Startup India Seed Fund Scheme

Authors : Nilanshu Shekhar, Rishabh Manocha, Akanksha Anand

The Government of India has come up with the Start-Up India Seed Fund Scheme for enabling, promoting, and encouraging entrepreneurship in the country. This funding scheme is aimed at early-stage start-ups to provide them financial assistance for Proof of Concept, Prototype Development, Product trials, market-entry, and commercialization. The total outlay for the entire scheme is INR 945 Crore and it is expected to support 3600 entrepreneurs. The Scheme was notified on the 21st of January, 2021, and shall have a duration of 4 years at the initial phase. Funds will be disbursed through eligible incubators to eligible start-ups. An Expert committee shall be formed under DPIIT which shall undertake the overall execution of the scheme. The scheme shall provide support in the form of grants and debt/convertible debentures. Once a Start-Up has been granted funding under this scheme, it will become ineligible for any subsequent funding under this scheme.

Objectives of the Scheme

This scheme target those Start-Ups that are finding it difficult to get their business forward from the ‘idea’ stage by providing them funding for the critical capital requirement at early stages. Since most funding agencies as well as Venture funds take a cautious stance on putting their money in a business idea that is at a very early stage of development, this scheme will be immensely beneficial. The more ideas that will be successfully implemented through this scheme, the more employment opportunities shall be created by such successful Start-Ups. Since the scheme is aimed at helping over 3000 Start-Ups during its subsistence, that will also result in the validation of multiple business ideas and will increase the Start Ups’ chances at success.

Eligibility under the Scheme

Since the scheme is structured in such a way that funds shall be disbursed among the eligible Start-Ups only through incubators, the eligibility conditions have also been set apart for being eligible under the scheme for Start-Ups and Incubators.

For a Start-Up to be eligible for receiving funding under this scheme, it needs to be recognized by the DPIIT. To be recognized by DPIIT as a Start-Up, an entity shall meet the following conditions, namely:

  • If 2 years have not passed since the year of its incorporation as a Private Limited Co., a registered Partnership Firm or a Limited Liability Partnership (LLP)
  • If the turnover of the said entity has never exceeded the INR 100 Cr. limit during any of the years since its incorporation/registration
  • If such entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation
  • Such an entity that has been incorporated by splitting an existing company is not entitled to be called as a Start Up

In addition to the conditions laid down by DPIIT, the business idea of the Start-Up must also be capable of commercialization and scaling up. Moreover, it must be using technology to solve the targeted problem, with areas such as social impact, waste management, food processing, biotechnology, healthcare, energy, mobility, defence, space, railways, oil and gas, textiles as being the key focus areas. The Start-Up must not have received more than 10 lakhs in funding under any other government scheme and its 51% shareholding must be held by Indian promoters.

For an Incubator to be eligible for receiving funding under this scheme, it must be a legal entity of the following type, namely:

  • Registered under Societies Registration Act, 1860
  • Registered under Indian Trusts Act, 1882
  • Registered as a Private Limited Company under Companies Act 1956/2013
  • Established under the Legislature or Act

Moreover, the Incubator must be functioning for at least the last 2 years. It also needs to have the infrastructure to sit 25 individuals in its workspace. The Incubator needs to have at least 5 Start-Ups under its incubation physically and it needs to have full-time employees for Managerial, Legal, Finance, and Human Resources positions. The Incubator must not be funded by private 3rd party investors and must have government support. For Incubators who are not supported by the government, the following additional eligibility also needs to be met for it to be eligible under the present scheme. The additional eligibility is as follows:

  • Must be operational for 3 years or more
  • Must have at least 10 startups under its incubation physically
  • Must submit audited annual reports for the last 2 years

Selection Procedure for Startup

A Start-Up, that is interested in availing the benefits under this scheme shall make an application on the Start Up India Portal. The following details need to be submitted while finishing up the Application:

  • Team profile
  • Problem statement
  • Product/service overview
  • Business model
  • Customer profiles
  • Market Size
  • Quantum of funds needed
  • Projected utilization plan for funds

Once the application has been finalized, a Start-Up can select up to 3 incubators as per their preference for funds distribution. Applications received on the portal will be shared with the respective Incubators for evaluation. The Incubators shall shortlist the Start-Up based on the evaluation criteria reached by them. The Shortlisted Start-Ups will then present their ideas to the Incubator Seed Management Committee. (or ISMC) Once the ISMC selects the Start-Up based on Presentation within 45 days, the selected Start-Ups shall start receiving the seed funds from their selected Incubators. Unsuccessful applicants shall be notified by E-mail regarding their rejection in the Application. The Incubators shall not charge any fee in cash or in-kind from the applicants or the beneficiaries under the scheme. The Incubators shall use the following criteria for selecting or rejecting the Application of a Start-Up:

  • Need for the idea
  • Feasibility
  • Potential Impact
  • Novelty
  • Team
  • Fund Utilization Plan
  • Presentation
  • Any other relevant parameters as per the incubators

Weightage shall be assigned to each of these parameters as per the own criteria of the Incubators and can be set differently for different Incubators.

