring discovery &
production of documents.
The Commission may issue the following directions:
Production of any document or report before it or before the Director General.
Production of any information relating to trade or business carried on by any person before the CCI or the
Director General.
RACTIFICATION OF ORDERS
The CCI has also the power to make amendments in the orders passed by it if it is of the opinion that the
order has some mistake.
However the CCI shall not amend the substantive part of the order.
EXECUTION OF ORDERS OF COMMISSION IMPOSING MONEYTORY PENALTY

If the CCI has imposed any monetary penalty then it is the duty of the party to pay the penalty within the
time prescribed in the order.
If a party makes a default in payment of the penalty then the CCI may recover such penalty in the manner
that is specified in regulations made in this regard by the Central Government.
If the CCI is of the opinion that, it would be better to recover the penalty as an income tax due then CCI may
refer the case to income tax authority.
If the income tax authority recovers the penalty then the person on whom penalty is imposed will be treated
as assesee under Income Tax Act, 1961.
PENALTY FOR FAILURE TO COMPLY WITH DIRECTION OF DIRECTOR GENERAL & CCI
If any party fails to make compliance with the order of the CCI or DG then in this case such person shall be
liable to a penalty which may extend to l lac Rs. Per day subject to maximum of Rs. 1 Crore.
If any person makes a false statement before CCI then a penalty of Rs. 50 Lacs to 1 crore may be imposed on
such person.
The CCI may also reduce the amount of penalty if the defaulting party has made full disclosures as required
by CCI.
If a Company commits any contravention then the person who was in charge of the company & responsible for
the business of the company will be liable to be proceeded against & punished.
However if such person proves that he exercised proper care & due diligence he may get a relief from the
punishment.
FINANCE OF CCI
The Central Government grants funds to CCI.
The act provides for constitution of competition fund for meeting the expenses of CCI under the act. The fund
will be credited with government grants, fees received by CCI, penalties & interest on all these amounts.
CCI shall maintain accounts & such accounts are to be audited by Comptroller & Auditor General of India.
The Commission shall furnish to the Central Government such returns and statements and such particulars in
regard to any proposed or existing measures for promotion of competition advocacy, creating awareness and

imparting training about competition issues, in such form and such manner as the Central Government may
prescribe.
NOTES
1. The Central Government is authorized to issue direction to the competition commission. The commission
is bound to follow such direction.
2. If the CCI does not follow the direction given by the Central Government or makes continuous breach in
discharge of its functions or in the opinion of Central Government it is necessary to do so then the Central
Government may take over the functions of the CCI & may supersede the Board. When such order is
passed the Chairman & members of CCI have to vacate their office, the properties of CCI vest in Central
Government & the powers & functions of CCI shall be discharged by Central Government. In this case the
Central Government shall reconstitute the CCI within a period of 6 months.
3. The CCI may call for information from the enterprises & when such information is received by CCI it has to
maintain complete secrecy in respect of such information.
4. The civil court cannot interfere in the matters that are to be handled by the CCI.
5. The Central Government is authorized to make rules in respect of the matters given below in the Act:
a) Salary & allowances of chairperson & the members of CCI.
b) Manner of execution of penalty imposed by CCI.
c) The qualifications for appointment of the directors under the act.
d) The fees to be paid along with applications made to CCI.
e) The manner of providing information to the Central Government.
f) The other matters as may be prescribed.
Power to impose lesser penalty

If any person has made full disclosure in connection with his offence CCI may impose lesser penalty.
However, the lesser penalty shall not be imposed where before making such disclosure, the report of Director
General under Section 26 has been received in the Commission.
However if it is discovered later that, any wrong disclosure was made, the benefit of lesser penalty will not
be available.
The Act does not vest power in the Commission to compound an offence as was the position under the MRTP
Act.
It is viewed that long drawn investigation and enquiries could be affected by provision such as compounding
which allows an offence to be settled quickly. The Commission is also not vested with power to compound.
Protection of action taken in good faith
While acting in pursuance of any of the provisions of this Act, the Chairperson and other Members and the
Director General, Additional, Joint, Deputy or Assistant Directors General and Registrar and officers and other
employees shall be deemed to be public servants within the meaning of Section 21 of the Indian Penal Code.
However the Act provides for protection of action taken in good faith. As per Section 59 no suit or legal
proceedings shall lie against the Central Government or Commission or any
Chairperson or any Member or Director General or Registrar or other officers or employees of the Commission
for anything, which is done or intended to be done in good faith under the Act or rules or regulations, made
thereunder.
Restriction on disclosure of information
The Commission from time to time may require any enterprise to submit information for the purposes of the
Act. The information may relate to sensitive business secrets and patents of such an enterprise. In order to
ensure complete secrecy of such information, Section 57 provides that no information relating to an
enterprise obtained by or on behalf of the Commission for the purposes of the Act shall be disclosed except

with the previous permission of the enterprise in writing otherwise than in compliance with or for the
purposes of the Act or any other law for the time being in force.
COMPETITION MAY KILL COMPETITION

Competition is a situation in the market in which each seller in the market competes with each other to
attract the buyer’s patronage. Competition generates many benefits for the buyers as it provides many
choices to buyers. The competition in market creates many sellers as well, who enjoy the similar position in
the market. These sellers come together and create a cartel to control market and keep other competitors
out. When cartel is created in the market the members of cartel perform anti-competitive acts to attract the
buyer and control the market, which affect the free competition in the market. Thus, it can be said that
competition kills
Penalties:
Section 42 Section 42A Section 43 Section 43A Section 44 Section 45
Contravention Compensation For failure to For Failure to For making false Penalty for
of Orders or for contravening comply with disclose statement or offences in
directions of the orders of directions of CCI information on omission to relation to
Commission commission and DG combination provide furnishing of
under section under section material information
27, 28, 31, 32, 6(2) information
33, 42A, 43A
Fine - 1 Lac for If any person If any person 1% of the Total Penalty of not If any person
each day but proves to have does not follow Turnover (of less then Rs 50 makes false
Maximum 10 suffered loss or directions of previous lacs which may statement
Crore. damage to CCI or DG under financial year) extend up to Rs knowing the
NCLAT on section 36 or Up to the 1 Crore. statement to be
account of (when CCI Value of total false or omits
violation of exercises assets, any material
direction of CCI. powers of Civil whichever is fact knowing it
Court and higher. to be material
section 41 when (Amazon and or willfully
DG exercises Future Case) suppresses or
the powers of destroys any
inspector document which
was to be
produced
If fine not paid NCLAT may Fine – Rs 1 lac Without
or directions award for every day up affecting the
not complied – compensation to to Maximum of penalty under
imprisonment such aggrieved Rs 1 Crore. section 44 – fine
for up to 3 years person. may be imposed
or fine of up to up to Rs 1
rs 25 crore as Crore.
fixed by Chief
Metropolitan
Magistrate
#CCI has the power of imposing penalty but where fine is to be imposed CCI will file a case before the Chief
Judicial Magistrate of Delhi.
Lets Summarize various Enquiries that can be Made by CCI

Section 19 Section 20 – Enquiry in Section 26 Procedure of Section 29 –
Combinations Enquiry under Section 19 Procedure of
Enquiry in
Combination
1. The Commission may The Commission may, on Section 26 – Procedure for 1) First of all, the
inquire into any abuse of its own knowledge or Enquiry Under Section 19 CCI has to form
dominance or in anti information relating to (The procedure for an opinion (prima
competitive agreements combination, inquire into determining whether the facie opinion)
on its own or on: whether such a factors given in section 19, that the proposed
combination has caused or exists or not for combination may
(a) receipt of any is likely to cause an determining whether an have adverse
information in such appreciable adverse effect agreement causes appreciable
manner and accompanied on competition in India, appreciable adverse effect effects on
by such fee, from any however the Commission on competition or not or competition.
person, consumer or shall not initiate any whether an enterprise is at (the procedure
consumer association or inquiry after the expiry of dominant position or not) we are discussing
trade association; or one year from the date on here commences
which such combination 1. The Commission may from the day
(b) a reference made to it has taken effect. inquire into any abuse of when the CCI
by the Central dominance or in anti receives the
Government or State The Commission shall, on competitive agreements on notice as we
Government or a statutory receipt of a notice under its own or on: discussed under
authority. sub-section (2) of section 6(2) with regard
6 or upon receipt of a (a) receipt of any to informing CCI
CCI may enquire in to all reference under sub- information in such manner within 30 days of
the below parameters section (2) of section 21 and accompanied by such passing board
to decide whether any (reference by statutory fee, from any person, resolutions or
enterprise is abusing authority), inquire consumer or consumer entering in
dominance or has whether a combination association or trade agreement
entered in to referred in that notice has association; or relating to
agreements which caused or is likely to cause mergers, so CCI
causes appreciable an appreciable adverse (b) a reference made to it will form the
adverse effect on effect on competition in by the Central Government opinion after
competition. India. or State Government or a receipt of such
statutory authority. notice)
For the purposes of
2) After forming an
knowing whether a
If CCI believes that the opinion, show
combination would have
matter of an information is cause notice will
the effect of or is likely to
already covered in some be sent to the
have an appreciable
previous information then parties asking
adverse effect on
CCI can club the new them to state
competition in the
information with the why an
relevant market, the
previous information. investigation
Commission shall have due
must not be
regard to all or any of the
If on receiving the above started and the
following factors, namely:
information the CCI parties will be
(a) actual and potential believes that there exists a asked to respond
level of competition prima facie case, it shall within 30 days
through imports in the direct the Director General from the date of
market; to make an investigation in receipt of the
the matter. notice.
(b) extent of barriers to 3) After receiving

entry into the market; If on receiving information reply from the
from Central or State parties, if the CCI
(c) level of combination in Government or from is of the opinion
the market; Statutory Authority, if CCI that the proposed
believes that there exists combination may
(d) degree of
no prima facie case in this have adverse
countervailing power in
case CCI shall close the appreciable
the market;
matter immediately and effect on
(e) likelihood that the pass such orders as it thinks completion, it
combination would result fit and the copy of the shall be within 7
in the parties to the report must be sent to days direct the
combination being able to respective Government or parties to publish
significantly and the Statutory Authority. information to
sustainably increase prices the public
or profit margins; The Director General is not regarding
vested with a right to move proposed
(f) extent of effective an application for combination
competition likely to institution of an enquiry within 10 days of
sustain in a market; relating to anti-competitive the receipt of the
agreements or abuse of order.
(g) extent to which
dominance. 4) The CCI may call
substitutes are available
for objections
or are likely to be
The terms ‘person’ and from any party
available in the market;
‘statutory authority’ have who considers it
(h) market share, in the been defined under to be affected by
relevant market, of the Sections 2(l) and 2(w) such combination
persons or enterprise in a respectively. The term within 15 days
combination, individually ‘person’ has been given from the date of
and as a combination; wide connotation and it publishing of the
includes an individual, a notice.
(i) likelihood that the HUF, a company, a firm, an 5) Within 15 days of
combination would result association of persons, any receiving
in the removal of a corporation established objections, the
vigorous and effective under any Central, State or CCI may call for
competitor or competitors Provincial Act or a additional or
in the market; Government company, a co- other information
operative society, a local which shall be
(j) nature and extent of authority and every furnished by the
vertical integration in the artificial juridical person. parties to
market; combination
The CCI directs the Director within 15 days of
(k) possibility of a failing
General to make an calling such
business;
enquiry in to the information, the
(l) nature and extent of relevant market. parties may ask
innovation; 2. The Director General for additional
starts the enquiry on time from CCI to
(m) relative advantage, by the parameters given in provide the other
way of the contribution to the act. information.
the economic 3. The enquiry by Director 6) Within 45 days of
development, by any General shall submit the receiving further
combination having or report within the time objections, the
likely to have appreciable as specified by CCI. CCI may proceed
adverse effect on 4. The DG sends a report to to deal with the

competition; the CCI after the case.
enquiry. 7) No combination
(n) whether the benefits 5. After receiving the shall come into
of the combination report the CCI sends the effect until 210
outweigh the adverse report to the Central days have passed
impact of the Government, State from the day of
combination, if any. Government or any notice (under
other relevant authority section 6(2)) or
for its comments (if the Commission
investigation or enquiry has passed
was started on orders, whichever
information of CG SG or is earlier.
statutory Authority)
If after considering the

objection or comments
of CG or SG or Statutory
Authority, the CCI
agrees with the
recommendations of DG
then CCI must close the
matter immediately and
the copy of order of CCI
must be sent to CG SG
or statutory Authority
and to the parties.
If after considering the

objection or comments
of CG or SG or Statutory
Authority, the CCI
believes that further
investigation must be
done then CCI must
order for further
enquiry as per the Act.
Commission on receipt of
recommendation of Director
General that there is
contravention of any of the
provisions of the Act, and a
further inquiry is called for,
shall inquire into such
contravention in
accordance with the
provisions of the Act

CHAPTER – 10
CONSUMER
PROTECTION ACT, 2019
INTRODUCTION 1986
Oyye CONSUMER BHUL JAO APNA TENSION,
INDIA MAI ACCHA LAW HAI, FOR CONSUMER PROTECTION
Before passing of consumers protection act, sale of goods was
only a law which contained provisions relating to consumer
protections but SOGA was not able to give sufficient
protection to the buyers, the Govt. passed consumer
protection act with the intention of protecting consumers &
providing a platform to the consumers for raising their
grievances, disputes & complaints.
NEW PROVISONS UNDER 2019
New definition of consumer

include online purchasing
Definition of goods include food
Provisions covering ‘endorsement’ of goods and services
Definition of ‘electronic service provider’
Provisions for ‘product liability’ and ‘product liability action’
Wide definition of unfair trade practice
New definition of ‘harm’
Central Consumer Protection Authority
Changes in pecuniary jurisdiction
Civil and criminal jurisdiction
Electronically filing of compliant
Mediation
More powers to district commission
Offences and penalties
THE CONSUMER PROTECTION ACT, 2019
“AN ACT TO PROMOTE AND PROTECT THE RIGHTS OF CONSUMERS”
The Main object of the Act is to Protect the common man from wrongs.
• How?
• By establishment of consumer councils at 3 levels
• Shift from ‘Caveat Emptor’ or ‘let the buyer beware’ to ‘Consumer Sovereignty or ‘Consumer is the
King’.
NECESSAITY FOR THE ACT
1] To make producers/traders more accountable to consumers.

2] Protecting the consumers from Unfair and deceptive practices such as selling of defective or sub-
standard goods, charging exorbitant prices, misrepresenting the efficacy or usefulness of goods,
negligence as to safety standards, etc.
3] For consumers to unite on a common platform to deal with issues of common concern and having their
grievances redressed satisfactorily.
Consumer Protection Act, 2019
Prior to the enactment of Consumer Protection Act, 2019, India had Consumer Protection Act, 1986, which
also had provisions relating to redressal forums, consumer councils, however due to many shortcomings in the
act the act was not able to provide faster settlement of disputes to the consumer. The Act was enacted in the
year 1986 and since than the time as well as business environment has been changed drastically. Now due to
advancement of competition and presence of global players issues such as unfair practice, frauds through
telemarketing, misleading advertisements, multilevel marketing etc, the new act was required which has
provisions for all these issues and hence the New Consumer Protection Act, 2019 replaced the consumer
protection act, 1986 and th new Act received the assent of the President on August 9, 2019.
In the case of Om Prakash Vs Reliance General Insurance, the Supreme Court stated that Consumer Protection
Act is a beneficial legislation and must be interpreted through liberal construction (means the scope of
provisions of the Act can be extended in order to provide benefits to the Consumer).
In the case of Emaar MGF Vs Aftab Singh, the Supreme Court Stated that the Consumer Protection Act is
enacted for the better protection of the consumers.
In the Lucknow Development Act Vs M.K Gupta, the Supreme Court stated that:
• The word protection used in the name of the act suggests that the act has been made to protect the
common men.
• The act helps the consumer to become a king in the market.
• The act helps the consumer in fighting against the powerful business houses.
• The act appears to be a silver lining in harsh realities, which can clear the rot.
SOME IMPORTANT DEFINITIONS
"Advertisement"
Advertisement means any audio or visual publicity, representation, endorsement or pronouncement made by
means of light, sound, smoke, gas, print, electronic media, internet or website and includes any notice,
circular, label, wrapper, invoice or such other documents.
Appropriate Laboratory
It means a laboratory or an organization as recognized by Central or State Government or established under

any law and maintained or financed by central or state government and is involved in test or analysing the
goods for checking their defects.
"Branch Office"
Branch office means— (i) any office or place of work described as a branch by the establishment; or (ii) any
establishment carrying on either the same or substantially the same activity carried on by the head office of
the establishment. [Section 2(3)]
"Central Authority"
Central Authority means the Central Consumer Protection Authority established under section 10.
Complaint

It means an allegation made in writing by the complaninant with a view to get a relief under the Act,
complaint may relate to:
Unfair contract, unfair trade practice, restrictive trade practice, goods having defects, services having
deficiency, excess price has been charged than displayed on product or was fixed under any law or fixed
under agreement, hazardous goods or service knowingly sold or offered without following safety standards,
claim relating to product liability lies against the manufacturer, seller or service provider.
"Complainant"
a consumer
any voluntary
consumer
numerous
association
consumers having
registered under
the same intrest
any law for the
time being in force
in case of death
if minor, his parent of a consumer,
or legal guardian his legal heir OR
legal
representative
) the Central
Government or
any State
Government
"Consumer”
A person:
a) Who buys any goods for a consideration which has been paid or promised or partly paid and partly
promised or under any deferred payment system, & includes any user of such goods other than the person
who buys the goods for consideration, & uses such goods with the permission of such person, but does not
include a person who buys the goods for resale or commercial purpose.
b) Who avails any services for a consideration which has been paid or promised or partly paid and partly
promised or under any deferred payment system, & includes any user of such services other then the
person who avails the services for consideration & uses such services with the permission of such person,
but does not include a person who avails the services for commercial purpose.
It has been clarified that the term commercial purpose does not include use by a consumer of goods bought
and used by him exclusively for the purpose of earning his livelihood by means of self-employment.
In case of Laxmi Engineering Works, V/s. P. S. G. Industrial Institute it was decided by Supreme Court that if
the commercial use is made by the purchaser himself for the purpose for earning his livelihood by means of
self-employment. Such purchaser will be called as a consumer.
If such person took assistance of one or two person to assist him in operating the machine he will still be a
consumer. But, if a person purchases a machine and appoints or engaged another person exclusively to
operate the machine then such person would not be a consumer.

Therefore, to be a ‘consumer’ under the Act:
(i) the goods or services must have been purchased or hired or availed of for consideration which has been
paid in full or in part or under any system of deferred payment, i.e. in respect of hire purchase transactions;
(ii) goods purchased should not be meant for re-sale or for a commercial purpose. Goods purchased by a
dealer in the ordinary course of his business and those which are in the course of his business to supply would
be deemed to be for re-sale; and
(iii) in addition to the purchaser(s) of goods, or hirer(s) or users of services, any beneficiary of such services,
using the goods/services with the approval of the purchaser or hirer or user would also be deemed a
‘consumer under the Act.
*A purchase of goods can be said to be for a ‘commercial purpose only if
a] the goods have been purchased for being used in some profit making activity on a large-scale, and
b] there is close and direct nexus between the purchase of goods and the profit-making activity.
CASE LAW:A Narasamma v. LIC of India.
In the given case it was held that
‘CONSUMER’ INCLUDES ANY BENEFICIARY OF SERVICE OTHER THAN THE PERSON WHO HIRES
THE SERVICES FOR CONSIDERATION.
Thus, the widow of the deceased policy holder is a consumer and is t entitled to be compensated
for the loss suffered by her.
“Goods “
Goods
every kind of movable property other than actionable claims and money; and includes stock and shares,
growing crops, grass and things attached to or forming part of the land, which are agreed to be severed
before sale or under the contract of sale.
CASE LAW: Morgan Stanley Mutual Fund v. Kartik Das
It was held that
APPLICATION FOR ALLOTMENT OF SHARES CANNOT CONSTITUTE GOODS. This is because it is

after allotment rights arise. Hence, at the stage of application there is no purchase of goods and
thus the purchaser cannot be called as the hirer of the service.
“Consumer dispute “
Means a dispute where the person against whom a complaint has been made, denies or disputes the
allegations contained in the complaint.
"Defect"

Maal Se Nai Ho Khush
Apne Sharrer Ko Karo Consumer Court Ki Taraf Push!!
It means any fault, imperfection or shortcoming in quality, quantity, potency, purity or standard of any goods
which is required to be maintained by the seller, under any law for time being force or under any contract,
express or implied or as is claimed by the trader in any manner whatsoever in relation to the goods. The
expression defective shall also be the part of definition.
It is clear from the above definition that non-fulfilment of any of the standards or requirements fixed under
any law or as claimed by the trader in relation to any goods fall under the scope of defect. Therefore,
violation of any of the provisions of enactments such as the Drugs & Cosmetics Act, 1950, , the Prevention of
Food Adulteration Act, 1955, the Indian Standards Institution (Certification Marks) Act, 1952 etc.
"Deficiency"
Deficiency means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of
performance which is required to be maintained by or under any law for the time being in force or has been
undertaken to be performed by a person as per contract or in any other manner and includes:
Any negligence, omission or any act which causes loss or injury or knowingly hiding information, which causes
loss to consumer.
Design
It means intended or known physical or material characteristics of the product and also includes the content
of the product and the result of manufacturing or other process used to produce the product.
"Direct selling"
Direct selling means marketing, distribution and sale of goods or provision of services through a network of
sellers, other than through a permanent retail location.
“E-Commerce"
E-Commerce means buying or selling of goods or services including digital products over digital or electronic
network.
"Electronic Service Provider"
Electronic service provider means a person who provides technologies or processes so that a product seller
can engage in advertising or selling goods or services to a consumer and includes any online market place or
online auction sites.
"Endorsement"
Kisi product ko promote karna kisi insan ya sanstha ke dwara:
Endorsement means any message, or verbal statement or demonstration or shwoing of the name, signature,
likeness or other identifiable personal characteristics of an individual (like virat kohli’s sign on Phillips
trimmer or showing of the name or seal of any institution or organisation, which makes the consumer to
believe that it reflects the opinion, finding or experience of the person making such endorsement,
endorsement is the term used in relation to advertisement.
"Establishment"
Includes an advertising agency, commission agent, manufacturing, trading or any other commercial agency
which carries on any business, trade or profession or any work in connection with any commercial activity,

trade or profession, or such other class persons including public utility entities in the manner as may be
prescribed.
"Express Warranty"
Express warranty means any material statement, confirmation or promise relating to a product or service
stating that it matches to such confirmation and includes sample or model of a product stating that the whole
of such product conforms to such sample or model.
"Goods"
Goods means every kind of movable property and includes "food" as defined in section 3(1)(j) of the Food
Safety and Standards Act, 2006.[Section 2(21)]
“Harm”
• damage to any property, other than the product itself

• personal injury, illness or death
• mental agony or emotional distress

• any loss of consortium (emotional harm suffered by family of victim)
or services or other loss resulting from a harm
• but SHALL NOT INCLUDE any harm caused to a product itself or any
damage to the property on account of breach of warranty conditions
or any commercial or economic loss, including any direct, incidental or
consequential loss relating thereto
"Injury"
Injury means any harm, illegally caused to any person, in body, mind or property.
"Manufacturer"
Manufacturer means a person who— (i) makes any goods or parts thereof; or (ii) assembles any goods or parts
thereof made by others; or (iii) puts or causes to be put his own mark on any goods made by any other
person.
"Mediation"
Mediation means the process by which a mediator mediates the consumer disputes.
"Member"
Member includes the President and a member of the National Commission or a State Commission or a District
Commission, as the case may be.

“Misleading Advertisements”
false description
gives a false
of the guarantee
product/service
purposely
MISLEADING conceals
ADVERTISMENTS important
information
likely to conveys a
representation
mislead that may
constitute unfair
consumers trade practice
“Persons”
"Product Liability"
Product liability means the responsibility of a product manufacturer or product seller, of any product or
service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or
by deficiency in services relating to such goods or service.
"Product liability action"

Product liability action means a complaint filed by a person before a District Commission or State Commission
or National Commission, as the case may be, for claiming compensation for the harm caused to him.
"Product manufacturer"
Product manufacturer means a person who makes any product or parts or assembles parts made by others or
puts his own mark on any products made by any other person or makes a product and sells, distributes,
leases, installs, prepares, packages, labels, markets, repairs, maintains such product or designs, produces,
fabricates, constructs or re-manufactures any product before its sale or being a product seller of a product, is
also a manufacturer of such product.
"Restrictive Trade Practice"
Restrictive trade practice means a trade practice which influences or manipulates price or its conditions of
delivery or influences flow of supplies in the market relating to goods or services in such a manner that
affects the benefits of consumer and is unjustified and includes:
(i) delay beyond the period agreed, by a trader for supply of such goods or in providing the services which has
increase or is likely to increase in the price or
(ii) any trade practice which requires a consumer to buy, hire or avail of any goods or, , services as condition
for buying, hiring or availing of other goods or services.
CONTRACT OF SERVICES & CONTRACT FOR SERVICES

JAHAN PAR CONTROL JADA HAI WO CONTRACT OF SERVICE,
JAHAN CONTROL KAM HAI WAHAN, CONTRACT FOR SERVICE!
The Supreme Court in the case of Indian Merchants Association v. V P Shantha, observed that a contract for
service implies a contract whereby one party undertakes to render services e.g. professional or technical
services to or for another in the performance and he is not subject to detailed direction and control but
exercises professional or technical skill and uses his own knowledge and discretion.
A contract of service on the other hand suggests relationship of master and servant and involves an obligation
to obey orders in the work to be performed and as to its mode and manner of performance. The
Parliamentary draftsman was well aware of this well-accepted distinction between ‘contract of service’ and
‘contract for services’ and had deliberately chosen the expression ‘contract of service’ instead of the
expression ‘contract for service’ in the exclusionary part of the definition of ‘service’, this being the reason
being that an employer could not be regarded as a consumer in respect of the services rendered by his
employee in pursuance of contract of employment.
− Contract of service suggest a long term relationship of master & servant or employer and employee.
− Under contract of service there is a higher degree of control on the service provider.
− Under contract of service the consumer decides the mode in which service will be provided.
− The definition of the word service does not include the word “contract of personal service”
− Hence if the employee does not work properly the employer cannot be treated as consumer.
− Contract for service this word suggest existence of services of professional nature for a specific period.
When a CA or CS gives advises to his clients he enters into contract for service with the clients.
− There is a lesser degree of control on the service provider in case of contract for service.
− When we go for a haircut, or buy a ticket of bus there is a contract for service.
"Spurious Goods"
Spurious Goods means such goods which are falsely claimed to be genuine.
"Trader"

Trader in relation to any goods, means a person who sells or distributes any goods for sale and includes the
manufacturer thereof, and where such goods are sold or distributed in package form, includes the packer.
“Unfair contract”
This contract can be between, manufacturer, trader, service provider as one party and the consumer as the
other party.
Through the contract there are changes in the rights of the consumer such as: asking excessive security
deposit for contractual obligations, imposing unreasonable penalty for non performance of contractual
obligation, refusing early repayment of debts (normally when banks refuse to accept prepayment of loans) ,
unilaterally ending the contract, assigning the contract to other party which can cause loss to consumer
without his consent, imposing unreasonable charge or obligation or condition on consumer.
"Unfair Trade Practice"
It means a practice in which, the seller in order to promote the sale, usage or supply of the goods or provision
of services, adopts any unfair method or unfair or deceptive practice including any of the following practices
• False representation of the goods and services stating that the goods or services have a particular
quality or standard, grade, style, model or sells second hand or renovated goods as new one or falsely
states that the goods or services have any affiliation, sponsorship or approval
• a false or misleading representation concerning the need for, or the usefulness of, any goods or
services
• gives to the public any warranty or guarantee of the performance, efficacy or length of life of a
product or of any goods that is not based on an adequate or proper test thereof, etc.
[if the seller or the person states that he is making the above claim on basis of some test that, then he shall
prove the validity of such test)
Also includes the following acts:
Makes a representation that shows that goods have some guarantee or warranty or promises to replace or
repair the goods for a specific time or till any specific result is achieved, but all such promises are misleading.
Materially misleads the public regarding price of the product or service (when compared with other sellers
who are providing the same kind of goods or service or gives false or misleading information about the other
sellers.
(for the above points the price mentioned on wrapper or container or displayed on a tag attached to goods or
contained in package shall be considered a s statement made to public)
Shows that the goods may be sold at bargain price ( price that is specified as bargain price or any statement
which creates an impression in public that the goods will be offered at bargain price basically a lower price
but it may result in charging different price from different customer)
Offering gifts or prizes, conduct of lottery without intention of providing them, any contest or lottery or game
of skill for promoting sale however if such contest or lottery or game of skill requires skill than it will not
amount to unfair trade practice. Withholding or delaying the results of contest or also amounts to unfair trade
practice.
Hoarding or destruction of goods to increase the price, selling or permitting to sell the goods that do not
match prescribed standard or not issuing a bill or memo, refusing to take back the defective goods and
making refund within period specified in the bill and if no period is specified than within 30 days.
Disclosing the confidential personal information of the clients unless such information is provided in
requirement of any law (medical stores, telecom companies, bank etc)

(jaisa saman bola vaisa na dena, jhoothe wade kar ke saman bechna, gupt jankari share karna, defective
goods vapas lene se mana karna, advt main galt jankari dena, yeh jhooth bolna kihamare saman manyata
prapt hai par asal main nai hai, jhoothe offers ya prize dene ka wada karna)
▪ Central Consumer Protection Council

Objective-
To advise the Central Government on the matters connected with the consumer protection and Promotion
of Consumer Rights.
Composition-
1 Chairman (Minister of Consumer Affairs of India)
Such other official or non official members appointed by Central Government.
At least one meeting of the council shall be held every year.
Time and place of the meeting will be decided by the chairman.
▪ State Consumer Protection Council

Objective-
To advise the State Government on the matters connected with the consumer protection and Promotion of
Consumer Rights.
Composition-
1 Chairman (Minister of Consumer Affairs of State)
Such other official or non official members appointed by State Government.
At least two meetings of the council shall be held every year.
▪ District Consumer Protection Council

Objective-
To promote & protect the rights of the Consumers within the District.
Composition-
1 Chairman (Collector of the District)
Such other number of members as considered appropriate by state government.
At least two meetings of the council shall be held every year.
Central Consumer Protection Authority
Section 10 of the Act authorises the Central Government to establish the Central Consumer Protection
Authority in order to regulate the matters relating to unfair practice, violation of consumer rights, misleading
advertisement which are against the interest of public and to enforce the rights of the consumer.
The Central Authority shall consist of a chief commissioner and such other number of members as decided by
the Central Government to discharge the functions of the Central Authority.
The head office of the Authority shall be at the national capital region and the Central Government may also
establish other regional offices.
Central Government may by a notification provide for rules relating to appointment, qualification, term of
office, salaries and conditions of service of the chief commissioner and the commissioner of the Central
Authority.
The Acts done by the Central Authority shall not be treated as invalid on the following grounds:
a. Any vacancy or defect in the constitution of the Central Authority or defect in the appointment of the
person acting as chief commissioner or commissioner.

B, Any irregularity in the procedure followed by Authority that affects the case.
APPOINTMENT OF OFFICERS, EXPERTS, PROFESSIONAL AND OTHER EMPLOYEES OF THE CENTRAL AUTHORITY
The Central Government shall provide for sufficient number of officers and employees as it thinks fit, in the
authority for discharge of the functions.
The salaries and allowances of the employees will be as decided by the Central Government.
The Central Government according to regulations may also appoint experts and professionals who have the
ability, integrity, standing and special knowledge in the area of consumer rights and welfare to assist the
authority in discharge of its functions.
Procedure of Central Authority
The Central Authority shall make regulation for dealing of business by Chief Commissioner and the
Commissioner.
The chief commissioner shall have the power of superintendence, control and administration. The chief
commissioner may delegate the administrative matters to any commissioner as he thinks fit.
Investigation Wing of Central Authority
➢ Purpose of conducting inquiry or investigation under this Act as may be directed by the Central
Authority.
➢ Headed by a Director General
➢ CG may appoint a Director General and such number of Additional, General, Joint , Deputy and
Assistant Director in such manner as may be prescribed. Who shall exercise their powers, and
discharge their functions, subject to the general control, supervision and direction of the Director-
General.
➢ The Director General may delegate all or any of his powers, as the case maybe.
➢ The inquiries or the investigations made by the Director General shall be submitted to the Central
Authority in such form, in such manner and within such time, as may be specified.
Powers of District Collector
On the complaint or reference made by the central authority or commissioner of regional office the district
collector may make enquiries in the matters given in the act (violation of the consumer rights etc.) and
submit the report to the central authority or commissioner of regional office.
Complaints to the Authority
Complaints under this act may be made in writing or in electronic mode to any one of the authorities, i.e
district collector or the commissioner of regional office.
Functions of Authority
Protect and enforce the rights of consumer and to stop the unfair trade practice and prevent misleading and
false advertisement.
The above point is the general function of the authority, however, without affecting the above general
power, the central authority may also:
Make enquiries or investigations, file complaints before destrict commissions, intervene in the proceedings
before district state or national commission, review the rights of the consumers, recommend international
best practices, promote research in the field of consumer rights, encourage NGOs to work with consumer
protection agencies, advice different ministries of Central and State Government, issue guidelines to prevent
unfair trade practice.

protect, promote and enforce the rights of consumers as a class
prevent unfair trade practices
prevent violation of consumers rights under this Act
ensure no person takes part in publication of any advertisment which is false or misleading
ensure that no false or misleading advertisement is made which contravenes any provision of the act or the rules or regulations
made thereunder.
Power of Central Authority to refer matter for investigation or to other Regulator
CONDUCT PRELIMINARY if it is satisfied that there after preliminary inquiry, the

ENQUIRY AS TO WHETHER exists a prima facie case, it Central Authority is of the
AFTER RECEIVING opinion that the matter is to be
THERE EXISTS ANY shall cause investigation to
COMPLAINT FROM THE CG dealt with by a Regulator
VIOLATION OR UNFAIR be made by the Director
OR ON ITS OWN MOTION established it may refer such
TRADE PRACTICES OR General or by the District
MISLEADING ADD. Collector. matter to the concerned
Regulator along with its report.
Power of Central Authority to recall goods (SECTION 20)
If e Central Authority on the basis of investigation may pass such order as may be necessary, including
recalling of goods or withdrawal of services which are dangerous, repayment of the prices of goods or services
so recalled and Discontinuation of unfair practices however the Central Authority shall give the person an
opportunity of being heard before passing an order under this section.
Power of Central Authority to issue directions and penalties against false or misleading advertisements
(SECTION 21)
Where the Central Authority is satisfied
that any advertisement is false or misleading and is prejudicial to the interest of any consumer or is in
contravention of consumer rights
it may, by order, issue directions to the concerned trader or manufacturer or endorser or advertiser or
publisher
to discontinue such advertisement or to modify the same in such manner and within such time as may be
specified in that order.
➢ it may, by order, impose on manufacturer or endorser a penalty which may extend to ten lakh rupees.
And for every subsequent contravention impose a penalty, which may extend to fifty lakh rupees.

➢ it may, by order, prohibit the endorser of a false or misleading advertisement from making
endorsement of any product or service for a period which may extend to one year. And for every
subsequent contravention, prohibit for a period which may extend to three years.
No endorser shall be liable to a penalty, if he has exercised due diligence to verify the veracity of the claims
made in the advertisement.
No person shall be liable to such penalty if he proves that he had published or arranged for the publication of
such advertisement in the ordinary course of his business.
The Central Authority shall give the person an opportunity of being heard before an order under this section is
passed.
Search and seizure (SECTION 22)
After preliminary inquiry the Director General or any other officer authorised by him, or the District Collector
if he believes on reasonable ground that any person has violated any consumer rights or committed unfair
trade practice or issues any false or misleading advertisement shall enter at any reasonable time into any such
premises and search for any document or record or article or any other form of evidence and seize such
document, record, article or such evidence and will make a note of seized records and can also require any
person to produce any record, register or other document or article as per CRPC, 1973
Every document, record or article seized or produced shall be returned within a period of twenty days of the
date of such seizure or production.
Where any article seized are subject to speedy or natural decay, the Director General or such other officer
may dispose of the article in such manner as may be prescribed.
If the complaint alleges a defect in the goods which cannot be determined without proper analysis or test of
the goods then:
REPORT ITS FINDINGS THEREON

REFER THE SAMPLE SO SEALED TO THE DISTRICT COMMISSION
OBTAIN A SAMPLE SEAL AND AUTHENCIATE IT TO THE APPROPRIATE WITHIN A PERIOD OF FORTY-FIVE
LABORATORY DAYS OR SUCH EXTENDED
PERIOD
Vexatious Search
The Director General or any other officer, exercising powers under section 22, who knows that there are no
reasonable grounds for so doing, and then too, searches, any premises or seizes any record, register or other
document or article, shall, for every such offence, be punished with imprisonment for a term which may
extend to one year, or with fine which may extend to ten thousand rupees or with both.
Redressal Forums Under the Act

BASIS DISTRICT STATE NATIONAL
Established by SG SG CG
(a) A President; and (a) A President; and (a) A President; and

(b) not less than two (b) not less than four (b) not less than four
and not more than or not more than and not more than
such number of such number of such number of
Composition
members as may be members as may be members as may be
prescribed, in prescribed in prescribed.
consultation with the consultation with the
Central Government. Central Government.
Complaints where Complaints where Complaints where

the value of the the value of the the value of the
goods or services goods or services goods or services
paid as consideration paid or unfair paid or unfair
does not exceed 50 contracts where contracts where
lacs rupees. consideration, consideration
exceeds rupees 50 exceeds rupees 2
Jurisdiction lacs, but does not crore. [Further,
exceed rupees 2 where the Central
crore. [Provided that Government deems
where the Central it necessary so to do,
Government deems it may prescribe such
it necessary so to do, other value, as it
it may prescribe such deems fit.]
other value, as it
deems fit.]
TO the State To the National To the Supreme

Commission on the Commission within a Court within a period
grounds of facts or period of thirty days of thirty days from
law within a period from the date of the the date of the
of forty-five days order. National order. Provided that
from the date of the Commission the Supreme Court
order. State may entertain an
Commission may shall not entertain appeal after the
entertain an appeal the appeal after the expiry of the said
after the expiry of expiry of the said period of thirty days
the said period of period of thirty days if it is satisfied that
Further appeal
forty-five days, if it unless it is satisfied there was sufficient
is satisfied that that there was cause for not filing it
there was sufficient sufficient cause for within that period.
cause for not filing it not filing it within
within that period. that period. Deposit 50% of the
amount.
Deposit 50% of the Deposit 50%of the
amount. amount.

The COPR provides a platform to resolve the consumer disputes through the various forums or consumer
courts formed under the Act. The benefits of Consumer Forums include:
1) Fast settlement of Disputes.
2) Time Saving
3) Cost saving
4) Mental Relief
5) Lesser formalities & expertise of consumer forums on consumer disputes
District Commission
Established by State Government for each of the districts in the state.
Constitution:
1 President +
2 Not less than two and not more than such number of members as may be prescribed, in consultation with
the Central Government.
Qualification and the manner of appointment will be decided by Central Government by Making Rules.
Jurisdiction of the district forum

Monitory limits
That means if the value of goods or services does not exceed Rs. 50 lacs=== complaint can be made with the
District Forum.
Territorial limits
In the district forum in which cause of action arises wholly or in part or the defendant actually resides or if
there are more then one defendant than at the district commission or forum where any of defendant resides
or, carries on a business or has a branch office or works for gain or where complainant resides or works for
gain.
In the case of Dyanavox Electronic Private Limited Vs. Rampuriya Jain Collage it was held that if a particular
machinery is supplied to a particular place and installed at that place, such place can be considered as a
place where cause of action arose.
The District Commission shall ordinarily function in the district headquarters and may perform its functions at
such other place in the district, as the State Government may, in consultation with the State Commission,
notify in the Official Gazette.
STATE COMMISSION
Established by the State Government + functions at state capital
Constitution:
1 President
+
Not less than four or not more than such number of members as may be prescribed in consultation with the
Central Government.
Qualification and the manner of appointment will be decided by Central Government by Making Rules.
Jurisdiction of the state commission

Monitory limits - Rs 50 lacs to 2 crores

That means if the value of goods or services or unfair practice when goods or services price, is more than Rs.
50 lacs to 2 crore complaints can be made with the State Commission.
Territorial limits
Complaint will be filed in the state commission in which (state) cause of action arises wholly or in part or the
defendant actually resides or if there are more than one defendant than at the state commission where any of
defendant resides or, carries on a business or has a branch office or works for gain or where complainant
resides or works for gain.
The state Commission can also call for records of any case which is pending before any district forum or any
case that has been decided by the district forum within the state if the state commission is of the opinion
that the district forum has acted in a wrongful manner.
Powers and authority of the State Commission may be exercised by Benches of State Commission, and a Bench
may be constituted by the President with one or more members in the opinion of President. It may be noted
that the senior-most member shall preside (matlab president banega bench ka) over the Bench.
Members of a Bench differ in opinion on any point, the points shall be decided as per opinion of the majority,
but if the members are equally divided, they will state point of difference, and refer to the President who
will hear the points himself or refer the case to one or more of the other members and such point or points
shall be decided according to the opinion of the majority of the members who have heard the case, including
those who first heard it.
The President or the other members, as the case may be, shall give opinion on the point or points so referred
within a period of one month from the date of such reference.
State Commission may review any of the order passed by it if there is an error in order, either on its own or
on an application made by any of the parties within thirty days of such order.
NATIONAL COMMISSION
Established by: Central Government + Functions at National Capital Region, may also function at other places
if specified by Central Governemnt.
Constitution:
1 President
+
Not less than four and not more than such number of members as may be prescribed
Jurisdiction of the national commission

Monitory limits
When the value of goods or services or unfair contract value exceeds Rs. 2 crore.
National commission also entertains appeal against the orders of state commission and Central Authority.
Territorial limits
Whole of India
The National Commission can also call for records of any case which is pending before any State Commission
or any case that has been decided by the State Commission if the National commission is of the opinion that
the State Commission has acted in a wrongful manner.
Powers and authority of the National Commission may be exercised by Benches of National Commission, and a
Bench may be constituted by the President with one or more members in the opinion of President. It may be
noted that the senior-most member shall preside (matlab president banega bench ka) over the Bench.

