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The Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, is all set to unveil a revolutionary digital platform – Bharat Startup Knowledge Access Registry (BHASKAR) under the flagship Startup India program.

• BHASKAR aims to bring together key stakeholders and address challenges in the entrepreneurial ecosystem.
• With over 1,46,000 DPIIT-recognized startups in India, BHASKAR seeks to harness the potential by offering access to resources, tools, and knowledge.
• It bridges the gap between startups, investors, mentors, and stakeholders, promoting interactions and collaborations.
• By providing a centralized platform, BHASKAR facilitates quicker decision-making, scaling, and personalized interactions through unique BHASKAR IDs.
• The platform is pivotal in driving India’s innovation narrative and fostering a more connected, efficient, and collaborative environment for entrepreneurship.

Key Features of BHASKAR

1. Networking and Collaboration: BHASKAR bridges the gap between startups, investors, mentors, and various stakeholders, enabling seamless interactions and collaborations across different sectors.
2. Centralized Access to Resources: By consolidating resources, BHASKAR provides startups with immediate access to essential tools and knowledge, facilitating faster decision-making and scaling.
3. Personalized Identification: Each stakeholder is assigned a unique BHASKAR ID, promoting personalized interactions and tailored experiences across the platform.
4. Enhanced Discoverability: With powerful search functionalities, users can effortlessly locate relevant resources, collaborators, and opportunities, leading to quicker decision-making and action.

BHASKAR: Pioneering the Future of India’s Startups

BHASKAR is poised to reshape India’s startup arena, fostering a more efficient, connected, and collaborative environment for entrepreneurship. The launch of BHASKAR underscores the Government of India’s commitment to catapulting India as a leader in global innovation, entrepreneurship, and economic growth.

Read More – https://www.pib.gov.in/PressReleasePage.aspx?PRID=2055243

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Mumbai-based brand ‘Shaadi.com’ was launched in 1997 by Anupam Mittal and cousins, founders of People Interactive (India) Private Limited (“Company”). Since its introduction into the “matrimonial market”, the brand has become a prominent online matchmaking platform with international repute and presence. However, in early 2024, news broke about a messy legal battle between Anupam Mittal (by this time, serving as managing director for over 15 years) and WestBridge Ventures II Holdings, a Mauritius-based private equity fund (“WestBridge”), from whom the Company had secured funding in 2006. Spanning proceedings before courts in India and Singapore, the case is poised to become a landmark moment in the evolution of international arbitration law and intra-corporate disputes. Involving allegations of forced transfer to competitors and an expensive series of litigations, this dispute necessitates that potential investors and investee companies (and their founders) glean an understanding of the key takeaways.

Background of the Relationship between the Parties

Timeline	Event
1997	People Interactive (India) Private Limited (“Company”) founded and Mumbai-based “sagaai.com” launched by Anupam Mittal and family (“Founders”), offering an online matchmaking platform for Indians around the world.
2001	The platform is renamed to “Shaadi.com” and becomes the Company’s flagship brand. [1]
October 2004	Anupam Mittal appointed as Managing Director of the Company.
February 10, 2006	WestBridge Ventures II Holdings, a Mauritius-based private equity fund (“WestBridge”) invests INR 165,89,00,000 (Rupees One Hundred Sixty Five Crores Eighty Nine Lakhs) in the Company (“Investment”). Company, Founders and WestBridge sign a shareholders’ agreement. [2]
	Parties agree on exit rights for WestBridge, which includes the following options:(i) an Initial Public Offering (IPO) to be completed within 5 years of closing;(ii) sale of WestBridge shares to third parties (excluding significant competitors);(iii) redemption or buyback provisions if the IPO was not completed within 5 years; and(iv) drag-along rights if the Company fails to buyback shares within 180 days of exercising the buyback option (“Drag Along”).  If an IPO was not completed within 5 years, WestBridge could redeem all its shares and if necessary, “drag along” all other shareholders (including Founders) to sell their shares to a third party.
	Parties agree in the SHA that:(i) the SHA is governed by the laws of India; (ii) any disputes arising from the agreement would be resolved through arbitration as per the International Chamber of Commerce Rules (“ICC”) with seat of arbitration in Singapore; and (iii) the enforcement of arbitration award would be subject to Indian laws.
2006	Consequent to the investment, WestBridge holds 44.38% and Anupam Mittal holds 30.26% of the shareholding of the Company.
2011	Contractually agreed period to complete IPO expires.
2017 – 2019	WestBridge seeks to exit the Company by allegedly entering into discussions to sell its shares to a direct competitor, Info Edge India Limited (“Info Edge”), owner of matchmaking platform ‘Jeevansathi’. [3]
	Tensions between the parties continue, with alleged acts of oppression and mismanagement by WestBridge “facilitated” by other Founder directors [4], including a joint requisition to the Company to convene an extraordinary general meeting of the Company. The agenda for such meeting involves replacing Anupam Mittal as the managing director.
December 2020	WestBridge exercises its buyback option, requiring that the Company: (i) convert the 1,000 Series A1 preference shares into 580,779 equity shares; and then, (ii) effect a buyback of said equity shares. Company converts the preference shares, but is unable to offer the buyback price for the converted equity shares.
October 2021	WestBridge issues a drag-along notice compelling the sale of shares to a “significant competitor”, relying on the SHA which states that if the buyback could not be completed, the Drag Along rights would be triggered, which included the right to have the holding of the minority shareholders (including founders) liquidated and sold to any party without restriction.

Jurisdiction is Key – India v/s Singapore:

This dispute has highlighted significant challenges in cross-border legal disputes and the complexities of enforcing shareholder agreements in international fora. Despite litigation stretching on since 2021, the issue of oppression and mismanagement has yet to be ruled on, and the current issue before the courts is actually of: (i) jurisdiction, i.e., determining the competent authority to adjudicate on the SHA and allegations of oppression and mismanagement; and (ii) enforceability of foreign arbitration awards:

• Singapore Jurisdiction: WestBridge argued that since the SHA stipulated that arbitration would be governed by International Chamber of Commerce (ICC) rules with Singapore as the arbitration seat, the dispute was to be heard and adjudicated in Singapore. The Singapore courts upheld this on the basis of: (i) the composite test, ruling that whether a dispute is arbitrable or not will be determined by the law of the seat as well as the law governing the arbitration agreement; and (ii) oppression/mismanagement disputes being arbitrable under Singapore law. 

