Consultancy Agreements (India)

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PRACTICE NOTE

by Nipasha Mahanta, Sayantani Saha and Vikram Shroff, Nishith Desai Associates

Status: Law stated as at 01-Dec-2023 | Jurisdiction: India

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A Practice Note addressing the key considerations and legal issues when a foreign entity is

considering engaging a consultant in India, including drafting guidance for the consultancy

agreement.

Foreign or Indian entities may decide to enter into

consultancy arrangements with consultants in India.

There are a number of important legal issues that arise

on any consultancy, which both parties should be aware

of if the arrangement is to be successful. This Note

provides an overview of the key aspects of a consultancy

arrangement in India. This Note considers:

• The status of a consultant for employment law and

tax purposes.

• The tax consequences if the consultant is deemed to

be an employee.

• Issues surrounding consultancy arrangements,

including the company’s liability for the consultant

and data protection.

• The common provisions included in the consultancy

agreement governed by Indian law, such as duration,

services, payment, intellectual property (IP) ownership,

conﬁdentiality, data protection, and termination.

• The governing law and jurisdiction of consultancy

agreements.

• The execution formalities for consultancy agreements.

Status of the Consultant

In India, there is a risk that a consultant may be deemed

to be an employee of the company (commonly known as

the risk of misclassiﬁcation).

Indian courts have held that the basic distinguishing

factor between employees and independent contractors

is the level of control and supervision exerted by the

company engaging them. In an arrangement with:

• An employee, the company has greater or complete

control over the employee.

• An independent contractor, the contractor has

the freedom and ﬂexibility to perform the services

based on their expertise and experience, with

minimal supervision and control by the company. An

independent contractor can be instructed regarding

the nature of the job or services to be performed, but

cannot be directed regarding the manner in which

they are to be performed.

The Supreme Court of India has held that the test

distinguishing an independent contractor from an

employee is the company’s right and extent of control

over how the work is to be done (Dhrangadhara

Chemical Works v State of Saurashtra, 1954 AIR 264). As

set out generally in Lakshminarayan Ram Gopal & Sons

Ltd v. Government of Hyderabad:

• An employer can tell the employee what to do and

how to do it.

• A contractor can be given instructions on what to do,

but cannot be told how to carry them out.

• An employee is under more comprehensive control

than a contractor.

(1964 25 ITR 449 (SC).)

The Court has set out various factors distinguishing an

employee from a contractor, including:

• The level of control over the individual.

• The level of integration of the individual within the

company’s business.

• The power to appoint and dismiss.

• The responsibility to pay remuneration and deduct

social security contributions.

• The responsibility to organise work and supply

equipment.

• The nature of the mutual obligations between the

parties.

• The terms of the contract between the parties.

(Ram Singh v Union Territory of Chandigarh, 2004 1

CLR 81.)

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Consultancy Agreements (India)

Factors Indicating a Genuine

Consultancy Relationship

Factors that indicate a genuine consultancy relationship

generally include:

• The contractual arrangement with a consultant is

a contract for services (on a principal-to-principal

basis), where the company pays fees to the consultant

for providing the services.

• The company’s level of control over the consultant is

minimal. The consultant can be directed regarding

what to do, but not how to do it.

• The arrangement with the consultant is non-exclusive.

The consultant can also provide services to their other

clients.

• Consultants are not entitled to typical employee

beneﬁts, such as leave, paid time off, holidays, bonus,

perquisites, social security, insurance coverage, and

allowances.

• The company is not required to reimburse expenses

incurred by consultants. Fees typically include and

cover all of the consultant’s expenses.

• Consultants are not provided with any company

equipment, business cards, or an email address (Silver

Jubilee Tailoring House v. Chief Inspector of Shops and

Establishments, AIR 1974 SC 37).

• Consultants are not bound to provide the services

from company’s premises and can provide services

from any remote location (Silver Jubilee Tailoring

House, AIR 1974 SC 37).

• Consultants are not required to adhere to the same

speciﬁed times of work that apply to employees.

• Consultants may hire other resources for performing

the contractually agreed work.

