India Business Law Journal
Your partner in legal intelligence
June 2015
Volume 9, Issue 1
Clash of the titans
Recruitment frenzy as Shroffs vie for dominance
Bangalore’s evolving legal market
Flaws exposed in due diligence practices
Should domestic companies embrace LPO?
Plus: The top foreign law firms for India work
www.indilaw.com
Contents
3
Leader
15
17
Familiar stories are sparking change
4
5
Inbox
Market pulse
Clash of the
titans
SNG sets up in Doha
Dhir & Dhir CEO stands down
India specialist for BakerHostetler
GCs enjoy sun, surf and lively debate
9
Law firms up and down the country reel as
rival recruitment sprees by competing
Shroffs rob them of top talent
The wrap
Deal digest: page 9
Business law digest: page 13
Dispute digest: page 15
35
17 Cover story
Clash of the titans
Uncovering
the real deal
24 Vantage point
Survive and prosper
Dennis Unkovic argues that Indian law firms
can remain independent and retain quality
clients after the arrival of foreign law firms
Recent experience suggests the process of
conducting due diligence is not taken
seriously enough in India
25 Spotlight
25
Processing improvements
39
Indian clients have typically shied away from
the services of legal process outsourcers.
Is this about to change?
29
Riding the boom
Joining the
dots
How Bangalore’s legal market is
changing to meet demand
35 What’s the deal?
Which foreign firms
are winning the
lion’s share of
India work?
Uncovering the real deal
39 Intelligence report
Joining the dots
64 Correspondents
Expert advice from India Business Law Journal’s correspondent law firms
64
Banking & finance
Economic Laws Practice
73
Mergers & acquisitions
Shardul Amarchand Mangaldas & Co
65
Canada-India trade & investment
Torys
74
Middle East-India trade & investment
Afridi & Angell
66
Competition & antitrust
Trilegal
75
Outbound investments & joint ventures
India Law Offices
67
Dispute resolution
Bharucha & Partners
76
Private equity & venture capital
Khaitan & Co
68
Foreign direct investment
Luthra & Luthra
77
Project finance
Khaitan Sud & Partners
69
Intellectual property
Saikrishna & Associates
78
Regulatory developments
Phoenix Legal
70
International trade
Economic Laws Practice
79
Smart cities
HSA Advocates
71
Media & entertainment
LexOrbis
80
Taxation & transfer pricing
Economic Laws Practice
June 2015
India Business Law Journal
1
Editorial board
India Business
Law Journal
June 2015
Volume 9, Issue 1
ISSN: 1994-5841
Pravin Anand
Managing Partner
Anand and Anand
Shamnad Basheer
Founder
SpicyIP
Sanjit Kaur Batra
Senior Counsel &
Legal Manager
(South Asia)
Dupont
Lalit Bhasin
Managing Partner
Bhasin & Co
Himavat Chaudhuri
Chief Legal
& Regulatory
Affairs Officer
Tata Sky
PM Devaiah
Partner & General
Counsel
Everstone Capital
Advisors
Contact us
Editorial
Email: editorial@indilaw.com
Telephone: +852 3622 2673
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Email: cs@indilaw.com
Telephone: +852 3622 2623
Fax: +852 3006 5377
www.indilaw.com
Sumes Dewan
Managing Partner
Lex Favios
Girish Gokhale
Senior Litigation
Consultant
DSK Legal
Badrinath Durvasula
Vice President & Legal
Head
Larsen & Toubro
Manik Karanjawala
Partner
Karanjawala & Co
Amit Anant Moghay
General Counsel
HSBC
Fali S Nariman
Senior Counsel
Editor
Vandana Chatlani
Deputy editor
Rebecca Abraham
Sub-editor
Simmie Magid
Contributors
Nandini Lakshman
Dennis Unkovic
Production editor
Debolina Partap
General Counsel
Wockhardt
Mysore R Prasanna
Independent
Consultant
Premnath Rai
Founding Partner
PRA Law Offices
S Ramaswamy
Vijaya Sampath
President
Senior partner
Indian Corporate
Lakshmikumaran &
Counsel Association
Sridharan
Sunil Seth
Senior Partner
Seth Dua &
Associates
Pun Tak Shu
Head of marketing
Anita Fung
Associate publisher
Tina Tucker
Publisher
James Burden
Printed in Hong Kong
Ashok Sharma
Pallavi Shroff
Amarjit Singh
Shruti Dvivedi Sodhi
Shardul Thacker
Founder President
Managing Partner
Managing Partner
Chief Compliance
Partner
Indian Corporate
Shardul Amarchand Amarjit & Associates
Officer
Mulla & Mulla &
Counsel Association
Mangaldas
Aircel
Craigie Blunt & Caroe
Jagannadham
Thunuguntla
Strategist & Head
of Research
SMC Global Securities
Correspondent law firms
• Afridi & Angell
• LexOrbis
• Bharucha & Partners
• Luthra & Luthra
• Economic Laws Practice
• Phoenix Legal
• HSA Advocates
• Saikrishna & Associates
• India Law Offices
• Shardul Amarchand Mangaldas & Co
• Khaitan & Co
• Torys
• Khaitan Sud & Partners
• Trilegal
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June 2015
Leader
Opinion
Familiar stories are sparking change
There is little novelty in a tale
about fraternal rivalry,
especially in India
In Processing improvements (page 25) we consider
another development that can potentially change India’s
legal market: legal process outsourcing (LPO). Despite
India being a major provider of LPO services, Indian companies have been slow to discover its benefits. Yet with
Indian companies increasingly on the lookout for efficiencies and process improvements, some observers foresee
hile many a Bollywood blockbuster has focused
the domestic market beginning to embrace the solutions
on this theme, stories of disputes between sibthat legal process outsourcers have to offer. Our coverage
lings – be it in the political sphere or within powasks when this might happen and how in-house teams
erful family owned businesses in India – have frequently
should set about assessing LPOs. It includes insights from
bubbled over into the public domain. But a lot depends
LPO providers and clients that will prove useful to any
on the clout that the family in question commands, and
would-be outsourcing client before they take the plunge.
more importantly on how the dispute ends.
In Riding the boom (page 29) we turn the spotlight on
Seen in this light, the dispute that led to the demise of
the lawyers and law firms that serve the needs of clients in
Amarchand Mangaldas may not have been particularly
Bangalore, India’s technology capital. The city is home to
remarkable, or entirely unexpected. Yet few
some of the country’s fastest growing techcould have foreseen the volume of movenology companies and this is mirrored in
ment triggered by the creation of the two
the interests and expertise of the city’s lawIndia Business Law Journal
legal powerhouses that it has spawned.
yers. As such, while Sajai Singh, a partner
Your partner in legal intelligence
This month’s Cover story (page 17)
at J Sagar Associates, says the focus of
focuses on the unprecedented recruithis Bangalore office “is on technology, be it
ment spree being undertaken by both
with regards to M&A, employment law, real
Shroff brothers as they vie to strengthen
estate, or anything else”, senior advocate
their individual firms. With few barriers
Sajan Poovayya, who founded Poovayya
preventing the poaching of lawyers,
& Co, does “a lot of technology-related
several high-profile professionals have
litigation”. Yet there is more to lawyers in
been lured away from their previous
Bangalore than meets the eye. Aside from
positions to join one or other of the
technology, they have built up expertise
new Shroff firms. Among the frenzy,
in a host of other practice areas and now
Recruitment frenzy as Shroffs vie for dominance
attributes such as loyalty to a firm
serve a wide range of clients, including priappear to have fallen by the wayside.
vate equity and venture capital funds and
Bangalore’s evolving legal market
According to Berjis Desai, the manlarge real estate players.
Flaws exposed in due diligence practices
aging partner of J Sagar Associates,
This month’s What’s the deal? (page
Should domestic companies embrace LPO?
Plus: The top foreign law firms for India work
which itself suffered a significant loss
35) examines the recent mudslinging at
of talent, this is a sign of a maturing
a company with a Bangalore pedigree:
legal market. More importantly, he says,
United Spirits (USL), which is now part of
the “churning will bring change and
the Diageo stable. A dispute following the
change, in the long term, is good”.
recent discovery of skeletons in the USL closet has once
Shardul and Cyril Shroff have both been battling to
again highlighted the need for clarity on what the seller
regain the dominant position, but there is no indication
is putting on the block, and what the buyer is seeking to
as yet which brother will come out on top. An informal
acquire. A robust due diligence exercise may be sufficient
and unscientific straw poll of lawyers conducted recently
to provide such clarity, but as our coverage finds, the due
by India Business Law Journal found opinion on which of
diligence process is often not taken seriously in India.
the new firms would edge ahead of the other split down
In this month’s Intelligence report (page 39) India
the middle. But what is abundantly clear is that the rivalry
Business Law Journal presents its ninth annual survey of
between the powerful brothers has reshaped the face of
the top international law firms for India-related work. Our
India’s legal market.
coverage reveals the top 10 foreign firms, as well as 10
Another familiar story that is sparking change in India is
key players and 18 significant players. We also highlight 15
renewed talk of allowing the entry of foreign law firms. And
regional and specialist law firms, and 47 “firms to watch”,
with the first foreign arrivals expected in just a few years’
which we believe in-house counsel should keep well within
time, their Indian counterparts are embarking on a proctheir sights. With India once again firmly in the gaze of
ess of soul-searching as they weigh up the strategies for
foreign firms following renewed talk of opening the legal
remaining independent and retaining quality clients in the
market, this year’s survey is particularly poignant.
face of international competition. Writing in this month’s
This issue of India Business Law Journal marks the start
Vantage point (page 24) Dennis Unkovic, the chairman of
of our ninth year of publication. As we mark the moment,
Meritas, a global alliance of law firms, discusses how this
we express our gratitude to our readers, our contributors,
may play out. Unkovic is of the view that there will always
our advertisers, our correspondent law firms and our editobe room for domestic law firms, which he says have a betrial board members. We look forward to continuing on this
ter understanding of the local culture.
journey with you in the years that lie ahead. g
W
June 2015
Volume 9, Issue 1
Clash of the titans
www.indilaw.com
June 2015
India Business Law Journal
3
Inbox
Letters to the editor
Media trials
A pertinent discussion
Dear Editor,
I read the article on media coverage impinging on the judicial process
(Trial and error) in the May issue of India
Business Law Journal with interest. The
article is both comprehensive and pertinent. It illuminates an ongoing debate
that comes to the fore every now and
then, but without influencing and effecting any change to the system.
The essential question remains can
the media cover judicial cases without
influencing public opinion, however,
fair and objective the coverage may
be. Yet as the alternative, i.e. not letting the media cover certain cases,
would be far more damaging to the
fabric of a democracy, we need to take
steps to ensure that trials by the media
are prevented. In this regard, the UK
has laid down stringent guidelines
about the manner in which the press
can and should cover judicial trials.
Needless to say, these guidelines have
sometimes been breached in spirit,
but the point is that an effort has been
made in this direction.
The questions, as the writer of your
article points out, become much more
complicated in a country such as India
where the media often step in to fill
the vacuum left by other institutions.
A prime example is the police, which
by not fulfilling their duties have often
left glaring episodes where justice has
been denied, which in turn has been
exposed by the media. For example, in the Jessica Lal murder case
(mentioned in your article) it seemed
obvious that every rule in the book
was bent to get the son of a powerful politician off the hook, triggering a
media storm and campaign for justice
to prevail. The same applies in cases
such as the horrific rape of the 23-year
old in the national capital in December
2012, which shook the conscience of
the nation. In cases such as these,
the media have been almost forced to
take on an activist role and in doing so
they have shed any pretence of being
balanced or objective. I for one think
this is commendable.
However, it also remains quite
clear that the media cannot be left
unchecked when they cover the judicial process, as this has and could
lead to excessive or biased coverage.
The writer of the article has pointed
out some steps to bring in a semblance of order to how the media
cover trials. This is much needed and
the suggestions made should be considered seriously. In the meanwhile, the media will continue to remain a powerful body that is
resistant to any and every external
attempt to impose any restrictions on
its functioning. It has instead insisted
on reforms from within and self-monitoring. It remains to be seen how
effective measures such as these will
prove to be. Swati Maheshwari
Former journalist and PhD candidate
Hong Kong Baptist University
Hong Kong
Opinions?
Observations?
Feedback?
We want to hear from you.
India Business Law Journal welcomes your letters.
Please write to the editor at editorial@indilaw.com.
Letters may be edited for style, readability and length, but not for substance.
Due to the quantity of letters we receive, it is not always possible to publish all of them.
4
India Business Law Journal
June 2015
Market pulse
Zara beats restaurant in trademark battle
D
elhi High Court has granted
an interim injunction against
a restaurant group, Oriental
Cuisines, holding that the group
had “dishonestly and fraudulently”
adopted Zara Tapas Bar as the name
of its Spanish restaurant. Justice JP
Mittal said Industria de Diseno Textil,
the Spanish multinational that owns
Zara, an international clothing chain,
had “a good prima facie case” entitling
it to protection of its Zara mark even
in relation to dissimilar goods and
services.
Industria de Diseno Textil was represented by Akhil Sibal, a New Delhibased lawyer, on instructions from
Sushant Singh, managing partner of
Sushant M Singh & Associates, a New
Delhi-based IP boutique.
Speaking to India Business Law
Journal Singh said: “The acknowledgement from the court that Zara
has a trans-border reputation again
generates the ray of hope to the foreign proprietors that the trans-border
reputation is protectable in India, even
if somebody is freeriding on the coattails of the proprietor for years.”
Zara Tapas Bar was one of over
100 food outlets operated by Oriental
Cuisines across India. Senior advocate NK Kaul appeared for Oriental
Cuisines. He was instructed by Anand
and Anand partner MS Bharath, who
heads the firm’s Chennai office, and
New Delhi-based senior associate
Prachi Agarwal.
Commenting on whether Oriental
Cuisines would challenge the order,
Bharath told India Business Law
Journal: “We are abiding by what the
order says until we decide what next.”
Law firms
L&S shifts team to
new Gurgaon office
Moving further on from its origins as
a specialist tax and litigation practice,
New Delhi-based Lakshmikumaran &
Sridharan (L&S) opened an office in
Gurgaon on 18 May – its fourth in the
national capital region.
Three equity partners, Seetharaman
June 2015
The dispute between Industria de
Diseno Textil and Oriental Cuisines
had been brewing since 2003, when
Oriental Cuisines opened Zara Tapas
Bar in Chennai and tried to register
the mark. Zara has been registered in
India in class 25 (clothing, footwear
and headgear) since 1993. The first
Zara store opened in India in 2010.
Industria de Diseno Textil adopted
Zara as its trademark in 1975. It operates in India through a joint venture
with Trent, a Tata Group company.
Bharath said that Zara was not a
well-known mark even in Spain in
2003. “It may have been a famous
mark but it was not well known … the
declaration by a court authority came
in several years after the Indian party
had started using it.” Efforts at settlement soon after Anand and Anand
took over the matter in 2010 were not
successful.
Stressing that Anand and Anand
is “not entirely” a plaintiff’s lawyer,
Bharath said: “[Oriental Cuisines] was
an existing client of ours who was
dragged to a court in Delhi. We are not
going to let go of a client just because
they have been sued.”
S, Mathivanan N and Vijaya Sampath,
have moved to the new office, which
will focus on corporate advisory
work.
L Badri Narayanan, a New-Delhi
based partner, told India Business
Law Journal that with “significant
revenues” coming from the firm’s corporate advisory and consulting work,
there was a need to be in Gurgaon
to be closer to corporate clients.
He added that L&S had previously
“resisted the temptation” to set up
in Gurgaon as the firm’s focus until
the past few years had been its tax
and litigation practices and so it had
wanted to remain close to the courts
in New Delhi.
The Gurgaon office currently has
around 20 lawyers and can accommodate up to 60. V Lakshmi Kumaran,
the firm’s managing partner, said the
new office is equipped with “stateof-the-art infrastructure to support
and strengthen” the firm’s practice in
North India.
L&S has almost 300 lawyers and
offices in 10 locations, including an
office in Geneva that was set up in
2014.
India Business Law Journal
5
Market pulse
SNG sets up shop
in Qatar’s capital
SNG & Partners has expanded its
presence outside India by opening
International Law Chambers at the
Qatar Financial Centre in Doha on 1
June.
The operation currently has three
lawyers: a local lawyer and two lawyers from the banking and finance
team from SNG & Partners’ New Delhi
office.
Rajesh Narain Gupta, managing
partner of SNG & Partners, told India
Business Law Journal that International
Law Chambers had attracted its first
client: Doha Bank.
Explaining why the firm chose to
set up in Doha, Gupta said: “We have
been advising certain banks and business houses in Qatar and realized that
there is a huge opportunity … There
is a substantial India interest in Qatar
… There is an expectation of world
football taking place in Qatar in 2022,
which implies huge infrastructure
development including hospitality.”
SNG & Partners has a licence to
Inttl Advocare
opens in Mumbai
New Delhi-based intellectual property boutique Inttl Advocare, headed
by Hemant Singh, has opened an office
in Mumbai. The office is headed by
Mohan Vegulaparanan, who recently
joined the firm. Vegulaparanan, who
has over 30 years of experience and is
a company secretary, will be responsible for developing the practice and
6
India Business Law Journal
practice foreign law in Singapore,
where it opened an office in July 2014
and has two lawyers. SNG & Partners
will manage its operations.
Singh told India Business Law Journal
that the firm chose to open an office
in Mumabi as it was “the best second
preference after Delhi” with respect to
the number of clients. He added that
“under the Madrid protocol Mumbai is
where all the processing and examination will take place” and Inttl Advocare
wanted “a local presence to have an
effective follow-up in prosecution of the
Madrid applications”.
Inttl Advocare has over 30 lawyers,
including six partners.
was formed in early 2013 through the
merger of two firms headed by brothers Rajesh and Sanjay Gupta.
People moves
JSA and Verus
lose key partners
Akshay Chudasama, a Mumbaibased partner at J Sagar Associates,
moved to Shardul Amarchand
Mangaldas & Co (SAM) on 1 June,
to be the firm’s managing partner in
Mumbai. A team of 18 lawyers who
worked with Chudasama at J Sagar
Associates followed him to SAM.
Chudasama, a key M&A lawyer, was
part of the four member management
committee of J Sagar Associates.
His decision to move on after what
he described as “nearly 10 wonderful
years at JSA” is part of the ongoing
seismic shift within Indian law firms
that has been triggered by the setting up of SAM and Cyril Amarchand
Mangaldas (CAM).
Jay Parikh, a partner at Verus
Advocates, also moved to SAM with
his team on 1 June. (See Cover story,
page 17, for analysis of people moves
to SAM and CAM.)
June 2015
Market pulse
Mumbai lawyer
moves in-house
India specialist for
BakerHostetler
Madhumita Ghosh, formerly an
associate at Wadia Ghandy & Co
in Mumbai, has moved in-house to
Phoenix Mills. As senior manager
legal, Ghosh is part of a 10-member
legal team headed by senior vice
president corporate affairs and legal
Vidya Sagar Pingoli.
Phoenix Mills is listed on the BSE
in Mumbai and the National Stock
Exchange. It owns, manages and
develops large mixed-use properties
with over 10 million square feet of
shopping, entertainment, commercial,
residential and hospitality assets.
“My aim has always been to work
in-house, but I had moved to a law
firm to get a better understanding
of transactions,” Ghosh told India
Business Law Journal. “I wanted
hands-on exposure on PE and M&A
matters.”
Rajiv Khanna, a New York-based lawyer with an interest in India, has recently
joined BakerHostetler as a partner in
its New York office. Khanna told India
Business Law Journal that he has been
doing India-related work since 1985 and
currently has around eight India-related
transactions in the pipeline.
Khanna was a partner at Seyfarth
Shaw and before that a partner at Sidley
Austin, K&L Gates, Greenberg Traurig
and also at LeBoeuf Lamb, which no
longer exists. He has been president
since the early 1990s of the IndiaAmerica Chamber of Commerce, a
US-based organization that promotes
understanding between business people, business leaders and politicians on
both sides. As part of this role Khanna
routinely hosts visiting dignitaries and
delegations from India.
“The two way trade between the US
and India was only US$100 million [in
the early 1990s], today it is US$100 billion and it is suggested over the next
five years to be US$500 billion. I have
seen the whole cycle up,” said Khanna.
“BakerHostetler is excited to welcome
Rajiv to the firm,” said John Gherlein,
chair of the firm’s business group. “His
international skills leading cross-border
transactions, especially in India, and
experience serving as outside general
counsel for international companies is a
complement to the team’s international
capabilities.”
Commenting on being at the firm
Khanna said: “I really like the quality of
lawyers both as lawyers and as persons
that I have so far met at BakerHostetler”.
BakerHostetler has more than 900 lawyers across the US.
Khaitan & Co
hires HR head
Amar Sinhji, a former group head of
human resources (HR) at Tata Capital,
recently joined Khaitan & Co as an
executive director and is to head HR
at the firm. Sinhji, who spent 15 years
in various Tata Group companies, has
also worked at the Essar Group and
Bharat Petroleum.
Khaitan & Co partner Haigreve Khaitan
said Sinhji’s appointment was “another
milestone” in the professionalizing of
the firm. In 2014, Khaitan & Co had
hired a partner from KPMG, Gautam
Chemburkar, as head of strategy.
Sinhji will join the management
team of Khaitan & Co, which includes
Madhumita Ghosh
Ghosh previously worked on the
in-house legal team of Reliance
Industries for more than four years
and also worked briefly at Rajani &
Partners, which has since morphed
into Rajani Singhania & Partners.
executive director strategy Gautam
Chemburkar, chief operating officer
Nilanjan Ghose and chief financial
officer Tina Gosar. The management
team reports to the firm’s executive
committee, which is made up of group
partners from across Khaitan & Co’s
four offices who are elected on a threeyear term.
Sinhji said he was “very excited and
honoured” to join Khaitan & Co and
was looking forward to “putting in place
world class HR practices” while ensuring that the firm “retains and nurtures
the ethos, culture and value systems,
that have sustained” it for over a 100
years.
Khaitan & Co has 11 executive directors, 98 partners and over 400 lawyers.
All executive directors are non-lawyers
and are of equal standing as partners.
Agarwal Jetley adds
an associate partner
Priyabrat Tripathy, who was an in-house lawyer at Isolux Corsan India
Engineering & Construction and before that at Delhi International Airport,
has joined Agarwal Jetley & Co as an associate partner.
Agarwal Jetley & Co is a full-service firm led by Praveen Agarwal. It has
around 17 lawyers across two offices, in New Delhi and Bangalore.
June 2015
Rajiv Khanna
India Business Law Journal
7
Market pulse
Dhir & Dhir CEO
stands down
Manju Mohotra, the CEO of Dhir &
Dhir, has resigned after three years at
the firm.
“I think I have earned it,” Mohotra
told India Business Law Journal. “Over
30 years of working, almost without a
break, with 17 years trying to manage
lawyers and run law firms. It always felt
good to be the first non-lawyer CEO in
the country. You did not have this concept when I started out!”
Prior to working with Dhir & Dhir,
Mohotra was the CEO of Singhania &
Partners, and earlier Singhania & Co. “I
In-house counsel
GCs enjoy sun, surf
and lively debate
Fifty heads of in-house legal teams
participated in a retreat from 30 April
to 3 May organized by the Indian
Corporate Counsel Association (ICCA).
They included Nasser Kabir, general
counsel of ReNew Power, Sormistha
Ghosh, general counsel of Schneider
Electric India, and Rajesh Jha, general
counsel of Reckitt Benckiser Group.
8
India Business Law Journal
always considered DC Singhania [the
managing partner of Singhania & Co] my
mentor,” she said. “He was such a visionary to take on a non-lawyer and give me
the challenge to manage the firm.”
Mohotra plans to take a sabbatical in
order to travel, spend time with family,
play golf and catch up on reading.
“I have known Manju for around 15
years,” said James Burden, the publisher of India Business Law Journal.
“She has the distinction of being one
of very few non-lawyers working in law
firms to possess the same gravitas and
command the same respect as the lawyers, often more so.
“I wouldn’t be at all surprised if we
see her back in the legal market in some
capacity in the future”.
“It was a unique combination of
high profile attendees, an interesting
agenda for three days with relevant
topics for the corporate legal sector
with a chance of knowledge sharing
with fellow GCs and Indian and international law firm partners,” said Ashok
Sharma, the founder president of the
ICCA.
Dubbed the Great Indian GC
Retreat 2015, the event was held at
a seaside resort in Kovalam, Kerala.
Technical discussions were interspersed with recreational activities,
such as beach games and a tour
of the backwaters of Kerala. Topics
discussed included investment treaty
Manju Mohotra
arbitration; mergers and acquisitions
in India; the anti-corruption environment in India; and sexual harassment
at the workplace.
Ministry of Law and Justice Secretary
PK Malhotra attended and spelled out
the government’s vision and steps
being taken to make India an attractive
investment destination.
Farokh Engineer, a former Indian test
cricketer, also attended. Engineer, who
is currently associated with UK-based
law firm Zaiwalla & Co, shared insights
from his cricketing career with the
participants.
The ICCA organized a similar retreat
in 2014 in Goa.
June 2015
The wrap
Deal digest
Zuari wins control
of UB Group unit
Shardul Amarchand Mangaldas & Co
advised Zuari Fertilisers & Chemicals
and Zuari Agro Chemicals when it
completed its second open offer for
Mangalore Chemicals & Fertilizers
(MCFL), which was part of the UB
Group. The firm has been advising the
Zuari Group over the past year during
which Zuari made the two open offers
to public shareholders of MCFL.
Shardul Shroff, executive chairman of Shardul Amarchand Mangaldas,
led the team, which included partner
Kalpataru Tripathy, principal associate Abhishek Guha and senior associate Navin Kumar. June 2015
Jai Munim, managing partner of
Mumbai-based Bachubhai Munim &
Co, advised the UB Group. MCFL was
advised by its in-house legal team.
When the transaction closed on
18 May, Zuari’s holding in MCFL was
53.03%. In May 2014, Zuari, which
was then the third largest shareholder
in MCFL, entered into an agreement with the UB Group, to launch
a competing offer for the company
in response to a hostile open offer by
Deepak Fertilisers and Petrochemicals
Corporation. The first open offer was
concluded in October 2014 and Zuari
subsequently announced a second
open offer for 36.56% of the share
capital of MCFL. The Competition
Commission of India (CCI) cleared the
second takeover bid by Zuari on 26
March this year.
Shardul Amarchand Mangaldas
advised the Zuari Group in negotiations and drafting of the agreement
between the Zuari Group and the
UB Group, drafting and reviewing of
both rounds of the open offer documents mandated under the Takeover
Regulations, intimations to the stock
exchanges, public advertisements,
drafting and filing of applications to
the CCI, reply to queries raised by
the Securities and Exchange Board
of India (SEBI) and CCI, reply to complaints by MCFL shareholders to SEBI
against the proposed open offer, etc.
Partner Shweta Shroff Chopra, principal associate Aparna Mehra, senior
associate Vivek Agarwal, and associate Prateek Bhattacharya handled
the competition law aspect of the
transaction.
India Business Law Journal
9
The wrap
Vinçotte buys
into Geecy
BMR Legal assisted Belgium-based
Vinçotte International when it acquired
a majority stake in Geecy Industrial
Services. Vinçotte provides safety,
quality and sustainability solutions for
companies and their environment, and
Mumbai-based Geecy provides nondestructive testing services, inspections and training. Both companies are
privately held.
Souvik Ganguly, a Mumbai-based
partner who led BMR Legal’s team,
told India Business Law Journal that
he was “delighted to assist Vinçotte,
which is one of the older companies
operating in the non-destructive testing space, come into India through this
transaction”.
Ganguly, along with associates Deep
Jain, Pratyush Singh and Namrata
Bhagwatula, began working on the
transaction when they were at Acuity
Law, which merged with BMR Legal in
April 2014. Geecy was represented by
its in-house team.
Tata sells DIESL
to TVS Logistics
Bhavi Sanghvi, a corporate and M&A
partner at AZB & Partners, advised
TVS Logistics Services when it signed
an agreement to acquire 100% of the
share capital of Drive India Enterprise
Solutions (DIESL), a Tata Group company that provides end-to-end logistics
solutions and has over 200 warehouses
across India.
A team from Desai Diwanji comprising partners Apurva Diwanji and
10
India Business Law Journal
“We needed to ensure that the Indian
party was sensitized to global corporate governance norms so that postclosure they are able to accept that
there are certain norms to be followed,”
said Ganguly. “As legal counsel we had
to ensure that the requisite corporate
governance norms are in place on the
closing date itself.”
The transaction closed on 22 May.
Vinçotte now holds 60% of Geecy, while
the company’s promoters hold 40%.
Toral Desai advised DIESL and the two
Tata companies that own it jointly, Tata
Industries and Tata International.
The transaction will need clearance
from the Competition Commission of
India.
TVS Logistics is to receive funding
from the Tata Opportunities Fund, a
private equity fund that invests in Tata
entities and independent Indian companies, to acquire DIESL from the Tata
Group. The transaction will make TVS
Logistics one of the most competitive
and diversified third party logistics
companies in India.
TVS Logistics has an annual turnover
of over `12 billion (US$188 million) and
controls about 3 million square feet of
warehouse space in India. It has joint
ventures in the UK, Spain, Thailand,
the US, Germany and China.
Vodafone exits
Bharti Airtel
S&R Associates represented
Vodafone Group when it sold its stake
in Bharti Airtel to conform to regulatory
requirements. Shares of Bharti Infotel
which represented a 4.2% interest
in Bharti Airtel were sold to Bharti
Enterprises for US$200 million. The
team from S&R Associates was led by
Mumbai-based partner Rajat Sethi and
comprised associates Tanya Aggarwal
and Lakshmi Pradeep.
Bharti Infotel was represented by a
team from AZB & Partners headed by
Gautam Saha.
