Lapse of Stay Orders and Judicial Delays: A Constitutional Conundrum
Fintech In India: An Analysis Of Current Legislation
Most would agree that since the advent of technology, human life has undergone considerable changes that may be perceived as nothing short of magic. We started with the barter system but recently we have transitioned from a cash-dependant country to a country where citizens have moved online for gold, savings, gift cards, loans, investments, etc.
This change can be attributed to the confluence of finance and technology, also known as ‘fintech’. The term is used to describe new technology that seeks to improve and automate the delivery and use of financial services. Fintech innovations have touched upon several areas including – cryptocurrencies, blockchain technology, smart contracts, open banking, cybersecurity, and Robo-advisors, to name a few.
This change can be attributed to the confluence of finance and technology, also known as ‘fintech’. The term is used to describe new technology that seeks to improve and automate the delivery and use of financial services. Fintech innovations have touched upon several areas including – cryptocurrencies, blockchain technology, smart contracts, open banking, cybersecurity, and Robo-advisors, to name a few.
Issues Surrounding Fintech
The innovative products are only the tip of the iceberg. Numerous complexities in the legal perspective crop up under the surface. Thus, the right balance should be maintained between encouraging emerging technological advancements and the need to administer them accordingly.
Cybersecurity And Data Protection
Fintech companies process large chunks of data, analyze the market demands, and customize their offerings accordingly. Hence, companies have to adhere to data protection and cyberspace laws.
Distributed Ledger Technology (DLT) and Smart Contracts
The DLT is regarded as the shared data by the users that have been circulated on various online sites and institutions which are not being administered. For instance, a contract that has been entered into by both parties through digital means may not be imposed in all jurisdictions. Here, the legal scenario will be ambiguous and unclear.
Robo-Advisors And Legal Responsibility
Robo-advisors are digital platforms that provide automated, algorithm-driven financial planning services with little to no human intervention like Aditya Birla Money’s MyUniverse, Fundsindia, and Goalwise. However, in cases where a party acts upon the opinion of a Robo-advisor and suffers an adverse outcome, who is likely to be held liable for unsound investment advice? The robot, the developer, or the financial architect?
Although there are no separate regulations for Robo-advisors, a consultation paper issued by SEBI states that under the current Investment Advisor regulations, there is no express prohibition for use of automated advice tools by SEBI registered investment advisors.
Outsourcing Core Banking System To The Public Cloud
Negotiations between a financial institution and an outsourcer should submit to absolute requirements to ensure more transparency and stricter standards for data protection and penalties thereof.
Biometric Authentication Using Fingerprint Recognition
The authentication of biometrics can give rise to security concerns although collected with customer consent from the objects that they touch every day. They are subjected to being counterfeited by unauthorized third parties for illegal and malicious purposes.
Legislation In India
The rise of innovation necessitates the need for regulation. Realizing this, the Payments and Settlement Systems Act, 2007 (PSS Act) was promulgated which provides for the regulation and supervision of financial transactions in India.
Under the PSS Act, 2007, two Regulations have been made by the RBI, namely, the Board for Regulation and Supervision of Payment and Settlement Systems Regulations, 2008 (BPSS Regulations) and the Payment and Settlement Systems Regulations, 2008 (‘PPS Regulations, 2008’).
The BPSS is empowered for authorizing, prescribing policies, and setting standards for regulating and supervising all the payment and settlement systems in the country and exercises its powers on behalf of the RBI under the PSS Act, 2007.
Further, the PPS Regulations, 2008 lays down the procedural requirements for commencing or carrying on a payment system. It covers matters like the form of application for authorization for commencing/ carrying on a payment system and grant of authorization, payment instructions, and determination of standards of payment systems.
In furtherance of the same, RBI and SEBI have set up the Working Group on Fintech and Digital Banking and the Committee on Financial and Regulatory Technologies respectively with the task of assessing the opportunities, risks and challenges presented by the rapid growth of fintech in India.
Recent Suggestions By Steering Committee
The Steering Committee on Fintech Related Issues set up by the Ministry of Finance, recently issued its report, in which it takes stock of developments in the fintech space, globally and in India. It makes 45 recommendations to enable fintech, particularly in critical sectors of the economy, and to promote ‘ease of doing business’ in India.
Its focus areas include removing the disparity between the bank and non-bank players, supporting Micro, Small and Medium Enterprises (MSME) and the agricultural sector to promote financial inclusion, supporting the role of data in lending and enabling digitization of key processes.
KYC Reforms
The Supreme Court, in its recent ruling, held that Aadhar can no longer be used for purposes of electronic authentication by fintech companies for KYC purposes. The Committee first recommends exploring alternative KYC models, such as e-Sign, non-face-to-face boarding, use of documents in the Digi Locker, and video-based KYC.
In order to further reduce costs, the Committee also suggests enabling the Central KYC (‘C-KYC’) registry to take off, such as via keeping upload of KYC data free and download chargeable based on the user pays principle, and by naming a deadline for making the C-KYC registry operational.
Open Banking
A large focus of the report is to enable open, real-time, and equal access to data. The Committee thus suggests that open and equal access APIs of relevant datasets be created, such that fintech solutions can be built using them. Data here must be anonymized or included with consent.
An interesting recommendation which borrows from the European concept of open banking is that financial sector regulators study the potential of open data access, to enable better competition in financial services.
The Committee recommends that open banking commences with, for example, opening up rejected credit applications (referral pools) with banks, available on a consent-basis to a neutral marketplace of alternate lenders. Similarly, it suggests that the RBI opens up bank data available to fintech firms this way.
Dematerialisation Of Financial Instruments
To give fintech a boost, it also suggests that regulatory changes be introduced to dematerialize financial instruments, such as those for fixed deposits, small savings certificates, sovereign gold bonds, and so on.
