India’s Most Critical Trade & Regulatory Compliance Digest

Ameet Datta, Suvarna Mandal | June 2024

Lex Witness in association with the Trade & Regulatory Compliance Practice Desk at Saikrishna & Associates brings to you a detailed analysis on select updates and notifications.

THE ADVERTISING STANDARDS COUNCIL OF INDIA’S GUIDELINES FOR ADVERTISEMENTS MAKING ENVIRONMENTAL/GREEN CLAIMS

On 18th January 2023, the Advertising Standards Council of India (“ASCI”) issued the Guidelines for Advertisements Making Environmental/Green Claims (“Green Claims Guidelines”) which are effective from 15th February 2024.

As per the preamble, the Green Claims Guidelines have been issued to do the following:

Demonstrate the manner in which advertisers can make true, clear, evidence-based environment claims;
Assist consumers in making informed choices while purchasing goods based on any environmental claims; and
Explain ASCI’s approach in investigating environmental claims and any contravention of the ASCI’s Code of Self Regulation of Advertising Content in India (“ASCI’s Code”).

Key highlights of the Green Claims Guidelines are as follows:

Key Terminology: The Green Claims Guidelines define the following terms:

Environmental Claims/Green Claims include claims that suggest or create an impression that a product and/or its packaging or a service inter alia is comparably less damaging to the environment than the previous version of the same product/service or competing goods/service; or has specific environmental benefits.
Greenwashing has been defined as unsubstantiated, false, deceptive, misleading environmental claims about products, services, processes, brands, or operations as a whole, or claims that omit or hide information to give the impression that they are less harmful or more beneficial to the environment than they actually are.

Manner of making Environmental/Green Claims:

As per the Green Claims Guidelines, environmental/ green claims can be explicit or implicit.
These claims can appear in the following forms – advertisements, marketing material, branding, packaging, or any information provided to the consumers.
As per the ASCI, all aspects of the environmental/ green claims would be relevant including, inter alia, the meaning of the terms used, qualifications and explanations of the claim, information that is not included or hidden, the colours, pictures, and logos used, etc.

Violation: Any environmental claim that qualifies as “greenwashing” would be considered to be violative of Chapter I of the ASCI Code which pertains to ‘Truthful & Honest Representation’.
Guidelines: In order to comply with the ASCI Code, the advertisers are required to adhere to the following guidelines–

Substantiation for absolute claims – Any absolute claims made in the form of inter alia “environment friendly”, “eco-friendly”, “sustainable”, and “planet friendly” must be substantiated by robust data or well recognized and credible accreditations or both if they are capable of implying that the entire product advertised has no impact or only a positive impact or reduces adverse impact.
No dilution of absolute claims – The Green Claims Guidelines prohibit any dilution of absolute claims through disclaimers or any other clarificatory mechanisms, such as QR codes or website links.
Evidence for comparative claims – Evidence regarding environmental benefits must be provided for comparative claims like “greener” or “friendlier” and the basis of such comparison should be made clear.
Full lifecycle analysis – Unless the advertisement states otherwise, general environmental claims must account for the full life cycle of the advertised product or service and must clearly provide the limits of the life cycle. Advertisements should not mislead consumers about the overall environmental impact of a product/service if such advertisements make claims based solely on a portion of its life cycle.
Specifications – The environmental claim should clearly specify whether they pertain to the product, its packaging, a service, or a portion of the product, package, or service, unless the same is clear from the context.
Avoid misleading environmental benefits – Advertisers should not mislead consumers about the environmental benefits of a product/service, by highlighting the absence of a damaging ingredient if it is not usually found in competing products or services. Furthermore, an advertiser cannot highlight any environmental benefit as a feature for its products, that results from a legal obligation applicable to competing products.
Free-of Claims – A ‘free-of’ claim should come with disclaimers. Asserting that a product is “free-of” a substance if the product is devoid of one substance but contains another with a comparable or greater environmental risk will be considered deceptive claim.
Certifications and Seals of Approval – An advertiser must specify the attributes of the product/ service that were evaluated by the certifier if the use of certification or seals of approval creates the impression of an environmental claim. Such certifications and seals of approval should be from a nationally/ internationally recognized certifying authority like agency accredited by the UN Council, BIS, etc.
Visual elements – Unless required under any law, the Green Claims Guidelines prohibit the use of visual elements in an advertisement that create a false impression that the product being advertised is less harmful or more beneficial to the environment.
Refrain from aspirational claims – As per the Green Claims Guidelines, advertisers should not make aspirational claims on the products, its packaging, or services about any future environmental objectives unless they have developed clear and actionable plans detailing how those objectives will be achieved.
Disclosure of carbon offset claims – Clear and prominent disclosure must be provided by the advertisers if the carbon offset will not occur for two years or longer. Advertisements must avoid suggesting, directly or by implication, that a carbon offset signifies a reduction in emissions if that reduction, or the action leading to it, was mandated by law.
Claims about products being eco-friendly – While claiming that the advertised product is compostable, biodegradable, recyclable, non-toxic, free-of, etc., advertisers should clarify the aspects and the extent to which such claims are being attributed. These claims should be supported by competent and reliable scientific evidence that proves that the product/qualified component will break down within a reasonably short period of time after customary disposal and that the product is free of elements that can lead to environmental hazards.