Vodafone’s exit from Bharti Airtel
was prompted by a unified telecom
licence regime that came into effect
in August 2013. It prohibits telecommunication service providers from
June 2015
The wrap
holding any beneficial stake in another
operator in the service areas where
they operate.
Vodafone had acquired a 10% stake
in Bharti Airtel in 2005 and sold a part
of it in 2007 after it acquired Hutchison
Essar, which is now Vodafone India.
Under the previous unified access
service licence regime, telecom companies were permitted to hold up to a
9.9% stake in other firms.
Bharti Airtel has operations in 20
countries across Asia and Africa.
Mitsubishi buys
out JV partner
Trilegal represented Mitsubishi Group
when it bought the entire equity stake
of Dubai-based ETA Ascon Holding
in Mitsubishi Elevator ETA India. ETA
Ascon Holding was advised by Clyde &
Co’s Dubai office.
New Delhi-based partner Charandeep
Kaur led Trilegal’s team, assisted by
company secretary Sampath Kumar,
counsel Ramakant Rai and Samsuddha
Majumder, senior associate Moksha
Bhat and associate Arjun Shiv.
The joint venture was established
in August 2012. The buyout of ETA’s
stake was carried out to allow its exit.
The joint venture company’s name was
changed to Mitsubishi Elevator India
after it became a 100% Mitsubishiowned company.
Mitsubishi installs elevators and escalators and provides after-sales services
in India. Mitsubishi Corporation and
Mitsubishi Electric Corporation recently
announced that they would set up a
new plant in India to manufacture elevators for the Indian market. According
to Mitsubishi, which aims to sell 5,000
units per year in India by 2020, the
country is the world’s second largest
new elevator and escalator market.
Bharti Airtel issues
10-year bonds
Allen & Overy advised Bharti Airtel
on US law when it recently raised
US$1 billion through a 10-year bond
issue to international investors under
Rule 144A. The lead managers were
a d v i s e d b y S k a dden Arps Slate
June 2015
Meagher & Flom on US law and Axon
Partners on Indian law.
Hong Kong-based partner Amit
Singh, who led Allen & Overy’s team,
told India Business Law Journal that this
was another highly accelerated bond
transaction by Bharti, “concluded in
a week’s time”. Singh added that the
structure had changed from issuing
through a Dutch subsidiary with a parent guarantee to an issue directly by
the parent, which necessitated several
changes in the disclosure and contract documentation. “The decision to
change the structure was taken at the
very last minute before pricing.”
Singh – who was supported on
this transaction by Garrick Merlo,
Julie Song and Katie Hickmet – also
advised Bharti Airtel on the earlier
transactions: an inaugural Rule 144A
US$1 billion bond offering in 2013
India Business Law Journal
11
The wrap
and simultaneous notes offerings of
US$1billion and €750 million under
Rule 144/Regulation S in 2014, where
the firm advised the issuer, Bharti
Airtel International (Netherlands), and
Bharti Airtel as the guarantor.
Skadden’s team included partners
Rajeev Duggal and Jonathan Stone
and Axon Partners team was led by cofounding partner Abhimanyu Bhandari.
“Bharti Airtel’s bond offering was a
complex transaction executed in an
accelerated time frame and paves the
way for increased activity by Indian
issuers,” Duggal told India Business
Law Journal.
Bharti Airtel will use the proceeds of
the latest issue for capital expenditure.
It recently received bilateral financing
commitments of up to US$2.5 billion
from China Development Bank and
Industrial and Commercial Bank of
China. China Development Bank’s
commitment is its single largest bilateral commitment to an Indian company and the largest to any telecom
operator globally.
IATA’s conduct not
anti-competitive
Cyril Amarchand Mangaldas
advised the International Air Transport
Association (IATA) and IATA India when
12
India Business Law Journal
the Competition Commission of India
(CCI) recently passed an order clearing
them of anti-competitive conduct. The
informant in the case, the Air Cargo
Agents Association of India (ACAAI),
was advised by Vaish Associates
Advocates.
The ACAAI had alleged anti-
competitive conduct by IATA and IATA
India under section 3 of the Competition
Act, 2002. The primary allegations concerned IATA’s alleged involvement in
fixing the rate of commission payable to the cargo agents and limiting
and controlling international air cargo
transport services through its various
resolutions. The ACAAI also alleged
that IATA’s introduction of a web-based
online and real time billing and settlement system for air cargo accounts
was in violation of section 3(3) of the
act, which prohibits anti-competitive
agreements.
The Cyril Amarchand Mangaldas
team was led by managing partner Cyril
Shroff and partner Nisha Kaur Uberoi.
Counsel Rajshekar Rao appeared for
IATA and IATA India on instructions
from Cyril Amarchand Mangaldas.
The Vaish Associates Advocates
team included partner MM Sharma and
senior associate Deepika Rajpal.
Cyril Amarchand Mangaldas reports
that this is the fourth consecutive win for
its competition law practice before the
CCI in 2015. It had earlier successfully
advised the Board of Control for Cricket
in India in an abuse of dominance matter.
In that case the Competition Appellate
Tribunal set aside an order passed by
the CCI, which had included a penalty,
on grounds of failure to adhere to principles of natural justice.
June 2015
The wrap
Business law digest
Securities regulation
Takeover
regulations
amended
On 5 May the Securities and
Exchange Board of India notified the
SEBI (Substantial Acquisition of Shares
and Takeovers) (Second Amendment)
Regulations, 2015, to amend the 2011
regulations.
Regulation 10, which provides for
exemptions to the rule in regulation 3
and 4, was amended to include the
acquisition of equity shares upon the
conversion of debt into equity under
a strategic debt restructuring scheme
as being exempt from the obligation to
make an open offer under regulations 3
and 4.
To qualify the acquisition must be of
equity shares by a consortium of banks,
financial institutions and other secured
lenders pursuant to conversion of their
debt as part of a strategic debt restructuring scheme in accordance with the
guidelines specified by the Reserve
Bank of India (RBI). These guidelines
mandate compliance with the conditions specified under sub-regulation (5)
or (6) of regulation 70 of the SEBI (Issue
of Capital and Disclosure Requirements)
Regulations, 2009, as applicable.
Issue of capital
and disclosure
rules amended
On 5 May SEBI also notified the
SEBI (Issue of Capital and Disclosure
Requirements (Second Amendment)
Regulations, 2015, to amend the 2009
regulations.
The amendment made to regulation
70 exempts from the scope of chapter
VII of the regulations any preferential
issue of equity shares subject to the
following conditions:
a. The preferential issue must be
to a consortium of banks and
financial institutions pursuant to
June 2015
the conversion of their debt, as part
of a strategic debt restructuring
in accordance with the guidelines
prescribed by the RBI;
b.The conversion price must be
determined in accordance with the
guidelines specified by the RBI for a
strategic debt restructuring scheme,
which must be not be less than the
face value of the equity shares;
c. The conversion price must be
certified by two independent
qualified valuers. For this purpose,
“valuer” will have the same meaning
as assigned to it under regulation
2(1)(r) of the SEBI (Issue of Sweat
Equity) Regulations, 2002;
d.Equity shares allotted must be
locked in for one year from the date
of trading approval, provided that
for the purposes of transferring
control, the consortium of banks and
financial institutions may transfer
their shareholding to an entity before
completion of the lock-in period
subject to continuation of the lockin on the shares for the remaining
period with the transferee;
e. The applicable provisions of the
Companies Act, 2013, including the
requirement of a special resolution,
must be complied with.
The amendment further exempts
any other secured lenders that opt
to join the strategic debt restructuring scheme in accordance with RBI
guidelines and convert their debt
into equity shares in accordance with
amendment.
India Business Law Journal
13
The wrap
Corporate law
Company
incorporation
rules amended
The Companies (Incorporation)
Amendment Rules, 2015, were notified
on 1 May, bringing about the following
key changes:
Integrated incorporation: Under the
new rule 36, an integrated incorporation
process under form INC-29 was introduced. This is a single form pursuant to
sections 4, 7, 12, 152, and 153 of the
Companies Act, 2013. The form encompasses the following processes: (a)
application for a director identification
number for new directors; (b) application for name approval; and (c) application for incorporation of a company.
See the table below for more details.
Earlier position
New position
Rule 5: Penalty
If a one person company or any officer of such a
company contravenes the provisions of the Companies
(Incorporation) Rules, 2014, the company or any of its
officers will be punishable with a fine of up to `10,000 plus
up to `1,000 for every day the contravention continues.
Rule 5 has now been replaced by inserting rule 7A, which
reduces the penalty to a maximum of `5,000 and a further
fine of up to `500 for every day after the first offence
during which such contravention continues.
Rule 7: Conversion of a private company into a one
person company:
(1) A private company other than a company registered
under section 8 of the Companies Act, 2013, with a paidup share capital of `5 million or less, or an average annual
turnover during the relevant period of `20 million or less,
may convert itself into a one person company by passing
a special resolution during its general meeting.
Private companies may only convert into a one person
company if they have both a paid-up share capital of
`5 million or less and an average annual turnover of `20
million during the relevant period.
The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in
Mumbai, New Delhi, Bangalore, Singapore, Silicon Valley and Munich.
14
India Business Law Journal
June 2015
The wrap
Dispute digest
Competition
law
Green signal for
exclusive pacts in
e-commerce
In Mr Mohit Manglani v M/s Flipkart India
Private Limited & Ors, the Competition
Commission of India (CCI) recently
dismissed complaints made against
Flipkart and other leading e-commerce
sites, observing that “it seems very
unlikely that an exclusive arrangement
between a manufacturer and an e-portal
will create any entry barrier”.
The CCI said it was “of the prima
facie view” that no case of contravention of either section 3 or section 4 of
the Competition Act, 2002, had been
made out against Flipkart, Snapdeal,
Amazon, Jabong and Myntra. While
section 3 deals with anti-competitive
agreements, section 4 deals with abuse
of dominant position.
Manglani had alleged that exclusive
agreements entered into between an
e-commerce site and sellers of goods
and services resulted in the site having 100% market share for products in
which it dealt exclusively. He alleged
that product-specific monopolies were
slowly destroying players in the physical market and distorting fair competition. As such, the exclusive agreements
had an appreciable adverse effect on
competition.
The e-commerce sites argued that they
are third-party platforms that merely bring
manufacturers and buyers together, and
that the relevant market as suggested by
Manglani “is misconceived and will lead
to fallacious results”. They also argued
Arbitration
Arbitration clause
survives after
termination of MoU
Allowing an appeal in Ashapura MineChem Ltd v Gujarat Mineral Development
Corporation, the Supreme Court held
June 2015
that online and offline retail are merely
different channels of distribution and not
separate relevant markets.
Holding that “every product cannot be
taken as a relevant market in itself”, the
CCI ruled that irrespective of whether the
e-portal market is considered as a separate relevant product market or as a sub-
segment of the market for distribution,
none of the e-commerce sites “seems to
be individually dominant”. The CCI found
that the exclusive agreements do not
appear to be adversely affecting existing
players in the market, “rather with new
e-portals entering into the market, competition seems to be growing”.
that when a memorandum of understanding (MoU) contains an arbitration
clause, parties to the MoU can refer to
arbitration disputes surrounding the
non-fulfilment of any conditions in the
MoU or failure to comply with any of its
requirements.
Appointing a sole arbitrator to decide
disputes arising between the parties
under the MoU, the court held that
an arbitration clause contained in a
MoU is a stand-alone agreement and
that it comes into effect irrespective of
whether the MoU leads to a full-fledged
agreement.
In 2007, Ashapura Mine-Chem
and Gujarat Mineral Development
Corporation signed a MoU by which
they proposed to constitute a joint venture along with a Chinese company for
setting up an alumina plant in Gujarat.
In 2011, Gujarat Mineral Development
Corporation cancelled the MoU after
differences arose. Ashapura MineIndia Business Law Journal
15
The wrap
Chem subsequently invoked the arbitration clause contained in the MoU
and filed an application under section
11 of the Arbitration and Conciliation
Act to Gujarat High Court for appointment of an arbitrator. The high court
rejected the petition on the ground that
there was no question of arbitration as
the MoU had been cancelled.
Section 16 of the Arbitration and
Conciliation Act provides that an
arbitration clause forming part of a
contract shall be treated as an agreement independent of such a contract.
The Supreme Court said that the law on
this issue been already settled in more
than one decision.
The judgment reconfirms the supremacy of the intention of the parties to
resolve their disputes by arbitration and
the globally accepted recognition with
regard to the severability of an arbitration agreement from the underlying
contract.
Banking law
the company under section 138.
The court held that vicarious liability
created under section 141 of the act
is to ensure that the people who are in
charge of the affairs of a company are
held responsible and proceeded against
if the company is found guilty of committing an offence under section 138.
Section 141 states that when the person
committing an offence under section
138 is a company, every director of the
company who was in charge of and
responsible for the conduct of its business shall also be deemed to be guilty.
Company directors
do not need notice
of bounced cheque
Does notice under section 138 of the
Negotiable Instruments Act, 1882, need
to be sent to directors of a company
before a complaint can be filed against
the company and its directors? Ruling in
Kirshna Texport & Capital Markets Ltd v Ila
Agrawal & Ors, the Supreme Court held
that section 138 – which deals with dishonour of cheques – “does not admit of
any necessity or scope for reading into
it the requirement that the directors of
the company in question must also be
issued individual notices under section
138 of the act”.
Setting aside a ruling by Bombay
High Court that had held notice must
be served to individual directors in
order to give them an opportunity to
rectify the mistake or clarify matters,
the Supreme Court said directors who
are in charge of affairs of a company
and responsible for its affairs would
be aware of the receipt of notice by
Administrative law
Student not bound
by adverse result of
falsified application
In Harjeet Singh Chawla v State of
Chhattisgarh & Ors, Chhattisgarh High
Court recently held that that a student
could not be compelled to accept the
result of a re-evaluation of test results
that he had not requested, as “a person
cannot be compelled to swallow the
adverse result of exercise for which he
never applied nor consented”.
Chawla, an LLM student at a staterun university, had received sufficient
marks to register for a PhD programme
at the university. He subsequently
learned that he was ineligible for the
programme as a re-evaluation of his
LLM test papers had resulted in a
downward revision of the marks he had
obtained.
After unsuccessfully raising the issue
with the vice-chancellor of the university, Chawla filed a writ petition before
the high court, seeking the quashing of
the amended results. Chawla also petitioned the court to order an enquiry by
an independent agency into the incident
and to further direct the university to
continue employing him as a part-time
teacher and to permit him to sit for the
PhD examination. He told the court that
he had not signed the application for reevaluation and that it contained a forged
signature.
The university had argued that it could
not be held liable, as it had acted in good
faith on an application filed for re-evaluation. A state examiner of questioned
documents who was asked to examine
Chawla’s signature on the re-evaluation
application told the court that Chawla
had neither signed the re-evaluation
request form nor completed it.
Quashing the result of the re-evaluation, the court held that a candidate
who does not apply for a re-evaluation
cannot be compelled to accept marks
based on an application filed fraudulently by another person.
The dispute digest is compiled by Bhasin &
Co, Advocates, a corporate law firm based
in New Delhi. The authors can be contacted at
lbhasin@bhasinco.in or lbhasin@gmail.com.
Readers should not act on the basis of this
information without seeking professional
legal advice.
16
India Business Law Journal
June 2015
Cover story
Legal market
Clash of the titans
Law firms up and down the country reel as rival recruitment sprees
by competing Shroffs rob them of top talent
Vandana Chatlani reports
H
earing the names “SAM” and “CAM” bandied about
India’s legal market, it is hard not to think of Green
Eggs and Ham, the popular children’s book written
and illustrated by Dr Seuss. The mastermind of those simple, catchy rhymes was Theodor Seuss Geisel, a talented
American writer and cartoonist, whose successful career
spanned children’s books, comic strips, advertising campaigns and political cartoons.
Similarly, the men behind India’s deceptively simple SAM
(Shardul Amarchand Mangaldas & Co) and CAM (Cyril
Amarchand Mangaldas) are legal forces to reckon with. For
21 years, brothers Shardul and Cyril Shroff were the managing partners of the country’s largest law firm. But on 9 May,
after six months of mediation, the firm was dissolved as the
brothers parted ways to set up their own practices. Now,
they head up not one, but two legal powerhouses. With
assets, resources and offices divided, competition is at the
forefront of their minds as they forge fresh partnerships and
build new fortresses through intensive recruitment drives.
“It’s a major change in our legal industry,” says Shiraz
Patodia, a partner at Dua Associates who SAM recently
recruited. “We haven’t seen something like this happen for
the last 30 years … every firm is impacted by this change in
some way.”
Haigreve Khaitan, a senior partner at Khaitan & Co, which
has lost six partners to SAM and CAM, says the legal market
is in a state of flux and uncertainty. “Everybody seems to be
June 2015
unsettled in one way and everyone who matters is getting
approached,” he says.
Rohan Shah, the managing partner of Economic Laws
Practice (ELP), which has lost two partners to the new firms,
expects to see recruitment issues intensify and believes it
will naturally create a domino effect. “Everyone is gearing
up, because whoever loses will in turn look somewhere else
and that will spread through the market,” he says. The firm
recently took on Ashish Prasad, a managing associate from
Luthra & Luthra.
The Shroffs’ cherry-picking is far from over and law firms
can only watch with trepidation as the hiring spree throws
up questions of loyalty, satisfaction, compensation, profit,
loss, attrition and client retention.
“I guess this is a disruptive event for the Indian legal market,” says Cyril Shroff, CAM’s managing partner. However,
he says, the dust should settle, leading to “a new normal”
until the next round of recruitment. “There’s only so much
that either firm can digest in terms of a new acquisition of
lateral talent. And there will probably be a time when one has
to pause before moving to the next step.”
Poaching frenzy
Shardul Shroff is the executive chairman of SAM and
his wife Pallavi is the firm’s managing partner. The firm has
kept hold of Amarchand’s offices in New Delhi, Gurgaon,
India Business Law Journal
17
Cover story
Legal market
Ahmedabad and Kolkata and is focusing now on building a
presence in Mumbai and Bangalore.
SAM began operations on 11 May with 300 lawyers
including 60 partners and intends to build a combined team
of 400 to 450 lawyers. It has already added around 55 in
Mumbai, who will be housed in Express Towers, taking over
the former offices of AZB & Partners, which has moved its
operations to Lower Parel.
“Mumbai and Bangalore are our priority,” says Shardul,
who admits that shortly after the break-up, some lawyers
were reluctant to join SAM because of the uncertainty associated with a new venture. Having gathered momentum,
however, he says the firm today has “more proposals on
hand than we can accept”.
SAM’s recent lateral hires include Patodia from Dua
Associates, who will join with her team of four; Yogesh
Chande from ELP; Jay Parikh from Verus Advocates,
who joins with two associates; and Radhika Pereira from
Dudhat Pereira & Associates, who is accompanied by a
team of eight lawyers.
Shardul says SAM’s approach is to be “very selective” and
hire “groups of excellence”. The firm has done just that with
the recruitment of J Sagar Associates (JSA) partner Akshay
Chudasama and his team of 18 lawyers, including four
salaried partners. Chudasama is now the managing partner
of SAM’s Mumbai office and also sits on the firm’s management committee.
SAM’s strategy of national practice groups means that
partners in charge are responsible for work across India
rather than in specific territories. “Lawyers such as Akshay
and Shiraz will have to create and execute work beyond
their local markets,” says Shardul. “They came on board
because they wanted to look at the larger picture and create
a national practice process rather than a regional or territorial one.”
For CAM, launched on 10 May, creating a solid presence in Delhi is a primary objective since the firm took over
Amarchand’s Mumbai, Bangalore, Chennai and Hyderabad
offices following the separation. While the Delhi office
located in Saket will be full-service, it will have a special
focus on developing intellectual property, pharmaceuticals
and white collar crime practices and will weigh in favour of
Everybody seems to be
unsettled in one way and
everyone who matters is
getting approached
Haigreve Khaitan
Senior Partner
Khaitan & Co
June 2015
litigation. Transactional work will lie at the heart of CAM’s
Mumbai practice.
CAM’s Delhi office today has almost 100 lawyers with 23
new partners hired along with partner moves from the firm’s
Mumbai office. Key hires include partners Harminder (Harry)
Chawla and Manishi Pathak from Kochhar & Co; Raghuram
Raju from Religare; Gyanendra Kumar, Srinivas Kilambi and
Anuradha Mukherjee and from MNK Law Offices; and Gauri
Rasgotra from Khaitan & Co.
With 475 lawyers across its other offices, CAM is close to
reaching its target of 600 lawyers by July. Cyril says he has
been overwhelmed with lawyers eager to join his firm, so
reaching his goal of 1,000 lawyers by 2018 may be easier
than anticipated.
“We’ve actually said ‘no’ to twice as many partners as
what we’ve taken on in Delhi,” says Cyril, who alone comments on law firm matters at CAM. “People haven’t necessarily been unhappy with where they were, in fact, some of
them were very happy with their organizations. They just
wanted to be here because they realized something different was being created for the first time. The excitement
of the change and the vision is what has been a driver for
many.”
Given the rivalry between the two brothers, it may come
as a surprise that neither has taken lawyers from the other’s
firm despite the absence of a non-poaching agreement.
“I haven’t taken anyone from SAM, nor has Shardul taken
anyone from CAM,” says Cyril, who took on Ranjan Negi and
Aarti Joshi from Amarchand’s Delhi office only after they had
left the firm prior to the launch of SAM and CAM. “If anyone
has joined Shardul and held a SAM card for even one second, we haven’t touched them. At some stage the poaching
may start, but for now we are both exercising self-restraint.”
Multiple motivations
With a legacy as powerful as Amarchand’s, it is no surprise
that the Shroffs are able to attract talented lawyers with rich
experience. A track record of serving illustrious clients such
as Adani, Aditya Birla, Amazon, Jindal Power, Vodafone, the
Tata Group, Kohlberg Kravis Roberts & Co and Standard
Chartered Bank, provides further appeal. For many, the
chance to join a firm of Amarchand’s pedigree as it launches
major greenfield operations is hard to turn down. Both junior and senior lawyers have responded enthusiastically to
the idea of starting on a clean slate, with juniors excited by
the prospect of leapfrogging into positions of responsibility at a much earlier stage than would have been possible
elsewhere.
“I was attracted by the opportunity to build something
from scratch,” says Chudasama. “I could have tried to do
that on my own, but I could have never done it without the
legacy, brand equity and track record that SAM presents. It
basically allows me to jump into the big league as a start-up
on day one.”
For Patodia, who will become the deputy dispute resolution head for India at SAM, choosing to leave Dua after 16
years there was tough. “It was the most difficult decision for
me to trade my comfort,” she says. “I was ruling the roost at
Dua. I am extremely emotional to leave the firm and leave my
colleagues behind.”
Patodia says she has been approached by large firms
for three or four years but didn’t find the right fit until she
met Shardul and Pallavi. “Once you’ve been at a firm for
such a long time, you don’t really want to change. I really
India Business Law Journal
19
Cover story
I was attracted by the
opportunity to build something
from scratch … It basically
allows me to jump into the big
league as a start-up on day one
Akshay Chudasama
Managing Partner (Mumbai)
Shardul Amarchand Mangaldas
considered my options and when I met Shardul and
Pallavi, I thought this was the right place.” She refers to
them as “the best lawyers today”, “excellent professionals and very good people”.
Although Shardul and Pallavi were able to strike a
chord with Patodia, she says other factors contributed
equally to her decision. “When you look at change at my
age, you have to think of a lot of things,” she says. “I’m
not a young person; I can’t leave Shardul and Pallavi if
I don’t like them and move on to someone else. I saw a
great future of self-growth at the firm, not just for myself,
but also for my team, which is very young. They’ve been
with me for a good 12-15 years, so it’s my duty to take
their interests into consideration.”
For Parikh, a co-founder of Verus Advocates – a
breakaway firm from Bharucha & Partners – joining SAM
was a “win-win situation”. Although leaving his firm was
difficult, Parikh says the opportunity came up “when we
were thinking, ‘What next?’”. He says joining SAM’s new
office in Mumbai allows him to continue his entrepreneurial pursuits while ensuring “faster client conversion”
as a result of being associated with a bigger brand.
Shardul dismisses concerns that snapping up experienced lawyers could lead to problems with cultural
assimilation and differing work styles. “I don’t worry
myself about the fact that new lawyers may not assimilate because they have joined us based on our vision to
look at the larger picture and create national practice
processes,” he says.
Cyril’s strategy for minimizing conflict lies in a “deep
investment of time for a proper induction”. He recently
conducted a three-day induction programme at the
firm’s Delhi office “not only to lay down clear principles
on how we work together, but also to give them a flavour
of Amarchand’s legacy”. According to Cyril, his team
members have been very friendly to one another also
because of their own experience, maturity and “a strong
desire to do things at the firm in a standard way”.
“My guess is it will take between six and 12 months
for a routine and rhythm to set in,” he says. “They are
not only grounded people, but also excellent lawyers.
20
India Business Law Journal
Legal market
The age profile of partners which we’ve taken on in Delhi
is about eight to 10 years older than Mumbai. Lawyers
such as Neeraj Sharma, Manishi Pathak and several
others who are in their late 40s and early 50s are at a
different level of maturity, just because of age and experience, which has made it much easier.”
Fame and fortune
There is no denying that large pay packets present
another huge incentive for new recruits.
“From what I understand a lot of people have been
offered large sums of money and that’s tempting honestly,” says Haigreve Khaitan.
Ranji Dua, the managing partner of Dua Associates,
believes the two firms “have been offering exorbitantly
high remuneration packages for limited guaranteed
periods of time in order to attract lawyers from other
firms”. Dua says this has led to prominent firms “losing
independent-minded partners”, and adds that retaining
such talent may prove problematic. “The real challenge
will be how each one of them secures the long-term
comfort and sustainability of these ambitious personalities,” he says.
Shardul argues that Amarchand was always at the top
edge of the market in terms of compensation and says
he will stay there. “I don’t think it’s a financial issue for
Cyril or me because our philosophy is talent is very critical in this profession. If you want to pick the best talent,
you have to pay well.”
Cyril rejects the notion that his firm is “buying off” new
recruits and says his offers are based on the packages
of CAM’s existing lawyers. “I haven’t paid any acquisition premium,” he says. “If you pay the new talent more
than what the market value is for someone in a similar
role, then you will end up creating a lot of internal problems. This is why I haven’t made any gold-plated hires
and it’s also one of the reasons I’ve avoided any ‘prima
donnas’ because they come with bigger problems.”
He has also been careful about putting people in
positions of power too early, in an attempt to prevent
personality clashes. CAM will not have a Delhi managing
I haven’t made any gold-plated
hires and … I’ve avoided any
‘prima donnas’ because they
come with bigger problems
Cyril Shroff
Managing Partner
Cyril Amarchand Mangaldas
June 2015
Legal market
partner “until the office settles and a natural leader
emerges,” he says. “It’s a double-edged sword. It’s good
to have a clear leader, but until the culture is set, it also
works the other way. There may be people willing to join
you but not if a certain person is in charge.”
Bearing losses
Talent acquisition and retention has long been a source
of tension for managing partners, but the Shroffs’ hunt for
lateral hires has amplified these concerns. Previously retention was mainly a problem at the junior level where graduates with little experience would jump without hesitation at
the promise of higher salaries. However, SAM and CAM are
primarily interested in hiring partners at the top end of the
spectrum who possess experience, specialization and a
strong client following.
While losing star partners to the Shroffs may be unnerving, some firms see it as a confirmation of their standing and
reputation in the legal community.
In JSA’s business model,
none is indispensable
or irreplaceable
Berjis Desai
Managing Partner
J Sagar Associates
Dua says it is not uncommon for competitors to target
partners at his firm because it has “one of the most robust
sets of senior and experienced partners of a total of around
50 partners”. Patodia was one of 19 litigation partners, of
which 18 will remain at the firm.
Others are comforted by the partners who have turned
down offers to join SAM and CAM.
“What has been assuring for us is the number of people
who have stuck on and flatly refused offers from SAM or
CAM because they don’t believe in the idea of getting paid
double or triple and being ‘bought’,” says Khaitan. “We have
about 100 partners and everyone has received a call. Those
who have stood by us have given us confidence.”
Khaitan says he was most surprised by Rasgotra’s decision to leave the firm “just because of the number of years
she has spent at the firm … she has always been a ‘Khaitan’”.
The firm is in no hurry to fill the gaps left by Rasgotra and
other partners, but, says Khaitan, “in terms of lateral hires we
continue to look around for quality talent”. Khaitan & Co has
recently recruited principal associate Manisha Shroff from
CAM and says it has two more key hires coming up in July
and August.
June 2015
Cover story
According to Berjis Desai, the managing partner of JSA,
attrition is not necessarily bad and can “unclog the system”.
In response to the loss of Chudasama along with 18 other
lawyers, Desai says “in JSA’s business model, none is indispensable or irreplaceable … entries and exits, like death and
taxes, are inevitable”.
Losses at the partner level are tougher for firms with fewer
to rely on. Dipankar Bandyopadhyay, a partner at Verus,
says Parikh’s departure “is a sad moment for Verus ... his
contribution towards building the firm’s systems and processes in its early stages cannot be forgotten”. He says the
firm is committed to “continuously investing in Verus and …
making meaningful recruitments at all levels of the firm” while
also following a structured internal promotion process.
Of course, jumping ship is not for everyone. “There are
some who believe Amarchand is a great career and others who don’t,” says Shah. “Those groupings remain.”
Regardless of how much movement the market sees, competition has reached new heights. “You have two very good
law firms and two very good leaders who are energized,”
says Shah. “Overall it will be positive for the profession
because everyone will undoubtedly have to up their game –
and that can only be good for clients and younger lawyers.”
Competing, evolving, innovating
The emergence of SAM and CAM has forced firms to
introspect and re-examine their strengths and weaknesses,
management models, client service strategies, fee structures and positioning within the legal market.
