India Business Law Journal –  July/August 2014

This was one of several questions posed by Raghuram Rajan, the head of India’s central bank, in comments on a proposed financial sector appellate tribunal. The tribunal is an integral part of a draft financial code, which if enacted will replace the bulk of India’s financial laws, and Rajan’s comments suggest a battle could be looming over the recalibration of regulatory power in the financial sector.

For while India’s finance minister, Arun Jaitley, said in his recent budget speech that the enactment of a new financial code was “necessary for better governance and accountability”, Rajan saw it differently. Stating that “a healthy respect for the regulator serves to keep participants on the straight and narrow,” Rajan warned excessive legal oversight could result in a regulator becoming a paper tiger.

Such ideological skirmishes are to be expected as the new government settles into the tasks at hand, but how will the regulatory landscape be altered? Will new ground rules that are being announced radically improve India’s business climate? How long should investors expect to be kept waiting and watching?

One area where changes are already making ripples is policy on foreign direct investment (FDI). Analysing recent moves to raise sectoral caps, this issue’s Cover story asks if this can have the desired effect. The finer details of the policy changes are yet to be announced, but Celia Jenkins at Tuli & Co says investors in the insurance sector are sceptical, not least because raising the FDI cap in insurance has been mooted for almost a decade. A similar policy for the defence sector is not expected to give a massive boost to FDI, as control and management are to remain firmly in Indian hands. Clearly it will take more to restore investor confidence.

In Budget blues? we look at the recent annual budget exercise. This was the first test of the reform and investment agenda of the new government and its challenge was to balance high expectations with the economic realities. Our coverage provides an analysis – by lawyers at Economic Laws Practice – of the key tax-related announcements made by the finance minister, and the critical amendments which would impact businesses in India. For while the budget did not include the hoped-for repeal of retrospective tax amendments, it presented a mix bag of tax measures that legal counsel will need to take on board.

In High-tech hazards Amit Thukral, assistant general counsel of Monsanto in India, puts forward a case against judicial interference in matters involving high technology. He argues that with the Indian state adopting “an Orwellian approach” to the advent of technology and an inherent resistance to allowing the use of cutting-edge technology, judicial intervention and prolonged court supervision delay the march of technology. As such, Thukral says matters of policy and technology are best left to experts and the courts should follow the rule of deference to expert body adjudication.

The courts need defer to nobody during the process of sanctioning a merger whereby a company is absorbed by another and so ceases to exist. In An eye on the ball we turn the spotlight on one of many such court-driven mergers that take place across India, albeit one that required legal counsel to be at their persuasive best: the merger of two wholly owned Indian subsidiaries of a Cyprus-based company that is part of Toronto Stock Exchange-listed WSP Global. However, in this area too change is on the horizon and when relevant sections of the Companies Act, 2013, come into effect contractual mergers will become the norm in some circumstances.

Are legal teams up to the task of dealing with the changes sweeping across India? Writing in this issue’s Vantage point Chakradhar Varadarajan, executive vice president, corporate legal, at Godrej Industries, suggests that recent graduates entering in-house teams and also corporate law firms may not be. Varadarajan points out that while the Bar Council of India examines and certifies lawyers before they are considered court-ready, it sets no such standards for lawyers going into in-house teams or corporate law firms. Professional legal education is not keeping pace with India’s rapidly changing economy and the immediate employability of the large number of law graduates that India produces – especially those from the lesser known law schools – may be in doubt. This will surely be cause for concern for clients seeking to stay abreast of India’s increasingly complex regulatory and legal framework.

This issue includes India Business Law Journal’s seventh annual edition of India Business Law Directory. As in previous years the directory is accompanied by in-depth editorial analysis of the state of the legal market.

With stiff competition for a finite number of mandates, our coverage reveals that while for some law firms collaboration may be the only way to stem fee pressures and remain competitive, others are employing novel strategies to gain an edge. Yet as companies require more specialist advice there are signs that Indian clients are increasingly prepared to pay for quality legal service. This will no doubt spur on lawyers and law firms as they strive to fulfil the legal needs of companies across India.

Observant readers may have noticed that this month’s cover is slightly different. We have a new logo on the bottom left, branding Vantage Asia, the company that publishes India Business Law Journal. The saffron and red colours are taken from the flags of India and China, reflecting the two law journals in Vantage Asia’s stable. The triangles symbolize mountain peaks, or vantage points, from which clear perspectives of the world can be attained. We hope you like it!