US Seeks Trade Rules At WTO For E-Commerce And Cloud Computing

US Seeks Trade Rules At WTO For E-Commerce And Cloud ComputingThe General Agreement on Trade in Services (GATS) may be discussed once again at the World Trade Organization (WTO) level. This is partly due to the fact that information and communication technology (ICT) has changed the way services are delivered today in a cross border environment. This is also due to the reason that United States (U.S.) is planning to use the WTO platform for securing strong trade rules for the electronic commerce and cloud computing industry. Both of these industries are dominantly controlled by U.S. based companies and this would definitely help U.S and its technology companies.

This proposition of U.S. is troublesome and not acceptable to many nations of the world. Even India would not be happy with this arrangement especially at a time when India is reviving her electronic industry.

India has already justified its preferential market access (PMA) policy for domestic telecom equipments manufacturers. India has also formulated the merger and acquisitions (M&A) policy and guidelines 2014 for telecom sector of India. Similarly, electronic system design and manufacturing (ESDM) policy and regulations in India 2014 have also been enacted by India.

On the other hand, U.S. is planning to spearhead a robust work programme to frame trade rules to allow cross-border information flows, remove localization requirements for protecting personal data within national borders, and agree to a proper coverage of cloud computing as part of computer and related services. Regulations in some countries consider cloud computing as a telecommunications service and U.S. is anxious to get a reversal notification on this issue.

U.S. is already negotiating about these fields at Trans-Pacific Partnership (TPP) regional trade liberalization talks and Trade in Services Agreement (TISA) talks with selective countries in Geneva. However, nothing can give U.S. more leverage than a binding international treaty of WTO in this regard as almost all of the countries are Member of WTO. This also means that countries like China, India, Brazil, South Africa, Indonesia and other developing countries would be forced to align their respective laws in terms of proposed agreement.

In a restricted proposal circulated at the WTO’s Council for Trade in Services last Thursday, the U.S. has expressed its intentions to facilitate e-commerce, an area in which WTO members have remained unsuccessful in arriving at an agreement since 1998. The U.S. wants complete freedom for cross-border information flows. It says “governments should not prevent services suppliers of other countries or customers of those suppliers, from electronically transferring information internally or across borders, accessing publicly available information, or accessing their own information stored in other countries”.

More importantly, governments should not insist that “ICT service suppliers use local infrastructure, or establish a local presence, as a condition of supplying services”. Further, governments must not give priority or preferential treatment to national suppliers of ICT services in the use of local infrastructure, national spectrum or orbital resources. As far as India is concerned, all these issue are bound to be agitated against and rejected by her as they are in conflict with existing policies of India in this regard.

We at Perry4Law and Perry4Law’s Techno Legal Base (PTLB) believe that this proposal of U.S. must also to be tested on the front of civil liberties protection in cyberspace, privacy and data protection (PDF), conflict of laws in cyberspace and many more techno legal issues as well.

E-Books Laws In India

E-Books Laws In IndiaThe Digital India project by Indian government has short listed areas like education, judiciary, healthcare, etc to be taken up for development and implementation. All these fields would be strengthened by using information and communication technologies (ICT) for effective and transparent delivery of public services in India.  For instance, India would strengthen and rejuvenate Indian Judiciary by trying to establish e-courts under the Digital India project. Unfortunately, the e-courts project of India has recently face a major setback when the e-committee refused to record proceeding in courts in electronic manner.

On the positive side, the e-books project of Indian government under the Digital India project has shown some affirmative developments. Digitisation of books is also undergoing in some of the libraries of India. We have a national digital preservation policy of India that can be helpful in the digitisation drive in general and digital preservation in India in particular.

However, while performing the digitisation of traditional books and other academic materials, Indian government must keep in mind the legal mandates of Public records Act, 1993 and Information Technology Act, 2000. Similarly, there are certain legal requirements while converting, selling, distributing, uploading and making available e-books to the end users. This is more so where international users are involved as that would require compliance with laws of multiple jurisdictions.