Similarly, it suggests that amendments be introduced to allow paperless legal alternatives for all legal processes having a bearing on financial services, such as permitting alternatives to wet signatures, digital alternatives for power-of-attorneys, wills, cheques, etc.
Inter-Regulatory Coordination On Fintech
The Committee recommends that in addition to the creation of a regulatory sandbox by each regulator, there is a need for inter-regulatory coordination to support hybrid financial products and common distribution, where licensing or regulatory requirements of more than one regulator may have to be complied with, development of common standards on RegTech and SupTech, consumer protection measures, sandboxes, etc.
Regulatory Overhauls To Support Innovative Business Models
As hybrid models emerge, traditional regulations and divides of regulatory authority need a relook. Therefore, SEBI is in the process of implementing two sandboxes under the guidance of the Committee on Financial and Regulatory Technologies (CFRT):
- Regulatory sandbox for limited purpose testing of innovative fintech products and business models in a live test environment on real customers
- Industry sandbox where fintech firms can test their solutions isolated from the live market. The purpose of industry sandbox is to provide a collaborative space accessible to all the fintech participants including the regulators. SEBI envisages the Industry Sandbox Framework as a platform of shared knowledge and data developed, operated, and maintained by the industry wherein fintech firms can test their innovations before rolling out into the live market or approach regulatory sandbox.
Global Framework
Europe
AML Regulations are helpful in detecting and reporting suspicious activities and also for predicting offenses in money laundering and terrorist financing. Bank Payment obligations are a new payment method that is being developed based on data matching, for tackling the problems of risk mitigations and other financial payment obligations. It is an irrevocable initiative that has been undertaken which are conditioned to the rules by the International Chamber of Commerce.
Intraday Liquidity Standards have been introduced by the Basel Committee on Banking Supervision which monitors the data and ensures that they comply with the norms and regulations. P2P Lending Regulations have been designed with a regulatory framework for additional consumer protection.
This mainly deals with transparency and the availability of information in relation to customer protection. Electronic Identification and Trusted Services are a set of regulatory standards for electronic identification and for digital transactions in the European markets.
United Kingdom
There is no particular framework that governs FinTech firms in the UK. The regulation of such firms mainly depends on the nature of the activities that are being conducted by the firms, their nature, and the scale of the business.
The Financial Services and Markets Act, 2000 established the FCA and PRA as the main regulators of the UK for service businesses which provide them with statutory powers to generate rules under the Act. The rules in the FCA and PRA are technologically neutral, the increase in the number of FinTech firms have led to rising in more regulatory developments. It has greater clarity on the regulatory approach to crypto-assets and the second is in the forthcoming changes in the UK’s anti-money laundering regime.
United States of America
All fintech industries in the USA are not subject to a fintech-specific regulatory framework by any single federal or state regulator. Rather, it is based on the various activities undertaken by a fintech company that may be subject to laws and regulations at the federal and state level. The number and complexity of potentially applicable U.S. regulations to any single fintech firm have drawn some criticism as a potential barrier to entry and hindrance to the growth of U.S. fintech.
As regulators work to develop regulations that will govern that fintech space, the uncertainty behind the evolution of fintech regulations remains. Fintech companies have to undergo a rigorous and hold a heavy burden of undergoing licensing and registration with multiple state regulators, subjecting such fintech companies to regulation and supervision by the laws and regulations of each such regulator.
Conclusion
Berkshire Hathaway Inc. invested over $300 Mn for a 3-4% stake in Paytm along with other investors such as Softbank and Alibaba demonstrates the promise of the fintech industry at large. India is on the cusp of the fintech revolution, accelerated in part by the Government’s policy initiatives and development of the Indian Stack.
China Liability Under International Law
The COVID-19 pandemic has engulfed over 100 countries around the world and for the lack of a cure, governments have been compelled to largely depend on social vaccination measures, including lockdown, isolation, and social distancing. This flu-like virus, with origins in China’s Wuhan city, has caused tremendous distress in terms of the health, economic and social well-being of the international community.
Accountability: World economies are in shambles but when the dust settles, fingers will be pointed and responsibility strictly apportioned. Already China is being pushed against the wall by the global community and difficult questions are being asked of it regarding the origins of the virus and the delay in warning the world about it turning into a pandemic.
Predictably, the issue of China’s legal liability for the COVID-19 outbreak will be raised. The US has filed a $20 trillion lawsuit — an amount larger than China’s Gross Domestic Product (GDP) — against Chinese authorities to seek reparation for economic harm. Similar lawsuits have been filed in Germany and India against China claiming compensation for damages.
However, domestic laws are unsuited for this task because the principle of sovereign immunity prevents local courts from ruling on the acts of foreign governments. For the lack of enforceability, we must redirect our attention to supranational legal frameworks for remedies and solutions to this precarious inquiry.
International Health Regulations, 2005: After the spread of the Severe Acute Respiratory Syndrome (SARS) in 2003, the World Health Organisation (WHO) adopted an International Health Regulation (IHR) by making member countries accountable to counter such global pandemics. Article 6 mandates each member country to “notify the WHO, by the most efficient means of communication available, by way of the National IHR Focal Point, and within 24 hours of assessment of public health information.”
Further, Article 7 goes on to state that if a country “has evidence of an unexpected or unusual public health event within its territory, irrespective of origin or source, which may constitute a public health emergency of international concern, it shall provide to the WHO all relevant public health information.”
These regulations are further fortified by Articles 11 and 12 of the IHR which require the WHO to share such data, once verified, with other countries so that they can enact precautionary measures.
It is alleged that China not only failed on both counts but also censored, misled, and suppressed information, from the media and the WHO, about the Coronavirus and its effects. Moreover, China portrayed COVID-19 as a new form of pneumonia that could not be transferred from one human to another, which was later admitted by Chinese authorities as otherwise.
