Tag Archives: Legal issues

Free Handbook on Prevention of Sexual Harassment of Women at Workplace

Academic eBook Template

This freely downloadable e-book is a ready reckoner of legislations and good practices related to prevention, prohibition and redressal of sexual harassment of women at workplace.

Download your copy here.

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Shutting Down A Company – Fast Track Exit Under The New Companies Act 2013

One of the quick ways to shut down a company, when non-operational over a period of time, was through a process called Fast Track Exit (FTE). In its place, under the Companies Act, 2013 has brought in a process called Removal of Names of Companies from Register (Section 248 of Companies Act, 2013), with effect from 26 December 2016.

On 26 December 2016, Ministry of Corporate Affairs (MCA) issued a Notification notifying Section 248, 249, 250, 251 and 252 of Companies Act, 2013 (Chapter XVIII). This chapter deals with Removal of Names of Companies from Register of Companies.

Company Shut Down.jpg

A company can apply for a shut down under the new process when:

  1. A company has failed commence business within one year of incorporation,
  2. The subscribers to MOA have not paid the subscription amount within 180 days and no declaration filed to this effect,
  3. Not carrying any business or operation for a period of two years (earlier it was one year) and has not sought to call itself a dormant company,
  4. When a company voluntarily wants to shutdown, it can, after clearing all its liabilities, by obtaining consent of atleast 75% of shareholders in terms of paidup capital.

Non-eligibility of companies to shut down under the new process:

  1. Listed companies, not for profit (section 8) companies, vanishing companies, non-compliant companies under various statutory laws, where investigation or inspection or enquiry is ordered, where prosecution or application for compounding is pending, where the assets of the company still have a charge on them.
  2. If three months prior to such application, a company had changed its name, shifted registered office, has disposed property or rights for value, made an application to National Company Law Tribunal (NCLT) for any compromise or arrangement or is under a winding up process.

These are some measures to ensure that there are no fraudulent applications for removal of name, including ensuring there is no intention to deceive creditors or defraud any person.

The new Rules, Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 at a high level:

  1. Removal of name of company from Register by ROC on suo-moto basis.
  2. Forms for making an application by the Company (Form-STK2) is notified, along with a fee of INR 5000, along with an Indemnity Bond from directors, Statement of Accounts certified by a chartered accountant, Affidavit from directors, Shareholders special resolution signed by every director, a statement that there are no pending litigations involving the company.
  3. An application filed, will be cross-verified by ROC, by giving a notice to all the directors at the address on record, along with reason cited by company for shutting down and if the directors have any representation to make/seek.
  4. ROC will further intimate and seek objections if any, from income tax, central excise, service tax authorities. There is a time line of 30 days within which such authorities have to respond and if no response is received, then it is presumed that such authorities do not have any objection.
  5. Based on the company’s business, such as NBFC, insurance, housing finance, collective investment schemes, asset management companies, then ROC requires a no-objection certificate from the applicable regulatory bodies.

Public Notice:

  1. ROC on receipt of application, issues a public notice, by notifying on MCA’s website. It appears that MCA will provide for a separate webpage for notifying public for all applications received by them in this regard.
  2. Publish in Official Gazette
  3. Publish in newspaper (English and vernacular) having wide circulation in the State where the registered office of the company is located
  4. If a company has applied for shutdown, then the company will have to notify on its own website

Effect of company notified as dissolved:

Though the company has been dissolved and its name removed from the ROC’s registers and intimation provided to tax authorities, it has to be noted that liabilities, if any, continues on every director, key officer, members of the company continues and may be enforced as if the company had not been dissolved.

This is the major difference between the process as described above and winding up through NCLT.

With detailed rules, process, forms and guidance, the Government has provided much clarity. The rules also provides for clear timelines for statutory bodies to respond. It would have been nice if timelines were established for disposal of application by the ROC as well. The expenses of opting this route of shutdown has marginally gone up, due to newspaper notification to be published.

Compliance Under the Prevention of Sexual Harassment Act

Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 came into force from December 2013. Earlier, we had written a brief about the Act, constitution of the Internal Complaints Committee (ICC).

In this presentation, we are capturing the compliances that organizations should comply with.

Authors: Saumya Kakar, Associate and Sohini Mandal, Junior Partner.

