THE START-UP ECOSYSTEM & THE IMPORTANCE OF LEGAL HELP

INTRODUCTION

 

Start-ups are nowadays being looked at as catalysts to an economy’s development, as they not only help in augmenting the overall GDP of the country but also address ancillary issues like creating job opportunities and fostering trade1. Therefore a start-up’s long term functioning is effective not only for the immediate players concerned but for the nation’s health too.

India is the fourth largest start-up ecosystem in the world, right behind USA and China, with unicorns like Paytm, OYO Rooms and BYJU’s in the lead according to Hurun Global Unicorn List 2020.2 Caring for this particular eco-system’s health thus becomes principal.

Venturing into the start-up business is like opening a Pandora’s box in a lot of ways. Even though the Government has come up with various schemes like Start Up India Seed Fund (2021), e-biz portal, SIP-EIT, Start Up India Initiative (2016) etc, it is at the ‘awareness’ front where things start to lack. Reports have shown that although approximately 90% start-ups in India are aware of Start-up India initiative of the Indian government, only 35% of them have been able to register under this and merely 20% start-ups are aware of specific benefits, schemes, tax exemptions and facilities provided by the government with more than 52% not having a firm IP Policy3.

 

There is a long compliance list which includes:

 

  • CHOOSING THE APPROPRIATE LEGAL STRUCTURE OF THE BUSINESS

This includes registration choices like Private Ltd Company, Ltd Liability Partnership, One Person Company, Partnership Firm, Sole proprietorship, Nidhi Company etc where each comes with its own benefits and duties. Identifying the correct start-up type can have substantial impact on the funding options for the company, its tax responsibilities, personal liability of the owner and can help save taxes as well as protect the personal assets in times of crisis. Taking legal advice can benefit the venture in the long run.

 

  • SETTING UP A CONTRACT DEED AND SIGNING OF OTHER DOCUMENTS LIKE NDA, PRIVACY POLICY ETC

Contract drafting is the basis of all economic ventures as it formalises the agreement between parties and helps in preventing any misunderstandings about key terms. Having a good legal team draft a contract helps in covering up all the possibilities which may arise in the future with the incorporation of ‘clauses’ which provide for minimal loss/liability and maximum protection/gain against the ruthless ecosystem. Contracts types generally range from employee contract, vendor contract, confidentiality agreements (NDA’s), Founders Agreement, website terms & conditions, privacy policy etc. Deeds drafted by an experienced legal team brings about clarity and prevents misinterpretation of communication and agreements.

 

  • COMPLIANCE WITH THE APPROPRIATE TAXATION, LABOUR AND INTELLECTUAL PROPERTY (IP) LAWS

Having expert legal guidance since the very inception of the Start-up is worthwhile as it will take into account the goals, strategies, and limitations of a Start-up and help in creating a customised IP Strategy accordingly as ‘no size fits all’ in this ecosystem.4. IP is the largest asset class and has great capability of being commercially exploited which in turn calls for stringent protection. IP Rights are granted under Trademarks, Copyrights, Patents and Industrial Designs generally. These provide precautionary protection to different assets and are fairly different yet similar in a lot of ways. A well-versed IP legal team can help in identification, registration and drafting of IP related asset policy. For example, legal experience dictates that getting a copyright protection is easier than getting an asset ‘patented’ owing to less complex registration mechanism and cost benefit to a start-up. Another example includes signing of NDA when meeting with potential investors and discussing an ‘invention’ which in turn protects it from misuse by third parties. Lastly, a well-researched and strategized IP policy can prevent accidental infringement and lessen the blow of liability.

With regards to labour laws, start-ups registered under the Start-up India initiative have to keep up with as many as nine labour law legislations within the very first year of its incorporation to get certain exemptions! These include The Industrial Disputes Act, 1947, The Trade Unit Act, 1926, The Industrial Employment (Standing Orders) Act, 1946 and The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 and many more. These exemptions have to be renewed annually by filing returns. A legal team can help in due compliance with the least amount of hassle.

Compliance factors heavily differ for taxation purposes of a start-up. For example any business whose turnover exceeds Rs. 40 lakhs in a financial year is required to register under GST and this limit is Rs 20 lakh for service providers5. The optional scheme provides for a lower amount of tax with minimum compliance for certain businesses having turnover up to Rs 1.5 crore in a year with monthly returns, annual returns being part of mandatory compliances under GST and GST audit for certain suppliers6. Legal intervention in the field of tax laws can only do benefit.

 

CONCLUSION

 

Thus, it’s clear that a start-up has to face lot of legal and administrative challenges both before and after its incorporation. A successful start-up is a venture which has several mechanisms in place for dealing with any problems which may arise out of the blue. A good legal team can help out by making sure that all legal and governmental compliances are adhered to, ultimately satisfying investor and customer credence. If you’re looking for starting your own start-up venture contact Dastaweez today! We are here to help.

