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Legal & Patents
Friday, December 13, 2019
Infy-Bansal Row Closure Good for Co

Many experts feel the lingering issue is a distraction for the management of company. Infosys’ move to settle alleged offences relating to the severance pay to former chief financial officer Rajiv Bansal will allow the company to remove a distraction and focus more on business, said analysts tracking the company.

On Friday, Infosys said the company and some of its current and past executives had applied to the Registrar of Companies (RoC), seeking to settle the charges through compounding — a provision under the Companies Act that allows businesses to quickly close certain cases by paying a fine.

“It is good to close the matter. Otherwise, this is a distraction for the management,” said Siddharth Pai, who was involved in more than $20 billion of outsourcing contracts as part of an advisory firm.

The charges it wants to settle include the failure to seek prior and separate approvals from the nomination and remuneration committee, audit committee and the board of the company for the severance package, and also not making the requisite disclosures, the filing said. Infosys founder NR Narayana Murthy had raised a red flag in February 2017 over the company’s alleged failure to meet disclosure guidelines. He said the details of the severance package to Bansal had also not immediately been placed before the board.

This and issues concerning the acquisition of Israeli firm Panaya led to a public spat, forcing the then chairman R Seshasayee, chief executive Vishal Sikka and two board members to quit. In February, Infosys paid ₹34 lakh to Sebi to settle the market regulator’s charge that the company had not received approval from its board committees before committing to pay the former executive. Infosys said on Friday it applied for compounding “to put this legacy matter to rest”. (Source: Economic Times)

Govt Flags Risks to Payments Through Social Media Cos

WhatsApp Fallout. Centre reaching out to RBI, NPCI to discuss safety features. The government is approaching the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) over the risks in allowing social media platforms such as whatsApp into the digital payments space in light of the recent hack of the messaging app.

The move comes as the hacking issue is being monitored at the highest levels of government.

“We are reaching out to the NPCI and the RBI to discuss safety features and in case some extra steps need to be undertaken to ensure security of financial data is not breached,” a senior government official told ET.

The recent lawsuit filed in the US against Israeli company NSO and its software Pegasus, said to be responsible for the intrusion, had spread alarm among Indian authorities, he said. Facebookowned WhatsApp has maintained that the platform is secure thanks to end-to-end encryption, the official pointed out.

WhatsApp-MeitY Row Continues

The latest development could mean further delays in the launch of WhatsApp’s payment feature, which is yet to pass the test of compliance with India's financial authorities, experts said.

Facebook chief executive Mark Zuckerberg said recently that the company was optimistic about starting soon. The messaging app, which has about 400 million users in the country, has been testing its payment service in India since last year and will be pitted against the likes of Paytm, Google Pay and Phone Pe in the fast-growing payments space. Meanwhile, the row between WhatsApp and the Indian authorities continued with company insisting it had informed the government of the security breach, along with details. The government said the information submitted had at best been speculative in nature.

“We maintain that WhatsApp didn’t disclose entire information to us. We learnt of it through media reports,” the official said.

The government said WhatsApp did inform CERTIN about the hacking incident, but maintained that the social media app didn’t disclose the names and identities of Indian citizens affected by the breach to the authorities, which it should have. The controversy began with WhatsApp/Facebook filing a lawsuit in the US against the Israeli company NSO on October 29, within days of the Indian Supreme Court allowing the Centre to issue intermediary guidelines in three months.

The guidelines are expected to allow the government to legally bind WhatsApp and any other messaging platform to tracing the source of any message on their platforms. WhatsApp has resisted this, saying it would be impossible without compromising the encryption that supposedly guarantees user privacy. (Source: Economic Times)

Infosys was indulging in “unethical practices” to boost revenues, allege whistleblower

For India’s second largest IT services company, Infosys, whistleblowers just don't seem to be give up. In its latest incident, a whistleblower group, called Ethical Employees, has allegedly complained to the US Securities and Exchange Commission and the Infosys Board that the CEO was indulging in “unethical practices” to boost short-term revenues and profits.

In 2017 and 2018, a previous whistleblower had raised questions over corporate governance issues about Infosys.

The Indian regulator, SEBI had even set up a probe committee to find out whether the allegations were true or not. The whistleblower had questioned the ₹17.4 crore severance package of former CFO Rajiv Bansal and the financial irregularities in Infosys’ $200 million acquisition of Israeli software firm, Panaya.

Following the allegations and several developments later, the then Infosys CEO Vishal Sikka was forced to step down. He was replaced by the current CEO Salil Parekh with the co-founder of the company, Nandan Nilekani taking over as the non-executive chairman.

New allegations

This time, a whistleblower group has come out with a fresh set of allegations. It said it has recordings and mails to show that Infosys was indulging in such practices.

It has alleged that CEO Salil Parekh overlooks reviews and approvals for large deals. The report which first appeared in a financial newspaper, alleged that Parekh directs his key employees to make wrong assumptions to show margins. The group also claims that the CFO is compliant.