“There is bound to be a sense of nervousness in the
market,” says Shardul. “Each of us is following a different
strategy; Cyril is going for size and I am going for quality. We
still believe that we will be the two largest in the market with
positions at the top.” He points out that he and Cyril have
achieved in 2015 what they had planned to achieve in 2017.
“We thought we would have 1,000 lawyers by 2017 but if
you combine our totals now, together we have crossed that
number,” he says.
Although the increased competition has rattled some,
others believe it is inherently good for the legal services
industry. “In India there is no real competition,” says Patodia.
“If foreign law firms come in, we’ll have a lot of competition
anyway, so let’s learn to live with it.”
The changing dynamics of the legal market mean that
firms need a strong contingency plan to deal with partner
losses. In addition, to survive, firms must be willing to
adapt, evolve, innovate and invest in intellectual and management capital.
“Lifelong loyalty to a firm is fast fading,” says Desai, adding this is a sign of a maturing legal market. “Churning will
bring change and change, in the long term, is good.”
Shah sees the dawn of a new era of consolidation.
“Previously people were very happy in their own spaces, but
now they will have reasons to look outside of their own firms
to see if there are opportunities,” he says.
Loyalties may be shifting among clients as well. Khaitan
says the split has led to a huge influx of work from both
domestic and international clients. “Clients who have been
loyalists for many years are looking elsewhere; perhaps they
want stable alternatives,” he says.
In his view, a perceived disconnect between the firms’
Mumbai and Delhi offices could be one reason for client
movement. “For a M&A transaction, for example, you’ll
need a strong Delhi competition, regulatory and government
India Business Law Journal
21
Cover story
Legal market
Talent tally
Some recently recruited partners at SAM and CAM
Shardul Amarchand Mangaldas & Co (SAM)
Name
Practice area
Previous firm/employer
Asim Abbas
Yogesh Chande
Akshay Chudasama
Ameya Gokhale
Ashoo Gupta
Iqbal Khan
Jay Parikh
Shiraz Patodia
Radhika Pereira
Ashni Roy
Deepto Roy
Gaurav Singhi
Abhishek Sinha
Mithun V Thanks
Technology, media and telecommunications
Securities
M&A, private equity, general corporate
Litigation, arbitration and dispute resolution
M&A, private equity, general corporate
M&A, private equity, general coporate
General corporate
Litigation, arbitration and dispute resolution
General corporate
M&A, private equity, general corporate
Projects and finance
M&A, private equity, general corporate
M&A, private equity, general coporate
M&A, private equity, general corporate
Khaitan & Co
Economic Laws Practice
J Sagar Associates
Chambers of Senior Advocate Pradeep Sancheti
J Sagar Associates
Khaitan & Co
Verus Advocates
Dua Associates
Dudhat Pereira & Associates
J Sagar Associates
Khaitan & Co
J Sagar Associates
Khaitan & Co
J Sagar Associates
Information provided by Shardul Amarchand Mangaldas
Cyril Amarchand Mangaldas (CAM)
Name
Practice area
Previous firm/employer
Rishi Anand
Kapil Arora
Harminder (Harry)
Chawla
Jay Cheema
Rahul Goel
Aarti Joshi*
Srinivas Kilambi
Gyanendra Kumar
Harsh Kumar
Piyush Mishra
Anuradha Mukherji
Kirat Nagra
Ranjan Negi*
Manishi Pathak
Niti Paul
Gokul Rajan
Raghuram Raju
Gauri Rasgotra
Ritika Rathi
Neeraj Sharma
V Sheshagiri
Alok Tiwari
Nivedita Tiwari
General corporate
Litigation
General corporate
Gnarus Partners
Bharucha & Partners
Kochhar & Co
Project financing, general corporate
Technology, media and telecommunications, competition law
General corporate
General corporate
General corporate, real estate
General corporate
Banking and finance
Litigation
Litigation
Intellectual property
General corporate, employment law
General corporate
Capital markets
General corporate
Litigation
General corporate
Litigation
Litigation
Litigation
General corporate
Clasis Law
Dhir & Dhir
Amarchand Mangaldas
MNK Law Offices
MNK Law Offices
Khaitan & Co
Luthra & Luthra
MNK Law Offices
Economic Laws Practice
Amarchand Mangaldas
Kochhar & Co
Kochhar & Co
Citigroup Global Markets India
Religare
Khaitan & Co
AZB & Partners
Dua Associates
Dua Associates
Dua Associates
Platinum Partners
Information provided by Cyril Amarchand Mangaldas
* Left Amarchand’s Delhi office before the split
22
India Business Law Journal
June 2015
Legal market
presence, while in Mumbai you’d need a strong securities
presence. So clients are wondering, is this really fulfilled?
Am I better off with another firm which has a greater DelhiBombay connect?”
Khaitan says a fear of low partner time on matters may be
another motivation for clients to consider alternative legal
service providers. “They are also wondering, ‘Will we have
quality people with quality time, or will those people be too
busy getting their house in order for the next year or so?’ All
of this gives us reason to improve and pull up our socks.”
Shardul believes some market movement is inevitable
and is only natural in a market which is in a state of flux. “We
accept that such things would happen, but there is more
coming in than going out from us,” he says.
SAM has been confirmed as the exclusive member of
Lex Mundi, an association of 160 law firms from around the
world. This position was held previously by Amarchand. Cyril
has no plans to join another network of law firms and says
leaving Lex Mundi will have no effect on his firm. “I’ve always
believed that the main business that comes through is from
your own personal connections. These networks have limited
value. It doesn’t really make a difference to us.”
The next stage
As for the distribution of equity at the new firms, professionals at SAM have been encouraged by the promise of
more ownership, even if this is introduced gradually.
“I won’t deny that there will be a significant family influence,
but we have an independent management committee where
the Shroffs will be a minority,” says Chudasama. Sitting on
the committee along with Shardul, Pallavi and Chudasama
are Gunjan Shah, Jatin Aneja, and M Damodaran, a former
chairman of the Securities and Exchange Board of India.
Patodia will also sit on the committee after joining SAM.
“They’ve been open to all the suggestions I’ve had so far
and been very welcoming,” Chudasama says. “We want to
be one firm, one balance sheet and one partnership. We need
to build a model where we make a genuine effort to refer work
and integrate to avoid work grabbing and factions.”
Cyril says CAM has diluted its equity already and is on
a steady path to bring the Shroffs’ share down further,
Overall it will be positive for the
profession because everyone
will undoubtedly have to
up their game
Rohan Shah
Managing Partner
Economic Laws Practice
June 2015
Cover story
There is bound to be a sense of
nervousness in the market …
We still believe that we will be
the two largest in the market
with positions at the top
Shardul Shroff
Executive Chairman
Shardul Amarchand Mangaldas
possibly as low as 40%. “There is no hard and fast rule
about how quickly this will happen, but as the pie grows,
so too will the dilution,” he says. “At this stage, there’s more
risk and I think it’s important that the family should take that
on.” Cyril says there appears to be no discontent among
new or existing partners with the pace of dilution because
“they are fairly compensated and because they can clearly
see the intention to dilute in a sensible way”.
For now, both SAM and CAM are works-in-progress as
Shardul and Cyril continue to scout the market to bulk up
their talent pools.
“We have hired quite well but there are many more marquee hires which are still pending, which should happen
in the next month or so,” says Shardul. “I think this will
complete the picture of good expertise across markets and
make SAM a really go-to firm.”
Cyril meanwhile has plans to tap overseas markets where
dual-qualified lawyers abound. “I’m hoping lawyers from
the London and New York markets will see this as an opportunity to come back and work with us,” he says.
The jury is still out on which firm will be more successful
and whether either or both will preserve the heart and soul
of Amarchand’s legacy.
Khaitan says the verdict won’t be in for a year or two.
“I can definitely say each of their home offices will probably preserve their own culture, because they outnumber
anybody else,” he says. “But in terms of new offices, it’s a
bit early to say. Both brothers are very capable and I have
tremendous respect for both, so I’m sure they’ll be able to
work out a plan.”
Dua says from his experience, developing a law firm
culture “takes decades of nurturing and cannot be instantly
generated”. He adds: “I do wish each of them well notwithstanding the temporary turmoil they have created whose
backlash will be most interesting to watch.”
Which firm will highly educated, savvy clients choose
for legal advice on India-related matters? “On critical matters, clients will continue to go where they believe they will
get the best service,” says Shah. “They have always been
driven by expertise and partner level attention and I don’t
think that will change.” g
India Business Law Journal
23
Vantage point
Opinion
Survive and prosper
Can Indian law firms remain independent and retain
quality clients after foreign law firms enter?
Dennis Unkovic argues they can
O
ver the past year, Prime Minister Narendra Modi has
launched a number of bold initiatives designed to
fundamentally change how the world views India
and how India views itself. One “Modi initiative” will provide
access to the Indian legal market to rapidly growing and
aggressive foreign law firms, which are currently barred from
practising law in the country.
I knew that change in the Indian legal market was finally
imminent after reading an insightful article titled “Road Map
for Reform”, by the well-respected president of the Society
of Indian Law Firms, Lalit Bhasin (India Business Law Journal,
February 2015). In it, Bhasin reversed his long-held view
that India is not yet prepared for foreign competition in its
legal market and instead embraced the view that this trend
is inevitable. According to Bhasin, “Indian law firms are now
ready for a phased sequential approach to the entry of foreign
lawyers and law firms”.
Now that the opening of the Indian legal market over the
next few years is inevitable, India’s leading law firms face a
stark choice: remain independent or elect to merge with certain “magic circle” firms or other large multinational law firms.
Either choice carries risks.
Since the mid-1980s, I have travelled extensively throughout
Asia and India, working on behalf of multinational companies.
I have seen many dominant Indian law firms which existed 30
years ago be replaced by more internationally focused firms.
Some analysts now predict that most of the larger remaining
national firms in India will eventually surrender their independence and become the Indian branch office of a multinational
law firm. I respectfully disagree with this analysis based on
historical trends from other large legal markets.
Having observed the rapid evolution of the Chinese legal
market over the past decade, as well as the response of
quality German firms to increased international competition,
I believe there are solid reasons why choosing independence
is an attractive option for Indian law firms. The experiences of
China’s and Germany’s legal markets – as summarized below
– can provide a helpful model of what we can expect in India.
National firms are more in tune with local culture: Even
as the world becomes more interconnected, major countries
such as India and China possess unique cultures and legal
systems that national law firms understand, making them better prepared than international firms to interact effectively with
domestic clients. Beginning in the 1990s, Chinese companies
flocked to retain foreign law firms operating in China, especially when seeking advice on doing business outside China.
However, over the past eight years, Chinese law firms have
grown larger and more sophisticated, and as a result Chinese
companies have been increasingly selecting local firms over
24
India Business Law Journal
the large foreign firms. Given the choice, Chinese clients prefer to work with lawyers with whom they are comfortable, and
that familiarity is something the local Chinese firms provide. I
presume that Indian clients may react in similar fashion.
Affordability: Aside from sophisticated capital or bankingdominated transactions that demand certain technical skills,
national law firms can handle most transactional legal matters
at significantly lower costs than the larger global firms. The
affordability of national firms is a basic fact that is unlikely to
change.
Benefits of networks: Over the past several decades,
international lawyer networks have emerged as a way for midsize and regional law firms to expand their reach throughout
the globe without having to merge into a multinational global
firm. Indian firms which wish to remain independent but also
want to be able to refer their clients to respected firms for
cases and transactions in different jurisdictions may find that
joining an international lawyer network is the ideal solution.
One size cannot fit all: In markets where leading national
law firms have merged with larger international law firms, top
lawyers are often seen leaving the resulting mega-firms in
order to set themselves up in smaller but sophisticated practices. Not every lawyer finds that a global firm offers the kind
of personalized environment in which they want to practise
law. Also, clients often follow the lawyers who represent them
and have no specific loyalty to the firms for which they work.
Domestic clients prefer national firms: In my experience,
mid-sized companies (as opposed to Fortune Global 500
companies) in need of legal representation are less willing
to use larger international law firms for a variety of reasons
and so choose to remain with national firms. For example, in
Germany, companies (both public and private) often prefer
to retain a quality German firm for personal and corporate
representation.
No single factor controls whether a national law firm presented with a highly attractive financial package should elect
to merge into a global law firm. What is clear to me is that
there will still be plenty of room for a national law firm in India
to operate independently and retain quality clients. National
law firms which remain independent and are members of
quality global legal networks will continue to receive significant inbound legal work from around the world. It will be interesting to watch India over the next five years and see how the
Modi initiative plays out. g
Dennis Unkovic is the chairman of Meritas (www.meritas.org), a global
alliance of 173 independent, full-service law firms in over 80 countries, and
a partner at Meyer Unkovic & Scott (www.muslaw.com).
June 2015
Spotlight
Legal process outsourcing
Processing
improvements
Indian clients have typically shied away from the services of legal
process outsourcers. Is this about to change?
Rebecca Abraham reports
C
orporate India’s ever increasing clout has transformed the country’s legal services market. In-house
counsel – like their counterparts at international
companies – now typically calls the shots in dealings with
law firms, and in-house legal teams are recognized as the
drivers of innovation in the market.
However, legal heads of Indian companies, unlike those
in developed jurisdictions, rarely use the services of alternative legal services providers. So despite India being the
breeding ground of the global legal process outsourcing
(LPO) industry, Indian companies have rarely benefited
from this industry.
Change afoot
Yet this is an area where the status quo may not last
for much longer. There are signs that Indian companies
may start seeking out the efficiencies achievable through
June 2015
outsourcing tasks that are routinely handled by the legal
function, but do not need to be handled by a lawyer.
At Tata Sky, a joint venture between Tata Sons and
21st Century Fox, chief legal and regulatory affairs officer
Himavat Chaudhuri has been looking for a suitable solution
for management of the company’s standardized contracts.
He says it’s mostly “fill in the blanks” kind of work with the
added dimension that it needs to be handled with rigour
and the contracts need to be stored carefully.
While this task is currently handled by a legal or business
team member, Chaudhuri has been exploring the possibility of outsourcing the work. “I thought it would be really
helpful to not have a lawyer or someone from the business
team do it.”
What benefits does he expect? Chaudhuri says that
while achieving cost savings is important, the main reason for reassigning the task would be to gain efficiencies.
“LPOs are very process driven. They have a very different
India Business Law Journal
25
Spotlight
Legal process outsourcing
[LPOs] have a very different
mindset to that of a lawyer …
I would expect them to do a
better job [managing contracts]
than an in-house counsel
Himavat Chaudhuri
Chief Legal and Regulatory
Affairs Officer
Tata Sky
mindset to that of a lawyer … I would expect them to do a
better job [managing contracts] than an in-house counsel
or business person.”
June 2015
Finding compatibility
But how would an in-house lawyer zero in on a suitable LPO?
“When they come to give their sales presentations they
are all going to sound really good,” cautions Kris Jolma, a
group manager in the global contracting office at Microsoft.
The technology giant has used the services of Integreon,
a knowledge process outsourcer with a significant LPO
business, since 2009 to manage and review contracts. In
November 2014, Integreon said it supported almost 20,000
contracts in 14 languages per year for Microsoft.
Would a large service provider such as Integreon be
a good fit for a company that is dipping its toes in LPO
waters for the first time? While Chaudhuri at Tata Sky
believes bench strength is important as “you don’t want
anything too small or too large”, Mark Ross, global head
of legal process outsourcing at Integreon, says size should
not be a major factor.
“Most clients in LPO, even the largest ones, start small,”
says Ross. He points out that Microsoft, for which Integreon
provides “support services from three locations around the
globe with a significantly high dedicated headcount supporting the account”, initially was supported with a small
team of seven paralegals in one delivery location.
A key factor, according to Jolma, is the calibre of the LPO’s
representative. “It usually comes down to who is the person
or sales rep that you can work with and partner with … can
you really work with this person for 10, 15 or 20 years?”
India Business Law Journal
27
Spotlight
When they come to give their
sales presentations they are all
going to sound really good
Kris Jolma
Group Manager, Global
Contracting Office
Microsoft
How does one judge that? “I would ask them to do a
mini-pilot of the services that they would provide, to get an
idea of what their quality is like and how they would handle
certain situations,” she says. “This would provide information about the level of accuracy that they provide.”
Jolma suggests that potential clients could also ask to
look at service level agreements between the LPO and its
clients. While checking references provided by the LPO
may provide clues as to its track record, she says it’s
equally important to seek out the views of clients that are
procuring similar services.
Scenario in India
While none of this is likely to pose any particular challenge, the reality is that although most legal outsourcers
have delivery centres in India, few look to sell their services
to Indian clients.
This is partly because jurisdictions such as the US and
the UK routinely provide enough clients for most LPOs.
Another important reason is the legislative framework that
Most clients in LPO, even the
largest ones, start small
Mark Ross
Global Head, Legal Process
Outsourcing
Integreon
28
India Business Law Journal
Legal process outsourcing
The needs of Indian companies
will be very similar to that in
other jurisdictions
Ram Vasudevan
CEO
QuisLex
governs the conduct of lawyers in India. The Advocates
Act, 1961, provides that only advocates can practise law.
This, compounded with the ban on foreign law firms operating in India, has made LPOs wary of being accused of
the unauthorized practice of law.
“The rules pertaining to what is perhaps classified as
the unauthorized practice of law in India are currently
more restrictive than they are in other locations around the
globe,” remarks Ross at Integreon.
Ongoing litigation in AK Balaji v The Government of India,
a case in which 30 foreign law firms and Integreon have
been named as defendants, is also often cited as a reason for their reluctance. An appeal in the Supreme Court
against a ruling by Madras High Court allowing foreign law
firms to “visit India for a temporary period on a fly-in and
fly-out basis” to advise their clients on foreign law is still at
the stage of procedural formalities.
A possibility?
Yet at least one LPO, Bodhi Global – a small LPO that
ceased to exist in 2013 and had close links with the leading Indian law firm AZB & Partners – served Indian clients.
According to Bahram Vakil, a founding partner at AZB &
Partners who was affiliated with Bodhi Global, it did due
diligence-related projects for Indian clients. “Our normal
Indian clients used Bodhi and didn’t even use us [AZB &
Partners] for repeat transactions – they just used Bodhi.”
Asked if Indian clients could seek out the services of
LPOs, Vakil readily replies: “I don’t see why not”.
Ram Vasudevan, the CEO of QuisLex, an LPO with
delivery centres in Hyderabad, New York and Chicago,
echoes this view. Yet while he says “the needs of Indian
companies will be very similar to that in other jurisdictions,” he adds that QuisLex has “not seen the need to
seek out Indian clients as we are geared to the needs of
our US clients”.
It may take some time for Indian clients to get the
attention of the LPO industry, which may not think they’re
worth the risk of becoming enmeshed in litigation. If they
succeed, they too may find that LPOs routinely try to
“make it as easy for clients as humanly possible” so as
to help them understand “the art of possible”, as Ross as
Integreon puts it. g
June 2015
Spotlight
Legal services in Bangalore
Riding the boom
As Bangalore continues to draw in investors, how has the city’s legal
market evolved to keep up with the needs of companies based there?
Rebecca Abraham reports from Bangalore
B
angalore has long been recognized as India’s information technology capital. But over the past few
years the city, which made its name as a base for
companies looking outwards to international markets, has
emerged as a hub for companies that serve the Indian
consumer.
A November 2014 study by Deloitte Touche Tohmatsu
India found the city is home to the largest number of the
country’s 50 fastest growing technology companies.
June 2015
Staying abreast
The focus on technology in Bangalore – often referred to
as India’s Silicon Valley – is mirrored in the city’s legal market, with many lawyers working on issues that have come
to fore as a result. This has included issues surrounding
freedom of expression on the internet (section 66A of the
Information Technology Act, 2000) and e-commerce models that use aggregator platforms.
India Business Law Journal
29
Legal services in Bangalore
Bangalore has grown in the
litigation sphere as corporate
activity has increased
Sajan Poovayya
Senior Advocate
“Bangalore has grown in the litigation sphere as corporate activity has increased … I do a lot of technology-related
litigation,” says Sajan Poovayya, a Bangalore-based senior
advocate who represented one of the petitioners who succeeded in getting section 66A declared unconstitutional by
the Supreme Court. Poovayya, a former additional advocate general for Karanataka, founded Poovayya & Co and
is currently an adviser to the firm.
The focus on technology is evident also at the local
June 2015
Spotlight
offices of India’s national law firms. At J Sagar Associates,
which has around 46 lawyers in Bangalore, partner Sajai
Singh explains that while each of the firm’s seven offices
is self-sufficient, each office has the “flavour” of the city
it is in.
“Here the focus is on technology, be it with regards to
M&A, employment law, real estate, or anything else,” says
Singh, who moved to Bangalore in 1996 to set up the firm’s
office in the city. Singh who represents emerging technology companies, is currently president of ITechLaw, an
international technology lawyers’ association that has its
headquarters in the US.
Rahul Matthan, a founding partner of Trilegal, heads the
firm’s Bangalore office. Describing technology as a practice area that he “naturally” knows a lot about, Matthan
remarks that with companies increasingly recognizing the
need for external lawyers, “there is competition, but not
dog eat dog”.
At Samvad Partners, which has offices also in Delhi
and Mumbai, partner Poornima Hatti has been advising
TaxiforSure, a Bangalore-based taxi aggregator, following
the arrest in New Delhi of a driver associated with Uber, an
international taxi aggregator. “No law captures the animal
of an aggregator,” says Hatti, whose area of expertise is
dispute resolution.
As she points out, Bangalore, which is strategically located
within the Mumbai to Chennai investment and logistical
corridor, is also home to several private equity and venture
capital funds. As a result, transactions involving the funds
India Business Law Journal
31
Spotlight
Legal services in Bangalore
frequently get serviced
out of Bangalore and
firms such as Samvad
Partners often act as
counsel to the parties
involved.
Hatti says that Samvad
Partners actively promotes a flexible work
culture, so as to support its women lawyers.
The firm’s partnership is
made up of four women
and three men.
Beyond technology
Real estate is another
area that provides work
f o r B a n g a l o re ’s l a w
Price match: The cost of legal services in Bangalore is higher than other south Indian cities
firms. The Economic
and comparable to Mumbai and Delhi.
Times reported that in
the first half of 2014
Bangalore drew in more
private equity investment in real estate than Delhi or
lawyers who rely on research tools available on the internet
Mumbai – a trend that was expected to continue.
can often be lacking in the skills required. “Young people
Lawyer Anup S Shah has built up a significant real estate
don’t read enough.”
practice in the city since moving to Bangalore from Mumbai
Recruiting able lawyers is not a particular problem for
in 1990. Shah’s firm today comprises “about 67 lawyers”
another of Bangalore’s well-respected lawyers, Nandan
and has an office in Chennai, which he works from on
Kamath, who heads a sports law boutique that is located in
Thursdays.
a modest building in a similarly upmarket area.
“You cannot manage a firm on remote control,” says
“This is an interesting area to grow a practice in,” says
Shah, sitting in a large conference room-cum-library on
Kamath, whose firm has done work for the International
the third floor of an impressive purpose-built building
Cricket Council, Indian Premier League and Coca-Cola,
in an upmarket area of the city, which has housed his
among others.
firm’s Bangalore office for the past two years. The firm’s
Bangalore has an unusually large number of law colleges
clients include big-name real estate companies such as
– around 20 according to one young lawyer – and is home
Sobha, Embassy and Puruvankara. Shah observes that
to the National Law School of India University. Yet law firms
with increased valuations for real estate deals, the legal
across the city say they are grappling with the challenges
work surrounding individual transactions has grown in
of recruiting and retaining competent lawyers.
complexity.
Explaining why this is so, Singh at J Sagar Associates
How easy is it to hire lawyers who are up to the chalsays: “For most bright young lawyers the first option is
lenges of the task? “Recruiting the right person takes time
and can be difficult,” remarks Shah, who adds that younger
For most bright young lawyers
the first option is to go to
Mumbai or Delhi
Sajai Singh
Partner
J Sagar Associates
32
India Business Law Journal
The horizon of real estate has
become wider on account of
the plethora of services required
by the real estate sector
Shuva Mandal
Managing Partner
Fox Mandal & Associates
June 2015
Legal services in Bangalore
to go to Mumbai or Delhi. Those choosing to work in
Bangalore are here for a reason, be it on account of family
or something else.”
A robust presence
One area where Bangalore appears to resemble Mumbai
and Delhi is with regard to the cost of legal services.
“Bangalore is at par with any other metro [as far as
cost is concerned],” says PM Devaiah, general counsel at
Everstone Capital Advisors.
Legal services in southern India are generally seen as
less pricey than in Mumbai or Delhi, but not in Bangalore,
where six of India’s top firms – AZB & Partners, Cyril
Amarchand Mangaldas, J Sagar Associates, Khaitan & Co,
Luthra & Luthra and Trilegal – all have offices.
Shardul Shroff, now executive chairman of Shardul
Amarchand Mangaldas, says that along with Mumbai,
Bangalore is the priority for his firm.
Bangalore is neither India’s financial capital nor is it significant from a regulatory or governmental perspective. Yet
with the city being a technology hub and home to several
companies that are at the forefront of a changing India
many law firms have built up robust local practices.
Khaitan & Co set up an office in Bangalore 24 years
ago. Partner Ganesh Prasad, a transactional lawyer whose
expertise lies in M&A and private equity, says that his focus
since moving to Bangalore three years ago has been on the
technology sector. He reports that Uber has been a client
June 2015
Spotlight
We are looking to provide a
one-stop shop [for dispute
resolution]
Promod Nair
Founder
Arista Chambers
since it entered India. Commenting on the recent issues
faced by Uber, Prasad says: “Shifting of the onus of regulators, in the absence of clear-cut regulations for aggregators, is unfortunate.”
Other national firms with offices in Bangalore include Dua
Associates, Fox Mandal & Associates, and Kochhar & Co.
Fox Mandal, which has 10 offices across India, has had
an office in Bangalore for the past 20 years.
India Business Law Journal
33
Spotlight
“Our clients include government bodies, MNCs, public
sector undertakings, startups and individuals … not many
law firms work with individuals,” says managing partner
Shuva Mandal, who heads the firm’s offices in Bangalore,
Hyderabad, Chennai, Mumbai and Pune. Mandal says
that with compliance moving up the corporate agenda, the
Bangalore office, which has 70 professionals including company secretaries and chartered accountants, has developed
a robust compliance practice.
Commenting on the firm’s real estate practice, which comprises 12 lawyers, Mandal says: “The horizon of real estate
has become wider on account of the plethora of services
required by the real estate sector.”
Kochhar & Co has five partners in Bangalore. Partner
Stephen Mathias, who co-heads the firm’s technology group,
says foreign companies make up 99% of their clientele and
that almost all billing is on an hourly basis. Stressing that they
routinely provide a high level of partner input on each brief,
Mathias and senior partner Suhas Srinivasiah report that they
have several clients who initially sought the services of more
prominent firms but could not get sufficient attention.
“The partner-to-associate ratio is such that we typically
have one partner and one associate working alongside each
other on each job,” says Srinivasiah, who adds that they have
recently advised high-end luxury manufacturers that are setting up retail operations in India.
Local startups
As is to be expected, Bangalore is home to several start-up
law firms. At Arista Law, a seven-lawyer firm, founder Promod
Nair is attempting to develop a dispute resolution practice
that focuses on advocacy both before the courts and in arbitrations and models itself on an English barristers’ chambers.
“We are looking to provide a one-stop shop,” says Nair, who
was previously a partner at J Sagar Associates and at Herbert
Smith Freehills. Describing his venture as an “an experiment”,
Nair says his practice does away with the need for a client to
hire a senior advocate to argue matters in court.
Aarna Law is another recent addition to Bangalore. The
firm focuses on dispute resolution and is headed by Shreyas
Jayasimha, a former partner at AZB & Partners.
A more typical Bangalore startup is two-year-old Mani
Chengappa & Mathur. In common with several other firms
Last year was a good year…
there were a fair number of
domestic M&As
PM Thimaiah
Partner
MD&T Partners
34
India Business Law Journal
Legal services in Bangalore
As tech spending picks up
there will be demand … we
know we have to brave it out
Samuel Mani
Partner
Mani Chengappa & Mathur
in Bangalore, the firm specializes in technology, media and
telecommunications. But according to Samuel Mani, who
was formerly head of legal at Infosys, what makes the firm
different is the long in-house experience of the three founding
partners.
Mani is candid about the challenges faced by a firm such
as his, which started out with no clients or infrastructure.
However, he is optimistic.
“As tech spending picks up there will be demand … we
know we have to brave it out,” says Mani, who adds that while
at present legal spending on media and telecommunications
matters is considerable, legal spending on technology is yet
to take off.
Typical of the many smaller firms that have gained a foothold in the market since setting up in Bangalore is MD&T
Partners. “Last year was a good year… there were a fair
number of domestic M&As from the runup to the elections
to after the elections,” says PM Thimaiah, who heads the
12-lawyer firm along with Mahesh Devaiah.
While real estate accounts for 35% of the firm’s work, the
firm routinely provides transactional, corporate advisory and
intellectual property-related services for clients both within
and beyond Karnataka.
Roundtable
In spite of their busy work schedules some of Bangalore’s
lawyers have been making use of a startup with a difference:
a lawyers roundtable that was initiated in April 2014 by MR
Prasanna, a Bangalore-based corporate law consultant and
former group general counsel of the Aditya Birla group.
What began as informal lunch meetings where Prasanna
and three or four lawyer friends discussed matters of interest has morphed into more formal learning and networking
opportunities complete with corporate sponsors and presentations on topics such as the role of experts in assessing
damages in M&A disputes and financial issues in private
equity deals.
“It is slowly gaining momentum, we are getting closer to
30 and hope to grow further,” says Prasanna with obvious
pride in his one-year-old venture. The lawyers roundtable
is clearly a good fit for Bangalore’s legal community as it
keeps up with clients that are often working to propel India
forward. g
June 2015
What’s the deal?