Distribution of Funds Under Scheme

The Incubators shall disburse the funds to the Start-Ups in the following manner:

  • INR 20 Lakhs as grant for the validation of Proof of Concept, or prototype development, or product trials. The disbursement is done on milestone-based installments. Only 20% of the total grant to an incubator shall be given as grants.
  • Up to 50 INR Lakhs of investment for market entry, commercialization, or scaling up through convertible debentures or debt or debt-linked instruments. The term of duration for the loan amount shall not exceed 5 years (60 months). The start-ups can opt for a moratorium of up to 12 months (1 year) for the repayment of the loan amount. The rate of interest cannot be more than the prevailing repo rate.
  • The funds shall be utilized only for the purposes it was released.
  • A legally binding agreement shall be entered between the Incubator and the selected Start Up clearly mentioning the milestones and other details pertaining to Seed Fund
  • Funds can be disbursed only in the company bank account.
  • An audited report on the utilization of funds shall be submitted at the end of the project. Failed ventures shall share their learning and reason for failures

The following details are required to be submitted by the beneficiary start-ups in their progress reports:

  • Progress of proof of concept
  • Progress of prototype development
  • Progress of product development
  • Progress of field trials
  • Progress of market launch
  • Quantum of loan, angel or VC funding raised
  • Jobs created by start-up
  • Turnover of start-up
  • Any other appropriate parameter

Successful implementation of the scheme will lead to the creation of a robust entrepreneurial ecosystem in the country. This will not only benefit the well-established and funded Tier – I cities but shall also enable the Tier – 2 and Tier – 3 cities to spread their entrepreneurship wings. This will further contribute to the exponential growth and development of the country.

Startup India Seed Fund Scheme

Authors : Nilanshu Shekhar, Rishabh Manocha, Akanksha Anand

The Government of India has come up with the Start-Up India Seed Fund Scheme for enabling, promoting, and encouraging entrepreneurship in the country. This funding scheme is aimed at early-stage start-ups to provide them financial assistance for Proof of Concept, Prototype Development, Product trials, market-entry, and commercialization. The total outlay for the entire scheme is INR 945 Crore and it is expected to support 3600 entrepreneurs. The Scheme was notified on the 21st of January, 2021, and shall have a duration of 4 years at the initial phase. Funds will be disbursed through eligible incubators to eligible start-ups. An Expert committee shall be formed under DPIIT which shall undertake the overall execution of the scheme. The scheme shall provide support in the form of grants and debt/convertible debentures. Once a Start-Up has been granted funding under this scheme, it will become ineligible for any subsequent funding under this scheme.

Objectives of the Scheme

This scheme target those Start-Ups that are finding it difficult to get their business forward from the ‘idea’ stage by providing them funding for the critical capital requirement at early stages. Since most funding agencies as well as Venture funds take a cautious stance on putting their money in a business idea that is at a very early stage of development, this scheme will be immensely beneficial. The more ideas that will be successfully implemented through this scheme, the more employment opportunities shall be created by such successful Start-Ups. Since the scheme is aimed at helping over 3000 Start-Ups during its subsistence, that will also result in the validation of multiple business ideas and will increase the Start Ups’ chances at success.

Eligibility under the Scheme

Since the scheme is structured in such a way that funds shall be disbursed among the eligible Start-Ups only through incubators, the eligibility conditions have also been set apart for being eligible under the scheme for Start-Ups and Incubators.

For a Start-Up to be eligible for receiving funding under this scheme, it needs to be recognized by the DPIIT. To be recognized by DPIIT as a Start-Up, an entity shall meet the following conditions, namely:

  • If 2 years have not passed since the year of its incorporation as a Private Limited Co., a registered Partnership Firm or a Limited Liability Partnership (LLP)
  • If the turnover of the said entity has never exceeded the INR 100 Cr. limit during any of the years since its incorporation/registration
  • If such entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation
  • Such an entity that has been incorporated by splitting an existing company is not entitled to be called as a Start Up

In addition to the conditions laid down by DPIIT, the business idea of the Start-Up must also be capable of commercialization and scaling up. Moreover, it must be using technology to solve the targeted problem, with areas such as social impact, waste management, food processing, biotechnology, healthcare, energy, mobility, defence, space, railways, oil and gas, textiles as being the key focus areas. The Start-Up must not have received more than 10 lakhs in funding under any other government scheme and its 51% shareholding must be held by Indian promoters.

