India: Retrospective Effect from FY 2014-15 of Payment of Bonus (Amendment) Act, 2015 Stayed by various High Courts

Brief Background

The Payment of Bonus Act, 1965 provides for the payment of statutory bonus to eligible employees. The bonus payable is to be determined on the basis of profits or on the basis of production or productivity of the establishment. The Act is applicable to factories and establishments employing at least 20 persons, although in some Indian states, the Government has extended the applicability of the law by reducing the threshold to factories and establishments employing at least 10 persons. The Act requires an employer to pay to an eligible employee a minimum bonus at the rate of 8.33% of the salary earned by the employee during the accounting year or INR 100 (USD 1.5), whichever is higher. As per law, the maximum statutory bonus can be limited to 20% of the employee’s salary.

In or about February 2013, the country faced nationwide general strikes by trade unions for removal of all ceilings under the Payment of Bonus Act, 1965. On September 2, 2015, 10 central trade unions were reported to have gone on a one-day strike demanding an increase in the wage ceiling and bonus calculation ceiling. Pursuant to these strikes, the Central Government gave assurances to the public regarding the sought amendment, also in light of the fact that the last revision of the two ceilings were made a long time ago in 2007. The Payment of Bonus (Amendment) Bill, 2015 was introduced in the Lok Sabha (House of People) of the Indian Parliament on December 7, 2015. The amendment was proposed to be made effective from April 1, 2015. However, Indian Prime Minister Mr. Narenda Modi signed off a last moment direction that the benefits should accrue from April 1, 2014, and on December 23, 2015, the Rajya Sabha (House of Ministers) of the Indian Parliament passed the bill, being effective from April 1, 2014, with a voice vote. The bill sought to amend the Payment of Bonus Act, 1965 as existing. The President of India gave his assent on the Bill on December 31, 2015 thus, making it an Act. The Payment of Bonus (Amendment) Act, 2015 as passed was published on the E-Gazette website on January 1, 2016 for notice upon the general public.

Key amendments brought about by the Payment of Bonus (Amendment) Act, 2015:

1. Eligibility Wage Ceiling increased - under the provisions of the previous Act, an employee who had worked for at least 30 days (in an accounting year) and drew a salary of INR 10,000 (Approx. USD 150) per month, was eligible to receiving statutory bonus. The amendment increases this eligibility limit to a salary threshold of INR 21,000 (Approx. USD 325) per month.
2. Ceiling for Bonus Calculation increased - under the previous Act, if an eligible employee’s salary were more than INR 3,500 (Approx. USD 55) per month, for the purposes of calculation of bonus, the salary would be assumed to be limited to INR 3,500 per month. The amendment raises this wage ceiling to INR 7,000 (Approx. USD 110) per month or the minimum wage notified for the employment under the Minimum Wages Act, 1948, whichever is higher.
3. Retrospective amendment - the amendment has been given effect from April 1, 2014.

In the year 2007, through the Payment of Bonus (Amendment) Act, 2007, the salary threshold for eligibility for for payment of bonus was increased from INR 3,500 (Approx. USD 55) to INR 10,000 (Approx. USD 150). Further, through the same amendment, the wage ceiling for computation of bonus was enhanced from INR 2,500 (Approx. USD 39) to INR 3,500 (Approx. USD 55).

Reactions from various Associations on the Retrospective Effect from FY 2014-15

Many were of the view that the retrospective nature of the amendments should have been avoided and employers should have been given adequate time to plan for such increase in their salary costs. The main concern was that employers would not have budgeted for this expense in the previous financial year (2014-2015) for which the books of accounts were already closed and taxes also paid. Such retrospective application from April 2014 would lead to financial stress, especially on the manufacturing sector where the number of workers is high.

As per media reports by The Hindu, an Indian daily, the Confederation of Indian Industries (CII) had written to the Labour Ministry on January 8, 2016 seeking a clarification to be given to allow industries to give bonus installments over the next two financial years to ease off the burden. It also demanded that the excess bonus received by employees, besides the minimum bonus, be adjusted in the next two financial years so as to “accommodate the newer workforce using the same or reduced allocable surplus.” In another report, a FICCI representative had reportedly stated that the industry had urged the government to amend the law prospectively from 2016-17 rather than give it a retrospective effect. The Micro, Small and Medium Enterprises (MSME) chamber, Indian Industries Association (IIA) in the Indian state of Uttar Pradesh is also known to have strongly opposed the retrospective implementation of the amendment, stating that MSMEs have no means to pay such bonus in arrears, while the Government by way of collecting taxes can pay the bonus. Even NASSCOM reportedly made representations on the retrospective applicability, financial impact, administrative challenges and the ambiguities in the revised Act to the concerned ministries.