Needless to mention, e-commerce laws of India would also be required to be followed by various stakeholders where commercial interests are involved. For instance, if an e-commerce website is selling e-books to international end users there are complicated set of laws that are applicable in such circumstances.

Further, conflict of laws in cyberspace has added its own set of problems while dealing with e-books at international and national levels. Intellectual property rights protection at the international level is really tedious when Internet and cyberspace is involved. Even a simple demand for basic electronic details of the accused offender may take months to materialise when foreign technology companies are involved.

In the international market, regulations of and litigation in the field of books publication and e-books are fast increasing. For instance, Apple was fined in Beijing court for unauthorised e-books sale. Similarly, publishers entered into a settlement with European Union for e-books price fixation. The Penguin Group also settled an e-book price escalation lawsuit recently. Amazon has also settled its dispute with Hachette recently involving e-books.

As far as India is concerned, e-commerce players like Amazon, Flipkart, etc are already engaged in selling of e-books in India. However, predatory pricing and taxation issues are still not clear in India. In fact, the Federation of Publishers’ and Booksellers’ Associations in India (FPBAI) has questioned the predatory pricing tactics adopted by Indian e-commerce players selling the books. There would be much more disputes and controversies when e-books would be involved as there is no settled law in India in this regard.

There is also great chances that the terms and conditions and other legal documents of various e-commerce players are not drafted as per Indian laws and this would create legal problems to parties dealing with the website.  In some cases these legal documents may be drafted in an anti competitive manner and may also be detrimental to the interests of the consumers. Indian government is planning to amend the consumer protection law of India to protect consumers’ rights in the e-commerce era.

At Perry4Law we have been dealing with publishing industry related legal issues in general and e-books related international and national legal issues in particular. From our experience we can just say that conversion and selling of e-books is not an easy task and these activities require techno legal compliances on the part of various stakeholders, including Indian government.

FPBAI Questions The Predatory Pricing Tactics Of E-Commerce Websites Of India

FPBAI Questions The Predatory Pricing Tactics Of E-Commerce Websites Of IndiaThe books publication industry of India is passing through a crucial and highly competitive phase. The growing popularity of e-books and sale of paper books at e-commerce websites have changed the way books were published, distributed and sold in India so far.

In the international market, regulations of and litigation in the field of books publication and e-books are fast increasing. For instance, Apple was fined in Beijing court for unauthorised e-books sale. Similarly, publishers entered into a settlement with European Union for e-books price fixation. The Penguin Group also settled an e-book price escalation lawsuit recently.

Back in India, the books distribution and wholesale channels have been severely hit by the burgeoning e-commerce business of India. While healthy competition is always welcome and is good or the consumers yet unreasonable and unethical business practices must be curbed at the very inception.

Unfortunately, Indian e-commerce websites are operating in an unregulated manner and they need to be suitably regulated as soon as possible. E-commerce websites in India are also engaging in violation of various Indian laws including taxation laws, foreign exchange laws, consumer laws and contractual laws. E-commerce websites in India are also engaging in predatory pricing thereby pushing the small business houses and businessmen out of business.

Books publishers in India have now decided to seek policy as well as legal intervention against the predatory pricing tactics of Indian e-commerce websites. The Federation of Publishers’ and Booksellers’ Associations in India (FPBAI) had recently written to Prime Minister Narendra Modi and the Ministries of Finance, Commerce, and Human Resource Development, complaining about the “questionable trade practices” adopted by e-commerce websites like Flipkart and Amazon. In fact, Myntra, Flipkart, Amazon, Uber, etc have already been questioned by the regulatory authorities of India for violating Indian laws.

S. Chand, a well-known publisher of text books, had also served a legal notice to Flipkart six months ago, accusing it of modifying discount structures, violating the clause, and retailing only their fast-selling titles. S. Chand has also snapped all ties with Flipkart and stopped providing its books to FlipKart since then. However, Flipkart continues to sell S. Chand’s books by sourcing them from wholesalers.