Due diligence
Uncovering the real deal
Recent experience suggests the process of conducting due diligence
is not taken seriously enough in India
Nandini Lakshman reports
D
ifferences between buyers and sellers after a deal is
done are not unusual. But the recent mud-slinging
between the world’s largest spirits maker, Diageo,
and Vijay Mallya, the promoter of United Spirits (USL),
over skeletons in the cupboard at USL, has highlighted
the importance of due diligence as a critical aspect of the
investing and buying process.
Diageo has owned nearly 55% of USL since July 2014.
Trouble erupted at USL after an internal report revealed financial irregularities at the company when Mallya, who continues
as the company’s chairman, was in control of it. The board of
USL recently asked Mallya to resign as chairman and nonexecutive director of the company, but he has refused.
Clarity is crucial
The dispute also highlights that while robust structuring
is key to the success of any investment, clarity on what the
seller is putting on the block, and what the buyer is seeking
to acquire is vital.
June 2015
“Due diligence is very important as it identifies risks that
could be there, helps you to provide solutions to mitigate the
risks which can hinder value or synergies, and arrive at the
right price looking at the past, present data and future probabilities,” says Amit Khandelwal, national director of transaction advisory services at Ernst & Young in New Delhi.
“Due diligence is not an investigation, nor is it a certification of wrongdoing. It is a diligence review,” asserts
Ramanand Mundkur, head of Bangalore-based Mundkur
Law Partners.
Yet as Nitin Potdar, an M&A partner at J Sagar Associates,
says, what you see is not always what you get. “The idea of
due diligence is to ascertain existing potential liabilities that
could have an impact on valuations.” It is important to go
beyond the standard documentation.
Potdar advises acquirers to look into their target’s internal
policies and procedures, anti-fraud programmes, compliance monitoring and audit, code of conduct, business ethics, operating principles and, last but not the least, whistleblowing policy.
India Business Law Journal
35
What’s the deal?
Due diligence
The idea of due diligence is
to ascertain existing potential
liabilities
Nitin Potdar
Partner
J Sagar Associates
A reliable process?
Due diligence has gained prominence in India since
1991, when the economy was opened up and mergers
and acquisitions became a vehicle for inorganic growth
for companies seeking to expand their footprint.
According to global deal tracker Dealogic, while the
number of India-associated deals fell to 1,044 in 2014
from 1,179 in 2012, the total value of the deals rose to
US$53.2 billion in 2014 from US$41.3 billion in 2012.
In the first five months of 2015, the 464 M&A deals
involving Indian companies that have been struck total
US$19 billion, a clear sign that deal sizes have been
growing.
Yet the big question is whether due diligence is taken
seriously in India.
Atul Sharma, managing partner at Link Legal India Law
Services, does not mince words when he says that due
diligence is not taken as seriously as it is in the West.
According to Sharma, “the general perception” is that
Indian businesses are family owned and are not well
governed. “Even if companies unearth corruption while
conducting due diligence, they often tend to rationalize
it as this is the way it is done in India.”
It’s all down to the client, according to Nishchal
Joshipura, a Mumbai-based partner at Nishith Desai
Associates.
“Some big foreign deals with a couple of contracts
with the target company may do high level due diligence,
while it may not be exhaustive if it’s a minor investment
transaction.”
According to Christopher Kummer, president of the
Vienna-based Institute of Mergers, Acquisitions and
Alliances, buyers who choose to be lax while conducting due diligence throw away “a perfect opportunity to
prepare for integration and hence prepare a detailed and
hands-on integration plan”.
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Second Floor, 254, Okhla Industrial
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Website: www.phoenixlegal.in
36
India Business Law Journal
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June 2015
Due diligence
Even if companies unearth
corruption while conducting
due diligence, they often tend
to rationalize it as this is the
way it is done in India
Atul Sharma
Managing Partner
Link Legal India Law Services
Insider trading concerns
But there are limits to the extent of due diligence possible in India.
Under insider trading regulations that were in place until
January – the Securities and Exchange Board of India
(Prohibition of Insider Trading) Regulations, 1992 – it was
almost impossible to carry out a due diligence exercise
on a company before investing in it. Any person who provided information on the company to an outsider, and any
person who traded based on that information, would have
fallen foul of insider trading regulations.
“As a result, even companies wanting to sell out
wouldn’t share much information hiding behind the insider
trading cloak,” says Vaishali Sharma, a partner at Agram
Legal Consultants in Mumbai.
However, the SEBI (Prohibition of Insider Trading)
Regulations, 2015, which came into effect in January,
acknowledge the need to allow access to unpublished
price-sensitive information (UPSI) to assess the viability of potential takeovers, mergers and acquisitions.
Accordingly, regulation 3 allows access to UPSI where
the board of directors of the company is of the “informed
opinion” that the proposed transaction is in the best interests of the company.
In potential transactions that would not trigger an obligation to make an open offer to all shareholders, the UPSI
obtained in the process of due diligence is to be made
“generally available at least two trading days prior to the
proposed transaction being effected”.
Commentators say that while this would ensure parity of information among all shareholders, making public
the unpublished due diligence findings would pose a
challenge.
“If you are a serious investor, you wouldn’t want everyone to know what you have found out,” says Mobis
Philipose, a member of a 15-member committee set up
in 2013 by SEBI to review insider trading regulations.
“Companies might refrain from divulging their findings,
unlike earlier when there was no obligation to make it
public.”
June 2015
What’s the deal?
Not a magic potion
However, even companies that take due diligence seriously, can miss important aspects if they lack experience
and capabilities or do not dig deep enough.
As for how much a company should reveal when it is the
target of a due diligence exercise, the general consensus is
that it should always reveal as much as it can.
“The more you disclose, less are the liabilities,” states
Bahram Vakil, a Mumbai-based partner and co-founder of
AZB & Partners. “On the flip side, if you are for the buyer
and not giving information I get suspicious.”
If acquirers are seen to have done shoddy due diligence,
then they have to bear the consequences and face the
risks that arise from a legal and financing point of view.
“This is possible only if the target company is seen to have
disclosed full and accurate information, without withholding anything during the due diligence process,” says Niren
Patel, an M&A partner at Khaitan & Co.
Shareholders will also be able to take action against the
management of a company as and when class action suits
become a reality in India. Section 245 of the Companies
Act, 2013, which provides for class action suits to be
brought before the National Company Law Tribunal, it is yet
come into effect.
Until it does shareholders can sue a company outside
India if it has overseas operations, as was seen in the
Satyam Computer corporate accounting fraud case. In
2009, the company’s chairman Ramalinga Raju resigned
after admitting to systematically falsifying accounts including revenue figures. Satyam faced lawsuits in the US from
shareholders who had purchased shares at artificially
inflated prices.
There are also misunderstandings surrounding what the
process can achieve.
“The first misunderstanding is to see due diligence as a
way … to make a transaction an ultimate success,” says
Kummer.
Even with fullest cooperation and a lot of information in
the public domain, due diligence will not provide assurance
that the company will do well.
Who conducts the exercise may be evidence of the often
mentioned casual attitude towards due diligence in India.
“Unfortunately most of the law firms deploy junior lawyers to handle a due diligence, which is scary,” says Potdar
at J Sagar Associates, in light of “the increased scope”
of the regulatory framework and compliances and the
extraordinary importance that due diligence has assumed.
According to Potdar, most companies cite cost constraints
and pressure to conduct due diligence quickly. As a result,
law firms try to get the most vital part of a business transaction done on the cheap.
Vakil at AZB & Partners echoes this view, saying that “clients treat due diligence as a commoditized item and go to
the cheapest law firm”.
Yet lawyers say due diligence can be tackled if the process is overseen by an experienced partner.
Early signs should not be ignored, says Amitabh Malhotra,
managing director of NM Rothschild & Sons (India), an
investment banking company. “If you are dealing with a
listed company, protect yourself and count your fingers
when you take your hand back.”
One way to minimize risk in the due diligence process is
to do background checks on people involved and the businesses, say lawyers. This however can increase cost.
India Business Law Journal
37
What’s the deal?
Clients treat due diligence as a
commoditized item and go to
the cheapest law firm
Bahram Vakil
Founding Partner
AZB & Partners
Some chose to ignore
In some cases the buyer fails to probe deep enough
before buying an enterprise or acquiring a majority stake.
But as Harish HV, a Bangalore-based partner with professional services provider Grant Thornton, says, at times the
buyer knows something is wrong but chooses to ignore it
because the larger picture is more compelling and competitors already have a toehold in the market.
Even if misdemeanours and financial jugglery at the target
company have been spotted, they may be overlooked if the
buyer is keen on making an acquisition.
At the same time, sellers too may want to keep certain
issues under wraps. An often repeated reason used by
Due diligence
sellers to withhold information from buyers is: You don’t
own me today and may use the information I provide to go
against me.
As Mundkur at Mundkur Law Partners points out, sellers
can quite easily hide potentially problematic issues when
due diligence is being carried out, as any such process
involves a certain amount of faith and trust.
Consider Japanese drug major Daiichi Sankyo’s acquisition of a majority stake in Indian pharmaceutical company
Ranbaxy in 2008. Even after the stake sale, the head of
Ranbaxy continued to be the chief executive officer and
managing director and assumed the position of chairman
of the board. When allegations of fraud at Ranbaxy began
emerging – including an import alert on a couple of its plants
by the US Food and Drug Administration (FDA) – Daiichi
accused Ranbaxy of not being upfront about its liabilities.
Even though Ranbaxy’s share price had stayed up after
it was acquired by Daiichi, it plunged after news about the
FDA import ban. As a result when Daiichi sold its stake to
Sun Pharma in April this year, the price tag of US$3.2 billion was over US$1 billion less than what it had paid when
it bought into Ranbaxy.
“There have been some avoidable instances of serious
adverse impact on risk and price when due diligence was
sidelined in the excitement of an acquisition,” says Vijaya
Sampath, senior partner at Lakshmikumaran & Sridharan,
adding that due diligence is critical to evaluating risk and
determining a fair price. When players point fingers at each
other, the fault may lie with both of them. While one may
have failed to disclose the shortcomings, the other may not
have asked the right questions.
As Seema Jhingan, a partner at LexCounsel in Delhi,
says: “Your horizon for asking questions needs to be wider
and the scope of legal due diligence has to go down to
associate and subsidiary companies as well.” g
The making of a dispute
The United Spirits dispute has had interesting twists and turns
Diageo started eyeing India’s leading alcohol beverage player, United Spirits (USL), in 2008. Diageo failed in
its initial attempt to take USL from Vijay Mallya, whose
business interests included Kingfisher Airlines, but it
was second time lucky and finally gained control of the
company in July 2014. By then, London-based Diageo
had shelled out nearly £1.85 billion (US$2.85 billion) for
a 54.78% stake in USL, almost double the sum offered
in the first attempt.
On 1 September 2014, United Bank of India named
Mallya as a wilful defaulter for reneging on loans given to
Kingfisher Airlines. The media also were flush with stories about alleged financial indiscretions at companies in
the UB Group, of which Mallya was chairman.
Still, on 30 September, Diageo reappointed Mallya
as chairman and non-executive director of the board of
USL. It also nominated a Mallya confidante – an erstwhile chief financial officer of USL – to the new board.
Finally, in April 2015, after an internal enquiry conducted
38
India Business Law Journal
by a team from PricewaterhouseCoopers, directors of
USL asked Mallya to step down from the board. The
inquiry into various matters, including certain doubtful
financial transactions led by the company’s CEO, had
revealed that between 2010 and 2013, funds involved in
many of these transactions were diverted from USL and/
or its subsidiaries to certain UB Group companies, including in particular, Kingfisher Airlines. The board said that as
a result it had lost confidence in Mallya continuing in his
role as a director and as chairman.
Mallya refused to step down. Denying the allegations,
he pointed out that Diageo had conducted extensive
due diligence on USL over a four-month period prior to
acquiring a stake in the company.
Diageo claimed that it wasn’t aware of the misappropriation of funds, and that Mallya hadn’t apprised them
of the situation. Given that Mallya’s financial woes were
the talk of the town, Diageo’s claims of not knowing
about the situation rang hollow.
June 2015
Intelligence report
Foreign law firms
Joining
the dots
India Business Law Journal reveals the foreign law firms that are
winning the lion’s share of India work
Vandana Chatlani reports
June 2015
India Business Law Journal
39
Foreign law firms
I
nternational law firms with an eye on India find
themselves at an interesting juncture a year
after the Bharatiya Janata Party came to power.
Business sentiment has picked up, the markets
have responded positively and bureaucrats have
sent out signals aimed at improving India’s image as an
investment destination. Liberalization in several sectors
and a push towards local manufacturing have given rise
to new opportunities for Indian and international businesses along with their legal advisers.
Proposals to allow foreign law firms phased entry into
India’s closed legal market could be a game changer for
the profession. While any such reforms will be gradual
and calibrated, the mere thought that the government
and organizations such as the Society of Indian Law
Firms – which vehemently opposed such entry in the past
– are considering foreign firm entry is remarkable.
The government has set up a high-profile inter-ministerial group under the chairmanship of Commerce
Secretary Rajeev Kher, to prepare a roadmap for reform
and liberalization of the legal services sector in India.
If and when the legal market opens its doors to foreign
participation, one can only picture a frenzy of activity
ensuing, with international firms vying for the best local
talent and domestic firms luring in foreign experts to
raise their game. For now, the recently formed Shardul
Amarchand Mangaldas & Co and Cyril Amarchand
Mangaldas are dominating the fight for the kings and
queens of India’s legal community as they calculate their
moves for the future.
Rigorous analysis
Against the backdrop of rumbles, reshuffles and recalibration within the Indian legal market, India Business
Law Journal reveals the India-related accomplishments
and activities of law firms around the world. Our report,
now in its ninth year, draws on an analysis of over 600 law
firms from every continent that have documented deals
and matters with an Indian connection over the past 12
months.
With a view to maximizing objectivity, our results are
based on rigorous research, extensive editorial experience, correspondence with corporate counsel and Indian
law firms, as well as a wide network of contacts.
As in previous years, we received hundreds of submissions from law firms and carefully reviewed public and
other records, along with reports in Indian and international media, to ensure the accuracy of our information.
Based on this research, India Business Law Journal is
pleased to present its selections of the top 10 foreign law
firms for India-related work. We also list 10 firms that are
considered key players for India-related deals (page 45),
and an additional 18 firms that are categorized as significant players (page 47).
As in previous years, we pay close attention to regional
and specialist firms in key economies such as Japan,
Singapore, Canada and Australia, and emerging regions
such as sub-Saharan Africa. We identify 15 firms in this
category that are equipped and experienced to take on
India-related assignments (see page 53).
We further feature 31 “firms to watch” (page 58) and 16
firms to watch in the regional category (page 62). Some of
these firms provide a full spectrum of legal services with
multiple practice areas spread across a geographically
June 2015
Intelligence report
diverse network of offices. Other firms provide a more
focused lens on India, with niche specialties and strong
regional relationships to help India-centric clients with
their investments, funding and disputes. We believe, on
the evidence available, that these firms are committed
to India and enthusiastic about attracting India-related
work.
All of the lists are in alphabetical order. Our top 10 table
consists of law firms that have unrivalled India practices
and are consistently engaged to advise on complex and
high-value transactions involving Indian businesses as a
result of their solid reputation, multidisciplinary practices,
size and geographical reach. The names in this category
often remain unchanged, however, rising competition
and the entry of one new firm this year suggest that shifts
at the top are increasingly inevitable.
Top 10
Allen & Overy
Baker & McKenzie
Clifford Chance
Freshfields Bruckhaus Deringer
Herbert Smith Freehills
Jones Day
Latham & Watkins
Linklaters
Shearman & Sterling
Slaughter and May
Allen & Overy retains its spot in the top 10 with a
strong portfolio of banking, capital markets and dispute
resolution matters. The firm was an adviser on seven
of India Business Law Journal’s Deals of the Year 2014
including ONGC Videsh’s US$2.3 billion US dollar and
euro bond issuances, where it advised the joint lead
managers and bookrunners on international law. It also
advised the joint lead managers on State Bank of India’s
US$1.2 billion qualified institutional placement; United
Spirits’ on its refinancing package as Diageo gained
control; and on Amtek Global Technologies’ €235 million
(US$263 million) refinancing provided by Kolhberg Kravis
Roberts & Co (KKR). Rohit Agrawal at Axis Bank relies on
the firm as international counsel for capital markets and
loan market transactions and has worked with Amit Singh
on medium-term note issuances. “[Amit is] very prompt,
professional and easily approachable,” says Agrawal.
“He has generally strived to provide an easy solution to
difficult problems.”
Baker & McKenzie rises to the top 10 after handling
a broad spectrum of banking, capital markets and M&A
mandates. Recent highlights include advising Videocon
d2h on the listing of its American depository shares
on Nasdaq and representing Sun Pharmaceuticals
on its acquisition of GlaxoSmithKline’s opiates business in Australia. Ashok Lalwani heads the firm’s India
practice from Singapore, which rakes in a lot of the
firm’s India-related deals. So far in 2015, lawyers in the
Singapore office advised State Bank of India, Bank of
Tokyo-Mitsubishi UFJ, and Mizuho Bank on a US$450
million syndicated term loan facility to Power Finance
India Business Law Journal
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Foreign law firms
Corporation as well as Mizuho Bank, State Bank of
India and Sumitomo Mitsui Banking Corporation on a
US$400 million syndicated term loan facility to Rural
Electrification Corporation. Jayshree Gupta is the newest
member of the firm’s global India focus group steering
committee. Based in Dubai, Gupta has practised in the
UAE since 1995 and is also qualified to practise in India
and England and Wales.
Clifford Chance has attracted sizeable mandates
through a strong Singapore presence, particularly on the
capital markets front led by partner Rahul Guptan. Last
year, the firm advised the lead managers on a US$100
million qualified institutional placement (QIP) of shares in
India’s Prestige Estate Projects, and the lead managers
on CESC’s US$80 million QIP. It also acted for Indiabulls
Real Estate on its US$175 million high-yield offering. This
year the joint global coordinators, bookrunners and managers turned to the firm for advice on a US$300 million
high-yield bond offering for Reliance Communications.
Paul Schrecongost, head of structured lending and special situations in Nomura’s legal department, has engaged
partner Andrew Brereton and senior associate Eugene
Phua for debt transactions including export financings.
“They are highly efficient, responsive and experienced in
India-related transactions,” he says.
Freshfields Bruckhaus Deringer keeps its position
in the top 10 thanks to expertise from India specialists
such as Pratap Amin and Arun Balasubramanian. Brooke
Lindsay, deputy general counsel at Etisalat, describes
Amin as “a phenomenal corporate lawyer”. Having
worked with him for three years, she adds: “I would not
deal in India without him … he is one of the best lawyers
I’ve worked with globally across a portfolio of 18 countries in which we have investments.” In 2014, Freshfields
won a leading role advising on the US$1 billion purchase
of Alstom’s thermal power division by German private
equity firm Triton. This year, Balasubramanian secured a
role as international adviser to Goldman Sachs on Daiichi
Sankyo’s US$3.2 billion block sale of its stake in Sun
Pharmaceuticals.
Renowned for its corporate clout Herbert Smith
Freehills (HSF) has no shortage of plaudits from happy
clients for “terrific responsiveness” and “excellent work
product under aggressive timelines”. “I have done an
enormous amount of M&A, debt raising, international
arbitration and litigation work with HSF … it has always
been the very best,” says Mukesh Bhavnani, the group
legal counsel and chief compliance officer at Vedanta.
A legal counsel in charge of global M&A says the firm
offers “a high degree of partner involvement, and high
quality of mid- to senior-level associates”. Nasser Kabir,
the general counsel at ReNew Power, says HSF is “outstanding”, adding that M&A partner Alan Montgomery
deserves a special mention for his ability to get the
best out of his team and the client. The legal counsel
in charge of global M&A says Montgomery is “skilled at
dealing with Indian clients … he can charm a difficult
counterparty with nuanced concessions while remaining firm on key deal points”. The firm was an adviser
on five of India Business Law Journal’s Deals of the Year
2014 and boasts an illustrious client list including Adani,
Bharti Airtel, Cipla, Reliance Defence Systems and the
Indian government.
Jones Day is usually known as a capital markets heavyweight, but client enthusiasm illustrates its strengths
June 2015
Intelligence report
I would not deal in India without
[Pratap Amin at Freshfields] …
he is one of the best lawyers
I’ve worked with globally
Brooke Lindsay
Deputy General Counsel
Etisalat
go beyond this. Patrick Kassen, the general counsel and
chief compliance officer of Equity International, engaged
the firm for private equity investments into India including
negotiating governance arrangements and structuring
the economics. “They are very practical, have a lot of
experience with common structures in India and respond
quickly,” he says. “Dennis Barsky is a great lawyer. He
is very smart, practical and provides excellent guidance
and advice.” Deborah Lucy, the assistant general counsel for corporate and commercial transactions at Cox
Automotive, worked with Jones Day on the company’s
first investment in India. “They were particularly responsive about the multi-continent issues, including making
multiple trips to the US and India from London on short
notice,” she says. “It truly felt as if we were the only client they had.” Lucy says Sumesh Sawhney and Bolu
Majekodumni were “fantastic” and “helped us keep our
priorities in sight through long and often difficult negotiations”. Clients also recommend Manoj Bhargava and
Nikhil Naredi.
Latham & Watkins’ India practice operates primarily
from Singapore, London and select US offices. The India
team regularly represents both issuers and underwriters
in public and private corporate financings, lenders and
borrowers on bank financings, and buyers and sellers
in public and private M&A transactions. Standout deals
include advising the dealer manager on ICICI Bank’s
offer of US$500 million 3.5% notes due in 2020; advising Brightstar on its acquisition of a 51% equity share
of Beetel Teletech; and acting for a subsidiary of the
Government of Singapore Investment Corporation on its
minority investment into Indian e-commerce company
Flipkart. The firm more recently advised UFO Moviez,
India’s largest digital cinema distribution network, on its
initial public offering. Prashant Gupta, a partner at Shardul
Amarchand Mangaldas, says Latham & Watkins “is the
leading international firm for capital markets transactions
in India”. Clients highly recommend Rajiv Gupta for his
experience with US securities law and India deals.
Clients and peers agree that Linklaters is a force
to reckon with on India-related transactions. The firm
advised on seven of India Business Law Journal’s Deals of
the Year 2014, including Tata Steel’s US$1.5 billion bond
issue and Suzlon Energy’s US$600 million corporate debt
restructuring. So far in 2015, the firm advised Canadian
real estate company Brookfield Property Partners on
its purchase of a portfolio owned by Unitech Corporate
Parks and IDFC in what is touted as the year’s largest real
estate deal to date. Schrecongost at Nomura has worked
with Philip Badge and Aditya Shroff on several Indiarelated debt financing transactions. “Aditya can draw on
a depth of Indian regulatory insight gained in his past role
as an in-house counsel with ICICI Bank and continues
India Business Law Journal
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Intelligence report
I have done an enormous
amount of M&A, debt raising,
international arbitration and
litigation work with HSF … it
has always been the very best
Mukesh Bhavnani
Group Legal Counsel and
Chief Compliance Officer
Vedanta
to keep on top of regulatory developments that affect
foreign lenders and investors in India,” he says. Earlier
this year, Narayan Iyer, who returned to Linklaters in 2013
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India Business Law Journal
Foreign law firms
after a stint with Indian best friend Talwar Thakore &
Associates, took over from Sandeep Katwala as head of
the firm’s India practice.
Shearman & Sterling maintains it position in the top
10 after another strong performance on India-related
deals over the past 12 months. The firm represented
Jaguar Land Rover Automotive on its US$1.11 billion
high-yield bond offering; was counsel to Greenko Group
on its US$550 million senior notes and bonds financing;
and represented Sun Pharmaceuticals on its US$3.2 billion acquisition of Ranbaxy. All three transactions were
featured in India Business Law Journal’s Deals of the
Year. Its client roster includes Aditya Birla Group, Tata
Steel, Jaguar Land Rover, Norwest Venture Partners
and Cennergi Proprietary, a joint venture between Tata
Power India and Exxaro Resources. The firm’s primary
India team consists of Matthew Bersani in Hong Kong,
Sidharth Bhasin in Singapore, Laurence Levy in London
and Stephen Besen in New York.
Slaughter and May completes our top 10 thanks
to an array of exciting and high-value transactions. In
October 2014, the firm closed a deal for Star India and
Star Middle East, subsidiaries of 21st Century Fox, in
relation to their successful bid for the global audio-visual
rights for International Cricket Council (ICC) events from
2015 to 2023. It also advised Tata Steel on the refinancing of the entire international debt portfolio of Tata Corus.
Last month, the firm advised Malaysia Airports Holdings
on the sale of its 10% equity stake in Delhi International
June 2015
Foreign law firms
Airport to the GMR Group. Sumeet Kachwaha, the
managing partner of Kachwaha & Partners, has worked
with Slaughter and May for almost 13 years. “They are
thoroughly upright and straightforward,” he says. “The
lawyers I’ve worked with are highly competent and professional. It has always been a pleasure to work with
them.” Simon Hall and Niloufer von Bismarck are key
India contacts.
Intelligence report
The lawyers I’ve worked with [at
Slaughter and May] are highly
competent and professional
Sumeet Kachwaha
Managing Partner
Kachwaha & Partners
Key players
Ashurst
Bird & Bird
Davis Polk & Wardwell
DLA Piper
Eversheds
Gibson Dunn & Crutcher
Milbank
Norton Rose Fulbright
Reed Smith
White & Case
Ashurst offers 20 years of experience of working with
government and regulatory agencies, local lawyers and
other parties in India. Its recent achievements include
advising Japan Bank for International Cooperation on
its investment in Takshasila Hospitals and acting for
International Market Management (IMM) on bringing two
restaurant brands – Wendy’s and Jamie’s Italian – to India
under two joint ventures with Rollatainers, a Haryanabased packaging, restaurant and food services company.
David Loyd, a director at IMM, has worked with the firm
on India matters since 1989. “Ashurst has always been,
in my view, the most represented UK law firm in India,” he
says. “Most importantly, with Ian Scott and now Richard
Gubbins, they have provided consistent representatives.
Two lawyers over 25 years is great.” Bhavnani at Vedanta
says Ashurst is “very proactive and helps me pre-empt
legal risks”. In 2014, the firm beefed up its India team,
hiring specialists with solid experience in Asia and India
including banking partner Kate Allchurch and capital
markets partner Anna-Marie Slot, who joined from White
& Case, and capital markets partner Nigel Pridmore, who
moved from Linklaters.
Bird & Bird’s broad spectrum of services for Indiafocused clients has attracted a diverse portfolio of matters in a variety of sectors such as energy, infrastructure, pharmaceuticals, technology, finance and media.
Debolina Partap, the general counsel at Wockhardt, says
the firm has provided “excellent service on trademark,
trade dress and design searches in Southeast Asia for
pharmaceutical brands”. She praises partner Lorraine Tay
“whose turnaround time for managing trademark registration is phenomenal … she often works from Singapore
in time zones for Europe and the US”. Anuj Saxena, the
chairman and managing director of Elder Health Care,
part of Elder Pharmaceuticals, has dealt with the firm for
a few years and notes its “extremely professional” and
“helpful” services. “Their lawyers are courteous, prompt
and well versed with both UK laws and Indian laws and
June 2015
I would surely recommend them to other companies in
India.” Earlier this year, the firm saw the departure of legal
director Divya Sharma, who returned to India to set up
DBS Law Corporate Legal Advisors. The India practice
continues to be led by Simon Fielder and Nipun Gupta.
Davis Polk & Wardwell’s India practice, led by Kirtee
Kapoor, focuses on capital markets and corporate work.
Kapoor recently relocated from Hong Kong to the firm’s
Menlo Park office, however the majority of the India practice’s 20 lawyers are still based in Hong Kong. QuEST
Global Engineering Services sought the firm’s advice on
its acquisition of Network Systems and Technologies
and Warburg Pincus engaged the firm as international
counsel for its investment in MXC Solutions India. More
recently, Delhi International Airport sought Davis Polk’s
advice on its US$289 million inaugural regulation S offering and the firm acted for the underwriters on HDFC’s
US$1.27 billion SEC-registered follow-on offering of
American depositary shares. V Suresh, the head of legal
at QuEST Global, calls Davis Polk “the best partner in the
M&A space”.
DLA Piper – one of our top 10 last year – remains a
strong contender for India work. It represented Rolta
on its on its US$300 million high-yield bond offering;
advised L&T Technology Services on the acquisition of
assets of US-based Dell Product and Process Innovation
Services; and is acting as the legal adviser to the majority bondholders in relation to the restructuring of the
unsecured foreign currency convertible bonds issued
by floriculture company Karuturi Global. In addition, it is
handling India-related disputes in the oil and gas, infrastructure and real estate sectors. Lee Miller, chairman
emeritus, was appointed to work with partner Daniel
Sharma as co-head of the India Group after the firm
lost India specialist Biswajit Chatterjee to Squire Patton
Boggs late last year.
Parmjit Singh heads up the India business group at
Eversheds, which has been a hive of activity thus propelling the firm to the key players category for the first time.
“Parmjit comes across as an excellent lawyer and has a
well-coordinated approach to advising clients internationally,” says a partner at an Indian law firm. “The firm
has a very organized approach to service delivery,” he
says, adding that its flexible pricing model is attractive to
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Intelligence report
cost-conscious Indian clients. In 2014, the firm advised
longstanding client Flemingo International on a merger
with onboard cruise retailer Harding Retail and completed a major due diligence exercise for the company
in over 25 jurisdictions. Other notable clients are Aditya
Birla Group, Axis Bank, Sequoia Capital, Rolls-Royce
and Essar Energy. Kingsley Ong has forged strong links
with clients for securitization matters while Singapore
office managing director Oommen Matthew has reeled in
clients for high stakes arbitrations under the International
Chamber of Commerce and Singapore International
Arbitration Centre regimes.