Factors Indicating an Employee

Relationship

Factors indicating an employee relationship include:

• The employment relationship is a contract of services

(on an employer-employee basis) where the company

pays the employee a salary for their employment.

• The employer can exercise complete control over the

activities of the employee. An employee can be directed

regarding how to execute tasks, as well as what to do.

• An employment relationship is typically exclusive, and

the employee must devote all of their working time

and attention to the business of the company.

• Employees are entitled to beneﬁts, such as leave, paid

time off, holidays, bonus, perquisites, social security,

insurance coverage, and allowances, under the

applicable labour laws.

• Employees are provided with an employee ID,

equipment, business cards, and an email address,

among other things (Silver Jubilee Tailoring House, AIR

1974 SC 37).

• Employees must adhere to certain ﬁxed times for their

working day.

Other Status

In India, a consultant does not acquire any other status

because of the consultancy agreement, aside from

potentially being misclassiﬁed as an employee (see

Status of the Consultant).

India has a unique law, the Contract Labour (Regulation

and Abolition) Act 1970 (CLRA), which applies where

the independent contractor (as a corporate legal entity

whose business is to provide labour to perform services

for the client) provides or deploys labour to perform

services for the client at the client’s premises (section

1(4), CLRA). The CLRA may be triggered depending

on the number of individuals deployed at the client’s

premises. If it applies, a registration is required by

the client and a license is required by the contractor

(sections 7 and 12, CLRA).

Consultant Deemed an Employee:

Tax Consequences

Tax Consequences for the Consultant

A consultant can deduct all business-related expenses

from their gross income (sections 36 and 37, Income Tax

Act, 1961 (Income Tax Act)).

Employees, however, can only offset certain speciﬁed

deductions, such as:

• House rent allowance (a deduction allowed on

amounts spent by employees on paying rent for their

accommodations) (section 10(13A), Income Tax Act).

• Contributions to the public provident fund and life

and medical insurance premiums, among other things

(Chapter VI-A, Income Tax Act).

As part of the Finance Act, 2020 (Finance Act), the

Indian government has introduced an alternative

taxation regime for employees in lower tax bands

(sections 115BAA and 115BAB, Income Tax Act). However,

employees opting to use this regime can only do so if

they forego all the deductions available to employees

under the standard regime.

Tax Consequences for the Company

Income earned by a consultant falls under the heading

“Income from Business or Profession” (with tax

deducted at source (TDS) at the rate of 10% (exclusive

of surcharge and cess)), while income earned by an

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Consultancy Agreements (India)

employee falls under the heading “salary” (with a

TDS rate of 30% (exclusive of surcharge and cess) for

the highest band) (sections 192 and 194J, Income Tax

Act; First Schedule, Finance Act). (Surcharge and cess

are both levies on high income; the rate of surcharge

depends on income, while cess is an additional levy on

income tax of 4% plus surcharge.)

If tax authorities conclude that the consultant is in

substance an employee warranting a re-classiﬁcation

of the income (and therefore tax rate), they may initiate

proceedings against the company under section 201 of

the Income Tax Act, for short deduction of tax.

This may involve:

• The levy of simple interest at the rate of 1% per month

for the period during which the tax was not deducted

(section 201(1)(A)(i), Income Tax Act).

• Recovery proceedings against the company or the re-

categorised consultant (section 222, Income Tax Act).

• Imposition of a penalty (up to 200%) for default on the

company (section 270A, Income Tax Act). (However,

if a good faith reason is established for the short

deduction of TDS, it is possible to avoid a penalty.)

The tax authorities can re-open these issues up to ten

years from the end of the relevant assessment year.

Consultancy Agreements

Governed by Indian Law

Status and Liability

When determining the nature of the relationship

between the parties, courts:

• Do not rely solely on the clauses or the terminology

used for describing the relationship in the consultancy

agreement.

• Assess the practical relationship focusing on the level

of control exercised over the consultant’s activities.

(Balwant Rai Saluja & Anr. v. Air India Ltd. & Ors, 9 SCC

407 (2014).)

To that extent, the company must also adopt adequate

practical processes to mitigate any misclassiﬁcation

risk arising from the arrangement (see Status of the

Consultant).