The FPBAI letter also seeks action to protect the publishing trade. E-commerce websites are purchasing books at lower discounts from publishers and distributors and sell the same at higher discounts, making a loss in each transaction. It is indeed a questionable activity as it smacks of the act of predatory pricing. In fact, bookstores such as Capital Book Depot in Chandigarh, Teksons and New Book Depot in Delhi have already shut their shops and many others are struggling for survival due to predatory pricing activities of e-commerce websites in India.

There is an urgent need on the part of Indian government to step in and come out with a dedicated e-commerce law of India to regulate the e-commerce activities in best possible manner. A techno legal framework is long due and Indian government has failed to provide the same so far.

India Should Regulate Taxation, Anti Competitive Practices And Predatory Pricing Of Indian And Foreign E-Commerce Websites

India Should Regulate Taxation, Anti Competitive Practices And Predatory Pricing Of Indian And Foreign E-Commerce WebsitesE-commerce in India has been in news for both good and bad reasons. It is really good to know that Indian e-commerce players have started making their own mark in the e-commerce sphere. However, it is equally alarming that e-commerce websites of India are not following the e-commerce laws of India. As a result e-commerce frauds in India have significantly increased and there is an urgent need to regulate and punish such e-commerce offences and crimes in India.

In fact, Myntra, Flipkart and many more e-commerce websites are under regulatory scanner of Enforcement Directorate (ED) of India for violating Indian laws and policies. ED has also raided two Bitcoins websites and their offices. ED believes that Bitcoins money can be used for hawala transactions and funding terror operations and this seems to be a legally plausible explanation as well.

E-commerce websites and technology companies are also under the scanner of taxation and regulatory authorities around the world. For instance, some believe that Amazon, Google and Starbucks are playing with the U.K. tax laws. Similarly, foreign companies and e-commerce portals would be required to register in India and comply with Indian laws. Indian government has also proposed establishment of Income Tax Overseas Units (ITOUs) of India in foreign countries to deal with evasion of taxes.

Transfer pricing issues have become a bone of contention for multi national corporations (MNCs) operating in India. Vodafone, Nokia and Shell have already received notices from income tax authorities of India regarding transfer pricing and other taxation issues. There are also great chances that the compulsory transfer pricing audit based on monetary threshold may be scrapped in India. Indian Tax Department has already received 232 applications from MNCs in 2013-14 for Advance Pricing Agreement.

However, if we analyse the trends in this regard, companies like Google, Facebook, Samsung etc may face more scrutiny from EU, U.S. and Indian regulators in the future. For instance, Google faced an anti trust suit for abusing its search results that was finally settled by it with the Federal Trade Commission (FTC) of United States. However, the antitrust probe initiated by the European Union (EU) is still pending a resolution.

A case has also been filed before the Competition Commission of India (CCI) against Google in for discriminatory trade practices related to its AdWords program. It has been alleged by the complainant that Google has abused its dominance by engaging in discriminatory and retaliatory practices relating to AdWords. A similar complaint was also filed by the Consumer Unity and Trust Society (CUTS) against Google before the CCI. The CCI also imposed a fine of Rs. 1 Crore upon Google for failure to supply information/ documents in the investigations. When Google planned to launch its Flight Travel Search Service in India, Indian stakeholders threatened to file a case before the CCI. Google App Vault may also raise regulatory issues if introduced in India without complying with the techno legal requirements.

Small and medium businesses and entrepreneurs of India are also facing the problem of predatory pricing undertaken by big e-commerce websites operating in India. With great financial resources, the e-commerce companies and websites offer products and services that cannot be offered in normal course of business. As a result, the small businesses cannot sell their products in the market and they are forced to quit the market. This now leaves only the big fishes to explore and monopolise the Indian market.