Gibson Dunn & Crutcher maintained its momentum
on India deals in 2014 securing roles on acquisitions,
joint ventures, investments, capital-raising exercises and
infrastructure projects. The firm has Indian-qualified lawyers handling local deals, in some cases without the need
for local counsel. Its recent mandates include assisting
National Technical Systems on the acquisition of National
Quality Assurance, including its India operations; working with New York Life in funding Adlabs Entertainment
through its private equity funds Jacob Ballas India and
Jacob Ballas Capital India; and handling the ongoing corporate restructuring of a joint venture between longstanding client Wolverine World Wide and Tata International.
Schrecongost at Nomura has worked with Jamie Thomas
on India-related financings and restructurings and commends his “excellent services” in this area. “Jamie is
hardworking, responsive and takes a hands-on approach
46
India Business Law Journal
Foreign law firms
Ashurst has always been, in my
view, the most represented
UK law firm in India
David Loyd
Director
IMM
to deals,” says Schrecongost. Jai Pathak is also highly
regarded for his expertise on India deals.
Milbank was an adviser on five of India Business Law
Journal’s Deals of the Year 2014 and has a client roster
consisting of names such as HSBC, Standard Chartered
Bank, JSW Steel, Sahara India, Tata Steel and Korea
Eximbank. It is a popular choice for banking, capital markets and M&A transactions, particularly in the telecoms
June 2015
Foreign law firms
and energy and natural resources sectors, which are its
core strengths. Standout deals include advising K-sure
and HSBC as the export credit agency arranger, HSBC
as facility agent and the participating commercial banks
in US$750 million facilities for Reliance Jio Infocomm;
acting for Sahara India on issues in relation to its ownership of the Grosvenor House Hotel in London and the
Plaza Hotel in New York; and assisting JSW Steel on its
debut international bond offering. Glenn Gerstell, David
Zemans, James Grandolfo and Naomi Ishikawa are primary contacts.
Sherina Petit and Raj Karia lead Norton Rose Fulbright’s
India practice. The firm has handled a wide spectrum of
matters ranging from arbitrations and project financing
to mergers and outsourcing for India-focused clients.
Abeezar Faizullabhoy, a partner at HSA Advocates who
consulted the firm for dispute resolution, infrastructure
and project work, says its services were excellent. “It is
undoubtedly a firm I would recommend and use again
and again,” he says. “I would highly recommend Sherina
Petit for her sound advice, practical approach, availability, speedy responses and desire to quickly find the
right lawyer within Norton Rose to provide advice if it is
something that she cannot personally do.” The executive
director of a foreign bank in India, who has worked with
Petit and Selene Tan on external commercial borrowings, says she is “very happy with their working style and
solution-oriented approach”.
Reed Smith’s consistent performance on transactional matters and disputes has won it glowing references from clients. “My first stop outside India is Reed
Smith,” says Partap at Wockhardt, who has consulted
the firm for banking, corporate structuring, foreign advisory and other general corporate matters relating to
India, the UK and the EU. “They understand the psyche
of general counsel and CFOs in India … the political
administrations across various Asian countries and how
they impact Asian business.” MP Bharucha, a senior
partner at Bharucha & Partners, says the firm has proved
to be most reliable and that he would “reach out to
Gautam Bhattacharyya unhesitatingly”. Alka Bharucha,
another senior partner at Bharucha & Partners, who
has worked closely with Roy Montague-Jones and Ian
Fagelson on M&A and financing matters, says “both are
extremely sound, mature lawyers with vast experience”,
with Montague-Jones being “especially knowledgeable
about Indian matters”. Reed Smith recently acted for
Jindal SAW in its defence against a lawsuit in a Texas
district court and advised State Bank of India on a
US$130 million letter of credit financing in connection
with the acquisition by Jindal Poly Films of companies in
Italy, Belgium and the Netherlands.
White & Case’s India-focused practitioners are based
in Singapore, London and New York and led by Nandan
Nelivigi. The firm recently advised the initial purchasers
on Greenko Group’s US$550 million senior notes and
bond financing and assisted Dublin-based Petroneft
Resources on the sale of a 50% stake in its WorldAce
Investments subsidiary to Oil India. Last month, the
firm strengthened its India team with the addition of
Pradyumna Mysoor from Linklaters in Hong Kong.
Mysoor, who specializes in M&A, is qualified in India and
England and Wales, and is a registered foreign lawyer in
Hong Kong. He has worked with two Indian law firms, J
Sagar Associates and Kochhar & Co.
June 2015
Intelligence report
Significant players
Berwin Leighton Paisner
Cleary Gottlieb Steen & Hamilton
Clyde & Co
Covington & Burling
Debevoise & Plimpton
Goodwin Procter
Kelley Drye & Warren
King & Spalding
O’Melveny & Myers
Osborne Clarke
Ropes & Gray
Simmons & Simmons
Simpson Thacher & Bartlett
Stephenson Harwood
Taylor Wessing
TLT
Vinson & Elkins
Wedlake Bell
Berwin Leighton Paisner (BLP) provides corporate,
finance, real estate, dispute resolution and tax services to
clients with Indian interests, particularly from its offices in
Singapore and Moscow. The Hinduja Group in partnership
with a Spanish group – Obrascon Huarte Lain Desarrollos
– called on the firm for advice on its acquisition of the Old
War Office at 57 Whitehall, which is to be restored and
redeveloped into a five-star hotel and high-end residential
apartments. A client in the aviation sector works with BLP’s
lawyers because they are “always available and they move
at remarkable speed with amazing accuracy when there
is a need”. The client has turned to BLP for advice on all
types of aircraft-related transactions and believes that,
compared with other firms, its services are wider and of
better value. “You can give your document to Tom Budgett
[Bird & Bird’s] lawyers are
courteous, prompt and well
versed with both UK laws
and Indian laws
Anuj Saxena
Chairman and
Managing Director
Elder Health Care
India Business Law Journal
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Foreign law firms
and Jamie Wiseman Clarke with your eyes closed and they
will ensure your interests are taken care of … that’s the
kind of trust they inspire,” he says. Deeba Deb became the
firm’s new India group chair in March.
Cleary Gottlieb Steen & Hamilton’s recent achievements include advising Bank of America Merrill Lynch in
the sale of its non-US wealth management business to
Julius Baer Group, assisting TPG Capital on its investment
in Janalakshmi Financial Services, and acting for brokers
on the US$3.6 billion sale of shares in Coal India by the
Indian government. The firm’s India practice is led from the
London office and includes Indian-qualified lawyers who
have practised in India. Shreya Lal Damodaran, Tihir Sarkar
and Raj Panasar are India specialists.
Clyde & Co drops down to the significant players category after a relatively quiet year on India deals. The firm’s
India practice took a hit after losing Indian aviation partner
Sidanth Rajagopal to Kaye Scholer. In addition, its Indian
best friend, Clasis Law, suffered splinters over the past
12 months with partners poached by other firms or leaving to set up their own. Despite this, in 2014, finance and
insolvency specialist Terry Green led the firm’s UK team
on a US$1 billion debt restructuring project for Southern
Petrochemicals Industries Corporation. The firm’s healthy
track record of India-focused transactions and access
to experts such as Dubai-based Abhimanyu Jalan, who
is qualified to practise in England and Wales, India and
Ontario, suggest that it will continue to jostle for position
on such mandates.
June 2015
Intelligence report
Covington & Burling has worked on a variety of Indiarelated projects, including delisting transactions, project
financings, joint ventures, trade and regulatory matters,
and investigations. It has also taken on international arbitrations involving Indian parties. Famy Care engaged the
firm for the US$800 million sale of some female reproductive health care businesses to Mylan Laboratories, while
Lightbridge Communications turned to the firm for advice
on its US$240 million sale to Tech Mahindra. The firm also
worked with Anheuser-Busch InBev on the termination
of its Indian brewing joint venture with RJ Corp and the
transition of the business to Crown Beers India, as well as
with Reliance Industries on its US$30 million investment in
Studio 8.
Clients of Debevoise & Plimpton’s India practice include
international investment banks, private equity firms, international strategic investors and Indian companies looking
to raise capital or make acquisitions outside of India. It is
working for Tribune on the purchase by its Tribune Digital
Ventures arm of What’s-ON, a television search and electronic programme guide data provider for India and the
Middle East; represented AIF Capital as a selling shareholder in the sale of Famy Care female reproductive health
care businesses to Mylan; and is acting for three Indian
companies in two joint venture disputes involving several
Spanish entities. “They offer a unique combination of top
tier global drafting and customer service with knowledge
of local laws, particularly as it relates to repatriation of
capital,” says one client. The firm has a long history and
India Business Law Journal
49
Foreign law firms
Jamie [Thomas at Gibson Dunn
& Crutcher] is hardworking,
responsive and takes a handson approach to deals
Paul Schrecongost
Head of Structured Lending
and Special Situations
Nomura
extensive experience in the insurance sector throughout
Asia, including India, and hopes to capitalize on opportunities presented by India as it opens this industry up to
foreign participation.
Goodwin Procter is a magnet for private equity and
venture capital work. Past clients include TA Associates,
Mayfield India, CX Partners, Inventus Capital Partners,
Sequoia Capital and Fidelity Growth Partners India. The
firm was an adviser on two of India Business Law Journal’s
Deals of the Year 2014 – as counsel to the investors in
Flipkart’s series E and F round of funding prior to the company’s acquisition of Myntra and as advisers to Bessemer
Venture Partners Trust in series E, F and G investments in
Snapdeal. More recently, the firm advised DST Global and
Falcon Edge Capital in connection with their investments in
Olacabs, an app-based taxi service in India. Clients favour
the firm’s “business-minded” approach and “intense client
interaction”.
Yash Rana, who heads up the India practice, is described
by one client as “an excellent transactional lawyer who
provides top-notch legal advice. He and his team know
the ins-and-outs of India corporate law and are always
impressive with their ability to creatively solve issues and
get deals done quickly and efficiently.” He adds that when
matters call for multiple law firms, “Goodwin is prepared
to work cooperatively to add value and manage multiple
teams.”
Kelley Drye & Warren’s India practice has been particularly active on the pharmaceutical front over the past 12
months with clients relying on the firm to resolve numerous
disputes. It was counsel to both Ranbaxy Pharmaceuticals
and Wockhardt in their defence against multiple suits alleging that they had caused state Medicaid agencies to overpay for prescription drugs by posting fraudulent prices. The
firm also represented Dr Reddy’s Laboratories in multiple
matters involving state false claim acts, and acted for Lupin
Pharmaceuticals in multiple Hatch-Waxman actions. In
addition, it has taken on assignments for clients such as
Continental Transfert Technique, Louis Berger Group, and
Indian IT, outsourcing and manufacturing companies on a
variety of matters.
June 2015
Intelligence report
King & Spalding enjoys an enviable reputation in the
energy sector and good relationships with India-based
companies. The firm represents Hiranandani Gas on matters relating to the development of an onshore liquefied
natural gas (LNG) import terminal project on the west coast
of India including the development of a multi-user LNG
import tolling services agreement and related inventory
borrowing and lending arrangements. It has also acted for
Oil India on its acquisition and shareholder arrangements
for a controlling stake in Russian oil company Stimul-T;
Adjaristsqali Georgia, Clean Energy Invest of Norway and
IFC InfraVentures on the development, financing and construction of a 400-megawatt set of hydropower facilities in
Georgia and a cross-border Georgia-Turkey transmission
project; and GAIL India on a tender for the construction
and long-term chartering of a fleet of up to 14 new-build
LNG vessels. The firm’s India practice is led by New Yorkbased Rahul Patel.
Capital markets and restructuring assignments have
been at the forefront of O’Melveny & Myers’ India practice in the past 12 months. The firm advised Madison
Pacific as trustee on an exchange offer in relation to the
US$250 million zero-coupon convertible bond issue by
Sterling Biotech and also represented a bondholder group
on the restructuring. It also acted for DB Trustees (Hong
Kong) in connection with Rolta International’s high-yield
bond issuance and represented Kotak Securities on Ortel
Communications’ initial public offering. M&A and fund
formation work are among the firm’s other strengths. It
is a long-time supporter of the Increasing Diversity by
Increasing Access (IDIA) project, which was set up to
reach out to marginalized and under-represented groups,
sensitize them to law as a viable career option and help
interested students acquire admission to law schools. The
firm offered an IDIA student a six-week paid internship in
its Singapore office last year.
Osborne Clarke has strengthened its position as an
international adviser for India deals since Prashant Mara,
the former co-head of Osborne Clarke’s India group, set
up Mumbai-based BTG Legal. A best-friends agreement
between the two firms gives clients greater access to
experts both in and outside India. Osborne Clarke’s network of offices around Europe attracts Indian clients with
businesses in the region, but a particular selling point is
its strength on Indo-German transactions. The firm has
acted for Aditya Birla Group in its acquisition of CTP, a
chemical company in Rüsselsheim; assisted Geometric
with a large commercial dispute in Germany; and advised
State Bank of India on its commercial and transactional
work in Germany. Suresh at QuEST Global has used the
firm extensively for requirements in the UK and describes
it as “a one-stop shop for all Indian multinational corporations”. Ulrich Bäumer, Rafael García del Poyo, Julian
Hemming and Gerd Hoor are India experts.
Ropes & Gray’s India practice is respected for its
expertise on the US Foreign Corrupt Practices Act
(FCPA), the UK Bribery Act, other anti-corruption laws,
investigative work and compliance programmes. It has
provided anti-corruption and compliance training sessions for global private equity firms and their India-based
portfolio companies in the real estate, construction and
technology sectors in New Delhi, Mumbai, Hyderabad,
and Bangalore. The firm recently advised a US-based
pharmaceutical company in an internal FCPA investigation
in India; provided anti-corruption due diligence related to
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Intelligence report
third-party relationships in India for an oil and gas company; and conducted an internal investigation for a medical device company related to allegations of employee
and third-party misconduct in India. Asheesh Goel, the
co-head of the firm’s global anti-corruption practice, has
a strong focus on working with clients in India in relation
to internal investigations, government investigations and
enforcement actions.
Simmons & Simmons has organized itself into sector
groups in order to give clients access to industry specialists across various practice areas. Current sector groups
include energy and infrastructure, financial institutions,
technology, asset management and investment funds,
media and telecommunications, and life sciences. The firm
is advising Indian mobile advertising network InMobi on a
variety of commercial and employment matters in Europe.
Other clients include ONGC Videsh, Oil India and GAIL. In
2014, the firm added talent to its India team through the
appointment of Hinal Patel, a former partner at DLA Piper
who specializes in technology sourcing, outsourcing and
general commercial contracting, and Patrick Graves, a
former partner at Osborne Clarke who has advised Indian
companies on European matters. London partners Colin
Leaver and Chris Horton are primary India contacts.
Simpson Thacher & Bartlett is a trusted international
adviser for both private equity and strategic clients
looking to invest in and exit India. Over the years, it
has represented KKR in numerous investments, including in Bharti Infratel, Aricent, Cafe Coffee Day, Magma
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India Business Law Journal
Foreign law firms
Fincorp, TVS Logistics and Gland Pharma, and advised
Blackstone on numerous investments and dispositions
including Intelenet, Emcure, Agile Electric, Hindustan
Power Projects, International Tractors, Nuziveedu Seeds
and SH Kelkar & Company. Recently China’s Zhejiang Ant
Small and Micro Financial Services turned to the firm for
advice on its acquisition of an equity interest in One97
Communications, India’s largest digital goods and mobile
commerce platform and an e-commerce payment service
provider. This is Ant Financial’s first investment in India.
Stephenson Harwood has taken on a variety of mandates for parties with Indian interests over the past year.
It recently advised Avation, a specialist commercial passenger aircraft leasing company, on the financing of two
ATR aircraft on lease to Alliance Air, a subsidiary of Air
India, and acted for the trading arm of Reliance Industries
on shipping disputes. The firm continues to advise Indian
real estate developer Unitech and Unitech Global in one of
the first civil test cases concerning alleged manipulation
of the London interbank offered rate. It also represents
the Piramal Group on a range of transactional matters.
The India practice is led by Kamal Shah with support from
London-based partners Tony Edwards, Sean Gibbons
and Mike Phillips, Singapore-based partner Saugata
Mukherjee, and Hong Kong-based senior partner Voon
Keat Lai.
Taylor Wessing counts Cipla, State Bank of India (SBI),
Unitech and Ranbaxy among its clients. The firm is currently representing Ranbaxy in relation to its appeal to the
June 2015
Foreign law firms
[Norton Rose Fulbright] is
undoubtedly a firm I would
recommend and use again
and again
Abeezar Faizullabhoy
Partner
HSA Advocates
EU’s General Court against the European Commission’s
fine of over €146 million on Ranbaxy and several other
pharmaceutical manufacturers for entering into anticompetitive settlement agreements relating to the antidepressant drug citalopram. This follows a 10-year
investigation and sector inquiry by the commission. The
result of the case will determine how EU competition law
applies to dispute settlement agreements and whether
the commission can extend competition law to new types
of agreements. The firm is also assisting SBI on matters
involving interest reserve accounts, International Swaps
and Derivatives Association master agreements, trade
finance and offshore trust accounts. Laurence Lieberman
heads up the firm’s India team.
Bristol-based TLT has supported Indian clients on a
variety of banking transactions, including structuring bilateral, club and syndicated transactions; worked on guarantees, security, priority and subordination issues; and
dealt with cross-border issues including asset-specific
finance. Partner Richard McBride is particularly active on
India-related banking and finance transactions. The firm
represented an Indian bank on a loan for the development
of an international hotel in Mumbai; acted for an Indian
bank on a multimillion-dollar payment guarantee facility
for a Spanish joint venture company in respect of a roads
design, rehabilitation and maintenance project in Africa;
and represented an Indian bank on a multiple option trade
finance facility for a commodities trading house. The
firm’s clients include Axis Bank, Exim Bank of India, Bank
of Baroda (DIFC branch), Bank of India (London), Punjab
National Bank and Canara Bank.
Projects and dispute resolution are core focus areas for
Vinson & Elkins in India. Last year, the firm advised Helios
Towers Africa on its purchase of over a fifth of Bharti Airtel’s
15,000 telecom towers located in four African countries.
Mark Beeley in London, James Loftis in Houston and
Nicholas Song in Beijing are the main contacts for India
work.
Wedlake Bell is our final firm in the significant players
category. Over the past 12 months, India-focused clients
have engaged the firm for a cross-border restructuring,
acquisitions, employment law advice, dissolution, real
June 2015
Intelligence report
estate transactions and a refinancing. The firm’s India
team, led by Kim Lalli, recently welcomed Clive Thorne
to the practice. Thorne, who joined from RPC, advises
Indian clients including Wipro, Bharat Heavy Electricals,
Tata, Jindal Steel & Power and Larsen & Toubro on intellectual property, information technology and arbitration.
Another key India partner, Ravinder Mahal, advises on
cross-border employment law and leads the firm’s new
iGlobal Law international employment platform, which has
a significant India dimension.
Regional and specialist firms
Anderson Mori & Tomotsune (Japan)
Anjarwalla & Khanna (Kenya)
Corrs Chambers Westgarth (Australia)
Drew & Napier (Singapore)
Duane Morris & Selvam (Singapore)
ENSafrica (Africa)
Heuking Kühn Lüer Wojtek (Germany)
Inventus Law (US)
McCarthy Tétrault (Canada)
Mori Hamada & Matsumoto (Japan)
Noerr (Europe)
Shook Lin & Bok (Singapore)
Stikeman Elliott (Canada)
Torys (Canada)
WongPartnership (Singapore)
Anderson Mori & Tomotsune has been winning roles
on a slew of inbound and outbound deals, partly thanks
to growing business ties between India and Japan. The
firm regularly advises Indian businesses on corporate
and commercial matters, dispute resolution, acquisitions
and capital raising in Japan and also assists Japanese
companies with their investments in India. In 2014, the
firm advised Sumitomo Corporation on its acquisition of
the auto leasing business of New Delhi-based Carzonrent,
an automotive-related service company, and also acted
as counsel to Meiji Seika Pharma on its US$290 million
purchase of Bangalore-based pharmaceutical company
Medreich. The firm’s India practice was set up in 2008 and
consists of more than 20 lawyers. Ryo Kotoura and Ryo
Okochi are primary contacts.
Anjarwalla & Khanna has long been a prominent
legal adviser for Indian companies with interests in East
Africa. The firm has secured mandates from clients
such as Sanghi Cement, Essar Oil, Tech Mahindra, Tata
Communications, Godrej Consumer Products, Abraaj
Capital, Essar Power, Exim Bank of India, TVS Motor
and Bharti Airtel. Telecommunications, infrastructure and
projects, natural resources, and banking and finance are
the firm’s core strengths. Sonal Sejpal, a director at the
firm, is also a founding member of Africa Legal Network,
an independent African alliance of top tier law firms with
close working relationships. Indian clients dealing with
Anjarwalla & Khanna can therefore benefit from coordinated legal advice across several jurisdictions in Africa.
Corrs Chambers Westgarth has built up a solid record
for India work, serving clients from the region in Australia
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Foreign law firms
and taking Australian clients into India. Recent achievements include advising a company which is building an
infrastructure technology system for the state of Victoria,
in relation to its subcontracting arrangements with a
prominent Indian technology company. It is also assisting an Indian technology company on issues associated
with its entry into the Australian market; advising an
Australian superannuation fund in relation to investment
opportunities in India’s infrastructure sector; and acting
for an Australian retailer on trademark and brand name
protection in India. Corrs is enthusiastic about participating in the business and political dialogue shaping the relationship between India and Australia. In November 2014,
Corrs’ CEO was part of a chief executives’ roundtable with
Indian Prime Minister Narendra Modi in Melbourne. Bruce
Adkins and Arvind Dixit co-chair the firm’s India practice.
Singapore law firm Drew & Napier offers legal advice
on M&A, dispute resolution, funds and intellectual property. The firm also has a desk in Jakarta, PT Drewmarks,
which has represented Indian clients in Indonesia. A
Singapore-based client engaged the firm on an international arbitration which involved legal issues in India.
“Drew & Napier have been exceptional in their response
to the complex and often time constrained requirements
of the various matters in dispute,” she says. “They are
technically excellent lawyers, who also take the time to
explain the complexity of the legal issues to non-lawyers.”
She recommends Cavinder Bull, whom she describes as
a “highly skilled lawyer, with a courteous manner even in
June 2015
Intelligence report
the midst of very difficult and antagonistic proceedings”,
along with Yuet Min Foo and Gerui Lim, whom she says
are also very skilled and “extremely dedicated to the
needs of the client”.
Duane Morris & Selvam has increased its focus and
visibility in the Indian market since the arrival of partner
Jamie Benson at the end of 2012. The firm has since
steadily built up a portfolio of clients, advising on capital
markets deals and a range of investments. In addition to
being in Singapore, Duane Morris & Selvam has offices
in Yangon and Shanghai, and offers clients access to its
global network through Duane Morris offices in the US,
UK, Oman and Vietnam. In 2014, the firm advised City
Union Bank, Suven Life Sciences and Texmaco Rail &
Engineering Services on the sale of shares through their
respective qualified institutional placements. It is currently
representing a European energy company on providing
energy supply and monitoring services to an Indian telecom company and also advising on onshore and offshore
financings for the project, the value of which is expected
to exceed US$1 billion.
ENSafrica is Africa’s largest law firm, with offices in
Burundi, Mauritius, Namibia, Rwanda, South Africa,
Tanzania and Uganda. “ENS is one of the best law firms
in the India-Africa corridor,” says Shameek Chaudhuri , a
partner at AZB & Partners, who has worked with the firm
on various outbound transactions into Africa by Indian
companies over the past eight years. The firm was the
lead transaction adviser on ICVL’s US$50 million purchase
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Intelligence report
of Rio Tinto’s Mozambique coal operations, one of India
Business Law Journal’s Deals of the Year 2014. Rudra
Pandey, a partner at Amarchand Mangaldas (now Shardul
Amarchand Mangaldas) was the Indian adviser on the deal
and describes ENS as attentive and responsive. “The deal
was handled very professionally and effectively by them,”
says Pandey. Sanjay Kassen and Mohamed Sajid Darsot
are primary contacts.
Heuking Kühn Lüer Wojtek’s strength lies in IndoGerman transactions. It has eight offices in the major
business centres of Germany, as well as offices in
Brussels and Zurich. Recent achievements include
advising a German manufacturer of industrial machinery on new trademark applications in India as well as
extension of current German and European trademarks
to India; acting for a Germany-based apparel company
on developing and producing washes, dyes and special
treatments in connection with its Ahmedabad-based
Indian subsidiary as well as on terminating its joint venture with the Ashima Group; and representing a Chennaibased subsidiary of Intuit Management Consultancy on
incorporation and tax structuring in Germany. Martin
Imhof heads the India desk.
Six-year-old Inventus Law, led by managing partner
Anil Advani, specializes in venture capital and private
equity advisory. It has offices in Palo Alto, San Francisco
and Bangalore and typically represents high-growth
start-up companies, founders, angel investors, incubators, accelerators and venture capital and private equity
investors. Nexus Venture Partners, Accel Partners, Kae
Capital, Haptik, Graphic India and JoGuru are all clients. In
2014, the firm represented Gurgaon-based ShopClues on
its US$100 million venture financing led by Tiger Global;
advised Bangalore-based Bookpad on its acquisition
by Yahoo!; represented Jaipur-based CultureAlley in its
series A financing by Tiger Global; advised Noida-based
Octro on its series A investment led by Sequoia Capital;
represented Willow TV on its cricket licensing rights; and
assisted Pune-based JoGuru on multiple rounds of venture financing.
Canadian firm McCarthy Tétrault recently advised
the syndicate of underwriters on Excel India Growth and
Income Fund’s C$200 million (US$159 million) IPO; represented Essar Global Fund on its agreement to provide
a near-term cash infusion to Essar Steel Algoma; and is
acting for an India-based consortium that is developing a
hydroelectric project in Georgia. It has also handled work
for Indian and Indian diaspora broadcasters and their
agents such as Aastha TV, ARY Digital, Channel Punjabi,
India Today Group, Sahara Filmy and UTV Movies groups
in Canada. David Tournier, the vice president of legal and
corporate affairs at IFFCO Canada, describes the firm as
“very responsive, skilful and efficient when solicited, while
very human and down to earth in their approach”. He
adds that the firm’s lawyers are “very knowledgeable, very
accessible, dynamic and practical”.
Mori Hamada & Matsumoto is a popular choice for
Japanese businesses wanting to enlarge their footprint
in India. Hitachi Metals turned to the firm last year for
advice on its purchase of a majority stake in Vikas Group’s
RPS Vikas Castings and Garima Vikas Metals units, while
Tokyo-based SBS Holdings engaged the firm for its purchase of a 66% stake in Transpole Logistics. The firm was
also counsel to Japanese listed company Nihon Nohyaku
on its purchase of a 74% stake in Hyderabad Chemicals.
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India Business Law Journal
Foreign law firms
My first stop outside India
is Reed Smith
Debolina Partap
General Counsel
Wockhardt
It recently hired two Indian-qualified lawyers, Pavitra Iyer
and Soni Tiwari, and frequently accepts secondees from
Indian law firms, such as AZB & Partners, Khaitan & Co, J
Sagar Associates and Trilegal. Key India lawyers are Yohei
Koyama and Chisako Takaya.
Noerr has taken on a wide range of Indo-European
transactional and advisory assignments. Recent highlights include advising Rocket Internet and its FoodPanda
unit on acquisitions of online food ordering businesses
in India, Mexico and South America; acting for the insolvency administrator of Germany-based Kaiser on its sale
to Amtek Group; and representing Siemens in connection with a case relating to personal data in arbitration
proceedings in India. Sarika Raichur, an Indian-qualified
lawyer and founding partner of Yuti Law Partners in New
Delhi, is an independent external consultant to Noerr and
advises on legal issues involved in inbound and outbound
investments, entries, acquisitions, disposals and other
cross-border legal issues. Noerr is the exclusive German
member of Lex Mundi, a global association of independent commercial law firms.
Shook Lin & Bok’s busy India practice is active on the
banking, corporate and dispute resolution fronts, advising investment firms, Indian banks, infrastructure companies and an Indian cooperative. Recent achievements
include acting for State Bank of India in a Singapore
High Court and Court of Appeal case against eSys
Technologies in relation to a US$80 million banking facility which involved the enforcement of a share pledge. The
firm is also acting for an Indian bank against a Singapore
marine services company and two Indian guarantors in
respect of a default on a loan agreement, and advising
an Indian cooperative in an arbitration involving a US$75
million claim against a US listed company and one of its
major shareholders.
Stikeman Elliott has a robust portfolio of clients which
it advises on Indo-Canadian transactions. In the past, it
has advised Indian Oil, Tata Steel Minerals Canada, Essar
Investments, Jindal Steel & Power and JSW Energy. The
firm recently assisted the underwriters on Fairfax India’s
US$500 million IPO and advised CX Partners and Capital
Square Partners on their US$260 million acquisition of
Aditya Birla Minacs. Tournier at IFFCO Canada says
Stikeman Elliott has set “very high standards of practice”.
He recommends Erik Richer La Flèche from the Montreal
June 2015
Foreign law firms
[Osborne Clarke is] a one-stop
shop for all Indian multinational
corporations
V Suresh
Head of Legal
QuEST Global
office for “his wealth of experience in very diverse jurisdictions and cultural contexts [which] is instrumental to
any international business transaction”, and commends
him for his unique knowledge of other business cultures,
including India’s, to provide international investors with “a
very clear understanding of the local specificities affecting their interests”. Tournier says that this, “coupled with
a refreshingly forthright and pragmatic approach, makes
June 2015
Intelligence report
him an invaluable and strategic adviser on most complex
transactions”.
