Feed by: Hemant K Batra of Kaden Boriss Legal

CBI has recommended to the Defence Ministry blacklisting of six firms, including four from abroad, as a sequel to its probe into the Ordnance Factory Board scam.

Its reported in the media that the apex investigating agency, in its letter, has mentioned four international firms – Singapore Technologies Kinetics Ltd (STK), Israel Military Industries Ltd (IMI), Rheinmetall Air Defence (RAD), Zurich and Cooperation Defence in Russia – to be blacklisted.

Besides, two Indian firms – T S Kisan and Company Pvt Ltd (New Delhi) and R K Machines Tools Ltd (Ludhiana) – have also been named in the CBI communication to the Defence Ministry sent earlier this week, they said.

The letter is advisory nature and it is up to the Defence Ministry to accept the recommendation or not, the source said. 

In June, the CBI had filed a 2,700-page charge-sheet in a special CBI court in Kolkata against former Director General of Ordnance factory Board, Sudipta Ghosh and 11 others for graft.

A case was registered by CBI on May 17, 2009 under different Sections of IPC and Prevention of the Corruption Act against Ghosh and others.

 The matter will come up in the CBI court on July 31.

He brands his analysis as “Return of Brotherhood between Mukesh and Anil Ambani: By Default or Compulsion or Choice”.

Extract:

“This debate regarding return of brotherhood or let’s say `laying to rest’ of the differences between the two Ambani brothers got triggered after the recent Supreme Court judgement pertaining to the sale of 28 million metric standard cubic metres a day (mmscmd) of natural gas by Mukesh’s Reliance Industries (RIL) to the younger Anil’s Reliance Natural Resources (RNRL) for 17 years at a rate far below the government-set price.

The Supreme Court in its verdict struck down the sale of gas by RIL to RNRL at the concessional price. The Court directed both the parties to renegotiate the MOU so as to ensure that new contract abides by a government price of $4.2 per million metric British thermal unit (mmBtu), compared with $2.34 per mmBtu the brothers agreed on in 2005 for a 17-year period.

I am not going into the merits of the judgement or the reasoning and the basis of reasoning given by the Supreme Court whilst dealing with the said dispute.  But, I would like to analyze the factors which may have lead to the return or brotherhood between the two brothers and in my opinion following would have been or may have been the factors leading to the return of the brotherhood -

 1.         After the recent Supreme Court judgement both the brothers must have realized that the MOU executed between them and as brokered/facilitated by their mother Kokila Ben was not a legally enforceable document.  If the Supreme Court has struck down one of the provisions of the MOU, where is the assurance that they would not against strike down some other provision of the existing MOU, if it is requested or prayed to do so in some subsequent dispute or matter.  Both the brothers must have realized after the recent Supreme Court judgement that this MOU was a risky proposition in times to come.  This MOU was foundation to the complete family understanding arrived at by the two brothers in the year 2005-2006.  In fact, both the brothers must have developed or encountered some apprehension, which would have made them doubtful regarding the validity of this MOU. The recent judgement may have given food for thought to many of the public shareholders of RIL or RNRL to question the terms of MoU other than the sale of gas, which in their prudence may have had adverse affect on the RIL or RNRL, as the case may be. In other words, some of the terms of MoU could have been prejudicial to the shareholders’ interest and to some extent unsustainable.  This must have lead to a serious rethinking process between the two brothers leading to the situation of better joining hands than wrestling their arms.  After all the understanding under the MOU related to not personal assets only but also with regard to fate of the companies involved, which are public limited in nature and holding trust of millions of share holders from the general public. Both the brothers must have also realized that the MOU, which they had executed nearly four year back, was though an informal document but at the same time having enormous ramification.  The said MOU was entered into at that time quiet hurriedly so as to prevent further damage to the reputation of the Ambani family and the Reliance empire as a whole. I don’t remember if any legal expert was involved at that time to vet or approve the said document from a legal point of view.  It was apparently never intended to be a legal document, without realizing that it may one day need legal ratification or stand the test of court of law. If any lawyer or expert lawyer was involved at that stage, I don’t think that the MOU would have been in the same shape and form as it is today; and that is what led to it being held not enforceable in certain aspects by the Hon’ble Supreme Court of India.