We at Perry4Law believe that there is an urgent need on the part of Indian government to look into this unfair practice commonly adopted by e-commerce websites in India. These practices are resulting in e-commerce frauds, violation of Indian laws and disturbing the balance of trade, commerce and business in Indian market. These unproductive, unprofessional, illegal and unethical activities cannot be allowed to operate in India anymore.

NPPA Issues Order For All Pharmaceutical Manufacturers And Firms To Register Under The Integrated Pharmaceutical Database Management System (IPDSM) Of India

NPPA Issues Order For All Pharmaceutical Manufacturers And Firms To Register Under The Integrated Pharmaceutical Database Management System (IPDSM) Of IndiaThe National Pharmaceutical Pricing Authority (NPPA) of India has been assigned the task of implementing the National Pharmaceutical Pricing Policy (NPPP), 2012 and the Drugs (Prices Control) Order 2013 (DPCO 2013). As an authority to manage and regulate these issues, NPPA is required to take all necessary measures for smooth and efficient implementation of the NPPP, 2012 and the DPCO, 2013.

Information technology has also introduced both challenges and opportunities for pharmaceutical stakeholders of India. Indian government has recently announced formulation of Electronic Health Record (EHR) Standards of India. AIIMS Bhubaneswar has also announced that it will launch Electronic Health Card for its patients. AIIMS, Delhi has introduced a system where patients can fix appointments with doctors over phone.

However, regulatory issues in these regard have been ignored by various healthcare stakeholders in India. For instance, online sale and purchase of prescribed drugs and medicines in India is happening in an unregulated manner. There are specific laws and regulatory requirements for opening of online pharmacies in India. But almost all of the online pharmacies are not following various laws of India applicable in this regard.

Although a full fledged action against illegal online pharmacies of India is still awaited yet the NPPA has issued a Notice to all pharmaceutical manufacturers to register themselves under the Integrated Pharmaceutical Database Management System (IPDSM) for online filing of returns in Form II, III, and V under DPCO, 2013. The term “manufacturers” for the purpose of this Notice/Order means any person who manufactures, imports and markets drugs for distribution or sale in the country.

Besides online filing of returns, the IPDSM would also ensure monitoring, fixing and revision of drug prices in India. The registration process is compulsory in nature and it will be open upto 31st October 2014 after which that data inputting facility shall be made available to all registered users for submission of online reports in respect of form II, III and V under DPCO 2013.

According to NPPA availability of reliable database is a necessary pre-requisite for carrying out the functions of price fixation and price revision in respect scheduled drugs; price fixation in respect of new drugs; monitoring the production and availability of scheduled formulations and the active pharmaceutical ingredients contained in the scheduled formulations; and monitoring the prices of non-scheduled formulations.

This reporting obligation on the part of pharmaceutical manufacturers is a legal obligation, which they are required to carry out with full and correct disclosure of information in a timely manner at prescribed intervals. Any default in the reporting would be deemed to be an act of contravention of the DPCO 2013 and therefore attracts penalties under the Essential Commodities Act, 1955.

Supreme Court Stays Bombay High Court Judgment That Quashed Product Advisory Issued By FSSAI

Supreme Court Stays Bombay High Court Judgment That Quashed Product Advisory Issued By FSSAIRecently the Bombay High Court stayed the scheme of product approval by Food Safety and Standards Authority of India (FSSAI) for six months after considering it as ambiguous. This created great inconvenience to FSSAI and dietary supplement, health supplement, functional food and nutraceutical industry of India. Obviously, the decision of Bombay High Court was challenged before the Supreme Court of India.

Now the Supreme Court of India has stayed the Bombay High Court judgment. A bench headed by Justice JS Khehar stayed the HC decision after FSSAI alleged that the impugned order has paralysed the mechanism to enforce food safety norms on imported food items.

The impugned product approval scheme by FSSAI initially limited the requirement of product approval for novel foods that contain ingredients which are introduced for the first time in the country or which do not have a history of safe use. However, the scope of scheme was extended to cover all categories of products which are not standardised, even if they were old and established in the market.

