VALLIAMMAI PALANIAPPAN

INTERN, VNS LEGAL

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S. No.

Topic Page No.

Date

1 Validity of Non-compete Clause in India

03 18-06-16

2 Stamp Duty – Lease, Sale, Loan, Mortgage, Hypothecation, Pledge, share purchase agreement, share holders agreement, share subscription agreement

07 20-06-16

3 Validity of agreement without stamp duty 18 22-06-16

4 Rectification deed for a property document - Comment

21 23-06-16

5 Comments on Sanction Letter 21 24-06-16

6 Consultancy Agreement 21

25-06-16

7 Should Softex form be filed after debonding STPI? – Comment

24 27-06-16

8 Accounts that NRI can open – Foreign Exchange (Deposit) Regulation, 2016

26 29-06-16

9 Permitted credits and debits – NRI – Foreign Exchange (Deposit) Regulation, 2016

40 29-06-16

10 Enforceability of contractual obligations and process/costs involved in the same in the state of Tamil Nadu

44 30-06-16

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Validity of Non-Compete Clause in India INTRODUCTION:

Under the wider ambit of the Contractual Law which gives perseverance to different clauses in an agreement, the non-compete clause stands erect neither leaning nor bending with perpetual sanctity. But enhancing its validity especially in Employment agreement is a minute scrutinization. By virtue of this non-compete clause, the employee undertakes and gives his acceptance to the condition of the employer that during the course of the employment or even after he leaves the job of the employer, he will not be the competitor of the employer. The non-compete clause finds place under the agreements and contracts throughout the globe. .

But the irony that exists with the Indian legal system is that, this covenant stands in contradiction with Section 27 of the Indian Contracts Act, 1872 which states that, an agreement which imposes any kind of restriction on exercising a lawful profession or trade should be declared void. Hence the objective of this paper is to discuss the validity of the non-compete clause in India.

NON-COMPETE CLAUSE:

A non-compete clause refrains the employee to compete or pursue similar line of profession, trade or business against his employer, practically for a given period of time and within the prescribed geographical line.

For an employee, it can cause an inadvertent damping effect on entrepreneurship, by refraining him from leaving the job to launch his own business. It may also result in a situation where the employee finds hard to have a livelihood.

From the employer’s stance, it helps them by preventing employees from taking trade secrets, commercial relationship or customer data to the rival firms when employees cease their service.

VIOLATION OF RIGHTS UNDER INDIAN CONSTITUTION:

The right to privacy1 of the employer is being violated, if such non-compete clause is said invalid. On the other hand, if the non-compete clause is said valid, the right to livelihood2 of the employee is being violated. However, between the employer’s right to

1 Art. 21 Of Indian Constitution 2 Ibid

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protect his confidential information from competitors and a person’s right to earn his livelihood, the latter will any time prevail over the former.3

PROVISION OF ICA – A GLANCE:

The concerned provision4 of The Indian Contract Act, 1872 reads as follows:

”Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.”

In the garb of confidentiality, an employer cannot be allowed to perpetuate forced employment, as it is hit by Section 27. There is nothing in the wording of Section 27 to suggest that the principle stated therein does not apply when the restraints is for a limited period only or is confined to a particular area. Such matters of partial restriction have effect only when the facts fall within the exception to the Section.

Therefore, generally speaking, section 27 of the Indian Contract Act imposes a restriction on all Employment agreement from any negative covenant of non-competition and the test for measuring the validity of such restriction lies on the Indian judiciary.

EXCEPTION TO THE RULE:

The restraint imposed on freedom of trade and business, has been recognised as valid in certain circumstances.

Exception 1 – The first of such circumstances is contained in the statutory exception to Section.27, which provides that, if a party sells the goodwill of his business to another, he can agree with the buyer that he will not carry on a similar business within the specified local limits, so long as the buyer, or any person deriving title to the goodwill, which has been transferred by him for good consideration.

Exception 2 – The second exception has been carved out by courts, by subjecting Section 27 to a less literal construction, and pertains to employment relationships. The restrictions that are to operate only while the employee is contractually bound to serve his employer are never regarded as being in restraint of trade.5 Therefore where a clause imposes a partial restraint, prohibiting the employee from performing services in the same area of business, as that of the employer, during the stipulated period of agreement, such restraint would not violate Section 27.

3 Desiccant Rotors International Pvt. Ltd. V. Bappaditya Sarkar 4 S.27 OF ICA,1872 5 Niranjan Shankar Golikari v. Century Spinning & Mfg. Co. , 1967 AIR 1098, 1967 SCR (2) 378

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Exception 3 – The third exception relates to the restrictions on a franchisee’s right to deal with competing products during the subsistence of the franchise agreement. While pronouncing a judgment6, the Apex court held that some term of commercial contracts have passed into the accepted currency of contractual relations, and aim at promoting trade and business. Such terms due to their nature and purpose cannot be said to enter into the field of restraint of trade. In this case,7 it was held that a negative stipulation in a franchising agreement, restraining the franchisee from dealing with competing goods, during the subsistence of the franchising agreement, could not be regarded as restraint of the franchisee’s right to trade.

LEGAL STATUS:

Whenever a law stands in contradiction with a prevailing custom, then the rescue operation is generally taken care by the third and most important pillar of democracy i.e. Judiciary. Therefore, here also the contravention between Section 27 and the negative covenant is being handled by the Judiciary through different leading cases.

In Krishan Murgai v. Superintendence Company of India8, the Delhi High Court deliberated over whether a contract of employment, entered into by the appellant with the respondent, which prohibited him from engaging in similar business as that of the respondent, during his employment, and for a further period of 2 years after the termination of his employment was violative of Section 27 of the ICA. The court held that, Section 27 does not distinguish between reasonable or unreasonable restraint of trade and therefore any restraint imposed on the employee after the term of employment, would prima facie be void and unenforceable.

In Star India Pvt. Ltd. V. Laxmiraj Seetharam Nayak & Anr9, the Bombay High Court had to determine whether an injunction could be granted in furtherance of a negative stipulation, in the nature of a non-compete clause, in an employment agreement. The Bombay High Court that the injunctive relief sought would be granted where its effect would be to compel the employee to continue in the services of the employer, against his will.

In Taprogge Sesellschaft MBH v. LAEC India Ltd10, the Bombay High Court held that a restraint operating after termination of the contracts to secure freedom from competition from a person, who no longer worked within the contract, was void. The court refused to enforce the negative covenant and held that, even if such a covenant was valid under German law, it could not be enforced in India.

6 M/s Gujarat Bottling Co. Ltd. v. The Coca Cola Co., 1995 AIR 2372, 1995 SCC (5) 545 7 Ibid 8 AIR 1979 Delhi 232 9 2003 (3) BomCR 563, 2003 (3) MhLj 726 10 AIR 1988 Bom 157

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Although the need to protect contractual autonomy and liberty has been repeatedly expounded by Indian courts, non-compete clauses have been consistently held to be invalid, by the virtue of Section 27 of the ICA.

Considering the developed social, legal and corporate circumstances, and the required confidentiality and the integrity of the employments, the judiciary has inclined its view towards giving some regard to the non-compete agreements.

In the case of Niranjan Shankar Golikari v. The Century Spinning and Manufacturing Company Ltd.,11 the Hon’ble Supreme Court observed that – “restraints or negative covenants in the appointment or contracts may be valid of they are reasonable”.

Further in one case – V.F.S. global services Pvt. Ltd.12, the Bombay High Court established the principle that a restraint on the use of trade secrets during or after the cessation of employment does not tantamount to a “restraint on trade” under Section 27 of the Act and therefore can be enforceable under certain circumstances.

In the case of Mr. Diljeet Titus, Adv v. Mr. Alfred A Adebare & Ors.,13 Delhi High Court held that, “The real test was the degree of employment control to determine whether it was a contract of service...” .

Like these there are several other judgments of various High courts which have laid down certain tests or guidelines to check the validity and legality of imposition of restrictions on such non-competing agreements. It shows that Indian courts may in certain circumstances enforce confidentiality agreements intended to protect an employer’s proprietary rights.

18-06-2016

11 1967 AIR 1098, 1967 SCR (2) 378 12 2008 (2) BomCR446, 2007 (2) CTLJ 423 Bom 13 130 (2006) DLT 330, 2006 (32) PTC 609 Del

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STAMP DUTY

LEASE INDIAN STAMPS ACT, 1899 –

2(16) "Lease" means a lease of immovable property, and includes also-

(a) a patta;

(b) a kabuliyat or other undertaking in writing, not being a counterpart of a lease, to cultivate, occupy, or pay or deliver or pay or deliver rent for, immovable property;

(c) any instrument by which tolls of any description are let;

(d) any writing on an application for a lease intended to signify that the application is granted;

STAMP DUTY FOR LEASE – BARE ACT – SCHEDULE I - 35,61

35. Lease, including an under-lease or sub-lease and any agreement to let or sub-let- (a) where by such lease the rent is fixed and no premium is paid or delivered-

(i) where the lease purports to be for a term of less than one year; The same duty as a Bond (No.15) for the whole amount payable or deliverable under such lease

(ii) where the lease purports to be for a term of not less than one year but not more than three years; (iii) where the lease purports to be for a term in excess of three years; (iv) where the lease does not purport to be for any definite term;

The same duty as a Bond (No.15) for the amount or value of the average annual rent reserved

The same duty as a Conveyance (No. .23) for a consideration equal to the amount or value of the average annual rent reserved The same duty

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as a Conveyance (No. 23) for a consideration equal to the amount or value of the average annual rent which would be paid or delivered for the first ten years if the lease continued too long

(v) where the lease purports to be in perpetuity; The same duty as a Conveyance (No. 23) for a consideration equal to one fifth of the whole amount of rents which would be paid or delivered in respect of the first fifty years of the lease

(b) where the lease is granted for a fine or premium or for money advanced and where no rent is reserved; (c) where the lease is granted for a fine or premium or for money advanced in addition to rent reserved.

The same duty as a Conveyance (No. 23) for a consideration equal to the amount or value of such fine or premium or advance as set forth in the lease

The same duty as a Conveyance (No. 23) for a consideration equal to the amount or value of such fine or premium or advance as set forth in the lease, in addition to the duty which

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would have been payable on such lease if no fine or premium or advance had been paid or delivered. PROVIDED that, in any case when an agreement to lease is stamped with the ad valorem stamp required for a lease, and a lease in pursuance of such agreement is subsequently executed, the duty on such lease shall not exceed eight annas

EXEMPTIONS

(a) Lease, executed in the case of a cultivator and for the purposes of cultivation (including a lease of trees for the production of food or drink) without the payment or delivery of any fine or premium, when a definite term is expressed and such term does not exceed one year, or when the average annual rent reserved does not exceed one hundred rupees. 134[* * *]

61. Surrender of lease- (a) when the duty with which the lease is chargeable does not exceed five rupees. (b) in any other case

The duty with which such lease is chargeable

Five rupees

63. Transfer of lease by way of assignment and not by way of under-lease. The same duty as a

Conveyance (No. 23) for a consideration equal to the amount of the consideration for the transfer

EXEMPTION Transfer of any lease exempt from duty.

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23. Conveyance [as defined by section 2(10)], not being a Transfer charged or exempted under No. 62, -

where the amount or value of the consideration for such conveyance as set forth therein does not exceed Rs. 50.

Eight annas

where it exceeds Rs. 50 but does not exceed Rs. 100 One rupee

Do

Do

Do

Do

Do

Do

Do

Do

Do

100

200

300

400

500

600

700

800

900

do

do

do

do

do

do

do

do

do

200

300

400

500

600

700

800

900

1000

Two rupees

Three rupees

Four rupees

Five rupees

Six rupees

Seven rupees

Eight rupees

Nine rupees

Ten rupees

and for every Rs. 500 or part thereof in excess of Rs. 1,000 Five rupees

EXEMPTION

Assignment of copyright by entry made under 123the Indian Copyright Act, 1847, section 5. Co-partnership-deed. See Partnership (No. 46)

TNREGINET

Categories of Documentt Stamp Duty Regn Fee 14 Lease

Lease below 30 years

Lease upto 99 years

Lease above 99 years

1 % } on the total amount

4 % } rent,premium, fine

8 % } etc.,

1% subject to a maximum of Rs.20000/-

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Categories of Document Stamp Duty Registration Fee 1 Conveyance (Sale) 7% on the market value of the

property

1% on the market value of property.

LOAN 8. Bonds, debentures or other securities issued on loans under Act 11 of 1879

(1) Notwithstanding anything in this Act, any local authority raising a loan under the provisions of the Local Authorities Loan Act, 1879, or of any other law for the time being in force, by the issue of bonds, debentures or other securities, shall, in respect of such loan, be chargeable with a duty of23[one per centum] on the total amount of the bonds, debentures or other securities issued by it, and such bonds, debentures or other securities need not be stamped and shall not be chargeable with any further duty on renewal, consolidation, sub-division or otherwise.

(2) The provisions of sub-section (1) exempting certain bonds, debentures or other securities from being stamped and from being chargeable with certain further duty shall apply to the bonds, debentures or other securities of all outstanding loans of the kind mentioned therein, and all such bonds, debentures or other securities shall be valid, whether the same are stamped or not:

PROVIDED that nothing herein contained shall exempt the local authority which has issued such bonds, debentures or other securities from the duty chargeable in respect thereof prior to the twenty-sixth day of March, 1978, when such duty has not already been paid or remitted by order issued by the Central Government.

(3) In the case of willful neglect to pay the duty required by this section, the local authority shall be liable to forfeit to the government a sum equal to ten per centum upon the amount of duty payable, and a like penalty for every month after the first month during which the neglect continues. MORTGAGE INDIAN STAMPS ACT, 1899 –

17) "Mortgage-deed" includes every instrument whereby, for the purpose of securing money advanced, or to be advanced, by way of loan, or an existing or future debt, or the performance of an engagement, one person transfers, or creates, to, or in favor of, another, a right over or in respect of specified property;

6 Agreement to Sale Rs.20 1% on the money advanced(1% on total consideration if possession is given)

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40. Mortgage-deed, not being 138[an agreement relating to deposit of title deeds, pawn or pledge (no. 6)] Bottomry bond (No. 16), Mortgage of a crop (No. 41), Respondentia bond, (no. 56), or Security bond (No. 57)-

(a) when possession of the property or any part of the property comprised in such deed is given by the mortgagor or agreed to be given;

The same duty as a Conveyance (No. 23) for a consideration equal to the amount secured by such deed

(b) when 139[* * *] possession is not given or agreed to be given as aforesaid; Explanation: A mortgagor who gives to the mortgagee a power-of-attorney to collect rents or a lease of the property mortgaged or part thereof, is deemed to give possession within the meaning of this Article. (c) when a collateral or auxiliary or additional or substituted security, or by way of further assurance for the above-mentioned purpose where theprincipal or primary security is duly stamped- for every sum secured not exceeding Rs. 1,000; and for every Rs. 1,000 or part thereof secured in excess of Rs. 1,000

The same duty as a Bond (No.15 for the amount secured by such deed Eight annas Eight annas

EXEMPTIONS

(1) Instrument, executed by persons taking advances under the Land Improvement Loans Act, 1883, or the Agriculturists' Loans Act, 1884, or by their sureties as security for the repayment of such advances. (2) Letter of hypothecation accompanying a bill of exchange. 140[* * *]

TNREGINET

.Deposit of Title Deed 0.5% on loan amount

subject to a maximum of Rs.25000/-

1% on loan amount subject to a maximum of Rs 5000/-

HYPOTHECATION Agreement or Memorandum of an Agreement-

(a) If relating to the sale of a bill of exchange.