It alleges that several billion dollar deals of last few quarters had nil margin, and asked the company to get deal proposals, margins, undisclosed upfront commitments made and revenue recognition checked with the auditors.

Infosys apparently has placed the whistleblower complaint with the audit committee.

This time, the whistleblower’s allegations come with lot more details than the earlier one.

It talks about how the complainants were asked to not fully recognise visa costs in the quarter, and were pressurised to not immediately recognise $50 million in reversals in a contract.

It alleged that the CEO Salil Parekh and CFO Nilanjan Roy were pressuring the finance team to show more profits in their treasury management by taking risks and making changes to policies. (Source: The Hindu Businessline)

BSNL trade unions set to go on lunch-hour protest on October 1

BSNL executive union blames FinMin for delaying revival package. BSNL’s unions and associations have called for a “lunch-hour demonstration” on October 1 to protest against salary delay and non-payment of wages to contract workers. The protest is also against the total ban on capital expenditure, along with other issues related to the revival of BSNL, union officials told BusinessLine.

The unions that are expected to take part in the protest include BSNL Employees’ Union, Sanchar Nigam Executives’ Association (SNEA), All-India BSNL Executives’ Association (AIBSNLEA), and All-India BSNL Officers’ Association, among others.

Unions and associations want the government – the principal employer and owner of the company – to pay salaries in case BSNL is not able to raise the funds. The unions’ demands include allotment of 4G spectrum and land monetisation, payment of salary on due date by BSNL or the Department of Telecommunications (DoT), payment to contract workers, and electricity and rental charges.

The demands also include the implementation of third-pay revision, financial support for loss-making rural exchanges, extention of soft loan to BSNL, among others.

The payment of pension contribution by BSNL, as per the government rule, is also part of the lunch-hour demonstration.

In February, BSNL employees across the country went on a three-day strike (February 18, 19 and 20) demanding allocation of 4G spectrum and government approvals for the loan.

BSNL is staring at another salary delay, with the ailing telecom firm expected to credit employees’ wages for September after a delay of 15-20 days.

This would be the fourth time the company would be missing the due date.

BSNL had paid the August salary after a lag of 18 days, while July wages were footed on August 5 after February salary paid later in March. The employees are expected to move BSNL management, through various unions, seeking early disbursal of salary.

As per company policy, salaries are credited on the last working day of every month. BSNL’s salary expenses come to about ₹750-850 crore, as the firm employs 1,63,902 personnel, of which, 46,597 are executives and 1,17,305 non-executives. (The Hindu BusinessLine)

Cognizant appeals against order upholding ₹2,806-cr I-T demand

The Madras High Court today allowed a writ appeal, in part, filed by Cognizant Technology Solutions against a Single Bench order in June, in a case involving a demand by the Income Tax department to the tune of ₹2,806 crore relating to buyback of shares from its shareholders.

Cognizant’s scheme of purchase was approved by the Madras High Court in April 2016. It bought back the shares and accordingly, it was treated as capital gains and a sum of ₹898.01 crore was withheld as TDS as per the return filed by it.

However, the Deputy Commissioner of Income Tax, Large Tax Payer Unit, issued an impugned order in March 2018 holding that the transactions made in pursuant of the buyback arrangement effected requires to be taxed on the premise that it would constitute dividend and not capital gain. As a consequence, Cognizant’s bank accounts were frozen.

Writ petition
Challenging the order, Cognizant filed a writ petition raising various grounds. In pursuant to the conditional interim order granted, the appellant paid a sum of ₹495 crore out of the payable demand of ₹2,806 crore. Thereafter, the writ petition was dismissed with liberty to the appellant to file an appeal.

Aggrieved over the same, the present writ appeal was filed by Cognizant before a Division bench consisting of Justices MM Sundresh and M Nirmal Kumar.

“As granted by the learned single Judge, we are inclined to grant a period of four weeks to file an appeal before the Appellate Authority. No costs. As and when such an appeal is filed, the same will have to be disposed of within a period of eight weeks thereafter.

Consequently, connected miscellaneous petition is closed. We did not find any error in the order of the single Judge with respect to the deposit made during the pendency of the interim order as erroneous.

It is only an interim arrangement directed to be made pending the appeal. In such a view of the matter, while upholding the direction of the learned single Judge with respect to the deposit and the liberty granted to file an appeal are accordingly upheld, the Bench said in its order. Cognizant’s spokesperson declined to comment saying, “We haven’t received a copy of the order yet.” (Source: The Hindu BusinessLine)

Google to pay out $150-200 mn over YouTube privacy claims

Privacy groups said YouTube had violated laws protecting children’s privacy by gathering data on users under the age of 13. Google will pay USD 150-200 million to settle allegations that YouTube violated a children’s privacy law while gathering data to better target its adverts, US media reports said on Friday.

The US Federal Trade Commission agreed the amount of the settlement against YouTube parent Google, which if approved by the Justice Department would be the largest settlement in a case involving children’s privacy, the New York Timesreported.