If Members of a Bench differ in opinion on any point, the points shall be decided as per opinion of the
majority, but if the members are equally divided, they will state point of difference, and refer to the
President who will hear the points himself or refer the case to one or more of the other members and such
point or points shall be decided according to the opinion of the majority of the members who have heard the
case, including those who first heard it.
The President or the other members, as the case may be, shall give opinion on the point or points so referred
within a period of one month from the date of such reference.
National Commission may review any of the order passed by it if there is an error in order, either on its own
or on an application made by any of the parties within thirty days of such order.
Central Government may, by notification, make rules qualifications, appointment, term of office, salaries and
allowances, resignation, removal and other terms and conditions of service of the President and members of
the National Commission.
President and members of the National Commission shall hold office for as given in rules but not exceeding
five years from the date on which he enters upon his office and shall be eligible for reappointment.
It may be noted that President or members shall not hold office after he has attained age which shall not
exceed, –
(a) in the case of the President, the age of seventy years;
(b) in the case of any other member, the age of sixty-seven years.
Where an order is passed by the National Commission ex parte, the aggrieved party may make an application
to the Commission for setting aside such order.
APPEAL PROVISIONS
Aggrieved by the orders issued by the District Commission, appeal petition may be filed before State
Commission on ground of facts (evidences) or law (stating that law was ignored or not followed) within 45
days from the date of orders + 50% of the amount specified by District Commission has to be deposited with
State Commission + No appeal against order passed in Mediation.
Aggrieved by the orders issued by the State Commission, appeal petition may be filed before National
Consumer Commission within 30 days from the date of orders + 50% of the amount specified by State
Commission has to be deposited with National Commission + No appeal against order passed in Mediation +
Appeal only when the case involves substantial questions of law and it shall be stated in the appeal that case
involves substantial question of law+ If National commission is satisfied that case involves substantial question
of law than it shall formulate such question and hear appeal on that matter + it can also hear appeal on other
matters if during proceedings it is satisfied that other question related to substantial law is also involved in
the case but not stated in the appeal + An appeal may lie to the National Commission from an order passed ex
parte by the State Commission.
State Commission or the National Commission, as the case may be, shall be heard as expeditiously as possible
and every endeavour shall be made to dispose of the appeal within a period of ninety days from the date of
its admission, if appeal is not disposed of in 90 days the state or national commission must record reasons in
writing, adjournment can be granted during the proceedings only when sufficient cause has been shown and
commission has recorded reasons for adjournment.

Any person, aggrieved by an order made by the National Commission may prefer an appeal to the Supreme
Court within a period of thirty days from the date of the order + 50% of the amount specified by National
Commission has to be deposited with Supreme Court.
Note: Supreme Court + State Commission + National Commission may entertain an appeal after the expiry of
the said period (30 or 30 or 45 days) if they are satisfied that there were sufficient cause for not filing it
within required period.
District Consumer Disputes Redressal Commission
Who can file a complaint?
(a) The consumer,—
(i) to whom such goods are sold or delivered or agreed to be sold or delivered or such service is
provided or agreed to be provided; or
(ii) (ii) who alleges unfair trade practice in respect of such goods or service;
(b) any recognised consumer association, whether the consumer to whom such goods are sold or delivered or
agreed to be sold or delivered or such service is provided or agreed to be provided, or who alleges unfair
trade practice in respect of such goods or service, is a member of such association or not;
(c) one or more consumers, where there are numerous consumers having the same interest, with the
permission of the District Commission, on behalf of, or for the benefit of, all consumers so interested; or
(d) The Central Government, the Central Authority or the State Government, as the case may be.
IT MAY BE NOTED THAT THE COMPLAINT MAY BE FILED ELECTRONICALLY IN PRESCRIBED MANNER.
Proceedings before District Commission
Note: The proceedings before district commission will be held by President + One member, both sitting
together.
1. Complaint will be made to the district forum in prescribed form along with the prescribed fees.
2. Within 21 days of receiving the complaint the district commission decides whether to accept or reject the
complaint.
3. If the district commission does not communicate anything within 21 days of receiving the complaint it shall
be deemed that the commission has accepted the complaint.
4. If the district commission rejects any complaint then it shall provide the opportunity of being heard to the
opposite party.
5. After admitting the complaint the district commission will send a copy of complaint, within twenty-one
days from the date of its admission to the opposite party asking the opposite party to give his version of the
case within a period of thirty days or such extended period not exceeding fifteen days (means total 45 days)
6. if the opposite party denies or dispute the allegation or does not give any reply within the (30 or 45 days
period) period as specified above the district commission will settle the case in following manner:
If Complaint relates to defect in Goods If the compliant relates to service or in respect of

goods for which the procedure discussed in the beside
table can not be followed (goods for which no test is

required)
If the complaint alleges a defect in the goods which The district commission will pass the decision on basis
cannot be determined without proper analysis or test evidences given by the parties and if the opposite
of the goods sample will be taken, will be sealed and party does not present his case within time
authenticated and will be sent to the Approved prescribed by district commission then the
Laboratory. commission can also pass ex parte orders.
The Laboratory will report within a period of forty- If the complainant does not appear for hearings then
five days of the receipt of the reference or within the district commission will pass orders on merits of
such extended period as may be granted to it. the case (by considering all the facts of the case)
The complainant has to pay fees toward the Appropriate order will be passed by district
laboratory expenses. commission after providing opportunity of being
heard to the parties.
The appropriate laboratory then carries out the test
and submits a report, which is then forwarded to the
opposite party with suitable remarks.
If any of the parties do not accept the laboratory

report or the methods adopted by laboratory then,
they can submit their objections in writing regarding
the report of laboratory.
After that fresh report will be received from

laboratory and opportunity of being heard will be
given to both the parties.
Appropriate order will be passed by district

commission.
Notes:
1. The district commission shall try to dispose the case at the earliest and within 3 months from the date of
receipt of the notice by the opposite party, if the goods do not require testing and within 5 months if the
goods require testing + if more than 3 or 5 months are taken, resons are to be recorded in writing + no
adjournment of proceeding shall be done unless sufficient cause is shown and after recording the reasons in
writing.
2. The district commission may also pass interim orders.
3. the proceedings before district commission can not be challenged on the ground that principal of natural
justice have not been followed + the district commission can also call for records form electronic service
provider.
4. District commission shall be deemed to be a criminal court as per CRPC, 1973 and the proceedings before it
shall be considered as judicial proceedings as per Indian Penal Code 1860.

REFERENCE TO MEDIATION-(SECTION 37)
at the first hearing of the complaint after its admission, or at any later stage, if it appears to the District
Commission that there exists elements of a settlement which may be acceptable to the parties, except in
such cases as may be prescribed, it may direct the parties to give in writing, within five days, consent to
have their dispute settled by mediation
Where the parties agree District Commission shall, within five days of receipt of such consent, refer the
matter for mediation.
Findings of District Commission
If the District Commission is satisfied that the goods complained against suffer from any of the defects, or any
unfair trade practice has been done, or claims for compensation under product liability are proved, it shall
issue an order to the opposite party asking him to do one or more of the following, namely:—
to remove the defect pointed out by the appropriate laboratory from the goods in question; to
remove the defects in goods or deficiencies in the services in question;
to replace the goods with new goods of similar description which shall be free from
any defect;
not to offer the hazardous or unsafe goods for sale;
to discontinue the unfair trade practice or restrictive trade practice and not to
repeat them;
to pay such sum as may be fixed by it, if it is of the opinion that loss or injury has been
suffered by a large number of consumers who are not identifiable conveniently. it may
be noted that the minimum amount of sum so payable shall not be less than twenty-
five per cent. of the value of such defective goods sold or service provide
to return to the complainant the price, or, as the case may be, the charges paid by the
complainant along with such interest

Every order made by the District Commission shall be signed by the President and the member who conducted
the proceeding.
If there exists any difference of opinion among the President and members, they shall state the point
or points on which they differ and refer the same to another member for hearing on such point or
points and the opinion of the majority shall be the order of the District Commission. However, the
other member shall give his opinion on such point or points referred to him within a period of one
month from the date of such reference.
Review by District Commission in Certain Case Section 40 empowers the District Commission to review
any of the order passed by it if there is an error apparent on the face of the record, either of its own
motion or on an application made by any of the parties within thirty days of such order.
Procedures for Service of Notice:
Notices can be delivered through speed post, registered post or courier service, or electronic means approved
by district commission the State Commission or the National Commission, as the case may be.
If the party to whom notice is to be served refuses to take delivery or refuses to accept the notice by any
other means when tendered or transmitted to him, the District Commission or the State Commission or the
National Commission, as the case may be, shall declare that the notice has been duly served on the opposite
party or to the complainant, as the case may be.
The notice shall be deemed to be sufficiently served, if addressed in the case of the opposite party, to the
place where business or profession is carried on, and in case of the complainant, the place where such person
actually and voluntarily resides.
Experts to Assist National Commission or State Commission
The National Commission or the State Commission, as the case may be, on an application by a complainant or
in any other manner, is of the opinion that case involves the larger interest of consumers, it may direct any
individual or organisation or expert to assist
Finality of Orders: every order of a District Commission or the State Commission or the National
Commission, as the case may be, shall, if no appeal has been preferred against such order under the
provisions of this Act, be final.
A complaint shall not be admitted unless it is filed within two years from the date on which the cause of
action has arisen.
It may be entertained after the period specified above, if the complainant satisfies the District
Commission, the State Commission or the National Commission, as the case may be, that he had sufficient
Penalty for Noncompliance of Order:
cause for not filing the complaint within such period.

Whoever fails to comply with any order made by the District Commission or the State Commission or the
National Commission, shall be punishable with imprisonment for a term which shall not- be less than one
month to three years, or with fine, which shall not be less than twenty-five thousand rupees to one lakh
rupees, or with both.
Appeal against Order Passed under Section 72
Where an order is passed under section 72(1), an appeal shall lie, both on facts and on law from— (a) the
order made by the District Commission to the State Commission;
(b) the order made by the State Commission to the National Commission; and
(c) the order made by the National Commission to the Supreme Court.
Every appeal shall be preferred within a period of thirty days from the date of order. However, an appeal can
be entertained beyond 30 days, if there exists any sufficient cause.
Appeal shall not lie before any court, from any order of a District Commission or a State Commission or the
National Commission, as the case may be.
MEDIATION
Establishment of Consumer Mediation Cell (section 74) :
• The State Government to establish a consumer mediation cell to be attached to each of the District
Commissions and the State Commissions of that State.
• Further the Central Government also empowers to establish a consumer mediation cell to be attached
to the National Commission and each of the regional Benches.
It shall maintain:
(a) a list of empanelled mediators; (b) a list of cases handled by the cell;
(c) record of proceeding; and (d) any other information as may be specified by regulations.
It shall submit a quarterly report to the District Commission, State Commission or the National Commission to
which it is attached, in the manner specified.
Empanelment of Mediators
The National/ State/ District shall prepare a panel of the mediators to be maintained by the consumer
mediation cell attached to respective forums, on the recommendation of a selection committee consisting of
the President and a member of that Commission.
The Panel shall be valid for a period of five years, and the empanelled mediators shall be eligible to re-
empanelment for another term, subject to such conditions as may be specified by regulations.
Nomination of Mediators from Panel (Section 76)
The District Commission, the State Commission or the National Commission shall, while nominating any person
from the panel of mediators referred to in section 75, consider his suitability for resolving the consumer
dispute involved
Duty of Mediator to Disclose Certain Fact (Section 77)

It shall be the duty of the mediator to disclose any nature of interest that may arise on account of being the
mediator for example if he happens to be relative of some party to dispute he must disclose it.
Replacement of Mediator in Certain Cases (Section 78)
Where commissions or forums are satisfied, on the information given by the mediator or on the information
received from any person including parties to the complaint and after hearing the mediator, it shall replace
such mediator by another mediator.
Procedure for Mediation (Section 79)
Where a consumer dispute is referred for mediation, the mediator nominated by such Commission shall
consider the rights and obligations of the parties, and shall be guided by the principles of natural justice while
doing mediation. The mediator so nominated shall complete mediation within such time and in such manner
as may be specified by regulations.
Settlement through Mediation (Section 80(1))
If an agreement is reached between the parties with respect to all of the issues involved in the consumer
dispute or with respect to only some of the issues, the terms of such agreement shall be reduced to writing
accordingly, and signed by the parties to such dispute or their authorised representatives.
The mediator shall then prepare a settlement report of the settlement and forward the signed agreement
along with such report to the concerned Commission.
Where no agreement is reached between the parties or the mediator is of the opinion that settlement is not
possible, he shall prepare his report accordingly and submit the same to the concerned Commission.
Recording Settlement and Passing of Order
The District Commission or the State Commission or the National Commission, as the case may be, shall,
within seven days of the receipt of the settlement report, pass suitable order recording such settlement of
consumer dispute and dispose of the matter accordingly
Where the consumer dispute is settled only in part, record settlement of the issues which have been so
settled and continue to hear other issues involved in such consumer dispute.
Where the consumer dispute could not be settled by mediation, the District Commission or the State
Commission or the National Commission, as the case may be, shall continue to hear all the issues involved in
such consumer dispute.
PRODUCT LIABILITY (CHAPTER VI, SECTION 82-87)
It shall apply to every claim for compensation under a product liability action by a complainant for any harm
caused by a defective product manufactured by a product manufacturer or serviced by a product service
provider or sold by a product seller.
Product Liability Action (SECTION 83)
May be brought by a complainant against a product manufacturer or a product service provider or a product
seller, as the case may be, for any harm caused to him on account of a defective product.
Liability of Product Manufacturer Section 84
A product manufacturer shall be liable in a product liability action, if—

(a) The product contains a manufacturing defect; or
(b) The product is defective in design; or
(c) There is a deviation from manufacturing specifications; or
(d) The product does not conform to the express warranty; or
(e) The product fails to contain adequate instructions of correct usage to prevent any harm or any warning
regarding improper or incorrect usage.
A PRODUCT MANUFACTURER SHALL BE LIABLE IN A PRODUCT LIABILITY ACTION EVEN IF HE PROVES THAT HE
WAS NOT NEGLIGENT OR FRAUDULENT IN MAKING THE EXPRESS WARRANTY OF A PRODUCT.
Liability of Product Service Provider Section85
A product service provider shall be liable in a product liability action, if—
(a) the service provided by him was faulty or imperfect or deficient or inadequate in quality, nature or
manner of performance which is required to be provided by or under any law for the time being in force, or
pursuant to any contract or otherwise; or
(b) There was an act of omission or commission or negligence or conscious withholding any information which
caused harm; or
(c) The service provider did not issue adequate instructions or warnings to prevent any harm; or
(d) The service did not conform to express warranty or the terms and conditions of the contract.
Liability of Product Sellers Section 86
A product seller who is not a product manufacturer shall be liable in a product liability action, if— (a) he has
exercised substantial control over the designing, testing, manufacturing, packaging or labelling of a product
that caused harm; or
(b) He has altered or modified the product and such alteration or modification was the substantial factor in
causing the harm; or
(c) he has made an express warranty of a product independent of any express warranty made by a
manufacturer and such product failed to conform to the express warranty made by the product seller which
caused the harm; or
(d) the product has been sold by him and the identity of product manufacturer of such product is not known,
or if known, the service of notice or process or warrant cannot be effected on him or he is not subject to the
law which is in force in India or the order, if any, passed or to be passed cannot be enforced against him; or
(e) He failed to exercise reasonable care in assembling, inspecting or maintaining such product or he did not
pass on the warnings or instructions of the product manufacturer regarding the dangers involved or proper
usage of the product while selling such product and such failure was the proximate cause of the harm.
Exceptions to Product Liability Action

A product liability action cannot be brought against the product seller if, at the time of harm, the product
was misused, altered, or modified.
In any product liability action based on the failure to provide adequate warnings or instructions, the product
manufacturer shall not be liable, if—
(a) The product was purchased by an employer for use at the workplace and the product manufacturer had
provided warnings or instructions to such employer;
(b) the product was sold as a component or material to be used in another product and necessary warnings or
instructions were given .
(c) the product was one which was legally meant to be used or dispensed only by or under the supervision of
an expert or a class of experts and the product manufacturer had employed reasonable means to give the
warnings or instructions for usage of such product to such expert or class of experts; or
(d) The complainant, while using such product, was under the influence of alcohol or any prescription drug
which had not been prescribed by a medical practitioner.
A PRODUCT MANUFACTURER SHALL NOT BE LIABLE FOR FAILURE TO INSTRUCT OR WARN ABOUT A
DANGER WHICH IS OBVIOUS OR COMMONLY KNOWN TO THE USER OR CONSUMER OF SUCH PRODUCT
OFFENCES AND PENALTIES
• Penalty for Noncompliance of Direction of Central Authority (SECTION 88)

Whoever, fails to comply with any direction of the Central Authority shall be punished with
Imprisonment for a term which may extend to six months or with fine which may extend to twenty
lakh rupees, or with both.
• Punishment for False or Misleading Advertisement (SECTION 89)
Any manufacturer or service provider who causes a false or misleading advertisement to be made
which is prejudicial to the interest of consumers shall be punished with imprisonment for a term which
may extend to two years and with fine which may extend to ten lakh rupees; and for every subsequent
offence, be punished with imprisonment for a term which may extend to five years and with fine
which may extend to fifty lakh rupees.
Compounding of Offences
• Any offence punishable under sections 88 and 89, may, either before or after the institution of
the prosecution, be compounded, on payment of such amount as may be prescribed.
• Such sum shall not, in any case, exceed the maximum amount of the fine, which may be imposed
under this Act for the offence so compounded.
• Central Authority or any officer as may be specially authorised by him in this behalf, may
compound offences.
• Nothing in this section shall apply to person who commits the same or similar offence, within a
period of three years from the date on which the first offence, committed by him, was
compounded.
• Any second or subsequent offence committed after the expiry of a period of three years from
the date on which the offence was previously compounded, shall be deemed to be a first offence.
• Where an offence has been compounded, no proceeding or further proceeding shall take place.

• Punishment for Manufacturing for Sale or Storing, Selling or Distributing or Importing Products
Containing Adulterant
Whoever, by himself or by any other person on his behalf, manufactures for sale or stores or sells or
distributes or imports any product containing an adulterant shall be punished, if such act—
DOES NOT DOES RESULT IN

RESULTS IN DEATH
RESULT IN ANY INJURY
INJURY
NOT AMOUNTING TO
AMOUNTING TO GRIEVOUS HURT
GRIEVOUS HURT
IMPRISONMENT FOR A
TERM WHICH MAY IMPRISONMENT FOR A TERM
EXTEND TO SIX MONTHS WHICH SHALL NOT BE LESS THAN
AND WITH FINE WHICH SEVEN YEARS, BUT WHICH MAY
MAY EXTEND TO ONE EXTEND TO IMPRISONMENT FOR
LAKH RUPEES; LIFE AND WITH FINE WHICH SHALL
NOT BE LESS THAN TEN LAKH
RUPEES.
IMPRISONMENT FOR A IMPRISONMENT FOR A

TERM WHICH MAY TERM WHICH MAY EXTEND
EXTEND TO ONE YEAR TO SEVEN YEARS AND
AND WITH FINE WHICH WITH FINE WHICH MAY
MAY EXTEND TO THREE EXTEND TO FIVE LAKH
LAKH RUPEES RUPEES
Notwithstanding the punishment, the court may, in case of first conviction, suspend any licence issued
to the person referred to in that sub-section, under any law for the time being in force, for a period up
to two years, and in case of second or subsequent conviction, cancel the licence.
(a) "Adulterant" means any material including extraneous matter which is employed or used for making
a product unsafe;
(b) "Grievous hurt" shall have the same meaning as assigned to it in section 320 of the Indian Penal
Code.

• Punishment for Manufacturing for Sale or for Storing or Selling or Distributing or Importing Spurious
Goods.
Whoever, by himself or by any other person on his behalf, manufactures for sale or stores or sells or
distributes or imports any spurious goods shall be punished, if such act
INJURY NOT
INJURY RESULTING IN RESULTS IN THE DEATH
AMOUNTING TO
GRIEVOUS HURT OF A CONSUMER
GRIEVOUS HURT
Imprisonment for a term imprisonment for a term

which may extend to which shall not be less
Imprisonment for a term
one year and with fine than seven years, but
which may extend to
which may extend to may extend to
seven years and with
three lakh rupees imprisonment for life
fine which may extend
to five lakh rupees and with fine which
shall not be less than
ten lakh rupees.
Notwithstanding the punishment, the court may, in case of first conviction, suspend any licence issued to the
person referred to, under any law for the time being in force, for a period up to two years, and in case of
second or subsequent conviction, cancel the licence.
Measures to Prevent Unfair Trade Practices in E-Commerce, Direct Selling (SECTION 94)
The Central Government to take such measures in the prescribed manner for the purposes of preventing
unfair trade practices in e-commerce, direct selling and also to protect the interest and rights of consumers.
Protection of Action Taken in Good Faith (SECTION 98)
No suit, prosecution or other legal proceeding shall lie against the Presidents and members of the District
Commission, the State Commission and the National Commission, the Chief Commissioner, the Commissioner,
any officer or employee and other person performing any duty under this Act, for any act which is in good
faith done or intended to be done in pursuance of this Act or under any rule or order made thereunder.

Act not in derogation of any other law (SECTION 100)
The provisions of Consumer Protection Act, 2019 shall be in addition to and not in derogation of the provisions
of any other law for the time being in force.
NOTES
1. When the gold in a bank locker is lost by the banker it will be considered as a deficiency in service.
2. The National commission exercises an administrative control over the state commission in the matter
relating to calling of information, periodical returns, issuing of directions regarding following of common
procedures across all the state commissions.
3. In the same manner the state commission exercises an administrative control over the district forums.
4. If any trader or any person against whom a complaint has been received does not obey the instructions of
the district forum or national commission or the state commission then such defaulting trader may be
liable to imprisonment that may extend to 1 month to 3 years or fine up to Rs. 2000 – 10000 or both.
5. When the Bank who was authorized to pay the insurance premium to insurance company failed to get the
policy renewed & the insured did not receive the insurance claim it will not be considered as deficiency in
service.
6. When a person receives treatment from the government hospital for free he can not be called a consumer
under the act and he also can not claim that the taxes paid by him are consideration for the services
provided by the Hospital.
7. If wrong medicine is given by the hospital due to which an infant dies will be considered as a deficiency in
service.
8. If any child drowns in the swing pool maintained by the school when free swimming facilities were
provided to the students & coach was also kept in this case the school will be held responsible for not
providing sufficient safety mechanisms.
9. If a lady falls from the passage between two bogies in the Trains & dies it will be considered as case of
deficiency in service & railway will be liable to compensate.
10. If farmer purchased a tractor to till his land & gave the same tractor on hire in the idle time he will be
considered as a consumer.
❑ Bhupendra Jang Bahadur Guna v/s Regional Manager and others

In this case, it was decided that when farmer purchased a tractor for tilling his land and he lends the
tractor during free time when the tractor is not in use, he will be called as consumer.
Que: Ramesh purchased a tractor from Mahi Limited for tilling the land but he used it during idle time for
transportation of agricultural produce on hire. Some defects were developed in the engine of the tractor.
He complained to Mahi Limited, but all in vain. Then he filed a suit in Consumer Dispute Redressal Forum
for damages caused by the defects. Mahi Limited pleaded that Ramesh is not a 'consumer' within the
definition of section 2(1) d) of the Consumer Protection Act, 1986, as he is using the tractor for
commercial purposes. Whether Ramesh will succeed in his case ? Refer to relevant provisions of Law in
support of your answer with reference to case laws, if any?
❑ A. Narsamma v/s LIC of India
In this case, it was decided that widow of insured is also a consumer and is entitled for benefits.
❑ Laxmiben Laxmichand Shah v/s Sakerben Kanji Chandan and others

In this case, it was decided that if the owner of the house does not provide the service of cleaning,
maintenance and repairing then the tenant cannot approach the court. Lessee cannot be considered as
consumer.

❑ Morgan Stanley Mutual Funds v/s Karthik Das
In this case, it was decided that the person who has applied for shares cannot be called as consumer till
the time the shares are allotted to him.
❑ State of Haryana v/s Santra

In this case, it was decided that the government hospital and medical officer will be responsible in case
the family operation fails.
❑ Alex J Rebello v/s Vice Chancellor Bangalore University

In this case, it was decided that students who are appearing for exams conducted by university cannot be
called as consumer when their answer sheets are evaluated by the universities.
❑ Divisional Manager, LIC of India v/s Bhavanam Srinivas Reddy

In this case, it was decided that failure to settle insurance claim on time amounts to deficiency in service
on the part of insurance company.
❑ Punjab National Bank v/s KB Shetty

In this case, it was decided that if the gold kept in the bank locker is lost, it mounts to deficiency in
service.
❑ Mrs. Anumati v/s Punjab National Bank

In this case, it was decided that if the bank adjusts the fixed deposit against the loan taken by consumer,
it does not amount to deficiency in service.
❑ Dainik Rail Yatri Singh v/s General Manager Northern Railway

In this case, it was decided that it railways cancel the train due to violence in order to protect passengers
as well as for its own safety, it does not amount to deficiency in service.
❑ N. Prabhakaran v/s General Manager Southern Railway

In this case, it was decided that failure of railways in providing cushion seats in first class apartment and
to check unauthorized persons from entering and occupying the first class compartment is a deficiency in
service.
❑ Union Bank of India v/s Seppo Rally

In this case, it was decided that if the bank could not remit the guaranteed amount outside India due to
failure or negligence and delay of foreign bank, it does not amount to deficiency in service.
❑ Indian Airlines v/s Dr. Jiteshwar Ahir

In this case, it was decided that when a person moves towards the airplane door and finds that stepladder
is attached to door but before he actually puts his entire weight on staircase, the ladder was suddenly
removed as a result of which he falls down on the ground and sustains injury. It was considered as
deficiency in service.
❑ Ranveet Singh Bagga v/s KLM Royal Ducth Fintimes

A person booked a flight from New Delhi to New York and his passport and visa were verified and approved
in Ne Delhi. However, at Amsterdam airport the authorities again verified his passport and visa and due to
which the person missed his flight. The visa of such person contained photocopy of actual photograph. The
supreme court decided that there is no deficiency in service on the part of airlines.
❑ Poonam Verma v/s Ashmit Patel

In this case, it was decided that when a homeopathic doctor gives allopathy medicines due to which the
patient dies, it amounts to deficiency in service.

❑ Gopi Ram Goyal and others v/s National Heart Institute
In this case, it was decided that if the complainant fails to prove negligence on the part of doctors, it is
not deficiency in service.
❑ Union of India v/s Nathmal Hansaria

In this case, a lady travelling by train fell down from running train from the passage between two
compartments, it was considered as deficiency in service.
❑ Harshad J Shah v/s LIC of India

An insurance agent collected the premium from the policy holder but deposited the amount of premium
after 3 months. In the mean time, the policy holder died. The insurance company rejected the claim. It
was decided/held by the court that there is no deficiency in service as the insurance agent did not have
any authority to collect any premium.
❑ National Insurance Company v/s Seema Malhotra

A person issued a cheque for deposit of car insurance premium but the cheque was dishourned for want of
funds. By the time, car met with an accident, the insured owner got killed and the car was badly
damaged. Widow claimed the insurance which was rejected by insurance company. The court decided
that there is no deficiency in service.
❑ Shreedharan Nair v/s Registrar, University of Kerala

Failure to provide degree certificate on completion of course by the university on the ground that
qualifying exam is not recognized by the university, it is decided in service.
❑ Isabella Thoburn College v/s Ms. Fatima Effendi

Non refund of admission fees is not deficiency in service on the part of university, as the student who is
voluntarily withdrawing admission cannot claim refund of admission fees.
LIC V/s. Mumtaji Begum :
Where the date of birth of the insured was in dispute and not accepted by the insurance company, the
Forums under the COPRA had no jurisdiction to entertain any complaint against the insurance company.
This is for the reason that there is no concluded contract in such cases and hence no question of payment
of insurance amount arises.
Mohd. Zuber V/s. SBI :-
In this case, the complainant claimed a huge amount of compensation of Rs. 1,11,25,00,000/- for the
irresponsible behavior of the bank. However, the National Commission rejected the claim considering the
large scale on which the complainant carried on his business and hence not a consumer under COPRA.
C.P.Belliapa V/s. Indo American Hybrid Seeds :

If Seeds were purchased by a farmer for better cultivation of rice & if seeds could not result in better
cultivation, the farmer cannot be called as a consumer as goods were bought for commercial purpose.
Kerala State Electricity Board V/s. Raveendran :

The National Commission considered a complaint regarding fall in electricity voltage damaging the
machine in a plastic factory and affecting production. The National Commission awarded compensation to
the complainant.
Superintendent of Post Offices V/s. Upbhogta Suraksha Parishad :

If due to delayed delivery by the postal authorities a person could not receive admission in educational
institution in such case there will be a deficiency in service.
Sreedharan Nair V/s. Registrar, University of Kerala :

Refusal to provide LLB Degree Certificate on completion of course on the ground that the qualifying
examination on the basis of which the student was admitted has not been recognized by the Kerala Law
College amounts to deficiency in service.
Life Insurance Corporation of India V/s. Mani Ram :

If the date on which premium has to be paid is informed to the insured & it the insured failed to pay the
interest on that day the insured will not be entitled to claim compensation.
Joseph Mathew Thomas & Co. V/s. Maruti Udhayog Ltd. :

Even if the goods were purchased for commercial purpose, during the period of warranty it is the duty of
seller to provide services.
Kusum Sharma & others V/s. Batra Hospital & Research Center
In this case the Supreme Court issued guidelines for the Medical Professionals.
While dealing a case of guilty of medical professional following principals are to be considered:
1. Negligence will be present if the there is a breach of duty which the man of reasonable man will not do in
those situations.
2. Negligence must be culpable (mala fide intention) error of judgment can not be called as negligence.
3. The medical professional should bring reasonable degree of skill, knowledge & care while discharging his
duties.
4. If the medical professional has followed the treatment method which is more risky but greater chances of
success also but also involves greater risk in this case if such method fails the medical professional cannot be
treated as guilty of negligence.
5. Negligence cannot be blamed if the Medical Professional discharges his duties with reasonable care and
skills.
6. It is duty if the society to make sure that the medical professionals are not harassed or humiliated which
might affect their duties.
Jitendra Kumar Vs Oriental Insurance Ltd.
If the truck caught fire and the driver did not have the license the insurance company can not deny the claim
on the ground that driver did not have the license.
National Insurance Co. Ltd. V/s. Skygems:

Parcels of precious stones sent by insured to London lost in transit. Insured claiming settlement of amount in
pounds. Insurer claimed payment could only be made in Indian rupees. It was held that claim to be settled
only in Indian Rupees as title or goods was not passed to consignee in London and respondent continued to be
owner having insurable interest in goods.
Charging of Enhanced price

On the Airports If enhanced price is charged from the consumer for soft drinks in this case there will be an
unfair practice from the consumer & the consumer will be entitled to compensation.
Achutrao Haribhau Khodwa v. State of Maharashtra, where a mop was left in the cavity of the patient, that
negligence was large on the act and it was a case of res ipsa liquitur (facts speak for themselves).
Mahendra Panchal (Dr.) v. Hemaben Sanjeev Kumar Kanodiya the apex commission noticed that after a
caesarian section surgery, a scissor was left behind in the stomach of the patient. The doctor took the plea
that during the course of the surgery, there was a power failure and the foreign object was left behind
inadvertently by the nurse.
The Commission, in its judgment, observed that "if the power supply went off during operation, it was all the
more necessary for the operating surgeon to have been extraordinarily careful to ensure that no foreign
material was left in the abdomen". The complainant was allowed a compensation of Rs 3.30 lakh plus interest.

CHAPTER – 11
ESSENTIAL
COMMODITIES ACT, 1955
This act provides power to the Central Government to pass the orders in connection with making availability
of essential commodities in the country & for defence purposes.
DEFINITIONS
1. Collector :
It includes the additional collector of area and any officer of state government not below the rank of sub-
divisional officer who is authorized to act under this act.
2. Essential Commodities :
The following commodities have been categorized as essential commodities under the Act :-
(a) Drugs.
(b) Fertilizers whether organic or inorganic or combination of both.
(c) Food Stuffs including edible oil & edible oil seeds.
(d) Hank yarn made from cotton.
(e) Petroleum & Petroleum products
(f) Raw jute & jute textiles.
(g) Seeds of cattle fodder
(h) Jute seeds
(i) Seed of food crops, vegetables & fruits.
(j) Any other article which may be included in 7th Schedule of Constitution of India.
In the case Samulson AID Harrison V/s. Union of India : It was decided that tea in the form of preparation of
beverage is not a food stuff as it is neither palatable or digestible.
In common parlance if a person has taken tea, he does not say that he has had his food.
Central Government in the public interest by specifying reasons in the notification in the Official Gazette, add
a commodity to the said Schedule and remove any commodity from the said Schedule, in consultation with
the State Governments.
If a notification is issued for amending the schedule as given above the Central Government will direct, that
an entry shall be made against such commodity in the Schedule declaring that such commodity shall be
deemed to be an essential commodity for a period not exceeding six months.
However, Central Government may, in the public interest by stating reasons, by notification in the Official
Gazette, extend such period beyond the said six months.
Every notification issued as above for adding or removing the commodity in schedule is required to be laid, as
soon as may be after it is issued, before both Houses of Parliament.
The commodities added in the schedule by Central Government can not be outside the scope of Entry 33 in
List III in the Seventh Schedule to the Constitution.
The Central Government has time and again, notified various commodities to be essential commodities.

The term ‘essential commodities’ is defined in Rule 35(3) of the Defence of India Rules, 1962, to mean “food,
water, fuel, light, power or any other thing notified by the Central Government in this behalf as essential for
the existence of the community”.
Of course, the definition in the Essential Commodities Act is more comprehensive than that in the Defence of
India Rules, but both definitions suggest certain things or articles and have scope for addition to the list of
other articles notified in that behalf by the Central Government.
In the case of Nathuni Lai Gupta v. The State it was decided that, the articles not covered in the definition
given in the Defence of India Rules, can become essential commodities within the meaning of the words used
in the Rules by a simple government notification and the slight difference in the definition of essential
commodity in the Act from that given in the Rules does not make one against the other
3. Sugar :
It means any sugar that contains 90% or more sucrose. It includes khandsari sugar, Bura Sugar, Sugar in
Vacuum pan, Sugar in powder form, crystalline sugar, sugar in processed form or sugar candy.
The Central Government has the powers to administer the Act by issuing notifications, directions or orders in
the official gazette.
POWERS OF CENTRAL GOVERNMENT – Section 3
In the following circumstances the Central Government may issue orders for regulating production, sale,
supply, distribution, storage or pricing of essential commodities.
− To increase the supply of essential commodities.
− To secured equitable distribution of essential commodities.
− To secure the availability of essential commodities at fair & reasonable prices.
− To secure the availability of essential commodities for defense requirements of country.
Section 3(1A) states that in spite of the above powers to Central Government may pass orders for:
(a) the supply of such foodstuffs, including cereals, pulses, potato, onions, edible oilseeds and oils, as the
Central Government may, by notification in the Official Gazette, specify, may be regulated only under
extraordinary circumstances which may include war, famine, extraordinary price rise and natural calamity of
grave nature.
(b) any action on imposing stock limit shall be based on price rise and an order for regulating stock limit of
any agricultural produce may be issued under this Act only if there is:
(i) hundred per cent. increase in the retail price of horticultural produce, or
(ii) fifty per cent. increase in the retail price of non-perishable agricultural food stuffs, over the price
prevailing immediately preceding twelve months, or average retail price of last five years, whichever is
Lower.
Such order for regulating stock limit shall not apply to a processor or value chain participant of any
agricultural produce, if the stock limit of such person does not exceed the overall ceiling of installed capacity
of processing, or the demand for export in case of an exporter:
However this provisions shall not apply to any order, relating to the Public Distribution System or the
Targeted Public Distribution System, made by the Government under this Act or under any other law for the
time being in force.
The expression “value chain participant”, in relation to any agricultural product, means and includes a set of
participants, from production of any agricultural produce in the field to final consumption, involving
processing, packaging, storage, transport and distribution, where at each stage value is added to the product.
WHAT KIND OF ORDERS CAN BE PASSED – Section 3(2)

If the above mentioned circumstances exists then the Central Government can pass orders for regulating
price, Production, Sales, Supply, distribution of essential commodities :
a. The Government can require obtaining of licenses in respect of manufacture of any essential commodity.
b. The Government may also pass orders for regulating storage, transportation, distribution & use of
essential commodities.
c. The Government can order for bringing any land under cultivation.
d. The Govt. can prohibit sale of any essential commodity in any particular area.
e. If any person holds in stock or is engaged in manufacture or in the business of buying or selling essential
commodities, the Central Government may ask such person to :
− Sell the essential commodity which is held by him or which will be received by him in future or which will
be manufactured by him in future to Central Government or State Government or to the officers
appointed by Central Government, State Government as the case may be.
− The above sale will be made at :
Agreed price: A price which is agreed between the parties with reference to controlled price.
✓ If no agreement could be made then sale will be made at the controlled price.
✓ If the price could not be decided as per the above 2 manners then the sale will be made at the market
price.
✓ After fixing of price the Government issues a notification.
f. The Central Government can pass order & prohibit the financial transactions in essential commodities that
are against public interest [commodities market].
g. The Central Government can pass order for entry & inspection of premises.
h. The Central Government can collect data & statistics in relation to production & availability of essential
commodities in the country & can also publish the same.
i. At the time of issuing licenses for selling of E.C. the Govt. can ask licensee to provide a security deposit as
a guarantee to comply with the conditions imposed by Central Government.
j. The Central Government can prohibit the sale of any E.C. which is ordinarily kept for sale.
In the case of Ambika Prasad Rajwade V/s. State of Chhatisgarh it was decided that when the state
government passes order & issues licenses in favour of the person whose names are mentioned in the order for
running fail price shops is not unconstitutional & does not violate article 14 of Constitution of India.
PRICING OF ESSENTIAL COMMODITY DURING EMERGENCY 3 (3A)
If :
(a) Essential Commodity is not available in any part of country.
(b) Essential commodity is not available at reasonable prices.
(c) Essential Commodity is not available for defense purpose
If the above conditions exist the Government will issue a notification in the official Gazette & prescribe a
price at which the E.C. will be sold in any area.
The loss that is caused to the traders will be compensated by the Government. The notification issued by the
Government will be valid for a period of 3 months from the date of issue of notification.
PROCUREMENT PRICE FOR FOOD GRAINS, EDIBLE OIL & OIL SEEDS – Section 3 (3B)
When the Government has to purchase the food grains edible oil & oil seeds for maintaining stock then the
Government will purchase such goods at a price fixed as per notification issued u/s. 3 (3A). If no such
notification has been issued or if it was issued then it has been expired hen the State Government will fix the
procurement price with the approval of Central Government & while grating the approval the Central
Government will consider the following factors :
a. Controlled Price.
b. General Crop Prospect.
c. Need for making the availability of the commodity at reasonable prices.
d. Recommendation of agricultural price commission if any, with regard to price of concerned grade or
variety of food grains.
PROCUREMENT PRICE FOR SUGAR – Section 3(3C)
The State Government purchases Sugar from the traders or manufacturers for maintaining the stock of sugar.