Commercial Courts, Commercial Division and Commercial Appellate Division of the High Courts Act, 2015: Another Attempt by the Government to Reduce Overbearing Litigation Numbers

In order to take forward and accelerate the agenda of the “Ease of Doing Business” and “Make in India”, the Commercial Courts, Commercial Division and Commercial Appellate Division of the High Court’s Act, 2015 (the “Act”) has been promulgated, which provides for the constitution of Commercial Courts and the establishment of Commercial Divisions and Commercial Appellate Divisions in the High Courts to adjudicate Commercial Disputes for achieving the motive of swift and speedy enforcement of contracts, recovery of monetary claims and compensation for damages suffered to increase investment and economic activity in our country.

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The key features of the Act are as follows:

    1. Wide meaning of “Commercial Dispute”: The term “Commercial Dispute” has been very broadly defined in the Act to encompass almost every kind of transaction that gives rise to a commercial relationship. The subject matter of disputes is very wide including but not limited to issues relating to maritime law, construction and infrastructure contracts, ordinary commercial transactions, intellectual property rights disputes, disputes involving exploitation of natural resources, insurance and re-insurance disputes. Such Commercial Disputes shall now be adjudicated upon by these Commercial Courts/Divisions.
    2. Commercial Courts/Divisions at various levels:
      • The Act provides for the constitution of “Commercial Courts” in every district in all states and union territories where the High Court of that state or union territory does not have/exercise ordinary original civil jurisdiction and “Commercial Divisions” within High Courts exercising ordinary original civil jurisdiction.
      • Further, Commercial Appellate Divisions are being set up in every High Court to hear appeals against, (i) orders of Commercial Division of High Court, (ii) orders of Commercial Courts and (iii) appeals arising from domestic and international arbitration matters that are filed before the High Courts.
    3. “Specified Value” of Commercial Disputes: The Act provides for the adjudication of Commercial Disputes of more than INR 1,00,00,000 (defined as “Specified Value” in the Act), by the Commercial Courts/Divisions. Further, it also prescribes the manner in which the Specified Value of a Commercial Dispute is to be determined.
    4. Transfer of Commercial Disputes: All suits and/or applications relating to a Commercial Dispute of a Specified Value pending before any civil court are required to be transferred to constituted Commercial Courts/Divisions for fast and speedy disposal of cases.
    5. Jurisdiction over arbitrations: In line with the Arbitration and Conciliation (Amendment) Act, 2015, all matters pertaining to international commercial arbitrations have been brought within the purview of the High Court, whether or not such High Court exercises original jurisdiction, except matters relating to the appointment of arbitrators in international commercial arbitrations. Applications and appeals arising out of domestic arbitrations involving purely local Indian parties, which would ordinarily lie before any principal civil court of original jurisdiction (not being a High Court), will now lie before a Commercial Court (where constituted) exercising territorial jurisdiction over such arbitration.
    6. Amendments to the Civil Procedure Code, 1908 (“CPC”): The provisions of the CPC, to the extent of its application to any suit in respect of a Commercial Dispute have been amended by the Act to streamline the conduct of Commercial Disputes. Key amendments to the CPC are as follows:
      • The Act has introduced a new provision in the CPC, which prescribes that a Commercial Court/Division shall hold a ‘case management hearing’ to frame issues and fix timelines to ensure that the case is concluded in an expeditious and efficient manner.
      • The amended provisions of the CPC allow parties to apply for summary judgement where the court could arrive at a decision solely on the basis of written pleadings.
      • The Act has also introduced comprehensive provisions in the CPC dealing with award of actual costs and interest. The amended provisions of the CPC also provide the issues that Commercial Courts/Divisions may consider while imposing costs on parties. The earlier provisions under the CPC dealing with costs and interest, provided for imposition of only nominal costs (which continue to apply to matters other than Commercial Disputes).
    7. Fixed Timelines: The Act has also introduced strict timelines to ensure prompt resolution of disputes including but not limited to all appeals to the Commercial Appellate Division must be filed within 60 days from the impugned judgement and the Commercial Appellate Division must endeavour to dispose of the case within a period of 6 months. But, there is nothing prescribed with regard to any penalty or punishment being imposed on the parties if they delay the disposal of the case.
    8. Appointment of judges: The Act recognizes that competent judges having experience in dealing with Commercial Disputes are important for expeditious disposal and therefore, requires appointment of persons having such experience to be judges of the Commercial Courts/Divisions.
    9. Measures to curb procedural delays: The Act acknowledges that piece by piece production of documents by parties at different stages tends to delay proceedings and therefore, requires filing of all documents relevant to the dispute at the time of filing of the suit itself or at the time of filing of the defense, as the case may be. Detailed procedures for discovery and inspection of documents of the opposite party and admission and denial of documents have been provided to shorten the scope of trial. The Act sets an outer limit of 120 days for filing defense beyond which the right to file the defense is forfeited and the Court would be bound to not take such a delayed submission on record.