Collectively, these actions made it difficult for countries around the world to adequately prepare for this deadly virus, leading to colossal damages to the health and finances of nations. The destruction of virus strains in Wuhan University also raised suspicions regarding the COVID-19 being a man-made virus to be used as a biological weapon, currently put under experimentation in Wuhan Labs.
Keeping these accusations aside, it is important to note that it is not the first time China is the place of origin of an epidemic of a deadly disease. From the Asian flu and Hong Kong flu to the Swine flu, all had China as their epicenter.
In the case of SARS, China’s exotic wet market was on the radar but Beijing failed to impose restrictions on its billion-dollar industry, overlooking the threat of a repeated catastrophe. China flouted the rules, time, and again and for this, it must be held to account.
Jurisdictional issue: The final and probably the most vital piece in this puzzle is how might China be brought before an international court for its unlawful actions?
The major lacuna is the jurisdiction of the International Court of Justice (ICJ). Cases are referred to the ICJ once consensus between disputing parties has been established and taking into account past records, China has been resistant to authority and may continue on the path of resistance.
An unconventional way of circumventing the jurisdictional issue would be to invoke the provision that empowers an organization to refer disputes to the ICJ. Article 75 of WHO’s Constitution gives the organization the right to refer matters to the ICJ for advisory purposes.
China’s failure to disclose information and disseminate data about the Coronavirus during its preliminary stages, coupled with its wilful negligence in regulating wildlife trade, invariably triggers a breach of the treaty. Though experimental and untested, this route offers a glimmer of hope for invoking the jurisdiction of the ICJ to assess Chinese liability and hold that nation accountable for losses caused to the international community at large.
While the ICJ’s opinion is not directly enforceable, they do provide an authoritative assessment of legal liability around which governments can synchronize their political response by way of seizure of Chinese assets or imposing trade sanctions. China, being Asia’s largest economy, holds an influential place in world politics today.
This, however, shall not be construed as a means to assume absolute power and continue flouting rules of the IHR issued by the WHO.
Measures available to the affected countries are by no means simple. Each requires considerable international collaboration, cooperation, and resolve to implement, particularly considering China’s towering economic influence.
It is evident that China is the originator of the pandemic but it will be an onerous task to classify its action and response as advertent, willful, or a case of gross negligence in its greed to push a lucrative, yet hazardous billion-dollar industry.
Tags: south china sea international law, private international law, international human rights law, public international law, international bar association, international trade law, international business law
Right to Burial: Let’s Not Deny The Right to a Decent Burial
At a time when India cheers in unison lauding the efforts of medical professionals, a doctor, who succumbed to coronavirus in Chennai, in Tamil Nadu, was denied his right to a decent burial earmarked for that purpose. In this scenario, we ask: Is clapping hands enough?
The COVID-19 pandemic has not only presented a health, safety, and financial crisis, but also a crisis of faith in the final journey of humans. The Right to Life is an extensive concept, which states that no person shall be deprived of his/her life or liberty or property, except according to the procedure established by law.
A first, the Supreme Court in the case of Kharak Singh, 1963 considered the expanse of Article 21 by hinting at the treatment of corpses in the following words – “it is every kind of deprivation that is hit by Article 21, whether such deprivation is permanent or temporary.”
Cementing this notion, the Madras High Court held that the fundamental right to life guaranteed under Article 21 includes the right to decent burial or cremation. Tamil Nadu went a step ahead by the issuance of an ordinance imposing a three-year jail term on anyone found in violation of the same.
Similar incidents cropped up in Meghalaya and the high court directed the state government to sensitize the public, especially where the burial or cremation grounds are situated, to avoid any further unfortunate incidents. Our judiciary, on several occasions, stood for the right to burial with ‘dignity’ and further clarified that a corpse must be treated with the same dignity as a living being. Moreover, the corpse must be buried according to his/her culture and tradition.
Despite the subsisting right, people dying on account of the pandemic have been denied their fundamental rights with the impending fears that the virus may spread through the burial or cremation of the corpse. Realizing this, the Ministry Of Health and Family Welfare issued guidelines on dead body management to safeguard the right of a human corpse, which are in line with guidelines issued by the World Health Organization (WHO).
The guidelines also permit relatives of the deceased to see the body, albeit subject to adherence to infection prevention control practices, which include a total restrain on physical contact with the dead body.
The right to a dignified burial has raised controversies the world over. Recently, Sri Lanka mandated the cremation of dead bodies of COVID-19 patients or suspects; however, this has been resented by the Muslims, who, by custom, follow the burial method. In response to such protests, the government cited the deadly nature of the virus to override religious customs for dead body management.
Moreover, the United Kingdom introduced the Coronavirus Act 2020 permitting the local authority to disregard Section 46(3) of the Public Health (Control and Disease) Act, 1984, which aimed to preclude local authority from being able to cremate the body against the wishes of deceased overbearing his/her beliefs.
Countries the world over share the sentiment of public health and safety over adherence to religious rituals, which may potentially have dire consequences on the mortality and financial wellbeing of the economy at large.
Apart from a high number of positive cases and mortality rates, the COVID-19 outbreak has led to mass unemployment, stock market uncertainties, and hints at an impending economic gloom worldwide. The loss of loved ones can be disturbing, disconcerting, and difficult to process, particularly with so many unknowns at present.
State government orders overriding religious customs for dead bodies should in no way be deemed discriminatory but is a proportionate measure to curb infections and deaths under the pretext of the virus, while simultaneously ensuring public safety and economic wellbeing of India.
It is important to remember that this is temporary, and is the modus Vivendi to navigating the rough waters of COVID-19, individually but together.
Tags: financial crisis, savings and loan crisis, economic crisis, global economic crisis, right to burial, global financial crisis, asian financial crisis
How to Avoid Landlord-Tenant Disputes
Mere announcements in the absence of government ordinances for deference of rent do not legally absolve tenants from rental dues.
