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Friday, September 28, 2007

Check Cheque


Thanks to CSMysore
Q1. What can I do when a cheque is dishonoured for the reason of insufficient funds. What legal action I can take to get the amount cleared?

A. On the dishonour of a cheque, one can file a suit for recovery of the cheque amount along with the cost & interest under order XXXVII of Code of Civil Procedure 1908 ( which is a summary procedure and) can also file a Criminal Complaint u/s 138 of Negotiable Instrument Act for punishment to the signatory of the cheque for haring committed an offence. However, before filing the said complaint a statutory notice is liable to be given to the other party.

Q2. I have got my cheque dishonoured few months back. It was issued by a Company. What can I do now?

A. On the dishonour of cheque by the company you can file a suit for recovery of the amount under Order XXXVII of CPC. As you have stated that cheques were dishonoured few months back and you have issued no notice to the company bringing to their knowledge the dishonour of cheques and the life of the cheque is still valid which is usually six months from the date of issue. You please present the cheque again and on receipt of the information about the dishonour of the cheque you immediately issue notice within 30 days from the receipt of the information of dishonour of cheque to the company. If the company does not pay the amount within 30 days from the receipt of the notice, you can file complaint under Section 138 of the Negotiatble Instrument Act. The said complaint is to be filed within one month on the expiry of 30 days period of notice.

Q3. Our is the software distribution co. During course of our business we had supplied software worth Rs.3 lacs. But our client dishonoured the cheque. We have filed court case on him after that he paid us Rs. 1 lac and then he has run away. We do not have any idea about his where about. Court has issued proclaimed offender notice, but we do not now how to trace him. He has closed his account and bankers are not cooperating with information like his other address. Pleas advice?

A. Let the proceedings of declaration of proclaimed Offender be completed. The accused will be declared Proclaimed Offender and can be arrested at any time. At this stage, you can not do anything else. However, simultaneously you can file Suit for Recovery with the last known address of the accused.

Q4. I have a cheque dishonoured. I have informed the person in writing, but no response, what should be done to register a case of cheating, and which place it should be filed? The place of the bank, where the cheque was dishonoured or the place where the cheque was handed?

A. When you have informed the person about the dishonour of the cheque, in case the information is given within 30 days from the dishonour of the cheque, you can file a Complaint under Section 138 of Negotiable Instrument Act within one month after the expiry of notice period of 30 days. The Complaint for cheating is not maintainable legally. However, in certain cases the police have been registering cases of cheating against the accused.

Q5. I have blank cheques given to me by a partnership firm. Since they owe me some money which I had given to them as a loan. Besides the cheques and the statement of accounts. I do not have anything else. Suppose one day, I suddenly get to know that they have closed the partnership firm and dissolved it, Can I deposit the cheques now and legally raise a claim on them and how?

A. You should fill the cheques and present for encashment. The Partnership Firm as well as partners are personally liable and even after dissolution also the firm and partners are liable. Once the cheques are dishonoured you have to file a suit for recovery of the said amount under the summary procedure provided in Order 37 of Code of Civil Procedure, 1908. You should also file a complaint under Section 138 of the Negotiable Instruments Act. For this you will have to first give a notice, within 30 days of the dishonouring of the cheques. Then if payment is not made within 30 days of receipt of notice a complaint has to be filed within 30 days thereafter.

Trezrrr every pulsss

Thursday, September 27, 2007

FEMA - Overseas Investment - Liberalization

Dear All,

Further to my email on the captioned subject, the RBI vide its AP DIR Circular No.11 & 12 dated 26 th Sept 2007 has amended Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004. This Regulation is dealing with overseas investments have been further liberalized, with immediate effect, as under:

1.Enhancement of limit for Overseas Direct Investment

As per Current provisions of Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004, the total overseas investment of an Indian party in all its Joint Ventures (JVs) and / or Wholly Owned Subsidiaries (WOSs) abroad engaged in any bonafide business activity should not exceed 300 per cent of its net worth for companies incorporated in India or bodies created under an Act of Parliament and 200 per cent of net worth in the case of registered partnership firms, under the automatic route.