FIRM’S TAKE

By providing guidelines for environmental/green claims, the ASCI has specifically taken cognizance of green claims and greenwashing by traders and sellers while recognizing that consumers are increasingly taking environmental concerns into consideration while purchasing any good/service.

Since the issue of misinformation is statutorily dealt under the Consumer Protection Act, 2019 (“CPA”, read with the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022), the Department of Consumer Affairs is also taking the initiative of providing guidelines on environmental claims. Notably, the Central Consumer Protection Authority (“CCPA”) had, in February 2024, sought comments from the public and stakeholders on the draft Guidelines for Prevention and Regulation of Greenwashing. Since the CCPA is yet to issue the finalised guidelines, the Green Claims Guidelines by ASCI provide guidance on parameters that should be considered to assess whether the environmental/green claim is true and backed by evidence.

Further, ASCI works closely with the CCPA to protect consumer interests, particularly on the issue of misleading advertisements. As per ASCI’s press release of March 2024, CCPA has requested ASCI to forward any advertisement that is non-compliant with the ASCI Code (and the guidelines) which could also potentially violate the CPA, or any of its guidelines, to CCPA for appropriate action. Accordingly, advertisers must ensure that any advertisement that has green claims is true, can be substantiated, and does not violate the ASCI Code and the Green Claim Guidelines (thereby potentially violating the CPA and the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022). Noncompliance of the same can lead to escalation of the complaint by the ASCI to the CCPA for action under the CPA.

HON’BLE SUPREME COURT OF INDIA MANDATES SELF-DECLARATION OF ADVERTISEMENTS

The Hon’ble Supreme Court, in the case of Indian Medical Association & Anr. v. Union of India [WP(C) No. 645/2022] pertaining to the misleading advertisements of Patanjali, issued a directive in its order dated 7th May 2024, mandating submission of a selfdeclaration by an advertiser/ advertising agency before the printing/airing/display of any advertisement.

The order was passed under Article 32, which pertains to the Supreme Court’s power to enforce the fundamental right of health, and Article 141 of the Constitution of India, which makes the law declared by the Supreme Court binding on all courts.

As per this order, before an advertisement is printed/ aired/displayed, advertisers or advertising agencies are required to submit a self-declaration on dedicated portals of the Ministry of Information & Broadcasting (“MIB”). The order also requires all advertisers to furnish proof of uploading the self-declaration to the concerned broadcaster/printer/ publisher/T.V. Channel/electronic media. An advertisement would not be permitted to run on the relevant channels/platforms without uploading the declaration as per the directive of the Supreme Court.

Pursuant to the Supreme Court’s order, the MIB issued a circular for submitting a ‘Self-Declaration Certificate’ (“SDC”), attesting that the advertisement does not contain misleading claims and complies with all relevant regulatory guidelines. These SDCs have to be submitted on the Broadcast Seva portal (for TV and Radio Advertisements) and the Press Council of India portal (for print and digital/internet advertisements). Thereafter, the MIB also issued the Guidelines for using Broadcast Seva Portal/ Press Council of India portal by Advertisers/Advertising Agencies for uploading Self-declaration Certificate (“SDC Guidelines”).