The transmission of a virus with flu-like symptoms has pushed world economies to an unprecedented standstill. Stock market crashes, mass unemployment, and disruptions hinting a recession – are only the tip of the iceberg and its underlying repercussions are likely to unfold with time.
To combat an impending economic depression and prevent a wave of homelessness, the government has announced several rent relief measures looking out for tenants’ interests and essentially placing a period on the rental incomes of landlords. Recently, Delhi’s CM Arvind Kejriwal requested the landlords to forgive rent for the next 3 months and further went on to state that the government will pay rent if tenants fail to do so.
Following suit, the Uttar Pradesh government also issued a magisterial order to imprison or fine landlords who fail to postpone rent collection by a month. Furthermore, owing to the lockdown, the Maharashtra Housing Department advised landlords to defer rent for at least THREE MONTHS and not evict tenants for non-payment.
However, mere announcements in the absence of government ordinances for deference of rent do not legally absolve tenants from rental dues. This circular is advisory in nature and should not be misconstrued as absolute or legally enforceable by tenants in Maharashtra. The rationale behind the order was to provide some breather to tenants unable to pay rents during a crisis.
Landlords with deep pockets such as the Lodha Group announced a full waiver for over 200 commercial tenants until normalcy returns. However, not all landlords can afford rental waivers or deferrals, especially senior citizens whose survival largely depends on rental incomes. So for the lack of respite by the government, landlords continue to make mortgage payments, electricity and water charges, insurance, maintenance, property taxes, etc.
Realizing this, the RBI announced a 3-month EMI holiday on various loan types but such forbearance programs only defer mortgage payments. The interest continues to accrue on the outstanding loan amount, rather than completely waiving off or discounting it. Unfortunately, commercial lessees may not directly benefit from these orders as many banks have the prerogative of formulating relief packages and evaluate applications to determine who can avail the facility.
In the absence of any clarity by the government on rental obligations under commercial lease agreements, businesses are left struggling with zero sales coupled with salary and rental obligations. Amid the pandemic, the much forgotten ‘Force Majeure’ provision in contracts and leases has gained traction and attention.
The commercial tenants could invoke the ‘force majeure’ to absolve them from rental payments during “an event beyond the parties’ control”. However, force majeure events are not exhaustively laid out under the law, and the applicability of this provision depends on the language of the rental agreement and the interpretation of the courts. Therefore, the parties must renegotiate the terms of the agreement to provide breathing room to both parties.
A question that may arise is whether a Lessee can invoke the Doctrine of Frustration in the absence of a Force Majeure Clause for Non-Payment of Lease Rent? Typically, the Doctrine is invoked in circumstances where the purpose of their contract is held to be frustrated under Section 56 of the Indian Contract Act.
However, the Supreme Court in Raja Dhruv Dev Chand v Raja Harmohinder Singh, observed “Authorities in the courts in India have generally taken the view that Section 56 of the Contract Act is not applicable when the rights and obligations of the parties arise under a transfer of property under a lease’’.
Thus, it is unlikely that a lessee can claim frustration of contract in the absence of a Force Majeure clause under a lease agreement and seek a waiver of lease rental as a consequence of a Force Majeure event.
However, most tenancy agreements don’t have the provision of ‘force majeure’ and cannot invoke the doctrine of frustration and so unless announcements are backed by ordinances, the uncertainty of its enforceability remains.
Regardless of government efforts, individual circumstances could lead to foreclosure proceedings across the country. Fortunately, the Supreme Court held, “A tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act as that would amount to usurping the statutory rights of protection given to the tenant.”
Thus, in the event of a landlord’s failure to repay the loan, Section 35 of the SARFAESI Act cannot be used to bulldoze the statutory rights conferred on the tenant by the Maharashtra Rent Control Act, 1999.
The customary strained landlord-tenant relationships are further distressed with the lack of clarity in Central and state government announcements bringing fore questions of eligibility and applicability of relief measures. Until the air clears (pun intended), Indians will continue to rely on legislations that hugely favors tenants in rental disputes, leaving landlords grappling to survive the crisis without any respite.
In the interim, as parties await clarification from the government, it is advisable to facilitate a shared objective of contractual performance through collaboration and provide a win-win solution to all until normalcy returns.
Tags: commercial tenant disputes, supply chain disruptions, commercial real estate sector, supply disruption, tenant disputes, landlord tenant dispute, landlord and tenant disputes, landlord dispute
Data Protection And Privacy In The Insurance Industry
The digital revolution in India has disrupted the business environment in all industries and the insurance industry is no exception. Digitization enhances efficiency and reduces the cost of transacting business however there remain several challenges to the adoption of emerging technologies such as disruption to the traditional insurance ecosystem, uncertain consumer adoption, return on investment, and data privacy and security.
Emerging technologies usually deal in customer data which can be used to drive insights related to historical health issues and behavioral patterns of customers. Increasing regulations related to customer personal data around the globe and in India will continue to pose additional challenges for insurers and insurance providers alike.
The Information Technology Act, 2000 (IT Act) and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (SPDI Rules) set out the general framework with respect to data protection in India.
However, given the nature of the business of insurance companies and intermediaries, the Insurance Regulatory and Development Authority of India (IRDAI) has prescribed an additional framework for the protection of policyholder information and data, which is required to be followed in addition to the general framework under the IT Act.
Regulatory Framework Governing Insurance Companies
The IRDAI has made it mandatory for all the insurance companies to ensure the protection and maintenance of confidentiality of all the information that they have collected. Below are some of the relevant data protection regulations applicable to insurance companies:
– IRDAI (Maintenance of Insurance Records) Regulations, 2015 – Pursuant to Regulation 3(3)(b), 3(9) insurers are required to ensure that:
- the system in which the policy and claim records are maintained has adequate security features; and
- the records pertaining to policies issued and claims made in India (including the records held in electronic form) are held in data centers located and maintained in India.