2.         Both the brothers have since resolved to terminate all the Non Compete Agreements executed by them.  Now, in the current scenario some legal expert must have adviced them that these Non Compete Agreements were not agreements between individuals but were agreements binding public companies and that these non compete agreements can also be challenged as unenforceable, void and invalid in light of Section 27 and other several provisions of the Indian Contract Act which declare certain agreements as void or voidable including the one which is/are in restraint of trade.  Even the Competition Act would have hit the said Non Compete Agreements in some way.  Therefore, both the brothers must have done some rethinking and arriving at a conclusion and consensus which led to the deletion of Non Compete Agreement from their arrangement. Or perhaps, Anil is now following the diktat of Mukesh, after Mukesh has got armed with a favourable order.

Though it is completely irrelevant to discuss the impact of MOU in the given set of circumstance but I cannot stop myself from commenting on the same in light of the recent Supreme Court judgement. One cannot ignore the fact that why Mukesh Ambani agreed at the first place to sell gas at a concessional rate to Anil Ambani. This was done to compensate Anil for something he had forfeited in favour of Mukesh.  If today, Mukesh is forbidden by the said judgement to extend one of the agreed concessions to Anil, Mukesh will have to compensate Anil either monetarily or in some other form of compensation; not doing so would enable Anil to withdraw or reclaim what he had forfeited in favour of Mukesh. Every concession is/was interconnect and was not `stand alone’.  In other simple words, A and B jointly own a silver glass; A agrees to forfeit his title in the said silver glass in favour of B by making B exclusive owner of the said silver glass; in return B agrees to supply a bottle of water (collected from Municipal Tap) daily to A for the next five years @ Rs. 1 per bottle; there is no precondition to the said arrangement as to what rate will B buy the water from Municipality and that is not the concern of A; if B fails to supply the bottle of water for whatever  reason including the price of water having gone up, A can reclaim his share in the said silver glass back from B.

In conclusion, I would only request the readers to judge for their own self as to whether this return of brotherhood which is being discussed in all the sections of media has got occasioned by default, compulsion of choice.”

The views expressed by Hemant K Batra are in his personal expert capacity and the firm, Kaden Boriss Legal may or may not subscribe to the same.

In today’s world where it is truly the survival of the fittest, knowing one’s own competition has become very important for most corporations/organizations. As already mentioned, Corporate Espionage is the practice of gaining information regarding one’s competitors using unethical or illicit means, without the knowledge of that competitor. There is a very thin line of difference between Corporate Espionage and Competitive Intelligence. Where Competitive Intelligence is ethical and legal, Corporate Espionage is the exact opposite.

The internet has now become a ‘highway of information’ when it comes to gathering and processing information and data in relation to anything and anyone. The means of spying have also undergone substantial transformations with the advent of technology. Spies no longer need to physically break into offices or homes to acquire sensitive information. Spying involves the use of almost the same technology as the one used for Competitive Intelligence i.e. business intelligence procedures. The basic difference between both is that while indulging in Corporate Espionage, the internet and connections used are equipped with a more advanced ‘attacking’ mode. Cyber attacks are becoming increasingly common in both public and private sectors. Thus there is an urgent need to enact and enforce stringent laws pertaining to cyber offences, says Sinha of Kaden Boriss Legal.

