Investment Law

Module:3

Foreign Trade (Development and Regulation) Act, 1992

Foreign Trade and its implications

Imports and exports are considered to be two important components of foreign

trade. Foreign trade refers to nothing but the exchange of the goods and services
between two or more countries, across their respective international borders.
The former implies the physical movement of the goods into a country from
another country following a legal manner. The latter is concerned with the
physical movement of the goods and services out of the country in a legal
manner. Thus, both the import and export have made the world a local market.
Foreign trade or international trade is considered to be extremely important for
the brand survival as well as the growth of any country. This is because foreign
trade acts as one of the primary economic boosters for that specific entity. Not
only this, foreign trade is also supposed to cover up the need for a country for
particular resources and to further get rid of the extra resources that are
abundantly available in the country.
Whether it is the optimum utilization of the resources, specialization and labor
division or price equality, quality of goods, multiple choices or the overall
economic development of the country, foreign trade has always helped in the
growth of a country where a country could stand on its own to address itself on
an international platform. Exporting, importing as well as entreporting involved
in the foreign trade of any country helps to raise the standard of living of the
people. These kinds of foreign trade also help to maintain the payment solution
balance of the country and make sure that there always exists a free flow of
economy.
Globalization has reached on its very summit and therefore a number of
countries have introduced their own respective foreign trade policies so as to
avoid all the hassle that might occur while trading with the foreign countries.
Thus, India, like other countries of the world has its own respective foreign
policy that covers all the know-hows as well as aspects involved while dealing
with the foreign countries.

The Foreign Trade (Development and Regulation) Act, 1992

The foreign policy of India is governed and regulated by the Foreign Trade
(Development and Regulation) Act, 1992. This Act was established on the 7th
of August in the year 1992. The Act hasn’t been originated as a separate act to
regulate the foreign policy, but the same came into existence as a replacement to
the Import and Exports (Control) Act, 1947. Today, the entire scenario of
exports and imports in India is regulated and managed by the Foreign Trade
(Development and Regulation) Act, 1992. This act has eliminated all the
existing nuances of the previously introduced act and has given the Government
of India some of the most enormous powers to control it. This act is considered
to be a supreme legislation in accomplishment of the foreign trade taking place
in the country. The Act has been incorporated with a major intention to provide
a proper framework as to the development as well as standardization of the
foreign trade by the way of facilitating imports and enhancing the exports in the
country and all the other matters related to the same.

Under this Act, various powers have been bestowed upon the Central
Government. According to the provisions of this act, the Central Government
has all the power to make any provisions that are related to foreign trade in
order to fulfill the objectives of the act. This Act also empowers the government
to make any provisions in tandem to the formulations of import as well as
export policies governing throughout the country. The Act further provides for
the appointment of the Director General by the Central Government by
notifying this appointment in the Official Gazette for carrying out all the foreign
trade policies as per the provisions provided.
Salient Features of the Act
Foreign Trade (Development and Regulation) Act, 1992 is believed to be a
breakthrough in the economic development of the country, especially in today’s
world of globalization and industrialization. The entire act has been designed in
such a manner so as to run in consonance with the current trade policies
associated with the foreign countries. Thus, overall, this Act features everything
that makes the economy of the country stronger whenever the regard of foreign
trade is taken into consideration.

The following are considered to be the salient features of the act:

 The act has empowered the Central Government to make provisions for
the development as well as regulation of foreign trade by the way of
facilitating imports into as well as augmenting exports from the country
and in all the other matters related to foreign trade.
 This act authorizes the government to formulate as well as announce the
export and import policy and to also keep amending the same on a timely
basis. The government has also been given a wide power to prohibit,
restrict and regulate the exports and imports in general as well as
specified cases of foreign trade.
 The act provides for certain appointments especially that of the Director-
General to advise the Central Government in formulating import and
export policy and to implement the same.
 The act commands every importer as well as exporter to obtain a code
number called the ‘Importer Exporter Code Number (IEC)’ from the
Director-General or the authorized officer.
 The act provides the balancing of all the budgetary targets in terms of
imports and exports so that the nation reaches the very peak of economic
development. The principal objectives here include the facilitation of
sustain growth as to the exports of the country, the distribution of quality
goods and services to the domestic consumer at internationally
competitive prices, stimulation of sustained economic growth by
providing access to essential raw materials as well as enhancement of
technological strength and efficiency of Indian agriculture, industry as
 well as services and improvement of their competitiveness to meet all
kinds of requirement of the global markets.

Present scenario of the Foreign Trade Policy

Presently, the Foreign Trade Policy of our country is in its sixth instalment of
the five-year policy that was earlier introduced in the year 1992 by the
Government of India. The new foreign trade policy of the country was
announced on the 1st of April, 2015 by the Government of India, Ministry of
Commerce and Industry. This current foreign trade policy extends for the period
2015-2020. The major aim of the current foreign trade policy introduced in the
country is nothing but the development of export potential, improvement of
export performance, encouragement of foreign trade as well as the creation of
favorable balance of the position of the payment. This policy, also known as the
Export Import Policy (EXIM Policy) is updated every year on the last day of
March and all the new improvements, modifications as well as schemes so
updated become effective from the first day of April each year.

Importance of Foreign Trade Policy

Foreign Trade policy of any country is equally important for the free flow of
economy and the overall economic development of the country. Without a
proper foreign trade policy, any country would fail to execute its import as well
as export business smoothly. If there exists no proper foreign policy in a
country, the entire import-export and international business of the country will
fall down miserably and the same will surely meet a dead end. A foreign trade
policy of any country ensures a free flow of business as well as economy while
transacting or trading on an international scale. The same policy helps to
maintain the free flow of economy of the country, thereby accelerating the
financial growth, facilitating a free trade and liberalization as well as improving
the overall standard of living of its people.
Conclusion
After the implementation of foreign trade policy in India, the import, as well as
export among the foreign countries, have increased and the same has become
very safe and secure to perform. Setting up of different plans/policies such as
SEZ and EPZ by the Foreign Trade Policy of India has increased the number of
foreign investors in the country. Trading Housing has given a platform to both,
the consumers as well as the manufacturers and thus the same has entertained an
easy practice of trade in between different countries. Furthermore, the
simplification of procedures, as well as the idea of incentives provided to the
exporters and importers involved in the foreign trade, has acted in a fair way for
the traders and there is still a wide scope of improvement in the same.
Thus, the introduction of Foreign Trade (Development and Regulation) Act,
1992 in India has made the industrialization more liberal and the same has been
proven to be highly beneficial for all the traders as well as consumers in the
coming ages.

