India: Corporate Law Alert - September 7, 2012

Last Updated: 4 December 2012

Overseas Direct Investments - Rationalisation of Form ODI

The Reserve Bank of India (RBI), vide A.P. (DIR) Series Circular No. 15 dated August 21, 2012, has amended Form ODI Part I and included new declarations under Section E and Section F of the said Form.

Foreign Direct Investment by citizens / entities incorporated in Pakistan

The RBI, vide A.P. (DIR Series) Circular No. 16, dated August 22, 2012, has amended Regulation 5 of Notification No. FEMA 20 / 2000 -RB dated May 3, 2000 to reflect the provisions of Press Note 3 (2012 Series) dated August 3, 2012 issued by the Department of Industrial Policy and Promotion with respect to investment in India by a citizen/ entity incorporated in Pakistan.

Fee for Delayed Filings

The Ministry of Corporate Affairs (MCA) has, vide notification number G.S.R. 617(E) dated August 7, 2012 inserted the following sub-rule (4) in the notification number G.S.R. 501(E), dated July 6, 1999:-

  1. In case of delays in filling applications with the Central Government under sub-section (2) of Section 233B of the Companies Act, 1956 (Act), the fee specified in the Table below will be applicable:
  2. Period of Delay

    Fee Payable with the Application

    Upto 30 days

    Two times the normal fee

    More than 30 days and upto 60 days

    Four times the normal fee

    More than 60 days and upto 90 days

    Six times the normal fee

    More than 90 days

    Nine times the normal fee

Clarification on Para 46A - "The effects of Changes in Foreign Exchange Rates"

The MCA has, vide Circular Number 25/2012 dated August 9, 2012, clarified that para 6 of Accounting Standard-11 and para 4(e) of Accounting Standard -16 will not apply to a company which is applying para 46-A of Accounting Standard- 11.

Applicability of Service Tax on commission payable to Non-Whole Time Directors

The Finance Act 2012 has made service tax applicable to anyone who provides a service not covered under the negative/exempted list and if the value of annual revenue exceeds INR 1,000,000.

The non-whole time directors of a company are not covered under the exempted category and therefore the sitting fee/commission payable to them by a company is liable to service tax.

Further, if the service tax is paid by a company, the service tax paid will be deemed to be remuneration under Section 198 of the Act and would accordingly increase the remuneration amount of such non-whole time directors.

This remuneration could exceed the limit of 1% of the profit of the company, under Section 309(4) of the Act when the Company has a managing/ whole time director/ managers or 3% of the profit of the Company, under Section 309(4) of the Act, as the case may be.

Therefore, as per Section 309 and 310 of the Act, this would require prior approval of the Central Government.

In view of the above, the MCA has, vide General Circular No. 24/2012 dated August 9, 2012, decided, that any increase in remuneration of non-whole time director(s) of a company solely on account of payment of service tax on commission payable to them by the company shall not require approval of the Central Government under Section 309 and 310 of the Act, even if it exceeds 1% or 3% of the profit of the Company, as under Section 309(4) of the Act, in the financial year 2012-2013.

Clarification – Payment of Remuneration to Managerial Personnel

The MCA has, vide notification number F. No. 14/11/2012 – CL- VII dated August 16, 2012, clarified that any employee of a company holding shares of the company upto 0.5% of paid up share capital of a company under any scheme formulated for allotment of shares to such employees including under a employees' stock option plan or by way of qualification shares will be covered under the category of 'persons not having any interest in the capital of the company'.

In view of the above, companies are exempted from obtaining the approval of the Central Government for payment of remuneration exceeding the limits imposed under the Act in respect of the personnel mentioned above.

Extension of Date

The MCA has, vide Notification number F. No. 17/160/2012 Cl.V. dated September 3, 2012, extended the date for filing of eform 23AC and 23ACA as per the revised Schedule VI from September 15, 2012 to October 15, 2012 or within 30 days from the date of the annual general meeting of the company, whichever is later.

Part I of the Arbitration Act not Applicable to Arbitration Seated outside India

A Constitution Bench of the Supreme Court, in the case of Bharat Aluminum Co v. Kaiser Aluminum Technical Service, Inc1 on September 6, 2012, has held that Part I of the Arbitration & Conciliation Act, 1996 (Arbitration Act) does not have any application to arbitrations that are seated outside India.

The judgment has considered the earlier Supreme Court decisions in the cases of Bhatia International v. Bulk Trading S.A.2 and Venture Global Engineering v. Satyam Computer Services3, and has overruled both these judgments.

The paragraphs mentioned herein below refer to the paragraphs of the said judgment.

