INDIA Trends and Developments Contributed by: Uday S. Ahlawat, Gaurav Bhalla and Shramona Sarkar, Ahlawat & Associates
contracted defence equipment. The vendor is required to discharge the prescribed offset value through one or more permitted activities in India and to comply with the applicable timelines and the reporting and verification requirements. The obligation is reflected in the procurement and offset contracts and continues to be monitored after the main supply contract has been performed. The offset framework should also be distinguished from the IC requirements under the DAP 2020. IC relates to the extent of Indian value addition in the equipment being procured, whereas an offset is a separate obligation arising from a qualifying procure - ment and is intended to generate specified economic or technological benefits for India. Offset avenues and selection of Indian partners The manner in which an offset obligation may be discharged is governed by the applicable DAP provi - sions. Permitted avenues include specified purchas - es from Indian defence companies and other eligible Indian entities, investment in eligible Indian defence capabilities, and transfer of technology, subject to the conditions and eligibility requirements prescribed under the applicable offset framework. Where an Indian offset partner (IOP) is required, the foreign vendor should select the IOP at an early stage and undertake appropriate legal and commercial due diligence. The assessment should cover the IOP’s ownership and control, manufacturing or technologi - cal capabilities, relevant licences and registrations, financial and compliance track record, and ability to undertake the proposed offset activity. The vendor should also establish that the proposed activity is capable of generating the offset credits claimed under the applicable rules. Export controls and trade SCOMET and dual - use classification India regulates exports of specified strategic, mili - tary and dual-use goods, software and technology (SCOMET) through the SCOMET framework. Whether an export requires authorisation depends principally on the classification of the item, rather than merely on the identity of the exporter.
Entities should therefore establish a product-classi - fication process covering hardware, software, tech - nical data, and technology. The classification should be documented and periodically reviewed to check whether the product could potentially fall within the SCOMET list (which is amended from time to time). Export authorisation process Where an item is subject to SCOMET controls, the exporter may need to obtain an authorisation from the DGFT before shipment. The application process generally requires disclosure of details of the item, end user, end use, destination, and transaction. End-use and end-user documentation is therefore an important part of the export authorisation compliance process. Companies supplying defence products internation - ally should also consider foreign export controls that may apply to incorporated technology, components or software, including controls imposed by the jurisdic - tion of the technology provider. Intellectual property Patent and design protection Defence companies can protect technology through patents, designs, copyright, contractual confidential - ity, and other IP rights. The defence context, however, introduces additional considerations where disclosure of an invention could affect national security. The Patents Act 1970 (the “Patents Act”) permits secrecy directions to be imposed where an invention is considered relevant to defence purposes. Such directions can restrict publication and communication of information concerning the invention. The central government is required to periodically reconsider the continuation of such directions. Indian residents also require prior permission in speci - fied circumstances before filing a patent application outside India, particularly where the invention is rel - evant for defence purposes. Government ’ s use and march - in rights The Patents Act permits the central government − or a person authorised by it − to use a patented inven - tion for specified purposes, subject to the statutory framework and applicable remuneration provisions.
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