 

REFERENCES

  1. Mishra, M. and Benjamin, A., 2019. The Viewpoint – A Stitch in Time saves Nine: Steps to Protect Intellectual Property of
    Start-Ups. [online] Bar & Bench. Available at:
    <https://www.barandbench.com/view-point/steps-to-protect-intellectual-property-of-start-ups> [Accessed 5 May 2021].
  2. Hurun India. 2020. HURUN INDIA UNICORN INDEX 2020. [online] Available at:
    <https://www.hurunindia.net/post/hurun-global-unicorn-list-2020-india> [Accessed 5 May 2021].
  3. Sodhi, G., Jain, A. and Singh, R., 2019. Linkages Between IP Protection and Start Ups in India. Technology Start-ups and IP
    Protection in India. [online] CUTS Institute for Regulation and Competition. Available at:
    <http://compip.circ.in/wp-content/uploads/2019/12/Technology-Startups-and-IP-Protection-in-India.pdf> [Accessed 5 May 2021].
  4. See Mishra & Benjamin, supra, at 1
  5. Jaiswal, A., 2021. Legal Compliances for Start-Ups in India. [online] TaxGuru. Available at:
    <https://taxguru.in/corporate-law/legal-compliances-start-ups-india.html> [Accessed 5 May 2021].
  6. Id.
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MOBIKWIK DATA BREACH

 MOBIKWIK DATA BREACH: A CALL FOR STRICTER ENFORCEMENT OF DATA PROTECTION LAWS

 

 

INTRODUCTION AND BACKGROUND

 

In what is said to be the biggest data breach in Indian History, data of 10 Crore Indian users of the Gurugram based Fin-Tech Mobile App, Mobikwik has been leaked. This data is said to include the personal details of users such as credit card numbers, passwords, names, email-IDs, phone numbers and other private sensitive data[1]. This data leak has been brought to light by several researchers, mainly Mr. Rajashekar Rajaharia and confirmed by a French based security researcher named Elliot Anderson, who claimed it to be the largest KYC data leak in history.[2] However, Mobikwik denied all such allegations of data breach. This database, amounting to 8.2 TB and consisting of sensitive personal information is said to have been stolen by a hacker who goes by the username ninja_storm and leaked on Dark Web Forums, which he was willing to sell at a price of 1.5 Bitcoin or 65 Lakh rupees[3]. He even provided proof by posting some of the data on his website. Mobikiwk again denied all these allegations of data leak in the dark web and said that considering the seriousness of the allegations they would conduct a forensic data security audit by a third party. Upon several requests he had deleted some accounts from the database, and agreed to delete all the data is Mobikwik publicly agreed that there had been a data breach[4]. RBI has however ordered Mobikwik to have a forensic audit done of their software and database.

 

WHAT MOBIKWIK HAS TO SAY

 

Mobikwik in a statement released by it on it’s twitter page said that, the allegations of data breach are false and concocted[5] and this data can be stored by different applications used by the customer and does not necessarily indicate it to be of Mobikwik[6]. Further, Mobikwik has said that considering the seriousness of allegations and to take abundant caution, it would get a third party to conduct a security audit. They have also stated that they are cooperating with the authorities, in relation to this alleged data breach[7].

 

WHAT RAJASHEKAR RAJAHARIA AND OTHER RESEARCHERS HAVE TO SAY

 

Mr. Rajesh states that he had informed Mobikwik about the alleged data breach when it initially came to light in January itself, but the company had rejected his claims and said they would take strict legal action against Mr. Rajashekar. According to him, as a user it is his right to know if his financial data was safe. He said that government authorities should thoroughly investigate the data leak immediately as it has wider ramifications that can potentially lead to several financial frauds. Full 16 digit card numbers might be unmasked because their encryption algorithm is public now.[8]

 

WHAT THE LAW STATES

 

In India the Information Technology Act, 2000 is the primary legislation governing information technology and data protection. Every person and company are protected and are obliged to follow these laws.

Mobikwik can be sued under Section 43A of the IT Act, 2000[9]. It provides for payment of damages to an aggrieved person by a company or body incorporated for negligence in maintaining due security procedures. Further, if the alleged data leak is true, Mobikwik ought to have released a statement regarding it, so that the users could have blocked their bank accounts.

Further, under Regulation 4 of the IT Rules, 2011[10], MobiKwik is required to provide every registered user of MobiKwik with a readable copy of the information that it keeps about the user.

 

LATEST DEVELOPMENTS AHEAD

 

The hacker has said that he has deleted all the data on humanitarian grounds and that the users were safe. RBI has however ordered them to conduct a forensic security audit.