In light of the key features stated above it is evident that the Act is a laudable piece of legislation and a step in the right direction but there are issues unaddressed/unclear in it, which are highlighted below:

      1. The definition of “Commercial Disputes” is very vague and wide. The list is not exhaustive and hence it can give rise to a number of litigations to just determine whether a dispute is a “Commercial Dispute” or not..
      2. It is extremely difficult to ascertain the value of an intellectual property right and this can give rise to a number of litigations. Also, breach of confidentiality disputes have not been included in the definition of “Commercial Disputes” which are really common in this era of competition. However, it may be difficult to determine the Specified Value of such disputes.
      3. As regards disputes arising out of agreements relating to immovable property, the qualification that the property must be used exclusively in trade or commerce could raise debates as to whether the property must have been in use for trade or commerce before an agreement is entered into or whether it would also cover agreements entered into for the purpose of using immovable property for the first time for commercial purposes.
      4. The present amendment to the CPC casts an onus on the parties by providing that all the documents in their power possession, control or custody relating to any matterin question in the proceedings, whether it is in support of or adverse to their claim, should be filed along with their pleadings, and further require the parties to make a declaration on oath at the time of filing of their pleadings that they do not have any other document with them pertaining to the facts and circumstances of the proceedings. No express exception has been made for such production either on the grounds of privilege or confidentiality etc. Just as has been the case in the US, it is likely that such broad requirement of discovery would become a tool for harassment by parties here and would become a factor in deciding whether to settle matters or face the pain of discovery.
      5. Having the same pecuniary value limit for all High Courts does not take into account the variable factor in such dispute cases. It is only reasonable to believe that the Himachal Pradesh High Court will have fewer commercial dispute cases than the Bombay High Court, and also of lesser commercial value. If the pecuniary value of these cases for every High Court or even the district court were to be decided based on the relevant data of the entire state, pendency would have been addressed more effectively.
      6. Keeping in mind the Act’s objective to reduce pendency, one must recognize the need for appointment of more judges. These Commercial Courts/Divisions are being assigned to the existing batch of judges, hence they will be hearing these cases apart from the matters that are already assigned to them. This may prove to be counter-productive.
      7. There is overlapping jurisdiction of the Commercial Divisions proposed for in the five High Courts exercising original jurisdiction and the Commercial Appellate Divisions within those High Courts in relation to the arbitration matters which can create issues.
      8. The transfer of pending cases in civil courts to these Commercial Court/Divisions may lead to practical and logistical difficulties initially as the Courts will have to deal with transferring of a substantial number of cases, which in turn may lead to cases being delayed until the correct courts receive the proceedings in suits that now would fall within the definitions of “CommercialDisputes’ being above the “Specified Value”. This may lead to a chaotic situation as was seen with the passing of a similar dicta for Section 138 Negotiable Instrument Act, 1881 cases in Dashrath Roopsingh Rathod v. State of Maharashtra & Anr.
      9. The Act also does not provide for a statutory right to appeal to the Supreme Court from an order of the Commercial Appellate Division. Accordingly, the Act limits the number of appeals allowed in Commercial Disputes to only one except in certain cases.
      10. The Act does not provide for any new or technologically advanced method of conducting the court procedures. The suggestions of e-filing, video conferencing of witness, and use of latest technology will go a long way in making these courts at par with the systems being followed in some countries.

“Justice delayed is justice denied” – The Act is inarguably a big step to curb this inefficiency of Indian judicial system. The Delhi High Court was the first off the blocks designating four of its benches as Commercial Divisions. It added two more benches to the Division followed by the High Court of Bombay designating judges for the Commercial Divisions. Despite the drawbacks, setting up of Commercial Courts/Divisions will accelerate economic growth, improve the image of the Indian justice system and enhance investors’ confidence in the country’s dispute resolution culture.