The HC held that the advisory to manufacturers had no force of law and FSSAI had no power to issue the impugned communication without it being ratified by the two houses of Parliament. “The order has also had the effect of paralysing almost entirely the discharge of regulatory functions by the Food Authority in relation to all the food products that are specified under Section 22 of the Act,” Solicitor-General Ranjit Kumar said.

Cyber Security Issues Of E-Commerce Business In India

Dietary And Health Supplement, Functional Food And Nutraceutical Legal And Regulatory Compliances In IndiaE-commerce business is booming in India and this is the right time to establish your own e-commerce business in India. A successful e-commerce business must take care of various techno legal issues that it is required to comply with in India. Different e-commerce segments are governed by different legal frameworks and certain well established principles of e-commerce laws of India. Unfortunately, e-commerce stakeholders of India are not complying with Indian laws and our government is also not very keen to curb such illegal activities of these e-commerce platforms.

In this article we are not discussing all those non compliance issues but are discussing a very specific but very crucial issue that has been ignored by both Indian government and e-commerce stakeholders of India for long. The issue pertains to non adoption of cyber security practices while engaging in e-commerce business in India. E-commerce websites, whether Indian or foreign, are vulnerable to diverse form of cyber attacks and crucial and sensitive customer details and information has been compromised on numerous counts due to this indifference and lack of cyber security practices. This has made them vulnerable to litigations around the world, including India.

We at Perry4Law believe that cyber breaches in India would raise complicated cyber law and cyber security issues in the near future. The cyber law and cyber security obligations of directors in India have also increased manifolds. Even companies operating in India and e-commerce platforms are required to ensure cyber law and cyber security obligations prescribed under Indian laws.

Cyber security breaches are increasing world over and India is also facing the same. Obviously, the cyber security challenges before the Narendra Modi government are tremendous and there is an urgent need to start working in this direction immediately.  Indian cyberspace must be protected on a priority basis and cyber security infrastructure of India needs robust protection. The payment gateways and banks providing banking and financial service must also be fully cyber secure. Cyber security trends of India (PDF) have highlighted various shortcomings of Indian cyber security initiatives.

However, the primary liability for non disclosure of cyber security breaches originating at e-commerce platforms is attributable to e-commerce platforms themselves. E-commerce websites and portals are required to ensure privacy and data protection (PDF) of their customers. A failure to ensure proper techno legal due diligence and e-commerce due diligence would attract both civil and criminal liabilities against e-commerce websites of India.

It is high time to draft a regulatory framework for cyber security disclosure in India for cyber breaches so that rights and interests of Indian consumers and customers are duly protected.

FedEx Corporation Pleaded Not Guilty To U.S. Charges Of Delivering Prescribed Drugs From Illegal Internet Pharmacies

FedEx Corporation Pleaded Not Guilty To U.S. Charges Of Delivering Prescribed Drugs From Illegal Internet PharmaciesIllegal online pharmacies or Internet pharmacies have become a nuisance for not only e-commerce stakeholders but also to those providing ancillary services like transport, logistics and delivery services. If the volume of transactions or delivery is tremendous, it becomes really difficult ensure that the package for delivery does not contains any illegal or prohibited good or article.

This does not mean that the e-commerce portal or the delivery service provider should not follow the laws of various jurisdictions. In fact, due to conflicts of laws in cyberspace, this task has become a herculean task and almost all of the e-commerce portals and delivery service providers are at risk of violation of laws and regulations of various countries.

The latest to add to this list is FedEx Corporation that is facing a charge of delivering prescribed drugs from illegal Internet pharmacies. However, FedEx has pleaded not guilty to such charges that include delivery of pain pills, anti-anxiety drugs and other controlled substances for illegal Internet pharmacies. FedEx was indicted by a federal grand jury on July 17 on 15 counts of conspiracy to distribute controlled substances and misbranded drugs and drug trafficking. If convicted, FedEx may face a fine of twice the gains from the conduct, alleged to be at least $820 million for it and co-conspirators.