• Indian Jurisdiction: Mittal argued that jurisdiction to hear issues of corporate oppression and mismanagement is exclusively vested with the NCLT under Sections 241-244 of the Companies Act, 2013 and are not arbitrable under Indian law, in accordance with Section 48(2) of the Indian Arbitration & Conciliation Act, 1996 (“A&C Act”), which is briefly excerpted below: 

“Enforcement of an arbitral award may also be refused if the Court finds that—

(a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public policy of India.

Explanation 1: For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if – (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.” (emphasis added)

It is crucial to note that the provisions of the A&C Act have been interpreted to limit the arbitrability of intra-company disputes and consequently, provide Mittal with the legal grounds to resist enforcement of the foreign arbitration award.

Implications of the Case

This case holds significant implications for corporate law, cross-border investments, and the arbitration landscape, particularly in the context of Indian startups and venture capital:

• Jurisdiction Determination: The case emphasizes the importance of clearly defining jurisdiction in cross-border agreements, especially where legal disputes span multiple countries. The differing interpretations of arbitration clauses by Singapore and Indian courts underscore the complexities of jurisdictional overlaps.

• Extent of Arbitration in Legal Disputes: The case explores the limits of arbitration, particularly concerning corporate governance issues like oppression and mismanagement. The contrasting legal positions in Singapore and India highlight the potential conflicts that arise when arbitration is attempted in disputes traditionally reserved for domestic courts.

• Enforcement of Cross-Border Orders: The enforceability of foreign arbitration awards in domestic courts is a critical concern, especially when the awards conflict with local laws. The Bombay High Court’s observation that corporate oppression disputes are non-arbitrable under Indian law, thus rendering foreign awards unenforceable, could set a precedent for future cases.

• Corporate Oppression and Minority Rights in India: The case brings to light the challenges of protecting minority shareholder rights in complex financial arrangements involving multiple jurisdictions. It illustrates the potential for exit mechanisms, such as drag-along rights, to be used in ways that might disadvantage minority stakeholders.

Adverse Impact on Shaadi.com

The crux of Anupam Mittal’s case is simple – if the Drag Along with sale of shares to a significant competitor is enforced, the impacts to the Company and the ‘Shaadi.com’ brand are adverse: 

• Control of the Company: If Info Edge or any other competitor were to purchase the shares sold as part of the Drag Along structure, this would open the path for them to acquire the majority shareholding in the Company, and could drastically alter the Company’s control dynamics. Currently, Anupam Mittal holds a 30% stake, while WestBridge controls 44.3%. With the consummation of the Drag Along sale, this could facilitate a takeover by such competitor and potentially diminish the Founder’s influence over the Company.

• Business, Strategy and Culture: A shift in control/ownership could lead to a major restructuring of Shaadi.com’s strategic direction and operations. This might affect key business decisions, brand positioning, and market strategies. Additionally, a change in control could impact the Company’s culture and its relationships with stakeholders, including employees, customers, and partners.

• Competition: As one of three prominent names in the online matchmaking platform industry (including ‘BharatMatrimony’ and ‘JeevanSathi’), any potential acquisition of the Company by a competitor would result in a potential acquisition of the ‘Shaadi.com’ brand absorbing the customer base and effectively, the market share held. This could not only result in a dramatic change in the existing market competition but potentially require strategic realignment within the industry. 

Future Implications for Startups and Venture Capital Firms

For startups and venture capital (VC) firms, this case underscores several crucial lessons. 

• Lessons in Drafting: It is crucial that: (i) exit clauses and dispute resolution mechanisms be drafted with precision; and (ii) transaction documents include clearly outlined terms for various scenarios, including exits, buybacks, and drag-along rights, to prevent ambiguous interpretations and conflicts. Properly crafted agreements and well-defined dispute resolution processes can mitigate risks and facilitate smoother exits and transitions

• Jurisdictional Issues: It is critical that arbitration provisions be aligned with the legal frameworks of all involved jurisdictions. This alignment helps avoid prolonged and expensive legal disputes that can arise when different legal systems have conflicting interpretations of agreements. Startups and VCs should also consider the implications of international arbitration clauses and ensure they are practical and enforceable across jurisdictions.

• Preference for Singapore-seated arbitration: One of the key takeaways from this dispute is that differing principles of law governing arbitrability of a subject matter, would impact the enforceability of foreign awards in India. Given its reputation as an arbitration-friendly jurisdiction, Singapore is often designated as the seat of arbitration in investment and shareholder agreements. However, in light of this case it is crucial for parties to keep two elements in mind when negotiating an arbitration clause designating a foreign seat: (i) the law applicable to the arbitration agreement must be expressly stipulated to avoid any uncertainty; and (ii) the subject matter of the anticipated dispute should be arbitrable under both the law applicable to the arbitration agreement as well as the law of the seat. 

Conclusion

The WestBridge vs. Shaadi.com dispute transcends a typical investor-company conflict and stands as a landmark case in corporate governance and cross-border legal disputes, with particular impact on arbitration law. It has the potential to reshape how shareholder agreements are interpreted and enforced, particularly in complex, multi-jurisdictional contexts. The outcome of this case is likely to set important precedents for the management of shareholder rights, dispute resolution, and arbitration processes in international investments, especially given the popularity of choice of Singapore as a seat of arbitration for foreign investors. It also sheds light on the intricate balance between protecting minority shareholder interests and upholding contractual agreements. The implications of this case extend beyond Shaadi.com, influencing future legal frameworks and practices for corporate governance and investor relations in the global business landscape. 