Authors: Saumya Kakar, Associate and Sohini Mandal, Junior Partner

Bankruptcy Bill, 2015

The Government introduced the Insolvency and Bankruptcy Bill, 2015 in Parliament on Monday (21/12/15). The current bankruptcy code in India and contains archaic laws and is spread out over multiple legislations. Due to this, India was ranked as the 136th best country for ease of conducting insolvency proceedings, as per the World Bank ranking earlier in 2015. Further, it is ranked as the 130th best country for ease of doing business, as per the same rankings (out of 180 countries). This Bill seeks to streamline the law according to global standards, making it easier to wind up or liquidate a company (both voluntarily and involuntarily), attract investment, promote entrepreneurship and push India higher in World Bank rankings. It has also been certified as a Money Bill, preventing the Rajya Sabha from stalling it, and providing for its quicker passage (a more detailed explanation of Money Bills is given at the end of the article). The important features of the Bankruptcy Code are as follows:

1.) It will amend and consolidate all bankruptcy laws and rules prevalent in other legislations (Companies Act, 2013, Sick Industrial Companies Act, 1985, and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) to become the overarching bankruptcy law.

2.) It covers individuals, companies, limited liability partnerships and partnership firms.

3.) It lays down a time limit within which the proceedings must be completed – 180 days from the date of admission of the application. This period can be extended by 90 days by the relevant authority, if it determines that “the case is of such complexity that an orderly corporate insolvency resolution process cannot be completed within one hundred and eighty days.”

4.) This time limit can be cut down to 90 days through a fast-track procedure available for some key categories.

5.) It provides for insolvency professionals who will specialize in helping sick companies. It also provides for information utilities that will collate all information about debtors to prevent serial defaulters from misusing the system.

6.) It seeks to establish an Insolvency and Bankruptcy Fund.

7.) It also provides for the creation of an Insolvency and Bankruptcy Board (the Insolvency Regulator) for regulating insolvency professionals, insolvency professional agencies and information utilities.

8.) The above Regulator will be comprised of the following authorities:

  • An Insolvency Adjudicating Authority, which will have the jurisdiction to hear and dispose of cases by or against the debtor;
  • A Debt Recovery Tribunal, which will have jurisdiction over individuals and unlimited liability partnership firms; and
  • A National Company Law Tribunal, formed under the Companies Act, 2013, which will have jurisdiction over companies and limited liability entities (Note: the SC in Madras Bar Association v. Union of India and Anr. (WP(C) No. 1072/2013), decided on May 14, 2015, upheld the constitutional validity of the NCLT and NCL Appellate Tribunal. These Tribunals will replace the Company Law Board, the Board of Industrial and Financial Reconstruction, the Appellate Authority for Industrial and Financial Reconstruction and the Company Courts in the jurisdictional High Courts. However, the NCLT and NCLAT are yet to be constituted).

9.) If any of the above forums fail to complete a process of insolvency before them within the stipulated timeline (clause 3 & 4), then the President of the forum is required to record in writing the reasons for the same.

10.) The “corporate insolvency resolution process” may be initiated by the following:

  • A financial creditor, meaning a creditor for financial facility. In this case, the basis of filing is the fact of a default to any financial creditor. This drastically changes the basis of the current provisions of “sickness” under the Companies Act, which is based on default to a majority in value of the creditors;
  • An operational creditor, meaning a creditor other than a financial creditor. Here, if there is no dispute as to a debt, and it isn’t paid within 10 days, the creditor can initiate an insolvency proves. This creates a level playing field between secured and unsecured creditors; and
  • The corporate debtor himself – the company.

11.) The Code provides for a mandatory moratorium, preventing individual creditors from taking action or selling assets, giving the courts and the company time to attempt rehabilitation. This moratorium lasts for all 180 days of the process. Previously, the Company Law Tribunal could only grant a moratorium of 120 days if it so chose – it was not mandatory.

12.) During the insolvency process, if the creditors and members resolve to voluntarily liquidate the company, then the moratorium does not apply.

Money Bill

Art. 110 of the Constitution of India, 1949, defines a Money Bill. As per this article, a Bill is a Money Bill if it contains only provisions dealing with all or any of six specific matters (Article 110 (1)(a) to (1)(f)), which are broadly related to:

  1. Imposing, abolishing or regulating a tax;
  2. Regulating government borrowings;
  3. The Consolidated and Contingency Funds of India; and
  4. Any matter incidental to any of the matters specified in the previous sub-clauses (Article 110(1)(g)).