Stay on Retrospective Effect from April 1, 2014

Upon representations from various industry bodies by way of writ petitions in various State High Courts challenging the retrospective effect from FY 2014-15, several high courts have stayed the retrospective operation temporarily.

For all of the above stay orders, it is clarified that the amendment would take effect from the financial year 2015-16 onwards, and not 2014-15 as earlier stipulated.

Thus, within a period of two to four months, six states in India have already obtained a stay on the retrospective operation of the amendment from FY 2014-15. It seems it is only a matter of time till all states follow suit. Meanwhile, the Indian Government’s continuing focus on labour law reforms calls for attention to a few important proposed changes to the Indian labour laws including the Labour Code on Wages Bill, 2015 which seeks to consolidate, simplify and rationalise various labour laws in India pertaining to wages, namely, the Payment of Bonus Act, 1965, Minimum Wages Act, 1948, Payment of Wages Act, 1936 and the Equal Remuneration Act, 1976.With the financial management of even private companies at stake, this area of law is surely one to watch out for.

India: Mr. Vikrant Rana delivers a lecture to a group of 120 women at TIFAC

Mr. Vikrant Rana, Managing Partner at S.S. Rana & Co., recently spoke to a group of 120 women scientists at the Technology Information, Forecasting and Assessment Council, New Delhi on the topic “Introduction to Trademarks”. The talk initially started with the basics of each IP in India, and then a detailed description on Trademark laws with special attention paid to the Procedural requirements in respect to trademark registration.

TIFAC, an acronym for Technology Information, Forecasting and Assessment Council is an autonomous organization set up in 1988 under the Department of Science & Technology to look ahead in technologies, assess the technology trajectories, and support technology innovation by network actions in select technology areas of national importance. TIFAC continues to strive for technology development of the country by leveraging technology innovation through sustained and concerted programmes in close association with academia and industry.

As recently as last month, the Ministry of Women and Child Development awarded the Nari Shakti Puraskar to TRIFAC on International Women’s Day for its work on KIRAN-IPR. KIRAN-IPR scheme is being implemented by the Patent Facilitating Center (PFC) of the TIFAC. It strives to recognize the contributions of women in the field of science and serves as a catalyst to encourage more women to seek a career in science and technology. About 400 women have already been trained under the scheme, out of which a total of 138 have cleared the Patent Agent Examination conducted by the Indian Patent Office. 

Delhi High Court stays the abandonment of inexplicably huge amount of Trademark Application

Earlier this week we had reported that the Indian Trade Marks Registry, after abandoning a huge number of applications, had given further opportunity by releasing a public notice dated April 4^th, 2016 to all the parties who have been adversely affected by it. By the said notice, Mr. Om Prakash Gupta, Controller General of Patents, Designs and Trademarks, had sought representations from applicants whose applications have been erroneously deemed as abandoned, the deadline for which was set on April 30, 2016.

However, on April 5^th, 2016, a writ petition was filed by the Intellectual Property Attorneys Association & Others in which, Honorable Justice Mr. Manmohan of the Delhi High Court, after hearing the contentions from both the sides and noticing the startling figures of disposal within a very short period of time, stayed the orders of abandonment passed by the Trade Mark office on or after March 20^th, 2016. The learned Judge further added that the Office shall not treat any Trademark application as abandoned without proper notice to an affected party as provided under Sections 21, 128, and 132 of the Trade Marks Act, 1999.

Total number of disposals from March 20 to the April 5, 2016 are –

Branch	Applications Disposed
Ahmedabad	15850
Chennai	47944
Delhi	57675
Kolkata	14851
Mumbai	57588
Total Applications	193908

The said copy of the order dated April 5, 2016 can be accessed here.

Telefonaktiebolaget LM Ericsson v. Competition Commission of India

Delhi High Court: CCI has Jurisdiction to hear Complaint against Ericsson for Patent Rights Abuse

In a recent judgment delivered by the Delhi High Court on March 30, 2016 in the case of Telefonaktiebolaget LM Ericsson v. Competition Commission of India (W.P.(C) 464/2014 & CM Nos.911/2014 & 915/2014), it was held that although while passing an order, the Competition Commission of India (hereinafter referred to as the ‘CCI') did not form a prima facie view including one with respect to its jurisdiction to entertain the information/complaint, the Delhi High Court in the present proceedings was not in a position to supplant its views over that of the concerned authority.