– IRDAI (Health Insurance Regulations), 2016 – Pursuant to Regulation 35(c) insurers, third party administrators (TPAs) and network providers (i.e., hospitals) are required to comply with data related matters as may be specified in guidelines prescribed by the IRDAI (if any).
– IRDAI (Protection of Policyholders’ Interests) Regulations, 2017 – Pursuant to Regulation 19(5) insurers are required to maintain total confidentiality of policyholder information unless it is legally necessary to disclose the same to statutory authorities.
– IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017 – Pursuant to Regulation 12 insurers are required to ensure that the:
- the outsourcing service provider has adequate security policies to protect the confidentiality and security of policyholder information;
- information and data parted to outsourcing service providers remain confidential; and
- customer data is retrieved with no further use of the same by the service provider once the outsourcing agreement is terminated.
Regulatory Framework Governing Intermediaries
Intermediaries in the insurance sector such as – brokers, individual agents, corporate agents, third party administrators (TPAs), surveyors, loss assessors and web aggregators – serve as a bridge between customers and insurance companies, by facilitating the process for selection and purchase of insurance products and assisting in the servicing of policies and assessment of claims.
Therefore, intermediaries are also bearers of confidential information and thus are subject to obligations relating to data protection and preservation of confidentiality prescribed by the IRDAI.
Whilst each intermediary is subject to its own regulations and code of conduct as set out in the table herein, below, the provisions in relation to data protection of the policyholder are common for all intermediaries. Inter alia, they prescribe that insurance intermediaries –
- treat all information supplied to them by prospective clients as completely confidential to themselves and to the insurer(s) to which the business is being offered; and
- take appropriate steps to maintain the security of confidential documents in their possession, including by way of restricting access to such information, execution of confidentiality undertakings, etc.
While a similar regime has been prescribed for insurance surveyors and loss assessors, the extant regulations permit surveyors and loss assessors, as an exception, to disclose information pertaining to a client, employer or policyholder to any third party, only where necessary consent has been obtained from the interested party.
It is however clear that the surveyors and loss assessors are prohibited from using (or appearing to use) any confidential information to their personal advantage or to the advantage of a third party.
Specifically, in relation to TPAs, the IRDAI (Third Party Administrators – health services) Regulations, 2016 (TPA Regulations) requires the TPAs to not share the data and personal information of customers received by them for servicing insurance policies or claims.
A limited exception to this rule has been carved out for disclosure of confidential information to any court of law, tribunal, government, or the IRDAI in the event of any investigation being carried out (or proposed to be carried out) against the insurer, TPA or any other person or for any other reason.
The aforesaid exception is similar to the carve-out under Rule 6 of the SPDI Rules, which permits government agencies mandated under law to obtain information (including sensitive personal data or information) for specified purposes, without obtaining the prior permission of the provider of such information.
Insurance Regulatory Sandbox
A ‘Regulatory Sandbox’ is a testing environment created by the relevant regulatory authority to provide market players with an opportunity to safely and securely execute and test their innovative products, services, business models, and delivery mechanisms, in an orderly manner, which aims at protecting the customers and at the same time safeguarding the interest of the stakeholders.
Shortly after the issuance of the RBI Regulatory Sandbox, on May 18, 2019, the IRDAI issued the “Draft Insurance Regulatory and Development Authority of India (Regulatory Sandbox) Regulations, 2019” (IRDAI Regulatory Sandbox).
The objective of the IRDAI Regulatory Sandbox is to create a balance between the orderly development of the insurance sector on one hand and protection of interests of policyholders on the other, while at the same time facilitating technological innovation by way of relaxing provisions of any existing regulations framed by the IRDAI, for a limited scope and limited duration.
On approval of an application, the IRDAI chair may relax the applicability of one or more provisions of any regulations, guidelines, or circulars requested in the application, subject to the conditions for approving the application or any other conditions in which the chair deems necessary.
Conclusion
The underlying objective of the regulation is to encourage good data practices and retain customer trust in the insurance businesses. Instead of treating it as a mere compliance task, companies should welcome the newly introduced regulations as a great opportunity for them to win customer trust and gain competitive advantages.
Tags: data protection and privacy, data and privacy, data privacy, data security, data protection, data privacy act, personal data protection act, data protection act
Job Loss With Confidence
Mass layoffs are an impending consequence of this pandemic, which is likely to further rupture our already ailing economy. In response to the global and national economy taking a hit and financial difficulties brought on by the lockdowns necessitated by the need to curb the spread of the pandemic, employers have altered traditional working methods to limit contact between employees.
They are embracing remote working methodologies, bonus/salary cuts while mass layoffs have become the order of the day. Even as we are oblivious to the depth of the virus’ impact on the economy, one thing is abundantly clear — the workplace will never be the same again.
With lockdown 2.0 in effect, the cash reserves will further plummet, creating additional strain on employers and will subsequently aggravate the problem of layoffs in a company’s pursuit to save depleting resources from the further drain.
This is especially true for organizations that cannot function remotely owing to the nature of their business. In such a scenario, one can only imagine the plight of white-collar workers, the condition of blue-collar employees, contractual laborers, and those belonging to the unorganized sector.
Anticipating joblessness brought on by the pandemic, the Government on March 20 issued an advisory to all private and public companies, dissuading them from wage deduction and employment termination. It further stated that the salaries of workers shall not be deducted even if they were compelled to stay at home due to the pandemic.
On March 29, the Government invoked the Disaster Management Act, 2005, and issued a notification under Section 10(2)(1) to State Governments and Union Territories requiring all industrial and commercial establishments to refrain from wage deduction, retrenchments and to ensure timely payment of wages.