Salient features of the SDC Guidelines and the MIB circular are as follows:

Applicability: The mandate applies to all advertisements, published on or after 18th June 2024, across TV channel/ print or digital media.
Authorised Representative: As per the SDC Guidelines, an Authorised Representative of the advertiser/ advertising agency must sign the SDC on behalf of the advertiser/advertising agency and submit the signed SDC on the MIB portal(s). The signature is to ensure accountability and authenticity of the declaration. The mobile number and email ID of the Authorised Representative would also be required for uploading the SDC.
Details of Advertisements: As part of the submission process, certain details about the advertisement including inter alia product/service being advertised, brief description of advertisement, full script of the advertisement, URL/ PDF of advertisement, and the proposed date first broadcast/publication will have to be provided.
Documents to be submitted before submitting the SDC:

Letter of Authorisation (“LoA”) of the Authorised Representative as per the sample provided in the SDC Guidelines.
Complete written script of the advertisement including all dialogues, voice overs texts displayed on screen, and any other verbal/written content featured in the advertisement.
Actual video/ audio file of the advertisement through a URL including visuals, audio, and any special effects or animations used in the advertisement.
If applicable, copy of the certificate issued by the Central Board of Film Certification (CBFC).
GST details (optional)

FIRM’S TAKE

The Supreme Court’s order, the MIB circular and the SDC Guidelines overlook various aspects of advertising, particularly online advertising, and are not practically workable as the requirement poses significant administrative and operational challenges. Some of the challenges as follows:

The mandate disregards the volume of advertisements and the scope is unclear: The mandate applies to ‘any advertisement’ that is to be printed/aired/displayed/ broadcast and does not take into consideration the sheer volume of advertisements that are produced on a daily basis. At this stage, it is also unclear whether the mandate could potentially include online banners, social media posts, and endorsements within its ambit. Requiring submission of SDCs for all advertisements would add to the compliance and financial burden of the advertisers/advertising agencies.
Remit of MIB Circular & SDC Guidelines goes beyond the SC Order: The MIB circular and SDC Guidelines travel beyond the order of the Supreme Court by requiring advertisers/ advertising agencies to follow a cumbersome compliance process and provide additional information and documents that are not required as per the order of the Supreme Court. Further, the MIB circular requires advertisers and advertising agencies to submit valid SDCs instead of simply providing the proof of uploading the SDC. The MIB circular places the onus of compliance with the mandate on broadcasters/ publishers which does not seem to be the intent behind the mandate of selfdeclaration envisaged by the Supreme Court.
Deters use of programmatic advertising and dynamic creative optimisation: The applicability of the selfdeclaration requirement on online/digital advertising will also affect the digital media industry as it cannot work practically with programmatic advertising and dynamic creative optimisation (“DCO”) functions that are often utilised in online advertising. Programmatic advertising and DCO use automated technology and algorithmic tools for ad placement by deciding, in real time, the publishers on whose site the ads will run. The advertiser is usually unaware about the publishers that will air the campaign and the personalisation carried out to the advertisement, making it impossible for advertisers to identify the publisher (for submission of proof of SDC), and provide details of the final advertisement (before its publication) for uploading the SDC.
Delays in advertisement launches and increase in costs and compliance burden: The cumbersome process that has been stipulated in the SDC Guidelines and the potential portal overloads would likely lead to delays in launching the advertisements and impact market strategies adding to the costs and impact the operations of brand owners, advertisers, publishers etc.

While the intent of holding the advertisers and advertising agencies accountable is understandable, the practical effect of this requirement is questionable. Any action against violations by advertisers and advertising agencies, whether they have submitted a SDC or not (irrespective of the truthfulness of the SDC), will be taken under current laws and regulations. The submission of an SDC for every advertisement merely adds a rigorous administrative layer which ultimately will be dealt with in the same manner and have the same consequence for non-compliance for advertisements published without an SDC.

Nevertheless, in the interest of ease of doing business, the MIB circular and SDC Guidelines should ideally be made less onerous and should not exceed the directive of the Supreme Court.

THE GOVERNMENT NOTIFIES THE CINEMATOGRAPH (CERTIFICATION) RULES, 2024

On 15th March 2024, the Ministry of Information & Broadcasting notified the Cinematograph (Certification) Rules, 2024 (“2024 Cinematograph Rules”) under the Cinematograph Act, 1952 (“Cinematograph Act”). The 2024 Cinematograph Rules supersede the Cinematograph (Certification) Rules, 1983 (“1983 Rules”) and have been introduced after the passing and notification of the Cinematograph (Amendment) Act, 2023 which seeks to inter alia streamline the film certification framework and also address issues such as online piracy and copyright infringement.