(b) If relating to the purchase or sale of a Government security;

One rupee.

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(c) If relating to the purchase or sale of shares, scrips, stocks, bonds, debunture stocks or any other marketable security of a like nature in or of any incorporated company or other body corporate.

(i) when such agreement or memorandum of an agreement is with or through a member or between members of a Stock Exchange recognized under the Securities Contracts(Regulation) Act, 1956(Central Act 42 of 1956);

(ii) in other cases;

(d) If relating to the purchase or sale of cotton including pods or kapas(unginned cotton);

(e) If relating to the purchase or sale of bullion or specie;

Subject to a maximum of fifty rupees, thirty paise for every Rs.10,000 or part thereof of the value of the security at the time of its purchase or sale, as the case may be.

Fifteen paise for every Rs.2,500 or part thereof of the value of the security at the time of its purchase or sale, as the case may be.

Fifty paise for every Rs.2,500 or part thereof of the value of the security at the time of its purchase or sale, as the case may be.

Thirty paise for every unit of transaction or part thereof.

(i) Ten paise for every unit of kilograms of silver or part thereof.

(ii) Fifty paise for every unit of one kilogram of gold or part thereof.

(iii) One rupee for every unit of 250 Sovereigns or part thereof.

Fifty paise for every unit of 25 metric

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(f) If relating to the purchase or sale of oilseeds:

(i) Groundnuts;

(ii) Linseed;

(iii) Castor seed;

(iv) Cotton see;

(g) If relating to the purchase or sale of yarn of any kind, non-mineral oils or spices of any kind;

(h) If relating to the purchase or sale of Hydro- sulphite of Soda;

(i) If relating to construction of a house or building including the multi unit house or building by the vendor on land sold by such vendor and containing stipulation that such land together with such house or building or multi- unit house or building so constructed shall be held either individually or jointly by the vendee of such lane-

(i) When the land is situated within the cities of Chennai, Madurai and Coimbatore and Municipal Towns of Salem and Tiruchirappalli;

(ii) When the land is situated in any other Area;

tonnes or part thereof.

Ten paise for every Rs.2500 or part thereof of the value of yarn of any kind,. Non-Mineral oils or spices of any kind.

Ten paise for every Rs.2500 or part thereof of the value of Hydrosulphite of Soda.

Thirteen rupees for every Rs.100 or part thereof of the cost of the proposed construction of house or building or of any flat or apartment within such multi-unit house or building, which is the subject matter of agreement.

Twelve rupees for every Rs.100 or part thereof of the cost of the proposedconstruction of house or building or any flat or apartment within such multi-unit house or building which is the subject-matter of the agreement.

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Explanation:-For the purpose of this clause,-

(i) “multi-unit house or building” shall mean only block or building having not less than five floors, flats or apartments as the case may be;

(ii) “cost of the proposed construction” means the cost as mentioned in the agreement or the cost as adopted for the purpose of estimation by the Public Works Department of the Government for the area concerned, whichever is higher and for this purpose a certificate from the Assistant Engineer of the Public Works Department of the Government of the area concerned regarding the cost of the proposed construction shall be attached along with the agreement for the purpose of execution. Such certificate shall be conclusive proof of the cost of the proposed construction.

j) If not otherwise provided for;

Twenty rupees;

P a g e | 16 PLEDGE Agreement relating to Deposit of Title-Deeds, Pawn or Pledge, that is to say, any instrument evidencing an agreement relating to:-

(1) The deposit of title-deeds or instruments Constituting or being evidence of the title to any property whatever( other than a marketable security) ; or

(2) the pawn or pledge of movable property, where such deposit, pawn or pledge has been made by way of security for the repayment of money advanced or to be advanced by way of loan or an existing or future debt-

(a) If such loan or debt is payable on Demand or more than three months from the date of the instrument evidencing the agreement.

(b) If such loan or debt is repayable within three months from the date of such instrument.

Five rupees per every Rs.1000/- or part thereof of the value of the loan or debt.

Two rupees and fifty paise for every Rs.1000/- or part thereof of the value of the loan or debt.

SHARE PURCHASE AGREEMENT c) If relating to the purchase or sale of shares, scrips, stocks, bonds, debunture stocks or any other

marketable security of a like nature in or of any incorporated company or other body corporate.

(i) when such agreement or memorandum of an agreement is with or through a member or between members of a Stock Exchange recognized under the Securities Contracts(Regulation) Act, 1956(Central Act 42 of 1956);

Fifteen paise for every Rs.2,500 or part thereof of the value of the security at the time of its purchase or sale, as the case may be

P a g e | 17 SHARE HOLDERS AGREEMENT 19.

Certificate of other Document, evidencing the right or title of the holder thereof, or any other person, either to any shares, scrip or stock in or of any incorporated company or other body corporate or to become proprietor of shares, scrip or stock in or of any such company or body.

One rupee.

SHARE SUBSCRIPTION AGREEMENT

36. Letter of Allotment of Shares in any company, or proposed company, or in respect of any loan to be raised by any company or proposed company.

One rupee.

20-06-2016

P a g e | 18 STAMP DUTY:

Stamp Duty is a tax paid on transactions executed via documents required to be stamped, as per the State Stamp Act & Indian Stamp Act, 1899. Levy of stamp duty is a state subject. It is of great importance, as it is usually the largest source of revenue, after sales tax. Each state, therefore, has a different rate.

WHEN TO PAY? Indian Stamp Act, 1899 prescribes that the stamp duty has to be paid before or at the

time of execution of instrument. Execution means signing of the document in question. So, it is clear that the stamp duty has to be paid before signing of the document since it is not practically possible to pay while signing the document.

UNSTAMPED – VALIDITY: Non-payment of stamp duty does not make the document void or invalid. However,

one may have to face consequences, as provided in the Indian Stamp Act,1899.

PROVISIONS RELATING TO UNSTAMPED DOCUMENTS: Notwithstanding anything contained in S.33 or in any other provisions of this Act, if,

after the registration of any instrument under the Registration Act, 190814, it is found that the proper stamp duty payable under this Act in respect of such instrument has not been paid, such duty shall, on a certificate from the Registrar of the District under the Registration Act, be recovered from the person liable to pay the duty.

