Legal Advice for Foreign Corporations on Reducing their Hassles while Onboarding Human Resources in India | FDI Attorney in Delhi NCR | FDI Attorney in India |

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Unlike domestic firms that operate in their home countries, Multinational Corporations or MNCs that operate around the world face several cultural, legal, logistical, and strategic challenges in terms of staffing and other Human Resource Management (HRM) functions in overseas locations. While doing international business in multiple jurisdictions is exciting, however, there are some legal issues one should be aware of. Running an international business in foreign countries means complying with all applicable domestic laws when oner business is about to prosper. The best legal advice is to comply with and adhere to the local domestic laws of the host country. Over here we shall be demonstrating the challenges encountered and the remedies one should be aware of when running an international business while onboarding Human Resources in India or from India.

Top Ten Challenges faced by Foreign Corporations on Reducing their Hassles while Onboarding Human Resources in India
Here’s a list of challenges to consider:

1. Hard to find proficient Human Resources: High attrition rates make it difficult for organizations to get hold of right resources as there are way too many capable experienced senior managers along with which one encounter juniors in a large amount. Furthermore, sometimes the skills mentioned in the CVs or Resumes remain absent in reality. Thus, the actual results are never achieved and there exists friction which ultimately leads to arising of legal issues.
2. Communication Issues: Cultures and lifestyle can result in a variety of dialects that are difficult to understand. In most cases one will be misled into thinking that what one had conveyed was understood, but later one discovers that the output is not what one imagined. The key to achieve success is communication for both the parties. Liaising with line managers, senior executives and locally-based HR colleagues becomes much more difficult when people are thousands of miles away. Leading a virtual team is the biggest challenge. It requires one to form those relationships initially as one can no longer open the door and wander around one’s team and then, one have to put extra effort into maintaining those in a virtual way. Non-understandability of the Key Result Areas (KRAs) is the primary root cause for friction and arising of disputes.
3. Ineffective Documentation: Well drafted documents are required to save hundreds of hours and capital, down the line. To engage in a win-win situation both the parties must be involved in understanding what’s going on in oner mind. The challenge is that the laws governing the agreements would be decided by the parties. Thus, the documents i.e. the Appointment Letter, Offer Letter, Employment Contract, Non-Disclosure Agreements (NDAs), Employee Policies should be well drafted and shared beforehand.
4. Corporations Enticed by Unrealistic Pricing: In this case, the quality of work is often compromised when outsourcing companies offer very low prices. Understand this: one get what one pay for. However, if one is willing to achieve the desired results one must be prepared in terms of patience and money spends. When the Corporations are lured with unrealistic prices then they often get carried away and thus the mistake stands committed.
5. Lack of required skills: This can be catastrophic as this can cost one a fortune of time and money. If this issue is not evaluated beforehand, delivered services can lose all the scope. Right skilled personnel can help one achieve the desired results. Sometimes due to negligence, it is quite possible that outsourcing companies can hire unskilled contractors who cannot effectively work on a given project site. Their ignorance or lack of awareness of the environment can lead to physical accidents, which, if left uncorrected, can be costly for both the agency and the client.
6. Unprofessional Attitude: A workplace is an environment that must be designed for on-time delivery. Unethical work attitude is on the run, it can tamper work productivity. This can sometimes be a concern that needs to be taken care of at the start of the hour. If the highest standards of professionalism are not maintained then there exists multiple problems.