Torys is another Canadian firm with a strong presence
on Indo-Canadian deals. The firm has offices in Toronto,
Calgary, Montreal, Halifax and New York. Its core specialties lie in the mining and metals, financial, technology and
life sciences sectors. The firm was an adviser to Canada
Pension Plan Investment Board on its US$500 million
strategic alliance with Piramal Enterprises, one of India
Business Law Journal’s Deals of the Year 2014. It also represented Fairfax Financial and Fairfax India on the latter’s
US$500 million IPO in January 2015. Pat Koval and Adam
Delean head up the firm’s India practice. Koval sits on the
board of directors of the Canada-India Business Council,
chairs its Finance and Governance Committee and is a
regular speaker at its events in Canada and India.
WongPartnership handles both contentious and noncontentious matters for India-focused clients. The firm has
expanded beyond Singapore and now has a presence in
Beijing, Shanghai, Jakarta, Kuala Lumpur, Abu Dhabi and
Yangon. It has bagged roles on a number of high-value
headline deals for Indian clients, acting as the Singapore
listing agent for Greenko Group’s US$550 million senior
notes and bonds financing; advising IDFC Alternative’s
India Infrastructure Fund II on a US$902.4 billion fundraising; and representing ABJA Investment and Tata Steel on
the latter’s offering of US$500 million in 4.85% guaranteed
notes due 2020 and US$1 billion in 5.95% guaranteed
notes due 2024. It is also acting for the liquidator of an
India Business Law Journal
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Intelligence report
insolvent subsidiary of a listed Indian company on matters
arising out of the liquidation and representing the subsidiary in a high court suit involving a multimillion-dollar claim
against its Indian parent company and directors. Rachel
Eng, Andre Maniam and Kah Keong Low are key contact
partners for India.
Foreign law firms
ENS is one of the best law firms
in the India-Africa corridor
Shameek Chaudhuri
Partner
AZB & Partners
Firms to watch
Akin Gump
Cadwalader Wickersham & Taft
Chadbourne & Parke
CMS
Cravath Swaine & Moore
Dentons
Foley Hoag
Hogan Lovells
Kaye Scholer
Kennedys
Kirkland & Ellis
Mayer Brown
Morrison & Foerster
Nabarro
Olswang
Pennington Manches
Pepper Hamilton
Perkins Coie
Pinsent Masons
Sheppard Mullin
Sidley Austin
Skadden
Squire Patton Boggs
Steptoe & Johnson
Sullivan & Cromwell
Thompson & Knight
Travers Smith
Watson Farley & Williams
Weil Gotshal & Manges
Winston & Strawn
Wragge Lawrence Graham & Co
Cadwalader Wickersham & Taft recently hired Indianqualified lawyer Karun Cariappa to help bring in and
execute India-related transactions. Cariappa has worked
with Jones Day and the now separated Amarchand
Mangaldas and has been handling corporate and securities law matters for Indian and international clients for over
10 years. The firm also benefits from the wide experience
of partner Jeffrey Maddox, who has advised on highvalue India-related transactions in the past. Cadwalader
recently advised on United Spirits’ offer for sale of Pioneer
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India Business Law Journal
Distilleries’ equity shares, and Dilip Buildcon’s IPO.
With over 800 partners and more than 3,000 lawyers,
CMS is the sixth largest law firm in the world with offices
in 33 countries. The CMS India desk is led by a team of
partners and senior associates based in London, Stuttgart,
Dusseldorf, Vienna, Zurich and Rome. Apollo Tyres sought
the firm’s advice on the €440 million construction of a
greenfield manufacturing plant in Hungary. The firm has
also assisted a number of international telecoms businesses on commercial contracts with Indian subcontractors and suppliers, and advised an international travel management company on investigating allegations of bribery
and corruption at its Indian operations. Cravath Swaine & Moore shies away from the volume
game on the India circuit and instead vies for roles on meaty
transactions. Earlier this year, it landed a position as the
adviser to HDFC Bank in connection with its US$1.27 billion offering of American depositary shares. The firm also
represented the bank on its concurrent offering of equity
shares in India. Philip Boeckman is a primary contact.
Markus Blenntoft leads the India practice at Dentons.
Based in Singapore, Blenntoft has advised a long list of
Indian clients including Axis Bank, Bank of Baroda, Essar
Steel India, Exim Bank of India, ICICI Bank, IDBI Bank, Kotak
Mahindra Bank, State Bank of India and Yes Bank. New York
partner Deepak Reddy also has India credentials.
Hogan Lovells made its presence felt on the India stage
in 2014, bagging a role as a legal adviser to Jaguar Land
Rover Automotive on its US$1.11 billion high-yield offering. The firm also represented the trustee of four series
of convertible bonds on which Suzlon Energy defaulted,
in connection with the bonds’ restructuring. Key India
partners are Waajid Siddiqui in New York, Marcia Wiss in
Washington DC, Crisipin Rapinet in London, Jamie Barr in
Hong Kong and James Harris in Singapore.
Renowned for its aviation finance and leasing practice,
Kaye Scholer wins work on a wide array of commercial, cargo and private jet aircraft transactions. The firm
poached Clyde & Co equity partner and aviation lawyer
Philip Perrotta and Indian-qualified aviation specialist
Sidanth Rajagopal in July last year. It has acted for Abric
Leasing in its dealings with Alliance Air in India; SpiceJet
in its restructuring of various lease agreements and workouts with lessors; and Veling in relation to its aircraft repossession in India. Brett Hurst, a director at Abric Leasing,
June 2015
Foreign law firms
worked with Rajagopal at Clyde & Co, before switching
to Kaye Scholer after his move. He describes the firm as
“exceptional … a dedicated team willing to work all hours
to meet deadlines and ensure the job is done correctly”.
He commends Rajagopal’s “personal touch”, his ability
to understand a client’s requirements and says he is “very
pleasant to work with”.
Known for its pre-eminence in the insurance industry,
Kennedys has captured India-related mandates from
around the world. In Dubai, the firm was instructed by
an Indian insurer to advise on expanding its business in
various jurisdictions in Middle East. In Singapore, the firm
worked on a recovery action in relation to a fire at a refinery
in North India. In Miami, the firm is acting as local counsel
for an Indian insurer in its dispute with a reinsurer located
in Trinidad and Tobago. The firm has an alliance with Indian
insurance boutique Tuli & Co. A client says partner Peter
Elingham is “efficient, very clear with his opinions and correspondence, quite friendly to interact with and possesses
excellent professional skills”.
Morrison & Foerster is keen to bulk up its India practice having brought on board Amit Kataria from Davis Polk
& Wardwell. Kataria is qualified to practise in India and
New York and handles cross-border M&A transactions.
He frequently advises Asian and international acquirers
and investors on Indian inbound and outbound deals and
also handles litigation and enforcement matters in India.
The firm’s recent achievements include advising SoftBank
on its investments in India, including its US$627 million
June 2015
Intelligence report
stake in Indian online marketplace Snapdeal, and on the
bank’s US$210 million investment in Indian car rental
company Ola.
Olswang captured a role on an interesting India deal
when it represented Musion Das Hologram on the licensing and use of 3D technology by Indian Prime Minister
Narendra Modi in the country’s election last year. The deal
required Musion to navigate an exit from an earlier joint
venture with an Indian counterparty, which had certain
rights to exploit the hologram technology in India. The
mandate also involved advice on strategy, negotiations
and defensive action against potential litigation in India
from the former Indian joint venture partner. The firm’s
team was led by Azmul Haque, head of its India practice.
The firm also represented the International Cricket Council
(ICC) on the media rights tender, bidding and evaluation
process that led to awarding audio-visual rights for ICC
events from 2015 to 2023 to Star India and Star Middle
East.
UK law firm Pennington Manches’ India practice
is spearheaded by Rustam Dubash. The firm recently
advised New Call Telecom, which has a growing presence in India, on its acquisition of Dutch mobile messaging company Nimbuzz. Nimbuzz has a significant and
niche subscriber base in Asia, particularly in India and the
Middle East.
US law firm Pepper Hamilton has been enthusiastic
about India deals for many years. The firm has acted for
a US government contractor with expertise in hazardous
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Foreign law firms
waste and removal of explosives in connection with the
development of an eco-park in India; assisted an Indiabased business process outsourcing company with its
IPO in the US and listing on Nasdaq; and acted for a
US-based supply chain software company in creating a
corporate entity in India. More recently, it was selected
to advise iGate on its sale by private equity firm Apax
Partners to Capgemini for US$4 billion. Valerie Demont
chairs the India practice.
Last year, Perkins Coie advised the Indian government on the creation and US$500 million IPO of its first
central public sector enterprise (CPSE) exchange traded
fund (ETF) on the National Stock Exchange. The CPSE
ETF, established as part of the government’s disinvestment programme, gives investors the opportunity to
own shares in 10 major listed public sector companies.
Partners Bobby Majumder in Dallas and Rajiv Sarathy in
Seattle co-chair the India practice.
Sheppard Mullin’s India-focused clients include
Tech Mahindra, Tata Business Support Service, Tata
Consultancy Services, Tata Communications America,
Recon Oil, Relativity Media, Comviva Technologies and
Oracle Financial Services Software. The firm’s India practice comprises 30 lawyers spread across offices in New
York, Washington DC, Chicago, Palo Alto, Del Mar, San
Francisco, Los Angeles, Brussels, London, Shanghai,
Beijing and Seoul. Navroze Palelkar, the senior legal
counsel for global initiatives at Tata Technologies, says
the firm is “excellent” and offers “a personal rapport with
each client … creates flexible engagement fee models
… and understands the pulse of their clients’ business”.
Palelkar recommends Robert Friedman, Brian Arbetter,
Jim Hayes and Brad Graveline.
Squire Patton Boggs boosted its India team last year
with the appointment of Biswajit Chatterjee from DLA
Piper. Chatterjee’s credentials have helped attract a
healthy pipeline of India work. In April this year, the firm
assisted HSBC Securities and Capital Markets (India) and
ICICI Securities on VRL Logistics’ `4.73 billion (US$75
million) IPO. A client says the firm’s “commitment to the
needs of their clients has been exceptional”.
Sullivan & Cromwell was an adviser on two of India
Business Law Journal’s Deals of the Year 2014: a US$2.5
billion dispute between Apollo Tyres and Cooper Tire,
where it advised Apollo (Mauritius) Holdings, Apollo
Tyres BV and Apollo Acquisition Corporation in the expedited trial in Delaware Chancery Court; and Jaguar Land
Rover Automotive’s US$1.11 billion high-yield offering,
where it advised the underwriters. Michael DeSombre
has significant India experience and special counsel
William Schroeder has led antitrust and competition law
compliance training programmes in a number of jurisdictions including India.
Thompson & Knight clinched roles on a number of
India-related deals in the oil, gas and energy sectors
over the past 12 months. The firm represented Jindal
Tubular USA on its US$104 million purchase of a pipe
mill in Bay St Louis, Mississippi; acted for Oil India in the
acquisition of a 50% interest in WorldAce Investments,
a Cypress-based wholly owned subsidiary of PetroNeft
Resources; and is representing GAIL India with regards
to ongoing issues associated with its US joint venture
with Carrizo Oil & Gas.
Travers Smith hired associate Ranjani Shrutisagar
from Amarchand Mangaldas (now Cyril Amarchand
June 2015
Intelligence report
[McCarthy Tetrault’s lawyers
are] very responsive, skilful and
efficient when solicited, while
very human and down to earth
in their approach
David Tournier
Vice President of Legal
and Corporate Affairs
IFFCO Canada
Mangaldas) in early 2014. Shrutisagar’s experience has
included advising the Essar Group, TBZ and Mahindra
Holidays. Travers Smith has been heavily involved in
the reverse takeover of the Attachmate Group by Micro
Focus. It advised Micro Focus on complex multinational
software ownership and licensing issues connected with
the transaction and coordinated due diligence efforts in
India and across seven other jurisdictions.
Watson Farley & Williams has developed wideranging experience across a spectrum of industries
for clients with Indian interests. The firm has advised
clients such as Bank of Baroda, Bank of India, Oilex,
CX Partners Fund and ICICI Bank on matters in sectors
such as aviation, maritime, energy, natural resources and
commodities, and IT. This January, the firm represented
Reliance Industries on the commercial arrangements
with Japan’s Mitsui OSK Lines in relation to transporting
liquefied ethane from the US to India.
Weil Gotshal & Manges has provided advice on
Indian matters to clients such as Advent International,
Baring Private Equity Asia, General Electric, Providence
Equity Partners and Wipro. The firm was counsel to
Providence Equity Partners on its purchase from Star
HS of its 50% stake in Star CJ, an Indian joint venture in
the home shopping channel business. It was also counsel to Advent International when, along with Temasek
Holdings, it agreed to acquire a 34% stake in Crompton
Greaves Consumer Electricals, a deal valued at US$1.07
billion.
Winston & Strawn’s India-related achievements are
mainly in the area of dispute resolution. The firm is advising a Central American renewable power company in a
potential ICC construction arbitration involving European
and South American entities owned by an Indian company; acting for an Indian company subject to an antisuit injunction in connection with the challenge in an
Indian court of an arbitral award issued by a Londonseated tribunal; and acting for an Indian energy company
in relation to a witness located in England in connection
India Business Law Journal
61
Intelligence report
with Indian arbitration proceedings under Indian law.
Last year, the firm hired foreign associate Arpan Gupta
in its London office. Gupta specializes in litigation and
international arbitration. Joe Tirado and Tyson Smith
deal with India matters.
Firms to watch (Regional)
Afridi & Angell (UAE)
Al Tamimi & Co (UAE)
Appleby (Mauritius)
Blake Cassels & Graydon (Canada)
Conyers Dill & Pearman
DFDL (Southeast Asia)
Galadari (Middle East)
Harneys
Hengeler Mueller (Germany)
Kojima Law Offices (Japan)
Maples and Calder
Meitar (Israel)
Nagashima Ohno & Tsunematsu (Japan)
Rajah & Tann (Singapore)
Straits Law (Singapore)
Webber Wentzel (Africa)
Al Tamimi & Co has 16 offices across nine countries in
the Middle East. Last November, the firm advised Warburg
Pincus on its `12 billion investment for a 10% stake in
Kalyan Jewellers. The firm also represented ICICI Bank on
its US$500 million global medium-term note programme.
Partner Rafiq Jaffer was head of legal at Barclays Bank in
India and on the senior leadership committee responsible
for management of the bank prior to joining Al Tamimi.
Canadian firm Blake Cassels & Graydon has a presence in Montreal, Ottawa, Toronto, Calgary, Vancouver,
New York, London, Bahrain, Al-Khobar (Saudi Arabia),
Beijing and Shanghai. Over the past 12 months, it acted
as Canadian securities counsel for a private placement of
shares by Ashok Leyland; assisted an India-based construction and project management services company in
its defence against a claim laid in British Columbia by a
Vancouver-based venture capital firm; and was retained
through a consortium of international engineering firms to
advise an Indian government authority on a series of design,
build, operate projects for solid-waste treatment facilities.
The firm also continues to provide advice and legal project
management for a York University campus in Hyderabad.
Kam Rathee is a special adviser for India. He was the president and executive director at the Canada-India Business
Council from 2004 to 2009, headed a Toronto-based international consulting firm assisting Canadian companies in
India and Indian companies in Canada, and ran his own law
practice in New Delhi from 1983 to 1988.
Vinay Ahuja is the head of DFDL’s India desk. He specializes in investment law, general corporate law and legal
and practical aspects of corporate and commercial cross62
India Business Law Journal
Foreign law firms
border transactions in the ASEAN region. DFDL has offices
in Bangladesh, Cambodia, Indonesia, Laos, Myanmar,
Singapore, Thailand and Vietnam. The firm has landed
mandates for clients such as Tata Steel’s mining division,
Spice Mobile, Birla Lao Pulp and Plantation, Apollo Tyres
and Aman Resorts. Past achievements include advising
Indian hospitality corporation Khamin Development in its
bid for a development company in the hospitality industry
in Thailand, and assisting Nava Bharat Ventures on its
hydropower project in Laos.
Middle East firm Galadari counts ICICI Bank, Axis Bank
and Marico among its clients. Its India work focuses on
the banking and finance, real estate, and corporate and
commercial sectors. The firm is currently defending Marico
against a claim by its Jordanian distributor in the Dubai
courts and is also advising Marico on its corporate structuring in Dubai. In addition, the firm is representing SDV
International Logistics on the public auction of 18 race cars
through the Dubai execution court. Ravi Sandip, part of the
corporate legal group at ICICI Bank in Dubai, has worked
with the firm on several lending transactions. “Maymoon
Talib has been our go-to lawyer for urgent transactions and
she has always delivered on time,” he says. “She understands the requirements of the bank and advises accordingly without compromising [our] interests.”
German firm Hengeler Mueller has a presence in
Frankfurt, Dusseldorf, Berlin, Munich, Brussels, London
and Shanghai. Its key practice areas for India work are corporate, M&A, labour law, banking and finance, and arbitration. The firm is currently representing an Indian company
on the enforcement of an arbitration award in Germany; a
German multinational company on its proposed acquisition of a listed Indian company; and a German company on
the restructuring of its Indian business. Daniela Favoccia,
Rainer Krause, Thomas Cron and Abhijit Narayan are the
main contacts for India work.
Tokyo-based Kojima Law Offices handles a host
of transactions for Indian clients requiring advice on
[Sheppard Mullin offers] a
personal rapport with each
client … creates flexible
engagement fee models …
and understands the pulse
of their clients’ business
Navroze Palelkar
Senior Legal Counsel for
Global Initiatives
Tata Technologies
June 2015
Foreign law firms
Japanese law, and Japanese clients seeking assistance
with their Indian investments. The firm advises on direct
and indirect investments into India, joint venture contracts,
technical collaboration agreements, acquisitions under
India’s Companies Act and Sick Industrial Companies Act,
Securities and Exchange Board of India regulations, and
assists in obtaining government licences and approvals. It
has acted for companies in the petroleum, automobile, car
parts, construction equipment, medical instruments, insurance and IT industries. As part of its training programme,
Kojima has seconded its lawyers to Indian law firms and
has received Indian lawyers for training. Clients recommend Hiromasa Ogawa.
Pandey at Shardul Amarchand Mangaldas says Japanese
firm Nagashima Ohno & Tsunematsu is “one of the best
in terms of banking, corporate M&A, capital markets and
competition law in Japan”. He adds that the firm has “many
lawyers with India experience” including Minoru Ota and
Masayuki Fukuda, who “have been doing phenomenally
well on the India front in the recent past”. The firm provides
legal support to Japanese companies on their joint ventures
with Indian companies, technical cooperation, M&A, merger
control rules, dispute resolution and labour law issues.
M Rajaram is the head of the India team at Singapore law
firm Straits Law. The firm is advising State Bank of India
(SBI) in relation to a restructuring by Aban group of a financing with a consortium of Indian banks worth US$2.1 billion.
It also represented Tata Power International on the US$124
million financing for a hydropower project in Georgia; SBI
June 2015
Intelligence report
[Nagashima Ohno & Tsunematsu
has] many lawyers with India
experience … [who] have been
doing phenomenally well on the
India front in the recent past
Rudra Pandey
Partner
Shardul Amarchand Mangaldas
as a facility agent in a US$5.33 billion club financing provided to Orange Maha Wind Energy; and Global Wellness
Holding, a Singapore subsidiary of the Mayer Group, for
the acquisition of multiple cosmetic brands and spas in
Singapore. g
India Business Law Journal
63
Correspondents
Banking & finance
Debt restructuring to raise
promoter ‘skin in the game’
By Babu
Sivaprakasam,
Deep Roy and
Megha Agarwal,
Economic Laws
Practice
O
ver the past couple of years,
debt transactions have been
centred on providing relief to
highly leveraged Indian companies, and
India has seen a series of regulations
aimed at mitigating the financial stress
and strengthening the enforcement
regime for recovery of overdue debts.
In February 2014, the Reserve Bank
of India (RBI) issued a circular titled
“Framework for Revitalising Distressed
Assets in the Economy – Guidelines
on Joint Lenders’ Forum (JLF) and
Corrective Action Plan (CAP)”, which
envisaged the procedure to be followed
by all lenders to deal with certain “special mention accounts”.
On 8 June 2015, the RBI issued a circular titled “Strategic Debt Restructuring
Scheme” (SDR circular) by which lenders, through the JLF, will have a right to
gain management control over borrowers. The intent is to ensure that promoters have more “skin in the game”.
Strategic debt restructuring
The SDR circular stipulates that at
the time of initial restructuring, the JLF
may finalize critical conditions and/or
viability milestones, which, if not fulfilled by the borrower, will trigger SDR.
SDR will enable the lenders to convert the whole or part of the outstanding loan and interest into equity. Upon
such conversion, lenders are required to
jointly become majority shareholders of
the borrower in a manner that they collectively hold 51% or more of the equity
shares of the borrower. This effectively
means that a security trustee or an
agent would hold the shares on behalf
of all the lenders. The SDR circular also
requires conformity with section 19(2)
of the Banking Regulation Act, 1949,
which would mean that no bank can
hold more than 30% in the borrower.
Lenders can also resort to SDR for
64
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accounts restructured prior to the date
of the SDR circular if the agreement
entered into between the lender and the
borrower has the requisite clauses for
enabling SDR. As regards prospective
restructuring agreements, they should
include the necessary covenants to
enable effective invocation of SDR.
Timeline and procedure
The decision to invoke SDR must be
taken within 30 days from review of the
account by the JLF, after triggering of
the relevant condition. Within 90 days
from the date of the decision (reference date), the conversion package
should be approved by the JLF. The
conversion of the debt into equity must
be completed within 90 days of the
approval of the conversion package.
The SDR circular stipulates that
the invocation of SDR will not trigger
restructuring for the purposes of asset
classification and provisioning norms.
Upon conversion of the loan to equity,
the asset classification of the account
on the reference date would continue
for 18 months from that date.
The conversion of the debt to equity
is to be in accordance with the pricing
formula specified in the SDR circular.
Requisite exemptions have been provided under the Securities and Exchange
Board of India’s Issue of Capital and
Disclosure Requirements Regulations
and Takeover Regulations for such conversions of loan to equity. Such a conversion would also not be considered as
an investment in an associate under the
accounting standards.
As the intent of the SDR circular is to
provide lenders with interim management control so as to sway the borrower
in the correct direction, the JLF lenders
are required to divest their shareholding in the borrower to a “new promoter”
who is not part of the existing promoter
group of the borrower. Once the lenders have divested their holdings, the
asset classification of the account may
be upgraded to “standard” and the
loan may be refinanced.
Where there are restrictions on foreign
investment, the new non-resident promoter should hold at least 26% of the
paid-up equity capital or the applicable
foreign investment limit, whichever is
higher.
Conclusion
The SDR circular provides a statutory “blessing” to a right that was contractually available to a lot of lenders
after an event of default under the loan
documents. Lenders seldom exercised
such a right and no detailed procedure
was provided.
The SDR circular, if properly implemented, will be a cause of concern for
borrowers. Several issues arise from
the facilitation provided under the SDR
circular – the tax implications on conversion and divestment have to be
considered, the existing liabilities of the
borrower have to be dealt with by the
interim management, whether the promoters are relieved from the personal
obligations under the loan arrangements needs to be ascertained, etc.
Moreover, it is unclear whether lenders
will have the wherewithal and willingness to run the management of their
borrowers, albeit for an interim period,
especially where there may be no possibility for an upside and all that the
lenders would receive is the repayment
of their dues.
Babu Sivaprakasam is a partner, Deep Roy is an
associate partner and Megha Agarwal is an associate at Economic Laws Practice. This article
is intended for informational purposes and does
not constitute a legal opinion or advice.
June 2015
Correspondents
Canada-India trade & investment
Eyes on the future: PPPs
and infrastructure assets
By Tara Mackay
and Mark Bain,
Torys LLP
A
s global demand for improved
infrastructure rises in tandem with
institutional investors’ need to
invest large capital pools in long-term
assets, allocations of private capital to
public infrastructure, as an investment
asset class, are set to grow significantly.
The public-private partnership (PPP)
model is increasingly being deployed by
governments and investors around the
world to inject private capital into the
asset class.
To address burgeoning demand, governments struggling to balance their
budgets must encourage private-capital investment in infrastructure. This
shouldn’t be a tough sell for institutional
investors like pension funds, sovereign
wealth funds and insurance companies,
whose investment needs align well with
infrastructure assets, which offer longterm and stable cash flows to offset longterm liabilities. These assets also often
have built-in inflation protection, and
their relative illiquidity compared to other
asset classes may not be a big issue for
such investors.
The most salient trend reported in the
OECD’s December 2014 Annual Survey
of Large Pension Funds and Public
Pension Reserve Funds was an increase
in alternative investments, including
infrastructure. While actual investment in
infrastructure was low on average, there
is huge potential demand, with many
funds increasing their allocation to infrastructure or opening new allocations to
the infrastructure asset class. According
to the report, target allocations among
the funds with dedicated infrastructure
exposure ranged from 1% to over 20%
of total assets.
The PPP procurement model is one way
to use private capital to build public infrastructure. Although PPP means different
things to different people, the Canadian
Council for Public-Private Partnerships
defines a PPP as “a cooperative venture
June 2015
79 Wellington Street West, 30th Floor,
Box 270, TD South Tower
Toronto, Ontario M5K 1N2 Canada
Tel: +1 416 865 3688
Fax: +1 416 865 7380
Email: info@torys.com
www.torys.com
between the public and private sectors,
built on the expertise of each partner,
that best meets clearly defined public
needs through the appropriate allocation
of resources, risks and rewards”.
A typical PPP transaction involves the
selection by a public-sector entity of a
private-sector partner to design, build,
finance, operate and maintain a piece of
public infrastructure for a term usually in
the range of 25 to 50 years. The transaction may be structured on an availability
basis, where the private partner is paid
for ensuring that the infrastructure is
available to the public in a specified condition, or may include some revenue risk
to the private partner, as would be the
case with a toll road or bridge. The vast
majority of PPP transactions in Canada
are availability payment deals.
The financing of a PPP transaction is
characterized by high leverage and low
debt service coverage ratios, robust
security packages from subcontractors
to cover performance risks and, ideally,
a strong government counter-party with
the power to appropriate the funds necessary to pay for the asset over time.
Although some PPP transactions
involve the refurbishment or repurposing of established assets (e.g. creating
high-occupancy toll lanes on existing
roadways), most are best described
as “greenfield” in that they involve the
creation of new assets needed to replace
aging infrastructure or accommodate
increased demands resulting from population growth or demographic shifts. In
this way, PPP transactions create new
assets to be bought and sold by investors in the future.
In Canada, many PPP transactions
involve relatively large milestone payments from the public-sector partner to
the private-sector partner on the substantial completion of construction. This
allows for the use of innovative financing
structures involving a combination of
short-term bank and/or bond financing to
cover the construction period, and longterm bond or private placement financing to cover the remainder of the operational term. Most of the large Canadian
life insurance companies are active as
debt investors in the PPP arena. The
Canadian pension funds also participate,
primarily as equity investors.
It was recently announced that La
Caisse de dépôt et placement du Québec
(La Caisse), which manages public pension plans in the province of Quebec and
has almost C$226 billion in net assets,
will be given new powers to control and
develop major infrastructure in the province. The Quebec government will identify and approve potential projects and
La Caisse will undertake the planning,
financing and execution of the project on
the government’s behalf. It appears that
their approach will share some features
with the PPP model, including a focus
on the overall costs of a project over its
entire lifecycle.
Assuming that planned legislative
amendments are passed later this year,
La Caisse plans to establish a new
subsidiary, CDPQ Infra, to execute the
projects. The first two projects identified
are a public transit system on Montreal’s
new Champlain Bridge (which is currently
being procured as a PPP project by the
Canadian government) and a public transit system linking downtown Montreal
to the Montreal-Trudeau International
Airport.
Canadian institutional investors have
also shown considerable interest in
infrastructure investment in India. It can
be expected that this trend will continue
as attractive opportunities arise.
Torys LLP is an international business law firm
that works with clients who expect the best advice and service. Tara Mackay and Mark Bain are
partners at the firm.
India Business Law Journal
65
Correspondents
Competition & antitrust
CCI initiates investigation
against real estate players
Mumbai
One Indiabulls Centre
14th Floor, Tower One, Elphinstone Road
Mumbai – 400 013
Tel: +91 22 4079 1000
Fax: +91 22 4079 1098
Email: amit.tambe@trilegal.com
gautam.chawla@trilegal.com
By Amit Tambe and
Gautam Chawla,
Trilegal
T
he Competition Commission of
India (CCI) directed its investigation wing, the Office of the Director
General, to investigate allegations of
abuse of dominant position against the
Delhi Development Authority (DDA) in
April and Jaypee Greens in May. The
investigation has been directed against
allegedly unfair and abusive clauses
inserted by these (prima facie dominant)
real estate players in their allotment letters and brochures, which are heavily
loaded in their favour.
DDA housing scheme case
In case No. 88/2014, Sunrise Resident
Welfare Association, the informant
before the CCI and a (registered) society incorporated for maintenance and
upkeep of common portions of the flats
allotted by the DDA, alleged that the
DDA had abused its dominant position
in its Housing Scheme 2010.
Based on the informant’s submissions, the CCI prima facie found the
DDA to be dominant in the market for
sale and distribution of residential flats
in Delhi, and stated that (among others)
the following clauses and acts appeared
to be unfair and abusive:
(1) False promise in the Housing
Scheme 2010 brochure regarding the
status/stage of construction of the flats.
The brochure issued with the scheme
stated that the flats were ready for occupation, although as per the informant
they were still being constructed on the
date of the draw of lots in April 2011
(and even the basic minimum facilities
were not ready).
(2) Delay in issuance of “allotment
cum demand letter” and handing over
of possession to the successful allottees. The draw of lots was held in April
2011, but the allotment cum demand
letter was issued and possession was
granted only in March 2012.