UNCTAD Draft Model on Trans-national Corporations

INTRODUCTION
Multiple factors, such as liberalisation, globalization, privatization, and modern
communication technology, enabled the companies to function smoothly in so
many countries at the same time. These international companies are classified
based on their investment, structure, services, and also by mode of operations.
Based on the business structure, we can divide an organization into two types,
one is multinational and the other one is transnational. These two kinds of
organizations broadly work under the same kinds of conditions, which is why so
many times these two are labelled as one.
‘Multinational’ as the name suggests, the business operates in at least one
country other than its home country.2 Such corporations have assets and
facilities in more than two countries. However, these companies have a central
office from which global management is controlled or coordinated. Hence, the
decision-making power of the central office affects all the subsidiaries globally.
Transnational” these companies operate in two or more countries but such
companies do not have a centralised control mechanism. Hence, decisions are
taken as per the suitability of the operating zone. As the management system
here is not centralized, similar firms operating in different countries cannot be
treated as subsidiaries. Multi-National Companies and transnational companies
are both big organizations which expand their industrial and marketing
networks through their branches or majority-owned foreign affiliates (MOFAs).
Since 1991, India has witnessed a huge inflow of foreign investment as Multi-
National Companies came into India. The new economic policy adopted by
India in 1991 has 3 vital characteristics:
A. Opening the economy to global markets.
B. Stabilizingtheeconomythroughstructuralreforms.
C. Reducing import tariffs and state intervention in policy decisions.

UNCTAD'S DRAFT MODEL ON TRANSNATIONAL CORPORATIONS

The United Nations Conference on Trade and Development (UNCTAD)3 is an
organ of the United Nations that deals with the effects of trade and investment
in developing nations. In the year 1983, UNCTAD issued a draft model relating
to ‘transnational corporations’. These are the vital provisions of the draft:

DEFINITION AND EXTENT OF THE DRAFT

‘Transnational corporations’ as this code’s explanation indicates an enterprise,
comprising entities in two or more countries, regardless of the legal form and
fields of activity of these entities, which operates under a system of decision-
making, permitting coherent policies and a common strategy through one or
more decision making centres, in which the entities are so linked, by ownership
or otherwise, that one or more of them may be able to exercise a significant
influence over the activities of the others. These entities can be of public,
private, or mixed ownership. This code has universal applicability at home and
in the host countries of transnational corporations. This code is open to adoption
by all states, regardless of their political and economic scenario and their level
of development. This particular draft applies to every type of enterprise. The
provisions of this code’s intention behind these provisions are not to create any
difference between “Transnational corporations” and domestic corporations but
to introduce a good set of practices for all enterprises. Under these provisions,
both transnational corporations and domestic corporations have been placed on
equal footing and subject to the same expectations. The provisions of this draft
include states, countries, or governments and also include regional groups of the
state. There are also clauses in this draft applicable to affairs within such groups
as well regarding the level of competence.

ACTIVITIES OF TRANSNATIONAL CORPORATIONS

Transnational corporations perform various kinds of activities irrespective of
their origin or place of work.
● General and Political
Transnational corporations need to respect the sovereignty and domestic
laws/regulations of a nation following international laws in consideration of
agreements signed by the nations concerning their resources and finance.
Transnational corporations should adhere to the explicitly declared
administrative laws and policies of the host nations. Units of "transnational
corporations" are governed by the laws and regulations of the countries in which
they operate to the extent necessary. Transnational corporations should conduct
their operations in line with the plans, programs, goals, and objectives set by the
governments of those nations. Such corporations should work towards the
achievement of such goals not only at national but, if possible, regional levels
too. All "transnational corporations" are required to work with the governments
of the nations in which they do business to create development plans and should
be receptive to requests for input in this regard so that positive relationships can
be developed with those countries. The host countries should make pertinent
governmental agreements for cooperative action.
All the contracts between the government and transnational corporations should
be bargained for and carried out in good faith. Generally, long-term agreements
have negotiation and review clauses in them. But, in the case of the non-
appearance of such clauses and if a fundamental change has taken place in the
circumstances under which the whole contract has been executed. So, in that
case, transnational corporations should band alongside the administration in
good faith for review and re-negotiations of the contracts. Transnational
corporations shall stay away from all actions, behaviour, and amenities which
can lead to destructive outcomes on social- cultural marking resolved by the
administration of host nations. Economic and mechanical evolution is generally
backed by social changes. In societal as well as commercial associations,
‘transnational corporations’ should not show prejudice about the footing of race,
religion, gender, colour, mother tongue, communal, state and ethnological or
any other viewpoint. ‘Transnational corporations’ must be bound by government
plans or policies designed to increase equality of opportunity and treatment. In
conformity regarding the endeavours of the global body about the ‘eradication
of apartheid in South Africa and its continued illicit occupation in Namibia.’
 All the ‘transnational corporations’ shall gradually lessen their
operational affairs and abstain from making any further funding in ‘South
Africa’ and instantly terminate all operations in South Africa.
 ‘Transnational corporations’ shall hold back from uniting formally or
informally, particularly concerning their “racist practices in South Africa
and illicit occupation of Namibia” to be in line with the United Nations
resolution concerning these two nations.
A “transnational corporation” shall not impede illicitly in the internal political
events of the nations in which they are operating. This implies that these
corporations shall also refrain from any disruptive and other illegitimate
occupation directed towards impairing the political and social structure in such
nations. A “transnational corporation” shall not interfere in any activities which
are the sole responsibility of the government. A “Transnational Corporation”
shall avoid, in its undertaking, handing out, encouraging or giving any
liquidation, gift or other benefits as consideration for carrying out its duties. For
the code, the principles set out in the international agreement on illicit payments
adopted by the United Nations should apply in the area of abstention from
corrupt practices.