If notification has been issued u/s. 3(3A) then sugar will be purchased at the price prescribed in the
notification.
However, if no notification has been issued or notification has been expired then the following factors, will be
considered at the time of fixing procurement price for sugar.
a. Minimum price fixed by Central Government for purchase of sugar Central Government fixes the price
after considering :
− Manufacturing cost of Sugar.
− Taxes and duties.
− Price of Sugarcane.
− Reasonable Return on Capital for the trader of the manufacturer.
b. The Central Government can prescribe different prices for different areas, states & industries.
c. The Central Government is also empowered to pass orders, requiring any person, not to remove sugar
from warehouse or export such sugar.
Further, the Central Government may determine different prices for different areas from time to time or for
different factories or for different kinds of sugar.
The purpose of fixing the price is, that the consumer must pay a reasonable return and producers also get a
reasonable return.
The Central Government is also authorised under section 3D the Central Government to direct that no
producer, importer or exporter to sell or otherwise dispose of or deliver any kind of sugar or remove any kind
of sugar from the bonded godowns of the factory in which it is produced, whether such godowns are situated
within the premises of the factory or outside or from the warehouses of the importers or exporters, as the
case may be, except under and in accordance with its direction.
However, the direction by Central Government does not affect the pledging of such sugar by any producer or
importer in favour of any scheduled bank as defined in clause (e) of Section 2 of the Reserve Bank of India
Act, 1934 or any corresponding new bank constituted under section 3 of the Banking Companies (Acquisition
and Transfer of Undertakings) Act, 1970, so, however, that no such bank sells the sugar pledged to it except
under and in accordance with a direction issued by the Central Government.
In terms of Sub-section 3(E) the Central Government is authorised to direct, by an order, any producer or
importer or exporter or recognised dealer or any class of producers or recognised dealers, to take action
regarding production, maintenance of stocks, storage, sale, grading, packing, marking, weighment, disposal,
delivery and distribution of any kind of sugar in the manner specified in the direction.
POWER OF CENTRAL GOVERNMENT TO APPOINT AUTHORIZED OFFICERS

The Central Government has the power to appoint officers as “Authorized controller” for ensuring
maintenance & increased supply of essential commodities. Such officer will also be provided powers by
Central Government & he may exercise his powers under the control & directions of Central Government.
Such officer must not act in a manner which will violate the order of Central Government.
The authorised controller shall exercise his functions in accordance with any instructions given to him by the
Central Government.
He shall not have any power to give any direction inconsistent with the provisions of any enactment or any
instrument determining the functions of the person in charge of the management of the undertaking except in
so far as may be specifically provided by the order.
The undertaking shall be carried on in accordance with any directions, given by the authorised controller
under the provisions of the order.

THE MANNER OF PASSING ORDER U/S 3
If the order relates to a specific person or industry. If order relates to classes of persons or
industry.
a. Such document can be delivered in any manner that The Central Government will issue a
assures the receipt of document by the recipient. notification in the official Gazzette.
OR
b. Affixing the copy of order on the conspicuous place of
the house or that industry in the presence of at least
2 witnesses.
The order passed by Central Government has to be placed in both the houses of parliament.
The order passed by Central Government may impose duties on the officers of Central Government/ State
Government / on the officers of authorities controlled by Central Government/ State Government.
The Central Government can also delegate its duties under the act to State Government or to the officer of
State Government or to any authority of the State Government.
It may be noted that the order passed by the Government under Section 3(2) specifies the various aspects
which may be covered under the order for ensuring the production, procurement and distribution of the
essential commodities.
Thus, the order in its nature, is a medium of administering the Act by the Government.
Imposition of Duties on State Government

Section 4 of the Act provides that an order made under Section 3 may give powers and impose duties on the
Central Government or the State Government or officers and authorities of the Central Government or State
Government and may contain directions to any, State Government or to officers or authorities thereof as to
the exercise of any such powers or discharge of any such duties
Delegation of powers In terms of Section 5

The Central Government may, by notified order direct that the power to make orders or issue notifications
under Section 3 shall in relation to such matters and subject to such conditions, if any, as may be specified in
the direction be exercisable also by (a) such officer or authority subordinate to Central Government, (b) such
State Government or such officer or authority subordinate to a State Government as may be specified in the
direction.
Section 6 provides that the order made under Section 3 shall have effect in spite of anything inconsistent
contained in any other law or in any agreement or document or notification issued under any law other than
this law.
It should be noted that section 6 does not make any inconsistent provision invalid, nor does it abrogate
(cancels) such laws. The object of Section 6 is simply to by-pass them.
For example if any order is made for textiles under section 3 of this act, then such order will prevail over any
other order made for textiles under any other law.
In the case of Ramananda Agrawala v. State it was decided by Calcutta High Court that the ultimate effect of
Section 6 is that an order under Section 3 will override existing laws, only on the ground that these are orders
validly made under Section 3 of the Act.

In the case of Mohammad Anwar Hussi v. State of Bihar it was decided by Patna High Court, that Section 6 is
section which gives protection to the orders made under Section 3 of the Act against any other order under
any other law.
Presumption as to Orders
Section 13 states that where an order has been made and signed by an authority as per any powers given
under this Act, a court shall presume that such order was so made by that authority within the meaning of
Indian Evidence Act, 1972.
Burden of Proof in certain cases

If any person is prosecuted for violation of order passed under section 3, such person will have to prove that
he has such authority, permit, licence or other document for his defence as the burden of proof lies upon him
to prove that he has not made violation of order under section 3.
Protection for Acts done in Pursuance of Order
If any person or any officer of the Government does any act in good faith as per the order under section 3
than such person will get an immunity in any case filed in the Court.
In case any suit is filed against the government officer who was acting under orders passed under section 3, in
such a case the government officer will have to proof that the action was taken by the Government officer
was as per the order under section 3 and hence there is no liability of the Government officer.
SEIZURE AND CONFISCATIONS – Section 6A

Seizure means to take the possession of the commodity contrary to the wishes of the person in possession of
the commodity.
When the authorized officer under the Act has the reason to believe that some person has made
contravention of the order u/s. 3(2) he may make seizure of Goods vehicle Animal package.
After making the seizure, the authorized officer will make a report of seizure & will give the report to
collector.
On receiving the seizure report, the collector may ask the authorized officer to produce the seized
commodities before him.
The Collector will make an inspection of the seized commodities & make necessary enquiries & on such
inspection & enquiries if the collector is satisfied that, contravention has been made of section 3(2) then the
collector after providing an opportunity of being heard to the owner of commodities, pass an order for
confiscation of seized commodities, vehicle, animal, vessel, labels or packages.
No order of contravention can be made in respect of food grains & edible oil seeds in lieu of confiscation fine
will charged.
The owner of vehicle, vessel or animal used to transport the commodity will be given a opportunity to pay a
fine not exceeding the market value of vessel, vehicle or animal & take back such animal, vehicle, vessel.
However, if the owner of vehicle, vessel or animal proves that the animal, vehicle, or vessel were used
without his knowledge then the collector may release animal, vessel or vehicle without payment of any fine.
If any party considers itself to be aggrieved by the order of collector then such person may make an appeal
with State Government within a period of 1 month from the date of receiving the order of Collector.

The S.G. will hear both the parties [Collector & the Appellant] and after hearing both the parties the S.G.
may pass the following orders.
(a) The state government may confirm the order of collector; or
(b) The State Government may modify the order of Collector; or
(c) The State Government set aside the order of Collector.
If the state government set asides the order of collector then the confiscated goods shall be returned to
appellant & if returning of the goods is not possible the price of the goods as decided in accordance with
controlled price market price or agreed price will be paid to the appellant.
In the case of Ramchandra v. Sub-Inspector of Police, it was decided that, if any jeep was moving ahead of
the lorry in which the essential commodity was transported, and the jeep did not have any essential
commodity and it was just moving ahead of the lorry, the sub inspector of police of the deputy commissioner
had no power to seize the jeep.
In the case of Hindustan Aluminium v. Controller of Aluminium, it was decided that, the Collector has no
jurisdiction to go into the validity of the seizure, he can only pass orders for the confiscation of the goods or
release the goods. If he believes that there has been a violation of order under section 3, he can pass order
for confiscation of the goods.
In case of S. Seetharamayya Gupta v. Distt. Revenue Officer it was decided that, the Collector can delegate
his powers under section 6A to any district officer and such district level officer as per the power given by
collector may validly pass orders for confiscation of the Goods.
Section 6D provides that the award of any confiscation under this Act by the Collector shall not prevent the
infliction of any punishment to which the person affected thereby is liable under this Act.
SALE OF SEIZED COMMODITY

As per Section 6A (2 )If, on receiving the report of seizure or after making the
inspection of the goods the collector is of the opinion that the goods are subject to speedy decay or natural
decay then the collector may pass an order for sale of the seized commodities.
Such sale will be done through :

a. Private agreement
b. Public Auction
c. Fair price shops.
The money received through sale will be kept by the collector on behalf of the government.
However, if :
a. No order of confiscation is passed by the collector; or
b. An appeal was preferred against the order of confiscation & such appeal has been decided in favour of
appellant; or
c. In the prosecution filed against the owner of commodity, the owner of commodity is acquitted by the
court.
In any of the above three cases, the sale proceeds will be returned to the owner of the commodity.
OFFENCES & PENALTIES
As per section 10A and 11, All the offences committed under this act shall be cognizable (police officer can
make arrest without warrant) & non bailable if :
a. There is a report in writing.
b. The report is made by public servant under IPC, 1860 or by aggrieved person or by recognized consumer
association.

In the case of Nathulal Vs. State of Madhya Pradesh & Hariprasad Rao V/s. State, it was decided that guilt
intention or malafide intention is the integral part of the offence under the act. If it is provide that the
trader did not have guilt intention to commit the offence u/s. 3 of the Act, he will met be punished.
If a person stores any essential commodity in excess quantity such person cannot be treated as accused of
violating the provisions of this act, unless it is proved that he had a guilt intention. Mensrea is essential
requirement of giving punishment under the act.
Penalties
Section 7 of the Act deals with penalties – if any person Contravention order passed by the Central
Government under Section 3 with reference to clause (h) (collection information or statistics) or (i)
(inspection of books) of Sub-section (2) of section 3, is punishable with imprisonment for a term which may
extend to one year and also with fine.
For the contravention of an order with reference to other clauses of Sub-section (2) of Section 3 the
punishment is imprisonment for a term ranging from three months to seven years and in addition fine is also
leviable.
If any person contravenes any order made under Section 3, any property in respect of which the order has
been contravened shall be forfeited to the Government and any package, covering, receptacle in which the
property is found and any animal, vehicle, vessel or other conveyance used in carrying the property, could
also be forfeited if the court so orders.
If any person to whom a direction is given under Section 3(4) (b) (directions for maintaining supplies) fails to
comply with the directions, he shall be punishable with imprisonment for a term which shall not be less than
three months but which may extend to seven years and shall also be liable to fine.
If any person convicted of an offence under this Section is again convicted of an offence under the same
provision he shall be punishable with imprisonment for the second and for every subsequent offence for a
term which shall not be less than six months but which may extend to seven years besides fine.
For adequate and sufficient reasons the court can award imprisonment for a term less than six months.
Where an offence is committed for a second time, besides the above punishment, the Court can also order
that the person shall not carry on any business of that essential commodity for such period not being less than
six months as may be specified by the Court.
CULPABLE MENTAL STATE – Section 10C

The act provides for culpable mental state which includes :
a. Intention
b. Motive
c. Belief in the fact
d. Knowledge of the fact.
Under the Act culpable mental state is essential for giving punishments unless culpable mental state is proved
no punishment will be given under the act.
Que: Discuss "Culpable Mental State' under the Essential Commodities Act, 1955.
ATTEMPT & ABETMENT
If any person:
− Makes attempt to contravene the provisions of this act.
− Abets the contravention of the offence.
It will be deemed that such person has contravened the provisions of this act.

FALSE STATEMENT – Section 9
If a person [trader]
GRANT OF INJUNCTION – Section 12B

If any kind of injunction is granted by the civil court against the order of Central Government or State
Government or the officers of Central Government or State Government under the provisions of this act such
injunction will not have any effect. However, if the civil court issues any notice of injunction on the
application of Central Government or State Government then such injunction will be valid.
Offence by Company
If violation of an order under Section 3 is made by a company, every person who, at the time of the violation,
was in charge of, and was responsible to, the company for the conduct of the business of the company, shall
be considered as guilty of the violation, and shall be liable to be punished accordingly.
In such cases, the company itself is also liable to be proceeded against.
Any such person, can, however, escape liability if he proves that the violation took place without his
knowledge or that he exercised all care to prevent it.
It may be noted that the term ‘company’ as used above, refers to any body corporate, and even includes a
firm or other association or individuals. In the case of a firm, the term ‘Director’ would mean a partner in the
firm.
Publication of names of convicted companies by Court – Section 10B

Court may get published in newspapers at the expense of the company the name, place of business and the
offence/contravention committed by company when a company has been convicted.
However, no publication shall be made until the period for preferring an appeal against the order of the Court
has expired or if appeal was preferred it has been disposed of.
The expenses of any publication shall be recoverable from the company as if it were a fine imposed by Court.
Congnizance of Offence by The Courts

Section 11 lays down that before a Court can take cognizance of any offence punishable under the Act, the
following three conditions must be satisfied, viz. (i) there must be a report in writing, (ii) the report must
contain the facts constituting such offence (iii) the report must be made by a public servant, as defined in
Section 21 of Indian Penal Code, or any aggrieved person or any recognised consumer association, whether
such person is a member of that association or not.

Que: What conditions must be satisfied for taking cognizance by the court for any offence punishable under
the Essential Commodities Act, 1955 ?
Prosecution of Public Servants (Section 15A)

If any public servant is accused of any offence alleged to have been committed by him while acting, or
purporting to act, in the discharge of his duties, in pursuance of any order made under Section 3, no court can
take cognizance of such an offence except with the previous permission:
(a) of the Central Government in the case of a person who is employed in connection with
the affairs of the Union, and
(b) of the State Government in the case of a person who is employed in connection with the affairs of the
State.
CHAPTER – 12
LEGAL METROLOGY ACT,
2009
INTRODUCTION
1) Law relating to weights & measures is

related to legal metrology.
2) Legal metrology is very important for
technological & industrial progress of any country.
3) The scope of legal metrology according
to international practice extends to 3 fields of human activities. i.e.
Commercial transactions, industrial measurements & measurements
needed to ensure public health & human safety & legal metrology
encourages all the 3 activities.
By above mentioned points we can conclude that legal metrology
plays a crucial role in strengthening the national economy
STANDARDS OF WEIGHTS & MEASURES

BHAI SARKAR NE BATA DIYA HAI KI EK KILO MATLAB KYA
INTERNATIONAL ORGANIZATION FOR LEGAL METROLOGY [OIML]
1) OIML is an inter-governmental organization which includes no. of member countries.
2) OIML was set-up in the year 1955, to establish standards for weighing instruments.
3) OIML harmonises the legal metrology procedures in the member countries.
4) OIML issues time-to-time recommendations related to improvements in the standards of weights &
measures.
OIML CERTIFICATE SYSTEM FOR MEASURING INSTRUMENTS

1) The Concept of certificate system for measuring instrument was introduced in the year 1991.
2) According to the System the Manufacturer of weighing instrument is required to obtain an OIML certificate
& a test report indicating that the type of instrument for which certificate is issued complies, with
requirements under the provisions of OIML.
3) Certificates issued by OIML are accepted by national Metrology services on voluntary basis.
DEFINITIONS
▪ Dealer:
As per section 2(b) dealer means a person who carries out directly or indirectly, the business of buying or
selling, supplying or distributing any such weights and measures, whether for cash or other valuable
consideration & includes a commission agent, an importer, a manufacturer, who sells ,supplies or
otherwise delivers any weights and measure manufactured by him to any other person.
▪ Export:
As per section 2(d) export means taking commodity out of India to the place out of India.
▪ Import:
As per section 2(e) import means bringing commodity into India from the place outside India.
▪ Label:
As per section 2(j) ‘label’ means any written, marked, stamped printed or graphic matter affixed to, or
appearing upon any pre-packaged commodity.

▪ Legal Metrology:
As per section 2(g) "Legal Metrology" means that part of metrology which deals with:
a) Units of weights and measures.
b) Methods of weighment and measurement.
c) Instruments of weights and measures.
And verifying that all the above 3 complies with the legal requirement in order to guarantee the public
the accuracy and security of weights and measures.
▪ Manufacture
As per section 2(i) "manufacturer" in relation to any weight or measure, means a person who –
(a) Manufactures weight or measure or one or more parts, and acquires other parts, of such weight or
measure and, after assembling those parts, claims the end product to be a weight or measure
manufactured by himself or itself.
(b) Assembles parts thereof manufactured by others and claims the end product to be a weight or
measure manufactured by himself or itself, as the case may be,
(c) Puts, or causes to be put, his own mark on any complete weight or measure made or manufactured by
any other person
▪ Protection:
As per section 2 (k) protection means utilisation of reading obtained from any weight and measure for the
purpose of determining any necessary steps which are to be taken for the purpose of safeguarding the
well-being of any human being or animal or to protect ay commodity, vegetation or thing whether
individually or collectively.
▪ Pre-packed commodity:
According to section 2 (l) pre-packed commodities means a commodity which in the absence of purchaser
is placed in a package of whatever nature whether sealed or not so that the product contained therein has
a pre-determined quality.
▪ Person: As per section 2(m) the term person includes:

− A Hindu Undivided Family
− Every department or office
− Every organization established or constituted by government
− Every local authority within the territory of India.
− A company, firm and association of individuals
− Trust constituted under the act.
− Every co-operative society constituted under the act.
− Every other society registered under the Societies Registration Act, 1860.
▪ Premises:
As per section 2 (n) the term “premises" includes—
(a) A place where any business, industry, production or transaction is carried on by a person, whether by
himself or through an agent, by whatever name called, including the person who carries on the
business in such premises,
(b) A warehouse, godown or other place where any weight or measure or other goods are stored or
exhibited,
(c) A place where any books of account or other documents pertaining to any trade or transaction are
kept,
(d) A dwelling house, if any part thereof is used for the purpose of carrying on any business, industry,
production or trade,
(e) A vehicle or vessel or any other mobile device, with the help of which any transaction or business is
carried on;

▪ Sale
It means transfer of ownership in weights & measures.
As per section 2(s) “seal” means a device or process by which a stamp is made, and includes any wire or
other accessory which is used for ensuring the integrity of any stamp
▪ Repairer
It means a person who repairs a weight or measure and includes a person who adjusts, cleans, lubricates
or paints any weight or measure or renders any other service to such weight or measure to ensure that
such weight or measure conforms to the standards established by or under this Act;
▪ Verification
As per section 2(v) "verification", with its grammatical variations and cognate expressions, includes, in
relation to any weight or measure, the process of comparing, checking, testing or adjusting such weight or
measure with a view to ensuring that such weight or measure conforms to the standards established by or
under this Act and also includes re-verification and calibration;
Transaction Under section 2(u)”transaction” means,- (i) any contract, whether for sale, purchase,
exchange or any other purpose, or (ii) any assessment of royalty, toll, duty or other dues, or (iii) the
assessment of any work done, wages due or services rendered.
▪ Stamp:
Section 2(t) defines "stamp" as to mean a mark, made by impressing, casting, engraving, etching,
branding, affixing pre-stressed paper seal or any other process in relation to, any weight or measure with
a view to-
(a) Certifying that such weight or measure conforms to the standard specified by or under this Act, or
(b) Indicating that any mark which was previously made thereon certifying that such weight Or measure
conforms to the standards specified by or under this Act, has been obliterated;
STANDARD WEIGHTS AND MEASURES

1. Section 4 of the Act provides that every unit of weight or measure shall be in accordance with the metric
system based on the international system of units.
2. Section 5 of the Act provides that the base unit of length shall be the metre; mass shall be the kilogram;
time shall be the second; electric current shall be the ampere; thermodynamic temperature shall be the
kelvin; luminous intensity shall be the candela; and amount of substance shall be the mole.
3. As per section 7 of the Act the base units of weights and measures specified in section 5 shall be the
standard units of weights and measures.
4. The Central Government will prepare such objects or equipments that can be used as standards for
determining the correctness of weights & measures.
5. No weight, measure or numeral, other than the standard weight, measure or numeral, shall be used as a
standard weight, measure or numeral.
6. The above provisions shall not be applicable for export of any goods or service.
7. Section 11 of the Act provides that A person shall not, in relation to any goods, things or service, quote, or
make announcement of, whether by word of mouth in any other manner, any price or charge, or issue or
show any price list, invoice, cash memo or other document, or prepare or publish any advertisement,
poster or other document, or indicate the net quantity of a pre-packaged commodity, or express in
relation to any transaction or protection, any quantity or dimension, otherwise than in accordance with
the standard unit of weight, measure or numeration.
(jo bhi advertisement do wo isi kanoon ke dwara bataye gaye weights ke hisab se do)

Section 12 provides that any custom, usage, practice or method of whatever nature which permits a person to
demand, receive, any quantity of article, thing or service in excess of or less than, the quantity specified by
weight, measure or number in the contract or other agreement in relation to the said article, thing or service,
shall be void.
APPOINTMENT AND POWER OF DIRECTOR, CONTROLLER AND LEGAL METROLOGY OFFICERS – Section 13 and 14
The Central Government is authorized to appoint (by Notification) a Director of legal metrology, Additional
Director, Joint Director, Deputy Director, Assistant Director and other employees for discharging duties in
relation to inter-state trade & commerce.
Each officer as appointed above will discharge his duties under the supervision & control of Central
Government, the officers will be public servants & the Central Government may also delegate any of its
powers to such officers.
The Central Government can also delegate its powers to legal metrology officers with the consent of the State
Government.
The Director, the Controller and every legal metrology officer authorised to perform any duty by or under this
Act shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code. They
will be protected for the actions that they take under this Act in good faith.
Section 14 of the Act, provides that the State Government may, by notification, appoint a Controller of legal
metrology, Additional Controller, Joint Controller, Deputy Controller, Assistant Controller, Inspector and
other employees for the State for exercising the powers and discharging the duties given or imposed on them
by or under this Act in relation to intra State trade and commerce.
The Controller and every legal metrology officer so appointed shall exercise such powers and discharge such
functions in respect of such local limits as the State Government may, by notification, specify.
Every legal metrology officer shall exercise and discharge the duties under the general superintendence,
direction and control of the Controller.
POWER OF INSPECTION, SEIZURE – Section 15

If the director or legal metrology officer or any authorized employee is of the opinion that any offence has
taken place or is likely to take place, the officers may make an inspection of that place.
The power also includes seize of any weight & measure, record, documents etc.
Every non-standard or unverified weight or measure, and every package used in the course of, or in relation
to, any trade and commerce and seized, shall be liable to be forfeited to the State Government.
However if the owner of such weights or measures get the unverified instrument stamped or verified within
the prescribed time then the instruments will not be forfeited.
Where any goods seized are subject to speedy or natural decay, the Director, Controller or legal metrology
officer may dispose of such goods in such manner as may be prescribed.
Every search or seizure made under this section shall be carried out in accordance with the provisions of the
Code of Criminal Procedure, 1973, relating to searches and seizures.
INSPECTION, SEIZURE ETC

Section 15 gives the following Powers to the Director, Controller or any Legal Metrology Officer:
INSPECTION, SEIZURE ETC

Section 15 gives the following Powers to the Director, Controller or any Legal Metrology Officer:

a) To enter at any reasonable time in to the premises and search for and inspect any weight or other goofs in
relation to which trade or commerce has taken place.
b) To seize ay weight and measure or other goods or registers.
c) To sell or dispose of the goods which are subject to natural decay.
MANUFACTURERS, ETC. TO MAINTAIN RECORDS AND REGISTERS

Section 17 of the Act provides that every manufacturer, repairer or dealer of weight or measure shall
maintain such records and registers as may be prescribed. The records and registers maintained shall be
produced at the time of inspection to the persons authorised for the purpose of Inspection.
Declarations on pre-packaged commodities:

Section 18 states that no person shall manufacture, pack, sell, import, distribute, deliver, offer, expose or
possess for sale any pre-packaged commodity unless such package is in such standard quantities or number
and bears thereon such declarations and particulars in such manner as may be prescribed. Any advertisement
mentioning the retail sale price of a pre- packaged commodity shall contain a declaration as to the net
quantity or number of the commodity contained in the package in such form and manner as may be
prescribed
REGISTRATION FOR IMPORTER OF WEIGHT OR MEASURE

Section 19 provides that no person shall import any weight or measure unless he is registered with the
Director in such manner and on payment of such fees, as may be prescribed and such weight or measure shall
match with standards established under the act.
APPROVAL OF MODEL
Every Manufacturer of weight or measure shall before manufacture of any model take the approval from the
authority prescribed under the act on payment of prescribed fees.
However the approval shall not be required in respect of any cast iron, brass, bullion, or carat weight or any
beam scale, length measures (not being measuring tapes) which are ordinarily used in retail trade for
measuring textiles or timber, capacity measures, not exceeding twenty litre in capacity, which are ordinarily
used in retail trade for measuring kerosene, milk or potable liquors
PROHIBITION MANUFACTURE, REPAIR OR SALE OF WEIGHT OR MEASURE WITHOUT LICENCE

Section 23 of the Act provides that no person shall manufacture, repair or sell, or offer, expose or possess for
repair or sale, any weight or measure unless he holds a licence issued by the Controller.
However, no licence to repair shall be required by a manufacturer for repair of his own weight or measure in
a State other than the State of manufacture of the same.
Section 24 : Verification and Stamping of Weight or Measure.
Every person having any weight or measure in his possession, custody or control in circumstances indicating
that such weight or measure is being, or is intended or is likely to be, used by him in any transaction or for
protection, shall, before putting such weight or measure into such use, have such weight or measure verified
at such place and during such hours as the Controller may by order, specify, on payment of such fees as may
be prescribed.
The Central Government may prescribe the kinds of weights and measures for which the verification is to be
done through the Government approved Test Centre.

The Government approved Test Centre shall be notified by the Central Government or the State Government,
as the case may be, in such manner, on such terms and conditions and on payment of such fee as may be
prescribed.
OFFENCES UNDER THE ACT:
Provision Punishement
Section 25 of the Act provides for penalty for use of Fine which may extend to twenty-five thousand
non-standard Weight or measure rupees and for the second or subsequent offence,
with imprisonment for a term which may extend to
six months and also with fine.
Under section 26 whoever tampers with, or alters in Fine which may extend to fifty thousand rupees and
any way, any reference standard, secondary standard for the second and subsequent offence with
or working standard or increases or decreases or imprisonment for a term which shall not be less than
alters any weight or measure with a view to deceiving six months but which may extend to one year or with
any person or knowing or having reason to believe fine or with both.
that any person is likely to be deceived by such act,
however no punishment when such alteration is made
for the correction of any error noticed therein on
verification,
Section 27 provides that every person who A fine which may extend to twenty thousand rupees
manufactures or causes to be manufactured or sells and for the second or subsequent offence with
or offers, exposes or possesses for sale, any weight or imprisonment for a term which may extend to three
measure which does not conform to the standards of years or with fine or with both.
weight or measure specified by or under this Act; or
which bears any label of weight, measure or number
which does not conform to the standards of weight,
measure or numeration specified by or under this Act,
As per Section 30 whoever, in selling any article or fine which may extend to ten thousand rupees, and;
thing by weight, measure or number, delivers or for the second or subsequent offence, with
causes to be delivered to the purchaser any quantity imprisonment for a term which may extend to one
or number of that article or thing less than the year, or with fine, or with both
quantity or number contracted for or paid for; or in
rendering any service by weight, measure or number,
renders that service less than the service contracted
for or paid for; or in buying any article or thing by
weight, measure or number, fraudulently receives, or
causes to be received any quantity or number of that
article or thing in excess of the quantity or number
contracted for or paid for; or in obtaining any service
by weight, measure or number, obtains that service
in excess of the service contracted for or paid for,
As per section 31 whoever does not provide fine which may extend to ten thousand rupees, and;
information within prescribed time or provides wrong for the second or subsequent offence, with
information or does not co-operate in inspection or imprisonment for a term which may extend to one
investigation year, or with fine, or with both
As per section 36 if pre packed commodity is sold but Fine for first offence – 25000, for subsequent offence,
such commodity does not match with the declarations up to 50000, for another offence fine up to 50000 to 1
given on the package lac or imprisonment up to 1 year or both.
Section 35 provides that whoever renders or causes to fine which shall not be less than two thousand rupees
be rendered, any service through means other than but which may extend to five thousand rupees and for
the weight or measure or numeration or in terms of the second or subsequent offence, with imprisonment

any weight, measure or number other than the for a term which shall not be less than three months
standard weight or measure but which may extend to one year, or with fine, or
with both.
Section 42 provides for vexatious search and mprisonment for a term which may extend to one
empowers the Director, the Controller or any legal year, or with fine which may extend to ten thousand
metrology officer, exercising powers under this Act or rupees or with both
any rule made thereunder, who knows that there are
no reasonable grounds for so doing, and yet searches,
or causes to be searched, any house, conveyance or
place; or searches any person; or seizes any weight;
measure or other movable property shall,
PENALTY FOR COUNTERFEITING OR SEALS

Section 44 provides that whoever counterfeits any seal specified by or under this Act or the rules made
thereunder, or sells or otherwise disposes of any counterfeit seal, or possesses any counterfeit seal, or
counterfeits or removes or tampers with any stamp, specified by or under this Act or rules made thereunder,
or affixes the stamp so removed on, or inserts the same into, any other weight or measure, shall be punished
with imprisonment for a term which shall not be less than six months but which may extend to one year and
for the second or subsequent offence, with imprisonment for a term which shall not be less than six months
but which may extend to five years.
Compounding of offences:
In respect of offence punishable under section 25 (relating to use of non standard weights and measures)
section 27-39 (relates to manufacture and sale of non standard weights and measures), section 45-47 (relates
to counterfeiting of seals) can be compounded on payment such sum as prescribed for the credit of central
government.
In this regard even the Director or Legal Metrology Officer may also be specially authorised to compound the
offences provided that such sum shall not exceed maximum amount of the fine that may be imposed under
the act.
Que: "Every non-standard weights and measures used in the course of trade is liable to be forfeited". Examine.
Section 49: Offences by Companies
In case offence under the Act is done by the company, in this case the nominated in charge of the company
who is responsible to conduct the affairs of the company will be liable and if no person is nominated then
every officer of the company responsible to conduct the affairs will be liable.
However, such person shall not be liable to any punishment, if he proves that the offence was committed
without his knowledge and that he exercised all due diligence to prevent the commission of such offence
The company under this Act may nominate a Director for discharging the responsibilities under this Act and
notice of such nomination is to be given to the legal metrology officer.
In case company has different branches or establishments then different persons may be nominated in respect
of such branches or establishments.
In case it is proved that the offence committed by the company was done with the consent or connivance or
negligence of director, manager or secretary or any officer then they shall also be liable.
In case the company is convicted under this act and the time for preferring appeal has been expired or if
appeal was filed it has been disposed off by the appellate court, in this case the Court may publish the name
of the company, place of business of the company and the nature of contravention made by the company, at
the expense of the company, in the news papers, which the Court directs.

Compounding of offence
In terms of offence punishable under section 25, sections 27 to 39, sections 45 to 47 either before or after the
institution of the prosecution, be compounded, on payment to the Government of such sum as may be
prescribed.
However, the Director or legal metrology officer as may be specially authorised by him in this behalf, may
compound offences punishable under section 25, sections 27 to 39, or any rule made under sub-section (3) of
section 52.
The Controller or legal metrology officer specially authorised by him, may compound offences punishable
under section 25, sections 27 to 31, sections 33 to 37, sections 45 to 47, and any rule made under sub-section
(3) of section 52: Provided that such sum shall not, in any case, exceed the maximum amount of the fine,
which may be imposed under this Act for the offence so compounded

CHAPTER – 13
REAL ESTATE (REGULATION
AND DEVELOPMENT) ACT,
2016
INTRODUCTION
Basically the grievances of consumers of Real Estate were resolved
through consumer protection Act, 1986 but the act was not able to
grant an adequate protection to the consumers of real estate. The
country also required a specific regulation to regulate the real
estate sector considering the tremendous growth & development of
Real Estate Sector.
The Real Estate (Regulation And Development) Act, 2016 attempts
to balance the interest of buyers & sellers of real estate.
The objective of Real Estate (Regulation And Development) Act,

2016 are as follows :
1. Ensure the accountability of the
promoters towards the allottee.
2. Promoting transparency & fair play in the real estate sector.
3. Introduction of professionalism.
4. Promote symmetry of information between promoter &allottee
5. Enforcement of contracts.
6. Fast track dispute resolution process.
7. Good Governance of real estate sector.
The Act came into force on May 1, 2017.
SALIENT FEATURES OF REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016
REAL ESTATE WALE KAR RAHE THE CUSTOMERS KO BAHUT PARSHAN,

RERA BAN NE SE HUM SAB HOME BUYERS KA HUA KALYAN!
1) The Act establishes a real estate regulatory authority for the purpose of development & regulation of real
estate sector.
2) The act ensures the rate of plots, apartment or building of real estate project are finalised in a fair
manner.
3) Establish a mechanism for redressing of grievances of consumers & establishing an Appellate Tribunal.
4) Establishment of State level authority.
5) Every Real Estate project shall be registered with RERA.
6) Promoters cannot sell a project unless they are registered. Even the real estate brokers are required to
be registered.
7) The promoters shall upload the details of project on the website of RERA including the layout plan and
time for completion of project.
8) The amount taken from buyer shall be maintained in a separate Bank Account and to be used for
construction of same project. However, the state Government can alter this requirement.

9) PCA/PCS/PCWA/Advocates may appear before RERA.
ADVANTAGES OF REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016

1) Increase in the FDI in real estate sector.
2) Reduction in litigation.
3) Promotes transparency.
4) Promotes timely completion of project.
DEFINITIONS
1. Advertisement :
It means a document described or issued as an advertisement through any medium and includes notice,
circular or publicity material that inform the persons about Real Estate project or offers sale of plot, building
or apartment.
2. Allottees :
The person to whom plot, apartment or a building is sold by the promoter & also includes a person who
acquires it subsequently but does not includes a person who takes it on rent.
3. Apartment :
A block, chamber, dwelling unit, flat, office, showroom, shops, godown, separate & self contained part of any
immoveable property or enclosed space which will be used for residential & commercial purposes.
4. Carpet Area :
It is net usable floor area of the apartment including the area covered by entrance walls, service shafts,
exclusive of balcony or verandah & open terrace but includes internal partition mode.
5. Commencement Certificate :
It is a permission granted by a competent authority to begin development work.
6. Common Area :
It includes :
− Entire land of Real Estate Project
− Staircase, lifts, entrance & exits of the building
− Basement, terrace, parks, play area open parking space centralized electricity Gas, water, sanitation.
− Water tank & ducts
− Lodging premises for persons employed for maintenance of property community & commercial facility
provided in the real estate project.
7. Competent Authority :
A local authority or municipal which exercises the authority over the land under its jurisdiction & has a power
to give permission for the development of the land.
8. Completion Certificate :
It is a certificate issued by the competent authority when the project has been developed according to the
sanctioned plant.
9. External development work :
It includes :
Roads, Road system landscaping, sewage, drainage, system, electricity supply transformer, substation, solid
waste management, or other work which may have to be erected in the periphery of or outside the project
for its benefit as may be provided under local laws.
10. Internal Development Work :
It includes :
Road, footpath, water supply, sewers, plants, street-lighting, disposal of sewage, water conservation system,
energy management, social infrastructure, health education & other public amenities as per the sanctioned
plan.
11. Interest :

It is the rate charged by the promoter when the allottees make a default and it shall be equal when the
promoters make a default. The promoter has to pay the interest till the time he makes a refund, allots ,pay
the interest from the date when he makes the default in payment.
12. Occupancy Certificate :
It is issued by the competent authority permitting the occupation of the building as per the local laws which
has civic infrastructure such as water, electricity.
13. Planning Area :
Planning or the development area or the local or regional area by whatever name called as specified by
competent authority or the State Government to be the planning area for further development under laws
relating to town & country planning.
14. Promoter :
The person who constructs, building, housing apartments or converts any existing building in apartments.
A person who develops a land in project & construct structure on plot for selling.
A development authority or a public body which builds apartments on a land given by government or sells the
plot given by government.
State level cooperative formed for constructing apartment or for converting building into apartment.
Any person who holds out himself as builder, colonizer contractor, developer, estate developer and claims to
be a holder of power of attorney from the owner of land on which a project has to be developed.
Any other person who constructs a building or apartment for general public.
The person who develops the land and the person who constructs the apartment, both will be considered as
promoter.
15. Real Estate Agent :
− A per son who negotiates on behalf of other person for sale of his plot or apartment or a building against a
commission.
− The person who introduces the parties through any medium in connection with Sale or purchase of plot,
building or apartment.
− It also includes property dealer, middlemen & broker.
16. Real Estate Project :
It includes :
− Building
− Building + Apartment
− Existing building in apartment
− Development of land in plots
For selling including common area, internal & external development work and all the important structures.
17. Appropriate Government :
− In case of Union Territory – Central Government
− In case of State – State Government
− In case of Union Territory of Pondicherry – The government of Union Territory.
− In case of Union Territory of Delhi – Ministry of Urban Development Under Government of India.
Que: Elaborate the concept of 'Appropriate Govemment' as stated in section 2(g) of the Real Estate
(Regulation and Development) Act, 2016.
RESPONSIBILITIES OF APPROPRIATE GOVERNMENT
BHAI HAR STATE GOVT KO APNE STATE KE LIYE,

RERA PAS KARNA PADINGA, AUR ZIMMEDARIYAN NIBHANI PADENGE!
1. Notify the rules & implement the act within 6 months from the date of commencement of the act.
2. Establish a regulatory authority within 1 year from the date of commencement of the act.
3. Establish Appellate Authority within 1 year from the date of commencement of the Act.

4. The Selection of Chairman & member of the regulatory authority and appellate Tribunal are to be made
on the recommendation of selection committee. So, within 1 year from the date of commencement of
this act, selection committee will also have to formed.
5. The officers & employees of regulatory authority & appellate tribunal are also to be appointed.
6. Allotment of premises for establishing physical offices.
7. Central Government has to establish a Central Advisory Council.
8. The Appropriate Government shall create a real estate regulatory fund.
REGISTRATIONS OF REAL ESTATE PROJECTS & AGENTS

BINA REGISTRATION KARAYE FLATS KI BOOKING NAI KAR SAKTE!
− It was a common practice in Indian Real Estate Market to launch a prelaunch or soft launch scheme before
commencement of work & getting all the required approvals and buyers also responded to such schemes in
order to get the benefit of higher discounts. This process contained a lot of risks for the buyer, as if, any
approval was not received for the project, the project was delayed and also the promoter used to run
away with money of buyers.
Hence all the projects are to be compulsorily registered with RERA one of the conditions for the
registration is that all the approvals must have been received for the real estate project. This provision
must have been inserted to protect the interest of the buyer.
− No booking shall be accepted without registration. The ongoing projects which had not received
completion certificate on the date of commencement of this Act shall also be registered under RERA,
within 3 months of from the date of commencement of this act.
− The projects that are developed beyond the planned area with the permission of local authorities, in the
interest of allottees, the RERA by an order asked the promoter to register the project with the authority.
− If the project is to be developed in phases then each phase of the project is to be considered as a
separate part and standalone part separate registration shall be obtained for each part.
PROJECTS THAT ARE EXEMPT FROM REGISTRATION
(a) When the area of land does not exceed 500 sq. Meters; and
(b) No. of apartment does not exceed 8.
#In case of Renovation & Reconstruction:
(a) When the area of land does not exceed 500 sq. meters.
(b) No. of apartment does not exceed 8
#When the promoter has received a completion certificate before commencement of act.
APPLICATION FOR REGISTRATION
Application will be made in the prescribed form along with the prescribed fees with RERA along with the
following documents
a) Brief details of enterprise its type [company, sole proprietorship firm, LLP, firm] name, address, details of
registration etc.
b) Name & photograph of promoter.
c) Brief details of all the projects that are launched by promoter in preceding 5 years that are developed or
completed undergoing project delayed project and its current status.
d) The authenticated copy of approval & commencement certificate from the competent Authority.
e) Plan of development work + facilities such as drinking water Freighting, renewable energy, emergency
evacuation services.

f) Location details along with latitude & longitude.
g) Proforma for allotment letter, agreement for sale & conveyance deed.
h) Number & types of apartment, carpet area, balcony, verandah,
i) Garage.
j) Name & address of real estate agent appointed to sell the project, if any.
k) Name & details of contractor, Architecture, structural, engineer or any other person connected with the
project.
l) A declaration by way of affidavit signed by the promoter stating :
✓ That the promoter has the title of the land and all other ownership document in this connection or a
power of attorney in connection with development of land.
✓ Land is free from any kind of encumbrances, time period within which the project will be completed.
✓ That 70% of the money received from allottee will be kept in the separate bank Account maintained with
scheduled commercial bank & will be utilized only for completion of project.
Note : The promoter shall be allowed to withdraw from the separate bank account only to cover the cost of
project in proportion to the percentage completion of the work after it is verified by an Engineer, Architect
or PCA stating that the withdrawal is in proportion to the completion of project.
Promoter shall get his accounts audited within 6 months after the end of financial year and during the audit it
shall be verified that the amount for the project has been used in percentage to the completion of the
project.
The promoter shall obtain all the pending approvals before filing the application.
The RERA shall operate a web based system for submitting or filing of application for registration of project
within a period of 1 year from the date of its establishment.
Within a period of 30 days from the date of receipt of the application the RERA shall:
(a) Grant registration + login id & password for accessing the web-site of the authority; or
(b) Reject the application after providing opportunity being heard.
If the authority does not make any communication within 30 days of receiving the application then it shall be
deemed that the registration has been granted & within 7 days login id & password will be given.
Registration will be valid for the declared duration by the promoter for completion of project.
EXTENSION OF THE PROJECT
BHAI BADI MUSHKIL SE MAXIMUM 1 YEAR,
KA EXTENSION MILEGA
In India one of the problems for home buyer is the delay in completion of the project. The duration of the
project will be extended only on the ground of force majeure [delay due to war, civil disturbances, Natural
calamity or other similar reasons].
Application by promoter will be given in the prescribed form for extension of time, the RERA after considering
the facts of case may extend the time for not exceeding 1 year after recording the reasons in writing.
If application for extension is rejected opportunity of being heard will be given to the promoter.
REVOCATION OF REGISTRATION
If RERA itself or on the application made by competent Authority is satisfied that :
(a) Promoter has failed to comply with provisions of this act; or
(b) The promoter has violated the terms & conditions upon which registration was given; or
(c) Promoter is involved in unfair or fraudulent practice.
Unfair practice means a practice adopted for promoting sale or development of any real estate project by
way of any unfair method or deceptive practice including the practice such as, falsely representing in writing
or visible mode that the services are of particular standard or grade or the promoter has some approval or
affiliation which he does not have or makes any false or misleading representation regarding his services or
the promoter permits any advertisement or prospectus whether in news paper or otherwise regarding services
that he does not intend to offer.