References:

[1] Article published in the business journal from the Wharton School of the University of Pennsylvania on May 11, 2012, accessible here.
[2] NCLT Order on September 15, 2023,  in Anupam Mittal v People Interactive (India) Private Limited and others, available here.

[3] Article published by Inc42 on September 05, 2024, accessible here.
[4] Bombay High Court Judgement on September 11, 2023, in Anupam Mittal v People Interactive (India) Private Limited and others, available here.

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The Companies Act, 2013 (the “Act”), has introduced significant changes to the rules governing application monies received by companies through private placement and preferential allotment of shares, aiming at enhanced transparency, protection of investor interests, and ensuring timely utilization of funds.

This article outlines the key provisions and implications of non-compliance regarding the refund of
application monies under the Act.

Following the recent budget announcement, which aimed to simplify regulations for Foreign Direct Investment (FDI) and Overseas Investment (ODI), the Department of Economic Affairs has amended the FEMA (Non-debt Instruments) Rules 2019. A significant aspect of this amendment is the introduction of a new provision that enables FDI-ODI swaps. We have curated a slide below to help you understand this better.

𝘖𝘵𝘩𝘦𝘳 𝘢𝘮𝘦𝘯𝘥𝘮𝘦𝘯𝘵𝘴:

1. Investment by OCIs on non-repat basis 𝐞𝐱𝐜𝐥𝐮𝐝𝐞𝐝 from calculation of indirect foreign investment. Earlier only NRI investment was excluded.

2. Aggregate FPI cap of 49% of paid-up capital on a fully diluted basis has now been removed. FPIs now required to 𝐨𝐧𝐥𝐲 𝐜𝐨𝐦𝐩𝐥𝐲 𝐰𝐢𝐭𝐡 𝐬𝐞𝐜𝐭𝐨𝐫𝐚𝐥 𝐨𝐫 𝐬𝐭𝐚𝐭𝐮𝐭𝐨𝐫𝐲 𝐜𝐚𝐩.

3. ‘White Label ATM Operations’ has been recognized as a new sector, with 100% 𝐅𝐃𝐈 𝐧𝐨𝐰 𝐚𝐥𝐥𝐨𝐰𝐞𝐝 𝐮𝐧𝐝𝐞𝐫 𝐭𝐡𝐞 𝐚𝐮𝐭𝐨𝐦𝐚𝐭𝐢𝐜 𝐫𝐨𝐮𝐭𝐞.

Key Indian players in this sector: India1 Payments, Indicash ATM (Tata Communications), Vakrangee, and Hitachi Payments.

4. NR to NR transfer will require prior Govt approval 𝐰𝐡𝐞𝐫𝐞𝐯𝐞𝐫 𝐚𝐩𝐩𝐥𝐢𝐜𝐚𝐛𝐥𝐞. In the erstwhile provisions, it was required only if investment in the specific sector required prior Govt approval.

5. Definitions – Control now defined in Rule 2, and definition of “startup company” has been aligned with “startups” recognised by DPIIT vide notification dated February 19, 2019. Definitions of “control” and “startup company” elsewhere have been deleted.

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Mumbai-based brand ‘Shaadi.com’ was launched in 1997 by Anupam Mittal and cousins, founders of People Interactive (India) Private Limited (“Company”). Since its introduction into the “matrimonial market”, the brand has become a prominent online matchmaking platform with international repute and presence. However, in early 2024, news broke about a messy legal battle between Anupam Mittal (by this time, serving as managing director for over 15 years) and WestBridge Ventures II Holdings, a Mauritius-based private equity fund (“WestBridge”), from whom the Company had secured funding in 2006. Spanning proceedings before courts in India and Singapore, the case is poised to become a landmark moment in the evolution of international arbitration law and intra-corporate disputes. Involving allegations of forced transfer to competitors and an expensive series of litigations, this dispute necessitates that potential investors and investee companies (and their founders) glean an understanding of the key takeaways.

Background of the Relationship between the Parties

Timeline	Event
1997	People Interactive (India) Private Limited (“Company”) founded and Mumbai-based “sagaai.com” launched by Anupam Mittal and family (“Founders”), offering an online matchmaking platform for Indians around the world.
2001	The platform is renamed to “Shaadi.com” and becomes the Company’s flagship brand. [1]
October 2004	Anupam Mittal appointed as Managing Director of the Company.
February 10, 2006	WestBridge Ventures II Holdings, a Mauritius-based private equity fund (“WestBridge”) invests INR 165,89,00,000 (Rupees One Hundred Sixty Five Crores Eighty Nine Lakhs) in the Company (“Investment”). Company, Founders and WestBridge sign a shareholders’ agreement. [2]
	Parties agree on exit rights for WestBridge, which includes the following options:(i) an Initial Public Offering (IPO) to be completed within 5 years of closing;(ii) sale of WestBridge shares to third parties (excluding significant competitors);(iii) redemption or buyback provisions if the IPO was not completed within 5 years; and(iv) drag-along rights if the Company fails to buyback shares within 180 days of exercising the buyback option (“Drag Along”).  If an IPO was not completed within 5 years, WestBridge could redeem all its shares and if necessary, “drag along” all other shareholders (including Founders) to sell their shares to a third party.
	Parties agree in the SHA that:(i) the SHA is governed by the laws of India; (ii) any disputes arising from the agreement would be resolved through arbitration as per the International Chamber of Commerce Rules (“ICC”) with seat of arbitration in Singapore; and (iii) the enforcement of arbitration award would be subject to Indian laws.
2006	Consequent to the investment, WestBridge holds 44.38% and Anupam Mittal holds 30.26% of the shareholding of the Company.
2011	Contractually agreed period to complete IPO expires.
2017 – 2019	WestBridge seeks to exit the Company by allegedly entering into discussions to sell its shares to a direct competitor, Info Edge India Limited (“Info Edge”), owner of matchmaking platform ‘Jeevansathi’. [3]
	Tensions between the parties continue, with alleged acts of oppression and mismanagement by WestBridge “facilitated” by other Founder directors [4], including a joint requisition to the Company to convene an extraordinary general meeting of the Company. The agenda for such meeting involves replacing Anupam Mittal as the managing director.
December 2020	WestBridge exercises its buyback option, requiring that the Company: (i) convert the 1,000 Series A1 preference shares into 580,779 equity shares; and then, (ii) effect a buyback of said equity shares. Company converts the preference shares, but is unable to offer the buyback price for the converted equity shares.
October 2021	WestBridge issues a drag-along notice compelling the sale of shares to a “significant competitor”, relying on the SHA which states that if the buyback could not be completed, the Drag Along rights would be triggered, which included the right to have the holding of the minority shareholders (including founders) liquidated and sold to any party without restriction.