For an Incubator to be eligible for receiving funding under this scheme, it must be a legal entity of the following type, namely:

  • Registered under Societies Registration Act, 1860
  • Registered under Indian Trusts Act, 1882
  • Registered as a Private Limited Company under Companies Act 1956/2013
  • Established under the Legislature or Act

Moreover, the Incubator must be functioning for at least the last 2 years. It also needs to have the infrastructure to sit 25 individuals in its workspace. The Incubator needs to have at least 5 Start-Ups under its incubation physically and it needs to have full-time employees for Managerial, Legal, Finance, and Human Resources positions. The Incubator must not be funded by private 3rd party investors and must have government support. For Incubators who are not supported by the government, the following additional eligibility also needs to be met for it to be eligible under the present scheme. The additional eligibility is as follows:

  • Must be operational for 3 years or more
  • Must have at least 10 startups under its incubation physically
  • Must submit audited annual reports for the last 2 years

Selection Procedure for Startup

A Start-Up, that is interested in availing the benefits under this scheme shall make an application on the Start Up India Portal. The following details need to be submitted while finishing up the Application:

  • Team profile
  • Problem statement
  • Product/service overview
  • Business model
  • Customer profiles
  • Market Size
  • Quantum of funds needed
  • Projected utilization plan for funds

Once the application has been finalized, a Start-Up can select up to 3 incubators as per their preference for funds distribution. Applications received on the portal will be shared with the respective Incubators for evaluation. The Incubators shall shortlist the Start-Up based on the evaluation criteria reached by them. The Shortlisted Start-Ups will then present their ideas to the Incubator Seed Management Committee. (or ISMC) Once the ISMC selects the Start-Up based on Presentation within 45 days, the selected Start-Ups shall start receiving the seed funds from their selected Incubators. Unsuccessful applicants shall be notified by E-mail regarding their rejection in the Application. The Incubators shall not charge any fee in cash or in-kind from the applicants or the beneficiaries under the scheme. The Incubators shall use the following criteria for selecting or rejecting the Application of a Start-Up:

  • Need for the idea
  • Feasibility
  • Potential Impact
  • Novelty
  • Team
  • Fund Utilization Plan
  • Presentation
  • Any other relevant parameters as per the incubators

Weightage shall be assigned to each of these parameters as per the own criteria of the Incubators and can be set differently for different Incubators.

Distribution of Funds Under Scheme

The Incubators shall disburse the funds to the Start-Ups in the following manner:

  • INR 20 Lakhs as grant for the validation of Proof of Concept, or prototype development, or product trials. The disbursement is done on milestone-based installments. Only 20% of the total grant to an incubator shall be given as grants.
  • Up to 50 INR Lakhs of investment for market entry, commercialization, or scaling up through convertible debentures or debt or debt-linked instruments. The term of duration for the loan amount shall not exceed 5 years (60 months). The start-ups can opt for a moratorium of up to 12 months (1 year) for the repayment of the loan amount. The rate of interest cannot be more than the prevailing repo rate.
  • The funds shall be utilized only for the purposes it was released.
  • A legally binding agreement shall be entered between the Incubator and the selected Start Up clearly mentioning the milestones and other details pertaining to Seed Fund
  • Funds can be disbursed only in the company bank account.
  • An audited report on the utilization of funds shall be submitted at the end of the project. Failed ventures shall share their learning and reason for failures

The following details are required to be submitted by the beneficiary start-ups in their progress reports:

  • Progress of proof of concept
  • Progress of prototype development
  • Progress of product development
  • Progress of field trials
  • Progress of market launch
  • Quantum of loan, angel or VC funding raised
  • Jobs created by start-up
  • Turnover of start-up
  • Any other appropriate parameter

Successful implementation of the scheme will lead to the creation of a robust entrepreneurial ecosystem in the country. This will not only benefit the well-established and funded Tier – I cities but shall also enable the Tier – 2 and Tier – 3 cities to spread their entrepreneurship wings. This will further contribute to the exponential growth and development of the country.

Startup India Seed Fund Scheme

Authors : Nilanshu Shekhar, Rishabh Manocha, Akanksha Anand

Trademark opposition has become a prolonged and tedious process in contemporary times. In a recent case, the office of the Controller General of Patents Designs and Trademark has submitted on affidavit to the Delhi High Court that more than 200,000 trademark opposition proceedings are pending. They have further disclosed that 1,13,517 trademark oppositions were filed during the period 24-3-2020 to 28-2-2022. After the initial filing process, many cases are waiting to start the hearing procedure to get a final decision.

Although, the Indian Trademark Registry is working hard to reduce the huge pendency of the opposition/cancellation proceedings filed. However, the persistent pendency in settling the opposition/ratification matters has piled up huge number of cases. The Controller General’s Office has taken the initiative by issuing a public notice that the parties to the opposition/ ratification who have settled their proceedings amicably should inform the Trademark Registry along with the supporting settlement documents so that the Trademark Registry would pass suitable orders in the matters as per law. But still, it is a long way that the pendency numbers of opposition/ratification can come down to a manageable number.