FedEx has contended that it cannot be held responsible for the contents of the 10 million packages it transports daily and that policing customers would violate their privacy. The case against FedEx will turn on “what were the duties” of the company regarding the pharmacies that were using it to ship drugs. This is a logical approach as well because if FedEx is engaging with apparently illegal online pharmacies, it can be held liable for violation of laws of various jurisdictions, including India.

For instance, laws for opening of online pharmacy store in India are not at all followed by almost all the online pharmacies of India. In fact, the Maharashtra FDA has already approached Drug Controller General of India (DCGI) for regulating illegal online pharmacies operating in India. FDA has also written to the DCGI to seek CBI intervention in the issue of what the FDA claims is smuggling of drugs to and fro from India through websites. It is also believed that many online pharmacies websites in India are controlled by underworld and organised criminal networks.

If FedEx deals with such illegal online pharmacies operating in India it cannot subsequently claim that it was not aware of the illegal drugs and pharmaceuticals delivered by it. When the business or initiative itself is illegal, how can FedEx claim a legal dealing with the same? Similar is the case of other service providers associated with such illegal online pharmacies. They are required to comply with e-commerce due diligence and cyber law due diligence (PDF) requirements of India to escape various civil and criminal liabilities.

We have widely scattered techno legal requirements to regulate online sale and purchase of prescribed drugs and medicines in India. For instance, the digital communication channels for drugs and healthcare products in India are well regulated. Similarly, sales of medicines in India through e-commerce websites are also regulated heavily. The Indian government has in the past also constituted a high-level committee to suggest regulatory and legislative measures to check online pharmacies trading in banned drugs in India. However, even after more than 2 years of this announcement, nothing has happened in this direction and illegal online pharmacies are operating in active violation of Indian laws.

Perry4Law strongly recommends that it is high time for the Indian government to enact a dedicated e-commerce law for India that can cover online pharmacies area as well. Similarly, online pharmacies operating illegally in India and those dealing with them in any manner whatsoever must also start complying with Indian laws and laws of other jurisdictions to escape various legal liabilities.

Chinese E-Commerce Firms Alibaba And Jingdong Targets Pharmaceutical E-Commerce Market

Chinese E-Commerce Firms Alibaba And Jingdong Targets Pharmaceutical E-Commerce MarketE-commerce has many segments and online sale of medicine is just one of it. However, medicines and pharmaceuticals are very sensitive commodities to be graded freely. Therefore, there are many techno legal regulatory compliances that are applicable to online dale of medicines world over. There are specific laws for online pharmacies in India and for opening of online pharmacy stores in India.

Chinese firms and companies have become very active in the field of e-commerce. China also has better infrastructure and regulatory regime than India as far as online pharmacies are concerned. Although some computerisation efforts have been undertaken in India yet they are insufficient to manage online pharmacies regime in India.

On the other hand, leading Chinese e-commerce firms like Alibaba and Jingdong have set their sights on the pharmaceutical e-commerce market, which is worth thousands of billions of yuan, though they will first have to tackle multiple barriers in the way of entering the market. However, if they wish to target Indian market, they have to comply with techno legal requirements of Indian laws.

Beijing has imposed strict regulations on the sales of medicinal products on the internet. According to regulations, vendors must be approved by the State Food and Drug Administration and will have to possess the internet-based Drug Information Service Certificate and the Internet Drug Transaction Service Certificate to sell drugs online. As of early April, less than 170 business-to-consumer (B2C) websites had obtained the two certificates. Due to the regulation barriers, most e-commerce giants can only sell the products online on behalf of legal sellers.

While traditional e-commerce websites have a steady stream of visitors, they cannot take a share of the online pharmaceutical market. On the other hand, while traditional pharmaceutical companies have an advantage in products and certificates, they have had difficulty venturing into the B2C pharmaceutical market.