Provided, no such certificate shall be granted unless due inquiry is made and such person is given an opportunity of being heard:

Provided further, no such inquiry shall be commenced after the expiry of three years from the date of registration of the instrument. (S.33-A (1))

14 Central Act XVI of 1908

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The certificate of the Registrar of the district under sub-section (1) shall, subject only to appeal under sub-section (3), be final and shall not be called in question in any court or before any authority. (S.33-A (2))

Any person aggrieved by a certificate of the Registrar of the district under sub-section (1) may appeal to the Chief Controlling Revenue Authority. Any such appeal shall be preferred within such time, and shall be heard and disposed of in such manner, as may be prescribed. (S.33-A (3))

If any person does not want to proceed any further than seeking the determination of the duty payable then no consequence will follow and an executed document is in the same position as an instrument which is unexecuted and unstamped and after the determination of the duty the collector becomes functus officio and the provisions of section 33 have no application.15

Where any receipt chargeable 16(with a duty not exceeding ten paise) is tendered to or produced before any officer unstamped in the course of the audit of any public account, such officer may, in his discretion, instead of impounding the instrument, require a duly stamped receipt to be substituted therefor. (S.34)

When any bill of exchange or promissory note chargeable 17(with a duty not exceeding ten paise) is presented for payment unstamped, the person to whom it is so presented, may affix thereto the necessary adhesive stamp, and, upon canceling the same in manner herein before provided, may pay the sum payable upon such bill or note, and may charge the duty against the person who ought to have paid the same, or deduct it from the sum payable as aforesaid, and such bill or note, shall, so far as respects the duty, be deemed good and valid:

Provided that nothing herein contained shall relieve any person from any penalty or proceeding to which he may be liable in relation to such bill or note. (S.47)

DEEMED TO BE UNSTAMPED, THOUGH STAMPED: Any instrument bearing an adhesive stamp which has not been cancelled so that it

cannot be used again, shall so far as such stamp is concerned, be deemed to be unstamped. (S.12 (2))

Every instrument written in contravention of Section 13 or Section 14 shall be deemed to be unstamped. (S.15)

15 Government of Uttar Pradesh v. Raja Mohammad Amir Ahmad Khan, AIR 1961 SC 787. 16 Substituted by The Central Act 19 of 1958. 17 Ibid

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S.13 – Every instrument written upon paper, stamped with an impressed stamp, shall be written in such manner that the stamp may appear on the face of the instrument and cannot be used for or applied to any other instrument.

S.14 – No second instrument chargeable with duty shall be written upon a piece of stamped paper upon which an instrument chargeable with duty has already been written:

Provided that nothing in this section shall prevent any endorsement which is duly stamped or is not chargeable with duty being made upon any instrument for the purpose of transferring any right created or evidenced thereby, or of acknowledging the receipt of any money or goods the payment or delivery of which is secured thereby.

ADMISSIBLE AS EVIDENCE ON PENALTY: Where any person from whom a stamped receipt could have been demanded, has

given an unstamped receipt and such receipt, if stamped, would be admissible in evidence against him, then such receipt shall be admitted in evidence against him, on payment of a penalty of one rupee by the person tendering it. (S.35(b))

Where an instrument has been admitted in evidence, such admission shall not, except as provided in section 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not duly stamped. (S.36)

Section 36 does not apply to a copy of document or secondary evidence recorded to prove the contents of an unstamped or insufficiently stamped document.18

In the case of Delhi Box Factory and Anr. (supra), following the decision of the Supreme Court in Javer Chand (supra), held that under Section 36 of the Indian Stamp Act, even an unstamped receipt requiring stamp duty once admitted into evidence cannot be rejected later on.

A similar view was expressed by the Delhi High Court in S.K. Gupta's case (supra) wherein it was reiterated that once a document has been marked as an exhibit in a case and has been used by the parties in examination and cross- examination of their witnesses, Section 36 of the Stamp Act, 1899 comes into operation.

In Devachand and Anr. vs. Harichand Kama Raj,19 unstamped promissory notes were admitted in evidence. It was held that the promissory notes having been once admitted in evidence could not afterwards be rejected on the ground of their not being duly stamped.

18 Lapudi v. Pulavarthi, AIR 1971 SC 1070. 19 ILR (1889) 13 Bombay 449 (FB)

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RECTIFICATION DEED – COMMENT

Just leaving the word ‘HUF’ against the Karta’s name in a document (property document here) cannot be considered as omission or typing error.

Adding ‘HUF’ in the same through another deed (rectification deed) cannot be considered as a minor change or an immaterial change.

The reason is the owner of the property changes.

For such material change, we can very well file a rectification deed, duly stamped and get it registered with the Registrar where the original document was initially registered.

Such change is possible only when the owner in the original deed agrees to such change.

COMMENTS IN SANCTION LETTER PAGE 4 - CLAUSE 4 – NOT ACCEPTABLE/ TO BE MODIFIED

PAGE 7 - ANNEXURE II –SERIAL NO. 1 – STFCL TO COFIRM

-SERIAL NO. 4 – NOT ACCEPTABLE

- SERIAL NO.5 – NOT ACCEPTABLE, MAY AFFECT OUR REPUTATUON

CONSULTANCY AGREEMENT

Unlike every other agreement, consultancy agreement starts as follows:

This agreement (consultancy agreement here) is made at such and such place on so and so

date.

And continues with the name and address of the parties to the agreement, indicating

the agreement is signed between the two.

Then the agreement proceeds with an explanation of the services that the party to the

agreement offers. The party providing the service shall accept that he has the necessary

power, manpower or skill, as the case may be, and declares that he is competent to enter the

agreement. There will also be a confirmation note that the other party is willing to avail the

service offered by the party availing the service, on such terms and conditions as set out in

the agreement.

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The agreement then continues with the clauses that the parties to the agreement desire

to have. Such clauses may vary from an agreement to another, as per the needs of the party

and the type to service provided or availed, as the case may be. Here are the clauses that are

frequently used in agreements.

TERM AND TERMINATION: The duration of validity of the agreement shall be specified. The procedure of

termination of the agreement shall be specified. Breach of agreement also results in

termination.

PAYMENT In consideration of the services rendered by the consultant, the other agrees to pay the

consultant, such amounts as specified in ANNEXURE II attached to the agreement, on

receipt of an invoice and a copy of attendance sheet.

OBLIGATIONS OF THE PARTIES: The number of working days, the leave days, payment etc. are agreed upon. The

parties to the agreement oblige that they shall not use the name, trademarks or logos of the

other party.

CONFIDENTIAL INFORMATION

The party shall not disclose any confidential information relating to the other party to

the agreement, to any third party. Failing which, it may result in termination.

MISCELLENEOUS

-ASSIGNMENT

Neither this agreement nor any of the rights, interests or obligations of either party

shall be assigned to any third party, unless otherwise agreed upon in writing by the parties.

-FORCE MAJURE

P a g e | 23

Neither Parties will be held responsible for delay or failure in performance of

obligations under the Agreement, due to causes beyond such Party’s reasonable control, such

as Act of God, etc.

-NOTICE

The notices shall be sent to the address mentioned in the agreement. The notices sent

shall be in English language. Notice can also be sent by mail, telex, facsimile transmission,

telegram or cable. The notice is said to be duly delivered when such delivery is before 4 p.m.

(local time)

-WAIVER

The failure of any party to insist upon the performance (in strict conformity with the literal

requirements) by the other party, of any term or stipulation of this agreement, shall not be

deemed to constitute a waiver of the right of such party. All terms, conditions and obligations

under this Agreement shall remain in full force and effect at all times during the subsistence

of this Agreement except where otherwise amended or modified by them by a mutual written

agreement.

-SEVERABILITY

If any provision under the Agreement is held to be invalid according to law, only such

provision shall be severed and the rest of the Agreement shall be held valid and enforceable.

-ENTIRE AGREEMENT

The Parties confirm and acknowledge that this Agreement shall constitute the entire

agreement between them and shall supersede and override all previous communications,

either oral or written, between the Parties with respect to the subject matter of this

Agreement, and no agreement or understanding varying or extending the same shall be

binding upon any Party

-GOVERNING LAW

This Agreement shall be governed by and interpreted in accordance with the laws of

India

P a g e | 24

-ARBITRATION Any dispute arising out of this agreement, between the two parties, shall be resolved

by Arbitration

-LIMITED LIABILITY

Each Party agrees that the other Party’s liability hereunder for damages, regardless of

the form of action, will not exceed the total amount actually paid for Services and Work

Products under the SOW giving rise to the damages.