Jurisdiction is Key – India v/s Singapore:

This dispute has highlighted significant challenges in cross-border legal disputes and the complexities of enforcing shareholder agreements in international fora. Despite litigation stretching on since 2021, the issue of oppression and mismanagement has yet to be ruled on, and the current issue before the courts is actually of: (i) jurisdiction, i.e., determining the competent authority to adjudicate on the SHA and allegations of oppression and mismanagement; and (ii) enforceability of foreign arbitration awards:

• Singapore Jurisdiction: WestBridge argued that since the SHA stipulated that arbitration would be governed by International Chamber of Commerce (ICC) rules with Singapore as the arbitration seat, the dispute was to be heard and adjudicated in Singapore. The Singapore courts upheld this on the basis of: (i) the composite test, ruling that whether a dispute is arbitrable or not will be determined by the law of the seat as well as the law governing the arbitration agreement; and (ii) oppression/mismanagement disputes being arbitrable under Singapore law. 

• Indian Jurisdiction: Mittal argued that jurisdiction to hear issues of corporate oppression and mismanagement is exclusively vested with the NCLT under Sections 241-244 of the Companies Act, 2013 and are not arbitrable under Indian law, in accordance with Section 48(2) of the Indian Arbitration & Conciliation Act, 1996 (“A&C Act”), which is briefly excerpted below: 

“Enforcement of an arbitral award may also be refused if the Court finds that—

(a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public policy of India.

Explanation 1: For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if – (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.” (emphasis added)

It is crucial to note that the provisions of the A&C Act have been interpreted to limit the arbitrability of intra-company disputes and consequently, provide Mittal with the legal grounds to resist enforcement of the foreign arbitration award.

Implications of the Case

This case holds significant implications for corporate law, cross-border investments, and the arbitration landscape, particularly in the context of Indian startups and venture capital:

• Jurisdiction Determination: The case emphasizes the importance of clearly defining jurisdiction in cross-border agreements, especially where legal disputes span multiple countries. The differing interpretations of arbitration clauses by Singapore and Indian courts underscore the complexities of jurisdictional overlaps.

• Extent of Arbitration in Legal Disputes: The case explores the limits of arbitration, particularly concerning corporate governance issues like oppression and mismanagement. The contrasting legal positions in Singapore and India highlight the potential conflicts that arise when arbitration is attempted in disputes traditionally reserved for domestic courts.

• Enforcement of Cross-Border Orders: The enforceability of foreign arbitration awards in domestic courts is a critical concern, especially when the awards conflict with local laws. The Bombay High Court’s observation that corporate oppression disputes are non-arbitrable under Indian law, thus rendering foreign awards unenforceable, could set a precedent for future cases.

• Corporate Oppression and Minority Rights in India: The case brings to light the challenges of protecting minority shareholder rights in complex financial arrangements involving multiple jurisdictions. It illustrates the potential for exit mechanisms, such as drag-along rights, to be used in ways that might disadvantage minority stakeholders.

Adverse Impact on Shaadi.com

The crux of Anupam Mittal’s case is simple – if the Drag Along with sale of shares to a significant competitor is enforced, the impacts to the Company and the ‘Shaadi.com’ brand are adverse: 

• Control of the Company: If Info Edge or any other competitor were to purchase the shares sold as part of the Drag Along structure, this would open the path for them to acquire the majority shareholding in the Company, and could drastically alter the Company’s control dynamics. Currently, Anupam Mittal holds a 30% stake, while WestBridge controls 44.3%. With the consummation of the Drag Along sale, this could facilitate a takeover by such competitor and potentially diminish the Founder’s influence over the Company.

• Business, Strategy and Culture: A shift in control/ownership could lead to a major restructuring of Shaadi.com’s strategic direction and operations. This might affect key business decisions, brand positioning, and market strategies. Additionally, a change in control could impact the Company’s culture and its relationships with stakeholders, including employees, customers, and partners.

• Competition: As one of three prominent names in the online matchmaking platform industry (including ‘BharatMatrimony’ and ‘JeevanSathi’), any potential acquisition of the Company by a competitor would result in a potential acquisition of the ‘Shaadi.com’ brand absorbing the customer base and effectively, the market share held. This could not only result in a dramatic change in the existing market competition but potentially require strategic realignment within the industry. 

Future Implications for Startups and Venture Capital Firms

For startups and venture capital (VC) firms, this case underscores several crucial lessons. 

• Lessons in Drafting: It is crucial that: (i) exit clauses and dispute resolution mechanisms be drafted with precision; and (ii) transaction documents include clearly outlined terms for various scenarios, including exits, buybacks, and drag-along rights, to prevent ambiguous interpretations and conflicts. Properly crafted agreements and well-defined dispute resolution processes can mitigate risks and facilitate smoother exits and transitions

• Jurisdictional Issues: It is critical that arbitration provisions be aligned with the legal frameworks of all involved jurisdictions. This alignment helps avoid prolonged and expensive legal disputes that can arise when different legal systems have conflicting interpretations of agreements. Startups and VCs should also consider the implications of international arbitration clauses and ensure they are practical and enforceable across jurisdictions.