India has in place the Information Technology Act, 2000 (‘Act’) which provides legal recognition for transactions carried out by means of electronic data interchange and other means of electronic communication. Very recently, the Information Technology (Amendment) Act, 2008 was enacted which introduced several new provisions relating to data protection, privacy, cyber terrorism etc. This Amendment was the need of the hour as India does not have a separate statute pertaining to data protection or cyber crimes per se. Chapter IX of the Act refers to provisions relating to penalties, compensation and adjudication and Section 43 covers a wide range of cyber contraventions related to unauthorized access to computer, computer system, computer network or resources. The damages of Rs. one crore (approx. USD 200,000) prescribed under this Section before the Amendment has been deleted and now the defaulter is made liable to pay damages by way of compensation to the person so affected. A new Section 43 A has been inserted to protect sensitive personal data or information possessed, dealt or handled by a body corporate in a computer resource which such body owns, controls or operates. If such a body corporate is negligent in implementing reasonable security practices and it causes wrongful loss or wrongful gain to any person, it shall be liable to pay damages by way of compensation to the person so affected. It must be noted here that the phrase ‘sensitive personal data or information’ has not been defined by the Act.

Chapter XI of the Act deals with the offences and Section 66 lays down the penalty for contravention of Section 43 which amounts to an imprisonment of upto three years or fine upto five lakh rupees or both. A host of new Sections have been added to Section 66 by the Amendment Act as Sections A to F prescribing punishment for offences such as sending of offensive through communication service etc. (66A[1]), dishonestly receiving stolen computer resource or communication device (66B[2]), identity theft (66C[3]), cheating by personation by using computer resource (66 D[4]), violation of privacy (66E[5]), cyber terrorism (66F[6]). For the offence of cyber terrorism, the Act now prescribes life imprisonment. Section 69 of the Act gives power to the state to issue directions for interception or monitoring of decryption of any information through any computer resource. Sections 69 A and B grant powers to the State to issue directions for blocking certain websites for public access if its content is believed to threaten the security and integrity of the State and to monitor and collect traffic data or information. Also, Sections 72 and 72 A lay down provisions relating to the penalty for breach of confidentiality and privacy and the punishment for disclosure of information in breach of lawful contract. The newly inserted Section 84 B[7] and C[8] lay down punishments in case of abetment of offences under the Act and also for attempt to commit such offences.

The Information Technology (Amendment) Act, 2008 seems to be a step forward in the direction of reducing instances of data theft, identity theft, cyber crimes etc. and thereby Corporate Espionage. In order to cope with the multifarious challenges that technological advancement may bring, it is essential to have in place more efficacious and stricter laws relating to cyber security. There is a need to bring harmony in the laws relating to data protection, copyright, cyber crimes throughout the world because it is this disparity between the laws and rules of various countries that makes it easy for spies to break into the computer networks and resources and carrying on their spying practices. Therefore, the only factor that can impede the growth of this illegal practice is the ethical conduct of businesses. At the same time, countermeasures must be taken by corporations in order to ensure that they are not spied.

In conclusion, Harsh Sinha of Kaden Boriss Legal states that it can be said that all organizations need to re-assess their security policies and take appropriate steps in order to protect themselves from becoming a victim of Corporate Espionage. They must identify their sensitive information. Information such as R & D processes, new market strategies, pricing structures, customer lists must be identified as sensitive and adequately protected. Risk assessment must be done and vulnerabilities identified and accordingly addressed. Adequate training should be provided to employees, users, managers etc. so that they can protect the sensitive information of the organization. At the end of the day, the more knowledge organizations have about such malpractices, the better they will be equipped to fight against it.

[1] Punishment under Section 66A – imprisonment upto three years with fine

[2] Punishment under Section 66B- imprisonment upto three years or fine upto rupees one lakh or with both

[3] Punishment under Section 66C- imprisonment upto three years and fine upto rupees one lakh rupees

[4] Punishment under Section 66D- imprisonment upto three years and fine upto one lakh rupees

[5] Punishment under Section 66E- imprisonment upto three years ow fine upto two lakh rupees or with both

[6] Punishment under Section 66F- imprisonment for life

[7] Punishment for Section 84B- same punishment as provided for that particular offence in the Act

[8] Punishment for Section 84C- punishment for a term that may extend to one-half of the longest term of imprisonment provided for that offence or with such fine as provided for the offence or with both