The agreement ends with the signature and address of two witnesses.

The annexes as mentioned in the agreement are attached.

SOFTEX With reference to

• S.7(1)(a) ,S.7(3) and S.47(2) of Foreign Exchange Management Act, 1999 • RBI Circular dt. September’13 - RBI/2013-14/254 A.P. (DIR Series) Circular No.43

One can conclude, Every exporter of goods or softwares has to give declaration in one of the forms (GR/PP/SDF/SOFTEX/Bulk SOFTEX) and submit it to the specified authority for certification.

- RESPECTIVE PROVSIONS OF FEMA & RBI CIRCULAR ATTACHED

P a g e | 25

Foreign Exchange Management Act, 1999

7. Export of goods and services

(1) Every exporter of goods shall; -

1. furnish to the Reserve Bank or to such other authority a declaration in such form and in such manner as may be specified, containing true and correct material particulars, including the amount representing the full export value or, if the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in a market outside India;

2. furnish to the Reserve Bank such other information as may be required by the Reserve Bank for the purpose of ensuring the realization of the export proceeds by such exporter.

(2) The Reserve Bank may, for the purpose of ensuring that the full export value of the goods or such reduced value of the goods as the Reserve Bank determines, having regard to the prevailing market conditions, is received without any delay, direct any exporter to comply with such requirements as it deems fit.

(3) Every exporter of services shall furnish to the Reserve Bank or to such other authorities a declaration in such form and in such manner as may be specified, containing the true and correct material particulars in relation to payment for such services.

7. Power to make regulations

(1) Reserve Bank may, by notification, make regulations, to carry out the provisions of this Act and the rules made thereunder :

(2) Without prejudice to the generality of the foregoing power, such regulations may provide for,-

1. the permissible classes of capital account transactions, the limits of admissibility of foreign exchange for such transactions, and the prohibition, restriction or regulation of certain capital account transactions under section 6;

2. the manner and the form in which the declaration is to be furnished under clause (a) of sub-section (1) of section 7;

3. the period within which and the manner of repatriation of foreign exchange under section 8;

4. the limit up to which any person may possess foreign currency or foreign coins under clause (a) of section 9;

5. the class of persons and the limit up to which foreign currency account may be held or operated under clause (b) of section 9;

6. the limit up to which foreign exchange acquired may be exempted under clause (d) of section 9;

7. the limit up to which foreign exchange acquired may be retained under clause (e) of section 9;

8. any other matter which is required to be, or may be, specified.

P a g e | 26

ACCOUNTS THAT NRI CAN OPEN

‘Non-Resident Indian (NRI)’ means a person resident outside India who is a citizen of India. (Regulation 2(vi) of The Foreign Exchange Management (Deposit) Regulations, 2016).

As per Foreign Exchange Management (Deposit) Regulations, 2016, a Non-residential Indian can open inter alia the following deposit accounts:

i) NRE Account

ii) FCNR(B) Account

iii) NRO Account

NRE Account 'NRE account' means a Non-Resident External account referred to in clause (i) of sub-

regulation (1) of Regulation 5 of Foreign Exchange Management (Deposit) Regulations,

2016. (Regulation 2(vii))

SCHEDULE 1

1. Eligibility:

Non-resident Indians (NRIs) and Person of Indian Origin (PIOs) are permitted to open and

maintain these accounts with authorised dealers and with banks (including cooperative banks)

authorised by the Reserve Bank to maintain such accounts.

P a g e | 27

The account should be opened by the non-resident account holder himself and not by the

holder of the power of attorney in India.

2. Types of accounts:

The accounts may be maintained in any form, e.g. savings, current, recurring or fixed deposit

account etc.

3. Permitted Credits:

a) Proceeds of remittances to India in any permitted currency.

b) Proceeds of personal cheques drawn by the account holder on his foreign currency account

and of travellers cheques, bank drafts payable in any permitted currency including

instruments expressed in Indian rupees for which reimbursement will be received in foreign

currency, deposited by the account holder in person during his temporary visit to India,

provided the authorised dealer/ bank is satisfied that the account holder is still resident

outside India, the travellers’ cheques/ drafts are standing/ endorsed in the name of the account

holder and in the case of travellers’ cheques, they were issued outside India.

c) Proceeds of foreign currency/ bank notes tendered by account holder during his temporary

visit to India, provided (i) the amount was declared on a Currency Declaration Form (CDF),

where applicable, and (ii) the notes are tendered to the authorised dealer in person by the

account holder himself and the authorised dealer is satisfied that account holder is a person

resident outside India.

d) Transfers from other NRE/ FCNR (B) accounts.

e) Interest accruing on the funds held in the account.

f) Current income in India due to the account holder, subject to payment of applicable taxes

in India

g) Maturity or sale proceeds of any permissible investment in India which was originally

made by debit to the account holder’s NRE/ FCNR (B) account or out of remittances received

from outside India through banking channels.

P a g e | 28

Provided that the investment was made in accordance with the foreign exchange regulations

in force at the time of making such investment.

h) Refund of share/ debenture subscriptions to new issues of Indian companies or portion

thereof, if the amount of subscription was paid from the same account or from other NRE/

FCNR (B) account of the account holder or by remittance from outside India through banking

channels.

i) Refund of application/ earnest money/ purchase consideration made by the house building

agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings / deals for

purchase of residential/ commercial property, together with interest, if any (net of income tax

payable thereon), provided the original payment was made out of NRE/ FCNR(B) account of

the account holder or remittance from outside India through banking channels and the

authorised dealer is satisfied about the genuineness of the transaction.

j) Any other credit if covered under general or special permission granted by Reserve Bank.

4. Permitted Debits:

a) Local disbursements.

b) Remittances outside India.

c) Transfer to NRE/ FCNR (B) accounts of the account holder or any other person eligible to

maintain such account.

d) Investment in shares/ securities/ commercial paper of an Indian company or for purchase

of immovable property in India provided such investment/ purchase is covered by the

regulations made, or the general/ special permission granted by the Reserve Bank.

e) Any other transaction if covered under general or special permission granted by the

Reserve Bank.

5. Rate of Interest:

Rate of interest applicable to these accounts shall be in accordance with the directions/

instructions issued by Reserve Bank from time to time

P a g e | 29

6. Loans against security of funds held in the account:

(1) To account holder: Authorised dealers and authorised banks maintaining such accounts

are permitted to grant loans in India to the account holder subject to the following conditions:

(a) The loan shall be used for:

i) personal purposes or for carrying on business activities except for the purpose of relending

or carrying on agricultural/ plantation activities or for investment in real estate business.

ii) making direct investment in India on non-repatriation basis by way of contribution to the

capital of Indian firms/ companies subject to the provisions of the relevant Regulations made

under the Act

iii) acquiring flat/ house in India for his own residential use subject to the provisions of the

relevant Regulations made under the Act

(b) Repayment shall be made either by adjustment of the deposit or by fresh inward

remittances from outside India through banking channels or out of local rupee resources in

the NRO account of the borrower.

(2) To third parties: Authorised dealers and authorised banks may grant loans to resident

individuals/ firms/ companies in India against the collateral of fixed deposits held in NRE

account subject to the following conditions:

i) The loan should be utilised for personal purposes or for carrying on business activities

except for the purpose of relending or carrying on agricultural/ plantation activities or for

investment in real estate business.

ii) There should be no direct or indirect foreign exchange consideration for the non-resident

depositor agreeing to pledge his deposits to enable the resident individual/ firm/ company to

obtain such facilities.

iii) The usual norms and considerations as applicable in the case of advances to trade/

industry shall be applicable to such credit facilities.