In all the above cases, the RERA may revoke the registrations of the project. Within 30 days of passing the
order of revocation notice has to be given to promoter and his representations are to be considered.
Instead of revoking the registration RERA may allow the promoter to continue the registration upon the terms
& conditions as RERA may impose.
CONSEQUENCES OF REVOCATION OF REGISTRATION

(a) RERA debars the promoters to access the webpage of the project.
(b) Specify the promoters in the list of defaulters and display his photograph on the website.
(c) Remaining work will be completed as per directions of RERA
(d) Freezing of Bank Account of project.
(e) Protection of interest of Allottees.
OBLIGATION OF RERA UPON CANCELLATION OF THE REGISTRATION OR LAPSE OF TIME

The RERA may consult the appropriate Government to take action including the completion of work by
competent Authority or association of allottees. The RERA’s order shall not be effective till expiry of time of
filling appeal and its disposal.
In case of revocation of registration the association of allottees shall have the right of first refusal to carry
out the remaining development work.
UNFAIR PRACTICE & FRAUDULENT PRACTICE

A promoter shall be deemed to be guilty of unfair practice if :
(a) He falsely represents in the advertisement or statements that his services are of particular grade or
standard.
(b) He states that he has certain approvals or affiliations which he does not have.
(c) He makes a false representation of his services in advertisement or prospectus.
If the promoter gives any advertisement in any newspaper or any media about a service which he does not
provide, it may amount to fraudulent practice.
REGISTRATION OF REAL ESTATE AGENT

MAGIC BRICKS, 99 ACRES YEH SAB REAL ESTATE AGENT HAI!
In order to make real estate agent more accountable to the buyer & seller the act requires the Real Estate
Agent to Register themselves under the act with this Authority. Without obtaining registration, no real estate
agent shall facilitate the purchase or sale of RERA registered project.
The Real Estate agent shall make an application in prescribed form along with prescribed fees & documents
with the RERA
On receiving the application the RERA shall :
(a) Grant a single registration for whole of the state or the union territory –
Registration No. will be granted. In every sale made by the agent, the registration No. Has to quoted.
The registration will be valid for a specific period & after such period it can be renewed. Or,
(b) Reject the application by giving reasons in writing and providing opportunity of being heard.
After filing application if no communication is made by RERA for a reasonable period then it shall be deemed
that the registration has granted.
If the agents make a breach of the provisions of this act then his registration may be revoked after providing
opportunity of being heard.
FUNCTIONS OF REAL ESTATE AGENT

1. Maintenance of books, records & document as may be prescribed.
2. Not to be engaged in unfair or fraudulent practice.
3. Give all the documents and information to which the allottee is entitled at the time of buying the plot or
apartment.
FUNCTIONS & DUTIES OF PROMOTER

1. To provide complete details of project to the layman who has no legal idea of the project.
2. No advertisement shall be issued till the time all the approvals for the project are received & the project
is registered with RERA.
3. Upon receiving the login id & password a web page has to be created on the website of RERA and
following details has to be provided on the Webpage :
− Details of Registration
− Status of the project
− Quarterly details of number of apartments booked
− Number of garages booked
− List of approval taken & pending.
4. The advertisement issued by promoter shall mention the website of authority and includes registration of
the project.
5. At the time of booking or allotment the following information are to be provided to the allottee :
− Sanctioned plan & layout plan with the specifications as approved by competent Authority.
− Stage wise schedule for completion of the project and the facilities of water, electricity & sanitation.
6. The promoter shall be responsible for all the obligations mentioned in the agreement to sell even after
sale of all the apartments.
7. If there is any structural defect the promoter shall be liable even after sale of all the apartment.
8. In case the project is developed on leasehold land then the promoter shall produce a lease certificate to
the allottees.
9. Obtain occupancy certificate or completion certificate.
10. Provide essential services at reasonable charges till the time the project is taken over by the association
of allottees.
11. No mortgage of the apartments or the property after execution of agreement to sale.
OBLIGATION OF PROMOTER RELATING TO VERACITY OF PROSPECTUS

If due to incorrect information in the advertisement or the prospectus.
If the buyer suffers any loss, the promoter shall:
(a) Compensate such buyer; and
(b) The buyer may also withdraw from the project and the promoter is liable to give refunds

No deposit or advance to be taken without entering Agreement to Sell. Not more than 10% of sale value of
the apartment can be accepted by the promoter without entering Agreement to sell + it has to be registered.
The Agreement to sell shall be in the prescribed form & shall contain :
− Particulars of project
− Particulars of apartment
− Internal & external development work
− Date of possession
− Rate of interest
− Date & manner of payment.
ADHERENCE TO SANCTIONED PLAN

1. Project shall be developed as per the sanctioned plan.
2. Notwithstanding anything contained in any law or contract the layout plan, specification, nature of
fixtures, fittings, amenities, common area, area of apartment or plot as approved by competent Authority
shall be disclosed to allottee.
3. The promoter shall not make any addition or alteration in the sanctioned plan or specifications without
the consent of allottee minor changes as required by allottee can be made when duly verified by the
architect and the engineer along with reasons. Change in the height, beam, structure, column, joist,
cutting of wall, floor, mezzanine are not covered under the minor changes.
Any other alteration in sanctioned plan & layout plan or specification of building including common area can
be done with the consent of 2/3rd of allottees [excluding promoter].
The family members who buy different flats in different names shall be considered as one allottee.
STRUCTURAL DEFECT
If there is any structural defect or workmen ship defect or quality defect or provision of services or non
compliance of the Agreement to sell by the promoter which is brought to the notice of promoter within a
period of 5 years from the date of transferring the posssession, the promoter shall correct such defect within
30 days. If the promoter does not correct the defect within 30 days, he has to pay compensation.
OBLIGATION OF A PROMOTER WHEN THE PROJECT IS TRANSFERRED TO THE OTHER PARTY

1. The promoter may with the consent of 2/3rd of allottees [excluding himself] + the promoter by obtaining
a written approval from RERA can transfer or assign the project to some other party.
2. Transfer or assignment shall not affect the sale already made by the past promoter.
3. The new promoter shall be liable to comply with all the pending provisions as per the act and agreements
with the allottees that was entered by the original promoter.
4. The transfer of the project shall not have the effect of increasing the time of the project.
OBLIGATION OF PROMOTER REGARDING INSURANCE
1. The promoter shall get following insurances :
− Insurance for construction of real estate project.
− Insurance for title of the land & building as the part of real estate property.
2. Till the time of transferring the project to the association of the allottees the insurance premium shall be
paid by the promoter and after execution of Agreement to sell, the benefit of the insurance will be
received by the allottees. The promoter shall transfer all the insurance documents to the allottees.
TRANSFER OF TITLE
The promoter shall through a written and registered agreement transfer the title and the possession of the
apartment or the plot to the allottee.
+
Transfer the undivided proportional title to the association of allottees or the competent Authority, within
the period specified in the sanctioned plan as provided in the local law.
If there is no local law then the above transfer shall be made within a period of 3 months from the date of
getting occupancy certificate.

All the documents like sanctioned plan, common area plan should also be transferred to the association of
allottee as per local law. However, if there is no local law then within a period of 30 days from the date of
getting occupancy certificate.
RETURN OF AMOUNT & COMPENSATION
If the promoter is not able to give the possession of plot, apartment or building:
a) As per the time mentioned in the Agreement to sell
OR
b) Due to discontinuing of his business as developer or on suspension or revocation of the registration of the
project.
He shall be liable to refund the amount given by the buyer with interest as may be prescribed and also a
compensation in case the allottee wishes to withdraw from the project.
If the allottee does not withdraw from project then interest shall be paid till the time of possession.
If the promoters title to the land is defective, the promoter shall pay compensation in the manner given in
the act.
If the promoter fails to meet any obligation as per the agreement or as per the act he shall be liable to pay
compensation.
RIGHTS & DUTIES OF THE ALLOTTEES

1. To obtain information regarding layout plan & sanctioned plan along with specifications as approved by
competent authority.
2. To know stage wise schedule completion of the project along with facilities of water, electricity &
sanitation.
3. To claim possession of plot or apartment or building or common area.
4. To claim compensation if possession is not given on time.
DUTIES OF ALLOTTEES
1. Make the payment as per the payment schedule as mentioned in the agreement to sell and if there is a
delay in payment interest should be paid.
2. Pay for electricity, municipal tax & other taxes.
3. Participation in formation of association of allottees.
4. Take the possession within a period of two months from the date of receipt of occupancy certificate.
5. Participate in the registration of conveyance deed.
REAL ESTATE REGULATION AUTHORITY

In the manner SEBI regulates stock market, RBI regulates banks, IRDA regulates insurance sector in the same
manner RERA regulates the real estate sector.
Till the time RERA is formed the Appropriate Government shall by an order designate the secretary of the
housing department of State as RERA.
RERA is a Body Corporate having a perpetual succession, with the power of holding properties in its own
name.
RERA shall have one chairperson + 2 other members appointed by State Government on the recommendation
of selection committee.
The selection committee shall consist of :

(a) The Chief Justice of High Court or his nominee.
(b) Secretary of department of Housing of State Government
(c) Secretary of law department.

Qualification & Experience of a Chairperson & Member :
In case of Chairperson : 20 years experience
In case of Member : 15 years experience
In : Urban development, Housing, Real Estate, Infrastructure, Economics, Planning, Law, Public Affairs.
State Government officers shall not be appointed as chairperson unless they have held the position of
Additional Secretary or equivalent in the state government or Central Government. State Government
officers shall not be appointed as members unless they have held the position of Secretary or its equivalent in
the State Government or Central Government.
Term of Office :
The chairperson and the member shall hold the office for a period of 5 years or upto the age of 65 years
whichever is earlier and they are not eligible for reappointment.
A person who has any pecuniary or financial interest in the functions of RERA cannot be appointed as
chairperson or member of RERA.
The salary and allowances of chairperson & member shall as may be prescribed and the salary & allowances
cannot be changed to the disadvantage of chairperson & members.
The chairperson or member may also resign from their office by giving a notice of not less than 3 months in
writing.
They can also be removed u/s. 26.
If any vacancy arises in the office of chairperson or member such vacancy shall be filled within a period of 3
months from the date of vacancy.
Removal of Chairperson & the member – Section 26 :

In the following cases the Appropriate Government may remove the chairperson or member.
1. If he is adjudged as insolvent.
2. If he is convicted for an offence of Moral Turpitude
3. He has became physically or mentally incapable.
4. If he has acquired any financial interest in the matter which is pending before RERA.
No removal can be made unless enquiry has been made by the Judge of High Court in which chairperson or the
member should be informed about the charges and opportunity of being heard has to be given.
Restriction on Chairperson or Member :

The Chairperson or the member of RERA cannot take any employment with any party who was associated with
RERA in relation to functions of such chairperson or member. However this restriction does not apply when
appointment is made in Government department or PSU or Local Authorities.
The Chairperson or member after cessation of their office, can not deal in the matters, which they were
handling before cessation of their office.
The chairperson or member shall not give any information to any party which was received in his capacity as
chairperson or member.
Officers and employees :

Appropriate Government in connection with functions of RERA may appoint officers & employees.

Meeting of RERA :
The RERA shall meet at regular intervals and in the meeting the prescribed procedure shall be followed.
If the chairperson is not able to attend the meeting then any other member of RERA may act as chairperson.
RERA takes its decision by vote of majority and in case of equality of votes the chairperson can exercise
casting votes.
The RERA shall dispose off any matter which is referred to it, within 60 days of reference and if such matter is
not disposed reasons in writing are to be given.
Complaints :
Any party who is aggrieved by the act of promoter or real estate agent may file a complaint before RERA.
FUNCTIONS OF RERA FOR PROMOTION & DEVELOPMENT OF REAL ESTATE SECTOR

For growth & promotion of real estate sector the RERA shall make recommendation to State Government or
competent authority for :
(a) Protection of interest of allottees.
(b) Single window clearance for approval of real estate projects.
(c) Transparent Grievance Redressal System.
(d) Environment sustainable construction technique.
(e) Grading of Project
(f) Digitization of land records.
ADVOCACY & AWARENESS

Whenever the appropriate Government makes any policy for real estate, it may consult from the RERA & it
shall be the duty of RERA to provide its opinion within a period of 60 days from the date of receipt of order of
the Appropriate Government. The opinion given by RERA shall not be binding on the Appropriate
Government.
RERA shall also take steps to create awareness about the real estate issues provide trainings in real estate
issues & should also promote advocacy.
Functions of RERA :
1. Registration of Real Estate projects.
2. Maintenance of records of real estate projects, promoters and agents.
3. Maintain a website.
4. A database for public viewing of Real Estate project, promoters and Agents.
5. Recommendation to appropriate Government for growth & development of real estate project.
6. Taking fees from promoter, agents &allottees.
7. To resolve the grievance of allottees.
POWERS OF RERA TO CALL FOR INFORMATION & CARRY INVESTIGATIONS
RERA NE AGAR MANGI KOI JANKARI,

PROMOTER,ALLOTTEE OR AGENT KI HAI JANKARI DENE KI ZIMMEDARI!
RERA may call for information and record from any promoter, allottee and real estate agent. When such
information is called by RERA then it shall be the duty of the promoter, real estate agent & allottee to
provide such information within the time prescribed by RERA.
RERA also has the power that is vested to the civil courts by the code of Civil Procedure in the matters
relating to :
− Issuing summons to the parties.
− Imposing of penalty on promoter, agent or allottee.
− To examine any document or witness or oath.
− To order for search of the premises

− To accept & reject applications
− Other powers as may be prescribed.
If RERA is satisfied that any practice is followed in the market which may prevent the development of REAL
Estate Sector or if some promoter or real estate agent is abusing its monopolistic position, RERA may refer
such case to competition commission of India.
During the continuation of any proceeding, the RERA may also make interim order. If RERA is satisfied that
any person has made contravention or is likely to make contravention of this act or rules that are made under
the act, the RERA may restrain such act by passing an order and such order will have effect till the time
further enquiry is made.
Under this act, RERA may also issue directions from time to time to the promoters and such directions shall be
binding on the promoters.
RERA can make rules for the procedures that it will follow for deciding any case, however it has to follow the
principle of Natural Justice.
RECTIFICATION OF ORDERS PASSED BY RERA

Within a period of 2 years from the date of passing of order if any mistake is brought to the notice of RERA in
the order passed by it, RERA may amend such order. No amendment in the order shall be made if appeal is
made against the order.
RECOVERY OF INTEREST OR PENALTY & ENFORCEMENT OF ORDER

If any party fails to pay interest or penalty or compensation imposed by RERA within the time prescribed by
it, RERA may by an order specify that such amount will be recovered as a land revenue.
If the RERA asks any person to refrain from doing any act & if such person does not follow the order of RERA,
RERA may pass the order as prescribed.
RESPONSIBILITIES OF RERA
1. Registration of projects & agents.
2. Making of Rules.
3. Appointment of Adjudicating Officer.
4. Renewal of Registration.
5. Website.
6. Extension of Registration.
7. Recommendation to Appropriate Government of real estate sector.
CENTRAL ADVISORY COUNCIL

The Central Government may by a notification in the official Gazette can form a Central Advisory Council.
The Minister of Housing is the full time chairperson of the Central Advisory Council.
It has representatives of :
− RERA
− Ministry of Financial Affairs
− Housing Development Corporation
− Ministry of Industry & Commerce
− National Housing Bank
− Ministry of Consumer Affairs
− Niti Aayog
− Ministry of Urban Development
Maximum 10 members who will represent the interest of :
− Consumers

− Promoters
− Labours
− NGO
− Research Agencies.
The Central Advisory Committee advices the Central Government in relation to :
− Implementation of the Act
− Protection of Consumer interest
− Faster growth of Real Estate Sector
REAL ESTATE APPELLATE TRIBUNAL [REAT]

REAT is established by Appropriate Government. Each state should have one REAT, two or more states may
form one REAT, one state may have more than one REAT.
If any party is not satisfied with the decisions, given by RERA, it may within a period of 60 days from the date
of receipt of order of RERA file an appeal with REAT. REAT may also accept delayed appeal if a party was
prevented by a sufficient cause.
REAT has the power to pass orders including interim order.
If appeal before REAT is filed by the promoter then he has to deposit 30% of penalty or 100% of the
compensation to be paid to the allottee or both.
REAT shall endeavour to dispose off appeal within a period of 60 days from the date of acceptance of the
appeal & if appeal could not be disposed off in 60 days reasons are to be given in writing.
Composition of REAT :
One Chairperson
+ 1 Technical or administrative member
+ 1 Judicial member.
Qualification of Chairperson & Judicial Member :
1. The person who is or has been the Judge of the High Court.
2. A person who has been Member of Indian legal service & held the post of secretary or Advocate of 20
years & has experience in real estate matters or has held a judicial office in the territory of India for a
period of at least 15 years.
Qualification of Administrative or Technical Member :
A person who is well versed in the field of urban development Real Estate, Infrastructure, Economics, Public
Affairs, planning, law and 20 years experience in the above fields.
OR
Held the post of Additional Secretary or Equivalent with Central Government or State Government.
POWERS OF REAT
REAT is a quasi judicial body and has the same powers as granted by CPC which is exercised by RERA.
REAT may decide its own procedures for resolving the cases and is not bound by the procedures given in CPC,
however it shall abide by the principals of natural justice.
Legal Representation
Before the proceedings held by RERA or REAT, the parties may themselves appear or may be represented by
PCA or PCS or PCMA or by a legal Practicioner.
Orders Passed by REAT

The orders passed by REAT shall have the same effect as the decree passed by the civil courts, the REAT may
also transmit its order to any civil court that has the jurisdiction on the matter and such civil court shall
execute the orders passed by RERA, in the same manner as decree is executed by the Court.

Appeal to the High Court
The appeal against the orders passed by REAT the appeal shall lie in the High Court and any party may within
a period of 60 days from the date of recieivng the orders of REAT may file the appeal before the High Court,
the High Court may also accept the delayed appeals if the High Cout is satisfied that the party was prevented
by sufficient cause, however no appeal shall be filed against the orders passed with the consent of the
parties.
POWERS OF RERA AND REAT
RERA and REAT have the powers to regulate the residential as well as commercial projects.
ROLES OF CS UNDER RERA

1. The CS is legal expert and also has the expertise of making representation with various quasi judicial
bodies.
2. The PCS may represent promoters, allottees, real estate agent, before the RERA or REAT.
3. The PCS can also apply for registration and extension of the project.
4. The CS can also look on the taxation aspects of real estate projects.
5. The CS can also make documentations in relation to various aspects of the Act.
OFFECNCES, PENALTIES AND ADJUDICATION
Penalty for non registration of the project 10% of estimated cost of the project and if default
continues, additional 10% of estimated cost of the
project or 3 years imprisonment or both
Penalty under section 4 for providing wrong 5% of estimated cost of the project
information to RERA at the time of registering a
project
Penalty for violating other provisions of the Act 5% of estimated cost of the project
If the Real Estate Agent does not register Rs. 10000 for every day during which the default
continues and may extend to 5% of estimated cost of
plot or apartment sold or purchased through him
Penalty for non compliance of the order of REAT by 3 years Jail, or fine for every day which may
Promoter cumulatively amount to of 10% of estimated cost of
the project
Penalty for non compliance of the order of RERA by 1 year imprisonment or 10% of estimated cost of plot
Real Estate Agent or apartment sold or purchased through him
Penalty for non compliance of the order of RERA or 1 year imprisonment or fine for everyday which may
REAT by Allotee cumulatively amount to of 10% of the cost of
apartment or plot purchased by him.
Compounding of offences
Notwithstanding anything contained in the Code of Criminal Procedure, 1973, if any person is punished with
imprisonment under the Act, the punishment may, either before or after the start of the prosecution, be
compounded (setteled) by the court on such terms and conditions and on payment of such sums as may be
prescribed.
However the sum prescribed shall not, in any case, exceed the maximum amount of the fine which may be
imposed for the offence so compounded.
ADJUDICATION
For the purpose of determining compensation under the act in respect of the provisions relating to:
a) Obligations of promoter regarding veracity of the advertisement or prospectus
b) Return of amount and compensation
c) Rights and duties of allottees

The Authority shall appoint in consultation with the appropriate Government one or more judicial officer as
deemed necessary, who is or has been a District Judge to be an adjudicating officer for holding an inquiry in
the prescribed manner, after giving any person concerned a reasonable opportunity of being heard.
If any person, in respect of the above matters has filed a complaint before the Consumer Courts, such person
can withdraw the case from such courts and file an application before Authority.
The application for adjudging compensation shall be dealt with by the adjudicating officer as expeditiously as
possible and dispose of the same within a period of sixty days from the date of receipt of the application and
if the case is not disposed of in 60 days reasons are to be recorded in writing by Authority.
While holding an enquiry the adjudicating officer may call any person for providing information, who in the
opinion of adjudicating officer is familiar with facts and circumstances with case.
Bar of Jurisdiction
No civil court can entertain any matter which has to be decided by the RERA or REAT under the Act and the
injunction passed by the Civil Courts shall not be operative for the matters that are to be dealt by RERA and
REAT.
AGREEMENT TO SELL
THIS AGREEMENT OF SALE executed at …………………. On the ……………… day of ……………., …………………….. (………),
BETWEEN S, son of SF, resident of ………………………………………… hereinafter called Promoter of the one part.
AND
P son of PF resident of ……………………………………………………….. hereinafter called the Purchaser of the other part.
(Note: Vendor is the promoter and the purchaser is allottee)
WHEREAS the vendor is the sole and absolute owner of the property more fully set out in the Schedule
hereunder:
AND WHEREAS it is agreed that the vendor shall sell and the purchaser shall purchase the said property for the
sum of Rs. …………………………… (Rupees …………………………………………………………… only) free of all encumbrances.
NOW THIS AGREEMENT OF SALE WITNESSES AS FOLLOWS:
1) The price of the property more fully set out in the Schedule is fixed at Rs. ……………………………… (Rupees
…………………………………….. only) free of all encumbrances.
2) The purchaser has paid to the vendor this day the sum of Rs. ……………. (Rupees
……………………………………………………….. only) by way of earnest money for the due performance of the
agreement, the receipt of which the vendor doth hereby admit and acknowledge.
3) The time for performance of the agreement shall be ………………. Months from this, and it is agreed that
time fixed herein for the performance shall be the essence of this contract.
4) The purchaser shall pay to the vendor the balance sale price of Rs. ……… ………….. (Rupees
……………………………………………………………………………. Only) before registration of the sale deed.
5) The vendor agrees that he will deliver vacant possession of the property to the purchaser before
registration of the sale deed.
6) The vendor shall execute the sale deed in favour of the purchaser or his nominee as purchaser may
require.
7) If the purchaser commits a breach of the Agreement, he shall forfeit the earnest amount of Rs.
………………….. (Rupees ……………………………….. ………….. only) paid by him to the vendor.

8) If the vendor commits a breach of the Agreement, the vendor shall not only refund to the purchaser
the sum of Rs. ……………………. (Rupees …………………………………………….. only) received by him as earnest
money, but shall also pay to the purchaser an equal sum by way of liquidated damages.
IN WITNESS WHEREOF the parties herein under have signed this agreement on the date and year hereinabove
mentioned in the presence of the witnesses.
Witnesses:
1) Sign. :………………………………..
Name : ……………………………… Vendor
Add. : ……………………………….
2) Sign. :………………………………..
Name : ……………………………… Purchaser.
Add. : ……………………………….
Parcel: As per the Schedule attached to the Agreement of Sale.

CHAPTER – 14
BENAMI TRANSACTION
PROHIBITION ACT
INTRODUCTION
The act was passed with the intention of :-
− Acquisition of all the Benami properties by the authority established under the act.
− To prohibit the acquisition of Benami properties.
However the act could not be enforced properly due to the following limitations of the act :-
(a) There was no provision for vesting of the property in the government.
(b) The authorities under the act did not have the powers of the civil court to enforce its decision.
(c) No appellate mechanism.
(d) The Government did not have the power to make the rules.
However in order to avoid the above limitations the parliament passed Benami Transactions (prohibitions)
Act, 2016
SALIENT FEATURES OF THE ACT
a. Attachment and confiscation of Benami properties.
b. The authorities under the act are granted the powers of civil court.
c. The person who is found guilty of holding Benami properties may be punished up to 1 year – 7 year
imprisonment + fine up to 25% of market value of the property
d. The central government is granted the power to make the rules.
e. The act contains various penal provisions.
DEFINITIONS
▪ Attachment:
It includes the prohibition on transfer of property and disposition or movement of the property.
▪ Benami property:
It means a property which is a result of Benami transaction and it also includes the proceeds of such property.
▪ Benami transaction:
1) A transaction or arrangement:
− When the property is transferred to or held by a person and consideration of the property is given by
another person.
− When the property is held for immediate or future benefits of a person who has provided the
consideration, however when the property is held by following person it will not amount to Benami
transaction :-
(a) Karta or the member of HUF and the property is held for the benefits of HUF or for other family
members of HUF.
(b) A person who holds the property in the capacity of trustee, executor , director of the company,
depository or depository participant or any other person who holds the property in the Judiciary
capacity.
(c) A person being an individual in the name of his spouse or in the name of the child of such individual
when the consideration for such property is paid out of known sources.
(d) Any person in the name of his brother, sister or lineal ascendants or descendants and the name of the
individuals appear as joint owners and the consideration for the property is paid by known sources.

2) When the transaction in any property is done in fictitious name.
3) When the owner of the property is not aware of ownership.
4) When the person providing the consideration is not traceable.
5) When the possession of property is transferred under doctrine of part performance, such transfer shall not
amount to Benami transaction if :-
− Possession is transferred
− Stamp duty is paid
− Registration is done
▪ Benamidar:
It means a fictitious person or a person in whose name a Benami property is taken or transferred and also
includes a person who lends his name.
▪ Beneficial owner:
The person whether his identity is known or not known , for whose benefit the property is held by benamidar.
▪ Fair market value:
The price which the property will fetch in the market and if the market price is not available then the prices
which may be decided in the manner prescribed.
▪ Firm:
It means a partnership firm under Partnership Act and it includes LLP.
▪ Property:
It means any property whether moveable, immoveable, tangible, intangible , corporeal, incorporeal and
includes any rights or interest in the property including legal documents. And if the property is capable of
being converted into same other form, the such other form.
▪ Person:
It includes individual, HUF, company, firm, association of person , artificial person.
SECTION 3 : PROHIBITION OF BENAMI TRANSACTION
As per the section 3, no person shall enter into any Benami transaction. Whoever enters into Benami
transaction, shall be punishable with imprisonment up to 7 years and also may be liable to a fine of 25% of
fair market value of property.
SECTION 4: PROHIBITION OF THE RIGHT TO RECOVER PROPERTY HELD AS BENAMI
No suit or claim or any right can be enforced against the person in whose name Benami property was held or
against any other person by the person, who claims to be the real owner of the property.
Further no defence given by the person claiming to be the real owner of the property will be accepted in the
court on any ground.
SECTION 5: CONFISCATIONS
Any property which is subject matter of a Benami transaction shall be liable to be confiscated.
SECTION 6: PROHIBITION ON RE–TRANSFER BY BENAMIDAR
The benamidar shall not re-transfer the property to the beneficial owner or to any person who acts on behalf
of beneficial owner.
Even if such re-transfer is made, it will be null and void.
SECTION 24: NOTICE AND ATTACHMENT OF PROPERTY INVOLVED
If the initiating officer is satisfied that any person is a benamidar and holds a Benami property after
recording the reasons in writing a notice can be sent to benamidar and a copy of notice will be sent to
beneficial owner stating that why the property must not be treated as Benami property.
If initiating officer is satisfied that during the period of notice the property may be transferred, he may with
prior approval of approving authority , attach the property for a period not exceeding 90 days.
The initiating officer after making all the enquiries and after calling all the reports and evidences and after
considering all the relevant facts, shall within a period of 90 days from the date of notice :
a) Pass an order for continuation of attachment after the approval of approving authority, till the order is
made by the adjudicating authority
OR
b) Declare not to attach the property with the approval of adjudicating authority.

Within a period of 15 days from the date of passing of the order of further attachment, a statement of the
assets shall be drawn and sent to the adjudicating authority.
Initiating officer means the assistant commissioner or Deputy commissioner as per Income Tax Act, 1991.
MANNER OF SERVICE OF NOTICE:
Notice shall be served by post and the notice shall have the same effect as summon issued by civil court under
Civil Procedure Code, 1908.
The notice may be addressed to individual if the property is in individual’s name, managing partner in case of
a firm , karta in case of HUF, principal officer in case of company , principal officer in case of AOP , the
person who manages the affairs in case of any other association.
ADJUDICATION OF BENAMI PROPERTY
On the receipt of notice given by initiating officer, within a period of 30 days from the date of receipt of
notice the adjudicating authority shall issue a notice to the following person:
✓ Benamidar
✓ Beneficial owner
✓ Any interested party including bank
✓ A party who makes claim over the property.
The above persons shall be given 30 days time to produce documents.
If the property is held in joint names then the notice shall be sent to all the joint owners. Notice shall not
become invalid on the ground that it is not sent to any one of the joint owners.
After receiving a reply and making enquiries and considering all the evidences , the adjudicating authority
shall issue an opportunity of being heard to benamidar , initiating officer and other claimants of the property.
The adjudicating authority may pass an order declaring the property to be a Benami property or for making an
attachment of Benami property.
If the adjudicating authority is satisfied that the property which is referred to him by initiating officer is a
Benami property, in this case the adjudicating authority by recording reasons in writing give a judgement
which is best in his opinion.
If during the proceedings before adjudicating authority the adjudicating authority believes that the property
other than property referred to him by initiating officer is also a Benami property, then the adjudicating
authority can pass an order of provisional attachment.
(The order will have the effect as if it were passed by initiating officer)
During the proceedings the adjudicating authority may add or remove the name of any person whose name is
falsely added or whose name does not appear in the proceedings before adjudicating authority.
The adjudicating authority shall pass it’s order within a period of one year from the date when the case was
referred to the adjudicating authority.
The adjudicating authority shall comprise of one chair person and two other members as appointed by central
government for different territories.
SECTION 27: CONFISCATION AND VESTING OF PROPERTY
If the adjudicating authority confirms the attachment made by the initiating officer, then after providing the
opportunity of being heard to the concerned parties the adjudicating authority will pass an order for
confiscation of properties. However the order of confiscation shall be subject to the appeal made before
appellate tribunal.
The provisions of confiscation shall not apply to a party who has acquired the property in good faith without
the notice of Benami transaction.
After passing of order of confiscation the property shall vest in the central government , no compensation will
be paid to any interested person , all the encumbrances on the property shall come to an end and no claim
shall lie to the central government.
The central government may by notification in official gazette appoint administrations to take such measures
as central government directs.
Upon his appointment the administration shall send the notice of vacation of the property to the persons who
are residing in the property and such person shall vacant the property within a period of 7 days from the date
of notice.
If no vacation is made then the administrator can take assistance of police officer.
APPELLATE TRIBUNAL

The central government is empowered to constitute an appellate tribunal to hear appeals against the orders
passed by adjudicating authority.
To create the appellate tribunal the central government will issue a notification in the official gazette. The
members and the chairperson of the appellate tribunal will also be appointed by central government.
The appellate tribunal is vested with all the powers that are vested in civil courts by CPC and it can regulate
its own procedure for deciding any case, however it has to follow the principle of natural justice.
APPEAL TO HIGH COURT:
If any party is not satisfied to the decision given by appellate tribunal then within a period of 60 days from
the date of receiving the decision of appellate tribunal appeal may be preferred to high court.
In appeal before high court, discussion will be made only on question of law involved in the case and the
respondent shall not be allowed to argue on any point except question of law.
However the high court can also admit any other question not formulated on the question of law, if the high
court believes it to be a question relating to the case.
The High Court may decide any issue :
a) Which has not been determined by the appellate tribunal.
OR
b) Which has wrongly been determined by the appellate tribunal.
SPECIAL COURTS
ACT KE ANDAR JAIL BHIJWANE,

KA KAM SPECIAL COURT HI KAREGA!
The central government in consultation with the chief justice of India designate one or more court as special
courts for the purpose of the offences punishable under the act and such court will be formed/ designated by
issuing notification in the official gazette.
Special courts shall not try any offence unless a complaint in writing is made by :
a) Adjudicating authority
b) Any other officer who is authorised in writing by central government or state government.
The special court shall endeavour to resolve a case within a period of 6 months form the date of complaint.
Apart from the offences given in the act, the special court shall also try the offences for which accused may
be guilty under CRPC.
OFFENCES AND PROSECUTION
If any person enters in to a Benami transaction:
✓ To defeat law
✓ To avoid the payment of statutory dues
✓ To avoid the payment of creditors
✓ A person who induces other person to enter in to a Benami transaction.
The person who is proved guilty for the above acts shall be punishable with :-
a) Imprisonment for a period of upto 7 years
(+)
b) Fine upto 25% of fair market value of the property
If any person provides false information under the act such person shall be liable for:
a) Imprisonment for 6 months to 5 years
(+)
b) Fine upto 10% of fair market value of property
No prosecution under this act shall be commenced without the approval of board formed by central
government.
Que: State the provisions regarding prohibition and punishment for "Benami Transactions given under the
Benami Transactions (Prohibition) Act, 1988.
OFFENCES BY COMPANIES
In case the offence under the act is committed by a company , every person in charge of and responsible for
affairs of management will be liable for punishment under this act , however if such person proves that the
offence was committed without his knowledge , he will not be liable for punishment.

CHAPTER – 15
PREVENTION OF MONEY
LAUNDERING ACT,
WHAT IS MONEY LAUNDERING?