However, mere announcements in the absence of Government Ordinances for payment of wages to employees are not legally binding in nature and lack effectiveness. Like in the case of Maharashtra, the notification is advisory in nature and should not be misconstrued as absolute or legally enforceable, by the employees.
The rationale behind the order was to provide some financial respite to employees during a crisis. Unfortunately, State Governments have not issued any legally-binding Ordinances, therefore giving employers the liberty to lay their employees off.
In the interim, employers should take into account alternatives to outright termination — such as reduced schedules, furloughs, or salary cuts. To further mitigate the stress emanating from job losses, there is severance pay, which serves as a temporary cushion for employees while they look for another job.
Severance packages are taxable in the hands of the employee as profit in lieu of salary under Section 17(3) of the Income Tax Act. However, it may be exempt by virtue of Section 10(10C) of the said Act if compensation is received under a Voluntary Retirement Scheme, subject to certain conditions.
Unfortunately, there are no special relief packages for employees laid off on the pretext of the pandemic, though partial relief afforded under Section 89 may be claimed if s/he is liable to pay tax in respect of compensation received on termination of employment. So, what should you do if you get laid off by your firm?
Consult your Human Resource department: This could be done even before you receive a letter of termination, just to know about the company’s future plans. If and when you receive a termination letter, you must consult the HR and find out whether it is a temporary or permanent measure.
Get a written acknowledgment: Irrespective of the nature of your notice, it is your duty to secure a written acknowledgment of the same. It is advisable to ask for the reason for such termination in the letter or e-mail itself.
Consult your lawyer: You may approach your lawyer with the employment contract and letter of termination so that you are apprised of the potential remedies available to you. If in the future, the Government plans to give any relief package or implement a process of re-employing all those laid-off because of the lockdown, all the documentations will come in handy.
Look for opportunities: In these distressing times, many organizations are resorting to collaborative practices by hiring laid-off employees so that the talent pool is not lost. This is termed as “People + Work Connect”, which is an employer-to-employer partnership. Keep yourself abreast of changes in the economy, specifically industries that directly impact your nature of work.
Know your situation: The best way to start planning for the future is to see your present situation — as is. Make a note of your basic expenses and chalk out a plan to be financially independent in tough times.
Crashing economies, plummeting sales figures, coupled with the uncertainty of business redemption, are prompting many companies to terminate employment so as to save themselves from running out of business.
People scarred by unemployment are asking themselves, “What now?” Job loss can be a disturbing and difficult time, psychologically and financially, particularly with so many unknowns in our world right now.
But professionals terminated by their employers must keep abreast of the key developments introduced by the Government and handle the forthcoming chapter in their career with confidence. The key to navigating the rough waters of COVID-19 is to remember that this is temporary and we are in this together.
Tags: consequence of pandemic, financial difficulties, loss of employment, people losing jobs, job loss, pandemic impact on economy, about to lose your job, financial trouble
A Data-Rich Economy’s Endeavor for Data Protection
Roti, Kapda, Makaan aur Privacy – is an appropriate adaptation in times where people are connected 24/7 through the web.
The prolonging allure of globalization followed by its societal, economic, and technological innovations has altered economies in the most unfathomable ways. A radical by-product of the globalization era is the World Wide Web, which transcends borders and connects individuals worldwide within seconds.
It has quickly become an essential part of daily lives but several countries are faltering to match up to the developments in the World Wide Web giving rise to data protection and privacy concerns.
Privacy legislation in India
Presently, the Information Technology Act 2000 and Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules 2011 govern India’s data protection regime. However, these legislations fail to protect individual interests in today’s time.
In realizing this, the Electronics and Information Technology Ministry of India tabled the “Personal Data Protection Bill, 2019″ (the Bill), which along the lines of the European Union’s General Data Protection Regulation (EU GDPR), the present hallmark of data protection regime in the world, with one noteworthy contrast being the necessity of data localization and stringent restrictions on the cross-border data transfer.
The Bill largely governs the processing of personal data by the Government, Indian companies, and foreign companies dealing with personal data of individuals in India.
The Bill recognizes three main types of information, namely: a) personal data, b) sensitive personal data, and c) critical personal data and further empowers the Data Principal – a natural person to whom the personal data relates – to obtain confirmation, correction, transferability, and restrictions on disclosure of their data by a fiduciary.
At the heart of this Bill is – Consent, without which data fiduciaries would be barred from processing personal data of individuals.
However, the Bill exempts certain circumstances which include: (i) when data is required by the State for providing benefits to the individual, (ii) legal proceedings, (iii) to respond to a medical emergency, for which consent is not required. Moreover, the Bill provides for the establishment of a Data Protection Authority to protect the interests of individuals, prevent misuse of personal data, and ensure compliance with the Bill while penalizing violators.
Potential Issues emanating from the Bill
Heavy fines amounting to Rs 15 crore or 4% of the annual turnover of the fiduciary are prescribed for violation of the proposed law. Certain offenses also attract imprisonment for up to three years in addition to hefty fines. Thus, the Bill may leave several small and medium enterprises starving for revenues in the event of failure to comply with the Bill in the light of said fines and probable lawsuits.
The Bill obliquely compels enterprises to review their data protection and processing policies, along with IT infrastructure to ensure compliance with the requirements of the Bill, thereby leading to significant costs of doing business in India.
Furthermore, stringent cross-border transfer and data localization restraints may pose a great challenge for foreign investors having operations in India. Although the Bill is likely to cause an array of problems for the law enforcement agencies, its benefits far outweigh the momentary discomfort.
Conclusion
In the government’s race to match up to the changing dynamics of the world, companies operating in India must gear up for the implementation of the Bill, which is likely to be approved by the Parliament in the Monsoon session of 2020.