To reduce the risk of misclassiﬁcation, a consultancy

agreement can include a statement that:

• The relationship between the consultant and the

company is not an employer-employee relationship,

and that the consultant is an independent service

provider and is entitled to a fee for the service provided.

• The consultant is not eligible to any beneﬁts,

allowances, or perquisites given by the company to

its employees unless they are speciﬁcally extended to

consultants.

• The consultant has the freedom to provide services for

other clients. This helps to conﬁrm the status of the

relationship between the company and the consultant

as one of contract-for-service.

Clauses that provide for the consultant to be given

company equipment, business cards, or an email

address, or to have their expenses reimbursed are likely

to increase the risk of misclassiﬁcation and therefore

should be avoided (see Status of the Consultant).

If the consultant is a company the business of which is

the provision of labour or manpower to perform services

for the client, the arrangement may, subject to the

number of individuals deployed at the client’s premises,

fall within the scope of the CLRA (see Other Status). If

the CLRA applies, the agreement with the contractor

can incorporate a covenant that the consultant is to:

• Assist the company in obtaining or updating its

contract labour registration under the provisions of

the CLRA.

• Obtain and validly retain the contract labour licence

under the CLRA for provision of the services.

• Comply with all obligations under the provisions of

the CLRA and the consultant’s licence.

If the contractor is engaging its employees to perform

services, the agreement with the contractor can also

include a covenant that the consultant is to:

• Be responsible for payment of all:

– wages, salary, or other beneﬁts to all contract

employees assigned to the company under the

agreement; and

– payroll, social security, insurance premiums, and

all statutory and contractual beneﬁts including

but not limited to salary, allowances, perquisites,

bonuses, overtime, leave, holidays, maternity

beneﬁts (including crèche, if applicable), provident

fund contributions, employees’ state insurance

contribution, labour welfare fund contribution,

profession tax, retrenchment compensation,

gratuity, notice pay, and so on.

• Ensure that the wages paid to all contract employees

are not less than the minimum wages provided

under the Minimum Wages Act, 1948, as revised

from time to time. In the case of revision of minimum

wages during the term of the agreement, this

revision is to be implemented from the effective date

of notiﬁcation.

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Consultancy Agreements (India)

• Be responsible and liable to provide to the company,

on a monthly basis, sufﬁcient details (with all

supporting documents) evidencing these payments to

all contract employees.

• Indemnify the company and keep it indemniﬁed

for non-payment of any amounts to the contract

employees.

Appointment of a Substitute

It is not common to include a clause in the consultancy

agreement allowing the consultant to appoint a

substitute. In fact, the typical practice is to state that the

agreement is not assignable by the consultant. This is

largely because the consultant may have been engaged

by the service recipient based on an assessment of

a certain level of expertise and experience, which a

substitute may not possess.

Duration

There are no limitations or legal requirements regarding

the duration of consultancy agreements. However,

a company should limit the duration of consultancy

agreements to minimise misclassiﬁcation risks. The

maximum time period for which companies enter into a

consultancy arrangement is typically 18 to 24 months.

Even with a shorter duration consultancy arrangement,

if the initial period is extended several times, it may

increase the risk of misclassiﬁcation.

Services

It is standard practice to include speciﬁc clauses in

a consultancy agreement regarding the consultant’s

duties, including that the consultant:

• Agrees and undertakes to perform certain services as

may be required by the company.

• Will perform their services consistently with the

standards as may be expected, required, or speciﬁed

by the company from time to time.

• Agrees to comply with all applicable policies of the

company as introduced, replaced, amended, or varied

from time to time.

• Will not:

– represent themselves to any person as an employee

or agent of the company; or

– enter into any contract, agreement, or arrangement

with any person that binds the company or creates

any liability or obligation on the company.

Payments

Payment by a Foreign Company to a Consultant

in India

Under Indian foreign exchange laws, proceeds for export

of services must be realised and repatriated to India

within nine months from the date of export (regulation

9(1), Foreign Exchange Management (Export of Goods

and Services) Regulations, 2015). In the context of a

consultancy agreement, this means the consultancy fees

must be realised and repatriated to India within nine

months from the date of provision of services.