With a view to provide greater flexibility to Indian parties for investments abroad, the existing limit of 300 per cent of the net worth of the Indian party (200 per cent in case of registered partnership firms) has been enhanced to 400 per cent of the net worth of the Indian party as on the date of the last audited balance sheet. This new enhanced limit will be applicable for both the Indian Companies and Indian Registered Partnership firm(Including Investment in Financial Services).

2. Portfolio Investment by Listed Indian Companies

As per Current provisions of Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004, listed Indian companies are permitted to invest up to 35 per cent of their net worth as on the date of its last audited balance sheet, in the equity of listed foreign companies, which are listed on a recognised stock exchange and having shareholding of at least 10 per cent in Indian companies listed on a recognised stock exchange in India and rated bonds / fixed income securities issued by overseas companies, under the portfolio investment scheme.

In order to provide greater opportunities to listed Indian companies for portfolio investments , the existing limit of 35 per cent has been enhanced to 50 per cent of the net worth of the listed Indian company as on the date of its last audited balance sheet. It has also been decided to do away with the requirement of a reciprocal 10 per cent share holding in Indian companies with immediate effect .

Accordingly, listed Indian companies are now permitted to invest up to 50 per cent of their net worth as on the date of its last audited balance sheet, in (i) shares and, (ii) rated bonds / fixed income securities, rated not below investment grade by accredited/registered credit rating agencies, issued by listed overseas companies. All other terms and conditions stipulated in Regulation 6B of the Notification shall remain unchanged.

3. Overseas Investment by Mutual Funds

Enhancement of the Aggregate Ceiling

The aggregate ceiling for overseas investment by Mutual Funds, registered with SEBI, has been enhanced from USD 4 billion to USD 5 billion with immediate effect. The existing facility to allow a limited number of qualified Indian Mutual Funds to invest cumulatively up to USD 1 billion in overseas Exchange Traded Funds, as may be permitted by the SEBI, shall continue.

Further Avenues for Overseas Investment

Mutual Funds, registered with SEBI are presently permitted to invest in ADRs / GDRs of Indian and foreign companies, rated debt instruments not below investment grade by accredited/registered credit rating agencies, in the equity of overseas companies listed on a recognized stock exchange overseas, in overseas mutual funds that make nominal investments (say to the extent of 10 per cent of net asset value) in unlisted overseas securities, and overseas exchange traded funds that invest in securities. In order to enable the Mutual Funds to tap a larger investible stock overseas, it has been decided to allow Mutual Funds also to invest in additional instruments, subject to the guidelines issued by SEBI.

Accordingly, the Mutual Funds registered with SEBI, are permitted to invest in:

i) ADRs / GDRs issued by Indian or foreign companies;

ii) Equity of overseas companies listed on recognized stock exchanges overseas;

iii) Initial and follow on public offerings for listing at recognized stock exchanges overseas;

iv) Foreign debt securities in the countries with fully convertible currencies, short term as well as long term debt instruments with rating not below investment grade by accredited / registered credit rating agencies;

v) Money market instruments rated not below investment grade;

vi) repos in the form of investment, where the counterparty is rated not below investment grade. The repos should not, however, involve any borrowing of funds by mutual funds;

vii) Government securities where the countries are rated not below investment grade;

viii) Derivatives traded on recognized stock exchanges overseas only for hedging and portfolio balancing with underlying as securities;

ix) Short term deposits with banks overseas where the issuer is rated not below investment grade;

x) Units / securities issued by overseas Mutual Funds or Unit Trusts registered with overseas regulators and investing in (a) aforesaid securities, (b) Real Estate Investment Trusts (REITs) listed in recognized stock exchanges overseas, or (c) unlisted overseas securities (not exceeding 10 per cent of their net assets).
Thanks & Regards

Wednesday, September 26, 2007

2 more Public Financial Institution

NOTIFICATION No. s.o. 1583 (E) dated 20-9-2007
In exercise of the powers conferred by sub-section (2) of section 4A of the Companies Act, 1956 (1 of 1956), the Central Government hereby specifies the following institutions to be public financial institutions and for that purpose makes the following further amendment in the Notification of the Government of India, published in the Gazette of India dated the 13th May, 1978 in Part II, section 3, sub-section (ii), in the erstwhile Ministry of Law, Justice and Company Affairs (Department of Company Affairs) vide number S.O. 1329 dated the 8th May, 1978, namely:--
In the said notification, after serial number 49, the following serial numbers and entries relating thereto shall be added, namely:--
''50. Tamil Nadu Urban Finance and Infrastructure Development Corporation Limited.
51. Kerala Power Finance Corporation Limited."
[F. No. 3/3/2004/CL.V]

Credits to CSMysore

Trezrrr every pulsss

Monday, September 24, 2007


The Reserve Bank of India (RBI)

RBI ACT 1934 – to regulate the issue of bank notes & keeping reserves, to secure monetary stability in India & to operate currency credit system to its advantage.