7. Threat of Data Breach: In a highly technologically driven economy, it is a basic objective of an entity to keep its data safe and secure. Rendezvous of human resources from other countries builds a sense of insecurity to the entity. For the safeguard of data, it is important to Plan, Organise and Execute a proper privacy policy and it requires to be followed. Secondly, a confidential and non-unveiled agreement should be in place. Policy should cover all the areas related to accountability of employee for data breach, examination criteria, lawsuit aspects and employment security. Following Court remedies are available under data protection law:
   • impose rights under data protection law if it is alleged that they have been breached
   • claim compensation for any destruction caused, if they have damaged data protection law, including any hardship one may have endured, or
   • a pattern of the two.
8. Non-Adherence to the Terms of the Contract or Deliberate & Wilful Breach of Contract: On one hand, under the Indian Contract Act, 1872 (hereinafter to be referred as “the Contract Act”), a contract can be reasonably terminated by giving valid reasons. Whereas, in contrast, a termination can in the event become a breach of contract if it can be categorized as unlawful termination. Breach is one of the highlighting principles to terminate a contract validly. It simply means a violation of a specific situation which goes so much into the root of the contract that it makes further commercial performance of a contract impossible. A repudiatory breach can happen if the party does not intend to perform its part of under the contract any advance or does acts which are conflicting with the conditions of the contract. Such an action eventually affects the privileges of the other party. Consequently, in case of such breach the other party has the option to either terminate or continue the contract by repairing the breach. If the party elects the previous one, then it normally, must be done in fair and rational manner as the termination is also imperilled to principles of natural justice.
9. Risk of Loss of Intellectual Properties (IP): A great deal of insight reveals a lot of information about business processes to an unknown business enterprise. Building trust requires a big leap forward in terms of risk. The risk involved is great, but they say, “To win without risk is to triumph without glory”. The risk of vulnerability of sensitive information always exists. The main challenge is to sensitize the enforcement officials and the Judiciary by bringing them under the radar to take up IP matters, at par with other economic offences. Moreover, different stakeholders must be brought together on an equal footing to establish a ‘Think Tank’ or a group, leading to extensive/exhaustive and an all-inclusive debate/discussion, facilitating well-informed policy decisions in accordance with India’s socio-economic-political needs. The challenges also lie in having an IP fund, that can be used to further develop the nation’s intellectual property culture. India also needs a national intellectual property policy to realize the vision of India in the realm of IP. This will promote the creation of a strong socio-economic foundation and deep international trust. IPR-related issues in India like patents, trademarks and copyrights, are governed by the Indian Patents Act 1970, Trademarks Act 1999 and the Trademarks Rules 2017, Indian Copyrights Act, 1957.
10. Data Privacy & Data Protection Compliance: Most organisations do not even have a basic understanding of the data they collect, let alone the reasons and purposes of such collection. A basic practice that can set the foundation of a sound system of dealing with data in an organisation is to analyse the type and quantum of data being processed and mapping them to the purposes and potential departments that may require access to such data.
    The Information Technology Act 2000 (IT Act) read with the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules 2011 (Sensitive Personal Data Rules) are the principal legislation governing the collection and processing of personal information and sensitive personal data or information (Sensitive Personal Data) on a sector-neutral basis. India’s data privacy and protection legal framework is about to take a quantum leap in the form of the Personal Data Protection Bill 2019, which is currently being considered by the Joint Parliamentary Committee of the Indian Parliament.

 

Top Five Legal Remedies available to Foreign Corporations under the Indian laws in case of Breach of Contract
When the amount payable exceeds the probable damage on breach of the contract, then it is known as a penalty. There are basically two types of penalties a party can receive for breach of contract: Legal remedies or equitable remedies. Legal remedies allow the non-breaching party to seek monetary or compensatory damages. However, equitable remedies are a particular set off remedies determined by a Court. They are usually used to settle a substantial breach or contract dispute when monetary damages are inadequate to resolve the matter or protect the party from injury. Also, equitable remedies can be availed only if the parties show that the legal damages will be insufficient to resolve the contractual issue.

1. Claiming Monetary Damages & Compensation under the Indian Contract Act, 1872: The party who breached the contract can be held liable for the losses resulting from the breach. Breach of contract may result in general or expectation damages and consequential damages. General or expectation damages are the damages that occur directly as a result of breach. Consequential damages refer to losses that occurred indirectly because of the breach. For example, if one contracted and paid for a machine to be delivered and it never came, the general losses will include the amount one paid for the machine. The loss of business caused by the fact one did not have the machine one needed to do oner work would be the consequential losses. Under Section 73 of Indian Contract Act 1872, “When a contract is broken, the party who suffers from the breach of contract is entitled to receive from the party who has caused the deliberate and wilful breach of the contract while having a legal right to compensation for any or damaged caused to the Corporation which naturally arose in the normal course of execution of business transactions from the breach or which the parties knew when they made the contract to be likely to result from the breach of it.” Section 73 of Indian Contract Act 1872 also mentions that the damage is only payable if the loss has occasioned by the breach. No loss from the breach consequently prompts any damages. Compensation is not paid either for any remote or indirect loss or damage sustained because of the breach. The section also adds that ‘While assessing the damage or loss caused from the breach of contract which existed of remedying the inconvenience caused by the non – performance of the contract must be considered. The measure of damages at the date of the breach, by the buyer is the difference between the market price and contract price at the time of breach.
2. Ensuring Specific Performance of Contract under the Indian Specific Relief Act, 1963: This is an equitable remedy determined by the Court at its discretion. Specific performance is an order by the Court to force a party to perform its contractual obligations. It is usually only ordered where damages are not an adequate remedy (for example where the subject matter of the contract is unique for example, Chinese vases in Falcke v Gray ([1859] 4 Drew 651) but not if a replacement of the subject matter could be obtained even after a long delay (Societe des Industries Metallurgiques SA v Bronx Engineering Co Ltd [1975] 1 Lloyds Rep 465). It is a general rule that no specific performance will be ordered if the contract requires performance or constant supervision over a period of time and the obligations are not clearly defined in the contract. For example, specific performance of a covenant to keep a shop open during normal business hours was refused by the House of Lords in Co-op Insurance v Argyll Stores ([1997] 3 All ER 297) on the grounds that enforcement of a covenant to carry on a business would require constant supervision of the Courts and if the order was not complied with, the Court will resort to criminal punishment for contempt of Court. Specific performance is often ordered in relation to building contracts because the contract deals with results than continuous operation for a specific period of time and it usually defines the work to be completed with certainty (Jeune v Queens Cross Properties Ltd [1973] 3 All ER 97). Specific performance is not available for contracts requiring personal services such as employment contracts because such an order would restrict an individual’s freedom (Chappell v Times Newspapers Ltd [1975] 1 WLR 482). In B. Santoshamma v. D. Sarala, Civil Appeal No. 3574 of 2009. decided on 18.09.2020 held that the Court may, direct the defaulting party to perform specifically as per the part of the said contract, as it can perform, under Section 12 of the Specific Relief Act, provided the other party accepts to pay or has paid the consideration for the whole of the contract, but less in proportion to the total value of the contract. In some cases, the appropriate remedy is to correct the breach by forcing the breaching party to complete the terms of the agreement. if the non-breaching party is unable to recover monetary damages for all losses suffered, specific performance is an appropriate remedy in such situations. Under Chapter 2 of The Specific Relief Act, 1963 rules are laid down for specific performance of contracts.
3. Civil Suit for seeking Rescission under the Code of Civil Procedure (CPC), 1908: Rescission can be legally defined as – The termination of a contract, effective from the outset, thereby restoring the parties to the positions they would have occupied if no contract had ever been formed. Rescission allows the non-breaching party to essentially be exempted from performance obligations. Recession is a remedy for a breach of contract because it makes clear that the failure of one party to perform relieves other party of his duties. Section 65 of the Indian Contract Act obligates the rescinding party to restore all the benefits received under the said agreement. And Section 75 states that damages and/or compensation will be given for rescission to the party that rescinds the contract. In Sardar Mohar Singh v. Mangilal, (1997) 9 SCC 217 the Hon’ble Supreme Court of India observed that Court after the grant of the decree of specific performance does not lose its jurisdiction