There are no speciﬁc restrictions on a foreign entity to

remit fees to an India-based consultant. Fees paid in

foreign currency are converted to INR through normal

banking channels when they are received by the India-

based consultant.

Deductions from Payments

It is common to include a clause in the consultancy

agreement providing for any sums due to the company

to be deducted from the amounts owed to the

consultant. The consultancy arrangement is purely

contractual in nature and parties can include any

obligations they choose, including one on recovery of

sums due to the company from the amounts owed to the

consultant (similar to Standard document, Consultancy

agreement (short form): International: clause 3.4).

Tax and Social Security

Consultant

The fees received by a consultant under a consultancy

agreement are subject to a TDS rate of 10% of the fees

(exclusive of surcharge and cess) (section 194J, Income

Tax Act) (see Consultant Deemed an Employee: Tax

Consequences). The remainder of the taxes (based on

the rates in force) must be paid by the consultant in

advance (section 207, Income Tax Act).

As the fees earned by a consultant fall under the

heading, “Proﬁts and Gains from Business and

Profession,” the consultant can make business-related

deductions under the Income Tax Act.

If the Central Goods and Services Tax Act, 2017 applies

to the services performed, the consultant must pay

goods and services tax (GST) to the relevant tax

authorities on the fees received under the consultancy

agreement. The consultant usually adds the GST to

their invoice to the company, collects the GST from

the company, and then pays it to the relevant tax

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Consultancy Agreements (India)

authorities. If the supply of services constitutes “export

of service,” the rate of tax on the supply of services

is zero (sections 2(6) and 16, Integrated Goods and

Services Tax Act, 2017).

Regarding social security, in a consultancy arrangement,

there is no legal obligation on a company to provide

social security beneﬁts to a consultant. Extending any

social security beneﬁt contributions to consultants

increases the risk of misclassiﬁcation.

Company

The company must withhold tax at source at the rate

of 10% (exclusive of surcharge and cess) of the fees

payable to the consultant (section 194J, Income Tax Act).

Where a consultant located in India is engaged by a

company located outside of India, the company runs a

high risk of having a permanent establishment (PE) for

tax purposes in India through that consultant if they are

later deemed misclassiﬁed.

If a PE is established, the proﬁts attributable to a PE in

India are, in principle, subject to tax in India at the rate

of 40% (exclusive of surcharge and cess) (First Schedule,

Finance Act). However, the exact tax position for that PE

depends on the tax treaty in place between India and

the jurisdiction in which the company is incorporated.

Regarding social security, see Consultant.

Data Protection

Data Privacy

Under the Information Technology Act, 2000 (IT Act)

and Information Technology (Reasonable Security

Practices and Procedures and Sensitive Personal Data

or Information) Rules, 2011 (Sensitive Personal Data

Rules), a company that collects, receives, possesses,

stores, deals, or handles information provided by a

person must provide a privacy policy for its handling of

or dealing in personal information (including sensitive

personal data or information (SPDI)). The company must

also ensure that this policy is available for review by the

person providing that information under lawful contract,

including by publishing it on the company’s website.

(Rule 4, Sensitive Personal Data Rules.)

An individual must expressly consent to any collection,

handling, processing, or transfer of their SPDI. SPDI

is deﬁned under the Sensitive Personal Data Rules to

include information relating to:

• Passwords.

• Financial information, such as bank account or debit

and credit card details.

• Physical and mental health condition.

• Sexual orientation.

• Biometric information.

• Medical records and history.

Under the law, the company must ensure that the

consultant has consented, in writing, to the collection,

handling, processing, or transfer of any of their SPDI

(rule 5, Sensitive Personal Data Rules).

Where collected data constitutes SPDI, the company

must ensure that certain conditions are satisﬁed as set

out by the Sensitive Personal Data Rules, including:

• Keeping the information secure and complying with

reasonable security practices and procedures under

the comprehensive documented information security

policy that the company should have in place.

• Not retaining the information for longer than is

required for the purposes for which it can lawfully be

used or is otherwise required under any other law in

force at the time.

• Only using the information for the purpose for which it

has been collected.

(Rule 5, Sensitive Personal Data Rules.)