A. Economical, financial, and social authority and control

Transnational corporations must assign power to make decisions among their
entities. So, they are all not to the development of the host country.
“Transnational corporations” shall cooperate with other corporations by
following local ordinances, policies, and rules so all transnational corporations
can meet successfully the demand fixed by laws. Every Transnational
Corporation should join the government in its policies to increase active
participation from its citizens in the ‘decision-making processes’. Transnational
Corporations should conduct their financial activities like the balance of
payments or other financial transactions following the laws and regulations of
that country. As needed by the administration or promotion of administration’s
policies concerning nature, scope, and purpose to the extent of Transnational
Corporations should add to the enhancement of exports and imports in the
nations where they function and also to an enhanced application of goods and
services, and other assets available to such nations.
Transnational corporations should be amenable to calls for by administration to
such nations concerning any plan for disinvestment or remittance of
accumulated profits, when the size and duration of such transfers can lead to
intense balance-of-payments strains for such nations. Transnational corporations
shall not go against the normally prevalent economic execution affairs prevalent
in the host country. They should not involve in small-duration economic
operations or transfers or defer or advance foreign exchange transactions in a
way which will enhance monetary instability in a nation and that can bring
about an intense balance of payment for the nations concerned.
Such corporations should not put curtailment on their unit’s far-off by and large
accepted commercial transactions prevalent in such nations regarding the
transfer of goods, services, and funds. Every Transnational Corporation should
never become part of operations which would have a serious unfavourable
collision on the survival of local markets, especially by restricting the
availableness of money to other transnational corporations. While providing
securities to enhance local equity involvement in enterprise such a nation or
engage in long-term debts in the local market, transnational corporations should
discuss with the administration of the host nation on request upon the effects of
such transactions on local money and capital markets.
Transnational Corporations shall not use monetary practices which are not
based on significant market prices or in the absence of such prices, the arm’s
length principle, which saves the effect of changing the tax base on which the
entities are assessed or of evading exchange control measures adversely affect
economic and social conditions of the nations in which they operate.
Transnational corporations should adhere to all the relevant laws, policies, and
regulations regarding the Transfer of technology, competition and restrictive
business activities, consumer protection, and environmental protection of the
nation in which they are operating.
Disclosure of Information: Every Transnational Corporation should disclose to
the public at large in the nation in which they operate, by using reasonable
modes of communication, all the lucid, full and detailed information on the
formation, blueprint, functions and activities as a whole. Such details should
include all economic and non-economic entries and should be made available to
the public at regular intervals. A piece of financial information to make
available annually with appropriate detailed notes and should include the
followings:
 A balance sheet;
 Research and development expenditure;
 An income statement including operating results and sales;
 A statement of allocation of net income or net profits;
 Details of significant new long-term capital investments;
 A statement of sources and uses of funds;
 Details of research and development expenditure.

Non-financial information should include

 Structure of Transnational corporation displaying name and address of
parent organisation, its important entities, % of ownership (direct or
indirect);
 The main function of its entities;
 Employment information including the average number of employees;
 Accounting policies used in the organisation;
 Policies applied concerning transfer pricing.

POSITION OF TRANSNATIONAL CORPORATIONS

● General treatment of “transnational corporations” by the host nations: All
nations have the right to regulate the entrance and initiation of the “transnational
corporation” together with the functions such corporations may play in social
and economic development and can also bar their existence in specific fields.
Such corporations should get just and fair-minded and non-biased treatment by
the laws of the nations in which they operate and also intergovernmental
conditions to which the governments of these nations have subscribed consistent
with International law.
Transnational corporations should not demand preferential treatment or
concessions given to domestic enterprises to promote self-reliance or make
them independent to survive global competition. All the laws, regulations,
policies, schemes, bylaws and other measures which can affect transnational
corporations must be clearly and readily available. Amendments in them must
be made by following exact legal procedure and also by keeping in mind the
legitimate rights and duties of all concerned parties. Any sort of confidential
information provided by transnational corporations to the government of the
host nation must be accorded reasonable safeguards to protect its confidentiality.
All Transnational corporations should be enabled to make all the payments such
as interest on capital invested, cash repatriated upon the termination of the
transaction, licence & technical assistance fees, and other royalties.

CONCLUSION
The ambience for international communication and cooperation in science has
been advantageous since ever. Unfortunately, the technical community has to
face a lot of drawbacks because of fear for national security and the internal
functioning of a nation. In 1998, a joint task force had been established by Japan
for the promotion of the Rights and Responsibilities of Multinational
corporations in an age of technological interdependence. In today’s era,
Transnational and Multinational corporations are scrambling to find ways to
protect their survival. They need to fulfil the responsibilities of a citizen in their
parent and host countries too since they cannot function by merely thinking
about themselves and the interests of their nation. They need to make stronger
connections with indigenous communities. The emergence of synergistic
contests ought to occur next to world peace may advance if the ongoing trend
holds since nationalistic political factions may not be able to dismantle
networks of internationalcooperation. The Japanese task force suggested that the
government, as well as multinational and transnational corporations, should
adhere to the core of ethical business and management. As there is no
immediate need to create guidelines regarding the rights and duties of MNCs as
there are so many exemplary examples of success and MNCs can learn from
them to flourish.

Control and Regulation of Foreign companies in India

Foreign companies which undertake business activities in India or invest in
Indian businesses need to comply with certain Indian laws. For example, at the
time of making an investment in India or setting up an Indian office, the foreign
company needs to comply with the Foreign Exchange Management Act
(FEMA). FEMA also requires foreign companies in India to comply with
certain procedural and filing requirements on a periodic basis when they
conduct operations in India. Similarly, if the company sells products or services
in India and has an office in India, it will have to comply with Indian tax laws.
Similarly, it will be required to comply with local regulations if it has an office
(such as a Shops and Establishment Registration).

Does the Companies Act apply to such companies, considering they are
incorporated outside India?

Understanding the definition of foreign company under Companies Act,

2013

A foreign company is a company which is incorporated outside India but having

its place of business (including a share transfer or an office registered with a
regulatory authority) in India. Under the Companies Act 2013, a foreign
company means any company or body corporate incorporated outside India
which has a place of business in India, either of its own or if it conducts
business through an agent, physically / electronically or any other manner.
However, all foreign companies are not required to comply with the Companies
Act, it is only applicable to foreign companies where 50% or more of the paid-
up share capital (calculated by including preference shares) is held by Indian
entities.

Foreign companies must comply with the provisions of the Companies Act,
2013 in respect to the business as if it were a company incorporated in India.

(For further details, refer to Sections 379-393 of Companies Act, 2013 deals
with the provisions relating to the control and regulation of companies
incorporated outside India.)
Filing and Compliance Requirements
There are 4 major filing and compliance-related requirements that foreign
company needs to comply with:
1) Delivery of documents to Registrar:

Every foreign company has to deliver the following documents to the registrar
for registration within 30 days from the establishment of place of business in
India-

i. Instruments constituting and defining the constitution of the company.

For example, a UK incorporated company will have to file its
memorandum and articles (as they exist under UK law) with the RO.

ii. Full address of the principal office of the company;

iii. A list of the directors and secretary of the company.

iv. The name and address of the person resident in India who has been
authorized to accept documents on behalf of the company

This is important because a notice or other document shall be deemed to be

sufficiently served on the foreign company if it is addressed to a person whose
name and address has been delivered to the Registrar.

(Refer to Section 380 for a detailed list of documents).

 If the documents are not in English a certified translation in English must

be submitted.
  A foreign company must comply with section 34 to 36 which states that
issue of prospectus by a foreign company will be treated as if the
prospectus is issued by an Indian company.

2) Books of account and records of foreign company

Every foreign company must prepare a balance sheet and profit and loss account
and attach necessary documents and file them with the ROC (with suitable
translations in case they are not in English). This must be accompanied by a
copy of the list of all offices or places of business in India.
It must also keep at its principal place of business in India (e.g. Indian head
office) the books of account which reflect receipts and expenditure, details of
sales and purchases and assets and liabilities in connection with Indian
operations.