 

THE ROAD AHEAD AND STRICTER PRIVACY POLICIES FOR COMPANIES

 

This is not the first ever security breach to have taken place. Previously popular apps like Big Basket and Unacademy were subjected to such a breach as well. Since the alleged leaked data comprises a lot of extremely sensitive data of each user, it is a potential threat to other banks and applications as well. It is important that these companies update their privacy policies and the users also have a proper understanding of the same. These privacy policies provide for all the information stored by the application and the extent of their liability, in case of a data breach and the safety mechanisms taken by the company to protect data. It is extremely important for the users to read these policies as these applications, at the end of the day monetize your personal data. It reveals how a company collects and processes your data and what it uses it for and can be cited by a user in the court in case of any breach of privacy. Alternatively, Mobikwik users can also check if their accounts were leaked by using an open website called Tor Browser.

 

REFERENCES

 

[1]Anonymous, Data of 10 crore Mobikwik users for sale on dark web, say cybersecurity experts, THE ECONOMIC TIMES (April 1st, 2021, 5:30 pm) https://economictimes.indiatimes.com/tech/startups/mobikwik-data-breach-personal-data-of-over-10-crore-users-allegedly-available-on sale/articleshow/81756544.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[2]Manas Tiwari, Mobikwik user data has leaked, here is what happened and this is what you should do next, INDIA TODAY (April 1st, 2021, 5:30 pm) https://www.indiatoday.in/technology/features/story/mobikwik-user-data-has-leaked-here-is-what-happened-and-this-is-what-you-should-do-next-1785435-2021-03-31

[3] Anonymous, MobiKwik data leak: What we know so far , CNBC TV (April 1st, 2021, 5:30 pm) https://www.cnbctv18.com/business/mobikwik-data-leak-what-we-know-so-far-8786251.htm

[4] Debasish Sarkar, A Hacker, 10 Crore Mobikwik Users, over 1 month: Timeline of the Largest KYC Data Breach, GADGETS NOW, (April 1st, 2021, 5:30 pm)  https://www.gadgetsnow.com/tech-news/a-hacker-10-crore-mobikwik-users-over-1-month-timeline-of-the-largest-kyc-data-breach/articleshow/81811357.cms

[5]https://twitter.com/MobiKwik/status/1367489330902675463?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1367489330902675463%7Ctwgr%5E%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.gadgetsnow.com%2Ftech-news%2Fa-hacker-10-crore-mobikwik-users-over-1-month-timeline-of-the-largest-kyc-data-breach%2Farticleshow%2F81811357.cms

[6] https://blog.mobikwik.com/message-from-the-company/

[7] https://twitter.com/BipinSingh/status/1376833273586941952

[8] Anonymous, Hackers allegedly leak data of 9.9 crore Mobikwik users in India, company rejects claim, FIRST POST, (April 1st, 2021, 5:30 pm)

https://www.firstpost.com/india/hackers-leak-data-of-9-9cr-indians-allegedly-from-mobikwik-database-company-rejects-claim-9481311.html

[9] § 43A, Information Technology  Act, 2000

[10] Regulation 4, Information Technology (Reasonable Security and Procedures and Sensitive Personal Data or Information) Rules, 2011

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GROWTH OF GAMING START – UPS IN INDIA

 

GROWTH OF GAMING START – UPS IN INDIA : A BILLION DOLLAR INDUSTRY

Introduction 

Recently it was reported[1] The parent company of popular game PUB-G that is South Korea based Krafton Inc. plans to invest about 100 million USD in India in order to cultivate local Indian games, e-sports, entertainment and Information Technology (“IT”) industries. PUBG was banned in India in September of 2020.[2] However, due to the huge potential in Indian gaming market, Krafton had in November of 2020 stated that it would make a new game called PUBG Mobile India so as to circumvent the ban. This would be operated by PUBG Mobile India taking out Chinese Tencent Games from the picture. The main crux now is that as of March 2021, it is looking for an investment strategy analyst in India to help with Mergers & Acquisitions (“M&As”) and other investment opportunities in India.

The Industry & its scope in India

There are a large number of opportunities which these gaming start-ups can provide to Indian economy. PUBG India for example is planning to hire more than 100 employees in the country and establish a local office. Not only would it provide employment opportunities but also contribute to corporate tax. Clearly this is a massive benefit to India and PUBG is not alone. As per the data till November 2020,[3] gaming start-ups add up to about a 1.2 billion USD industry. These range from fantasy games to ludos. In the global mobile gaming market, that puts India in the 6th position in the world. The most downloaded game in India is Ludo King developed by a Mumbai start-up called Gametion Technologies.

Evolution of the gaming industry

The first mobile game in India was Snake on Nokia mobiles in the 1990s which was however preceded by personal computer and console gaming systems. The latter started investing in India from mid 1990s and after the launch of Apple App Store in 2008 the entire market for mobile gaming changed forever and was followed by the launch of Android version called Google Play Store. These generate money not only by offer of paid games but also in-game purchases for various benefits. In India especially, fantasy sports or skill based game skill poker and rummy have taken off greatly.