The same provisions apply to any handling of data

collected by the consultant as part of the services

provided.

A new data protection law, the Digital Personal Data

Protection Act, 2023 has been enacted in India, which

provides for stricter data protection related obligations

in non-employment related matters. However,

provisions of the law are yet to be made effective.

It is sufﬁcient to adopt a clause for these purposes

(see, for example, Standard document, Consultancy

agreement (short form): International: clause 6).

Data Transfer

If the data being transferred constitutes SPDI, it can only

be legally transferred if:

• The entity to whom the data is being transferred

(whether based in India or abroad) ensures the same

level of data protection adhered to by the transferor.

• The transfer is necessary for the performance of a

lawful contract between the recipient of the data

(or any person on its behalf) and the provider of the

information.

• The person whose data is being transferred has

consented to the data transfer.

(Rule 7, Sensitive Personal Data Rules.)

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Consultancy Agreements (India)

Intellectual Property (IP)

Unlike an employer-employee relationship, in a

consultancy arrangement, the intellectual property (IP)

rights in relation to any IP conceived and generated by

the consultant during the consultancy agreement must

be speciﬁcally assigned in favour of the company. In

the absence of a speciﬁc assignment, those IP rights

continue to vest with the consultant.

For this reason, an extensive clause on IP should be

included in the consultancy agreement to protect the

company’s rights regarding the IP rights created by the

consultant. This clause should include:

• A list of IP already created by the consultant that

is excluded from the scope of the consultancy

agreement.

• A statement that:

– the consultant agrees that the exclusive ownership

of all content or part of any IP, or both, that is

not protected under copyright laws or other IP

law, or both, or that is not patentable, is to be

automatically and irrevocably transferred and

irrevocably, absolutely and perpetually assigned to

the company from date of creation;

– the consultant agrees to provide cooperation and

assistance to secure and maintain the company’s

rights, carry out the intent of the consultancy

agreement for vesting the company with full title of

the IP at issue, and all rights, titles, and interests,

and will sign, execute, and afﬁrm all documents,

including, without limitation, all applications,

forms, instruments of assignment, and supporting

documents and perform all other acts as may be

required for the abovementioned purposes; and

– any assignment in so far as it relates to

copyrightable material will not lapse nor the rights

transferred therein revert to the consultant, even

if the company does not exercise the rights under

the assignment within a period of one year from

the date of assignment (in accordance with the

provisions of section 19(4) of the Copyright Act,

1957).

Indemnities

The Indian Contract Act, 1872 (Indian Contract Act)

contains provisions that recognise indemnity, which are

triggered if the parties include an indemnity clause in

a contract. Indemnity is where one party promises to

indemnify the other party from loss caused to them by:

• The action or conduct of the indemnifying party.

• The action or conduct of any other person caused by

the fault, breach, or negligence of the indemnifying

party.

Companies generally include an indemnity clause for

the consultant to indemnify the company for any losses

that it may incur due to the consultant’s negligence

(similar to Standard document, Consultancy agreement

(short form): International: clause 10.4).

Conﬁdentiality

A consultancy agreement can include a conﬁdentiality

clause that continues after termination of the

agreement. The consultant may have access to

conﬁdential information of the company while rendering

their services, which, if disclosed by the consultant

after termination of the consultancy agreement, may

cause substantial damage or loss to the company. The

company can therefore rightfully and legally bind the

consultant with conﬁdentiality restrictions even after

termination of the consultancy agreement.

The inclusion of this clause does not lead to a

misclassiﬁcation risk.

The consultancy agreement can also include a deﬁnition

of “Conﬁdential Information,” stating that conﬁdential

information:

• Means and includes information that is conﬁdential

and proprietary to and disclosed to or obtained by the

consultant from:

– the company;

– the company’s afﬁliates; and

– certain third parties with which the company or

afﬁliates, or both, have relationships.

• Includes the above-described information regardless of:

– its format, which may be (without limitation) in

graphic, written, electronic, or machine-readable

form on any media, or oral; and

– whether the information is expressly stated to be

conﬁdential or marked as conﬁdential.

• Is not limited to information of value or signiﬁcance to

the company, afﬁliates, or the company’s competitors

(present or potential).