3) Display of name
Name of the company and the country in which it is incorporated shall be
exhibit on the outside of every office and place where it carries on business. It
shall also be stated in all its official publication. Example: business letters, bill
heads, notices etc. It shall be in letters easily legible in English characters, and
also in the characters of the language or one of the languages in general use in
the locality in which the office or place is situated.

Consequences of non-compliance
Non-compliance has the following consequences:
o The company will be punishable with fine ranging between INR 1
lakh to 3 lakhs. If the violation continues an additional fine of up to
INR 50,000 per day can be levied.
 o Specific officers who are in default shall be punishable with
imprisonment of up to 6 months or fine ranging between INR
25,000 to INR 5,00,000.

o The company will not be able to institute legal proceedings in

connection with any contracts entered by it. However, the validity
of the contracts will not be affected and the other party can sue on
it.

4.Provisions for raising capital

Typically, foreign companies operating in India do not access Indian capital

markets. They can raise capital privately from Indian investors or banks and
financial institutions in India.
In case they want to access capital publicly, they need to issue a prospectus.
There are certain documents (Refer Rule 11 of Companies (Registration of
Foreign Companies) Rules, 2014) that shall be annexed to the prospects such as
consent required from any person as an expert, a copy of contracts for
appointment of managing director or manager, a copy of any other material
contracts, not entered in the ordinary course of business, but entered within
preceding two years, a copy of underwriting agreement etc.
Typically, securities issued are Indian Depository Receipts (IDRs) and not
shares, because the company is incorporated offshore. Foreign company can
make an issue of Indian Depository Receipts (IDRs) only when such company
complies with the conditions mentioned under Rule 13 of Companies
(Registration of Foreign Companies) Rules, 2014, in addition to the Securities
and Exchange Board of India (Issue of Capital and Disclosure Requirements)
Regulations, 2009 and any directions issued by the Reserve Bank of India. IDRs
have not been popular with only Standard Chartered Bank issuing them since
the route has been made available to foreign companies.
Winding up
A foreign company may be wound up as an unregistered company if it ceases to
carry on business in India, whether the body corporate has been dissolved or
otherwise ceased to exist as per the law under which it was incorporated. (Refer
to section 376 of Companies Act, 2013)

Overview of compliance requirements under foreign exchange laws

An offshore business which has a direct Indian operation in India (and is not
operating through an agent) will be treated as one of Liaison Office (LO),
Branch Office (BO) or Project Office (PO), for which Reserve Bank of India
(RBI) under provisions of the Foreign Exchange Management Act (FEMA)
1999.

Compliance requirements under FEMA are mentioned below:

1. 1.After establishment, all new entities setting up LO/BO/PO shall submit

a report containing information, as per format provided in Annex 3
within five working days of the LO/BO becoming functional to the
Director General of Police (DGP) of the state concerned in which LO/BO
has established its office.

2. Branch Offices / Liaison Offices have to file Annual Activity Certificates

(AAC) (Annex 4) from Chartered Accountants, at the end of March 31,
along with the audited Balance Sheet on or before September 30 of that
year.AAC certifies that the company is undertaking only those activities
which are permitted by the Reserve bank.

At the time of winding up of Branch/Liaison/ Project Office the company

has to approach the designated AD Category – I bank with the documents
prescribed.
 Foreign Collaboration and Joint Venture

Important points to convey the meaning of foreign collaboration:

1. Strategic alliance between one or more resident and non-resident

entities.
2. Before starting collaboration both entities must seek prior permission
from the governmental authority of the domestic country.
3. During the ongoing process of seeking permission, collaboration
entities prepare a preliminary agreement.
4. After obtaining necessary permission, individual representatives of
resident and non-resident entities sign the preliminary agreement. A
signature acts as a written acceptance of each other’s expectations,
terms, and conditions.
5. After establishing foreign collaboration entities start a business
together in the domestic country.
6. The term of the foreign collaboration is specified in written form.

CLASSIFICATION OF FOREIGN COLLABORATION

As no country is self-sufficient, all countries are reliant on one another to satisfy

their needs. Interdependence between countries is a common phenomenon. A
foreign partnership is extremely beneficial in addressing resource shortages and
obtaining advanced technology at a low cost.

Due to the consequences of liberalization, privatization, and globalization,

foreign participation in the Indian market is rapidly rising. Indian companies are
interested in foreign counterparts since the foreign market may provide them
with technical and market expertise.
1.Financial Collaboration: The in-flow of foreign investment takes place in
the host country. The foreign company lends finance by:
 Purchasing ownership shares
 Giving long-term loans
 Giving credit facility

2.Technical Collaboration: The inflow of foreign technology takes place in a

foreign country. Integration of foreign technology with domestic technology.
Various services are provided by the foreign company such as professional
services and expertise, installation of automated machinery in developing
countries, and many more. Helps to remove the existing technological gap and
inflow of modern technology in the domestic country.
3.Marketing Collaboration: The in-flow of foreign goods and services takes
place in the host country. Integration of the foreign and the domestic market.
The foreign country agrees to take part in the sale of goods by the domestic
country.
4.Management Consultancy Collaboration: The in-flow of foreign
management consultancy takes place in the domestic country. Provide training
or teaches various management skills for production, financing, marketing, and
personnel management.

FOREIGN COLLABORATION IN INDIA

In India, foreign collaboration agreements are being made between Indian and
foreign companies through the sale of technology, spare parts, and the use of
foreign brand names for its final products. Foreign capital in India is governed
by the Foreign Exchange Management Act, 1999 and rules and regulations
made by RBI.

FOREIGN COMPANIES MAY TAKE PLACE IN THREE FORMS:

  Collaboration between the Indian and Foreign private companies;
 Collaboration between the Indian government companies and foreign
private companies;
 Collaboration between the Indian Government and a foreign government

AREAS FOR FOREIGN COLLABORATION

The Government of India periodically publishes a list of industries in which
foreign investment is authorized.
Foreign Investment Promotion Board (FIPB) of the Government of India also
considers technology imports in industries listed in Annexure A and Annexure B
of Schedule 1 of the Foreign Exchange Management Regulations, 2000, subject
to compliance with the provisions of Industrial Policy and Procedure as notified
by the Ministry of Commerce and Industry Secretariat for Industrial Assistance
(SIA) from time to time.

FOREIGN DIRECT INVESTMENT (FDI):

A type of cross-border investment in which an investor from one country has a
long-term stake in and considerable influence over a company from another
country. FDI is an important component of international economic integration
because it establishes solid and long-term linkages between economies.
FDI is an important component of international economic integration because it
develops stable and long-term ties between economies.

International investors can invest in India through a variety of strategies:

1. Merger / Amalgamation
2. Purchase of shares from the Indian Residents
3. Subscription to Memorandum of Association
4. Right/bonus issue

Routes Under Which Foreign Investors Can Invest in India:

 1. Automatic Route: Foreign entities or Non-Resident do not need the
approval of the Government of India or RBI.
2. Government Route: Foreign entity compulsorily needs the approval of the
Government of India. Should file an application through the Foreign
Investment Facilitation Portal.