The allegations against YouTube were made by privacy groups who said the platform had violated laws protecting children’s privacy by gathering data on users under the age of 13 without obtaining permission from parents, Politico reported. The FTC is expected to announce its decision on the settlement in September, the New York Times said.

US regulators have long argued Google fails to protect children from harmful content and data collection on its YouTube platform. Advocacy group The Center for Digital Democracy said in a statement that the proposed settlement would be “woefully low” given Google’s size and revenue, and called on the FTC to “enjoin Google from committing further violations” of children’s privacy law.

Google remains the money-making engine for parent company Alphabet, with most of its revenue coming from digital ads, which accounted for USD 116 billion of the USD 136 billion the Silicon Valley-based company took in last year.

In January, France’s CNIL data watchdog slapped Google with a record 50-million-euro fine for failing to meet the EU’s tough General Data Protection Regulation (GDPR), which came into force early last year. Google is appealing the fine.

Fellow US tech giant Facebook recently settled a record $5 billion fine with the US Federal Trade Commission for misusing users’ private data. (Source: The Hindu Businessline)

Ecomm may Face a Repackaging Challenge

Cos have to find alternatives to single-use plastic; govt may also make them recycle the waste they generate. Ecommerce companies such as Flipkart, Amazon and BigBasket will have to find alternatives to single-use plastic, as the government is likely to restrict its use for packaging from October 2.

The government is also thinking of ways to make ecommerce companies recycle the waste that they generate. This will, in turn, push these companies to come up with alternative packaging materials quickly.

“They (ecommerce companies) are the ones creating all this waste, so the onus of recycling it has to be put on them as well,” said environment secretary CK Mishra, without confirming whether the government was indeed proposing to ban single-use plastics. “It’s all about reduction of waste, and then, they gradually need to move towards alternative packaging.”

Last Thursday, Walmart-owned Flipkart said it had already reduced use of single-use plastic by 25% and has set a target of using 100% recycled plastic by March 2021.

The homegrown etailer has also filed for an extended producer responsibility (EPR), aiming to collect back 30% of the waste it generates in the first year.

EPR is a policy approach where producers are responsible for treating or disposing waste after the sale of products.

Several other ecommerce companies, including Amazon and Big-Basket, are also trying to reduce the use of single-use plastic. Big-Basket has stopped using them to package products in Bengaluru, which has banned the use of such plastics altogether.

“Creating alternatives for single use plastic packaging is one of the significant steps we have taken towards fulfilling our commitment to create a sustainable ecosystem. Our long-term vision is to eliminate the use of plastic and maximise the use of recycled and renewable materials,” Kalyan Krishnamurthy, group CEO of Flipkart, said in a statement last week.

Mishra said the ecommerce firms will need to create awareness among consumers, set up mechanisms for waste collection and ensure proper recycling, to hit their ambitious targets. (Source: Economic Times)

Indian Telecom Cos may Leave Huawei Out of Core 5G Network

Airtel, Vodafone Idea, Jio to play safe amid uncertainty over Chinese MNC’s future Bharti Airtel, Vodafone Idea and Reliance Jio Infocomm are considering giving a pass to Huawei in ‘core’ elements of their 5G networks in favour of other companies to try and hedge risks against any future ban on Chinese equipment manufacturers in India.

Bharti Airtel and Vodafone Idea use Huawei and ZTE equipment for their 2G, 3G and 4G networks in certain service areas. Jio, which works with Samsung for its pan-India 4G network, is widely expected to go with the South Korean company even for 5G.

“Given how there are global security concerns regarding Huawei’s equipment, nobody wants to get caught in the crossfire. It’s better to be safe and deploy Huawei in the non-core part of the 5G network,” a senior executive at one of the telcos told ET.

A senior executive at another telco echoed the views.

“We don’t want to be caught in a situation where we have deployed Huawei and then a ban comes. It would be such a big gamble to do so and already, given the stress in the sector, looks like nobody is going to take that risk,” the executive said.

Both executives said the situation was dynamic and nothing had been finalised as yet. They added that Airtel and Vodafone Idea would need to consider that eliminating Huawei and ZTE from a major part of the 5G contract could raise the cost of deployment because their options would then be European vendors Nokia and Ericsson.

“We are working with all our strategic network partners,” an Airtel spokesperson said in response to ET’s detailed queries. The telco didn’t elaborate on its 5G deployment plans.

Vodafone Idea and Jio didn’t respond to ET’s queries.

This template has already been adopted by some mobile phone companies in the UK, including Vodafone Group Plc. They use Huawei mainly for radio systems, the non-core part of the network, or broadly put, the hardware portion of the network — a measure that some say reduces security threats, if any. Vodafone has already gone live with its 5G network in the UK. (Source: Economic Times)

Oz Rules may Force Big Tech to Show Code

Facebook and Google could be compelled to reveal the workings of the closelyguarded algorithms under a new push for tech regulation by Australia.

Regulators set their sights on the tech giants when they published the results of an 18-month investigation into the impact of platforms on economy. The proposals by the Australian regulator would constitute one of the toughest enforcement regimes in the world. (Source: Economic Times)

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