P a g e | 30

(3) Loans outside India – Authorised dealers may allow their branches/ correspondents

outside India to grant loans to or in favour of non-resident depositor or to third parties at the

request of depositor for bona fide purpose except for the purpose of relending or carrying on

agricultural/ plantation activities or for investment in real estate business, against the security

of funds held in the NRE accounts in India and also agree for remittance of the funds from

India, if necessary, for liquidation of the outstanding.

(4) The authorised dealer/ bank should ensure that the advances are fully secured by the fixed

deposits and regulations relating to normal margin, interest rate, etc. are complied with.

(5) The loans granted under this paragraph shall be subject to such directions as may be

issued by the Reserve Bank from time to time.

(6) The term “loan” shall include all types of fund based/ non-fund based facilities.

7. Change of residential status of the account holder:

NRE accounts should be re-designated as resident accounts or the funds held in these

accounts may be transferred to the RFC accounts (if the account holder is eligible for

maintaining RFC account) at the option of the account holder immediately upon the return of

the account holder to India for taking up employment or for carrying on business or vocation

or for any other purpose indicating intention to stay in India for an uncertain period. Where

the account holder is only on a short visit to India, the account may continue to be treated as

NRE account even during his stay in India.

8. Repatriation of funds to non-resident nominee:

Authorised dealers/ authorised banks may allow remittance of funds lying in the NRE

account of the deceased account holder to his non-resident nominee.

9. Miscellaneous:

(a) Joint accounts – Joint accounts may be permitted to be opened in the following cases:

i) In the names of two or more NRIs and/or PIOs

ii) With resident relative(s) on ‘former or survivor’ basis. However, the said resident relative

shall be eligible to operate the account as a Power of Attorney holder in accordance with the

extant instructions during the life time of the account holder.

P a g e | 31

Explanation – For the purpose of this regulation, ‘relative’ means relative as defined in

section 2(77) of the Companies Act, 2013.

b) Opening of account during temporary visit: An account may be opened in the name of an

eligible NRI or PIO during his temporary visit to India against tender of foreign currency

travellers cheques or foreign currency notes and coins tendered, provided the authorised

dealer is satisfied that the person has not ceased to be a non-resident.

c) Operations by Power of Attorney: Authorised dealers/ authorised banks may allow

operations on an NRE account in terms of Power of Attorney or other authority granted in

favour of a resident by the non-resident account holder, provided such operations are

restricted to withdrawals for local payments or remittance to the account holder himself

through banking channels. In cases where the account holder or a bank designated by him is

eligible to make investments in India, the Power of Attorney holder may be permitted by the

authorised dealers/ banks to operate the account to facilitate such investment. The resident

Power of Attorney holder shall not, however, be allowed to repatriate outside India funds

held in the account under any circumstances other than to the account holder himself, nor to

make payment by way of gift to a resident on behalf of the account holder nor to transfer

funds from the account to another NRE account.

d) Special Series of Cheques: For easy identification and quicker processing of cheques

drawn on NRE accounts, authorised dealers/ banks shall issue cheque books containing a

special series of cheques to their constituents holding NRE accounts.

e) Temporary overdrawings: Authorised dealers/ authorised banks may at their discretion/

commercial judgement allow for a period of not more than two weeks, overdrawings in NRE

savings bank accounts, up to a limit of Rs.50,000 subject to the condition that such

overdrawings together with the interest payable thereon are cleared/ repaid within the said period of two weeks, out of inward remittances through banking channels or by transfer of

funds from other NRE/ FCNR(B) accounts.

f) Remittances abroad by Resident nominee: Application from a resident nominee for

remittance of funds outside India for meeting the liabilities, if any, of the deceased account

holder or for similar other purposes, should be forwarded to the Reserve Bank for

consideration.

P a g e | 32

g) Tax Exemption: Income from interest on balances standing to the credit of NRE Accounts

is exempt from Income Tax. Likewise balances held in such accounts are exempt from wealth

tax.

h) Reporting: The transactions in these accounts shall be reported to the Reserve Bank in

accordance with the directions issued by it from time to time.

FCNR(B) Account 'FCNR (B) account' means a Foreign Currency Non-Resident (Bank) account referred to in

clause (ii) of sub regulation (1) of Regulation 5 (Regulation 2(v))

SCHEDULE 2

1. Eligibility:

(a) NRIs and PIOs are eligible to open and maintain these accounts with an authorised dealer.

(b) These accounts may be opened with funds remitted from outside India through banking

channels or funds received in rupees by debit to the account of a non-resident bank

maintained with an authorised dealer in India or funds which are of repatriable nature in

terms of the regulations made by Reserve Bank. Accounts may also be opened by transfer of

funds from existing NRE/ FCNR (B) accounts.

(c) Remittances from outside India for opening of or crediting to these accounts should be

made in the designated currency in which the account is desired to be opened/ maintained.

Without prejudice to this, if the remittance is received in a currency other than the designated

currency (including funds received in rupees by debit to the account of a non-resident bank),

it should be converted into the latter currency by the authorised dealer at the risk and cost of

the remitter and account should be opened/ credited in only the designated currency.

(d) In case the depositor with any currency other than designated currency desires to place a

deposit in these accounts, authorised dealers may undertake with the depositor a fully covered

P a g e | 33

swap in that currency against the desired designated currency. Such a swap may also be done

between two designated currencies.

2. Designated Currencies:

Deposit of funds in the account may be accepted in such permissible currencies as may be

designated by the Reserve Bank from time to time.

3. Type of account:

These accounts may be opened only in the form of term deposit with maturity of such period

as may be specified by the Reserve Bank from time to time.

4. Rate of Interest:

The rate of interest on funds held in these deposit accounts will be in accordance with the

directives issued by the Reserve Bank from time to time.

5. Permissible Debits/ Credits:

All debits/ credits permissible in respect of NRE accounts as specified in Schedule 1 shall be

permissible in respect of these accounts also.

6. Rate for Conversion of Rupees into Designated Currencies and vice versa:

i) Remittances received in Indian rupees for opening these accounts shall be converted by the

authorised dealer into the designated foreign currency at the clean T.T. selling rate for that

currency ruling on the date of conversion.

ii) For the purpose of payment in rupees, funds held in these accounts shall be converted into

rupees at the authorised dealer’s clean T.T. buying rate for the concerned currency ruling on

the date of withdrawal.

7. Inland Movement of Funds:

Any inland movement of funds for the purpose of opening these accounts as well as for

repatriation outside India of balances held in these accounts will be free of inland exchange

or commission for the non-resident depositors. The Authorised dealer receiving foreign

P a g e | 34

currency remittances in these accounts will also, on request, pass on the foreign currency to

another authorised dealer if the account has to be opened with the latter, at no extra cost to

the remitter.

8. Manner of Payment of Interest:

(i) Interest on balances held in these accounts may be paid half-yearly or on an annual basis

as desired by the depositor.

(ii) Interest may be credited to a new FCNR (B) account or an existing/ new NRE/ NRO

account in the name of the account holder, at his option.

9. Loans/ overdrafts against security of funds held in the account:

(1) The terms and conditions as applicable to NRE deposits (cf. Schedule 1) in respect of

loans and overdrafts in India to depositor and to third parties as also loans outside India

against security of deposits, shall apply mutatis mutandis to FCNR(B) deposits.

(2) The margin requirement shall be notionally calculated on the rupee equivalent of the

deposits.