The decision discusses and is based on the following principal points:

(i) Provisions of the Act

  1. The principle of territoriality is the governing principle of the Arbitration Act. Consequently, the seat of arbitration will determine jurisdiction of the court. (Relevant Paragraphs -63 & 72)
  2. The reasoning contained in Bhatia's and Venture's cases is incorrect. (Relevant Paragraphs - 54, 76, 85, 161, 171 & 199)
  3. The exclusion of the word "only" in Section 2(2) does not have the consequence of making Part I applicable to arbitrations seated outside India. Such an interpretation cannot be upheld inasmuch as that then Section 2(2) would be rendered superfluous, which is contrary to the principles of statutory interpretation. (Relevant Paragraphs - 59, 63 & 75)
  4. There is no conflict between Section 2(2) on the one hand and (i) Section 1(2); (ii) Sections 2(4) and 2(5); (iii) Section 2(7) on the other hand. These latter provisions have to be read as part of a whole and, in any event, none of them can be read as individually extending the scope of Part I of the Arbitration Act to arbitrations seated outside India. (Relevant Paragraphs - 65, 75, 84, 85, 88, 94 & 75)
  5. Both Section 2(1)(e)4 and Section 20 of the Arbitration Act have to be interpreted keeping in mind the principles of territoriality. Even these provisions cannot be said to extend the applicability of Part I to arbitrations seated outside India. (Relevant Paragraphs - 95, 97, 98, 100 & 121).
  6. Section 28 of the Arbitration Act is not an indication of the intention of the Parliament that Part I can be extended to arbitrations which take place outside India. The section merely shows that the legislature has segregated the domestic and international arbitration. Therefore, to suit India, conflict of law rules have been suitably modified, where the arbitration is in India. This will not apply where the seat is outside India. In that event, the conflict of laws rules of the country in which the arbitration takes place would have to be applied. (Relevant Paragraph -123)
  7. There is a complete segregation of Part I and Part II of the Arbitration Act. Regulation of arbitration consists of four steps (a) commencement; (b) conduct; (c) challenge to the award; and (d) recognition or enforcement of the award. Part I of the Arbitration Act regulates arbitrations at all the four stages. Part II, however, regulates arbitration only in respect of commencement and recognition or enforcement of the award. It is, therefore, clear that the regulation of conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the arbitration is being conducted. Such a court is then the supervisory court possessed of the power to annul the award. (Relevant Paragraphs - 126 & 129)
  8. The non-obstante clause contained in Section 45 of the Arbitration Act does not alter the scope and ambit of the field of applicability of Part I to include international commercial arbitrations, which take place out of India. (Relevant Paragraph - 133)
  9. Section 48(1)(e) of the Arbitration Act is only one of the defenses on the basis of which recognition and enforcement of the award may be refused. It has no relevance to the determination of the issue as to whether the national law of a country confers upon its courts, the jurisdiction to annul the awards made outside the country. The term "[country] under the law of which an award was made" in Section 48(1)(e) of the Act refers only to the country and not to its substantive law. Therefore, it cannot be said that there are two courts with the power to annul an award. (Relevant Paragraphs - 138 & 139, 147 & 157)

(ii) Interim measures under Section 9 of the Arbitration Act

  1. Section 9 of the Arbitration Act cannot be held to be a sui generis provision, which falls neither in Part I or Part II of the Act. (Relevant Paragraph - 160)
  2. Extending the applicability of Section 9 to arbitrations which take place outside India would be to do violence to the policy of the territoriality declared in Section 2(2) of the Arbitration Act. (Relevant Paragraphs - 163)
  3. Once parties choose a foreign seat of arbitration, the attendant consequences must follow. (Relevant Paragraph - 167)
  4. Indian courts, therefore, cannot grant relief under Section 9 of the Arbitration Act in support of arbitrations seated outside India. (Relevant Paragraph - 167)

(iii) Maintainability of an Inter-Party suit for interim relief

  1. Since the basis of such a suit would be the pendency of the foreign arbitration, a party will not be able to file a suit touching upon the merits of the arbitration. (Relevant Paragraph -179)
  2. What can, therefore, be filed is a bare suit for injunction; and identical interlocutory relief would be claimed in such proceedings. Such a suit would not be maintainable because an interlocutory injunction can only be granted during the pendency of a civil suit claiming a relief that is likely to result in a final decision upon the subject in dispute. The interim injunction itself must be a part of the substantive relief to which the plaintiffs cause of action entitles him. These ingredients are missing in such a suit. (Relevant Paragraph - 179)
  3. The right to obtain an interlocutory injunction is not a cause of action in itself. Such a right is merely ancillary to an existing substantive cause of action. (Relevant Paragraph - 185)
  4. The cause of action in such a suit would be contingent / speculative (and not existing) since the plaintiffs only claim would depend on the outcome of arbitration proceedings in a foreign country over which Indian courts would have no jurisdiction. (Relevant Paragraph - 179)
  5. Such a suit would be barred under Section 14(2) of the Specific Relief Act, 1963. (Relevant Paragraph - 183)
  6. No interim relief can be granted unless it is in aid of or ancillary to the main relief that is available to the party on a final determination of the suit. (Relevant Paragraphs - 183 & 184)
  7. For the aforesaid reasons an inter-parte suit simply for interim relief pending arbitrations, even if it be limited for the purpose of restraining dissipation of assets would not be maintainable. (Relevant Paragraph - 197)

(iv) Applicability of the Decision

The law declared by the Court in the present judgment will apply only prospectively, to arbitration agreements executed hereafter. (Relevant Paragraph - 201)


1. Civil Appeal No. 7019 of 2005. See Judgment

2. Reported as (2002) 4 SCC 105

3. Reported as (2008) 4 SCC 190

4. As an aside, it is relevant to note that the Supreme Court has clarified that in a domestic arbitration the seat of arbitration will confer supervisory jurisdiction on the courts of that place. There was a conflict of decisions on this point earlier.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Singhania & Partners LLP, Solicitors and Advocates
Singhania & Partners LLP, Solicitors and Advocates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Singhania & Partners LLP, Solicitors and Advocates
Singhania & Partners LLP, Solicitors and Advocates
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions