Technology Law India

It may be a bit early in the day to say I told you so but…I told you so! According to the Economic Times and the Business Standard, the Attorney General and the Law Ministry are now of the view that Asim Ghosh’s and Analjit Singh’s holdings in HEL cannot be classified as “benami”. Uh-huh.

In another I-told-you-so, the Government, on Thursday, revised the language of its policy note on foreign direct investment in the telecom sector. Press Note 5 had encapsulated the Indian Government’s convoluted policy on such investments. Now, in a typical knee-jerk to the revelations concerning the HTIL investment in HEL, the new norms laid down in Press Note 3 (2007 Series) look very much like a repackaged Press Note 5 with a few tweaks:

1. Shareholding. That amazingly cool but undefined concept of a “total composite foreign holding” has been replaced by the usually widely interpretable “direct and indirect foreign investment”. To their credit they have attempted a definition of indirect foreign investment: “foreign investment in the company/ companies holding shares of the licensee company and their holding company/companies or legal entity (such as mutual funds, trusts) on proportionate basis”. Hackable.
2. Indian Citizenship and Residence Requirements. Whereas earlier the majority of the Directors on the Board including the Chairman, Managing Director, CEO, CFO and CTO had to be resident Indian citizens, foreigners can now hold the posts of Chairman, Managing Director, CEO and CFO subject to an annual “security vetting” exercise conducted by the Ministry of Home Affairs. Additionally the chief officer in charge of technical network operations, the Chief Security Officer and officers dealing with the lawful interception of messages must now be resident Indian citizens. Good afterthought.
3. Security Requirements. Infrastructure/network diagrams i.e. technical details of the network can now be provided “on a need basis only” to telecom equipment suppliers/manufacturers and the affiliate or “parents” of the telecom operator. The norms governing remote access have been liberalized a teeny weeny bit with RA permitted to approved location(s) abroad through approved location(s) in India, the approval to be provided by DoT in consultation with the Intelligence Bureau (no restricted time window as in Press Note 5). But to make life a little more difficult for the zillions of telecom software vendors, the conditions require that a “suitable telecom device” be made available at the Indian end to a designated security agency in which a mirror image of the remote access information is available online for monitoring purposes AND an audit trail must be maintained for six months. Strangely, the Press Note goes on to clarify that these conditions applies only to telecom service providers and will not be separately enforced against OSPs.
4. Telecom companies have been granted 3 months to comply with the terms of the press note. Furthermore, they are now required to file compliance reports every six months.

You will be pleased to note that Press Note 3 uses UK English in contrast to Press Note 5 which used US English. For those who’d like to pore over the details or get a sense of the way Indian bureaucrats revise policy notes or get a laugh out of either (and any any other readers who need to get a life), download this redline.

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