PERMITTED SECTORS FOR FOREIGN DIRECT INVESTMENT

Infrastructure Sector:
Growing pressures on government funds, as well as widespread concern about
the quality of services provided by incumbent corporations, culminated in a
surge of private sector FDI into infrastructure, particularly in developing
nations.
In the financial year 2021, India’s infrastructure industries received around 7.9
billion dollars in foreign direct investment equity. In comparison to past years,
this was a significant rise. The government’s “National Infrastructure Pipeline”
encourages private and foreign investment in the infrastructure sector, which
might explain the increase in FDI inflows.

Aviation Sector:
The Civil Aviation sector has been divided into three sectors for the purpose of
FDI policy:

 Airports
 Air Transport Services
 And Other services
Under the automatic route, 49 percent FDI is authorized in scheduled air
transport services and domestic scheduled passenger carriers. The limit
for non-resident Indian (NRI) investment is 100 percent. A foreign airline
must invest through the approved method, and the 49 percent maximum
applies to both FII and FDI.
Banking Sector:
Under the “automatic method,” which includes initial public offerings (IPOs),
private placements, ADR/GDRs, and acquisition of shares from existing
owners, foreign direct investment (FDI) up to 49 percent is permissible in
Indian private sector banks.
 The maximum foreign investment in an insurance firm is set at 26%
under the Insurance Act.
 In nationalized banks, FDI and portfolio investment are subject to total
statutory restrictions of 20%.
 Such investments in the State Bank of India and its affiliated banks would
be subject to a 20% cap.

Mining Sector:
 With a 2020 production of 99.6 MT, India is the world’s second-largest
crude steel producer.
 India ranks fourth in the world for iron ore output, with 187.60 million
tons produced in the fiscal year 2019 (up to February 19). Iron ore
resources in the nation account for 8% of the world’s total.
 In India, 100 percent FDI in mining is permitted via the automatic route.
 Under the automatic method, 100 percent FDI in the mining sector is
authorized in India for coal and lignite.
 Under government channels, 100 percent FDI in the mining industry is
permitted in mining and mineral separation of titanium-containing
minerals and ores, value addition, and integrated operations.

Health Division (International Collaboration):

 An Indo – Foreign Cell (IFC) was set up in the Indian Council of Medical
Research, in the early 1980s to coordinate biomedical research between
national and international agencies. To facilitate cooperation in areas of
medical research India has several bilateral Science & Technology
cooperation agreements with foreign countries. The purpose of these
 agreements has been for joint scientific meetings, seminars, exchange of
scientific information, and exchange of scientists for training and support
in the procuring of scientific equipment.
 In India, 100% FDI is authorized in the healthcare industry via the
automatic route for green-field projects.
 The government route allows for 100% FDI in medical equipment for
investments in brown-field projects.

Real Estate
In March 2005, the Indian Government changed current regulations to enable
100 percent foreign direct investment in the building industry. The liberalization
act clears the way for foreign investment to fulfill the need for commercial and
residential real estate development. It has also prompted a number of global
financial institutions and private equity funds to form dedicated funds focused
on the real estate market.

FDI IN INDIA IS PROHIBITED IN THE FOLLOWING SECTORS:

 Chit funds
 Lottery business
 Real estate business
 Manufacturing of cigars, cigarettes, tobacco, or tobacco substitutes
 Gambling and betting as well as casinos
 Construction of Farmhouses
 Trading in transferable Development Rights

JOINT VENTURES – A PRACTICAL APPROACH

INTRODUCTION:

A JV (Joint Venture) is a type of commercial partnership wherein two or more

entities commit to sharing their assets, technology, expertise, skills, etc. to
achieve some certain goal. This action might be the start of a fresh initiative or
some different type of commercial operation. Each partner in a JV is liable for
the earnings, expenses, damages, and expenditures linked with it. Moreover, the
venture is a distinct business corporation from the partners’ existing economic
concerns.

A corporation can create a joint venture with an overseas entity to experience

global commerce without carrying on all the responsibilities of multinational
commercial operations. Overseas entrepreneurs who form a joint venture reduce
the risks associated with buying a company entirely. Due diligence on the
overseas destination and the partner is important in international company
expansion since it reduces the risks associated with a commercial deal.
The present economic slump has further increased the attraction of leveraging
strategic possibilities via global partnerships but even some of the wealthiest
corporation’s dearth’s the adequate infrastructure, facilities, expertise, and
managerial power to penetrate emerging foreign economies. Industrial
partnerships of different types enable enterprises to penetrate the international
economies quite inexpensively and efficiently. Statutory and administrative
disparities, as well as cultural, linguistic, and monetary anomalies, end up
making International Joint Venture (IJV) cooperation an appealing alternative.

A corporation can create a joint venture with an overseas entity to experience

global commerce without carrying on all the responsibilities of multinational
commercial operations. Overseas entrepreneurs who form a joint venture reduce
the risks associated with buying a company entirely. Due diligence on the
overseas destination and the partner is important in overseas company
expansion since it reduces the uncertainties associated with a commercial deal.

VARIOUS FORMS OF JOINT VENTURES

1. PROJECT JOINT VENTURE: It is the most predominant type of joint

venture. It might be used to build a toll way or a commercial
establishment, among other things. The essential feature is that the
objective is specified and confined to the execution of a specific
endeavour according to the venture contract. The Joint Venture expires
after the task is accomplished.

2. FUNCTIONAL JOINT VENTURE: This is a model wherein all parties

collaborate since they both have competence with one or more
commercial assignments and aim to establish a synergistic ecosystem for
one another and advantage from the synergies that emerge. For
illustration, if one firm owns a network of transportation and the other has
spare warehousing capacity, both can assist one other in stock keeping
 and handling and save each other’s expenditures of owning separate
vehicles or warehouses and utilizing them when unoccupied.

3. VERTICAL JOINT VENTURE: This Joint Venture is among two

commercial organizations in the equivalent supply network. This is
accomplished when one of the organizations manufactures a specific type
of commodity for which it requires a specialized raw material. To that
end, it can work with the vendor to create and sustain the potential of
such manufacturing, avoiding the risk caused by the inadequacy of this
primary raw material. This is the situation when the manufacturing
business desires to preserve a predetermined degree of confidentiality or
when the requirement for this raw material is minimal but the
requirement for the finished goods is extremely significant.

4. HORIZONTAL JOINT VENTURE: Likewise, this type of joint

venture involves two businesses that produce similar products or
assistance. This has the advantage of allowing one of the enterprises to
participate in a foreign marketplace. The domestic collaborator possesses
localized knowledge, including a preexisting supply channel, whilst the
international collaborator can benefit from efficiencies of magnitude.
Furthermore, rules often require the presence of a domestic firm, thus
joint venture is among the available ways to access such economies.