India versus the world                                                                                        

In the global gaming industry, China comes out to be at the top followed by the USA, Japan, South Korea, United Kingdom and finally India. As of now India has 326 million games and 3% of the total pool of game publishers. With the growth of the internet this is only going to increase. Expectations are that the industry could hit 1.6 billion USD by 2025. Best part is that this growth is led by Indian start-ups like Gametion Technologies, Junglee Games, Dream 11, 99 Games etc.

Top 10 Gaming Start-ups in India as of now[4]

  1. First is Nazara Technologies founded in 1999 by Mr. Nitish Mittersain based in Mumbai and operating in 64 countries. It deals in sports based games and games for kids based on cartoon characters among others. It has raised 64.3 million USD and is planning to go public.
  2. Second, is the more recent Paytm First games launched in 2018 as a joint venture between Alibaba and Paytm. It deals in 300+ games across genres and has raised 20 million USD within 2 years.
  3. Third, is Moonfrog Labs founded by a group of 4 in 2013 and is based out of Bangalore. Its most popular game is Teen Patti gold and has till date raised 16 million USD from the likes of Sequoia Capital.
  4. Fourth we have Zapak owned by Reliance Group which deals primarily with online games for kids and has raised 15 million USD.
  5. Fifth we have 99Games founded in 2008 and dealing mainly with movie based games.
  6. Sixth, there is JetSynthesys founded in 2014. It focuses primarily on celebrity based games and leads in Virtual Reality (VR) gaming.
  7. Next we have Mech Mocha founded in 2015. It is a vernacular social gaming platform and allows users to interact with video and voice chat. It has raised about 10 million USD.
  8. Then we have PlaySimple Games founded in 2014 which offers simple games to play with family and friends and has raised about 4.6 million USD.

[1]Reuters, PUBG parent Krafton looking for new investment strategy analyst in India, Live Mint (Mar. 24 7:00 PM) https://www.livemint.com/technology/tech-news/pubg-parent-krafton-looking-for-new-investment-strategy-analyst-in-india-11616325544902.html.

[2] Ankita Chakravarti, PUBG banned in India: here is what you can play now, India Today (Mar. 24 7:00 PM) https://www.indiatoday.in/technology/features/story/pubg-banned-in-india-here-is-what-you-can-play-now-1717975-2020-09-03.

[3] Vaishnavi Dayalani, India mobile gaming startups tapping the 1.3 bn market opportunity, INC 42 (Mar. 24 7:00 PM) https://inc42.com/datalab/india-mobile-gaming-startups-tapping-the-1-2-bn-market-opportunity/.

[4] Varun, Top 10 mobile gaming startups in India, Indian Wire (Mar. 24 7:00 PM) https://www.theindianwire.com/startups/top-10-mobile-gaming-startups-india-273272/.

[1] Varun, Top 10 mobile gaming startups in India, Indian Wire (Mar. 24 7:00 PM) https://www.theindianwire.com/startups/top-10-mobile-gaming-startups-india-273272/.

  1. Ninth, we have Hashcube which is a cross-platform gaming platform founded in 2008 and is largely dependent on online Sudoku for its success. It has raised about 684.2K USD.
  2. Tenth, there is Rolocule founded in 2010 and specializes in motion gesture games like motion tennis etc. It has raised about 589.7K USD.

 

Conclusion

It is clear that most of the gaming start-ups in India are recent and of domestic origin. The fact that this billion dollar industry could easily be a multi-billion dollar one in the coming future is not hidden from anyone. In fact recent ban of Chinese games provides a further opportunity for Indian start-ups in this industry.[1] As is seen above, they have easily raised millions of dollars from foreign investors and many of them are planning to go public. It is a perfect sector for start-ups to break into. If you are looking to start your own gaming start-up contact Dastawezz today for formalities like company registration, drafting of the user-service agreement, disclaimer policy etc!!

[1] Vaishnavi Dayalani, Can Indian gaming startups leapfrog Chinese rivals after the ban,  INC 42 ( (Mar. 24 7:00 PM) https://inc42.com/datalab/can-indias-gaming-startups-leapfrog-chinese-rivals-after-the-ban/.

[1] Vaishnavi Dayalani, Can Indian gaming startups leapfrog Chinese rivals after the ban,  INC 42 ( (Mar. 24 7:00 PM) https://inc42.com/datalab/can-indias-gaming-startups-leapfrog-chinese-rivals-after-the-ban/.