Brief Facts of the Case

The present judgment arose out of petitions filed by Telefonaktiebolaget LM Ericsson (hereinafter referred to as ‘Ericsson’), a company incorporated under the laws of Sweden, against the orders dated November 12, 2013, and January 16, 2014, passed by the CCI under Section 26 (1) of the Competition Act, 2002. The said orders were passed pursuant to information filed by Micromax Informatics Ltd. and Intex Technologies (India) Ltd alleging abuse of dominance by Ericsson with its large portfolio of Standard Essential Patents (hereinafter referred to as ‘SEPs’) and demanding heavy royalties. Ericsson has on the other hand claimed that its patents have been infringed by Micromax and Intex. The information filed by Micromax and Intex led the CCI to pass the aforesaid impugned orders directing the Director General, CCI, to investigate the matter regarding the violation of the provisions of the Competition Act. Thus, aggrieved and holding that the impugned orders passed by CCI are without jurisdiction as the commencement of any proceedings in relation to a claim of royalty by a proprietor of a patent would fall within the scope of Patents Act, 1970, Ericsson filed a petition before the Delhi High Court.

Submissions on Behalf of Ericsson

• The Patents Act is a special act and contains comprehensive provisions for addressing all the matters including protecting the interests of consumers and general public whereas Competition Act has been enacted as a general law to promote and sustain competition in the market and to prevent practices having an adverse effect on competition
• Patents Act, specifically Sections 83-90, 92 and 92 A, contains provisions to adequately redress the grievances of any person in respect of non-availability of rights to use a patent on reasonable terms and the Controller General of Patents, Designs and Trade Marks and/or a Civil Court were vested with the function and the power to remedy any grievance relating to a patentee’s demand for excessive or unreasonable royalty by grant of compulsory license and the CCI on the other hand had no jurisdiction to grant such relief.

Decision of the Delhi High Court

The central challenge in these petitions is with respect to the jurisdiction of CCI to entertain complaints of Micromax and Intex under the Competition Act. The Delhi High Court, while deciding that the CCI possesses jurisdiction, held the following:

1. Ericsson is an enterprise within the meaning of Section 2(h) of the Competition Act as it possesses a large portfolio of patents and engaged in developing technologies and acquiring patents which fall under the wide definition of goods under the Sale of Goods Act, 1930, and movable property under General Clauses Act, 1897. The proceedings initiate by the CCI for violation of Section 4(1) of the Competition Act could not, at the threshold, be held to be without jurisdiction on account of Ericsson not being an enterprise within the meaning of Section 2(h) of the Competition Act.
2. The remedies provided under Section 27 of the Competition Act for abuse of dominant position are materially different from the remedies as available under Section 84 of the Patents Act. The remedies under the two enactments are not mutually exclusive and grant of one is not destructive of the other.
3. In the absence of any irreconcilable conflict between the two legislations, the jurisdiction of CCI to entertain complaints for abuse of dominance in respect of patent rights could not be ousted.
4. The contention that disputes between the parties being the subject matter of pending suits could not be entertained by CCI, is rejected. The proceedings under the Competition Act before the CCI are not in the nature of a private lis and that the proceedings in the suits filed by Ericsson and the proceedings before CCI are not mutually exclusive. It is not necessary that an adverse finding against Ericsson by CCI would necessarily result in the grant of relief as prayed for by Intex or Micromax.
5. The scope of enquiry before CCI would obviously be limited to whether Ericsson has abused its dominant position and, if so found, CCI may issue orders as contemplated under Section 27 of the Competition Act.
6. The question whether there is any abuse of dominance is solely within the scope of the Competition Act and a civil court cannot decide whether an enterprise has abused its dominant position and pass orders as are contemplated under Section 27 of the Competition Act.
7. Merely because certain reliefs sought by Micromax and Intex before CCI are also available in proceedings under the Patents Act also does not exclude the subject matter of the complaints from the scope of the Competition Act. An abuse of dominant position under Section 4 of the Competition Act is not a cause that can be made a subject matter of a suit or proceedings before a civil court.
8. The CCI cannot be faulted for proceeding on the basis that Ericsson holds the SEP’s that it asserts it holds. At any rate, Ericsson cannot be heard to complain against CCI proceeding on such basis.

In our earlier newsletters titled ‘Patent Infringement War Between Ericsson and Micromax’ in Issue 14 Volume V and available here, ‘iBall - Ericsson Not FRANDS’ in Issue 36 Volume VII and available here, and ‘Jurisdiction of Competition Commission of India to Decide Royalty Rates in Patent Licensing Agreements’ in Issue 08 Volume VI and available here, we had covered how Ericsson has been initiating multiple litigation against several telecommunication companies in India such as Micromax, iBall, Intex, Xiaomi etc. for recovery of royalty in respect of SEPs.  

In the present case, it was concluded by the Delhi High Court that while it accepts that at the stage of passing an order, the CCI “has to form a prima facie view and this would include a view as to its jurisdiction to entertain the information/complaint, which it has not done’, the Delhi High Court in the present proceedings under Article 226 of the Constitution of India was not in a position to supplant its views over that of the concerned authority. The Delhi High Court, while holding that CCI has clear jurisdiction, also clarified that “nothing stated herein should be construed as an expression of opinion-prima facie-or otherwise on the merits of the allegations and all observations and that all observations are in context of jurisdiction of CCI to pass the impugned orders”.

      The abovementioned judgment of the Delhi High Court can be accessed here.

India: 100% FDI Permitted in E-Commerce Retailing

New Delhi                                                                                         March 29, 2016

On Tuesday, March 29, 2016, a major development took place regarding the Foreign Direct Investment (FDI) policy and the e-commerce sector in India. As reported by leading Indian newspapers like The Hindu and The Times Of India, the Government of India clarified its position on FDI in the e-commerce sector, that is, a market-place where buyers deal with sellers directly in the absence of any physical infrastructure. The Government has permitted 100% FDI in the market-place format of e-commerce retailing through the automatic route in an attempt to increase foreign investment in the e-commerce sector. The clarification came in the form of a press note titled ‘Guidelines for Foreign Direct Investment (FDI) on E-Commerce’ issued by the Department of Industrial Policy and Promotion (DIPP) on FDI in online retail models to support the aforementioned move of the Government. This is a much welcome move as it would encourage foreign investment and foreign exchange inflows and act as a catalyst in the growth journey of the nation.

As reported by us in our earlier newsletter dated February 15, 2016 (Volume VIII, Issue No. 07) which can be accessed here, the DIPP had replied to the Delhi High Court stating that e-commerce websites are not recognized in the FDI policy of India, meaning thereby that no FDI would be permitted for any company that is engaged in multi-branding retail in the e-commerce sector. As per the Consolidated FDI Policy Circular 2015 (FDI Policy) released by the DIPP earlier, 100% FDI was allowed only in the business-to-business (B2B) model and not the business-to-consumer (B2C) model or retail trading through the automatic route.

The Government’s latest move removed the barrier on 100% FDI in e-commerce retail trading/B2C model in the following cases:

• Where a manufacturer sells its products manufactured in India through e-commerce retail.
• Where a single brand retail trading entity, operating via brick and mortar stores, undertakes retail trading through e-commerce.
• Where an Indian manufacturer sells its own single brand products through e-commerce retail. Here, it was clarified that an Indian manufacturer would be the investee company that is the owner of the Indian brand and manufactures in India a minimum of 70% of its products in-house and sources a maximum of 30% from Indian manufacturers.

In order to bring clarity, the DIPP came out with the definition of the following terms:

• E-Commerce - The buying and selling of goods and services including digital products over a digital and electronic network.
• E-Commerce Entity - A company incorporated under the Companies Act, 1956/2013 or a foreign company covered under Section 2(42) of the Companies Act, 2013, or an office, branch or agency in India as per Section 2(v)(iii) of the Foreign Exchange Management Act, 1999, owned or controlled by a person who is resident outside India.
• Inventory-Based Model of E-Commerce - An e-commerce activity where the inventory of goods and services is owned by an e-commerce entity and is sold to consumers directly.
• Market-Place Model of E-Commerce - The providing of an IT platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyers and sellers. A market-place entity will be permitted to enter into transactions with sellers that are registered on its platform on a business-to-business basis, the DIPP added.

