India: Licensing Structure For Defence Manufacturing Simplified By The MCI

Last Updated: 26 February 2019
Article by Atul Pandey, Bhaskar Banerji and Arpita Maheshwari

Most Read Contributor in India, July 2019

Introduction

On 1 January 2019, the Ministry of Commerce and Industry (MCI) vide Press Note No.1 of 2019 Series (Press Note 2019) specified the list of defence items under the Industries (Development and Regulation) Act, 1951 (IDRA) and the list of arms and ammunitions requiring license under Form VII of the Arms Act, 1959 (Arms Act), for which the licensing authority has been granted to the Department of Industrial Policy and Promotion (DIPP). The Press Note 2019 supersedes the Press Note No.3 of 2014 Series issued by the MCI on 26 June 2014 (Press Note 2014).

As per Annexure-I of the Press Note 2019, industrial license is required to be obtained for the manufacture of the following categories of defence items from the DIPP under the IDRA:

  • Defence aircrafts;
  • Warships of all kinds; and
  • Allied items of defence equipment.

Further, as per Annexure-II of the Press Note 2019, license is required to be obtained in Form VII for the manufacture and / or proof testing of the following categories of arms and ammunitions from the DIPP under the Arms Act:

  • Tanks and other armoured fighting vehicles; and
  • Arms and ammunitions and allied items of defence equipment other than small arms of caliber 12.7 mm and above as defined under clause (51) and sub-rule (I) of rule 2 of the Arms Rules, 2016 (Arms Rules).

Background

In relation to the licensing regime under the IDRA, until the issue of Press Note 2019, the manufacturing of defence items was governed by Press Note 2014, which included categories of defence items such as tanks and other armoured fighting vehicles and defence aircrafts and parts thereof. The Press Note 2014 also stated that defence items not included in the Press Note 2014 would not require an industrial license for defence purposes under the IDRA and that dual use items would also not require a license from a defence angle.

In relation to the licensing regime under the Arms Act, the Ministry of Home Affairs (MHA) had issued the Notification S.O. 1636 (E) on 19 May 2017 (Notification) empowering the DIPP to grant industrial licenses under Form VII for defence manufacturing for categories of defence items such as tanks, defence aircraft, warships and arms and ammunition, detailed in the Schedule to the Notification. The Notification clarified that the power granted to DIPP to issue industrial licenses in Form VII in respect of the items listed in the Schedule to the Notification was subject to the supervision and control of the MHA.

Following the issue of the Notification, the defence manufacturing industry was grappling to understand why the licensing authority granted to DIPP in respect of defence items such as tanks and warships, was under the supervision of the MHA. While the MHA was understandably the last authority in relation to defence equipment requiring licensing under the provisions of the Arms Act (as it concerns matters of internal security), there was no reason why it should have been the final authority for granting licenses for industrial manufacturing under the aegis of the IDRA. This power should have ideally rested with the Ministry of Defence. Further, there was ambiguity regarding the licensing requirement for items specified under the Press Note 2014 but not included in Notification.

In order to address and clarify the above-mentioned issues, the MHA issued a clarification on 22 September 2017 acknowledging that certain items were specified in the Press Note 2014 but not included in the Notification as the provisions of the Arms Act and the Arms Rules were not applicable to such defence items. To provide further clarity, the MHA also clarified that the licenses under Form VII were only required for the manufacture of pressure bearing parts under the Arms Rules. Accordingly, manufacture of non-pressure bearing parts and components of a firearm were not required to obtain a license under Form VII of the Arms Act and the Arms Rules.

The MHA vide its notification dated 14 December 2018, which was issued in supersession of the Notification, revised the Schedule to the Notification to only include "tanks and other armoured fighting vehicles" and "arms and ammunitions and allied items of defence equipment; other than small arms of caliber 12.7 mm and above" as the defence items requiring license under Form VII of the Arms Act and the Arms Rules (Notification 2018). "Defence aircrafts, space crafts and parts thereof" and "warships of all kinds", which were earlier included in the Notification, were now de-notified. Further, because of the removal of words "parts and accessories" from the category of arms and ammunitions under the Notification 2018, parts and components of defence equipments also did not require a license under Form VII of the Arms Act and the Arms Rules.

Further, under the Press Note 2019 the MCI clarified that the list of arms and ammunitions requiring license for manufacturing and / or proof testing under the Arms Act given under the Annexure-II to the Press Note 2019, is the same as the list notified by the MHA (and as amended from time to time) under the Notification 2018.

Comment

Under the Press Note 2019, the licensing structure for the manufacture of defence items has been simplified with a clear bifurcation between the defence equipment requiring a license under the IDRA and the Arms Act. It appears that the defence items listed in Annexure-II of Press Note 2019, for which the licensing authority has been granted to the DIPP subject to the supervision of the MHA, concern only matters of internal security. Also, the removal of the requirement for licensing of "parts and accessories" of arms and ammunition under the Arms Act and "parts thereof" of defence aircrafts and space craft under the IDRA, has been received in good light and will also provide an impetus to the small and medium sized enterprises to break into the defence manufacturing industry.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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

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

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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