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ZOMATO DELIVERY DISPUTE: ANALYZING THE LEGAL ISSUES

Introduction & background 

On 9th of March, 2021 one Hitesha Chandranee of Bangalore claimed that when she complained of her food delivery from Zomato getting delayed, she was assaulted by the delivery person (more particularly punched on the face).[1] The woman has posted a video of her bleeding nose online. While the woman herself was first booked by the police for assaulting the delivery guy. However, a day later the delivery boy – one Kamaraj was arrested and Zomato suspended him as per procedure. According to the delivery boy, the women assaulted him first and so he filed a complaint with the police following which a FIR was registered against the women.

 

What the female customer has to say

As per the woman, she filed a complaint with Zomato customer care asking them to either deliver the food for free or cancel the order. According to her while she was on the call, the delivery person just did this assault.

 

What the delivery boy has to say

                                                                                                            

According to the police, the delivery boy has stated that the woman hit him with slippers, accused him of defaming her and hurled abuses at him. He just held her hand to stop this attack. The girl has now deleted her video from twitter that went viral leading to disruption on social media against Zomato. The boy has further claimed that he never entered her house and she herself accidently injured herself.[2]

 

What Zomato has to say

[1] Anonymous, Bengaluru assault case FIR against women for assaulting Zomato delivery man, Financial Express, (Mar. 15, 2021, 5:00 PM) https://www.financialexpress.com/india-news/bengaluru-assault-case-fir-against-woman-for-assaulting-zomato-delivery-man/2213548/.

[2] Salman SH, Zomato delivery man arrested in Bengaluru, Inc42, (Mar. 15, 2021, 5:00 PM) https://inc42.com/buzz/zomato-delivery-partner-arrested-in-bengaluru/.

[1] Anonymous, Bengaluru assault case FIR against women for assaulting Zomato delivery man, Financial Express, (Mar. 15, 2021, 5:00 PM) https://www.financialexpress.com/india-news/bengaluru-assault-case-fir-against-woman-for-assaulting-zomato-delivery-man/2213548/.

[1] Salman SH, Zomato delivery man arrested in Bengaluru, Inc42, (Mar. 15, 2021, 5:00 PM) https://inc42.com/buzz/zomato-delivery-partner-arrested-in-bengaluru/.

While Zomato has made it clear that it would help the women with the police and assistance along with assistance on medical care, it is also assisting the delivery boy with legal support. The founder of Zomato posted a statement on Twitter that as per the company’s protocol they have temporarily suspended Kamaraj from delivering any food but are still supporting him with legal expenses etc.

 

Legal issues involved in the case

The charges against the women are section 355 (assault), 504 (insult) and 506 (criminal intimidation) of the Indian Penal Code at Bengaluru’s Electronic City Police Station.[1] While the delivery boy has been arrested, there are no details of exact charges levelled against him.

Let’s take a look at these charges:

  1. Assault under section 355 Indian Penal Code (“IPC”)[2]

Using criminal force to a person with intent to cause dishonor without a sudden/grave provocation from the person so attacked can be punished for 2 years along with fine if he/she is found guilty of offence of assault under this section. However, this offence is bailable and requires a warrant for arrest. Moreover, it can be compounded under section 320 of Code of Criminal Procedure.[3]

  1. Insult under section 504 of IPC[4]

Under this provision if a person insults, gives provocation to a person and knowing likely that it will cause to break public peace, then the person can be imprisoned for 2 years along with fine. The offence however is bailable and compoundable and would require a warrant to arrest.

  1. Criminal Intimidation under section 506 of IPC[5]

If someone causes a threat of death or grievous hurt he/she can be punished for 2 years of imprisonment and fine. However, this offence is bailable, compoundable and would require warrant for arrest.

 

 

Latest Developments

[1] Anonymous, Zomato controversy FIR registered against Hotesha Chandranee Kamaraj, OpIndia, (Mar. 15, 2021, 5:00 PM) https://www.opindia.com/2021/03/zomato-controversy-fir-registered-against-hitesha-chandranee-kamaraj-bengaluru/.

[2] Indian Penal Code, 1860, § 355, No. 45, Acts of Parliament, 1860 (India).

[3] Code of Criminal Procedure, 1973, § 320, No. 2, Acts of Parliament, 1974 (India).

[4] Indian Penal Code, 1860, § 504, No. 45, Acts of Parliament, 1860 (India).

[5] Indian Penal Code, 1860, § 506, No. 45, Acts of Parliament, 1860 (India).

[1] Anonymous, Zomato controversy FIR registered against Hotesha Chandranee Kamaraj, OpIndia, (Mar. 15, 2021, 5:00 PM) https://www.opindia.com/2021/03/zomato-controversy-fir-registered-against-hitesha-chandranee-kamaraj-bengaluru/.

[1] Indian Penal Code, 1860, § 355, No. 45, Acts of Parliament, 1860 (India).

[1] Code of Criminal Procedure, 1973, § 320, No. 2, Acts of Parliament, 1974 (India).