− Money laundering is the process of converting black money which is result of illegal sources into white
money.
− Through money laundering the illegal money which can be a result of smuggling, terrorism, illegal arms
dealings, prostitution rings, drugs trafficking is taken away from its origin & such money is brought into
the normal channels of economy. The money laundering process takes place into 3 stages:
− Section 3 of the Prevention of Money Laundering Act, 2002 states that whosoever directly or indirectly
attempts to commit or knowingly helps or knowingly is a party or actually involved in any process or
activity connected with the proceeds (money) of crime including its concealment, possession, acquisition
or use and claiming that, it is an pure property shall be guilty of offence of money laundering.
− Section 4 provides that any person who commits the offence of money laundering shall be punishable with
rigorous imprisonment for a term which shall not be less than three years but which may extend to seven
years and also liable to fine.
− However, where the proceeds of crime involved in money laundering relates to any offence specified
under the Narcotic Drugs and Psychotropic Substances Act, the punishment may extend to rigorous
imprisonment for ten years.
• In this stage of money laundering the money

launderer introduces his illegal profit into financial
system by breaking uplarge amounts of cash into
Placement small, small sums & such small sums are deposited
directly into bank account or monitory instruments
are purchased which are collected & then transferred
to different locations.
• When funds have entered into the economy

through placement the 2nd stage begins, the
Layering launderer enters into the series of financial
transactions. He invest such money into shares,
securities, fixed deposits, etc.
• After successful processing of criminal profits

through the first 2 stages of money laundering
process, the launderer integrates such money into
Integration the economy. The launderer sells his investment
made under stage of layering & invest his money
into real estate, luxury assets or in the business
ventures.
Intermediary
The term intermediary under sub-section 1(n) of Section 2 has been defined as to mean a stock broker, sub-

broker, share transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, merchant
banker, underwriter, portfolio manager, investment advisor, and any other intermediary associated with
securities market and registered under Section 12 of the SEBI Act, 1992 or an association recognised or
registered under the Forward Contracts (Regulation) Act, 1952 or any member of such association;
intermediary registered by the Pension Fund Regulatory and Development Authority; a recognised stock
exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956.
Money Laundering
Section 3 of the Act states that whosoever directly or indirectly attempts to indulge or knowingly assists or
knowingly is a party or actually involved in any process or activity connected with the proceeds of crime
including its concealment, possession, acquisition or use and projecting or claiming it is an untainted
property shall be guilty of offence of money laundering.
Section 4 provides that any person who commits the offence of money laundering shall be punishable with
rigorous imprisonment for a term which shall not be less than three years but which may extend to seven
years and also liable to fine. However, where the proceeds of crime involved in money laundering relates
to any offence specified under the Narcotic Drugs and Psychotropic Substances Act, the punishment may
extend to rigorous imprisonment for ten years.
THE PROCESS OF MONEY LAUNDERING HAS FOLLOWING DISADVANTAGES ON ECONOMY

1) Wrong calculation of GDP.
2) Losing of taxation revenue by the government.
3) Through money laundering purchasing power of people increases which results into inflation.
4) The source of money which is used for money laundering is a criminal source & when such money is easily
converted into white money it encourages people to commit more & more crimes.
5) As money laundering though international sources takes place without help of authorized dealer, so the
foreign reserves of the country are also affected.
6) If affects social & economic welfare of the country.
GLOBAL INITIATIVES FOR PREVENTION OF MONEY LAUNDERING

Many conventions (programmes) like Vienna convention, European Union money laundering directive have
taken place to prevent money laundering
FINANCIAL ACTION TASK FORCE (FATF)

The main international body engaged in taking efforts
to counter (stop) or prevent money laundering is FATF.
FATF is setup by the government of G-7 countries. The
main tasks of FATF are following:
a) Making rules and regulations for combating money
laundering and recommending the policies for the
prevention of money laundering.
a) Checking the progress of
member nations in applying rules made under FATF to
prevent money laundering.
b) Reviewing money laundering techniques & preventive measures.
c) Co-ordinating with non-member countries for prevention of money laundering.
UNITED NATIONS GLOBAL PROGRAMME AGAINST MONEY LAUNDERING

Office of the Drug Control and Crime Prevention implement this programme against Money Laundering with a
view to increase the effectiveness of international action against money laundering.
The programme encompasses following three areas of activities, providing various means to states and
institutions in their efforts to effectively combat money laundering:

(1) Technical cooperation is the main task of the Programme. It encompasses activities of creating awareness,
institution building and training.
(2) The research and analysis aims at offering States Key Information to better understand the phenomenon
of money laundering and to enable the international community to devise more efficient and effective
countermeasure strategies.
(3) The commitment to support the establishment of financial investigation services for raising the overall
effectiveness of law enforcement measures.
THE VIENNA CONVENTION

This was a convention held by United Nation. It was the meeting of all UN members in Vienna.
In this convention it was agreed by all the member of united nation that the laundering of money from drug
trafficking will be criminalized.
It promotes co-operation between the member states in the investigations.
It also provides that the domestic bank secrecy policies will not be applicable in the international criminal
investigations.
The Vienna Convention came out with following conclusions:
1) The activity of drug trafficking will be declared as a Criminal Act.
2) International co-operation in the investigations relating to Money Laundering.
3) The local bank secrecy laws will not apply to international investigations
COUNCIL OF EUROPE CONVENTION

→ It is a group of European Union.
→ Council of European Union has also taken steps to counter money laundering.
→ The following steps are taken by the Council of European Union to prevent money laundering:
(a) Co-operation between the members as well as the non-members in the measures to prevent money
laundering.
(b) In the members country of European Union the activity of drug trafficking will be criminalised.
(c) Attachment of the property or the money which is result of money laundering.
(d) Co-operation in the financial investigation.
The conclusion made out of the convention was:
(a) This convention establishes a Common policy on money laundering.
(b) The Convention lays down the principal for international co-operation between the members, which may
also include the state outside the Europe.
(c) Investigative Co-operation, Assistance in Investigation, search, seizure, confiscation of the all the money
that is result of criminal activities or drug trafficking etc, are the basic objectives of convention.
EUROPEAN MONEY LAUNDERING DIRECTIVE

− Due to the cross border liberalization policy new opportunities have been generated in European Union.
− To control this tremendous increase in money laundering situation the Council of Ministers called a
meeting & issued their directives to the members of European Union.
− In the year 1991 these directives were issued by Council of European Communities.
− The directive requires:
1) The every member states have to forbid money laundering.
2) The financial institutions & internal control system should be established to combat money laundering.
3) The Banks should have to maintain all the records of the transactions entered with the customers for a
period of previous 5 years.
4) Reporting of the suspicious transactions.
BASEL COMMITEES STATEMENT OF PRINCIPLES
− The Basel Committee also

suggested principles for prevention of money laundering.
− Banks of all the member
countries of United Nations are required to follow
principles of Basel Committee.
− These principle Includes:
(a) Norms/rules for customer
identification & Customer Verification.
(b) Every bank shall support the law enforcement agencies e.g. SEBI, CBI etc.
(c) Maintenance of records of transactions made by client & also reporting of the same.
RESOLUTION OF THE INTERNATIONAL ORGANISATION OF SECURITIES COMMISSION

IOSCO adopted a resolution encouraging its members to take step to prevent money laundering in the
securities and future markets
ATTACHMENT OF PROPERTY INVOLVED IN MONEY LAUNDERING – Section 5
Section 5 of the Act authorises the Director or any officer not below the rank of Deputy Director authorised by
him and who has reason to believe on the basis of material in his possession that any person is in possession of
any proceeds of money laundering; such person has been charged of having committed a scheduled offence
and such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may

result in frustrating any proceedings relating to confiscation of such proceeds of crime to, provisionally attach
by order in writing such property for a period not exceeding 180 days from the date of the order.
The said provisional attachment does not debar the person who has the possession of the property from
enjoying the same but the said person is prohibited from creating any third party interest in the said
property.
The Director or any other officer who provisionally attaches any property is required to forward a copy of the
order along with material in his possession to the Adjudicating Authority immediately and thereafter required
to file, within a period of thirty days from such attachment file a complaint, stating the facts of such
attachment before the Adjudicating Authority.
Que: State the provisions relating to attachment, seizure and confiscation of property under the Money
Laundering Act, 2002.
ADJUDICATING AUTHORITY
Section 6 empowers the Central Government to appoint by a notification one or more persons not below the
rank of Joint Secretary to the Government of India as Adjudicating Authority to pass orders under the act.
ADJUDICATION – Section 8
Step 1 On receipt of the complaint from the Director or any other officer who has made a provisional
attachment of the property the Adjudicating Authority may issue a 30 days notice to such party
& ask the party to state reasons as to why the property should not be considered as a property
generated through money laundering & be declared as the property of the Government
Step 2 If the property has been held jointly then notice will be given to all the persons.
Step 3 If the adjudicating authority is not satisfied by the reply given by the party then after giving an
opportunity of being heard the Adjudicating Authority declares the property as property of
Central Government & on such declaration all encumberances or leases on the property shall
come to an end, and the Adjudicating Authority will issue an order in writing for confirming the
attachment and the attachment and retention shall continue for a period of maximum 365 days
or during the pendency of proceedings before appropriate Court in India or outside India and
the attachment order will become final after the order of confiscation is passed by Special
Court.
In the period of 365 days, investigation is conducted and case is put before special courts so
that final order of confiscation is passed.
for the purpose of counting 365 days the period during which an investigation is stayed by
special court shall be excluded from 365 days.
After the confirmation of provisional order of attachment the director shall take the possession
of the property.
If the special court after trial finds that the property is the result of money laundering then by
an order it shall declare that the property stands forfeited to the Central Government.
where on conclusion of a trial under this Act, the Special Court finds that the offence of money
laundering has not taken place or the property is not involved in money-laundering, it shall
order release of such property to the person entitled to receive it.
where the trial under this Act cannot be conducted by reason of the death of the accused or
the accused being declared a proclaimed offender (bhag gaya) or for any other reason if trial
could not be concluded, the Special Court shall, on an application moved by the Director or a

person claiming to be entitled to possession of a property in respect of which an order has
been passed (confirmation of provisional attachement), pass appropriate orders regarding
confiscation or release of the property, as the case may be, involved in the offence of money-
laundering after having regard to the material before it.
where a property stands confiscated to the Central Government, the Special Court, may also
direct the Central Government to restore such confiscated property or part of the proeprty of a
claimant who has legal right in the property, who may have suffered a quantifiable loss as a
result of the offence of money laundering.
However the Special Court shall not consider such claim unless it is satisfied that the claimant
has acted in good faith and has suffered the loss in spite of having taken all reasonable
precautions and is not involved in the offence of money laundering.
It should be noted that the Special Court may, if it thinks fit, consider the claim of the
claimant for the purposes of restoration of such properties during the trial of the case in such
manner as may be prescribed
VESTING OF PROPERTY IN CENTRAL GOVERNMENT

Section 9 of the act provides that if any property of any person is confiscated then title and rights in respect
of such property will be transferred to central government.
However if there is any charge on such confiscated property then adjudicating authority shall give an
opportunity of being heard to such interested party and pass the order.
If in the enquiry it is found that such charge is created to defeat the provisions of the act then such charge
will be declared to be void.
OBLIGATION OF BANKING COMPANIES, FINANCIAL INSTITUTIONS AND INTERMEDIARIES
Chapter IV of the Act deals with obligations of Banking companies, financial institutions and intermediaries.
Section 12 requires every banking company, financial institution and intermediary to maintain a record of
transactions, the nature and value of which may be prescribed, whether such transactions comprise of a
single transaction or a series of transactions legally connected to each other, and when such series of
transactions take place within a month.
This information is required to be furnished to the Director within such time as may be prescribed. Banks and
financial institutions are required to verify and maintain the records of the identity of all its clients, in such
manner as may be prescribed.
The Central Government may, by notification, exempt any reporting entity or class of reporting entities from
any obligation under this Chapter.
The records as mentioned above are required to be maintained for a period of ten years from the date of
cessation of the transactions between the clients and the banking company, financial institution or
intermediary. Section 13 states that the Director may, either on his own motion, or on an application made by
any authority, officer, or person, call for records of all transactions and make such inquiry or cause such
inquiry to be made, as he thinks fit.
In the course of any inquiry, if the Director finds that a banking company, financial institution or an
intermediary or any of its officers has failed to maintain or retain records in accordance with the provisions of
the Act, he may, by an order, levy a fine on such banking company, financial institution or intermediary which
shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure.
Section 15 empowers the Central Government to prescribe, in consultation with the Reserve Bank of India,
the procedure and the manner of maintaining and furnishing information for the purpose of implementation of
the provisions of the Act.

SUMMON, SEARCHES AND SEIZURES
Section 16, provides that if any offence is committed then it empowers person to enter any place within the
geographical jurisdiction assigned to him.
As per, Section 16(3), the person authorised has to mark the records inspected by him.
Section 17 empowers authority to search and seizure.
Further he must also make extract of such records inspected, make inventory of property verified and also
take a statement from such persons who are useful or reference to the proceeding under the Act.
Section 18 authorises any person or authority on behalf of central government by special or general order to
search any person who has committed offences under the Act.
Section 19 – Arrest of Persons
1. If The director, deputy director, assistant director or any other officer who is
authorized by Central Government believes (after recording reasons in writing)
that any person is or has been the guilty of the offence relating to this act
(pmla), he may arrest such person and the arrested person must as soon as
possible must be informed the grounds or reasons for his arrest.
2. After the arrest The director, deputy director, assistant director or any other
officer who is authorized by Central Government, shall immediately after the
arrest forward the copy of arrest order along with all the material (evidences)
in his possession to adjudicating authority in the sealed envelop and the
adjudicating authority shall keep the material in its possession for the
prescribed period.
3. The person who has been arrested shall be produced before the chief judicial
magistrate or the metropolitan magistrate having the jurisdiction within 24
hours of arrest excluding the time of travel.
RETENTION OF THE PROPERTY AND RECORDS

Section 20 and Section 21 of the act provides that property and records seized under section 17 or section 18
or it is frozen under section 17(1A) respectively and the authorised officer has a reason to believe that such
property must be retained by the authority. (authorised officer) then such property may be retained by the
authority for not more than 180 days from the date of seizer or frozen.
The copy of the order of retention or continuing of the period of freezing passed by the officer (who is
authorised by director) shall be forwarded to adjudicating authority in a sealed cover.
The power to pass order retention of the property or record lies with the adjudicating authority and before
passing the order he shall satisfy that the property or record seized were involved in money laundering.
After the completion of period of retention the property will be returned to the person from whom the
property was seized, if the Adjudicating Authority is satisfied that the property was not the result of money
laundering.
Even after passing of the order of release of seized property by the adjudicating authority or the Court, the
authorised officer may withhold the property for 90 days if Director or the officer authorised by director is of
the opinion that, such property is relevant for filing appeals.
Section 21 deals with retention of records.

(1) Where any records have been seized, under section 17 or section 18 or frozen under sub-section (1A)
of section 17 and the Investigating Officer or any other officer authorised by the Director in this

behalf has reason to believe that any of such records are required to be retained for any inquiry
under this Act, such records may if seized, be retained or if frozen, may continue to remain frozen,
for a period not exceeding one hundred and eighty days from the day on which such records were
seized or frozen, as the case may be.
(2) The person, from whom records seized or frozen, shall be entitled to obtain copies of records.
(3) On the expiry of the period specified under sub-section (1), the records shall be returned to the
person from whom such records were seized or whose records were ordered to be frozen unless the
Adjudicating Authority permits retention or continuation of freezing of such records beyond the said
period.
(4) The Adjudicating Authority, before authorising the retention or continuation of freezing of such
records beyond the period specified in sub-section (1), shall satisfy himself that the records are
required for the purposes of adjudication under section 8.
(5) After passing of an order of confiscation or release under sub-section (5) or subsection (7) of section
8 or Section 58B, the Adjudicating Authority shall direct the release of the records to the person from
whom such records were seized.
(6) Where an order releasing the records has been made by the Court, Adjudicating Authority under
section 21(5), the Director or any officer authorised by him in this behalf may withhold the release of
any such record for a period of ninety days from the date of such order, if he is of the opinion that such
record is relevant for the appeal proceedings under the Act.
Presumption in Inter-connected Transactions
Section 23 of the Act deals with presumption in inter-connected transactions and provides that where
money laundering involves two or more transactions and one or more such transactions is or are proved to
be involved in money laundering, then for the purposes of adjudication or confiscation under Section 8, it
shall be presumed that the remaining transactions form part of such interconnected transactions, unless
otherwise proved to the satisfaction of the Adjudicating Authority.
Appellate Tribunal
Section 25 empowers the Central Government, to establish an Appellate Tribunal to hear appeals against
the orders of Adjudicating Authority and other authorities under the Act. Further appeal from the orders of
the Appellate Tribunal would lie to the High Court under Section 42 of the Act.
SPECIAL COURTS
Section 43(1) empowers the Central Government to designate, in consultation with the Chief Justice of the
High Court, one or more Courts of Session as Special Courts or Court for such area or areas or for such case or
class or group of cases as may be specified in the notification, for trial of offence relating to money
laundering.
The Special Courts may try an offence on the Complaints made by the officers authorised under this Act.
PUNISHMENT FOR CONTRAVENTION

According to Section 45 of the Act, in spite of anything contained in the Code of Criminal Procedure, 1973, A
person accused of an offence under this Act shall not be
released on bail or on his own bond unless the Public Prosecutor (sarkari vakeel) has been given an
opportunity to oppose the application for such release + if the Public Prosecutor opposes the application of
release on bail,
The court is satisfied that there are reasonable grounds for believing that the accused is not guilty of such
offence and that the accused will not commit any offence while on bail.

A person, who, is under the age of sixteen years, or is a woman or is sick or infirm, and is accused either on
his own or along with other co-accused of money-laundering and of less than one crore rupees, may be
released on bail, if the Special Court so directs.
The Special Court shall not take cognizance (notice or sangan in hindi) of any offence punishable under
section 4 (money laundering) until a complaint in writing is made by (i) the Director, or any officer of the
Central Government or a State Government authorised in writing by the Central Government by a general or
special order made by Central or State Government.
The limitation on granting of bail specified in is in addition to the limitations under the Code of Criminal
Procedure, 1973 or any other law for the time being in force on granting of bail.
No police officer can not carry any kind of investigation under this Act unless he is authorised by Central
Government.
Power of Central Government to Issue Directions
Section 52 empowers the Central Government to issue, from time to time, such orders, instructions and
directions to the authorities as it may deem fit for the proper administration of this Act. The authorities and
all other persons employed in execution of the Act have been put under obligation to observe and follow
such orders, instructions and directions of the Central Government. However, no such orders, instructions
or directions shall be issued so as to require any authority to decide a particular case in a particular manner
or interfere with the discretion of the Adjudicating Authority in exercise of his functions.
AGREEMENT WITH FOREIGN STATES

Section 56 empowers the Central Government to enter into an agreement with the Government of any
country for enforcing the provisions of the Act and also for exchange of information for the prevention of any
offence under the this Act or under the corresponding law in force in that country or investigation of cases
relating to any offence under the Act.
If the CG receives any request from any of the Contracting states regarding investigation of any offence under
this Act, with proper evidences, the CG may forward such request to the special court constituted by it.
Attachment, Seizure and Confiscation of Property, etc.
Section 60(1) provides that where the Director has made an order for attachment of any property under
Section 5 or for freezing under sub-section (1A) of section 17 or where an Adjudicating Authority has made
an order relating to a property under section 8 or where a Special Court has made an order of confiscation
relating to a property under sub-section (5) or sub section (6) of section 8 and such property is suspected to
be in a contracting state, the Special Court on an application by the Director or the Administrator appointed
under Section 10(1) as the case may be, may issue a letter of request to a court or an authority in the
contracting state for execution of such order.
Section 60(2) prescribes that where a letter of request is received by the Central Government from a court
or an authority in a contracting State requesting attachment, seizure, freezing or confiscation] of the
property in India, derived or obtained, directly or indirectly, by any person from the commission of an
offence under a corresponding law] committed in that contracting State, the Central Government may
forward such letter of request to the Director, as it thinks fit, for execution in accordance with the
provisions of this Act.
Section 60(2A) states that where on closure of the criminal case or conclusion of trial in a criminal court
outside India under the corresponding law of any other country, such court finds that the offence of
money-laundering under the corresponding law of that country has been committed, the Special Court shall,
on receipt of an application from the Director for execution of confiscation under sub-section (2), order,
after giving notice to the affected persons, that such property involved in money-laundering or which has
been used for commission of the offence of money-laundering stand confiscated to the Central Government.
Reciprocal Arrangements for Processes and Assistance for Transfer of Accused Persons

Section 59(1) prescribes that where Special Court, in relation to an offence punishable under Section 4
desires that a summon to an accused person; or a warrant for the arrest of an accused person; or a
summon to any person requiring him to attend and produce a document or other thing, or to produce a
document or other things or to produce it; or a search warrant issued by it, shall be served or executed at
any place in any contracting state, it shall send such summons or warrant in duplicate in such form, to such
court, Judge or Magistrate through such authorities as the Central Government may by notification, specify
in that behalf and that court, Judge or Magistrate, as the case may be, shall cause the same to be
executed.
Sub-Section (2) stipulates that where a Special Court, in relation to an offence punishable under Section 4
has received for service or execution, summon to an accused person; or a warrant for the arrest of an
accused person; or a summon to any person requiring him to attend and produce a document or other
things or to produce it; or a search warrant; issued by a court, Judge or Magistrate in a contracting State, it
shall cause the same to be served or executed as if it were a summon or warrant received by it from
another court in the said territories for service or execution within its jurisdiction.
Where a warrant of arrest has been executed, the person arrested shall, so far as possible be dealt with in
accordance with the procedure specified under Section 19 and where a search warrant has been executed,
the things found in the search shall so far as possible be dealt with in accordance with the procedure
specified under Section 17 or 18.
However, where a summon or search warrant received from a contracting state has been executed, the documents or
other things produced or things found in the search shall be forwarded to the court issuing the summon or search
warrant through such authority as the Central Government may by notification specify in this behalf.
SUMMONS OR WARRANTS BY SPECIAL COURTS

The warrant or summons issued by the special court under the act shall also be effective in the contracting
states and such summons or warrants will be enforced by the courts of the contracting states.
The summons or warrants enforced by the contracting states shall have the same effect as if they were issued
by the courts of contracting states.
When the summons or warrants will be enforced, the courts of contracting states are also authorised to freeze
the records of such person in the manner given under PMLA.
All the records or documents received by the contracting state shall be forwarded to the state that has issued
summons or warrants.
KYC NORMS
1. RBI issued master circular on KYC norms.
2. The objective of KYC norms is to take measures to control financing of terrorism.
3. The policy aims to prevent the banks for being used whether intentionally or unintentionally by criminals
for money laundering or terrorist financing activities.
4. According to the policy bank should collect adequate information from the customers relating to his
identity and proof of residence.
5. Banks should ensure that any transfer of fund by DD/mail or telegraphic transfer and issue a traveller’s
cheque for value of Rs.50000 and above is effected by debit to the customer’s account or against cheques
and not against cash payment.
6. Banks should frame their KYC policies incorporating the following four key elements:
(a) Customer Acceptance Policy;
(b) Customer Identification Procedures;
(c) Monitoring of Transactions; and
(d) Risk Management.
7. Customers means:-
a) A person or entity that maintains an account and/or has a business relationship with the bank;
b) One on whose behalf the account is maintained (i.e. The beneficial owner);

c) Beneficiaries of transactions conducted by professional intermediaries, such as stock brokers,
chartered accountants, solicitors etc. As permitted under the law, and
d) Any person or entity connected with a financial transaction which can pose significant reputational or
other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single
transaction.
8. Banks are required to maintain all necessary information in respect of transactions to permit
reconstruction of individual transaction, including the following information:
a) The nature of the transactions;
b) The amount of the transaction and the currency in which it was denominated;
c) The date on which the transaction was conducted; and
d) The parties to the transaction
9. Reporting to Financial Intelligence Unit – India
In terms of the PMLA Rules, banks are required to report information relating to cash and suspicious
transactions and all transactions involving receipts by non-profit organisations of value more than rupees
ten lakh or its equivalent in foreign currency to the Director, Financial Intelligence Unit-India (FIU-IND) in
respect of transactions.
10. The Central Government is empowered to freeze funds and other financial assets which are held by the
individuals or entities or any other person engaged in or suspected to be engaged in terrorism and prohibit
any individuals or entity from making any funds, financial assets for the benefits of the individuals or
entities listed in the schedule (schedule includes terrorism activities)
Obligations which have been imposed upon the banks to remain cautious under the Prevention of Money
Laundering Act, 2002 and also to preserve and maintain the below records:
1. To follow KYC procedures.
2. The information for opening of account provided by customers must be kept
confidential.
3. Banks to ensure compliance with FCRA, 2010.
4. The transactions data of client must be maintained in such a manner that it is
easily retrievable whenever requested by Competent Authorities.
5. The residential and identity proofs and other documents provided by the clients are
to be properly preserved.
6. Special attention to be paid to suspicious transcations.
INTRODUCTION OF NEW TECHNOLOGIES – CREDIT CARDS/DEBIT CARDS/ SMART CARDS/GIFT CARDS

Banks should pay special attention to any money laundering threats that may arise from new or developing
technologies including internet banking .
Many banks are engaged in the business of issuing a variety of Electronic Cards that are used by customers for
buying goods and services, drawing cash from ATMs, and can be used for electronic transfer of funds.
Banks are required to ensure full compliance with all KYC/AML/CFT guidelines issued from time to time, in
respect of add-on/ supplementary cardholders also. Further, marketing of credit cards is generally done
through the services of agents.
Banks should ensure that appropriate KYC procedures are duly applied before issuing the cards to the
customers. It is also desirable that agents are also subjected to KYC measures.
FREEZING OF ASSETS UNDER SECTION 51A of UNLAWFUL ACTIVITIES (PREVENTION) ACT, 1967
This law gives power to the CG to seize, freeze or attach the funds or financial assets or economic resources
which are held by a person or for benefit of any person who is engaged or suspected to be engaged in
terrorism and such person can also be prohibited from transferring or dealing with such assets.
QUESTION AND ANSWER

▪ Financial Action Task Force (FATF)
The main international body engaged in taking efforts to counter (stop) or prevent money laundering is
FATF. FATF is setup by the government of G-7 countries. The main task of FATE are following :

a) Checking the progress of members nation progress in applying rules made under FATF to prevent
money laundering.
b) Reviewing money laundering techniques & preventive measures.
c) Co-ordinating with non-member countries for prevention of money laundering.
▪ Impact of money laundering on development

In India, to prevent money laundering activities, the Prevention of Money Laundering Act, 2002 was
passed.
Section 3 of the Prevention of Money Laundering Act, 2002 states that whosoever directly or indirectly
involved in any process or activity connected with the proceeds of crime including its concealment,
possession, acquisition or use and projecting or claiming it is an untainted property shall be guilty of
offence of money laundering.
The following impact of money laundering on development:
1) Wrong calculation of GDP.
2) Losing of taxation revenue by the government.
3) Through money laundering purchasing power of people increases which results into inflation.
4) The source of money which is used for money laundering is a criminal source & when such money is
easily converted into white money it encourages people to commit more & more crimes.
5) As money laundering though international sources takes place without help of authorized dealer, so
the foreign reserves of the country are also affected.
6) It affects social & economic welfare of the country.
▪ Summon, searches and seizures

Section 16, provides that if any offence is committed then it empowers person to enter any place within
the geographical jurisdiction assigned to him.
Section 16(3) the person authorised has to mark the records inspected by him. Further he must also make
extract of such records inspected, make inventory of property verified and also take a statement from
such persons who are useful or reference to the proceeding under the Act.
Section 18 authorises any person or authority on behalf of central government by special or general order
to search any person who has committed offences under the Act.
▪ Retention of the property and records

Section 20 and Section 21 of the act provides that property and records seized under section 17 or section
18 or it is frozen under section 17(1A) respectively and the authorised officer has a reason to believe that
such property must be retained by the authority.
Then such property may be retained by the authority for not more than 180 days from the date of seizer
or frozen.
The copy of the order of retention or continuing of the period of freezing shall be forwarded to
adjudicating authority in a sealed cover.
The power to pass order retention of the property or record lies with the adjudicating authority and
before passing the order he shall satisfy that the property or record confiscated was involved in money
laundering
After the completion of period of retention the property will be returned to the person from whom the
property was confiscated.
▪ Special courts
Section 43(1) empowers the Central Government to designate, in consultation with the Chief Justice of
the High Court, one or more Courts of Session as Special Courts or Court for such area or areas or for such
case or class or group of cases as may be specified in the notification, for trial of offence relating to
money laundering.
▪ Agreement with foreign states

Section 56 empowers the Central Government to enter into an agreement with the Government of any
country for enforcing the provisions of the Act and also for exchange of information for the prevention of
any offence under the this Act or under the corresponding law in force in that country or investigation of
cases relating to any offence under the Act.
If the CG receives any request from any of the Contracting states regarding investigation of any offence
under this Act, with proper evidences, the CG may forward such request to the special court constituted
by it.
▪ Punishment for contravention

The offences committed under this act shall be cognizable and the offences that are punishable for more
than 3 years under the Act, in respect of such offences, no bail shall be granted unless an application is
given to public prosecutor.
No police officer can not carry any kind of investigation under this Act unless he is authorised by CG.
▪ Summons or warrants by special courts

The warrant or summons issued by the special court under the act shall also be effective in the
contracting states and such summons or warrants will be enforced by the courts of the contracting states.
The summons or warrants enforced by the contracting states shall have the same effect as if they were
issued by the courts of contracting states.
When the summons or warrants will be enforced, the courts of contracting states are also authorised to
freeze the records of such person in the manner given under PMLA.
All the records or documents received by the contracting state shall be forwarded to the state that has
issued summons or warrants.

CHAPTER – 16
INTELLECTUAL PROPERTY
RIGHTS
INTRODUCTION
• As the term intellectual property relates to the creations of human mind and human intellect, this
property is called Intellectual property.
• Creators can be given the right to prevent others from using their inventions, designs and to use that
right to negotiate payment in return for others using them. These are Intellectual Property Rights.
• Intellectual Property is the Property, which has been created by exercise of Intellectual Faculty.
• Thus Intellectual Property refers to creation of mind such as inventions, designs for industrial articles,
literary, artistic work, symbols which are ultimately used in commerce.
• The legal privileges granted to the inventor or creator to safeguard his invention or creativity for a
predetermined amount of time are known as intellectual property rights (IPR).
• Since it gives the inventor or creator of an IP an exclusive right to exploit his invention or product for
a specific length of time, IPR is a powerful weapon for protecting investments in time, money, and
effort.
REGULATORY FRAMEWORK
NATURE OF INTELLECTUAL PROPERTY

• Intangible Rights over Tangible Property: IP’s intangibility is the primary characteristic that sets it
apart from other types of property. When works are exploited for commercial purposes, it enables
the creators or owners to profit from their creations.
• Right to sue: IP is a property right, it can be inherited, purchased, gifted, sold, licenced, entrusted,
or pledged. They also have the legal right to sue anyone who uses their innovation without their
permission and to be compensated.
• Rights and Duties: The owner of the IP has the sole authority to create, copy, sell, and otherwise
exploit the work. Additionally, there is a negative right that bars others from using their statutory
rights.
• Coexistence of different rights: In relation to a specific function, various IPR kinds may coexist. For
instance:-
i. An image of an innovation might be copyrighted and the invention itself might be patented.
ii. A design may be included in a trademark and may also be protected under the Design Act.
• Exhaustion of rights: The doctrine of exhaustion generally applies to intellectual property rights.
Exhaustion fundamentally means that after the first sale made by the right holder that person’s right
expires and he is no longer permitted to halt the movement of the goods moving forward.
• Dynamism: New things are being added to the IPR scope and the scope of its protection is being
enlarged in accordance with the demands of scientific and technical advancement. Biopatents,
Software Copyrights, and Plant Diversity Protection are few examples of recent advancements in the
IPR area.
NEED OF INTELLECTUAL PROPERTY
• Every invention involves labour, time, and resources.

• Therefore, it is important to acknowledge and honour a creator’s
• intellectual works.
• In 1967, the World Intellectual Property Organization (WIPO) was founded as a UN body.
SCOPE OF INTELLECTUAL PROPERTY
• There are two methods for classifying IP as either copyright or industrial property.
• Patents or inventions, trademarks, trade names, biodiversity, plant breeding rights, are all examples
of industrial properties.
• A novel creation, procedure, tool, or product is considered to be an invention.
• Copyright protects the expression of ideas that are distinct from patents.
The General Agreement on Trade in Services (GATS)
• The General Agreement on Trade in Services (GATS) is the first ever collection of legally binding,
multinational regulations governing global trade in services.

• The GATS functions on three levels, similar to the accords on goods:
1) the primary text, which contains basic principles and obligations;
2) annexes, which deal with rules for particular sectors; and
3) individual nations’ explicit commitments to allow access to their markets.
• GATS provides a fourth special element list that identifies the instances where the most-favored-
nation principle of non-discrimination is not currently being followed by a country.
• The two key pillars that support the GATS’ contribution to global services trade are
(a) increasing the openness and predictability of pertinent rules and regulations and
(b) fostering progressive liberalisation through subsequent rounds of talks.
WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO)
• The United Nations organisation devoted to using intellectual property as a tool to foster innovation
and creativity is known as the World Intellectual Property Organization (WIPO)
• In 1974, the Organization was designated as a specialised agency of the UN. The WIPO’s main office
is in Geneva. It is committed to creating a fair and open worldwide intellectual property (IP) system
that encourages innovation, rewards creativity, and advances economic growth while protecting the
general welfare.
• In order to establish and unify laws and procedures for the protection of intellectual property rights,
WIPO serves as a platform for its Member States. Additionally, WIPO provides global patent filing
services as well as global registration services for trademarks, industrial designs,
• The World Intellectual Property Organization works to advance the growth and application of the
global intellectual property system by:
i. Services - run systems which make

it easier to obtain protection
internationally for patents,
trademarks, designs and
appellations of origin, and to
resolve IP disputes.
ii. Law - develop the international

legal IP framework in line with
society’s evolving needs.
iii. Infrastructure - build collaborative

networks and technical platforms to
share knowledge and simplify IP
transactions, including free
databases and tools for exchanging
information.
iv. Development - build capacity in

the use of IP to support economic
development.

Legal Frameworks under WIPO
1. Patent Cooperation Treaty (PCT): The Paris Convention’s Patent Cooperation Treaty (PCT) enables
public access to technical data pertaining to inventions while also assisting applicants in securing
patent protection for their ideas on a global scale. Applicants are able to concurrently apply for
protection of an innovation in a large number of nations by submitting a single worldwide patent
application under the PCT.
2. Madrid Agreement: The Madrid Agreement, set forth the rules for the Madrid System for the
International Registration of Marks. The method enables the protection of a mark across a wide range
of nations.
3. Vienna Agreement: For marks that are composed of figurative features, the Vienna Agreement
creates an International Classification of the Figurative Elements of Marks known as the Vienna
Classification.
4. Nice Agreement: Regarding the International Classification of Goods and Services for the Registration
of Marks, the Nice Agreement came into force.
5. Locarno Agreement: The Locarno Agreement creates the Locarno Classification, an international
classification system for industrial designs.
6. WIPO Copyright Treaty (WCT): A particular agreement under the Berne Convention known as the
WIPO Copyright Treaty (WCT) deals with the protection of works and the rights of their authors in the
digital sphere.
7. WIPO Performances and Phonograms Treaty (WPPT): (WPPT) deals with the rights of two categories
of beneficiaries:
(i) performers (actors, singers, musicians, etc.); and
(ii) manufacturers of phonograms (persons or legal entities that have responsibility for the fixation of
sounds).
8. WIPO Intergovernmental Committee : WIPO Intergovernmental Committee is engaging in text-based

negotiations to find a text that will effectively protect traditional knowledge (TK), traditional cultural
expressions (TCEs), and genetic resources (GRs).
9. Standing Committee on Copyright and Related Rights (SCCR): (SCCR) was established to look into
issues of substantive law or harmonisation in the area of copyright and related rights.
10. Hague System/Agreement: Through the submission of a single international application, the Hague
System for the International Registration of Industrial Designs offers a useful commercial option for
registering up to 100 designs in 74 contracting parties spanning 91 countries.
11. Lisbon System/Agreement: By using a single registration process and a single set of costs, the Lisbon
System for the International Registration of Appellations of Origin and Geographical Indications
provides a way to secure protection for an appellation of origin or a geographical indication in the
contracting parties.

TRADE-RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS (TRIPS)
• The TRIPS Agreement is essential for facilitating intellectual property trade, settling intellectual
property trade disputes, and giving WTO members the freedom to pursue their own national goals.
• The Agreement formally acknowledges the importance of the connections between intellectual
property and trade. That was accomplished by the Uruguay Round.
• The TRIPS Agreement is an attempt to put these rights under common international law and to close
the gaps in how they are safeguarded and upheld globally.
• It provides minimal requirements for enforcement and protection of intellectual property owned by
citizens of other WTO members by each government.
• WTO countries have a great deal of flexibility under the TRIPS Agreement to customise their
methods to IP protection and enforcement to meet their needs and realise public policy objectives.
• The Agreement gives members plenty of leeway to strike a balance between the long-term
advantages of encouraging innovation and the potential short-term costs of restricting access to
works of creative genius.
• The TRIPS Agreement addresses the following topics:
i. How general rules and fundamental ideas of the global trading system apply to international
intellectual property?
ii. What are the minimum protection criteria for intellectual property rights that members should
offer?
iii. What mechanisms should members offer to defend those rights in their home countries?
iv. Specific interim framework for resolving intellectual property disputes
v. Special transitional arrangements for the implementation of TRIPS provisions.
THE CONCEPT OF INTELLECTUAL PROPERTY
The term “intellectual property” refers to works produced by the human mind and intellect.
INDUSTRIAL PROPERTY
• Industrial property is a kind of intellectual property and relates to creation of human mind, e.g.,
inventions and industrial designs.
• Simply stated, inventions are new solutions to technological problems, and industrial designs are
aesthetic creations determining the appearance of industrial products. In addition, industrial
property includes trademarks, service marks, commercial names and designations, including
indications of source and appellations of origin, and the protection against unfair competition.
• Industrial property right is a collective name for rights referring to the commercial or industrial
activities of a person. These activities may include the activities of industrial or commercial
interests. They may be called inventions, creations, new products, processes of manufacture, new
designs or model and a distinctive mark for goods etc.
• A person’s commercial or industrial activities are covered by a group of rights known as industrial
property rights.

PATENT
• A patent is a monopoly award that gives the inventor control over the output and, up to a certain
point in the demand curve, the price of the patented goods.
• The patent system’s primary economic and commercial justification is that it encourages investment
in industrial innovation. The upkeep and expansion of a country’s stock of valuable, transferable,
and industrial assets are both facilitated by innovative technologies.
• An innovation, such as a product or a technique that gives a novel approach to a problem or a new
technical solution, is given an exclusive right known as a patent.
• For the duration that the invention is shielded by a patent, the patent holder has the authority to
decide who may or may not use the invention. The owner may provide licence to exploit the
innovation under mutually agreeable terms.
• From the day the patent application was submitted, the patent is valid for 20 years. After a patent
expires, the invention is no longer protected and becomes part of the public domain, meaning that
the owner no longer has the sole right to use the invention.
TRADE MARK
• A trade mark tries to safeguard both the interests of the trader and the customer by differentiating
the items of one manufacturer or trader from comparable goods of others.
• A trademark can be any combination of words, characters, numbers, symbols, or devices showing
images of people, animals, or both.
• A trademark acts as an effective form of advertising for the goods and their quality since it denotes
the relationship between the merchant and the items during the course of commerce.
COPYRIGHT
• The idea of Copyright protection only began to emerge with the invention of printing, which made it
for literary works to be duplicated by mechanical processes instead of being copied by hand.
• Copyright as the name suggests arose as an exclusive right of the author to copy the literature
produced by him and stop others from doing so
• Thus, the copyright deals with the rights of intellectual creators in their creation. It is also
concerned with virtually all forms and methods of public communication, not only printed
publications but also with such matters as sound, and television broadcasting, films for public
exhibition etc. and even computerised systems for the storage and retrieval of information.
• In 1999, the Copyright Act, 1957 has been amended to give effect to the provisions of Article 14 of
the TRIPs agreement providing term of protection to performers rights at least until the end of a
period of 50 years from the end of the calendar year in which performance took place.
INDUSTRIAL DESIGNS

• Industrial designs belong to the aesthetic field, but are at the same time intended to serve as
pattern for the manufacture of products of industry or handicraft.
• An industrial design is the aesthetic aspect of a useful article, which must appeal to the sense of
sight and may consist of the shape and/or pattern and/or colour of article.
• An industrial design to be protectable, must be new and original. Industrial designs are protected
against unauthorised copying or limitation, for a period which usually lasts for five, ten or fifteen
years.
• The first designs legislation enacted in India was the Patterns and Designs Protection Act, 1872.
• The Inventions and Designs Act, 1898, which consolidated and amended the law relating to the
protection of inventions and designs. The (British) Patents and Designs Act, 1907, became the basis
of the Indian Patents and Designs Act, 1911.
• The new Designs Act, 2000 has been passed by the Parliament.
Geographical Indication (GI)
• Geographical Indicator is that part of industrial property that designates a nation or a location
within it as the nation or place of origin of that product.
• Such a name typically carries a guarantee of quality due to the fact that it originated in the
specified geographical place, region, or nation.
• A GI identifies a product’s origin, which could be a village or town, a region, or a nation.
• Geographical Indications are covered by Articles 22 to 24 of the WTO Agreement on TRIPS.
• Ex: Darjeeling tea, Chanderi sarees, Kanchipuram silk sarees, Alphanso Mango, Nagpur orange, and
Kolhapuri (Chappal)
TRADE SECRET
• A trade secret is a method, practise, procedure, design, instrument, pattern, or collection of

information that is not widely known or easily discoverable and through which a company might gain
a competitive edge over rivals or clients.
• An enterprise may gain a competitive edge from secret business information. Sales techniques,
distribution strategies, consumer profiles, marketing plans, client and supplier lists, production
procedures, and advertising strategies are all examples of trade secrets.
• A trade secret can be preserved indefinitely, but there must be a significant amount of secrecy,
making it difficult to obtain the information unless inappropriate means are used.
NATIONAL INTELLECTUAL PROPERTY RIGHTS POLICY
• The Indian government has provided the exclusive right of intellectual property to safeguard the
originality of inventors’ works.

• This intellectual property contains rights centred on copyright, patents, trademarks, trade names,
industrial designs, and merchandise.
• The privileges granted to individuals over the works of their imaginations are known as intellectual
property rights.
• Typically, they grant the creator a limited time, exclusive permission to utilise his or her works.
• The National Intellectual Property Rights Policy was put into place to encourage innovation, enhance
the business climate, and make it easier to commercially utilise intellectual property. The Policy is
in accordance with India’s proclamation that this decade is the “Decade of Innovation”.
• The Policy places a special emphasis on spreading knowledge about IPRs and emphasising their value
as a marketable financial asset and a tool for the economy.
• IPR Policy focus on:
i. Improving access to healthcare, food security, and environmental protection, among other areas of
critical social, economic, and technological importance.
ii. fostering creativity and innovation and thereby promote entrepreneurship and enhance socio-
economic and cultural development.
The Policy outlines seven goals, The goals are briefly discussed below:
1. IPR Awareness: Outreach and Promotion

2. Generation of IPRs
3. Legal and Legislative Framework: To have strong and effective IPR laws.
4. Administration and Management: To modernize and strengthen service oriented IPR
administration.
5. Commercialization of IPR - Get value for IPRs through commercialization.
6. Enforcement and Adjudication - For combating IPR infringements.
7. Human Capital Development - To strengthen and expand human resources, institutions and
capacities for teaching, training, research and skill building in IPRs.

CHAPTER – 17
LAW RELATING TO PATENTS
INTRODUCTION
The term ‘Patent’ acquired a statutory meaning in India under the Patents Act, 1970.
A Patent is a statutory right for an invention granted for a limited period of time to the patentee
by the Government, in exchange of full disclosure of his invention for excluding others, from making,
using, selling, importing the patented product or process for producing that product for those purposes
without his consent.
Patent is a monopoly grant and it enables the inventor to control the output and within the limits set by
demand, the price of the patented products.
Patents are given to promote innovations & developments and to ensure that these creations got
recognition commercially without delay;
PATENTS
Section 2(1) (m) of the Patents Act, 1970, defines the term patent as to mean a patent for any invention
granted under Patents Act.
An invention is considered as new (novel), if it is not anticipated by prior publication

in patent and non-patent literature, i.e., an invention is novel if it has not been
disclosed in the prior art, where the prior art means everything that has been
published, presented or otherwise disclosed to the public before the date of filing/
priority date of complete specification. An invention is considered as novel, if it has
not been anticipated by prior use or prior public knowledge in India.
Bishwanath Prasad Radhey Shyam v. Hindustan Metal Industries,
• It was held by the Hon’ble Supreme Court of India that the object of Patent law is to
encourage scientific research, new technology and industrial progress.
• A limited-time grant of the only right to own, use, or sell a patented product
encourages development of new commercially useful inventions.
• The disclosure of the invention to Patent Office, which becomes public domain after a
predetermined duration of the monopoly, is the cost of the monopoly grant.
ADVANTAGES OF PATENTS

1. Patentee have the complete rights to restrict outsider. He has absolute power to utilize his invention and
all his rights are very much ensured under the Act.
2. The patentee has a privilege to file the suit for encroachment of his patent and can ask for remedies
like, Injunction, compensation and a settlement of profit.
3. Patentee can commercially exploit his creation and in this way the patentee can likewise wins benefit
along these lines.
4. The holder of the exclusive permit can also avail the rights given to the patentee and can bring a suit if
there should arise an occurrence of any encroachment of Patent.
5. A patentee gets the privilege to make changes in or alterations of an invention
What can be Patented?
An invention relating either to a product or process that is new, involving inventive step
and capable of industrial application can be patented.
Sec 2 (1) (j) : Invention as to mean a new product or process involving an inventive step and capable of
Industrial application. Capable of industrial application, in relation to an invention, means that the
invention is capable of being made or used in an industry.
Sec 2 (1) (l) :The term new invention as to mean any invention or technology which has not been
anticipated by publication in any document or used in the country or elsewhere in the world before the
date of filing of patent application with complete specification, i.e. the subject matter has not fallen
into public domain or that it does not form part of the state of the art.
Raj Prakash v. Mangat Ram Choudhary,:
• It was held that inventive creation is to discover something or find something not
found by anybody previously.
• The fundamental thing is that the creator was first to embrace it.
• The main issue is that each basic creation is asserted, as in the form of novelty or new
character, it will be considered as an invention.
WHAT ARE NOT INVENTIONS
The following are not inventions within the meaning of Section 3 of the Act:
1. An invention which is frivolous or which is contrary to well established natural laws,
2. An invention the use of which could be contrary to public order or morality, causing prejudice to human,
animal or plant
3. The mere discovery of a scientific principle or the formulation of an abstract theory,
4. The mere discovery of a new form of a known substance which does not result in the enhancement of the
known efficacy of that substance or mere new use for a known substance,
5. A substance obtained by a mere admixture resulting only in the aggregation of the properties of the
components,

6. mere arrangement or duplication of known devices each functioning independently of one another in a
known way;
7. A method of agriculture or horticulture,
8. Any process for the medicinal, surgical or other treatment of human beings,
9. Plants and animals in whole or part thereof (including seeds, biological process for production of plant &
animal)
10. A mathematical or business method or a computer programme per se or algorithms,
11. A literary, dramatic, musical or artistic work or any other aesthetic creation whatsoever including
cinematographic works and television productions,
12. Method of playing game,
13. A presentation of information.
14. topography of integrated circuits;
15. an invention which in effect, is duplication of known properties of traditionally known component.
SECTION 4 prohibits the grant of patent in respect of an invention relating to atomic

energy
After analysing the legislative history of Section 3(d), the Hon‘ble Supreme Court in the
matter of Novartis AG Vs. Union of India, commented,
• “We have, therefore, no doubt that the amendment/addition made in section 3(d) is
meant especially to deal with chemical substances, and more particularly
pharmaceutical products.
• The amended portion of section 3(d) clearly sets up a second tier of qualifying
standards for chemical substances/ pharmaceutical products in order to leave the door
open for true and genuine inventions but, at the same time, to check any attempt at
repetitive patenting or extension of the patent term on spurious grounds.
• It was also held that patent applicants must prove the increase in therapeutic efficacy
and just increased bioavailability alone may not necessarily lead to an enhancement of
therapeutic efficacy, and in any given case, enhanced efficacy must be specifically
claimed and established by research data.
What are the Criteria of Patentability?
An invention is patentable subject matter if it meets the following criteria:
i. It should be novel.
ii. It should have inventive step or it must be non-obvious.
iii. It should be capable of Industrial application.
iv. It should not attract the provisions of section 3 and 4 of the Patents Act, 1970.
PERSONS ENTITLED TO MAKE APPLICATION FOR PATENT
An application for a patent for an invention may be made by any of the following persons, that is to say:

1. By any person claiming to be the true and first inventor of the invention,
2. By any person being the assignee of the person claiming to be the true and first inventor,
3. By the legal representative of any deceased person who immediately before his death was entitled
to make such an application.
FORM OF APPLICATION AND PROVISIONAL & COMPLETE SPECIFICATION
1. Section 7 dealing with form of application requires every application for a patent to be made for one
invention only.
2. Where the application is made by virtue of an assignment of the right to apply for a patent for the
invention, there shall be furnished with the application proof of the right to make the application.
3. Every international application under the Patent Cooperation Treaty (PCT) for a patent, as may be filed
designating India shall be deemed to be an application under the Act, if a corresponding application has
also been filed before Controller in India.
4. The filing date of such application and its complete specification processed by patent office as
designated office shall be the international filing date accorded under the PCT.
What is the Patent Cooperation Treaty (PCT)?
• The PCT is an international treaty with more than 150 Contracting States which are
bound with certain formal requirements set out in the Treaty and Regulations.
• The PCT makes it possible to seek patent protection for an invention simultaneously in
a large number of countries by filing a single international patent application instead
of filing several separate national or regional patent applications.
• However, granting of patents remains under the control of the national or regional
patent offices.
5. Every such application, not being a convention application or an application filed under PCT designating
India, shall be accompanied by a provisional or a complete specification.
6. Section 9 stipulates that where an application for a patent is accompanied by a provisional

specification, a complete specification shall be filed within twelve months from the date of filing of
the application, and if the complete specification is not so filed, the application shall be deemed to be
abandoned.
7. Where two or more applications in the name of the same applicant are accompanied by provisional
specifications in respect of inventions of which one is a modification of another and the Controller is of
opinion that the whole of such inventions are such as to constitute a single invention and may properly
be included in one patent, he may allow one complete specification to be filed in respect of all such
provisional specifications.
8. However, the period of twelve months shall be reckoned from the date of filing of the earliest
provisional specification. Where an application for a patent is accompanied by a specification purporting
to be a complete specification, the Controller may, if the applicant so requests at any time within
twelve months from the date of filing of the application, direct that such specification shall be treated
as a provisional specification and proceed with the application accordingly.

9. Where a complete specification has been filed in pursuance of an application for a patent accompanied
by a provisional specification, the Controller may, if the applicant so requests at any time before the
grant of patent, cancel the provisional specification and post-date the application to the date of filing of
the complete specification.
When should an Application for a Patent be Filed?
An application for a patent can be filed at the earliest possible date and should not be
delayed. Delay in filing an application may entail some risks such as:
(i) some other inventor might file a patent application on the said invention and
(ii) there may be either an inadvertent publication of the invention by the inventor
himself/herself or by others independently of him/her.
GENERAL PROCEDURE
CONTENTS OF SPECIFICATIONS
Section 10 dealing with contents of Specifications whether provisional or complete, shall describe the
invention and begin with a title sufficiently indicating the subject matter to which the invention relates.
Every complete specification is required to:
1. Fully and particularly describe the invention and its operation or use and the method by which it is
to be performed,
2. Disclose the best method of performing the invention which is known to the applicant and for which
he is entitled to claim protection,
3. End with a claim or claims defining the scope of the invention for which protection is claimed,
4. Be accompanied by an abstract to provide technical information on the invention.
However, the Controller may amend the abstract for providing better information to third parties and if
the applicant mentions a biological material in the specification which may not be described in such a
way as to satisfy the above clauses and if such material is not available to the public, the application

shall be completed by depositing the material to an International Depository Authority and by fulfilling
the following conditions, namely:
i. The deposit of the material shall be made not later than the date of filing the patent application in
India and a reference thereof shall be made in the specification within the prescribed period,
ii. All the available characteristics of the material required for it to be correctly identified or indicated
are included in the specification including the name, address of the depository institution and the
date and number of the deposit of the material at the institution,
iii. Access to the material is available in the depository institution only after the date of the application
for patent in India or if a priority is claimed after the date of the priority,
iv. Disclose the source and geographical origin of the biological material in the specification, when used
in an invention.
How a Patent Specification is prepared?
• A patent specification can be prepared by:

i. the applicant himself or
ii. his registered and authorized agent.
• The patent specification generally comprises of the title of the invention indicating its
technical field, prior art, draw backs in the prior art, the solution provided by the
inventor to obviate the drawbacks of the prior art,
• a concise but sufficient description of the invention and its usefulness,
• details of best method of its working.
• The complete specification must contain at least one claim or statement of claims
defining the scope of the invention for which protection is sought for.
PUBLICATION OF APPLICATIONS
1. No application for patents shall ordinarily be open to public for such period as may be prescribed.
Sub-section (2) entitles an applicant to request the Controller to publish his application at any time
before the expiry of the period.
2. The Controller on receipt of such request shall publish such application as soon as possible.
3. The publication of every application shall include the particulars of the date of application, number
of application, name and address of the applicant identifying the application and an abstract.
4. Upon publication of an application for a patent, the depository institution shall make the biological
material mentioned in the specification available to the public.
5. The patent office may, on payment of prescribed fee make the specification and drawings, if any, of
such application available to the public.
6. On or from the date of publication of the application for patent and until the date of grant of a
patent in respect of such application, the applicant shall have the like privileges and rights as if a
patent for invention had been granted on the date of publication of application.
7. However, the applicant shall have no right to institute any proceedings for infringement until the
patent has been granted.
When is an Application for Patent Published?
Every application for patent is published after expiry of 18 months from the date of its

filing or priority date whichever is earlier. However, following applications are not
published.
i. Application in which secrecy direction is imposed.
ii. Application which has been abandoned u/s 9(1) and i.e. when a provisional application
has been filed and the complete application has not been filed with 12 months from
the filing of the provisional application.
iii. Application which has been withdrawn 3 months prior to 18 months.
REQUEST FOR EXAMINATION
• Sec 11B: No application for a patent shall be examined unless the applicant or any other interested
person makes a request in the prescribed manner for such examination within the prescribed period.
• In case the applicant or any other interested person does not make a request for examination of the
application for a patent within the specified period, the application shall be treated as withdrawn by
the applicant.
EXAMINATION OF APPLICATION
Sec 12: When the request for examination has been filed in respect of an application for a patent, the
application and specification and other documents related thereto shall be referred at the earliest by
the Controller to an examiner for making a report to him in respect of the following matters, namely:
1. Whether the application and the specification and other documents relating thereto are in accordance
with the requirements of the Act,
2. Whether there is any lawful ground of objection to the grant of the patent,
3. The result of investigations, and
4. Any other matter which may be prescribed.
SEARCH FOR ANTICIPATION BY PREVIOUS PUBLICATION AND BY PRIOR CLAIM
Sec 13: The examiner to whom the application for a patent is referred shall make investigation for the
purpose of ascertaining whether the invention so far as claimed in any claim of the complete
specification:
1. Has been anticipated by publication before the date of filing of the applicant’s complete
specification,
2. Is claimed in any claim of any other complete specification published on or after the date of filing of
the applicant’s complete specification.
CONSIDERATION OF THE REPORT OF EXAMINER BY CONTROLLER

In case the report of the examiner is adverse to the applicant and requires any amendment of the
application, specification or other documents, the Controller shall, before proceeding to dispose of the
application, communicate the gist of obligations to the applicant as expeditiously as possible and afford
him an opportunity of hearing.
POWER OF CONTROLLER TO REFUSE OR REQUIRE AMENDED APPLICATION
Section 15 empowers the Controller to refuse the application or to require the application, specification
or other documents to be amended, if he is satisfied that the application or any specification or any
other document filed in pursuance thereof does not comply with the provisions of the Act.
POWER OF CONTROLLER TO MAKE ORDERS RESPECTING DATING OF APPLICATION AND CASES OF

ANTICIPATION
1. At any time after the filing of an application and before the grant of the patent, the Controller may at
the request of the applicant direct that the application shall be post-dated to such date as may be
specified in the request and proceed with the application accordingly.
2. However, no application shall be post-dated to a date later than six months from the date on which it
was actually made or would be deemed to have been made.
3. Where an application or specification (including drawings) or any other document is required to be

amended under Section 15, the application or specification or other document shall, if the Controller so
directs, be deemed to have been made on the date on which the requirement is complied with or
where the application or specification or other document is returned to the applicant, the date on which
it is refiled after complying with the requirement.
4. Where it appears to the Controller that the invention so far as claimed in any claim of the complete
specification has been anticipated, he may refuse the application unless the applicant:
i. Shows to the satisfaction of the Controller that the priority date of the claim of his complete
specification is not later than the date on which the relevant document was published, or
ii. Amends his complete specification to the satisfaction of the Controller.
POTENTIAL INFRINGEMENT
• Patent infringement is the violation of the exclusive rights of the patent holder. The
Patents Act 1970, does not specifically define activities or situations that constitute
patent infringement.
• Section 48 of the Patents Act gives the patent holder/ patentee an ‘exclusive right’ to
exclude any third- party from making, using, offering, selling, manufacturing etc. the
patented invention/ product/ process, during the valid term of the patent.
• This essentially creates monopolistic rights over the patented invention/ product/
process.
• Thus, any activity which violates such a monopoly can be considered a patent
infringement.
• In cases of patent infringement, the patent holder has the right to sue the infringing
party to get relief and compensation for the damage caused. Sections 104-114 of the

Act provide certain guidelines relating to patent infringement.
Section 19 provides that if in consequence of the investigations it appears to the Controller that an
invention in respect of which an application for a patent has been made cannot be performed without
substantial risk of infringement of a claim of any other patent, he may direct that a reference to that
other patent, be inserted in the applicant’s complete specification by way of notice to the public within
such time as may be prescribed, unless:
1. The applicant shows to the satisfaction of the Controller that there are reasonable grounds for
contesting the validity of the said claim of the other patent, or
2. The complete specification is amended to the satisfaction of the Controller.
Where after a reference to another patent has been inserted in a complete specification in pursuance
of a direction under Section 19(1):
a) that other patent is revoked or otherwise ceases to be in force; or

b) the specification of that other patent is amended by the deletion of the relevant claim; or
c) it is found, in proceedings that claim of that other patent is invalid or not infringed by any
working of the applicant’s invention, the Controller may, on application, delete the reference to
that other patent.
SUBSTITUTION OF APPLICANTS
1. If, before a patent is granted, someone believes they have a right to it due to an assignment or written
agreement with the original applicant or because of the law, they can make a claim. If the Controller (a
patent authority) agrees with their claim, they can direct that the patent application continues in the
name of the person making the claim, or in the names of multiple claimants and the original applicant,
depending on the situation.
2. No such direction shall however, be given by virtue of any assignment or agreement made by one of the
two or more joint applicants for a patent except with the consent of the other joint applicant or
applicants.
3. Further, no such direction shall be given by virtue of any assignment or agreement for the assignment of
the benefit of an invention unless:
i. The invention is identified therein by reference to the number of the applications for the patent, or
ii. There is produced to the Controller an acknowledgement by the person by whom the assignment or
agreement was made that the assignment or agreement relates to the invention in respect of which
that application is made, or
iii. The rights of the claimant in respect of the invention have been finally established by the decision of
court, or
iv. The Controller gives directions for enabling the application to proceed or for regulating the manner in
which it should be proceeded.
4. Where one of the two or more joint applicants for a patent dies at any time before the patent has been
granted, the Controller may upon a request made by the survivor or survivors and with the consent of the

legal representative of the deceased direct that the application shall proceed in the name of the survivor
or survivors alone.
5. If any dispute arises between joint applicants for a patent whether or in what manner the application
should be proceeded with, the Controller may upon an application made by any of the parties, and after
giving to all parties concerned an opportunity of being heard, give such directions as he thinks fit for
enabling the application to proceed in the name of one or more of the parties alone or for regulating the
manner in which it should be proceeded with.
Time for Putting Application in Order for Grant
Section 21 provides that, application for a patent shall be deemed to have been abandoned unless, the
applicant complied within the prescribed period with all the requirements imposed on him under the
Act, whether :-
• In connection with the complete specification or otherwise in relation to the application from the
date on which the first statement of objections to the application or complete specification, or,
• Other documents related thereto is forwarded to the applicant by the Controller.
Explanation to section 21(1) clarifies that where application / specification / document filed as part of
the application has been returned to applicant by Controller in course of proceedings,
the applicant shall not be deemed to have complied with such requirements unless:
• he has re-filed it or
• proved that document could not be re-filed for reasons beyond his control
Section 21 (2) provides that if at expiration of period prescribed, an appeal to the High Court is pending;
the time within which the requirements of the Controller shall be complied with shall, on an application
made by applicant before expiration of prescribed period be extended until such date as the High Court
may determine.
In case, the time within which the appeal may be instituted has not expired, the Controller may extend
to such further period as he may determine.
However, in case an appeal filed during the said further period, and the High Court has granted
extension for complying with requirements of the Controller, then requirements may be complied within
the time granted by Court.
OPPOSITION TO THE PATENT
Section 25 of the Act deals with opposition to grant of patent and provides that where an application for
a patent has been published but a patent has not been granted, any person may, in writing, represent by
way of opposition to the Controller against the grant of patent on the following grounds:
1. That the applicant for the patent or the person under or through whom he claims, wrongfully
obtained the invention,
2. That the invention so far as claimed in any claim of the complete specification has been published
before the priority date of the claim,

3. That the invention so far as claimed in any claim of the complete specification is claimed in a claim
of a complete specification published on or after the priority date of the applicant’s claim and filed
in pursuance of an application for a patent in India, being a claim of which the priority date is
earlier than that of the applicant’s claim,
4. That the invention so far as claimed in any claim of the complete specification was publicly known
or publicly used in India,
5. That the invention so far as claimed in any claim of the complete specification is obvious and clearly
does not involve any inventive step,
6. That the subject of any claim of the complete specification is not an invention within the meaning of
this Act,
7. That the complete specification does not sufficiently and clearly describe the invention or the
method by which it is to be performed,
8. That the complete specification does not disclose or wrongly mention the source of geographical
origin of biological material used for the invention.
Any interested person to give notice of opposition, to the Controller in the prescribed manner at any
time after the grant of patent but before the expiry of a period of one year from the date of publication
of grant of a patent, on any of the following grounds only:
1. That the patentee wrongfully obtained the invention or any part thereof from him or from a
person under or through whom he claims,
2. That the invention so far as claimed in any claim of the complete specification has been
published before the priority date of the claim in any specification filed in pursuance of an application
for a patent made in India,
3. That the invention so far as claimed in any claim of the complete specification was publicly
known or publicly used in India before the priority date of that claim,
4. That the invention so far as claimed in any claim of the complete specification is obvious and
clearly does not involve any inventive step,
5. That the subject of any claim of the complete specification is not an invention,
6. That the complete specification does not sufficiently and clearly describe the invention.
7. That the complete specification does not disclose or wrongly mentions the source and
geographical origin of biological material used for the invention.
CONSTITUTION OF OPPOSITION BOARD AND ITS PROCEEDING
Where any such notice of opposition is duly given the Controller shall notify the patentee and constitute
a Board by order in writing to be known as the Opposition Board and refer such notice of opposition
along with the documents to that Board for examination and submission of its recommendation. The
Controller shall on receipt of the recommendation of the Opposition Board and after giving the patentee

and the opponent an opportunity of being heard, order either to maintain or amend or revoke the
patent.
Controller to Treat Application as Application of Opponent
Section 26: where in opposition proceeding, the Controller finds that the invention, was obtained from
the opponent in the manner set out in section 25(2)(a) and revokes the patent on that ground, he may,
on request, direct that the patent shall stand amended in the name of the opponent; or he may pass an
order that the specification be amended by the exclusion of that part of the invention.
Where opponent, before date of order of Controller requiring amendment filed an application for a
patent for an invention which included invention held to have been obtained from him, the Controller
may treat such application, as having been filed, for the purposes of the priority dates of claims of the
complete specification, but for all other purposes application shall be proceeded with as an application
for a patent.
RESIDENTS NOT TO APPLY FOR PATENTS OUTSIDE INDIA WITHOUT PRIOR PERMISSION
No person resident in India shall, except under the authority of a written permit sought in the prescribed
manner and granted by or on behalf of the Controller, make or cause to be made any application
outside India for the grant of a patent for an invention unless an application for a patent for the same
invention has been made in India, not less than six weeks before the application outside India the
Controller to dispose of every such application within the prescribed period.
However, if the invention is relevant for defence purpose or atomic energy, the Controller shall not
grant permit without the prior consent of the Central Government.
GRANT OF PATENTS
Where an application for a patent has been found to be in order for grant of the patent and either the
application has not been refused by the Controller by virtue of any power vested in him by the Act, or
the application has not been found to be in contravention of any of the provisions of the Act, the patent
shall be granted as expeditiously as possible to the applicant or, in the case of a joint application, to the
applicants jointly, with the seal of the patent office and the date on which the patent is granted shall be
entered in the register.
GRANT OF PATENTS SUBJECT TO CONDITIONS
Grant of patents subject to conditions provides that the grant of a patent shall be subject to the
conditions that:
1. Any machine, apparatus or other article in respect of which the patent is granted may be imported or
made by or on behalf of the Government for the purpose merely of its own use,
2. Any process in respect of which the patent is granted may be used by or on behalf of the Government
for the purpose merely of its own use,

3. Any machine, apparatus or other article in respect of which the patent is granted may be made or
used, and any process in respect of which the patent is granted may be used by any person, for
the purpose merely of experiment or research including the imparting of instructions to people,
and
4. In the case of a patent in respect of any medicine or drug, the medicine or drug may be imported
by the Government for the purpose merely of its own use or for distribution in any dispensary,
hospital or other medical institution maintained by or on behalf of the Government or any other
dispensary, hospital or other medical institution which the Central Government may, having regard to
the public service that such dispensary, hospital or medical institution renders, specify in this behalf
by notification in the Official Gazette.
Rights of Patentees
Patentee has exclusive right to prevent third parties
(a) from the act of making, using, offering for sale, selling or importing for those purposes that product
in India , without consent
(b) from the act of using that process, offering for sale, selling or importing the product obtained
directly by that process in India, without consent
What are the Rights of a Patentee once the Patent is Granted?
• A patentee enjoys the exclusive right to make and use the patented invention.
• The patentee also has the right to assign the patent, grant licences, or otherwise deal
with the patent, for any consideration.
• These rights, created by statute, are circumscribed by various conditions and
limitations as prescribed under the Patents Act, 1970.
TERM OF PATENT
1. The term of every patent which has not expired and has not ceased to have effect, on the date of
such commencement shall be 20 years from the date of filing of the application for the patent.
2. The term of patent in case of International applications shall be 20 years from the international
filing date accorded under the Patent Cooperation Treaty.
3. A patent shall cease to have effect notwithstanding anything therein or in the Act on the expiration
of the period prescribed for the payment of any renewal fee, if that fee is not paid.
4. On cessation of the patent right due to non-payment of renewal fee or on the expiry of the term
of patent, the subject matter covered by the said patent shall not be entitled to any protection.
PATENTS OF ADDITION
• Section 54, 55 and 56 deals with patents of addition.

• Section 54: where application is made for improvement or modification of main invention, the
Controller may, if the applicant so requests, grant the patent as a patent of addition.

Where an invention is being an improvement or modification of another invention, the Controller may, if
patentee so requests, revoke patent and grant a patent of addition in respect thereof.
A patent of addition shall not be granted before the grant of the patent for the main invention.
Section 55 deals with term of patents of addition.
Patent of addition is granted for a term equal to that of the patent for the main invention.
No renewal fees is payable, but if any patent becomes an independent patent the same fees shall
thereafter be payable, as if the patent had been originally granted.
Section 56 deals with validity of patents of addition.
Grant of a patent of addition shall not be refused and a patent granted as a patent of addition shall not
be revoked or invalidated, on the ground that the invention claimed in the complete specification does
not involve inventive step or any improvement in or modification of the main invention, and the validity
of a patent of addition shall not be questioned on the ground that the invention ought to have been
independent patent.
Ravi Kamal Bali v/s Kala Tech and others, the Bombay High Court dismissed the
defendant‘s arguments that Patent of addition can only be granted if it has an inventive
RESTORATION OF LAPSED PATENTS
Section 60 provides that where a patent has ceased to have effect by reason of failure to pay any
renewal fee within the period prescribed the patentee or his legal representative may within eighteen
months from the date on which the patent ceased to have effect, make an application for the
restoration of the patent.
PROCEDURE FOR DISPOSAL OF APPLICATIONS FOR RESTORATION OF LAPSED PATENTS
1. If, after hearing the applicant in cases where the applicant so desires, the Controller is prima facie
satisfied that the failure to pay the renewal fee was unintentional and that there has been no undue
delay in the making of the application, he shall publish the application in the prescribed manner, and
within the prescribed period, any person interested may give notice to the Controller of opposition
thereto on either or both of the following grounds that:
i. the failure to pay the renewal fee was not unintentional, or
ii. there has been undue delay in the making of the application.
2. If notice of opposition is given, the Controller shall notify the applicant, and shall give to him and to the
opponent an opportunity to be heard before deciding the case.
3. If no notice of opposition is given within the prescribed periodnor if in the case of opposition, the
decision of the Controller is in favour of the applicant, the Controller shall, upon payment of any unpaid
renewal fee and such additional fee as may be prescribed, restore the patent.
RIGHTS OF PATENTEES OF LAPSED PATENTS WHICH HAVE BEEN RESTORED

Where a patent is restored, the rights of the patentee shall be subject to such conditions as may be
prescribed and to such other conditions as the Controller thinks fit to impose for the protection or
compensation of persons who may have begun to avail themselves of, or have taken definite steps by
contract the patented invention between the date when the patent ceased to have effect and the date
of the publication of the application for restoration of the patent. No suit or other proceeding shall be
commenced or prosecuted in respect of an infringement of a patent committed between the date on
which the patent ceased to have effect and the date of the publication of the application for restoration
of the patent.
SURRENDER AND REVOCATION OF PATENTS
The patentee to offer to surrender his patent, at any time by giving notice to the Controller. The
Controller shall publish the offer in the prescribed manner and also notify every person other than the
patentee whose name appears in the register as having an interest in the patent. Any person interested
may give notice of opposition to the Controller and where such notice in given the Controller shall notify
the patentee. If the Controller is satisfied after hearing the patentee and any opponent, if desirous of
being heard, that the patent may properly be surrendered, he may accept the offer and by order revoke
the patent.
GROUNDS FOR REVOCATION OF PATENTS
A patent may be revoked on any of the following grounds:
1. Where an invention as claimed in a valid claim of earlier priority date which is included in the
complete specification of another patent granted in India,
2. Where the patent application was filed by a person who is not entitled under the provisions of the
Act,
3. Where the patent was wrongfully obtained,
4. When the subject of a claim of the complete specification is not an invention,
5. Where the invention that is being claimed is not new having regard to what was publicly known,
6. Where the invention that is claimed is obvious and lacks any inventive step,
7. Where the invention is not useful,
8. Where the invention and the method by which it is to be performed is not sufficiently and fairly
described by the complete specification,
9. Where a false suggestion or representation was made to obtain the patent,
10. Where the subject of any claim of the complete specification is not patentable
11. The invention that is being claimed was secretly used in India before the priority date of the claim,
12. Where information required u/s 8 has not been disclosed by the applicant or information furnished is
false to his knowledge;
13. Where the permission was obtained by fraud.
14. complete specification does not disclose wrong source

WORKING OF PATENTED INVENTIONS – GENERAL PRINCIPLES
In exercising the powers conferred for working of patents and compulsory licences, regard shall be had
to the following general considerations, namely:
1. That patents are granted to encourage inventions and to secure that the inventions are worked in
India on a commercial scale,
2. That they are not granted merely to enable patentees to enjoy a monopoly for the importation of
the patented article,
3. That the protection and enforcement of patent rights contribute to the promotion of technological
innovation and to the transfer and dissemination of technology, to the mutual advantage of
producers and users of technological knowledge and in a manner conducive to social and economic
welfare, and to a balance of rights and obligations,
4. That patents granted do not impede protection of public health and nutrition,
5. That patents granted do not in any way prohibit Central Government in taking measures to protect
public health,
6. That the patent right is not abused by the patentee,
7. That patents are granted to make the benefit of the patented invention available at reasonably
affordable prices to the public.
COMPULSORY LICENCES
Compulsory licenses are authorizations given to a third-party by the Controller General to make, use or
sell a particular product or use a particular process which has been patented, without the need of the
permission of the patent owner. This concept is recognised at both national as well as international
levels.
1. Section 84 provides that at any time after the expiration of three years from the date of the grant of a
patent, any person interested may make an application to the Controller for grant of compulsory licence
on patent on any of the following grounds, namely:
i. that the reasonable requirements of the public with respect to the patented invention have not been
satisfied, or
ii. that the patented invention is not available to the public at a reasonably affordable price, or
iii. that the patented invention is not worked in the territory of India.
2. An application for compulsory licence may be made by any person.
3. Every application for compulsory licence to contain a statement setting out the nature of the applicant’s
interest together with such particulars as may be prescribed and the facts upon which the application is
based.
4. The Controller on being satisfied that the reasonable requirements of the public with respect to the
patented invention have not been satisfied or the patented invention is not worked in the territory of

India or the patented invention is not available to the public at a reasonably affordable price, may grant
a licence upon such terms as he may deem fit.
5. In considering the application of compulsory licence, the Controller is required to take into account:
i. the nature of the invention,
ii. the ability of the applicant to work the invention to the public advantage,
iii. the capacity of the applicant to undertake the risk in providing capital and working the invention, if
the application were granted,
iv. as to whether the applicant has made efforts to obtain a licence from the patentee on reasonable
terms and conditions and such efforts have not been successful within a reasonable period.
6. It may be noted that above shall not be applicable in case of national emergency or other
extreme urgency or in case of public non-commercial use or on establishment of a ground of anti-
competitive practices adopted by the patentee.
7. The Controller is under no obligation to take into account matters subsequent to the making of
the application. It has been clarified that the reasonable period shall be construed as a period not
ordinarily exceeding a period of six months, the reasonable requirements of the public shall be deemed
not to have been satisfied if:
i. by reason of the refusal of the patentee to grant a licence or licences on reasonable terms:
a) an existing trade or industry,
b) the demand for the patented article has not been met to an adequate extent or on
reasonable terms,
c) a market for export of the patented article manufactured in India is not being supplied or
developed,
d) the establishment or development of commercial activities in India is prejudiced or
ii. by reason of conditions imposed by the patentee upon the grant of licences under the patent or
upon the purchase, hire or use of the patented article or process, the manufacture, use or sale of
materials not protected by the patent, or the establishment or development of any trade or industry
in India, is prejudiced; or
iii. the patentee imposes a condition upon the grant of licences under the patent to provide
exclusive grant back, prevention to challenges to the validity of patent or coercive package licensing,
or
iv. the patented invention is not being worked in the territory of India on a commercial scale to an
adequate extent or is not being so worked to the fullest extent that is reasonably practicable,
v. the working of the patented invention in the territory of India on a commercial scale is being
prevented or hindered by the importation from abroad of the patented article by:
a) the patentee or persons claiming under him, or

b) persons directly or indirectly purchasing from him, or
c) other persons against whom the patentee is not taking or has not taken proceedings for
infringement.

REVOCATION OF PATENTS BY THE CONTROLLER FOR NON-WORKING
Section 85 deals with revocation of patents by Controller for non-working and provides that where, in
respect of a patent, a compulsory licence has been granted, the Central Government or any person
interested may, after the expiration of two years from the date of the order granting the first
compulsory licence, apply to the Controller for an order revoking the patent on the ground that the
patented invention has not been worked in the territory of India or reasonable requirements of the
public with respect to the patented invention has not been satisfied or the patented invention is
not available to the public at a reasonably affordable price. The Controller, if satisfied may make an
order revoking the patent. The controller has however been put under obligation to ordinarily decide
such application within one year of its presentation.
Procedure for Dealing with Applications
Section 87 where the Controller is satisfied, of an application for compulsory licence or revocation of
patent, he shall direct applicant to serve copies upon the patentee and other person interested in the
patent, and shall publish the application in the Official Journal.
The patentee or any other person desiring to oppose the application may, within prescribed time give to
Controller notice of opposition.
Notice of opposition should contain a statement setting out the grounds on which the application is
opposed.
Controller shall give to applicant and opponent an opportunity to be heard before deciding the case.
Powers of Controller in granting compulsory licences
Section 88 provides that where the Controller is satisfied that the manufacture, use or sale of materials
not protected by the patent is prejudiced by reason of conditions imposed by the patentee, he may
order grant of licences under the patent to such customers of the applicant as he thinks fit.
Controller may:
1. make an order for the grant of a licence,

2. order the existing licence to be cancelled, or
3. Instead of making an order for grant of licence, order the existing licence to be amended.
Where two or more patents are held by the same patentee & requirements not been satisfied with
respect to only some patents, then, if Controller is satisfied that the applicant cannot efficiently work
the licence granted to him and if those patents involve important technical advancement, he may, by
order, direct the grant of a licence in respect of the other patents also
Termination of compulsory licence
Section 94: A compulsory licence may be terminated by the Controller.
The holder of the compulsory licence has been entitled to object to such termination.
INTERNATIONAL ARRANGEMENTS

1. A convention country is that country, which is a signatory or party or a group of countries, which are
signatories to an international, regional or bi-lateral treaty, to which India is also a signatory and
which affords to the applicants for patents in India or to citizens of India similar privileges as are
granted to their own citizens or citizens to their member countries in respect of the grant of patents
and protection of patent rights.
2. Where any country notified by the Central Government as Convention Country does not accord to
citizens of India the same rights in respect of the grant of patents and the protection of patent rights
as it accords to its own nationals, no national of such country shall be entitled either solely or jointly
with any other person:
i. to apply for the grant of a patent or be registered as the proprietor of a patent,
ii. to be registered as the assignee of the proprietor of a patent, or
iii. to apply for a licence or hold any licence under a patent granted under the Act.
3. Where a person has made an application for a patent in respect of an invention in a convention
country and that person or legal representative or assignee of that person makes an application under
the Act for a patent within twelve months after the date on which the basic application was made,
the priority date of a claim of the complete specification being a claim based on matter disclosed in
the basic application, is the date of making of the basic application.
4. Where applications have been made for similar protection in respect of an invention in two or more
convention countries, the period of twelve months shall be reckoned from the date on which the
earlier or earliest of the said applications was made.
5. The applicant of a convention application to furnish, in addition to the complete specification, copies
of the specifications or corresponding documents filed or deposited by the applicant in the patent
office of the convention country and verified to the satisfaction of the Controller within the
prescribed period from the date of communication by the Controller.
6. If any such specification or other document is in a foreign language, a translation into English of the
specification or document verified by affidavit or otherwise to the satisfaction of the Controller are
required to be furnished.
PATENT AGENT
Work relating to drafting of specifications, making of application for a patent, correspondence with the
Patent office on the objections raised,
PATENT OFFICE AND ITS ESTABLISHMENT
The Controller General of Patents, Designs and Trade Marks appointed under Section 3(1) of the Trade
Marks Act, 1999 shall be the Controller of Patents for the purposes of this Act.

CHAPTER – 18
LAW RELATING TO TRADE MARKS
INTRODUCTION
• A trademark is a sign capable of distinguishing the goods or services of one enterprise from those of
other enterprises.
• A new Trade Marks Act, 1999 have been enacted to provide for registration of trade mark for goods
as well as services including prohibition to the registration of imitation of well-known trademarks,
and expansion of grounds for refusal of registration.
• Section 2(1)(zb) of the Act as to mean a mark capable of being represented graphically and which is
capable of distinguishing the goods or services of one person from those of others and may include
shape of goods, their packaging and combination of colours; and
(i) in relation to Chapter XII (other than section 107), a registered trade mark or mark used in
relation to goods or services to indicate a connection in course of trade, and some person
(proprietor) having right, to use mark
(ii) in relation to other provisions of this Act, a mark used in relation to goods or services to indicate
a connection in course of trade, and some person (proprietor or permitted user) having right, to use
mark, and includes a certification trade mark or collective mark.
A trade mark is a visual symbol which may be a word signature, name, device, label,
numerals or combination of colors used by one undertaking on goods or services or other
articles of commerce to distinguish it from other similar goods or services originating from
a different undertaking.
• A Trade Mark distinguishes the goods of one manufacturer or trader from similar goods of others and
therefore, it seeks to protect the interest of the consumer as well as the trader.

CERTIFICATION TRADE MARK
Mark capable of distinguishing goods or services in connection with which it is used in the course of trade
which are certified by the proprietor of the mark in respect of origin, material, mode of manufacture of
goods or performance of services, quality, accuracy or other characteristics from goods or services not so
certified and registerable as such in respect of those goods or services in the name, as proprietor of the
certification trade mark, of that person.
COLLECTIVE MARK
Collective mark means a trade mark distinguishing the goods or services of members of an association of
persons.
WELL KNOWN TRADE MARK
A well-known trade mark in relation to any goods or services means a mark which has become so to the
substantial segment of the public which uses such goods or services such that the use of such mark in

relation to other goods or services would be likely to be taken as indicating a connection in the
course of trade or rendering of services between those goods or services and a person using the mark in
relation to the first-mentioned goods or services.
• According to the new rule, a trademark owner can file an application in form TM-M
with a request made to the Registrar for declaring the mark to be “well-known”.
• Well-known trademarks are recognised in India on the basis of their reputation,
nationally, internationally and the cross-borders.
• Unlike other trademarks whose goodwill and reputation is limited to a certain
specified geographical area and to a certain range of products, well-known
trademarks have its goodwill and reputation protected across the nation and across
categories of goods and services.
For Example: Google has been registered as a well-known trademark of Alphabet Inc.
DECEPTIVELY SIMILAR
A mark shall be deemed to be deceptively similar to another mark if it so nearly resembles that other
mark as to be likely to deceive or cause confusion.
ASSIGNMENT
According to Section 2(1)(b) of the Act, assignment means an assignment in writing by act of the parties
concerned.
PERMITTED USE
The term permitted use, in relation to a registered trade mark, as to mean the use of trade Mark:
1. By a registered user of the trade mark in relation to goods or services:
• With which he is connected in the course of trade, and
• In respect of which the trade mark remains registered for the time being, and
• For which he is registered as registered user, and
• Which complies with any conditions or limitations to which the registration of registered
user is subject or
2. By a person other than the registered proprietor and registered user in relation to goods or services
• With which he is connected in the course of trade, and
• In respect of which the trade mark remains registered for the time being, and

• By consent of such registered proprietor in a written agreement.
• Which complies with any conditions or limitations to which the registration of such user is
subject
Who can Apply for a Trademark and How?
Any person, claiming to be the proprietor of a trademark used or proposed to be used by him, may apply.
The application can be submitted:
• At front office counter, or

• Sent by post
• Filed online through e-filing gateway at official website
What are different types of Trademarks that may be Registered in India?
1. Any name (including personal or surname of the applicant which is not unusual for trade to adopt as
a mark.
2. An invented word or any arbitrary dictionary word.
3. Letters or numerals or any combination thereof.
4. Devices, including fancy devices or symbols.
5. Monograms.
6. Combination of colors or even a single color in combination with a word or device.
7. Shape of goods or their packaging.
8. Sound marks when represented in conventional notation
PROCEDURE FOR REGISTRATION
Sec 18: Deals with procedure for making application for registration.
Sec 23: Obligation on Registrar to register TM , where application has been accepted or not been
opposed.

PROCESSING OF TM APPLICATION IN TRADE MARK REGISTRY
A brief description of stage wise processing in Trade Mark Registration is as follows:
1. Pre-Examination Processing:
Filing of application: A Trade Mark Application may be filed online or offline. After digitization of
offline applications, both online and offline applications are merged and proceed further for
processing through the Trade Mark system.
VIENNA Codification: All applications which may require VIENNA Codification should be processed
expeditiously and serially as per priority based on the date of filing of application.
2. Examination of Applications:
Examination in Trade Mark Registration is done in two stages, first examination report is prepared by an
Examiner and then the application and examination report is forwarded to Examination Controller for
approval.
Examination Controller evaluates the examination report, and if found proper, approves it and thereafter
the examination report is issued to applicant.

However, if some deficiency is noted by the Controller, the examination
report is reverted/referred back to the concerned Examiner with suggestions for resubmission/re-
examination.
At this stage, application may be accepted or an objection may be raised as per provisions of the Trade
Mark Act.
In case it is accepted, it will be published in Trade Mark Journal, else examination report will be issued
to the applicant containing office objections which needs to be replied by the applicant within 30 days
from the date of receipt of examination report.
3. Post Examination Processing:
i. Consideration of Reply: After receipt of examination report, applicant needs to submit his
reply to the office objections within one month time and if he fails to do so, the application is
abandoned for want of reply. If reply is submitted within the prescribed period, the same is
considered by the authorized.
At this stage, the authorized officer may accept application and the same is to be published, in the
Trade Mark Journal. In other cases, where the office objections cannot be waived or found not
met, a hearing opportunity is offered to the applicants in all those cases where a decision can
adversely affect the interest of the applicant, a hearing opportunity is given as per law.
ii. Show-cause hearing: In case the objection/s raised by the office are not met after consideration
of reply to the examination report, the application moves for show cause hearing.
4. Post Advertisement Processing:
After the acceptance of the mark, trademark is published in Trade Mark Journal. If no opposition is
filed within four months from the date of publication of the trademark, the published trademark
becomes eligible for registration.
The issuance of registration certificate is done through automated Trade Mark system. The
certificate gets automatically issued if no opposition is filed within the prescribed period.
The Trade Mark once registered is valid for 10 years. The same can be renewed after every 10 years
for an indefinite period by paying the prescribed fee on the prescribed form.
5. Opposition:
If the trademark is opposed by any third party after the publication, the same needs to be disposed
of after giving proper hearing opportunity to both the parties. If the opposition is dismissed, the
trade mark proceeds for registration and registration certificate is issued to the applicant. In case
opposition is allowed, the application gets refused as per law.
6. Post Registration Trade Mark Management
It is possible for the registered proprietor to record the post registration changes pertaining to
proprietor name, address, address for service, assignment or registered user, etc. in the Register of
Trade Marks by filing a request on the prescribed form, with the prescribed fee.