STANDS TO BENEFIT OF A JOINT VENTURE:

Among the most significant joint venture pros is that it may assist your
company, in growing faster, enhancing efficiency, and intensifying profitability.
Joint ventures also provide the following advantages:
 Gaining direct exposure to new economies and supply systems
 Expanded capacity
 Exposure to fresh information and skills, as well as skilled manpower
 Increased availability of resources, such as innovation and capital
 Contingency and overheads sharing with the business collaborator.
These advantages are particularly important for a small or medium-sized
company that lacks the funding, manpower, or experience to explore a
possibility except it can split the business risks and expenses via a collaboration,
such as an international joint venture. IJVs enable parties to operate swiftly,
cost-effectively, and with reliability in the domestic economy.

An additional advantage of a joint venture is its adaptability. A joint venture, for

instance, may have a finite lifespan and only encompass a portion of what you
do, restricting all the partners’ engagement and the company’s risk. Joint
ventures are particularly prevalent among firms that operate in many nations,
such as those in the transportation and tourism industry.

DISADVANTAGES OF JOINT VENTURES:

Joint ventures also have a relatively higher rate of failure, with many failures
being extremely expensive to the participating enterprises. As per the BCG
analysis, over 90 Japanese companies failed between the period of 1972 and
mid-1976. Most of such organizations were big initiatives involving well-
known American corporations like Avis, Sterling Drug, General Mills, and
TRW. Harvard Business School research found that the joint ventures were
unsuccessful due to tactical and administrative modifications undertaken by the
venture’s owners. These businesses were either dissolved or acquired by one of
the partners, or ownership was transferred from one to the other.
If there is insufficient preparation and management, an international joint
venture may be a stressful journey and, eventually, a catastrophe. Market trends,
technological challenges, bureaucratic concerns, and economic slumps can all
be challenging to predict and have a crippling effect on IJVs.
Revenues from an IJV are diminished since they are allocated by default.
Management challenges might develop despite having proper channels in place
to settle conflicts due to the partners’ diverse organizational ideologies. The
collaborators may also learn that they do not end up sharing objectives and are
not adaptable enough to modify and suit the business’s developing demands.
Joint ventures are sometimes challenging to finance as an organization,
specifically in terms of borrowing, because their life is temporary and hence
lacks stability.

Module:4
Foreign Exchange Management Act, 1999

Background of FEMA
India had for long time adverse balance of payment position in
international trade i.e.imports were more than exports; due to which there
was shortage of foreign exchange in India. Foreign Exchange Regulation
Act was introduced in 1947. This was later replaced with ‘the Foreign
Exchange Regulation Act, 1973’ (FERA), which came into effect on 1st
Jan., 1974. Government initiated process of liberalisation of Indian
economy in 1991. Foreign Investment in various sectors was permitted.
This increased flow of foreign exchange to India and foreign exchange
reserves have increased substantially. In view of this, FERA has been
repealed and FEMA (Foreign Exchange Management Act, 1999) has been
passed. The Act has been made effective from 1st June, 2000.
As per Statement of Objects to the FEM Bill, the object of FEM Bill is to
consolidate and amend the law relating to foreign exchange with the
object of facilitating external trade and payments and for promoting the
orderly development and maintenance of foreign exchange markets in
India.
Reserve Bank of India is the overall controlling authority in respect of
FEMA.
1.1 Extra territorial jurisdiction of FEMA
This Act extends to whole of the India. It has some extra territorial
jurisdiction too i.e. it also applies to all branches, offices and agencies
outside India owned and controlled by a person resident in India and also
to any contravention thereunder committed outside India by any person to
whom the Act applies [section 1 of FEMA]

In British India Steam Navigation Co. Ltd. v. Shanmugha Vilas Cashew

Industries (1990) 48 ELT 481 (SC), it was held that foreign ship on high
seas, or her foreign owners or their agents in a foreign country are not
covered under FERA unless the foreign ship enters Indian port or
territorial waters.

1.2 Salient provisions of FEMA

FEMA provides * Free transactions on current account subject to
reasonable restrictions that may be imposed * RBI control over capital
account transactions * Control over realisation of export proceeds *
Dealing in foreign exchange through ‘Authorised Persons’ like Authorised
Dealer/Money Changer/Off-shore banking unit * Adjudication of
Offences * Appeal provisions including Special Director (Appeals) and
Appellate Tribunal * Directorate of Enforcement.

1.2.1 Enforcement of FEMA

Though RBI exercises overall control over foreign exchange transactions,

enforcement of FEMA has been entrusted to a separate ‘Directorate of
Enforcement’ formed for this purpose. [section 36 of FEMA].

Though FEMA does not treat violation of FEMA provisions as criminal

offence, preventive detention under COFEPOSA for violation of FEMA is
permissible, as FEMA and COFEPOSA occupy different fields. – UOI v.
Venkateshan 2002 AIR SCW 1978 = 38 SCL 669 (SC).
1.2.2 RBI to administer FEM (Non-debt Instruments) Rules

FEM (Non-debt Instruments) Rules, 2019, though notified by Central

Government, shall be administered by the Reserve Bank of India. While
administrating these rules, RBI may interpret and issue such directions,
circulars, instructions, clarifications, as it may deem necessary, for
effective implementation of the provisions of these rules – Rule 2(A) of
FEM (Non-debt Instruments) Rules, 2019 inserted w.e.f. 27-7-2020.

1.3 Suspension of Act in extraordinary situations

FEMA has considerably liberalised provisions in respect of foreign
exchange. However, some times, an extraordinary situation may arise. In
such cases, Central Government can suspend operation of any or all
provisions of FEMA in public interest, by issuing a notification. The
suspension can be relaxed by issuing a notification. Copy of notification
shall be placed before Parliament for 30 days. [section 40 of FEMA]

Objectives

 To reinforce and amend the law relating to foreign exchange.

 To simplify and ease the external trade and payments.
 To promote the systematized development and maintenance of a
healthy foreign exchange market in India.
 To remove disparity of payments.
 To control and direct the employment business and investment of
the non-residents.
 To utilise the foreign exchange resources effectively for the country.
Features of FEMA

 FEMA does not apply to the Indian citizens who resides outside
India. This criteria is checked by the number of days a person stays
in India for more than 182 days in the preceding financial year.
  Central Government has the authority given by FEMA to impose
restrictions on and supervise three things which are- payments made
to any person outside India or receipts from them, forex and foreign
security deals.
 It specified the areas for holding of forex that required specific
permission of the Reserve Bank of India (RBI) or the government.
 FEMA classified the transaction into a current and capital account

.
To whom it is applicable?

 It is applicable to the whole of India.