1) Supervisory & controlling authority over banks: S-22 to issue licenses; S-23 previous approval of RBI for new branches.

2) Inspection: Suo motto or as per CG. The Central Government (CG) may order prohibiting fresh deposit or direct RBI to wind up.

3) Power to issue directions: S-21 to regulate advances, rates, etc…

4) Control over Top Management: S-36:- Remove/terminate/appoint with RBI approval, the manager, CEO, chairman, etc…


The Central Board of Directors who acts as CEO/Governor & <= 4 Deputy Governor; 4directors nominated by Central Government (CG) with 10other directors & 1 Government of India (GOI) official.


LAF allows RBI to adjust in system depending on its monetary policy stance & its reading of country's macro economic fundamentals. LAF operated through Repos & Reverse Repos in order to set a corridor for money market interest rates.

The rates that influence the conditions in money market are,

REPO or floor rate: @ which RBI is willing to borrow money against security; it is flexible & reflect market conditions; it SQUEEZES the liquidity.

REVERSE REPO or cap rate or Bank's re-finance: lending against security held by banks; it INJECTS liquidity.

Thus, LAF is the same day auction & settlement system.


It is to stabilise rupee by buying & selling in foreign exchange market. The choices include, Foreign exchange intervention, International Policy Co-ordination & Capital controls.

The currency intervention (sterilised/un-sterilised) is to dampen the volatility & to prevent misalignment. The un-sterilised intervention is to affect the size of money supply. The sterilised intervention is the effect of changes in money supply offset through Open Market Operation (Sell forex & Buy G-sec).

The objective includes,

Ø Reflection of economic fundamentals in external value of rupee;

Ø Reduce excess volatility in exchange rates;

Ø Help maintaining an adequate level of forex reserves;

Ø Help eliminating market constraints.

Trezrrr every pulsss

Tuesday, September 18, 2007

The entire gamut of Management Audit, thats it


Check this !

Interesting & Important Notifications/Cases



Ø Determination of origin of goods

The Central Government has released the Rules of Determination of Origin of Goods under the Preferential Trading Agreement between India and Chile.

Customs Notification No. 84/2007-Cus. Dt 17/08/07 (NT)

Ø Exemption of additional duty of customs

The Central Government has exempted electronic integrated circuits falling under Customs Tariff Heading 8542 from payment of additional duty of customs in lieu of Sales Tax/VAT.

Customs Notification No. 93/2007-Cus. Dt 08/08/07

Ø HSN-Most suitable for classification

The Tribunal has held that the Explanatory Notes to the internationally recognized and accepted Harmonised System of Nomenclature (HSN) are most suitable for the determination of the customs classification of a product.

Hotel Leela Ventures Ltd. Vs. CC (2007 (145) ECR 222)


Ø Bank Certificate Not required

The Director General of Foreign Trade (DGFT) has deleted the requirement for filing of a bank certificate related to the financial soundness of the exporter filing an application for grant of Registration cum Membership Certificate (RCMC).

DGFT Public Notice No. 25 (RE-2007)/2004- 09, dt.23/07/07

Ø Procedural change in reimbursement of CST

The Central Government has made changes in the procedures relating to re-imbursement of Central Sales Tax for supplies made to 100% Export Oriented Units (EOU) and Units in Electronic Hardware Technology Park (EHTP) and Software Technology Park (STP).

Public Notice No. 39 (RE-2007)/2004 -2009,dt.24/07/2007

Ø Amendment of FTP

The High Court of Calcutta has held that the Foreign Trade Policy can only be amended by notifications published in the Official Gazette and not otherwise. Further, the High Court has held that the Foreign Trade (Development and Regulation) Act, 1992 does not authorize the Central Government to amend the export and import policy with retrospective effect.

Soubhik Exports Ltd. Vs. Union of India (2007 (214) ELT 334)

Antidumping Duty

Ø Anti-dumping duty has been imposed on the following products:

§ bias tyres, tubes and flaps originating in or exported from the People.s Republic of China and Thailand.

§ hexamine originating in or exported from Russia and Saudi Arabia.

§ partially oriented yarn, originating in or exported from People.s Republic of China.

§ nonylphenol originating in or exported from Chinese Taipei.

Customs Notification Nos. 88/2007 dt. 24/07/2007, 89/2007 dt. 25/07/2007,92/2007 dt. 03/08/2007 & 94/2007 dt.22/08/2007

Ø The Antidumping Duty levied on partially oriented yarn, originating in or exported from the Republic of Korea and Turkey, has been withdrawn.

Customs Notification 95/2007 dt. 22/08/2007


Ø ESI medical services are covered under consumer protection Act

The medical service rendered in an ESI hospital/dispensary to an insured employee fails with in the ambit of section 2(1) (o) of the Consumer Protection Act, and, therefore, the Consumer Protection Act have jurisdiction to adjudicate upon a dispute arising between the insured and the Employees. State Insurance Corporation.

Chairman, Employees. State Insurance Corporation,2007

LLR 740

Trezrrr every pulsss

Friday, September 14, 2007

Interesting Act in Banking, now you will believe...


Gives mode of proving of entries in bank's book & production in courts.

Indian Evidence Act: so long as the original document is available, a copy cannot be produced. The exception being production of a certified copy of a document permitted by law.

"Bankers book" include ledgers, cash books, day books, account books & all other books used in the ordinary business of a bank & all other books used in the ordinary business of a bank.

S - 2(8): "Certified copy" means a copy of entry in the books of bank, with Certificate written at the foot of such copy that it is true copy of such entry, that such entry is contained in one of the ordinary books of bank & was made in the usual & ordinary course of business & that such book is still in the custody of the bank, & where the copy was obtained by mechanical/other process, which in itself ensure the accuracy of the copy, a further certificate to that effect but where the book from which such copy was prepared has been destroyed in the usual course of bank's business after the date on which the copy had been so prepared, a further certificate to that effect, each such certificate being dated & subscribed by the Principal accountant or manager of the bank with his name & official title.

Now, enjoy the same…

Entry with Certificate.

True Copy.

Ordinary books & Ordinary course under custody. Ensure accuracy, if by process.

Certificate after copy destroyed in the usual course.

Certificate to be dated subscribed by A/C't or Manager.


SECTION 4: A certified copy of any entry in banker's book is the prima facie evidence of existence of such entry & the matters, transactions, & accounts recorded therein recorded as, the original entry itself is now by law admissible BUT NOT FURTHER/OTHERWISE.

GAUHATI BANK LTD : entries in books of accounts shall not alone be sufficient evidence to charge any person with liability. It is a mere corroborative evidence.

SECTION 5: ONLY for order of court/judge make a special cause, an officer of bank be compelled to produce any banker's book or to appear as a witness to prove matters in any legal proceeding to which bank is not a party.

Criminal Procedure Code: an officer in charge of police station can compel a bank officer to produce the books without order of court.

"Legal Proceeding" means


Any proceeding/inquiry in which evidence is/may be given;


An arbitration; &


Investigation/Inquiry for evidence by police officer of Magistrate authorised person.


1. On application of any party to a legal proceeding, the court/judge may order to inspect & take copies of banker's books or the bank to prepare & produce the certified copies along with a certificate that "no other entries relevant was found in the books";

2. Order with or without summoning the bank & 3-clear days service;

3. Either offer to produce or SCN against order, within time limited for obedience.


1. Cost of application of doing under the act as per the discretion of court/judge who may further order to be paid by bank, if fault on the part of bank;

2. Enforced, as if the bank is a party to the proceedings;

3. Order as if it were the decree for money paid by itself.

SECTION 8: Order of court/judge for production & inspection of books of banks, an order by officer ranking not below Superintendent of Police.

Chota sa, nanha sa, pyara sa.... act hai nah !