• Preference for Singapore-seated arbitration: One of the key takeaways from this dispute is that differing principles of law governing arbitrability of a subject matter, would impact the enforceability of foreign awards in India. Given its reputation as an arbitration-friendly jurisdiction, Singapore is often designated as the seat of arbitration in investment and shareholder agreements. However, in light of this case it is crucial for parties to keep two elements in mind when negotiating an arbitration clause designating a foreign seat: (i) the law applicable to the arbitration agreement must be expressly stipulated to avoid any uncertainty; and (ii) the subject matter of the anticipated dispute should be arbitrable under both the law applicable to the arbitration agreement as well as the law of the seat. 

Conclusion

The WestBridge vs. Shaadi.com dispute transcends a typical investor-company conflict and stands as a landmark case in corporate governance and cross-border legal disputes, with particular impact on arbitration law. It has the potential to reshape how shareholder agreements are interpreted and enforced, particularly in complex, multi-jurisdictional contexts. The outcome of this case is likely to set important precedents for the management of shareholder rights, dispute resolution, and arbitration processes in international investments, especially given the popularity of choice of Singapore as a seat of arbitration for foreign investors. It also sheds light on the intricate balance between protecting minority shareholder interests and upholding contractual agreements. The implications of this case extend beyond Shaadi.com, influencing future legal frameworks and practices for corporate governance and investor relations in the global business landscape. 

References:

[1] Article published in the business journal from the Wharton School of the University of Pennsylvania on May 11, 2012, accessible here.
[2] NCLT Order on September 15, 2023,  in Anupam Mittal v People Interactive (India) Private Limited and others, available here.

[3] Article published by Inc42 on September 05, 2024, accessible here.
[4] Bombay High Court Judgement on September 11, 2023, in Anupam Mittal v People Interactive (India) Private Limited and others, available here.

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The Companies Act, 2013 (the “Act”), has introduced significant changes to the rules governing application monies received by companies through private placement and preferential allotment of shares, aiming at enhanced transparency, protection of investor interests, and ensuring timely utilization of funds.

This article outlines the key provisions and implications of non-compliance regarding the refund of
application monies under the Act.

The ‘transaction flow’ refers to the various stages involved in a Company obtaining funding from an Investor. Given that this imposes numerous obligations on the Company and the Founders, it becomes critical for Founders to have a clear understanding of the steps involved in receiving funding from an Investor. However, fledgling startups often find the complex terms involved overwhelming and are thus unable to gain a clear picture of the process flow involved in raising funding. 

 

Important Steps

• Term Sheet – a non-binding agreement that outlines the basic terms and conditions of the transaction. 
• Transaction Documents – refers to the agreements required to be entered into between the parties to lay down the governing framework of the investment. This would typically take the form of a securities subscription agreement (“SSA”) and a shareholders’ agreement (“SHA”), or a variation of the same known as a securities subscription and shareholders’ agreement (“SSHA”). These agreements will contain detailed language on the nature of each party’s rights and obligations under the contract and will be binding on the parties.
• Execution – refers to the stage where the parties actually sign and ‘execute’ the Transaction Documents, validating the same and binding the parties to the terms agreed.
• Conditions Precedent – refers to the conditions required to be completed by the Company and/or Founders to the Investor’s satisfaction before the investors wire the funds to the Company’s bank account (also referred to as Closing). The conditions precedent shall be completed in parallel with execution of transaction documents so that there is no delay in Closing. 
• Closing – refers to the stage at which the funds are received by the company and securities are allotted to the Investors.
• Conditions Subsequent – refers to the conditions required to be completed by the Company and/or Founders after Closing, typically include conditions arising out of due diligence of the company and other compliance related steps.

 

The ‘Transaction Flow’ – A Founders’ perspective

Important Terms	Points to bear in mind for Founders
Term Sheet	A Term Sheet helps layout the structure for the Transaction Documents and can help establish the negotiated position on critical terms early in the process, which in turn, enables a quick flow from drafting and vetting of agreements to Execution. Term Sheets are non-binding and the terms, although not advisable, but, can vary in the transaction documents.
Due Diligence	A due diligence exercise reviews the records maintained by the Company to ascertain whether the Company’s operations are in accordance with the applicable law. The findings are then highlighted to the Investors basis the magnitude of risk involved in a due diligence report.  Typically, startups have trouble ensuring the secretarial compliances prescribed under Companies Act, 2013 (and relevant rules thereunder) or compliances prescribed under labour legislations, and rectifying the same is made a Condition Precedent or a Condition Subsequent. This would vary from Investor to Investor, based on how risk averse they are.
Transaction Documents	In the event that the Company has already completed previous round(s) of funding, Founders must pay heed to the rights of existing Investors and ensure that the appropriate waiver of rights (as applicable) is captured in the agreements. Further, in case of an existing SHA with Investors from earlier rounds of funding, the parties would execute an amendment to SHA or a complete restated SHA, which would be signed by all shareholders of the Company, in addition to the incoming Investors. Consequently, the transaction documents would require consensus of terms from both existing and incoming Investors. It is also important to note that employment agreements between the Founder(s) and the Company (sometimes prescribing specific conditions of employment by Investors) are often made part of this stage.
Execution	Every agreement would require payment of stamp duty to the competent state government. The duty payable varies from state to state and agreement to agreement, and is either a fixed value or a percentage (%) value of the investment amount (i.e., the ‘consideration’). The Stamp papers are required to be procured prior to the execution of the transaction documents. Execution can be done through either wet ink or digital signatures.
Conditions Precedent	This usually encompasses a variety of obligations on the Company/Founders. Typically, completion of this stage is marked by a “Completion Certificate” issued by the Company. We can broadly categorise Conditions Precedent into two headings: (a) statutorily mandated conditions; and (b) Investor mandated conditions.  Statutorily mandated conditions – this would include actions such as passing board and shareholders’ resolutions for increasing authorised capital of the Company and issuance of shares, circulation of offer letters and filing the legally mandated forms for private placement of securities (such as SH-7, MGT-14), procuring requisite valuation reports, et al.  Investor mandated conditions – this would typically arise from a due diligence exercise undertaken by the Investors of the Company. Legal and/or financial issues in the operations of the Company would be actioned for resolution here. However, based on the regulatory requirements applicable to a foreign Investor, sometimes satisfaction of certain compliances that would ordinarily be undertaken later, are included in this stage.
Closing	This stage is marked by movement of funds from the Investors and related compliances to be undertaken under law/the Transaction Documents to complete the allotment of securities, such as: filing of PAS-3, issue of share certificates, amending the articles of association, compliance with Foreign Exchange Management Act, 1999 (including filing form FC-GPR reporting the remittance received), appointment of directors, etc.  It is critical to understand that this is the stage at which the Investors actually become shareholders of the Company.
Conditions Subsequent	Conditions subsequent are usually required to be completed within a specific period after the Closing Date (i.e., the date on which Closing takes place). These can include items such as amendment of articles of association and memorandum of association of the Company or even statutory filings (such as under Companies Act, 2013 or Foreign Exchange Management Act, 1999). However, this can also include special items mandated by the Investors such as appointment of a labour law consultant or privacy law consultant to ensure that the Company is in compliance with applicable laws that might be too complex for the Founders to navigate without professional expertise.