66
India Business Law Journal
(3) Charging of penal interest for
delayed payments and automatic cancellation in case of non-payment. As
per the brochure, to avoid payment
of any interest, the allottee had to pay
the demand amount within 90 days
of issue of the demand letter. If the
demand amount was paid within the
next 90 days after that, the allottee had
to pay the demand amount with 15%
compounded interest. The failure to pay
(including interest) within 180 days of
issue of the demand letter led to automatic cancellation of the allotment.
(4) Payment of applicable free-hold
charges or conversion charges by the
allottee at the time of execution and
registration of the conveyance deed,
even though the DDA had assured that
the (initial) allotments would be made on
a free-hold basis.
Based mainly on the above, the
informant asked that the CCI direct
the DDA to: (a) refund the free-hold or
conversion charges; (b) refund the penal
interest charged for delayed payments;
and (c) pay compensation to each of the
flat owners for sub-standard construction and workmanship.
Jaypee Greens case
In case No. 99/2014, Naveen Kataria,
the informant and the purchaser of a
villa at Jaypee Greens in Greater Noida,
alleged that the provisional allotment
letter issued by Jaypee was one-sided,
unfair and heavily in favour of Jaypee.
She also contended that despite her
repeated representations and letters to
change the provisional allotment letter
(for its failure to mention certain inclusions) and the deficiencies in the possession letter, Jaypee did not reply to any of
her letters or her legal notice (at least until
the time she approached the CCI).
The CCI prima facie agreed with the
submissions of the informant that Jaypee
Greens was dominant in the market for
development and sale of residential units
in Noida and Greater Noida, and found
that the following clauses (among others) of the provisional allotment letter
imposed unfair terms and conditions:
(1) The allottee had to waive its right
in perpetuity to prevent (or object to)
additional construction or alteration of
building plans by Jayee Greens.
(2) The allottee had to pay 18% annual
interest on any outstanding amount
towards the purchase of the villa. The
payment made by the allottee was
to be first adjusted against penalty, if
any, and then go towards the balance
instalments.
Conclusion
These are not the first cases against
the DDA or Jaypee Greens where the
CCI has directed investigation on the
alleged imposition of unfair clauses.
However, given that these clauses have
become routine and are inserted by
many real estate players (which was also
the subject matter of a separate investigation), the CCI has received several
complaints including individual grievances against real estate companies.
The test for the CCI is to sieve through
the complaints, even while discharging its statutory mandate to protect
consumer interest, and resist directing investigation where the real estate
player involved is not prima facie dominant in the concerned relevant market.
The CCI is not, and should not become,
a forum for settling individual consumer
disputes regardless of the reliefs claimed
by the parties.
Amit Tambe is a partner at Trilegal and Gautam
Chawla is a senior associate. Trilegal is a fullservice law firm with offices in Delhi, Mumbai,
Bangalore and Hyderabad.
June 2015
Correspondents
Dispute resolution
Arbitration clause survives
even if MoU bears no fruit
By Vivek Vashi and
Shreya Ramesh,
Bharucha & Partners
I
n a recent decision, the Supreme
Court has reiterated the independence of an arbitration clause from the
underlying contract and the principle of
separability, by ruling that regardless
of whether a memorandum of understanding (MoU) results in a contract,
as envisaged by parties, the arbitration
agreement will survive.
Ashapura Mine-Chem and Gujarat
Mineral Development Corporation
(GMDC) had entered into a MoU in
2007 for the purpose of establishing
an alumina plant in Gujarat through a
joint venture with a Chinese company.
The MoU envisaged referring disputes
to arbitration if amicable settlement
through mutual consultation failed.
GMDC terminated the MoU, claiming
that Ashapura failed to fulfil its conditions and also on account of significant
proposed amendments to the MoU,
precipitated by policy changes. The parties attempted, and failed, to amicably
resolve their disputes. Consequently,
they reached no consensus on the
appointment of a sole arbitrator.
Ashapura’s petition for the appointment of an arbitrator under section 11
of the Arbitration and Conciliation Act,
1996, was dismissed by Gujarat High
Court. The court deemed the MoU to be
stillborn since the joint venture failed to
materialize, and ruled that the arbitration clause could not survive since the
MoU was not a concluded contract.
Ashapura filed a special leave petition
before the Supreme Court to challenge
the high court’s ruling.
Before the Supreme Court, Ashapura
rightly contended that the unenforceability or invalidity of the underlying contract
does not render the arbitration agreement contained within it void. The court,
taking a pro-arbitration stance, upheld
Ashapura’s contentions and the wellsettled principle of separability, which
mandates that unless the arbitration
June 2015
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agreement itself stands impeached,
invalidation of the underlying contract
has no bearing on the enforceability of
the arbitration clause, which remains
juridically autonomous.
The Supreme Court relied on its judgments in Enercon (India) Ltd & Ors v
Enercon GmbH & Anr, Reva Electric Car
Company Pvt Ltd v Green Mobil and
Today Homes & Infrastructure Pvt Ltd v
Ludhiana Improvement Trust & Anr to set
aside the high court’s dismissal of the
section 11 petition and appointed a sole
arbitrator.
Ruling on pre-emptive rights
Pre-emptive rights of shareholders,
whether through a right of first refusal
or otherwise, have been the subject of
contention in the recent past. Bombay
High Court has now considered a catena of judgments on the issue and ruled
that such pre-emptive rights do not
constitute a violation of section 111A of
the Companies Act, 1956.
In an arbitration between Bajaj Auto
and Western Maharashtra Development
Corporation (WMDC), the arbitrator had
held that, in terms of the agreement
between parties, the 27% shareholding of WMDC in Maharashtra Scooters
(jointly promoted by both parties and
publicly listed) was to be valued for sale
to Bajaj Auto at a fixed price which was
determined through arbitration.
WMDC filed an appeal against the
award before a single judge of Bombay
High Court, who ruled that clause 7 of
the protocol agreement entered into
between Bajaj Auto and WMDC, which
granted the right of first refusal to Bajaj
Auto, was contrary to section 111A.
The single judge, in the petition under
section 34 of the act, reasoned that the
pre-emption clause inter se between
shareholders would breach the principle of free transferability enshrined in
section 111A, and set aside the award
on this basis alone. Cross-appeals
were filed against the order of the single judge by Bajaj Auto and WMDC.
Subsequently, a division bench of
Bombay High Court, in Messer Holdings
v SM Ruia & Ors, had expressly considered and rejected the above view
of the single judge. It was held that the
rights of a shareholder in a public listed
company, including that of entering into
consensual terms of agreement for sale,
are not whittled down merely because
the company is publicly listed.
At the final hearing of the appeals, the
division bench noted the precedent in
Messer Holdings and also considered
the historical background, i.e. the deletion of section 22A of the Securities
Contracts (Regulation) Act, 1956, by the
Depositories Act, 1996, and the consequent incorporation of section 111A
into the Companies Act, 1956. The
court observed that section 111A was
aimed at regulating the powers of the
board of directors of a company. The
section’s purpose was merely to ensure
that directors cannot refuse to transfer
shares except for reasons specified in
the statute, and it ought not to be so
narrowly construed as to fetter the rights
of a shareholder in a public company.
The court also observed that preemption agreements were expressly
made a part of section 58 of the
Companies Act, 2013, and are now
to be treated as contracts. The order
of the single judge was held to be
unsustainable, to the extent that it set
aside the award on the ground that the
pre-emption rights envisaged by the
protocol agreement between the parties violated section 111A.
Vivek Vashi is the mainstay of the litigation
team at Bharucha & Partners, where Shreya
Ramesh is an associate.
India Business Law Journal
67
Correspondents
Foreign direct investment
Clarity needed on aspects
of recent liberalization
By Sundeep Dudeja
and Aditya Periwal,
Luthra & Luthra
Law Offices
N
on-resident investors must steer
two key, yet constantly developing features of the Indian regulatory landscape: exchange control
regulations and the tax regime. While
exchange control is almost embossed
into the genes of every investment agreement, tax concerns affect structuring
and impact returns and exit. Recent
trends indicate that the government is
now investor friendly and liberalizing
the regulatory framework with fleeting
reforms. The emerging view seems to be
that investors now have greater flexibility
than before to shoehorn their commercial objectives within the idiosyncrasies
offered by this jurisdiction.
Recent news reports indicate that
a single-window system for clearing
foreign direct investments (FDI) is on
the anvil to speed up the investment
process. To further facilitate the process, the limit on FDI under the authority
of the Foreign Investment Promotion
Board (FIPB) has been increased from
`12 billion (US$190 million) to `20
billion, and the Cabinet Committee
on Economic Affairs has approved a
further rise in the limit to `30 billion.
Further, the government now proposes
to take over from the Reserve Bank of
India (RBI) regulation pertaining to foreign individuals and entities purchasing
property in India.
Given that India is an exchange controlled jurisdiction, the majority of the
issues in FDI in India arise as a consequence of capital account transactions. These are transactions which
relate to foreign ownership of India
assets and vice versa. Investments by
non-residents in Indian companies are
capital account transactions.
Until last year, FDI was permissible
under the automatic route only for
investment in fully paid shares and convertible instruments. Partly paid shares
were a distant reality and warrants
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were allowed with the approval of the
FIPB. Limitations in choice of instruments imposed challenges in structuring M&A transactions. Recently the RBI
has allowed some flexibility in permitting foreign investors to subscribe to
partly paid shares and warrants. This
seems to have increased the wriggle
room available in structuring acquisition transactions.
Partly paid shares and warrants can
now be subscribed under the foreign
portfolio scheme and FDI route, as well
as by non-resident Indians (NRIs). A minimum of 25% of the total amount owed
(including share premium) is required to
be brought in up front. For partly paid
shares, the outstanding 75% is required
to be brought in within 12 months unless
the issue size exceeds `5 billion, in
which case the period can be longer,
subject to specified conditions. For
warrants, the outstanding 75% must be
brought in within 18 months.
While pricing for partly paid shares
is required to be determined up front,
for warrants, the pricing at the time of
conversion should not be lower than
the fair value worked out at the time of
their issuance. Reporting requirements
in both cases have been prescribed.
Compliance with the conditions as
regards entry route, sectoral caps and
under FDI policy would apply to the
investee company as well as the resident transferor/transferee.
The provisions of the Companies Act,
2013, also would have to be complied
with for the issuance of these instruments as well as for forfeiture in case
of non-payment of call money. NRIs will
however be eligible to invest on a nonrepatriation basis in partly paid shares
and warrants issued by Indian companies and in accordance with the provisions of the Companies Act, Securities
and Exchange Board of India guidelines
and tax provisions, as applicable.
While this is a positive step, further
clarity is required on certain issues: Can
existing partly paid shares or warrants
issued to residents or non-residents
be acquired by non-resident investors
from the original allottees? Can existing
instruments issued with FIPB approval
benefit from the new regime? Can new
instruments be issued for non-cash
consideration? Can foreign venture
capital investors benefit from the liberalized regime?
While the amendment seems good in
spirit, effective implementation on existing structures will be particularly crucial
for investors. In the absence of a clarification from the RBI/FIPB, it appears
that existing partly paid instruments
may not be in a position to benefit from
this relaxation and investors may have
to approach the RBI/FIPB for a dispensation. Each of the aspects referred to
above should therefore be viewed in
light of the changes being introduced
to ensure compliance with the extant
exchange control regulations.
The FDI policy is an evolving document, updated every year (most recently
on 12 May 2015) and strives to maintain a balance between investor sentiment and domestic economic interests.
Investors should therefore take into
consideration the regulator’s intentions
while documenting investment agreements. While the agreements must be
flexible to accommodate future liberalizations, they should be nuanced
enough so as not to fall foul of the extant
exchange control regulations.
Luthra & Luthra Law Offices is a full-service law
firm with offices in Delhi, Mumbai, Bangalore and
Hyderabad. Sundeep Dudeja is a partner and
Aditya Periwal is a managing associate at the firm.
This article is intended for general informational
purposes only and is not a substitute for legal
advice.
June 2015
Correspondents
Intellectual property
Exhaustion of copyright
in today’s digital market
By Ameet Datta and
Suvarna Mandal,
Saikrishna &
Associates
T
he digital market has become an
important means of distributing
copyright works. In relation to
“tangible” copyright works such as
books, CDs, etc., the rights and the
ability of the copyright owner to assert
control over the distribution of the
work is well established under what is
known as the “doctrine of first sale” or
“exhaustion”. Lawmakers and judges
around the world are still grappling
with the application of this legal doctrine to digital works and goods.
According to the doctrine, once a
product has been put on the market with the consent of the copyright
owner, and the product has been lawfully sold, the copyright owner’s right
with respect to control of the distribution of the product is exhausted.
In countries that follow “international
exhaustion”, the first sale of the product anywhere in the world will lead
to exhaustion of distribution rights of
the copyright owner in that country,
while national or regional exhaustion
means the copyright owner’s distribution rights will be exhausted only when
the first sale of the product is made
within the country or a particular region
and can be asserted if the product is
sold anywhere else in the world.
India follows national exhaustion
with respect to copyright works. This
doctrine flows from section14(a)(ii) of
the Copyright Act, 1957, which states
that the owner of a literary, dramatic
or musical work, not being a computer programme, has the exclusive
right to issue copies of the work to
the public “not being copies already
in circulation”. Amendments to the
act in 2012 extended the exhaustion
doctrine to cinematographic films and
sound recordings. Sections 14(d)(ii)
and 14(e)(ii) now state that the right
owner has the exclusive right to sell or
give on commercial rental or offer for
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sale or for such rental “any” copy of
the work.
Also, section 51(b)(iv) states that a
copyright is infringed when any person
imports into India any infringing copies
of the work. An “infringing copy”, as
defined in section 2(m) of the act, in the
case of literary, dramatic, musical or
artistic work is a “reproduction” of the
work, in the case of cinematographic
film is a “copy of the film made on any
medium by any means”, and in the
case of sound recording is “any other
recording embodying the same sound
recording, by any means”.
The act does not differentiate
between physical and digital work,
or the mediums in which the copyright works are made available, so the
exhaustion doctrine applies equally to
any kind of copyright work irrespective
of its nature or the medium in which it
is stored.
A bid to adopt the doctrine of international exhaustion by amending sections 2(m) and 14 of the act failed in
2010, after a series of debates in parliament that considered the interests of
publishers.
As for case law, in John Wiley v
Prabhat Chander (2008) Delhi High
Court held that exporting books whose
sale and distribution was subject to
territorial restrictions amounts to copyright infringement. In this case, the
plaintiff published low-priced editions
(LPEs) of a book with the rider that
they were meant for sale/resale only
in India, Bangladesh, Nepal, Pakistan,
Sri Lanka, Indonesia, Myanmar, the
Philippines and Vietnam. The defendants offered the LPEs online for sale
worldwide. The plaintiff contended
that after first sale its rights in the LPEs
were exhausted only in India and the
defendants had contravened of their
distribution right under the act.
The court held that in the absence of
an express provision for international
exhaustion, regional exhaustion would
apply and affirmed that the right owner
had the exclusive right to assign or
license the work, which could be limited by way of period or territory, and
could be exclusive or non-exclusive.
Therefore, a copyright owner’s distribution right may be exhausted with respect
to some countries and not others.
The European Court of Justice, in
UsedSoft GmbH v Oracle International
Corp (2012), discussed the issue of
digital exhaustion with respect to download-to-own software. The court held
that under certain circumstances, the
exhaustion of the right to distribute
under the EU Software Directive may
be applicable to both physical copies of
the software (CD/DVD) and digital files
downloaded online with the consent of
the copyright owner, therefore allowing
sale of second-hand software online.
A German court of appeal, in a decision with regard to audio books in
June 2014, held that under another
EU directive, the doctrine of exhaustion did not apply to download-to-own
digital content.
In Capital Records v ReDigi (2013),
a US district court held that reselling downloaded music amounted to
an infringement of the reproduction
right of the copyright owner and that
the first sale principle applied only to
“material items, like records, that the
copyright owner put into the stream of
commerce”.
No legislature or court anywhere has
defined “digital exhaustion”. With the
rapid growth of the copyright marketplace, statutory clarifications of digital
first sale rights are needed.
Ameet Datta is a partner at Saikrishna & Associates, where Suvarna Mandal is an associate. The
views expressed in this article are personal.
India Business Law Journal
69
Correspondents
International trade
Lessons of WTO verdict on
India’s avian flu measures
By Sanjay Notani
and Vikram Naik,
Economic Laws
Practice
T
he Appellate Body of the World
Trade Organization on 4 June
rejected the appeal filed by India
against a panel decision at the Dispute
Settlement Body. The dispute concerned
certain import prohibitions imposed by
India affecting certain poultry and poultry products from countries reporting
notifiable avian influenza to the World
Organisation for Animal Health (OIE).
The OIE is the international organization responsible for establishing health
standards, including avian influenza (AI),
for international trade in animals and
animal products. The import prohibition
was maintained through India’s AI measures under the Livestock Importation
Act, 1898, and Statutory Order 1663(E)
dated 19 July 2011.
The US complained that India’s AI
measures amounted to an import prohibition not based on the relevant international standard (the OIE Terrestrial
Code). In particular, the US asked
the WTO panel to find that India’s AI
measures were inconsistent with a
number of provisions of the Sanitary
and Phytosanitary (SPS) Agreement.
India responded that its AI measures “conform to” the OIE Terrestrial
Code pursuant to article 3.2 of the SPS
Agreement and consequently, compliance with other provisions of the SPS
Agreement and the General Agreement
on Tariffs and Trade 1994 must be
presumed. Accordingly India maintained that it was under no obligation
to provide the panel the scientific risk
assessment prescribed under articles
5.1 and 5.2 for its AI measures, and
the measures were based on scientific
principles and evidence in accordance
with article 2.2 of the SPS Agreement.
The panel analysed the issues and
chiefly held that India’s AI measures are
inconsistent with articles 5.1, 5.2 and
2.2 of the SPS Agreement because they
are not based on a risk assessment;
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India’s AI measures are inconsistent
with article 2.3 of the SPS Agreement
because they arbitrarily and unjustifiably
discriminate between members where
identical or similar conditions prevail
and are applied in a manner which constitutes a disguised restriction on international trade; India’s AI measures are
inconsistent with article 3.1 of the SPS
Agreement because they are not “based
on” the relevant international standard,
and India’s AI measures do not “conform
to” chapter 10.4 of the OIE Terrestrial
Code within the meaning of article 3.2 of
the SPS Agreement; India’s AI measures
are inconsistent with articles 5.6 and 2.2
of the SPS Agreement because they are
significantly more trade-restrictive than
required to achieve India’s appropriate
level of protection (ALOP) and therefore
are also applied beyond the extent necessary to protect human and animal life
or health.
On 26 January 2015, India filed an
appeal challenging several key findings of the panel, and on 4 June, the
Appellate Body issued its report. The
Appellate Body upheld the panel’s findings that India’s AI measures are inconsistent with articles 5.1 and 5.2 because
they were not based on a risk assessment. The Appellate Body upheld the
panel’s findings under articles 3.1 and
3.2 that India’s AI measures are neither
“based on”, nor “conform to”, chapter
10.4 of the OIE Terrestrial Code.
The Appellate Body also endorsed
the panel’s finding that India’s AI measures violate article 6 because they
require the prohibition of all imports
from any country that has notified AI
to the OIE, and thus foreclose the possibility of allowing imports from AI-free
areas within exporting countries. The
measures were also held to arbitrarily
and unjustifiably discriminate between
members where identical or similar
conditions prevailed.
The Appellate Body upheld the panel’s findings that India’s AI measures are
inconsistent with article 5.6 because
they are significantly more trade-restrictive than required to achieve India’s
ALOP with respect to the products
covered by chapter 10.4 of the OIE
Terrestrial Code, and found that the
panel did not err in finding that the US
had identified alternative measures that
would achieve India’s ALOP.
Thus, any new measures by India
to protect against AI-affected chicken
or for that matter any future measures affecting agricultural products will
need to be based on an analysis of
the specific grounds on which the AI
measures were held to be violative by
the Appellate Body. Some key points
in brief are:
• A new measure may be imposed,
conforming to the OIE Terrestrial
Code, whereby imports may be
prohibited but subject to recognizing
disease-free regions or zones.
• If the new measures are not to be
based on the OIE Terrestrial Code,
sufficient scientific justification must
be provided prior to imposition,
justifying higher protection than the
OIE Terrestrial Code as the ALOP
standard for India.
• Risk assessment must be carried
out prior to imposition of new
AI measures based on scientific
methods and techniques adopted
by international organizations.
• The level of protection sought
must be substantiated by scientific
justification and risk assessment
ought to be incorporated in light of
the risk to human and animal health.
Sanjay Notani is a partner and Vikram Naik is an
associate at Economic Laws Practice. This article is intended for informational purposes and
does not constitute a legal opinion or advice.
June 2015
Correspondents
Media & entertainment
Competition googly may
prove tricky for Google
By Manisha Singh
and Priya Anuragini,
LexOrbis
F
or internet users of today, Google
is a synonym for web search.
Such is the clout of the company
that users don’t search for information,
they google it. However, for the past
few years the search engine giant has
been grappling with anti-competitive
charges in different jurisdictions and
its predicament has taken a turn for
the worse with the European Union
Competition Commission recording the
preliminary finding that the US-based
web search company has abused its
dominant position in the market for
general internet search services.
Earlier, Google was also fined by
India’s competition regulator for being
uncooperative during investigation
into complaints by Consim Info and
Consumer Unity and Trust Society.
While Google has some time to respond
and allay the concerns of competition
regulators, the crackdown on the company is already being seen as an opening for new players to emerge just as
Google came up when Microsoft was
busy negotiating competition charges.
Charges against Google
At the heart of competition complaints against Google is an attempt
to ensure online search neutrality and
objectivity, keeping in view the crucial
role that search engines play in locating the relevant information from the
vast mountain of information available
online. Horizontal search using generic
search queries is usually the first level
of online consumer search and search
results are displayed after ranking all
the relevant websites in order of relevance. The search engine results page
(SERP) gives links to these websites in
decreasing order of relevance. Clearly,
ranking on the SERP plays a crucial
role in steering traffic to any website as
almost 90% of clicks are on websites
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listed on the first page of the SERP.
Instead of general search, some
search platforms focus only on particular subject matter such as books,
news, information, etc., and are tailored
to address specific vertical queries.
While there are a lot of search engines
that exclusively provide vertical search
services, Google, although primarily a
horizontal search engine, also provides
vertical search services such as Google
Shopping, Google News, Google Maps,
etc., and thus has the opportunity
to integrate vertical services with its
immensely popular horizontal services.
However if a vertical search platform is displayed when a horizontal
query is keyed in, it not only increases
the number of visits to the platform
but is also detrimental to other similarly placed vertical search platforms.
For instance, if “books” is the search
query on Google and the SERP displays Google Books as the first link, it
will take the users to a specific vertical
platform when it may not even be the
most relevant result for the user or the
best vertical search engine for books,
thus discriminating against other such
vertical search engines.
And this precisely is the charge
against Google. It has been alleged
that Google has distorted the search
results to push its vertical services to
the top of horizontal search results at
the expense of similarly placed competing vertical services. Considering
Google’s commanding dominance
in horizontal search, this integration
of horizontal and vertical search may
exclude or at least harm competitors in
the vertical search business.
Google has also been under the
scanner for engaging in discriminatory
practices in online search advertising.
Google’s advertisement programme,
done through Google AdWords, enables
advertisers to choose heavily searched
terms as keywords to trigger advertisement in the “sponsored links” ad area.
The programme allows advertisers to
bid even for those keywords which are
the trademarks of their business competitors. In fact, Google’s “keyword
suggestion tool” aids advertisers in
choosing such AdWords by suggesting
keywords, trademarked or otherwise,
that can be purchased by the advertisers so that links to their websites appear
at as many locations as possible.
Clearly, this has not gone down well
with trademark owners, who have
attacked Google for creating confusion
and aiding deception and diversion
of business traffic especially because
Google’s trademark policy unequivocally states that Google will not investigate or restrict the use of trademark
terms in keywords, even if a trademark
complaint is received. The bidding
process for keywords is also alleged to
be unfair and opaque.
While these charges lie at the core
of the ongoing competition tirade
against Google, numerous other complaints against Google are currently
being investigated. Apart from internet
search, Google’s conduct in relation
to its commonly used open-source
mobile operating system, Android, is
also under scrutiny. Getting entangled
in the competition web may prove to
be perilous for Google but it is important to safeguard the interests of other
stakeholders. After all, a website’s
ranking is totally dependent on search
engines and any kind of search bias or
manipulation by the search engines,
especially when the search engine
enjoys as much dominance as Google,
would be detrimental to both the users
and industry players.
Manisha Singh is a founding partner of LexOrbis,
where Priya Anuragini is an associate.
India Business Law Journal
71
Correspondents
Mergers & acquisitions
Price discovery of delisting
offers:Time for a change
216 Amarchand Towers
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New Delhi - 110 020
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Managing Partner: Pallavi Shroff
pallavi.shroff@AMSShardul.com
Akila Agrawal,
Shardul Amarchand
Mangaldas & Co
T
he Securities and Exchange
B o a rd o f I n d i a ( S E B I ) h a s
recently amended the Takeover
Regulations providing potential acquirers who trigger a mandatory tender
offer an opportunity to directly delist
the company. This helps avoid the
absurd situation where acquirers who
have acquired shares in the tender offer
are forced to divest them in a year’s
time in order to meet minimum public
shareholding requirements. However,
it is unclear whether direct delisting
will be the preferred option for future
acquirers who do not want to manage
a listed entity in India.
One of the key factors that work
against exercise of this option is the
steep premium one has to pay in a
direct delisting offer, where the price is
determined by a reverse book building
method. Generally speaking, it may be
more cost effective to do a fixed-price
tender offer, followed by a delisting offer
on expiry of the cooling-off period.
The question is whether the reverse
book building method that is currently
adopted for price discovery of delisting
offers has outlived its utility.
Unique situation
India is the only jurisdiction in the
world that offers a reverse book building method of price discovery for delisting offers. A majority of the developed
markets, such as US, UK, Canada and
Japan, do not offer any appraisal rights
to minority shareholders. In some other
jurisdictions, only dissenting shareholders get appraisal rights and these
are normally based on a look-back
price or a fair valuation of the stock.
India is unique in offering public
shareholders the right to determine
the exit price, with the law only prescribing a floor price. The genesis of
this methodology dates back to 2002,
June 2015
when a committee chaired by Pratip
Kar raised the need for a reverse book
building method of price discovery.
A fixed-price exit was under scrutiny
as a number of multinational companies were delisting shares from the
exchanges and historical trading price
was not adequate compensation in a
depressed market.
The committee was of the view that a
book building process would provide a
transparent, fair and reasonable mechanism of price discovery. This recommendation was implemented in 2003.
Basic premise
A fundamental assumption that the
committee had made in recommending
this change was that rational investors
would quote a reasonable premium in
book building. Market behaviour indicates the contrary. Unlike other jurisdictions where the share price plummets
on the announcement of an intention
to delist, in India the share price skyrockets due to speculative trading and
the shareholders’ right to demand a
premium far higher than what could be
considered reasonable.
There is no denying that permanent
loss of investment opportunity ought
to be compensated, but premiums
in the range of 50% have historically
tipped the balance heavily in favour of
the minorities. Moreover, delisting does
not result in a 100% squeeze-out of
the minority shareholders and there are
instances where higher premiums are
paid at the final squeeze-out stage.
A few shareholders who do not have
any intention to sell have the ability
to derail the process, and it is clear
that the process is open to manipulation. SEBI recognized this in a concept
paper in 2006, in which an alternative
price mechanism, namely, 25% premium on the fair value or look-back
price of the share, was mooted. Again,
in 2014, a fixed-price alternative was
considered in SEBI’s concept paper
for changes in the delisting regulations.
However, neither of these proposals
was accepted and the only change has
been to reduce the influence of block
holders by modifying the exit price to
be the highest price at which the promoter touches the threshold limit (as
opposed to the price at which the maximum number of shares is tendered).
Conclusion
The reverse book building process as
an investor protection method is suitable for new markets. Given the current
phase of development of the Indian
securities market, it no longer seems
to be an efficient method of price discovery. The BSE in Mumbai and the
National Stock Exchange are among
the world’s leading stock exchanges
and it is time SEBI recognizes and
supports the principle that delisting is
a corporate decision. Companies have
the right to delist and cannot be forced
to stay listed by onerous regulations.
In most jurisdictions, the decision
to delist is simply made by the board
of directors and the directors are
expected to exercise their fiduciary
obligations and act in the best interests
of the company and its stakeholders. It
is time that SEBI rectifies this anomaly.
Investor protection does not necessarily mean protection of minority investments to the exclusion of the interests
of controlling stakeholders. It refers to
the protection of all investors in the
securities market.
Akila Agrawal is a partner at Shardul Amarchand
Mangaldas & Co. The views expressed in this article are those of the author and do not reflect the
position of the firm.
India Business Law Journal
73
Correspondents
Middle East-India trade & investment
Holders of assets in Dubai
can now register a DIFC will
Jumeirah Emirates Towers
Office Tower, Level 35
Dubai, United Arab Emirates
Tel: +971 4 330 3900
Fax: +971 4 330 3800
Email: dubai@afridi-angell.com
www.afridi-angell.com
By Stuart Walker,
Afridi & Angell
T
he Wills and Probate Registry in
the Dubai International Financial
Centre (DIFC) opened in late April
of this year. It is now possible to register a will in Dubai, and to have a high
degree of confidence that it will be
enforced in accordance with its terms.
Prior to the establishment of the
registry, it hadn’t been possible to
be so confident that foreign wills
would be enforced in the United Arab
Emirates. There were concerns that
Shari’a law would be applied to the
estates of non-Muslims, particularly
with respect to real property (land and
buildings). The establishment of the
registry is therefore a welcome initiative, and persons who have assets in
Dubai should almost certainly register
a will with the registry.
Points to note
A few points to note right from the
beginning: firstly, only non-Muslims
may lodge their wills with the registry. At the time of registering the will
the testator (the person making the
will) must confirm that they are not a
Muslim, nor have ever been a Muslim.
If this confirmation is later proved to
be inaccurate then the will becomes
void. Secondly, testators must be at
least 22 years old. Thirdly, the will
can only relate to assets in the emirate of Dubai. Finally, the value of the
Dubai assets must be balanced with
the costs of using the registry. There
are a number of fees payable, some
reasonably significant for many people. For example, the cost of registering a will is currently 10,000 Emirati
dirhams (US$2,700).
Testators who have assets outside
of Dubai will also need another will to
deal with those assets. The general
rule is that a new will cancels all previous wills. Care must therefore be taken
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India Business Law Journal
when drafting both the DIFC will and
the foreign will to ensure that one does
not inadvertently cancel or override the
other.
Previous state of affairs
Prior to the introduction of the registry, a multitude of approaches were
taken in respect to estate planning
by Dubai residents. Many people, of
various faiths, made no will at all. For
people who are aware of the applicable inheritance and intestacy rules,
this was (and continues to be) a perfectly sensible choice. If your family
structure is straightforward, and you
understand and are comfortable with
how your assets will be distributed
where there is no will, then there is no
reason to make one.
Historically, a variety of solutions
were offered to people who were not
sure how their assets would be treated
if there was no will, and who wished
to create one. Some were told that it
was necessary to register a Dubai will
with a local notary. Others were told to
make a will in their home country, have
it translated into Arabic, and then registered locally. Others were told that it
was sufficient to sign the will and have
it witnessed by a staff member at their
home country consulate in Dubai. In
short, there was no consensus as to
the most appropriate method of creating a will in the UAE, or of ensuring
that it would be enforced in accordance with its terms.
Resolution of concerns
The DIFC Wills and Probate Registry
seeks to resolve these concerns.
Wills are reviewed by registry staff
prior to being accepted for registration. This review is designed to
prevent the registration of wills with
blatantly unacceptable terms (e.g. “...
and finally, I leave the balance of my
estate for the funding of international
terrorism, and general crimes against
the state”). More significantly, the
review ensures that the will formalities are properly attended to (i.e. that
the will is correctly witnessed, and so
forth).
Once registered, the intention is
that the terms of the will can be given
effect to by the DIFC Court if necessary. Decisions of the DIFC Court
must, as a matter of UAE law, be
enforced by the Dubai courts. It is
then anticipated that other relevant
Dubai governmental entities (such as
the Economic Department in respect
of assets such as company shares,
or the Lands Department in respect
of real property) would automatically
abide by orders issued by the Dubai
courts (or even by the DIFC Court
directly).
Note of caution
This process appears robust, but
a small note of caution must be
sounded. This is a new, and so far
untested, system. It remains to be
seen whether the relevant government departments will indeed recognize DIFC wills. We anticipate that this
point will be resolved relatively soon,
as there appears to be a significant
number of individuals eager to make
use of the registry. Furthermore, we
have no reason to believe that the
system will not work as it should. On
that basis, we welcome this beneficial
addition to the legal landscape of the
emirate of Dubai.
Stuart Walker is a partner at Afridi & Angell, a
UAE-based law firm with offices in Abu Dhabi,
Dubai, the DIFC and Sharjah.
June 2015
Correspondents
Outbound investments & joint ventures
Switzerland’s great allure
beckons foreign investors
By Gautam Khurana,
India Law Offices
and Arnaud Cywie,
Borel & Barbey
I
ndian-Swiss trade and investment
has increased during the past few
decades with a recent estimate of
more than 200 Swiss companies having
joint ventures or subsidiaries in India and
strong Indian investment in Switzerland
due to major advantages that the country offers. In this respect, Switzerland is
a strategic market for India because of
its political and legal stability, its prosperous economy notably in the service
sector, its tax system and its position
and relations with the EU countries.
According to the State Secretariat for
Economic Affairs, “international investments are a key factor for economic
growth and prosperity in Switzerland”.
The country in principle has no restrictions on foreign investment or capital transactions (although a business
licence is required in specific sectors,
e.g. banks, insurance). Furthermore,
real estate used for economic activities
is not subject to prior approval.
Company types
Two company types (with a limited
liability of the shareholders/members
to the company’s assets only) are particularly notable for their practical significance: limited liability companies
and corporations.
Limited liability companies require a
minimum capital of 20,000 Swiss francs
(US$21,500), fully paid up, and are often
used for small and medium-sized companies. Members must be disclosed in
the commercial register and the transfer of shares is normally subject to the
approval of the general meeting.
Corporations require a minimum capital of 100,000 francs (of which at least
50,000 must be paid up). Shareholders
are not disclosed in the commercial
register and both bearer shares and
registered shares can generally be
transferred easily.
June 2015
D - 19 (GF) & D - 31, South Extension - 1
New Delhi - 110 049
Tel: +91 11 2462 2216, 2462218
Fax : +91 11 2465 4364
Email: g.khurana@indialawoffices.com
There is no citizenship requirement
for board members. The only constraint
is that at least one Swiss resident must
fully represent the company and this
must be recorded in the commercial
register.
Acquisitions and restructurings
In Switzerland, as in many other
countries, it is possible to purchase a
company itself (assets and liabilities) or
the shares of a company (share deal).
The choice between the two acquisition procedures will depend on various
factors such as the type of the targeted
company, the transferability of the
assets and tax considerations. Under
Swiss law, an individual seller may realize a tax-free capital gain whereas the
sale will be taxed as income if the seller
is a company. The buyer will normally
account for the shares as a participation in its financial statements.
In practice, share deals are frequent
and generally subject to a process
which starts with negotiations followed
by due diligence, the drafting of the
agreement (which will be typically structured with recitals, the characterization
of the sale and the price, warranties,
other provisions regarding employees,
applicable law and jurisdiction) and
finally the signing and closing.
In turn, restructurings are governed
by the Merger Act of 2003 (some tax
provisions are also fundamental to
reach a neutral reorganization with a
neutral transfer of the hidden reserves).
International restructurings are notably
ruled by the Federal Act on Private
International Law, which permits international transfers, mergers and demergers under certain conditions (protection
of equity rights and creditors, fulfilment
of foreign/domestic law, etc.).
The Swiss tax system is very competitive for companies. The ordinary
effective corporate income tax rates
range from about 12% to 24% depending on the canton where the company is incorporated (corporate income
taxes are levied at the federal, cantonal
and municipal level). Moreover, holding companies, principal and domiciliary companies can benefit from
privileged tax status with much lower
rates. While such privileged statuses
are being abolished some cantons
have already pledged to reduce their
corporate income tax rates to remain
competitive.
Certain regions provide tax holidays
for newly incorporated companies for
a limited number of years. Each canton also levies a corporate net wealth
tax (rates vary between 0.001% and
0.5%). In terms of indirect taxes, the
standard VAT rate is 8%.
Swiss law further provides a 35% withholding tax on dividends distribution,
which cannot be reclaimed by investors
domiciled abroad and thus constitutes a
definitive tax burden. This is why a double taxation avoidance agreement (DTAA)
is crucial. The DTAA of 1994 between
India and Switzerland provides a residual
withholding tax rate of 10%.
Finally, another major benefit of
Switzerland is the possibility of obtaining binding advanced rulings from the
tax authorities, which clarify the tax
situation and thus offer great security in
particular for investors.
For all these reasons, Switzerland is
an important and accessible market for
Indian investors, which will also provide
a gateway to European markets.
Gautam Khurana is the managing partner at
India Law Offices in New Delhi. Arnaud Cywie
is a lawyer at Borel & Barbey in Geneva. The
firms collaborate on legal matters arising out of
investments and transactions involving Indian
and Swiss companies.
India Business Law Journal
75
Correspondents
Private equity & venture capital
Delisting before open offer:
SEBI’s missed opportunity?
Simal, 2nd Floor
7/1 Ulsoor Road
Bengaluru 560 042, India
Tel: +91 80 4339 7000
Fax: +91 80 2559 7452
Email: bengaluru@khaitanco.com
By Ganesh Prasad
and Sanjay Khan,
Khaitan & Co
T
he Securities and Exchange Board
of India (SEBI) has recently notified
crucial amendments to the SEBI
(Delisting of Equity Shares) Regulations,
2009 (Delisting Regulations), and the
SEBI (Substantial Acquisition of Shares
and Takeovers) Regulations, 2011
(Takeover Regulations). These amendments were followed up with a circular
permitting on-market settlement of buyback, delisting and open offers.
The above changes are aimed at easing the process of acquisition of listed
companies by permitting an acquirer to
make a delisting offer prior to completion of the mandatory open offer (in situations where the acquisition triggers the
requirement to make an open offer).
Backdrop
By way of background, in terms of the
Takeover Regulations, if an acquirer’s
shareholding in the target company
(taken together with the shareholding
of persons acting in concert with the
acquirer) exceeds the maximum permissible non-public shareholding (i.e.
75%) pursuant to an open offer, the
acquirer is required to bring down its
shareholding below the prescribed level
within one year, and is prohibited from
making a delisting offer during the oneyear period.
This requirement posed concerns for
financial investors aiming to acquire
listed companies, as such investors prefer to delist the target company immediately after the acquisition, so that they
can: (a) exercise better control over the
target company (i.e. with less public
scrutiny and a lower public shareholding); and (b) steer the target company in
line with their aggressive growth strategies (which may require stern and
often unpopular measures). The above
requirement, therefore, kept many a
financial investor at bay.
76
India Business Law Journal
Attempted resolution
The amendments to the Delisting
R e g u l a t i o n s a n d t h e Ta k e o v e r
Regulations have attempted to resolve
this issue by providing acquirers with
an option to make a delisting offer
before proceeding with the mandatory
open offer. Prima facie, this seems to
have resolved the issue (and credit
must be given to SEBI for this attempt).
However, a careful analysis of the process gives rise to certain concerns that
may not make this option lucrative.
For instance, in the case of a delisting
offer made pursuant to an open offer, the
open offer price becomes the floor price
for the delisting offer. This, coupled with
the fact that on failure of the delisting
offer, the open offer price stands revised
with a 10% annual interest (owing to
delay in the open offer), will lead to the
delisting offer price (which is determined
pursuant to the reverse booking building
process) being substantially higher than
the open offer price.
In most cases, this will not be commercially viable for the acquirer, and will only
end up delaying the open offer process.
On a related note, however, a welcome
change in the Delisting Regulations is
the introduction of a “true” reverse book
building process for discovering the
delisting offer price, which is now the
price at which the acquirer would cross
the threshold of 90%.
Further, the acquirer is required to open
an escrow account before making the
detailed public statement for the open
offer, and open another escrow account
before proceeding with the delisting
offer. It is not clear whether the open
offer escrow account can be topped up
and used by the acquirer for the delisting
offer as well, and used for the open offer
in case of failure of the delisting offer.
A possible solution to the concerns
highlighted above could be permitting
the delisting and open offer to run simultaneously. The acquirer could make
a common public announcement for
both the offers (with a common escrow
account), giving the public shareholders
an option to tender their shares under
the open offer (at the open offer price)
or submit their bids under the delisting
offer (at prices of their choice), during
a common tendering/bidding period
(which can be implemented in terms of
the above-mentioned circular).
If the resultant delisting offer price
was acceptable to the acquirer, it could
proceed with the delisting offer, or else
continue with the open offer purchases.
Achieving this would require developing the infrastructure needed to run two
simultaneous offers, notifying ancillary
changes to the regulations, and tackling
issues that may emerge while finalizing the process. However, once implemented, it would surely make the option
to delist on substantial acquisition of
shares much more attractive to financial
investors.
Overall, SEBI’s move to provide a
delisting option before completion of an
open offer is encouraging. However, with
some additional effort, this option could
be made even more lucrative (for both
the acquirer and the public shareholders). While one open offer coupled with
a delisting offer in terms of the amended
regulations has already been announced,
the above suggestion of running the
delisting and open offer simultaneously,
if implemented, could certainly boost
acquisitions of listed companies. If, however, the regulations are left in the current
form, it might be a missed opportunity for
the market regulator.
Ganesh Prasad is a partner and Sanjay Khan is
an associate at Khaitan & Co. The views of the
authors are personal, and should not be considered as those of the firm.
June 2015
Correspondents
Project finance
Achieving revival through
change in management
By Tanuj Sud and
Aiswarja Mohanty,
Khaitan Sud &
Partners
T
he project finance route has enabled development of projects
through a risk-sharing approach
while limiting the downside impact on the
balance sheets of sponsors. The projectrelated lenders usually rely on primary
security (i.e. the project’s asset base) and
seek principal recourse to cash flows
generated from a project, but this may
be supplemented by third party support
(such as sponsor support or personal or
corporate guarantees or pledge of promoter shares in the borrower).
The lenders acting through a security
trustee, or by themselves in a default
scenario, enforce their security by sale
of project-related assets in consonance
with the provisions of the Securitisation
and Reconstruction of Financial Assets
and Enforcement of Security Interest Act,
2002 (SARFAESI), Transfer of Property
Act, 1882, and Indian Contract Act,
1872.
In certain kinds of enforcement action,
depending on the remedy/recourse
elected to be pursued, the provisions of
the Code of Civil Procedure, 1908, may
have to be borne in mind. In the context
of enforcement of pledge of shares (that
are in electronic form), the Depositories
Act, 1996, and regulations framed by
Securities and Exchange Board of India
will also apply.
While SARFAESI provides direct
recourse, without court intervention, to
project-related assets in a default scenario (where the account can be declared
as a non-performing asset under Reserve
Bank of India norms), the realizable value
of the project-related assets may not be
commensurate with the total outstanding exposure on the lenders’ books. In
relation to large infrastructure projects
that are sliding into regular defaults, the
question often faced by the lenders is
whether to enforce their security interest
by way of recourse under SARFAESI and
cut their losses or to attempt a revival.
June 2015
Khaitan Sud & Partners
D-41, Defence Colony
New Delhi - 110024
India
Tel: +91 11 41552824-25
Fax: +91 11 41510266
Email: tanuj.sud@kspartners.co.in
www.kspartners.co.in
Where the default could be attributable
to the existing management and consequently curable on change of such management or transfer of control, revival
of the company may entail transfer of
its ownership/management. Change in
control may be effectuated in the following ways:
Conversion of outstanding debt to
equity: The lenders’ outstanding debt
may be converted to equity shares
provided that the equity shares issued
are sufficient to seize control and are
in no way inferior to the shares held
by the existing promoters, and restrictions for individual banks under the
Banking Regulation Act, 1949, are not
breached.
Taking over of management:
Pursuant to section 13(4) of SARFAESI,
the lenders may take over management
of the borrower. This route ensures noninterference of the current management
and vesting of effective control with the
lenders notwithstanding the nature of
the rights associated with the existing
promoter shareholding.
Invocation of pledge: The lenders
may invoke pledge and enjoy control of
the company by direct exercise of the
voting rights in relation to the pledged
shares. When creating the pledge, the
lenders should ensure that the pledged
shares are in no way inferior to the
shares retained by the promoters.
We believe that the most efficient
means of enforcement of security (in
relation to large infrastructure projects
with high debt component in project
cost) would be invocation of pledge followed by subsequent sale of the pledged
shares resulting in change in ownership
at the project level. Considering that
finding prospective buyers may be a
time-consuming process, management
of the borrower may be taken over in
the interim period under section 13(4) of
SARFAESI, which enables the lenders to
run the project without interference from
existing management while continuing to negotiate with potential buyers.
Improving the financial health of the borrowing entity will further incentivize sale
of the shares.
Once a potential promoter/promoter
group is identified, the pledge on the
shares may be invoked (after reasonable
notice to the pledgor) followed by transfer of the shares resulting in realization
of debt and ensuring change in control.
It must be noted that the valuation of
the shares may be lower and it may
be harder to attract potential buyers if
the strategy being contemplated is not
the first recourse or if there is disagreement among lenders as to the mode of
enforcement. In this context, lenders
may seek to achieve upfront consensus on priority of enforcement actions,
although this may be counterproductive
as priority of enforcement actions will
depend on factual considerations which
can only be evaluated based on occurrence of such events.
In the past, takeover of management/
invocation of pledge has not always been
viewed as the “go to option” by lenders (in consortium financing). However,
given the constant enhancement to the
existing regulatory framework relating
to change in management/control, this
may be a tool that lenders increasingly
use on a going forward basis towards
revival of ailing projects. In any event,
the lenders must, weighing the factual
matrix in each case, identify causes and
achieve consensus as to the enforcement mechanism in a timely manner so
as to not cause delay in decision making
and ensure efficiency in recovery.
Khaitan Sud & Partners is a fast growing law firm
providing specialist legal services to both domestic and international clients. Tanuj Sud is a partner
and Aiswarja Mohanty is an associate at the firm.
India Business Law Journal
77
Correspondents
Regulatory developments
New framework to combat
frauds: A good follow-up
By Sawant Singh and
Aditya Bhargava,
Phoenix Legal
O
ne of the villains in the Indian
growth story is the poor state
of capitalization of India’s public
sector banks (PSBs). Most government
majority-owned PSBs are among India’s
largest banks and also have the largest
exposure to stressed assets and sectors. Continued exposure to delinquent
borrowers and fraudulent practices by
borrowers of the PSBs has contributed
to the declining credit quality of the
loans made by the PSBs.
To improve the PSBs’ situation, the
Reserve Bank of India (RBI) has taken
steps such as introducing higher provisioning for restructured assets and
guidelines for formation of a joint lenders
forum to “work out” potentially stressed
borrowers before they become nonperforming assets. The RBI has also
introduced changes to the prescriptions
on wilful defaulters to make it more difficult for delinquent borrowers to access
the credit markets. These measures
apply not only to PSBs but to the banking sector in general (including Indian
branches of foreign banks).
Following up on these measures, the
RBI issued a circular on 7 May prescribing a framework to identify and deal with
fraudulent accounts, and to develop
appropriate risk control measures for
such accounts. The framework, based
on the recommendations of an RBI internal working group, seeks to direct the
attention of banks to early detection and
prevention of fraud, and prompt reporting
to the RBI and any investigating agencies
of any instance of fraud, without overly
affecting the “normal conduct of business” and “risk taking ability” of banks.
The framework observes that detecting fraudulent bank accounts currently
takes an “unusually long time” and
that banks tend to report fraud only
on exhaustion of all chances of recovery. The framework also notes that the
tracking of early warning signals should
78
India Business Law Journal
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Phase III
New Delhi – 110 020, India
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Email: delhi@phoenixlegal.in
not be considered as an additional task,
but rather must be “integrated with the
credit monitoring process in the bank
so that it becomes a continuous activity and also acts as a trigger for any
possible credit impairment in the loan
accounts”.
The framework contemplates “red
flagging” of accounts on the basis
of “early warning signals”. While the
framework provides an indicative list
of such signals – income tax raids,
frequent change in the scope of project
undertaken by the borrower, frequent
invoking of bank guarantees issued on
behalf of the borrower, etc. – banks can
include further signals based on their
experience.
The list of early warning signals
appears comprehensive but is bereft
of qualitative criteria. For instance,
reduction in the promoter’s stake is not
necessarily an indicator of fraudulent
practice. Similarly, “substantial relatedparty transactions” are common in
closely held groups and may not be
indicators of fraudulent practice.
The threshold for application of the
early warning signals is `500 million
(US$7.8 million). All such accounts that
are red flagged must also be reported
to the Central Repository of Information
on Large Credits. For accounts below
`500 million, banks have the discretion
to determine the mode for identification
of fraud.
Unusually, the framework appears to
be a hybrid mix of both prescriptions
and principles. Along with detailed
provisions relating to red flagging, the
framework sets out the following principles: (a) empowerment of bank staff to
report fraudulent activity coupled with
a whistle-blowing policy that protects
whistleblowers and ensures against
fear of victimization; (b) auditors reporting instances of fraud to the bank’s
audit committee; (c) bank’s acquiring
Mumbai
Vaswani Mansion, 3rd Floor
120 Dinshaw Vachha Road
Churchgate
Mumbai – 400 020, India
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“market intelligence” and gathering
information from the public domain
on potential borrowers as part of the
pre-sanction appraisal process; and (d)
tracking market developments relating to major clients, and continuous
monitoring and vigilance at the time of
annual review of loan accounts.
To encourage banks to report fraudulent accounts, the framework also contemplates provisioning over four quarters (rather than with immediate effect),
for accounts reported as fraudulent,
subject to there being no delay in reporting. In case of any delay in such reporting, the reporting bank will have to make
provisions with immediate effect.
The framework prescribes that borrowers that default on their loan obligations and are reported as fraudulent will
be debarred from obtaining financial
assistance from banks and non-banking institutions for five years from the
date of full payment of the “defrauded
amount”. The framework also contemplates the establishment of a central
registry on fraudulent accounts that
can be accessed by banks.
The issuance of the framework is a
good follow-up to the measures already
introduced by the RBI such as the joint
lenders forum. This is particularly important considering the repeated warnings
of international rating agencies on the
declining asset quality of Indian banks
and the stressed state of infrastructure
sector borrowings. Provisions such as
the creation of a central registry are
far-sighted and welcome moves, and
will certainly provide a fillip to the RBI’s
efforts to leave no stone unturned to
inculcate discipline in banks and to
improve their asset quality.
Sawant Singh is a partner and Aditya Bhargava
is a principal associate at the Mumbai office of
Phoenix Legal.
June 2015
Correspondents
Smart cities
Emergence of smart cities
presents new opportunities
By Hemant Sahai
and Pranav Kumar
Singh,
HSA Advocates
T
h e I n d i a n g o v e r n m e n t ’s
announcement of an ambitious
programme for creation of over
100 brownfield and greenfield “smart
cities” presents unprecedented investment opportunities. In the first of our
regular columns on this emerging business opportunity, we headline some
key developments as well as critical
issues that will engage the technical,
financial and legal brains as this sector
gathers momentum.
Earlier this year, India and the US
agreed to partner to develop three smart
cities. Memorandums of understanding were signed by representatives of
the US States Trade and Development
Agency and the state governments of
Uttar Pradesh, Rajasthan and Andhra
Pradesh in the presence of India’s urban
development minister, for developing
smart cities in Allahabad, Ajmer, and
Visakhapatnam. Japan, Singapore and
other countries too have expressed
interest in participating in the smart cities development programme.
What exactly is a smart city? While
various definitions have been propounded, each stressing the significance of technology, the draft concept
note issued by India’s Ministry of Urban
Development recognizes four essential
attributes of a smart city: (a) institutional
infrastructure (including governance); (b)
physical infrastructure (water and power
supply, sanitation, waste management,
transportation, affordable housing,
connectivity, etc.); (c) economic infrastructure (to create economic growth
and employment opportunities); and (d)
social infrastructure (education, health,
culture, entertainment).
Our definition is simpler: “creation of
an ecosystem that empowers citizens
to access diverse economic opportunities and social services in an efficient and inexpensive manner”. This
empowerment can be achieved through
June 2015
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New Delhi – 110 017
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pranav.singh@hsalegal.com
www.hsalegal.com
technology, infrastructure and high quality governance.
While this definition may appear unidimensional, it captures the main attributes
of a smart city, i.e. an entity that offers its
citizens diverse economic opportunities
to achieve a high standard of living, in a
predictable and enabling environment.
Therefore, availability of high quality
infrastructure and technology including
IT to access services, plus availability of
diverse economic opportunities, all contribute to the making of a smart city.
Finally, the city needs a soul, which
comes only from the diversity of its peoples and cultures. This requires high quality and predictable governance, including
law and order, management of essential
services and creation of enabling policy
frameworks, to encourage citizens to
seek economic growth, to migrate to and
make these cities their homes, in preference to the traditional metropolises.
Viewed from this perspective, the
definition is not unidimensional at all.
Creation of a smart city will require
deployment of significant financial and
human resources. Governments will need
to leverage the best technical, financial
and legal brains, to create developmental
models that attract capital and technology. Upgrading of existing and creation
of new infrastructure is just one facet and
cannot obfuscate the need for creation of
economic, financial, legal, regulatory and
governance models different from what
India has experienced so far.
It is clear that the staggering investments required can be leveraged only
through a combination of public and
private capital. Therefore, in addition to
public funding of trunk infrastructure and
IT systems, it is now universally accepted
that private capital can be attracted only
through appropriate public-private partnership models that provide the right mix
of economic incentives and appropriate
risk sharing.
Governance of these cities will be one
of the most complex challenges since
India’s constitutional and legal framework envisages local urban bodies as the
primary managers of cities. Existing bodies do not have the institutional capacity
to either raise financing or manage the
transition to smart cities. There is need
for innovative legislation that will allow a
legal framework for developing efficient,
independent and autonomous governance institutions.
The Delhi-Mumbai Industrial Corridor
(DMIC) project, which envisages creation
of six greenfield cities, is experimenting
with new governance structures for its
cities and has created enabling legal
frameworks for them. However, DMIC’s
advantage lies in developing greenfield
cities and the model may not work for
brownfield smart cities. Article 243Q of
India’s constitution provides the umbrella
framework for creation of such governance structures and innovative and original legal thought will be required.
Financing these projects too will require
significant innovation and political will.
Diverse models, including monetization
of land, are being considered for raising finances, however, these models
run the risk of distorting these projects
into speculative real estate play. There is
need to bridge capital markets and infrastructure financing, specifically deepening of the corporate and municipal bond
markets. This requires changes to the
legal and regulatory framework.
While the challenges may appear
daunting, political will coupled with entrepreneurial acumen should help mitigate
some of these risks.
Hemant Sahai is the managing partner and Pranav
Kumar Singh is a partner at the New Delhi office of
HSA Advocates. HSA is a full-service firm with offices in New Delhi, Mumbai and Kolkata, and with
a correspondent relationship in Bangalore.
India Business Law Journal
79
Correspondents
Taxation & transfer pricing
Goods and services tax:
Barriers on the road ahead
By Ranjeet Mahtani,
Rajat Chhabra and
Ketan Tadsare,
Economic Laws
Practice
V
ictor Hugo once said “no one
can resist an idea whose time
has come”. Introducing GST in
India was mooted way back in 2000
but it was only last month (on 6 May)
that the bill containing constitutional
amendments needed for GST’s implementation was passed by the Lok
Sabha (lower house of parliament) with
the required special majority. The bill
has now been sent by the Rajya Sabha
(upper house) to a select committee for
consideration and comments, perhaps
further delaying the start of GST.
Under the bill: (i) parliament and state
legislatures are empowered to legislate
on GST (India being a federal structure,
both levels of government need the
power to levy taxes on goods and services); (ii) various central and state taxes
are to be subsumed in central GST and
state GST; (iii) varying from the 2011 version of the bill, and to compensate for
central sales tax, an additional 1% GST
is to be levied for two years; (iv) a GST
Council will be created in view of comments and concerns about the 2011 bill;
and (v) alcohol for human consumption
is excluded from the ambit of GST, etc.
Who wins: Bill or politics?
The journey from bill to act is far from
over. The bill still requires passage in
the Rajya Sabha by a special majority,
and endorsement by at least half of the
state legislatures followed by presidential assent.
While the bill’s passage in the Lok
Sabha turned out to be a cakewalk
given the majority of the ruling party,
without a majority in the Rajya Sabha,
its passage there will be an uphill task.
It is under these circumstances that the
bill was referred to a select committee,
after the opposition insisted on this
step in view of the comments made on
the 2011 bill. Moreover, the opposition
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wants the select committee to consult
stakeholders including the states, trade
unions and industry associations. The
21-member panel is scheduled to give
its report around the middle of August.
The bill will then need to be endorsed
by at least 15 of the 29 state legislatures, which seems likely to be an
easier task given that the ruling alliance
is in power in 13 states.
Implementation challenges
After the bill clears the political roadblocks, GST faces several challenges
from an implementation perspective,
both for various industries and the
administrator. The various stages to go
through and perhaps roadblocks to be
overcome before GST is implemented
suggest that while the central government is resolved to see it start on 1
April 2016, it will be a huge challenge
for industry, the administrator and all
stakeholders. The time to prepare is
now.
To make GST real in India, it will be
necessary to: (i) formulate model GST
legislation (including for integrated
GST) based on which states can draw
up their legislation; (ii) design and draw
up rules for place of supply, which will
be the backbone of the levy mechanism (there is some indication that
the draft rules are already with the
states for their comments); (iii) constitute the GST Council, and enable its
early functioning and taking on board
its suggestions and recommendations;
(iv) fix the floor rate, threshold and tax
rates, and indicate bands within which
states may fix the rates (the finance
minister recently announced that the
revenue neutral rate will be lower than
the previously computed 27%, i.e.
14% for central GST + 13% for state
GST); and (v) enable a robust IT infrastructure for a smooth tax collection,
credits and reporting experience for all
stakeholders.
While GST will raise gross domestic
product by about 2.5% (per government estimates and empirical evidence
from other countries) and India will
benefit from higher revenues, some
concerns need to be addressed: (i)
the 1% additional GST levy (unlikely
to be available as set-off) envisaged
on supply of goods in the course of
inter-state trade or commence and its
cascading effects are likely to be a burden on the businesses; (ii) supply chain
realignment – stock transfers becoming tax-neutral under GST will compel
businesses to rethink their supply chain
decisions (i.e. selling through depots,
warehouses, etc.); and (iii) exclusion of
products from the GST net which will
distort the taxation scheme.
Interestingly, Malaysia implemented
GST on 1 April this year. It will be useful for India to pick up on Malaysia’s
experience and feedback from various
stakeholders.
Before parting …
The introduction of GST, along with
other government initiatives such as
the “Make in India” programme, have
the potential to reduce costs, reshape
the country’s logistics landscape, redefine India as a single “common economic market” and place India on a
high-growth trajectory.
It is hoped that the much discussed
GST is quickly implemented, since it is
idea whose time has indeed come!
Ranjeet Mahtani is an associate partner, Rajat
Chhabra is a senior associate and Ketan Tadsare is an associate manager at Economic Laws
Practice. This article is intended for informational
purposes and does not constitute a legal opinion
or advice.
June 2015