  The DIPP came up with a few conditions as well which are as follows:

• Digital and electronic networks will include all networks of computers, TV channels and internet applications used in an automated manner like web pages, mobiles etc.
• Market-place e-commerce entity will be permitted to enter into transactions only with sellers registered on its platform on a B2B basis.
• E-commerce market-place will cover areas like support services to sellers regarding warehousing, logistics, order fulfillment, call center services, payment collections etc.
• E-commerce entity providing a market-place will not exercise ownership over the inventory (goods purported to be sold). An ownership of the inventory will convert the business into an inventory-based model.
• E-commerce entities will not be permitted to sell more than 25% of the sales made through its market-place from one vendor or their group companies.
• For goods and services being made available for sale electronically on websites in a market-place model, the name, address and contact details of the seller will have to be provided. Delivery of goods to customers, post-sales and customer satisfaction will be the responsibility of the seller itself.
• The payments received for sales in the market-place model, payments for sale will be facilitated by the e-commerce entity conforming with the guidelines of the Reserve Bank of India. 
• Any warrantee or guarantee of the goods and services sold in the market-place model will be the responsibility of the seller.
• E-commerce entities providing a market-place will not directly or indirectly influence the sale price of goods or services and will have to maintain a level playing field.

100% FDI under the automatic route is only permitted in the market-place model of e-commerce and not yet in the inventory-based model of e-commerce. The online market-place has already witnessed huge foreign investments by global players as well as homegrown players operating in the market-place.  Also, a result of this development would be that foreign firms will now be able to set up e-commerce companies without an Indian partner and homegrown companies will now be capable of being owned completely by foreign firms.

However, a direct repercussion of the abovementioned conditions is that the e-commerce entities will not be allowed to directly or indirectly influence the sale price of goods or services and will have to maintain a level playing field. This could end up in such entities not being able to provide its customers huge discounts and offers on goods including digital and electronic items anymore or end the days of jaw-dropping discounts on electronics like smartphones and televisions. As a result, online prices will come to be on par with the neighbourhood retailer offers. Further, advertising openly about big sale days may also not happen. This would call for a big change in the existing business model, said Mr. Kishore Biyani, CEO of Future Group, running the country's largest brick-and-mortar retail company. What is yet to be seen is the consumers’ reaction to such a move resulting in the end of discount-induced binge-shopping and the corresponding effect of the same on the e-commerce entities. The above mentioned decision is stated to have come into effect immediately from March 29, 2016.

The aforementioned guidelines can be accessed here.

Indian Patent Office going paper-less

As per the notification issued on March 31, 2016 by the Office of Controller General of Patents, Designs and Trademark, auto-allotment system is implemented from April 01, 2016 in order to streamline the allotment of patent application to examiners for examination.

The First Examination Reports (FERs) will now be issued electronically by respective Controllers and sent to respective agents/applicant through e-mails only. The first examination report will also be available on official website (lnPASS).

Further, response to FER shall be sent to the original jurisdiction to which the application belongs through front office counter or be filed through comprehensive e-filing system.

Source: http://www.ipindia.nic.in/iponew/officeOrder_232016_01April2016.pdf

S.S. Rana & Co shares Holi festivities with the ‘third gender’

India’s transgender minority have been a part of South Asia’s culture for thousands of years. Transgender is generally described as an umbrella term for persons whose gender identity, gender expression or behavior does not conform to their biological sex. They are celebrated in the sacred Hindu texts like the Mahabharata and the Ramayana and held powerful position in courts of the Mughal Empire.

But with the world taking a turn towards modernity, their social fortunes had changed towards obscurity. With the colonial government passing the Criminal Tribes Act, 1871 classing all eunuchs as criminal, they were ostracized from all forms of social life and mostly survived in close knit communities of their own.

But over the course of time, the people of India still regarded them as auspicious and since times immemorial have asked them to bless celebrations such as marriages and births. The attitude of acceptance towards them was institutionalized when the Supreme Court of India, in the case of National Legal Services Authority v. Union of India, WP (Civil) No 604 of 2013, declared transgendered people to be officially called the ‘third gender’, giving them a right to self-identification of their gender. This move was seen as a big step towards gender equality in India, the effects of which can be felt on social media, as today we have a transgender police inspector, a transgender mayor, a transgender college principle and even a transgender music band; something that would have been unthinkable even a decade ago.

At S.S. Rana & Co., keeping in line with our traditions, and all inclusive policy shared the festivities of Holi with a few members of the third gender.