 

Conclusion

It is important to realise that every Investor is different and therefore the ‘transaction flow’ can look different for two different rounds of funding for the same Company. The above terms are simplified for Founders to gain an understanding of what to expect when preparing to raise funding. Founders who are aware of the intricacies involved in raising funding can: 

1. be better prepared in structuring the round; 
2. gain an understanding of the ancillary costs roughly involved; and
3. negotiate a position that allows for the completion of certain action items in a manner that does not cause significant financial strain or undue delay in reaching the Closing stage.

Reach out to us at [email protected] to discuss any questions you may have!

The doctrine of “work for hire” is a legal concept that determines the ownership of a copyrighted work when it is created in the context of an employment relationship or under a specific contractual arrangement. The purpose of this doctrine is to establish clarity regarding the rights and ownership of creative works, particularly when multiple parties are involved in the creation process.

 

Criteria for Work to Qualify as a “Work for Hire”

To qualify as a “work for hire,” certain criteria must be met, although the specifics may vary depending on the jurisdiction. Generally, the following elements are considered:

• Employee-Employer Relationship: In an employment scenario, the work created by an employee within the scope of their employment duties is automatically considered a “work for hire.” The employer is deemed the legal author and owner of the copyright.
• Commissioned Works: In some cases, a work may be commissioned from an independent contractor, such as a freelancer or consultant. For such works to be categorized as “works for hire,” there must be a written agreement explicitly stating that the work is a “work for hire” and that the commissioning party will be considered the legal owner of the copyright.

It is important to note that different jurisdictions may have variations in the specific requirements and definitions of a “work for hire.” Therefore, it is essential to consult the copyright laws of the relevant jurisdiction for a comprehensive understanding.

 

“Work for Hire” In The United Kingdom

In collaborative scenarios, where multiple parties contribute to the creation of a work, it becomes necessary to ascertain the ownership of the copyright. The terms of the collaboration agreement and the intentions of the parties involved play a crucial role in such cases.

The case of Creation Records Ltd v. News Group Newspapers Ltd [1997] EMLR 444 shed light on this issue. The court considered a situation where a photograph was taken by a photographer for a newspaper article. The court emphasized the importance of the contractual arrangements and the intention of the parties involved in determining the ownership of the copyright. The photographer, in this case, retained the copyright as the collaboration agreement did not clearly transfer it to the newspaper.

 

“Work for Hire” In The United States

In the United States, the concept of “work for hire” is extensively addressed under the Copyright Act of 1976. According to Section 101 of the Act, a work qualifies as a “work for hire” if it is:

Prepared by an Employee: The work must be created by an employee within the scope of their employment duties. In such cases, the employer is considered the legal author and owner of the copyright.

The landmark case of Community for Creative Non-Violence v. Reid (490 U.S. 730, 1989) explored the scope of an employment relationship and ownership of a work. The Supreme Court considered factors such as the control exerted by the employer, the provision of employee benefits, and the nature of the work to determine whether the work was a “work for hire.” The court ultimately ruled that the work in question did not meet the criteria for a “work for hire,” and the copyright ownership remained with the creator.

 

“Work for Hire” In India

In India, the concept of “work for hire” is not explicitly defined in copyright legislation. However, the Copyright Act, 1957, does provide provisions related to the ownership of copyright in works created in the course of employment. The case of Eastern Book Company v. D.B. Modak (2008) addressed the ownership of copyright in works created by employees. The court held that if an employee creates a work during the course of their employment and it falls within the scope of their duties, the employer will be considered the first owner of the copyright unless there is an agreement to the contrary.

When it comes to works created by freelancers or under contractual arrangements, the ownership of copyright is typically determined by the terms of the agreement between the parties involved. In the case of Indian Performing Right Society v. Eastern Indian Motion Pictures Association (2012), the court emphasized the importance of contractual arrangements and the intent of the parties involved in determining copyright ownership. The court ruled that the ownership of copyright rests with the party who commissions the work unless otherwise specified in the agreement.

 

Similarities and Differences between U.K., U.S., and Indian Approaches

The U.K., U.S., and India have different approaches to the “work for hire” doctrine. While all jurisdictions consider the employment relationship and written agreements as important factors, the specific criteria and legal provisions differ. The U.S. has a more detailed statutory framework for “works for hire,” while the U.K. and India rely on case law and contractual agreements to determine copyright ownership.

 

Emerging Trends and Future Outlook

• Evolving Nature of Employment Relationships: The nature of employment relationships is undergoing significant changes, driven by factors such as the gig economy, remote work, and freelance culture. These developments pose new challenges in applying the doctrine of “work for hire.” The line between employee and independent contractor can become blurred, making it more complex to determine copyright ownership. As the workforce becomes more flexible and diverse, legal frameworks may need to adapt to address these evolving employment relationships.
• Influence of Technology and Remote Work: Advancements in technology have transformed the creative industries, enabling collaboration and work across geographical boundaries. Remote work has become more prevalent, and creative projects often involve contributors from different locations. This raises questions about jurisdictional issues and the application of copyright laws in cross-border collaborations. Clear contractual agreements and international harmonization of copyright laws may be necessary to provide guidance and ensure fair treatment of creators.