In case the concerned officer examining the request raises some objections and requires some
compliance on part of the applicant, the same should be processed ordinarily within 30 days from
the date of compliance by the applicant.
It is also a practice of Registry to send one month notice to previous registered proprietor in case
any change in proprietorship by way of assignment or transmission is filed by the applicant. In this
case, the request can be processed only after expiry of one month notice period as mentioned
above.
What are the Benefits of Registering a Trademark?
The registration of a trademark confers upon the owner the exclusive right to the use the
trademark in relation to the goods or services in respect of which the mark is registered
and to indicate so by using the symbol ® , and seek the relief of infringement in
appropriate courts in the country.
ABSOLUTE GROUNDS FOR REFUSAL OF REGISTRATION
Absolute grounds for refusal for registration prohibit the registration of those trademarks:
1. which are devoid of any distinctive character,
2. Which consist exclusively of marks or indications which may serve in trade to designate the kind,
quality, quantity, intended purpose, values, geographical origin or the time of production of the
goods or rendering of the service or other characteristics of the goods or service,
3. Which consist exclusively of marks or indications which have become customary in the current
language or in the bona fide and established practices of the trade, shall not be registered.
Himalaya Drug Company vs. S.B.L. Ltd.
1. The Appellant had filed a suit against the Respondent for infringement of trade mark
“Liv.52” by use of the trade mark “Liv-T”.
2. The lower court dismissed the suit of the Appellants holding that the mark ‘LIV’ is
publici juris and there is no similarity between the two trademarks. ‘Liv’ will be
considered as the generic on account of the fact that it is used in respect of medicine
used for treatment of ailment of ‘Liver’ and non-distinctive part of the mark and it is
to be ignored even if the two rival marks are to be taken as a whole.
3. The Plaintiffs filed an appeal before the High Court of Delhi, whereby the High Court
reversed the finding of the lower court and upheld the principles of Trade Mark law of
comparison and infringement.
4. The court held that the onus of proving that the term ‘LIV’ has become generic lied
heavily on the Defendant, more so in the light of the fact that the Trade Mark of the
Plaintiff had voluminous sales, was being used since the year 1955 and was registered
since the year 1957 and as seven years had expired from the date of the registration,
the Registration of the trade mark the trade mark was taken to be valid as per Section
32 of the erstwhile Trade Marks Act, 1958.
5. The Defendant could not prove by way of its evidence that the word ‘LIV’ is generic.
The Plaintiff on the other hand proved the distinctiveness of its mark by way of its
evidence by providing the orders where the mark ‘LIV.52’ has been granted
protection. The court also noted that consumer asked for Plaintiff’s product as Liv.52
thus ‘LIV’ was the essential and prominent feature of the mark ‘LIV.52’ and restrained

the Defendant from using the mark ‘LIV-T’ and the Court allowed the Defendant to
amend its mark accordingly to a mark which will not be similar to the mark of the
Plaintiff.
The following trademark shall not be registered:
1. If the trademark tends to deceive the public or cause any confusion,
2. In any instance if the trademark hurts any religious sentiment of any demographic section of
Indian citizens,
Registrar of Trade Marks v. Ashok Chandra Rakhit Ltd
The Hon’ble Supreme Court observed:
• Registrar found that the word “Shree” was used by Hindus as an auspicious symbol and
placed even on letter heads.
• In course of time, a practice became established whereby the word “Shree” was either
refused registration or a disclaimer was enforced if it were made a part of a trade
mark.
• So inflexible had been this practice that barring this particular trade mark No. 3815
there was no other trade mark containing the word “Shree” which had been registered
without a disclaimer of the word “Shree”.
• This circumstance was bound to be regarded as discrimination and it was suggested that
the Registry should deal impartially and uniformly with all applications
3. It comprises or contains scandalous or obscene matter,
4. Its use is prohibited under the Emblems and Names (Prevention of Improper Use) Act, 1950.
Amritpal Singh vs. Lal Babu Priyadarshi, Intellectual Property Appellate Board (IPAB) the
word RAMAYAN was refused registration on the grounds that:
• Firstly, it was not capable of distinguishing the goods of the applicant and
• Secondly, that it was likely to hurt religious sentiments of a class of society.
The Registrar shall, while determining a well-known trade mark, take into account facts:-
(i) the knowledge or recognition of that TM in public
(ii) the duration, extent and geographical area of use of that TM;
(iii) the duration, extent and geographical area of any promotion, advertising or publicity, at fairs or
exhibition
(iv) the duration and geographical area of any registration or application for registration of that TM
under this Act;

(v) the record of successful enforcement of rights in that TM, in particular the extent to which the trade
mark has been recognised as a well-known trade mark by any court or Registrar under that record.
Registrar shall, while determining a trade mark as known or recognised in a relevant section of the
public, take into account–
(i) the number of actual or potential consumers of the goods or services;
(ii) the number of persons involved in the channels of distribution of the goods or services;
(iii) the business circles dealing with the goods or services;
RELATIVE GROUNDS FOR REFUSAL OF REGISTRATION
A trade mark shall not be registered if, because of:
1. Its identity with an earlier trade mark and similarity of goods or services covered by the trade mark,
or
2. Its similarity to an earlier trade mark and the identity or similarity of the goods or services covered
by the trade mark, there exists a likelihood of confusion on the part of the public, which includes
the likelihood of association with the earlier trade mark.
A trade mark which is identical with or similar to an earlier trade mark and is to be registered for goods
or services which are not similar to those for which the earlier trade mark is registered in the name of a
different proprietor, shall not be registered if or to the extent the earlier trade mark is a well-known
trade mark in India and the use of the later mark without due cause would take unfair advantage of or
be detrimental to the distinctive character or repute of the earlier trade mark.
Nothing in this section shall prevent the registration of a trade mark where the proprietor of the earlier
trade mark or other earlier right consents to the registration, and in such case the Registrar may register
the mark under special circumstances under section 12.
While considering an application for registration of a trade mark and opposition filed in respect thereof,
the Registrar shall:
1. Protect a well-known trade mark against the identical or similar trademarks,
2. Take into consideration the bad faith involved either of the applicant or the opponent affecting
the right relating to the trade mark.
• Imperial Tobacco Co. of India Ltd. vs. The Registrar of Trade Marks Calcutta High
Court judgement dated 28 May, 1968, the Imperial Tobacco Company manufactured
and distributed cigarettes with a label “simla” all over the country.
• ITC ltd. made an application to the Registrar for the registration
• in the year 1960 and 1966. But both the times the registration application was refused
by the registrar. The Calcutta High Court rejected the appeal on the ground that the
term “simla” is a famous geographical place. This term cannot be registered as a
trademark.
• The trade mark “Simla” with the label is composite in character. Its essential feature
is the word Simla.
• ‘’Simla” is neither an invented word nor is it a word having a dictionary meaning. It is
a well-known hill-station of India.

• Its geographical signification is, therefore, plain and unequivocal. The snow-clad hills
in outline on the label makes the geographical significance inescapable.
Prohibition of Registration of Names of Chemical Elements or International Non-Proprietary Names
Section 13 states that no word shall be registered as a trade mark:
(a) which is commonly used name of single chemical element or compound,or
(b) which is declared by WHO & notified by Registrar, as an international non-proprietary name or
deceptively similar,
If registered, shall be deemed to be entry made in register without sufficient cause or an entry wrongly
remaining on the register, as the circumstances may require.
USE OF NAMES AND REPRESENTATIONS OF LIVING PERSONS OR PERSONS RECENTLY DEAD
• Where an application is made for the registration of a trade mark which falsely suggests a
connection with any living person,
• or a person whose death took place within twenty years prior to the date of application for
registration of the trade mark,
• the Registrar may, before he proceeds with the application,
a) require the applicant to furnish him with the consent in writing of such living person or, as the
case may be, of the legal representative of the deceased person to the connection appearing on
the trade mark, and
b) may refuse to proceed with the application unless the applicant furnishes the Registrar with such
consent.
WITHDRAWAL OF ACCEPTANCE
Where, after the acceptance of an application for registration of a trade mark but before its
registration, the Registrar is satisfied:
1. That the application has been accepted in error, or
2. That in the circumstances of the case the trade mark should not be registered, the Registrar may,
after hearing the applicant if he so desires, withdraw the acceptance and proceed as if the
application had not been accepted.
ADVERTISEMENT OF APPLICATION
• Once Registrar has accepted application, he shall get application advertised in the prescribed
manner after acceptance.
• However, the application shall be advertised before acceptance if the application is related to a
trademark to which Section 9(1) and Section 11(1) & (2) apply or in any other case as it seems
expedient to the Registrar.
• The purpose of advertisement is to give information to public at large and afford an opportunity to
oppose registration of mark.

• Advertisement must be complete in all respects and otherwise the very purpose of advertisement
will be frustrated.
• If, incomplete or incorrect information advertised, it would amount to misrepresentation.
REGISTRATION
When an application for registration of a trade mark has been accepted and either:
1. The application has not been opposed and the time for notice of opposition has expired, or
2. The application has been opposed and the opposition has been decided in favour of the applicant,
the Registrar shall register the said trade mark within eighteen months of the filing of the
application and the trade mark when registered shall be registered as of the date of the making of
the said application.
On the registration of a trade mark, the Registrar shall issue to the applicant a certificate in the
prescribed form of the registration thereof, sealed with the seal of the Trade Marks Registry.
Where registration of a trade mark is not completed within twelve months from the date of the
application by reason of default on the part of the applicant, the Registrar may, after giving notice to
the applicant, treat the application as abandoned unless it is completed within the time specified in that
behalf in the notice.
Duration, Renewal, Removal and Restoration of Registration
• Registration of a trademark is allowed for a period of 10 years.

• It allows renewal of registration for successive periods of 10 years, from the date of the original
registration or the last renewal.
• Act also provides for Restoration of removed trade marks on payment of renewal fee.
Can a Registered Trademark be Removed from the Register?
It can be removed on application to the Registrar on prescribed form on the ground that
the mark is wrongly remaining on the register. The Registrar also can suo moto issue
Notice for removal of a registered trademark.
INFRINGEMENT OF REGISTERED TRADE MARKS
A person shall be deemed to have infringed a registered trade mark, if he uses a

mark which is identical with or similar to the registered trade mark and the
registered trade mark has a reputation in India and is detrimental to the distinctive
or repute of the registered trade mark.
A registered trade mark is infringed by a person who, not being a registered proprietor or a person using
by way of permitted use, uses in the course of trade, a mark which because of:

1. Its identity with the registered trade mark and the similarity of the goods or services covered by
such registered trade mark, or
2. Its similarity to the registered trade mark and the identity or similarity of the goods or services
covered by such registered trade mark, or
3. Its identity with the registered trade mark and the identity of the goods or services covered by such
registered trade mark, is likely to cause confusion on the part of the public, or is likely to have an
association with the registered trade mark.
A registered trade mark is infringed by a person if he uses such registered as his trade name or part of his
trade name, or name of his business concern or part of the name, of his business concern dealing in
goods or services in respect of which the trade mark is registered.
A person uses a registered mark, if, in particular, he:
1. Affixes it to goods or the packaging thereof,
2. Offers or exposes goods for sale, puts them on the market, or stocks them for those purposes under
the registered trade mark,
3. Imports or exports goods under the mark, or
4. Uses the registered trade mark on business papers or in advertising.
A registered trade mark is infringed by any advertising of that trade mark if such advertising:
1. Takes unfair advantage of and is contrary to honest practices in industrial or commercial matters, or
2. Is detrimental to its distinctive character, or
3. Is against the reputation of the trade mark.
The legislative scheme is clear that when the mark of the defendant is identical and goods or services
are similar, it may be necessary to prove that it is likely to cause confusion on the part of the public.
However, when the trade mark of the defendant is identical with the registered trade mark of the
plaintiff, the Court shall presume that it is likely to cause confusion on the part of the public.
LIMITS ON EFFECT OF REGISTERED TRADE MARK
Nothing shall be construed as preventing the use of a registered trade mark by any person for the
purposes of identifying goods or services as those of the proprietor provided the use:
1. Is in accordance with honest practices in industrial or commercial matters, and
2. Is not such as to take unfair advantage of or be detrimental to the distinctive character or repute of
the trade mark.

A registered trade mark is not infringed where:
1. A trademark's use shows information about goods or services like their type, quality, quantity,
intended use, value, where they come from, when they were made, or other characteristics.
2. When a trademark is registered, it may come with specific conditions or restrictions. If the trademark
is used in a way that falls outside of these conditions or limitations, it may not be protected in certain
situations, such as when selling goods in certain places or exporting them, offering services in specific
locations, or in other circumstances that the registration doesn't cover.
3. The use by a person of a trade mark:
i. in relation to goods connected in the course of trade with the proprietor or a registered user of
the trade mark if, as to those goods or a bulk of which they form part, the registered proprietor
or the registered user conforming to the permitted use has applied the trade mark and has not
subsequently removed or obliterated it, or has at any time expressly or impliedly consented to
the use of the trade mark, or
ii. in relation to services to which the proprietor of such mark or of a registered user conforming to
the permitted use has applied the mark, where the purpose and effect of the use of the mark is
to indicate, in accordance with the fact, that those services have been performed by the
proprietor or a registered user of the mark.
4. The use of a registered trade mark, being one of two or more trademarks registered under this Act
which are identical or nearly resemble each other, in exercise of the right to the use of that trade
mark given by registration under this Act.
PASSING OFF

“The act or an instance falsely representing one’s own product as that of another in an attempt to
deceive potential buyers. Passing off is actionable in tort under the law of unfair competition. It may be
actionable as trademark infringement”.
1. With the tremendous growth in trade and commerce, the competitors or other traders tend to
imitate the well-known or reputed trademarks by imitating colour scheme or get up or packaging
with a view to pass off such goods as goods of the genuine owner.
2. In cases of registered trademarks, the owner can move the court under this Act for the infringement
whereas in cases of the unregistered trademarks, the Act recognizes the Common Law remedy of
passing off.
3. The tort of passing off is based upon the principle that “no man is entitled to represent his goods as
being the goods of another man; and no man is required to use any mark, sign or symbol, device or
means, whereby without making a direct representation himself to a purchaser who purchases from
him, he enables such purchaser to tell a lie or to make a false representation to somebody else who
is the ultimate purchaser.”
4. The plaintiff, in an action of passing off, has to establish that his business or goods has acquired the
reputation and that his mark has become distinctive of his goods among the public at large.
5. He has to establish that there is likely hood of deception or confusion in the minds of the public. He,
however, does not have to establish the fraudulent intention on the part of the defendant.
6. Lastly, he has to establish that confusion is likely to cause damage or injury to the reputation,
goodwill and fair name of the plaintiff. He need not prove the actual loss or damage in an action of
passing off.
Mahendra and Mahendra Paper Mills Ltd. vs. Mahindra and Mahindra Ltd.
Supreme Court broadly stated, in an action for passing off on the basis of unregistered
trade mark generally for deciding the question of deceptive similarity the following factors
are to be considered:
1. The nature of the marks i.e. whether the marks are word marks or labels marks or
composite marks i.e. both words and label works.
2. The degree of resemblances between the marks, phonetically similar and hence
similar in idea.
3. The nature of the goods in respect of which they are used as trademarks.
4. The similarity in nature, character and performance of the goods of the rival traders.
5. Class of purchasers who are likely to buy the goods bearing the marks they require,
6. The mode of purchasing the goods or placing orders for the goods.
REGISTRATION TO BE PRIMA FACIE EVIDENCE OF VALIDITY
1. In all legal proceedings relating to trade mark registered under the Act, the original registration and
all subsequent assignments and transmission thereof shall be prima facie evidence of its validity.
2. However, as per Section 34 the proprietor or a registered user of a registered trademark is not
entitled to interfere with or restrain the use by any person of a trademark identical with or nearly
resembling it in relation to goods or services in relation to which that person or a predecessor in title
of his has continuously used that trade mark from a prior date.

3. Therefore, in case of unregistered marks, the owner of the trade mark may lodge a case against
passing off action in case his trademark is used by some other person. It has been held by the courts
in various cases and the ownership of a trademark is decided by its usage in commercial
transactions.
ASSIGNMENT AND TRANSMISSION
1. The registered proprietor of a trademark to assign the trade mark and to give effectual receipts for
any consideration for such assignment.
2. Section 38 deals with the assignability and transmissibility of a registered trade mark with or without
goodwill of the business either in respect of all goods or services or part thereof.
3. Section 39 provides that unregistered trade mark may be assigned or transmitted with or without the
goodwill of the business concerned.
4. Section 40 contains restriction on assignments or transmissions of trade mark where multiple

exclusive rights would be created in more than one person in relation to same goods or services,
same description of goods or services, goods or services or description of goods or services which are
associated with each other, which would be likely to deceive or cause confusion. Nevertheless, such
assignment is not deemed to be invalid, if having regard to the limitations imposed, the goods are to
be sold in different markets - either within India or through exports.
5. Section 42 stipulates conditions for assignment of a trade mark without goodwill of business. Such an
assignment shall not take effect unless the assignor obtains directions of the Registrar and advertises
the assignment in accordance with the directions of the Registrar and as per the prescribed manner.
6. The assignment of certification trade mark can only be done only with the consent of the Registrar.
Section 44 states that associated trademarks shall be assignable and transmissible only as a whole
but they will be treated as separate trade marks for all other purposes
REMOVAL OF TRADE MARK FOR NON-USE
Section 47 deals with removal of a trade mark from the register on the ground of non-use and provides
that a trade mark which is not used within five years of its registration, becomes liable for
removal either completely or in respect of those goods or services for which the mark has not been
used. The five years period starts from the date on which the trade mark is actually entered on the
register.
Collective Marks
Collective Marks means a trades mark distinguish the goods or services of members of an association of
person not being a partnership within the meaning of the Indian Partnership Act, 1932 which is the
proprietor of the mark from those of others.
Sections 61 to 68 provide for registration of a collective mark which belongs to a group or association of
persons and the use thereof is reserved for members of the group or association of persons. Collective
marks serve to distinguish characteristic features of the products or services offered by those
enterprises. It may be owned by an association which may not use the collective mark but whose

members may use the same. The association ensures compliance of certain quality standards by its
members, who may use the collective mark if they comply with the prescribed requirements concerning
its use. The primary function of a collective mark is to indicate a trade connection with the Association
or Organisation.
Trade Mark Agent
• A legal practitioner, or
• A person registered in the prescribed manner as a trade marks agent, or
• A person in the sole and regular employment of the principal.
Qualifications for Registration
A person shall be qualified to be registered as a trademarks agent if he—
a) Is a citizen of India,
b) Is not less than 21 years of age,
c) Is a graduate of any university in India,
d) Is considered by the Registrar as a fit and proper person to be registered as a trademark agent.
APPLICATION FOR REGISTRATION AS A TRADEMARKS AGENT
Every person desiring to be registered as a trademarks agent shall make an application in Form TM-G.

CHAPTER –19
LAW RELATING TO COPYRIGHT
INTRODUCTION
• Copyright is a well-recognised form of property right which had its roots in the common law system
and subsequently came to be governed by the national laws in each country.
• Copyright as the name suggests arose as an exclusive right of the author to copy the literature
produced by him and stop others from doing so.
• Today, copyright law has extended protection not only to literary, dramatic, musical and artistic
works but also sound recordings, films, broadcasts, cable programmes and typographical
arrangements of publications.
• Computer programs have also been brought within the purview of copyright law.
What is Copyright?
Copyright (or author’s right) is a legal term used to describe the rights that creators have
over their literary and artistic works. Works covered by copyright range from books,
music, paintings, sculpture, and films, to computer programs, databases, advertisements,
maps, and technical drawings.
Why should Copyright be Protected?
• Copyright ensures certain minimum safeguards of the rights of authors over their creations, thereby
protecting and rewarding creativity.
• Creativity being the keystone of progress, no civilized society can afford to ignore the basic
requirement of encouraging the same.
• Economic and social development of a society is dependent on creativity.
• The protection provided by copyright to the efforts of writers, artists, designers, dramatists,
musicians, architects and producers of sound recordings, cinematograph films and computer
software, creates an atmosphere conducive to creativity, which induces them to create more and
motivates others to create.
• The Copyright Act provides an economic right to the author to reproduce the work, to issue copies,
to perform or communicate it to the public, to make any cinematograph film or sound recording or
to make any adaptation or translation of the work.
• The Act also provides a right to claim authorship of the work, an integrity right- right to protect
one’s honour and reputation and a general right- right to not have a work falsely attributed to
oneself.
• These moral rights remain with the author even after assignment of the copyright

“Adaptation” means:
1. In relation to a dramatic work, the conversion of the work into a non-dramatic work,
2. In relation to a literary work or an artistic work, the conversion of the work into a dramatic work by
way of performance in public,
3. In relation to a literary or dramatic work, any version of the work in which the story or action is
conveyed wholly or mainly by means of pictures in a form suitable for reproduction in a book, or in a
newspaper, magazine or similar periodical,
4. In relation to a musical work, any arrangement or transcription of the work, and
5. In relation to any work, any use of such work involving its re-arrangement or alteration.
“Author” means:
1. In relation to a literary or dramatic work, the author of the work,
2. In relation to a musical work, the composer,
3. In relation to an artistic work other than a photograph, the artist,
4. In relation to a photograph, the person taking the photograph,
5. In relation to a cinematograph or sound recording the producer, and
6. In relation to any literary, dramatic, musical or artistic work which is computer-generated, the
person who causes the work to be created.
WORKS IN WHICH COPYRIGHT SUBSISTS
1. Original literary, dramatic, musical and artistic works,
2. Cinematograph films, and
3. Sound recording.
Copyright shall not subsist in any work specified above, other than a work to which the provisions of
Section 40 (deals with power to extend copyright to foreign works) or section 41 (deals with
provisions as to works of certain international organisations) apply, unless:
i. In the case of a published work, the work is first published in India, or where the work is first
published outside India, the author is at the date of such publication, or in a case where the
author was dead at that date, was at the time of his death, a citizen of India,
ii. In the case of an unpublished work other than a work of architecture, the author is at the date of
making of the work a citizen of India or domiciled in India, and In the case of a work of
architecture the work is located in India.
Copyright shall not subsist:

a) In any cinematograph film if a substantial part of the film is an infringement of the copyright in any
other work,
b) In any sound recording made in respect of a literary, dramatic or musical work, if in making the sound
recording, copyright in such work has been infringed.
The copyright for a movie or music recording does not override the individual copyright for any work that
makes up a significant part of the film or recording.
In the case of a work of architecture, copyright shall subsist only in the artistic character and design and
shall not extend to processes or methods of construction.
MEANING OF COPYRIGHT
It also applies to architectural works and computer program/software. It can be understood as a

bundle of rights that include the right of reproduction, communication, adaptation, and
translation of the work. Copyright ensures protection to the rights of authors over their creations
and in turn aims at rewarding creativity.
Section 14 of the Act defines the term Copyright as to mean the exclusive right to do or authorise
the doing of the following acts in respect of a work or any substantial part thereof, namely:
a. Copyright in the case of a Literary, Dramatic or Musical Work, not being a Computer Programme
To reproduce the work in any material form including the storing of it in any medium by electronic
means,
i. To issue copies of the work to the public,
ii. To perform the work in public,
iii. To make any cinematograph film or sound recording,
iv. To make any translation of the work,
v. To make any adaptation of the work,
b. Copyright in the case of a Computer Programme
i. To do any of the acts specified in specified in respect of a literary, dramatic or musical work,
ii. To sell or give on commercial rental or offer for sale or for commercial rental any copy of the
computer programme.
c. Copyright in the case of an Artistic Work To reproduce the work in any material form
including:
i. The storing of it in any medium by electronic or other means, or
ii. Depiction in three-dimensions of a two- dimensional work, or
iii. Depiction in two-dimensions of a three-dimensional work.

d. Copyright in the case of a Cinematograph Film
1. to make a copy of the film, including:
i. A photograph of any image forming part thereof, or
ii. Storing of it in any medium by electronic or other means.
2. To communicate the film to the public.
e. Copyright in the case of a Sound Recording
i. To make any other sound recording embodying it including storing of it in any medium by
electronic or other means,
ii. To sell or give on commercial rental or offer for sale or for such rental, any copy of the sound
recording,
iii. To communicate the sound recording to the public.
It may be noted that “commercial rental” does not include the rental, lease or lending of a
lawfully acquired copy of a computer programme, sound recording, visual recording cinematograph film
for non-profit purposes by a non-profit library or non-profit educational institution.
Gramophone Company of India Ltd. vs. Super Cassette Industries Ltd.

• Whether action of the Defendant in using its sound recording to produce a
cinematograph film constitutes infringement of the Plaintiffs copyright in the original
literary, dramatic and musical works.
• Copyright conferred on the owner of a copyright in a sound recording by virtue of
Section 14(e) does not specifically include the right to make a cinematograph film
embodying the sound recording.
• It gives the owner exclusive right to make any other sound recording embodying it.
• Right to utilise the literary, dramatic or musical work to make a cinematograph film is
specifically conferred on the owner of the copyright in the literary, dramatic or
musical work Without the specific permission of the owners of the copyright in the
musical, dramatic, or literary works from which the sound recording was made, the
owner of the copyright in a sound recording cannot proceed with incorporating the
sound recording or version recording in a cinematograph film.
TERM OF COPYRIGHT
TERM OF COPYRIGHT NUMBER OF YEARS
Term Of Copyright In Published Literary, Lifetime of the author until sixty years from
Dramatic, Musical And Artistic Works the beginning of the calendar year next
following the year in which the author dies.
In the case of a work of joint authorship,
be construed as a reference to the author
who dies last.

Term Of Copyright In Anonymous And In the case of literary, dramatic, musical or
Pseudonymous Works artistic work , which is published
anonymously or pseudonymously, copyright
shall subsist until sixty years from the
beginning of the calendar year next
following the year in which the work is
first published.
Provided that where the identity of the

author is disclosed before the expiry of the
said period, copyright shall subsist until
sixty years from the beginning of the
calendar year next following the year in
which the author dies.
Term Of Copyright In Posthumous Work In the case of literary, dramatic, or musical

works, where copyright exists when the
author passes away, and if these works
haven't been published before the
author's death, the copyright continues for
a duration of 60 years. This 60-year period
starts from the beginning of the calendar
year immediately following the year in
which the work is initially published.
However, if an adaptation of the work is
published before the original work, the 60-
year countdown begins from the beginning
of the calendar year following the year of
that adaptation's publication.
Term Of Copyright In Cinematograph Films Copyright shall subsists until sixty years
from the beginning of the calendar year
next following the year in which the film is
published.
Term Of Copyright In Sound Recording Copyright shall subsist until sixty years from
the beginning of the calendar year next
following the year in which the sound
recording is published.
Term Of Copyright Government Works where Government is the first owner of the
copyright therein, copyright shall subsist
until sixty years from the beginning of the
calendar year next following the year in
which the work is first published.
Term Of Copyright In Works Of Copyright shall subsist until sixty years from
International Organizations the beginning of the calendar year next
following the year in which the work is first
published.

The © symbol stands for copyright.
ASSIGNMENT OF COPYRIGHT
1. The owner of a copyright, whether it's an existing work or a future one, can give someone else the
rights to that copyright. They can do this completely or partially, with or without restrictions, and
for the entire copyright duration or just a portion of it.
2. However, in case of the assignment of copyright in any future work, the assignment shall take effect
only when the work comes into existence.
3. An assignment of copyright cannot cover new ways of using the work that didn't exist or weren't in
commercial use when the assignment was made, unless the assignment specifically mentions these
new ways.
4. However, the author of the literary or musical work included in a cinematograph film shall not waive
their right to receive royalties. These royalties must be shared equally with the person or entity who
owns the copyright to the film.
The author can only assign these royalties to their legal heirs or to a copyright society for collection and
distribution. Any agreement that goes against this rule is not valid.
Video Master vs. Nishi Production

• Hon’ble Bombay High Court considered the issue whether assignment of video
rights would include the right of satellite broadcast as well.
• The Court agreed with the defendant’s arguments that there were several public
communication channels, including video TV, satellite broadcasting, and terrestrial
television broadcasting.
• The film’s owner owned independent copyright in each of those formats, and he
could assign it to various people.
• As a result, the video copyright granted to the plaintiff would exclude the satellite
broadcast copyright of the film, which was a separate entitlement of the owner of
the film.
MODE OF ASSIGNMENT
1. An assignment of the copyright in any work should be in writing signed by the assignor or by his duly
authorised agent.
2. The assignment of copyright in any work required to identify such work, and also specify the rights
assigned, the duration, territorial extent of such assignment, the amount of royalty and any other
consideration payable to the author or his legal heirs during the currency of the assignment and the
assignment subject to revision, extension or termination on terms mutually agreed upon by the
parties.
3. Where the assignee does not exercise the rights assigned to him under any of the other sub- sections
of this section within a period of one year from the date of assignment, the assignment in respect of
such rights shall be deemed to have lapsed after the expiry of the said period unless otherwise
specified in the assignment.

4. The assignment of copyright in any work contrary to the terms and conditions of the rights already
assigned to a copyright society in which the author of the work is a member is void.
DISPUTES WITH RESPECT TO ASSIGNMENT OF COPYRIGHT
1. If an assignee fails to make sufficient exercise of the rights assigned to him, and such failure is not
attributable to any act or omission of the assignor, then, the Commercial Court may, on receipt of a
complaint from the assignor and after holding such inquiry as it may deem necessary, revoke such
assignment.
2. If any dispute arises with respect to the assignment of any copyright, the Commercial Court may, on
receipt of a complaint from the aggrieved party and after holding such inquiry as it considers
necessary, pass such order as it may deem fit including an order for the recovery of any royalty
payable, Provided that the Commercial Court shall not pass any order under this sub-section to
revoke the assignment unless it is satisfied that the terms of assignment are harsh to the assignor in
case the assignor is also the author,
Every complaint shall be dealt with by the Commercial Court as far as possible and efforts shall be
made to pass the final order in the matter within a period of six months from the date of receipt of
the complaint and any delay in compliance of the same, the Commercial Court shall record the
reasons thereof.
LICENCES
Chapter VI containing section 30-32 B deal with licences.
LICENCES BY OWNERS OF COPYRIGHT
1. The author or the copyright owner has exclusive rights in his creative work and he alone has right to
grant license with respect to such work.
2. Section 30 of the Act empowers the owner of the copyright in any existing work or the prospective
owner of the copyright in any future work to grant any interest in the right by licence in writing by
him or by his duly authorised agent.
3. However, in the case of a licence relating to copyright in any future work, the licence shall take
effect only when the work comes into existence.
4. This section clarifies that where a person to whom a licence relating to copyright in any future work
is granted, dies before the work comes into existence, his legal representatives shall, in the absence
of any provision to the contrary in the licence, be entitled to the benefit of the licence.
COMPULSORY LICENCE IN WORKS WITH HELD FROM PUBLIC
1. If at any time during the term of copyright in any work which has been published or performed
in public, a complaint is made to the Commercial Court that the owner of copyright in the work:

i. Has refused to republish or allow the republication of the work or has refused to allow the
performance in public of the work, and by reason of such refusal the work is withheld from the
public, or
ii. Has refused to allow communication to the public by broadcast of such work or in the
case of a
sound recording the work recorded in such sound recording, on terms which the complainant
considers reasonable,
2. The Commercial Court, after giving to the owner of the copyright in the work a reasonable
opportunity of being heard and after holding such inquiry as it may deem necessary, may, if it is
satisfied that the grounds for such refusal are not reasonable, direct the Registrar of Copyrights to
grant to the complainant a licence to republish the work, perform the work in public or
communicate the work to the public by broadcast, as the case may be, subject to payment to the
owner of the copyright of such compensation and subject to such other terms and conditions as the
Commercial Court may determine, and thereupon the Registrar of Copyrights shall grant the licence
to such person or persons who, in the opinion of the Commercial Court, is or are qualified to do so in
accordance with the directions of the Commercial Court.
COMPULSORY LICENCE IN UNPUBLISHED OR PUBLISHED WORKS
1. Where, in the case of any unpublished work or any work published or communicated to the public
and the work is withheld from the public in India, the author is dead or unknown or cannot be
traced, or the owner of the copyright in such work cannot be found, any person may apply to the
Commercial Court for a licence to publish or communicate to the public such work or a translation
thereof in any language.
2. Before making an application, the applicant shall publish his proposal in one issue of a daily
newspaper in the English language having circulation in the major part of the country and where the
application is for the publication of a translation in any language, also in one issue of any daily
newspaper in that language.
3. Where an application is made to the Commercial Court, it may after holding such inquiry as may be
prescribed, direct the Registrar of Copyrights to grant to the applicant a licence to publish the work
or a translation thereof in the language mentioned in the application subject to the payment of such
royalty and thereupon the Registrar of Copyrights shall grant the licence to the applicant in
accordance with the direction of the Commercial Court.
4. Where a licence is granted under this section, the Registrar of Copyrights may, by order, direct the
applicant to deposit the amount of the royalty determined by the Commercial Court in the public
account of India or in any other account specified by the Commercial Court so as to enable the
owner of the copyright or, his heirs, or the legal representatives to claim such royalty at any time.
5. If the original author is dead, the Central Government may, if it considers that the publication of the
work is desirable in the national interest, require the heirs, executors or legal representatives of the
author to publish such work within such period as may be specified by it.
STATUTORY LICENCE FOR BROADCASTING OF LITERARY AND MUSICAL WORKS AND SOUND RECORDING

1. Any broadcasting organisation desirous of communicating to the public by way of a broadcast or by
way of performance of a literary or musical work and sound recording which has already been
published may do so, subject to the provisions of this section.
2. The broadcasting organisation shall give prior notice, of its intention to broadcast the work stating
the duration and territorial coverage of the broadcast, and shall pay to the owner of rights in
each work royalties in the manner and at the rate fixed by the Commercial Court.
3. The rates of royalties for radio broadcasting shall be different from television broadcasting and the
Commercial Court shall fix separate rates for radio broadcasting and television broadcasting.
4. In fixing the manner and the rate of royalty the Commercial Court may require the broadcasting
organisation to pay an advance to the owners of rights.
5. No fresh alteration to any literary or musical work, which is not technically necessary for the
purpose of broadcasting, other than shortening the work for convenience of broadcast, shall be
made without the consent of the owners of rights.
TERMINATION OF LICENCE
If at any time after the granting of a licence, the owner of the copyright in the work or any person
authorised by him publishes a translation of such work in the same language and which is substantially
the same in content at a price reasonably related to the price normally charged in India for the
translation of works of the same standard on the same or similar subject, the licence so granted shall be
terminated. However, such termination shall take effect only after the expiry of a period of three
months from the date of service of a notice in the prescribed manner on the person holding such licence
by the owner of the right of translation intimating the publication of the translation.
Copyright Society
A copyright society is a registered collective administration society under Section 33 of the Copyright
Act, 1957. Such a society is formed by authors and other owners. A copyright society can issue or grant
licences in respect of any work for which it is authorised to by the authors or owners of the work.
The Copyright Society is a legal body that protects or safeguards the interest of the owner in the product
in which copyright subsists. Copyright societies give assurance to the creative author of the commercial
management of their works. It can also be described as a registered collective administration society for
the management and protection of copyright.
REGISTRATION OF COPYRIGHT SOCIETY
1. Sec 33 (1) prohibits any person or association of persons to commence or, carry on the business of
issuing or granting licences in respect of any work in which copyright subsists on respect or in
respect of any other rights conferred by the Act.
2. However, owner of copyright in his individual capacity, continue to have the right to grant
licences in respect of his own works consistent with his obligations as a member of the registered
copyright society.

3. The business of issuing or granting license in respect of literary, dramatic, musical and artistic
works incorporated in a cinematograph films or sound recordings shall be carried out only through
a copyright society duly registered under the Act.
4. Central Government registers association of persons as a copyright society after taking into account
the following factors:
i. In the interests of the authors and other owners of rights,
ii. The interest and convenience of the public and in particular of the groups of persons who are most
likely to seek licences in respect of the relevant rights, and
iii. The ability and professional competence of the applicants.
5. Registration granted to a copyright society mentioned above shall be for a period of five years and
may be renewed from time to time before the end of every five years on a request and the Central
Government may renew the registration after considering the report of Registrar of Copyrights on
the working of the copyright society.
6. Central Government if satisfied that a copyright society is being managed in a manner detrimental
to the interests of “authors and other owners of right” concerned, cancel the registration of such
society.
ADMINISTRATION OF RIGHTS OF OWNER BY COPYRIGHT SOCIETY
1. The Act empowers a copyright society to accept exclusive authorisation from an author and other
owners of right to administer any right in any work by issue of licences or collection of licence fees
or both.
2. Such authorization can be withdrawn by an author and other owners of right.
3. Copyright society is competent to enter into agreement with any foreign society to entrust to such
foreign society or rights administered by the said copyright society in India, or for
administering in India the rights administered in a foreign country by such foreign society or
organisation.
4. Copyright Society empower to:
i. Issue licences in respect of any rights under this Act,
ii. Collect fees,
iii. Distribute such fees among author after making deductions for its own expenses.
CONTROL OVER THE COPYRIGHT SOCIETY BY THE AUTHOR AND OTHER OWNERS OF RIGHT
As per Section 35 every copyright society is subject to the collective control of the owners of rights it
administers. All members of copyrights society shall enjoy equal membership rights and there shall be no
discrimination between authors and owners of rights in the distribution of royalties.

RIGHTS OF BROADCASTING ORGANISATION AND OF PERFORMERS RIGHTS OF BROADCASTING
ORGANISATION AND PERFORMERS
BROADCAST REPRODUCTION RIGHT
1. Every broadcasting organisation to have a special right to be known as “broadcast reproduction

right” in respect of its broadcasts.
2. The Broadcast reproduction right shall subsist until twenty-five years from the beginning of the
calendar year next following the year in which the broadcast is made.
3. During the continuance of a broadcast reproduction right in relation to the broadcast or any
substantial part thereof:
i. Re-broadcasts the broadcast, or
ii. Causes the broadcast to be heard or seen by the public on payment of any charges, or
iii. Makes any sound recording or visual recording of the broadcast, or
iv. Makes any reproduction of such sound recording or visual recording, or
v. Sells or gives on commercial rental or offer for sale or for such rental, any such sound recording
or visual recording.
PERFORMER’S RIGHT
Where any performer appears or engages in any performance, he shall have a special right to be known
as the “performer’s right” in relation to such performance. The performer’s right subsist until fifty
years from the beginning of the calendar year next following the year in which the performance is made.
EXCLUSIVE RIGHT OF PERFORMER
The performer’s right which is an exclusive right subject to the provisions of the Act to do or authorise
for doing any of the following acts in respect of the performance or any substantial part thereof, namely:
1. To make a sound recording or a visual recording of the performance, including:
i. reproduction of it in any material form,
ii. issuance of copies of it to the public not being copies already in circulation,
iii. communication of it to the public,
iv. selling or giving it on commercial rental or offer for sale or for commercial rental.
2. To broadcast or communicate the performance to the public except where the performance is
already broadcast.

3. It may be noted that once a performer has, by written agreement, consented to the incorporation of
his performance in a cinematograph film he shall not, in the absence of any contract to the
contrary, object to the enjoyment by the producer of the film of the performer’s right in the same
film. However, the performer shall be entitled for royalties in case of making of the performances
for commercial use.
MORAL RIGHT OF PERFORMER
The performer of a performance shall, independently of his right after assignment, either wholly or
partially of his right, have the right to claim to be identified as the performer of his performance.
What are the Moral Rights of an Author?
The author of a work has the right to claim authorship of the work and to restrain or claim
damages in respect of any distortion, mutilation, modification or other acts in relation to
the said work which is done before the expiration of the term of copyright if such
distortion, mutilation, modification or other act would be prejudicial to his honour or
reputation. Moral rights are available to the authors even after the economic rights are
assigned.
COPYRIGHT PROTECTION TO FOREIGN WORKS
1. The Copyright Act applies only to works first published in India, irrespective of the nationality of the
author.
2. However Section 40 of the Act empowers the Government of India to extend the benefits of all or
any of the provisions of the Act to works first published in any foreign country.
3. The benefits granted to foreign works will not extend beyond what is available to the works in the
home country and that too on a reciprocal basis i.e. the foreign country must grant similar
protection to works entitled to copyright under the Act.
4. The term of copyright in a work shall not exceed that which is enjoyed by it in its country of origin.
REGISTRATION OF COPYRIGHT
Section 45 of the Act clearly mentions that the author or publisher of, or the owner of or other person
interested in the Copyright in, any work may make an application in the prescribed form accompanied by
the prescribed fee to the registrar of Copyrights. The use of word “may” clearly indicate that the author
is at the discretionary liberty to apply for registration of Copyrights. On receipt of an application in
respect of any work, the Registrar of Copyrights may, after holding such inquiry as he may deem fit,
enter the particulars of the work in the Register of Copyrights.
REGISTRAR OF COPYRIGHTS POSSESS CERTAIN POWERS OF CIVIL COURTS
The Registrar of Copyrights shall have the powers of a civil court when trying a suit under the Code of
Civil Procedure, 1908, in respect of the following matters, namely:

1. Summoning and enforcing the attendance of any person and examining him on oath,
2. Requiring the discovery and production of any document,
3. Receiving evidence on affidavits,
4. Issuing commissions for the examination of witnesses or documents,
5. Requisitioning any public record or copy thereof from any court or office,
6. Any other matter which may be prescribed.
Sanjay Soya Private Ltd. vs. Narayani Trading Company

• the Bombay High Court ruled that no section of the Act requires registration of
copyright before requesting relief under the Act.
• Instead, it is up to the owner’s choice whether to register copyright under the Act.
• The Convention and the TRIPS Agreement were also cited by the court to buttress its
ruling. Registration just establishes a presumption of validity for information placed in
the Copyright register.
• The word “may” is used in the Act, which deals with entries in the register of
copyrights, and Section 51 states that infringement is not limited to the registered
Work. Protection should be “automatic” as soon as the Work is created.
COPYRIGHT REGISTRATION WORKFLOW

INFRINGEMENT OF COPYRIGHT
Copyright infringement refers to the unauthorized use of someone’s copyrighted work.