Foreign Companies And E-Commerce Portals Would Be Required To Register In India And Comply With Indian Laws

PRAVEEN DALAL MANAGING PARTNER OF PERRY4LAW AND CEO OF PTLBForeign companies and e-commerce players have been avoiding compliance with Indian laws for long by hiding behind the conflict of laws in cyberspace. Companies like Google are avoiding compliance with Indian laws even if they have established subsidiaries in India. This has become possible because we had lax laws and many loopholes in our existing laws. The Indian Companies Act, 2013 (PDF) was formulated to tackle this situation and most of its provisions have been brought into force recently to streamline the corporate culture of India.

These include the relevant Rules under various chapters of the Companies Act 2013 as well. As a result, the directors’ liability under the Companies Act, 2013 has significantly increased. Even the cyber law and cyber security obligations of the Directors of companies operating in India have been clearly mentioned under the Companies Act, 2013. Thus, the regulatory compliances under Indian Companies Act 2013 have been given a new meaning.

There are some speculations that India may open online retail and e-commerce sector very soon. However, we at Perry4Law believe that this liberty would not be a free ride but would come with the compliance requirements that various e-commerce stakeholders and foreign companies have been ignoring so far.

This is a significant indication as many retail outlets and entrepreneurs have to decide their policies and strategies accordingly. For instance, Carrefour is carefully analysing its Indian strategy these days.  Similarly, companies like Google, Amazon, Rakuten, Twitter, Facebook, etc are also trying their hands on e-commerce business. However, income tax liability of these companies is still not clear in India and the same must be clarified by the new government immediately.

Some media reports have claimed that online retailers such as the UK’s fashion and beauty store ASOS.com, Japanese e-commerce firm Rakuten.com and Overstock.com of the U.S. that sell in India without registering an Indian arm may soon have to, if the government decides on a literal interpretation of the Companies Act of 2013. Companies outsourcing work to Indian back-offices, information technology (IT) companies, and analytics hotshops may also have to follow suit.

According to section 2(42) of the new Companies Act of 2013, “any company or body corporate incorporated outside India which has a place of business in India whether by itself or through an agent, physically or through electronic mode or which conducts any business activity in India in any other manner, is classified as a foreign company”. Section 380 of the Companies Act 2013 provides that every such foreign company must register in India.

Further, Rule 2 (1) (c) of the Companies (Registration of Foreign Companies) Rules 2014 provides that for the purposes of clause (42) of section 2 of the Act, ”electronic mode” means carrying out electronically based, whether main server is installed in India or not, including, but not limited to -

(i) Business to business and business to consumer transactions, data interchange and other digital supply transactions;

(ii) Offering to accept deposits or inviting deposits or accepting deposits or subscriptions in securities, in India or from citizens of India;

(iii) Financial settlements, web based marketing, advisory and transactional services, database services and products, supply chain management;

(iv) Online services such as telemarketing, telecommuting, telemedicine, education and information research; and

(v) All related data communication services,

whether conducted by e-mail, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise;

These provisions have been incorporated as foreign companies, especially the technology companies, have been avoiding payment of taxes as per Indian laws. They have been making tremendous profits out of Indian transactions but still they contend that they are not regulated under Indian laws. Thus, these provisions were required to be formulated to covers such foreign technology companies and there is nothing wrong with their incorporation.

We at Perry4Law also believe that all Subsidiary/Joint Ventures Companies in India, especially those dealing in Information Technology and Online Environment, must mandatorily establish a server in India. Otherwise, such Companies and their Websites should not be allowed to operate in India. The Ministry of Home Affairs, India and Intelligence Bureau (IB) are already exploring this possibility.

A “Stringent Liability” for Indian Subsidiaries dealing in Information Technology and Online Environment must be established by Laws of India. More stringent online advertisement and e-commerce provisions must be formulated for Indian Subsidiary Companies and their Websites.