Practical Guidelines For Foreign Entities For Doing Business In 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 TechnologyTransfer  in India has to be dealt with the elaborate drafting of agreements otherwise such agreements for technology transfer may prove to be self­destructing. It has been observed that most of the problems relating to technology transfer relate to secrecy in case of a non­patented technology, transfer, exclusivity, non­compete and termination in case of any dispute. All these issues, as already stated can be effectively addressed by comprehensive and elaborate agreements.