India’s consolidated foreign direct investment policy was finally issued recently. The real estate sector is attracting significant foreign investment. Following up on last month’s activities, there was a further development relating to entry of foreign law firms in India. And a very important decision relating to privacy was pronounced by the Supreme Court.

Consolidated FDI Policy – The latest edition of the Consolidated Foreign Investment Policy was recently published by India’s Department of Industrial Policy and Promotion, Ministry of Commerce and Industry. The policy captures all the changes made to last year’s policy during the course of the year. One of the major highlights of the policy is a separate section for startup companies. Start-ups can issue equity or equity linked instruments or debt instruments to a foreign venture capital investor against receipt of foreign remittance, as per the applicable foreign exchange regulation. In addition, start-ups can issue convertible notes to persons resident outside India subject to certain conditions, which are to ensure compliance with overall FDI Policy.

Foreign Investment in Real Estate – There has been a steady increase in investment in the real estate sector by foreign institutional investors on the strength of key reforms which have been initiated in this sector. The total annual investments into Indian real estate from foreign investors have consistently outpaced their domestic counterparts. And in the past couple of years, the gap has widened further. Since 2016, foreign investors have invested close to $9 billion, against $2.1 billion by Indians. Among foreign investors, participation from a few countries such as Canada, Hong Kong, the Netherlands and Qatar have gained prominence over traditional investors like Singapore and the United States. Since last year, pension funds have invested more than $1.7 billion in the Indian real estate sector and have emerged as the second largest investor after private equity players. On the other hand, sovereign wealth funds, which were investing around $700-800 million on an annual basis in India since 2014, have deployed about $1.7 billion this year.

Restrictions on Subsidiary Layers – The Government has recently passed the Companies (Restriction on number of layers) Rules, 2017. The rules, notified after public consultation, came into effect from September 20, 2017. It assumes significance against the backdrop of concerns that shell companies are being floated to act as conduits for illicit funding activities. Layering restriction on investment subsidiaries were incorporated in the Companies Act, 2013 “with a view to check misuse of multiple layers of subsidiaries for diversion of funds/siphoning off funds as a measure of minority investor protection,” the ministry had said while issuing the draft rules in June. Earlier this month, the ministry had said that over 1.06 lakh directors would be disqualified for their association with shell companies. The move came after the registration of 2.09 lakh companies that have not been carrying out business activities for a long period were cancelled.

Entry of Foreign Law Firms – A meeting was called by the Commerce Ministry (DOC) earlier this month with legal industry stakeholders, including Society of Indian Law Firms (SILF), the Indian National Bar Association (INBA) and Bar Association of India (BAOI). The three SILF members present at the meeting reiterated their position that foreign law firms, if they were to enter India, shouldn’t be allowed to hire Indian lawyers. A follow-up was sent from the ministry sent after the meeting, wherein the following action points results from the meeting with a deadline of 20 September was provided:

  • Stakeholders to provide comments and inputs on the issues discussed in the meeting. Also, it is requested to suggest precise elements which needs to be addressed in this regard along with the roadmap/timelines.
  • BAI is requested to provide documentation on liberalization processes in Asia-Pacific region.
  • SILF/BAI is requested to provide details on the BRICS legal forum.
  • DOC to prepare a paper on reforms in legal services in consultation with stakeholders.

Right to Privacy a Fundamental Right: A landmark judgement was recently passed by the Supreme Court of India, wherein it was held that right to privacy is protected as an intrinsic part of the right to life and personal liberty under Article 21 and as a part of the freedoms guaranteed by Part III of the Constitution. The apex court settled the position of law in the subject matter and over-ruled its previous decisions wherein it had been held that the right to privacy is not protected by the Constitution. The importance of privacy laws in India came to the forefront in the various arguments made during hearings in this case.

Posted by Sourish Mohan Mitra

Sourish Mohan Mitra, India-qualified lawyer from Symbiosis Law School, Pune and currently working as an in-house counsel in Delhi, India; views expressed are personal; he can be reached at; Twitter: @sourish247

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