Franchising Laws - India - Franchise - International Franchise ...

Kanga & Co india
• various state statutes and regulations.
In the context of cross-border franchising the Secretariat of Industrial
Assistance (SIA), the Ministry of Commerce and the RBI are
the main government agencies regulating the foreign investment and
remittances abroad.
11 Describe the relevant requirements of these laws and agencies.
The franchise agreement will be governed by the Indian Contract Act
1872. This statute covers all aspects of the contract: offer, acceptance,
validity, breach and termination. The principles set out in this
statute govern the rights and obligations of the parties. In case of
breach, the rights can be enforced by appropriate legal proceedings
and invoking the Specific Relief Act, 1963 for remedies such as
injunction and damages.
The intellectual property protection and issues will be governed
by the Trade Marks Act 1999, the Patents Act 1970, the Designs Act
2000 the Copyright Act 1957.
The MRTP Act and the Competition Act 2002 regulate competition
in business.
An action can be taken by a consumer under the Consumer Protection
Act 1986 for deficiency in goods or services. The franchise
agreement would normally provide for this liability to be borne by
the franchisee.
The Income Tax Act 1961 governs all tax aspects of any franchise
business in India.
FEMA prescribes the guidelines on foreign investments and foreign
remittances. Currently, remittance towards franchise fees is freely
allowed. However, there are limits on free payments (without approval)
towards royalty and technical fees for technology transfers.
12 What are the exemptions and exclusions from any franchise laws and
regulations?
Since there are no specific laws regulating franchise, there are no
exemptions and exclusions from any franchise laws and regulations.
13 In the case of a sub-franchising structure, who must make pre-sale
disclosures to sub-franchisees? If the sub-franchisor must provide
disclosure, what must be disclosed concerning the franchisor and the
contractual or other relationship between the franchisor and the
sub-franchisor?
There are no disclosure requirements.
14 What is the compliance procedure for making pre-contractual disclosure
in your country? How often must the disclosures be updated?
There are no disclosure requirements.
15 What information must the disclosure document contain?
There are no disclosure requirements.
16 How do the relevant government agencies enforce the disclosure
requirements?
There are no disclosure requirements.
17 What actions can franchisees take to obtain relief for violations
of disclosure requirements? What are the legal remedies for such
violations? How are damages calculated? If the franchisee can cancel
or rescind the franchise contract, is the franchisee also entitled to
reimbursement or damages?
As stated earlier, there are no disclosure requirements in India.
Nonetheless, a franchisee can file civil proceedings for damages for
any misrepresentation or breach of warranties under the franchise
agreement, and criminal proceedings for criminal breach of trust.
The damages normally allowed would be actual damages only and
not consequential.
18 In the case of sub-franchising, how is liability for disclosure violations
shared between franchisor and sub-franchisor? Are individual officers,
directors and employees of the franchisor or the sub-franchisor exposed
to liability? If so, what liability?
As mentioned above, there are no disclosure requirements in India.
However, the liability for any misrepresentation will depend on the
franchise agreement between the franchisor and sub-franchisee.
Normally, the franchisor or the sub-franchisor is vicariously liable
for all acts of its individual officers, directors and employees, either
in the course of business or in good faith, or both. The individual
officers, directors and employees of the franchisor or the subfranchisor
are not exposed to any liability unless the liability is
specifically undertaken.
19 In addition to any laws or government agencies that specifically regulate
offering and selling franchises, what are the general principles of law
that affect the offer and sale of franchises? What other regulations or
government agencies or industry codes of conduct may affect the offer
and sale of franchises?
There are no franchise-specific laws, including for offer and sale of
franchises.
20 What other actions may franchisees take if a franchisor engages in
fraudulent or deceptive practices in connection with the offer and sale of
franchises? How does this protection differ from the protection provided
under the franchise sales disclosure laws?
See question 17.
Legal restrictions on the terms of franchise contracts and the
relationship between parties involved in a franchise relationship
21 Are there specific laws regulating the ongoing relationship between
franchisor and franchisee after the franchise contract comes into effect?
The franchise agreement would be governed by the Indian Contract
Act 1872 and various other laws already mentioned above.
22 Do other laws affect the franchise relationship?
See question 10.
23 Do other government or trade association policies affect the franchise
relationship?
The franchise relationship is not affected by any government or trade
association policies.
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