10. Change of residential status of the account holder:

When an account holder becomes a person resident in India, deposits may be allowed to

continue till maturity at the contracted rate of interest, if so desired by him. However, except

the provisions relating to rate of interest and reserve requirements as applicable to FCNR (B)

deposits, for all other purposes such deposits shall be treated as resident deposits from the

date of return of the accountholder to India. Authorised dealers should convert the FCNR(B)

deposits on maturity into resident rupee deposit accounts or RFC account (if the depositor is

eligible to open RFC account), at the option of the accountholder and interest on the new

deposit (rupee account or RFC account) shall be payable at the relevant rates applicable for

such deposits.

11. Joint account, repatriation of balances, etc.:

P a g e | 35

(1) Terms and conditions as applicable to NRE accounts (cf. Schedule 1) in respect of joint

accounts, repatriation of funds, opening account during temporary visit, operation by power

of attorney, loans/ overdrafts against security of funds held in accounts, shall apply mutatis

mutandis to FCNR (B) accounts.

(2) Authorised dealer may permit remittance of the maturity proceeds of FCNR (B) deposits

to third parties outside India, provided the transaction is specifically authorised by the

account holder and the authorised dealer is satisfied about the bona fides of the transaction.

12. Reporting:

The transactions in these accounts shall be reported to Reserve Bank in accordance with the

directions issued by it from time to time.

13. Other features:

(a) Reserve Bank will not provide exchange rate guarantee to authorised dealers for deposits

of any maturity in these accounts.

(b) Lending of resources mobilised by authorised dealers under these accounts are not subject

to any interest rate stipulations.

NRO Account ‘NRO account’ means a Non-Resident Ordinary account referred to in clause (iii) of sub-regulation (1) of Regulation 5 (Regulation 2(viii))

SCHEDULE 3

1. Eligibility

(a) Any person resident outside India may open NRO account with an authorised dealer or an

authorised bank for the purpose of putting through bona fide transactions in rupees not

involving any violation of the provisions of the Act, rules and regulations made thereunder.

(b) The operations on the accounts should not result in the account holder making available

foreign exchange to any person resident in India against reimbursement in rupees or in any

P a g e | 36

other manner. (c) At the time of opening of the account, the account holder should furnish an

undertaking to the authorised dealer/ authorised bank with whom the account is maintained

that in cases of debits to the account for the purpose of investment in India and credits

representing sale proceeds of investments, he will ensure that such investments/

disinvestments will be in accordance with the regulations made by Reserve Bank in this

regard.

NOTES:

A. Opening of accounts by individuals/ entities of Pakistan nationality/ ownership requires

approval of Reserve Bank.

B. Opening of accounts by entities of Bangladesh ownership requires approval of Reserve

Bank. C. Opening of accounts by individual/s of Bangladesh nationality may be allowed by

authorised dealer or authorised bank, subject to satisfying itself that the individual/s hold a

valid visa and valid residential permit issued by Foreigner Registration Office (FRO)/

Foreigner Regional Registration Office (FRRO) concerned;

D. Post Offices in India may maintain savings bank accounts in the names of persons resident

outside India and allow operations on these accounts subject to the same terms and conditions

as are applicable to NRO accounts maintained with an authorised dealer/ authorised bank.

2. Types of Accounts

NRO accounts may be opened/ maintained in the form of current, savings, recurring or fixed

deposit accounts. The requirements laid down in the directives issued by Reserve Bank in

regard to resident accounts shall apply to NRO accounts.

3. Permissible Credits/ Debits

(A) Credits

(i) Proceeds of remittances received in any permitted currency from outside India through

banking channels or any permitted currency tendered by the account-holder during his

temporary visit to India or transfers from rupee accounts of non-resident banks.

(ii) Legitimate dues in India of the account holder.

(iii) Transfers from other NRO accounts.

P a g e | 37

(iv) Any amount received by the account holder in accordance with the rules or regulations

made under the Act.

(B) Debits

(i) All local payments in rupees including payments for investments subject to compliance

with the relevant regulations made by the Reserve Bank.

(ii) Remittance outside India of current income in India of the account holder net of

applicable taxes.

(iii) Transfers to other NRO accounts.

(iv) Settlement of charges on International Credit Cards issued by authorised dealer banks in

India to NRIs or PIOs, subject to the limits for repatriation of balances held in NRO accounts

specified in regulation 4(2) of Foreign Exchange Management (Remittance of Assets)

Regulations, 2016

4. Remittance of funds held in NRO accounts

Balances in NRO accounts are not eligible for remittance outside India without the general or

specific approval of Reserve Bank. Funds received by way of remittances from outside India

in foreign exchange which have not lost their identity as remittable funds will only be

considered by Reserve Bank for remittance outside India. Where an account (current/

savings) is opened by a foreign tourist visiting India, with funds remitted from outside India

in a specified manner or by sale of foreign exchange brought by him to India, authorised

dealers may convert the balance in the account at the time of departure of the tourist from

India to foreign currency for payment to the account holder provided the account has been

maintained for a period not exceeding six months and the account has not been credited with

any local funds, other than interest accrued thereon.

5. Grant of Loans/ Overdrafts

A. To Account holders

(i) Loans to non-resident account holders may be granted in rupees against the security of

fixed deposits subject to usual norms as are applicable to resident accounts, for personal

P a g e | 38

purposes or for carrying on business activities except for the purpose of relending or carrying

on agricultural/ plantation activity or for investment in real estate business.

(ii) Authorised dealer/ bank may permit overdraft in the account of the account holder subject

to its commercial judgement and compliance with the interest rate etc. directives.

B. To Third parties

Loans/ overdrafts to resident individuals/ firms/ companies in India may be granted against

the security of deposits held in NRO accounts, subject to the following terms and conditions.

(i) The loans shall be utilised only for meeting borrower’s personal requirements and/ or

business purpose and not for carrying on agricultural/ plantation activities or real estate

business, or for relending.

(ii) Regulations relating to margin and rate of interest as stipulated by Reserve Bank from

time to time shall be complied with.

(iii) The usual norms and considerations as applicable in the case of advances to trade/

industry shall be applicable for such loans/ facilities.

6. Treatment of Loans/ Overdrafts in the event of change in the resident status of the

borrower

In case of person who had availed of loan or overdraft facilities while resident in India and

who subsequently becomes a person resident outside India, the authorised dealer may at their

discretion and commercial judgement allow continuance of the loan/ overdraft facilities. In

such cases, payment of interest and repayment of loan may be made by inward remittance or

out of legitimate resources in India of the person concerned.

7. Joint Accounts

The accounts may be held jointly with residents on ‘former or survivor’ basis. NRIs and/or

PIOs may hold NRO account jointly with other NRIs and/or PIOs.

8. Operations by Power of Attorney

P a g e | 39

Authorised dealers/ authorized banks may allow operations on an NRO account in terms of a

Power of Attorney, provided such operations are restricted to

(i) all local payments in rupees including payments for eligible investments subject to

compliance with relevant regulations made by the Reserve Bank; and

(ii) remittance outside India of current income in India of the non-resident individual account

holder, net of applicable taxes. The resident Power of Attorney holder shall not repatriate

outside India funds held in the account under any circumstances other than to the nonresident

individual account holder himself nor shall make payment by way of gift to a resident on

behalf of the nonresident account holder nor transfer funds from the account to another NRO

account.

Any remittance outside India shall be within the ceiling as may be prescribed by the Bank

from time to time and subject to tax compliance.

9. Change of Resident Status of Account holder

(a) From Resident to Non-resident

When a person resident in India leaves India for a country (other than Nepal or Bhutan) for

taking up employment, or for carrying on business or vocation outside India or for any other

purpose indicating his intention to stay outside India for an uncertain period, his existing

account should be designated as a Non-Resident (Ordinary) account.