[1] Indian Penal Code, 1860, § 504, No. 45, Acts of Parliament, 1860 (India).

[1] Indian Penal Code, 1860, § 506, No. 45, Acts of Parliament, 1860 (India).

As per the most recent reports, the woman has fled Bengaluru.[1] If this is true then she might be booked for false criminal complaint and not complying with the police investigation.

 

Conclusion

Since the investigation is currently going on, it won’t be appropriate to comment on the outcome since no one is sure of the facts and there are a lot of discrepancies in the factual matrix of various reports. Perhaps apps like Zomato should include clauses to fix liability on customers for misbehaving with the delivery people in the terms and conditions of service

[1] Manju Shettar, Zomato row after delivery boy Kamaraj filed FIR: Hitesha Chandranee flees Bengaluru, New Indian Express, (Mar. 15, 2021, 5:00 PM) https://www.newindianexpress.com/states/karnataka/2021/mar/17/zomato-row-after-deliveryboy-kamaraj-files-fir-hitesha-chandranee-flees-bengaluru-2277547.html.

[1] Manju Shettar, Zomato row after delivery boy Kamaraj filed FIR: Hitesha Chandranee flees Bengaluru, New Indian Express, (Mar. 15, 2021, 5:00 PM) https://www.newindianexpress.com/states/karnataka/2021/mar/17/zomato-row-after-deliveryboy-kamaraj-files-fir-hitesha-chandranee-flees-bengaluru-2277547.html.

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IS GOOGLE COLLECTING DATA OF MINORS UNLAWFULLY?

INTRODUCTION

The Campaign for a Commercial-Free Childhood (CCFC) and the Center for Digital Democracy (CDD) cited reports from three separate research groups that concluded Google Play Store apps aimed at children quietly transmitted data about individual users to other companies. These advocacy groups on Wednesday called on the US Federal Trade Commission (FTC) to investigate whether apps that Google’s Play Store labels as Teacher approved are unlawfully collecting personal data without parental consent to target ads at children.[1]

WHAT THE ADVOCACY GROUPS HAVE TO SAY

The Campaign for a Commercial-Free Childhood (CCFC) and the Center for Digital Democracy (CDD), which have helped spur FTC action before, cited among other evidence reports from three separate research groups since last June that concluded Play Store apps aimed at children quietly transmitted data about individual users to other companies.[2]

WHAT GOOGLE HAS TO SAY

Google said in response to Wednesday’s complaint that its app store is “committed to providing a positive and safe environment for children and families” and that it “will continue to make the protection of children on our platform a priority”.

THE GENERAL DATA PROTECTION REGULATION (GDPR)

The GDPR[3] protects the data of all Europeans by making demands that all sites that accept visitors/customers from European citizens/residents publish and follow a transparent Privacy Policy. We covered the full GDPR requirements in-depth elsewhere. What’s important here is what the GDPR says about data subjects who are also minors under 18.

[1] Anonymous, Google’s ‘Teacher approved’ apps mislead on kids’ privacy: Activists tell FTC, HINDUSTAN TIMES, (April 2nd , 2021 , 10:30 am) https://tech.hindustantimes.com/tech/news/googles-teacher-approved-apps-mislead-on-kids-privacy-activists-tell-ftc-71617282337953.html

[2] Paresh Dave, Google’s ‘Teacher approved’ apps mislead on kids’ privacy, activists tell FTC, THOMSON REUTERS, (April 2nd, 2021, 10:30 am) https://www.reuters.com/article/us-alphabet-google-privacy/googles-teacher-approved-apps-mislead-on-kids-privacy-activists-tell-ftc-idUSKBN2BN0DY

[3] General Data Protection Regulations, European Union, 2016

Anonymous, Google’s ‘Teacher approved’ apps mislead on kids’ privacy: Activists tell FTC, HINDUSTAN TIMES, (April 2nd , 2021 , 10:30 am) https://tech.hindustantimes.com/tech/news/googles-teacher-approved-apps-mislead-on-kids-privacy-activists-tell-ftc-71617282337953.html

[1] Paresh Dave, Google’s ‘Teacher approved’ apps mislead on kids’ privacy, activists tell FTC, THOMSON REUTERS, (April 2nd, 2021, 10:30 am) https://www.reuters.com/article/us-alphabet-google-privacy/googles-teacher-approved-apps-mislead-on-kids-privacy-activists-tell-ftc-idUSKBN2BN0DY

[1] General Data Protection Regulations, European Union, 2016

 

The GDPR sets a general age of consent at 16, which means you can’t legally process the data of a data subject 15 years-old or younger.

THE CHILDREN’S ONLINE PRIVACY PROTECTION ACT (COPPA)

COPPA[1] differs from the GDPR in two critical ways: It only impacts children in the U.S. and it only protects the privacy of children under 13 years old.