A Money Bill can be introduced only in the Lok Sabha (Art. 109(1)), and only with the prior permission of the President. In case any question arises as to whether a Bill is a Money Bill or not, the decision of the Speaker of the Lok Sabha on this matter is final (Art. 110(3)). Once it is passed in the Lok Sabha, the Money Bill goes to the Rajya Sabha for its recommendation (along with a certificate from Speaker stating that it is a Money Bill). Unlike regular/non-money bills, Money Bills are not subject to the approval of both houses. The Rajya Sabha cannot reject or stall the Money Bill, but can only give its recommendations and return the amended Money Bill to the Lok Sabha (Art. 109). Further, as per Art. 109 (5) if the Rajya Sabha does not return the Money Bill to the Lok Sabha within 14 (fourteen) days, it is considered as passed by both houses of Parliament. If the Money Bill returns on time, the Lok Sabha can either incorporate some or all of the changes proposed by the Rajya Sabha, or reject all of them. Once the Money Bill has gone through the Lok Sabha a second time, it is deemed to be passed by both houses. Lastly, the President cannot send the Money Bill back to the Lok Sabha for consideration, as it was initially introduced with his/her permission.

Right to be forgotten: Legal Validity and Practical Challenges

Background

In 2010, a Spaniard, Mario Costeja González approached the Spanish Data Protection Agency with a complaint against Google and a local newspaper. A Google search of his name led to an auction notice of his repossessed home on the local newspaper. Costeja claimed that since the proceedings had been resolved many years ago, the search results still being available online was a breach of his privacy. The Spanish court referred the matter to the Court of Justice of European Union. Among numerous questions considered by the EU Court, the most notable was whether individuals have a right to request that their personal data be removed from accessibility via a search engine. In a landmark judgement, the EU Court held that where the information is ‘inaccurate, inadequate, irrelevant or excessive,’ individuals have the right to ask search engines to remove links with personal information about them. The court also ruled that even if the physical servers of the search engine provider are located outside the jurisdiction, the privacy rules would apply if they have branch office or subsidiary in the Member State.

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Theoretical debate on Right to be Forgotten: US v. EU

Position under EU Law

The 1995 EU Data Protection Directive contains the basis for what has evolved into the much debated right to be forgotten. Article 12 of the Directive allows a person to seek deletion of personal data once it is no longer required.[1] Later the EC released a proposal in 2012 to unify data protection across Europe under a single law, General Data Protection Regulation. The regulation is still under consideration and is expected to be adopted soon. Under this regulation, a right to erasure is provided under Article 17 which would enable the data-subject to seek deletion of data. Under Article 17, consideration regarding data controller’s legitimate business interests may be overridden by the fundamental rights of the data subject.

Position under US Law

Ever since the Costeja judgment there has been a furore over this issue. The ideological debate on the right to be forgotten can be seen a reflective of the divergent positions of EU and US on privacy. In EU, the right to be forgotten flows from the French law right to oblivion. On the other hand, in US, the approach has been to have sector specific privacy laws such as the HIPAA and Children’s Online Privacy Protection Act rather than an all encompassing law. Further, the right to be forgotten as perceived in Costeja or the proposed regulation in EU would likely be seen as contravening on the First Amendment position on free speech in the US.

As far as search results go, the position is likely to be different in US for another reason. The Communications Decency Act, 47 U.S.C. § 230, provides immunity to search engines and other Internet access providers from any liability for linking to others’ content. The theoretical criticism of the right to be forgotten also pits it against right to privacy in that it goes one step beyond. Right to privacy is only applicable to that which is private, whoever, right to be forgotten seeks to remove what is already in the public domain legitimately.

Legal basis for right to be forgotten:

There is a point of view that private information should be treated as a form of intellectual property and accordingly, individuals should be given the property rights to control their data which would include all ‘personally identifiable data.’ This could theoretically be a legal basis for the ‘right to be forgotten’ as deeming the data as intellectual property would make it applicable on all parties, not merely those with privity of contract. However, as mentioned above, this would involve significant speech restrictions and whether the publication is truthful or not would have no impact. This arrangement would run counter to First Amendment and defamation where truth is always a defence. This theory of right to be forgotten could also give rise to the notion that if data is treated as property, it can be traded in a ‘private data market.’