(b) From Non-resident to Resident

NRO accounts may be designated as resident rupee accounts on the return of the account

holder to India for taking up employment, or for carrying on business or vocation or for any

other purpose indicating his intention to stay in India for an uncertain period. Where the

account holder is only on a temporary visit to India, the account should continue to be treated

as non-resident during such visit.

10. Payment of funds to Non-resident Nominee

P a g e | 40

The amount due/ payable to non-resident nominee from the account of a deceased account

holder, shall be credited to NRO account of the nominee with an authorised dealer/

authorised bank in India.

11. Reporting of transactions

(i) The transaction in the account which may appear to represent reimbursement in rupees

against foreign exchange made available to a person resident in India other than authorised

dealer, as well as any other transaction of suspicious nature, should be reported to Reserve

Bank.

(ii) The transactions in these accounts shall be reported to the Reserve Bank in accordance

with the directions issued by it from time to time.

(iii) The accounts opened by an authorised dealer or an authorised bank in respect of

individual/s of Bangladesh nationality shall be reported by the authorised dealer/ authorised

bank branch to its Head Office and the Head Office of such authorised dealer/ authorised

bank shall forward a quarterly report containing details of Name of the Individual(s), Passport

Number, Issuing Country/State, Name of the FRO/ FRRO, Date of issue of Residential

Permit and validity thereof, to the Ministry of Home Affairs (Foreigners Division) on

Quarterly basis”.

Explanation: ‘Quarterly basis’ means, quarter as at end of March/ June/ September and

December of every year.

PERMITTED CREDITS &DEBITS – NRI: Here are the permitted credits and debits for an NRI under various schedules of The Foreign

Exchange (Deposit) Regulations, 2016

NRE ACCOUNT The permitted credits and debits with respect to NRE Accounts under Schedule 1 of the

Regulation are as follows:

P a g e | 41

Permitted Credits:

a) Proceeds of remittances to India in any permitted currency.

b) Proceeds of personal cheques drawn by the account holder on his foreign currency account

and of travellers cheques, bank drafts payable in any permitted currency including

instruments expressed in Indian rupees for which reimbursement will be received in foreign

currency, deposited by the account holder in person during his temporary visit to India,

provided the authorised dealer/ bank is satisfied that the account holder is still resident

outside India, the travellers’ cheques/ drafts are standing/ endorsed in the name of the account

holder and in the case of travellers’ cheques, they were issued outside India.

c) Proceeds of foreign currency/ bank notes tendered by account holder during his temporary

visit to India, provided (i) the amount was declared on a Currency Declaration Form (CDF),

where applicable, and (ii) the notes are tendered to the authorised dealer in person by the

account holder himself and the authorised dealer is satisfied that account holder is a person

resident outside India.

d) Transfers from other NRE/ FCNR (B) accounts.

e) Interest accruing on the funds held in the account.

f) Current income in India due to the account holder, subject to payment of applicable taxes

in India

g) Maturity or sale proceeds of any permissible investment in India which was originally

made by debit to the account holder’s NRE/ FCNR (B) account or out of remittances received

from outside India through banking channels.

Provided that the investment was made in accordance with the foreign exchange regulations

in force at the time of making such investment.

h) Refund of share/ debenture subscriptions to new issues of Indian companies or portion

thereof, if the amount of subscription was paid from the same account or from other NRE/

FCNR (B) account of the account holder or by remittance from outside India through banking

channels.

P a g e | 42

i) Refund of application/ earnest money/ purchase consideration made by the house building

agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings / deals for

purchase of residential/ commercial property, together with interest, if any (net of income tax

payable thereon), provided the original payment was made out of NRE/ FCNR(B) account of

the account holder or remittance from outside India through banking channels and the

authorised dealer is satisfied about the genuineness of the transaction.

j) Any other credit if covered under general or special permission granted by Reserve Bank.

Permitted Debits:

a) Local disbursements.

b) Remittances outside India.

c) Transfer to NRE/ FCNR (B) accounts of the account holder or any other person eligible to

maintain such account.

d) Investment in shares/ securities/ commercial paper of an Indian company or for purchase

of immovable property in India provided such investment/ purchase is covered by the

regulations made, or the general/ special permission granted by the Reserve Bank.

e) Any other transaction if covered under general or special permission granted by the

Reserve Bank.

FCNR ACCOUNT The permitted credits and debits with respect to FCNR Accounts under Schedule 2 of the

Regulation are as follows:

Permissible Debits/ Credits:

All debits/ credits permissible in respect of NRE accounts as specified in Schedule 1 shall be

permissible in respect of these accounts also.

P a g e | 43 NRO ACCOUNT The permitted credits and debits with respect to NRO Accounts under Schedule 3 of the

Regulation are as follows:

Permissible Credits

(i) Proceeds of remittances received in any permitted currency from outside India through

banking channels or any permitted currency tendered by the account-holder during his

temporary visit to India or transfers from rupee accounts of non-resident banks.

(ii) Legitimate dues in India of the account holder.

(iii) Transfers from other NRO accounts.

(iv) Any amount received by the account holder in accordance with the rules or regulations

made under the Act.

Permissible Debits

(i) All local payments in rupees including payments for investments subject to compliance

with the relevant regulations made by the Reserve Bank.

(ii) Remittance outside India of current income in India of the account holder net of

applicable taxes.

(iii) Transfers to other NRO accounts.

(iv) Settlement of charges on International Credit Cards issued by authorised dealer banks in

India to NRIs or PIOs, subject to the limits for repatriation of balances held in NRO accounts

specified in regulation 4(2) of Foreign Exchange Management (Remittance of Assets)

Regulations, 2016

P a g e | 44 SNRR ACCOUNT The debits and credits in the SNRR account should be specific/ incidental to the business proposed to be done by the account

ENFORCEABILITY OF CONTRACTUAL OBLIGATIONS AND PROCESS/COSTS INVOLVED IN THE SAME IN THE STATE OF TAMIL NADU

Tamil Nadu is the fifth best state in India in enforcing contracts.

HOW ENFORCED?

In order to trade futures, buyers and sellers are required to post ‘margin deposits’ with the market intermediary. Margin deposits represent a financial guarantee that buyers and sellers will fulfil their obligations of the futures contract, and therefore build contract integrity. Margin deposits typically range between 5% and 15% of a contract’s face value and are set by the futures exchange where the contracts are traded. The size of the margin deposit depends in part on the likelihood of a price change. A higher margin is required in a more volatile market, indicating a higher degree of risk. Margin deposits are automatically amended as the market moves. An unfavourable price movement resulting in a financial loss will hence be deducted in real time. If the deposit drops below a minimum threshold, trader accounts will be suspended until they have made the necessary adjustment. This can reduce the appeal to producers of using futures markets directly as cash flow problems may occur in the short term if the market moves against you.

EFFECTIVE CONTRACT ENFORCEMENT When two parties strike a bargain, there must be some mechanism to ensure that each party will stick to the terms. The main contract enforcement mechanisms are self-enforcement (e.g. posting bonds, ending a commercial relationship), reputation (e.g. risking a future commercial relationship), organizational (e.g. third party audits), technology (e.g. to monitor sales) and of course contract law. The PFI user needs to examine these mechanisms. From an economy-wide perspective, the issue is not whether a contract can be enforced but rather the cost of the various enforcement mechanisms and their efficacy in improving confidence between contracting parties. To be effective, the costs of enforcement must not outweigh the gains achieved from increased contractual commitment

PROCESS/COST INVOLVED:

Time and cost are tracked following the evolution of a sale of goods dispute, from the moment the plaintiff files the lawsuit until actual payment.