MINOR DATA PROTECTION LAWS IN INDIA

Rule 4 of the IT Rules[2] requires body corporate to put up privacy policies for collection and disclosure of personal information. As of now, there is no legislation covering children’s data privacy online, but the Personal Data Protection Bill[3] may turn the tables around.

Chapter IV of the PDP Bill deals with the personal data and sensitive personal data of children.  It provides for a broad requirement that data fiduciaries must process personal data of children in a manner that protects the child’s rights, and is in the best interests of the child[4].

The PDP Bill considers any person below the age of 18 a child, at par with Indian laws on the age of majority, which require a person to be 18 years of age to enter contracts, vote etc. In this context, one of the areas of focus in the PDP Bill’s discussion is on children and children’s rights in the context of personal information is the issue of consent, that is, a contract between the application owner and the person providing the consent, which is based on trust and is a fiduciary relationship.

WHAT HAPPENS WHEN CHILDREN WANT TO ACCESS ONLINE SERVICES

The app must first verify or confirm the age of the child, to ensure that the consent has been obtained from the parent or the guardian. The PDP Bill, however does not explain in the process in which it must be done, except for saying that the government would provide

[1] The  Children’s Online Privacy Protection Act, United States Federal Law, 1998

[2] Regulation 4, Information Technology (Reasonable Security and Procedures and Sensitive Personal Data or Information) Rules, 2011

[3] The Personal Data Protection Bill, 2019

 

[4] § 16(1) , The Personal Data Protection Bill, 2019

[1] The  Children’s Online Privacy Protection Act, United States Federal Law, 1998

[1] Regulation 4, Information Technology (Reasonable Security and Procedures and Sensitive Personal Data or Information) Rules, 2011

[1] The Personal Data Protection Bill, 2019

[1] § 16(1) , The Personal Data Protection Bill, 2019

 

regulations on how the age verification would be undertaken.[1] In prescribing these age verification mechanisms, a number of criteria will be taken into consideration:

  • The volume of personal data processed, how much of that personal data is likely to be that of a child
  • Whether it is possible that there will be any harm to the child from the processing of such personal data.
  • Regulations will also classify data fiduciaries that operate commercial websites or online services directed at children, or process large volumes of personal data of children, to be ‘guardian data fiduciaries’.

THE ROAD AHEAD AND WHY APPS MUST CONSIDER MINORS DATA PROTECTION IN THEIR PRIVACY POLICIES

In the future, which is extremely technology driven, most of the education is said to be online. Especially considering the boom in the Ed-Tech sector, where the primary consumers are minors, government make stricter policies in this regard and application companies also take proper cautions and measures to prohibit data breaches, especially since this data would be of minors. Not having, proper privacy policies in place would in fact prove to be counter-productive to the company itself. Showing customers that their privacy is being considered seriously would only, add to the applications achievements. In this age of technology, the consumers can not be easily fooled, especially after people have been reading about the data breaches of different applications and the controversies surrounding Whatsapp and Facebook.

 

[1] Smitha Krishna Prasad, Personal Data Protection Bill, 2019: Protecting Children’s Data Online, MEDIANAMA, (April 2nd , 2021 , 10:30 am) https://www.medianama.com/2020/01/223-pdp-bill-2019-children-protection/

[1] Smitha Krishna Prasad, Personal Data Protection Bill, 2019: Protecting Children’s Data Online, MEDIANAMA, (April 2nd , 2021 , 10:30 am) https://www.medianama.com/2020/01/223-pdp-bill-2019-children-protection/

 

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Ratan Tata vs Cyrus Mistry

Legal Battle between Ratan Tata and Cyrus Mistry

The Supreme Court on 26th of March 2021, approved the decision by Tata Sons Ltd to remove Cyrus Pallonji Mistry as its Executive Chairman and Director in 2016 and also overturned the National Company Law Appellate Tribunal (NCLAT) order that quashed the conversion of Tata Sons into a private company from a public company. The 3-judge bench of SA Bobde, CJ and AS Bopanna and V. Ramasubramanian, JJ has upheld the removal of Cyrus Mistry as Chairman by the Tata Sons and has also answered all questions in favour of Tata Sons. The Court said that NCLAT has, by reinstating Mistry without any pleading or prayer, “has forced upon the appellant an Executive Chairman, who now is unable to support his own reinstatement.”
The Court said,
“The relief of reinstatement granted by the Tribunal, was too big a pill even for the complainant companies, and perhaps Cyrus Mistry, to swallow.”
The dispute
From 25.06.1980 to 15.12.2004 Shri Pallonji S. Mistry, the father of Cyrus Pallonji Mistry was a Non-Executive Director on the Board of Tata Sons. On 10.08.2006 Cyrus Mistry was appointed as a Non¬Executive Director on the Board and by a Resolution of the Board of Directors of Tata Sons dated 16.03.2012, Mistry was appointed as Executive Deputy