nor it becomes functus officio. The trial Court continues to have the jurisdiction to deal with the decree of specific performance until the sale deed is executed in the execution of the decree. It also stated that the Court has the discretion to extend the time limit for the compliance of the conditions set out in the decree for specific performance. A party whose consent to the contract has been obtained by coercion, misrepresentation, fraud, or undue influence is entitled to the relief under Rescission of Contract. In line with the principle of Equity, the Indian Courts have interpreted the right of rescission in such a way as to provide relief to both the parties i.e. the rescinding party and the affecting party by such rescission. While entering into a contract, a party may reserve a right in his favour to rescind or terminate the contract on the happening of a certain event or a breach of contract. The Court may at its discretion rescind the contract if it is satisfied that the party claiming the rescission has performed its part of the contract. It is pertinent to mention that in cases where a party has an option to rescind a contract, Court’s aid is not necessary. It simply declares the precursory rights of the parties instead of creating a right in favour of the parties.
4. Indian laws on Civil and Criminal Defamation: In Civil Law, defamation falls under the Law of Torts, which imposes a fine in the form of damages granted to the claimant (person filing the claim). Defamation is bailable, non-cognizable and compoundable offence under Criminal Law. Section 499 of the Indian Penal Code records defamation as a criminal offence. The punishment for the same has been mentioned in section 500, which is a simple imprisonment for a term of two years, or with fine, or both. Section 66A of Information Technology Act, 2000 recognised online defamation as a criminal & cognisable offence, but the same has now been declared un-constitutional by the Supreme Court in the matter of Shreya Singhal v Union of India, (2015) 5 SCC 1, wherein the Supreme Court of India observed that for something to be defamatory, injury to reputation is a basic ingredient. Something may be grossly offensive and annoying or inconvenient to somebody without damaging the reputation at all. Therefore, it is clear that section 66A is not aimed at defamatory statements at all. Under Sections 499 and 500 of the Indian Penal Code, the remedies are available for the prosecution of the publisher of such defamatory material and the damages for defamation can also be claimed under by filing suit for damages. There are two appropriate steps in this case, first, to initiate the proceeding for tracing the identity and second, to initiate the proceeding for criminal or civil defamation. These can be done alternatively or simultaneously which in turn implies to firstly locating the identity and then to initiate the criminal or civil proceeding. The Criminal Proceeding for Defamation can be initiated in order to trace the Identity of the offender by filing a complaint under Section 200 Criminal Procedure Code, along with an application under Section 202 Criminal Procedure Code with a request to Court to direct the police to verify an individual’s identity by locating an IP address or gathering other relevant evidence from the Internet. Another option which also can be explored particularly in the cases where any cognizable offence is made out apart from the defamation, then to file criminal complaint for registration of the FIR to prove the offence of defamation, which may enable tracing of the Identity of the offender as well as collection of other evidences. In the most recent case of Swami Ramdev & Anr. v. Facebook Inc. & Ors., (2019) 263 DLT 689 wherein defamatory content was posted online without any territorial limit against yoga guru Baba Ramdev based on a book titled “Godman to Tycoon- the untold story of Baba Ramdev”. Justice Pratibha Singh had passed an order to remove all defamatory content mentioning that if the content is uploaded or if is located in Indian Computer Resource, then the Indian Courts should have International Jurisdiction to pass Worldwide Injunctions.
5. Reaching Out to Social Media Platforms seeking Redressal of the Grievance & Removal of the Defamatory and Derogatory Content: Under the operative Indian law, the person who made derogatory statement as well as its distributor and publishers can be sued. Apart from the author of such statement, intermediaries concerned, the website holder, the internet service providers, as well as the other users of such platforms on whose profiles defamatory statements have been written by the author, can be sued in their capacity as a publisher of defamatory statements and can be held liable for such statements. It is to be noted that such intermediaries or other users may not be aware of such defamatory statements by the author on their own virtual profile. Other than all this, the aggrieved person can reach out directly to these platforms requesting them to remove such derogatory posts.

 

In an increasingly mobile and globalized world where companies must move personnel quickly and efficiently between jurisdictions, it is critical to have a fundamental understanding of the impact of national laws on international operations. India presents its own challenges. Along with numerous cultural challenges, those wishing to do business in India need to navigate through a plethora of Indian employment laws, deal with often conflicting immigration rules and processes and understand a complex and often opaque tax system. Running an international business is exciting, but one need to make sure that the business meets all legal requirements. Failure to do this could derail the business. Make sure that one complies with all key legal requirements of running an international business. Successfully completing the contracts based on aforesaid approaches increased our ability to think out of the box and the get the work done in the right manner. Having talked about the challenges of outsourcing, it is crucial to highlight that if these issues are not addressed beforehand they can have a huge impact on one’s business (mostly downwards).
Authored By; Adv. Anant Sharma & Aashita Khandelwal