 Any branch, office, and agency, which is situated outside India, but
it is owned or controlled by a person resident in India. Any violation
by these entities committed outside India will be covered under this
Act.
In general, FEMA includes three different types of categories and deals
separately which are:-

 Person
 A person resident in India
 Person resident outside India

Adjudication and appeal under FEMA

Appointment of Adjudicating Authority

Section 16 states about the appointment of Adjudicating Authority

 The Central Government by publishing an order under the Official

Gazette can appoint as many officers of the Central Government as
 the adjudicating authorities for holding an inquiry in the prescribed
manner against whom the complaint has been made.
 The Central Government while appointing the Adjudicating
Authorities should also specify in the order published in the Official
Gazette about their respective jurisdictions.
 The Adjudicating Authority must hold an enquiry only on a complaint
made in writing by an authorised officer through a general or special
order by the Central Government.
 The alleged person can appear either in person or can take the
assistance of any legal practitioner or a Chartered Accountant to
present his case before the adjudicating officer.
 Every Adjudicating Authority must have the same powers of a civil
court.
 Every Adjudicating Authority should deal with the complaint
diligently and also try to dispose of the complaint within one year
from the date of the receipt.
If the Adjudicating Authority fails to dispose of the complaint within the said
or specified period then the Authority should give the reasons in writing.

Appeal to Special Director (Appeals)

Section 17 of the Act deals with Appeal to Special Director

1. The Central Government by notification should appoint one or more

Special Directors (Appeals) to hear appeals against the orders of the
Adjudicating Authorities and should also specify in the notification
the matter and places in which the Special Director (Appeals) may
exercise jurisdiction.
2. Being an Assistant Director of Enforcement or a Deputy Director of
Enforcement or any other person who is dissatisfied with an order
made by the Adjudicating Authority can file an appeal to the Special
Director (Appeals).
3. When the aggrieved person receives the copy of an order made by
the Adjudicating Authority then appeal made shall be filed within
forty-five days from that date.
If any person files the appeal after the date of the expiry then it is
completely up to the Special Director (Appeals) that he may entertain the
appeal once he is satisfied that there was sufficient cause for not filing it
within that period.

1. The Special Director (Appeals) on receiving the appeal may give the
parties to the appeal an opportunity to be heard and if he is
 satisfied then may pass an order regarding confirming, modifying or
setting aside the order appealed against.
2. A copy of every order made by the Special Director (Appeals) should
be sent to the appellant parties and also to the concerned
Adjudicating Authority.
3. The Special Director (Appeals) will also have the same powers of a
civil court which are conferred on the Appellate Tribunal.

Appellate Tribunal
Section 18 of the Act, talks about the establishment of the Appellate Tribunal
which says that the Central Government through a notification may establish
an Appellate Tribunal for foreign exchange in order to hear the appeals
regarding the orders of the Adjudicating Authorities and the Special Director
(Appeals).

Qualifications, for the appointment of Chairperson,

Member Special Director (Appeals)
Section 21 of this Act, states the qualifications, for the appointment of
Chairperson, Member Special Director (Appeals).

A person shall only be qualified for the appointment if he:

 In the case of a Chairperson- if, he is or has been qualified to be the

Judge of High Court.
 In the case of a Member- if, he is or has been qualified to be the
Judge of District Court.
 In the case of a Special Director (Appeals)-if he was a member of
the Indian Legal Services and in that service held the post of Grade
1, or
Was a member of the Indian Revenue Service and held the post equivalent to
a Joint Secretary of the Government of India.

Procedure and powers of Appellate Tribunal and

Special Director (Appeals)
Section 28 of the act states that
 1. Both Appellate Tribunal and Special Director (Appeals) shouldn’t be
bound by the procedure of the Code of Civil Procedure instead
should be guided by the principle of natural justice and should follow
the provisions of this Act.
2. While trying any suit both of them should have the same powers as
a civil court under the Code of Civil Procedure.
3. Any order passed by the Appellate Tribunal or the Special Director
(Appeals) under this Act shall be performed or executed by them as
a decree of a civil court and, for this purpose both of them must
have all the powers of a civil court.
4. The Appellate Tribunal or the Special Director (Appeals) can also
transfer any order made by it to a civil court having local
jurisdiction. And such civil court shall execute the order as if it were
a decree made by that court.

Appeal to High Court

If any person is dissatisfied with the decision of the Appellate Tribunal he/she
may file an appeal to the High Court within sixty days of that communication
of the decision or order.

High Court may give a further extension of sixty-days if the Court is satisfied
with the reasons for the delay of the appeal filed by the appellant.

Directorate of Enforcement.
Section 36 of this Act, talks about Directorate of Enforcement

1. The Central Government for the purpose of this Act may establish
Directorate of Enforcement with a Director and with that other
officers or class of officers as the government thinks fit and they will
be called as Officers of Enforcement.
2. The Director of Enforcement or an Additional Director of
Enforcement or a Special Director of Enforcement or a Deputy
Director of Enforcement are authorised by the Central Government
to appoint officers of Enforcement below the rank of an Assistant
Director of Enforcement.
3. The officer of Enforcement can exercise his powers and duties apart
from the limitations or conditions imposed on him by the Central
Government under this Act.
Power of search, seizure, etc.
Section 37 of the Act states that

1. If any person violates or contravenes any rule, provision, order etc.

which was restricted or specifically mentioned not to do then the
Director of Enforcement and other officers of Enforcement above the
rank of an Assistant Director can only investigate.
2. Through a notification the Central Government can authorise any
officer or class of officers in the Central Government, State
Government or the Reserve Bank, to investigate any contravention.
3. Similar powers which are conferred on the Income-tax authorities
under the Income-tax Act, 1961 should be exercised by the officers
and shall exercise such powers, subject to such limitations laid down
under that Act.

Structure to appeal when the party is

aggrieved
Contraventions and Penalties
If any person contravenes any provision, rule, order, regulation or direction
of this Act. The person will be liable to pay the fine for that contravention and
thrice the amount which is mentioned in the Act where the violation is
measurable or up to two lakh rupees where the amount cannot be
determined or measured. Also where such violation is a continuing one then
a further penalty will be extended to five thousand rupees every day.
Any Adjudicating Authority adjudging any contravention and if he thinks fit or
is satisfied with the violation done then in addition to any penalty he may
direct the party who is responsible for this contravention, that any currency,
property, security or money in respect of which the contravention has taken
place shall be confiscated to the Central Government and further direct that
if there are any foreign exchange holdings of the persons committing the
contraventions must be brought back into India or must be retained outside
India in accordance with the directions made in this behalf.

If any person fails to make full payment of the penalty imposed on him
within a period of ninety days from the date on which the notice for payment
of such penalty is served on him, he shall be liable to civil imprisonment.