Thus, it is the use of someone’s copyrighted work without permission thereby infringing
certain rights of the copyright holder, such as the right to reproduce, distribute, display or
perform the protected work. If the reproduction of the work is carried out after the expiry
of the copyright term it will not amount to an infringement.
A copyright is infringed when any person without a licence granted by the owner of the copyright or the
Registrar of Copyright or in contravention of the conditions of a licence so granted or of any condition
imposed by a competent authority:
1. Does anything, the exclusive right to do which is by this Act conferred upon the owner of the
copyright, or
2. Permits for profit any place to be used for the communication of the work to the public where such
communication constitutes an infringement of the copyright in the work.
3. When any person:
i. makes for sale or hire, or sells or lets for hire, or by way of trade displays or offers for sale or
hire, or
ii. distributes either for the purpose of trade or to such an extent as to affect prejudicially the
owner of the copyright, or
iii. by way of trade exhibits in public, or
iv. imports into India, any infringing copies of the work.
The reproduction of a literary, dramatic, musical or artistic work in the form of a cinematograph film
shall be deemed to be an “infringing copy”.
It may be noted that “Infringing copy” means:
1. In relation to a literary, dramatic, musical or artistic work, a reproduction thereof otherwise than in the
form of a cinematographic film,
2. In relation to a cinematographic film, a copy of the film made on any medium by any means,
3. In relation to a sound recording, any other recording embodying the same sound recording, made by any
means,
4. In relation to a programme or performance in which such a broadcast reproduction right or a performer’s

right subsists under the provisions of this Act, the sound recording or a cinematographic film of such
programme or performance, if such reproduction, copy or sound recording is made or imported in
contravention of the provisions of this Act.
Which are the Common Copyright Infringements?

The following are some of the commonly known acts involving infringement of copyright:
1. Making infringing copies for sale or hire or selling or letting them for hire,
2. Permitting any place for the performance of works in public where such performance
constitutes infringement of copyright,
3. Distributing infringing copies for the purpose of trade or to such an extent so as to
affect prejudicially the interest of the owner of copyright,
4. Public exhibition of infringing copies by way of trade, and
5. Importation of infringing copies into India.
STATUTORY EXCEPTIONS-CERTAIN ACTS NOT TO BE INFRINGEMENT OF COPYRIGHT
Certain exceptions to infringement have been stipulated by the Copyright Act.
These includes:
1. A fair dealing with any work, not being a computer programme, for the purposes of:
i. private or personal use, including research,
ii. criticism or review, whether of that work or of any other work,
iii. reporting of current events and current affairs, including the reporting of a lecture delivered in
public.
2. The making of copies or adaptation of a computer programme by the lawful possessor of a copy of
such computer programme, from such copy in order to utilise the computer programme for the
purposes for which it was supplied, or to make back-up copies purely as a temporary protection
against loss, destruction or damage in order only to utilise the computer programme for the purpose
for which it was supplied.
3. The observation, study or test of functioning of the computer programme in order to determine the
ideas and principles which underline any elements of the programme while performing such acts.
4. The making of copies or adaptation of the computer programme from a personally legally obtained
copy for non-commercial personal use.
5. The transient or incidental storage of a work or performance purely in the technical process of
electronic transmission or communication to the public.
It may be noted that if the person responsible for the storage of the copy has received a written
complaint from the owner of copyright in the work, complaining that such transient or incidental storage
is an infringement, such person responsible for the storage shall refrain from facilitating such access for
a period of twenty-one days or till he receives an order from the competent court refraining from
facilitating access and in case no such order is received before the expiry of such period of twenty-one
days, he may continue to provide the facility of such access.
6. The reproduction of any work for the purpose of a judicial proceeding or for the purpose of a report of a
judicial proceeding.
7. The reproduction or publication of any work prepared by the Secretariat of a Legislature.
8. The reproduction of any work in a certified copy.
9. The reading or recitation in public of reasonable extracts from a published literacy or dramatic work.
10. The reproduction of any work:

i. by a teacher or a pupil in the course of instruction, or
ii. as part of the questions to be answered in an examination, or
iii. in answers to such questions.
11. The performance, in the course of the activities of an educational institution, if the audience is limited
to such staff and students, the parents and guardians of the students.
12. The performance of a literary, dramatic or musical work by an amateur club or society, if the
performance is given to a non-paying audience, or for the benefit of a religious institution.
13. The storing of a work in any medium by electronic means by a non-commercial public library, for
preservation if the library already possesses a non-digital copy of the work.
14. The making of not more than three copies of a book by or under the direction of the person in
charge of a non-commercial public library for the use of the library if such book is not available for sale
in India.
15. The reproduction, for the purpose of research or private study.
16. The production or publication of a translation in any Indian language of an Act of a Legislature and of any
rules or orders made thereunder:
i. if no translation of such Act or rules or orders in that language has previously been produced,
ii. where a translation of such Act or rules or orders in that language has been produced or
published by the Government, if the translation is not available for sale to the public,
iii. however, such translation contains a statement at a prominent place to the effect that the
translation has not been authorised or accepted as authentic by the Government.
17. The making or publishing of a painting, drawing, engraving or photograph of a work of architecture or
the display of a work of architecture.
18. The making or publishing of a painting, drawing, engraving or photograph of a sculpture, or other artistic
work, if such work is permanently situate in a public place or any premises to which the public has
access.
19. The performance of a literary, dramatic or musical work or the communication to the public of such
work. However, religious ceremony including a marriage procession and other social festivities associated
with a marriage.
20. The adaptation, reproduction, issue of copies or communication to the public of any work in any
accessible format by any person to facilitate persons with disability to access to works including sharing
with any person with disability of such accessible format for private or personal use, educational purpose
or research; or any organisation working for the benefit of the persons with disabilities in case the
normal format prevents the enjoyment of such works by such persons. However, the copies of the works
in such accessible format are made available to the persons with disabilities on a non-profit basis.
REMEDIES AGAINST INFRINGEMENT OF COPYRIGHT
“Owner of copyright” shall include:
1. An exclusive licensee,

2. In the case of an anonymous or pseudonymous literary, dramatic, musical or artistic work, the publisher
of the work, until the identity of the author or, in the case of an anonymous work of joint authorship, or
a work of joint authorship published under names all of which are pseudonyms, the identity of any of the
authors, is disclosed publicly by the author and the publisher or is otherwise establishment to the
satisfaction of the Commercial Court by that author or his legal representatives.
The Copyright law in India provided for remedies to be made available to the author
against a copyright infringer. The Copyright Act, 1957 provides to an author both Civil,
Criminal and border enforcement remedies. They are:
1. Civil Remedies: provide for injunctions, damages, interpretation of accounts, delivery and
destruction of infringing copies and damages for conversion.
2. Criminal Remedies: provide for imprisonment, fines, seizures of infringing copies and
delivery of infringing copies to the owner.
3. Border Enforcement: also provides for prohibition of import and destruction of any
imported goods that infringe the copyright of a person with the assistance of the customs
authorities of India.
PROTECTION OF RIGHT OF MANAGEMENT INFORMATION
Any person, who knowingly removes or alters any rights management information without authority, or
distributes, imports for distribution, broadcasts or communicates to the public, without authority, copies
of any work, or performance knowing that electronic rights management information has been removed
or altered without authority, shall be punishable with imprisonment which may extend to two years and
shall also be liable to fine.
OFFENCES & PENALTIES
Any person who knowingly infringes the copyright in a work under the Act shall be liable to imprisonment
for a minimum period of six months which may extend to three years and with minimum fine of fifty
thousand rupees which may extend up to rupees two lakhs. However, the court may impose a sentence
less than six months or a fine less than fifty thousand, if the infringement had not been made for gain in
the course of trade or business.
Offences under Section 63 of the Act are non-bailable in nature, and as such an application for
anticipatory bail will be maintainable.

CHAPTER – 20
LAW RELATING TO
GEOGRAPHICAL INDICATIONS OF
GOODS
INTRODUCTION
1. Geographical Indications of Goods are that aspect of industrial property which refers to a country or
to a place situated therein as being the country or place of origin of that product.
2. The desire of mankind for quality and genuine premium products such as silk, cotton and spices,
having distinct characteristics originating from a particular region, have over centuries created an
impact on human civilization which has resulted in discovery of new sea routes and new continents.
3. These identifications became so important that these regions started specializing in producing these
unique products, which led to identifying such goods as originating from a particular region, which
over a period of time has become renowned globally.
4. Rising demand for such products among the consumers, gave rise for counterfeit products, which
began to tarnish the image of genuine products.
5. A effort to safeguard the interest of the producers and consumers led to evolution and
conceptualization of “Geographical Indications”.
The object of the Geographical Indications of Goods (Registration and Protection) Act, 1999 is three
fold,
1. Specific law governing GI of goods in country which could adequately protect interest of
producers of goods,
2. To exclude unauthorized persons from misusing GI and protect consumers from deception
3. To promote goods bearing Indian GI in the export market.
Examples of Indian GI: Darjeeling Tea, Kanchipuram Silk Saree, Alphanso Mango, Nagpur Orange,
Kolhapuri Chappal, Bikaneri Bhujia, Agra Petha etc.
GEOGRAPHICAL INDICATION
1. Geographical indication in relation to goods means an indication which identifies such goods as
agricultural goods, natural goods or manufactured goods as originating, or manufactured in the
territory of a country, or a region or locality in that territory, where a given quality, reputation or
other characteristic of such goods is essentially attributable to its geographical origin.
2. It may be noted that any name which is not the name of a country, region or locality of that country
shall also be considered as the geographical indication if it relates to a specific geographical area

and is used upon or in relation to particular goods originating from that country, region or locality,
as the case may be.
Geographical Indication
1. It is an indication.
2. It originates from a definite geographical territory.
3. It is used to identify agricultural, natural or manufactured goods.
4. The manufactured goods should be produced or processed or prepared in that
territory.
5. It should have a special quality or reputation or other characteristics.
Example of Regtd GI: Darjeeling Tea, Chanderi Sarees, Kota Doria, Kancheepuram Silk, Madhubani
Paintings etc.
INDICATION
Indication includes any name, geographical or figurative representation or any combination of them
conveying or suggesting the geographical origin of goods to which it applies.
PROHIBITION OF REGISTRATION OF CERTAIN GEOGRAPHICAL INDICATIONS
Section 9 of the Act prohibits registration of certain geographical indications. They are as follows:
1. The use of which would be likely to deceive or cause confusion, or
2. The use of which would be contrary to any law for the time being in force, or
3. Which comprises or contains scandalous or obscene matter, or
4. Which includes or contains any material that may offend the religious sensitivities of any group or
segment of the Indian population, or
5. Which would otherwise be disentitled to protection in a court, or
6. Which are determined to be generic names or indications of goods and are, therefore, not or ceased
to be protected in their country of origin, or which have fallen into disuse in that country, or
7. A geographical indication shall not be registered if it accurately describes the place of origin of the
goods but falsely suggests to individuals that the goods come from a different location, despite being
factually correct regarding the actual place, region, or locality of origin.
REGISTRATION OF GEOGRAPHICAL INDICATION
Section 8 of the Act provides that a geographical indication may be registered in respect of any or all of
the goods, comprised in such class of goods as may be classified by a region or locality in that territory,
as the case may be the Registrar and in respect of a definite territory of a country.
Any question arising as to the class within which any goods fall or the definite area in respect of which
the geographical indication is to be registered or where any goods are not specified in the alphabetical

index of goods published shall be determined by the Registrar whose decision in the matter shall be
final.
APPLICATION FOR REGISTRATION
Any association of persons or producers or any organisation or authority established by or under any law
for the time being in force representing the interest of the producers of the concerned goods, who are
desirous of registering a geographical indication in relation to such goods shall apply in writing to the
Registrar.
The application shall contain:
1. A single application may be a statement as to how the geographical indication serves to designate
the goods as originating from the concerned territory of the country, in respect of specific quality,
reputation or with its inherent natural and human factors, and the production, processing or
preparation of which takes place in such territory, region or locality, as the case may be,
2. The class of goods to which the geographical indication shall apply,
3. The geographical map of the territory of the country in which the goods originate or are being
manufactured,
4. The particulars regarding the appearance of the geographical indication as to whether it is
comprised of the words or figurative elements or both,
5. A statement containing such particulars of the producers of the concerned goods, if any, Application
maybe made for registration of a geographical indication for different classes of goods and fee
payable therefore shall be in respect of each such class of goods.
Every application shall be filed in the office of the Geographical Indications Registry locality in the
country to which the geographical indication elates is situated.
The Registrar may refuse the application or may accept it absolutely.
REGISTRATION
1. On the registration of a geographical indication, the Registrar shall issue each to the applicant and
the authorised users, if registered with the geographical indication, a certificate sealed with the
seal of the Geographical Indications Registry.
2. It may be noted that where registration of a geographical indication is not completed within twelve
months from the date of the application by reason of default on the part of the applicant, the
Registrar may, after giving notice to the applicant in the prescribed manner treat the application as
abandoned unless it is completed within the time specified in that behalf in the notice.
STEP BY STEP GUIDE ON GEOGRAPHICAL INDICATION OF GOODS REGISTRATION PROCESS
Step 1: Filing of application
Check whether the indication comes within the ambit of the definition of a Geographical Indication. The
association of persons or producers or any organization should file an affidavit how the applicant claims
to represent their interest.

1. Application must be made in triplicate.
2. The application shall be signed by the applicant.
3. Details of the special characteristics.
4. Three certified copies of the map of the region to which the GI relates.
5. Details of all the applicant together with address. If there is a large number of producers a
collective reference to all the producers of the goods may be made in the application and the GI.
Step 2 & 3: Preliminary Scrutiny and Examination
1. The Examiner will scrutinize the application for any deficiencies.
2. The applicant should within one month of the communication in this regard, remedy the same.
3. The content of statement of case is assessed by a consultative group of experts will versed on the
subject.
4. Thereafter an Examination Report would be issued.
Step 4: Show Cause Notice
1. If the Registrar has any objection to the application, he will communicate such objection.
2. The applicant must respond within two months or apply for a hearing.
3. The decision will be duly communicated. If the applicant wishes to appeal, he may within one month
make a request.
Step 5 : Publication in the Geographical Indications Journal
Every application, within three month of acceptance shall be published in the Geographical Indications
Journal.
Step 6: Opposition to Registration
1. Any person can file a notice of opposition within three months (extendable by another month on
request which has to be filed before three months)
2. The registrar shall serve a copy of the notice on the applicant.
3. Within two months the applicant shall sent a copy of the counter statement.
4. If he does not do this be shall be deemed to have abandoned his application. Where the
counterstatement has been filed, the registrar shall serve a copy on the person giving the notice of
opposition.

5. Thereafter, both sides will lead their respective evidences by way of affidavit and supporting
documents.
6. A date for hearing of the case will be fixed thereafter.
Step 7: Registration
1. Where an application for a GI has been accepted, the registrar shall register the geographical
indication. If registered the date of filing of the application shall be deemed to be the date of
registration.
2. The registrar shall issue to the applicant a certificate with the seal of the Geographical indications
registry.
Step 8: Renewal
A registered GI shall be valid for 10 years and can be renewed on payment of renewal fee.
Step 9: Additional Protection to Notified Goods
Additional protection for notified goods is provided in the Act.
Step 10: Appeal
Any person aggrieved by order or decision may prefer appeal.
Geographical Indications Registration Workflow

What is the benefit of registration of Geographical Indications?
1. It confers legal protection to Geographical Indications in India.

2. Prevents unauthorised use of a Registered Geographical Indication by others.
3. It provides legal protection to Indian Geographical Indications which in turn boost
exports.
4. It promotes economic prosperity of producers of goods produced in a geographical
territory.
DURATION OF REGISTRATION
Section 18 deals with duration, renewal, removal and restoration of registration of GI.
The registration shall be for period of 10 years, but may be renewed
The registration of an authorised user shall be for period of 10 years OR for period till date on which
registration of authorised user expires, whichever is earlier.
The Registrar shall, on application and payment of the prescribed fee, renew registration of GI or
authorised user, as the case may be, for a period of 10 years from the date of expiration of the original
registration or last renewal of registration.
Infringement of Unregistered Geographical Indication
As per section 20 of the Act a person shall not be entitled to institute any proceeding to prevent, or to
recover damages for, the infringement of an unregistered geographical indication.
INFRINGEMENT OF REGISTERED GEOGRAPHICAL INDICATIONS
When is a registered Geographical Indication said to be infringed?
• When an unauthorised user uses a geographical indication that indicates or suggests

that such goods originate in a geographical area other than the true place of origin of
such goods in a manner which mislead the public as to the geographical origin of such
goods.
• When the use of geographical indication result in an unfair competition including
passing off in respect of registered geographical indication.
• When the use of another geographical indication results in false representation to
the public that goods originate in a territory in respect of which a registered
geographical indication relates.
The following acts shall be deemed to be acts of unfair competition, namely:
1. All acts of such a nature as to create confusion by any means whatsoever with the establishment,
the goods or the industrial or commercial activities, of a competitor,
2. False allegations in the course of trade of such a nature as to discredit the establishment, the
goods or the industrial or commercial activities, of a competitor,
3. Geographical indications, the use of which mislead the persons as to the nature, the
manufacturing process, the characteristics, the suitability for their purpose, or the quantity of the
goods. Using different GI that, falsely suggests they come from the area linked to the registered
geographical indication, is an infringement of that registration.

Indore ke bane “Sev” bech rahe ho with label “Ratlami Sev”
(It would be an infringement, as using GI with
false suggestion of region)
ASSIGNMENT OR TRANSMISSION
It is specified that the rights to a registered geographical indication cannot be assigned,

transferred, licensed, pledged, mortgaged, or subjected to similar agreements. Nevertheless, in
the event of the authorized user's demise, their rights in a registered geographical indication will pass
on to their legal successor in accordance with the prevailing laws.
PROHIBITION OF REGISTRATION OF GEOGRAPHICAL INDICATION AS TRADE MARK
1. Section 25 of the Act provides that the Registrar of Trade Marks shall, Suo-motu or at the request of an
interested party, refuse or invalidate the registration of a trade mark which contains or consists of a
geographical indication with respect to the goods or class or classes of goods not originating in the
territory of a country, or a region or locality in that territory which such geographical indication
indicates, if use of such geographical indications in the trade mark for such goods, is of such a nature as
to confuse or mislead the persons as to the true place of origin of such goods or class or classes of goods.
How a Geographical Indication is different from a Trade Mark?
1. A trade mark is a sign which is used in the course of trade and it distinguishes goods or
services of one enterprise from those of other enterprises.
2. Whereas a geographical indication is an indication used to identify goods having
special characteristics originating from a definite geographical territory.
2. In the case of Tea Board, India vs. ITC Limited plaintiff moved an interlocutory application for
temporary injunction for restraining the defendant from using or conducting or making its business
at the hotel by the name “DARJEELING LOUNGE”.
3. Application stated that usage of the word “DARJEELING” in the name and logo by defendants is
passing off or attempting to pass off its business or services so as to discredit the fame of Darjeeling
tea as a geographical indication and/ or to mislead persons.
4. Hon’ble Calcutta High Court inter alia observed that passing-off has to be seen in the light of what it
implies in trade mark law. As to whether any goods or services are passed off as some other goods or
services would depend on a variety of factors ranging from the nature of the marks, their
resemblance, the nature of the goods and services, the similarity of the character of the goods and
services, the mode of accessing the goods or services and other surrounding circumstances.
5. The word “Darjeeling” - as precious to tea as it may be as champagne to sparkling wines of that
province in France - cannot be exclusively claimed by the plaintiff by virtue of its registration as a
geographical indication or as a certification trade mark.

6. Even for a case of passing-off, the use of “Darjeeling” by a person other than the plaintiff can be
complained of if the word or the geographical indication has any nexus with the product with which
it is exclusively associated upon the registration.
7. It is not necessary to consider whether a “Darjeeling Tea Stall” selling only hot cups of tea can
entitle the plaintiff to carry a complaint in respect thereof or a “Darjeeling Tea House” selling all
varieties of packaged tea can be said to be in derogation of the plaintiff’s rights.
8. The defendant’s “Darjeeling Lounge” is an exclusive area within the confines of its hotel which is
accessible only to its high-end customers. The lounge is a place where such customers and
accompanying visitors may frequent, and even sip Darjeeling tea or any other beverage or drink, but
there is scarcely any likelihood of deception or confusion in the lounge being named “Darjeeling” for
the plaintiff to be granted to any order that it seeks.
9. As to the case of dilution, the name “Darjeeling” has been extensively used in trading and
commercial circles for decades before the GI Act was enacted.
10. In a case of dilution by blurring, it is the uniqueness of a mark which is protected even in a case
where there is no likelihood of confusion. But the word “Darjeeling” has been and continues to be so
widely used as a business name or for like purpose for so long that the plaintiff’s recent registration
would, prima facie, not entitle it to enjoy the kind of exclusivity that it asserts.
OFFENCES, PENALTIES AND PROCEDURE
MEANING OF APPLYING GEOGRAPHICAL INDICATIONS
A person shall be deemed to apply a geographical indication to goods who:
• Applies it to the goods themselves, or

• Applies it to any package in or with which the goods are sold, or exposed for sale, or had in
possession for sale or for any purpose of trade or manufacture, or
• Uses a geographical indication in any manner reasonably likely to lead to the belief that the goods in
connection with which it is used are designated or described by that geographical indication, or
• In relation to the goods uses a geographical indication in any sign, advertisement, invoice,
catalogue, business letter, business paper, price list or other commercial documents and goods are
delivered to a person in pursuance of a request or order made by reference to the
geographical indication as so used.
A geographical indication shall be deemed to be applied to goods whether it is woven in, impressed on,
or otherwise worked into, or annexed or affixed to, the goods or to any package or other thing.
FALSIFYING AND FALSELY APPLYING GEOGRAPHICAL INDICATIONS
A person shall be deemed to falsify a geographical indication who, either:
• Without the assent of the authorised user of the geographical indication makes that geographical
indication,
• Falsifies any genuine geographical indication.

A person shall be deemed to falsely apply to goods a geographical indication who, without the assent of
the authorised user of the geographical indication:
1. Applies such geographical indication or a deceptively similar geographical indication to goods or any
package containing goods,
2. Uses any package bearing a geographical indication which is identical with or deceptively similar to
the geographical indication of such authorised user, for the purpose of packing, filling or wrapping
therein any goods other than the genuine goods of the authorised user of the geographical
indication.
PENALTY FOR APPLYING FALSE GEOGRAPHICAL INDICATIONS
According to Section 39 of the Act, any person who:
• Falsifies any geographical indication, or

• Falsely applies to goods any geographical indication, or
• Applies to any goods to which an indication of the country or place in which they were made or
produced, or
• Tampers with, alters or effaces an indication of origin which has been applied to any goods to which
it is required to be applied under section 71,
• Causes any of the things above-mentioned in this section to be done, shall, unless he proves that he
acted, without intent to defraud, be punishable with imprisonment for a term which shall not be less
than six months but which may extend to three years and with fine which shall not be less than fifty
thousand rupees but which may extend to two lakh rupees.
It may be noted that the court may, for adequate and special reasons to be mentioned in the judgment,
impose a sentence of imprisonment for a term of less than six months or a fine of less than fifty thousand
rupees
Special Provisions Relating to Applications for Registration from Citizens of Convention Countries
Section 84: CG may by notification in Official Gazette, declare such country or group of countries or
union of countries or Inter-Governmental Organisations to be a convention country for the fulfillment
of treaty, convention or arrangement with any country or a country which is a member of a group of
countries or union of countries or Inter- Governmental Organisations outside India which affords to
citizens of India similar privileges as granted to its own citizens.

CHAPTER – 21
LAW RELATING TO DESIGNS
INTRODUCTION
Industrial designs refer to creative activity which result in the ornamental or formal appearance of a
product and design right refers to a novel or original design that is accorded to the proprietor of a validly
registered design. Industrial designs are an element of intellectual property.
The objective of the Designs Act, 2000 is to protect new or original designs so created to be applied or
applicable to particular article to be manufactured by Industrial Process or means.
Bharat Glass Tube Limited vs. Gopal Glass Works Limited,
• With advancement of science & technology in India, the Act of 1911 was amended by
Parliament and new Act known as Designs Act, 2000 was passed.
• The sole aim of Act:
a. Protection of the IPR of the original design for a period of 10 years or period
extendable.
b. Benefit the person for his research and labour put in by him to evolve new and
original design.
• Design should not be registered, if:

a. Not new or original or published previously
b. Disclosed to public anywhere in India or other country by publication in tangible
form
c. Not significantly distinguishable from known designs
• Registration can be cancelled, if proper application filed before the the Controller
that design has been previously registered.
• Controller after hearing both parties, cancel such registration if satisfied that:
a. Design not new or original or
b. Already registered or
c. Not registerable
• Appeal shall lie to High Court, against that order.
Escorts construction Equipment Ltd. vs. Action construction Equipment Pvt. Ltd
Delhi High Court observed that the primary object of Act is to protect shape and not the
function or functional shape.
The expression design doesn‘t include a method or principle of construction.

DESIGN
• Design means only the features of shape, configuration, pattern or ornament or composition of lines
or colour or combination thereof applied to any article whether two dimensional or three
dimensional or in both forms, by any industrial process or means, whether manual, mechanical or
chemical, separate or combined, which in the finished article appeal to and are judged solely by the
eye, but does not include any trade mark.
• Design is one of the categories of IPR where the design system focuses on the aesthetic feature of an
article derived from its visual appearance. Relevant aspects are the shape, configuration, surface
pattern, the colour or line or a combination thereof as applied to an article which produces an
aesthetic impression on the sense of sight.
Pictorial examples of design:
Bajaj (Motorcycle)
Bangle Set
PROPRIETOR OF A NEW OR ORIGINAL DESIGN
1. Where the author of the design, for good consideration, executes the work for some other person,
means the person for whom the design is so executed,
2. Where any person acquires the design either exclusively of any other person,
3. In any other case, means the author of the design.
PROHIBITION OF REGISTRATION OF CERTAIN DESIGNS
A design which prohibited of registration under Section 4 of the Design Act, 2000 are as follows:
1. Is not new or original, or
2. Has been disclosed to the public anywhere in India or in any other country by publication in
tangible form,
3. Is not significantly distinguishable from known designs or combination of known designs, or
4. Comprises or contains scandalous or obscene matter, shall not be registered.
Hon’ble Supreme Court of India held that expression new or original appearing in Section 4 means that
the design which has not been registered and has not been published anywhere or has been made known
to the public and that it had been invented for the first time or it has not been reproduced by anyone.

M/s Brighto Auto Industries vs. Shri Raj Chawla
• New is taken generally to mean as different to what has gone before and original
• To secure recognition for newness or originality it is imperative that a design should
not have been published or registered previously.
• Not necessary that whole design should be new, the newness may be confined to only
significant part.
• Duty of the court to take special care that no design shall be counted new unless it is
distinct from previously existed design.
APPLICATION FOR REGISTRATION OF DESIGNS
1. The Controller may, on the application of any person claiming to be the proprietor of any new or
original design not previously published in any country and which is not contrary to public order or
morality, register the design under this Act.
2. Every application shall be in the prescribed form and shall be filed in the patent office,
3. A design may be registered in not more than one class, and, in case of doubt as to the class in which
a design ought to be registered, the Controller may decide the question.
4. The Controller may, if he thinks fit, refuse to register any design presented to him for registration,
but any person aggrieved by any such refusal may appeal to the High Court.
5. An application which, owing to any default or neglect on the part of the applicant, has not been
completed so as to enable registration to be effected within the prescribed time shall be deemed to
be abandoned.
6. A design when registered shall be registered as of the date of the application for registration.
Design Registration Process Workflow

REGISTRATION TO BE IN RESPECT OF PARTICULAR ARTICLE
1. A design may be registered in respect of any or all of the articles comprised in a prescribed class of
articles.
2. Any question arising as to the class within which any article falls shall be determined by the
Controller whose decision in the matter shall be final.
3. Where a design has been registered in respect of any article comprised in a class of article, the
application of the proprietor of the design to register it in respect of some one or more other
articles comprised in that class of articles shall not be refused, nor shall the registration thereof
invalidated:
i. on the ground of the design not being a new or original design, by reason only that it was so
previously registered, or
ii. on the ground of the design having been previously published in India or in any other country, by
reason only that it has been applied to article in respect of which it was previously registered.
4. Where any person makes an application for the registration of a design in respect of any article and
either:
i. that design has been previously registered by another person in respect of some other article, or
ii. The design to which the application relates consists of a design previously registered by another
person in respect of the same or some other article with modifications or variations not sufficient
to alter the character or substantially to affect the identity thereof, then, if at any time while the
application is pending the applicant becomes the registered proprietor of the design previously
registered, the foregoing provisions of this section shall apply as if at the time of making the
application, the applicant, had been the registered proprietor of that design.
Essential requirements for the registration of ‘Design’ under the Act
i. The design should be new or original

ii. The design should relate to features of shape, configuration, pattern or
ornamentation applied or applicable to an article.
iii. The design should be applied or applicable to any article by any industrial process.
iv. The features of the design in the finished article should appeal to and are judged solely by
the eye. This implies that the design must appear and should be visible on the finished
article, for which it is meant.
v. Any mode or principle of construction or operation or anything which is in substance a
mere mechanical device, would not be a registrable design. For instance a key having its
novelty only in the shape of its corrugation or bent at the portion intended to engage with
levers inside the lock associated with, cannot be registered as a design under the Act.
vi. The design should not include any Trade Mark or property mark or artistic works as defined
under the Copyright Act, 1957.
PUBLICATION OF PARTICULARS OF REGISTERED DESIGNS

Section 7 of the Act provides that the Controller shall, as soon as may be after the registration of a
design, cause publication of the prescribed particulars of the design to be published in such manner as
may be prescribed and thereafter the design shall be open to public inspection.
Substitution of Applicant or Joint Claiming (Section 8)
1. Name of an applicant can be substituted or a joint claim can be made for an applied design, if the
following requirements are met:
i. The claim for substitution is made before the design has been registered, and
ii. Right of claimant shall be created only by:
• An assignment,
• Agreement in writing made by the applicant or one of the applicants, or
• Operation of law
iii. The design under consideration shall be identified in the assignment or agreement specifically by
reference to the number of application for registration, or
iv. The rights of the claimant in respect of the design have been finally established by a Court.
2. A request for substitution of applicant shall be filed in Form-2 along with the required fee. If the
above said requirements are fulfilled and the Controller is satisfied that, upon registration of design, the
claimant would be entitled to any interest in the design the Controller may direct that the application
shall proceed:
i. in the names of the claimant(s), or
ii. in the names of the claimant(s) and the applicant or the other joint applicant(s), as the case may
be.
3. However, in case of joint applicants, the Controller shall not pass such direction without with the
consent of the other joint applicant(s),
4. In case, joint applicant(s) die(s) at any time before the design has been registered, a request may
be made for substitution by the survivor(s) and the Controller may direct that the application shall
proceed in the name of the survivors alone. However, no such direction shall be issued without the
consent of legal representative of the deceased,
5. If case, there is any dispute between joint applicants as to whether or in what manner the
application should be proceeded with an application may be made by any of the parties. The Controller
may give such directions as he thinks fit for enabling the application to proceed in the name of one or
more of the parties alone or for regulating the manner in which it should be proceeded with, or for both
those purposes, as the case may be. However, the Controller shall not pass any such direction without
giving an opportunity to be heard to all the concerned parties.
CERTIFICATE OF REGISTRATION
Under section 9 of the Design Act, the Controller grant a certificate of registration to the proprietor of
the design when it registered.

The Controller may, in case of loss of the original certificate, or in any other case in which he deems it
expedient, furnish one or more copies of the certificate.
Effect of Registration of Design
The registration of a design confers upon the registered proprietor ‘Copyright’ in the
design for the period of registration. ‘Copyright’ means the exclusive right to apply a
design to the article belonging to the class in which it is registered.
Register of Designs
• Section 10: There shall be kept at patent office a book called the register of designs, wherein shall
be entered:
a. names and addresses of proprietors of registered designs,
b. notifications of assignments & transmissions, and
c. other matter as may be prescribed
• Such register may be maintained wholly or partly on computer, floppies or diskettes.
• The register of designs shall be prima facie evidence of any matter.
COPYRIGHT ON REGISTRATION
When a design is registered, the registered proprietor of the design shall, have copyright in the
design during ten years from the date of registration. However, the Controller shall, on payment of
the prescribed fee, extend the period of copyright for a second period of five years from the expiration
of the original period of ten years. High Court of Delhi in the case of Microfibers Inc. vs. Girdhar and
Co. observed the following guidelines:
1. The definition of artistic work has a very wide connotation as it is not circumscribed by any
limitation of the work possessing any artistic quality. Even an abstract work, such as a few lines or
curves arbitrarily drawn would qualify as an artistic work. It may be two dimensional or three
dimensional. The artistic work may or may not have visual appeal.
2. It is the exclusive right of the holder of a Copyright in an original artistic work to reproduce the work
in any material form.
3. The design protection in case of registered works under the Designs Act cannot be extended to
include the copyright protection to the works which were industrially produced.
4. A perusal of the Copyright Act and the Designs Act and indeed the Preamble and the Statement of
Objects and Reasons of the Designs Act makes it clear that the legislative intent was to grant a
higher protection to pure original artistic works such as paintings, sculptures etc and lesser
protection to design activity which is commercial in nature. The legislative intent is, thus, clear that
the protection accorded to a work which is commercial in nature is lesser than and not to be
equated with the protection granted to a work of pure Article.
5. The original paintings/artistic works which may be used to industrially produce the designed article
would continue to fall within the meaning of the artistic work and would be entitled to the full
period of copyright protection as evident from the definition of the design. However, the intention
of producing the artistic work is not relevant.
6. This is precisely why the legislature not only limited the protection by mandating that the
copyright shall cease under the Copyright Act in a registered design but in addition, also deprived

copyright protection to designs capable of being registered under the Designs Act, but not so
registered, as soon as the concerned design had been applied more than 50 times by industrial
process by the owner of the copyright or his licensee.
7. In the original work of art, copyright would exist and the author/holder would continue enjoying
the longer protection granted under the Copyright Act in respect of the original artistic work per se.
8. If the design is registered under the Designs Act, the design would lose its copyright protection
under the Copyright Act. If it is a design registrable under the Designs Act but has not so been
registered, the design would continue to enjoy copyright protection under the Act so long as the
threshold limit of its application on an article by an industrial process for more than 50 times is
reached. But once that limit is crossed, it would lose its copyright protection under the Copyright
Act. This interpretation would harmonize the Copyright and the Designs Act in accordance with the
legislative intent.
What is the duration of the registration of a design? Can it be extended?
The duration of the registration of a design is initially ten years from the date of registration, but in
cases where claim to priority has been allowed the duration is ten years from the priority date. This
initial period of registration may be extended by further period of 5 years on an application made to the
Controller before the expiry of the said initial period of ten years.
RESTORATION OF LAPSED DESIGNS
Where a design has ceased to have effect by reason of failure to pay the fee for the extension of
copyright, the proprietor of such design or his legal representative and where the design was held by
two or more persons jointly, then, with the leave of the Controller one or more of them without
joining the others, may, within one year from the date on which the design ceased to have effect,
make an application for the restoration of the design.
Can the Registration of a Design be cancelled?
According to Section 19 of the Act, the registration of a design may be cancelled at any
time after the registration of design on a petition for cancellation in prescribed form with
fee to the Controller of Designs on the following grounds:
i. That the design has been previously registered in India, or

ii. That it has been published in India or elsewhere prior to date of registration, or
iii. The design is not new or original, or
iv. Design is not registrable, or
v. It is not a design.
DESIGNS TO BIND GOVERNMENT
A registered design shall have to all intents the like effect as against the Government as it has against
any person
Piracy of Registered Design

During the existence of copyright in any design it shall not be lawful for any person, without the license
or written consent of the registered proprietor:
1. For the purpose of sale to apply or cause to be applied, to any article in any class of articles in
which the design is registered,
2. To import such article for the purposes of sale,
3. To publish or expose or cause to be published or exposed for sale, that article.
What is Piracy of a Design?
Piracy of a design means the application of a design or its imitation to any article
belonging to class of articles in which the design has been registered for the purpose of
sale or importation of such articles without the written consent of the registered
proprietor. Publishing such articles or exposing terms for sale with knowledge of the
unauthorized application of the design to them also involves piracy of the design.
INDUSTRIAL AND INTERNATIONAL EXHIBITIONS
The exhibition of a design, to which a design is applied, at an industrial or other exhibition to which the
provisions of this section have been extended by the Central Government by notification in the Official
Gazette without the privity or consent of the proprietor, shall not prevent the design from being
registered or invalidate the registration thereof.
1. The exhibitor exhibiting the design or article, or publishing a description of the design, gives to the
Controller previous notice in the prescribed form, and
2. The application for registration is made within six months from the date of first exhibiting the design
or article or publishing a description of the design.
APPEAL
An appeal lies to the High Court against an order passed by the Controller under the following provisions:
1. An order refusing registration of a design,
2. An order passed in a cancellation petition,
3. An order passed in a rectification petition,
4. An order refusing registration on the ground of public order or morality.
Every appeal shall be made within three months of the date of the order of the Controller. The date of
such order is the date on which the order is dispatched.
In calculating the said period of three months, the time taken in granting a copy of the order appealed
against shall be excluded.

The High Court may, if it thinks fit, obtain the assistance of an expert in deciding such appeals, and the
decision of the High Court shall be final.

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CS EXECUTIVE – NEW SYLLABUS

2. Foreign Contribution Regulation Act 2010

19. LAW RELATING TO COPYRIGHT

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THE OBJECTIVES OF FEMA WAS:-

• Consolidate & amend law relating to foreign exchange

FEMA PROVIDES FOR:-

• Current account & capital account transactions

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The registration of Authorized dealer is granted in 4 categories :

It includes the following:

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However the above transactions can be done through authorized dealer.

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CURRENT ACCOUNT TRANSACTIONS – SECTION 5

b. Payments due as interest on loans and as net income from investments

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Some Clarifications with regard to LRS:

The capital Account Transactions that can be done under LRS:

1. Opening of Foreign currency accounts with bank abroad.

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Other Remittances for other then Individuals:

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CAPITAL ACCOUNT TRANSACTIONS – SECTION 6

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INDIAN COMPANIES WITH OVERSEAS OFFICES

Acquisition/ transfer by a Person of Indian Origin (PIO)

Payment for Acquisition of Immovable Property in India

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ACQUISITION AND TRANSFER OF IMMOVEABLE PROPERTY IN INDIA

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REMITTANCES BY COMPANIES OR ENTITIES :

Following documents are required to be submitted to authorized dealer :

4) No income from any source outside India shall be left unrepatriated.

REMITTANCES OF ASSET WHICH REQUIRE RBI’S APPROVAL :

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INCOME TAX CLEARANCES :

Power of the Reserve Bank to issue directions to authorised person

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Power of Reserve Bank to Inspect authorised person

ADJUDICATION & APPEALS

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The chairperson & member may be reappointed if they are qualified.

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Under Section 15, Contraventions are settled.

Through compounding of contravention a settlement or compromise is made in relation to any kind of

Through compounding an offence is settled in easy fast & flexible manner.

COMPOUNDING OF OFFENCES BY REGIONAL AUTHORITIES OF RBI

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APPLICATION FOR COMPOUNDING

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The copy of order :

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As per section 4, following are exempt from the provisions of section 3:

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