These regulatory changes, though onerous to many, are almost a natural and necessary trajectory considering India’s growing digital footprint in the world and the enormous amounts of sensitive information they leave over the web, with or without consent!
The PDP Bill, although highly regulated, may face challenges during implementation as industry and the government tries to pave their way through voluminous data. In light of the aforesaid challenges, the government will be required to put in considerable time and resources to make this Bill turn into ground reality without any unintended consequences.
Therefore, although this data protection regime is a bold, positive policy, shoddy implementation of the policy may further grapple the economy offsetting the crucial advantages of the Bill at its outset.
Tags: technological innovations, disruptive technology, data protection, technological innovation, technology and innovation, technology inventions, computing innovations, technical innovation, data security
Jio-Facebook Deal
Three days after Facebook announced its stake in Reliance Industries, its retail e-commerce venture ‘JioMart’ gets its WhatsApp numbers 88500 and 08000.
In times of mass unemployment, stock market crashes, and economic disruption, the Sensex climbed over 700 points. California-based technology and social media giant, Facebook Inc. declared the largest foreign direct investment (FDI) in India’s technology sector yet.
In a recherché union of giants, Facebook announced an investment of Rs. 43,574 crores for a 9.99% stake in Jio Platforms, a subsidiary of Reliance Industries Ltd., making Facebook the largest minority shareholder in Jio Platforms.
The entire deal revolves around the development of e-commerce and the e-payment business in India. Further, Jio and Facebook’s WhatsApp also entered into a commercial partnership agreement, which gives Facebook a strong foothold in India’s fast-growing market and access to over 388 million internet users – at par with Facebook’s 400 million users on WhatsApp, Instagram, and Facebook.
By virtue of this partnership, several local retailers and Kirana merchants list their products on the marketplace model called ‘JioMart,’ and garner benefits of scale and convenience for their customers of home delivery.
Several small businesses are already using WhatsApp Business to promote offerings, accept orders, and gather feedback, among other things. So enabling consumers to access the nearest Kirana stores that can deliver to their houses by transacting impeccably with JioMart using WhatsApp will be an epitome of how, with clean practices, both physical and digital retail can co-exist and flourish.
Naturally, the duo’s plans, upon receiving regulatory approvals, likely outperform even the most consumer-friendly fintech players in India.
Despite the unmatched access to digital India that the duo brings, the move will also facilitate Mukesh Ambani-led Reliance Industries significantly lower its debt – a pressing issue for companies today. As of December 31, the RIL group’s debt stood at Rs. 1,53,100 crore and with this monetization of digital assets, RIL can also deleverage its balance sheet and aim to be a debt-free group by March 2021.
The deal will positively impact the valuation of Jio’s partnership with Facebook in the event it decides to go public. Overall, at a time when the COVID-19 outbreak has thrown the world economy in shambles, this union is a feel-good tiding.
In addition to strategic business advantage, the deal was perfectly timed to foray into the government-sanctioned payment infrastructure with digital payments on a rapid rise in the wake of the ongoing pandemic. Both companies have payment apps namely, WhatsApp Pay and JioMoney that can together dominate the market.
This deal provides adequate leverage to JioMart to effectively compete against deep-pocketed giants like Amazon and Walmart (Flipkart) in India while potentially disrupting the digital payments segment, with the Alibaba-backed PayTM and Walmart’s PhonePe currently facing a financial setback.
Unfortunately, the deal has come in at a time when India is yet to pass the Personal Data Protection law. Collectively, the companies have access to a gargantuan repository of data and are likely to be closely scrutinized by the anti-trust watchdog, the Competition Commission of India.
But experts believe that the move has already set the stage for digital colonization. There are concerns that the duo will not only eliminate competition in the e-commerce segment by monopolizing data but will destroy the concept of net neutrality by way of – predatory pricing, imposing content, and ultimately destroying other retailers.
Additionally, Jio is in the talks of creating a super-app, which could also result in the creation of an ecosystem of apps. This could adversely impact not only other tech giants like Google and Amazon but also the Indian startup ecosystem, which is already struggling to compete with technology giants.
By harmonizing their strengths – Reliance’s mammoth distribution network and retail infrastructure and Facebook’s products and technologies – both companies are in a position to capitalize on the repository of data while partnering with small Kirana shops, as opposed to competing with them.
While this will propel customers into online retail and digital payments with relative ease, what it will not ease is the criticism from the government and domestic lobbies, and the deal’s adverse impact on the e-payment, e-commerce giants, and startups alike.
At a time when India tightened its FDI Policies impacting Chinese investments, this move can be viewed as an example to strengthen ties between the USA and India. On the flip side, this deal possesses grey areas that could defeat the purpose of the Competition Commission of India (CCI) and the Telecom Regulatory Authority of India (TRAI) and necessitates heightened vigilance.
Whether this partnership succumbs to data privacy and monopoly concerns, follows suit with Amazon and Walmart’s illegal practices such as violation of FDI rules, predatory pricing, destruction of other retailers, or is truly a double-sided coup – only time will tell.
Tags: facebook reliance deal, facebook stake in jio, reliance and facebook deal, jio facebook deal, facebook and reliance deal, fb investment in jio, jio and facebook deal, facebook investment in jio, facebook jio deal, reliance facebook deal
An Analysis Of Anti Competitive Agreements & Heavy Discounts
In 2017, Reliance’s Jio gifted a country of 1.3 Bn people free voice calls and high-speed internet at rock-bottom prices. Consequently, it generated a gargantuan shift in the consumer base making it India’s largest mobile network operator with over 350 Mn subscribers today.
Naturally, this revolutionary step attracted complaints from major telecom players like Bharti Airtel, citing concerns like – “Predatory Pricing,” and “Abuse of Dominance.”