 

Practical Considerations for Creators and Employers

• Clear Contractual Agreements: Creators and employers should prioritize clear and comprehensive contractual agreements that address the issue of copyright ownership explicitly. These agreements should clearly define the scope of work, the intended ownership of copyright, and any limitations or conditions related to its use, licensing, or transfer.
• Negotiating Fair Terms: Creators, especially freelancers and independent contractors, should be proactive in negotiating fair terms that protect their rights and interests. This may involve discussing ownership, compensation, attribution, moral rights, and the ability to use their work for self-promotion or future projects.
• Consultation with Legal Professionals: Seeking legal advice from professionals well-versed in copyright law is crucial, particularly when dealing with complex projects or cross-jurisdictional collaborations. Legal experts can provide guidance, ensure compliance with relevant laws, and help draft contracts that protect the rights of creators while meeting the needs of employers.
• Awareness of Jurisdictional Differences: When engaging in international collaborations, it is important to have a thorough understanding of the copyright laws and regulations in the relevant jurisdictions. Being aware of jurisdictional differences can help parties anticipate potential conflicts and take proactive measures to address them through appropriate contractual provisions.
• Regular Review and Updates: Contracts and agreements should be periodically reviewed and updated to reflect changes in circumstances, business relationships, or legal frameworks. Regularly revisiting contractual arrangements can help ensure that they remain relevant and provide adequate protection to all parties involved.
• Collaboration and Communication: Open and transparent communication between creators and employers is essential for a successful working relationship. Engaging in discussions about copyright ownership, expectations, and any potential issues can help prevent misunderstandings and disputes down the line.

 

Conclusion

In conclusion, the doctrine of “work for hire” under copyright law is a complex and significant concept that determines copyright ownership in various employment and contractual relationships. Through our critical survey of cases in the United Kingdom, United States, and India, several key insights emerge. In India, while there is no explicit provision for “work for hire,” the Copyright Act recognizes the ownership of copyright in works created during the course of employment. Ownership in freelance and contractual arrangements is determined by the terms of the agreement. Throughout our survey, it becomes apparent that clear and explicit contractual agreements are vital in all jurisdictions to address copyright ownership and prevent disputes.

In the bustling markets and stores of India, where buying and selling happens every day, there’s a set of rules quietly at work to make sure you get what you pay for. These acts and rules are colloquially known as ‘Legal Metrology’. The rules are intended to make sure that measurements and weights used in trade are accurate and fair, and are represented to the consumer clearly. The rules are enforced by the Legal Metrology Division, which is managed by the Department of Consumer Affairs under the Ministry of Consumer Affairs, Food & Public Distribution.

 

What is Legal Metrology?

Legal Metrology sets out to ensure that whatever you buy (whether it’s rice, oil, fruits, cosmetics, backpacks, electronics, or any other packaged goods or commodities) is in compliance with requirements and guidelines about the quantity, weight, measurements, expiry date, origin, manufacturer, etc., and is also packaged in a manner that these details are captured and made available to you. It’s like having referees in the game of trade, making sure everyone plays fair.

 

How Does It Work?

1. Ensuring Accuracy: You might notice a stamp or mark on the weighing/measuring devices/equipments, this is to show that they’ve been verified and are accurate. In fact, the Legal Metrology department also issues Licenses to manufacturers, dealers and repairer of weighing/measuring devices for dealing with such instruments. 
2. Packaged Goods: Ever look at a pack of biscuits or a bottle of shampoo and see all those details like MRP, manufacturing date, expiry date, consumer care information as well as the quantity of the package? Legal Metrology rules make it mandatory for companies to give you this information in the manner prescribed under the Legal Metrology Act, 2009 as well as the Legal Metrology (Packaged Commodities) Rules, 2011 so you are aware of the contents of the package and of your mode of communication with the company in case of any complaints.

 

What a Consumer Should Know?

• Rights as a Consumer: You have the right to get what you pay for. If you feel something is not right, like the weight of a product or the information on the pack, you can file a complaint through the online platform – https://consumerhelpline.gov.in/ , which will be forwarded to the appropriate officer for grievance redressal. One can register complaints by call on 1800-11-4000 or 1915 or through SMS on 8800001915. 
• Checking for Stamps: Next time you buy something by weight, look for the stamp or mark on the scale or the measuring device. It means it’s been checked and is okay to use

 

What a Business Owner (For Consumer Goods) Should Know?

• Product Packaging and Labelling: You must ensure that all products intended for retail sale are accurately weighed or measured and are packaged as per the prescribed standards. This includes providing essential information such as net quantity, MRP (Maximum Retail Price), date of manufacture, expiry date, and consumer care details on the packaging.
• Weighing and Measuring Instruments: Businesses using weighing and measuring instruments (like scales, meters, etc.) must ensure these instruments are verified and stamped by authorized Legal Metrology officers. Regular calibration and maintenance of these instruments are essential to maintain accuracy and compliance.
• Compliance and Audits: Regular audits and inspections are conducted by Legal Metrology authorities to verify compliance with Legal Metrology rules. Non-compliance can lead to penalties, fines, seizure of goods or even legal repercussions, which can impact a company’s reputation and operations.

 

Challenges and Moving Forward

Offences relating to weights and measures are punished with fine or imprisonment or with both depending on the offence committed. The government is working on making these rules easier to understand and ensuring everyone follows them correctly.

 

Conclusion

Legal Metrology rules are not just about weights and measures; they are about fairness and trust in every transaction you make. By making sure everything is measured and packaged correctly, these rules protect you as a consumer and ensure that businesses play by the rules. So, next time you shop, remember these rules are on your side to make sure you get what you deserve!

The Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, is all set to unveil a revolutionary digital platform – Bharat Startup Knowledge Access Registry (BHASKAR) under the flagship Startup India program.

• BHASKAR aims to bring together key stakeholders and address challenges in the entrepreneurial ecosystem.
• With over 1,46,000 DPIIT-recognized startups in India, BHASKAR seeks to harness the potential by offering access to resources, tools, and knowledge.
• It bridges the gap between startups, investors, mentors, and stakeholders, promoting interactions and collaborations.
• By providing a centralized platform, BHASKAR facilitates quicker decision-making, scaling, and personalized interactions through unique BHASKAR IDs.
• The platform is pivotal in driving India’s innovation narrative and fostering a more connected, efficient, and collaborative environment for entrepreneurship.

Key Features of BHASKAR

1. Networking and Collaboration: BHASKAR bridges the gap between startups, investors, mentors, and various stakeholders, enabling seamless interactions and collaborations across different sectors.
2. Centralized Access to Resources: By consolidating resources, BHASKAR provides startups with immediate access to essential tools and knowledge, facilitating faster decision-making and scaling.
3. Personalized Identification: Each stakeholder is assigned a unique BHASKAR ID, promoting personalized interactions and tailored experiences across the platform.
4. Enhanced Discoverability: With powerful search functionalities, users can effortlessly locate relevant resources, collaborators, and opportunities, leading to quicker decision-making and action.

BHASKAR: Pioneering the Future of India’s Startups

BHASKAR is poised to reshape India’s startup arena, fostering a more efficient, connected, and collaborative environment for entrepreneurship. The launch of BHASKAR underscores the Government of India’s commitment to catapulting India as a leader in global innovation, entrepreneurship, and economic growth.

Read More – https://www.pib.gov.in/PressReleasePage.aspx?PRID=2055243

The IFSCA issued a consultation paper yesterday proposing an “informal guidance” framework, summarized below:

Who can request:

• Existing players in IFSCA

• Persons intending to undertake business in IFSC

• Others as may be specified

Types of guidance:

• No-Action Letters: Request IFSCA to indicate whether or not it would take any action if the proposed activity/ business/ transaction is carried out

• Interpretive Letters: Request for IFSCA’s interpretation of specific legal provisions

Process:

Application fee: USD 1,000

IFSCA aims to respond to requests within 30 days

The consultation paper invites stakeholders / public to submit feedback by September 10, 2024 via email This is a proactive approach by the IFSCA to foster transparency and provide support to entities operating or looking to operate within the IFSC, ensuring that they have the necessary guidance to comply with the evolving regulatory landscape.

DOWNLOAD FULL PDF

We’re thrilled to share the remarkable growth in fund management activities at GIFT-IFSC! Our latest infographic highlights the significant increase in the number of FMEs and funds, investment commitments, and quarterly growth. This impressive surge underscores the expanding scale and acceptance of GIFT-IFSC as a premier fund management hub.

IFSCA has released a Circular prescribing the fees for the newly introduced Book-keeping, Accounting, Taxation, and Financial Crime Compliance Services (BATF) Regulations.

𝐅𝐞𝐞 𝐒𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞:
– 𝐀𝐩𝐩𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐅𝐞𝐞𝐬: $1,000 per activity
– 𝐑𝐞𝐠𝐢𝐬𝐭𝐫𝐚𝐭𝐢𝐨𝐧 𝐅𝐞𝐞𝐬: $5,000

𝐀𝐧𝐧𝐮𝐚𝐥 𝐅𝐞𝐞𝐬 𝐟𝐨𝐫 𝐒𝐞𝐫𝐯𝐢𝐜𝐞 𝐏𝐫𝐨𝐯𝐢𝐝𝐞𝐫𝐬:
– Less than 500 employees: $5,000 per activity
– 500 to 1,000 employees: $7,500 per activity
– More than 1,000 employees: $10,000 per activity

𝐊𝐞𝐲 𝐏𝐨𝐢𝐧𝐭𝐬 𝐟𝐨𝐫 𝐄𝐱𝐢𝐬𝐭𝐢𝐧𝐠 𝐀𝐧𝐜𝐢𝐥𝐥𝐚𝐫𝐲 𝐒𝐞𝐫𝐯𝐢𝐜𝐞 𝐏𝐫𝐨𝐯𝐢𝐝𝐞𝐫𝐬 (𝐀𝐒𝐏𝐬):
– Existing ASPs rendering BATF services under the IFSCA ASP Framework are not required to pay the application fee for the same activity under BATF regulations.
– Annual/recurring fees will be adjusted for the fees already paid under the ASP framework.

𝐈𝐦𝐩𝐨𝐫𝐭𝐚𝐧𝐭 𝐃𝐚𝐭𝐞:
– Existing ASPs must communicate their willingness to operate under the new BATF regulations for bookkeeping, accountancy, and taxation services by August 2, 2024.

𝘍𝘰𝘳 𝘮𝘰𝘳𝘦 𝘥𝘦𝘵𝘢𝘪𝘭𝘴, 𝘤𝘩𝘦𝘤𝘬 𝘰𝘶𝘵 𝘵𝘩𝘦 𝘊𝘪𝘳𝘤𝘶𝘭𝘢𝘳 𝘩𝘦𝘳𝘦: http://surl.li/yxvqex

Don’t forget, the FLA annual return under FEMA 1999 is due by 𝐉𝐮𝐥𝐲 15. Ensure timely submission to avoid penalties.

𝐖𝐡𝐨 𝐍𝐞𝐞𝐝𝐬 𝐭𝐨 𝐅𝐢𝐥𝐞?
All India-resident companies, LLPs, and entities with FDI or overseas investments.

𝐊𝐞𝐲 𝐃𝐚𝐭𝐞𝐬:
1. Submission Deadline: July 15
2. Revised Return Deadline: September 30

𝐇𝐨𝐰 𝐭𝐨 𝐅𝐢𝐥𝐞:
1. Register on the RBI portal: FLA Registration Link
2. Submit the required verification documents.
3. Log in and complete the form.