Trezrrr every pulsss

Tuesday, September 11, 2007


Types, Scheme, Listing & Explanatory Statement

Some provisions of the Companies Act, 1956 facilitate corporate, business or financial restructuring in a variety of ways. The main provisions are:


Chapter V of the Companies Act, comprising sections 390 to 396A, contains provisions on 'Arbitration, Compromises, Arrangements and Reconstructions.' [There are, however, no provisions on 'Arbitration' since section 389, which dealt with Arbitration, stands deleted].


Sections 100 to 105 of the Act facilitate reduction of share capital.


Sections 106 and 107 of the Act facilitate variation of shareholders' rights.


Section 494 facilitates restructuring of a company which is in the course of winding up.



Drafting of a scheme of amalgamation

The Companies Act or the Rules made thereunder do not prescribe any form or contents of a scheme of amalgamation. Conventionally, however, certain standard clauses are included in a scheme of amalgamation. These are as follows: —


Appointed Date (or Transfer Date) of amalgamation.


Effective Date of amalgamation.


Capital structure of the transferor company and the transferee company


Share Exchange Ratio.


Transfer of undertaking and liabilities of transferor-company to the transferee-company from the appointed date.


Continuance of legal proceedings of the transferor-company by transferee-company after the effective date.


7. Transferor-company to carry on business on behalf of the transferee-company between appointed date and effective date.


Effect of amalgamation on contracts of the transferor-company after the effective date.


Services of the transferor-company's employees, their service conditions, effect of amalgamation thereon, retirement benefits, etc.


Allotment of the transferee-company's shares to the transferor-company's shareholders in exchange of their shares in the transferor-company as per the share exchange ratio, treatment as to fractions, rights of the shareholders.


Dissolution of the transferor-company (without winding up) on the effective date.


Main objects of the transferor-company to become one of the main objects of the transferee-company.


Conditions subject to which the scheme is to take effect.




In order to ensure that listed companies do not in any way violate or override or circumscribe the provisions of securities laws or the stock exchange requirements, it has been decided to make suitable amendments in the Listing agreement.

Therefore, you are hereby directed under section 11(1) and 11B of the Securities and Exchange Board of India Act, 1992 to immediately take steps to amend the listing agreement as follows:

1. In clause 24 of the Listing Agreement, three new sub-clauses (f), (g) and (h) shall be added as under –

(f) "The company agrees that it shall file any scheme/petition proposed to be filed before any Court or Tribunal under sections 391, 394 and 101 of the Companies Act, 1956, with the stock exchange, for approval, at least a month before it is presented to the Court or Tribunal."

(g) "The company agrees to ensure that any scheme of arrangement/ amalgamation/ merger/reconstruction/reduction of capital, etc., to be presented to any Court or Tribunal does not in any way violate, override or circumscribe the provisions of securities laws or the stock exchange requirements.

(h) "Explanation: For the purposes of this sub-clause, 'securities laws' mean the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996 and the provisions of the Companies Act, 1956 which are administered by SEBI under section 55A thereof, the rules, regulations, guidelines etc. made under these Acts and the Listing Agreement."

(i) "The company agrees that in the explanatory statement forwarded by it to the shareholders under section 393 or accompanying a proposed resolution to be passed under section 100 of the Companies Act, it shall disclose the pre and post-arrangement or amalgamation (expected) capital structure and shareholding pattern."

2. Clause 31(c) of the Listing Agreement shall be substituted as under—

(c) "three copies of all the notices, call letters or any other circulars including notices of meetings convened under section 391 or section 394 read with section 391 of the Companies Act, 1956, together with Annexures thereto, at the same time as they are sent to the shareholders, debenture holders or creditors or any class of them or advertised in the Press."

The A. P High Court has held that in terms of clause 24 of the Listing Agreement, consent of stock exchanges is not compulsory and it would suffice if company files scheme/petition under sections 391, 394 and 101 before the stock exchange, a month before it presents scheme/petition before Court or Tribunal for its approval



The Explanatory Statement as required under section 173 is quite different from the Explanatory Statement which is required under section 393(1)( a) of the Act.  Section 393(1)(a) does not ordain disclosure of all material facts. It not only enumerates the categories of particulars, but it deliberately makes a departure by omitting any reference to material facts. The legislature having used a different phraseology in the said two provisions, it must be held that the legislative intent under the said section 393 was not to provide for disclosure of all material facts.   Observe the usage of 2 different words viz. "material facts" & "material interest".

Trezrrr every pulsss

Monday, September 10, 2007

World Trade Organisation - WTO in full

Anything u think of WTO is here & that too in a very legible n interesting way,

Thanks to the Anonymous author, presenting B4U.....
"Resolved That all friends of CS-Final are clearing WTO, JV & FC, this time.......

World Trade Organization

I) World trade organization:

1) is an institution.

2) comprised of:

** GATT 1994 - General Agreement on Tariffs and Trade

(1947 agreement + latest decisions-in respect of controversies + amendments made). It began with 3 sections in the year 1945. The 4 th section was introduced in 1964 covering 38 artilces.

** GATS - General Agreement on Trade in Services

** TRIPS - Trade Related Intellectual Property Rights

** TRIMS Trade Related Investment Measures

** DSM - Dispute Settlement Mechanism.

(Note: it is the presence of DSM in WTO's regime that differentiates it from GATT 1947).

II) Important Rounds from the examination point of view:

a) Uruguay Round.

b) Paris convention. (I guess there is another one that is to be read with this one…if I am not wrong that is Berne OR Bonn..i don't remember exactly.)

c) Marakkesh Treaty.

d) Doha Declaration.

e) Hongkong….(though this round is not that much important, but since this happens to be the latest on cards, and having been held somewhere in December, it might very well come for the exam).

Rest if time permits, or if u feel that u r bugged up, u can go thru them during that time.

III) Important agreements:

a) Agreement on agriculture.

b) Agreement on Textile and clothing.

c) Agreement on Anti-dumping.

d) Agreement on CVD.

e) Agreement on Safeguards.

IV) General Agreement on Tariffs and Trade:

Part I of GATT:

Three pillars of GATT:

Most Favoured Nation.

Binding Tariff Commitment. And

Uniform National Treatment.

1) Article I and II:

i) MFN: Most Favoured Nation.

Meaning: All the members of the WTO are to be treated at par. There should be no discrimination amongst the members of WTO.


Article II of GATT:

Deals with Schedule of Concessions:

à Tariffs and concessions.

2) Uniform National Treatment: Artilce 5

Once the goods of a country enter into the commerce of another country, it shall be treated at par with the indigenously produced goods.

For eg.:

Indian goods àentering àAmerican Market à shall be treated at par à with the goods produced in America.

Under Article 21, one can break the rules of GATT (i.e. MFN, UNT etc.) on security grounds.

Article 6 says that no country will allow dumping or subsidized goods to enter into its commerce if it is injurious to domestic industry.

Article 7 deals with customs valuation of goods.

Article 8 deals with Fees and Formalities connected with Importation and exportation. (Note: India charges 1% of C.I.F Value).

Article 10 - Complete trade related rules are to be declared at appropriate time to WTO.


6 19 16 11

Dumping Safeguards Subsidies Quantitative Restrictions

Article 11: Quantitative Restrictions:

No country can have quantitative restrictions on goods being sold to that country barring the goods covered under the negative list.

(INDIA: 1998- 7000 items were there under article 11.

Latest status: 1429 were under quantitative restrictions list. 715 items were lifted on 01.04.2000, and balance on 01.04.2001 i.e. 714 items.)

Quantitative restrictions should be on Non-discriminatory basis. (i.e. applicability of the rule of MFN)

Exception: Article 13 – Balance of Payments.

Article 12: Restrictions to provide for action to be taken by government to check BOP payments.

Article 18 (A): BOP – correction…to be read with Article 12.

Article 18 (B): Foreign Exchange to be maintained – Exception to Article 12.

Article 18 (C): Protection of Domestic Industries:

Article 20: General Or Security Restrictions

Part III of GATT

Article 24: Free Trade Arrangement OR customs union OR Economic Unions.

Article 24 is an exception to Article 1 (MFN). There are around 300 items coming under FTA.

First worthwhile FTA was entered with Thailand, called as "EARLY HARVEST SCHEME" covering 85-86 items. (from 01.09.2004). {just for information}.

June 2005: CECWS: comprehensive economic cooperative agreement with Singapore.

(may come for examination).

Part IV of GATT

Special and differential treatment of developing countries.

Generalized System of Preferences whereby developing countries were given concessions in respect of payment of duty.

Agreement on Anti dumping:

** It has 18 articles and 2 annexures.

** It is not applicable to services. It is applicable only for products. It is also not applicable in case of smuggled goods.

Meaning of dumping:

A product is considered to be dumped when such product enters the commerce of the country at less than its normal price.

What is meant by Normal Price?

a)*1 Normal value – comparable value

b)*1 (of) Like Product

c)*1 (sold) During the course of trade

d)*1 In domestic country.

How normal value is to determined?

There are three methods in which normal value can be determined:



*1 Sales to appropriate Construct Costs using data

(a) to (d) is Third country allowing Sales and General

less than Expenses & administration

comparable prices. Expenses plus profits.

(this is the commonly used

(comparison is to be made method to determine normal

only when at least 5% of the value)

export quantity is sold in

the domestic market)

20-80 test: this test is usually applied in determining normal value under Step I. It means that at least 80% of transactions should have resulted in profits. It is only upon this condition that the determination of normal value under Step I is permitted.

Article 2.3:- Relationship/composite arrangement

Value to next independent buyer

Prices are usually compared at ex-factory level.

Elimination of interest, physical characteristics, are all on equal footing for determining ex-factory price.

Article 6:- Determination of Injury:

15 parameters have been laid down in article 3.4 for the purpose:

Actual and potential decline in

1) Sales

2) Profit.

3) Output.

4) Market share.

5) Productivity.

6) Return on Investments.

7) Utilization of capital.

8) Inventories.

9) Employment.

10) Wages.

11) Growth.

12) Ability to raise capital/investment.

13) Factors affecting domestic prices.

14) Magnitude/margin of dumping.

15) Negative effects on cash flows.

What is meant by injury?

Injury is a depression on the working of domestic industries.

(align reasons extraneous to dumping to determine injury).

Important point:


Causal Material Injury


All the three must exist together to prove dumping.

De-Minimus Margin:

Price: The volume of dumped import shall normally be regarded as de-minimus i.e. negligible, if the price at which the goods are being dumped is less than 2% of export price.

Quantity: The volume of the dumped import shall be regarded as de-minimus i.e. negligible, if the volume at which the goods are being dumped is less than 3% of Total Imports of the like product by the importing member.

In other words, if dumping of goods, in terms of price/quantity being imported exceeds the above prescribed minimum, then the country can proceed to impose dumping duty on the goods being so imported.

Group of countries involved:

When a group of countries dump the products at less than the margin fixed, then they shall be aggregated to determine the level of dumping, and the Anti dumping duty shall be levied thereafter.

Price: 4% ( I guess it is 4%, plz kindly refer the book)

Quantity: 7%.

Procedure for determining the dumping duty: Shall be based on investigation:

Filing of application

(by the domestic industries)

Initiation of investigation

Time taken – usually 60 days

Preliminary determination Negative


Of investigation


Impose Preliminary Impose price undertakings


Final determination

Positive Negative

New Comer Interim review

Review also called as changed circumstances


Levy dumping Termination of Investigation

Measures for 5 years

Sunset review

Continue for another five years

Positive Negative termination of Invg.


1) While initiating investigation, it shall specify the period with respect to which investigation is to be made.

2) Sunset review means existence of circumstances forcing continuation of levy of dumping measures.

3) New comer review: it can very well be explained with the help of an example:

let us assume that the Tata and Birla have been dumping their goods in Japan. Now, Ambani wants to enter the market say after 2 years of preliminary measures…hence, the Ambani may request Japan to make a new comer review and identify the need for imposition of dumping duty.

4) Interim review also known as changed circumstances review:

Interim review is requested by the importing industry to the government of the country, to review the circumstances based on which dumping duty was imposed. In other words, it is a request to reconsider the imposition of dumping duty.

Article 5.2: Domestic industries to submit evidence in respect of the 15 parameters under article 3.4.

Article 5: Initiation standards.

Zeroing of dumping:

Let us take the example of India dumping goods in Japan. In order to determine dumping based on export prices, it is necessary for the japan to consider all the prices at which the goods have been imported.

In other words, it is necessary for japan to consider both the prices below the normal value and the prices above the normal value.

For example: Prices at which goods have been imported Normal value

1000 1500







Hence, the price of Rs. 1600 is also to be considered for the purpose of determining dumping margin.

How is dumping margin determined?

Dumping Margin = Normal value – export price

Injury margin =

Price sold by domestic industries Rs.140.00

Less: Price sold Rs.060.00

Duty Rs.020.00

Transportation Costs Rs.020.00


Injury margin Rs.040.00

Normal Value, when disregarded:

a) No domestic sales.

b) Ordinary course of business, at 5% of export quantity sold (i.e. if it is less than 5%).

c) Sales made at a loss (20-80test-profits).

d) Comparison at ex-factory level (not possible)

Agreement on Safeguards:

Assessment of material injury:

Imminent threat and foreseeing of injury. Shall be based only on facts and not on any allegations or conjuncture.

Article 3.7 provides for 4 factors for determining threat of material injury;

a) Rate of increase of dumped imports.

b) Capacity of the party which is dumping.

c) Price suppressing/depressing effects àextent of dumping.

d) Inventories.

Article 11: provides for three types of review:

Interim review, sunset review, and new comer review.


Causal Serious Injury


Something on Agriculture:


What are the important factors to be looked into:

a) Specificity:

It means that the subsidy offered must be industry/enterprise specific.

b) Export Oriented:

The subsidy given should be export oriented, than merely providing relief to the farmers.

c) Export Promotion Capital Goods Scheme

It is only on the fulfillment of the above factors/conditions, can a country consider that the subsidy offered by the government of another country is indeed injurious to the commerce of this country and proceed to impose the duties on such imports.

Examples of subsidies:

Bounty, grants, benefits, subsidy (as such), and non-taxability of taxable proposition.

Interest free sales tax is not a subsidy.

Countervailing measures can be imposed only if:

a) Subsidised goods are being imported,

b) There is Material injury,

c) There is causal link.

The difference between the Countervailing measures, Anti dumping duty, and safeguard measures is that in safeguards the injury factor is a serious injury and not material injury as in other cases.

Filing of application

Initiation of investigation

Public notice of hearing

Preliminary investigation findings

Positive Negative

Impose Accept undertakings

Preliminary a) Termination of undertakings. Terminate investigation

Measures b) termination of CVD

Final determination

Positive Negative Termination of Invg

Suo Motu/Application

Of interested party

Mid-term review

(to be completed within 12 months)

Levy Countervailing duty for

5 years

Sunset review after 5 years

Judicial review:- independent tribunal formed by members to review the consistency of determination of the investigation authority.

Agriculture subsidies:

Topics that can be referred are: Definition of measures (Article 9.1), anti-circumvention, difference between safeguards under agriculture, and subsidies and countervailing measures, phased introduction/decrease in existing subsidies, peace clause (A.13), and Article 20..continuation of negotiation.


There are four modes of services:





Services cross borders

Telephone services


Service receiver cross borders

Patients coming for treatment in Indian hospitals.


Commercial presence of establishment

Mostly influenced by developed countries

establishing branch offices….


Service provider cross borders

Mostly associated with the interest of developing countries.

Indians going abroad like software professionals.

12 major sectors

11 listed sectors other sectors

165 sub-sectors

Every product in WTO is described by an 8 digit code:

There are 95 chapters, divided as follows:

1) First 17:- agricultural products

2) Balance 78:- industrial products.

In all they cover roughly 12000 products.

Rules of origin/Letter of origin:

a) LOO is Issued by chamber of commerce and industry (usually).

b) Purpose for obtaining ROO/LOO:

i) efficient operation of Regional Trade agreements.

ii) dumping determination.

iii) Generalised system of preferences:- i.e.

*** export by least developed countries to developed countries at lower rates of tariffs as compared to developing countries.

*** No MFN rate.

*** Concessional rate of tariffs.


*Let us assume as follows:

**Cotton is produced in Turkey.

***Yarn is made in Egypt.

****Dyed and cloth made in India.

*****Ready made garments in China.

Now, if the cotton produced in Turkey is covered under chapter 46, and cloth manufactured in India is covered under Chapter 54, then it shall be deemed that the product originated in India (since the final product being sold is Cloth).

Now, let us take another situation. If the cotton produced in Turkey is covered under Chapter 46, and the cloth manufactured in India is also covered under Chapter 46, then it shall be deemed that the product originated in Turkey.

Read it again!

Trezrrr every pulsss

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