• Does not include information that:

– is in the public domain other than by the consultant’s

breach of the agreement or of any other agreement

by which the consultant is bound, or both;

– was previously known by the consultant, as

established by written records of the consultant

before receipt of that information from the

company; or

– was lawfully obtained by the consultant from a third

party without any obligations of conﬁdentiality to

the company.

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Consultancy Agreements (India)

Restrictive Covenants

Restrictive covenants can be included in the consultancy

agreement. It is typical to include a clause providing for

non-solicitation of employees, clients, and customers.

The non-solicitation clause can apply during the term

of the agreement and for a reasonable period after

its termination. What is reasonable depends on the

circumstances, but it is usually three to six months and

in some cases up to two years.

For example, parties can include a non-solicitation

clause stating that:

” The Consultant hereby agrees and undertakes

that during the term of the agreement with the

Company and for a period of [•] years following the

date of termination of agreement, the Consultant

shall not, directly or indirectly, solicit and/or

attempt to solicit employment of or advise any of

the Company’s existing employees or any person

who was employed by the Company within six

months prior to such solicitation or any person

or organisation providing services to or through

Company and/or its afﬁliates to terminate his/

her contract or relationship with Company or to

accept any contract (directly or indirectly) or other

arrangement for providing services to any other

person or organisation.”

Termination

Mandatory Notice Periods and Payments

Indian law does not stipulate any mandatory notice

period or payments to be made to the consultant on

termination of the consultancy agreement. In this regard,

the arrangement between a company and a consultant

is purely governed by the parties’ agreement under the

contract.

Without Notice Termination for Other Causes

There are no statutory provisions regarding when

consultancy agreements can be terminated without

notice by either party. However, contractually, parties

can agree to circumstances in which without notice

termination can occur. These may include:

• Breach of any of the material conditions or terms of

the agreement.

• The following behaviour by either the company or the

consultant:

– fraud;

– negligence;

– misrepresentation;

– dishonesty; or

– misconduct.

Procedure

Indian law does not deﬁne a particular procedure for

terminating a consultancy agreement. This is normally

governed by the terms of the consultancy agreement.

Governing Law and Jurisdiction

The parties to the agreement can decide the governing

law and jurisdiction that applies to the agreement.

However, if the agreement is between two Indian

parties, it is most practical for the governing law to be

Indian law and jurisdiction to be that of an Indian court.

Arbitration

The agreement can include an arbitration clause as an

alternative to court litigation as a dispute resolution

mechanism. The clause can include that:

• The agreement is to be governed by and construed

under the laws of India.

• Any dispute arising out of or related to the agreement,

including any question regarding its existence,

validity, or termination, is to be referred to and ﬁnally

resolved by:

– arbitration under the Arbitration and Conciliation

Act, 1996; and

– the rules of the Mumbai Centre for International

Arbitration (MCIA), which are deemed to be

incorporated by reference in this clause.

• The seat and venue of the arbitration is to be in a

particular city.

• There is to be a sole arbitrator appointed as per the

MCIA rules.

• The language of the arbitration is to be in English.

• The law governing the arbitration is to be Indian law.

Mediation

While the parties to the agreement can decide

contractually on a dispute resolution mechanism,

mediation is not a common preferred mode of dispute

resolution in India. The dispute resolution mechanisms

typically used in the context of consultancy agreements

are arbitration or litigation.

The mediation centres in India are generally afﬁliated

with the High Courts of Delhi and Chennai. There

are also certain international mediation centres that

administer mediation in India, such as the Singapore

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Consultancy Agreements (India)

International Mediation Centre (SIMC). While India is a

signatory to the Singapore Convention on Mediation,

it has not yet ratiﬁed it, and therefore mediation

settlements entered into abroad are not currently

enforceable in India. However, domestic legislation in

this area is expected shortly.

Representations and Warranties

Common representations and warranties include that:

• The consultant has been provided with a copy of the

agreement for review before signing it.

• The consultant has reviewed the agreement and

understands the terms, purposes, and effects of the

agreement.

• The consultant has had the opportunity to seek

clariﬁcations before signing the agreement.