Difference between FERA and FEMA

Basis FERA FEMA

FERA was implemented to
regulate foreign payments
Meaning and to ensure optimum
use of foreign currency in
India.
FEMA aims to promote
foreign trade, foreign
payments and to increase the
size of foreign exchange
reserve in the country.

It is an old enactment and It is a new enactment and

was approved by the was approved by the
Enactment
Parliament in the year Parliament in the year 1999
1973. and is currently in force.

It has 49 Sections divided

Number of Sections It had 81 Sections.
into 7 chapters.

When foreign exchange

When this was
When foreign exchange reserves were adequate but
introduced(position of
reserves were very low. required regulation and
foreign exchange)
balance.

Outlook towards foreign A rigid approach was

A flexible approach is there.
exchange reserves. there.

Determining the Through citizenship only it More than 182 days/ 6

residential status was determined. months stay in India.
 A person has to take
permission from RBI
Transfer of funds relating to the transfer of
funds to external
operations.
If any violation of the
provision or order then it
contravention/violation
will be considered as a
criminal offence.
The guilty person will be
Punishment for the
sentenced to
violation
imprisonment.
Module:5
Role of Information technology in the investment market
Information technology (IT) plays a crucial role in the investment market,
revolutionizing how investments are made, managed, and monitored. Here are
some key ways in which IT impacts the investment market:
There is no requirement of
the pre-approval from RBI
regarding the transfer of
funds relating to the external
operations, funds or trade.
If any violation of the
provision or order then it will
be considered as a civil
offence.
The guilty person will be held
liable to pay a fine and if the
fine is not paid within
stipulated time then will be
sentenced to imprisonment.
 Trading Platforms: IT has revolutionized trading by providing
electronic platforms that enable investors to buy and sell securities with
ease. These platforms offer real-time access to market data, allowing
investors to make informed decisions. They also provide features like
order management, trade execution, and portfolio tracking.
 Algorithmic Trading: IT has led to the rise of algorithmic trading, where
computer algorithms execute trades based on predefined criteria.
Algorithms can analyze market data at high speeds and execute trades
faster than human traders. This has increased trading efficiency and
liquidity in the market.
 Market Analysis: IT has enabled sophisticated market analysis through
data analytics, machine learning, and artificial intelligence. These
technologies can analyze vast amounts of data to identify trends, patterns,
and correlations in the market. This analysis helps investors make better-
informed decisions and manage risks more effectively.
 Risk Management: IT has improved risk management in the investment
market. Risk management tools use advanced algorithms to assess the
risk profile of investment portfolios, identify potential risks, and
implement risk mitigation strategies. This helps investors protect their
portfolios from market volatility and unforeseen events.
 Automation: IT has automated many aspects of the investment process,
reducing the need for manual intervention. Automation has improved
efficiency and reduced operational costs. Tasks such as trade execution,
portfolio rebalancing, and reporting can now be done quickly and
accurately using automated systems.
 Information Dissemination: IT has improved the dissemination of
information in the investment market. Investors now have access to real-
time market data, company financials, news, and analysis through online
platforms. This information helps investors stay informed and make
timely investment decisions.
 Online Investment Platforms: IT has enabled the development of online
investment platforms that allow investors to manage their investments
online. These platforms offer a wide range of investment products and
services, making it easier for investors to diversify their portfolios. They
also provide tools for portfolio analysis, goal setting, and risk assessment.
Functioning of DEMAT A/C portal

The functioning of a DEMAT account portal involves several key steps and
features that allow investors to manage their securities holdings electronically.
Here's a general overview of how a DEMAT account portal typically operates:

1. Account Creation: Investors first need to open a DEMAT account with a

registered depository participant (DP). This account is linked to the
investor's bank account and PAN card for KYC (Know Your Customer)
purposes.
2. Logging In: Once the DEMAT account is opened, investors can log in to
the DEMAT account portal using their login credentials provided by the
DP.
3. Viewing Holdings: The portal allows investors to view their securities
holdings, including stocks, bonds, mutual funds, and other financial
instruments, held in electronic form.
4. Transaction History: Investors can also view their transaction history,
including purchases, sales, and transfers of securities.
5. Executing Transactions: The portal allows investors to buy, sell, and
transfer securities electronically. Investors can place orders for securities
and track the status of their orders in real time.
6. Portfolio Management: The portal offers tools for portfolio
management, including performance tracking, asset allocation, and risk
analysis. Investors can monitor the performance of their investments and
make informed decisions.
7. Statement Generation: The portal generates account statements, which
provide a summary of the investor's holdings and transactions over a
specific period. These statements are useful for tax purposes and
regulatory compliance.
8. Security Features: To ensure the security of transactions, the portal uses
encryption technology and secure authentication methods. Investors are
required to use strong passwords and may have the option for two-factor
authentication.
9. Customer Support: The portal provides customer support services,
including online chat, email support, and a helpline, to assist investors
 with any queries or issues they may have regarding their DEMAT
account.

Investment through internet and virtual banking from legal

perspectives.

Investment through internet and virtual banking involves various legal

considerations to ensure compliance with regulations and protect investors'
interests. Here are some key legal perspectives to consider:

1. Regulatory Compliance: Investments made through internet and virtual

banking platforms must comply with regulatory requirements set by
financial regulators such as the Securities and Exchange Board of India
(SEBI), Reserve Bank of India (RBI), and other relevant authorities.
Investors and financial institutions must adhere to rules and guidelines
regarding KYC (Know Your Customer), anti-money laundering (AML),
and other regulatory requirements.
2. Electronic Transactions: Investments made through internet and virtual
banking platforms are considered electronic transactions. These
transactions are governed by the Information Technology Act, 2000,
which provides a legal framework for electronic transactions, digital
signatures, and electronic records.
3. Cybersecurity: Internet and virtual banking platforms must have robust
cybersecurity measures in place to protect investors' personal and
financial information. Financial institutions must comply with
cybersecurity regulations and standards to prevent data breaches and
unauthorized access to sensitive information.
4. Consumer Protection: Investors using internet and virtual banking
platforms are entitled to consumer protection under various laws and
regulations. Financial institutions must ensure transparency, fairness, and
accountability in their dealings with investors to protect their interests.
5. Dispute Resolution: In case of disputes related to investments made
through internet and virtual banking, investors have the right to seek
 recourse through legal channels. Financial institutions must have
mechanisms in place for resolving disputes in a fair and timely manner.
6. Contractual Obligations: Investors and financial institutions enter into
contractual agreements when using internet and virtual banking platforms
for investments. These agreements outline the rights and responsibilities
of both parties and are legally binding.
7. Data Privacy: Financial institutions must comply with data privacy laws
and regulations when collecting, storing, and processing investors'
personal and financial information. Investors have the right to privacy
and data protection under applicable laws.
8. Cross-border Transactions: Investments made through internet and
virtual banking may involve cross-border transactions, which are subject
to additional legal considerations, including foreign exchange regulations
and international tax laws.