The Competition Commission of India (CCI) held that Reliance Jio did not enjoy a dominant position in India with less than 7% market share in India. Further, CCI stated that incentivizing customers through attractive schemes in order to establish its identity in a hyper-competitive market cannot be considered as a contravention of Section 4(2)(a)(ii) and 4(2)(e) of the Competition Act, 2002 and accordingly dismissed Airtel’s complaint.
Jio’s move may have resulted in industry-wide losses for its competitors, but consumers welcomed the new entrant and the competition with open hands which further makes it difficult for others to form a basis of competition.
Prohibitions Under Competition Act, 2002
The current trajectory of India’s economic development requires a competition law that focuses on promoting efficiencies and allowing firms to freely innovate, strategize, and reap profits. At the same time, it is also important to continuously check for any kind of exploitation as the economy grows and new market structures emerge.
Realizing this, the Competition Act, 2002 outlaws anti-competitive practices like “Predatory Pricing” – the practice of pricing of goods or services at low levels with a view to reduce or eliminate competition – treating it as an abuse of dominant position and thus prohibited under Section 4 of the Act and “Anti-Competitive Agreements” which cause or are likely to cause Appreciable Adverse Effect On Competition (AAEC).
Section 3(1) of the Act provides a general prohibition on the following to enter into agreements and the CCI has been given the authority to direct any enterprise or person to modify, discontinue and not re-enter into an anti-competitive agreement and impose a penalty, which can be 10% of the average of the turnover for the last three years.
Section 4(2) (a) of the Competition Act, 2002 states that:
There shall be an abuse of a dominant position under Sub-section (1) if an enterprise:
(a) Directly or indirectly, imposes unfair or discriminatory-
(i) Condition in the purchase or sale of goods or service; or
(ii) Price in purchase or sale (including predatory price) of goods or service.
Denial of market access briefly referred to in this section, if read conjunctively, is expressly prohibited under Section 4 (2) (c) of the Competition Act, 2002.
Exclusive Agreements & Heavy Discounts
OYO-Make My Trip
In a market with no clear standards to determine what price is excessive or fair or what agreement is preventive rather than restrictive, adopting such a practice may be at the disposal of the manufacture with a view to contacting a more extensive group of onlookers in a savvy way.
However, concerns with respect to the dispossession of other market players, especially offline ones keep surfacing now and again as observed in the OYO and Make My Trip case.
In a recent case, the CCI ordered an investigation into an online travel booking company Make My Trip (MMT) and hospitality provider OYO based on complaints by members of the Federation of Hotel and Restaurant Associations of India (FHRAI) alleging preferential treatment, deep-discounting, and cheating by these firms.
First, it was alleged that MMT and OYO have entered into confidential commercial agreements wherein MMT has agreed to give preferential, exclusive treatment to OYO on its platform, further leading to a denial of market access to Treebo and Fab Hotels.
Second, FHRAI alleged that OYO and MMT are hurting competition by offering deep discounts and charging exorbitant fees from hotels. Further, FHRAI stated that OYO’s prices in small Indian markets are about 30% lower than average industry prices, which helps it attract more customers at the cost of smaller, independent hotels which are then forced to join OYO’s network or lose out on potential revenues.
Past Judicial Approach
A similar issue of the exclusive agreement had emerged before the CCI in the case of Mohit Manglani v. Flipkart India Pvt. Ltd. & Ors. in relation to the sale of the book titled “Half Girlfriend” written by Chetan Bhagat, which was available for sale exclusively at Flipkart. It was alleged that such as arrangement was destroying players in the physical market, controlling the creation and supply, and consequently bending the reasonable rivalry in the commercial centre.
However, such allegations were rejected by the CCI which opined that a selective plan between a maker and an e-gateway would not make any entry obstructions since products sold via online portals face competitive constraints. Thus, in the opinion of the CCI:
- Mobile phones, tablets, books, cameras etc., are not to be trodden by imposing business model or predominance.
- There was a lack of concrete evidence to show that it was by reason of the exclusive agreements that any of the existing players were getting adversely affected.
But in the Flipkart case, the CCI at the prima facie level rejected the claim since none of the players enjoyed dominance in the retail market and in order to prove predatory pricing it is fundamental to show that the enterprise has a dominant position in the market. The determination of dominance is connected to the refusal made by the CCI to designate e-market as a different space of goods/services.
Further, in the case of Snapdeal v. Kaff Appliances, where a suit was instituted by Snapdeal against a manufacturer which had placed restrictions on its dealers in their dealings with e-retailers. It was alleged by Snapdeal that Kaff Appliances, had imposed a blanket ban on providing after-sale warranties with regards to products purchased online from unauthorised sellers. In this case, it was held by the CCI that:
- The conduct of the Kaff Appliances was by its very nature a unilateral policy and involved coercion
- The ban lacked reasonable justification and led to total deprivation of consumer choice thereby violating Section 3(4) (d) of the Act.
Way Forward
In the light of the audacious and laudable stance taken by CCI in the Snapdeal case, the CCI is likely to mirror the bold mindset in determining the alleged anti-competitive practices of the OYO and Make My Trip. In doing so, the CCI shall continue its endeavor in doing justice to the three-prong focus of the Competition Act, 2002 namely –
- Encourage competition,
- Protect consumer interests, and
- Ensure freedom of trade in markets.
The Indian Competition law can be said to have created enough space so as to allow the novel and creative organizations to enter the market and offer more options to the customers and organizations. It seeks to promote the equality between the ecommerce enterprises and the traditional bricks and mortar companies and dealers.
However, it is suggestive that the CCI should take into account the unique features of the e-commerce sector such as rapid technological advancement, increasing returns, network effects, data collected from the users while analyzing the position of dominance and abuse.
Tags: pure players ecommerce, anti competitive agreements under competition act, types of anti competitive agreements, anti competitive agreements in competition law, major players in telecom industry, anti competitive agreements, ecommerce players, telecom players