How do U.S.-based information technology companies commit crimes in India and violate legal provisions of Indian laws and get away with it?

Home/Corporate Law, Criminal Law, Intellectual Property/How do U.S.-based information technology companies commit crimes in India and violate legal provisions of Indian laws and get away with it?

How do U.S.-based information technology companies commit crimes in India and violate legal provisions of Indian laws and get away with it?

This information is being provided based on a real-life situation. Let us consider this question with the help of an example. Suppose there is a U.S.-based information technology company which wants to open a subsidiary in India. A foreign company or its subsidiary has to pay a higher rate of tax than a domestic company in India. And therefore the first legal provision which this U.S.-based information technology company will violate is that it will bypass this provision of income tax act and will incorporate accompanying India in the name of one of its employees and later acquire it. But the Indian government is so lazy that it does not bother to take any action against such U.S.-based information technology company. What ought to be done in such a case is that the assets of this U.S.-based information technology company in India must be frozen by the government and its departments. However this is not done.

The next thing which this information technology company will do India is to ask its employees to work for it on the basis of salary but a part of the salary will be kept with the information technology company in its U.S.-based bank accounts. The excuse with this U.S.-based company will make to do so is that it is required under US laws. However there is no provision in US legal system to keep a part of salary of the employees with the company itself. This is what had happened with one of my clients. He was first made managing director of a U.S.-based information technology company and since it was a start-up my client brought some of his articles from his home like his headphones, speakers, kitchen gas cylinder, few of his laptops et cetera so that the start-up can be successful in India. Apart from this my client was told that he will be paid salary of more than $ 20,000 per month. Although this was done for a few months, the U.S.-based company later told him that because of financial crunch, he will be paid only part of his salary and the rest of it shall not be paid until the lapse of one year. After a lapse of one year he was told, by email, that the company shall pay him the rest of his salary in one installment. My client believed the company and assumed that since it was a U.S.-based concern, it will not cheat my client.

So much so that when the managing director of the U.S.-based company came to India, my client spent money from his own pocket to entertain him in one of the five-star hotels in Chandigarh. My client assumed that the U.S.-based company will pay him back. Some emails were exchanged too regarding this aspect.

My client worked 14 to 15 hours a day, seven days a week for this U.S.-based concern and its India based subsidiary. He was under an impression that he will be paid handsome amount for his hard work and dedication. He created a software which was sold to at least 10 to 15 companies in America by the U.S.-based concern.

Later, the Indian company after taking permission from the U.S.-based company purchased a vehicle in its own name. Later a dispute arose as to whether this was legal or not. Since the U.S.-based company had already given permission, my client assumed that the emails sent by the U.S.-based company will be of great help to him. He was informed by the U.S.-based company that since they wanted to raise venture capital in America, it was not possible to have this particular vehicle in the books of India based subsidiary. Therefore they tried to transfer the vehicle in the name of my client and they tried to make my client responsible for the purchase of this vehicle by showing that the purchase was unlawful.

When my client resisted, he was told that the software which may client had created was defective and was of no use at all. And therefore they were not obliged to pay him any salary. He was also told that some of the salary which was to be paid to my client was to be adjusted in the purchase of the vehicle since he had misinformed the U.S.-based company as to the requirements of the Indian subsidiary with respect to the vehicle purchase by it. He was further told that the US-based information technology company had not asked him to pay any expenses for the managing director when he visited India and that any expenses he had incurred was to be borne by himself.

So the end result for my client was that U.S.-based company made a huge profit because of hard work of my client and his team in India while my client himself came under unlawful debt of the U.S.-based company. His salary was not paid and he was alleged to have purchased a vehicle in an unlawful manner.

Now the question arises what is the legal remedy available to my client? This is one case where a foreign company has cheated a citizen of India. Although a First Information Report can be registered against the managing directors based in USA, but since they’re not going to come to India, this criminal case shall result in nothing. Further, the company refused to give him back the articles which he had brought in the India-based subsidiary. Although he will get the articles back but compared to his salary which has been kept by the U.S.-based company the price of the articles which he had taken to the India-based company is negligible. He’s also not going to get his salary or the expenses incurred to entertain the managing director of the U.S.-based company. This is so because the India-based company has no financial base and all the funding is done by the U.S.-based company.

Now the question arises whether my client has any remedy which is not legal in nature? My client was fortunate that he had not signed any in nondisclosure agreement with the U.S.-based company. Further while writing the code of the software, may client had not made any commenting within the source code to show which part of the source code was designed to do what. Therefore it is perfectly legal now for my client to approach all the customers of the U.S.-based company and provide him with a better software with a better source code and with a better service. This will hit the U.S.-based company where it pains the most. Further, may client can also sell the same software to the competitor of this U.S.-based company at cheaper price by creating a better source code. In the present case, the U.S.-based company has already incurred losses because my client had not commented in the source code when it was supplied to the U.S.-based company. The software engineers in the US-based company were unable to understand what part of source code was designed to do a particular aspect.

What should a person to prevent that this may happen to him?
1. The most important aspect is to refuse to sign nondisclosure agreement or to delay it as much as possible. My client in the present case can distribute the source code as open source code to the public at large and cause huge financial loss to the US based concern.
2. Do what my client did – do not comment in the source code to show what part of the source code will do what action.
3. Always take your salary in time. Do not keep a part of it in the company assuming that the company consists of nice guys and the employer will keep his promises. Do not entertain any official from your own pocket.
4. Keep information about all the clients of the company which you think might betray your trust at a later stage and you will not be able to get Justice because the company is not based in India.
5. Every company has some hidden secrets. In the present case the company in US wanted to raise venture capital in US on the basis of the work of the Indian based subsidiary. After taking my advice, my client client made sure that this venture capital funding in US failed. And all this was done in a perfectly legal manner.