Ambiguities: Legal and Technical

What is personal data?

There are no precise definitions in the EU Regulation of where the right would apply. Personal data is broadly defined[2] as information that can be linked, either by itself or in combination with other available information, to uniquely identify a natural person. However, it is open to interpretation whether personal data includes information that can be used to identify a person with high probability but not with certainty, for instance, an account of a person’s history, actions or performance. Neither is the Regulation clear on whether it includes information that identifies a person not uniquely, but as a member of a small set of individuals, such as a family. The difficulty is that the EU regulations and laws tend to be deliberately broad and general, to allow for a range of interpretations appropriate for many different situations. However, this poses significant technical issues without a precise definition of the data and circumstances to which the right to be forgotten shall apply.

Who can exercise the right to be forgotten?

This is another issue that needs greater clarity. Often a piece of information could concern more than one individual and in such a scenario there could be a conflict between their respective wishes on how such data or information is to be treated. A related question is how the right to be forgotten should be balanced against the public interest in accountability, journalism, history, and scientific inquiry. Would the same standards be applicable to a regular individual, a politician and a celebrity when it comes to deletion of embarrassing reports from the past? There are also no proposed regulations that could ensure neutrality by the data controllers.

What constitutes ‘forgetting?’

The strictest way of looking at what constitutes ‘forgetting’ would be deletion of all copies of data from all sources to the point that recovering the data is not possible by any means. This may prove be impractical and a weaker way to enforce the right would involve allowing the data to survive in an encrypted form, or even allowing the data to remain unencrypted but not present in a public domain.

Impact so far:

As of July 2014, Google Inc. has begun to comply with the CJEU decision. A form that allows individuals to request the removal of their personal information from Google Inc.’s search results in the local domains is available for users. Notably, for all proper name searches within local domains of EU Member States (e.g., “google.es” or “google.co.uk”), Google Inc. has added the phrase, “Some results have been removed under data protection law in Europe” at the bottom of the search results page. It is interesting though that is the case only for the local domains of the EU member states and even within these state, one can do a search on ‘google.com’ to access the unedited search results.

Conclusion

The idea behind the right to be forgotten definitely has considerable merit, especially in the age where information is disseminated so freely and unlike the ephemeral information pre-digital era, most data continues to remain accessible. However, the right as contemplated by EU is still at a very half baked stage in terms of how exactly it would be enforced. Significant technical and conceptual challenges remain in (i) permitting a person to identify and locate personal data about them; (ii) controlling all information derived from the data in question from which the data in question could be derived; (iii) having fixed criteria for who has the right to request erasure; and, (iv) implementing the entire process of removal of all data and derived information when an authorized person exercises the right.

[1] Article 12 – Member States shall guarantee every data subject the right to obtain from the controller:….(b) as appropriate the rectification, erasure or blocking of data the processing of which does not comply with the provisions of this Directive, in particular because of the incomplete or inaccurate nature of the data; (c) notification to third parties to whom the data have been disclosed of any rectification, erasure or blocking carried out in compliance with (b), unless this proves impossible or involves a disproportionate effort.

[2] The new proposed EU regulations define personal data in art 4 as follows: “(1) ‘data subject’ means an identified natural person or a natural person who can be identified, directly or indirectly, by means reasonably likely to be used by the controller or by any other natural or legal person, in particular by reference to an identification number, location data, online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that person; (2) ‘personal data’ means any information relating to a data subject.”Data protection directive, definitions in Article 2 are “(a) ‘personal data’ shall mean any information relating to an identified or identifiable natural person (‘data subject’); an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity.”

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A short note on the FDI in MSEs

A Micro & Small Enterprise, in terms of MSMED Act, 2006 can now go ahead and issue shares imagesor convertible debentures to a person resident outside India (PROI), exceeding 24% of its paid -up capital. The only conditions which need to be fulfilled is w.r.t the sectors prohibited and the maximum limits in Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. Nonetheless, it should comply with FDI Policy, as notified by Ministry of Commerce & Industry, G.O.I., from time to time.

Further, any Industrial Undertaking, which is not an MSE and having an industrial license under the provisions of Industries (Development & Regulation) Act, 1951 for manufacturing items reserved for MSE sector, can issue shares exceeding 24% of its paid up capital with prior approval of FIPB.