• The consultant has not been subjected to duress or

undue inﬂuence of any kind to execute the agreement

and the agreement does not impose an undue

hardship on the consultant.

• The consultant has executed the agreement of the

consultant’s own free will and without relying on

any statements made by the company or any of its

representatives, agents, or employees.

• The agreement is in all respects reasonable and

necessary to protect the legitimate business interests

of the company.

• The consultant has all requisite power and authority

and does not require the consent of any third party

to enter into the agreement and grant the rights

provided in the agreement.

• The execution, delivery, and performance of the

agreement by the consultant does not and will not

conﬂict with, breach, violate, or cause a default under:

– any agreement, contract, or instrument to which the

consultant is a party; or

– any judgment, order, or decree to which the

consultant is subject.

• The consultant is not a party to or bound by any

agreement with another person that is or is similar to:

– an employment agreement;

– a consulting agreement that may lead to a conﬂict

of interest for the consultant;

– a non-compete agreement; or

– a conﬁdentiality agreement.

• The consultant’s services and all items or materials, or

both, furnished by or related to or as a result of these

services shall not infringe on or violate any right or

property of any person or entity, including:

– personal, civil, or property rights;

– privacy rights;

– common law right;

– copyright;

– trademark;

– trade name; or

– patent.

• The consultant’s services and all items or materials, or

both, furnished by or related to or as a result of these

services shall not constitute against any person or

entity:

– libel;

– slander; or

– unfair competition.

• The consultant will not execute any instrument

or grant or transfer any rights, titles, or interests

inconsistent with the terms and conditions of the

agreement.

Execution and Other Formalities

The agreement must be signed by both parties “on a

consensus” (sections 10 and 13, Indian Contract Act).

Either original or digital or electronic signatures are

acceptable.

An instrument (document) creating rights and

obligations for the parties must be stamped under the

local stamp duty law on or before the date of execution,

to be admissible as evidence in an Indian court.

Depending on the state in which stamping is done, it

can be achieved by:

• Purchasing stamp paper.

• Franking the agreement.

• Obtaining an e-stamp online.

(Section 3, Indian Stamp Act, 1899.)

The agreement does not need to be registered with any

authority in India.

Language

The agreement does not have to be in any language

other than English to be valid and enforceable.

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Consultancy Agreements (India)

Company’s Liability for the

Consultant

While Indian courts recognise the doctrine of vicarious

liability, it is largely limited to employer-employee

relationships and does not extend to independent

contractor relationships. As a result, in general, the

company is not held vicariously responsible for the

consultant’s acts and behaviour.

Consultancy agreements generally contain an

indemnity clause regarding any losses or damages that

the company may incur because of the consultant’s

negligence.

Discrimination

In India, the following anti-discrimination and

harassment laws apply to private establishments:

• The Equal Remuneration Act, 1976 (ERA).

• The Rights of Persons with Disabilities Act, 2016

(RPDA).

• The Transgender Persons (Protection of Rights) Act,

2019 (TPA).

• The Sexual Harassment of Women at Workplace

(Prevention, Prohibition and Redressal) Act, 2013

(SHA).

While the ERA applies only to an employer-employee

relationship, the TPA and RPDA are broader in scope

and prohibit discrimination against any disabled or

transgender person (not just an employee).

The SHA includes sexual harassment of any woman in

the workplace (including a consultant or independent

contractor) within its scope.

If the company’s policies extend the applicability of

other anti-discrimination provisions to consultants and

independent contractors, these may also need to be

considered when assessing the risk of the consultant

bringing discrimination claims against the company.

It is not common practice to include any clauses

pertaining to discrimination or attempting to mitigate

the risk of it in a consultancy agreement. However, they

may legally be included.

Anti-Bribery and Corruption

The consultant may need to comply with India’s anti-

bribery and anti-corruption law, the Prevention of

Corruption Act 1988 (POCA). POCA does not have extra-

territorial applicability and therefore does not apply

to corruption and bribery occurring outside the Indian

jurisdiction.

In addition to POCA, in the consultancy agreement it is

common to refer to the US Foreign Corrupt Practices Act

1977 and the UK Bribery Act 2010, both of which have

extraterritorial application.