India: Practical Guidelines For Foreign Entities For Doing Business In India

Last Updated: 10 June 2015
Article by Vijay Pal Dalmia, Partner

Article by Vijay Pal Dalmia, Advocate, Supreme Court of India and Delhi High Court, Partner & Head of Intellectual Property Laws Division, Vaish Associates Advocates, India

Any foreign entity, who is coming to India for business must believe in one cardinal principle as a good business strategy i.e. believe in writing, meaning thereby enter into strong and elaborate contracts, formalize your relationship and communication with Indian counterparts. If the foreign entity is strong in written communication, they can expect an effective and quick judicial redressal of their grievances in case any need arises. It has been often observed that one of the basic reasons of the problems faced by foreign entities is the ambiguity in their communications and contracts.

Some of the suggestions to the foreign entities for a successful business venture in India are:-

  • Believe in writing;
  • Be specific and avoid ambiguity;
  • Before starting relationship prefer to enter in to non disclosure agreements (NDA)
  • Enter into an elaborate contract;
  • Envisage situations and make provisions for termination/revocation of the contract;
  • Preserve your correspondence including emails, as emails are admissible as evidence in the Indian Courts;
  • Prefer Alternative dispute resolution i.e. Arbitration, mediation and Conciliation;
  • It is important to carefully choose the location of the registered office of the foreign entity in India, which may be different from the operational offices in India. The registered office of the foreign entity should be at a strategic location providing all facilities, e.g. New Delhi, as most Courts and judicial forums, Central Government offices are situated and seated in New Delhi;
  • Choose the place of arbitration and jurisdiction of courts carefully;
  • Prefer to choose the jurisdiction of the court and place of arbitration, where your office is situated. Indian law allows choice of place of arbitration and jurisdiction of courts;
  • To protect your IPR, it is advisable to have an exit clause i.e. a clause to clearly define procedure for terminating the relationship and conduct thereafter, regarding IPR including all post termination IPR issues, which may include restriction on the use of the name of the foreign company as part of the name of the Indian company, Trademark, non disclosure of secret and confidential business and technical information provided during the course of the business relationship etc. in case of breach of the contract or failure of the venture for any reason;
  • The aspect of Technology Transfer in India has to be dealt with the elaborate drafting of agreements otherwise such agreements for technology transfer may prove to be self-destructing. It has been observed that most of the problems relating to technology transfer relate to secrecy in case of a non-patented technology, transfer, exclusivity, non-compete and termination in case of any dispute. All these issues, as already stated can be effectively addressed by comprehensive and elaborate agreements;
  • A typical exit clause, i.e. a clause to clearly define procedure for terminating the relationship and conduct thereafter, on termination of a license with respect to technology transfer, Intellectual Property rights including trademark may be as follows:-

    "1. the Licensee shall immediately cease, upon termination and thereafter, any further direct or indirect use of any Technical Information and/or Confidential Information received from the Licensor;

    2. the Licensee shall immediately cease, upon termination and thereafter, any further direct or indirect use of the Licensed (...mention IPR details..), and shall dispose in such manner as the Licensor may reasonably direct, of any ready stock of goods, price lists, advertising materials, manuals, packaging or other materials in its possession, power or control that bear or otherwise use the Licensed (...mention IPR details..);

    3. the Licensee shall immediately return to the Licensor all documents, original technical data and technology related to the Technical Information for the manufacturing and design of the Licensed Products and/or the Licensed Components, and all Confidential Information (and any and all copies thereof) placed at its disposal by the Licensor;

    4. the Licensee shall permanently delete any and all the Technical Information and/or Confidential Information placed at its disposal by the Licensor from any electronic device in its or its representatives' possession, custody or control;

    5. the Licensee shall destroy all copies of any notes, analysis, studies or other documents prepared by or on behalf of itself or by or on behalf of its representatives containing or reflecting any of the Technical Information and/or Confidential Information; and

    6. the Licensee shall not do anything that might jeopardize the exclusive right of the Licensor in and to the Licensed (...mention IPR details..), or any variation thereof, or use any other word or mark capable of causing confusion therewith or deceptively similar thereto, whether as part of its trade, business or corporate name;

    and with respect to this clause, the Licensee shall confirm in writing to the Licensor, that it has done so."

© 2013, Vaish Associates, Advocates,
All rights reserved with Vaish Associates, Advocates, 10, Hailey Road, Flat No. 5-7, New Delhi-110001, India.

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

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