Highlights of the 2024 Cinematograph Rules:

Key definitions:

Feature film: A feature film has been defined as a fictionalized story-long film. This is different from the 1983 Rules which defined a feature film as a fictionalized story film in 35mm or other gauges or in or on video, tape or compact video disc.
Long film: As per the 2024 Cinematograph Rules, a log film is a film running 72 minutes or more including the credit and title time of the film. The 1983 Rules defined a long film in the context of meters or corresponding length in other gauges.
Short film: Similarly, the 2024 Cinematograph Rules have altered the definition of the term ‘short film’ to simply mean a film running less than 72 minutes as opposed to the 1983 Rules which similar to the old definition of long film uses a measure of length to defines the term.
Foreign film: This is a new term that has been introduced to mean a film produced outside India.
UA certificate: The 2024 Cinematograph Rules also introduce a definition for UA certification as a certificate with the appropriate UA marker, an age-based indicator for a film that has received or is intended to receive a “UA” Certificate under Section 4 of the Cinematograph Act which provides the procedure for examination of films by the Board of Film Certification (“Board”).

Online certification processes: To streamline and digitize operations, the 2024 Cinematograph Rules have introduced an online certification process by establishing an online portal called the ‘e-cinepramaan portal’ for filing applications for film certification/re-certification as well as examination of films.
Accessibility features: For making the content accessible for persons with disabilities, the 2024 Cinematograph Rules require every application for film certification to be accompanied by same language subtitles, same language audio description, or same language closed captions and any other accessibility features that the Central Government may notify, along with other documents prescribed for the application process.
Protection of the rights of a copyright holder: As per the 2024 Cinematograph Rules, in the event, that an application is made by a person other than the producer/copyright holder of the film, then written authorisation on a stamped paper of appropriate value from the producer or copyright holder of the film will also have to be submitted along with the application.
Priority scheme: The 2024 Cinematograph Rules allow for an applicant to apply for the priority scheme, by paying 3 times the usual fee payable for the examination of the film, for scheduling the examination of the film ‘preferably’ within 5 days of the submission of the application subject to the availability of the Board. For examining the films, the Examining Committee of the Board is required to follow the order in which it received the applications for film certification. However, it can alter the order on receipt of a priority application. This scheme has been introduced to allow filmmakers to expedite the examination of the film in case of any urgency felt by filmmaker(s) due to their prior commitments before the release of the film.
Engagement of experts: The 2024 Cinematograph Rules allow regional officers, appointed by the Central Government to enable the Board to perform its functions, and to invite subject or language experts in the field of films to assist with examining the film by the Examining Committee.
Age-based categories for film certification: In the 1983 Rules, the UA certificate was limited to the age of 12 years. The 2024 Cinematograph Rules have introduced an agebased categorisation of film certification by subdividing the UA certification into three age-based categories, namely 7 years, 13 years and 16 years
Timeline for issuing certificates: After completion of the entire process, the timeline for issuing a certificate has been reduced from 7 days (in the 1983 Rules) to 2 days in the 2024 Cinematograph Rules.
Validity of certificates: As per the 2024 Cinematograph Rules, a certificate granted by the Board will be valid perpetually and throughout India. Earlier, a Board-granted certificate was valid only for 10 years and required the filing of a renewal/re-application after the expiration of its validity.
Re-certification for a television broadcast: As per the 2024 Cinematograph Rules, an application for re-certification or change of category of the film that has received final certification from the Board will have to be filed on the e-cinepramaan portal for a film that is intended to be exhibited on television or any other media other than the one that was originally certified.
Gender representation: The 2024 Cinematograph Rules empower the Central Government to take appropriate steps to appoint women members to the Board for due representation for women. As per the 2024 Cinematograph Rules, at least one-third of the members of the Board must be women and this number can be increased to ensure that women preferably represent 50% of the panel of members of the Board. Further, in the case of the advisory panel, the Central Government has been empowered to determine the number of members to such panel after consulting with the Board wherein at least one-third of the members shall be women and preferably 50% shall be women.

FIRM’S TAKE

The overhaul of the framework governing cinematography (by amending the Cinematograph Act, 1952 and introducing the 2024 Cinematograph Rules) is a welcome step for ensuring the modernisation of the process and at the same time protecting intellectual property rights and combating piracy.

The 2024 Cinematograph Rules also take into consideration the various initiatives of the government for fostering ease of doing business, women empowerment, and ensuring accessibility of content.

The digitisation of the application process would ensure prompt and transparent submission and processing of applications thereby enhancing the efficiency of the process. The introduction of the priority scheme and perpetual validity of certificates is vested in the interest of ease of doing business and would be pivotal in reducing the compliance burden on the filmmakers.

The age-based categorisation of the UA certificate is a positive step towards ensuring that informed decisions are taken about the consumption of age-appropriate content and balancing the right to freedom of speech and expression and the duty of the government to protect children. By requiring applicants to submit language subtitles, audio descriptions etc. the 2024 Cinematograph Rules not only allow accessibility of content but also factor in inclusivity.

In addition to ensuring the representation of women, an overall gender-neutral tone has been adopted while drafting the 2024 Cinematograph Rules. For instance, the term ‘chairman’ in the 1983 Rules has been changed to ‘chairperson’ under the 2024 Cinematograph Rules.

While the above-noted steps have been introduced and notified, their success would depend on the effective implementation of the provisions of the 2024 Cinematograph Rules.

DOT AMENDS THE KYC INSTRUCTIONS FOR THE M2M CONNECTIONS.

The Department of Telecommunications (“DoT”) on 21st March 2024 amended the existing KYC instructions for Machine to Machine (“M2M”) connections to relax the restrictive features for M2M connections (“M2M KYC Amendment”).

By way of background, the guidelines for the registration of M2M service providers & WPAN/ WLAN connectivity providers for M2M Services dated 8th February 2022 (“M2M Guidelines”) regulate and operationalize M2M services in India through registration under such guidelines. The M2M Guidelines prescribe a host of requirements for such providers including inter alia adherence to KYC and related guidelines issued by DoT to authorized Telecom Service Providers (“TSPs”) from time to time. Accordingly, all guidelines/instructions issued by the DoT on M2M services including the KYC Instructions, as amended by the M2M KYC Amendment, apply to the provision of M2M services. Furthermore, the DoT can also request information regarding adherence to the KYC Instructions, as and when necessary.

The DoT, on 21st March 2024, has eased the erstwhile instructions issued by DoT on 16th May 2018, and 30th May 2019 (“KYC Instructions”) regarding the implementation of restrictive features for subscriber identity module cards (“SIM”) used for M2M communication services and associated know your customer (“KYC”) instructions via the M2M KYC Amendment. The M2M KYC Amendment has allowed the use of SIM cards for M2M communications services in the following manner:

Outgoing/incoming calls will be allowed to/from a predefined set of a maximum of 4 numbers only.
Likewise outgoing/incoming SMS will be allowed to/ from a predefined set of a maximum of 4 numbers only.
Data communications will be allowed on a maximum of 100 (one hundred) predefined public internet protocol (“IP”) addresses/ uniform resource locator (“URLs”) with fixed access point names (“APNs”) or equivalent technology options by the TSPs.
These restrictions do not apply to calls made to emergency numbers like police, fire, ambulance, etc.

A list of such numbers/IP addresses is to be provided to the TSPs while obtaining M2M SIM cards. Should there be a need to modify this list at a later stage, the TSPs can be requested to update or reconfigure these numbers and IP addresses accordingly. These restrictive features do not apply to data communication on private networks or virtual private networks.

Previously, data communication was allowed on a maximum of 4 numbers of predefined public IP addresses/URLs with fixed APNs or equivalent technology options by TSP. However, with the M2M KYC Amendment, data communication will be allowed on a maximum of 100 numbers of predefined public IP addresses/URLs with fixed APNs or equivalent technology options by the TSPs.

FIRM’S TAKE

The DoT’s M2M KYC Amendment relaxes restrictive features for M2M SIM connections, allowing M2M service providers to leverage up to 100 predefined public IP addresses/ URLs and accordingly service more customers per SIM card. This DoT initiative demonstrates a commitment to fostering a more supportive environment for M2M communication, potentially acting as a catalyst for the growth of the M2M industry and the broader Internet of Things ecosystem in India.

The Ministry of Heavy Industries notifies a scheme to promote manufacturing of EVs in India Image 5

The Ministry of Heavy Industries notified a scheme to promote the manufacturing of electric passenger cars on 15th March 2024 (“EPV Scheme”). The EPV Scheme inter alia provides a concessional import tariff rate of 15% for global EV manufacturers that is contingent upon them setting up Electric Passenger Vehicle (“EPV”) manufacturing facilities in India with a minimum investment of USD 500 million over a period of 5 years. The EV manufacturer must achieve a minimum domestic value addition of at least 25% within 3 years and at least 50% within 5 years from the date of issuance of the approval letter. To safeguard the domestic EV industry, the EPV Scheme does not incentivize the import of EVs worth less than USD 35000 and caps the number of such imported EVs at 8000 per year.

The EPV Scheme is in line with other initiatives taken by the Government of India to promote the EV industry such as the PLI Scheme for Automobile and Automotive Components (PLI Auto), the PLI Scheme for Advanced Chemistry Cell (PLI-ACC), the Scheme for Faster Adoption and Manufacturing of Hybrid & Electric Vehicles (FAME) along with the EV policies by various states.

Key Features:

Approved applicants to set up manufacturing facilities in India with a minimum investment of USD 500 million.
Operationalization of manufacturing facilities shall be made operational within a period of 3 years from the date of issuance of the approval letter.
Approved EPV manufacturers to achieve a minimum domestic value addition of 25% within 3 years and 50% within 5 years from the date of issuance of the approval letter.
Import of completely built-in units of EPVs manufactured by approved EPV manufacturers at a reduced customs duty of 15% subject to the conditions as per the EPV Scheme.
EPVs can initially be imported with a minimum CIF value of USD 35,000, at a concessional duty rate of 15% for a period of 5 years from the date of issuance of the approval letter.
The maximum number of EPVs allowed to be imported at the concessional duty rate of 15% shall be capped at 8000 per year and carryover of unutilized annual import limits would be allowed.
The maximum number of EPVs to be imported under the EPV Scheme shall be such that the total duty foregone will be limited to either the maximum duty foregone per applicant (limited to Rs.6,484 crore) or the committed investment of the applicant, whichever is lower.
The lower customs duty of 15% would be applicable for a total period of 5 years (from the date of issuance of approval letter) subject to setting up of manufacturing facilities in India within 3 years (involving a minimum investment of Rs.4,150 crore/USD 500 million). To avail of lower customs duty, the approved applicants will be required to submit import applications on an annual basis.
The applicant’s commitment to set up manufacturing facilities and achievement of DVA shall be backed by a bank guarantee equivalent to the total duty to be forgone, or Rs 4150 crore, whichever is higher, during the scheme period.
The bank guarantee will be invoked in case the approved applicant does not achieve the requirements on a minimum investment of 500 USD million within 3 years or domestic value addition or investment less than the duty forgone/ USD 500 million, whichever is more.
Implementation guidelines for the EPV scheme will be issued separately.
Tenure of the EPV scheme will be 5 years or as notified by the Government of India.
The EPV Scheme will be implemented through a Project Management Agency which will be responsible for providing secretarial, managerial, and implementation support and carrying out other responsibilities as assigned by the Government of India from time to time.
Applicants shall furnish an undertaking on integrity compliance duly signed by its authorized signatory along with the application form.
The companies whose credentials have been considered for selection of applicant under the EPV Scheme shall not be allowed to dilute their shareholding (direct or indirect) in the applicant during the tenure of the Scheme.
In case benefits availed under the EPV scheme have been obtained by misrepresentation/ falsification of information, the approved applicant will have to refund the duty foregone, along with interest apart from action that may be undertaken under law.

Eligibility Criteria:

The Applicant company/group of companies will have to satisfy the following requirements:

Incorporation under the Companies Act in India
Should be engaged in the automotive sector and/or manufacturing.
Global group revenue should be at least a minimum of INR 10,000 crore.
Global investment of the Company or its Group Companies in fixed assets should be at least INR 3,000 Crore.
Minimum investment commitment in India of INR 4,150 crore/ USD 500 million within 3 years.
Domestic value addition criteria during manufacturing of at least 25% within 3 years and at least 50% within 5 years from the date of issuance of the approval letter

Application Deadline:

Applications will be invited within 120 days (or more) of notification of the EPV scheme.
Further, the Ministry shall have the right to open the application window, as and when required, within the first 2 years of the Scheme.

FIRM’S TAKE

The EPV scheme seeks to incentivize high-end foreign EV manufacturers like Tesla to establish manufacturing facilities in India by allowing the import of a limited number of EPVs at a concessional duty rate. A template for attracting foreign manufacturers into India has already been established through the Production Linked Incentive scheme for electronic manufacturing which has attracted the likes of Apple to set up their manufacturing facilities in India. This has led to Apple exporting USD 10 billion worth of iPhones from India during FY 24.

The EPV scheme also protects the interests of the domestic EV manufacturers allowing a concessional import duty rate of 15% for premium EVs worth USD 35000 for a period of 5 years from the date of issuance of the approval letter. Further, the maximum number of EPVs allowed to be imported at the concessional duty rate of 15% shall be capped at 8000 per year. While it is laudable that the Government is seeking to attract EV manufacturing in India through policy incentives, it should also consider focusing on alleviating some of the chronic problems of the manufacturing sector to make the domestic industry competitive with its foreign counterparts. This includes liberalizing restrictive labor laws, providing land and power to industries at concessional rates, ensuring an abundance of skilled labor, etc.

GUIDELINES FOR ARBITRATION AND MEDIATION IN CONTRACTS OF DOMESTIC PUBLIC PROCUREMENT IMAGE 6

On 3rd June 2024, the Ministry of Finance issued an Office Memorandum (“OM”) providing extensive guidelines for arbitration and mediation in contracts of domestic public procurement (“DPP Contracts Guidelines”). As per the OM, these guidelines have been issued considering the enactment of the Mediation Act, 2023 (“Mediation Act”) and the government’s experience with arbitration and issues therein as an alternate dispute resolution mechanism.

The OM provides various issues with the current arbitration mechanism that have necessitated the Government to re-examine the Government’s approach towards arbitration. For instance, as per the OM, arbitration is a time-consuming and expensive method of dispute resolution as compared to other alternatives. The OM also states that reduced formality during arbitration proceedings and the binding nature of the decisions have led to incorrect decisions. The OM also claims that arbitrators are not subject to the level of standards that are applied while selecting and appointing judges. The OM goes on to state that the transfer of concerned officials who have been involved in the arbitration process does not allow the Government to effectively present their case before arbitrators. Moreover, numerous arbitration awards have been challenged before the Courts which has increased the burden on the courts instead of reducing their burden as was intended. The OM also makes the observation that although the practical implications of the arbitration process were intended to be commercially viable and sensible, however, in practice, given the adversarial process involved, claims and counterclaims are often inflated instead of being realistic.

Key highlights of the DPP Contracts Guidelines are as follows:

Reliance on arbitration needs to be reduced in domestic public procurement contracts: As per the DPP Contracts Guidelines, arbitration should not be routinely/ automatically included as a method of dispute resolution in procurement contracts/tenders.
Adoption of arbitration in certain cases: If arbitration is included in contracts, then, as a norm, it should be restricted to disputes (not contracts) with a value less than INR 10 crore. Further, in the contract conditions/bid conditions, it must be specifically mentioned that arbitration will not be a method of dispute resolution in all other cases.
Inclusion of arbitration in disputes exceeding INR 10 crore: For including arbitration clauses for disputes exceeding the value of INR 10 crore, reasons should be recorded and the approval of the concerned Secretary or an officer not below the level of Joint Secretary (for Government Ministries/ Departments, attached/ subordinate offices and autonomous bodies) or the Managing Director (for Central Public Sector Enterprises/ Public Sector Banks/ Financial institutions etc.) should be sought.
Challenge/Appeals: In cases where there is a decision against the govt./ public sector enterprise, the decision to challenge/ appeal should be taken only if the case merits such challenge/appeal and if there are high chances of winning in the court/ higher court and should not be resorted to in a routine manner.
Institutional arbitration: After considering the reasonableness of the cost of arbitration relative to the value involved, institutional arbitration may be given preference.
Mediation should be encouraged: The DPP Contracts Guidelines encourage the adoption of mediation under the Mediation Act and/ or negotiated amicable settlements for dispute resolution for Government departments/entities/ agencies. As per these guidelines, for high-value matters, a High-Level Committee (which may consist of a retired judge or a retired high-ranking officer or technical expert) for dispute resolution may be set up and the Government department/ agency/entity may either negotiate directly with the other party or conduct mediation through a mediator and place a tentative proposed solution before the Committee or use the Committee as the mediator. Setting up and referring the matters to the Committee would allow scrutiny by a ‘highranking body at arm’s length’ and would promote fair decisions in the public interest.
Re-negotiation of longduration works contracts: The DPP Contracts Guidelines suggest renegotiating the terms of long-duration works contracts due to unforeseen major events if required to serve the public interest, and placing the terms of the tentative re-negotiated contracts before a suitable High-Level Committee before approval. Approval will need to be obtained for the final accepted solution.
Mediation: Mediation agreements should not be routinely/automatically included in procurement contracts/tenders. However, such a clause may be incorporated if so decided. Nevertheless, pre-litigation mediation will not be affected by the absence of the mediation agreement.
Adjudication by courts: Disputes will be adjudicated by courts if they are not covered in an arbitration clause and where the above-noted methods fail in resolving the disputes.
Modification in the application of DPP Contracts Guidelines: The Secretary concerned (or an officer not below the level of Joint Secretary to whom such authority has been delegated) can authorise general or casespecific modification to the application of the DPP Contracts Guidelines.
Application: The DPP Contracts Guidelines apply to contracts of domestic procurement by the Government and its entities, including Central Public Sector Enterprises (CPSEs), Public Sector Banks (PSBs), and Government companies.

FIRM’S TAKE

In the process of promoting mediation and other alternate dispute resolution methods, the DPP Contracts Guidelines undermine the importance of and the pivotal role played by arbitration in resolving disputes and also shed light on the Government’s unsatisfactory experience with arbitration. The DPP Contracts Guidelines state that arbitration should not be the norm or preferred mode of dispute resolution in public procurement contracts, potentially disincentivising parties to do business in India and requiring contractors and/or suppliers to carefully assess dispute resolution clauses while bidding for and entering into an agreement with the Government. These guidelines also display a level of ‘cooling-off’ of the Government’s confidence in arbitration proceedings.

The premise for this policy change from arbitration to other dispute resolution methods needs to be reexamined. As per the Government, arbitrators are not selected using similar standards that are considered for the appointment of judges. This concern not only questions the accountability of arbitrators but also disregards the fact that arbitrators are appointed with the mutual consent of the parties. It also disregards the technical expertise that arbitrators may possess in the subject matter which could be crucial for understanding and effectively deciding the matter at hand and may have been one of the factors for appointing arbitrators.

Unlike an arbitrator who is required to take a position in a dispute, a mediator would simply facilitate settlements. By advocating mediation as the preferred method of dispute resolution, the Government hopes to ‘settle’ most of its disputes. However, the Government does not seem to have taken into account the sheer number of contracts that may require settlement and the bargaining power of the parties in such settlement discussions.

The Government has also raised a concern about the number of arbitration awards that have been challenged before the courts. This concern disregards the fact that litigation would be the only recourse available to parties if they fail to settle the matter through mediation (or any other dispute resolution mechanism). This would result in increasing the burden on the courts instead of reducing the same. The shift from arbitration to court proceedings post-mediation seems counterproductive as it would certainly not lessen the load of litigation in terms of backlog in the courts. In essence, arbitration acts as the first stage of adjudication where matters are decided before they reach the court and are subject to litigation. With this shift in policy, parties would now end up going to court in the first instance, instead of opting for alternate dispute resolution, and increase the backlog of the already backlogged courts.

Notwithstanding the above, mediation and other dispute-resolution mechanisms also have benefits that may prove to be beneficial and effective for all the parties provided that these mechanisms are implemented expeditiously and efficiently.

While the intent to promote alternative dispute-resolution mechanisms is understandable and in the right spirit, whether the Government can take a stand discouraging the adoption of arbitration as an alternative dispute-resolution mechanism is questionable and may require re-assessment.

About Author

Ameet Datta

Ameet Datta is a Partner at Saikrishna & Associates. He is an IP litigator and TMT lawyer with over 22 years of experience and wide ranging expertise across IP Law, Technology law, privacy and data protection law, white collar crime cases around data breaches, and, media & entertainment law specifically in relation to licensing, content aggregation & acquisition, film & music production, distribution/ licensing, format rights, defamation and right of publicity. Ameet has extensive experience with the creative sector in terms of multiple litigations including licensing disputes before the Courts & the Copyright Board. Ameet is closely involved with Copyright laws, Technology regulations and policy matters. In 2010, Ameet appeared as an expert witness before the Indian Parliamentary Standing Committee overseeing amendments to the Copyright Act, 1957. Ameet has been highly ranked as a recommended lawyer for IP Litigation, and, telecoms, media & entertainment by Chambers & Partners (Asia Pacific), WTR1000; as a recommended lawyer for IP litigation by Legal 500, and recommended as an IP Star by MIP

Suvarna Mandal

Suvarna Mandal is a Partner at Saikrishna & Associates. She has nearly a decade of experience in providing trade & regulatory compliance advice to domestic and international clients for understanding and complying with a wide range of national, state as well as sector-specific legislations and regulations in the spheres of telecommunications, technology law, consumer law, environmental law, product compliance and safety regulations (including packaging standards, labels and safety standards), data protection and privacy, media law, advertising regulations, etc. She provides end-to-end compliance counselling to clients across various industries and sectors such as software services, consumer electronics, technology, telecom, media, intermediaries, e-commerce, online value-added services sectors, consumer goods and medical devices. Suvarna also works closely with clients’ Government Affairs team to prepare strategic policy documents, representations and formal communications towards policy development and policy reform efforts with the Government.