Due to the extended delays, lots of aggrieved parties are now turning to civil actions like injunctions instead of filing opposition with the trade mark registry. The entire process of filing opposition/ratification gets dragged into the darkness of delay of many years, due to the high pendency rates. Also, any favourable outcome of opposition will at the maximum result in rejection/removal of infringers trademark application, whereas a civil action suit can result in recovery of damages and injunctions, which can immediately restrict the infringing activity.

Infringement or violation of trademark rights might not always be done by a party who is willing to register their infringing trademark with the registry. When a brand or company becomes successful or popular amongst the consumers, a large number of copycats emerge with inferior quality replicas in order to make some quick buck. In such times, the proprietor of the registered trademark might not even know who the infringing party is or how many are there in the market, in such situations the traditional method of trademark opposition may fall short or be totally ineffective.

In such scenarios filing for injunctions and/or other civil remedies are the most ideal approach for protecting and enforcing one’s rights. This protects the proprietor of registered trademark as the effect of injunctions are felt more immediate and fruitful in favour of registered trademark owner. If any consumer gets any inferior replica product which he believes to be the product of registered trademark owner due to the infringing trademark, the loss or harm on goodwill and the reputation of the company might far outweigh the compensation that might be liable to be paid by the defendant on final adjudication. Multiple such instances during the pendency of the final adjudication or hearing in case of trademark opposition may completely destroy the reputation of a company or organisation leave aside the loss in business.

Therefore, in certain situations prevention of infringement is expedient, injunctions should be filed. It also prevents destruction of evidences and safeguards vested interests of the registered trademark owner. There are different types of injunctions, which help the proprietor of a trademark to get the most desirable and beneficial outcome. These are:

  • Interlocutory/Temporary/Interim Injunction– These are the injunctions filed at the onset of a suit preventing the other party from committing an action until the disposal or adjudication of the suit. This is granted in the discretion of the court when a prima facia case is established and there is a possibility of irreparable harm to the plaintiff and balance of convenience is in favour of plaintiff.
  • Mareva Injunction– These are the injunctions filed by the plaintiff to prevent the defendant from disposing of his property against the interests of the plaintiff.
  • Anton Piller orders– When the defendant might destroy evidence for defeating the ends of justice the court can direct the defendant to grant the plaintiff or a commissioner appointed by court entry to his premises and preserve the evidence.
  • John Doe orders– When the plaintiff has no concrete knowledge of who is infringing their rights, the court can order a commission to inspect any premises where infringement might be carried out.
  • Permanent /Perpetual Injunction– It is the final order/adjudication of the court that restricts or restrains a person from committing any acts or actions permanently

The enactment of Commercial Courts Act, 2015 and the subsequent amendment, has broadened the scope of commercial courts as it has grown to include intellectual property rights under its ambit & lowered the threshold for approaching the Commercial court to 3 Lakhs INR. The moving away from the provisions of civil procedure code has also contributed to the speedy disposals in the commercial courts. This enables the creation of a more specialised judicial body with respect to the commercial matters when compared to traditional courts.

The Commercial Courts Act 2015 also provides for summary judgement under order XIII-A. This provision allows for quick resolution of claims, where the defendant have no real means of defending the claim. In the cases of SanDisk LLC v. Memory World (CS(COMM) 659/2018) and Ahuja Radios v. A Karim (CS(OS) 447/2013), the Delhi high court issued permanent injunction in favour of the plaintiff, in summary judgement the court was satisfied that the defendants have no real prospects of defending their claims. In cases, where the time taken for final adjudication will keep compounding losses or harm to the plaintiff, the prevention of such injury will be much better than compensating rightful owners later.

Furthermore, the formation of Intellectual Property Division (IPD) in the Delhi High Court has shown a hope of ray of instant relief to a trademark owner whose trademark is being infringed and looking for instant relief in the form of injunction and recovery of punitive damages. In the recent past, there is an upward trend in cases where the applicant filed a suit with the Commercial Courts set up at High Courts for procuring injunctions & recovering punitive damages. Therefore, trademark owners, instead of, filing an opposition/ratification with the Trademark Office which takes several years to start the hearing procedure are moving to Commercial Courts set up by the Hon’ble High Court.

All these developments are steps in the right directions as this expedites the whole process of enforcement of intellectual property rights. As the maxim states “Justice delayed is justice denied”, delays in enforcement of trademarks not only negatively impacts the proprietor but it also effects the innocent, unsuspecting consumers who is unaware of such trademark infringements. So such infringements should be nipped in the bud. Under such injunctions is the best weapon in the arsenal of a trademark proprietor for timely and effective enforcement of their rights.