Tata Consultancy Services v. Cyrus Investments Pvt. Ltd. & Ors. ; Civil Appeal NOs. 440-441 of 2020.
Tribunal ruling is Overturned, SC backs Tata decision to sack Cyrus Mistry. (2021, March 26). Retrieved March 30, 2021, from https://indianexpress.com/article/india/ratan-tata-cyrus-mistry-supreme-court-7247192/

Chairman for a period of five years from 01.04.2012 to 31.03.2017, subject however to the approval of the shareholders at a General Meeting.
He was then designated as the Executive Chairman with effect from 29.12.2012, even while designating Ratan Tata as Chairman Emeritus. On 24.10.2016, the Board of Directors of Tata Sons replaced Mistry with Ratan Tata as the interim Non-Executive Chairman. Mistry was replaced only from the post of Executive Chairman and it was left to his choice to continue or not, as Non¬Executive Director of Tata Sons.As a follow up, certain things happened and by separate Resolutions passed at the meetings of the shareholders of Tata Industries Limited, Tata Consultancy Service Ltd. and Tata Teleservices Ltd., Mistry was removed from Directorship of those companies.
Mistry then resigned from the Directorship of a few other operating companies such as the Indian Hotels Company Limited, Tata Steel Limited, Tata Motors Limited, Tata Chemicals Limited and Tata Power Company Limited, after coming to know of the impending resolutions to remove him from Directorship.
Thereafter, 2 companies by name, Cyrus Investments Private Limited and Sterling Investment Corporation Private Limited, in which CPM holds a controlling interest, filed a company petition before the National Company Law Tribunal under Sections 241 and 242 read with 244 of the Companies Act, 2013, on the grounds of unfair prejudice, oppression and mismanagement.

Relevant Provisions under the Companies Act 2013

 

 

 

Section 241 of the Act provides that any member of a company can make an application for seeking relief to the NCLT in case of oppression and mismanagement. Section 244 prescribes the shareholders qualifications required to make an application under section 241. Section 244 provides that in the case of a company having a share capital, at least one hundred members or members constituting one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares, can make an application to the NCLT alleging oppression and mismanagement. Further, in case of a company not having a share capital,  at least one-fifth of the total number of its members are required to make an application under section 241 of the Act.

244 further gives NCLT the power to waive all or any of the requirements specified in section 244 so as to enable the members to make an application under section 241.

Section 242 gives the power to the Tribunal to give an order  to regulate the conduct of affairs of the company in future, the purchase of shares, restriction on the transfer of the share, termination, setting aside or modification of any agreement, setting aside of any transfer, delivery of goods, payment, execution or other act relating to property, removal of managing director, manager, or any of the directors of the company, recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and imposition of costs as may be deemed fit.

 

Supreme Court on NCLAT’s order to reinstate Mistry

Overruling the NCLAT decision to reinstate Mistry, who was removed as Executive Chairman by the board of Tata Sons on October 24, 2016, the bench said his removal happened for “valid and justifiable reasons” and could not be termed as “oppressive or prejudicial in law”. The following words at the end of sub¬section (1) of 242 “the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit” cannot be interpreted a conferring on the Tribunal any implied power of directing reinstatement of a director or other officer of the company who has been removed from such office.

“These words can only be interpreted to mean as conferring the power to make such order as the Tribunal thinks fit, where the power to make such an order is not specifically conferred but is found necessary to remove any doubts and give effect to an order for which the power is specifically conferred.”

Hence, the architecture of Sections 241 and 242 does not permit the Tribunal to read into the Sections, a power to make an order (for reinstatement) which is barred by law vide Section 14 of the Specific Relief Act, 1963 with or without the amendment in 2018.

Further, NCLAT appears to have granted the relief of reinstatement gratis without any foundation in pleadings, without any prayer and without any basis in law, thereby forcing upon the appellant an Executive Chairman, who now is unable to support his own reinstatement.

Not just this, but NCLAT has gone to the extent of reinstating Mistry not only on the Board of Tata Sons, but also on the Board of Tata group companies, without they being parties, without there being any complaint against those companies under section 241 and without there being any prayer against them. These companies have followed the procedure prescribed by Statute and the Articles and they have validly passed resolutions for his removal.

 

Impact on Corporate Governance

This judgement has put a lid on the most publicly and fiercely contested corporate war but will also have ramifications for corporate governance issues and have profound impact on corporate governance jurisprudence as it restricts the scope of the Court’s interference in the corporate decision-making process and allows decision-making based on the majority in the Board. The Supreme Court verdict affirms some of the fundamentals of corporate governance, including the supremacy of charter documents, autonomy and independence of the board and the rights of private companies and shareholders to govern their relationship.

 

 

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